ML030230642
| ML030230642 | |
| Person / Time | |
|---|---|
| Site: | Diablo Canyon  |
| Issue date: | 01/17/2003 |
| From: | Landau J Howard, Rice, Nemerovski, Canady, Falk & Rabkin, Pacific Gas & Electric Co |
| To: | Office of Nuclear Reactor Regulation, US Federal Judiciary, Bankruptcy Court, Northern District of California |
| References | |
| 01-30923, 94-0742640 | |
| Download: ML030230642 (11) | |
Text
T.
_56 , 2-7S-1 3 1 JAMES L. LOPES (No. 63678)
JULIE B. LANDAU (No. 162038) 2 HOWARD, RICE, NEMEROVSKI, CANADY, FALK & RABKIN 3 A Professional Corporation Three Embarcadero Center, 7th Floor 4 San Francisco, California 94111-4065 Telephone: 415/434-1600 5 Facsimile: 415/217-5910 6 Attorneys for Debtor and Debtor in Possession PACIFIC GAS AND ELECTRIC COMPANY 7
8 UNITED STATES BANKRUPTCY COURT 9
NORTHERN DISTRICT OF CALIFORNIA 10 SAN FRANCISCO DIVISION 11 Case No. 0 1-30923 DM In re 12 Chapter 11 Case PACIFIC GAS AND ELECTRIC 13 COMPANY, a California corporation, February HCAARD RP"I c* 14 Date:
Time: 1:30 p.m. 6, 2003 Debtor. Place: 235 Pine Street, 22nd Floor
~FAWON San Francisco, California 15 Federal I.D. No. 94-0742640 16 17 NOTICE OF MOTION AND MOTION FOR AUTHORITY TO INCUR 18 LEASE EXTENSION FEES; MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT THEREOF 19
[SUPPORTING DECLARATION OF KENNETH RICHERSON FILED 20 SEPARATELY]
21 22 23 24 25 26 27 28 MPA MOTION FOR AUTHORITY TO INCUR LEASE EXTENSION FEES;
.V 1 NOTICE OF MOTION AND MOTION 2 PLEASE TAKE NOTICE that on February 6, 2003 at 1:30 p.m., or as soon 3 thereafter as the matter may be heard in the Courtroom of the Honorable Dennis Montali, 4 located at 235 Pine Street, 22nd Floor, San Francisco, California, Pacific Gas and Electric 5 Company, the debtor and debtor in possession in the above-captioned Chapter 11 case 6 ("PG&E"), will and hereby does move the Court for entry of an Order Approving Motion for 7 Authority to Incur Lease Extension Fees related to Implementation of Plan of 8 Reorganization (the "Motion").
9 This Motion is based on this Notice of Motion and Motion, the accompanying 10 Memorandum of Points and Authorities, the Declaration of Kenneth Richerson, filed II concurrently herewith, the record of this case and any evidence presented at or prior to the 12 hearing on this Motion.
of the HCtNAD 13 PLEASE TAKE FURTHER NOTICE that pursuant to Rule 9014-1(c)(2)
RICE 14 Bankruptcy Local Rules for the Northern District of California, any written opposition to the 15 Motion and the relief requested herein must be filed with the Bankruptcy Court and served 16 upon appropriate parties (including counsel for PG&E, the Office of the United States 17 Trustee and the Official Committee of Unsecured Creditors) at least five (5) days prior to the 18 scheduled hearing date. If there is no timely objection to the requested relief, the Court may 19 enter an order granting such relief without further hearing.
20 21 22 23 24 25 26 27 28 MOTION FOR AUTHORITY TO INCUR LEASE EXTENSION FEES; MPA 1 MEMORANDUM OF POINTS AND AUTHORITIES debtor in possession in the 2 Pacific Gas and Electric Company, the debtor and din order authorizing PG&E to incur 3 above-captioned Chapter 11 case ("PG&E"), requests Plan of Reorganization, 4 lease extension fees related to implementation of PG&E's proposed 5 pursuant to Bankruptcy Code Section 363(b)(1).
6 7 I. FACTUAL BACKGROUND Chapter 11 of the Bankruptcy 8 PG&E filed a voluntary petition for relief under and PG&E continues to function 9 Code on April 6, 2001. A trustee has not been appointed, 1108 of the Bankruptcy Code.
10 as a debtor-in-possession pursuant to Sections 1107 and Corporation, has proposed a 11 PG&E, together with its parent corporation, PG&E to time, the "Plan"), which is currently the 12 Plan of Reorganization (as amended from time the Court.
13 subject of confirmation proceedings before three new companies, ETrans E'flX 14 The Plan generally provides for the creation of (collectively, the "New Entities"), whereby 15 LLC, GTrans LLC and Electric Generation LLC of business based on PG&E's historical 16 PG&E will separate its operations into four lines will continue the retail gas and electric 17 functions. Accordingly, the Reorganized Debtor the electric transmission 18 distribution business, ETrans LLC ("ETrans") will operate the interstate gas transmission business, and 19 business, GTrans LLC ("GTrans") will operate generation business.
20 Electric Generation LLC will operate the electric 13 motions seeking 21 PG&E previously filed and obtained orders approving with implementation of the Plan. In 22 authority to incur business-related costs in connection Consulting Expenses and the 23 the Motion for Authority to Incur Information Technology filed on July 23, 2002, PG&E identified 24 accompanying Declaration of Stephanie Maggard, need to commence before the Plan is 25 additional implementation projects that would estimated that the total expenses for these 26 confirmed (the "Implementation Projects") and to $17.8 million. Since that time, PG&E 27 Implementation Projects would range from $10.8 million in additional implementation expenses 28 has obtained approval for approximately $8.7 FEES; MPA MOTION FOR AUTHORITY TO INCUR LEASE EXTENSION 1 pursuant to the (i) Motion for Authority to Incur Miscellaneous Implementation Expenses 2 filed on August 15, 2002, (ii) Motion for Authority to Incur Additional Miscellaneous 3 Implementation Expenses filed on September 12, 2002, and (iii) Third Motion for Authority 4 to Incur Miscellaneous Implementation Expenses filed on October 18, 2002. The present 5 Motion seeks authority to incur approximately $75,000 in additional monthly expenses 6 beginning February 2003 (except that, as noted below, a portion of these monthly expenses 7 would not be paid until March or April 2003) and continuing to such time as the Plan is 8 confirmed.
9 10 A. Request to Pay Lease Extension Fees for New Facilities to be Leased.'
11 As set forth in the Third Motion for Authority to Incur Miscellaneous 12 Implementation Expenses filed on October 18, 2002 (Docket No. 10594) at page 7, PG&E prepared for occupancy RCPN RICE 13 anticipates that up to seven new buildings will need to be leased and 2
("Plan Effective Date').
",,1, 14 for use by the New Entities by the Effective Date under the Plan A Pf-- C 15 For example, PG&E currently has substation maintenance facilities that include both 16 distribution and electric transmission functions. Since the Reorganized Debtor and the New 17 Entities will be separate legal entities, it is important that there be no confusion about 18 employee supervision and compliance with legal and business requirements. Physical 19 separation of the employees of the Reorganized Debtor and the New Entities will 20 accomplish these important objectives. These new facilities, a subset of the total new 21 facilities that will ultimately be needed by the New Entities, represent only those facilities 22 that are necessary by the Plan Effective Date for the New Entities' commencement of initial 23 field operations.
24 ' The evidentiary basis and support for the facts set forth in this Motion are contained 25 in the Declaration of Kenneth Richerson, filed concurrently herewith.
2 Pursuant to the Third Miscellaneous Motion, PG&E obtained authority to incur 26 costs for preliminary work related to leasing the new buildings (as well as the modification of existing PG&E buildings). This preliminary work included hiring construction project 27 managers, obtaining necessary permits, doing preliminary engineering and design work and 28 obtaining environmental assessments.
MOTION FOR AUTHORITY TO INCUR LEASE EXTENSION FEES; MPA V
to herein as 1 The present Motion relates to lease "option" payments (referred identified as key sites to be 2 "Extension Fees") for the new buildings that PG&E has now following Plan confirmation in order 3 leased by one or more of the New Entities immediately Effective Date.
4 to ensure that the new facilities will be operational by the Plan as part of a written 5 PG&E is in the process of negotiating the Extension Fees tenant) for the various properties 6 lease (or lease assignment) with each landlord (or current unless and until the Plan is 7 described below; however, the leases will not be effective the leases. PG&E intends to 8 confirmed and the Court has authorized PG&E to enter into the leases effective upon Plan 9 bring a subsequent motion seeking authority to enter into 10 confirmation.
available for lease II As explained further below, there are five buildings currently which PG&E has been able to 12 that are well-suited to the needs of the New Entities and for or expects to obtain favorable lease terms. However, the landlords (or current HomJ 13 negotiate (or sublease) the space and are UFAiWN 14 tenants) of the five buildings are actively attem pting to lease pending the outcome of the Plan 7,;, 15 not willing to hold the properties exclusively for PG&E sixth building (described in Section 16 confirmation proceedings. PG&E is also considering a not yet been identified and 17 B.6 below). Additional buildings may be needed but have seeking approval for any 18 therefore PG&E reserves the right to bring further motions 19 additional Extension Fees that may be necessary.
to others, PG&E 20 In order to prevent the buildings from being leased or subleased in exchange for the landlord's 21 is requesting authority to make month to month payments (provided that there may 22 agreement to lease the property to PG&E upon Plan confirmation PG&E anticipates that it will 23 be other conditions to be satisfied, including Court approval).
for the properties (i.e., the 24 obtain six successive "extension periods" of one month each monthly payments in 25 period of time during which the landlords will agree to accept 26 27 28 FEES; MPA MOTION FOR AUTHORITY TO INCUR LEASE EXTENSION 1 exchange for waiving the right to lease the properties to another tenanty 2
3 B. Description of Properties and Lease Extension Fees 4 The following describes the particular properties that PG&E intends to lease and 5 the anticipated Extension Fees to be paid for each property in order to ensure the continued 6 availability of each property for lease by PG&E upon Plan confirmation.
7 The properties described below (i) are necessary for the New Entities to 8 commence business operations by the Plan Effective Date, (ii) meet the specific 9 requirements of the New Entities (such as sufficient warehouse space that includes an 10 outside storage or parking area), and (iii) are located in key geographic areas designed to 11 meet the New Entities' needs for regional employee headquarters and to provide convenient 12 access for service employees relative to the service territories to be covered.
HCPAMA 13 RICE oNuý 14 1. GTrans Construction Headquarters in Stockton.
15 PG&E has identified an industrial building in Stockton that is well-suited for use 16 by GTrans as its Construction Headquarters. Employees to be located here will be 17 responsible for all transmission pipeline construction and major emergency repair activities.
18 This location will be near GTrans' transmission pipeline and underground storage facilities 19 and has outstanding freeway access allowing for efficient dispatch of construction crews and 20 fast emergency response. The building also offers a mix of building to yard area that is not 21 readily available in the Stockton area. The building, consisting of approximately 20,000 22 square feet, includes both a warehouse area and an office area; the site includes a large 23 parking lot and covers approximately 3.6 acres. GTrans intends to use the building for 24 offices, storage of materials and a fabrication shop, and to use the lot for parking of 25 construction trucks.
26 27 3 The only exception is for the Foster City property described in Section B.5 below, periods of one month each.
28 where PG&E expects to obtain four successive extension MOTION FOR AUTHORITY TO INCUR LEASE EXTENSION FEES, MPA 1 PG&E is in the process of negotiating the lease terms and anticipates that the per 2 Extension Fees will commence in April 2003 in the amount of approximately $12,000 without any other charges 3 month. This amount is equivalent to the base rent (i.e., rental fees a lease of the property.
4 such as taxes or insurance) that PG&E expects to negotiate for 5
6 2. GTrans Offices and Maintenance Base in Turlock.
to 7 PG&E has identified an industrial building in Turlock that is well-suited transmission facilities.
8 GTrans' needs because of its location in relation to GTrans' local response for the 9 This facility is ideally located for maintenance personnel and emergency due to its large yard area and 10 area between Ceres and Livingston. The property is desirable includes both 11 because it requires only minimal tenant improvements. The building square feet; the site includes 12 warehouse and office areas, consisting of approximately 6,000 feet. This facility will be used for general HCJVR 13 a parking lot covering approximately 7,500 square storage and parking of a portion "C 14 offices by maintenance and operating personnel and for the 15 of the GTrans' truck fleet.
that the 16 PG&E is in the process of negotiating the lease terms and anticipates of this Motion) in the 17 Extension Fees will commence in February 2003 (following approval equivalent to the base rent that 18 amount of approximately $3,100 per month. This amount is 19 PG&E expects to negotiate for a lease of the property.
20 21 3. GTrans Offices and Maintenance Base in Oakland.
well-suited to 22 PG&E has identified an industrial building in Oakland that is local transmission system 23 GTrans' needs because of its central location with respect GTrans' looking for an 24 located between Hayward and Rodeo. PG&E has spent several months site. This site also offers 25 alternative site in the Oakland area and has found no other suitable includes both warehouse 26 good freeway access for rapid emergency response. The building will be used as a 27 and office areas (consisting of approximately 11,180 square feet), and well as for storage and 28 headquarters for East Bay maintenance and operations employees as MPA MOTION FOR AUTHORITY TO INCUR LEASE EXTENSION FEES; 1 parking of a portion of the GTrans truck fleet.
2 PG&E is in the process of negotiating the lease terms and anticipates that the 3 Extension Fees will commence on March 1, 2003 in the amount of approximately $7,500 per 4 month. This amount is equivalent to the base rent that PG&E expects to negotiate for a lease 5 of the property.
6 7 4. ETrans Warehouse in Woodland.
8 PG&E has identified an industrial building in Woodland that is well-suited for 9 use as a warehouse by ETrans because of its location along the Interstate 5 and Highway 113 10 transportation corridors and its large outdoor storage area. The building will be utilized as a 11 warehouse with limited office space, consisting of approximately 64,800 square feet; the 12 appurtenant land covers approximately 8.42 acres and includes a fenced and paved lot.
HCPAARD 13 PG&E is in the process of negotiating the lease terms and anticipates that the RKE rC=, E*J.C 14 Extension Fees will commence in February 2003 (following approval of this Motion) in the AP,*- r-15 amount of approximately $22,700 per month for the first 3 months and approximately 16 $32,100 for the next 3 months. The first three months' Extension Fees are equivalent to 17 approximately 85% of the base rent under the lease that would be assigned to PG&E by the 18 current tenant and the next three months' Extension Fees are based on the current tenant's 19 full lease costs (including rent, real estate taxes and insurance).
20 21 5. Shared Building for ETrans and GTrans in Foster City.
22 PG&E has identified an industrial building in Foster City that is well-suited for 23 use by ETrans and GTrans due to its location between San Francisco and San Jose, near 24 local transmission facilities for ETrans and GTrans. ETrans and GTrans intend to use this 25 facility to maintain and operate their respective local transmission facilities located 26 throughout the San Francisco Peninsula region. PG&E has spent several months looking for 27 possible alternatives to this building and has not found a suitable alternative site. The site 28 contains both warehouse and office areas, consisting of approximately 20,000 square feet, MOTION FOR AUTHORITY TO INCUR LEASE EXTENSION FEES; MPA general 1 and also includes a 13,500 square foot parking lot. The site would be used for 2 offices, material storage, truck parking and a fabrication shop.
that the 3 PG&E is in the process of negotiating the lease terms and anticipates of this Motion) in the 4 Extension Fees will commence in February 2003 (following approval to the base rent 5 amount of approximately $20,600 per month. This amount is equivalent 6 under the lease that would be assigned to PG&E by the current tenant.
7 8 6. Potential ETrans Site In Or Near Rocklin.
along 9 PG&E is currently searching for a suitable industrial building for ETrans office space, areas 10 either the Highway 50 or Highway 80 corridors, including warehouse and has located only 11 suitable for truck parking, material storage and a fabrication shop. PG&E space, both in the 12 two possible sites that meet ETrans' requirements for outside storage square feet (building) and RICE HONRD 13 Rocklin area and consisting of approximately 10,000 for this type of facility EAIK 14 "oM.(X approximately 30,000 square feet (yard). The market is competitive at this time to make 15 because few such facilities exist in the area. PG&E requests authority once a decision has 16 monthly payments of Extension Fees, if necessary to retain the property believes that this 17 been made, in the amount of approximately $8,500 per month. PG&E a lease of the properties 18 amount is equivalent to the base rent that could be negotiated for 19 under consideration.
20 II.
21 THE LEASE EXTENSION FEES SHOULD BE APPROVED PURSUANT TO CODE SECTION 363(b)(1) OF THE BANKRUPTCY 22 of estate 23 PG&E seeks approval for the Extension Fees described above as a use Bankruptcy Code Section 24 property that is outside of the ordinary course of business under implementation of the 25 363(b)(1). Since the purpose of the Extension Fees is related to the may be characterized as 26 Plan, PG&E believes that the purpose and scope of the expenditure Court approval.
27 outside of the ordinary course of business and therefore requires to Section 28 The Court has considerable discretion in approving a request pursuant FEES; MPA MOTION FOR AUTHORITY TO INCUR LEASE EXTENSION
'I 1 363(b)(1) of the Bankruptcy Code ("[t]he trustee, after notice and a hearing, may use, sell or 2 lease, other than in the ordinary course of business, property of the estate"). See In re 3 Montgomery Ward Holding Corp., 242 B.R. 147, 153 (D. Del. 1999) (affirming the 4 bankruptcy court's decision to approve expenditure for employee incentive programs, noting 5 that bankruptcy court has considerable discretion in approving a Section 363(b) motion).
6 In determining whether to authorize a transaction under Section 363(b)(1), courts 7 require a debtor to show that a sound business purpose justifies such actions, applying the 8 business judgment test. See, eg., Stephens Indus., Inc. v. McClung, 789 F.2d 386, 389-90 9 (6th Cir. 1986); Committee of Equity Sec. Holders v. Lionel Corp. (In re Lionel Corp.), 722 10 F.2d 1063, 1071 (2d Cir. 1983); see also 3 Lawrence P. King, Collier on Bankruptcy 11 ¶363.02[1][g] (15th ed. rev. 1998).
12 Once the debtor has articulated a rational business justification, a presumption and in the honest HOAARD RKE 13 attaches that the decision was made "on an informed basis, in good faith CANUYx DU.K 14 belief that the action taken was in the best interest of the [debtor]." See, e.g., Official
&RABON 15 Comm. of Subordinated Bondholders v. Integrated Res., Inc. (In re Integrated Res., Inc.),
16 147 B.R. 650, 656 (S.D.N.Y. 1992) (citing Smith v. Van Gorkom, 488 A.2d 858 (Del.
17 1985)).
18 Sound business justifications exist for approval of the Extension Fees described 19 above. PG&E has identified the need for each property, including the various properties' 20 desirability based on location, unavailability or higher cost of suitable alternative sites, and 21 satisfaction of specific needs and requirements such as ample warehouse or yard space.
22 PG&E believes that the Extension Fee amounts are reasonable and comparable to the base 23 rent that could be negotiated for a long-term lease of each property. At the same time, 24 PG&E is not assuming the long-term obligations associated with a typical lease until such 25 time as Plan confirmation occurs and this Court has authorized PG&E to enter into leases.
26 PG&E also believes that these properties will not be available to PG&E several months from 27 now without payment of the Extension Fees; therefore, PG&E believes that the Extension 28 Fees are essential to implementation of the Plan.
MOTION FOR AUTHORITY TO INCUR LEASE EXTENSION FEES; MPA 1 Finally, PG&E is solvent and has sufficient cash to pay the expenses described its creditors. 4 2 herein without causing any detriment to 3
4 CONCLUSION 5 For all of the foregoing reasons, PG&E respectfully requests that the Court 6 approve PG&E's payment of the Extension Fees described above and grant such other and 7 further relief as may be just and appropriate.
8 DATED: January 17, 2003 9 Respectfully, 10 HOWARD, RICE, NEMEROVSKI, CANADY, FALK & RABKIN 11 A Professional Corporation 12 By: aýJULIE B. LAýNDAýU ý 13 CA!PDX 14 Attorneys for Debtor and Debtor in Possession rALU
- fRA.(IN PACIFIC GAS AND ELECTRIC COMPANY 15 WD 01 1703/1-141990511049361lv3 16 17 18 19 20 21 22 23 24 25 26 27 4 As reflected in PG&E's November 2002 Monthly Operating Report, PG&E held more than $4.1 billion in cash reserves as of November 30, 2002.
28 MOTION FOR AUTHORITY TO INCUR LEASE EXTENSION FEES; MPA