By Jessica Berthold
LOS ANGELES --Five large generators who are owed money by Southern California Edison sent the utility a letter Friday saying it didn't appear its Edison International (EIX) unit was working on an immediate solution for repayment, and requested a meeting "in the very near future" to discuss a
forbearance agreement, according to documents obtained by Dow Jones Newswires.
The letter was written by Reliant Energy Inc.'s (REI) attorney, William Bates, and signed by Mirant Corp. (MIR), Dynegy Inc. (DYN), Enron Corp. (ENE) and Puget Energy Inc. (PSD).
As reported, Mirant and Reliant have said they are seeking a third party to join them in an involuntary bankruptcy petition against SoCal Edison.
As of July 31, Southern California Edison owed large power suppliers $878 million.
A conference call early in the week between generators and Edison Chief Financial Officer Ted Craver "gave little comfort that SCE intends promptly to work out a payment plan with its creditors if the legislature does not enact a rescue bill," according to the letter sent to Edison attorney Thomas B. Walper.
"Similarly, we received no assurance that SCE is willing to deal immediately with generator creditors whose debts would remain unsatisfied through a legislative 'solution'", the letter said.
The letter goes on to request that SoCal Edison meet with generators before the legislature is set to reconvene Oct. 9 on a rescue bill for the utility, which has $3.3 billion in unpaid bills and overdue debt.
The California Senate failed to approve an Assembly rescue bill for the utility before the session adjourned Sept. 14. The bill would allow the utility to issue $2.9 billion in revenue bonds to repay bank and small generator creditors, but not large creditors whom many lawmakers suspect of price gouging.
The generators would welcome a forbearance agreement that stipulates Southern California Edison won't start the process of issuing bonds until it has made satisfactory arrangements with all creditors, according to the letter. Any such agreement would also spell out the timing and mechanism for repayment, said Reliant spokesman Richard Wheatley.
Southern California Edison doesn't comment on private correspondence or ongoing negotiations with creditors, an executive said when asked about the letter.
"However, we have been in regular contact with all creditors and other interested parties," said Brian Bennett, the utility's vice president of external relations.
Generators say, however, that the utility's efforts at reaching a payment solution have been weak.
"For nine months, there has been no meaningful contact with Southern California Edison regarding their debts to Mirant," said Mirant spokesman Pat Dorinson. "A short, nonsubstantive phone call at the eleventh hour does not give us great comfort that they are serious about settling their debts."
When asked why generators chose to take this action now, Wheatley replied that the legislature didn't seem interested in a bill that would address the utility's debts to large generators.
He added, however, that there were other ways to address the company's debts to generators.
"One step could be a forbearance agreement, or they could use their cash flow or existing revenue. Or, they could use revenue from a securitized bond sale, to be used in the forbearance process or to pay back outstanding loans. Legislation could also be crafted, though what's been crafted to this point did not cover generators. Short of all those things, bankruptcy will not be averted."
If the utility chooses not to respond to the letter, generators could use that to support claims that Southern California Edison did not negotiate "in good faith" for repayment of their debts, said a source close to the issue. Such evidence would give generators ammunition in an involuntary bankruptcy
filing, the source said.
That kind of evidence is not necessary, however, said John Hansen, a bankruptcy attorney with Nossaman, Guthner, Knox and Elliott in San Francisco.
"It would not be a requirement, but it wouldn't hurt their case, either. The main criterion is whether a debtor is generally not paying its debts as they come due."
Hansen added that he wouldn't be surprised if the utility consented to a bankruptcy, if pushed into one with an involuntary filing.
"I wouldn't be surprised if Edison would consent, because they wouldn't have a defense. They are defaulting on debts, and rather than drag it out, they could point to the (involuntary filing) and say 'it wasn't our choice,'" Hansen said.
Edison's Craver said last week, however, that the company would "vigorously oppose" an involuntary bankruptcy.