The Portland Tribune
Behind the scenes of the big power deal
By DON HAMILTON
They finished sometime around dawn Tuesday, with papers and soft drinks scattered about, the fish and rice finally cold and a gloomy-gray sky staring back at them through the 19th-floor office window.
When they finally let the cleaning crews in, the last holdouts among the group of lawyers and financiers left the Schwabe Williamson & Wyatt offices in the PacWest Center downtown and returned to the wet streets. Their job was done. They had just put the final touches on what may turn out to be one of the biggest business deals in Oregon history.
Less than six hours later, former Gov. Neil Goldschmidt led a powerful group of political and business leaders at a crowded news conference announcing the agreement:
Portland General Electric, the beleaguered local electric company owned by the disgraced Enron Corp., would be sold for $2.35 billion to the Texas Pacific Group, one of the country's largest investment firms.
The sale must be approved by various courts and regulatory agencies before it's final.
The deal marks a new chapter in the furious debate over PGE's future, raging for four years at the highest levels of the city's political and business power structure. It has included, at various times, threats of city condemnation, secrecy agreements, the state Legislature, Congress, arguments over public versus private power, a PUD vote and private negotiations at not one but two of the city's biggest law firms.
Underlying all that is a level of community frustration and anger not often directed toward an electric company. Enron and its financial dealings embarrassed many Oregonians and left them feeling betrayed as a result of crippled retirement funds, huge rate increases and dubious tax schemes.
"If we could wave a magic wand, the people from Enron would never have shown up on the doorstep," said Tom Walsh, the former TriMet chief pegged for the board of Oregon Electric Utility Co., the new firm that will oversee PGE. "They have wickedly taken advantage of this community."
Expectations ran high and low
The process started 11 months ago when Texas Pacific and its founder, David Bonderman, first grew interested in PGE.
Bonderman is a colorful character but not well-known outside the financial world. The magna cum laude graduate of Harvard Law School worked as a civil rights lawyer and traveled through Asia before founding the Texas Pacific Group. He hired the Rolling Stones for his 60th birthday party and speaks Urdu, the Central Asian language.
"It's not been a state secret that Enron and its creditors, through the bankruptcy process, have been interested in disposing of this asset," Bonderman said. "Enron had an investment banker who probably called everyone in the universe to see if they were interested."
Kelvin Davis, who heads Texas Pacific's utility group, was the first to suggest it pursue PGE. He said some were doubtful about getting involved in the Enron mess because "it was a great deal of complexity and risk."
He then contacted the Blackstone Group, the investment firm hired by Enron to market its remaining assets.
Negotiations were secret, carried out mostly between Enron's bankruptcy lawyers in New York, Schwabe's Portland office and Texas Pacific in San Francisco. PGE's top 20 managers were in and out of the Portland law firm every day for weeks as Enron managers blew "hot and cold" on the sale.
Schwabe Williamson & Wyatt partner Jay Waldron, who represented Texas Pacific, said "They never knew to the end if it would go through. It was up and down with Enron -- they always had to discuss something."
And it was hugely complicated, with judges, federal regulatory agencies, Enron's new management and creditors all playing a role.
"We had plenty of times when negotiations fell apart entirely, and then we were told by the creditors committee or management or both that they'd decided instead to spin it off to the shareholders," Bonderman said.
"And they'd change their minds," he said. "Maybe we'd have a role in helping them change their minds. Maybe not. It's been a very complicated process."
Sten makes backup plan
Meanwhile, another set of secret negotiations were under way at another Portland law firm. City Commissioner Erik Sten was meeting regularly at Ater Wynne's KOIN Center offices with a group studying the possibility of the city buying PGE. The plan remains on hold in case the Texas Pacific deal falls apart.
Participants in the Texas Pacific talks kept their discussions quiet, even while meeting at well-known spots such as the Heathman Hotel and PGE headquarters in downtown Portland.
Just a few days before the announcement, Texas Pacific's Davis, one of the lead negotiators, dined with Waldron at Higgins, a popular hangout for media types located on Southwest Broadway.
"It was a long, careful due diligence," said a source close to the negotiations. "For the deal to work, it couldn't get into the public eye."
The final stages of the deal played out late Monday and early Tuesday in conference rooms on the 19th floor of the PacWest Center on Southwest Fifth Avenue, the Schwabe Williamson offices. The group included blue-chippers from the financial world, the products of Stanford, Harvard and Yale. They studied law and economics and spend their time playing with figures that have nine and 10 numbers.
On Monday night the activity wasn't just in Portland. The group on the 19th floor used phones, faxes and e-mail to stay in touch through the night with Enron attorneys in Houston, investment bankers in New York and Texas Pacific workers in Washington, D.C., and San Francisco.
Midway through the evening, two Texas Pacific workers in San Francisco were needed in Portland. They caught the last plane to Portland, finally arriving at the PacWest Center at midnight.
Longtime politicos recruited
One crucial element remained undone, though, until less than three weeks ago. Under federal law, a majority of the Oregon Electric board of directors had to come from the community. Bonderman and Davis wanted three people well-known in the community -- reputable, local, public faces for the new company.
Three weeks ago, Neil Goldschmidt was planning on ratcheting down his public activities. The former mayor, 63, and his wife have a place at Kings Hill in Portland and in Yamhill County, where they grow grapes. This year, they bottled their first wine.
But, on Oct. 31, he answered Bonderman's call to join the board of the new company overseeing PGE.
A few days later, on the night of Nov. 5, Goldschmidt called Walsh at home and asked him to join. Goldschmidt and Walsh, also 63, have a long collaboration dating to 1969, when they both decided to run for the Portland City Council. Walsh lost his 1970 race, but Goldschmidt won and went on to become mayor and governor.
Goldschmidt said if the deal goes through, he would remain on the Oregon Electric board for five years. Walsh said he'll serve "until they kick me off."
Goldschmidt and Walsh will be joined on the board by Gerald Grinstein of Seattle, former chairman of Delta Air Lines. As head of Burlington Northern, Grinstein helped Walsh on the west-side light-rail project. He did not attend the Portland news conference where the announcement was made.
"These guys are here," Bonderman said, "because they want to do the right thing for Portland and for the company."
Goldschmidt said he hopes the deal, if completed, will help heal some of the bad feelings that have developed between PGE and the city.
"I think it's very much a story that's better than is being told, he said, "but it's not going to get told right until we get Enron out of here. Make it history."
Kristina Brenneman contributed to this story.