January 05, 2005
Documents hint at plans for PGE
GAIL KINSEY HILL and JEFF MANNING
In preparing to buy Portland General Electric, Texas Pacific Group reportedly has outlined scenarios under which it would flip the investment in five years, dramatically reduce the utility's work force and produce a hefty profit for investors.
The Texas-based investment group's projections are included in confidential documents filed with the Oregon Public Utility Commission and obtained by Willamette Week, according to a joint report from the weekly newspaper and KGW-TV, which aired Tuesday night.
Texas Pacific, which is trying to purchase PGE from Enron for $2.35 billion, took issue with the findings. "It is our understanding that the information is taken out of context and therefore is highly misleading," read a statement issued by the Fort Worth, Texas-based investment firm Tuesday evening.
The documents apparently include Texas Pacific's "due diligence" of PGE, a thorough analysis of the utility that preceded the investment firm's November 2003 announcement of the proposed purchase.
According to the report aired on KGW, the secret documents show that Texas Pacific would resell PGE in five years and realize as much as a $1 billion profit. Such a quick resale would run counter the firm's emphasis on a seven- to 12-year holding period.
The documents also reportedly outline "wholesale layoffs." Cuts would hit PGE managers, one-quarter of the customer service staff and one-half the workers at a natural gas-fired power plant in Columbia County, according to projections reportedly included in the documents.
The report appears to add fuel to the controversies that surround the proposed purchase. In thousands of pages of public documents filed with the Oregon Public Utility Commission, critics have outlined the risks that could accompany an acquisition by a buyout firm.
Critics also have complained for months about discrepancies between Texas Pacific's public testimony and the contents of confidential documents filed with the PUC, which is expected to decide within the next couple of months whether to approve the transaction.
Just last month, the Business Owners and Managers Association, an intervenor in the proceedings, asked the PUC to release some of the confidential, or protected, material. "Applicants themselves have put at issue the need for the removal of the protective order," attorney Ann Fisher wrote in the BOMA motion. "They have placed advertisements and made public statements, including statements made during oral arguments that are inconsistent with material contained in the protected material."
The "applicants" in the request refer to Texas Pacific and Oregon Electric Utility, the entity created to carry out the purchase and serve as the holding company for PGE.
In particular, Fisher cited potential discrepancies regarding tax benefits, anticipated profits and the likely "exit strategy" -- whether Texas Pacific would take PGE public or sell to an energy conglomerate.
The confidential documents are available to BOMA and other registered intervenors in the regulatory review, which number almost 50. They are not available to the media or the general public.
The PUC's administrative law judge hasn't yet ruled on the disclosure request.
The Citizens' Utility Board also has decried what it argues are significant contradictions between Texas Pacific's public statements and confidential information the firm submitted to the PUC. "We believe there are contradictory statements both within the secret and the public documents," said Jason Eisdorfer, a Citizens' Utility Board lawyer. "So which statements do you trust? That's the question we've been asking for some time."
Eisdorfer said it's less than clear from the documents, either secret or public, how long Texas Pacific would hold PGE.
The Citizens' Utility Board and other intervenors contacted by The Oregonian Tuesday declined to discuss details contained in the confidential material.
An administrative law judge for the PUC on Tuesday warned intervenors, all of whom signed confidentiality agreements, against releasing the protected information. Such material is kept private to protect proprietary details.
Texas Pacific, in the statement released Tuesday, dismissed any suggestions that the due diligence analysis was a blueprint for its plans regarding PGE. "We have repeatedly stated that Oregon Electric does not yet have specific plans regarding the operation of PGE after closing, including no plans for cost cutting or staffing reductions," it said.
"Other parties in this case have misunderstood the nature and uses of these due diligence reports," the statement continued. "These reports were never intended to be, and will not be, relied upon for the formulation of any operating plans at PGE."
Critics, however, say the confidential material contains details that can't be found anywhere else. "If they won't tell us their operating plan, then analysis such as the due diligence is our best evidence," said Bob Jenks, executive director of the Citizens' Utility Board.
Lee Beyer, chairman of the three-member PUC said Tuesday that he had not seen the Willamette Week story, but that all documents in the case, confidential and public, are available to commissioners and other parties to the review. "The important thing is that this is not new information," Beyer said. "It's part of the public record, even though it's shielded.
"Their release or the nonrelease doesn't impact our decision or impact our timeline."