Portland General Electric, Sierra Pacific merger in doubt
Legislation pending in the Nevada state legislature and actions taken today by Public Utility Commission cast doubt on the ability of Sierra Pacific Resources to complete its previously announced purchase of Portland General Electric Co. Legislation, if passed, would stop the development of a competitive electric market in the state and prohibit Sierra Pacific from selling its remaining power plants. The utility had planned to use the proceeds from those sales to pay debt prior to the merger.
Ann de Rouffignac
HOUSTON, Mar. 8�Bills pending in the Nevada Legislature and Public Utility Commission (PUC) actions Thursday cast doubt on the ability of Sierra Pacific Resources to complete its previously announced purchase of Portland General Electric Co.
Proposed legislation, if passed, would stop development of a competitive electric market in the state and prohibit Sierra Pacific from selling its remaining power plants. The utility had planned to use the proceeds from those sales to pay down debt prior to the merger.
Gov. Kenny Guinn also requested the PUC to look into the divestiture of the power plants, said Cynthia Messina, spokesperson for the commission. A docket to investigate reversing the sale of the power plants and the potential legal ramifications was opened Thursday.
�We need to have a certain level of certainty in our power supply. The California experience has shown us that we need to get back to what works. Sound resource planning means we strengthen our generation assets and transmission capability as essential to keeping the lights on in Nevada,� said PUC Chairman Don Soderberg in a statement.
Enron Corp., parent of Portland General Electric, was worried enough to warn in a filing with the US Securities and Exchange Commission (SEC) Feb. 28 the merger transaction would be �delayed.� The filing stated recent events in California and Nevada have hurt the buyer, Sierra Pacific Resources. Enron did not return phone calls.
The sale of Portland to Sierra for $2.1 billion, plus $1 billion in debt and preferred stock, was supposed to be completed by May 5, 2001, under the November 1999 agreement. Except for the SEC, all regulatory agencies have signed off on the merger, said Karl Walquist, spokesman for Sierra Pacific. The SEC must approve the combined company's balance sheet.
�Without paying down some debt, it would be more difficult to get that approval,� he said.
On May 5, either party could terminate the merger without a penalty, Walquist said. He stressed, however, Sierra Pacific was working in good faith to complete the merger. He said actions of the legislature and PUC are beyond the company�s control.
Sierra Pacific has been hit hard by the recent run-up in wholesale power prices and has requested a string of rate adjustments and rate increases, which the commission has approved. Nevada's deregulation critics complain that allowing the utility to divest all of its power plants makes it even more vulnerable to high wholesale prices threatening the entire western region.