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AKREnergy Chapter 11 Business Reorganization Employee Relations Plan

Submitted by Arnice Cox, Katie Furtado and Rachel D. Graham


Founded in 2001, AKR Energy is a natural gas electric company in Northern California committed to the use and continual distribution of natural energy supply to support global sustainability. Our core values include innovation, environmental responsibility, commitment to affordable energy and providing the best workplace for the people that make it all possible - our employees.


PROBLEM STATEMENT

AKR Energy is filing chapter 11 bankruptcy reorganization, resulting in across-the-board drastic stock devaluation, including the largest percentage of shares— the employees’ 401K plans.

SITUATION ANALYSIS

THE CHALLENGE

AKR Energy, located in northern California, fully transitioned from being a natural gas electric company to a hydroelectric energy supplier in 2007. AKR receives their water supply for power generation from the Snowpack in the mountains of the Sierra Nevada. In 2009, AKR purchased majority stock holdings in two major Californian utility systems—Barkley Power, Inc. and SanFran Light and Power—from Morgan Stanley, a New York investment firm. The purchase resulted in exponential service area expansion, covering 20,000 square miles across 18 counties in California from 2009 to the winter of 2012.

As a result of major drought across the U.S in the winter of 2012, AKR’s water supply from the Sierra Nevada Snowpack has been drastically reduced, driving generation down to 50 percent in some areas. It is projected that production will be down by 1,137 megawatts this summer than in the past due to the drought, forcing the company purchase electricity from out-of-state suppliers at sky-rocketing prices due to high demand in the hot summer months. Because the California Public Utilities Commission has held electricity rates steady, AKR has had to spend approximately $25 million to meet high demands for hydroelectricity. Thus, AKR has no choice but to file a Chapter 11 business reorganization petition to recover from the obtained debt. A consequence of the reorganization is that all current shares of the company will be drastically devalued and new ones will be issued and sold to investors. The company’s shares make up the largest percentage of AKR’s employees’ retirement plans; thus, a majority of their 401K plans will become worthless overnight.


OVERALL GOAL

THE GOAL

Utilizing integrated strategies and tactics to maintain transparent communications with key internal and external audiences, this employee relations plan will meet five key objectives resulting in a 95 percent employee retention rate through the end of May 2013.

KEY PUBLICS

THE AUDIENCE

Because AKR Energy stands as one of the largest energy providers in the State of California, its petition for Chapter 11 business reorganization impacts several audiences throughout its service area. For the sake of this proposal, efforts will focus on five key constituencies: • • • •

Employees Media Investment firms AKR Customers


OBJECTIVE Sustain a 95 percent employee retention rate through the end of May 2013.

STRATEGY

EMPLOYEES

Of the utmost importance to all employees is maintaining a sense of job security and a feeling that the organization is being transparent about the Company’s financial well-being. To that end, AKR Energy will communicate early and often throughout the Chapter 11 proceedings, coordinating efforts with the Chief Financial Officer and the Office of Human Resources.

TACTICS

Coordinate weekly staff briefings for the first four weeks of the Chapter 11 petition process starting within 24 hours of initial petition. Initial briefing will clearly communicate timeline for proceedings; no layoffs or pay cuts; implementation of freeze on hiring, overtime and raises. Develop organization intranet site to allow employees to monitor repurchased stock value growth and progress with reorganization planning. Messages from the CEO updating staff 24 hours prior to milestones along the proceedings timeline posted to company intranet.


OBJECTIVE To generate neutral-to-positive stories in 90 percent of local, regional and national media outlets throughout the 180 day Chapter 11 petition filing period.

STRATEGY

MEDIA

To successfully maintain the confidence of employees and other key publics, AKR Energy must manage messaging regarding the details of its reorganization strategy. The Company will implement proactive media relations with local press and broadcast outlets, trade publications, national beat reporters and network news outlets providing as much full detail as allowed by law and prior to major developments.

TACTICS Designate primary spokesperson(s) to address media requests for information or interviews. Develop comprehensive media list.

Coordinate press conference announcing details of Chapter 11 filing.

Develop initial news release on the proceedings and disseminate 12 hours prior to filing.

Arrange high-level interviews with key outlets, offering exclusives to those deemed media “friendlies.�

Prepare and proactively disseminate statements from the CEO for each milestone of the Chapter 11 proceedings.


OBJECTIVE To retain 85 percent of referring investment professionals and to recapture 85 percent of former shareholders during stock resale.

STRATEGY

SHAREHOLDERS AND INVESTMENT PROFESSIONALS

As a result of this reorganization process, it is assumed that the Company will experience heavy attrition amongst referring investors and current shareholders. AKR Energy will work to reassure this core constituency that the Company has a solid play for emerging from this reorganization as a strong company and a viable investment option.

TACTICS

Hold investor relations Google Hangout featuring the CEO to provide full details on the progress of the proceedings. Notice to be sent via email within 24 hours of filing and will continue weekly through the proceedings duration. Set up AKREnergyRenewed.com, a website to provide updates on the reorganization progress.

Work with Office of Investor Relations to develop Investors toolkit to include information to support AKR Energy’s past and future strength as an investment option.


OBJECTIVE To provide customers with the reassurance of the company’s commitment to quality service within the first 12 hours of the Chapter 11 filing and 24 hours prior to each milestone throught the 180-day proceedings period.

STRATEGY

CUSTOMERS

AKR Energy customers have come to expect quality service at an affordable rate. To maintain a favorable environment for the company’s successful emergence from Chapter 11 restructuring, the Company will maintain consumer confidence by applying the same level of transparent communications employed with other key constituencies.

TACTICS

Personalized email from CEO utilizing customer email alert services laying out details of the orgranizational restructuring strategy. Mail personalized billstuffer message from CEO at the beginning of the reorganization process. Weekly blog update on reorganization process on AKREnergyRenewed.com. Web banner on AKREnergy.com redirecting to AKREnergyRenewed.com.


AKREnergy Chapter 11 Business Reorganization Employee Relations Plan TIMELINE DATE

AUDIENCE

1/8/13

ALL ALL

Media

1/9/13

Employees All

Employees

Shareholders/Investors 1/10/13

1/11/13 1/12/13 1/15/13

Media

Customers Media ALL ALL

Media Media

Customers

1/17/13

Employees

4/14/13

Employees

3/31/13 4/30/13 5/1/13

5/30/13 6/1/13

Employees Employees Media

Employees & Shareholders/ Investors Media

TACTIC Establish AKREnergyRenew.com

A.M. - Collateral material & list development completed and approved Set up virtual and live temporary newscenter/media room. Virtual newsroom available on AKREnergyRenew.org. Midnight - AKREnergyRenewed Intranet goes live 10 a.m. - AKREnergyRenewed.com goes live

10 a.m. - All staff meeting to apprise employees of Chapter 11 Bankruptcy filing Noon - Google Hangout with CEO

Noon - Media Advisory announcing press conference 3 p.m. - Press conference

10 a.m. - Email alert with link to Google Hangout with CEO Calls to primary media targets to secure interviews

AKREnergyRenewed.com blog goes live with first message

CEO message regarding upcoming initial hearing posted to intra- and internet Exclusive interviews with local & regional media

CEO Statement voicing confidence in progress of initial hearing issued Mail personalized letter from the CEO to each customer as a bill stuffer Staff update on progress of reorganization process Meetings to present draft reorganization plan

Meeting to present proposed reorganization plan

Staff meeting to announce reorganization agreement

Press release detailing proposed reorganization strategy

Message from the CEO announcing successful finalization

Press conference announcing final details of reorganization


AKREnergy Chapter 11 Business Reorganization Employee Relations Plan EVALUATION OBJECTIVE

Sustain a 95 percent employee retention rate through the end of May 2013.

Generate neutral-to-positive stories in 90 percent of local, regional and national media hits throughout the 180 day Chapter 11 petition filing period.

Retain 85 percent of referring investment professionals and to recapture 85 percent of former shareholders during stock resale.

Provide customers with the reassurance of the company’s commitment to quality service within the first 12 hours of the Chapter 11 filing and 24 hours prior to each milestone throught the 180-day proceedings period.

RESULT At the time of the announcement of its decision to file for Chapter 11 Business Reorganization, AKR Energy employed 10,536 employees across its 18-county service territory. While there was initial attrition in the months of January and February (attributed to normal staff reduction and unrelated to the news of the reorganization), through May 31, 2013 its employee count was 10,102. This amounts to a 95.8 percent retention of staff levels.

Over the 180 days of the Chapter 11 proceedings, AKR Energy’s Office of Communications fielded more than 120 media inquiries for local, regional and national media. The Company’s CEO did initial interviews with the local ABC affiliate and was subsequently invited to be a guest on This Week, ABC’s national Sunday morning issues show, to discuss the impact of climate change on energy prices and the fiscal health of energy providers. AKR’s media efforts resulted in 236 unique hits in print, broadcast and digital media and more than 3.5 million impressions. According to MediaMetric News Monitoring Services, 216 of these hits placements registered as neutral-to-positive newsstories. As expected, there was heavy attrition amongst shareholders with a major sell-off occurring the day before the bankruptcy filing resulting in the loss of more than a third of the company’s smaller shareholders. To date, less than half of those investors have been recaptured. Fortunately, more than 90 percent of referring investment professionals were retained so a strong rebound is anticipated. CEO Webcast to customers received more than 50,000 page views between 1/10/13 and 1/24/13 10 email alert messages sent to 750,000 AKR Energy customers

3,349 phones calls from customers to call center with satisfaction ratings averaging 4.25 between 1/10/13 and 6/1/13 (Based on a 5-point scale)

More than 200 positive comments fielded through info@akrenergyrenewed.com between 1/10/13 and 6/1/13


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w ene

R ^ AKREnergy HOME

CUSTOMERS

EMPLOYEES

INVESTORS

VENDORS

MEDIA

Daily Desk Notes from Katie ... There’s an ReNew Day on the Horizon! Greetings AKR Family, As we enter this next phase in our company’s development, I want to reiterate that the success of our company rests on the shoulders of our committed work force. As any change brings relevent questions and a measure of apprehension, we’ve launched AKREnergyRenewed.com to keep you up to date on the progress with the Company’s Voluntary Business Reorganization strategy.

RESOURCESLINKS Schedule an investment counseling session

ReNew Employee Toolkit AKR Energy Stock Prices Daily Desk Notes Archives

Net Earnings Growth

As we look over the horizon toward a stronger ReNew day, we feel confident that taking this moment to reassess our structure and business practices will enable us to emerge stronger.

4th Quarter 2012

3rd Quarter 2012

2nd Quarter 2012

One of the employee benefits we at AKR pride ourselves on is the opportunity for wealth development through a robust 401(K) plan. As we face the unfortunate decision to reorganization, this perk will be impacted. In the coming days, each of you will be able to meet with investment counselors who can provide strategies for mitigating adverse exposure. Please visit the Office of Human Resources or email Arnice Cox, Vice President, Human Resources, at acox@arkenergy.com to schedule your appointment today.

1st Quarter 2012

Key to the strength of any family is strong communication. As a family, AKR leadership plans to keep you all involved and informed every step of the way, through regular posts to this site, weekly full-staff briefings and monthly small group meetings with your direct management team.

IMPORTANTDATES Jan. 12th Initial Chapter 11 hearing

Posted January 10, 2013 8:30 a.m.

Jan. 17th Weekly Staff Briefing Jan. 18th Finance Committee Meeting Jan. 19th Investment Counseling Jan. 24th Weekly Staff Briefing Jan. 26th Board of Directors Meeting Jan. 28th Official Creditor Committee


AKREnergy

 

Business Reorganization IMPORTANT DATES January 10, 2013

AKR Energy to file Chapter 11 Voluntary Business Reorganization Petition

January 12, 2013

Initial Hearing on Chapter 11 Petition

January 28, 2013

Official Creditors Committee appointed

March 18, 2013

AKR Finance Committee meeting to review recommendations for reorganization

March 30, 2013 Draft AKR Energy Business Reorganization Plan submitted to shareholders for review April 1 – 12, 2013

Comment period from shareholders on draft reorganization plan

April 14, 2013

Proposed reorganization plan presented to employees and shareholders

April 15, 2013

AKR Energy Business Reorganization Plan submitted for court approval

April 30, 2013

Staff meeting to announce final terms of reorganization plan

May 1, 2013 May 31, 2013 June 1, 2013

Confirmation and discharge of reorganization plan AKR Energy Business Reorganization Plan to begin implementation Press conference to announce details of AKR Energy Business Reorganization Plan

500 North Lake Boulevard Tahoe City, CA 96145 530-555-1234 (o) 530-555-1515 (f) akrenergy.com


AKREnergy

 

Business Reorganization FACT SHEET

AKR Energy will commence a Chapter 11 Voluntary Business Reorganization process on January 10, 2013.

Chapter 11 Business Reorganization will allow AKR leadership to bolster liquidity and enable the Company to focus on its most valuable business lines while navigating challenges resulting from fluctuating climate change issues and flat power generation rates.

The Chapter 11 Business Reorganization process is estimated to last 180 days.

The Company currently possesses sufficient liquid assets and reserves to sustain normal business operations and provide continual service to customers during the Chapter 11 process.

The Company is working to obtain a fully committed, $50 million debtor-in-possession credit facility with an 18-month maturity from Bank of America Merrill Lynch to enhance liquidity and working capital, subject to Court approval.

There will be no staff reductions during the Chapter 11 process. However, there will be a freeze placed on all new hires, overtime pay, and cost-of-living and merit-based wage increases.

As a result of this Chapter 11 filing, AKR Energy stocks will experience significant devaluation that will impact staff 401K investment portfolios. Estimated devaluation has been placed in a range between 50 and 75 percent.

A stock resale is scheduled to take place approximately 30 to 60 days following the completion of the Chapter 11 filing process.

AKR will be filing monthly operating reports with the Bankruptcy Court and also plans to post these monthly operating reports on the Investor Relations section of akrenergy.com.

Information for suppliers and vendors is available at (800) 736-3933 (RENEWED) or (530) 736-3933. AKR Energy customer can call (888) 736-3933 with any questions regarding continuity of service.

500 North Lake Boulevard Tahoe City, CA 96145 530-555-1234 (o) 530-555-1515 (f) akrenergy.com


AKREnergy

 

Business Reorganization FACT SHEET

AKR Energy will commence a 180-day Chapter 11 Voluntary Business Reorganization process on January 10, 2013.

Chapter 11 Business Reorganization will allow AKR leadership to bolster liquidity and enable the Company to focus on its most valuable business lines while navigating challenges resulting from fluctuating climate change issues and flat power generation rates.

This process does not indicate that AKR Energy is, or in the foreseeable future going to be, ceasing operations.

There will be no staff reductions during the Chapter 11 process. However, there will be a freeze placed on all new hires, overtime pay, and cost-of-living and merit-based wage increases.

As a result of this Chapter 11 filing, AKR Energy stocks will experience significant devaluation that will impact staff 401K investment portfolios. Estimated devaluation has been placed in a range between 50 and 75 percent.

A stock resale is scheduled to take place approximately 30 to 60 days following the completion of the Chapter 11 filing process.

The Company currently possesses sufficient liquid assets and reserves to sustain normal business operations and provide continual service to customers during the Chapter 11 process.

The Company is working to obtain a fully committed, $50 million debtor-in-possession credit facility with an 18-month maturity from Bank of America Merrill Lynch to enhance liquidity and working capital, subject to Court approval.

AKR will be filing monthly operating reports with the Bankruptcy Court and also plans to post these monthly operating reports on the Investor Relations section of akrenergy.com.

Information for suppliers and vendors is available at (800) 736-3933 (RENEWED) or (530) 736-3933. AKR Energy customer can call (888) 736-3933 with any questions regarding continuity of service.

500 North Lake Boulevard Tahoe City, CA 96145 530-555-1234 (o) 530-555-1515 (f) akrenergy.com


AKREnergy

  Contact: Rachel D. Graham Vice President, Communications rgraham@akrenergy.com 530.555.1256 (office) 530.555.1021 (mobile)

NEWS RELEASE FOR IMMEDIATE RELEASE: January 10, 2013

AKR ENERGY TO COMMENCE VOLUNTARY CHAPTER 11 BUSINESS REORGANIZATION Company foresees no layoffs; some stock devaluation [TAHOE CITY, CA] – AKR Energy (“AKR” or “The Company”) today announced it filed a voluntary petition for Chapter 11 business reorganization in the U.S. Bankruptcy Court for the Northern District of California. The business reorganization is intended to bolster liquidity and enable AKR to focus on its most valuable business lines while navigating challenges resulting from fluctuating climate change issues and flat power generation rates. In 2009, the Company made investments in two major California utility systems, expanding its service area to more than 20,000 square miles over 18 counties in the state of California. The Company saw expanded profits as a result of the stock purchase through the third quarter of 2012. However, decreased production of hydroelectricity resulting from the drought in 2012 necessitated a $25 million investment above original cost projects to meet increased demand. “AKR Energy was built on the notion that energy should be generated both affordably and responsibly,” said Katie Furtado, the Company’s co-founder and CEO. “Our first responsibility is to maintain this standard for both our customers and the valued employees who make it possible. As we move forward with this transformation of our company, we do so keeping this guiding principle at the forefront of our efforts.” The Company is working to obtain a fully committed, $50 million debtor-in-possession credit facility with an 18month maturity from Bank of America Merrill Lynch to enhance liquidity and working capital. The credit facility is subject to Court approval and other conditions precedent. The Company believes that it has sufficient liquidity to operate its business during chapter 11, and to continue service to its more 1.5 million customers. AKR also expects to pay employee wages and benefits are the current rate and that there will be no layoffs. AKR has taken this step after preliminary discussions with key constituencies and intends to work toward a consensual reorganization in the best interests of its stakeholders. The Company expects to complete its U.S.based restructuring by mid-year 2013. (more) 500 North Lake Boulevard Tahoe City, CA 96145 530-555-1234 (o) 530-555-1515 (f) akrenergy.com


The Company and its Board of Directors are being advised by BRD Consulting Inc. and Stedman & Winfrey LLP. In addition, Angela K. Charbonnet, Vice Chairman of BRD Consulting, will serve as Chief Restructuring Officer to support the management team on restructuring matters during the Chapter 11 case. More information about AKR’s Chapter 11 filing is available on the Internet at www.akrenergyrenewed.com. Information for suppliers and vendors is available at (800) 736-3933 (RENEWED) or (530) 736-3933. AKR Energy customers can call (888) 736-3933 with any questions regarding continuity of service. AKR will be filing monthly operating reports with the Bankruptcy Court and also plans to post these monthly operating reports on the Investor Relations section of akrenergy.com. The Company will continue to file quarterly and annual reports with the Securities and Exchange Commission, which will also be available in the Investor Relations section of akrenergy.com. ###


Principles of Public Relations Final Project 2013