Brilliant Energy Files for Bankruptcy After Texas Freeze
(Bloomberg) -- Brilliant Energy LLC filed for bankruptcy in the Southern District of Texas, adding to a growing list of companies that have stumbled after power outages caused by a winter freeze in February.
The Chapter 7 filing signals an intent to liquidate the business while under court protection. The electricity provider has estimated liabilities of $50 million to $100 million compared with assets of $10 million to $50 million, according to its bankruptcy petition.
At their peak, the unprecedented power outages in Texas left four million homes and businesses without heat, light and in some cases water as a rare and powerful winter storm gripped the region, causing as much as $129 billion in economic losses. Dozens of people died in the cold.
Brilliant Energy is at least the fourth firm to seek bankruptcy protection in the wake of the Texas freeze, underscoring the crushing financial pressure the outages have put on power companies in the state. The market faces a more-than $3 billion shortfall as over a dozen companies can’t pay their bills.
DTE Energy Trading, a creditor in the case, claims in court papers that Brilliant has been in default on certain power contracts since 2017 and owed DTE about $15 million prior to last month’s freeze. The wholesale electricity seller says it’s now owed some $60 million and has asked Brilliant’s bankruptcy judge to intervene before “irreparable harm” befalls the company’s most valuable assets -- its customer contracts.
DTE is asking for a court-appointed trustee to take control of Brilliant and sell the customer contracts. Without it, the state’s grid operator may transfer the contracts to another electricity provider, destroying what value is left in the company and potentially foisting higher power bills on consumers, DTE argues in court papers.
The contracts may be worth as much as $12 million, according to DTE. An emergency hearing is set for Wednesday afternoon.
“The value of those customer contracts now is at risk of being lost as a result of this Chapter 7 filing and management’s precipitous actions,” lawyers for the energy wholesaler wrote in court papers. DTE claims it was in talks about selling the contracts prior to the filing, but Brilliant “abruptly ended those negotiations, sent the debtor’s employees home, and then filed the instant Chapter 7 case.”
Brilliant Energy’s bankruptcy lawyer declined to comment.
“We will work with the bankruptcy court to ensure the best outcome for DTE stakeholders,” a representative for DTE said in emailed comments. The company will disclose its energy trading unit’s results in its quarterly report and expects on-target performance for the period, the representative said.
The case is Brilliant Energy LLC, 21-30936, U.S. Bankruptcy Court for the Southern District of Texas (Houston).
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