2 April, 2002 – Centrica, the UK electricity and gas supplier, has pulled out of its $130m deal to buy US energy company NewPower, following a decision by a New York judge last Wednesday.
The judge presiding over the Enron Bankruptcy case refused to block claims against NewPower for any liabilities it may face because it was part of the collapsed energy trader’s consolidated tax and benefits group for a short time. Enron has a 44 per cent stake in NewPower.
Centrica and NewPower said on Thursday they had agreed to terminate their merger agreement.
Getting the order was necessary for Centrica to complete the tender offer for NewPower shares, the firms said. The UK group announced the deal in February but said at the time it was subject to bankruptcy court approval.
In filings to the court, Enron had argued that if the sale fell through “NewPower’s financial condition will continue to deteriorate”, affecting the value of the stake and the amount Enron creditors will recover from bankruptcy.
“I understand that if the purchaser does not care to go forward, that may very well cost the [Enron] estate,” Mr Gonzalez said on Wednesday. “But I don’t believe I have the authority to give the estate this benefit.”
Enron was also tied to NewPower through deals with the energy trader’s off-balance-sheet partnerships, which are now the subject of a lawsuit filed by other NewPower shareholders.
NewPower supplies about 650 000 mainly residential customers in deregulated US markets. In December, Centrica paid £96.4m for Enron Direct, a UK electricity and gas supplier.
NewPower said that other companies had already expressed interest in a merger but that it was examining other options, including another stock deal, asset sale, and securitization of inventory and receivables.
NewPower said it did not believe the issue of Enron-related liabilities would be a stumbling block to other deals.
“We were only a subsidiary of Enron for 48 days, the risk is very low, but Centrica was especially risk averse and that [indemnity] was something they wanted,” said a spokeswoman for the US company.