Bankrupt co-op, creditor reach deal

BILLINGS — A bankrupt Montana electric cooperative announced a tentative deal with creditors Wednesday that would keep customer rates at current levels and allow it to unload a largely unused power plant near Great Falls that helped drag it into bankruptcy.

Southern Montana Electric Generation and Transmission Cooperative serves more than 11,000 customers in central and eastern Montana.

It fell into bankruptcy in October 2011 after building the now-idle Highwood gas plant and getting locked into unfavorable contracts to buy more power than it needed.

Interim manager Scott Sweeney says the proposed deal would allow Southern’s four smaller member co-ops break up after four years. Other members at the start of the bankruptcy already have exited, taking with them most of the parent co-op’s customers.

A prior proposal from ousted bankruptcy trustee Lee Allen Freeman would have kept Southern together for 12 years and driven up electricity rates to pay off $85 million in loans used to build Highwood.

Terms of the deal filed Wednesday in federal court must be approved by U.S. Bankruptcy Judge Ralph Kirscher.

It followed months of negotiations after the two sides filed competing plans to reorganize the co-op so it might emerge from bankruptcy.

The settlement was reached by representatives of Southern and the noteholders that loaned it money to build the gas plant, Prudential Insurance and Modern Woodmen of America. The plant served as collateral on the loans.