Lawyers from Autry, Horton & Cole and McKenna Long & Aldridge worked opposite sides of a $55 million power company transaction with philosophical roots dating back to the Franklin D. Roosevelt administration.

The deal involved selling Sowego LLC, which owns a 100-megawatt power plant in Mitchell County, to the Georgia Energy Cooperative, or GEC, which is a coalition of energy producers providing power for rural areas.

Kenneth T. Horton Jr. of Autry Horton, who represented GEC, and Robert E. Tritt of McKenna Long, who represented Sowego, both said the deal took more than a year to put together because of the numerous approvals the parties had to obtain from entities including the Rural Utilities Service, the U.S. Department of Agriculture and the Federal Energy Regulatory Commission.

“It was not an asset purchase,” said Horton, but a purchase of the limited liability company which owns the plant. If his client bought only the plant, he said, it would not have preserved Sowego’s existing contracts for water, gas and other services.

The parties also had to get the approval of pre-existing lenders. The Sowego plant had been financed by Ambac Assurance Corp., and in 2001, Sowego issued bonds that Ambac purchased, said Horton, who worked on the deal with partners Charles T. Autry and Roland F. Hall. By purchasing the limited liability company instead of the plant itself, he added, GEC essentially agreed to repay the bonds through power purchase agreements but did not have to directly assume—or refinance—the loan.

The purchase was part of a larger transaction that brought two electric membership corporations, or EMCs—Grady EMC in Cairo and Three Notch EMC in Donalsonville—into the previously 13-member GEC. The two new EMCs were indirect, part-owners of the Sowego plant, Tritt said, and they inked additional power purchase contracts with GEC as part of the deal.

Each member of GEC will pay a pro rata share of the cost of acquiring the Sowego company based on their electricity usage. Payments will be made via a decades-long power purchase agreement, according to Horton.

The deal’s Roosevelt-era roots come from the creation of electric cooperatives, a power production structure that had its beginnings in Georgia when Roosevelt visited Warm Springs for polio treatments and discovered that power costs there were high because of the cost of transmitting electricity to rural areas.

His realization led to the Rural Electrification Act of 1936, which prompted the creation of cooperatives initially designed to generate reliable, affordable power for farmers.

Georgia now has 42 electric cooperatives, which Horton said serve about 70 percent of the state’s land area. The Sowego plant, he said, is a gas-fired “peaking plant,” which means it runs only during extremely hot or cold weather, when lower-cost, coal-fired plants cannot keep up with peak customer demand. All 15 GEC members, he said, will use the plant.

The next time Alston & Bird partner William H. Hughes flips on a light switch in a hotel room in China, where he travels on business, the electricity illuminating his room may come from a clean-coal project he helped set in motion.

In a project that will implement the first commercial use of a technology that allows the production of low-emission coal-based electricity and carbon capture and sequestration, Hughes represented Chinese client Beijing Guoneng Yinghui Clean Energy Engineering Co. in its licensing and engineering services contract with U.S.-based KBR Inc.

The technology, called Transport Integrated Gasification, or TRIG, was developed by Southern Co., KBR Inc. and other partners, including the U.S. Department of Energy, at a DOE facility operated and managed by Southern Co. in Wilsonville, Ala.

The deal involves two power plants. One, a 120-megawatt plant that burns diesel, will be retrofitted to produce gasified coal and will have the capacity to serve 700,000 Chinese homes. The other plant, which will be built on an undeveloped site, will serve some 4 million Chinese homes with its 800 megawatt capacity. The new plant will use Integrated Gasification Combined Cycle, or IGCC, technology to take carbon-containing fuels such as coal or biomass and gasify them.

Once the gas exists, Hughes said, the technology will extract the CO2 from it. “You then can burn the gas to fire a gas-fired turbine and use the waste heat to fire a steam turbine,” Hughes said. “You get very, very efficient use of your fuel because you have these two different cycles of power generation and you can get down to virtually carbon-free emissions if you extract the CO2” and if other flue gases such as sulfur, mercury and nitrogen dioxide are removed.

The plants will be built in Dongguan, a city of 8 million in the Southern Chinese province of Guangdong, which is part of the Pearl River Delta, a well-known manufacturing district.

“It's just filled with factories, most of which have been built in the last 10 or 15 years,” Hughes said, explaining that those factories tend to have individual coal-fired boilers or on-site diesel generators.

“Air pollution really is a serious problem,” said Hughes, who worked on the deal with Atlanta partner David C. Keating and associate T. Timothy Wang, as well as lawyers and consultants from the firm's Washington office. “You go to a manufacturing center like Dongguan and I think the air is similar to what you had in Pittsburgh or Birmingham, Alabama, in the 1950s and '60s. There's just a pall that hangs over the place.”

The area not only needs to clean up its air, he said, it also has an inadequate power supply and needs to ramp up electricity production.

Because of those problems, Hughes said the Chinese government lent its support to the deal. Such support is consistent with a speech President Hu Jintao gave to the United Nations in September, in which he discussed China's commitment to cutting its carbon dioxide emissions per unit of gross domestic product by a “notable margin” by 2020, and its intent to “step up” the country's efforts to establish a green economy. Hughes also pointed out that one of the country's motivators is to develop technology it can export.

He said he flew to China in August to put the deal together, spending four days with 40 to 50 other people in a large meeting room at a hotel, participating in negotiations that took place in a mix of English and Chinese.

One of the major cultural aspects of getting the deal done, he said, was sharing mealtimes with the other participants. He recalled one typical South China country-style dinner at a restaurant in Dongguan where diners were seated at large tables with Lazy Susans in the center. The meal, he said, was delicious and involved lots of seafood and vegetables with the trademark “umami,” or Chinese protein-type flavoring reminiscent of mushrooms or a good steak, and “a whole roast chicken on a plate kind of looking you in the eye as it came around.”

Then, he said, he returned to the United States and, with in-house lawyers for KBR, put everything in writing before his Chinese clients flew over to sign the papers in one of Alston & Bird's conference rooms. The transaction is governed by U.S. law.

The deal, he said, went smoothly thanks in part to the support of the Chinese government. “When the central government decides to do something,” he said, “it typically gets done.”

In a rare transaction for the cooperative power industry, three lawyers at Autry, Horton & Cole have crafted an energy purchase and sale agreement valued at more than $500 million between 15 of Georgia’s electric cooperatives and an arm of Baltimore-based power giant Constellation Energy, Inc.

The deal allows the coops to avoid the effort and expense of building a power plant to serve their customers’ growing needs and instead to purchase electricity at competitive rates from Constellation Energy Commodities Group between 2011 and 2015.

“This is an unusual transaction for cooperatives in many ways,” said Kenneth T. Horton, one of the partners on the deal. “Most cooperatives in the country … typically have members commit to buying all their energy from a single entity.”

That entity, he said, would build the power plants and handle transmission, systems and the supply of electricity to customers. But Georgia, he said, “is on the cutting edge of the cooperative form.”

In 1997, Oglethorpe Power, which supplies power to more than 35 Georgia cooperatives, became the first electric utility in the country to split into three independent companies, one for generation, one for transmission and one for systems operations such as scheduling, power dispatch and energy monitoring. At the time, its CEO said the company disaggregated in anticipation of federal deregulation in the power industry.

The 1997 restructuring also was unique, said Horton, because the coops were permitted to buy power from sources other than the Oglethorpe entities, giving them more flexibility than coops in other states.

“There are not a lot of other cooperative groups outside of Georgia that do these types of transactions that frequently,” Horton added. “The most complicated, sophisticated and interesting system in the country for cooperatives is in the state of Georgia.”

Georgia, in some ways, can take credit for the genesis of electric cooperatives. Autry said that when President Franklin Delano Roosevelt came to Warm Springs, Ga., for polio treatments, he became curious about the high cost of power in the area. He learned that prices were high because it was so expensive to get electricity to rural areas.

That realization eventually led to the Rural Electrification Act of 1936, and Georgia’s current roster of 42 electric cooperatives were created under that act in the 1930s and 1940s as a means of providing reliable, affordable power to farmers.

Those coops, according to Autry, now provide power to some 70 percent of Georgia’s land area, though a considerably lesser percentage of its inhabitants because their service areas are sparsely populated.

Coops essentially function as monopolies, said partner Roland F. Hall, who has authored a book on cooperatives, because the state’s Public Service Commission and the Georgia Territorial Act assign service areas to utilities.

That monopoly structure may make coops an attractive investment structure in this era of economic uncertainty. Horton said bids for the deal were solicited from a number of power marketers, including some financial institutions. He explained that since deregulation, entities such as Goldman Sachs have entered the power arena because they recognized the potential profit in the transactions.

Constellation, represented by senior in-house counsel David Hannan, produced the winning bid.

The 15 coops that Autry, Horton & Cole represent are or are becoming members of the Georgia Energy Cooperative, or GEC, which Autry describes as “a cooperative made up of cooperatives.” Under the terms of the deal, GEC members can benefit from an economy of scale in purchasing power and selling any excess. The anticipated value of the electricity to be bought and sold during the deal’s four-year lifespan, Horton said, is in excess of $500 million.

He said the deal took about a year to put together and involved negotiations with multiple parties, as well as contract drafting.

In a statement, GEC President and CEO Glenn Loomer said Autry, Horton & Cole had represented the coop in all of its power supply deals since its formation in 2001. “After months of analysis and negotiation,” he said, “our members selected the transaction with Constellation as the most economical way to provide all their energy needs through the middle of the next decade. … This was a major deal.” 

In January 1990, a business unit of Seaboard Corp. installed the first barge-mounted power plant in the Dominican Republic. Seaboard brought online another power barge in the Dominican a decade later.

Now, those two floating power plants are being sold in a $70 million deal. King & Spalding partners Russ Richards in Atlanta and Juan Crespo in Houston are advising Seaboard, one of the firm’s longtime clients.

The floating power plants [photo, left] are the operating assets of a Seaboard business unit, Transcontinental Capital Corp. The plants consist of two barges, on which are installed a system of diesel engines that generate electric power. The barges are named the Estrella del Norte and the Estrella del Mar and are floating on the Ozama River.

Pueblo Viejo Dominicana Corp., which operates a gold-mining project in the Dominican, is acquiring the barges. Pueblo Viejo Dominicana is a joint venture between Barrick Gold Corp. and Goldcorp Inc. The Dominican law firm Pellerano & Herrera advised Pueblo Viejo Dominicana on the purchase of the barges.

King & Spalding’s Richards has handled corporate work for Shawnee Mission, Kan.-based Seaboard on other occasions, including the $375 million sale of its poultry division to ConAgra in 2000, and the formation of a joint venture with Triumph Foods in 2004 to sell pork products.

Some unexpected obstacles got in the way, but after a year-long regulatory review, Troutman Sanders partner Terry C. Bridges was able to help close a deal on behalf of a New Mexico utility company.

Bridges’ client, PNM Resources Inc., on Jan. 30 closed on the $640 million sale of its natural gas operations in New Mexico to Continental Energy Systems LLC. Continental is owned by funds controlled by New York private equity firm Lindsay Goldberg LLC. Following its purchase of PNM Resources’ natural gas assets, Continental renamed the business New Mexico Gas Co.

When the deal was first announced in January 2008, the companies expected the deal to close in December, pending approval by the New Mexico Public Regulatory Commission. While the actual closing was only slightly delayed, the closing process presented some unforeseen challenges, according to Bridges.

For one, there were interested parties that didn’t like elements of the deal. The U.S. National Nuclear Security Administration (NNSA) filed a motion with the New Mexico PRC to block the deal, saying they objected to PNM Resources’ plan to retain all of the financial gain from the sale of the assets. The NNSA wanted PNM Resources to share the financial gain with the utility’s ratepayers.

However, the New Mexico PRC ultimately ruled against the NNSA and allowed PNM Resources to book the entire gain, Bridges said. As part of that agreement, Continental agreed to freeze base rates for three years.

Later, a New Mexico municipality filed an objection to the sale. The city wanted a right-of-first-refusal to purchase a gas pipeline that runs through its city limits, if the gas line was ever again put up for sale. But once again, the New Mexico PRC ruled in favor of PNM Resources, Bridges said.

The global credit crunch also didn’t stop the deal from happening, even though the buyer is controlled by a private equity fund, Lindsay Goldberg. Among the banks that participated in financing Continental’s purchase is Royal Bank of Canada, Bridges said.

More...

Heavy pressure from environmental groups put the kibosh on Dynegy Inc.’s plans to participate in building a coal-fired power plant in Southwest Georgia.

Now Dynegy is about to take another step to distance itself from the state of Georgia. The Houston company has reached a deal to sell a natural gas-fired plant in west Georgia to Oglethorpe Power Corp. for $105 million in cash. The deal is pending regulatory approval and is slated to close in the second quarter.

A group from Sutherland repped Oglethorpe on the deal, led by corporate partners Herbert Short and Tom Warren. Short is the interim general counsel to Oglethorpe, a not-for-profit cooperative owned by 38 electric membership corporations, including Cobb EMC of Marietta.

Sutherland assigned 15 lawyers to the transaction, in addition to Short and Warren. The lead team consisted of partner Scott Wright and counsel Robert Neis on tax matters, and associates Ram Sunkara on M&A, Steven LaSota on real estate and Tina Radchenko on energy. All are in Atlanta except Radchenko, who’s in New York. Locke Lord Bissell & Liddell lawyers in Houston advised Dynegy, Warren said.

The 539-megawatt plant to be sold to Oglethorpe is located near the town of Centralhatchee in Heard County, on the Alabama state line. The plant has already been serving some of Oglethorpe Power’s customers through a purchase agreement.

Dynegy in January backed out of a joint venture with LS Power Associates LP to build a 1200-megawatt coal-fired power plant on the Chattahoochee River near Blakely, dubbed the Longleaf plant. LS Power plans to go it alone and build the plant.

Environmental groups argued Longleaf would threaten public health because of its pollutants. Fulton County Superior Court Judge Thelma W. Cummings Moore agreed and invalidated Dynegy’s permit. Moore’s decision turned on her interpretation of a 2007 U.S. Supreme Court decision that says the Environmental Protection Agency has the authority to regulate carbon dioxide.

The Georgia Chamber of Commerce and others asked the state Court of Appeals to review Moore’s ruling. The Court’s ruling remains pending.

Lawyers from Hartman, Simons, Spielman & Wood and Sutherland are the legal advisers on the bankruptcy court-approved sale of a Georgia natural gas marketer.

Sutherland partners Tom Byrne and Knox Dobbins advised MXenergy Inc. on its agreement to acquire Catalyst Natural Gas LLC for about $2 million. Hartman Simons partners Sam Arden and Joe DeLisle were counsel to Catalyst on the deal. The sale has received approval from U.S. Bankruptcy Court Judge Joyce Bihary and from the Georgia Public Service Commission.

Catalyst, of Atlanta, filed for Chapter 11 protection on Oct. 1 in U.S. Bankruptcy Court for the Northern District of Georgia. Catalyst was a natural-gas marketing company that had served 34,000 customers in Georgia. MXenergy, of Stamford, Conn., provides natural gas and electricity in the U.S. and Canada.

In addition to the sales agreement, a host of Atlanta-area attorneys are advising clients in the Catalyst bankruptcy proceedings.

Jones & Walden partners Leon Jones and Denise Dotson are bankruptcy counsel to Catalyst, while Powell Goldstein partner Robert Mercer is legal counsel to the official committee of unsecured creditors to Catalyst.

Cohen Pollock Merlin & Small partner Gus Small is representing interested party Gas South LLC, which said in a court filing that it estimates that it’s owed about $1.5 million by either Atlanta Gas Light or by Catalyst. That debt is a result of Catalyst under-supplying the natural gas system shared by the state’s gas-marketing companies, Small wrote in a court filing on behalf of natural-gas marketer Gas South.

McKenna Long & Aldridge partners Gary Marsh and Craig Dowdy and associate David Gordon are counsel to creditor Atlanta Gas Light Co.

Rogers & Hardin partners Kimberly Myers, Tony Powers and Robert Remar are representing creditor Georgia Natural Gas, a unit of SouthStar Energy Services.

King & Spalding partner Paul Ferdinands is counsel to creditor SCANA Corp.

Morris, Manning & Martin partners Becky Patrick and David Rabin are counsel to Infinite Energy Inc. on litigation it filed against Catalyst. Hartman Simons partner David L. Pardue is defending Catalyst in the Infinite Energy litigation.

Scroggins & Williamson partners Robert Williamson and Hayden Kepner are counsel to interested party Constellation Energy Commodities Group Inc. McDermott Will & Emery partners Nathan Coco in Chicago and Robert Stephens in Houston are also advising Constellation Energy.

Troutman Sanders partner John Mercer advised Wisconsin Electric Power Co. on a $300 million securities offering.

The electric utility said in a regulatory filing that it plans to sell $300 million of unsecured debentures at 6 percent due Apr. 1, 2014. Wisconsin Electric Power will use the proceeds from the offering to “repay short-term debt, for working capital and for other general corporate purposes, including the payment of dividends,” according to a prospectus.

Troutman associates Patrick Macken and Brad Resweber assisted Mercer. All three Troutman lawyers work out of Atlanta. Dewey & LeBoeuf is advising the underwriters, Citigroup Global Markets and Wachovia Capital Markets.

Wisconsin Electric Power is a subsidiary of Wisconsin Energy Corp. Wisconsin Electric Power sells electricity to more than 1.1 million customers in its home state and in the upper peninsula of Michigan.

David Stockton’s client, an Appalachian coal mining company, got in just under the wire.

James River Coal Co., the morning of Monday, Sept. 29, raised $44 million through the sale of 1.5 million shares of common stock. The deal happened just in the nick of time, said Stockton, a corporate partner at Kilpatrick Stockton in Atlanta. That’s because later that Monday, the Dow Jones Industrial Average dropped 777.68 points, its largest one-day drop in history, after the U.S. House of Representatives rejected a $700 billion bailout bill for the financial sector.

“The sale closed on Monday morning, and then the market tanked that afternoon,” Stockton said. “If [the James River securities offering] had not closed on Monday until the end of the day, there could have been problems.”

What had made James River’s securities sale possible was a recent rise in the company’s stock price along with rival coal companies. Coal stocks had risen in the past year because the price of coal had risen. That paralleled an increase in price of oil, Stockton said.

James River’s stock had risen significantly over the past 12 months, touching a 52-week high of $62.83 per share in late June, Stockton said. With its stock price up, that made it an opportune time to proceed with a stock sale, Stockton said. James River’s investment bank, UBS Securities LLC, made the decision on Monday morning to proceed with the stock sale.

Mining disasters that occurred in Kentucky and West Virginia in 2006 indirectly led to James River’s decision to raise capital through a stock sale. Because of increased health and occupational safety regulations that were implemented in the wake of the Kentucky Darby and Sago mine disasters, coal companies have had to boost spending to comply with the new rules.

“These new regulations have been very costly and have required major capital expenditures,” Stockton said. “They have been a major financial burden for the coal companies.”

According to a regulatory filing, among the expenses that James River incurred from the new regulations were: constructing and maintaining caches for the storage of additional self-contained self rescuers throughout underground mines; installing rescue chambers in underground mines; and installing cable lifelines from the mine portal to all sections of the mine to assist in emergency escape.

Working with Stockton on the securities offering was Kilpatrick associate Josh Galante in New York. Cravath, Swaine & Moore advised UBS.

James River is headquartered in Richmond, Va., and operates 15 underground mines and 11 surface mines in Kentucky and Indiana. James River’s largest customer is Georgia Power Co., according to regulatory filings.

In the hunt for renewable source materials to make biofuels, researchers are leaving no stone unturned. Everything from green algae to switchgrass to corn stalks is being studied for its potential as a commercially viable fuel.

Another potential source material is grease, which is what drove a recent deal made by a McKenna Long & Aldridge client.

American Proteins Inc. in Aug. sold three facilities in Georgia that collect used cooking oil from restaurants and turn it into yellow grease. The assets were acquired for an undisclosed price by Darling International Inc. of Irving, Texas.

While traditionally used for animal feed, yellow grease can also be used to make biofuels, said McKenna partner Jeremy Silverman. Consequently, the market for yellow grease has risen dramatically in the past year, he said.

Silverman was lead corporate counsel to American Proteins, along with associates Trey Wainwright, Doug Eingurt and Stacey Robinson. McKenna has been a legal advisor to American Proteins since 1982, Silverman said. Weil, Gotshal & Manges advised Darling.

American Proteins, of Cumming, is the largest U.S. processor of poultry by-products. Darling collects and recycles animal by-products and used cooking oil from restaurants, butchers and grocery stores and then re-sells tallow and meat, bone and blood meal. Darling also provides grease trap cleaning services.