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SDG&E; Quiet as Analysts Ponder Move

Times Staff Writer

San Diego Gas & Electric Co. executives maintained their silence Friday about the events that forced the scuttling of a planned merger with Tucson Electric Power, as industry analysts predicted that the utility will soon reconsider SCEcorp’s stock-swap merger offer, which SDG&E;'s directors unanimously rejected Sept. 1.

“I think that (SDG&E; has) got to do it,” said Edward J. Tirello, a New York-based utility industry analyst with Shearson Lehman Hutton. “I think that they have to do it during the next 30 to 60 days.”

An SCE spokeswoman declined to comment on whether SCE, the Rosemead-based parent company of Southern California Edison, had already asked SDG&E;'s board to reconsider its $2.16-billion offer made in early July.

SCE wants to merge SDG&E; into Edison, creating the nation’s largest electric utility, with 4.8 million customers. San Francisco-based Pacific Gas & Electric Co., with slightly more than 4 million customers, is now the nation’s largest.

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SDG&E; executives Friday declined to comment on whether the utility will present SCE’s bid to its shareholders.

Fueled the Speculation

With the proposed SDG&E-Tucson; Electric merger dashed, analysts speculated that SDG&E--which; will need more purchased electricity to sate its growing demand--might try to arrange a merger or acquisition with another power-rich utility in the Southwest.

SDG&E; Chairman Thomas Page fueled that speculation Thursday by suggesting that his firm intends to explore some “extraordinary transactions.”

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Analysts were uncertain, however, what Page actually meant.

“That was a pretty vague and all-encompassing statement,” said John Curti, a San Francisco-based industry analyst with Birr, Wilson. “It suggests a merger, an acquisition or a leveraged buyout, but you have to wonder just what, if anything, is possible.”

“It’s too early to tell what the fallout will be,” said G. Mitchell Wilk, a member of the state Public Utilities Commission, who suggested that California’s utility industry might still see a long-predicted wave of mergers.

‘Just a Matter of Time’

“If San Diego does end up merging with Edison, we’re going to have the two largest utilities in the world right here in California,” Wilk said. “I think we’ve all known that it’s just a matter of time” before mergers occur in California.

Wilk was uncertain why SDG&E; and Tucson Electric called off the merger that was first announced in early June.

“If I believe everything that I read in the newspapers, one would assume that benefits (sought by SDG&E; and Tucson Electric) might not have been realizable,” he said.

Wilk also suggested that SDG&E; and Tucson Electric abandoned their deal because of a restriction federal regulators placed on an Oregon utility that last week won permission to merge with a Utah utility.

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Thursday’s terse press release by SDG&E; acknowledged only that the two utilities disagreed on how to fend off SCE, which had pledged to oppose the merger during upcoming regulatory hearings in California, Arizona and Washington, D. C.

One industry observer suggested that top executives disagreed on whether the two utilities should have used extensive litigation to limit SCE’s role during upcoming regulatory reviews.


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