SemStream’s attempt to placate the Arizona Corporation Commission Wednesday regarding its parent company’s bankruptcy elicited frustration and many unknowns.
Commissioner Kris Mayes was unassuaged by SemStream’s assurances that halted plans for a Winslow storage facility would not adversely affect Payson customers.
“I don’t understand how you can not see this,” Mayes said. “I’m baffled, frankly.”
She said her biggest concern centered on what would happen to parent company SemGroup’s assets that include SemStream Arizona, which 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.
SemGroup filed for bankruptcy on July 22 after failed bets on purchasing oil futures resulted in $3.2 billion in losses. The company has hired a chief reorganization officer.
A bankruptcy court will soon appoint an examiner to investigate the company’s trading practices. A report is expected in about five months.
A long silence followed on the conference call after commissioners asked SemStream officials why they weren’t advised that the company was making such large bets on commodity prices.
David Wunch, SemStream LP’s executive vice president, said that issue will be addressed in the report.
“I look forward to that report, but the answer is you don’t know,” Mayes said. “I appreciate your candor on that.”
SemStream Arizona President Doug Mann said he was unaware of SemGroup’s hedging, though he added that “most energy companies do deal with hedges from time to time.”
Commissioners also pounded on 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.
Mann argued 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, would have never had the technology nor the capital to build such a facility on its own.
“I looked at it as a benefit,” Mann said. “The hope is to achieve lower prices…Stockbrokers 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.”
Mayes later suggested the commission could force the company to build the storage facility.
“We’ve just learned they had $170 million to work with,” Mayes said. Several banks loaned SemGroup the money as part of bankruptcy proceedings. Wunch earlier said that the chief reorganization officer decides how to spend money.
The commission’s attorney said she would look into the legalities of ordering the company to build the storage facility.
Mayes asked Mann if Thomas Kivisto, the chief executive officer that resigned days before the company filed bankruptcy, had received excessive executive compensation — a “golden parachute.”
Mann said he didn’t know.