PF Archive

Power News

01 11 2002

NEG walks away from GenHoldings PG&E's National Energy Group has walked away from its investment in the GenHoldings I portfolio and has effectively handed over the assets to its lenders. The move is the first time in recent memory that a sponsor has resorted to such drastic action, and has not pursued a strategic sale. As such it demonstrates the central attraction of non-recourse structures to sponsors ? that such a burden can be abandoned ? and opens up the possibility of further similar actions by distressed corporates.The GenHoldings portfolio consists of the Millennium project, a 360MW plant located in Massachusetts that is operating, a 1080MW plant located in Athens, New York, the 1092MW Harquahala facility in Arizona, and a 1170MW Covert, Michigan plant. Harquahala was originally a synthetic lease candidate, and Covert was only to be included if the GenHoldings portfolio raised enough in syndication. The Citi- and SG-led financing raised $1.46 billion towards a $1.7 billion target. The difference of $240 million was to have been made up with NEG equity.NEG has said that it will write off $150 million that it has already injected, leaving the banks to find an additional $355 million. It has also decided to ignore the requirement to put more equity into the 1121MW La Paloma project, saying that such injections were forbidden under the amended and extended revolving credit agreement that it signed with SG, Citi and JP Morgan, among others. NEG owes $369.5 million to fund it's share of the capitalisation of the 99% complete plant. La Paloma was a hybrid project/ synthetic lease that closed in 2000, and required equity post-completion in part to comply with...