Wholesale electricity provider GenOn Energy has filed for Chapter 11 bankruptcy protection, according to a report from Reuters. The filing comes amid accusations that GenOn’s parent company, NRG Energy, took more than $520 million from the subsidiary improperly, according to a report from The Wall Street Journal.
On June 12, GenOn Americas Generation LLC and other “GenOn entities” entered into a restructuring and lock-up agreement with NRG Energy, under which NRG will provide a cash-collateralized credit facility up to $330 million, according to an SEC filing. Under a proposal, NRG would be released from liability in exchange for a $243 million cash payment. GenOn creditors, meanwhile, would assume control of the company.
The WSJ report notes the move was designed to cut $1.8 billion in debt and to settle charges that NRG “improperly extracted” funds from GenOn.
In December, debt holders of GenOn Energy filed a lawsuit against NRG over a service agreement between the two companies that required GenOn to pay $193 million per year. In April, they filed an amended complaint alleging breach of fiduciary duty by some current and former GenOn executives in relation to a management services agreement. The complaint also accused NRG of aiding and abetting those breaches.
NRG acquired GenOn in 2012 for $1.7 billion. Last month it proposed putting the subsidiary in Chapter 11 protection. According to the restructuring and lock-up agreement, during the bankruptcy NRG will supply GenOn with transition services at an annualized rate of $84 million.
GenOn owns and operates 32 power generation facilities across eight states. The acquisition by NRG created the “largest competitive generator” in the U.S., reportedly. But the company’s debt burden has grown since.
GenOn had a scheduled bond payment tomorrow, June 15.