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---------------------- Forwarded by Phillip K Allen/HOU/ECT on 05/07/2001 0= 6:54 AM --------------------------- From:=09Kristin Walsh/ENRON@enronXgate on 05/04/2001 04:32 PM CDT To:=09John J Lavorato/ENRON@enronXgate, Louise Kitchen/HOU/ECT@ECT cc:=09Phillip K Allen/HOU/ECT@ECT, Tim Belden/ENRON@enronXgate, Jeff Dasovi= ch/NA/Enron@Enron, Chris Gaskill/ENRON@enronXgate, Mike Grigsby/HOU/ECT@ECT= , Tim Heizenrader/ENRON@enronXgate, Vince J Kaminski/HOU/ECT@ECT, Steven J = Kean/NA/Enron@Enron, Rob Milnthorp/CAL/ECT@ECT, Kevin M Presto/HOU/ECT@ECT,= Claudio Ribeiro/ENRON@enronXgate, Richard Shapiro/NA/Enron@Enron, James D = Steffes/NA/Enron@Enron, Mark Tawney/ENRON@enronXgate, Scott Tholan/ENRON@en= ronXgate, Britt Whitman/ENRON@enronXgate, Lloyd Will/HOU/ECT@ECT=20 Subject:=09California Update 5/4/01 If you have any questions, please contact Kristin Walsh at (713) 853-9510. Bridge Loan Financing Bills May Not Meet Their May 8th Deadline Due to Lack= of Support Sources report there will not be a vote regarding the authorization for the= bond issuance/bridge loan by the May 8th deadline. Any possibility for a= deal has reportedly fallen apart. According to sources, both the Republic= ans and Democratic caucuses are turning against Davis. The Democratic cauc= us is reportedly "unwilling to fight" for Davis. Many legislative Republic= ans and Democrats reportedly do not trust Davis and express concern that, o= nce the bonds are issued to replenish the General Fund, Davis would "double= dip" into the fund. Clearly there is a lack of good faith between the leg= islature and the governor. However, it is believed once Davis discloses th= e details of the power contracts negotiated, a bond issuance will take plac= e. Additionally, some generator sources have reported that some of the lon= g-term power contracts (as opposed to those still in development) require t= hat the bond issuance happen by July 1, 2001. If not, the state may be in = breach of contract. Sources state that if the legislature does not pass th= e bridge loan legislation by May 8th, having a bond issuance by July 1st wi= ll be very difficult. The Republicans were planning to offer an alternative plan whereby the stat= e would "eat" the $5 billion cost of power spent to date out of the General= Fund, thereby decreasing the amount of the bond issuance to approximately = $8 billion. However, the reportedly now are not going to offer even this = concession. Sources report that the Republicans intend to hold out for ful= l disclosure of the governor's plan for handling the crisis, including the = details and terms of all long-term contracts he has negotiated, before they= will support the bond issuance to go forward. Currently there are two bills dealing with the bridge loan; AB 8X and AB = 31X. AB 8X authorizes the DWR to sell up to $10 billion in bonds. This bi= ll passed the Senate in March, but has stalled in the Assembly due to a lac= k of Republican support. AB 31X deals with energy conservation programs fo= r community college districts. However, sources report this bill may be am= ended to include language relevant to the bond sale by Senator Bowen, curre= ntly in AB 8X. Senator Bowen's language states that the state should get = paid before the utilities from rate payments (which, if passed, would be li= kely to cause a SoCal bankruptcy).=20 =20 According to sources close to the Republicans in the legislature, Republic= ans do not believe there should be a bridge loan due to money available in = the General Fund. For instance, Tony Strickland has stated that only 1/2 = of the bonds (or approximately $5 billion) should be issued. Other Republ= icans reportedly do not support issuing any bonds. The Republicans intend= to bring this up in debate on Monday. Additionally, Lehman Brothers repo= rtedly also feels that a bridge loan is unnecessary and there are some ind= ications that Lehman may back out of the bridge loan. =20 Key Points of the Bridge Financing Initial Loan Amount:=09$4.125 B Lenders:=09=09JP Morgan=09=09$2.5 B =09=09=09Lehman Brothers=09=09$1.0 B =09=09=09Bear Stearns=09=09$625 M Tax Exempt Portion:=09Of the $4.125 B; $1.6 B is expected to be tax-exempt Projected Interest Rate:=09Taxable Rate=09=095.77% =09=09=09Tax-Exempt Rate=09=094.77% Current Projected=20 Blended IR:=09=095.38% Maturity Date:=09=09August 29, 2001 For more details please contact me at (713) 853-9510 Bill SB 6X Passed the Senate Yesterday, but Little Can be Done at This Time The Senate passed SB 6X yesterday, which authorizes $5 billion to create t= he California Consumer Power and Conservation Authority. The $5 billion= authorized under SB 6X is not the same as the $5 billion that must be aut= horized by the legislature to pay for power already purchased, or the addi= tional amount of bonds that must be authorized to pay for purchasing power = going forward. Again, the Republicans are not in support of these authoriz= ations. Without the details of the long-term power contracts the governor = has negotiated, the Republicans do not know what the final bond amount is = that must be issued and that taxpayers will have to pay to support. No f= urther action can be taken regarding the implementation of SB 6X until it = is clarified how and when the state and the utilities get paid for purchas= ing power. Also, there is no staff, defined purpose, etc. for the Calif= ornia Public Power and Conservation Authority. However, this can be consi= dered a victory for consumer advocates, who began promoting this idea earl= ier in the crisis. =20 SoCal Edison and Bankruptcy At this point, two events would be likely to trigger a SoCal bankruptcy. T= he first would be a legislative rejection of the MOU between SoCal and the = governor. The specified deadline for legislative approval of the MOU is Au= gust 15th, however, some decision will likely be made earlier. According t= o sources, the state has yet to sign the MOU with SoCal, though SoCal has s= igned it. The Republicans are against the MOU in its current form and Davi= s and the Senate lack the votes needed to pass. If the legislature indicat= es that it will not pas the MOU, SoCal would likely file for voluntary bank= ruptcy (or its creditor - involuntary) due to the lack operating cash. =20 The second likely triggering event, which is linked directly to the bond is= suance, would be an effort by Senator Bowen to amend SB 31X (bridge loan) s= tating that the DWR would received 100% of its payments from ratepayers, th= en the utilities would receive the residual amount. In other words, the st= ate will get paid before the utilities. If this language is included and p= assed by the legislature, it appears likely that SoCal will likely file for= bankruptcy. SoCal is urging the legislature to pay both the utilities and= the DWR proportionately from rate payments.
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