SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________
FORM 10-Q
(Mark One)
[X]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 2000
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____
COMMISSION FILE NUMBER 333-30715
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CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK
SPECIAL PURPOSE TRUST PG&E-1
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(Issuer of the Certificates)
PG&E Funding LLC
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(Exact name of Registrant as Specified in its Charter)
Delaware 94-3274751
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(State or Other Jurisdiction of (IRS Employer Identification Number)
Incorporation or Organization)
245 Market Street, Room 424, San Francisco, California 94105
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (415) 972-5467
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Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X]. No___.
THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION
H 1(A) AND (B) OF FORM 10-Q AND IS THEREFORE FILING THIS FORM WITH
THE REDUCED DISCLOSURE FORMAT.
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
<TABLE>
PG&E FUNDING LLC
CONDENSED BALANCE SHEET (IN THOUSANDS)
Balance at September 30, December 31,
2000 1999
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ASSETS
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CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $ 13,171 $ 5,817
Current portion of Transition Property receivable 287,975 287,980
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TOTAL CURRENT ASSETS 301,146 293,797
NONCURRENT ASSETS:
Restricted funds 44,886 41,549
Transition Property receivable 1,799,843 2,015,853
Unamortized debt issuance expenses 9,494 11,667
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TOTAL NONCURRENT ASSETS 1,854,223 2,069,069
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TOTAL ASSETS $2,155,369 $2,362,866
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LIABILITIES AND MEMBER'S EQUITY
---------------------------------
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ - $ 4
Interest payable 2,519 2,651
Current portion of long-term debt 290,000 290,000
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TOTAL CURRENT LIABILITIES 292,519 292,655
Long-term debt 1,818,051 2,030,548
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TOTAL LIABILITIES 2,110,570 2,323,203
MEMBER'S EQUITY 44,799 39,663
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Commitments and Contingencies - -
TOTAL LIABILITIES AND MEMBER'S EQUITY $2,155,369 $2,362,866
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The accompanying Notes to Condensed Financial Statements are an integral part of this
statement.
</TABLE>
<TABLE>
PG&E FUNDING LLC
CONDENSED STATEMENT OF INCOME AND CHANGES IN MEMBER'S EQUITY (IN THOUSANDS)
Three months ended September 30, Nine months ended September 30,
2000 1999 2000 1999
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INCOME
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<S> <C> <C> <C> <C>
Income from Transition Property receivable $37,004 $41,916 $114,550 $129,495
Interest income 1,485 1,086 4,179 2,932
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TOTAL INCOME 38,489 43,002 118,729 132,427
EXPENSES
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Interest expense 35,296 39,786 109,338 122,766
Servicing fees 1,363 1,540 4,218 4,750
Administrative and general (55) 50 37 163
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TOTAL EXPENSES 36,604 41,376 113,593 127,679
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NET INCOME $ 1,885 $ 1,626 $ 5,136 $ 4,748
Member's equity - beginning of period 42,914 36,419 39,663 33,297
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MEMBER'S EQUITY AT END OF PERIOD $44,799 $38,045 $ 44,799 $38,045
======= ======= ======== =======
The accompanying Notes to Condensed Financial Statements are an integral part of this
statement.
</TABLE>
<TABLE>
PG&E FUNDING LLC
CONDENSED STATEMENT OF CASH FLOWS (IN THOUSANDS)
For the nine months ended September 30, 2000 1999
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<S> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES $223,245 $238,480
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CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term debt (212,554) (216,843)
Net change in restricted funds (3,337) (18,899)
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NET CASH USED IN FINANCING ACTIVITIES (215,891) (235,742)
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NET CHANGE IN CASH AND CASH EQUIVALENTS 7,354 2,738
CASH AND CASH EQUIVALENTS AT JANUARY 1, 5,817 2,105
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CASH AND CASH EQUIVALENTS AT SEPTEMBER 30, $13,171 $4,843
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest $107,238 $120,265
The accompanying Notes to Condensed Financial Statements are an integral part of this
statement.
</TABLE>
Notes to Financial Statements
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A. Basis of Presentation
This Quarterly Report on Form 10-Q includes the accounts of PG&E Funding LLC,
a Delaware special purpose limited liability company, whose sole member is
Pacific Gas and Electric Company, a provider of electric and natural gas
services. Pacific Gas and Electric Company is a wholly-owned subsidiary of
PG&E Corporation. Both Pacific Gas and Electric Company and PG&E Corporation
are subject to the reporting requirements of the Securities Exchange Act of
1934. This quarterly report should be read in conjunction with PG&E Funding
LLC's Condensed Financial Statements and Notes to the Condensed Financial
Statements included in its 1999 Annual Report on Form 10-K.
PG&E Funding LLC, was formed on July 1, 1997, in order to effect the
issuance of notes (the "Notes") intended to support a ten percent electric rate
reduction. This reduction, which became effective as of January 1, 1998, is
provided to Pacific Gas and Electric Company's residential and small
commercial electric customers in connection with the electric industry
restructuring mandated by California Assembly Bill 1890, as amended by
California Senate Bill 477 (electric restructuring legislation).
PG&E Funding LLC was organized for the limited purposes of issuing
the Notes and purchasing Transition Property. Transition Property is the right
to be paid a specified amount (presented in the financial statements as
"Transition Property receivable") from a nonbypassable charge payable by
residential and small commercial electric customers. The nonbypassable charge
was authorized by the California Public Utilities Commission (CPUC) pursuant
to the electric restructuring legislation. PG&E Funding LLC issued the Notes
in December 1997.
PG&E Funding LLC is restricted by its organizational documents from
engaging in any other activities. In addition, PG&E Funding LLC's
organizational documents require it to operate in such a manner that it should
not be consolidated into the bankruptcy estate of Pacific Gas and Electric
Company in the event that Pacific Gas and Electric Company becomes subject to
such a proceeding. PG&E Funding LLC is legally separate from Pacific Gas and
Electric Company. The assets of PG&E Funding LLC are not available to
creditors of Pacific Gas and Electric Company or PG&E Corporation, and the
Transition Property is legally not an asset of Pacific Gas and Electric
Company or PG&E Corporation. PG&E Funding LLC is expected to terminate after
final maturity of the Notes on December 26, 2009.
PG&E Funding LLC believes that the accompanying statements reflect
all adjustments that are necessary to present a fair statement of the
financial position and results of operations for the interim periods. All
material adjustments are of a normal recurring nature unless otherwise
disclosed in this Form 10-Q. Results of operations for interim periods are
not necessarily indicative of results to be expected for a full year.
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions. These estimates and assumptions
affect the reported amounts of revenues, expenses, assets, and liabilities and
the disclosure of contingencies. Actual results could differ from these
estimates.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The following analysis of the results of operations of PG&E Funding LLC is in
an abbreviated format pursuant to Instruction H of Form 10-Q. Such analysis
should be read in conjunction with the Condensed Financial Statements included
herein and the Condensed Financial Statements and Notes to the Condensed
Financial Statements included in PG&E Funding LLC's Annual Report on Form 10-K
for the year ended December 31, 1999.
PG&E Funding LLC is a special purpose, single member limited
liability company organized in July 1997 for the limited purposes of holding
and servicing the Transition Property (as described below), issuing notes
secured primarily by the Transition Property and performing related
activities. Pacific Gas and Electric Company, as the sole member of PG&E
Funding LLC, owns all of the equity securities of PG&E Funding LLC. PG&E
Funding LLC's organizational documents require it to operate in a manner such
that it should not be consolidated in the bankruptcy estate of Pacific Gas and
Electric Company in the event Pacific Gas and Electric Company becomes subject
to such proceeding.
In December 1997, PG&E Funding LLC acquired Transition Property from
Pacific Gas and Electric Company and issued $2,901,000,000 in principal amount
of the PG&E Funding LLC Notes, Series 1997-1, Class A-1 through Class A-8
(the "Notes"), with scheduled maturities ranging from ten months to ten years
and final maturities ranging from two to eleven years. The Notes were issued
pursuant to an Indenture dated December 8, 1997 between PG&E Funding LLC and
Bankers Trust Company of California, N.A., as trustee (the "Indenture"). PG&E
Funding LLC sold the Notes to the California Infrastructure and Economic
Development Bank Special Purpose Trust PG&E-1, a Delaware business trust
(the "Trust"), which issued certificates corresponding to each class of Notes
(the "Certificates") in a public offering. PG&E Funding LLC entered into a
servicing agreement (the "Servicing Agreement") with Pacific Gas and Electric
Company pursuant to which Pacific Gas and Electric Company is required to
service the Transition Property on behalf of PG&E Funding LLC.
The California Public Utilities Code (the "PU Code") provides for the
creation of "Transition Property." A financing order dated September 3, 1997
(the "Financing Order") issued by the CPUC, together with the related
Issuance Advice Letter, establishes, among other things, separate
nonbypassable charges (the "FTA Charges") payable by residential electric
customers and small commercial electric customers in an aggregate amount
sufficient to repay in full the Certificates, fund the Overcollateralization
Subaccount established under the Indenture, and pay all related costs and
fees. Under the PU Code and the Financing Order, the owner of Transition
Property is entitled to collect FTA Charges until such owner has received
amounts sufficient to retire all outstanding series of Certificates and cover
related fees and expenses and the Overcollateralization amount described in
the Financing Order.
In order to enhance the likelihood that actual collections with
respect to the Transition Property are neither more nor less than the amount
necessary to amortize the Notes in accordance with their expected amortization
schedules, pay all related fees and expenses, and fund certain accounts
established pursuant to the Indenture as required, the Servicing Agreement
requires Pacific Gas and Electric Company, as the Servicer of the Transition
Property, to seek, and the Financing Order and the PU Code require the CPUC to
approve, periodic adjustments to the FTA Charges. Such adjustments will be
based on actual collections and updated assumptions by the Servicer as to
future usage of electricity by specified customers, future expenses relating
to the Transition Property, the Notes and the Certificates, and the rate of
delinquencies and write-offs. The Servicer filed an advice letter with the
CPUC, advising them of a decrease to the FTA Charge for residential and small
commercial customers effective January 1, 2000.
PG&E Funding LLC uses collections of the Transition Property
receivable to make scheduled principal and interest payments on the Notes.
Income earned on the Transition Property receivable is expected to offset
(1) interest expense on the Notes, (2) amortization of debt issuance expenses
and the discount on the Notes and (3) the fees charged by Pacific Gas and
Electric Company for servicing the Transition Property and providing
administrative services to the Note Issuer.
Income generated from the Transition Property receivable for the
three and nine month periods ended September 30, 2000 was approximately
$37,004,000 and $114,550,000 respectively, and for the three and nine month
periods ended September 30, 1999 was approximately $41,916,000 and
$129,495,000 respectively. The decrease reflects the declining Transition
Property receivable balance. During the three month periods ended
September 30, 2000 and 1999, PG&E Funding LLC earned interest income from
other investments of approximately $1,485,000 and $1,086,000 respectively,
and had interest expense of approximately $35,296,000 and $39,786,000
respectively. During the nine month periods ended September 30, 2000 and 1999,
PG&E Funding LLC earned interest income from other investments of approximately
$4,179,000 and $2,932,000 respectively and had interest expense of
approximately $109,338,000 and $122,766,000 respectively. The interest expense
is comprised of interest on the Notes, and amortization of the Note discount
and issuance costs. The decrease in interest expense is due to the declining
balance of the Notes. PG&E Funding LLC also incurred servicing fees of
approximately $1,363,000 and $1,540,000, and trustee, administrative, and
general fees of approximately ($55,000) and $50,000 for the three month periods
ended September 30, 2000 and 1999 respectively. The change to trustee,
administrative, and general fees is due to a refund PG&E Funding LLC received
in the third quarter 2000 for additional fees it had paid that were determined
to have already been included in its payment of a quarterly administrative fee.
For the nine month periods ended September 30, 2000 and 1999, PG&E Funding LLC
incurred servicing fees of approximately $4,218,000 and $4,750,000 and trustee,
administrative, and general fees of approximately $37,000 and $163,000
respectively.
For the quarters ended September 30, 2000 and 1999, collections of FTA
Charges were approximately $112,535,000 and $110,433,000 respectively. This
brought the total year-to-date collections as of September 30, 2000 and 1999 to
approximately $330,563,000 and $360,773,000 respectively. Principal and
interest payments on the Notes were approximately $319,792,000 and
$337,108,000, with payments for servicing fees and other expenses of
$4,322,000, and $4,867,000 for the nine month periods ended September 30, 2000
and 1999 respectively. The Note Issuer expects future collections of FTA
charges to be sufficient to cover scheduled principal and interest payments on
the Notes, and to cover related expenses.
Forward-looking Information:
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This Quarterly Report on Form 10-Q, including the preceding discussion of
financial condition and results of operations, and elsewhere, contains forward
looking statements that involve risks and uncertainties. These statements are
based on the beliefs and assumptions of management and on information
currently available to management. Words such as "estimates", "expects",
"anticipates", "plans", "believes", and similar expressions identify forward
looking statements involving risks and uncertainties. Actual results or
outcomes could differ materially.
PART II
OTHER INFORMATION
ITEM 5. OTHER INFORMATION.
The Quarterly Servicer's Certificate dated September 25, 2000 attached as
Exhibit 99.1 hereto includes certain additional information regarding
collections of FTA Charges.
ITEM 6. EXHIBITS
(a) Exhibits required to be filed by Item 601 of Regulation S-K:
27 Financial Data Schedule for the quarter ended
September 30, 2000.
99.1 Quarterly Servicer's Certificate dated September 25, 2000.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized on this the 13th day of November, 2000.
PG&E FUNDING LLC, as Registrant
By /s/ GABRIEL B. TOGNERI
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Gabriel B. Togneri, Treasurer
INDEX TO EXHIBITS
Exhibit Number Description
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27 Financial Data Schedule
99.1 Quarterly Servicer's Certificate
dated September 25, 2000
