PG&E NATIONAL ENERGY GROUP POWER PROJECTS OBTAIN NEW FINANCING
COMMITMENTS FROM LENDERS
BETHESDA, Md. – PG&E National Energy Group Inc. today
announced that the company and its lenders have reached agreement
to provide funding for two of the company’s power-plant projects,
Lake Road Generating in Connecticut and La Paloma Generating in
California. PG&E National Energy Group is a wholly owned subsidiary
of PG&E Corporation (NYSE: PCG).
The funds will allow construction to be completed at the La Paloma
plant, provide additional working capital facilities to enable each
project to continue to procure fuel and other services and support
collateral that may be required by suppliers of natural gas transportation
services and others for the completion and operation of the projects.
Subsidiaries of PG&E National Energy Group will continue to
manage the completion of construction of La Paloma, provide operating
services to both projects and provide energy management services.
The agreement requires that each facility be transferred to its
lenders or their designees on or before June 8, 2003. This funding
is without further recourse to PG&E National Energy Group. The
company also is required to work with the lenders to replace its
energy trading entity as the energy management services provider.
The Lake Road facility, fueled by natural gas and fuel oil, is
an 840-megawatt power plant in Killingly, Conn., that sells wholesale
electricity into the New England market. It entered commercial operation
in June 2002. La Paloma Generating is a 1,121-megawatt combined-cycle
power plant fueled by natural gas, which is 99 percent complete
in Kern County, Calif.
The administrative agent for each syndicate of lenders is Citibank
PG&E National Energy Group is in default on several of its
major credit agreements as a result of failing to repay $431 million
under its revolving credit facilities that matured on Nov. 14, 2002,
and failing to make various interest payments. These payment defaults
have created cross-defaults under various loan facilities, including
the Lake Road and La Paloma facilities. PG&E National Energy
Group has been in active negotiations regarding a global restructuring
of its debt with lenders, including lenders for the La Paloma and
Lake Road facilities. An element of this global restructuring would
be for the company to abandon, sell or transfer certain merchant
assets including Lake Road and La Paloma.
Unless further agreements are reached, PG&E National Energy
Group Inc. and certain of its subsidiaries may be compelled to seek
protection under or be forced into Chapter 11 of the Bankruptcy
Code. Notwithstanding the restructuring efforts, if PG&E National
Energy Group abandons, sells or transfers assets, the company would
incur substantial charges to earnings in either the fourth quarter
of 2002 or in 2003.
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