VERNON L. HOPKINSON (3656)
RAY M. BECK (3987)
JULIE A. BRYAN (4805)
DANIEL J. TORKELSON (4426)
COHNE, RAPPAPORT & SEGAL, P.C.
525 East 100 South, Suite 500
P.O. Box 11008
Salt Lake City, Utah 84147-0008
Telephone: (801) 532-2666
General Counsel for the Trustee, Roger G. Segal
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF UTAH, CENTRAL DIVISION
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In re: )
)
BONNEVILLE PACIFIC CORPORATION, ) Bankruptcy No. 91A-27701
)
Debtor. ) (Chapter 11)
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REPORT OF TRUSTEE REGARDING ADMINISTRATION OF ESTATE
FROM JULY 1, 1996 THROUGH JUNE 30, 1997
Roger G. Segal, the duly-appointed, qualified and acting Chapter 11
trustee for the above-referenced Debtor's Estate ("Trustee"), pursuant to
11 U.S.C. Section 1106(a), submits the following Report regarding
administration of the Chapter 11 bankruptcy Estate (the "Estate") of
Bonneville Pacific Corporation (the "Debtor" or "Bonneville") for the period
from July 1, 1996 to June 30, 1997 (and certain material events which
occurred after June 30, 1997).
<PAGE>
I.
INTRODUCTION
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This is the fifth report filed by the Trustee and is intended to cover
the period from July 1, 1996 through June 30, 1997 (and certain material
events which occurred after June 30, 1997). An initial report was filed
with the United States Bankruptcy Court (the "Bankruptcy Court") on
July 22, 1993 and covered the period from June 12, 1992 through June 30, 1993.
The second report was filed with the Bankruptcy Court on September 9, 1994
and covered the period from July 1, 1993 through June 30, 1994. The third
report was filed with the Bankruptcy Court on August 22, 1995 and covered the
period from July 1, 1994 through June 30, 1995. The fourth report was filed
with the Bankruptcy Court on September 20, 1996 and covered the period from
July 1, 1995 through June 30, 1996. This Report should be read in
conjunction with the initial report, the second report, the third report and
the fourth report.
Material developments have occurred during the period covered by this
Report. Most significantly, the Trustee, with the assistance of his special
litigation counsel and his general counsel, has reached settlements with all
but one of the remaining defendants in the Trustee's action to recover the
millions of dollars lost by the Debtor due to the wrongful and negligent acts
of certain insiders, professionals and others; SEE SEGAL, TRUSTEE v.
PORTLAND GENERAL, et al, United States District Court for the District of
Utah ("District Court"), Case No. 92-C-364J, and the cases severed therefrom
(the "Trustee's Litigation"). Part III below provides summaries of each of
the Trustee's settlements reached during the period covered by this Report
with defendants in the Trustee's Litigation and Part IV below provides
<PAGE>
summaries of various other settlements reached by the Trustee during the
period covered by this Report.
Additionally, the Trustee and his professionals, together with
Bonneville's management, have essentially completed the task of disposing of
the Debtor's uneconomical power projects and business interests. As a
result, the business interests of the Debtor now consist of several
profitable subsidiaries and power projects which are described in Part II
below. The Trustee continues to preserve the value of the Debtor's Estate by
managing the operation of the Debtor's business assets and monitoring the
operation of the Debtor's subsidiaries.
Finally, the Trustee has resolved many disputed claims which have been
filed against the Estate, as discussed in Parts III, IV and VI below.
As a result of the settlements reached in the Trustee's Litigation and
with other parties, the disposition of uneconomical projects and business
interests, and the resolution of many disputed claims against the Estate, the
Trustee believes that it is now possible to formulate a plan of
reorganization.
II.
OPERATING ENTITIES AND VALUABLE ASSETS
--------------------------------------
The Estate's business assets now consist(1) primarily of four (4)
valuable businesses. Set forth below is a summary of the remaining business
assets of the Estate which have substantial value:
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(1) Regarding the previous disposition of Estate assets, see the Trustee's
first, second, third and fourth annual reports.
<PAGE>
(a) BONNEVILLE FUELS CORPORATION AND ITS SUBSIDIARIES, INCLUDING;
COLORADO GATHERING CORP., BONNEVILLE FUELS MARKETING CORP., BONNEVILLE FUELS
MANAGEMENT CORP. AND BONNEVILLE FUELS OPERATING CORP. Bonneville Fuels
Corporation ("Fuels") is a wholly-owned subsidiary of the Debtor engaged
primarily in natural gas production and sales in the Western United States.
As of June 30, 1996, Fuels and its subsidiaries had 15 full time employees
and 1 part time employee. During the one-year period covered by this Report,
Fuels and its subsidiaries had gross income of approximately $17,811,822.00
and had a net operating income of approximately $2,694,885.00.(2)
Based on an independent report prepared by the Ryder Scott Company, as
of December 31, 1996, Fuels' total proved oil and gas reserves had a present
value, using a ten percent (10%) discount rate, of approximately
$40,011,344.00, which was an increase from the December 31, 1995 report
valuation of $10,223,000.00. This increase was the result of: a) production
of approximately three million MCFE (thousand cubic feet equivalent) of its
reserves; and b) significantly higher end of year gas prices ($3.24/MCF
compared to $1.28/MCF). Although the December 31, 1996 report reflects a
substantially higher value for the reserves, THE RYDER SCOTT REPORT VALUE MAY
BE UNREALISTICALLY HIGH DUE TO THE UNSEASONABLY HIGH 1996-97 WINTER PRICES.
Since the end of last winter, prices have averaged at or below $2.00/MCF for
Fuels' production basins.
BECAUSE THE VALUE OF FUELS' NATURAL GAS RESERVES IS PRIMARILY
DEPENDANT ON THE PRICE OF NATURAL GAS, SUCH VALUE CONSTANTLY FLUCTUATES AS
NATURAL GAS PRICES RISE AND FALL. The Trustee believes that the current
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(2) Effective December 31, 1996, Fuels booked a recovery of bad debts in the
amount of $1,788,000.00. Fuels' net operating income for the period
covered by this Report, including the bad debt recovery, would be
approximately $4,482,805.00.
<PAGE>
present value of Fuels' proved oil and gas reserves are materially less than
the December 31, 1996 figure estimated by Ryder Scott. Nevertheless, the
Trustee believes that Fuels is one of the Debtor's most valuable assets.(3)
Fuels has a revolving credit facility with Colorado National Bank
("CNB"), which has a $10,000,000.00 borrowing base. The balance owed to CNB
as of June 30, 1996 was approximately $2,900,000.00 which balance was
reduced to 0.00 as of June 30, 1997.(4)
(b) BONNEVILLE PACIFIC SERVICES COMPANY, INC. ("BPSC"). This
wholly owned subsidiary of the Debtor is in the business of operating power
projects. BPSC currently operates, pursuant to long term contracts, the
following projects:
(i) The NCA #1 85 megawatt natural gas fired cogeneration
project, located near Las Vegas, Nevada; and
(ii) The NCA #2 85 megawatt natural gas fired cogeneration
project, located near Las Vegas, Nevada.
These valuable contracts are linked with Bonneville's continued indirect
ownership interest in the NCA #1 project, which is discussed below. In
addition, BPSC oversees the operation of, and manages, the Estate's interest
in the Kyocera power project which is described later in this Report.
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(3) Portland General Holdings, Inc., claimed to have a security interest in
the stock of Fuels, securing a claim in the approximate amount of
$14,000,000.00 (which the Trustee and the Debtor at all times disputed).
Pursuant to a settlement between the Trustee and Portland General (SEE
discussion in Part III below) Portland General released its security
interest and returned the Fuels stock to the Trustee.
(4) Fuels continues to use the revolving credit facility to acquire and
develop oil and gas properties. As of August 15, 1997, the balance owed
to CNB was approximately $500,000.00.
<PAGE>
As of June 30, 1997 BPSC had 39 employees. During the one-year period
covered by this Report, BPSC had gross income of approximately $4,638,000.00,
and net operating income of approximately $1,440,000.00. BPSC HAS NO LONG
TERM DEBT AND AS OF JUNE 30, 1997 HAS IN ITS POSSESSION UNENCUMBERED CASH OR
OTHER LIQUID INVESTMENTS OF APPROXIMATELY $6,112,000.00.
(c) NEVADA COGENERATION ASSOCIATES NO. 1 ("NCA #1"). NCA #1 is
owner of an 85 megawatt natural gas fired project that has been in operation
since 1992. Bonneville, through its wholly owned subsidiary, Bonneville
Nevada Corporation ("BNC"), has a fifty percent (50%) partnership interest in
NCA #1; the remaining partnership interest is owned by a subsidiary of Texaco,
Inc ("Texaco"). BONNEVILLE AND BNC HAVE ENTERED INTO VARIOUS AGREEMENTS WITH
TEXACO WHICH MAY SIGNIFICANTLY IMPACT UPON EITHER PARTNERS' ABILITY TO SELL
OR DISPOSE OF THEIR RESPECTIVE INTERESTS IN NCA #1. As discussed above,
NCA #1 is operated by Bonneville's wholly owned subsidiary, BPSC.
From July 1, 1996 through June 30, 1997, BNC received partnership
distributions from NCA #1 totaling $6,280,000.00. Of this amount,
$2,751,507.89 was distributed to Bonneville and then paid by Bonneville to
the Bank of Tokyo, pursuant to a court approved adequate protection
agreement, in full satisfaction of the Bank of Tokyo's claim against the
Estate (Claim No. 133), which was secured by Bonneville's stock in BNC.
The Bank of Tokyo has withdrawn Claim No. 133 and released its security
interest in the BNC stock. THE REMAINDER OF THE PARTNERSHIP DISTRIBUTION,
TOTALING $3,528,492.11, HAS BEEN RETAINED BY AND REMAINS AT BNC.
NCA #1 owes: (a) approximately $52,650,000 to a consortium of
institutions that provided financing for the NCA #1 project; and
(b) approximately $27,400,000 to the holders of industrial revenue bonds,
<PAGE>
which were sold to provide financing for the NCA #1 project. NCA #1 is
current on such obligations. Bonneville has guaranteed the industrial
revenue bonds.
In December, 1996, NCA #1 was able to amend the long term credit
facility (the "Loan") with the project lenders. The Loan amendment provided
for a lower interest rate, the release of certain reserve accounts and a
reduction in administrative requirements for servicing the Loan.
The NCA #1 Project is profitable and one of Bonneville's most valuable
assets. As previously reported, arbitration regarding curtailment activity
(i.e. reduced power purchases) by Nevada Power Company ("NPC") has been
concluded with NCA #1 being awarded and paid $829,920.00; which payment was
reflected in the amounts distributed to NCA #1's partners. The Settlement
and Release Agreement between the parties did not, however, include any
provision regarding future curtailments of the project. Since
January 1, 1996, curtailments of NCA #1 have continued but at dramatically
lower levels than previously experienced. There is no assurance that this
trend will continue. In light of curtailment and market risks facing both
NCA #1 and NPC, the parties negotiated and reached a tentative agreement
pertaining to future curtailments. The tentative agreement provides for a
slight reduction in applicable energy and capacity rates but eliminates the
threat of future curtailments, except in limited circumstances. This
agreement must be finalized and approved by various parties and thereafter
approved by the Public Service Commission of Nevada ("PSCN") before it
becomes effective. The PSCN may not rule upon the agreement for several
months. If approved, management for NCA #1 believe that the settlement
agreement will provide NCA #1 with long term revenue stability and additional
flexibility in anticipation of market deregulation. The agreement if
<PAGE>
approved, will also resolve all remaining litigation between the parties.
On September 24, 1996, the United States Environmental Protection Agency
("EPA") filed a Notice of Violation ("NOV") against NCA #1 relative to the
installation of a selective catalytic reduction system ("SCR") for the
project. Through negotiations between representatives of NCA #1 and the EPA,
a tentative agreement regarding the NOV has been reached and a definitive
settlement agreement is currently being drafted by legal counsel for the EPA.
(d) KYOCERA PROJECT. The Debtor owns a gas-fired cogeneration
project (nominally rated at 3.2 MW) which is located in San Diego,
California, and which is known as the Kyocera Project. The Kyocera Project
is located at a microchip packaging manufacturing facility owned and operated
by Kyocera America, Inc. ("KAI"). The electricity and chilled water
produced by the Kyocera Project is purchased by KAI pursuant to an Energy
Supply Agreement (the "Energy Supply Agreement").
During the one-year period covered by this report, the Kyocera project
generated net operating income of approximately $170,000.00. This compares
to net operating income for the previous one-year period of approximately
$346,000.00, with the reduction resulting primarily from higher fuel prices.
Although the Kyocera project is only nominally rated at 3.2 MW, it is not
subject to any secured claims. Therefore, the Trustee believes, based upon
its net cash flows, that its value to the Estate is in excess of
$1,000,000.00.
The Debtor and KAI have recently commenced negotiations regarding the
possible expansion of the Kyocera Project and an extension of the Energy
Supply Agreement.
<PAGE>
III.
SEGAL (TRUSTEE) V. PORTLAND GENERAL, ET AL. LITIGATION
------------------------------------------------------
In August of 1993 the Trustee filed an Amended Complaint in a pending
action in the United States District Court for the District of Utah (the
"District Court"), which suit was the primary action by the Trustee to
attempt to recover the millions of dollars lost by Bonneville due to the
alleged wrongful or negligent acts of the defendants named in the litigation.
SEGAL (TRUSTEE) v. PORTLAND GENERAL, et al., Case No. 92-C-364J, and the
cases severed therefrom (the "Trustee's Litigation"). The Trustee is
represented in this litigation by his special litigation counsel, Beus,
Gilbert & Morrill of Phoenix, Arizona.
During the period of this Report, significant progress was made in the
Trustee's Litigation. Specifically, the Trustee entered into settlement
agreements with all but one of the remaining defendants.(5)
A brief summary of the terms and status of the settlements entered into
or effectuated during the period covered by this Report is set forth below:(6)
1. FRASER & BEATTY AND J. MICHAEL BRADLEY. The Settlement Agreement
with Fraser & Beatty and J. Michael Bradley was entered into on
August 8, 1996 and was approved (without objection) by the Bankruptcy Court
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(5) The only remaining defendant is William Cerutti. The status of the
Trustee's action against William Cerutti is discussed at the end of this
Part III.
(6) Each Settlement Agreement must be reviewed in its entirety for all
conditions (and consideration) of the settlemnt. In each of the
settlments, the defendant has denied any wrongdoing or liability.
<PAGE>
after a hearing held on September 3, 1996. Fraser & Beatty, as required by
the terms of the Settlement Agreement, paid the $10,000,000.00 settlement
payment to the Estate on September 6, 1996.
2. PIPER JAFFRAY. The Piper Jaffray Settlement Agreement was entered
into on August 12, 1996 and was approved (without objection) after a hearing
held on September 9, 1996. Piper Jaffray, as required pursuant to the terms
of the Settlement Agreement, made an initial settlement payment of
$7,000,000.00 to the Estate on September 19, 1996. Piper Jaffray is required
to pay to the Estate another $1,500,000.00 on September 9, 1997 and another
$1,500,000.00 on September 9, 1998.
3. PORTLAND GENERAL. On August 22, 1996 the Trustee entered into a
comprehensive verbal settlement agreement with Portland General Corporation
("PGC"), its wholly owned subsidiary, Portland General Holding Inc. ("PGHI")
and certain past and present officers of PGC or PGHI (collectively such
entities and persons are referred to as "Portland"). Pursuant to the
settlement, which was documented by formal settlement agreement dated
September 9, 1996, Portland has released any and all claims against
Bonneville, the Estate and related entities and individuals, except that
PGHI retains ownership of 2,000,000 shares of common stock of Bonneville.
PGHI has surrendered ownership of approximately 7,842,000 shares of common
stock of Bonneville and Portland has withdrawn with prejudice its filed claim
(in the amount of $230,369,276.00) against the Estate and dismissed its
counterclaim against Bonneville and the Estate, which was pending in the
Trustee's Litigation. The settlement was approved by the United States
Bankruptcy Court (without objection) after a hearing held on October 7, 1996.
<PAGE>
4. KIDDER PEABODY. On September 20, 1996 the Trustee entered into a
verbal settlement agreement with Kidder Peabody. Pursuant to the settlement,
which was documented by formal settlement agreement dated October 4, 1996,
Kidder Peabody paid $15,000,000.00 to the Estate on October 4, 1996. The
settlement was approved by the United States Bankruptcy Court (without o
bjection) after a hearing on the Motion held on October 28, 1996.
5. WESTINGHOUSE. On December 3, 1996, the Trustee entered into a
settlement agreement with Westinghouse Electric ("Westinghouse"). Pursuant
to the settlement, Westinghouse agreed (a) to pay $6,000,000.00 to the
Estate, payable $3,000,000.00 not later than April 10, 1997 and
$3,000,000.00 not later than April 10, 1998; and (b) to withdraw with
prejudice its unsecured $6,000,000.00 subordinated claim. The settlement was
approved by the Bankruptcy Court (without objection) after a hearing held on
December 20, 1996. The first $3,000,000.00 payment was made by Westinghouse
on April 9, 1997.
6. JACK DUNLOP. On or about December 4, 1996 the Trustee entered
into a formal settlement agreement with Jack and Nancy Dunlop. The
settlement agreement provided for payment by Jack Dunlop of $10,000.00 and
other consideration to the Estate. The settlement was approved by the
Bankruptcy Court (without objection) after a hearing held on
January 13, 1997. Dunlop paid the $10,000.00 settlement amount to the
Estate on February 14, 1997.
7. CALPINE. On December 10, 1996 the Trustee entered into a verbal
settlement agreement with Calpine Corporation ("Calpine"), a Defendant in
an action severed from the main Litigation. Pursuant to the settlement,
which was documented by a formal settlement agreement dated
December 30, 1996, Calpine agreed (a) to pay to the Estate the sum of
$767,500.00; and (b) to release and withdraw with prejudice its filed claims
<PAGE>
in the total amount of $3,057,969.60. The settlement was approved by the
Bankruptcy Court (without objection) after a hearing held on January 28, 1997.
Calpine has withdrawn its claims and paid the $767,500.00 settlement amount
to the Estate on February 11, 1997.
8. DINUBA ENERGY, INC., AND RONALD C. YANKE. On or about
February 18, 1997, the Trustee entered into a verbal settlement agreement
with Dinuba Energy, Inc. ("Dinuba"), and Ronald C. Yanke ("Yanke"),
defendants in an action severed from the main Litigation. Pursuant to the
settlement, which was documented by formal settlement agreement dated
February 24, 1997, Dinuba and Yanke paid $4,500,000.00 to the Estate on or
about March 21, 1997. The settlement was approved by the Bankruptcy Court
(without objection) after a hearing held on March 17, 1997.
9. AMENDMENT TO MAYER, BROWN & PLATT SETTLEMENT. Pursuant to the
Trustee's settlement with Mayer, Brown & Platt ("MBP"), which was discussed
in the Trustee's fourth report, MBP paid $30,000,000.00 to the Estate and
agreed to make an additional payment if MBP subsequently settled claims
asserted against it by Portland General. Specifically, pursuant to
paragraph 11 of the Settlement Agreement, as approved by the Court, if
Portland General settled with MBP before Portland General initiated suit
against MBP then MBP would pay $3,500,000.00 to the Estate and if Portland
General settled with MBP after suit was initiated, but before trial
commenced, then MBP would pay $1,750,000.00 to the Estate. Conversely, if a
trial on the merits commenced between Portland General and MBP and the
parties then settled, or if the suit was fully litigated to a judgment, then
the Estate would receive no additional amount from MBP. Without Portland
General having filed suit, MBP and Portland General tentatively reached a
settlement agreement between themselves, which settlement was conditioned
<PAGE>
upon the Trustee agreeing to amend the Settlement Agreement so that the
Estate would receive $1,750,000.00 pursuant to paragraph 11 of the Settlement
Agreement (rather than $3,500,000.00). The Trustee agreed to amend the MBP
Settlement Agreement, as requested, in order to ensure that the settlement
between MBP and Portland General would be effectuated. The Amendment to the
MBP Settlement Agreement was approved by the Bankruptcy Court (without
objection) after a hearing held on January 28, 1997. MBP paid the
$1,750,000.00 to the Estate on February 4, 1997.
10. PAYMENTS BY L. WYNN JOHNSON. Pursuant to the Trustee's settlement
with L. Wynn Johnson ("Johnson"), which was discussed in the Trustee's
fourth report, Johnson agreed to pay (in addition to other consideration) a
total of $1,650,000.00 to the Estate. Johnson, as required by the terms of
the Settlement Agreement, paid an initial settlement payment of $250,000.00
on June 24, 1996. Concerning the remaining $1.4 million balance, Johnson
paid three (3) installments of $50,000.00 each on or about July 1, 1996,
October 1, 1996 and January 1, 1997, and paid a $100,000.00 installment on or
about July 1, 1997. The remaining balance (plus accrued interest at 6% per
annum) is due in two additional installments of $100,000.00 each on
October 1, 1997 and January 1, 1998, with a final payment of the entire
remaining balance on or before April 1, 1998.
All litigation settlement recoveries actually received by the Estate
are subject to a contingency fee in favor of the law firm of Beus, Gilbert &
Morrill ("BG&M"), special litigation counsel for the Trustee(7). The "Legal
Representation Agreement" between the Trustee and BG&M, which sets forth the
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(7) Because the Estate received no affirmative recovery from Portland
General, BG&M received no fees in connection with the Trustee's settlment
with Porland General despite an enormous amount of work by BG&M in
connection with that litigation.
<PAGE>
terms of the contingent fee arrangement, was approved after notice and
hearing by the Bankruptcy Court in 1992. Pursuant to the contingent fee
agreement, BG&M would, after subtracting for litigation costs, be paid forty
percent (40%) of any settlement or litigation recoveries received after trial
commences, thirty-three percent (33%) of any settlement sums received after
the litigation is filed but before trial commences, or, as the case may be,
twenty percent (20%) of the settlement sum received if the settlement occurs
before litigation is commenced (in all instances less amounts paid to the
Trustee's General Counsel, Cohne, Rappaport & Segal, P.C., for fees related
to the Trustee's Litigation). Any fees or costs paid to BG&M must first be
allowed (approved) by the Bankruptcy Court upon application after notice and
hearing.
The only remaining defendant in the Trustee's Litigation (including
actions severed from the main litigation) is William Cerutti (Segal v.
Cerutti, United States District Court for the District of Utah, Case
No. 92-CV-1115-J-C). A continued hearing was held by the District Court on
November 1, 1996 concerning the motion by Defendant William Cerutti for
Summary Judgment. At the hearing the Court made an oral ruling granting the
Defendant's motion. The Defendant filed a Proposed Order Granting Summary
Judgment and on December 16, 1996 the Trustee filed a Motion for
Reconsideration and an objection to the Proposed Order. A hearing on the
Trustee's Motion for Reconsideration was held on February 28, 1997 at which
time the Court took the matter under advisement. As of the date of this
Report, the Court has not ruled on the Trustee's Motion for Reconsideration.
<PAGE>
IV.
OTHER PENDING LITIGATION AND SETTLEMENTS
----------------------------------------
In addition to the SEGAL v. PORTLAND GENERAL, et al. litigation
discussed in Part III of the Report, the Trustee was also involved in or is
monitoring several cases and other matters, as described below. The Trustee
has also obtained a number of agreements from various persons or entities
which agreements "toll" the running of any statute of limitation period.(8)
During the period covered by this Report, the Trustee has reached settlements
with several such persons and entities, which settlements are discussed
below. Also discussed below are other miscellaneous settlements(9) that have
been reached by the Trustee during the period covered by this Report.
1. GOHLER v. WOOD. A class action suit has been commenced by certain
shareholders and debenture holders of Bonneville Pacific against some of the
same defendants named by the Trustee in the SEGAL v. PORTLAND GENERAL, et al.
litigation. The class action suit is entitled GOHLER v. WOOD, United States
District Court for the District of Utah, Case No. 92-C-181S. The class has
been certified. The plaintiffs in the class action are represented by
Milberg, Weiss, Bershad, Hynes & Lerach as lead counsel. The remaining
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(8) The Trustee has entered into "tolling agreements" with certain persons
or entities, which toll the running of any applicable statute of
limitation that might otherwise bar the Trustee from initiating suit
against such person or entity. The Trustee and his repsective attorneys
are now completing their investigation into those persons or entities
which executed tolling agreements. If the Trustee is not able to settle
possible claims held by the Estate against persons or entities that
signed tolling agreements and who, or which, the Trustee believes are
liable to Bonneville, then in the next few months the Trustee, with the
assistance of his special litigation counsel, may commence additional
litigation.
(9) Each Settlement Agreement must be reviewed in its entirety for all terms
and conditions (and consideration) of the settlment. In each settlement,
the defendant has denied all wrongdoing or liability.
<PAGE>
defendants are (a) Deloitte & Touche, (b) Mayer, Brown & Platt,
(c) Hanifen Imhoff, (d) Kidder-Peabody, and (e) Piper-Jaffray. While the
Trustee is not a party to this suit, he continues to monitor the action.
2. NATIONAL UNION v. BRIX, et al. This case was filed in the United
States District Court for the District of Utah, Case No. 92-C-1047S. The
Plaintiff in this litigation, National Union Fire Insurance Company of
Pittsburgh, PA ("National Union"), issued, and Bonneville purchased, a
$10,000,000.00 director and officer liability insurance policy and a
$5,000,000.00 attorney policy insuring Bonneville and its officers,
directors and in-house attorneys. The Trustee, as well as many other
parties, were named as defendants in the action. Through a series of
settlements, National Union paid a total of approximately $10,000,000.00
(directly or indirectly) to either (a) the GOHLER v. WOOD class action
plaintiffs (see subsection 1 above)(10), or (b) in defense costs to the former
officers, directors or attorneys of Bonneville. The Estate did not receive
any funds from these settlements. While the Trustee did not contest most of
the settlements, the Trustee did object to National Union paying what was
estimated by the Trustee to be approximately $3,000,000.00 in defense costs
related to claims asserted by the Trustee against certain former officers,
directors or attorneys of Bonneville whom the Trustee alleged were
liable to the Estate for some of Bonneville's losses; i.e., it was the
Trustee's position that the insurer (National Union) could not pay defense
costs when it was Bonneville, an insured and purchaser of the policies, which
had initiated the litigation against its own officers, directors and
attorneys. The District Court approved the settlements over the Trustee's
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(10) The Trustee is informed and believes that the class action plaintiffs
(or their attorneys) remain in possession of several million dollars
resulting from such settlements.
<PAGE>
objection and the Trustee appealed the District Court decision to the Tenth
Circuit Court of Appeals (Case No. 4093).
During the period of this Report, the Trustee entered into a Settlement
Agreement dated July 17, 1996 with National Union (which settlement also
included as a party Mark E. Rinehart, who at various times served as General
Counsel for the Debtor). The settlement was approved by the Bankruptcy Court
(without objection) pursuant to an Order entered on August 21, 1996. Pursuant
to the Settlement Agreement, National Union made a settlement payment of
$400,000.00 to the Estate on September 6, 1996, in consideration for the
dismissal of the Trustee's appeal and the release of claims possessed by the
Trustee against National Union and Mark E. Rinehart.
3. RAYMOND L. HIXSON. The Trustee's settlement with Raymond L. Hixson
("Hixson") was entered into June 17, 1996 and was approved (without
objection) by the Bankruptcy Court by Order entered on July 22, 1996.
Although Hixson was not a defendant in the Trustee's Litigation, Hixson had
signed a "tolling agreement" which tolled the running of the statute of
limitations on claims relating to Hixson's involvement with Bonneville.
Hixson, as required by the terms of the Settlement Agreement, paid the
$1,000,000.00 settlement payment to the Estate on or about July 25, 1996.
4. NORWEST BANK. On April 10, 1997, the Trustee entered into a
verbal settlement agreement with Norwest Bank Minnesota, N.A, ("Norwest"),
one of the entities which had signed a tolling agreement. Pursuant to the
settlement, which was documented by formal settlement agreement dated
April 16, 1997, Norwest paid to the Estate $5,000,000.00 on May 12, 1997.
<PAGE>
The settlement was approved by the Bankruptcy Court (without objection) after
a hearing held on May 12, 1997.
5. COFFIN PARTIES. On May 30, 1997 the Trustee entered into a
Settlement Agreement with Terry E. Coffin, Coffin, Snyder & Matthews and
Runft, Coffin & Matthews, Chartered (collectively the "Coffin Parties")
pursuant to which the Coffin Parties paid to the Estate the sum of
$990,511.67. The settlement was approved by the Bankruptcy Court (without
objection) after a hearing held on June 30, 1997.
6. LDS CHURCH. Since 1985, certain "Insiders" of Bonneville
(specifically, Robert L. Wood, L. Wynn Johnson, Jack Dunlop and Raymond L.
Hixson) made cash contributions to The Church of Jesus Christ of Latter Day
Saints (the "LDS Church"). The LDS Church also directly received from the
Insiders shares of common stock in Bonneville Pacific Corporation, some of
which was sold by the LDS Church. Between 1989 and 1991 certain of the
Insiders also donated real property to the LDS Church.
On May 23, 1997 the Trustee entered into a Settlement Agreement with
the LDS Church. Pursuant to the Settlement Agreement, the LDS Church paid
to the Estate the sum of $1,100,000.00 and the LDS Church was granted a claim
of up to approximately $500,000.00 for damages incurred by the LDS Church
arising from its purchase of stock of the Company (which claim may be
subordinated pursuant to 11 U.S.C. Section 510(b)). The settlement was
approved by the Bankruptcy Court (without objection) after a hearing held on
July 7, 1997.
7. DESERET TRUST COMPANY. On May 23, 1997 the Trustee entered into a
Settlement Agreement with the Deseret Trust Company ("DTC"), the LDS Church,
Raymond L. Hixson and Vivian M. Hixson concerning the Raymond L. Hixson
<PAGE>
Charitable Remainder Unitrust, which was funded with shares of Bonneville
owned by Raymond L. Hixson. Pursuant to the settlement, the LDS Church paid
a total of $580,000.00 to purchase the "income interest" specified in the
Unitrust as well as any other right, title or interest the Hixsons, the
Trustee, Bonneville or the Estate may have had in the Unitrust or its assets.
A portion of the $580,000.00 payment, in the amount of $232,000.00, was paid
directly to Vivian Hixson as required by the provisions of the previous
Settlement Agreement between the Trustee and Raymond L. Hixson and Vivian
Hixson (see subparagraph 3 above). $232,000.00 of the $580,000.00 payment
was paid to the Trustee for the benefit of the Estate and $116,000.00 of the
$580,000.00 payment was paid to the Trustee to be held by him for payment
(subject to Bankruptcy Court approval) to his special litigation counsel,
Beus, Gilbert & Morrill ("BGM"), pursuant to the 1992 contingent fee
agreement between the Trustee and BGM. The settlement was approved by the
Bankruptcy Court (without objection) after a hearing held on July 7, 1997.
Subsequently the Bankruptcy Court approved the payment of fees to BGM.
8. CLAIM NO. 145 FILED BY FIRST SECURITY BANK, N.A. The Trustee and
First Security entered into a Settlement Agreement dated April 18, 1997,
concerning Claim No. 145 filed by First Security Bank, N.A., related to the
Crystal Springs Project and the Antelope Valley Project. Pursuant to the
settlement, First Security reduced its $2,504,869.14 claim related to the
Crystal Springs Project to $50,000.00. The settlement was approved by the
United States Bankruptcy Court (without objection) after a hearing held on
June 2, 1997. As a consequence of the settlement, First Security's combined
claim against the estate totals $800,000.00, (i.e., $750,000.00 related to
the Antelope Valley Project and $50,000.00 related to the Crystal Springs
Project).
<PAGE>
9. GERALD MONSON. On June 18, 1997 the Trustee entered into a
formal settlement agreement with Gerald Monson, a former officer of the
company who had signed a tolling agreement. Pursuant to the settlement,
Gerald Monson paid the Estate the sum of $30,000.00 on July 31, 1997. The
settlement was approved by the United States Bankruptcy Court (without
objection) after a hearing held on July 14, 1997.
10. VULCAN POWER COMPANY. On May 5, 1997, the Bankruptcy Court
approved a settlement agreement between the Debtor and Vulcan Power Company
("Vulcan") a debtor-in-possession in a case then pending in Oregon. The
settlement is intended to resolve issues arising from the Debtor's sale to
Vulcan of its interest in the Mammoth Project in California. The Trustee
currently estimates that the Debtor may have to spend approximately
$150,000.00 to plug and abandon certain geothermal well sites connected with
the Mammoth Project.
11. HANSEN, JONES & LETA, P.C. On June 17, 1997 the Trustee entered
into a formal settlement agreement with Hansen, Jones & Leta, P.C. and the
Home Insurance Company, its insurer. Hansen, Jones & Leta served as counsel
for Bonneville from November 18, 1991 to December 5, 1991 and as counsel for
Bonneville as debtor in possession from December 5, 1991 to March 31, 1992.
By court order dated December 2, 1992 (with a related motion to alter or
amend being denied on May 22, 1996), the Bankruptcy Court denied Hansen,
Jones & Leta's Final Fee and Cost Application and further ordered
disgorgement of all fees previously paid to Hansen, Jones & Leta. Hansen,
Jones & Leta appealed the decision of the Bankruptcy Court. The settlement
agreement resolved all legal issues and provided for payment of
$149,012.20 to the Estate. The settlement was conditioned upon approval by
<PAGE>
the Bankruptcy Court. A hearing on the Trustee's Motion for Approval of the
Settlement Agreement was held as scheduled on July 14, 1997, at which hearing
the Court approved the settlement. The settlement has now been fully
consummated and the appeal has been dismissed.
12. LEBOEUF, LAMB, GREENE & MACRAE. On or about March 26, 1997 the
Honorable Thomas R. Brett, United States District Court Judge, denied a writ
of mandamus sought by the law firm of LeBoeuf, Lamb, Greene & MacRae
("LeBoeuf") directed towards Judge Allen of the Bankruptcy Court. However,
in so ruling the District Court withdrew reference from the Bankruptcy Court
with respect to all matters related to LeBoeuf. The Trustee estimated that
LeBoeuf (which had represented the Official Unsecured Creditors' Committee
prior to June 16, 1992) could have sought a large administrative claim
against the Estate. However, LeBoeuf and the Trustee entered into a
Settlement Agreement dated May 8, 1997, which resolved all matters between
the Estate and LeBoeuf. The settlement was conditioned upon approval of the
United States District Court. The hearing on the Motion for Approval of the
Settlement was held as scheduled on June 6, 1997, at which hearing the
District Court approved the settlement. Pursuant to the Settlement
Agreement, LeBoeuf has reimbursed the Estate $64,679.25 in previously
allowed and paid fees and costs and the parties have mutually released one
another from any and all claims.
13. SNELL & WILMER ATTORNEYS' FEES. On May 22, 1996, the Bankruptcy
Court entered its Memorandum Opinion and Decision on the Motion for
Reconsideration filed by Snell & Wilmer concerning the Court's
December 2, 1992 Memorandum Decision denying the law firm any fee
compensation (as counsel for the Debtor-in-possession and special counsel
for the Trustee) and ordering disgorgement of all payments previously
<PAGE>
received by such law firm. Snell & Wilmer appealed the decision to the
District Court. The appeal was fully briefed and oral argument was heard on
July 8, 1997. To date, there has been no ruling on the appeal. The
monetary amounts sought by Snell & Wilmer exceed $200,000.00.
V.
MISCELLANEOUS OTHER MATTERS
---------------------------
1. INTERCOMPANY RECEIVABLES AND PAYABLES. On December 4, 1996 the
Trustee filed a Motion for Approval of the Trustee's Resolution of
Intercompany Receivable and Payables by which certain debts allegedly due
and owing by Bonneville to its wholly-owned subsidiaries and certain
obligations of the subsidiaries due and owing to Bonneville pre-petition
would be offset and any net payable to Bonneville would be converted to
equity. A hearing on the Motion was held as scheduled on December 20, 1996
at which hearing the Motion was approved. The Trustee and Bonneville have
now taken all of the actions necessary to so resolve the intercompany
receivables and payables as authorized by the Bankruptcy Court.
2. CHANGE OF TAX YEAR. In an effort to resolve tax issues relating
to the material litigation settlements which have occurred since May 1, 1996,
the Trustee filed with the Internal Revenue Service an application to change
the Debtor's tax year from one ending on April 30th to one ending on
December 31st. The Trustee desired to change the Debtor's tax year period
(when changed the Debtor would have a short tax year from May 1, 1996 through
December 31, 1996 and thereafter the Debtor's tax year would be on a
calendar year basis) in order to facilitate the filing of a plan of
<PAGE>
reorganization for the Debtor. By shortening the Debtor's tax year, the
Trustee may be able to receive a prompt tax determination for the tax year
ending December 31, 1996, which determination will facilitate any party in
interest filing a plan of reorganization because the amount of tax owed by
the Debtor, if any, should be quantified (see 11 U.S.C. Section 505). The
IRS, on February 24, 1997, conditionally granted the Debtor's application to
change its tax year. It is believed that the Debtor can meet and comply
with all of the conditions imposed by the IRS and therefore the Debtor is
proceeding as if its tax year has been changed and a U.S. Corporate Income
Tax Return will be filed for the short year ended December 31, 1997. The IRS
has notified the Trustee that the IRS will not be auditing the Debtor's filed
consolidated U.S. Corporation Income Tax Return for the period ending
April 30, 1996. The Debtor is in the process of preparing the
U.S. Corporate Income Tax Return for the year ending December 31, 1996 and
that return will be completed and filed on or before September 15, 1997.
3. SUBSIDIARY MANAGEMENT RETENTION PROGRAMS. On June 23, 1997, the
Bankruptcy Court granted the Trustee's Motion for Management Retention
Programs for the Debtor's Subsidiaries. The Trustee is currently in the
process of working with the employees of Bonneville Fuels Corporation and
Bonneville Pacific Services Corporation on employment agreements consistent
with the approved Management Retention Programs.
<PAGE>
VI
CLAIMS AGAINST THE ESTATE
-------------------------
The following is not intended to be a definitive analysis of claims
which have been, or might be, asserted against the Estate. The following
discussion is intended to give parties in interest a general understanding
of the types of claims which have been, or which may be, asserted. THE
FOLLOWING DISCUSSION OF CLAIMS (AND THE AMOUNTS SET FORTH HEREIN) REFLECT
ONLY THE TRUSTEE'S ESTIMATION OF THE AMOUNT OF POSSIBLE CLAIMS AGAINST THE
ESTATE; IT IS VERY LIKELY THAT THE AMOUNTS STATED HEREIN MAY CHANGE
MATERIALLY due to,among other things, amendments to deficient claims, rulings
by the Bankruptcy Court concerning claim objections(11) or negotiations
between the various parties-in-interest.
1. GENERAL STATUS OF FILED CLAIMS. The Bankruptcy Court has
established two (2) claim bar dates (deadlines), one being the original
April 13, 1992 date and the other (the supplemental bar date) being
December 16, 1996(12). As of December 16, 1996 there were a total of not
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(11) The Trustee, as well as any other party-in-interest, may object to any
filed claim. 11 U.S.C. Section 502(a).
(12) On August 20, 1996 the Trustee filed a Motion for Establishment of a
Supplementary Claims Bar Date seeking to set December 16, 1996 as the
claims bar date by which all creditors of Bonneville who had not
previously been adequately notified to file claims must complete and
file a proof of claim with the Clerk of the Bankruptcy Court. The
Trustee believes that most of the new claims which have been filed relate
to possible claims against Bonneville arising out of the purchase or
sale of its securities. SEE 11 U.S.C. Section 510(b). A hearing on the
Motion was scheduled before the Bankruptcy Court on September 10, 1996.
No objections to the Motion were filed and at the hearing the Court
granted the Motion and signed an order establishing the supplementary
claims bar deadline. Consequently, the Trustee proceeded with the action
authorized by the order granting the Motion; specifically, notice was
sent to thousands of potential claimants and notice was published in
newspapers of general circulation throughout the United States.
<PAGE>
less than 4,247 proofs of claim filed as reflected in the official claims
register maintained by the Clerk of the United States Bankruptcy Court in
connection with Debtor's case, excluding those claims deemed filed pursuant
to 11 U.S.C. Section 1111(a). Subsequent to December 17, 1996, there were
not less than an additional 357 claims filed.(13)
2. ADMINISTRATIVE AND PRIORITY CLAIMS. While the Estate is current
in paying all of its allowed (and ordinary course) administrative claims,
it is EXTREMELY DIFFICULT TO ESTIMATE the total amount of the administrative
expenses which will ultimately be allowed. Such additional administrative
expenses may include, but are not limited to: (a) unpaid income taxes
(including any alternative minimum tax) since May 1, 1996; (b) fees and
costs incident to confirming a plan of reorganization; (c) "substantial
contribution" claims pursuant to 11 U.S.C. Section 503(b); and (d) although
the Bankruptcy Court has allowed interim fees and costs for the Trustee and
his Professionals, the final award of fees and costs has not been allowed by
the Bankruptcy Court(14). The Trustee currently estimates that the total
amount of all priority and administrative claims (including taxes,
administrative fees and amounts necessary to plug and abandon the Mammoth
Project geothermal wells) could be as much as $15,000,000.00.
- ---------------
(13) It is not clear which late claims, if any, the Court will permit to be
deemed timely filed. CF. PIONEER INV. SERVICES v. BRUSWICK ASSOC.,
113 S.Ct. 1489 (1993). IT IS ALSO LIKELY THAT ADDITIONAL LATE CLAIMS
WILL BE FILED. Generally the claim amounts discussed herein take into
account the late claims filed through August 25, 1997.
(14) SEE 11 U.S.C. Section 326(a) for limitations on compensation for a
bankruptcy trustee. To date the Trustee has been paid for almost a
five (5) year period less than $800,000.00 (which fees have been based
upon the hours expended by the Trustee in administering the Estate.
<PAGE>
3. SECURED CREDITORS. There are NO remaining secured claims against
the Estate. At the time of the Trustee's fourth report, there were two (2)
secured claims against the Estate: (a) the disputed claim of Portland
General secured by a pledge of Bonneville's stock in Bonneville Fuels (see
Part III above); and (b) the claim of Bank of Tokyo secured by a pledge of
Bonneville's stock in BNC(15). As discussed in Part III above, the Trustee
entered into a Settlement Agreement with Portland General, which resulted
in the withdrawal of Portland General's secured claim and the release of
Portland General's security interest in the Fuels stock. As discussed in
Part II above, during the period covered by this Report, the Trustee fully
paid the obligation owing Bank of Tokyo on its secured claim.
4. BANK CLAIMS. At the present time the Trustee estimates that the
unsecured claims of financial institutions or similar entities (calculated
at the amount owed as of the date of the Debtor's voluntary Chapter 11
petition, December 5, 1991, hereafter the "Petition Date") total a little
more than $31,000,000.00, taking into account the resolution of the First
Security Bank claim, as discussed in Part IV above.
5. 1989 CONVERTIBLE SUBORDINATED 7 3/4% DEBENTURES (HEREAFTER
"DEBENTURES"). At the present time the Trustee estimates that the unsecured
claims of the CURRENT HOLDERS of the Debentures (calculated at the amount
owed as of the Petition Date) total approximately $64,750,000.00(16). The
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(15) As discussed in Section II of this Report, NCA #1 also has multimillion
dollar obligation to a consortium of institutions and to the holders
of certain industrial revenue bonds. The Debtor has guaranteed the
industrial revenue bonds.
(16) This number is ascertained by adding to the $63,250,000.00 principal
amount owed on the Debentures prepetition interest of approximately
$1,500,000.00 which interest is calculated at the rate of 7 3/4% per
annum for 3 2/3 months (August 15, 1991 to December 5, 1991).
<PAGE>
bank claimants (see paragraph 4. above) may argue that these Debenture
claims are contractually subordinated to the Bank Claims.
6. TRADE OR MISCELLANEOUS (NON-SECURITIES) GENERAL UNSECURED CLAIMS.
At the present time the Trustee estimates that valid trade claims or other
miscellaneous (non-securities related) general unsecured claims (calculated
at the amount owed as of the Petition Date) should total between
approximately $5,000,000.00 and $6,000,000.00.
7. PREPETITION DEBENTURE SALE CLAIMS. Claimants in this category are
those persons or entities who between August 15, 1989 (the approximate date
of the issuance of the Debentures) and December 5, 1991 sold their Debentures
and incurred a loss; such claims are likely subordinated pursuant to
11 U.S.C. Section 510(b).
Of the filed claims in this category, the Trustee estimates that
approximately $5,000,000.00 in claims (generally calculated on the net loss
between the purchase price and sales price at the time of the prepetition
sale) appear to be valid. An additional approximately $500,000.00 in claims
(generally calculated on the net loss between the purchase price and sales
price at the time of the prepetition sale) in this category have also been
filed but such claims require additional investigation by the Trustee or
documentation from the claimant; therefore, the Trustee estimates that only
an unknown portion of these additional claims will ultimately be determined
to be valid.
8. POST-PETITION DEBENTURE SALE CLAIMS. Claimants in this category
are those persons or entities who on or after December 6, 1991 sold the
Debentures they had purchased prepetition and incurred a loss. It is not
clear whether these claimants possess any allowable claim. Specifically, an
argument can be made that post-petition sellers of the Debentures have no
remaining claim against the Estate because when the sale occurred each seller
<PAGE>
transferred (assigned) the entire claim to the buyer of the Debenture and,
therefore, the seller no longer has any claim of any kind against the Debtor
or the Estate. If claimants in this category are determined to have allowed
claims, then such claims are likely subordinated pursuant to
11 U.S.C. Section 510(b).
If claimants in this category are determined to possess allowable
claims against the Estate, then of the filed claims in this category the
Trustee estimates that approximately $10,000,000.00 in claims (generally
calculated on the net loss between the purchase price and sales price at the
time of the post-petition sale) appear to be valid. If claimants in this
category are determined to possess allowable claims against the Estate, then
an additional approximately $1,000,000.00 in claims (generally calculated
on the net loss between the purchase price and sales price at the time of
the post-petition sale) in this category have also been filed but such
claims require additional investigation by the Trustee or documentation from
the claimant; therefore, the Trustee estimates that only an unknown portion
of these additional claims could ultimately be determined to be valid.
9. LIMITED PARTNER CLAIMS. Claimants in this category would be
persons or entities who purchased limited partnership interests in Magic
Valley Hydroelectic Associates 1984, a Utah limited partnership affiliated
with the Debtor. These claims total approximately $4,000,000.00(17). The
Debtor may possess some valid defenses to these claims; accordingly, the
Trustee is investigating these claims further. If claimants in this category
are determined to have allowed claims, then such claims may be subordinated
pursuant to 11 U.S.C. Section 510(b).
- ---------------
(17) The method of loss calculation utilized by the claimants and the time
(date) at or through which the claim is calculated varies greatly
amount the respective claims.
<PAGE>
10. SECTION 510(b) EQUITY CLAIMS. Claimants in this category are
persons or entities who prepetition purchased the Debtor's common stock and
because of such purchase suffered a loss(18). Of the filed claims(19) in
this category, the Trustee estimates that in the range of approximately
$40,000,000.00 in claims(20) appear to be valid(21). An additional
approximately $10,000,000.00 in claims in this category have also been filed
but such claims require additional investigation by the Trustee or
documentation from the claimant (or the claims may be duplicates); therefore,
the Trustee estimates that only a portion of these additional claims will
ultimately be determined to be valid.
11. EXISTING EQUITY. At the present time the Trustee estimates that
there are approximately 11,600,000 shares of the Debtor's common stock now
- ---------------
(18) Such losses include both claimants who sold their stock and those who
still retain their stock. AS TO THOSE CLAIMANTS WHO STILL OWN THE STOCK,
THE CLAIM AMOUNT FIGURES DO NOT INCLUDE ANY CREDIT FOR THE CURRENT
REMAINING VALUE, IF ANY, OF THE EQUITY.
(19) The method of loss calculation utilized by the claimants and the time
(date) at or through which the claim is calculated varies greatly among
the respective claims. Some currently existing equity holders filed
claims but apparently unintentionally omitted from the claim their
monetary Section 510(b) securities related claim; in calculating the
total amount of the filed claims in this category the Trustee has
assumed, for the time being, that some of these currently existing
holders also possess a monetary Section 510(b) equity claim against the
Debtor.
(20) This claim amount is generally calculated as follows. If the claimant
has sold the stock, then the amount is generally calculated on the net
loss between the purchase and the sales price at the time of the sale.
If the claimant has not sold the stock, then the amount is generally
calculated only on the purchase price at the time of purchase; such
amount does not include any credit for the current remaining value, if
any, of the stock. In calculating the claim amounts (loss), generally
the transaction costs (e.g., commissions) have been included.
(21) Such claims amount includes the $10,000,000.00 allowed, compromised claim
of CIGNA (now assigned) and the $3,000,000.00 claim filed by the plan
trustee for the Debtor's ESOP Plan (Claim No. 243). Concerning this
latter claim, the Trustee currently believes that the claim amount
is too high and should be materially reduced.
<PAGE>
held by persons or entities other than the Debtor or the Trustee(22). Of this
amount, Portland General Holdings Inc. is in possession of 2,000,000 shares.
On April 22, 1997, investment partnerships affiliated with Wexford Management,
LLC, announced that it had filed a Schedule 13D with the Securities and
Exchange Commission since it had acquired 752,500 shares of the Debtor's
common stock at a total purchase price of $602,592.00.
12. DEEPLY SUBORDINATED CLAIMS. Deeply subordinated claims (i.e.,
those claims which are subordinated to all other claims against the estate)
are claims which arose by reason of the Trustee's negotiated settlements
with various creditors. Such claims, all of which have been approved by the
Court, total $8,945,000.00.
13. POST-PETITION INTEREST ON CLAIMS. Various claimants argue that
they are entitled to post-petition interest on their allowed claims(23).
At this time it is not known whether post-petition interest will ever be paid
on any allowed unsecured claim because (a) it is not at all clear that the
Estate will possess sufficient funds to pay post-petition interest on any
particular class of claims, and (b) the law concerning payment of
post-petition interest to any particular class of claims is not clear and,
therefore, even if sufficient funds did exist, the issue of payment of
post-petition interest (and the applicable rate of interest, if any, and
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(22) The Trustee is also in possession of approximately 9,500,000 shares of
the common stock of the Debtor; such stock was received by the Trustee
as part of his Court approved settlements with the Insiders, Portland
General, Westinghouse and others. The Debtor also holds approximately
210,000 shares in treasury stock.
(23) Certain classes of creditors (for example, those in categories 7, 9 and
10 above) may also argue that they are entitled to prepetition interest
on their claim from the time the claim arose until the Petition Date.
PLEASE NOTE THAT IN GENERAL THE CLAIM AMOUNTS FOR CATEGORIES 7, 9 AND
10, AS SET FORTH IN THIS REPORT, DO NOT INCLUDE ANY PREPETITION INTEREST
CALCULATION FROM THE TIME THE CLAIM AROSE UNTIL THE PETITION DATE.
<PAGE>
from what date) to any particular class of claims would have to be either
consensually resolved in a plan of reorganization or would have to be
adjudicated by a court of competent jurisdiction.
VII.
AVAILABLE ASSETS FOR CREDITORS
------------------------------
The primary assets of the Estate are as follows: (1) the Trustee
anticipates that by the end of September 1997, the Estate will have, after
the payment of or the reserve for the contingent fee owed to BG&M, cash,
other liquid investments, collectible settlement receivables and other
account receivables totaling approximately $140,000,000.00(24); (2) the
Estate's interest in (a) Bonneville Fuels, (b) Bonneville Pacific Services
Company, Inc., (c) the NCA #1 Project and (d) the Kyocera Project, all
described in Part II of this Report; (3) miscellaneous assets, including the
Estate's affirmative claims against remaining parties which have signed
"tolling agreements" with the Trustee, having an estimated current net value
of approximately $1,500,000.00.
The value of the Debtor's interest in its businesses is difficult to
estimate. For example, the value of Fuels fluctuates with changes in
natural gas price, and the value of NCA #1's (BNC) and BPSC's contracts must
be analyzed in light of possible disputes with Nevada Power Company and the
contractual relationships with Texaco. In any event, in January of 1997 the
Trustee retained, with Bankruptcy Court approval, Bear, Stearns & Co., Inc.
to, among other things, value the Debtor's businesses. Bear, Stearns & Co.,
- ---------------
(24) Cash and liquid assets which are EXCLUDED from this number, but which
are or may indirectly be part of the Estate (as of June 30, 1997)
include the significant unrestricted cash and other liquid investments
of BPSC and BNC, as described in Part II(b) and (c) of this Report.
<PAGE>
Inc. preliminarily completed most of its initial work in valuing the
businesses but has made no written report to the Trustee. At this time the
Trustee has not decided whether to make public the valuation work to date
performed by Bear, Stearns & Co., Inc. However, in part based upon the
preliminary valuation work of Bear, Stearns & Co., Inc., the Trustee is of
the opinion that the book value of the Company's business assets, which is
the value used on the Company's balance sheet which is included in the Monthly
Financial Statements filed with the Bankruptcy Court (under the category
"Other Assets: Investment in and advances to subsidiaries and partnership")
is likely materially less than the current fair market value of such
businesses.
VIII.
REORGANIZATION
--------------
In light of the settlements to date reached in the Trustee's Litigation
and in light of the December 16, 1996 supplementary claim deadline, the
Trustee is now in the position to possibly formulate and propose a plan of
reorganization. Meetings were held in April 1997 and August 1997, in
New York City with major creditors, equity owners and other claimants, at
which meetings certain issues relating to a plan were discussed. While
general plan negotiations with parties in interest are now beginning, it will
be several months, if not substantially longer, before any creditor with an
allowed claim can anticipate receiving any distribution from the Estate.
The Trustee has employed the law firm of Weil, Gotshall & Manges, L.L.P.,
with its principal office in New York City, as Special Plan Counsel. The
purpose of the employment includes, but is not limited to, advising the
Trustee concerning tax issues and assisting the Trustee and his General
Counsel concerning a plan of reorganization and issues relating thereto.
<PAGE>
In preparation for a plan of reorganization, the Trustee on behalf of
the Company has employed Hein + Associates, a national accounting firm, to
prepare audited financial statements for Bonneville and certain of its
subsidiaries. An application seeking approval of the employment was filed
and hearing on the application was held as scheduled on December 20, 1996.
At the hearing the Court approved the Application. Hein + Associates has
completed most of the work required for the audits.
IX.
CONCLUSION
----------
The Trustee, his attorneys and Bonneville's current management believe
that since 1992 substantial progress has been made in rehabilitating
Bonneville's businesses and financial affairs. If all parties in interest
cooperate, it is possible to have a confirmed plan of reorganization for
Bonneville in the early part of 1998.
Anyone having questions concerning the Debtor or this Report should
contact the Trustee or his General Counsel.
DATED this 4th day of September, 1997
__________________________________________
ROGER G. SEGAL, Chapter 11 Trustee for
Bonneville Pacific Corporation
<PAGE>
CERTIFICATE OF SERVICE
----------------------
I hereby certify that I am a member of and/or employed by the law firm
of COHNE, RAPPAPORT & SEGAL, P.C. 525 East 100 South, Suite 500, P.O.
Box 11008, Salt Lake City, Utah 84147-0008, and that in said capacity a true
and correct copy of the foregoing REPORT OF TRUSTEE REGARDING ADMINISTRATION
OF ESTATE FROM JULY 1, 1996 THROUGH JUNE 30, 1997 was caused to be served
upon all those persons how are listed on the Debtor's limited mailing matrix
by depositing a properly addressed envelope containing the same in the United
States mail, first class, postage prepaid thereon, this 4th day of
September, 1997.
__________________________________________
