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Enron proposes plan for new company

Bankrupt Enron Corp on Friday proposed remaking itself as a smaller power and pipeline company, a move welcomed by creditors who reviewed an early draft of the plan, the company said.

Under the proposal, Houston-based Enron would retain pipelines, power plants, and distribution networks in North, Central and South America, while selling European and Asian assets under bankruptcy proceedings.

It would also keep Portland General Electric, throwing doubt on a proposed sale of that utility to Northwest Natural Gas Co.

"I think (creditors) were pleased with the progress that has been made to date," said Stephen Cooper, Enron's interim chief executive and restructuring officer. "I think that they were open to proposals that we made today...and to working hand-to-hand with us."

Luc Despins, an attorney for the creditors committee, said the committee will consider Enron's proposal for "many weeks" before taking a position.

The proposed company -- called OpCo Energy Company -- would include gas transmission networks, a major utility in Oregon, and a workforce of about 12,000 employees, down from Enron's current staff of 23,000. Enron said the plan would not result in massive layoffs since many jobs would be moved to acquiring companies once units get sold.

AUCTIONS TO PAY CREDITORS

Cooper said his proposal aims to remove Enron's core energy assets from the control of the bankruptcy court. It would auction assets to the highest bidder under Section 363 of the US Bankruptcy Code.

Creditors would receive cash, stock or other financial instruments based on the value of those sales. After that, they would not have claims on OpCo.

"Taking our core energy assets out from under the fallout of the Enron bankruptcy is...of the best ways we can maximise value in the shortest amount of time," said Cooper, who was hired in January to restructure the failed energy giant.

He said he hopes to complete the auction and sale process by the end of 2002.

Houston-based Enron released details of its business plan for the new company. It estimated OpCo could have $10.8 billion in assets. It could also post earnings in excess of $1.3 billion before interest, taxes, depreciation and amortisation in calendar 2003.

The company is also considering selling off European and Asia assets, which are not considered core energy businesses.

"Most of our assets that are outside of North, Central and South America will be disposed of," Cooper said. Those assets include wind-generation business, a power plant in India and real estate.

He estimated that the entire amount creditors could recover ranged between $15 billion to over $20 billion. Creditors are owed more than $40 billion.

Cooper made his proposals to Enron's creditors committee early Friday in New York. Any reorganisation plans must be cleared by the creditors before they are sent to bankruptcy court for final approval.

Enron filed for Chapter 11 bankruptcy protection from its creditors on Dec 2 following the collapse of the former energy trading giant over questions about its accounting and partnerships.

THREE OPERATING AREAS

The business plan divides OpCo into three areas -- transportation services, power distribution, and generation and production. The proposed company could have 15,000 miles of pipeline assets, 75,000 miles of distribution assets and 6,700 megawatts of generation, Enron said.

Enron included Portland General Electric as a key piece in its new company, throwing doubt on whether a proposed sale of the utility would go through. Enron in October agreed to sell PGE, an Oregon utility, to Northwest Natural Gas Co for about $1.8 billion.

"In its reorganisation plan issued today, Enron has indicated its preference to keep PGE. However, it has not formally notified Northwest Natural that it has rejected the agreement," Northwest Natural's chief executive officer, Richard Reiten, said in a statement.

When asked about PGE's sale, Cooper said Enron "had not foreclosed on the possibility of a sale" and said talks continued with Northwest. Northwest's Reiten said his company will work with Enron over the next two weeks to clarify Enron's intentions.

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