Cobb Energy ailing, foe says

Nine months after Marietta-based Cobb Energy’s last fiscal year ended, auditors have yet to release its 2007 audited financial statements.

In court Thursday, attorneys suing the company and its nonprofit affiliate Cobb Electric Membership Cooperative alleged why: “for all practical purposes, Cobb Energy appears bankrupt,” attorney David Cohen said.

Cohen accused Cobb Energy of playing “cat and mouse” with the financial report in an attempt to keep the electric cooperative’s customers in the dark.

Cobb Energy operates Cobb EMC.

“We believe that the reason they’re not available is that there is going to be a going-concern letter,” he said, referring to a warning accountants can issue that a company may not be viable. He asked the court to require Cobb Energy to provide draft versions of the financial report.

Michael Weinstock, representing Cobb Energy, denied any purposeful delay and said the litigation itself had stalled the process, giving auditors “extra nerves.”

They will release the report when it’s final, he said.

“We’re not prepared to waive our right to withhold a draft document,” he said.

“It will be whenever it will be.”

The court exchange was the latest in an ongoing battle between Cobb EMC’s customers and the two companies that — together — supply their electricity..

Cobb Energy operates the nonprofit, customer-owned cooperative under a 40-year contract that has allowed it to charge an 11 percent markup on its costs.

In a lawsuit filed in October, customers said that arrangement siphoned co-op assets and enriched insiders at the co-op’s expense.

Cobb Energy also operates a range of side businesses, most of which have reported regular losses, according to past financial documents.

The fight over the 2007 financials has become a key issue in the case.

That’s partly because Cobb Energy now owns assets such as the meters needed to keep the lights on.

In earlier years’ financial reports, Cobb Energy’s assets were pledged to lenders as collateral.

Thursday’s disclosure battle followed a strong suggestion from Cobb County Superior Court Judge Stephen Schuster that the two sides try to settle the case.

Going to trial “is just going to be a bloodbath,” Schuster said, adding that the case wouldn’t result “in a total victory for anyone, a grand slam for anyone.”

Sixteen lawyers in the case talked about a deal for three days last month, but got nowhere, attorneys said in court.

The disclosure fight also coincided with an appeal to the state Supreme Court of an earlier court ruling.

Cobb EMC is appealing Schuster’s order that Cobb EMC create a method for its customers to vote for board members without attending the co-op’s annual meeting.

The appeal could take months, leaving the current board in place while the two sides either reach a deal or go to court.

Plaintiffs say they can’t work out a settlement without knowing whether the co-op is exposed to Cobb Energy’s debts, which Cohen said were in the tens of millions of dollars.

Carol Cookerly, a spokeswoman for Cobb Energy, said the company did not wish to discuss its finances with The Atlanta Journal-Constitution.

Cohen said financial reports through 2006 showed the company had lost $6.45 million since its inception a decade ago.

He said a particular concern was a $20 million line of credit with a Virginia co-op lender.

The $20 million was all but used up at the end of 2006 and was to be repaid by the end of 2007, Cohen said.

The delayed release of the 2007 financials itself could throw the loan into default, Cohen said.