PG&E; Corp. said Thursday that its National Energy Group subsidiary, which builds power plants and trades energy, has defaulted on about $2.9 billion in debt and will take nearly $250 million in charges for the fourth quarter.
The San Francisco-based company's unregulated arm, like many other power-plant builders and energy traders, was slammed by a series of circumstances including the collapse of Enron Corp., low electricity prices and tight credit. NEG has said it is developing a restructuring plan that may involve a bankruptcy filing.
Although Thursday's disclosures, made in a filing with the Securities and Exchange Commission, are a disappointment to shareholders of PG&E; Corp., the problems at NEG will not affect the customers of Pacific Gas & Electric Co., which is operating under Bankruptcy Court protection. That's because the PG&E; corporate structure "ring-fences" the company's subsidiaries so the problems of one do not affect the other.
NEG also said lenders for three power-plant projects agreed to provide enough money to complete construction in exchange for ownership of the facilities. NEG reached a similar arrangement with lenders last month for its La Paloma power plant in Kern County, a 1,121-megawatt facility that will begin generating power in the next several weeks.
PG&E; shares closed up 10 cents at $15.18 on the New York Stock Exchange. News of the expected charges was announced after the market closed.