PG&E's real estate rumors
Dow Jones Interactive
October 12, 2001
 
 
Generators Have No Plans To Change Pwr Deals With Calif
Dow Jones Interactive
October 12, 2001
 
 
Distributive Generation Helps Providers, Transmitters, Distributors & Consumers with Cost Reduction and Reliability, in an Advisory by Industrialinfo.com
Dow Jones Interactive
October 12, 2001

 
 
 
 
 
 
 
PG&E's real estate rumors

I sure hate to kick a bankrupt utility when it's down, but what are all these rumors floating around the commercial real estate world that Pacific Gas and Electric Co. is quietly -- very quietly -- placing its downtown San Francisco headquarters up for sale? 

Sources tell me that PG&E is looking to unload more than 100 pieces of property throughout Northern California, and the crown jewel of the offering is the utility's headquarters building, which it would then lease back under a long-term contract. 

However, PG&E is trying to keep the sales below the radar by going through investment banking channels rather than listing most of the properties outright, sources say. "I'd bet they're trying to not spook the market and get people even more worried about their situation," one broker said. 

A spokesman for the utility insisted that there are "no current plans" to sell the headquarters but refused to say categorically that PG&E isn't pondering the idea. 

As for other properties that may be on the block, the utility hasn't updated its online portfolio of surplus assets in months, so it's impossible to say what may or may not be up for grabs. 

Still, the rumored plan for the headquarters is for PG&E to sell off either one or both of its main headquarters buildings at Market and Beale streets in the Financial District, and then lease the property back from the new owner. 

PG&E already leases part of its headquarters from Shorenstein Co. for about $233,000 a month. Likely buyers for the other utility buildings would include Shorenstein and Sam Zell's Equity Office Properties, which became a serious player in the Bay Area after merging with Spieker Properties. 

Although PG&E does not publicly discuss its real estate assets, internal utility documents recently placed the value of the downtown headquarters at about $450 million -- before commercial office prices went into a tailspin. 

This wouldn't make a huge dent in the roughly $13 billion PG&E owes its creditors. But, hey, every little bit helps. 

COLLATERAL DAMAGE: Business hasn't improved at the former Afghan Treasures shop on Market Street, even after "Afghan" was dropped from the store's name right after the Sept. 11 terrorist attacks and it became just "Treasures." 

"Business is down maybe 75 percent since then," said Hadi Faiez, a salesman at the store who is originally from Kabul. "No business now." 

Treasures sells ethnic-type stuff from South Asia, Southeast Asia and Africa -- incense, carvings, that kind of thing. The only merchandise from Afghanistan is some carpets, which range in price from about $200 to $1,600. 

Now that Afghanistan is being painted by the West as the source of all evil -- just as Iraq similarly represented the maw of hell for the previous Bush administration -- Faiez said he worries that Americans will never appreciate the many good things about his homeland. 

"My people make a lot of nice stuff," he said. "Carpets, jewelry. Many nice things. Maybe no one will see that for a while." 

I'd call that a safe bet. 

GRIM PREDICTION: Famed architecture critic Ada Louise Huxtable, writing in the New York Times in 1966 about the city's decision to go ahead with construction of the huge World Trade Center: 

"Who's afraid of the big, bad buildings? Everyone, because there are so many things about gigantism that we just don't know. The gamble of triumph or tragedy at this scale -- and ultimately it is a gamble -- demands an extraordinary payoff. The Trade Center towers could be the start of a new skyscraper age or the biggest tombstones in the world." 

SOUTH OF THE BORDER: After checking out PG&E's headquarters the other day -- a bit out of my price range -- I strolled a few blocks over to the new Chipotle burrito restaurant near Mission and New Montgomery streets. They're the one with ads plastered all over Muni metro stations. 

A nice enough place. Industrial-chic decor, with arty black-and- white photos on the wall. But nowhere will patrons see even a hint of Chipotle's dirty little secret: Its majority shareholder is none other than fast-food king McDonald's, home of the Happy Meal. 

Manager Nels Nielsen smiled guiltily when I asked if his restaurant was ashamed of its corporate parentage. 

"If people ask, I tell them," he said. 

And if they don't ask? 

"We're an independent corporation." 

MUM'S THE WORD: Speaking of keeping one's corporate DNA under wraps, bet you didn't know that Bay Area lite-rock radio station KOIT and lite-classical KDFC are both owned by none other than the Mormon Church. 

Explains a lot, if you ask me.

 
Generators Have No Plans To Change Pwr Deals With Calif
 
LOS ANGELES -(Dow Jones)- Some of California 's largest power generators said they haven't been approached by state officials to discuss the possibility of renegotiating $43 billion in long-term power pacts the state entered into last spring and executives with the companies indicated they would unlikely be willing to restructure the deals. 

The California Public Utilities Commission has urged the administration of Gov. Gray Davis to renegotiate the deals, saying the contracts will saddle ratepayers with expensive power for the next 15 years. 

In addition, PUC President Loretta Lynch said the commission won't pass a rate agreement needed to sell $12.5 billion in bonds to pay for the power contracts until the deals are renegotiated. The rate agreement between the PUC and the state Department of Water Resources will ensure there is enough of a revenue stream in the current rate structure to pay off the bonds. 

Barry Goode, legal adviser to Gov. Davis, said last week the state has no intention of opening up talks with generators to restructure the contracts. The PUC filed a complaint with the Federal Energy Regulatory Commission, the agency that oversees the wholesale price of power, saying the price of electricity in the contracts, which average about $79 a megawatt-hour for the first five years, are not "just and reasonable." 

All of the energy companies have defended the contracts, saying the prices were based on natural gas futures and the market price for wholesale electricity . However, the price for power sharply declined shortly after the contracts were signed, for which Davis and Calpine Corp. (CPN) Senior Vice President of Power Marketing Jim Macias credit the deals. 

Calpine, a San Jose-based company which holds the bulk of the $43 billion in long-term pacts, hasn't been asked to restructure the contracts, Macias said. He said many of the contracts are tied to the construction of new power plants and if the deals were changed the company could lose its financing and the facilities wouldn't get built. 

"We don't think our contracts will be renegotiated," Macias said. "It's very difficult to see even how this would be renegotiated. We made a commitment to deliver the power and the state made a commitment to pay for it. If either party fails to perform, there is a provision in the contract that says you have to make the other party whole." 

Macias said it wasn't "impossible" to restructure the contracts, but that it would be very "difficult to unwind the position." 
 
   Other Suppliers Say Financing Tied To Long-Term Deals 
   
Tom Murnane, a spokesman for Sempra Energy Resources, a unit of Sempra Energy (SRE), also signed a multibillion long-term contract with the state. He too said the company hasn't been approached by state officials to renegotiate the contracts. 

"We're building a fleet of power plants based on these contracts," said Murnane. "In order to secure lending we had to show banks that we had this deal. Would the state allow us to renegotiate if power prices increase?" 

The only legal recourse for renegotiation, Murnane said would be if both parties agreed to change the terms of the contracts. 

"But then where do you stop?" Murnane said. 

Steve Stengel, a spokesman for Dynegy Inc. (DYN), said the company has "no obligation" to renegotiate the long-term deal his company signed with California just because the price for power has declined recently. 

"We have a legally binding agreement and therefore we don't have any obligation to renegotiate the contract," Stengel said. "However, we could choose to if it was mutually beneficial to both parties." 

A spokeswoman for the FERC said the PUC complaint has been received but the agency wouldn't comment further. 

Macias said the PUC would have a "very difficult challenge convincing FERC that these contracts were not reasonably priced when the were entered into." 

"It's a high hurdle to demonstrate that FERC needs to step in and void these contracts, especially if the people who entered into them believe these contracts helped stabilize the market," Macias said. 

 
Distributive Generation Helps Providers, Transmitters, Distributors & Consumers with Cost Reduction and Reliability, in an Advisory by Industrialinfo.com
 
HOUSTON--(BUSINESS WIRE)--Oct. 12, 2001--The following is an advisory by Industrialinfo.com (Industrial Information Resources Inc.; Houston, Texas). Distributive generation is the use of small electric generators used to help meet peak power demands during times of high usage on the electrical grid. These small generators are found in many varied sources including fuel cells, batteries, turbine/generators (combustion, wind, waste heat, steam, micro) and reciprocating engine/generators. Consumers, as well as those who provide, transmit and distribute electricity, have found that having these small generators in key areas can help when there is a shortage or other problem with the grid. 

Many government and service organizations such as police, fire and hospitals and large energy consumers such as factories, mills and plants have had emergency generation for a long time. With electrical deregulation here and the spot market having such high peaks, others have found it cheaper and more convenient as well. Several utilities throughout the Midwest and Western states have taken to renting or purchasing many small generators (20-50 or more) and installing them at substations and at major customers' sites to prevent problems during electrical shortages and outages. 

As consumers become more and more reliant on automation and computers, the need for reliable power will increase and the need for distributive power will continue to grow as well. The day may come when distributive power could account for as much as 5% of all power. 

Industrialinfo.com provides daily news related to the industrial market place including industry alerts and databases for the energy and industrial markets. For more information on trends and upcoming construction activities in the Power and Energy markets as well as other industrial sectors send inquiries to powergroup@industrialinfo.com or visit us at www.industrialinfo.com.