05:28 PM PST on Wednesday, January 5, 2005

By kgw.com and AP Staff

The proposed $2.35 billion sale of Enron subsidiary Portland General Electric to the Texas Pacific Group is exactly what critics and opponents fear -- a quick turnaround plan to make a huge profit on the largest remaining asset in the Enron bankruptcy, according to documents obtained by a Portland newspaper.

kgw.com Graphic

PGE's downtown Portland headquarters.

Willamette Week reported in its regular Wednesday edition it has obtained confidential documents that outline Texas Pacific plans to make big cuts in PGE staff to reap an estimated $800 million to $1.2 billion profit on the utility by selling it within five years.

Initial details of the documents uncovered by the newspaper were also broadcast Tuesday night on KGW.

Code-named "Project Tahoe," the documents were submitted to the Oregon Public Utility Commission by the Fort Worth-based investment firm, whose co-founder and managing partner, David Bonderman, has established a track record of turning around troubled companies, including Continental Airlines and Burger King.

The documents also were made available to dozens of "intervenors" in the OPUC regulatory hearings who oppose the Texas Pacific buyout proposal -- with the condition the material be kept confidential.

Those intervenors include the city of Portland, consumer watchdog groups and some of the biggest corporate names in Oregon, including Intel Corp., the largest single employer in the state with its largest U.S. division spread across the western suburbs of Portland.

Willamette Week said it obtained the documents from one of the intervenors but did not identify which one.

Texas Pacific, in a statement issued Wednesday afternoon in response to questions from KGW, labeled the disclosure of the documents "illegal" and accused the newspaper of taking the "information out of context" and presenting it in a "highly sensational fashion."

OPUC Chairman Lee Beyer told The Associated Press the documents amount to "mere speculation" about possible outcomes of the sale, and he emphasized the commission has not made a decision -- despite a recommendation from its own staff to reject the deal.

Beyer said Texas Pacific, acting under the widely accepted rules of corporate "due diligence," carefully analyzed Portland General Electric and came up with various "scenarios" on how to balance public benefit with increased profitability under the buyout proposal.

"It's a lot of financial modeling," he said. "The documents are purely speculative."

John Mangan, spokesman for Texas Pacific, reiterated Wednesday that the investment firm has no "specific plans" for "cost cutting or staffing reductions" at PGE.

He also said the company Texas Pacific formed to handle the buyout, Oregon Electric, "has been very clear" that it plans to run PGE for up to 12 years.

Bob Jenks, director of the Citizens Utility Board of Oregon, a watchdog group, said the only thing that has been clear is that Texas Pacific wants to sell PGE again.

"The fact that their most likely outcome is selling to another company is in the public record," Jenks said, noting the extensive filings by the Citizens Utility Board and other intervenors during OPUC hearings that confirm Texas Pacific has "a history of costcutting when they buy companies."

The alternative to the Texas Pacific buyout, Beyer noted, is to reject the deal and send it back to U.S. Bankruptcy Judge Arthur Gonzalez in New York, who has considered simply distributing PGE stock among Enron creditors to satisfy the bankruptcy debts, likely leaving current PGE management in place.

"We have a clear job," Beyer said, "and that is to make sure the ratepayers of Portland General Electric get reliable power at the cheapest rate possible."

Willamette Week, however, contended the documents confirm what critics have said all along -- that Texas Pacific has no interest in running a utility or becoming part of the community it serves.

Erik Sten, the Portland city commissioner who has led a city effort to buy PGE and turn it into a municipal utility, said he had not seen the "Project Tahoe" documents but that city staff had read them.

"It doesn't surprise me, but it disappoints me that the public essentially has been given a false story about their plans," Sten told AP.

"It's been clear all along that these guys (Texas Pacific) are in it for the short term," he said. "I'm glad it's coming out now rather than after (PGE) is sold."

One of the intervenors, the Portland Building Owners and Managers Association, recently filed a motion seeking to make the documents public.

In the motion, the association's attorney, Ann Fisher, wrote that Texas Pacific has "placed advertisements and made public statements, including statements made during oral argument, that are inconsistent with the material contained in the protected" confidential documents.

The Oregon Public Utility Commission held an executive session Wednesday afternoon, with commissioners reportedly discuss the disclosure of the confidential documents.

Beyer, however, said the disclosure will not affect their decision.

"We'll take the time necessary so we'll feel comfortable with our decision in the end," Beyer said.