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Texas Retail Provider Files Plan To Exit Bankruptcy, Continue Service To Customers; Reaches Settlement With Wholesale Supplier

November 18, 2021

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Copyright 2010-21
Reporting by Paul Ring •

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Pogo Energy, LLC, (Debtor) has filed with a bankruptcy court a proposed plan of reorganization (the "Plan") that would see the reorganized company continue service to retail customers, as Pogo has reached a settlement with its wholesale supplier and credit provider Luminant

The reorganized Pogo Energy would continue to act as a retail electric provider and serve customers (Pogo Energy has continued to serve customers during the bankruptcy proceedings)

Pogo Energy provided certain financial information as part of the plan of reorganization

For 2021 (estimated, 7 months actual), Pogo Energy reported its ending net ESI IDs as 13,587, and average ESI IDs as 14,194.

For 2021 (estimated, 7 months actual), Pogo Energy reported Gross Margin of 32.5%

For 2021 (estimated, 7 months actual), Pogo Energy reported gross profit of $27.06 per Average ESI/Month

Pogo reported that, "After ongoing negotiations between the Debtor and Luminant, including a full-day settlement conference on July 20, 2021, the Debtor and Luminant reached an agreement regarding the resolution of Luminant’s Claim. Luminant and the Debtor have entered into the Restructuring Support Agreement ('RSA') whereby the Luminant and the Debtor agreed upon certain key terms for the Debtor’s Plan, which Luminant would support in exchange for settlement of its Secured Claim and related releases from liability from the Debtor’s Estate ('Luminant Settlement'). The Luminant Settlement is not final until approved by the Bankruptcy Court."

The Plan states concerning the Luminant claim as follows:

Class 2- Luminant Secured Claim

(a) Classification: Class 2 contains the Luminant Secured Claim against the Debtor.

(b) The Luminant Secured Claim shall be Allowed in an aggregate principal amount of no less than $27,744,438.62, plus all other unpaid and outstanding obligations including any accrued and unpaid interest thereon, and all applicable fees, costs, charges, expenses, premiums, letters of credit or other amounts arising under the Energy Services Agreement, in each case, as of the Petition Date. The Luminant Secured Claim shall not be subject to any avoidance, reduction, setoff, recoupment, recharacterization, subordination (equitable, contractual, or otherwise), counterclaim, defense, disallowance, impairment, surcharge under section 506(c) of the Bankruptcy Code, objection, any challenges under applicable law or regulation, or any other claim or defense.

(c) Treatment: Except to the extent that Luminant agrees to a less favorable treatment, Luminant shall receive, in full and final satisfaction, compromise, settlement, release, and discharge of and in exchange for its Allowed Luminant Secured Claim, in accordance with the following terms:

(i) Initial Payment: Payment in Cash to Luminant in the amount of $2,300,000.00 on or before the Effective Date; and

(ii) Amortized Payment: Payment in Cash of $13,888.88 each month beginning on the last day of the first whole month following the Plan Effective Date and continuing for 36 months thereafter such that the total amortized Cash consideration paid to Luminant equals $500,000.

(d) Voting: Class 2 is Impaired under the Plan. Luminant is entitled to vote to accept or reject the Plan.

The Plan provides that, "The Debtor shall use best efforts to promptly identify and engage a replacement QSE for the Debtor’s electricity business after the Confirmation Date. Contemporaneous with replacing the Debtor’s QSE, (ii) the Debtor, the replacement QSE, and Luminant shall execute a novation agreement to effect the novation of the transactions under the Energy Marketing Agreement; and (ii) such novation agreement shall effect the applicable delivery point shall be amended consistent with the terms of Section 16.1 of the Energy Marketing Agreement. For the avoidance of doubt, upon the entry of the Confirmation Order, the Debtor or Reorganized Debtor, as applicable, shall be authorized to enter into and execute the agreements and amendments, and otherwise execute the documentation needed to effectuate the engagement of a replacement QSE and to terminate Luminant’s obligation to serve as the Debtor’s QSE (and all obligations related thereto)."

Furthermore, the Plan provides, "Within 5 business days of the entry of the Confirmation Order, the Debtor shall execute amended Energy Services Agreements, consistent with the RSA, in form and substance satisfactory to Luminant. Such amended Energy Services Agreements shall provide for, among other things (a) automatic termination of the Energy Marketing Agreement on February 28, 2022; (b) the addition of an 'Event of Default' under the Energy Marketing Agreement between the Debtor and Luminant for any default in the Debtor’s obligations under the Plan; and (c) an obligation that the Debtor shall (i) hedge expected customer obligations to 100% of the expected weather normalized usage for each month through February 28, 2022, and (ii) hedge to a minimum of 95% of expected and forecasted usage for each month, including swing, 10 business days before the beginning of that month."

Pogo stated, "The Debtor intends to use a variety of sources to fund the Plan. The Debtor, exercising its business judgment, will seek to maximize the assets available to the Debtor’s Estate for payment of creditors’ Allowed Claims. The Debtor intends, first and foremost, to fund the Plan with its operating revenue. The Debtor also may satisfy claims for less than face value by negotiating with certain creditors. Finally, the Debtor contemplates seeking financing through one or more sources. Should the Debtor obtain such financing prior to the Confirmation Date, the terms of such financing and related agreements shall be disclosed in the Plan Supplement, and the Plan will operate as a motion to the Bankruptcy Court approve such financing in accordance with sections 363 and 364 of the Bankruptcy Code, as applicable."

Under the Plan, Phillip Terry, current Pogo CEO, will be CEO of the Reorganized Debtor.

The Plan states, "On the Plan Effective Date, equity interests in the Company will be deemed canceled and replaced with equity interests in the reorganized Company; however, no distributions to holders of equity interests will be permitted until holders of Claims in classes senior to equity interests have been paid in full or otherwise paid under the terms of the Plan."

Case No. 21-31224-MVL

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