PG&E Corporation's La Paloma Generating Project Reaches Milestone With Record Financing

Transaction is the largest ever for a single greenfield competitive power plant in the U.S.

Bethesda, Md. – PG&E Corporation (NYSE: PCG) today announced the completion of a $730 million financing for its 1048-megawatt La Paloma Generating Project now under construction in Southern California. The financing is the largest to date in the United States for a single greenfield competitive power plant, and the plant will be the largest in California built expressly for the state's new competitive power market. The facility, slated for operation in 2001, is one of 13 highly efficient natural gas-fueled plants the Corporation plans to bring into service nationwide over the next three years.

"PG&E Corporation's National Energy Group is pursuing an aggressive strategy for growth in the competitive power generation business," said Thomas G. Boren, executive vice president of PG&E Corporation and president and CEO of the Corporation's National Energy Group. "We currently are building or developing 10,000 megawatts of clean, efficient, natural gas-fueled generation, and we expect to continue to grow that development portfolio," he said. "Critical to reaching that goal is the strong financial foundation we lay for our competitive power project portfolio. Innovative structures such as the La Paloma financing and last year's award-winning Lake Road project financing are enabling us to achieve our development goals as planned, and are positioning our portfolio for long-term financial success."

The Corporation's landmark financing for the Lake Road Generating Plant was recognized among the best deals of 1999 in three trade publications; Global Finance, Asset Finance International, and Corporate Finance magazines.

The financing for the La Paloma facility is structured as a project-financed synthetic lease, using a special securitized commercial paper facility, supported by an equity commitment. According to John R. Cooper, senior vice president and chief financial officer for the Corporation's generating unit, the finance group replicated the documentation and other aspects of the successful Lake Road transaction for the La Paloma project. "By using the Lake Road financing's template in terms of structure, technology, documentation, lead arrangers, attorneys, and advisors, we saved millions of dollars in financing costs and fees," said Cooper. "In addition, the banks reported that they saved time and effort in explaining and documenting the transaction for their credit approvals."

The transaction's lead arranger/book manager was Citibank/Salomon Smith Barney, Inc. Arrangers were Société Générale and Deutsche Bank. Co-arrangers were BNP Paribas Group, Credit Lyonnais, and Dresdner Kleinwort Benson. There were 23 additional lenders, contributing to an over subscription in syndication.

The natural gas-fueled, combined-cycle La Paloma Generating plant site is located approximately 40 miles west of Bakersfield, Calif. in western Kern County on an industrial site previously used for oil production.

PG&E Corporation with 1999 operating revenues of nearly $21 billion and operations in 27 states, markets energy services and products throughout North America through its National Energy Group. The Corporation has ownership and management interests in more than 30 power plants and has one of the largest energy trading and risk management programs in North America.


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