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Enron Mail |
Today's IssueAlert Sponsors:=20 <http://www.energyventurefair.com/<; We are seeking 75 of the most promising energy-based technology and service= companies to present at Energy Venture Fair II, January 29 & 30, 2002, Hou= ston, TX-the follow-up to the explosively successful Energy Venture Fair I = held in Boston in June. If you are a Senior Executive from one of these com= panies, and are interested in having a platform to present your vision and = business plans before a national audience of investors, please contact Nann= ette Mooney at (818) 888-4445, Ext. 11, for more information, or via email = at nannettem@energyventurefair.com <mailto:nannettem@energyventurefair.com<= . APPLY TODAY - SPACE IS LIMITED.=20 <http://www.energyventurefair.com<;=20 <http://secure.scientech.com/issueswatch/article.asp?id=3D832<;=20 Miss last week? Catch up on the latest deregulation, competition and restru= cturing developments in the energy industry with SCIENTECH's IssuesWatch <h= ttp://secure.scientech.com/issueswatch/article.asp?id=3D932<=20 <http://secure.scientech.com/rci/wsimages/scientech_logo_small.jpg< <http://secure.scientech.com/rci/wsimages/IssueAlert_Logo_188.jpg< October 8, 2001=20 Enron Exits Portland General (Again)=20 By Jon T. Brock Director, Strategic and Competitive Intelligence=20 <https://www.secure.scientech.com/rci/wsimages/j_brock_photo.jpg< [News item from PR Newswire] Enron Corp. (NYSE: ENE) announced today that i= t has entered into an agreement with Northwest Natural Gas Company (NYSE: N= WN) for the sale of Enron's wholly owned electric utility subsidiary, Portl= and General Electric. The proposed transaction, which is subject to customa= ry regulatory approvals, is expected to close by the fourth quarter of 2002= .=20 Analysis: Enron is attempting to sell Portland General again, this time to = Northwest Natural Gas Company (NW Natural). Enron attempted to sell Portlan= d General to Sierra Pacific in November of 1999. However, that sale did not= complete apparently due to a delay in Nevada deregulation. Let's take a st= ep back and look at the history of Enron's dance with Portland General.=20 Enron originally confirmed that its "merger" with Portland General had clos= ed effective July 1, 1997, approximately one year after it was announced. T= he $3-billion combination created an enterprise with a market value of appr= oximately $12 billion. Enron issued 50.5 million new common shares to share= holders of Portland General, consolidated Portland General's debt of $1.1 b= illion and accounted for the transaction on a purchase accounting basis.=20 The acquisition linked Enron and Portland General, a successful, low-cost e= lectric utility operating in the fast-growing Pacific Northwest region. Wit= h ownership of approximately 5,000 megawatts of generating capacity and mor= e than 38,000 miles of natural-gas pipeline worldwide in 1997, the combined= company aimed to provide integrated energy solutions for wholesale and ret= ail natural gas and electricity customers in North America and internationa= lly. At least that was the plan.=20 Enron also did an acquisition of a telecommunications firm based in Portlan= d, Ore. that had links to Portland General. On Nov. 17, 1997, Enron announc= ed the acquisition of OPTEC Inc., a Portland, Ore.-based provider of data c= ommunications integration and services. The acquisition was handled through= FirstPoint, Enron's telecommunications unit at the time. It was originally= part of Portland General. FirstPoint had announced in September 1997 an ag= reement with the Williams Communications Group unit of The Williams Cos. (W= illiams) and Montana Power's Touch America, to build a fiber optic network = from Portland to Los Angeles.=20 For those of us covering the energy industry, you will recall that 1997 was= a period of energy "convergence." Utilities were expanding into telecommun= ications at a head-spinning rate and oil and gas companies were busy doing = "strategic acquisitions."=20 Williams had agreed to acquire Mapco Inc. for about $2.46 billion in stock = and the assumption of about $1 billion in Mapco debt in November 1997. Also= announced in the same month was Sonat Inc., known for its pipelines, agree= ing to acquire closely held exploration and production concern Zilkha Energ= y Co. for $1.04 billion in stock. In June 1997, NGC Corp. announced that it= had closed an acquisition of Destec Energy, Inc., a leading independent po= wer producer, and had closed on the related sale of most of Destec's intern= ational projects and operations to AES Corp. for $407 million, subject to c= ertain adjustments. The net cost of the assets to be retained by NGC, origi= nally expected to be approximately $400 million, had been estimated to be i= n the range of $300 to $325 million, after the sale of certain non-strategi= c assets. Also occurring in June of 1997 was Duke Power Co. and Houston-bas= ed PanEnergy Corp. linking up in a "merger" that took approximately seven m= onths to complete. Under terms of the agreement, shares of PanEnergy stock = would be converted to 1.0444 shares of Duke Energy stock. Duke Energy would= adopt Duke Power's present common stock dividend payment of $2.12 per shar= e.=20 So Enron was not alone in the "merger-mania" field of energy companies expa= nding their balance sheet with strategic assets. Two years later however, E= nron decided to exit Portland General. Enron had decided to sell Portland G= eneral to Sierra Pacific. With the announced sale, Kenneth Lay, Enron Corp.= chairman and CEO said, "The rapidly evolving competitive electricity marke= t allows us to deliver commodity services and risk management products to o= ur customers without requiring the ownership of a regulated electric utilit= y." Jeff Skilling, then Enron's president and COO, also chimed in by saying= , "In general, we would say that Portland General is not as strategic as it= was before-when it had a strong wholesale business that we could integrate= with our nationwide wholesale business."=20 In the two years following the $3-billion purchase of Portland General, Enr= on found operating a strictly regulated electric utility to be frustrating.= Oregon regulators approved the acquisition only after Enron agreed to cut = power rates by $141 million, more than double what the company had proposed= . Oregon regulators also rejected plans to sell Portland General's 14 power= plants-playing havoc with Enron's asset management strategy.=20 Nevada-based Sierra Pacific Resources agreed to buy Portland General in Nov= ember 1999. It was to pay $2.1 billion, including $2.02 billion in cash. It= also was to assume about $1 billion in debt and preferred stock. The deal = was officially called off in April of this year although it had been consid= ered dead months before. Sierra Pacific planned to sell some of its Nevada = assets to raise cash for the deal, but Nevada's move to electricity deregul= ation was delayed, and Sierra couldn't carry out the sales.=20 Enron begins to look for another buyer and has found Northwest Natural Gas = Company. According to Enron, under terms of the agreement, Northwest will p= urchase Portland General from Enron for $1.875 billion. This is comprised o= f $1.55 billion in cash, $200 million in Northwest preferred stock, $50 mil= lion in Northwest common stock, and the assumption of Enron's $75-million b= alance on its customer benefits obligation, which was stipulated in its 199= 6 agreement to purchase Portland General. In addition to the purchase price= , Northwest will assume approximately $1.1 billion in Portland General debt= and preferred stock.=20 According to Moody's this morning, Northwest plans to form a holding compan= y (HoldCo) that will become the parent of Northwest Natural and Portland Ge= neral. HoldCo plans to finance this transaction with a combination of about= $1.5 billion of bank borrowings, about $250 million of common stock and FE= LINE PRIDES (a mandatory convertible hybrid security) to be sold to Enron, = and about $150 million of common stock to be sold to the public. Consummati= on of this transaction is contingent upon numerous regulatory approvals, wh= ich are expected to take from nine to twelve months.=20 Northwest principally is engaged in the distribution of natural gas. The Or= egon Public Utility Commission has allocated to Northwest, as its exclusive= service area, a major portion of western Oregon, including the Portland me= tropolitan area, most of the Willamette Valley and the coastal area from As= toria to Coos Bay. Northwest also holds certificates from the Washington Ut= ilities and Transportation Commission granting it exclusive rights to serve= portions of three Washington counties bordering the Columbia River. Gas se= rvice is provided in 96 cities, together with neighboring communities, in 1= 7 Oregon counties, and in nine cities, together with neighboring communitie= s, in three Washington counties. They serve more than 525,000 customers in = northwest Oregon and southwest Washington. Portland General currently serve= s 730,000 customers and owns 2,015 megawatts of electric generation, split = evenly between hydro, coal and natural gas.=20 So is energy convergence over? Absolutely not! Northwest is obviously movin= g into power with this purchase of Portland General from Enron. And it is a= good move for them. They are obviously the local favorite, have an establi= shed network in the states of Oregon and Washington, and already have commo= dity delivery experience in the natural-gas arena. As far as I can tell, th= ere are no "strings attached" to deregulation of Oregon in order for this d= eal to go through like in the Sierra Pacific deal. Let's see if Enron can f= inally sell its regulated electric utility asset. It's been trying since 19= 99.=20 An archive list of previous IssueAlerts is available at www.scientech.com <http://secure.scientech.com/issuealert/<;=20 We encourage our readers to contact us with their comments. We look forward= to hearing from you. Nancy Spring <mailto:nspring@scientech.com< Reach thousands of utility analysts and decision makers every day. Your com= pany can schedule a sponsorship of IssueAlert by contacting Jane Pelz <mai= lto:jpelz@scientech.com<. Advertising opportunities are also available on o= ur Website.=20 SCIENTECH is pleased to provide you with your free, daily IssueAlert. Let u= s know if we can help you with in-depth analyses or any other SCIENTECH inf= ormation products. If you would like to refer a colleague to receive our fr= ee, daily IssueAlerts, please reply to this e-mail and include their full n= ame and e-mail address or register directly on our site.=20 If you no longer wish to receive this daily e-mail, and you are currently a= registered subscriber to IssueAlert via SCIENTECH's website, please visit = <http://secure.scientech.com/account/<; to unsubscribe. Otherwise, please se= nd an e-mail to to IssueAlert <mailto:IssueAlert@scientech.com<, with "Dele= te IA to SCI" in the subject line.=20 SCIENTECH's IssueAlerts(SM) are compiled based on the independent analysis = of SCIENTECH consultants. The opinions expressed in SCIENTECH's IssueAlerts= are not intended to predict financial performance of companies discussed, = or to be the basis for investment decisions of any kind. SCIENTECH's sole p= urpose in publishing its IssueAlerts is to offer an independent perspective= regarding the key events occurring in the energy industry, based on its lo= ng-standing reputation as an expert on energy issues.=20 Copyright 2001. SCIENTECH, Inc. All rights reserved. An archive list of previous IssueAlerts is available at www.scientech.com <http://secure.scientech.com/issuealert/<;=20 We encourage our readers to contact us with their comments. We look forward= to hearing from you. Nancy Spring <mailto:nspring@scientech.com< Reach thousands of utility analysts and decision makers every day. Your com= pany can schedule a sponsorship of IssueAlert by contacting Jane Pelz <mai= lto:jpelz@scientech.com<. Advertising opportunities are also available on o= ur Website.=20 SCIENTECH is pleased to provide you with your free, daily IssueAlert. Let u= s know if we can help you with in-depth analyses or any other SCIENTECH inf= ormation products. If you would like to refer a colleague to receive our fr= ee, daily IssueAlerts, please reply to this e-mail and include their full n= ame and e-mail address or register directly on our site.=20 If you no longer wish to receive this daily e-mail, and you are currently a= registered subscriber to IssueAlert via SCIENTECH's website, please visit = <http://secure.scientech.com/account/<; to unsubscribe. Otherwise, please se= nd an e-mail to to IssueAlert <mailto:IssueAlert@scientech.com<, with "Dele= te IA Subscription" in the subject line.=20 SCIENTECH's IssueAlerts(SM) are compiled based on the independent analysis = of SCIENTECH consultants. The opinions expressed in SCIENTECH's IssueAlerts= are not intended to predict financial performance of companies discussed, = or to be the basis for investment decisions of any kind. SCIENTECH's sole p= urpose in publishing its IssueAlerts is to offer an independent perspective= regarding the key events occurring in the energy industry, based on its lo= ng-standing reputation as an expert on energy issues.=20 Copyright 2001. SCIENTECH, Inc. All rights reserved. <http://infostore.consultrci.com/spacerdot.gif?IssueAlert=3D10/8/2001<;
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