Talen Montana LLC asked the Texas court presiding over its parent company's Chapter 11 bankruptcy case to allow recovery of hundreds of millions of dollars of pension funds and Colstrip coal plant remediation costs that PPL Corp. allegedly transferred out of the Talen Energy Supply LLC subsidiary.

In November 2014, when Talen Montana was doing business as PPL Montana LLC, the cash proceeds from an approximately $900 million sale of its hydroelectric assets to NorthWestern Corp. were improperly distributed to PPL, according to a May 10 filing reiterating a 2018 lawsuit that remains pending in a Montana court.

Those fraudulent transfers left Talen Montana in "dire condition" financially, unable to generate "adequate future income or assets to pay its liabilities," the company said in the court filing.

"By extracting this value from PPL Montana and disregarding PPL Montana's substantial liabilities, defendants rendered PPL Montana insolvent and unable to fund its significant obligations — both for environmental remediation, as well as obligations to other creditors such as its employees' and former employees' pension plan," Talen Montana said. "Following the sale, all that remained at PPL Montana were its coal-fired assets, which are projected to generate negative cash flows for the foreseeable future and are burdened with substantial environmental and other liabilities." (U.S. Bankruptcy Court for the Southern District of Texas, Houston Division, 22-90054)

PPL countersued Talen Montana a month after the October 2018 petition, blaming private equity giant Riverstone Holdings LLC for Talen Montana's financial condition after taking Talen Energy Supply private in 2016. The Delaware Court of Chancery in 2019 denied all of the defendants' motions to dismiss the litigation except for the charge that PPL breached "the implied covenant of good faith and fair dealing."

Talen Montana is the operator of the Colstrip plant and is one of seven companies that shares ownership in the plant's two remaining operating units. Talen and one other owner, NorthWestern Corp., have not pledged to exit the coal-fired generation business by the end of 2025.

"We just don't want to prematurely suggest that Colstrip's economic life is ending because someone picked an arbitrary date of 2025," Debra Raggio, senior vice president and regulatory and external affairs counsel for Talen Energy Corp., told Montana state lawmakers during a May 19 hearing.

Guggenheim Securities LLC told clients May 19 that "two of Colstrip's co-owners are saying that repairs needed for unit 3 have impacted Colstrip's performance for several weeks and that the cost of repairs is expected to be significant."

Talen Energy said May 18 that the Montana subsidiary's employee pension plan "is very well funded in comparison with other similar pension plans and is on track to be fully funded by the end of 2025," according to reporting by Lee Montana Newspapers.

Talen Energy Supply's restructuring agreement includes $1.76 billion of debtor-in-possession financing and new equity investment of up to $1.65 billion.

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