Generators set aside reserves for California crisis

By the OGJ Online Staff

HOUSTON, Apr. 11--After the hammering Calpine Corp.'s stock took in the wake of Pacific Gas & Electric Co.'s bankruptcy reorganization filing Friday -- reportedly for not reserving for potential losses -- Mirant Corp. Wednesday bumped its reserve for California unpaid bills to $295 million.

Mirant, with 3,065 Mw of merchant facilities in California, said in a US Securities and Exchange Commission filing it was owed $392 million by the California Independent System Operator and the now defunct California Power Exchange for past due power bills.

"The provisions to be taken by the company through the first quarter of 2001, combined with the provisions taken last year, reflect our current assessment of the risks associated with the California market situation," said Marce Fuller, CEO.

Despite the large sum put aside for reserves, Mirant said it still expects to meet or exceed its estimate for first quarter earnings per share and throughout the year. Mirant, formerly Southern Energy, expects to earn 46-48�/share, including the reserves and the uncertainties in the western energy markets.

Mirant is not the only merchant generator to report reserves and receivables because of California's two largest investor-owned utilities failure to pay their wholesale power bills. Now the timing of their payment is even more uncertain because of Pacific Gas & Electric's reorganization filing.

Calpine Corp.'s shares plummeted Friday by 7.6% or $3.80/share to close at $46.80. Monday analysts attributed the decline, in part, to Calpine's exposure to Pacific Gas & Electric and its failure to set aside reserves. Calpine said its accounts receivable exposure to Pacific Gas & Electric totaled $267 million.

Calpine's 600 Mw of qualified facilities (QF) which have contracts with Pacific Gas & Electric accounted for most of the total. Calpine said that in the bankruptcy proceedings, Pacific Gas & Electric would have to "assume" these contracts and then pay all past due amounts.

"If PG&E fails to assume the contracts, Calpine's QF subsidiaries will sell power on the open market and seek damages from PG&E for breach of contract through the bankruptcy claims resolution process," according to Calpine's statement.

Other California generators announced reserves when they filed fourth quarter and year-end income statements.

Duke Energy Corp. has about $400 million in receivables and reserves of $110 million as of January, said Tom Williams, spokesman. The company is announcing its first quarter results next week when it could say more about its reserve situation.

"Our exposure to California is $265 million as of the filing of our 10-K," said Steve Stengel, spokesman for Dynegy. "We have not disclosed the amount of our reserve."

A spokesperson for Williams declined to say how much in receivables or reserves, if any, the company had as a result of its exposure in the California power markets, despite Pacific Gas & Electric reorganization filing.