By the OGJ Online Staff
HOUSTON, Nov. 19, 2001 — Financially ailing Edison International doesn’t expect to pay most creditors until the end of the first quarter of 2002, company officials said Monday.
Small generators known as qualifying facilities can expect to get their money by the end of the second quarter 2002, Edison officials explained. “We will be a creditworthy entity by the end of next year. Our goal for 2002 is to restore financial strength, repay defaults and arrears, and reduce debt,” said Ted Craver, CFO of Edison, in a conference call.
Edison’s utility unit, Southern California Edison Co.(SCE), has been on the verge of bankruptcy because of unprecedented high wholesale power costs that couldn’t be recovered from retail ratepayers last year. The utility and its parent went into debt as it borrowed to pay for power. When credit was no longer available, the state’s Department of Water Resources had to step in and buy power for the utility’s customers.
In the meantime, SCE accumulated $5.5 billion of bank debt and notes and past due payments to generators and qualifying facilities. SCE reached an agreement with the California Public Utilities Commission in late September that will restore the company to financial health. Edison agreed not to pay dividends until past due bills are paid.
The company’s free cash position stands at $2.75 billion as of last week, Craver said. The remaining $2.75 billion needed to pay the past due bills will come from $1.25 billion of additional cash generated over the next several months, the reissue of $550 million of pollution control bonds, and a draw-down on an existing credit line.
“We will treat all creditors equally,” he said. Craver said a new agreement will have to be worked out with the QFs. The agreement negotiated in the early summer when there was still a chance for a negotiated legislative solution will have to be “reworked” to reflect the changed circumstances, he said.
Craver said the renewable generators want a fixed contract at 5.37-/kw-hr. The renewable QFs want that rate now, as well as a partial payment of bills for electricity that are pay due. “We want to do that in June,” Craver said.
Last week, geothermal energy producer CalEnergy Operating Corp. filed suit against SCE to collect $100 million in past due energy payments. In addition, Des Moines, Iowa-based CalEnergy asked the court to enforce an agreement that sets the price of power going forward. SCE categorically denied having breached any agreement with CalEnergy.
Edison also owes millions to other generating companies, but Edison is having trouble sorting out how much it owes individual companies. Craver said starting balances are the problem. He said Edison intends to pay 100- on the dollar for the now-defunct California Power Exchange and for the California Independent System Operator bills.
“We will pursue our claims on the generators separately,” Craver said. Edison will begin building up cash after paying off existing commitments. That money will be used to retire expensive debt, for risk management activities, and to support growth, he said.