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Enron to Sell Portland General to Northwest Natural (Update9)
Bloomberg, 10/08/01 Northwest Natural Gas to buy Portland General for $1.8 billion Associated Press Newswires, 10/08/01 UK Pwr Mkt: Spot Dn On High Interconnector Flow Dow Jones News Service, 10/08/01 USA: NW Natural sees "double digit" earnings growth. Reuters English News Service, 10/08/01 NW Natural Gas's Portland General Buy Has No Breakup Fee Dow Jones News Service, 10/08/01 Northwest Natural's CEO on Portland General Purchase: Comment Bloomberg, 10/08/01 Enron to Sell Portland General to Northwest Natural (Update9) 2001-10-08 16:21 (New York) Enron to Sell Portland General to Northwest Natural (Update9) (Adds closing share prices in fifth paragraph.) Houston, Oct. 8 (Bloomberg) -- Enron Corp. agreed to sell Portland General Electric to Northwest Natural Gas Co. for $2.9 billion in cash, stock and assumed debt, ending a more than two-year effort to shed its Oregon utility. Enron, the largest energy trader, no longer needs Portland General to sell electricity in the West and wants to spend on more promising businesses, Chief Executive Ken Lay said in a statement. Enron bought the utility for $3.21 billion in 1997 to gain knowledge on selling power to neighboring California. ``Portland General is a 5 percent bottom-line growth rate company,'' said Anatol Feygin, a J.P. Morgan analyst who rates Enron ``buy.'' ``On wholesale and retail energy operations, Enron has had 35 percent growth in earnings before interest and taxes, and bottom-line growth of just under 20 percent.'' Shares of Enron rose $1.72, or 5.4 percent, to $33.45. Northwest fell 42 cents to $22.99. Enron will get less than it hoped from the sale, though spokeswoman Karen Denne said the Houston-based company expects to break even. A November 1999 agreement to sell the utility to Sierra Pacific Resources of Nevada for $3.1 billion fell through in April of this year because California banned sales of power plants serving the state. Regulators had required Sierra Pacific to sell a stake in a plant that sells power to California as a condition of its purchase of Portland General. Oregon Regulators Both Northwest and Portland General are based in Portland, Oregon, which should make it easier for Enron to win clearance of the sale. Oregon regulators can be expected to approve the purchase in as little as nine months, Northwest Chief Executive Richard Reiten said. ``No other combination of companies could achieve as much political, regulatory, and general support of the citizens,'' Reiten said. ``We operate in essentially the same geographic area.'' Northwest, a gas utility, will pay $1.55 billion in cash, $200 million in preferred stock and $50 million in common stock, Enron said. Northwest will assume $1.1 billion in debt and give $75 million in customer discounts previously agreed upon by Enron. Northwest has 525,000 natural-gas customers in Oregon and Washington. Portland General has 730,000 customers in Oregon. Over the past 10 years, Lay has transformed Enron from a gas pipeline operator into a company that gets most of its profit growth from commodities trading. Enron no longer wants to own expensive assets such as power plants that are under the control of regulators, who limit profitability and often make the assets difficult to sell, analysts say. ``This is a sign Ken Lay is tightening up the ship,'' said Mark Baskir, manager of the $15 million Strong Energy Fund, which holds 2,400 Enron shares. ``I feel better about the stock now.'' Retail Sales Enron's road to becoming a top energy trader in California has been bumpy. It delayed attempts to sell electricity to California residential customers in 1999, saying the state's deregulation law made it impossible to profit from small power sales. It transferred its retail electricity sales business in all states to NewPower Holdings Inc., a separately traded company formed by Enron in October 2000. When power prices in western state's soared late last year and early this year, some utilities stopped paying for wholesale power. Enron has estimated it's owed as much as $500 million for energy sales in California. California's two largest utilities, PG&E Corp.'s Pacific Gas & Electric and Edison International's Southern California Edison, are insolvent after racking up billions in debt buying power at prices far exceeding what state officials would allow them to pass to customers. California Battle California officials have accused Enron and other power traders of manipulating the state's market. Enron also has struggled with Oregon regulators. It was forced to cut power prices to Portland General's customers by $141 million over eight years, more than double what the company had anticipated when it bought the utility. Oregon also rejected Enron's plans to sell its utility's 14 generating plants. Enron will keep its stake in Northwest for at least 30 months, the company said in a statement. It will have voting rights limited to 4.9 percent of Northwest's common stock and will have representation on Northwest's board. Northwest said the sale is expected to close this quarter and add to earnings next year. Northwest expects to maintain its annual dividend of $1.25 a share through this year. Job cuts are planned, Northwest said, without saying how many positions would be eliminated. Northwest said it won't renegotiate union contracts. Merrill Lynch and Credit Suisse First Boston will arrange loans to finance the cash portion of the purchase, Northwest said. Credit Suisse advised Enron on the sale. Enron last week agreed to sell oil and gas fields in India to the U.K.'s BG Group Plc for $388 million. In May, the company withdrew from a gas-pipeline project in Qatar. Northwest Natural Gas to buy Portland General for $1.8 billion By WILLIAM McCALL AP Business Writer 10/08/2001 Associated Press Newswires Copyright 2001. The Associated Press. All Rights Reserved. PORTLAND, Ore. (AP) - Northwest Natural Gas said Monday it will buy Portland General Electric for $1.8 billion in a deal that will combine the largest natural gas and electric utilities in Oregon. The purchase comes about four years after Enron Corp., one of the largest energy companies in the nation, paid $3.2 billion for Portland General Electric in a bid to expand into the Pacific Northwest and California. But the slow pace of deregulation in Oregon and the California energy crisis prompted Houston-based Enron to start shopping for another buyer shortly after the takeover. Northwest Natural Gas said it expects to close the purchase late next year, pending approval by regulators and its shareholders. Enron will receive $1.55 billion cash and $350 million in securities. The deal will create a Portland-based holding company with $5 billion in assets and more than 1.25 million customers. The new company would own more than 2,000 megawatts of generation, 26,000 miles of electric transmission and distribution lines and 12,000 miles of gas mains. Northwest Natural Gas Chairman Richard G. Reiten said the deal would "help ensure that assets critical to Oregon's economy and environment will be locally-owned." There will be an undetermined number of job cuts, he said, although all union contracts will be honored. The deal brought immediate criticism from one of the state's leading consumer watchdog groups. Bob Jenks, executive director of the Citizens Utility Board, said he was concerned about the heavy debt Northwest Natural Gas will carry under the deal and the gas company's recent efforts to lobby the Legislature to bypass regulators. "They've tried to politicize rate proceedings," Jenks said. "If that's going to happen, and PGE rate cases are fought out in the Legislature and the governor's office, then I don't think that's going to be in the interest of PGE customers." Analysts said the deal makes sense because the two utilities can cut a lot of costs in their overlapping service areas. But Dan Fidell of A.G. Edwards & Sons said analysts and investors also are wary of the heavy debt load on NW Natural. "Their balance sheet is going to suffer, at least in the near term," Fidell said. "They're probably looking at downgrades in their credit rating." Enron earlier attempt to sell Portland General Eelctric fell through last March. It has seen stock prices fall in recent months as it moved into investments outside its core business, including an Internet company that took a beating in the stock market. But in morning trading Monday, Enron shares rose 77 cents to $32.50, which analysts said was partly due to heavier investment in strategic energy companies following news about the U.S. attack on terrorist outposts in Afghanistan. --- On the Net: Enron: http://enron.com Northwest Natural Gas: http://northwestnatural.com Portland General Electric: http://www.portlandgeneral.com Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. UK Pwr Mkt: Spot Dn On High Interconnector Flow 10/08/2001 Dow Jones News Service (Copyright © 2001, Dow Jones & Company, Inc.) LONDON -(Dow Jones)- U.K. spot electricity prices Monday were down on a high volume of power from the intercontinental interconnector despite cooler weather, while trade in forward contracts was too thin to site a trend, traders said. Helping prices fall was the ready availability of cheap power through the in terconnector. All available capacity on the interconnector was used on Monday, c ompared with only half on Friday. Also influencing prices was that, like last week, Enron started the day shor t, and then tried to push prices down before buying in large volumes, traders sa id. "Basically it looks like Enron have gone into the winter short, thinking tha t pre-NETA jitters would make everyone else go long, and so far it looks like th ey're winning that bet," said a trader. No one at Enron was immediately available for comment. Day-ahead base load traded at GBP17-GBP17.35/MWh, down from Friday's trading for Monday base load at GBP17.30-GBP17.70/MWh. Day-ahead peaks traded at GBP18.50-GBP19.50/MWh. Day-ahead extended peaks traded at GBP19.30-GBP19.50/MWh. Weekend base load traded at GBP16.30/MWh, down from Friday's prices for last weekend at GBP17/MWh. Week 42 traded at GBP17.50-GBP17.55/MWh, down from Friday's prices at GBP17. 70-GBP17.75/MWh. Enron's visible buying in the spot market is all the more striking given tha t its own 2000MW facility at Teesside is runing at just over half its maximum ou tput. This likely reflects the high price of natural gas relative to electricity, a trader reckoned. Plant has been in flux recently with a 400MW unit at Seabank II struggling t o maintain consistent output, while British Energy's 581MW unit at Heysham 1 cam e back online on Friday, and was generating 500MW by Monday afternoon. Both 535M W units at Dungeness B remain offline, while traders expect at least one to come back online soon. Forward market prices were down beginning with November, but not trading in volumes large enough to identify a trend. On the U.K. Power Exchange, within-day prices peaked during settlement perio d 39 at GBP36.95/MWh. Lowest prices were for settlement periods 7-11 at GBP1/MWh . Volume was 12,412MWh in 24,824 contracts. On the Automated Power Exchange, the average weighted day-ahead price was GBP18.63/MWh, up from Friday's price of GB P16.01/MWh. The Meteorological Office expects Tuesday's temperatures to be 2 degrees Cel sius warmer in the southeast and Yorkshire and Lincolnshire. Countrywide, temper atures are forecast to in line with historical norms. The Balancing Mechanism Reporting System said demand will peak Tuesday at 38 ,094 MW, with off-peak demand hitting a low of 25,908 MW. Demand peaked Monday a t 39,094 MW. The following forward contracts traded Monday. Figures are in GBP/MWh: Contract Monday Friday Nov 2001 base 19.33-41 19.50 Jan base 21.50-21.66 --- Apr base 17.88-18.00 --- Winter 2002 base 20.10 --- Summer 2002 base 17.44 17.50 Summer 2003 base 17.58-17.59 17.60 Q1 2001 19.85-19.92 --- Winter 2003 20.38 --- -By Sarah Spikes, Dow Jones Newswires; +44-(0)20-7842-9345; sarah.spikes@dowj ones.com -0- 08/10/01 17-52G Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. USA: NW Natural sees "double digit" earnings growth. 10/08/2001 Reuters English News Service (C) Reuters Limited 2001. NEW YORK, Oct 8 (Reuters) - Northwest Natural Gas Co. said on Monday that the acquisition of Portland General Electric from Enron Corp would enhance its earnings by "double digits" from the first year. Earlier on Monday Northwest said it was paying $1.8 billion for the firm and the deal was expected to completed by last quarter of next year. Speaking to financial analysts on a conference call after announcing the deal, executives said the deal had all necessary financing and a new holding company which will be created to accommodate the assets will have debts of up to 80 percent of its capital structure. Northwest said it expects the new holding company to receive an investment-grade credit rating after three years. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. NW Natural Gas's Portland General Buy Has No Breakup Fee By Christina Cheddar 10/08/2001 Dow Jones News Service (Copyright © 2001, Dow Jones & Company, Inc.) Of DOW JONES NEWSWIRES NEW YORK -(Dow Jones)- Northwest Natural Gas Co.'s (NWN) planned acquisition of Enron Corp.'s (ENE) Portland General Electric Co. unit doesn't contain a provision for a breakup fee, Northwest officials said Monday during a conference call. Earlier, Northwest Natural, of Portland, Ore., and Enron, of Houston, announced the companies agreed to the terms of the sale. The transaction was anticipated since Friday when the companies confirmed a Wall Street Journal that the two were talking. Under the terms of the planned sale, Northwest will acquire the Enron unit for $1.55 billion in cash and $250 million in seller-financing securities. Northwest also agreed to cancel a $75 million payment obligation from Enron to Portland General that was related to Enron's purchase of Portland General in 1996. Northwest also is assuming $1.1 billion in existing Portland General debt and preferred stock. During the conference call, Northwest officials said they expect the acquisition to close in the fourth quarter of 2002, following approval of Northwest's shareholders and regulatory agencies, including the Federal Energy Regulatory Commission. The company has already secured the necessary financing, officials said. Northwest shares recently traded at $23.10, down 31 cents, or 1.3. On Friday, the stock closed down 9.9% to $23.41 in anticipation of the acquisition. Enron shares, meanwhile, have gained $1.41, or 4.4%, to $33.14. Enron had previously agreed to sell Portland General to Sierra Pacific Resources (SRP) for $3.1 billion, but the deal was called off six months ago, in part because of complications stemming from the California power crisis. Enron's decision to sell Portland, an electric utility with $5 billion in assets and $3.9 billion in enterprise value, is an example of Enron's strategy to sell its physical assets and focus on its energy trading activities. Northwest Natural Gas Chairman and Chief Executive Richard Reiten said the acquisition of Portland General will have "solid accretion" under old accounting rules, and "double-digit accretion" under the new accounting rules pertaining to the treatment of goodwill. Under the former accounting rules, goodwill was amortized to expense. Reiten didn't provide any specific estimates for the earnings of the combined companies. In an interview, Reiten said the ability of the transaction to increase the combined company's earnings potential will be helped by a number of factors including the companies' overlapping service areas and combined customer bases. Reiten expects to consolidate customer billing, call centers and meter reading. Prior attempts by Northwest and Portland General to initiate joint meter reading for about 350,000 customers already have yielded about $1 million in cost savings, Reiten said. Also, the acquisition gives Northwest the ability for non-speculative trading around the combined company's natural gas and electric assets, he added. "The opportunities are exceptional for a utility in the Northwest. That's why we are so confident about the ability of this transaction to add to the bottom line," said Reiten, who served between 1989 and 1996 as the company's president and chief operating officer and as a member of its board. The combination will result in staff reductions, but Reiten said he couldn't quantify how many. He said some of the reductions would occur through early retirement incentives and though attrition. -Christina Cheddar, Dow Jones Newswires; 201-938-5166; christina.cheddar@dowjones.com Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. Northwest Natural's CEO on Portland General Purchase: Comment 2001-10-08 13:36 (New York) Portland, Oregon, Oct. 8 (Bloomberg) -- Richard Reiten, chief executive of Northwest Natural Gas Co., comments on the company's agreement to buy Portland General Electric Co. from Enron Corp. for $2.8 billion in cash, stock and assumed debt. The transaction would consolidate the natural gas and electric utilities in Portland, Oregon. Enron bought Portland General for $3.1 billion in 1997. A 1999 agreement to sell the utility to Sierra Pacific Resources of Nevada for $3.1 billion failed in April because of regulatory delays. How Northwest, which has a market capitalization of about $580 million, will finance the $2.8 billion purchase: ``We will issue $150 million of common equity at close. Our Financial plan calls for another $150 million, three years out, in 2005.'' The company also expects to borrow $1.4 billion, and it will assume $1.1 billion in Portland General's debt. On regulatory approval: ``We expect a nine-month to 12-month regulatory approval period. Our first full year as a combined company would be 2003. We expect to begin paying down debt that first full year, and we expect double-digit accretion to earnings the first full year. ``No other combination of companies could achieve the efficiencies these companies can, because we operate in essentially the same geographic area. No other combination of companies could achieve as much political, regulatory and general support of the citizens.'' On potential cost savings: ``We expect significant efficiencies. Common meter reading, common call centers (customer service). All support services and administrative functions that are duplicated, we can bring them together. ``We have a wonderful match of the gas utility's interstate pipeline and gas storage that can be used to enhance the gas-fired generation facilities of Portland General. ``We have a storage field 15 miles from a 550-megawatt generating plant. We'll be able to trade around those assets, in non-speculative trading, something that Portland General has become very good at under its ownership by Enron. Those assets will enhance trading to bring costs down for the gas-fired generation and give us more options.'' On the investment profile of the holding company that will be formed to own the two utilities: ``We see ourselves as a strong, combination utility with a good, secure dividend, a fair price paid for our assets, and good growth in earnings. We're confident we'll get regulatory support for our structure.''
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