SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________
FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN
GENERAL INSTRUCTION I 1(a) AND (b) OF FORM 10-K AND
IS THEREFORE FILING THIS FORM WITH THE REDUCED DISCLOSURE FORMAT.
[X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
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
- ---------
CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK
SPECIAL PURPOSE TRUST PG&E-1
- ----------------------------
(Issuer of the Certificates)
PG&E Funding LLC
- -----------------
(Exact name of Registrant as Specified in its Charter)
Delaware 94-3274751
(State or Other Jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
245 Market Street, Suite 424, San Francisco, California 94105
- ------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (415) 972-5467
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: None
- ----
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
California Infrastructure and Economic Development Bank Special Purpose Trust
PG&E-1 Rate Reduction Certificates, Series 1997-1, Class A-3 6.15%
Certificates, Class A-4 6.16% Certificates, Class A-5 6.25% Certificates,
Class A-6 6.32% Certificates, Class A-7 6.42% Certificates,
and Class A-8 6.48% Certificates, maturing serially from 2000 to 2007,
and underlying PG&E Funding LLC Notes of the same respective classes
- ------------------------------------------------------------------------------
(Title of Class)
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 [ ].
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X].
Aggregate market value of the voting and non-voting common equity held by
non-affiliates of the Registrant: $ 0.
DOCUMENTS INCORPORATED BY REFERENCE.
Not applicable.
PART I
Item 1. Business
General
PG&E Funding LLC (the "Note Issuer") is a special purpose, single member
limited liability company organized under the laws of the State of Delaware.
Pacific Gas and Electric Company, as the sole member of the Note Issuer,
owns all of the equity securities of the Note Issuer. The principal executive
office of the Note Issuer is located at 245 Market Street, Suite 424,
San Francisco, California 94105. Its mailing address is Mail Code N4E,
P.O. Box 770000, San Francisco, CA 94177 and its phone number is
(415) 972-5467. The Note Issuer was organized in July 1997 for the limited
purposes of holding and servicing the Transition Property (as described below)
and issuing notes secured by the Transition Property and other limited
collateral and related activities, and is restricted by its organizational
documents from engaging in other activities. The Note Issuer's organizational
documents require it to operate in a manner such that it should not be
consolidated into the bankruptcy estate of Pacific Gas and Electric Company
in the event Pacific Gas and Electric Company becomes subject to such a
proceeding.
The only material business conducted by the Note Issuer has been the
servicing of the Transition Property. During the year, PG&E Funding LLC
collected approximately $478,000,000 in Fixed Transition Amount (FTA)
Charges (as described below) and paid $448,000,000 in principal, interest,
and other expenses. Of the original $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"), there remains approximately $2,320,800,000 in principal, with
scheduled maturities ranging from six months to eight years. The specific
interest rate and maturity of each class of Notes is specified herein under
Note D of the Notes to Financial Statements attached hereto. The Notes were
issued pursuant to an Indenture between the Note Issuer and Bankers Trust
Company of California, N.A., as trustee(the "Indenture"). The Note Issuer
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.
The Note Issuer has no employees. It 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 the Note Issuer. In addition, the Note Issuer
entered into an Administrative Services Agreement with Pacific Gas and
Electric Company pursuant to which Pacific Gas and Electric Company performs
administrative and operational duties for the Note Issuer.
Transition Property
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 California Public Utilities Commission
(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 advice letters with the
CPUC, advising them of decreases to the FTA Charge effective January 1, 1999,
and January 1, 2000. The decreases in FTA Charges are a result of over
collection and yearly principal reduction.
The Trust
The Trust was organized in November 1997 solely for the purpose of purchasing
the Notes and issuing the Certificates. It does not conduct any other material
business activities.
Item 2. Properties.
The Note Issuer has no material physical properties. Its primary asset is the
Transition Property described above in Item 1 (Business).
The Trust has no material properties. Its primary assets are the
Notes described above in Item 1 (Business).
Item 3. Legal Proceedings.
There are no material pending legal proceedings involving the Note Issuer,
the Trust, or the Transition Property.
Item 4. Submission of Matters to a Vote of Security Holders.
Omitted with respect to the Note Issuer pursuant to Instruction I of Form 10-K.
PART II
Item 5. Market For Registrant's Common Equity and Related Stockholder Matters.
(a) Sales of Unregistered Securities.
---------------------------------------
There is no established public trading market for the Note Issuer's equity
securities. All of the Note Issuer's equity is owned by Pacific Gas and
Electric Company. Pacific Gas and Electric Company purchased its
membership interest in the Note Issuer in July 1997 for a purchase price
of $5,000 and made capital contributions to the Note Issuer aggregating
approximately $27,348,000 as of December 31, 1999. Such purchase was
exempt from registration under the Securities Act of 1933, as amended,
pursuant to Section 4(2) thereof. The Note Issuer made no other sales of
unregistered securities.
(b) Restrictions on Dividends.
--------------------------------
The Indenture prohibits the Note Issuer from making any distributions to its
member unless no default has occurred and is continuing thereunder and the
book value of the remaining equity of the Note Issuer, after giving effect to
such distribution, is equal to at least 0.5% of the original principal amount
of all series of Notes that remain outstanding. During 1999, the Note Issuer
did not make any distributions to its member. The Note Issuer may make
distributions to its member from time to time in the future as permitted
by the Indenture and approved by the Board of Directors.
(c) Certificate Holders.
-----------------------
As of March 16, 2000, the sole holder of record of the Certificates was
Cede & Co., as nominee of The Depository Trust Company. The Certificates
are not traded on any established trading market.
Item 6. Selected Financial Data.
Omitted pursuant to Instruction I of Form 10-K. Not applicable to the Trust.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
The following analysis of the Note Issuer's results of operations is in an
abbreviated format pursuant to Instruction I of Form 10-K. Such analysis
should be read in conjunction with the financial statements attached hereto.
As discussed above under Item 1 (Business), the Note Issuer is a
special purpose entity established in July 1997 for limited purposes.
On December 8, 1997, the Note Issuer issued Notes in order to purchase
Transition Property. As the Note Issuer is restricted by its organizational
documents from engaging in activities other than those described in Item 1
(Business), income statement effects were limited primarily to income
generated from the Transition Property receivable, interest expense on the
Notes, Transition Property servicing fees and incidental investment interest
income.
Income generated in 1999 and 1998 from the Transition Property
receivable were approximately $170,155,000 and $194,304,000, respectively.
The decrease reflects the declining Transition Property receivable balance.
During 1999 and 1998, the Note Issuer also earned approximately $4,154,000
and $3,233,000 in interest from other investments, respectively. In 1999
and 1998, the Note Issuer also incurred interest expenses of approximately
$161,487,000 and $182,240,000 related to interest on the Notes and the
amortization of debt issuance expenses and discount on the Notes for
1999 and 1998, respectively. The decrease in interest expense is due to the
declining balance of the Notes. For 1999 and 1998 the Note Issuer also
incurred servicing fees of approximately $6,246,000 and $6,594,000 and
administrative and general fees of approximately $210,000 and $474,000,
respectively.
The Note Issuer expects to use 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 receivable and providing
administrative services to the Note Issuer. (These agreements are discussed in
greater detail in Note E to the Financial Statements attached hereto.)
Collections of FTA Charges are currently meeting expectations. For
the year ended December 31, 1999 and 1998, collections of FTA Charges of
approximately $478,000,000 and $490,000,000 were sufficient to cover
scheduled payments on the Notes and related expenses. Principal and interest
payments on the Notes for 1999 and 1998 were approximately $448,327,000
and $476,456,000, respectively. The collections resulted in a surplus of
approximately $23,304,000 and $5,088,000 after deducting scheduled payments
on the Notes and related expenses for 1999 and 1998, respectively. The excess
collections will be applied toward future payments on the Notes. Management
believes that it is reasonable to expect future collections of FTA Charges to
be sufficient to make scheduled payments on the Notes and pay related expenses
on a timely basis.
PG&E Funding LLC is dependent on Pacific Gas and Electric Company,
as servicer of the Transition Property, to collect the FTA Charges from
residential and small commercial customers and remit the FTA Charges to
the Trust. Information regarding Pacific Gas and Electric Company's Year 2000
efforts is contained in Pacific Gas and Electric Company's reports filed with
the Securities and Exchange Commission. Pacific Gas and Electric Company
successfully transitioned into theYear-2000 without any Y2K-related service
disruptions affecting the collection and remittance of FTA Charges. There is,
however, a risk that some computer-related problems that might not manifest
themselves for a period of time and that supplier or business partner Y2K
problems may materialize and have a material adverse impact on PG&E
Funding LLC's results of operations, financial condition, and cash flows.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Long-term Debt:
- --------------------
The table below provides information about the Notes
at December 31, 1999:
(in millions)
Expected maturity date 2000 2001 2002 2003 2004 Thereafter Total
Notes $290 $290 $290 $290 $290 $ 871 $2,321
Average interest rate 6.2% 6.2% 6.3% 6.4% 6.4% 6.5% 6.3%
Item 8. Financial Statements and Supplementary Data.
The financial statements and related financial information of the Note Issuer
are set forth below.
The Trust is a pass-through entity with no assets other than the
Notes and no liabilities other than the Certificates. It does not have, and
will not have, income or losses separate from payments on the Notes. Expenses
of the trustees of the Trust are payable by the Note Issuer pursuant to the
terms of a Fee and Indemnity Agreement. For these reasons, no separate
financial statements of the Trust are included.
INDEPENDENT AUDITORS REPORT
To the Member of PG&E Funding LLC:
We have audited the accompanying balance sheet of PG&E Funding LLC
(a Delaware Limited Liability Company) as of December 31, 1999 and
the related statements of income and changes in member's equity and of cash
flows for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of PG&E Funding LLC as of
December 31, 1999 and the results of its operations and its cash
flows for the year then ended, in conformity with generally accepted
accounting principles.
/s/ Deloitte & Touche LLP
San Francisco, California
March 29, 2000
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Member of PG&E Funding LLC:
We have audited the accompanying balance sheet of PG&E Funding LLC
(a Delaware Limited Liability Company) as of December 31, 1998, and 1997, and
the related statements of income and changes in member's equity and cash
flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of PG&E Funding LLC as of
December 31, 1998, and 1997, and the results of its operations and its cash
flows for the years then ended, in conformity with generally accepted
accounting principles.
/s/ ARTHUR ANDERSEN LLP
San Francisco, California
March 30, 1999
<TABLE>
PG&E FUNDING LLC
BALANCE SHEET
DECEMBER 31,
(in thousands)
<CAPTION>
1999 1998
---------- ----------
ASSETS
- ------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 5,817 $ 2,105
Current portion of
Transition Property receivable 287,980 289,785
---------- ----------
Total Current Assets 293,797 291,890
Noncurrent Assets:
Restricted funds 41,549 21,547
Transition Property receivable 2,015,853 2,318,279
Unamortized debt issuance expenses 11,667 15,042
---------- ----------
Total Noncurrent Assets 2,069,069 2,354,868
---------- ----------
TOTAL ASSETS $2,362,866 $2,646,758
========== ==========
LIABILITIES AND MEMBER'S EQUITY
- -------------------------------
Current Liabilities:
Accounts payable and accrued expenses $ 4 $ 48
Interest payable 2,651 2,848
Current portion of long-term debt 290,000 290,000
---------- ----------
Total Current Liabilities 292,655 292,896
Long-term debt 2,030,548 2,320,565
---------- ----------
Total Liabilities 2,323,203 2,613,461
Member's Equity 39,663 33,297
---------- ----------
TOTAL LIABILITIES AND MEMBER'S EQUITY $2,362,866 $2,646,758
========== ==========
<FN>
The accompanying Notes to Financial Statements are an integral part of this
statement.
</TABLE>
<TABLE>
PG&E FUNDING LLC
STATEMENT OF INCOME AND CHANGES IN MEMBER'S EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1999, 1998 and
FOR THE SIX-MONTH PERIOD FROM INCEPTION TO DECEMBER 31,1997
(in thousands)
<CAPTION>
1999 1998 1997
---------- ---------- ---------
INCOME
- --------
<S> <C> <C> <C>
Income from Transition Property receivable $170,155 $194,304 $12,168
Other interest income 4,154 3,233 83
-------- -------- -------
Total Income 174,309 197,537 12,251
EXPENSES
- --------
Interest expense 161,487 182,240 12,048
Servicing fees 6,246 6,594 463
Trustee fees - 192 -
Administrative and general 210 282 10
-------- -------- ------
Total Expenses 167,943 189,308 12,521
-------- -------- -----
NET INCOME(LOSS) $ 6,366 $ 8,229 (270)
-------- --------- ------
Member's equity at beginning of period 33,297 27,078 -
Member's contributions(distributions) - (2,010) 27,348
-------- --------- ------
MEMBER'S EQUITY AT PERIOD END $ 39,663 $ 33,297 $27,078
======== ========= ======
<FN>
The accompanying Notes to Financial Statements are an integral part of this
statement.
</TABLE>
<TABLE>
PG&E FUNDING LLC
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1999, 1998 AND
FOR THE SIX-MONTH PERIOD FROM INCEPTION TO DECEMBER 31, 1997
(in thousands)
<CAPTION>
1999 1998 1997
--------- --------- ---------
CASH FLOWS FROM OPERATIONS:
<S> <C> <C> <C>
Net Income (Loss) $ 6,366 $ 8,229 $ (270)
Adjustments to reconcile net income to net cash
used in operating activities:
Income from Transition Property receivable (170,155) (194,304) (12,168)
Amortization of debt issuance expenses and
discount on long-term debt 3,458 4,861 395
Changes in operating assets and liabilities:
Transition Property Receivable 474,386 489,608 -
Accounts payable (44) (3,420) 3,468
Interest payable (197) (8,805) 11,653
--------- --------- ---------
NET CASH (USED)/PROVIDED BY OPERATING
ACTIVITIES $ 313,814 $ 296,169 $ 3,078
--------- --------- ----------
INVESTING ACTIVITIES:
Purchase of Transition Property Receivable - - $(2,891,200)
--------- --------- ----------
FINANCING ACTIVITIES:
Proceeds from issuance of Notes - - $2,886,643
Principal payments on long-term debt $(290,100) $(290,100) -
Equity contribution from Pacific Gas and
Electric Company - - 27,348
Equity distribution to Pacific Gas
and Electric Company - (2,010) -
Debt issuance expense (6,276)
(Increase)in restricted funds (20,002) (7,142) (14,405)
--------- --------- ----------
NET CASH PROVIDED BY FINANCING ACTIVITIES $(310,102) $(299,252) $2,893,310
---------- --------- ----------
NET CHANGE IN CASH AND CASH EQUIVALENTS 3,712 (3,083) 5,188
CASH AND CASH EQUIVALENTS AT: JANUARY 1, 2,105 5,188
Inception-July
1, 1997 -
--------- --------- ----------
CASH AND CASH EQUIVALENTS AT DECEMBER 31, $ 5,817 $ 2,105 $ 5,188
========= ========= ==========
Debt issuance expenses deducted from the
proceeds received from the issuance of Notes - - $ 13,924
Cash paid for interest: $ 158,228 $ 186,335 -
<FN>
The accompanying Notes to Financial Statements are an integral part of this
statement.
</TABLE>
Notes to Financial Statements
- ------------------------------------
A. Basis of Presentation
The financial statements include 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.
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 industry restructuring legislation). As
described in Note D, PG&E Funding LLC issued the Notes in December 1997.
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 distribution customers. The
nonbypassable charge was authorized by the California Public Utility
Commission (CPUC) pursuant to the electric industry restructuring legislation.
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, 2007.
B. Summary of Accounting Policies
Cash Equivalents
Cash equivalents (stated at cost, which approximates market) include working
funds and short-term investments with original maturities of three months or
less.
Restricted Funds
Restricted funds include amounts required under the indenture agreement,
surplus collections, and interest earned on these funds.
The indenture agreement for the Notes requires PG&E Funding LLC to
maintain funds equal to approximately 0.50% of the original principal amount
of the Notes in an account with a trustee of the California Infrastructure and
Economic Development Bank Special Purpose Trust PG&E-1(the Trust). These
funds are to be held in reserve and used only in the event that collections of
the nonbypassable charge provide insufficient funds to make scheduled payments
on the Notes and to pay other expenses of PG&E Funding LLC.
Surplus collections of nonbypassable charges result when collection
of these charges exceeds scheduled payments of principal, and interest on the
Notes, and related expenses. These surplus collections were approximately
$23,304,000 in 1999 and $5,088,000 in 1998, and will be applied to future
payments on the Notes.
Unamortized Debt Issuance Expenses and Discount on Notes
The expenses associated with the issuance of the Notes have been capitalized.
These expenses and the discount on the Notes are being amortized over the life
of each respective class of Notes.
Income Taxes
PG&E Funding LLC is a single-member limited liability company. Accordingly,
all federal income tax effects and all material State of California franchise
tax effects of PG&E Funding LLC's activities accrue to Pacific Gas and Electric
Company.
Use of Estimates
The preparation of financial statements, in conformity with generally accepted
accounting principles, requires management to make estimates and assumptions.
These estimates and assumptions affect the reported amount of revenues,
expenses, assets, and liabilities and the disclosure of contingencies. Actual
results could differ from these estimates.
C. Transition Property Receivable
Changes in the value of the Transition Property receivable reflecting a yield
of approximately 6.91% are shown below (in thousands):
- ------------------------------------------------------------------------------
1999 1998
-----------------------------
Present value, January 1 $2,608,064 $2,903,368
Income due to increase in present value during the year 170,155 194,304
Less: principal and interest paid during the year (474,386) (489,608)
- -------------------------------------------------------------------------------
Total Transition Property Receivable, December 31 2,303,833 2,608,064
Less: Current portion (287,980) (289,785)
- -------------------------------------------------------------------------------
Noncurrent portion $2,015,853 $2,318,279
- -------------------------------------------------------------------------------
D. Long-term Debt
In December 1997, PG&E Funding LLC issued approximately $2.9 billion of the
Notes to the Trust. The Trust, in turn, issued pass-through certificates known
as "rate reduction bonds" with an original principal amount equal to the
original principal amount of the Notes. PG&E Funding LLC used the proceeds
from the Notes to purchase the Transition Property receivable from Pacific Gas
and Electric Company.
The Notes are secured solely by the Transition Property and other
assets of PG&E Funding LLC. Scheduled maturities and interest rates for the
Notes at December 31, 1999, are:
Scheduled Principal
Maturity Interest Amount
Class Date Rate (in thousands)
- ----------------------------------------------------------------------------
A-1 September 25, 1998 5.94% $ 0
A-2 June 25, 1999 6.01% 0
A-3 June 25, 2000 6.15% 89,800
A-4 June 25, 2001 6.16% 300,000
A-5 June 25, 2002 6.25% 290,000
A-6 September 25, 2003 6.32% 375,000
A-7 September 25, 2006 6.42% 866,000
A-8 December 26, 2007 6.48% 400,000
- ----------------------------------------------------------------------------
$2,320,800
Less: Current maturities (290,000)
Unamortized discount (252)
- ----------------------------------------------------------------------------
Long-term debt $2,030,548
- ----------------------------------------------------------------------------
The estimated fair value of the Notes was approximately $2.3 billion at
December 31, 1999 and approximately $2.6 billion at December 31, 1998.
The estimated fair value of the Notes was based on quoted market prices.
The source of repayment will be a nonbypassable charge authorized by
the CPUC. This nonbypassable charge will be collected from Pacific Gas and
Electric Company's residential and small commercial electric customers by
Pacific Gas and Electric Company, as Servicer. Collections of the
nonbypassable charge are deposited on a monthly basis by Pacific Gas and
Electric Company, as Servicer, with PG&E Funding LLC in an account maintained
by the trustee of the Trust. Each quarter such monies are used to make principal
and interest payments on the Notes. The debt service requirements include an
overcollateralization amount that is retained for the benefit of the holders
of the Notes. Any amounts not required for debt service will be returned to
PG&E Funding LLC.
E. Significant Agreements and Related Party Transactions
Under a Transition Property Servicing Agreement, Pacific Gas and Electric
Company, the Servicer, is required to manage and administer the Transition
Property of PG&E Funding LLC and to collect the nonbypassable charge from
residential and small commercial electric customers on behalf of PG&E Funding
LLC. PG&E Funding LLC pays a servicing fee equal to 0.25% of the outstanding
principal amount of the Notes. The Servicer is also entitled to receive as
compensation any interest earnings on nonbypassable charge collections prior
to remittance to the Trust and any late payment charges collected from Pacific
Gas and Electric Company's customers. For the periods ended December 31, 1999
and 1998, PG&E Funding LLC incurred servicing fees of approximately
$6,246,000 and $6,594,000 respectively.
Under an Administrative Services Agreement, Pacific Gas and Electric
Company is required to provide administrative and technical services for PG&E
Funding LLC. Pursuant to the terms of this agreement, Pacific Gas and
Electric Company may not charge fees in excess of $25,000 per calendar quarter
without the consent of the California Infrastructure and Economic Development
Bank. For the periods ended December 31, 1999 and 1998, PG&E Funding LLC had
incurred administrative services fees of approximately $100,000 and $94,000
respectively.
The Trust was created for the limited purposes of purchasing the
Notes from PG&E Funding LLC, issuing rate reduction bonds, and applying the
proceeds from the Notes to the payment of the rate reduction bonds. Under a
Fee and Indemnity Agreement, PG&E Funding LLC is responsible for paying all
fees and expenses incurred by the Trust.
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure.
Information responding to this item has been previously disclosed in a current
report on Form 8-K dated February 17, 1999 and filed on February 23, 1999,
and as amended by a current report on Form 8-K/A dated June 11, 1999.
PART III
Item 10. Directors and Executive Officers of the Registrant.
Omitted with respect to the Note Issuer pursuant to Instruction I of Form 10-K.
The Trust has no directors or officers.
Item 11. Executive Compensation.
Omitted with respect to the Note Issuer pursuant to Instruction I of Form 10-K.
Not applicable to the Trust.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
Omitted with respect to the Note Issuer pursuant to Instruction I of Form 10-K.
Not applicable to the Trust.
Item 13. Certain Relationships and Related Transactions.
Omitted with respect to the Note Issuer pursuant to Instruction I of Form 10-K.
Not applicable to the Trust.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) The following documents are filed as part of this report:
(1)Financial Statements:
The following financial statements of the Note Issuer and
report of independent accountants are included in Item 8:
Independent Auditors Report-Deloitte & Touche LLP
Report of Independent Accountants-Arthur Andersen LLP
Balance Sheet at December 31, 1999 and 1998
Statement of Income and Changes in Member's Equity
for the Year Ended December 31, 1999, 1998, and for the
six-month period from inception to December 31, 1997
Statement of Cash Flows
for the Year Ended December 31, 1999, 1998, and for the six-month
period from inception to December 31, 1997
Notes to Financial Statements
(2)Exhibits required to be filed by Item 601 of Regulation S-K:
3.1 Certificate of Formation.(1)
3.3 Amended and Restated Limited Liability Company Agreement.(1)
4.1 Note Indenture.(2)
4.2 Series Supplement.(2)
4.3 Note.(2)
4.4 Amended and Restated Declaration and Agreement of Trust.(2)
4.5 First Supplemental Trust Agreement.(2)
4.6 Rate Reduction Certificate.(2)
10.1 Transition Property Purchase and Sale Agreement.(2)
10.2 Transition Property Servicing Agreement.(2)
10.3 Note Purchase Agreement.(2)
10.4 Fee and Indemnity Agreement.(2)
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Deloitte & Touche LLP
27.1 Financial Data Schedule.
99.1 Quarterly Servicer's Certificate dated December 25, 1999
(b) Reports on Form 8-K filed during the quarter ended December 31, 1999:
None
- -----------------------------------------------------------------------------
(1)Incorporated by reference to the exhibit with the same name and numerical
designation included in the Registrant's Registration Statement on Form S-3
No. 333-30715.
(2)Incorporated by reference to the exhibit with the same name and numerical
designation included in the Registrant's Report on Form 8-K dated
December 8, 1997.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned on the 29th day of March, 2000.
PG&E FUNDING LLC, as Registrant
By /s/ KENT M. HARVEY
--------------------------------------
Kent M. Harvey, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on March 29, 2000.
Signature Title
------------ -----
/s/ KENT M. HARVEY President and Director
-----------------------------
Kent M. Harvey (Principal Executive Officer)
/s/ GABRIEL B. TOGNERI Treasurer and Director
-----------------------------
Gabriel B. Togneri (Principal Financial Officer)
/s/ CHRISTOPHER P. JOHNS Controller
-----------------------------
Christopher P. Johns (Principal Accounting Officer)
/s/ WALTER S. LEVISON Director
-----------------------------
Walter S. Levison
INDEX TO EXHIBITS
Exhibit Number Description
- ------------------- --------------
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Deloitte & Touche LLP
27.1 Financial Data Schedule
99.1 Quarterly Servicer's Certificate
dated December 25, 1999
Other exhibits not filed herewith and listed under Part IV, Item 8, have been
incorporated by reference from other documents previously filed with the
Commission.
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of
our report included in this Form 10-K into the Company's previously filed
Registration Statement File No. 333-30715.
/s/ ARTHUR ANDERSEN LLP
San Francisco, California
March 29, 2000
EXHIBIT 23.2
INDEPENDENT AUDITORS CONSENT
We consent to the incorporation by reference in Registration Statement No.
333-30715 of PG&E Funding LLC on Form S-3, as amended,
of our report dated March 29, 2000, appearing in this Annual Report on Form
10-K of PG&E Funding LLC for the year ended December 31,
1999.
/s/ Deloitte & Touche LLP
San Francisco, California
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<MULTIPLIER> 1000
<S> <C>
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 0
<OTHER-PROPERTY-AND-INVEST> 41,549
<TOTAL-CURRENT-ASSETS> 293,797
<TOTAL-DEFERRED-CHARGES> 11,667
<OTHER-ASSETS> 2,015,853
<TOTAL-ASSETS> 2,362,866
<COMMON> 0
<CAPITAL-SURPLUS-PAID-IN> 25,338
<RETAINED-EARNINGS> 14,325
<TOTAL-COMMON-STOCKHOLDERS-EQ> 39,663
0
0
<LONG-TERM-DEBT-NET> 2,030,548
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 290,000
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 2,655
<TOT-CAPITALIZATION-AND-LIAB> 2,362,866
<GROSS-OPERATING-REVENUE> 0
<INCOME-TAX-EXPENSE> 0
<OTHER-OPERATING-EXPENSES> 6,456
<TOTAL-OPERATING-EXPENSES> 6,456
<OPERATING-INCOME-LOSS> (6,456)
<OTHER-INCOME-NET> 174,309
<INCOME-BEFORE-INTEREST-EXPEN> 167,853
<TOTAL-INTEREST-EXPENSE> 161,487
<NET-INCOME> 6,366
0
<EARNINGS-AVAILABLE-FOR-COMM> 0
<COMMON-STOCK-DIVIDENDS> 0
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 313,814
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
EXHIBIT 99.1
QUARTERLY SERVICER'S CERTIFICATE
Exhibit E to Servicing Agreement
Quarterly Servicer's Certificate
California Infrastructure and Economic Development Bank Special
Purpose Trust PG&E-1
$2,901,000,000 Rate Reduction Certificates, Series 1997-1
Pursuant to Section 4.01(d)(ii) of the Transition Property Servicing
Agreement dated as of December 8, 1997 (the "Transition Property Servicing
Agreement") between Pacific Gas and Electric Company, as Servicer, and PG&E
Funding LLC, as Note Issuer, the Servicer does hereby certify as follows:
Capitalized terms used in the Quarterly Servicer's Certificate (the
"Quarterly Certificate") have their respective meanings as set forth in the
Agreement. References herein to certain sections and subsections are
references to the respective sections of the Agreement.
Collection Periods: September '99, October '99, November '99
Distribution Date: December 25, 1999
1. Collections Allocable and Aggregate Amounts Available for the Current
Distribution Date:
[S] [C]
i. Remittances for the Sept '99 Collection Period $38,512,726.00
ii. Remittances for the Oct. '99 Collection Period $39,056,735.00
iii. Remittances for the Nov. '99 Collection Period $36,045,472.00
iv. Net Earnings on Collection Account $924,760.19
----------------
v. General Sub-Account Balance $114,539,693.19
vi Reserve Sub-Account Balance $22,798,554.16
vii. Overcollateralization Sub-Account Balance $2,538,375.00
viii.Capital Sub-Account Balance (less $100K) $14,405,000.00
----------------
ix. Collection Account Balance $154,281,622.35
2. Outstanding Principal Balance and Collection Account Balance as of Prior
Distribution Date:
i. Class A-1 Principal Balance $0.00
ii. Class A-2 Principal Balance $0.00
iii. Class A-3 Principal Balance $163,057,145.00
iv. Class A-4 Principal Balance $300,000,000.00
v. Class A-5 Principal Balance $290,000,000.00
vi. Class A-6 Principal Balance $375,000,000.00
vii. Class A-7 Principal Balance $866,000,000.00
viii.Class A-8 Principal Balance $400,000,000.00
--------------
ix. Rate Reduction Certificate Principal Balance $2,394,057,145.00
x. Reserve Sub-Account Balance $22,798,554.16
xi. Overcollateralization Sub-Account Balance $2,538,375.00
xii. Capital Sub-Account Balance $14,405,000.00
3. Required Funding/Payments as of Current Distribution Date:
i. Projected Class A-1 Certificate Balance $0.00
ii. Projected Class A-2 Certificate Balance $0.00
iii. Projected Class A-3 Certificate Balance $89,800,000.00
iv. Projected Class A-4 Certificate Balance $300,000,000.00
v. Projected Class A-5 Certificate Balance $290,000,000.00
vi. Projected Class A-6 Certificate Balance $375,000,000.00
vii. Projected Class A-7 Certificate Balance $866,000,000.00
viii.Projected Class A-8 Certificate Balance $400,000,000.00
---------------
ix. Projected Class A Certificate Balance $2,320,800,000.00
x. Required Class A-1 Coupon $0.00
xi. Required Class A-2 Coupon $0.00
xii. Required Class A-3 Coupon $2,507,003.60
xiii.Required Class A-4 Coupon $4,620,000.00
xiv. Required Class A-5 Coupon $4,531,250.00
xv. Required Class A-6 Coupon $5,925,000.00
xvi. Required Class A-7 Coupon $13,899,300.00
xvii. Required Class A-8 Coupon $6,480,000.00
xviii.Required Overcollateralization Funding $362,625.00
xix. Required Capital Sub-Account Funding $0.00
4. Allocation of Remittances as of Current Distribution Date Pursuant to
8.02(d) of Indenture:
i. Note, Delaware and Certificate Trustee Fees $1,163.33
ii. Quarterly Servicing Fee $1,496,285.72
iii. Quarterly Administration Fee $25,000.00
iv. Operating Expenses (subject to $100,000 cap) $4,540.59
v. Quarterly Interest $37,962,553.60
1. Class A-1 Certificate Coupon Payment $0.00
2. Class A-2 Certificate Coupon Payment $0.00
3. Class A-3 Certificate Coupon Payment $2,507,003.60
4. Class A-4 Certificate Coupon Payment $4,620,000.00
5. Class A-5 Certificate Coupon Payment $4,531,250.00
6. Class A-6 Certificate Coupon Payment $5,925,000.00
7. Class A-7 Certificate Coupon Payment $13,899,300.00
8. Class A-8 Certificate Coupon Payment $6,480,000.00
vi. Principal Due and Payable $0.00
vii. Quarterly Principal $73,257,145.00
1. Class A-1 Certificate Principal Payment $0.00
2. Class A-2 Certificate Principal Payment $0.00
3. Class A-3 Certificate Principal Payment $73,257,145.00
4. Class A-4 Certificate Principal Payment $0.00
5. Class A-5 Certificate Principal Payment $0.00
6. Class A-6 Certificate Principal Payment $0.00
7. Class A-7 Certificate Principal Payment $0.00
8. Class A-8 Certificate Principal Payment $0.00
viii.Operating Expenses (in excess of $100,000) $0.00
ix. Funding of Overcollateralization Sub-Account(
to required level) $362,625.00
x. Funding of Capital Sub-Account (to required level) $0.00
xi. Net Earnings Released to Note Issuer $924,760.19
xii. Released to Note Issuer upon Series Retirement:
Overcollateralization Sub-Account $0.00
xiii.Released to Note Issuer upon Series Retirement:
Capital Sub-Account $0.00
xiv. Deposits to Reserve Sub-Account $505,619.76
xv. Released to Note Issuer upon Series Retirement:
Collection Account $0.00
5. Outstanding Principal Balance and Collection Account Balance as of current
distribution date:
(after giving effect to payments to be made on such distribution date):
i. Class A-1 Principal Balance $0.00
ii. Class A-2 Principal Balance $0.00
iii. Class A-3 Principal Balance $89,800,000.00
iv. Class A-4 Principal Balance $300,000,000.00
v. Class A-5 Principal Balance $290,000,000.00
vi. Class A-6 Principal Balance $375,000,000.00
vii. Class A-7 Principal Balance $866,000,000.00
viii.Class A-8 Principal Balance $400,000,000.00
-------------------
ix. Rate Reduction Certificate Principal Balance $2,320,800,000.00
x. Reserve Sub-Account Balance $23,304,173.92
xi. Overcollateralization Sub-Account Balance $2,901,000.00
xii. Capital Sub-Account Balance $14,405,000.00
6. Sub-Account Draws as of Current Distribution Date (if applicable, pursuant
to Section 8.02(e) of Indenture):
i. Reserve Sub-Account $0.00
ii. Overcollateralization Sub-Account $0.00
iii. Capital Sub-Account $0.00
-------------------
iv. Total Draws $0.00
7. Shortfalls In Interest and Principal Payments as of Current Distribution
Date:
i. Quarterly Interest $0.00
1. Class A-1 Certificate Coupon Payment $0.00
2. Class A-2 Certificate Coupon Payment $0.00
3. Class A-3 Certificate Coupon Payment $0.00
4. Class A-4 Certificate Coupon Payment $0.00
5. Class A-5 Certificate Coupon Payment $0.00
6. Class A-6 Certificate Coupon Payment $0.00
7. Class A-7 Certificate Coupon Payment $0.00
8. Class A-8 Certificate Coupon Payment $0.00
ii. Quarterly Principal $0.00
1. Class A-1 Certificate Principal Payment $0.00
2. Class A-2 Certificate Principal Payment $0.00
3. Class A-3 Certificate Principal Payment $0.00
4. Class A-4 Certificate Principal Payment $0.00
5. Class A-5 Certificate Principal Payment $0.00
6. Class A-6 Certificate Principal Payment $0.00
7. Class A-7 Certificate Principal Payment $0.00
8. Class A-8 Certificate Principal Payment $0.00
8. Shortfalls in Required Sub-Account Levels as of Current Distribution Date:
i. Overcollateralization Sub-Account $0.00
ii. Capital Sub-Account $0.00
9. Distributions of Principal per $1,000 of Original Principal Amount
Principal Pmt
per $1,000 of
Original Principal Principal Payment Orig. Princ. Amt.
[ A ] [ B ] [ B/A X 1,000 ]
------------------ ----------------- ----------------
i. Class A-1 $0.00 $0.00 $0.000000
ii. Class A-2 $0.00 $0.00 $0.000000
iii. Class A-3 $163,057,145.00 $73,257,145.00 $449.272830
iv. Class A-4 $300,000,000.00 $0.00 $0.000000
v. Class A-5 $290,000,000.00 $0.00 $0.000000
vi. Class A-6 $375,000,000.00 $0.00 $0.000000
vii. Class A-7 $866,000,000.00 $0.00 $0.000000
viii.Class A-8 $400,000,000.00 $0.00 $0.000000
----------------- ----------------- ---------------
$2,394,057,145.00 $73,257,145.00
10. Distributions of Interest per $1,000 of Original Principal Amount
Principal Pmt
per $1,000 of
Original Principal Interest Payment Orig. Prin Amt.
[ A ] [ B ] [ B/A X 1,000 ]
------------------ ----------------- ---------------
i. Class A-1 $0.00 $0.00 $0.000000
ii. Class A-2 $0.00 $0.00 $0.000000
iii. Class A-3 $163,057,145.00 $2,507,003.60 $15.375000
iv. Class A-4 $300,000,000.00 $4,620,000.00 $15.400000
v. Class A-5 $290,000,000.00 $4,531,250.00 $15.625000
vi. Class A-6 $375,000,000.00 $5,925,000.00 $15.800000
vii. Class A-7 $866,000,000.00 $13,899,300.00 $16.050000
viii.Class A-8 $400,000,000.00 $6,480,000.00 $16.200000
----------------- ----------------- --------------
$2,394,057,145.00 $37,962,553.60
[/TABLE]
IN WITNESS HEREOF, the undersigned has duly executed and delivered
this Quarterly Servicer's Certificate the 15th day of December, 1999.
PACIFIC GAS AND ELECTRIC COMPANY, as Servicer
by: /s/ CHRISTOPHER JOHNS
---------------------------
Christopher Johns
Vice President & Controller
