Portland, OR-based Northwest Natural Gas Corp. told state regulators Thursday that it’s still interested in buying Portland General Electric, which bankruptcy-mired Enron Corp. still wants to sell. The gas utility made these points in a strongly worded response to questions raised in the ongoing state regulatory proceedings by large industrial customers who recently recommended the state proceedings be suspended, pending more clarity from Enron’s Chapter 11 bankruptcy proceedings in a New York federal court.

In essence the gas utility told regulators that suspending the ongoing process until all the uncertainties of Enron’s situation have been cleared up “would almost certainly delay the closing” of the deal and leave Northwest Natural with increased financial risks. Northwest asked the regulators to reject the pending proposal to “indefinitely suspend” the ongoing state merger process.

Clarifying its recent 8K filing to the Securities and Exchange Commission, Northwest Natural said it intends to come to an Oregon Public Utilities Commission hearing Tuesday in Salem, OR, “prepared to discuss ways to provide more time in the (Portland General merger) schedule to address these uncertainties, without resorting to an indefinite suspension of the schedule. Enron uncertainties have been present in this (case) from the beginning; the filing of this application (to buy PGE) and Enron’s Chapter 11 filing occurred within days of each other.”

Regardless of Enron’s situation, the previously tight PUC timetable calling for a May decision has been pushed back into the summer at the earliest for resolution of the case, which may be suspended, pending a clearer indication of what is going to happen in Enron’s bankruptcy case. A request from Northwest Natural had already caused this delay.

One of the major intervenors in the proposed electric-gas utility merger, the Industrial Customers of Northwest Utilities (ICNU), last week suggested the entire regulatory proceeding should be halted until Northwest Natural Gas decides whether it is going to re-do its agreement with Enron to take into consideration issues stemming from its bankruptcy filing. An Oregon PUC administrative law judge subsequently asked the gas utility for clarification, resulting in Thursday’s nine-page filing.

Northwest Natural alleged that ICNU “has distorted the facts” to give the impression that either Enron or the gas utility have lost interest in the deal, citing perceived reluctance by the former energy giant to renegotiate certain parts of the sale, such as the stock purchase agreement. Enron has not refused to do anything, according to Northwest’s filing to the regulatory commission.

“Indefinitely suspending or significantly delaying this proceeding will only shift control of events away from the (Oregon parties) to the (New York) bankruptcy court,” Northwest wrote in its responses. “Northwest Natural supports the transaction on the terms contained in this filing, and intends to negotiate (no renegotiate) the transaction to the extent necessary to preserve those terms, protect against material adverse effects on PGE, and secure financing for the transaction.”

In the Thursday filing, Northwest responded to concerns raised by the PUC ALJ:

A spokesperson for the Oregon PUC indicated that the regulators will decide by the end of this month whether or not to suspend the merger proceedings.

“We’re actually raising concerns ourselves,” said Steve Sechrist, a Portland-based Northwest Natural spokesperson, who noted that the company outlined those concerns in an 8-K filing to the Securities and Exchange Commission March 1. “There were a couple reasons for the filing: (a) a $3 million judgment against us in a 10-year-old court case, and (b) questions about whether the Enron bankruptcy may now cause some tax liabilities for PGE that Northwest Natural was not aware of originally when it signed the purchase agreement with Enron.”

One of the “main concerns” is whether there are tax liabilities that could carry over in Portland General to its new owner, Sechrist said. “And we are trying to get information from Enron this week to try to analyze the tax consequences, but the problem we’re having is that in most bankruptcies, information moves back and forth very slowly. Getting information from Enron right now is very difficult.”

Northwest Natural noted in its SEC filing that it reserved the right to walk away from the deal if it found that potential liabilities did, in fact, spill over to Portland General. Northwest clarified in its Thursday filing that these types of statements in the SEC document are boilerplate when one party in a transaction is in the midst of Chapter 11 bankruptcy reorganization.

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