Brazos seeks approval of $350 million bankruptcy loan

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Workers install a utility pole to support power lines after an unprecedented winter storm in Houston, Texas, U.S., February 22, 2021. REUTERS/Adrees Latif/File Photo

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(Reuters) - Brazos Electric Power Cooperative Inc is seeking bankruptcy court approval of a $350 million loan as it restructures in the aftermath of February's historic winter storm that wiped out power for millions in Texas.

The cooperative, represented by Norton Rose Fulbright, filed a motion to access the loan on Tuesday. A hearing is set for May 18 before Chief U.S. Bankruptcy Judge David Jones in Houston to approve its use of up to $150 million of the loan on an interim basis. The judge will take up the full amount of the loan at a later date.

Brazos, which is the oldest and largest electric power co-op in Texas, filed for bankruptcy protection in March in the face of a disputed $2.1 billion bill from the state's grid operator, the Electric Reliability Council of Texas (ERCOT), following the severe cold snap in February. The co-op said it was in "fantastic financial health" before the storm caused wholesale electricity rates to soar.

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The loan, provided by a J.P. Morgan Chase Bank-led group of lenders, will fund collateral requirements Brazos must meet with ERCOT. The loan will also fund the co-op's purchases of gas and power on spot and day-ahead markets and provide working capital, according to court papers.

Brazos owes approximately $2 billion in funded debt and $340 million in trade debt. The co-op had $252 million in cash on hand as of April 30 but expects that figure to drop to $141 million by May 28 and $29 million by June 4, according to the motion.

The co-op says it needs the additional financing to ensure that it can meet power demand increases during the summer months.

The $2.1 billion bill from ERCOT for the seven days the storm lasted is nearly three times the co-op's total power cost from 2020, which was $774 million, according to court papers. For several days during the storm, ERCOT had set electricity prices at $9,000 per megawatt hour.

Last week, the Texas House approved a $2.5 billion plan to bail out the state's electricity market.

The case is In re Brazos Electric Power Cooperative Inc, U.S. Bankruptcy Court, Southern District of Texas, No. 21-30725.

For Brazos: Louis Strubeck, Jason Boland, Michael Parker and Steve Peirce of Norton Rose Fulbright US

For ERCOT: Kevin Lippman of Munsch Hardt Kopf & Harr

For J.P. Morgan: Davis Polk & Wardwell

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