Although tainted by the infamous “E”-word now permeating American news and political-speak, Northwest Natural Gas Corp. is pressing ahead on its plan to buy Enron Corp.’s utility subsidiary Portland General Electric Co. (PGE) for $1.8 billion. The two Portland, OR-based companies plan to form a new combination utility powerhouse by the fourth quarter this year.

Announced last October, the Northwest Natural-Portland General combination was left out of Enron’s bankruptcy filing two months later, although the final financing that Northwest is currently completing with co-lead investment bankers, Credit Suisse First Boston and Merrill Lynch, must be okayed by the New York federal bankruptcy judge handling Enron’s Chapter 11 proceeding. That approval is expected by the end of this month, according to a Portland-based Northwest Natural spokesperson.

“As far as we know it is going forward as planned,” said Steve Sechrist, Northwest spokesperson. “We are on track with all of our regulatory filings — including in Oregon and Washington, and all the federal agencies involved. We’re proceeding with putting the financing together and at this point have more than enough commitments from commercial banks.”

The deal is mostly cash, with a portion — $250 million — in Enron seller financing, taking an equity stake in the new combined company. Part of that would be common stock and the rest preferred convertible stock that Northwest would issue to Enron. It is this whole transaction that the bankruptcy judge needs to approve.

A newly named holding company will be announced at the time the regulatory approvals are completed, Sechrist said, noting that while a combination umbrella utility will be formed it will have separate PGE and Northwest Natural subsidiaries delivering power and natural gas, respectively, to utility customers concentrated in the most populated areas of Oregon and (for gas) also several southwestern counties of the state of Washington, including the Portland suburban community of Vancouver, WA, across the Columbia River.

The combining companies have estimated annual savings of about $30 million from the efficiencies that the coupling will create after the first year. There is no estimated amount for any added costs of the merger due to the ongoing bankruptcy, Sechrist said. One of the tricky post-merger issues will be the retirement programs for the PGE employees, almost all of whom have been impacted negatively to some degree by the Enron meltdown, according to a Portland General spokesperson.

“You can’t turn on the financial news without finding some PGE employees who are suing Enron and those who have had their retirement incomes devastated,” the spokesperson said. “With Northwest Natural there is no stock transfer like we had with Enron when all PGE stock was changed into Enron shares.”

The Oregon Public Utilities Commission has indicated it will make a decision on the proposed acquisition by May 28, and after that it is expected that the Washington state and federal rulings would come. The Federal Energy Regulatory Commission, Federal Trade Commission, Securities and Exchange Commission, Department of Justice and the Nuclear Regulatory Commission also must approve the deal.

“The Oregon PUC decision will be a pretty important milestone, and the target date for that is sooner than we originally planned,” Sechrist said. “The regulators indicated that they had spent 9 to 10 months on the aborted merger between PGE and (Reno, NV-based) Sierra Pacific Resources, so they should be able to do an expedited process on ours.”

The projected fourth quarter 2002 target for finalizing the combination was based on a longer Oregon regulatory process, so Sechrist said, it might happen sooner this year rather than later.

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