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Enron's divestiture campaign gaining speed

A clearer picture of Enron Corp.'s progress in a long-announced campaign to sell off worldwide assets emerged on Friday, as word of potential offers for two large power assets arose.

Northwest Natural Gas Co. on Friday said it was in talks to buy Enron's Oregon utility subsidiary Portland General Electric Co., which Enron has been seeking to sell for over a year. Sources said that the gas company would offer $1.8 billion in cash and stock and would assume $1 billion in debt.

Separately on Friday, Indian media reports said that India's largest private utility, Tata Power Co, will finalise a bid in three weeks for Enron's 65 per cent stake in the troubled Dabhol Power project.

Overall, Enron has been seeking to sell the assets to raise cash that it can apply to higher-growth business for a greater return. Though the Portland General and Dabhol sales fit Enron's asset-light approach, each have their own peculiarities that make a sale attractive.

With Dabhol, it is a costly, nasty payment fight pitting Enron and its fellow foreign investors against Dabhol's sole power customer, the Maharashtra State Electricity Board.

Though still profitable, Portland General became a bit of an albatross when the wheels came off of California's electricity market, thanks to a botched deregulation scheme. Seeking a place at the table in the California market, Enron bought the 725,000-customer utility for $2.1 billion in July 1997.

Dabhol suitors come calling

Earlier this week, Tata managing director Adi Engineer told Reuters the company was in preliminary talks to buy Enron's controlling stake in Dabhol Power, which runs a $2.9-billion power project on India's west coast.

Enron spokesman John Ambler declined comment on word of the offer, but said that "We still think there needs to be a central government purchase or involvement at some point," in any deal to sell the Dabhol stake.

Dabhol's 740-MW generator in Maharashtra has been shut since June after the state electricity board stopped buying power and defaulted on payments. Enron then stopped work on a near-complete second phase generation unit that would have increased production capacity to 2,184 MW.

The Financial Express said Indian lenders, who have an exposure of $1.4 billion to the project, will also finalize a revival package in three weeks. The Hindu Business Line said the government had agreed in principle to a set of concessions suggested by the lenders to make the project viable.

European layoffs

Meanwhile, Enron Europe announced Thursday that it would cut between 5-10 per cent of its 5,000 jobs.

"Enron's business continues to grow in Europe in terms of traded volumes and numbers of transactions, but like any company we are constantly seeking ways to do more with less in order to maintain earnings growth," Enron Europe President and CEO John Sherriff said in a statement.

Sheriff did not elaborate where the cuts would come from. It was unclear whether those cuts included the unspecified number of staff severed from Enron Europe's metals division, a reduction the company announced in mid-July.

The latest cuts come amid a slower-than-expected deregulation of wholesale markets in the European Union. Enron's core marketing and trading business is built to function best in a liquid and transparent wholesale marketplace.

The Enron Saga

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