The Portland Tribune, November 11, 2003

Second Enron snub sends city to court
Officials will ask U.S. bankruptcy judge to onsider PGE offer

BY KRISTINA BRENNEMAN
The Tribune

It wouldn't be the first time that Oregon has bucked federal law.

Rejected a second time by Enron Corp. in their quest to buy Portland General Electric, city officials are planning to take their bid directly to federal bankruptcy Judge Arthur Gonzalez.

No apparent reason was given for refusing the estimated $2.2 billion bid that was offered two weeks ago, but sources say Enron apparently wants to hold on to its PGE subsidiary a little longer.

The city's original bid -- also for $2.2 billion -- was rejected in June. Enron reportedly is entertaining other suitors, including at least one private company.

Calls to Enron were not returned before the Tribune's Monday-deadline.

City officials are taking the unusual step of going directly to U.S. Bankruptcy Court in New York -after twice approaching Enron and several creditors groups about the Portland plan to buy the Enron subsidiary.

Commissioner Erik Sten, who is leading the city's effort to buy PGE, said Monday that because Enron has "operated in secret," he's not positive that creditors "are sure of the city's direction and getting resolution for the region."

City officials may take their -appeal to buy PGE to the federal judge as soon as Nov. 18 -- the next scheduled hearing on Enron's reorganization plan, Sten said. They are talking with lawyers about their next step, he added.

"This is our first opportunity to lay out clearly to creditors what work we've done and what we can do to solve this problem," said Sten, who is backed by Mayor Vera Katz and a majority of the City Council. "We tend to be an active participant with the court, and that's the most appropriate way to pursue this.

"Enron and PGE are quick to point out what might happen," he said. "We want to hear what they actually plan to do."

The lone dissenter is Commissioner Jim Francesconi, who said last week that he would prefer a private buyer and wants to ensure that customers get a rate savings of at least 15 percent.

"It's clear there is a majority of council working on this," Sten said.

Enron management has said it will make its plans for PGE clear at next week's bankruptcy hearing. The Houston company's latest bankruptcy reorganization plan put a $1.278 billion equity value on PGE exclusive of the $1 billion in debt the utility is carrying.

City officials say legal costs and other liabilities are also a factor in PGE's sale value.

PGE Chief Executive Officer Peggy Fowler said last week that the company's liability risks had been reduced. But the utility is facing an even worse dilemma after last week's Marion County Circuit Court ruling. It requires PGE to repay or cut rates for customers for the $300 million it collected to shut down the Trojan nuclear power plant in St. Helens.

PGE spokesman Kregg Arntson said the utility is appealing the decision, and the legal process is "far from over."

"We obviously disagree with the decision," he said.

"We were right to be concerned with those liabilities," Sten said of the Friday ruling. "Enron made a firm pledge that the losses won't be passed on, so I want to know how will they eat the $300 million."

Meanwhile, a class-action suit by PGE shareholders charging that Enron and PGE executives and Goldman Sachs misled them in PGE's 1997 sale to Enron was transferred last week to federal bankruptcy court in Houston.

Contact Kristina Brenneman at kbrenneman@portlandtribune.com.