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
- Guarantee of the turbine revolver - $205
- 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 company’s
“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 time.”
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, Ore., will continue to be operated and managed by
a subsidiary of PG&E 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
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.