After struggling for more than a year to sell Portland General Electric (PGE), Enron Corp. finally reached a $2.35 billion deal, including the assumption of $1.1 billion in debt, Tuesday with a new company funded by a private investment group and run by local business and community leaders.
The buyer, Oregon Electric Utility Co. LLC, is being financially backed by investment funds managed by the $13 billion Texas Pacific Group (TPG), headed by David Bonderman. The new utility holding company will be run by three prominent local leaders, including former Oregon Governor Neil Goldschmidt, Gerald Grinstein, a former chairman of Burlington Northern and Delta Air Lines, and Tom Walsh, the former head of Tri-Met, the regional transit authority. All three are expected to be members of a re-appointed PGE board of directors once the sale is consummated.
The electric utility company would retain its name and its headquarters in Portland. PGE serves more than 750,000 retail customers in the Northwest, including half of Oregon’s population.
The transaction already has been approved by the Enron board of directors, and Enron said that it is supported by its official unsecured creditors’ committee in its bankruptcy proceeding. However, the sale still requires approval from the bankruptcy court, which will conduct an “overbid” process to give other potential buyers an opportunity to submit superior bids. The bankruptcy process is supposed to be completed in the next 60 days.
If the court approves the sale, it then still would have to be approved by the Oregon Public Utility Commission and by federal regulators. Subject to receiving all approvals, Enron expects to close the deal in the second half of 2004.
“Enron and its [creditors] believe this transaction is the best option to deliver maximum value to our economic stakeholders,” said Stephen Cooper, Enron’s chief restructuring officer. “As we have said all along, we will not break up PGE. This transaction supports that commitment.”
Calling the buyers a good “quality group of investors,” PGE’s CEO Peggy Fowler said, “We are hopeful we can work through the bankruptcy and OPUC processes to complete this transaction and bring renewed stability to PGE,” although she has no illusion that it will be quick or easy. Until the Oregon Public Utilities Commission approves the deal, Oregon Electric cannot name its board and take control of the utility.
The relationship between PGE and Enron has been anything but stable. Enron has attempted but failed to sell the Oregon utility several times before, including deals with Sierra Pacific Resources and Northwest Natural Gas.
In August 2002, Enron formally put Portland General Electric on the auction block along with Transwestern Pipeline, Northern Plains, Citrus Corp. and many other U.S. and international generation, distribution and pipeline assets, which made up nearly all of what was left of the company.
The Portland City Council last year also passed a resolution to look into possibly making a bid for the utility. The buyers told news media Tuesday that they hope that the city council will quickly support the deal at the Oregon PUC. They said they plan to complete meetings with the mayor and individual council members this week. The “problem” with the city’s bid is that PGE’s territory goes well beyond its boundaries, Goldschmidt said.
In response to questions at a Portland press conference, the former governor, who is expected to be named chairman of a new PGE board, said the new acquirer is not a “stalking horse” for UK-based ScottishPower’s PacifiCorp regional utility operator that is also based in Portland. Some of the speculation that perhaps eventually the neighboring holding company might get involved was sparked by the fact that Goldschmidt’s current business partner, Tom Imeson, is a former PacifiCorp vice president.
Goldschmidt said that both he and Walsh, who have long-time political ties, are “very recent” additions to the buying company, but that Grinstein as a former airline and railroad senior executive, is a close “personal and business” colleague of the Texas Pacific’s founding partner, Bonderman.
Goldschmidt said the new owners had no intention of trying to operate the utility or replace its current management.
Bonderman called the PGE purchase “an attractive, but not overwhelming investment for us.” TPG’s investors are largely institutions and a majority of its capital comes from a number of America’s largest public and private pension funds, banks and insurance companies. One of its major investors is the Oregon Public Employees Retirement Fund.
The firm under Bonderman has major investment stakes in Continental Airlines, one of several formerly troubled companies that it has helped revive financially. PGE, he said, suffers on two front — one being what he called “Enron not being the perfect steward” the past few years, and “very difficult economic times” in Oregon in particular in the past few years.
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