Subject: davis claims ene willing to take haircut
fyi .
in the attached article , gov davis mentions that enron is one of the generators that have agreed to accept " less than 100 cents on the dollar " . of course , no one has made such a claim .
the governor will say whatever it takes to make his story and polling numbers work .
jim
- - - - - forwarded by james d steffes / na / enron on 03 / 01 / 2001 06 : 05 pm - - - - -
karen denne 03 / 01 / 2001 09 : 16 am to : jeff dasovich / na / enron @ enron , richard shapiro / na / enron @ enron , james d steffes / na / enron @ enron , steven j kean / na / enron @ enron , mark palmer / corp / enron @ enron cc : subject : merrill lynch report : governor davis comes to wall street
davis is saying he ' s had discussions with us about taking a loss on our debts ? ? have we had any such conversations w / him ? ( i told the media yesterday we hadn ' t been contacted by him . . . )
- - - - - - - - - - - - - - - - - - - - - - forwarded by karen denne / corp / enron on 03 / 01 / 2001 09 : 08 am - - - - - - - - - - - - - - - - - - - - - - - - - - -
from : ann m schmidt on 03 / 01 / 2001 08 : 54 am
to : karen denne / corp / enron @ enron
cc :
subject : merrill lynch report : governor davis comes to wall street
karen ,
fyi . ann
governor davis comes to wall street
3 / 1 / 1 9 : 47 ( new york )
m e r r i l l l y n c h research bulletin
fixed income research reference number 10906001
united states mar / 01 / 2001 09 : 47
leo j . kelser ( 1 ) 212 449 - 7803
highlights of this issue
governor gray davis of california met with a group of sell - side and rating
agency analysts in new york yesterday . the governor outlined his plan for
restoring the utilities to financial viability so that they can meet their
obligations . below we summarize a few highlights from the meeting .
trying to fit solution within existing rate structure
the governor talked about the need to find a solution to the utilities '
problems within the context of their existing rate structures . he indicated
that the temporary 9 % rate hike from january 2000 would be made permanent and
that a 10 % rate reduction that went into effect in january 1998 would be
reversed in march 2002 .
status of negotiations with pg & e
as we noted in a february 26 ( * * th ) comment , the governor has reached an
agreement in principle with southern california edison ( eix : b 3 / cc ) to address
that utility ' s past under - collections . he hopes to also have an agreement with
pg & e within the next 30 days , suggesting that progress was made in particular
in the last 2 - 3 days . however , the governor acknowledged that reaching an
agreement with pg & e was more difficult due to its larger under - collected
balance and lower rates compared with sce .
some generators agree to haircut
the governor indicated that a couple of unnamed generators have voluntarily
agreed to accept less than 100 cents on the dollar for their past due
receivables . when pressed about which parties they ' ve had constructive
discussions with , he identified williams ( wmb : baa 2 / bbb - ) , enron ( ene :
baal / bbb + ) and dynegy ( dyn : baa 2 / bbb + ) . we note that most of the generators
and marketers with exposure to california have established reserves against
possible losses . importantly , the governor said that he hoped that the banks
and bondholders would not be asked to take a haircut .
prospects for legislation and possibility of ballot initiative
the governor said he is quite confident that he can reach an agreement with the
utilities that the legislature can support . although he admitted that he
couldn ' t prevent someone from proposing a ballot initiative , the governor said
that in the end , the acid test with the public is how it affects their pocket
books . thus , if there is ultimately a ballot initiative , governor davis is
optimistic that the public will be supportive of his plan given the limited
impact on electric rates .
status of defaulted utility debt
as we have commented in the past , it appears unlikely that the resulting
legislation will pass with the required 2 / 3 majority to go into effect
immediately . accordingly , there will be a several month lag before the
utilities receive any cash . in response to a question , it appears that the
state will not step in to help the utilities pay off any maturing or defaulted
commercial paper . but the governor and his advisers hope that legislation will
provide enough certainty so that the companies can get bridge financing .
essentially , it appears the governor is leaving it up to the utilities to find
the money from their banks .
governor ' s strategy to keep the lights on
the governor stated that a key reason that deregulation failed in california
was that no new power plants were built in the state for over twelve years . in
the intervening time , demand caught up with supply . in response , he has
proposed various conservation initiatives and is trying to expedite the
construction of new power plants . he set a goal of having 20 , 000 megawatts
( mws ) of new supply on line by 2004 .
in addition , the governor highlighted the need for additional investment in the
transmission infrastructure . in particular , he cited the need to expand the
capacity to import more power from arizona as well to improve the ability to
move power from south to north within the state . he suggested that part of the
rationale for the state taking over the utilities ' transmission grids was to
ensure that the additional investment takes place . he also suggested that the
state would lease the transmission lines back to the utilities to allow them to
continue to operate them .
in the meantime , the focus is to move away from california ' s over - reliance on
the spot market . in that vein , calpine ( cpn : bal / bb + ) yesterday announced the
signing of two long - term contracts with the state ' s department of water
resources ( dwr ) . one of those contracts was to sell up to 1 , 000 mws over a ten -
year term . the other was to provide up to 495 mw of peaking capacity under a
20 - year contract . earlier in february , cpn had reached agreement with the dwr
on a separate 10 - year contract for an additional 1 , 000 mws .
( eix , wmb ) mlpf & s was a manager of the most recent public offering of
securities of this company within the last three years .
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provider id : 10906001
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