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Enron Mail |
Below is the transcript of an interview conducted yesterday with State=20
Treasurer Phil Angelides: Summary: ? Bond Issuance to be $10B with 10-15 year term, 70% tax exempt and 30%=20 non-exempt ? Angelides in favor of wind fall profit tax ? Opposed to current discussion between Davis and Socal in regards to Socal= =20 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= ,=20 essentially warranting that sufficient revenues from rates will be availabl= e=20 for purchasing power. It is really their job to define what each party need= s=20 to pay for power. We need to give assurance to the investment community tha= t=20 whatever the overall rate is, the state will get enough to pay its bonds.= =20 However, if the utilities challenge the decision, it could stall the bond= =20 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,=20 around $10bn. The PUC has allowed us to sell north of $13bn, but we=20 anticipate that $10bn is absorbable. Until the administration provides=20 details for this office and the public on what its costs of buying power ar= e=20 and what it needs in terms of funding, what will drive it is that number, n= ot=20 what the PUC has said. The issuance may well be a single $10bn issue or a= =20 series 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=20 obligations. In 1997 the CA infrastructure rate reductions bonds was a $7bn= =20 issuance, and this was handled well. This is not exclusively a CA market. = =20 Around $200bn of these bonds is sold each year. We anticipate that the=20 bonds will be 70% tax-exempt and 30% non-exempt." What is the total of electric supply contracts that are firm enough to=20 require funding? "We have estimates. The DWR is buying power, and let=01,s say power costs $= 100=20 and its portion of rates is $70. This bond issuance covers the diff between= =20 $100 and $70. So, the bond issuance is a way to cover the gap. However, if= =20 power prices do not come down, you cannot keep borrowing. If we issue more= =20 than $10bn in bonds, I have to see the whole financial plan. (The=20 implication 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= =20 mix." Do you have the ability to do bridging tax anticipation notes or anything= =20 like that to take care of the general fund? "The very purpose of the bridge loan is that we are taking a taxable and=20 tax-exempt bridge loan until bonds are issued. In order for us to issue=20 bonds, a number of steps have to occur. I would hope that the PUC and DWR d= o=20 what they have to do realistically by June. Then the bond issuance would= =20 come semi all-at-once. (In other words, either all at once, or something= =20 like $3 billion every three weeks.)" Are all of the general funds=01, assets in cash, or are some in the form of= a=20 less liquid receivable? "We have a lot of liquidity in real cash in general fund. We have a cash= =20 flow. We have the ability in pooled money investment accounts so that we ca= n=20 go out to five years. We have $40bn-plus in that account." What is the minimum working capital required in the general fund for=20 day-to-day operations? "It depends, and goes up and down. On any given day we are doing on the=20 order of $500mm. There is a $100bn budget between the general funds and=20 special fund." Are you discussing the DWR contracting in relation to the required funding?= =20 Do you have a veto on the deals struck? "This is all in the administration=01,s court. What we have asked for is t= he=20 information. We have asked for this today by letter. We have to move from= =20 working with 3 or 4 banks to a public offering, which means public=20 disclosure. The general fund has been making advances to buy power, but we= =20 want to get out of that business and to stop the $4bn plus drain on general= =20 fund from arranging an interim loan." What is the credit risk from industry or other large users cherry picking o= r=20 self-selecting? "There are limits on the options out there. AB1X has limited the ability o= f=20 people to opt out of the system. If you do allow them to opt out, what do= =20 they have to pay to preserve the revenue stream? The agreement between the= =20 DWR and the PUC will say that, through a financing order, we will get you t= he=20 revenue to service the bonds, even if it adjusts rates. This will be a=20 covenant that the money will be made available." If an initiative is launched could it create enough uncertainty to have an= =20 effect on ABIX or the bond issuance? What about =01&Harvey proofing=018? W= hat is=20 the direct state participation? "The state=01,s role is infrastructure and economic development. Bonds wil= l be=20 issued in name of DWR only to pay for power the state is buying, not to rep= ay=20 utility deb. I don=01,t think the state will repay utility debt. The stat= e can=20 buy power in or out of Chapter 11. There will be no participation by the= =20 state bank. I know Harvey well, and he and I agree on a number of things. = =20 For example, I am cosponsoring the public power authority. We should not pu= t=20 the state in the business of refinancing utility debt. I don=01,t think mo= st=20 consumer groups realize that we are selling bonds to pay for power. I very= =20 much want, and it is in my interest, to repay the general fund. At the sam= e=20 time that this office is financing the purchase of energy, the fundamental= =20 problem is the price we are being charged by the generators-the ransom that= =20 is being demanded by the generators. I agree with Harvey that as of this=20 current time the generators are winning. We will have to consider excess= =20 profits taxes, or if the generators continue, they have increased their=20 prices tenfold. The generators they bought a set of plants for $3.1bn. =20 Since January the state has spent over $4bn. If the generators don=01,t ta= ke=20 their foot off our throat, they may leave us no option but to take back=20 plants under emergency power. So let them justify those rates. What caus= es=20 the problem is the generators jacking up prices to the point where they wil= l=20 make us do something about it." What is the =01&measurable size premium=018 that will have to be paid based= on the=20 most current estimates of bond issue size? "Measurable is the wrong choice of words. We don=01,t know how many basis= =20 points. 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=20 generators over 12 years with a 2-year grace period. They should work that= =20 out themselves, not on the backs of ratepayers. The perspective here is th= at=20 they did very, very well in 1996, 97 and 98. They upstreamed billions."
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