Message-ID: <16462692.1075844241904.JavaMail.evans@thyme> Date: Fri, 18 May 2001 05:13:00 -0700 (PDT) From: susan.mara@enron.com To: alan.comnes@enron.com, angela.schwarz@enron.com, beverly.aden@enron.com, bill.votaw@enron.com, brenda.barreda@enron.com, carol.moffett@enron.com, cathy.corbin@enron.com, chris.foster@enron.com, christina.liscano@enron.com, christopher.calger@enron.com, craig.sutter@enron.com, dan.leff@enron.com, debora.whitehead@enron.com, dennis.benevides@enron.com, don.black@enron.com, douglas.huth@enron.com, edward.sacks@enron.com, eric.melvin@enron.com, erika.dupre@enron.com, evan.hughes@enron.com, fran.deltoro@enron.com, gayle.muench@enron.com, ginger.dernehl@enron.com, gordon.savage@enron.com, harold.buchanan@enron.com, harry.kingerski@enron.com, james.steffes@enron.com, james.lewis@enron.com, james.wright@enron.com, jeff.messina@enron.com, jeremy.blachman@enron.com, jess.hewitt@enron.com, joe.hartsoe@enron.com, karen.denne@enron.com, kathy.bass@enron.com, kathy.dodgen@enron.com, ken.gustafson@enron.com, kevin.hughes@enron.com, leasa.lopez@enron.com, leticia.botello@enron.com, mark.muller@enron.com, marsha.suggs@enron.com, marty.sunde@enron.com, meredith.eggleston@enron.com, michael.etringer@enron.com, michael.mann@enron.com, michelle.cisneros@enron.com, mpalmer@enron.com, neil.bresnan@enron.com, neil.hong@enron.com, paul.kaufman@enron.com, richard.zdunkewicz@enron.com, richard.leibert@enron.com, richard.shapiro@enron.com, rita.hennessy@enron.com, robert.badeer@enron.com, rosalinda.tijerina@enron.com, sandra.mccubbin@enron.com, sarah.novosel@enron.com, scott.gahn@enron.com, scott.stoness@enron.com, sharon.dick@enron.com, skean@enron.com, susan.mara@enron.com, tanya.leslie@enron.com, tasha.lair@enron.com, ted.murphy@enron.com, terri.greenlee@enron.com, tim.belden@enron.com, tony.spruiell@enron.com, vicki.sharp@enron.com, vladimir.gorny@enron.com, wanda.curry@enron.com, william.bradford@enron.com, jubran.whalan@enron.com, triley@enron.com, richard.sanders@enron.com, robert.williams@enron.com, dwatkiss@bracepatt.com, rcarroll@bracepatt.com, donna.fulton@enron.com, gfergus@brobeck.com, bruno.gaillard@enron.com, linda.robertson@enron.com, ren@enron.com, lazure@enron.com, michael.tribolet@enron.com, phillip.allen@enron.com, christian.yoder@enron.com, jklauber@llgm.com, tamara.johnson@enron.com, greg.wolfe@enron.com, jeff.dasovich@enron.com, dirk.vanulden@enron.com, steve.walker@enron.com, james.wright@enron.com, mike.smith@enron.com, richard.shapiro@enron.com, leslie.lawner@enron.com, robert.neustaedter@enron.com, steve.walton@enron.com, psmith3@enron.com, mjackso7@enron.com, janel.guerrero@enron.com, mark.fillinger@enron.com, jennifer.rudolph@enron.com, martin.wenzel@enron.com, wgang@enron.com, joseph.alamo@enron.com, tracy.ngo@enron.com, ray.alvarez@enron.com, steve.hall@enron.com, jay.zoellner@enron.com, fatimata.liamidi@enron.com, sonia.perez@enron.com, chris.holmes@enron.com, venkatesh.mani@enron.com, richard.crevelt@enron.com, dave.perrino@enron.com Subject: Governor Davis' Lead Bond Counsel Holds Teleconference Today wi th Financial Analysts: Summary Mime-Version: 1.0 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" 05/18/2001 11:48 AM To: "Aaron Thomas (E-mail)" , "Andrea Weller (E-mail)" , "andrew Chau (E-mail)" , "Bill Chen (E-mail)" , "Douglas Oglesby (E-mail)" , "Jeffrey Hanson (E-mail)" , "jennifer Chamberlin (E-mail)" , "john Barthrop (E-mail)" , "John Leslie (E-mail)" , "Joseph Alamo (E-mail)" , "Kathleen Magruder (E-mail)" , "Marcie Milner (E-mail)" , Michael Nelson , "Mona Petrochko (E-mail)" , "Peter Bray (E-mail)" , "Rebecca Schlanert (E-mail)" , "Richard Counihan (E-mail)" , "Robert Morgan (E-mail)" , "Sue Mara (E-mail)" 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 >