Centrica Plc’s bid to take over NewPower Holdings Inc. ended Friday after a New York court overseeing Enron Corp.’s bankruptcy case refused to protect Centrica from future liability related to the bankrupt trader. NewPower had been an Enron subsidiary for less than 50 days before it was spun off as an independent company. The order protecting Centrica from liability claims was considered necessary for it to complete a tender offer for NewPower shares, which was set to expire at midnight Thursday.

In a statement, the U.K.-based Centrica said it no longer intended to purchase NewPower stock, but added that the two companies “have agreed to hold discussions to determine whether an offer to NewPower to purchase business assets, rather than common stock would be a viable alternative, but there is no assurance that such discussions will lead to a transaction.”

Judge Arthur Gonzalez of the U.S. Bankruptcy Court for the Southern District of New York had declined on Thursday to enjoin claims against NewPower for any joint and several liability it potentially would have had for the brief time it was in the Enron consolidated tax and benefits groups. Gonzalez also denied Centrica’s bid to release it from potential liability for Enron’s taxes. Centrica, U.K.’s largest natural gas supplier and North America’s largest retail energy marketer, agreed in February to purchase NewPower for $130 million, paying Enron $56.5 million for its 44% stake and buying the rest of NewPower’s stock from other stakeholders (see NGI, March 4).

Gonzalez said he did not have the authority to issue an order in favor of Enron and Centrica, and noted that “if the purchaser does not wish to go forward, the result is that the estate would not receive a significant economic benefit.” Enron is attempting to sell more than $3 billion in assets, including NewPower.

Robinson Lacy, a lawyer representing Centrica, told Gonzalez that Centrica may back out of the transaction without an order that exempts it from tax liability. However, the U.S. Internal Revenue Service had opposed the exemption, calling it “unprecedented.”

Despite the exemption denials, Gonzalez had approved other terms of the sale at the request of Enron lawyer Brian Rosen, who told the judge that Enron wanted to “put a little pressure” on Centrica to complete the acquisition. Without the transaction, said Rosen, NewPower’s “financial condition will continue to deteriorate.” Centrica’s Lacy added that if the sale is not completed, “everybody, including the IRS, will be poorer. They will be destroying NewPower itself.”

The court rulings had dampened hopes that the acquisition would go through, even though the Federal Energy Regulatory Commission had given approval for the deal on Wednesday.

Centrica currently supplies gas to 1.3 million customers across North America under the Direct Energy and Energy America brands, making it the largest unregulated energy supplier. In addition, 600,000 customers have already signed up with Direct Energy in anticipation of the opening of the Ontario electricity market scheduled in May 2002. In June 2001, Centrica also assumed full ownership of GreenSource Ltd., a company providing access to a network of private gas servicing and installation contracting firms in Ontario. This was followed in January 2002 by the announcement that it had reached agreement to acquire Enbridge Services Inc., which more than doubled the customer base of Centrica’s Canadian business.

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