Bankrupt Energy and Power Solutions Inc. is preparing for a Nov. 17 auction now that a California judge has approved its bid procedures motion with a few changes.

Judge Scott C. Clarkson of the U.S. Bankruptcy Court for the Central District of California in Santa Ana on Tuesday, Oct. 18, approved the Costa Mesa, Calif., energy-efficiency services company's bid procedures with changes to the stalking-horse bidder's breakup fee, debtor counsel Garrick A. Hollander of Winthrop Couchot PC said. An order had not been entered as of Thursday, Oct. 20.

Energy and Power Solutions serves manufacturing and commercial organizations by showing companies how to reduce its energy usage and carbon emissions through its invention, xChangePoint. XChangePoint is a software consultation program that tracks the natural resources a business uses.

Energy and Power Solution's stalking-horse bidder, ISPE Services LLC, has offered $4.5 million for all of the company's tangible assets. From the purchase price, $1.39 million would go to cure costs for contracts assumed by the debtor.

ISPE is an affiliate of a much larger, successful energy company, Hollander said. He declined to reveal the name of the corporation.

Under the amended bidding procedures, suitors would have to offer a minimum of $5.33 million with a $250,000 deposit to compete with the stalking horse. Bidding at the auction would increase in increments of $100,000 if at least one bidder came forward. The overbid is $100,000, plus a $100,000 breakup fee.

The breakup fee was previously $225,000, but Hollander said Clarkson thought it was too large, so it was amended, which will be reflected in Clarkson's order.

Lender and collateral agent NGEN II LP and the official committee of unsecured creditors objected to the breakup fee, which both parties said was far too high.

An auction and sale hearing have been scheduled for Nov. 17, Hollander said. The bid deadline is Nov. 15.

Hollander said a couple of different bidders have expressed interest in the company besides the stalking-horse bidder, one more serious, but declined to say whom.

Energy and Power Solutions hired Greentech Capital Advisors to sell the company in December 2010.

Court documents said the company is facing a lack of liquidity and doesn't have the time to operate through a prolonged bankruptcy process. If Energy and Power Solutions isn't sold promptly, the debtor asserted, the value of its business would deteriorate. The company is projected to run out of cash on Dec. 15.

A case management conference is also scheduled for Nov. 17.

Clarkson granted the company interim cash collateral use from lenders Silicon Valley Bank and NGEN II on Sept. 30. Sillicon Valley Bank is owed $2.65 million and asserts a senior secured claim on substantially all of the debtor's assets. NGEN is owed $5.3 million and also asserts a secured claim on substantially all the debtor's assets. In addition, the debtor owes secured lender TD Bank $5 million.

Sillicon Valley Bank and NGEN have consented to the cash use as long as a prompt sale takes place, court documents said.

The company projects it needs cash through Nov. 30. The cash would ensure that the business' ordinary operations are not interrupted, court documents said.

A final cash hearing is scheduled for Oct. 27.

Energy and Power Solutions filed for Chapter 11 bankruptcy protection on Sept. 23 with affiliates CIO Energy Center LLC, Lynn Energy Center LLC, NEC-EPS Holding LLC, Franklin Energy Center LLC and DairyGen LLC. The cases are jointly administered.

The company, which does business as EPS Corp., was founded in 2002. XChangePoint has two patent applications pending in the U.S.

Energy and Power Solutions primarily provides services to the dairy, food and beverage, meat processing, industrial manufacturing, cold storage, medical and science and utilities industries.

The debtor also owns and operates combined heat and power cogeneration assets that it's planning to sell at retail locations, which are not yet operating.

Energy and Power Solutions is privately funded by investors including Altira Group LLC, NGEN Partners LLC and Robeco CV.

The company raised $20 million in venture-backed capital to support the development and commercialization of xChangePoint in 2007, followed by another $30 million in venture equity on April 27, 2009.

However, the company sustained losses and cash flow difficulties throughout the development and commercialization of xChangePoint. Its financial difficulties were further impacted by decreases in industrial electrical prices.

Energy and Power Solutions filed documents with the Securities and Exchange Commission on March 31, 2010, with plans to raise $25 million in an initial public offering. However, on Dec. 29, 2010, it withdrew its prospectus due to "market conditions," SEC filings said.

Due to the recession, the company was unable to attract the capital investment needed to raise funds for an IPO, court documents said.

Energy and Power Solutions has 24 employees. It listed $10 million to $50 million in assets and liabilities in its petition.

Debtor counsel also includes Marc J. Winthrop of Winthrop Couchot.

Stephen T. O'Neill of Murray & Murray PC represents NGEN II.

Ronald Clifford of Blakeley & Blakeley LLP represents the committee of unsecured creditors.