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Lenders Provide Funding For PG&E National Energy Group's La Paloma Construction Project To Proceed

11/05/2002

BETHESDA, Md. - PG&E National Energy Group, Inc. today announced that the company and a syndicate of lenders have reached an agreement to provide funding for the La Paloma Generating plant, allowing construction to continue at the Kern County, Calif. facility. PG&E National Energy Group, as guarantor, was required to make a payment in November against the remaining $369.5 million equity contributions under the La Paloma Generating credit facility to fund construction costs. PG&E National Energy Group is a wholly owned subsidiary of PG&E Corporation (NYSE: PCG).

La Paloma Generating is a 1,121 megawatt natural gas-fired, combined-cycle generating project. The project is now 99 percent complete.

The agreement announced today is intended to provide funds necessary to continue construction and is a transitional step until the lenders look at a more permanent resolution. The financing arrangements for the project are secured by a first mortgage on the La Paloma facility. In October 2002, PG&E National Energy Group funded approximately $4.5 million of construction costs and notified the lenders under La Paloma Generating's credit facility that it would not make further payments of construction costs for the plant. As reported in an Oct. 21, 2002 filing with the U.S. Securities and Exchange Commission, PG&E National Energy Group and the lenders under its 364-day and two-year revolving credit facilities entered into an amendment to the credit facilities that, among other amendments, prohibits PG&E National Energy Group from making any payment for the La Paloma Generating plant and for certain other projects under construction.

The Administrative Agent for the syndicate lenders is Citibank N.A.

The agreement announced today is consistent with PG&E National Energy Group, Inc.'s previously announced strategy to explore options to raise cash and reduce its indebtedness, ongoing guarantee and working capital requirements. These options include, but are not limited to sales of assets and businesses, debt restructuring, and reorganization of existing operations.

Headquartered in Bethesda, Md., PG&E National Energy Group Inc. develops, builds, owns and operates electric generating and natural gas pipeline facilities and provides energy trading, marketing and risk-management services.

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