The Oregonian - Business News

Enron unveils PGE option

05/16/03

GAIL KINSEY HILL

Instead of selling Portland General Electric at auction, bankrupt Enron is considering distributing all shares of the utility to creditors to help satisfy billions of dollars in claims against the one-time energy trading giant.

Enron already has announced decisions to apply a similar stock-distribution plan to its domestic pipeline companies and its international assets.

The company hasn't pulled PGE off the auction block yet. In fact, Enron officials continue to maintain that several entities are interested in the utility. But 10 months have passed since the sale process began, and no winning bidder has been announced.

"Basically, we're down to two options," said Robert Bingham, a director with corporate turnaround consultants Zolfo Cooper, who was brought in to serve as Enron's associate director of restructuring. Bingham also is a member of PGE's board of directors.

If an acceptable bid isn't secured in the next few months, he said, "We will plan on distributing the stock of PGE to the individual creditors of Enron, at which point PGE would become a public company again."

Bingham visited Portland on Thursday to meet with PGE executives and to update state utility regulators on the Enron bankruptcy, which has entered its 18th month and has proven to be one of the most complex and expensive restructurings in corporate history.

Enron has received several extensions of a court deadline for filing its reorganization plan. It now faces a June 30 deadline.

PGE executives say they are encouraged by the latest news from Houston, which makes at least one thing clear: PGE and Enron will go their separate ways.

To emphasize the split, PGE began running ads in local papers today under the headline, "A cloud is lifting from your reliable utility company."

In an open letter to the community, utility chief executive Peggy Fowler wrote, "Today, I'm pleased to tell you that the expected pathway has become clearer: Enron will not own PGE."

Fowler insists that much of the controversy that has engulfed PGE is due to past Enron scandals, not to the utility's practices.

Despite PGE's efforts to add a dash of detail to its future, plenty of questions remain.

If Enron ends up distributing shares of PGE to creditors, for example, more than 5,000 entities likely would end up with the utility's stock, but how much each company would receive has yet to be determined. Banks, including JPMorgan Chase and Citibank, are listed among the largest creditors.

No single entity would hold more that 5 percent of PGE stock, Bingham said. Enron now owns all 42,758,877 shares of PGE's outstanding common stock.

Bingham said the stock would trade on a major national exchange.

Multnomah County Commissioners held a public hearing Thursday on a proposal to create a public utility district within county boundaries to serve customers receiving their electricity from PGE and Pacific Power, owned by PacifiCorp.

The Oregon Public Power Coalition, headed by Portland attorney Dan Meek, gathered enough signatures to qualify the utility-takeover proposal for a public vote.

The coalition opposes Enron's ownership of PGE and argues that a public utility district would operate at less expense and with greater integrity than a corporate-owned utility.

PGE and PacifiCorp officials oppose the takeover effort, which they claim would create an expensive, hodgepodge distribution system.

The city of Portland also is trying to buy PGE and is widely thought to be one of the bidders in negotiations with Enron.

City Commissioner Erik Sten has led the push to buy the utility, arguing that public ownership provides the best protection of ratepayer and community interests. He said Thursday that he did not think Bingham's announcement tripped up the city's intentions.

"We're at the point where we can say definitively that a public purchase is possible and the best result for ratepayers," Sten said.

Gail Kinsey Hill: 503-221-8590, gailhill@news.oregonian.com