Ex-Sierra Pacific partner in new merger

Tuesday, Oct. 9, 2001 | 8:58 a.m.

SUN STAFF AND WIRE REPORTS

HOUSTON -- Northwest Natural Gas Co. has agreed to buy Portland General Electric Co. for $2.98 billion in a deal combining Oregon's largest natural gas and electric utilities.

Portland General's owner, Houston-based Enron Corp., will receive $1.55 billion cash and $250 million in common and preferred stock. Northwest Natural Gas will also assume $1.1 billion in Portland General debt.

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.

Enron began trying to sell Portland General Electric shortly after acquiring the Portland-based utility in 1997.

Enron announced in late 1999 that it would sell PGE to Sierra Pacific Resources, the parent company of Las Vegas electric utility Nevada Power Co., for $3.1 billion. But the deal faltered and was called off last March.

Monday's deal is about $100 million below the mark once set by Sierra Pacific.

"My guess (for the reduction in price) is that there's a limited number of buyers out there ... Sierra Pacific was a logical fit, and once you eliminated them, there aren't that many," said Ron Tanner, utilities analyst with Legg Mason. "A lot of utilities in the West are beat up. You just don't have the players that were interested in buying the company."

Sierra Pacific could also afford to pay more, Tanner said, because it was an electricity utility, and could derive cost savings from synergies with its current operations.

Enron's stock has fallen recently, which some analysts partly blame on investments outside Enron's core businesses of natural gas trading and wholesale electricity sales.