Harbinger Brings Attention Back to PGE Once Again

harbinger n. 1. formerly, an advance party of an army or royal party, who arranged for lodging, entertainment, etc. 2. a person or thing that comes before to announce or give an indication of what follows; herald. (Webster’s New World Dictionary)

An investment group called Harbinger Capital Partners Masters Fund has, wittingly or unwittingly, become the first to buy up a significant amount of the newly released stock of Portland General Electric. The investment company owns 7.3% (or 4.5 million shares) of those independent stocks as they were released in early April from Enron bankruptcy holdings. The company has denied seeking to influence the operations of PGE, and it is unknown whether Harbinger purchased the PGE stocks as part of a more general gathering up of Enron creditor claims (the company is known to focus on distressed stock acquisition), or whether they were aiming to buy PGE stocks in particular.

Although 7.3% does not sound like a large amount, owning that much of a company often allows an investor to influence board of director appointments and other critical decisions. For that reason, Oregon has a law that requires a company to file for PUC approval if they own more than 5% of an Oregon investor-owned utility. This is the same law that required Texas Pacific Group to undergo scrutiny of its financial structure and plans for PGE in 2004, in an historic outcome in which the PUC rejected the Texas investment corporation’s attempt to purchase PGE as a whole entity.

The Harbinger we currently face is still unknown to a great extent, except in that it heralds the beginning of another round of ownership proceedings at the Public Utility Commission. It is possible that Harbinger bought the Enron creditor claims as just another distressed company acquisition, and does not wish either to influence the utility or to trigger the Oregon 5% ownership clause, in which case their best option might be to sell 2.4% of the PGE stock they own. Even this sale, however, would be a sizable dump of the newly released stocks and might have to be done gradually so as not to negatively affect the share price.

On the other hand, Harbinger could plan to keep the PGE stock and even purchase more as more becomes available from the Enron bankruptcy court claims (currently, 43% of Enron claims have been released to creditors and the public). This raises issues of what approval is necessary and whether multiple proceedings would be needed, should the investment corporation’s percentage of PGE stock rise from 7% to 10% or 15%.

Whatever the company’s intentions are, the Oregon Attorney General’s office has let Harbinger know that they need to start filing their ownership application with the PUC. And however their long-term plans may play out, CUB will become involved in this case as we have in so many other utility ownership cases in recent years. As long as Harbinger owns 5% or more of PGE stock, we are going to want to see their books, examine their practices, and make some sense of their plans for Oregon’s largest electric utility. And we will ask the PUC to reject the application to own significant amounts of PGE stock if their ownership fails to provide benefits to customers, as was the case with Texas Pacific.

We aren’t yet expecting the worst out of this turn of events. It certainly is a harbinger of continued rounds of activity with regard to PGE, though. The fun just never ends.

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