Officials block sale of Enron asset

The Oregon Public Utility Commission denied the $2.35 billion bid for the utility by Texas Pacific Group, a Fort Worth-based private investment group, saying the potential harm to customers from the deal outweighs the potential benefits.

"Based on the evidence presented to us, we found that PGE customers would not be better off in terms of rates and service than they would with PGE as a separate, stand-alone company," said Commission Chairman Lee Beyer.

Texas Pacific Group, led by David Bonderman, who steered the effort to bring Continental Airlines out of its last bankruptcy, has been trying to purchase the utility for more than a year. It promised to make the company more community-focused and to make millions of dollars in rate cuts. The utility commission had been considering the decision for nearly three months since it heard closing arguments on Dec. 14 on the deal.

The commission said Thursday the new company formed to take over PGE would have to issue substantial debt, which would in turn lead to a lower credit rating for the company and a higher cost of doing business.

The commission said it felt those moves would ultimately lead to higher prices being passed on to consumers.

A spokesman for Oregon Electric Utility Co., the company formed by Texas Pacific to acquire Portland General, said the company is reviewing the commission's order and evaluating its next step.

Houston-based Enron is disappointed with the decision, but needs time to study the order before deciding its next action, a company spokeswoman said.

Enron bought Portland General in 1997 for $3 billion, and tried to sell it several times before entering into bankruptcy in December 2001. The utility serves about 750,000 homes and businesses in Portland, Salem and other communities in northwest Oregon and owns and operates nearly 2,000 megawatts of electric generating capacity.

There are several possible scenarios for what will happen next.

Texas Pacific could modify its offer, perhaps changing the amount of debt in the deal, and reapply to regulators. That move seems unlikely, however, given that commission staff previously recommended changes that Texas Pacific didn't adopt.

The investors also could appeal the rejection through the district courts in Oregon.

Enron could entertain bids from other bidders, who would likely need to go through the Oregon Public Utility Commission.

Since there's been increased interest in power generation assets nationwide in the past six months, there's likely plenty of other interested buyers.

Public officials in Oregon have floated the idea of having the city buy the company and turn it into a public utility, a plan that could be announced shortly.

Enron also could choose to distribute shares of PGE to its creditors. That's a move it is planning to make with Prisma Energy, a wholly owned subsidiary that operates a collection of international energy projects.

Enron exited bankruptcy on Nov. 18 with plans to pay creditors 17 to 20 cents on the dollar for approximately $67 billion in claims.

Despite the delay in the Portland General deal, Enron expects to make its first distribution to creditors in June, with others to follow every six months.