Electric supplier’s bankruptcy filing leaves NH Renewable Energy Fund in a bind

Agera’s failure to pay into fund could mean a more than $2 million shortfall for PUC-administered program

The sudden bankruptcy filing last week of Agera Energy LLC, a major electricity supplier owned by an indicted insurance executive, could jeopardize the some $2.2 million owed to New Hampshire’s Renewable Energy Fund – more than half of what that fund intends to spend this fiscal year.

It also could result in an unknown number of business and residential customers forced into buying energy from their default utility, with most having to pay a lot more for power than they had anticipated. (Agera has warned its customers not to try to switch to another supplier without permission of the bankruptcy court.)

A majority of Agera’s contracts will be taken over by the energy company Constellation, if the $24.75 million sale of those contracts is approved early next month by the bankruptcy court. Constellation, a subsidiary of Exelon Corp., which is publicly traded on the NASDAQ exchange, is a much larger company, with 2 million customers nationwide and about 13,000 in New Hampshire.

But at deadline, neither Constellation nor Agera would say how many New Hampshire contracts would be taken over, or even how many customers Agera has.

(The New Hampshire Public Utilities Commission says Agera’s market information, which is disclosed to them in quarterly reports, “is not publicly available.”)

Deeper problems

Agera filed for bankruptcy on Oct. 4, two days after New Hampshire threatened legal action after the company didn’t hand over alternative compliance payments, the penalty a company is required to pay for not meeting the state’ s renewable energy standard. That, along with similar threats from Massachusetts and Rhode Island, was what triggered the filing.

Together, the company estimates that it owes $73 million dollars in such payments and it might no longer be able to sell electricity in those states, according to an affidavit from Agera’s chief operating officer, Todd Sandford.

But Agera’s financial problems are much deeper. Its 56 employees serve some 35,000 customers, three-quarters of which are commercial, in 16 states at the time of the filing. It claims $124 million in assets, but $71 million in that is in receivables

It has $208 million in debt – a debt that was long time in the making.

Agera is a spinoff of another company – Glacial Energy Holdings – which itself filed for bankruptcy in 2014. Before the filing, Glacial’s CEO was convicted in January 2017 for diverting more than $18.5 million in taxable income from Glacial’s New York unit to a mining business in the Democratic Republic of the Congo from 2006 through 2008.

The hedge fund that engineered the spinoff, Platinum Partners, has had its share of legal troubles. Platinum co-founder Mark Nordlicht was found guilty of securities fraud at the beginning of this year, stemming from an alleged scheme to rig a bondholder vote. Last month, a federal judge overturned the jury’s decision, granting Nordlicht a new trial and acquitting another executive.

Then in March, Greg Lindberg – the main owner of Agera through such companies as Eli Global LLC – was indicted for conspiring to bribe North Carolina regulators along with that state’s Republican Party chair and former Congressman Robert “Robin” Cannon.

Cannon allegedly agreed to direct money to an insurance commissioner in return for favorable action on his business. Both of the defendants deny the charges.

“To my knowledge, Lindberg has had no involvement with the Debtors’ [Agera’s] day-to-day operations,” Sandford said in the affidavit.

Payment liabilities

Agera grew significantly from January 2017 though June 2018, but it was a risky growth, Sandford said. Most of the contracts were fixed, yet the price of energy varied. The new CEO, Geoffrey Duda, chief financial officer, Mark Linzenbold, didn’t like what they saw – “poor (and in some case no) visibility into forward margins,” some “very low and negative forward margins” and an “overstated balance sheet.”

Indeed, in August 2018 there were $39 million in overstated receivables, with all but $2 million not even billed for, according to Sandford.

Lindberg’s Eli Global considered a bankruptcy filing as an option right then and there, but instead decided to bail it out. However, some of the promised payments didn’t come through.

Duda left the company without explanation (leaving it without a CEO to this day), and in May it became clear that Eli Global was no longer in position to inject the requisite capital needed to support the business.

This meant that the company couldn’t afford to buy Renewable Energy Certificates for the 2018 compliance year, a much cheaper way to comply with Renewable Portfolio Standards. Instead, it would have to pay the Alternative Compliance Payments, the penalty a company is required to pay for not meeting the standards and cost about 60% more.

In July, the Massachusetts Department of Energy Resources demanded $42.6 million from Agera, threatening to revoke the company’s license to sell power in the state. The New Hampshire PUC’s demand for $2.23 million was first issued on Sept. 17, and was followed by the Oct. 2 threat of enforcement action.

Other states would follow, adding to a total renewable payment liability of $72 million.

Those are unsecured debts, meaning that the NH PUC would be at the end of the line in any bankruptcy sale. Ahead of them would be a secured lender, BP Energy, which is owed $161.6 million, and secondary lender Colorado Bankers Life Insurance Company, which has a $35.7 million claim. Three grid operators have on deposit some $23 million of the company’s cash. And then there are “carve-out expenses” for the bankruptcy professionals and other payments required to keep the company going including the $1.85 million of incentive payments to retain “key” executives. The $24.75 million Constellation sale won’t be enough to cover all that.

But that sale is just a starting point. Constellation is the “stalking horse” that might invite higher bids. An actual auction is schedule for Nov. 4 if there are other bidders, with a hearing to approve the sale the next day.

What would a $2.2 million loss to the PUC mean for the Renewable Energy Fund, which is totally dependent on Alternative Compliance Payments? The fund now has a balance of $9.2 million, but about $5.5 million is already earmarked for current projects. The PUC plans to spend $4.2 million next year, with more than $2.4 million in the commercial and industrial sector, on such things as competitive grant programs. The rest goes to residential programs, including the popular wood pellet furnace heating program.

Often, the demand is for the programs are so great that money runs out before the end of the fiscal year.

This isn’t the first time this has happed. Glacial Energy, People’s Power and Gas and Glacial Energy have failed to make ACP payments. In light of this, the PUC made it clear that suppliers provide a financial security instrument that could be drawn on for failure to pay for ACP.

But, according to PUC records, Travelers Insurance canceled such a bond required by the PUC on July 31, but BP supplied a letter of credit from the Bank of America. That credit, however, cannot exceed $500,000.