PRESS RELEASES 2002 RELEASE
FOR IMMEDIATE RELEASE
December 12, 2002
Contact: Natalie Wymer, 301/280-5654
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.

TWO 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 N.A.

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 risk-management services.




 

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