Texas Pacific rips watchdogs
PGE suitor accuses consumer groups of acting in self-interest
Texas Pacific Group partner Kelvin Davis says Oregon's consumer groups Ñ whose mission is to protect utility customers Ñ are acting in their own self-interest when they try to hinder the company's proposed $2.35 billion purchase of PGE.
If the sale is turned down by the Oregon Public Utility Commission, he said, 'there is no $43 million rate credit. Customers will lose hundreds of thousands of dollars in rate relief.
'Who is representing whose interest here?' he continued. 'I question if customers' interest is being represented fairly' by the Citizens Utility Board of Oregon and Industrial Customers of NW Utilities.
Davis made the comment Wednesday, a day after the Portland Building Owners and Managers Association filed a motion to reopen regulators' briefings on the sale.
BOMA attorney Ann Fisher said the acquisition needs to be reconsidered, now that Texas Pacific has said that recently leaked documents are not the investment group's definitive plans for PGE's future.
'I want to be able to gauge whether these materials should be taken seriously,' she said. 'I'm sure if you went through the documents, there are questions that should come up now that they're available.'
Texas Pacific has 15 days to respond to the motion before the PUC rules on it. A decision on the PGE sale itself is expected by the end of the month.
The building owners group and Citizens Utility Board of Oregon are among the consumer groups opposed to the PGE sale, as well as many business and city leaders. The Oregon Business Association and Salem Chamber of Commerce support it.
If the PUC approves the $2.35 billion deal with Texas Pacific with what Fisher describes as 'wimpy' conditions, she said a coalition of consumer activists might file an appeal through the commission and Marion County Circuit Court.
Texas Pacific's Davis said he doubted such a move would be given much credence.
'I think the commission has extremely broad authority to make this ruling,' Davis said. 'They've done a thoughtful review of this case. I'd be surprised if anyone thought they had grounds for an appeal, if it was approved.'
Sale vs. IPO
Texas Pacific leaders have spent the last week countering elements contained in the 2003 documents, including its plans for reselling PGE.
Davis said at this point Texas Pacific favors an initial public offering, which many analysts say would be less profitable than an actual sale. It also would be dependent on the stock market's receptiveness and PGE's profitability.
'Since we made a commitment, our views have changed, so we think the most likely exit is an IPO, but it could be sold strategically,' Davis said. 'We are investing in the business to own it and make it better.'
A PGE stock offering 'is most likely just a bunch of baloney,' said CUB's Jason Eisdorfer. 'Their own documents indicate they could earn $400 million more by selling it than an IPO. They think people want to hear they are going to spin it off. These guys haven't earned anybody's trust.'
'Anyone making a risky investment like this should expect an annual return rate of 15 percent,' said Jim Bellessa, a utility analyst for D.A. Davidson, referring to Texas Pacific's $440 million contribution to the $2.35 billion cash-and-debt purchase. 'They're probably shooting for 20 percent.'
In this case, he said, Wall Street's expectation would be for the firm to double its investment within three to five years.
Possible buyers outlined
Meanwhile, as Texas Pacific tries to field criticism about how it would take care of PGE, the leaked papers show that the investment group already has pinpointed 13 potential buyers.
Among them, two former PGE suitors: the NW Natural gas utility and Pacific Power's parent company.
The two companies' strengths Ñ and potential interest Ñ in acquiring PGE are outlined amid the 700 pages of confidential documents that Texas Pacific was compelled to release earlier this week after Willamette Week revealed millions of dollars in potential staff and capital cutbacks.
NW Natural, whose bid for PGE was abandoned when PGE's parent company, Enron Corp., went spectacularly bankrupt in December 2003, was highlighted for its 'previous strong intentions to buy PGE.'
Referring to Pacific Power's parent, Scottish Power PLC, consultants wrote that the company 'has previously indicated interest in PGE,' but they said they were uncertain if the company would be pursuing acquisitions of additional U.S. utilities.
Eleven other potential buyers are listed in the report, ranging from Sempra Energy Inc. of Southern California to MidAmerican Energy Holdings Co. of Des Moines, Iowa.