Energy supplier puts NH in a bind

Agera’s bankruptcy hobbles renewable energy fund

Mitch Greenwald, principal of Greenwald Realty Associates, will be getting a solar roof built on a mixed-use apartment building he owns off Main Street in Keene, just before the sun sets on a solar rebate program that made it possible.

Greenwald, who is running for mayor in Keene on a renewable energy platform, is upset that other businesses in downtown may not be able to benefit as well.

“I actually did this to set an example. It’s a shame what happened,” said Greenwald.

“What happened” is that the staff of the New Hampshire Public Utilities Commission has recommended closing the state’s solar commercial rebate program to new applications, due to a lack of funds. And one reason why it lacks funds is that a little-known energy supplier in New Hampshire, with some very big contracts, has filed for bankruptcy.

Agera Energy, a New York-based electricity and gas supplier owned by an insurance executive and large Republican donor indicted for bribery, filed for Chapter 11 reorganization on Oct. 4 in a New York bankruptcy court. It claimed more than $208 million in liabilities, with $126 million in assets.

Because of the filing, it will be unlikely that states around the country will be able to collect the total of $73 million that the company owes their renewable energy programs, including the $2.2 million that Agera owes New Hampshire.

The PUC’s Renewable Energy Fund budget is $4.2 million for the 2020 fiscal year, which ends on June 30, 2020. The PUC earmarked spending more than $2.4 million to support commercial and industrial projects. The rest goes to residential programs, including the popular wood pellet furnace heating program. If Agera had paid up, the fund would have had $6 million to work with.

Lost funding

It isn’t the first time a bankruptcy and failure to make Renewable Energy Fund payments has been felt in New Hampshire, though it has never happened on such a large scale.

Previously, People’s Power and Gas (PP&G) and Glacial Energy filed for bankruptcy in 2014. Glacial owed $374,470, and the PUC had a $350,000 bond, so the loss was less than $25,000. PP&G, which owed $83,000, also had a bond, but the PUC was not able to collect because it was on an overseas bank. That caused the agency to require a domestic bond in the future.

In September, BP Energy supplied a letter of credit for Agera from the Bank of America. That credit, however, cannot exceed $500,000, and collection might be difficult, since BP is Agera’s largest creditor. And even if the PUC does receive the money, there would still be a $1.7 million debt.

“That money would completely fund the program for a whole year,” said Madeleine Mineau, executive director of Clean Energy NH. “A lot of projects hinge on that rebate being available. It attracts a lot of additional private funding. Now they are talking about not accepting applications until the middle of next summer.”

Green Energy Option of Keene, which is the developer of Greenwald’s projects, has about a half-dozen commercial projects that count on the rebates, which can amount to up to a quarter of the cost of a project but are capped at $50,000. The money helps borrowers leverage through a complex web of financing and incentives, including a federal tax credit that is rapidly diminishing.

Click on timeline to enlarge

“It all depends on financing,” said owner Pablo Fleischmann. “But credits may change the payback period from four years to 11.”

For Greenwald, the payback period could be an “outstanding” 2 1/2 years. Otherwise, he said, he would still be paying it off way into retirement.

Credits vs. penalty

Agera owes the PUC the money because it did not meet the state’s renewable energy portfolio standards. Too much of its energy still relies on fossil fuels. Agera could have complied by buying renewable energy credits, RECs, as it has done in the past. But because it didn’t, it has to pay an alternative compliance payment (ACP) penalty.

Agera, in its bankruptcy filing, said it paid a 60% premium for the ACP over the RECs. In other words, if Agera managed to scrape up $45 million (or $1.35 million in New Hampshire) for RECs it could have avoided $73 million in penalties ($2.2 million in New Hampshire.)

Those ACP penalties are the immediate cause of the bankruptcy. The New Hampshire PUC sent a letter threatening legal action two days before the company filed. 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. And other states are sure to follow.

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. Those small numbers, however, don’t reveal the size of the contracts.

For instance, since April 2016, Agera’s 300 contracts — with such customers as the federal Department of Defense and the Social Security Administration — are currently worth about $250 million, with a potential total value of $900 million, according to the federal website USASpending.gov. None of these contracts is listed as “primarily performed in New Hampshire,” though perhaps power sold to regional offices in Massachusetts makes its way up here.

Big political donations

That’s quite a bit of growth for a company that started as a spinoff from the aforementioned 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. At the beginning of this year, a jury found Platinum co-founder and then-chief operating officer Mark Nordlicht guilty of securities fraud, stemming from an alleged scheme to rig a bondholder vote. In September, a federal judge overturned the jury’s decision, granting Nordlicht a new trial and acquitting another executive. The U.S. Attorney’s office in the Eastern District of New York gave notice of its intent to appeal the judge’s ruling.

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, via a $500,000 donation to that state’s Republican Party. Cannon allegedly agreed to direct money to an insurance commissioner to get rid of a regulator who was hurting his business. In a September filing, Lindberg’s attorney argued that Lindberg believed that the regulator was biased.

Lindberg is as a big contributor nationally. Since 2016, he donated more than $1 million to committees and candidates, mostly Republican, though he occasionally gave to Democrats. While this might have eased the way for Agera’s federal contracts, Lindberg maintained that the reseller was a relatively small part of his business empire.

Less than a week after Agera filed for bankruptcy, Lindberg issued a statement saying that he didn’t seek out the company, but inherited it as part of an acquisition, and that after investing $100 million, decided to no longer support the investment. Lindberg’s main holding company, Academy Association Inc., had $4 billion in equity as of the end of last year, and his businesses are expected to make around $300 million next year, he said.

On the other hand, BP Energy, which supplies much of Agera’s energy, filed suit in August against Lindberg in a federal district court in Texas, alleging that Lindberg reneged on a $51 million guarantee to fund Agera.

“To my knowledge, Lindberg has had no involvement with the Debtors’ [Agera’s] day-to-day operations,” said Agera’s chief operating officer, Todd Sandford, in an affidavit filed Oct. 4 with the bankruptcy court.

Agera grew significantly from January 2017 through June 2018, but it was risky growth, Sandford said. Most of the contracts were fixed, yet the price of energy varied. The CEO, Geoffrey Duda, and the 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 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, though his new company, Teleios Commodities, is listed as one of Agera’s top 30 unsecured creditors, with a $100,000 claim.

In May, it became clear that Lindberg was “no longer in position” to inject the requisite capital needed to support the business, said Sandford. That’s why it couldn’t afford the RECs to avoid the ACP penalty due in June.

But the filing just doesn’t affect renewable energy.

Department of Corrections

Agera’s action will leave thousands of its commercial customers scrambling for new suppliers or risk paying the higher utility rate.

About 80% of Agera’s contracts will be taken over by Constellation Energy, if the $24.75 million sale of those contracts is approved early next month by the bankruptcy court. Constellation, a subsidiary of Exelon Corp., is a much larger company, with 2 million customers nationwide and about 13,000 in New Hampshire.

But a fifth of Agera’s customers are “out-of-the-money,” according to an Oct. 15 Agera bankruptcy filing. That means that Agera, “in their sound business judgment,” would reject those contracts. If the bankruptcy court approves that motion, the customers will revert to the default rate.

Agera lists the rejected contracts in a filing, but doesn’t disclose them, so it’s unclear how many are in New Hampshire. Indeed, the PUC won’t even say how many customers Agera has in the state.

One customer is the state Department of Corrections, which has a contract to buy more than 300,000 therms of gas from Agera, delivered by Liberty Utilities, to the Berlin prison, at a cost of 48.1 cents per therm, which is a “pretty good rate” said Karen Rantamaki, director of the state Department of Administrative Services’ Division of Plant and Property Management. Rantamaki didn’t know if that contract has been rejected or not, but if it defaults to the utility rate now, it would be 55 cents, “and my guess is that it would go up in the winter,” she said.

The state would probably have to rebid the contract to get a better rate, but other businesses won’t have to wait as long, said Bob Hayden of Standard Power, a broker that shops around for the best price. Hayden said that Agera had very competitive prices, but he warned many of his customers away from the company because, “based on their legacy, we were concerned about them”

Other brokers, he said, might be in worse shape, not just because of the extra work but because of the lost commissions. They will be unsecured creditors, just like the PUC, meaning that they would be at the end of the line in any bankruptcy sale.

Ahead of them would be a secured lender, BP, 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 $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 the sale is just a starting point. Constellation is the “stalking horse” in a possible auction that might invite higher bids. That auction is scheduled for Nov. 4 if there are other bidders, with a hearing to approve the sale the next day, if all goes according to schedule.

Categories: Energy and Environment

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