EDITORS: Please do not use
"Pacific Gas and Electric" or "PG&E" when
referring to PG&E Corporation or its National Energy Group.
The PG&E National Energy Group is not the same company as Pacific
Gas and Electric Company, the utility, and is not regulated by the
California Public Utilities Commission. Customers of Pacific Gas
and Electric Company do not have to buy products or services from
the National Energy Group in order to continue to receive quality
regulated services from Pacific Gas and Electric Company.
PG&E NATIONAL ENERGY GROUP DEFAULTS ON REVOLVING CREDIT FACILITY
Company Pursues Global Restructuring Plan
BETHESDA, Md. – PG&E National Energy Group today announced
that the company is in default under its corporate revolving credit
arrangement for failure to repay $431 million due today. The company
is in active negotiations with key lenders and bondholders regarding
a global restructuring of the company’s debts. PG&E National
Energy Group is a wholly owned subsidiary of PG&E Corporation
The company’s failure to repay the $431 million tranche
of the corporate revolving credit facility causes a cross-default
under five other major credit facilities and equity funding obligations.
- Default under the two-year tranche of the corporate revolving
credit facility - $273 million outstanding, primarily consisting
of letters of credit;
- Cross-default under PG&E National Energy Group’s senior
unsecured notes due in 2011 - $1 billion outstanding;
- Guarantee of the turbine revolver - $205 million outstanding;
- Equity commitment guarantee to GenHoldings credit facility
- $355 million outstanding;
- Equity commitment guarantee to La Paloma credit facility
- $375 million outstanding; and
- Equity commitment guarantee to Lake Road credit facility
- $230 million.
In addition, the company will not be making a $52 million interest
payment due Friday, Nov. 15, 2002, on the senior unsecured notes
due in 2011.
Notwithstanding the defaults, PG&E National Energy Group believes
that the lenders will continue negotiations to restructure the
“While the challenges are complicated and multifaceted,
we are confident that there is a path of resolution that can work
for all parties involved,” said Thomas B. King, president,
PG&E National Energy Group. “However, working through
and resolving the various issues is going to require substantial
As reported in a Nov. 13, 2002, form 10-Q filing with the U.S.
Securities and Exchange Commission, if the restructuring cannot
be achieved by agreement with PG&E National Energy Group’s
creditors, the company and certain of its subsidiaries may be compelled
to seek protection under or be forced into Chapter 11 of the Bankruptcy
Code. The recent form 10-Q filing also outlines the financing facilities
in greater detail.
Like much of the wholesale energy sector, PG&E National Energy
Group has faced a challenging environment and difficult market
conditions. During 2001 and 2002, new supply additions begun during
the high-price period combined with a softening economy and reduced
load growth resulted in excess energy supply in many regions. The
excess supply conditions have put downward pressure on the prices
of most regional wholesale energy markets. Prior to the decline
of the energy markets, the company initiated substantial growth
plans. Obligations undertaken to support these growth plans are
now beginning to mature.
In recent days, PG&E National Energy Group:
- Signed an agreement to sell one-half of its 50 percent interest
in the Hermiston Generating plant to Sumitomo Corporation and
Sumitomo Corporation of America. The plant, located in Hermiston,
will continue to be operated and managed by a subsidiary of
National Energy Group.
- Announced that it plans to shut down its Spencer Station Generating
facility in Denton, Texas.
Headquartered in Bethesda, Md., PG&E National Energy Group
develops, builds, owns and operates electric generating and natural
gas pipeline facilities and provides energy trading, marketing
and risk-management services.
This news release discusses certain matters that may be considered “forward-looking” statements
within the meaning of Section 27A of the Securities Act of 1933,
as amended, including statements regarding the intent, belief or
current expectations of PG&E National Energy Group and its
management. Actual future results could differ materially from
those expressed or implied in any forward-looking statements. PG&E
National Energy Group describes in its filings with the U.S. Securities
and Exchange Commission some of the key factors that could cause
actual results to differ materially.