New York, Aug. 28: The Enron Corp. announced detailed plans on Tuesday to sell a dozen big businesses by the end of the year, a step toward generating the cash that the company needs to settle the more than $ 50 billion in claims against it.
Among the assets Enron plans to auction are Portland General Electric, an Oregon utility; the Transwestern Pipeline Co., which runs through the southwest into California; and a 50 per cent stake in Citrus Corp., a joint venture with the El Paso Corp., which owns the Florida Gas Transmission Co., a big natural gas pipeline.
The announcement of the sale comes as some of Enron’s old competitors, like Dynegy Corp. and Williams Cos., are trying to stave off bankruptcy by selling natural gas pipelines and power plants, too. But industry analysts said that some of Enron’s assets, particularly its pipelines, could draw a lot of interest, even in such a desperate climate.
If Enron successfully sheds the subsidiaries at favorable prices, it becomes highly unlikely that any businesses will remain that could one day form the core of a smaller, more modest successor to the energy trading giant that collapsed late last year and was forced to seek bankruptcy protection.
“We’re trying to do three things here: maximize value, deliver it quickly and preserve as many jobs as we can,” said Mark Palmer, a spokesman for Enron, which is based in Houston. “If maximizing value means selling each one of these assets, then we have reached our goal.”
Palmer said the company expected final bids in November and would decide in December which ones to accept, pending approval by the bankruptcy court.
He noted that prospective buyers had been waiting for the sale to start and that the company would now make information available about the businesses so those buyers could begin the due diligence process.
There is a chance, though, that the bids Enron receives might be so low that the company would move to repeat the sale under different terms, Palmer said. Rather than selling each business individually, Enron could pool them together into what it had assessed in May as a $ 10.8 billion collection of power plants, utilities and pipelines called OpCo Energy.
But industry analysts said that stitching together the businesses into one company made little sense because they are so far-flung and different.
A buyer interested in the Florida pipeline, for example, might have little use for a utility in the Northwest like Portland General, said Gerald M. Keenan, an independent energy industry analyst based in Chicago.
The pipelines would likely be the big draws in the bidding process. Mitchell F. Hertz, a partner at the law firm Kirkland & Ellis in charge of its energy group, said: “If you look at the sales that are getting done, they’re assets with steady income streams, like regulated utilities and gas pipelines.”
In the last few months, other energy marketing and trading companies have been selling their assets to reduce debt and improve their credit ratings. Sales of power plants have been slow. Sales of utilities are complicated by the Public Utility Holding Company Act, which prohibits companies from owning utilities outside the same service area. But pipelines have gone quickly, most notably Dynegy's recent sale of the Northern Natural Gas Co. to MidAmerican Energy Holdings, a unit of Warren E. Buffet’s Berkshire Hathaway.
But Northern Natural Gas went at a deep discount: Dynegy paid $ 1.5 billion for it in November and then sold it to MidAmerican for $ 928 million.