The Wall Street Journal ($):

A bankruptcy judge rejected FirstEnergy Corp.’s $3.1 billion attempt to walk away from a fleet of failing power plants, siding with regulators who want the parent company on the hook for pollution cleanup costs.

Judge Alan Koschik of the U.S. Bankruptcy Court in Akron, Ohio, said Thursday a $4 billion restructuring strategy to lift FirstEnergy Solutions Corp. out of chapter 11 was “patently unconfirmable,” a setback for the bankrupt company, its creditors and its publicly traded parent.

FES filed for bankruptcy more than a year ago to part ways with FirstEnergy, which agreed to contribute $1 billion to pay back creditors and forgive $2.1 billion in claims against the unit. In exchange, FirstEnergy was to receive immunity from future legal claims surrounding FES, including the costs of cleaning up and shuttering several coal and nuclear plants in Ohio and Pennsylvania.

But Judge Koschik rejected the exit plan, a victory for federal and state regulators who accused FirstEnergy of abusing bankruptcy law to try to extricate itself from the money-losing power facilities.

Most of the power assets that FES and other bankrupt affiliates own are slated for closure, unable to operate profitably amid aggressive competition from cleaner gas-fired and renewable power generators that have become cheaper to run in the past decade. FES now plans to deactivate four nuclear reactors by 2021 and 11 fossil-fuel units by 2022, part of a wave of plant closures across U.S. wholesale power markets, where natural gas is plentiful and state-subsidized renewables are gaining in popularity.

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