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Enron Mail |
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EXECUTIVE SUMMARY
?=09Bankruptcy Fears Mount With Absent MOU or Plan B=20 ?=09California PUC Wagers the Promise of QF Payments=20 ?=09SoCal Ring Fencing ?=09California Budget having Problems Bankruptcy Fears & Plan B=20 Sources are becoming more pessimistic regarding the prospects for a state b= ailout of SoCal. At this time the negotiations on Plan B appear to be in d= anger of falling apart. The governor's efforts to position the legislature= to take the blame if SoCal files (due to lack of movement on the MOU) and = Senator Burton's hostile response that the governor is the one responsible = for delays is a sign that sentiment toward working for a bailout may be dis= appearing. It now appears more likely that a Plan B alternative to the MOU= will not be reached due primarily to a failure to achieve consensus on how= to spread the burden of the dedicated rate component. This could likely l= ead to a SoCal bankruptcy filing in the foreseeable future and as sources n= ote, parties to the crisis are not optimistic about reaching a deal. =20 CPUC Moves to Pay QFs According to media reports on the CPUC QF payment plan, SoCal's payments to= QFs are contingent on the legislatures' approval of the MOU. In a move to= publicize their cooperation and facilitate this process, today the CPUC pa= ssed three of the four MOU provisions set by Davis/SoCal Ed negotiations an= d promised to examine the last provision at their June 28th meeting. Thus,= with the CPUC posing no hindrance to stabilizing SoCal Ed., the legislatur= e will bare the burden of debating the MOU or Plan B. Sources report that = if it appears that no legislative solution can be achieved, the QFs could f= ile involuntary bankruptcy against SoCal. Yesterday's decision raised the = state's price cap on the QF's substantially, and ought to help increase pro= duction. So once again, price caps have kept crucial power generation asse= ts off the market. Sources note that the QFs contracts with SoCal now have= cancellation clauses built into them in the event of SoCal filing involunt= arily- this is something the QFs learned from the experience of PG&E's fili= ng and Judge Montali's subsequent rulings. The financial question about th= ese payments to QFs is less whether they will in and of themselves bankrupt= Edison, than it is whether other creditors force Edison into bankruptcy ra= ther than see that money leave the building. The sums in question are not h= uge, an absolute maximum of $50 million, but we are told some bondholders m= ay well consider $50 million to be a sum worth fighting for. Ring Fencing Edison International (EIX) has issued a $1.2 billion bond via its Mission E= nergy subsidiary, proceeds of which will be used to pay off certain credit = lines with banks. Sources report that paying off these credit lines will ne= gate cross-default clauses in those lines, and insulate EIX from the effect= s of a bankruptcy at Southern California Edison. This is exactly what PG&E = did a few weeks before filing Chapter 11, and has further convinced a lot o= f people that the game plan at EIX includes letting SCE file and restructur= e in bankruptcy rather than outside of it. Sources comment that when Judge = Montali approved large bonuses for PG&E senior management after PG&E's fili= ngs, it made Bryson and members of his team "reconsider" the merits of bank= ruptcy. =20 California State Budget: Day-to-day stress relief notwithstanding, the California state budget is st= ill a shambles. More than $8 billion has been paid to power generators, dep= leting a political treasure chest which was going to be doled out to specia= l interest groups for years to come. The only hope for the state comes from= the issuance of $12.5 billion in "Power Bonds." Financial market participa= nts are still questioning whether the State of California is illegally decl= aring itself to be a senior creditor of the one (soon probably two) bankrup= t utilities. By declaring that CPUC rate hikes be directed first to holders= of "Power Bonds" rather than general creditors of the utilities, the State= is saying that the money they spent buying power "on behalf of the utiliti= es" is a senior claim. The state Treasurer Phil Angelides has given repeate= d assurances that this is so, and will likely do so again in a conference c= all next Tuesday, but concern about this opinion reportedly dampened enthus= iasm for a $1 billion G.O. bond California issued this week. One highly res= pected Sacramento columnist said this week that the "Power Bonds" are no be= tter than 50-50 to get issued at all.
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