LOS ANGELES -- The El Paso Electric Co. this week gained extra time to solve its problems, which include satisfying financial arrangements for its ownership stake in a nuclear power station that is co-owned by public utilities in the West.
But the company stressed yesterday that, contrary to a published report, it has not defaulted on financing agreements tied to the Palo Verde Nuclear Generating Station in Arizona, which is owned partly by public utilities.
The privately owned company on Monday announced a delay on the closing of its financial restructuring plan, which tentatively was scheduled for completion by the end of November. The utility said that negotiations continue with its existing creditor group and that it hopes to complete a restructuring by mid-December.
El Paso Electric also noted that its revolving credit facility of $150 million was amended to extend its termination date to Dec. 16 from Nov. 30.
The New York Times earlier this week reported that El Paso Electric was in default on some financing agreements for Palo Verde. But Alan Bunnell, a spokesman for the utility, said yesterday that no default has occurred, adding that the company continues to work on a proposed restructuring plan.
The Times article prompted inquiries from some investors who hold tax-exempt bonds issued by other utilities to finance Palo Verde. A market source, for example, noted that an investor raised questions about what would happen to other participants in the Palo Verde project if one co-owner defaulted on its obligations.
C.M. Perkins, general manager of Salt River Project, noted yesterday that "other partners [in Palo Verde] have to step up" and assume any obligations that are not met by a co-owner.
Mr. Perkins said the El Paso Electric situation has not generated discussion about the step-up provision, largely because it appears the company still could work out its problems.
The Palo Verde project is operated by another private utility, Arizona Public Service Co. Public utilities with an ownership stake in the project are the Salt River Project in Arizona, the Los Angeles Department of Water & Power, and the Southern California Public Power Authority.
Mr. Bunnell noted that El Paso Electric continues to negotiate with its creditors in an attempt to avoid any events of default.
The utility serves about 248,000 customers in El Paso and the Rio Grande Valley in Texas and New Mexico. El Paso Electric has a 15.8% interest in each of the three nuclear units at Palo Verde, which is located 55 miles west of Phoenix.
Texas regulators last month denied certain rate increases sought by the troubled utility, thereby exacerbating its financial problems.
Mr. Bunnell said the regulators disallowed faster reimbursement of about $16 million of construction-related costs tied to Palo Verde unit 3 and instead spread recovery of the expenses over a five-year period.
The restructuring plan includes attempts by the utility to provide renewal letters of credit in connection with the company's sale-lease-back transactions at Palo Verde. Any events of defaults in connection with those sale-leaseback arrangements "could lead to events of default under substantially all of the company's financing and lease agreements, including the company's mortgage indentures and letter of credit agreements," El Paso Electric said in a release this week.
The company is working to avoid defaults on any of its agreements because "it causes a domino effect" within the utility if any of the transactions default, Mr. Bunnell noted.
