As SemStream officials attempted to placate the Arizona Corporation Commission Wednesday regarding their parent company’s bankruptcy, the few answers provided seemingly caused more friction.
Commissioner Kris Mayes said her largest concern centered on what would happen to parent company SemGroup’s assets, which include SemStream. SemStream Arizona provides propane to roughly 9,000 customers in northern Gila County.
Chris Lopez, a bankruptcy lawyer for SemGroup, said that’s still unclear. The company has obtained $170 million in interim financing to continue business. Lopez did not rule out asset sales, but said reorganization is also an option.
The company has hired a chief reorganization officer.
Commissioners pounded against SemStream officials, recalling promises that a planned storage facility in Winslow would lower propane prices for Payson customers.
The bankruptcy halted construction plans.
“Don’t you think that’s a negative impact to the customers of SemStream?” Mayes asked.
SemStream Arizona President Doug Mann argued that the storage facility was hoped for, but never promised. He said the facility, which would have cost $7 million, was meant to offer flexibility to SemStream LP. SemStream Arizona, he said, never would have had the technology nor the capital to build such a facility.
“I looked at it as a benefit,” Mann said. “The hope is to achieve lower prices…Stock brokers on Wall Street hope for what is ahead also.”
“I’m not sure you want to be making comparisons to the stock market now,” Mayes responded. “Some of those entities are being investigated by the FBI.”
Mann and the commissioners continued to disagree with whether the halted plans for the Winslow storage facility would adversely affect Payson customers.
“I don’t understand how you can not see this,” Mayes said. “I’m baffled, frankly.”
Commissioners also asked why they weren’t advised that SemGroup was making such large hedges.
A long silence followed on the conference call, after which David Wunch, SemStream LP’s executive vice president, said he didn’t know.
Mann said he was unaware of SemGroup’s hedging, though he added that “most energy companies do deal with hedges from time to time.”
SemGroup filed for bankruptcy on July 22 after failed bets on purchasing oil futures resulted in $3.2 billion in losses.
An examiner will be appointed to investigate SemGroup’s fall. A report is expected in five months. For more details, see Friday’s Roundup.