What are the chances that Southern California Edison will wind up in bankruptcy court? “Nine out of 10,” says OC treasurer John Moorlach. What are the chances he, Moorlach, will succeed in his bid to become chairman of the creditors’ committee? “Three out of 10.” Moorlach insists his motivation for plunging into the power crisis isn’t a desire for higher office. “I’m a CPA. This stuff excites me. Bob Citron was financial, the 91 toll road was financial, school bonds are financial, this is financial. That’s as shallow as it gets and I’m sorry.” Save the apologies for Gov. Gray Davis, whose plan to bail out SCE is, in Moorlach’s words, “atrocious.” While Davis and SCE continue to lobby lawmakers for a government-backed remedy, Moorlach is talking to the people holding the bills. Moorlach, whose own claim on SCE is $1 million in defaulted bonds held by the county employees’ pension fund, says he has the support of some creditors and is talking with others. He’s getting advice from longtime associate Chriss Street, a Newport Beach financial-workout expert (and subject of another story on this page). Davis wants the state to float $3.9 billion in bonds for SCE, paid off by a state purchase of SCE’s power grid for $2.4 billion and in higher electric bills for businesses; the utility would be left pretty much as is. Moorlach and Street doubt the Legislature will go along, which is why they anticipate a bankruptcy workout that will overhaul SCE’s balance sheet and operations. Street thinks there’s $100 million a year to squeeze out by cutting overhead, increasing efficiency and leveraging assets, and that a leaner SCE would generate hundreds of million dollars more in new cash flow as energy costs drop in the years ahead. He says that should satisfy creditors who would be holding new debt, stock options and other rights.
Davis touts a government takeover of the power grid as giving California more control of power distribution (while preserving SCE’s monopoly). Street envisions the opposite,throwing open the grid to out-of-state producers who will pay or partner with SCE for the right to sell directly to California consumers (while ending SCE’s monopoly). Street also thinks the utility can sell rights of way to telecoms, broadband firms and others wanting to wire homes and businesses: “Edison has these enormous amounts of sunk costs that modern technology is making more valuable.” Street says a reorganization has a better chance than the Davis plan of returning SCE to credit-worthiness, doesn’t put taxpayers at risk and doesn’t cause “collateral damage” to business. Meanwhile, Pacific Gas & Electric, which is in Chapter 11, has proposed a reorganization that pays creditors in full, doesn’t raise electric rates and has buoyed parent PG & E; Corp.’s stock price. Oh, to be a fly on the wall when directors of SCE parent Edison International meet again Oct. 18 No surprise, OC’s biggest hotels were hard hit in the wake of the terrorist attacks, with word that occupancy at the Anaheim Marriott was at the 10% level and the Hilton Anaheim not a whole lot better.
