電力與可替代能源-加利福尼亞破產(chǎn)考慮：與金伯利·溫尼克通話記錄

1、17 January 2019 Americas/United States Equity Research Electric UtilitiesResearch Analysts Michael Weinstein, ERP212 325 0897 HYPERLINK mailto:w.weinstein w.weinsteinMaheep Mandloi212 325 2345 HYPERLINK mailto:maheep.mandloi maheep.mandloiKhanh Nguyen, CFA212 538 3524 HYPERLINK mailto:khanh.l.nguyen

2、 khanh.l.nguyenUtilities & Alternative EnergyCOMMENTCalifornia Bankruptcy Considerations: Transcript of Call with Kimberly WinickOn January 15, we hosted a conference call with Kimberley Winick, who serves as Of Counsel at Clark & Trevithick PLC in Los Angeles, CA. Her practice centers around commer

3、cial finance and bankruptcy law and she has had direct experience representing clients in the 2001/2 PG&E bankruptcy case. Our discussion focused on the possible impacts of a new PG&E bankruptcy filing, with emphasis on renewable power supplier contracts.We include a full transcript of the call in t

4、his note. Major takeaways below:Executory contracts may be rejected at PG&Es will and they can also be reassigned (to CCAs, for example). Once they have filed bankruptcy they have the right to assume or reject all of the contracts that are considered to be executory, which are any contracts under wh

5、ich performance is required by both parties - by both PG&E and the other party on the petition date. Alternatively once it assumes a contract it can assign it to another party, which is something they might not be able to do before bankruptcy if contract provisions prohibited it. For example, this m

6、ay allow PG&E to reassign higher-priced contracts to Community Choice Aggregators (CCAs), illustrating the extra power of a bankruptcy filing.PG&E can require PPAs to keep selling to them in bankruptcy, even if PG&E isnt paying. Importantly, there is no deadline for a decision whether to accept or r

7、eject. PG&E will have to pay for energy it receives, and it has to pay reasonable price; not necessarily market price, but reasonable price. The price provided for in the contract is generally considered to be the reasonable price unless PG&E can demonstrate to the court for some reason that its not

8、 reasonable and they should be permitted to pay less. Power providers may petition the court for more if needed, but may still only get partial recovery of owed payments, with remaining owed amounts reclassified as an unsecured claim against PG&E (pari passu with other unsecured claims).Above-market

9、 PPAs are more at risk for rejection, with less risk for at- market contracts given the states renewable and decarbonization goals.Prior notes: For our preliminary take on these issues, please see our HYPERLINK /s/V7e2Zk4AN-Ytkb 1/14 HYPERLINK /s/V7e2Zk4AN-Ytkb note: Seeking Clarity for California R

10、enewables. Also see our HYPERLINK /s/V7eWVE4AF-Yp3E 11/16 note HYPERLINK /s/V7eWVE4AF-Yp3E for ED: Material Exposure to PG&E Solar PPAs, our HYPERLINK /s/V7eWV44AF-Yp3E 11/16 note for NEP: HYPERLINK /s/V7eWV44AF-Yp3E Distributions Resilient Despite PG&E Risk, and our HYPERLINK /s/V7eWnu4AF-Yp3E 11/1

11、6 note for HYPERLINK /s/V7eWnu4AF-Yp3E NEE/NEER: Digging Deeper Limited Exposure to PG&E.See our companion transcript note for our other call with Frank LindhReplay details: Dial 855-859-2056, Conf ID: 6882088, available till 1/22DISCLOSURE APPENDIX AT THE BACK OF THIS REPORT CONTAINS IMPORTANT DISC

12、LOSURES, ANALYST CERTIFICATIONS, LEGAL ENTITY DISCLOSURE AND THE STATUS OF NON-US ANALYSTS. US Disclosure: CreditSuisse does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the Firm may have a conflict of interest that could affect

13、 the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.Additional takeaways from our call with Kimberly Winick:The 2001 bankruptcy was different; in the current situation, there is no easy way to contain future wildfire-rela

14、ted liabilities from recurring: In 2001, PG&E was solvent and expected to remain so through the bankruptcy, which was filed with the idea that the company might be able to recover adequate revenues under FERC regulation rather than CPUC authority. Ultimately, the CPUC fixed the problem so that the c

15、ompany could emerge from bankruptcy with securitization of power costs and a plan to discharge its liabilities. However, this time the problem is not a temporary and fixable imbalance between retail revenues and wholesale power costs. In contrast, even though a bankruptcy filing could isolate and de

16、al with an estimated $30B for 2017/18 wildfire liabilities, any emerging entity(ies) would likely continue to deal with the same problems in 2019/20/21, etc .Bankruptcy provides breathing space, but only for now. PG&E may sell some assets in bankruptcy, but what theyre really doing is using bankrupt

17、cy as a breathing space. When they file the petition, it immediately stops collection efforts and as the debtor in possession (DIP) under Chapter 11 of the Bankruptcy Code, PG&E can continue to operate its business and receive DIP financing to help do that. The costs of operation are ordinary and ne

18、cessary expenses that will be given top priority to be paid during the course of the case. However, the court can deal with existing liabilities, but what about the future? SB-901 provides some guidance for where they need to go in the future, but its also turning out that wildfires can continue to

19、generate significant risk, which will remain with the companys assets, whatever their disposition.The bankruptcy court is not the only, venue for discussions. The court cannot change the law or regulations, so PG&E must continue to comply with their regulated tariffs and the states renewable require

20、ments. As a result, expect state and federal regulators as well as state legislators to become interested parties to a bankruptcy proceeding.PPA prices cannot be changed unless mutually renegotiated, but unsecured claims may get less than full recovery if PG&E is found balance-sheet insolvent. While

21、 an executory contract may be rejected outright, if PG&E agrees to “assume” the contract and its obligations, it also must accept the price within it and even regulators would not be able to change the price either. However, the mere threat of rejection could push power providers to renegotiate thei

22、r pricing. Furthermore, upon assumption, any pre-petition defaults (e.g., payments in arrears) must be paid, or “cured”, although these pre-petition cure payments are pushed into the pile of general unsecured claims for settlement upon emergence from bankruptcy at the end of the process. Also, any c

23、ontracts that are “rejected” create a new unsecured claim that also goes into the same pile for disposition at emergence. If PG&E is found solvent at the end of the process, then claimants will get 100 cents on the dollar for their claims, but if PG&E is found balance-sheet insolvent, they would rec

24、eive less. And given the uncertainty over the level of 2017/18 wildfire liabilities that PG&E would enter a bankruptcy with, plus the uncertainty over future new liabilities that could reduce asset values, it is unclear whether PG&E will be found solvent in this new case, should it be filed.The judg

25、e mentioned by Ms. Winick as likely to take the case has extensive experience with PG&E. HYPERLINK /judge/montali Judge Dennis Montali of US Bankruptcy Court, Northern District of California is likely to take the case should it be filed. He currently presides over PG&Es 2001 bankruptcy case, which i

26、s still technically open through 2020 for some remaining claims, and is already familiar with most of the people and companies that would be involved. Any new bankruptcy filing would be treated as a new and separate case. In the 2001 case, a mediator judge was brought in to manage thenegotiations be

27、tween PG&E, the CPUC, and creditors committee, which is normal for any bankruptcy case.Priority of payments in bankruptcy gives special placement to tort claimants. Essentially, secured creditors have priority with remaining funds going to tort and condemnation claims (e.g., wildfire-related) as a g

28、roup, which is considered pari-passu to the entire group of remaining unsecured creditors. Unsecured creditors as a group will take their allotted proportion of payments and then divide them up further according to the internal priority of bond payments (senior unsecured debt followed by junior leve

29、ls and general claims, including rejected power contracts and unpaid pre-petition claims). After tort claimants and Anything left over could be allotted to equity.Governor Newsoms expected CPUC appointee could take the lead in negotiations, but would need marching orders from the Governor or the leg

30、islature, especially considering the (non-wildfire-related) risks to reliability and affordability from Customer Choice Aggregation and system decentralization that have developed in recent years.Judge Alsups HYPERLINK /news/articles/2019-01-15/pg-e-can-t-escape-judge-whose-wildfire-risk-tolerance-i

31、s-zero show-cause order to shut down in high wind conditions could cross over into bankruptcy jurisdiction if there are significant economic/financial repercussions.Scrambled eggs. Any difference between holdco and opco debt may be eliminated through consolidation in bankruptcy; the judge may scramb

32、le everything into a single entity.Transcript:CREDIT SUISSE SECURITIES, LLCModerator:Michael Weinstein Speaker: Kimberly Winick January 15, 20192:00 p.m. ET(Edited for clarity)Michael Weinstein: Good afternoon, everyone. Thank you for joining us again.Today we are going to speak with a bankruptcy ex

33、pert who has had experience with the 2001 bankruptcy with PG&E.And I want to just start off by just cautioning that were not providing legal advice to anyone and that everyones circumstances are different, and you should always rely on your own counsel for legal advice. Having said that, were going

34、to be speaking about the issues at hand, and were going to try to get a feel for what the consequences of PG&Es bankruptcy filing could be for investors.Kimberly Winick serves as Of Counsel for Clark & Trevithick PLC in Los Angeles, California. Her practice centers around commercial finance and bank

35、ruptcy law, structured loans, credit sales, asset acquisition leases, and long-term contracts to minimize bankruptcy risks, such as non-payments, subordination, avoidance of preference and fraudulent conveyances, the assumption and rejection of leases, and protection and preservation of collateral.W

36、hile counsel with Mayer Brown, she represented three Qualifying Facilities in the 2001 PG&E case, and was involved in preserving rights under power purchase agreements, representing them in the filing of claims and the Chapter 11 plan proposal and confirmation process.So with that, I will introduce

37、and welcome Kimberly to the call. Thank you very much for joining us. Perhaps we could just startoff by you explaining some of your past experience back in 2001 and how that might differ from the current situation?Kimberly Winick:Well thank you very much, Michael.And yes, the situation is definitely

38、 different 17 years down the road. As you may recall, back in 2001, California had deregulated energy and hadnt quite gotten the hang of it, and outside actors took huge advantage of that. So Enron and others moved the market and the cost of purchasing energy generated by third-party providers just

39、soared.As a result, PG&E found itself being squeezed by the cost. PG&E at that time, as it does now, owned the distribution and transmission systems. It had sold most of its fossil fuel generating plant. It didnt really have very much in the way of renewables at the time. I remember I represented so

40、me wind- power companies in their own bankruptcy cases back then.But renewables was very much a nascent industry at the time, so this was mostly fossil fuel, and there was a real energy crisis. We had rolling blackouts in the state and we had a lot of disarray in the entire system.PG&E had been hit

41、with a rate freeze in connection with the deregulation. They were hit with a rate freeze and they werent able to pass the cost of acquiring energy onto the rate payers. So PG&Es looking at a losing proposition and some of the qualified facilities that were selling power to PG&E were stuck with PPAs

42、that had rates that PG&E was paying to those providers, which were not sufficient to cover the providers cost of acquiring energy.So it was really kind of a runaway financial situation, but at that time it appeared that PG&E was solvent. Everybody expected that PG was solvent - PG&E was solvent, and

43、 it was filing in order to possibly get out from under the regulation of the CPUC and get under FERC, which they hoped would enable them to take bigger bites out of rate payers.That didnt happen, but that was a very differently motivated case. Here weve got really not a problem with energy. PG&E con

44、tinues to own its distribution and transmission assets. It owns some hydro facilities. It owns a nuclear facility that its in the process of decommissioning.It has a lot of power purchase agreements. It has enough committed power to cover all of its obligations to the people that it supplies power t

45、o, and it has enough transmission and distribution system to maintain the flow of energy for third-party providers as well.And in addition, as a result of regulation by the CPUC, as an independently owned utility, PG&E indeed has got to have surplus margins, so that when there are spikes, it can cov

46、er the spike needs.So what we really have here is a case thats being driven by the fact that PG&E has had these fires happen, and theyre looking at upwards of $30 billion of liability for fires. And its further compounded by the fact that PG&E as a corporate entity has been involved with several ser

47、ious public incidents over the last number of years.You have San Bruno. Before that you had polluted water. Since San Bruno, youve had questions over appropriate maintenance on their gas transmission lines, you have them being found criminally liable in 2017 for a number of the fires that occurred t

48、hen, and if youve looked at the news stories, and Im sure many of you have, surrounding the Camp Fire, broad investigations are continuing into responsibility for these fires, not that their equipment was necessarily involved.And so I think thats why were in quite a different situation now. And so w

49、ere looking at PG&E saying, Well we think we need to file bankruptcy, and bankruptcy is a very effective tool. I mean, what were looking at here is a reorganization case. Recently in the last several years in Texas, there have been some caseswhere utilities have filed and theyve immediately gone int

50、o liquidation.PG&E may sell some assets in bankruptcy, but what theyre really doing is using bankruptcy as a breathing space. So when they file the petition, it immediately stops the collection efforts. (As the debtor) in possession under Chapter 11 of the Bankruptcy Code, PG&E can continue to opera

51、te its business, and Im sure you all know theyre working on getting $5 billion or $6 billion in debtor and possession financing, meaning lenders who are willing to finance and provide liquidity during the bankruptcy case.So PG&E is trying to posture itself so that this is just a shelter where it can

52、 continue to operate while it tries to work on some very big problems, and the big thing is going to be what do they do about all these liabilities? And its going to be not just the existing liabilities, but what about the future? SB-901 provides some guidance for where they need to go in the future

53、, but its also turning out that fires can generate just fabulous risk, and so where does that go?In bankruptcy, the Bankruptcy Code will allow PG&E to continue operating, and its costs of operation are ordinary and necessary expenses that will be given regular priority. They get paid - well, they gi

54、ve - the get top priority. They get paid during the course of the case.I know that one of the things that immediately happens is people say, Well, (I am a party to a power purchase) agreement; whats going to happen to me? PG&E has the right to require everybody who is a provider under a PPA to conti

55、nue selling to PG&E.In the last go-around, we were all very concerned about whether PG&E was going to be able to pay for that power, and additionally there were several qualified facilities who were owed a lot of money when the case filed.One of them specifically went in - Ive been rechecking the pl

56、eadings to remind myself - one of them went in and said, Your Honor, we need to be excused from being forced to perform during the bankruptcy case because its - were losing money.Every time we fire up and start providing energy, were losing money. And they owe us $60 million from the energy we sold

57、to them before the bankruptcy case and we cant keep doing this.And the judge said, well well get something worked out, and made arrangements for PG&E to slowly pay one-third of that debt, but required the PPA party to continue providing power during the bankruptcy case. And I expect this time around

58、 that people will want to be assured that theyre going to be paid, but - so they will probably show up in court and say, your honor, we want to be sure that if were seeing to PG&E theyre going to pay us, and the budget and the liquidity provisions show that.The other thing is though is that the rate

59、 payers will continue paying their bills to PG&E, so there should be a cash flow sufficient to cover the cost of - related to paying for the generated power as well as distribution and transmission. There are a lot of other contract parties involved in the case but Im not sure that anybody here care

60、s about that.So the basic thing is that PG&E wants to keep operating, but theyre going to have to keep complying with state regulations and the CPUC requirements regarding how they deal with rate payers and - one of the important things is theyre going to have to keep focusing on satisfying the rene