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Enron Mail |
Below is the transcript of an interview conducted yesterday with State Trea=
surer Phil Angelides: Summary: ?=09Bond Issuance to be $10B with 10-15 year term, 70% tax exempt and 30% n= on-exempt ?=09Angelides in favor of wind fall profit tax ?=09Opposed to current discussion between Davis and Socal in regards to Soc= al paying off the generators over 12 years with a 2-year grace period What decisions on rate components are necessary before you can sell bonds? "The big things we need are that the PUC must enter into agreement with DWR= , essentially warranting that sufficient revenues from rates will be availa= ble for purchasing power. It is really their job to define what each party = needs to pay for power. We need to give assurance to the investment communi= ty that whatever the overall rate is, the state will get enough to pay its = bonds. However, if the utilities challenge the decision, it could stall the= bond issuance." What do you think will be the size of the first bond issue? "Based on what is currently possible and what the legislature has authorize= d, around $10bn. The PUC has allowed us to sell north of $13bn, but we ant= icipate that $10bn is absorbable. Until the administration provides details= for this office and the public on what its costs of buying power are and w= hat it needs in terms of funding, what will drive it is that number, not wh= at the PUC has said. The issuance may well be a single $10bn issue or a ser= ies of smaller ones done together, e.g. $3bn each 3 weeks apart." What is the total size of the market for CA tax-exempt bonds? "What we do normally is $5-10bn in bonds for various revenues or general ob= ligations. In 1997 the CA infrastructure rate reductions bonds was a $7bn i= ssuance, and this was handled well. This is not exclusively a CA market. = Around $200bn of these bonds is sold each year. We anticipate that the bo= nds will be 70% tax-exempt and 30% non-exempt." What is the total of electric supply contracts that are firm enough to requ= ire funding? "We have estimates. The DWR is buying power, and let's say power costs $100= and its portion of rates is $70. This bond issuance covers the diff betwee= n $100 and $70. So, the bond issuance is a way to cover the gap. However, i= f power prices do not come down, you cannot keep borrowing. If we issue mo= re than $10bn in bonds, I have to see the whole financial plan. (The impli= cation is that he will not keep this plan secret.)" What will be the term mix of the bond issues? "Overall term is expected to be in the 10-15 year range. I do not know the= mix." Do you have the ability to do bridging tax anticipation notes or anything l= ike that to take care of the general fund? "The very purpose of the bridge loan is that we are taking a taxable and ta= x-exempt bridge loan until bonds are issued. In order for us to issue bond= s, a number of steps have to occur. I would hope that the PUC and DWR do wh= at they have to do realistically by June. Then the bond issuance would com= e semi all-at-once. (In other words, either all at once, or something like= $3 billion every three weeks.)" Are all of the general funds' assets in cash, or are some in the form of a = less liquid receivable? "We have a lot of liquidity in real cash in general fund. We have a cash f= low. We have the ability in pooled money investment accounts so that we can= go out to five years. We have $40bn-plus in that account." What is the minimum working capital required in the general fund for day-to= -day operations? "It depends, and goes up and down. On any given day we are doing on the or= der of $500mm. There is a $100bn budget between the general funds and speci= al fund." Are you discussing the DWR contracting in relation to the required funding?= Do you have a veto on the deals struck? "This is all in the administration's court. What we have asked for is the = information. We have asked for this today by letter. We have to move from= working with 3 or 4 banks to a public offering, which means public disclos= ure. The general fund has been making advances to buy power, but we want t= o get out of that business and to stop the $4bn plus drain on general fund = from arranging an interim loan." What is the credit risk from industry or other large users cherry picking o= r self-selecting? "There are limits on the options out there. AB1X has limited the ability o= f people to opt out of the system. If you do allow them to opt out, what d= o they have to pay to preserve the revenue stream? The agreement between th= e DWR and the PUC will say that, through a financing order, we will get you= the revenue to service the bonds, even if it adjusts rates. This will be = a covenant that the money will be made available." If an initiative is launched could it create enough uncertainty to have an = effect on ABIX or the bond issuance? What about "Harvey proofing"? What is= the direct state participation? "The state's role is infrastructure and economic development. Bonds will b= e issued in name of DWR only to pay for power the state is buying, not to r= epay utility deb. I don't think the state will repay utility debt. The st= ate can buy power in or out of Chapter 11. There will be no participation = by the state bank. I know Harvey well, and he and I agree on a number of t= hings. For example, I am cosponsoring the public power authority. We shoul= d not put the state in the business of refinancing utility debt. I don't t= hink most consumer groups realize that we are selling bonds to pay for powe= r. I very much want, and it is in my interest, to repay the general fund. = At the same time that this office is financing the purchase of energy, the= fundamental problem is the price we are being charged by the generators-th= e ransom that is being demanded by the generators. I agree with Harvey that= as of this current time the generators are winning. We will have to consi= der excess profits taxes, or if the generators continue, they have increase= d their prices tenfold. The generators they bought a set of plants for $3.= 1bn. Since January the state has spent over $4bn. If the generators don't= take their foot off our throat, they may leave us no option but to take ba= ck plants under emergency power. So let them justify those rates. What c= auses the problem is the generators jacking up prices to the point where th= ey will make us do something about it." What is the "measurable size premium" that will have to be paid based on th= e most current estimates of bond issue size? "Measurable is the wrong choice of words. We don't know how many basis poi= nts. If it is more than $10bn, we will begin to feel it.=20 Also, I am not for that proposal to allow the utilities to pay off the gene= rators over 12 years with a 2-year grace period. They should work that out = themselves, not on the backs of ratepayers. The perspective here is that t= hey did very, very well in 1996, 97 and 98. They upstreamed billions."
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