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Beartooth Electric plans to leave bankrupt Southern Montana Electric cooperative this fall

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HELENA, Montana — Red Lodge's Beartooth Electric Cooperative plans to leave the four-member Southern Montana Electric Generation and Transmission Cooperative this fall once Beartooth pays off its share of the bankrupt wholesale power supplier's debt.

That amounts to $1.2 million for the defunct Highwood Generating Station and about $200,000 to unsecured creditors, Beartooth board member Arleen Boyd said Thursday.

The departure has been planned for some time, and cutting ties with Southern now will allow Beartooth to better secure a long-term power supply contract and negotiate with potential business partners, Boyd said.

"We're looking at a very nice market for power right now, but we're looking at our own future," Boyd said. "It clears the deck and makes a business proposition clearer and cleaner and easier to reach."

Southern chairman David Dover referred questions to Billings attorney Malcolm Goodrich, who said Beartooth's exit was anticipated but declined to comment on the plans of the other coop members.

Southern filed for bankruptcy in 2011, and its reorganization plan was approved last year. Two former members — the city of Great Falls and Yellowstone Valley Electric — departed during the bankruptcy proceedings, leaving only four rural electricity cooperatives: Beartooth, Fergus Electric, Tongue River Electric and Mid-Yellowstone Electric.

The reorganization plans calls for the members to decide whether to close Southern after its debts are paid off over four years.

"All of the existing contractual obligations of the co-op would have to be satisfied before there could be any dissolution," Goodrich said.

Southern's biggest asset, the Highwood plant near Great Falls, was sold this week for an undisclosed price. Southern's decision to file for bankruptcy was fueled by the $85 million debt incurred to build the gas-fired plant, which was seldom used, and an unfavorable power supply contract with PPL Montana.

Southern's board approved Beartooth's exit plan, but the Red Lodge cooperative still needs the signatures of the other members and Southern's creditors, Boyd said. If that is completed before Beartooth's Oct. 31 target date, the cooperative will leave Southern sooner, she said.

Beartooth is in negotiations with multiple companies for a long-term power supply contract after 2017, she said.

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