Canadian Gas producers fear cash grabgreenspun.com : LUSENET : Grassroots Information Coordination Center (GICC) : One Thread
Fair use for educational/research purposes only!
Gas producers fear cash grab PG&E restructuring
Carol Howes Financial Post, with files from news services CALGARY - Canadian natural gas producers are worried that larger creditors could grab most of the assets of the near-bankrupt Pacific Gas & Electric Co., leaving their bills unpaid.
Greg Stringham, vice-president of the Canadian Association of Petroleum Producers, said yesterday there will likely be a protracted legal fight over PG&E's recent restructuring, which separated its natural gas assets from its utility, protecting its gas business from potential creditors.
"PG&E's position on the gas side is that it remains unaffected because of the restructuring. So, it depends on what happens to legal challenges to that restructuring," he said.
"The concern that's out there is, will the restructuring itself protect the money that's coming from the gas consumers to the gas producers from being touched?"
Last year, Canadian energy companies shipped 672.5 billion cubic feet of natural gas to the California region, worth about $3.7-billion.
Pacific Gas and Electric Co., a unit of PG&E Corp. and California's largest investor-owned utility, filed for Chapter 11 bankruptcy protection on Friday after piling up US$9-billion in wholesale power costs it has not been able to recover because of California's 1996 deregulation legislation.
The filing was the largest by a U.S. utility, and the third-largest by any U.S. company.
Analysts said yesterday PG&E Corp.'s decision to seek bankruptcy protection for its utility also increases the chances that Edison International's Southern California Edison will follow suit. Edison is the state's second-largest utility and has US$5.5-billion in debt.
However, Edison executives said they hope a rescue package can be reached.
Mr. Stringham said it is impossible to determine exactly how much Canadian gas supply is directed to PG&E because much of it is sold to gas marketers, which in turn sell it to U.S. utilities and other customers. PG&E also purchases its own pipeline capacity from Alberta and buys its own natural gas from local producers.
"Hopefully, they will be able to continue to pay for the gas," he said.
Canadian companies such as B.C. Hydro and TransAlta Corp. were also assessing the situation yesterday, saying they are confident they will get paid.
Provincially owned B.C. Hydro is owed about US$300-million from PG&E and Southern California Edison, but said it was difficult to assess the exact amount owed by each party because payments go through the California Power Exchange and California Independent System Operator.
According to court filings, the power exchange is owed US$1.9-billion and CISO is owed US$1.1-billion.
B.C. Hydro said it plans to do what is necessary in the bankruptcy proceedings to protect its interest.
PG&E's creditors with the largest unsecured claims are all U.S.-based suppliers. Some, such as U.S. electricity generator Calpine Corp. and Sempra Energy Trading Corp., have operations in Canada.
-- Martin Thompson (firstname.lastname@example.org), April 10, 2001