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UNITED STATES BANKRUPTCY COURT

 

DISTRICT OF MAINE
In re:
Chapter 11
BUCKSPORT GENERATION LLC, Case No. 15-10802
Debtor.

 

 

AFFIDAVIT OF KYLE NENNINGER IN SUPPORT OF FIRST DAY MOTIONS

1, Kyle Nenninger, being duly sworn, depose and say:

1. I am employed by, and have a membership interest in, Energy Advisory Partners
LLC a ?nancial advisory ?rm specializing in the energy industry and retained pre-
petition by Bucksport Generation LLC (the Bucksport Mill LLC (?Bucksport Mill?)
and AIM Development (USA) LLC under an Agreement to Serve as Restructuring
Agent for Bucksport Energy Project dated July 13, 2015.

2. EAP was retained for the purpose of assisting the Debtor and Bucksport Mill in
restructuring and optimizing the pro?tability of certain energy generation assets described in
more detail below and co-owned by Bucksport Mill and the Debtor. Services provided to the
Debtor, Bucksport Mill and AIM include, but are not limited to, restructuring contracts to reduce
costs, restructuring operations, and coordinating communications with Verso Paper LLC 
and Verso Maine Power Holdings LLC the former owners of the membership
interests of Bucksport Mill and the Debtor, respectively.

3. In addition to retaining the services of EAP, the Debtor also hired me as an
employee pursuant to the terms of an At Will Employment Agreement dated July 16, 2015 (the

?Nenninger Employment Agreement?).

 

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4. On November 3, 2015, the Debtor ?led a voluntary petition for relief under

chapter 11 of title 11 of the United States Code (the ?Bankruptcy Code?) in the United States

Bankruptcy Court for the District of Maine. The same day, the following motions were filed

(collectively, the ?First Day Motions?):

a.

Motion for Interim and Final Orders: (A) Authorizing Debtor to Obtain
Postpetition Financing; (B) Granting Superpriority Claim and Postpetition
Senior Security Interest to AIM Development (USA) 
(C) Authorizing the Debtor to Use Cash Collateral; and (D) Scheduling a
Final Hearing and Granting Related Relief (the ?Borrowing and Cash
Collateral Motion?);

Motion for Authority to: (A) Pay Pre-Petition Employee Wages, Salaries
and Related Payroll Obligations; (B) Make Payments for Which Payroll
Deductions Are Made; (C) Continue Employee Bene?ts Programs and
Related Administrative Obligations in the Ordinary Course; and (D)
Direct All Financial Institutions to Honor All Related Payment Requests

(the ?Payroll Motion?);

Motion for Entry of an Order Authorizing the Maintenance of Bank
Account and Continued Use of Existing Business Forms and Checks (the
?Cash Management Motion?);

Motion for Order, Pursuant to Rule 1007(c) of the Federal Rules of
Bankruptcy Procedure, Extending Time toFile Schedules and Statement
of Financial Affairs (the ?Schedules Motion?); and

Motion for Expedited Hearing and Approval of Shortened Objection
Period With Respect to Various First Day Motions (the ?Motion for

Expedited Hearing?).

This Af?davit is submitted in support of these First Day Motions, which are described in greater

detail below.

5. All facts set forth herein are based on my personal knowledge, on information

supplied to me by others within the Debtor?s organization, upon my review of relevant

documents, or on my opinion based on my experience and knowledge of the Debtor?s operations,

financial condition and present liquidity needs. If I were called to testify, I could and would

testify competently to the facts set forth herein. Part I of this Af?davit describes certain relevant

2

 

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historical events which are necessary to understand the issues involved in this bankruptcy case.
Part II of the Af?davit describes the Debtor?s operations as of the Petition Date. Part details
events precipitating this chapter 11 ?ling and explaining the Debtor?s preliminary plans for
restructuring under chapter 11. Finally, Part IV sets forth facts relevant to each of the First Day
Motions.
1. Historical Events

6. Pre-petition, Verso Bucksport LLC (?Verso Mill?), a wholly owned subsidiary of
VP, owned and operated a paper mill located in Bucksport, Maine (the ?Mill?

7. The Mill was powered by certain generation assets which include, inter alia, a 21
MW generator, backpressure steam turbine and related equipment (collectively, a 72.4

MW Generator, condensing steam turbine and related equipment (collectively, a General

 

Electric 7FA 185 MW gas turbine heat recovery steam generator and related equipment
a 25 MW Generator, condensing steam turbine and related equipment (collectively,
a gas boiler and related equipment two oil boilers and related equipment
(?Boiler 6 and Boiler and a multi?fuel boiler and related equipment (?Boiler 
Collectively, G2, G3, G4, G5, Boiler 5, Boiler 6, Boiler 7, Boiler 8, Boiler 9 and all associated
equipment shall be referred to herein as the ?Energy Plan 

8. Other than coordinated shut downs for maintenance purposes or emergencies, the
Energy Plant previously operated twenty-four (24) hours per day, seven (7) days per week
producing electricity and steam necessary to power the Mill which, until the end of 2014, was
operating at full capacity with employees staf?ng the paper?making facility around the clock in
three shifts. In addition, the Energy Plant had the capability to, and did in fact, sell electricity

and capacity into the New England energy market.

 

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9. Prior to February 28, 2014, Bucksport Energy LLC (?Bucksport Energy?), a
subsidiary of HO. Energy Services (U.S.) Inc. (?Bucksport Energy Parent?), owned a seventy-
two percent interest in G4 and Boiler 9. Verso Mill owned the remaining twenty-eight
percent interest in G4 and Boiler 9 and one hundred percent (100%) interest in all other
assets comprising the Energy Plant and the Mill itself. Bucksport Energy and Verso Mill jointly
operated the Energy Plant pursuant to the following documents:

a. Co-Owners Ownership, Operating Mutual Sales Agreement dated as of
December 15, 1998, as subsequently amended by the Amended and Restated
Co-Parties Ownership, Operating Mutual Sales Agreement, dated as of July
27, 1999 (the original agreement and subsequent amendment being
collectively referred to herein as the ?Verso Co-Owners Agreement?); and

b. Ground Lease and Sublease, dated as of December 15, 1998, as amended by
the Amended and Restated Ground Lease and Sublease dated as of July 27,
1999 (the original lease and subsequent amendment being collectively
referred to herein as the ?Verso Ground Lease?).

10. The majority of employees staf?ng both the Mill and Energy Plant were
employed under a collective bargaining agreement (the ?Verso between VP and United

Steel Workers Local No. 00261 and Local No. 01188 and the International Brotherhood of

Electrical Workers Local No. 1777 (the ?Unions?). The Verso CBA had a term beginning May

 

1, 2011 and ending on October 31, 2015.

11. In connection with its operation of the Energy Plant, Bucksport Energy entered
into a Global Services Business Long Term Service Contract dated as of August 7, 1998
(the by and between Bucksport Energy and General Electric International, Inc.
pursuant to which GE agreed to provide long term parts and services relating to G4. The
GE LTSA included detailed schedules for planned maintenance and parts replacement to be

performed by GB in consideration for certain charges to be paid by Bucksport Energy.

 

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12. Further, Bucksport Energy Parent entered into the Firm Gas Transportation
Service Agreement with Bangor Gas Company (?Bangor Gas?), dated July 15, 1999 (the 
Transmission Contract?) pursuant to which Bangor Gas agreed to construct, maintain and
operate a gas pipeline capable of supplying gas suf?cient to support the Energy Plant?s
continuous operation. In exchange for these transmission services, Bucksport Energy agreed to
pay an Annual Transmission Capacity Charge of $1,150,662 to Bangor Gas.

13. On or about February 28, 2014, Bucksport Energy Parent transferred Bucksport
Energy?s entire seventy-eight percent interest in G4 and Boiler 9 to Verso Bucksport
Power LLC (?Verso Generation?), a wholly owned subsidiary of VMPH. In connection with
that transaction, Bucksport Energy?s rights, obligations and liabilities under the GE LTSA and
Bucksport Energy Parent?s rights, obligations and liabilities under the Gas Transmission
Contract were assigned to Verso Generation.

14. Bangor Gas?s consent to the assignment of the Gas Transmission Contract was
conditioned upon Verso Generation?s execution of a Collateral Agreement pursuant to which
Verso Generation deposited $949,540 into an account controlled by Bangor Gas (the ?Ego;
Gas Collatera Bangor Gas asserts a ?rst priority security interest in the Bangor Gas
Collateral.

15. Effective January 1, 2014, GE and Verso Generation entered into Amendment
No. 03 to the GE LTSA (the ?Verso Generation LTSA Amendment?). The Verso Generation
LTSA Amendment, inter alia, extended the original term of the GE LTSA and established
Annual Milestone Payments of one million dollars ($1,000,000) in 2014, three million ?ve

hundred thousand dollars ($3,500,000) in 2015, ?ve million dollars ($5,000,000) in 2016, and

 

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three million ?ve hundred thousand dollars ($3,500,000) in 2017 (the ?Annual Milestone
Payments?).

16. On or about December 5, 2014, VP and VPMH entered into a Membership
Interest Purchase Agreement (the with AIM under which AIM purchased all of 
and respective membership interests in their wholly owned subsidiaries, Verso Mill and
Verso Generation, respectively. Post-closing, Verso Generation-?now a subsidiary of 
continued to be a party under the GE LTSA, as amended, and the Gas Transmission Contract, as
amended. AIM entered into an Employee Leasing Agreement with VP pursuant to which AIM
leased employees from VP to staff and operate the Energy Plant for a period commencing on the
date on which the MIPA closed and ending on the earlier of April 30, 2015 or such earlier date
elected by AIM (the ?Employee Leasing Agreement?). The Verso CBA expired on April 30,
2015 without a new collective bargaining agreement in place, however, the Debtor, Bucksport
Mill, AIM and its af?liates, agents and successors continued to be bound by its terms under the
terms of the Employee Leasing Agreement and applicable labor laws until a new collective
bargaining agreement was reached.

17. The parties closed on the MIPA on or about January 29, 2015. Soon thereafter
Verso Mill?s name was changed to Bucksport Mill LLC and Verso Generation?s name was
changed to Bucksport Generation LLC. AIM continues to be the sole member of each entity.

II. Debtor?s Operations

18. The Debtor and Bucksport Mill continue to co-own and operate the Energy Plant.
Their rights and obligations with respect to those generation assets are governed by the Co-
Owners Ownership, Operating and Mutual Sales Agreement by and between Bucksport Mill

LLC f/k/a Verso Bucksport LLC and Bucksport Generation LLC f/k/a Verso Bucksport Power

 

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LLC, effective as of January 29, 2015 (the ?Co-Owners Agreement?) and the Ground Lease
between Verso Bucksport LLC and Bucksport Generation LLC f/k/a Verso Bucksport Power
LLC, effective as of January 29, 2015 (the ?Ground Lease?). The Co-Owners Agreement and
the Ground Lease are based upon the terms and conditions set forth in the terminated Verso Co-
Owners Agreement and the Verso Ground Lease.

19. Contemporaneously with the closing of the MIPA, AIM entered into an Asset
Management Agreement with Consolidated Asset Management Services (Texas), LLC 
has?) pursuant to which CAMS Texas agreed to perform all management, administrative,
compliance and other support services necessary to operate the Energy Plant.

20. Among other services, CAMS Texas was obligated under the Asset Management
Agreement to manage accounts related to the Energy Plant project, which management included
making deposits into and withdrawing funds from the accounts, and paying expenditures
necessary to fund Energy Plant obligations. Although the accounts were maintained by CAMS
Texas, as a third party manager, all deposits into and disbursements from those accounts were
carefully allocated among the Debtor and Bucksport Mill in accordance with the Accounting 
Allocation Methodology set forth in the Co-Owners Agreement.1 CAMS Texas also ensured
compliance with all regulatory requirements, negotiated, obtained and renewed licenses and
permits as necessary, and negotiated with contract counterparties for the provision of goods and
services necessary to the Energy Plant?s OperatiOns.

21. Also on January 29, 2015, AIM entered into an Operating and Maintenance

Agreement (the Agreement? and, together with the Asset Management Agreement, the

 

1 The Accounting Allocation Methodology is a comprehensive schedule listing every source of income and
operational expense of the Energy Plant; from the cost of lubricants to labor costs on the liabilities side and from
capacity payments to renewable energy credits on the asset side. Each of the more than 150 items listed on the
Accounting Allocation Methodology are speci?cally allocated between and among the Debtor and Bucksport Mill
in accordance with each entity?s ownership interest in the assets comprising the Energy Plant.

7

 

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Agreements?) with Consolidated Asset Management Services (Maine), LLC 
_Ma_ir_1?? and, collectively with CAMS Texas, the Entities?) pursuant to which CAMS
Maine managed the Energy Plant. Payroll for the Energy Plant?s employees was?like other
operating expenses of the Energy Plant?accounted for in accordance with the Accounting 
Allocation Methodology.

22. While the CAMS Entities undertook the daily operation of the Energy Plant in
accordance with their respective obligations under the CAMS Agreements, the CAMS Entities
performed those services as agents of Bucksport Mill and the Debtor. Orders were placed on
behalf of, and invoiced to, the Debtor and/or Bucksport Mill, as appropriate under the terms of
the Co-Owners Agreement. Costs, expenses, assessments and other liabilities were allocated
between the Debtor and Bucksport Mill in accordance with the Accounting Allocation
Methodology.

23. While the Energy Plant is capable of operating in the same way it has in the past,
there have been some signi?cant changes in operation. Principally, Bucksport Mill no longer
operates the Mill and is currently seeking permits and approvals necessary to demolish that
facility. The historically large work force necessary to operate both the Mill and the Energy
Plant has shrunk to a pool of just 18 employees who are available to operate the Energy Plant;
two of whom are contract employees retained for the sole purpose of restructuring the Energy
Plant to increase pro?tability.

24. With the closure of the Mill, the need for the Energy Plant to constantly provide
steam and electricity to the Mill ended. Accordingly, the Energy Plant no longer operates
continuously and now sells energy on a merchant basis and is a participant in the ISO New

England?s forward capacity market. In that role, the Energy Plant is in a stand by capacity mode

 

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and needs only generate electricity when ISO New England calls upon it to ensure constant
availability of electricity on the regional New England grid or is dispatched in the day ahead
energy markets if prevailing prices exceed the Energy Plant?s costs. Under the applicable ISO
New England tariff provisions, the Energy Plant receives capacity payments from ISO in
consideration for its continuous availability to produce electricity when called upon to do so by
ISO New England (the ?Capacity Payments?).

25. On the rare occasion the Energy Plant operates to generate electricity, the Energy
Plant receives payment for the electricity it produces for ISO New England (the ?Electricity
Revenues?). Under the Accounting Allocation Methodology, the Debtor is entitled to forty?
seven percent of the Capacity Payments and seventy-two percent of the Electricity
Revenues generated by G4. The remaining ?fty-three percent of the Capacity Payments
and twenty-eight percent of the Electricity Revenues generated by G4, plus one hundred
percent (100%) of the Electricity Revenues generated by G3 and G5, constitute pro?ts of the
Bucksport Mill.

26. The Energy Plant?s change in operations from a continuous source of energy
powering the Mill to a merchant generator greatly reduces the amount of natural gas the Energy
Plant requires to operate and completely changes the necessary timing and amount of
maintenance G4 needs such that the Bangor Gas Contract and GE LTSA are an ill ?t for the
project.

27. In an effort to cut costs and increase the Energy Plant?s pro?tability, the Debtor,
Bucksport Mill and AIM have, among other things, decided to streamline the Energy Plant?s
operations by eliminating the CAMS Entities as middle men. To that end, the Debtor entered

into a Labor Agreement between BuckSport Generation LLC a Subsidiary of AIM Development

 

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(USA), LLC and United Paper, Steel and Forestry, Rubber, Manufacturing, Energy, Allied
Industrial and Service Workers International Union on Behalf of its Local Union #01188 and the
International Brotherhood of Electrical Workers Local No. 1253, effective as of July 1, 2015 (the
?@839.

28. Further, on September 24, 2015, AIM, the Debtor and the CAMS Entities entered
into the Assignment of and First Amendment to the Asset Management Agreement and First
Amendment to Agreement (the Amendment?), pursuant to which AIM assigned
its rights, obligations and liabilities under the CAMS Agreements to the Debtor. Further, the
term of the Agreement was shortened to October 15, 2015 and CAMS Texas?s role under
the Asset Management Agreement was drastically scaled back to an advisory capacity, beginning
November 1, 2015. These changes result in a corresponding reduction in CAMS Texas?s
management fee. The Debtor now employs the remaining eighteen (18) employees?twelve (12)
of whom are members of the Unions?~and, as of September 18, 2015, maintains its own
operating account at Comerica Bank.

29. The Debtor funded its pre-petition restructuring efforts with a ten million dollar
secured line of credit evidenced by that certain Secured Line of Credit
Promissory Note dated September 8, 2015 (the Note?). On the Petition Date, the
outstanding balance under the AIM Note was $9,124,692.27. To secure its obligations under the
AIM Note, the Debtor executed a Security Agreement of even date granting AIM a blanket

security interest in all of the Debtor?s assets.

10

 

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Events Precipitating Filing

30. Although the Debtor undertook signi?cant restructuring efforts pre-petition, the
Debtor continues to struggle with historical liabilities which are impossible to satisfy as result of
the reduced scope of the Energy Plant?s operations.

A. The GE LTSA

31. The Debtor contends that GE breached the GE LTSA pre-petition by failing to
provide planned maintenance and combustion inspections in accordance with applicable
schedules established in the GE LTSA and, further, by exceeding the recommended replacement
interval for parts and failing to repair and replace parts in accordance with the terms of the GE
LTSA.

32. By letter dated April 21, 2015, the Debtor noticed GE that it was in material
breach of the GE LTSA and demanded cure of the default by delivery of parts which the Debtor
contends were overdue to be delivered. GE failed to cure such defaults in accordance with the
terms of the GE LTSA. In its letter dated April 21, 2015, the Debtor also demanded adequate
assurance of future performance by GB of obligations under the GE LTSA, but GE failed to
respond and provide adequate assurances of future performance within the reasonable time
provided by the Debtor. On May 5, 2015 the Debtor provided notice to GE that?as a result of
its material breach of contract and failure to provide adequate assurance of performance?the
Debtor considered GE to have repudiated the GE LTSA and, further, that such repudiation was
?nal. Based on material breaches and repudiation, the Debtor terminated the LTSA
effective May 5, 2015.

33. The Debtor is asserting a pre-petition claim against GE in the amount of at least

$12,558,611.04.

ll

 

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34. GE, on the other hand, claims the Debtor is in breach of the GE LTSA for failure
to make payments due to GE under the GE LTSA. GE asserts a claim against the Debtor in the
amount 

35. The Debtor intends to commence an adversary proceeding seeking damages for
breach and repudiation of the GE LTSA. To the extent the Court ?nds that the GE LTSA is
still in effect the Debtor will reject it.

B. The Gas Transmission Contract

36. The Debtor?s predecessor-in?interest, Bucksport Energy, entered into the Gas
Transmission Contract at a time when its gas supply needs were signi?cantly greater due to the
continuous operation of the Energy Plant. In the Debtor?s current role as a merchant energy
plant, the ?xed annual contract rate of $1,150,662 is staggerineg high and grossly
disproportionate to the transmission services Bangor Gas provides to the Debtor and will provide
to the Debtor in the ?lture.

37. The Debtor has sought?both in direct negotiations with Bangor Gas, and through
its participation in Bangor Gas?s administrative proceeding before the Maine Public Utilities
Commission seeking approval for renewal of a multi-year rate plan?to adjust its rate under the
Gas Transmission Contract from a ?xed annual rate to a cost of service rate. To date, the Debtor
has been unsuccessful in these negotiations.

38. The Debtor?s current operational structure simply does not support its current
obligations under the Gas Transmission Contract and, therefore, the Debtor anticipates rejecting

the Gas Transmission Contract in this proceeding.

12

 

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IV. The First Day Motions

39. I reviewed each of the First Day Motions, including the exhibits thereto, and I
believe that the relief sought in each of the motions is necessary if the Debtor is to operate in
chapter 11 with a minimum of disruption. Ultimately, these motions will be critical to the
Debtors? ability to achieve a successful reorganization.

A. Borrowing and Cash Collateral Motion

40. The Debtor seeks authority to borrow up to ten million dollars ($10,000,000) in
debtor in possession ?nancing from AIM (the Loan?) to fund the Debtor?s day-to-day
operations, working capital needs and restructuring costs in accordance with the budget (the
?_B_1_1dget?) attached as Exhibit to the Borrowing and Cash Collateral Motion. The Debtor
further seeks authority to grant AIM, in consideration for the DIP Loan, a ?superiority? claim
pursuant to section 364(c)(1) of the Bankruptcy Code and a blanket lien in all of its assets, junior
only to any valid, enforceable and properly perfected lien of Bangor Gas in the Bangor Gas
Collateral. Finally, the Debtor also seeks authority to use Cash Collateral in accordance with the
Budget. The terms of the DIP Loan and the use of Cash Collateral are set forth more fully in the
Borrowing and Cash Collateral Motion.

41. AIM is the only prepetition secured creditor holding liens which will be primed as
a result of the DIP Loan and is the only prepetition secured lender with a security interest in Cash
Collateral. AIM consents to the use of Cash Collateral and DIP Loan proceeds in accordance
with the Budget.

42. The Debtor?s only other prepetition secured lender is Bangor Gas, which asserts a
?rst priority security interest in the Bangor Gas Collateral totaling $949,540. The Bangor Gas

Collateral secures a potential claim of no more than $3 83,554 and, therefore, Bangor Gas enjoys

l3

 

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an equity cushion of at least $565,986 in the Bangor Gas Collateral. As AIM is not priming
Bangor Gas?s lien in the Bangor Gas Collateral, and that creditor enjoys a substantial equity
cushion, Bangor Gas is unaffected by the relief sought herein and its interests are adequately
protected.

43. The Debtor requires the use of the DIP Loan funds and Cash Collateral in order to
continue operating during this Chapter 11 case. Without the DIP Loan, even with the use of
Cash Collateral, the Debtor would become unable to pay general operating expenses within a
short period, including, without limitation, employee payroll and other bene?ts and operational
costs allocated to the Debtor under the Accounting Allocation Methodology. Upon the
Debtor?s inability to pay its general operating expenses, the Debtor would have to liquidate,
resulting in the destruction of substantial value that would otherwise inure to the bene?t of the
Debtor?s stakeholders.

44. The credit provided under the DIP Documents, together with the use of Cash
Collateral, will enable the Debtor to pay its employees and otherwise operate its business during
the pendency of this Chapter 11 case, thereby preserving and enhancing the value of its estate for
the bene?t of all parties in interest.

B. Payroll Motion

45. The Debtor has eighteen (18) employees. Twelve (12) employees are hourly
wage earners (the ?Hourly Employees?) and six (6) employees are salaried personnel (the
?Salaried Employees? and, together with the Hourly Employees, the ?Employees?). The Hourly
Employees are represented by the Unions and the terms of their employment are governed by the

CBA.

14

 

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46. The Employees perform a variety of critical functions, including management,
operation, mechanical and electrical maintenance and administration of the Debtor. The
Employees? skills, knowledge, and understanding of the Debtor?s infrastructure, assets and
operations are essential to the effective operation of the Debtor?s business and to a successful
reorganization of that business in a fashion that maximizes the return to creditors and other
parties-in-interest of the estate.

47. Just as the Debtor depends on the Employees to operate its business on a daily
basis, these individuals also depend on the Debtor. Indeed, the vast majority of these individuals
rely exclusively on payments received from the Debtor for their basic living necessities.
Accordingly, the Debtor seeks authority to pay the Debtor?s prepetition employee wages and
salaries; make payments for which payroll deductions are made, including health insurance
premiums; make payments to the Debtor?s employee retirement plans and to fund certain
health and dental costs and expenses; and pay all costs incident to the foregoing payments
(including payroll-related taxes and processing costs).

48. As of the Petition Date, the Employees were owed and had accrued various sums
for wages and salaries. In addition, as of the Petition Date, the Debtor had outstanding
obligations for certain payroll deductions, including union dues, employee retirement plan
contributions, and all costs incident to the foregoing payments, including payroll related taxes
and processing costs. The obligations are coming due on November 12, 2015 and relate to the
period beginning October 25, 2015 and continuing through November 7, 2015 (the 
Mod?). The obligations incurred during the pre-petition portion of the Payroll Period

constitute pre-petition claims.

15

 

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49. During a typical pay period, Employees accrue, on average, approximately
$51,244.00 in straight wages and salary, before deductions, plus approximately $2,238.00 in
additional compensation in the form of matching retirement contributions, pro?t sharing
payments and other bene?ts. As set forth more fully in the Payroll Motion, the Debtor expects to
withhold approximately $14,309.00 in federal and state taxes and to deduct approximately
$11,381.00 in employee bene?t deductions during the Payroll Period.

50. The Debtor seeks authority: to pay to Employees the total gross compensation,
net of the tax withholdings and employee bene?t deductions; to pay to the tax withholdings
to the appropriate state and federal taxing authorities; (0) to make payments for which employee
bene?t deductions are made, including health insurance premiums, retirement plan contributions,
union dues and other employee bene?ts; and pay all costs incident to the foregoing payments,
such as the payroll processing fee payable to the Debtor?s payroll servicer Paychex, Inc.
(collectively, the ?Prepetition Compensation?).

51. Although the Prepetition Compensation will be fully funded from the Debtor?s
operating account, only forty-seven percent of those obligations constitute liabilities of the
Debtor under the Accounting Allocation Methodology. The remaining ?fty three percent
of the Total Gross Compensation is credited against the Bucksport Mill Trust Funds.

C. Cash Management Motion

52. The Debtor ?led the Cash Management Motion seeking an order, inter alia: (1)
authorizing the Debtor to continue using its sole ?nancial account, an operating account
maintained at Comerica Bank (the (2) authorizing the Debtor to continue using

existing business forms; and (3) ?nding that Fed. R. Bank. P. 6003 is satis?ed.

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53. As set forth more fully in the Cash Management Motion, the Debtor opened the
Account on or about September 18, 2015 as part of its pre-petition restructuring efforts and,
more speci?cally, in conjunction with its efforts to phase out the CAMS Entities as project
managers and operators.

54. All of the Capacity Payments and Electricity Revenues received by the Energy
Plant are deposited into the Account. In accordance with the Co?Owners Agreement and the
Accounting Allocation Methodology, ?fty-three percent of the Capacity Payments,
twenty?eight percent of the Electricity Revenues generated by G4 and one hundred
percent (100%) of the Electricity Revenues generated by G3 and G5 constitute pro?ts of
Bucksport Mill and are held in trust in the Account for the bene?t of that entity (the ?Bucksport
Mill Trust Funds?). All of the Energy Plant?s operating expenses are paid from funds in the
Account. Expenses which are allocated as liabilities of Bucksport Mill under the Accounting 
Allocation Methodology are debited against the Bucksport Mill Trust Funds (the ?Bucksport
Mill Expenses?). Quarterly, the Debtor pays to Bucksport Mill the Bucksport Mill Trust Funds,
net of any Bucksport Mill Expenses.

55. The Debtor requires continued use of the Account in order to avoid disruption to
the sophisticated and comprehensive Accounting Allocation Methodology which, in turn,
would likely result in delayed payments to, and confusion among, vital vendors and suppliers.
Any interruption in these relationships would likely impair the Debtor?s ability to maintain the
Energy Plant?s status as a stand by capacity generator, causing it to breach its obligations under
applicable ISO New England tariff provisions. Moreover, any requirement to open a new
account may delay the Debtor?s ability to fund payroll and related expenses coming due on

November 12, 2015.

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56. Since the Account was established less than two months prior to the Petition Date,
the typical reasons for requiring debtors to open new debtor-in?possession accounts post-petition
are inapplicable in this case. Accordingly, the time and expense of opening a new account would
cause the Debtor to incur additional costs and deplete assets of the estate without providing any
bene?t to the Debtor?s creditors. Under the circumstances, the maintenance of the Account is
both essential to the Debtor?s business and in the best interests of the Debtor?s estate.

57. For similar reasons, the Debtor also seeks authority to continue using its
correspondence, business forms (including, but not limited to, letterhead, purchase orders, and
invoices) and checks (collectively, the ?Business Forms?) existing immediately before the
Petition Date without reference to the Debtor?s status as a debtor-in?possession.

58. Parties doing business with the Debtor will undoubtedly be aware of the Debtor?s
status as a debtor?in?possession as a result of press coverage and noticing. Moreover, if the
Debtor were required to change its Business Forms, it would be forced to choose standard forms
rather than the current forms with which the Debtor?s vendors and suppliers are familiar. Such a
change in operations would create a sense of disruption and potential confusion within the
Debtor?s organization and confusion for the Debtor?s vendors and suppliers. The Debtor
believes that it would be extremely costly and disruptive to cease using all existing Business
Forms and to purchase and begin using new stationery, business forms, and checks. The Debtor
respectfully submits that to do so would be unnecessary and that appropriate care can be taken to
assure the proper use of the existing forms.

59. Finally, the Debtor seeks authority under Fed. R. Bank. P. 6003 to continue
operating the Account in the ordinary course of business. This relief is particularly necessary in

this case where the Account includes both the Debtor?s operating cash and the Bucksport Mill

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Trust Funds and expenses paid from the Account constitute liabilities the Debtor and/or
Bucksport Mill, as determined by the Accounting Allocation Methodology.

D. Schedules Motion

60. The Debtor seeks authority to extend the deadline for ?ling schedules and a
statement of ?nancial affairs (the ?Schedules?) to sixty (60) days after the Petition Date. As the
Debtor states more fully in the Schedules Motion, several factors weigh in favor of allowing the
Debtor additional time to gather information necessary to accurately and thoroughly complete its
schedules.

61. Speci?cally, AIM only acquired the Debtor?s membership interests when AIM
and the Verso entities closed on the MIPA on January 29, 2015. At the time of the closing, all of
the Debtor?s of?cers and directors withdrew and were replaced with an entirely new
management team. While the Debtor continues to be the same corporate entity, much of the
historical knowledge regarding the company?s operations, assets, liabilities and ?nancial
condition was lost in the change in management.

62. The Schedules require the Debtor to provide information on a wide variety of
topics dating back at least one year and, in some cases, two years. While AIM performed due
diligence in connection with the Stock Purchase Transaction, that process did not produce all of
the information the Debtor is required to disclose in the Schedules. Accordingly, in order to
accurately and thoroughly complete the Schedules, the Debtor will be required to seek
information from prior of?cers, directors, employees and agents of the Debtor, as well as prior
counsel to the Debtor.

63. Relevant information regarding the Debtor?s assets, liabilities, operations and

?nancial condition since the stock purchase transaction will be only easier to obtain.

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The CAMS Entities?min their roles as asset managers and operators of the Energy Plant?~?
performed many of the day-to-day functions necessary to operate the Energy Plant in the eight
months following the Stock Purchase Transaction. Accordingly, the Debtor will need to
coordinate with those entities to obtain necessary information to complete the Schedules with
respect to the past eight months.

64. Obtaining information from both periods?pre-stock transaction and post-stock
transaction?will be time consuming and require both Debtor and its counsel to reach out to a
number of unaf?liated third parties. Extending the time for ?ling the Schedules would not only
ensure that the Debtor is able to produce accurate and thorough schedules, it will also enable
Debtor?s management and counsel to prioritize the Debtor?s obligations as a debtor-in-
possession.

E. Motion for Expedited Hearing

65. The Debtor requires expedited relief with respect to the First Day Motions to:
allow the Debtor the ability to pay certain prepetition obligations incurred in the ordinary course
of business; maintain relationship with customers, vendors, the Unions and the ISO New
England, among others; obtain ?nancing and authority to use cash collateral for the purpose of
funding post-petition obligations and restructuring efforts; and preserve the estate by minimizing

unnecessary expenses, delays and other disruptions to the Debtor?s operations.

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Dated: November  2015  
Kyle Nenninger

STATE OF MAINE

CUMBERLAND, SS.

Personally appeared the above-named Kyle Nenninger and acknowledged the foregoing to be
true to the best of his personal knowledge, information and belief.

Before me

NW 0mm

Notary Pu?b?l?i?v 
My Commission Expires 

 

AUBREY L. CUMNGS
Notary Public. Maine
My Commission Expires October 21 . 2017

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