Ann de Rouffignac
OGJ Online
NRG Energy Inc. said in a conference call with analysts Tuesday it reserved an undisclosed sum in case payment is not received for power sales in California.
�We have reserves for the fourth and first quarters,� said Craig Matacyznski, senior vice-president of NRG.
The big independent power company emphasized, nevertheless, that all bills in California have been paid to date and expects to be paid in full for ongoing power sales. NRG owns a net stake in 1,569 Mw of power plants in California.
Pacific Gas and Electric Co. and Southern California Edison Co., units of PG&E Corp. and Edison International respectively, have accumulated $11 billion of debt this year. They are unable to pass on the full amount of their wholesale purchases to retail customers, the result of a rate freeze the utilities supported as an condition of California's deregulation law.
Analysts have noted these utilities are experiencing a severe cash crunch that could limit their ability to pay for power. The California Independent System Operator buys power on behalf of the utilities.
�We have received payment for our Crockett facility from PG&E and we expect to receive payments from other utilities, the ISO, and the PX in the future,� said Matacyznski. But NRG executives also said the company is reducing its exposure to California.
The California portion of its portfolio of power plants will be reduced to 7% of total assets by the end of 2001 compared to 11% of assets for 2000, said Matacyznski. The decrease results from developing and acquiring more power plants in other geographic regions.
Meanwhile, the company said it would not divest its stake in California. Eventually, it might even expand, if the market is �corrected,� executives said. The company is currently engaged in the permitting process to repower its El Segundo plant and will even expand generation capacity, if the right �signals� come from energy officials, these officials said.
While several analysts expressed concern about California Gov. Gray Davis�s �state of the state� speech last night, NRG executives downplayed the governor�s more extreme ideas. NRG did not lend much credence to the idea that California would take over the generation assets and run the electricity sector in the state itself.
�All the rhetoric and name calling in California will fall off the table when the real market players of utilities, generators, and customers come to the table to resolve the situation,� says Matacyznski.
NRG executives said the company did its part to keep the lights on in California in the fourth quarter, but it did not make a lot of money doing so. They said the sales generated only slight margins over cost due to high fuel prices.
Company officials didn't respond to analysts who wondered who was making money from the unprecedented high wholesale power prices in California.
For the nine months ended Sept. 1, 2000, NRG�s net income increased by 380% to $140.9 million compared with $29 million for the comparable period last year. Fourth quarter and year-end results have not been released.
