ML030230672

Declaration of Kenneth Richerson in Support of Motion for Authority to Incur Lease Extension Fees

ML030230672
Person / Time
Site:	Diablo Canyon
Issue date:	01/17/2003
From:	Richerson K 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 DM, 94-0742640
Download: ML030230672 (7)

Text

JAMES L. LOPES (No. 63678)

JULIE B. LANDAU (No. 162038)

HOWARD, RICE, NEMEROVSKI, CANADY, FALK & RABKIN A Professional Corporation Three Embarcadero Center, 7th Floor San Francisco, California 94111-4065 Telephone:

415/434-1600 Facsimile: 415/217-5910 Attorneys for Debtor and Debtor in Possession PACIFIC GAS AND ELECTRIC COMPANY 1

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10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 UNITED STATES BANKRUPTCY COURT NORTHERN DISTRICT OF CALIFORNIA SAN FRANCISCO DIVISION Case No. 01-30923 DM LECTRIC Chapter 11 Case ia corporation, Date:

February 6, 2003 ebtor.

Time:

1:30 p.m.

Place:

235 Pine Street, 22nd Floor 12640 San Francisco, California DECLARATION OF KENNETH RICHERSON IN SUPPORT OF MOTION FOR AUTHORITY TO INCUR LEASE EXTENSION FEES I, Kenneth Richerson, declare:

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I have been employed by Pacific Gas and Electric Company ("PG&E") in its Building and Land Services Department since 1973. Since 1993, 1 have held the positions of Transaction Specialist and Senior Transaction Specialist in the Property Planning and Transactions Group. Previous to 1993, I held various positions within PG&E, including Senior Property Appraiser, Property Appraiser, Right of Way Agent, Sales and Lease Agent and Document Writer. In my current position as a Senior Transaction Specialist, I am responsible for identifying, and obtaining satisfactory leases for, all lease sites necessary to support implementation of PG&E's Plan of Reorganization (the "Plan").

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This declaration is submitted in support of PG&E's Motion for Authority to DECLARATION OF KENNETH RICHERSON HCMAAR RKM

&FAZDN kp* b-U In re PACIFIC GAS AND E COMPANY, a Califorr De Federal I.D. No.94-074

1 Incur Lease Extension Fees (the "Motion"). Defined terms used herein shall have the 2

meanings set forth in the Motion. I make this declaration based on personal knowledge, 3

except where otherwise indicated, and if called as a witness, could and would testify 4

competently to the matters set forth herein.

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PG&E anticipates that up to seven new buildings will need to be leased and 6

prepared for occupancy for use by the New Entities by the Effective Date under the Plan 7

("Plan Effective Date"). These new facilities are needed to provide separate working areas 8

for field employees of the Reorganized Debtor and the New Entities by the Plan Effective 9

Date. For example, PG&E currently has substation maintenance facilities that include both 10 distribution and electric transmission functions. Since the Reorganized Debtor and the New 11 Entities will be separate legal entities, it is important that there be no confusion about 12 employee supervision and compliance with legal and business requirements. Physical 13 separation of the employees of the Reorganized Debtor and the New Entities will RKE Gvcý 14 accomplish these important objectives. These new facilities, a subset of the total new

&PAMIIN 15 facilities that will ultimately be needed by the New Entities, represent only those facilities 16 that are necessary by the Plan Effective Date for the New Entities' commencement of initial 17 field operations.

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The present Motion relates to lease "option" payments (referred to herein as 19 "Extension Fees") for the new buildings that PG&E has now identified as key sites to be 20 leased by one or more of the New Entities immediately following Plan confirmation in order 21 to ensure that the new facilities will be operational by the Plan Effective Date.

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PG&E is in the process of negotiating the Extension Fees as part of a 23 written lease (or lease assignment) with each landlord (or current tenant) for the various 24 properties described below; however, the leases will not be effective unless and until the 25 Plan is confirmed and the Court has authorized PG&E to enter into the leases. PG&E 26 intends to bring a subsequent motion seeking authority to enter into the leases effective upon 27 Plan confirmation.

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As explained further below, there are five buildings currently available for DECLARATION OF KENNETH RICHERSON 1

1 lease that are well-suited to the needs of the New Entities and for which PG&E has been 2

able to negotiate or expects to obtain favorable lease terms. However, the landlords (or 3

tenants) of the five buildings are actively attempting to lease (or sublease) the space and are 4

not willing to hold the properties exclusively for PG&E pending the outcome of the Plan 5

confirmation proceedings. PG&E is also considering a sixth building, described in 6

Paragraph 14 below. Additional buildings may be needed but have not yet been identified.

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In order to prevent the buildings from being leased or subleased to others, 8

PG&E is requesting authority to make month to month payments in exchange for the 9

landlord's agreement to lease the property to PG&E upon Plan confirmation (provided that 10 there may be other conditions to be satisfied, including Court approval). PG&E anticipates 11 that it will obtain six successive "extension periods" of one month each for the properties 12 (i.e., the period of time during which the landlords will agree to accept monthly payments in 13 exchange for waiving the right to lease the properties to another tenant). The only exception RKE c

14 is for the Foster City property described in Paragraph 13 below, where PG&E expects to 15 obtain four successive extension periods of one month each.

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The following describes the particular properties that PG&E intends to lease 17 and the anticipated Extension Fees to be paid for each property in order to ensure the 18 continued availability of each property for lease by PG&E upon Plan confirmation. The 19 properties described below (i) are necessary for the New Entities to commence business 20 operations by the Plan Effective Date, (ii) meet the specific requirements of the New Entities 21 (such as sufficient warehouse space that includes an outside storage or parking area), and 22 (iii) are located in key geographic areas designed to meet the New Entities' needs for 23 regional employee headquarters and to provide convenient access for service employees 24 relative to the service territories to be covered.

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GTrans Construction Headquarters in-Stockton. PG&E has identified an 26 industrial building in Stockton that is well-suited for use by GTrans as its Construction 27 Headquarters. Employees to be located here will be responsible for all transmission pipeline 28 construction and major emergency repair activities. This location will be near GTrans' DECLARATION OF KENNETH RICHERSON 1

transmission pipeline and underground storage facilities and has outstanding freeway access 2

allowing for efficient dispatch of construction crews and fast emergency response. The 3

building also offers a mix of building to yard area that is not readily available in the 4

Stockton area. The building, consisting of approximately 20,000 square feet, includes both a 5

warehouse area and an office area; the site includes a large parking lot and covers 6

approximately 3.6 acres. GTrans intends to use the building for offices, storage of materials 7

and a fabrication shop, and to use the lot for parking of construction trucks. PG&E is in the 8

process of negotiating the lease terms and anticipates that the Extension Fees will commence 9

in April 2003 in the amount of approximately $12,000 per month. This amount is equivalent 10 to the base rent (i.e., rental fees without any other charges such as taxes or insurance) that 11 PG&E expects to negotiate for a lease of the property.

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GTrans Offices and Maintenance Base in Turlock. PG&E has identified an HOA'RD 13 industrial building in Turlock that is well-suited to GTrans' needs because of its location in RICE M,,.

14 relation to GTrans' local transmission facilities. This facility is ideally located for A,

15 maintenance personnel and emergency response for the area between Ceres and Livingston.

16 The property is desirable due to its large yard area and because it requires only minimal 17 tenant improvements. The building includes both warehouse and office areas, consisting of 18 approximately 6,000 square feet; the site includes a parking lot covering approximately 19 7,500 square feet. This facility will be used for general offices by maintenance and 20 operating personnel and for the storage and parking of a portion of the GTrans' truck fleet.

21 PG&E is in the process of negotiating the lease terms and anticipates that the Extension Fees 22 will commence in February 2003 (following approval of the Motion) in the amount of 23 approximately $3,100 per month. This amount is equivalent to the base rent that PG&E 24 expects to negotiate for a lease of the property.

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GTrans Offices and Maintenance Base in Oakland. PG&E has identified an 26 industrial building in Oakland that is well-suited to GTrans' needs because of its central 27 location with respect GTrans' local transmission system located between Hayward and 28 Rodeo. PG&E has spent several months looking for an alternative site in the Oakland area DECLARATION OF KENNETH RICHERSON 1

and has found no other suitable site. This site also offers good freeway access for rapid 2

emergency response. The building includes both warehouse and office areas (consisting of 3

approximately 11,180 square feet), and will be used as a headquarters for East Bay 4

maintenance and operations employees as well as for storage and parking of a portion of the 5

GTrans truck fleet. PG&E is in the process of negotiating the lease terms and anticipates 6

that the Extension Fees will commence on March 1, 2003 in the amount of approximately 7

$7,500 per month. This amount is equivalent to the base rent that PG&E expects to 8

negotiate for a lease of the property.

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ETrans Warehouse in Woodland. PG&E has identified an industrial 10 building in Woodland that is well-suited for use as a warehouse by ETrans because of its

-11 location along the Interstate 5 and Highway 113 transportation corridors and its large 12 outdoor storage area. The building will be utilized as a warehouse with limited office space, BMARD 13 consisting of approximately 64,800 sqtuare feet; the appurtenant land covers approximately RICE BU1iC 14 8.42 acres and includes a fenced and paved lot. PG&E is in the process of negotiating the 15 lease terms and anticipates that the Extension Fees will commence in February 2003 16 (following approval of the Motion) in the amount of approximately $22,700 per month for 17 the first 3 months and approximately $32,100 for the next 3 months. The first three months' 18 Extension Fees are equivalent to approximately 85% of the base rent under the lease that 19 would be assigned to PG&E by the current tenant and the next three months' Extension Fees 20 are based on the current tenant's full lease costs (including rent, real estate taxes and 21

'insurance).

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Shared Building for ETrans and GTrans in Foster City. PG&E has 23 identified an industrial building in Foster City that is well-suited for use by both ETrans and 24 GTrans due to its location between San Francisco and San Jose, near local transmission 25 facilities. ETrans and GTrans intend to use this facility to maintain and operate their 26 respective local transmission facilities located throughout the San Francisco Peninsula 27 region. PG&E has spent several months looking for possible alternatives to this building 28 and has not found a suitable alternative site. The site contains both warehouse and office DECLARATION OF KENNETH RICHERSON I

areas, consisting of approximately 20,000 square feet, and also includes a 13,500 square foot 2

parking lot. The site would be used for general offices, material storage, truck parking and a 3

fabrication shop. PG&E is in the process of negotiating the lease terms and anticipates that 4

the Extension Fees will commence in February 2003 (following approval of the Motion) in 5

the amount of approximately $20,600 per month. This amount is equivalent to the base rent 6

under the lease that would be assigned to PG&E by the current tenant.

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Potential ETrans Site In Or Near Rocklin. PG&E is currently searching for 8

a suitable industrial building for ETrans along either the Highway 50 or Highway 80 9

corridors, including warehouse and office space, areas suitable for truck parking, material 10 storage and a fabrication shop. PG&E has located only two possible sites that meet ETrans' 11 requirements for outside storage space, both in the Rocklin area and consisting of 12 approximately 10,000 square feet (building) and approximately 30,000 square feet (yard).

13 The market is competitive for this type of facility because few such facilities exist in the uqyg 14 area. PG&E requests authority at this time to make monthly payments of Extension Fees, if RLK URAMN(

15 necessary to retain the property once a decision has been made, in the amount of 16 approximately $8,500 per month. PG&E believes that this amount is equivalent to the base 17 rent that could be negotiated for a lease of the properties under consideration.

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Sound business justifications exist for approval of the Extension Fees 19 described above. PG&E has identified the need for each property, including the various 20 properties' desirability based on location, unavailability or higher cost of suitable alternative 21 sites, and satisfaction of specific needs and requirements such as ample warehouse or yard 22 space. PG&E believes that the Extension Fee amounts are reasonable and comparable to the 23 base 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.

DECLARATION OF KENNETH RICHERSON 1

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10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 NMB SPAkn I declare under penalty of perjury under the laws of the United States of America that the foregoing is true and correct and that this Declaration is executed this 17th day of January, 2003, at San Francisco, California.

KENNETH RICHERSON DECLARATION OF KENNETH RICHERSON