Enron Opens Bidding on 12 of Its Key Assets

August 29 2002 – Enron Corp., adding to the glut of power plants and pipelines on the market, has opened up bidding on 12 of its main assets, including Portland General Electric in Oregon and a Quebec paper mill, as well as pipelines, power plants and an electric-distribution company in South America.

The Houston energy company announced in May that it intended to create a new company with these assets, but that it would first put them on the auction block in bankruptcy court in an attempt to place a market value on them to satisfy creditors. The creditors then have a choice either to accept the bids or to take a stake in the reorganized company.

More recently, creditors have been pushing for an outright sale of Enron’s assets, which would allow them to recoup a portion of their losses right away instead of making them part owners of a reconstituted company, according to a person familiar with the matter. Creditors are now willing to scrap the plan for the new company and weigh separate bids for individual Enron assets, the person said.

The auction, which is to be completed by the end of November, comes at a difficult time. Since Enron filed for bankruptcy protection in December, many of its onetime competitors are now facing their own liquidity problems and are selling power plants and pipelines to bolster their balance sheets. And so far, it doesn’t look good for the sellers. Houston-based Dynegy Inc. just sold its Northern Natural Gas pipeline for $928 million in cash and $950 million in debt to MidAmerican Energy Holdings Co., which is part-owned by Warren Buffett’s Berkshire Hathaway Co. That was 40 per cent less than the $1.5 billion Dynegy paid Enron for the pipeline only nine months ago.

Michael Hoffman, of Blackstone Group, which is running the auction, acknowledged it would be a tough time to sell the assets. He said confidentiality agreements with a number of potential bidders have been signed, adding that they include international and US utilities, financial buyers and private-equity firms that traditionally haven’t looked at the power industry. “We’re going to a broader group than normal,” he said. “This is not like the telecom business, where it’s very difficult to get people to show up. Generally speaking, these are high-quality, good cash-flow assets that in good markets or bad markets should attract serious bidders.”

Enron also is selling its two major pipeline units, Northern Plains Natural Gas Co. and Transwestern Pipeline Co., which consists mostly of a natural-gas pipeline from west Texas to California. Enron’s Northern Plains unit owns a majority of publicly traded Northern Board Partners, which includes a pipeline from Canada to the Midwestern US.

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