Northwest Natural In Talks With Enron Over Portland Utility 
By Wall Street Journal staff reporters Robin Sidel, Rebecca Smith and Nikhil Deogun 10/05/2001

 The Wall Street Journal B2 (Copyright (c) 2001, Dow Jones & Company, Inc.) 
Enron Corp. is in advanced discussions to sell its Portland General Electric utility unit to Northwest Natural Gas Co. for about $1.8 billion in cash and stock in a highly leveraged transaction that would eventually give Enron a minority stake in Northwest, according to people familiar with the matter. 
The discussions are at a very delicate stage, and some important points need to be finalized, these people caution. The current environment could also make financing such a transaction quite difficult, and board approval isn't a certainty. However, should the two sides agree to terms, a deal could be announced in the next few days. Northwest Natural is also expected to assume roughly $1 billion in debt. 
Enron and Northwest Natural declined to comment.  If a transaction is consummated, it would come nearly six months after the collapse of Enron's agreement to sell the utility to Sierra Pacific Resources. That transaction fell apart in part because of the California energy crisis.  A purchase of Portland General would be a very big bite for Northwest Natural, which has a market capitalization of just $650 million and supplies natural gas to more than 500,000 residential and business customers in Oregon and Vancouver, Wash. Portland General is an electric utility serving more than 1.4 million customers in Oregon.  The deal would bring together two Oregon utilities whose executives and employees know each other well. Richard G. Reiten, Northwest's chairman and chief executive, was president and chief operating officer of Portland General between 1989 and 1996, and also served on its board.  By buying a utility, Northwest would hope to have more bargaining power in its gas purchases, enabling it to buy more product and store it when prices are cheap. A deal would be accretive to Northwest's earnings, people familiar with the matter say. And the financial risk for Northwest Natural is somewhat muted because Enron is helping to facilitate and finance the transaction by agreeing to take common stock and convertible preferred stock in Northwest Natural in addition to cash. Northwest Natural would finance the transaction with debt and equity offerings.  Shares of Northwest Natural were trading up $1.04 at $25.99 in 4 p.m. composite trading on the New York Stock Exchange, while Enron stock was down 39 cents a share at $33.10.  For Enron, a deal with Northwest Natural would be the latest twist in a five-year ordeal that was supposed to help the nation's biggest energy trader break into California's deregulating electricity market. But the utility business proved less valuable than anticipated when Enron was prevented from selling off utility contracts that enabled it to buy electricity cheaply. And California's market developed serious problems last year that made it a less attractive place for Enron to do business.  Enron, which also owns a major gas-transmission pipeline system, has a history of buying assets and businesses, learning what it can from them, and then selling off the bulk of physical assets so it can reinvest capital elsewhere.  It isn't clear where Enron will put the capital to work that it garners from the sale. Its broadband telecommunications business is in the doldrums and it recently said it would invest $250 million in it this year, down from a formerly projected $750 million.