August 23, 2002 — The California Public Utilities Commission (PUC) and the Official Committee of Unsecured Creditors in the Pacific Gas and Electric Co. chapter 11 case, recently announced that they have reached agreement on modifications to the PUC’s previously filed Plan of Reorganization for PG&E.
The creditors’ committee will become a co-proponent of the PUC’s plan and will urge that creditors vote for and prefer the joint PUC/committee plan over the plan proposed by PG&E and PG&E Corp.
“The committee’s and the PUC’s efforts have been aimed at promoting a consensual reorganization of PG&E. We believe that we have addressed through the plan modifications many of the confirmation objections filed by various parties in the case, including certain objections raised by PG&E,” said Gary Cohen, General Counsel for the PUC.
“We are pleased to be joining forces with the creditors’ committee and are confident that our alliance will ensure prompt confirmation of our plan.”
PG&E Co. responded in a statement that the new plan was not feasible. “The CPUC’s announcement Thursday, weeks after the voting period ended, underscores the fact that its current plan is not feasible and cannot be confirmed.
The modifications to the commission’s previously filed plan principally involve:
• An undertaking by the PUC and the committee to work together with UBS Warburg to design the specific terms of the securities to be issued under the plan to achieve investment grade ratings (the plan, as modified, contemplates the issuance of debt and preferred equity securities).
• A proposed “reorganization agreement”, under which the PUC will include in the reorganized utility’s rate base the amounts needed by PG&E to meet its obligations in respect of the new securities, as well as all prudently incurred operating costs. The reorganization agreement will remain in effect for the life of the securities and will be incorporated into the plan.
PG&E Co. said it would need to get and thoroughly review more information about the plan in order to provide a detailed analysis. But the utility maintained that its reorganization plan was still the fairest and most feasible solution to resolve the Chapter 11 case.
“PG&E’s reorganization plan is the only one that allows the utility to emerge from Chapter 11 as an investment-grade company, pays all valid claims in full with interest and gives the State of California a clearly defined path to exit the power buying business,” PG&E Co. said.
To help implement the new joint plan, the PUC and the committee will seek bankruptcy court approval of a limited extension of the voting period in PG&E’s chapter 11 case so that creditors are made aware of this significant development and afforded an opportunity to recast their votes and preferences. The committee and the PUC said they do not expect this to result in any delay in the previously scheduled confirmation process.
In addition, the committee will move before the bankruptcy court to formally retain UBS Warburg, the PUC’s financing and capital markets arranger, to raise the financing necessary to repay creditors in full and allow PG&E to emerge from bankruptcy.
The committee and the commission said they believe that the modifications to the commission’s plan will receive the support of creditors and the investment community and will facilitate an expeditious emergence by PG&E from chapter 11.