State law and bankruptcy reorganization criteria make it a longshot that any of the public or private-sector proposals to buy Portland General Electric (PGE) will displace the current plan to distribute the Enron Corp. utility's stock to the Chapter 11-reorganized holding company's major creditors. The possibility of another buyer emerging is not impossible, but unlikely, according to sources at both the utility and holding company.
Following the Oregon PUC's rejection March 11, a flurry of options were rushed back onto the front burner. Since then, at least two legislative proposals in the Oregon Senate are pursuing alternatives to make it easier for private- or public-sector acquisition of PGE from Enron. The latter activities stepped up last week following the Texas Pacific Group (TPG)-Enron announcement calling off their deal.
On Thursday the Oregon state Senate Business and Economic Development Committee moved ahead with a bill (SB 1008) to create a new public-sector company, Oregon Community Power, to buy PGE from Enron, overseeing the utility operations with a seven-member board appointed by the governor. Lawmakers put added limits on the proposed new entity, restricting its ability to expand into areas now served by other utilities and requiring that the proposed quasi-public sector utility continue to pay local taxes.
A major hurdle, however, to any public-sector proposal is the Oregon Constitutional prohibition against government entities owning stock, and the Enron bankruptcy requirement that potential buyers purchase the PGE stock -- not its assets. The legislature eventually would have to put a constitutional amendment on a future statewide ballot for either the state or City of Portland purchases to be legal in the state, said a PGE spokesperson, who added that the utility was busy working toward the eventual stock transfer to Enron creditors.
In the meantime, Oregon's newest private-sector proposal surfaced last month from a local group and former private-sector utility senior executives. They joined forces to promote the ownership of PGE through a "mutual" company like the insurance industry has had for decades, spawning Oregon Mutual Utility Development (OMU), which March 21 announced that it had retained investment banker New Harbor, Inc., a leading investment adviser to electric utilities.
In parallel with its ongoing plans to distribute PGE utility stock to Enron creditors, the caretaker management at Chapter 11-reorganized Enron reiterated last Thursday that it will consider any "credible bids" for its PGE subsidiary, according to a New York City-based spokesperson for Enron, while confirming that Enron CEO Stephen Cooper is scheduled to meet with Oregon's governor and Portland's mayor next week to outline the current process for transferring PGE stock to creditors.
A utility spokesperson said Enron is narrrowly defining what "credible bids" means, insisting that prospective bidders have all financial, state regulatory, and transition plans spelled out in order to be considered as qualified to buy the PGE stock (but specifically not the assets). They also must make a higher offer than the state-rejected $2.35 billion by TPG from October 2003.
"The new bids must reflect the upward changes in value of the utility," said a PGE spokesperson, noting that the Portland-based utility has added generation assets, the power market has strengthened, and its credit ratings have improved since the TPG offer 18 months ago.
The stock transfer has to be approved by both the federal Securities and Exchange Commission and the Oregon Public Utility Commission before it can move forward. The Oregon PUC kicked off the current sequence when it rejected a proposed purchase of PGE by a Texas-based private investment group.
A week ago, TPG and Enron announced they had terminated their agreement for the private investment group to buy the PGE utility for $2.35 billion, following last month's state regulatory rejection of the sale, which had been pending for almost 18 months. As a result, Enron said it would distribute the PGE stock to its creditors as approved in its Chapter 11 bankruptcy reorganization plan.
In the joint April 6 announcement, Enron said it will follow a phased schedule for distributing the shares after getting the state and federal regulatory approvals. Initial issuance could come as early as October, but more likely a year from now, Enron said in a prepared statement from Enron's Cooper.
"We have said that we will continue to review credible offers by any party," said New York City-based Jennifer Lowney, a spokesperson for Cooper and Enron. "As the process [for distributing PGE stock to creditors] moves forward, and we have now begun that process, in parallel with that we can continue to consider offers."
At the time Enron and TPG announced the termination of their sales agreement, Cooper called Oregon Gov. Ted Kuglongoski and Portland Mayor Tom Potter and committed to the April 20 meeting to go over the details of Enron's current plans for PGE, Lowney told NGI Thursday. She said that Enron did not plan to release any more information regarding the upcoming meetings in Oregon.
In its statement following one by TPG, Enron said it was distributing 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 P'GE will continue to operate successfully as a publicly-traded entity."
"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 embraced Enron's stock distribution plan as "good for PGE's customers, employees and community."
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