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Content-Type: text/plain; charset=ANSI_X3.4-1968 Content-Transfer-Encoding: quoted-printable X-From: Jeff Dasovich X-To: skean@enron.com, Richard Shapiro, James D Steffes, Susan J Mara, Harry Kingerski, Leslie Lawner, Michael Tribolet, Kristin Walsh, Karen Denne, mpalmer@enron.com, Janel Guerrero, Paul Kaufman, Susan M Landwehr, Linda Robertson X-cc: X-bcc: X-Folder: \Jeff_Dasovich_Oct2001\Notes Folders\All documents X-Origin: DASOVICH-J X-FileName: jdasovic.nsf FYI. Couple of pretty good takes from the press. ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ Calif Republicans May Prevail With 'Bailout' For Edison =20 Updated: Wednesday, July 18, 2001 03:17 PM=01;ET =01;=20 =01; By Jason Leopold=20 Of DOW JONES NEWSWIRES=20 LOS ANGELES (Dow Jones)--Assembly Republicans could upstage Democrats in th= e=20 California Assembly Wednesday in a bid to rescue ailing utility Southern=20 California Edison Co. from insolvency.=20 And they may do so with a bill its backers unabashedly call a "straight=20 bailout" for the Edison International (EIX, news, msgs) unit.=20 "This how the minority in the Assembly can use their votes to derail majori= ty=20 legislation," Jamie Fisfis, spokesman for the Assembly Republican Caucus,= =20 said Wednesday.=20 The bipartisan bill, introduced by Assemblyman Rod Wright, D-South Central= =20 Los Angeles, and Assemblyman Keith Richman, R-Granada Hills, capitalizes on= =20 partisan politics and dissatisfaction with several elements of a competing= =20 bill sponsored by Assembly Speaker Bob Hertzberg, D-Van Nuys, and Assembly= =20 Speaker Pro Tem Fred Keeley, D-Boulder Creek.=20 Both bills face a critical vote Wednesday in the Energy Costs and=20 Availability Committee. Wright said he's secured nine votes for his bill on= =20 the 20-person committee - the eight Republicans and one Democrat. Keeley's= =20 office said his bill needs one more vote.=20 "It's going to be close," Wright said minutes before the committee hearing.= =20 Assembly Republicans and some Democrats are concerned by provisions in the= =20 Hertzberg bill that would have the state buy the utility's transmission=20 lines, limit consumers' ability to choose their power provider and place th= e=20 burden of the rescue on businesses.=20 Bill Forgoes Power-Line Buyout=20 Wright's bill would forgo those measures, instead allowing Southern=20 California Edison to recoup more than $3.5 billion in unrecovered power cos= ts=20 through a surcharge placed on utility bills in exchange for a commitment by= =20 the utility to sell power from its generation units to the state at cost.= =20 Southern California Edison executives said the Hertzberg-Keeley bill, which= =20 would require the company to absorb some of its wholesale-power losses,=20 wouldn't allow the company to become creditworthy and return to the power= =20 business any time soon.=20 Consumer groups have criticized both plans as bailouts and have vowed to=20 overturn the rescue efforts if either is enacted. Business groups, includin= g=20 the state's Chamber of Commerce and the California Manufacturers and=20 Technology Association, said if large businesses are stuck paying for the= =20 bailout, consumers will feel the pinch through increased costs in the retai= l=20 sector.=20 Steve Maviglio, press secretary to Gov. Gray Davis, said the governor is=20 "working with the Legislature for an appropriate balance that does not plac= e=20 any undue burden on any sector."=20 Lawmakers have until Aug. 15 to pass legislation supporting an April=20 memorandum of understanding between Southern California Edison and the stat= e,=20 but have an effective deadline of Friday, the last day before a month-long= =20 summer break.=20 Neither bill in the Assembly nor another bill in the Senate implements in= =20 full the terms of the MOU, which calls for the state to buy the utility's= =20 transmission lines for $2.76 billion and allow it to issue bonds to recover= =20 $3.5 billion in wholesale power costs it hasn't been able to recover from= =20 customers, whose rates are frozen.=20 Edison has said it faces bankruptcy if lawmakers don't act by the MOU's=20 August deadline.=20 -By Jason Leopold, Dow Jones Newswires; 323-658-3874;=20 jason.leopold@dowjones.com=20 ____________________________________________________ Six Months Later, Edison's Utility May Still End Up Bankrupt By Liz Goldenberg Rosemead, California, July 18 (Bloomberg) -- Even if California lawmakers= =20 pass a rescue plan to bail out insolvent Southern California Edison, some= =20 analysts say bankruptcy may be the only solution.=20 ``The reason they haven't filed remains more of a mystery than when they wi= ll=20 file,'' said Jon Kyle Cartwright, a senior energy credit analyst at Raymond= =20 James & Associates Inc. in St. Petersburg, Florida, who isn't recommending= =20 buying any debt sold by California utilities.=20 ``If the weather heats up or their creditors wise up, they'll have to go in= to=20 bankruptcy,'' said Cartwright.=20 Six months after the state's No. 2 utility defaulted on its debt, Californi= a=20 lawmakers are debating a rescue package designed to restore it to investmen= t=20 grade status. Any failure to do so by Friday, when the legislature is=20 scheduled to adjourn for a month, may result in a collapse of negotiations= =20 between the lawmakers, the governor, and the utility, and ultimately,=20 bankruptcy.=20 There are at least three versions under consideration, each targeting=20 different groups, such as large businesses or power suppliers, to help foot= =20 the bill for the bailout. There isn't any agreement as to what the rescue= =20 should look like, who will pay, and who is to blame for the situation.=20 Acceptable Option?=20 The bad news for the utility and its creditors is that ``bankruptcy seems t= o=20 be an increasingly accepted option by the legislature,'' said Dorothea=20 Matthews, the senior utility analyst for CreditSights, Inc., a research fir= m.=20 Any three unsecured creditors can file a petition to put the utility into= =20 bankruptcy. Debt holders, banks, and power generators are Southern Californ= ia=20 Edison's unsecured creditors.=20 The original rescue, signed on Apr. 9, between Governor Gray Davis and Edis= on=20 expires on Aug. 15. If legislative action isn't taken by then, either party= =20 can back out.=20 That is something that Southern California Edison may do, ``given the delay= s=20 that have plagued the rehabilitation process at virtually every stage,'' sa= id=20 David Bodek, an analyst who covers the utilities industry for Standard &=20 Poor's, a credit rating company.=20 Edison may decide that its utility may fare better under the eye of a=20 bankruptcy judge rather than politicians.=20 The lawmakers' goal is to save the utility in a way that is palatable to th= em=20 and to California voters. Stock and debt holders aren't a priority, analyst= s=20 said.=20 Do the Right Thing=20 ``Investors will brunt the majority of the pain here,'' said Raymond James'= s=20 Cartwright. ``An investment thesis that requires a group of politicians to= =20 get together and do the right thing is ill fated -- there is no way of=20 knowing what the state will or will not do.''=20 On a conference call yesterday with investors holding Southern California= =20 Edison debt in default, Edison chief financial officer Ted Craver said that= =20 while all the legislation being debated has returning the utility to=20 creditworthiness as a goal, the language needed to achieve that wasn't=20 included.=20 ``This is the beginning of the legislative process'' that will go on for th= e=20 next few days, he said.=20 Creditworthiness, which Edison officials say is the most important goal, is= =20 determined by credit rating companies and investors, rather than by the=20 legislature or the utility.=20 Stay Tuned=20 ``Our money is still on an eventual filing'' for bankruptcy, said=20 CreditSights' Matthews, who puts those chances at about 80 percent. ``Stay= =20 tuned. It ain't over until the fat lady sings, but we think we can hear her= =20 warming up in the wings.''=20 Southern California Edison accrued more than $5.4 billion in debts as it pa= id=20 soaring wholesale power costs that a flawed 1996 deregulation law prohibite= d=20 it from passing on to customers. It has defaulted more than $930 million of= =20 maturing debt since Jan. 16, and lost its investment-grade credit rating. T= he=20 utility owes banks more than $200 million for loans coming due on Sept. 15= =20 and has no access to the capital markets.=20 ``With few notable exceptions, (utility) bondholders have been well served = by=20 regulatory and political support for the financial well-being of'' utilitie= s=20 such as Southern California Edison, S&P's Bodek said.=20 Lacked Support=20 California's utilities have ``lacked such support over the past year, as=20 manifested by a stubborn and prolonged resistance to remedial action despit= e=20 imminent insolvency.''=20 Pacific Gas & Electric Co., the state's largest investor- owned utility,=20 filed for bankruptcy protection on April 6 after racking up more than $9=20 billion in debts.=20 The state stepped in to keep the lights on and the power flowing after=20 suppliers refused to extend additional credit to the state's two largest=20 investor-owned utilities. California has spent more than $7 billion buying= =20 power since January.=20 It is still possible that a last minute deal will satisfy all parties,=20 analysts said.=20 ``What worries me is that there is nothing in the legislation that will all= ow=20 the utility to pass on reasonable power procurement costs in the future,''= =20 said Susan Abbott, a managing director in the power group at Moody's=20 Investors Service, a credit ratings company.=20 ``If a bill goes through that in no way addresses the issue of power cost= =20 recovery for the utility, it would potentially be subject to the same=20 conditions that resulted in the financial distress it's experiencing today.= ''=20 =01; =01; =20
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