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Content-Type: text/plain; charset=us-ascii Content-Transfer-Encoding: 7bit X-From: Susan J Mara X-To: Alan Comnes, Angela Schwarz, Beverly Aden, Bill Votaw, Brenda Barreda, Carol Moffett, Cathy Corbin, Chris H Foster, Christina Liscano, Christopher F Calger, Craig H Sutter, Dan Leff, Debora Whitehead, Dennis Benevides, Don Black, Douglas Huth, Edward Sacks, Eric Melvin, Erika Dupre, Evan Hughes, Fran Deltoro, Gayle W Muench, Ginger Dernehl, Gordon Savage, Harold G Buchanan, Harry Kingerski, James D Steffes, James W Lewis, James Wright, Jeff Messina, Jeremy Blachman, Jess Hewitt, Joe Hartsoe, Karen Denne, Kathy Bass, Kathy Dodgen, Ken Gustafson, Kevin Hughes, Leasa Lopez, Leticia Botello, Mark S Muller, Marsha Suggs, Marty Sunde, Meredith M Eggleston, Michael Etringer, Michael Mann, Michelle D Cisneros, mpalmer@enron.com, Neil Bresnan, Neil Hong, Paul Kaufman, Richard L Zdunkewicz, Richard Leibert, Richard Shapiro, Rita Hennessy, Robert Badeer, Rosalinda Tijerina, Sandra McCubbin, Sarah Novosel, Scott Gahn, Scott Stoness, Sharon Dick, skean@enron.com, Susan J Mara, Tanya Leslie, Tasha Lair, Ted Murphy, Terri Greenlee, Tim Belden, Tony Spruiell, Vicki Sharp, Vladimir Gorny, Wanda Curry, William S Bradford, Jubran Whalan, triley@enron.com, Richard B Sanders, Robert C Williams, dwatkiss@bracepatt.com, rcarroll@bracepatt.com, Donna Fulton, gfergus@brobeck.com, Bruno Gaillard, Linda Robertson, Ren, Lazure, Michael Tribolet, Phillip K Allen, Christian Yoder, jklauber@llgm.com, Tamara Johnson, Greg Wolfe, Jeff Dasovich, Dirk vanUlden, Steve Walker, James Wright, Mike D Smith, Richard Shapiro, Leslie Lawner, Robert Neustaedter, Steve Walton, psmith3@enron.com, mjackso7@enron.com, Janel Guerrero, Mark Fillinger, Jennifer Rudolph, Martin Wenzel, wgang@enron.com, Joseph Alamo, Tracy Ngo, Ray Alvarez, Steve C Hall, David Leboe/Enron@EnronXGate, Jay Zoellner, Fatimata Liamidi, Sonia Perez, Chris Holmes, Venkatesh Mani, Richard Crevelt, Dave Perrino X-cc: X-bcc: X-Folder: \Richard_Shapiro_June2001\Notes Folders\Discussion threads X-Origin: SHAPIRO-R X-FileName: rshapiro.nsf Sue Mara Enron Corp. Tel: (415) 782-7802 Fax:(415) 782-7854 ----- Forwarded by Susan J Mara/NA/Enron on 05/18/2001 12:11 PM ----- "Fairchild, Tracy" <tracy.fairchild@edelman.com< 05/18/2001 11:48 AM To: "Aaron Thomas (E-mail)" <athomas@newenergy.com<, "Andrea Weller (E-mail)" <aweller@sel.com<, "andrew Chau (E-mail)" <anchau@shellus.com<, "Bill Chen (E-mail)" <bchen@newenergy.com<, "Douglas Oglesby (E-mail)" <doao@chevron.com<, "Jeffrey Hanson (E-mail)" <jeff.hanson@phaser.com<, "jennifer Chamberlin (E-mail)" <jnnc@chevron.com<, "john Barthrop (E-mail)" <jbarthrop@electric.com<, "John Leslie (E-mail)" <jleslie@luce.com<, "Joseph Alamo (E-mail)" <jalamo@enron.com<, "Kathleen Magruder (E-mail)" <kmagruder@newpower.com<, "Marcie Milner (E-mail)" <Marcie.Milner@enron.com<, Michael Nelson <mnelson@electric.com<, "Mona Petrochko (E-mail)" <mpetroch@enron.com<, "Peter Bray (E-mail)" <pbray@newpower.com<, "Rebecca Schlanert (E-mail)" <rschlanert@electric.com<, "Richard Counihan (E-mail)" <rick.counihan@greenmountain.com<, "Robert Morgan (E-mail)" <rmorgan@newenergy.com<, "Sue Mara (E-mail)" <smara@enron.com< cc: Subject: Governor Davis' Lead Bond Counsel Holds Teleconference Today wi th Financial Analysts: Summary < Governor Davis' Lead Bond Counsel Holds Teleconference Today with < Financial Analysts: Summary < < The host of the teleconference was Mr. Joseph Fichera, CEO of Saber < Partners (serving as Governor's independent Bond Counsel) < < Mr. Fichera's goal appeared to be to calm the financial markets as the < Governor is hoping under a best case scenario to put the bonds out to < market sometime in June. Fichera told me yesterday that he does these < calls on an "as needed" basis. There appeared to be some concern that the < "media is getting ahead of the story" and the inference could be made that < this is causing problems for the Governor's MOU legislation (which they < also said they hope to have signed by June) and perhaps for the emerging < "Plan B" as well. < < A replay of this teleconference is available at www.energyinfo.ca.gov.ca < < Mr. Fichera broke down his statement into the following sections: < < California State Senate: Pieces of Governor's MOU legislation moving in < separate committees; in the Senate this is positive for moving it forward. < < Assembly Plan B Group: Assemblymembers Keeley, Dutra and Nation are < working together and have good ideas to move the Governor's MOU < legislation through. Fichera said that the Governor's office is meeting < with both parties but the plan is still in the formative stages. He < added that they still have the Senate to deal with and no movement on the < proposal is imminent. They are hopeful that it will be "moving toward < resolution in a week or two." < < Generators: Fichera stated that since the Governor's meeting with the < generators, a subgroup has agreed to continue to meet with Governor's < staff and advisors to resolve the issues. He stated that the issue of < litigation and investigations by the AG's office is "off the table" for < discussion and that topics of discussion are limited to supply issues and < managing the coming summer. < < QFs: Governor's team has facilitated 5 days of discussions with SCE and < QFs over past two weeks; most QFs are represented at these negotiations. < They continue to discuss the back payments owed and lower prices going < forward to give pricing stability to CDWR and the market. Their hope is < that due to negotiations, the QFS will all be fully available to the < market this summer. < < PGE: They see the bankruptcy judge's refusal to allow certain QFs to get < out of their contracts as a positive development. < < QFs on-line: There are currently 700 MWs off-line; this is better than < their model anticipated for May. They expect more than 90% < on-line by June. Last month 1700 QF MWs off-line; Fichera explained that < standard QF contracts have severe penalties if not on by June 1 during < peaks but that they are allowed to be off during off-peak hours. He added < that they are still trying to resolve their issues. < < Key aspects of budget plan (by this I believe he meant energy financing, < not the annual budget): conservation and contracts < < Conservation: They built in a 4% reduction in demand and 3% reduction for < price elasticity--conservatively projecting 7% in conservation. He < stated the we saw 9% conservation in March and April, "so we think our < model is conservative." Fichera added that the new electricity rates go < out in June and they expect that this will cause a "good reaction" due to < price signals and demand reduction. < < They also built in 2% in natural load growth to their projections as well < to further ensure a conservative estimate. < < Energy Costs: Projected ($1.78 billion) vs. actual ($1.80 billion) equals < a variance of 1.4% < < May Energy Costs: As of May 6th, right on budget target, with a variance < of less than a half percent < < Contracts: Fichera stated that DWR continues to execute new contracts and < reduce the net short exposure in the spot market. He added that 10-20% of < necessary contracts are not yet executed, but rather in the agreement in < principal stage. He released the following stats: < < Needed executed contracts completed (these percentages must refer to < projected load accounted for): 43% for May, 67% for June, 48% for July, < 42% for August < < When agreements in principle added in: 73% for June, 67% for July, 60% for < August: < < Questions from analysts: < < Have you built-in an assumption that QFs will be able to opt out of < contracts? "No, we do not because we are fighting the opt-out positions. < The bankruptcy judge refused to allow this and the AG is probably going to < be involved to stop that. A few hundred MWs have gone into the market. < We are aware of this issue, which is why we're pushing the MOUs--this < litigation would stop if we get an agreement on the MOU because the back < payment issue would be settled." < < Timing with SDG&E, where are you on MOU or Agreement in Principle? We < have to constantly reevaluate our negotiations due to other decisions < {happening simultaneously around us]. We are resuming face to face < negotiations on Monday and we are still resolved to reach an agreement. < There is no drop dead date. < < Generators working group? We're discussing DWR credit issues, summer, < support for MOU--the generators have issues with outstanding payments due. < The Governor expects them to provide haircut re: those payments and that's < part of discussion. < < QF resolution: will gas QFs be released from contracts? We don't know < what PG&E is going to do but they could do that-- release at any time--no < indications yet--haven't affirmed all the contracts yet. We want to avoid < this in the SCE situation. There are a lot of overlapping QFs that supply < both utilities. We are trying to set a standard as to what we are looking < for. < < Bond issue timing? The current plan, assuming there is no further action < by the legislature, is to close sales 91 days after bond sales, on Aug. < 14. We have sufficient cash to carry us through this period. We are < making a bridge loan from the General Fund. In June we see improved < revenue stream from ISO; rate increases will also improve cash stream. < < Can you give us any prices on new contracts? Not on new contracts, we are < resisting for market reasons giving out individual prices for individual < contracts. Our website has aggregated average prices for contracts signed < so far. < < Where is the legislature? Legislators want to see sharing of the pain--so < far the focus has been mostly on generators. The undercollection is < associated so far with the generators, legislators are beginning to see < that only about 1/3 of the undercollection is tied to generators. So < should QFs and commercial banks share the pain? Some think some are less < guilty than others. We can only deal with Edison. The media has gotten a < little ahead of the process, this is going to take longer than a few < weeks. < < Handicap? Lead horse? The Assembly is more organized and focused right < now on enhancements and changes to the Governor's plan; the Senate is not < as organized, though we have engaged with Senator Burton--we met with him < 3 times this week. And the Senate Majority leader has sponsored a bill to < implement the Governor's plan. < < If QFs freed up from contracts under bankruptcy or otherwise released from < contracts--how does this affect your financial plans? "I think it would < change it dramatically. It would be a budget busting event." That's why < we're resisting in court and pushing the MOU and hope that the legislature < sees why bankruptcy is not a viable solution. < < Does this need to be solved before bond issue? The combination of AB1x < and 31x gives us ironclad bonding authority and the legal ability to < recover all costs. We think that only a few QFs can survive without < long-term contracts, so it's also possible that not all would go into spot < market, few may be able to survive as merchant generators. < < Windfall profits tax--helpfulness of generators--did they perform < adequately during summer of 2000? What are your expectations of their < performance? The Governor did not have a quantitative answer in mind--he < left that open as to how he'll evaluate their performance. People at DWR < and ISO will probably have the strongest influence on the Governor in this < matter. < < Bond issue timing? We are working with the treasurer and hope to sell < bonds by end of June "if stars are aligned"--it may be one mega-deal or < several tronches (sp?)--this is still open for discussion. Even with the < rising prices that we expect this summer, most of our net short will be < under contract or reduced due to demand side management and thus we don't < expect our budget to be busted. < < Extended bridge financing commitment?--irrelevant because we don't have < authority to issue for 90 days. < < Renewable QFs/gas prices--is there anything can you do--levelize gas < prices so they can operate under "S-rack" (sp?) price formula? < < Many options have been discussed, to bring them into the market we need < such issues to become part of the global settlement and to continue to be < worked out. < < Polanco MOU legislation: is it identical to the Governor's view or already < changed? This is the implementing legislation for the Governor's MOU--not < changed so far. Governor did not put MOU on table as legislation that < could be changed. (He went on to explain that anything taken out must be < replaced in some other fashion to keep the MOU balanced...) This is going < to take some time; however, we do have a sense of urgency--we are hoping < for a vote sometime in June. The MOU has deadline of August 15. < < Tracy Fairchild < Senior Account Supervisor < Edelman Public Relations Worldwide < (916) 442-2331 < tracy.fairchild@edelman.com <
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