The Daily Deal
SAN FRANCISCO – A California bankruptcy court, April 11, approved Pacific Gas and Electric Co.’s plan to emerge from Chapter 11 protection by spinning off into three companies.
The approval by Judge Dennis Montali is not an endorsement of the plan, which has drawn fire for proposing to sidestep several state laws. Rather, the action shows Montali believes that the disclosure statement adequately reflects changes discussed during several months of hearings.
Still, PG&E of San Francisco said the ruling was a major step. “This is enormous,” said Bill Lafferty, a PG&E attorney with Howard, Rice, Nemerovski, Canady, Falk & Rabkin.
Formal approval of the disclosure statement is expected April 24. PG&E‘s plan seeks to create three companies that fall primarily under federal, not state, regulation. Before winning court approval, the plan ran into opposition from several groups demanding more information about PG&E‘s post-bankruptcy activities. Consumer advocacy group The Utility Reform Network, for example, said the utility needed to disclose more detail about financial projections and income. PG&E complied.
Other objections came from environmental groups concerned about PG&E‘s commitment to preserve several thousand acres of public land that house various of its facilities. Environmental Defense raised questions about PG&E‘s plans to care for 140,000 acres of watershed lands if it is allowed to escape most regulation by the California Public Utilities Commission.
Although PG&E made some concessions to environmental groups, Nancy Ryan, a senior economist with Environmental Defense, said her group isn’t satisfied. “The changes made were more cosmetic than substantive,” she said.
Assuming formal approval of PG&E‘s plan comes next week, the utility can begin soliciting creditors to support its plan starting in mid-June.
PG&E‘s outline for its reorganization will compete with a separate plan expected to be filed April 15 by the CPUC. The commission is challenging PG&E‘s spin-off plan and wants to retain regulatory jurisdiction over the utility.
The CPUC proposes PG&E use the $6.1 billion it estimates PG&E will have in cash by January 2003 to repay certain creditors, while refinancing and reinstating balances owed to holders of long-term notes, and to meet other obligations.
But the commission’s plan may have run into trouble even before it is filed. On Thursday a consumer group filed suit in state Supreme Court seeking to ban the CPUC from recommending that ratepayer money be used to pay down the utility’s debt, a main element of the commission’s plan, according to The Foundation for Taxpayer and Consumer Rights in Santa Monica.
“We are very concerned that the PUC is acting as a rogue agency flouting state laws,” said Doug Heller, an advocate with the group.
The CPUC did not have an immediate response.
California’s largest utility, PG&E declared bankruptcy in April 2001, posting $9 billion in losses. The company, a unit of Pacific Gas & Electric Corp., attributed its problems to buying power at prices higher than state law allowed it to charge customers.
Plan approved
PG&E‘s latest reorganization plan has been appproved by the
U.S. bankruptcy court in San Francisco. Previous versions
have been rejected as insufficiently grounded. The plan is
for PG&E to emerge from bankruptcy protection as three
independently operating companies.
Company PG&E Corp.
CEO: Robert D. Glynn Jr.
Headquarters: San Francisco
Timeline:
Date – Action
4/06/01 – PG&E files for bankruptcy protection
5/18/01 – Judge eliminates ratepayers committee that hoped to have a say in the PG&E bankruptcy process
7/06/01 – PG&E and creditor Calpine reach settlement
8/03/01 – Bank of New York steps down as PG&E trustee and will resign from creditors’ committee
9/20/01 – PG&E files creditor-supported plan of reorganization in San Francisco
12/19/01 – PG&E files amended plan of reorganization
1/10/02 California sues PG&E for up to $4 billion
1/17/02 – PG&E sues California for $4 billion
1/24/02 – PG&E and the California Public Utility Commission head to court over rival reorganization plans
1/25/02 – PG&E argues in court that the federal government should take over for the state in overseeing the utility
2/01/02 – PG&E submits reorganization plan support documentation to bankruptcy court
2/07/02 – Bankruptcy judge rejects PG&E‘s reorganization strategy
2/11/02 – California opposes PG&E‘s motion to transfer a $4 billion civil suit against the utility to a federal court
2/13/02 – California Public Utilities Commission files a term sheet outlining its plan to pull utility out of bankruptcy
2/20/02 – PG&E opposes CPUC reorganization plan
3/07/02 – PG&E files another revised reorganization plan with bankruptcy court
3/20/02 – California officials object to what they consider to be the bankrupt utility’s attempt to sidestep state law in its reorganization plan
3/26/02 – Judge orders PG&E to provide more information about estimated income and financial projections assumed in its reorganization plan
4/03/02 – PG&E appeals to federal court to overturn bankruptcy court decision denying its reorganization plan.
4/11/02 – Bankruptcy court approves the latest version of PG&E‘s reorganization plan
Source: The Deal
http://www.TheDeal.com
