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PG&E Ordered to Join Reorganization Talks

The firm and regulators must resolve differences in helping Pacific Gas & Electric emerge from bankruptcy, a judge says.

March 05, 2003|From Bloomberg News

PG&E Corp. and California regulators must hold settlement talks to resolve differences in rival reorganization plans for Pacific Gas & Electric, the state's largest utility, a bankruptcy judge said Tuesday.

The utility filed for bankruptcy protection in April 2001, citing $13 billion in debt. The state Public Utilities Commission and PG&E have fought for the last two years over which plan the company would use to emerge from bankruptcy. While both plans pay creditors, PG&E's plan would spin off three companies out of reach of state regulators.

"The judge is clearly trying to move the process forward by trying to get some common ground," said Edward Paik, whose $450-million Liberty Utilities Fund owns more than 1 million PG&E shares. "The continued uncertainty is not positive."

Acknowledging that previous mediation was unsuccessful, U.S. Bankruptcy Judge Dennis Montali scheduled a settlement conference for next Monday because "there is little to be lost, and potentially much to be gained."

Paul Aronzon, head of the creditors committee, had asked Montali to order settlement talks when PG&E disclosed a $1.2-billion proposal last month to boost its reorganization plan.

The additions to the plan included using $500 million in cash and raising as much as $700 million through stock sales. Montali had suspended the trial so creditors could review the proposal.

Ordering the talks "is a big deal" because Montali "could have gone forward on the same path we were on," Aronzon said. Creditors don't want the bankruptcy to get bogged down in years of litigation because they'll have to wait to get paid, he said.

Pacific Gas spokesman Ron Low said the company would participate in the settlement conference.

Roberta Kaplan, the attorney for the utilities commission, said the agency supports all settlement initiatives.

Aronzon said he hopes that during the settlement talks, "PG&E will finally get the message that they have to be in negotiations instead of litigation."

Shares of San Francisco-based PG&E fell 26 cents to $12.50 on the New York Stock Exchange. They have fallen about 45% in the last year. The company spent $132 million on the bankruptcy last year.

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