$2.1-Billion Deal Would Create Utility Giant

Energy marketer Enron Corp. said Monday that it will buy Portland General Corp., a big Oregon utility, for $2.1 billion in stock, a deal that would create the nation’s largest combined electric and natural gas utility.

The deal, the latest of several prompted by the continuing deregulation of the utility industry, also includes assumption of $1.1 billion in debt.

Houston-based Enron is one of the biggest sellers of natural gas and wholesale electricity in North America. Portland, Ore.-based Portland General is a low-cost electric utility serving 657,000 retail customers in northwest Oregon as well as wholesale electricity customers nationwide.

The agreement comes as the electric utility industry has been consolidating and as customers are being allowed to shop more aggressively for power from the cheapest source.

“We believe it is a truly innovative transaction that will alter the future of natural gas and electricity,” said Ken Lay, Enron chairman and chief executive.

With the purchase, Enron would have the capability to generate, transmit and distribute natural gas and electricity.

“This is likely to accelerate the sale of cheaper third-party electricity in the West as soon as the regulatory barriers fall further,” said analyst Steven A. Parla of CS First Boston.

Most utilities now operate as regulated monopolies in specific territories.

Other recent utility deals include Texas Utilities Co.’s agreement earlier this year to buy natural gas company Enserch Corp. for $1.7 billion.

But the Enron-Portland General deal is the first to involve a major gas company and could increase the pace of mergers within energy industries, Parla said.

The combined company would own more than 5,900 megawatts of electricity-generating capacity worldwide. It would also own more than 37,000 miles of natural gas pipeline.

Under terms of the deal, Portland General shareholders would get one share of Enron stock for each of their 51 million shares.

Enron shares fell $2 to close at $39.75; Portland General shares were up $6.75 at $34.875. Both trade on the New York Stock Exchange.

Portland General, which has 2,600 employees, would join Enron’s four other business units and would remain in Oregon, the companies said.

There could be modest job cuts, according to Ken Harrison, chairman and chief executive of Portland General, who would retain his current title and would also become vice chairman of Enron. Lay would remain Enron’s chairman and chief executive.

The boards of both companies have approved the deal, which is still subject to approval by shareholders, expected in October. Federal regulatory approval is expected to take about a year.