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Enron Mail |
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Executive Summary
-CPUC rules that SoCal must pay 15% of debt to QFs (approximately $50 million) -Ruling heightens likelihood of voluntary bankruptcy filing by SoCal -Voluntary filing further heightened by successful ring-fencing by EIX parent -Bankruptcy judge firm in support for QFs Report 1. SoCal Loses CPUC Ruling, But Retains Appeal Option As you may have seen, Bloomberg reported that the CPUC voted 5-0 to force SoCal to make 15% of its payments owed to alternative energy producers in California. CPUC rules allow 30 days to appeal its rulings, leaving a window open for SoCal to buy more time. 2. Voluntary Filing In? With regard to a SoCal bankruptcy filing, the key now is how SoCal's board feels about progress rather than deadlines with creditors. In other words, sources believe that a voluntary filing is more likely than an involuntary filing. A continuing lack of progress on a bailout and an increase in the number of liens filed against SoCal is more likely to make the SoCal board want to file for bankrutpcy voluntarily. The recent ring-fencing by Edison International reflects their need to pay off cross-default risk and to cut ties in their bank facility between the parent company and lines of credit helds by SoCal. In and of outself, it does not necessarily signal an imminent filing. 3. Involuntary Out? Sources indicate that the unsecured financial creditors are not considering a filing against SoCal. This is because the financial creditors believe that they would still be worse off in bankruptcy. Sources report that in creditor discussions, there has not been talk of the debt holders not being paid. "People have talked about screwing the generators and everyone else, but not the debt holders," a source commented. The QFs are unlikely to file against SoCal because they have fairly good contracts in place. Also, they receive high capacity fees in the summer (these fees vary seasonally and are distinct from generating fees). These capacity fees are calculated on a rolling, 4-year basis and will be re-calculated next year. The QFs want this summer included in the recalculation, incentivizing them to keep their contracts in place. 4. Montali Supporting QFs Judge Montali, by his recent rulings, is sending a signal that he is concerned for the QFs and is sensitive to their hardships. He is trying to help them through his rulings. For example, as long as QFs remain on line, those who petition can receive additional payments from PG&E. Over a 4-month period, these payments equal 20% of the QFs' pre-petition claims. This provides the QFs incentive to remain connected to PG&E. 5. GE Looking to Restructure Generating Capacity Financing General Electric is reportedly "deeply concerned" about the stability of financing generating capacity in the US. (GE has over 70% of the gas turbine market.) GE is reportedly trying to keep its margins down and is not raising its prices due to concerns about instability. Sources believe that a very significant percentage of generating capacity financing will have to be restrucured in five years.
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