Sierra Pacific-PGE Merger, Entergy-Koch Venture OK'd

FERC yesterday gave Sierra Pacific Resources (SPR), parent of Sierra Pacific Power and Nevada Power, the go-ahead to acquire Portland General Electric (PGE) from Enron Corp. The marriage, which is expected to close during the first quarter of 2001, still must be approved by the Securities and Exchange Commission (SEC). It also gave the green light to a proposed partnership venture between New Orleans-based Entergy Corp. and privately held Koch Industries Inc. to be called Entergy-Koch L.P.

This deal also is awaiting SEC approval. Analysts predict the $1 billion venture, which will include "selected assets" of the two companies, will become a North American and European powerhouse in electricity and gas, gas transmission and weather derivatives.

Last July, the Commission put the Sierra Pacific-PGE merger on hold while it established further procedures to address the competitive concerns that it had with the proposed transaction --- specifically its impact on Sierra Pacific's destination market and its effect on market-clearing prices in the California power markets.

In its Tuesday order, FERC ruled that the merger partners "have addressed these issues.....and have offered mitigation measures to address potential anti-competitive effects of the proposed merger."

After owning the utility for just two years, Enron announced its decision to sell PGE to Sierra Pacific last November, due in part to the adverse regulatory changes in the California and Oregon markets. (see Daily GPI, Nov. 9, 1999). Enron's asking price was $2.1 billion, including $2.02 billion in cash and the assumption of Enron's $80 million PGE merger payment obligation. Sierra Pacific also will assume $1 billion in PGE debt and preferred stock.

Meanwhile, the proposed Entergy-Koch venture is expected to be among the nation's top 10 energy commodity traders, trading physical volumes in excess of 100 million MWh of electricity annually and 5 Bcf of natural gas daily, according to the two companies (see Daily GPI, April 25).

The new venture, once completed, would include the capabilities of Koch Energy Trading, Koch Gateway Pipeline's interstate transportation system and related gas storage assets. It also will include Entergy's power marketing and trading businesses.

FERC said Koch and Entergy would not merge as a result of the partnership, but rather would maintain separate corporate existences. Subsidiaries of the two companies not contributing to the venture will be unaffected by the transaction, it noted.

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