Last Wednesday, the Texas Pacific Group (TPG) and Enron Corp. announced that they terminated their agreement for TPG, a private investment group, to buy Enron's Portland General Electric (PGE) utility for $2.35 billion. The decision follows a rejection of the sale by state regulators in March. As a result, Enron plans to distribute PGE stock to its creditors as approved in its Chapter 11 bankruptcy reorganization plan.
Snubbing several public- and private-sector proposals in Oregon for buying the utility, Enron said it will follow a phased schedule for distributing the shares that first will have to be approved by the Oregon Public Utility Commission and the Securities and Exchange Commission. Initial issuance could come as early as October, but more likely a year from now, Enron said in a prepared statement from CEO Stephen Cooper.
Enron said it would distribute the PGE stock to creditors because "it maximizes value to Enron's creditors and will help put an end to the uncertainty surrounding the utility's ownership," Cooper said. "The PGE management team and I are confident that PGE will continue to operate successfully as a publicly-traded entity."
TPG said the transaction was not in the interests of the institutional investors in its various private funds to embark on another uncertain course with the PUC. The cost of the continuing process, its impact on the TPG impending investment, which was heavily leveraged, and the uncertainty of the ultimate outcome all weighed in favor of dropping the deal with Enron, Texas Pacific indicated in a prepared statement.
"We have agreed with Enron to terminate our contract, thereby providing Enron the opportunity to once again decide whether it wishes to keep its holding in PGE and distribute it to the creditors in due course in accordance with its bankruptcy plan or to proceed along some other avenue." The other "avenue" in the end was unacceptable to Enron.
"As part of this process, current PGE common stock would be cancelled and new common stock would be issued," Enron said. "Initially, at least 30% of the new PGE common stock would be issued to creditors, with the remainder held in a reserve and released to creditors determined to hold allowed claims in accordance with Enron's bankruptcy plan."
PGE CEO Peggy Fowler called the plan "good for PGE's customers, employees and community." She added that "as we move forward with plans to make PGE a publicly-traded utility headquartered in Oregon, our focus remains on delivering safe, reliable power and providing top-notch customer service at a reasonable cost."
Following the Oregon PUC's rejection on March 11, a flurry of PGE ownership options were being pursued. Since then, at least two legislative proposals have been introduced in the Oregon Senate for pursuing alternatives to make it easier for a private- or public-sector acquisition of PGE.
In Oregon, the newest proposal surfacing in the past two weeks came from a local group and some former utility executives. They joined forces to promote the ownership of PGE through a "mutual" company called Oregon Mutual Utility Development (OMU), which would function like companies in the insurance industry have for decades. OMU has retained investment banker New Harbor Inc., a leading investment adviser to electric utilities.
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