Retail Supplier Exiting State's Market -- EnergyChoiceMatters.com

Retail Supplier Exiting State's Market

June 17, 2022

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Copyright 2010-21 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

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Sunwave Gas & Power Pennsylvania Inc. has filed to relinquish its Pennsylvania electricity supplier license

In such filing, Sunwave Gas & Power Pennsylvania Inc. stated, "Sunwave will no longer be servicing customers in the State of Pennsylvania effective July 1, 2022."

Sunwave did not provide any further information concerning the disposition of any Pennsylvania electric customers, but its phrasing in the filing suggests the company is currently, or had recently been, serving Pennsylvania electric customers

In contrast, affiliate Sunwave USA Holdings Inc. filed to relinquish its Pennsylvania gas supplier license. That filing included different language stating that, "Sunwave USA Holdings Inc. has no flowing gas customers in the State of Pennsylvania."

As previously reported, earlier this year, Sunwave Gas & Power was suspended from participation in the ISO New England markets and had its customers in ISO New England returned to default service

Sunwave Gas & Power Pennsylvania Inc. and Sunwave USA Holdings Inc. are both ultimately owned by C Wave Power & Gas, Inc.

In March, Sunwave USA Holdings, Inc. and C Wave Power & Gas, Inc. filed an action in New York state court seeking an order requiring Canadian companies Sunwave Gas & Power, Inc. (SG&P) and ONEnergy, Inc. to pay approximately $746,000 under a promissory note. SG&P is a wholly owned subsidiary of ONEnergy Inc.; SG&P and ONEnergy are separate companies that are not affiliated with the plaintiffs Sunwave USA Holdings, Inc. and C Wave Power & Gas, Inc.

As alleged by Sunwave Gas & Power, Inc. in a filing made before a U.S. bankruptcy court, "In March 2019, Foreign Debtor [Sunwave Gas & Power, Inc.] closed on the sale of Sunwave US to C Wave Power & Gas Inc. ('CWave'). As a part of the sale process, Foreign Debtor entered into a Transition Services Agreement ('TSA') with CWave -- the purpose of which was to provide Sunwave US with financial support from January 2019 through the close of the sale in March 2019. At the close of the sale, negative working capital in Sunwave US exceeded the purchase price to CWave. Consequently, Foreign Debtor executed an unsecured promissory note in favor of CWave for certain unpaid amounts owing under the TSA (the 'CWave Note')."

As alleged by Sunwave Gas & Power, Inc. in a filing made before a U.S. bankruptcy court, "Subsequent to the sale of Sunwave US, the Foreign Debtor [Sunwave Gas & Power, Inc.] attempted to find a buyer for its Canadian operations but was ultimately unsuccessful in doing so. Consequently, in December 2019, Foreign Debtor [Sunwave Gas & Power, Inc.] began winding down its Canadian operations. Notwithstanding, Foreign Debtor [Sunwave Gas & Power, Inc.] undertook several efforts to recapitalize and restart its operations. However, these efforts were unsuccessful. Thus, on February 23, 2022, Foreign Debtor [Sunwave Gas & Power, Inc.] commenced the Canadian Proceeding [a bankruptcy proceeding before a Canadian court]."

As alleged by Sunwave USA Holdings, Inc. and C Wave Power & Gas, Inc. in a New York state court filing, "On January 14, 2019, Defendant Sunwave Gas & Power, Inc., a corporation organized in Canada (SG&P), borrowed $2,000,000.00 (two million United States’ dollars) pursuant to a signed Promissory Note (the 'Note') designating C Wave as the 'holder' of the Note and promising to pay 'without setoff, deductions, recoupment or counterclaim' the principal balance remaining on the Note plus interest ..."

As alleged by Sunwave USA Holdings, Inc. and C Wave Power & Gas, Inc. in a New York state court filing, "The Note came due on January 14, 2020, but despite the due date, SG&P failed to pay the balance due. As at March 4, 2019, the outstanding principal balance was $690,653.81 [with interest increasing the amount since such time]."

Sunwave Gas & Power, Inc. (SG&P) filed a Chapter 15 proceeding in U.S. bankruptcy court to recognize its Canadian-filed bankruptcy process noted above, and to receive customary stays, including a stay of the New York court action filed by Sunwave USA Holdings, Inc. and C Wave Power & Gas, Inc.

However, the U.S. bankruptcy court denied the stay with respect to the complaint at the New York state court

In a New York state court filing, opposing a motion for summary judgment, Sunwave Gas & Power, Inc. (SG&P), and ONEnergy, Inc. alleged, among other things, that ONEnergy is not a party to the promissory note and thus its inclusion as a party in the New York court case is "baseless."

Sunwave USA Holdings, Inc. and C Wave Power & Gas, Inc. alleged in New York state court that Sunwave Gas & Power, Inc. (SG&P), and ONEnergy, Inc., "expressly, publicly acknowledged the debt due to Plaintiffs. In SP&G’s 'Management’s Discussion and Analysis of Financial Condition and Results of Operations' dated August 24, 2021, for the period ending as at June 30, 2021, SP&G acknowledged the debt reflected by the Note."

Sunwave Gas & Power, Inc. (SG&P), and ONEnergy, Inc. countered by alleging that, "The public filing and associated CWave Note disclosure were made on the basis of ONEnergy’s consolidated financial position, consistent with accounting standards and securities regulations. Accordingly, the disclosure does not constitute an assumption by ONEnergy of the obligations under the CWave Note and, instead, was required under best accounting and securities law practices. Consequently, CWave does not, under any set of facts or law, have a direct right of action against ONEnergy."

Sunwave USA Holdings, Inc. and C Wave Power & Gas, Inc. countered by alleging, "Defendants [Sunwave Gas & Power, Inc. (SG&P), and ONEnergy, Inc.] attempt to surmount the MD&A obstacle by arguing that the disclosure on the MD&A was merely a pro forma disclosure consistent with accounting standards. But OEG did not merely provide a pro forma disclosure. OEG went the extra mile and reported in that 'ONEnergy is obligated to make future payments' on the items listed, including the Note payable to C Wave. MD&A 15 at 11 of 13. In that way, OEG left no doubt that the obligation on the Note held by C Wave was every bit as much OEG’s obligation as it was SGP’s obligation. Moreover, the MD&A makes clear that OEG is not only equating itself with SGP, but it is exercising dominion and control over SGP, at least with respect to the Note."

Sunwave USA Holdings, Inc. and C Wave Power & Gas, Inc. alleged, "In general ... the corporate veil can be pierced if the parent company dominates the subsidiary with respect to the transaction at issue to the point that the subsidiary shows no separate corporate interests of its own, and the plaintiff demonstrates that an injustice or wrong will likely result to the plaintiff if the corporate veil is not pierced."

Sunwave Gas & Power, Inc. (SG&P), and ONEnergy, Inc. further alleged that the motion for summary judgment filed by Sunwave USA Holdings, Inc. and C Wave Power & Gas, Inc. lack sufficient admissible evidence for such relief

The NY state court case remains pending

Cases:

New York State Supreme Court, Index No. 650988/2022

U.S. NY Southern District Bankruptcy Court, Case No. 22-10491(JLG)

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