[Federal Register Volume 70, Number 132 (Tuesday, July 12, 2005)]
[Notices]
[Pages 40075-40081]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-3663]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 35-27995]


Filings Under the Public Utility Holding Company Act of 1935, as 
Amended (``Act'')

July 6, 2005.
    Notice is hereby given that the following filing(s) has/have been 
made with the Commission under provisions of the Act and rules 
promulgated under the Act. All interested persons are referred to the 
application(s) and/or declaration(s) for complete statements of the 
proposed transaction(s) summarized below. The application(s) and/or 
declaration(s) and any amendment(s) is/are available for public 
inspection

[[Page 40076]]

through the Commission's Branch of Public Reference.
    Interested persons wishing to comment or request a hearing on the 
application(s) and/or declaration(s) should submit their views in 
writing by July 28, 2005, to the Secretary, Securities and Exchange 
Commission, Washington, DC 20549-0609, and serve a copy on the relevant 
applicant(s) and/or declarant(s) at the address(es) specified below. 
Proof of service (by affidavit or, in the case of an attorney at law, 
by certificate) should be filed with the request. Any request for 
hearing should identify specifically the issues of facts or law that 
are disputed. A person who so requests will be notified of any hearing, 
if ordered, and will receive a copy of any notice or order issued in 
the matter. After July 28, 2005, the application(s) and/or 
declaration(s), as filed or as amended, may be granted and/or permitted 
to become effective.

Enron Corp., et al. (70-10309)

    Enron Corp. (``Enron'' or ``Applicant''), 1221 Lamar, Suite 1600, 
Houston, Texas 77010-1221, a registered holding company, on its behalf 
and on behalf of its subsidiaries held as of the date of this notice, 
including Portland General Electric Company (``Portland General''), 121 
Salmon Street, Portland, Oregon 97204, a public utility company 
(collectively, ``Applicants''), have filed an application-declaration 
(``Application'') with the Commission under sections 6(a), 7, 9(a), 10, 
12(b),(c), and (f), 13(b) of the Act and rules 42-46, 52-54, 80-87, and 
90-91 under the Act.

I. Introduction

A. Enron and Its Subsidiaries

1. Enron
    Enron is a registered holding company within the meaning of the Act 
by reason of its ownership of all of the outstanding voting securities 
of Portland General, an Oregon electric public utility company. From 
1985 through mid-2001, Enron grew from a domestic natural gas pipeline 
company into a large global natural gas and power company. 
Headquartered in Houston, Texas, Enron and its subsidiaries 
historically provided products and services related to natural gas, 
electricity, and communications to wholesale and retail customers.
    Commencing on December 2, 2001, and periodically thereafter, Enron 
and certain of its subsidiaries each filed a voluntary petition for 
relief under chapter 11 of title 11 of the United States Code (the 
``Bankruptcy Code'') in the United States Bankruptcy Court for the 
Southern District of New York (``Bankruptcy Court''). One hundred 
eighty (180) Enron-related entities filed voluntary petitions. Enron 
and its subsidiaries that filed voluntary petitions are referred to as 
the ``Reorganized Debtors.'' \1\ Portland General, Enron's sole public 
utility subsidiary company, did not file a voluntary petition under the 
Bankruptcy Code and is not in bankruptcy. Likewise, many other Enron-
affiliated companies that are operating companies have not filed 
bankruptcy petitions and continue to operate their businesses.
---------------------------------------------------------------------------

    \1\ The Portland Debtors are Portland General Holdings, Inc. and 
Portland Transition Company, Inc. Reorganized Debtors mean the 
debtors, other than the Portland Debtors, from and after November 
17, 2004. As used in this Application, when relief is requested for 
the Reorganized Debtors, the Portland Debtors shall be deemed 
included in such request.
---------------------------------------------------------------------------

    On March 9, 2004, Enron registered as a holding company under the 
Act. On that date the Commission issued an order authorizing Enron and 
certain subsidiaries to engage in financing transactions, nonutility 
corporate reorganizations, the declaration and payment of dividends, 
affiliate sales of goods and services, and other transactions needed to 
allow the applicants to continue their businesses through the time 
leading up to the expected sale of Portland General at which point 
Enron would deregister under the Act (``Omnibus Order'').\2\ The second 
order, referred to as the ``Plan Order'', authorized the Fifth Amended 
Joint Plan of Affiliated Debtors Pursuant to Chapter 11 of the 
Bankruptcy Code, dated January 9, 2004 (``Fifth Amended Plan'') under 
section 11(f) of the Act.\3\ The Plan Order also constituted a report 
on the Fifth Amended Plan under section 11(g) of the Act and authorized 
the debtors to continue the solicitation of votes of the debtors' 
creditors for acceptances or rejections of the Fifth Amended Plan.
---------------------------------------------------------------------------

    \2\ Enron Corp., et al., Holding Co. Act Release No. 27809 
(March 9, 2004), Enron Corp., et al., Holding Co. Act Release No. 
27882 (August 6, 2004) (``Supplemental Order'').
    \3\ Enron Corp., Holding Co. Act Release No. 27810 (March 9, 
2004).
---------------------------------------------------------------------------

    By order, dated July 15, 2004, the Bankruptcy Court confirmed the 
Supplemental Modified Fifth Amended Joint Plan of Affiliated Debtors 
Pursuant to Chapter 11 of the United States Bankruptcy Code, dated July 
2, 2004 (the ``Plan''). The Effective Date of the Plan occurred on 
November 17, 2004. With limited exceptions the Debtors became 
Reorganized Debtors.
    As explained in the Plan Order, the Plan does not provide for Enron 
to survive in the long term as an ongoing entity with any material 
operating businesses. Enron's role as a Reorganized Debtor is to hold 
and sell assets and to manage the litigation of the estates pending the 
final conclusion of the bankruptcy cases.
    On November 17, 2004, the debtors entered into a common equity 
trust agreement and a Preferred Equity Trust Agreement with Stephen 
Forbes Cooper LLC, a New Jersey limited liability company (``SFC'').\4\ 
Under the Common Equity Trust Agreement and the Preferred Equity Trust 
Agreement, SFC acts as a trustee of two trusts formed to hold Enron's 
Common Stock (the ``Common Equity Trust'') and four classes of 
preferred stock (the ``Preferred Equity Trust''), respectively, which 
were issued pursuant to the Plan on its Effective Date. The 
beneficiaries of these two trusts are the former holders of Enron's 
common stock and four classes of preferred stock that were cancelled on 
the Effective Date pursuant to the Plan. The interests in such trusts 
are uncertified, non-voting and non-transferable, except that such 
interests may be transferred by the laws of descent and distribution. 
In the highly unlikely event that the value of Enron's assets exceed 
the amount of its allowed claims under the Plan, Enron will make 
distributions pursuant to the Plan to the Common Equity Trust and the 
Preferred Equity Trust based upon the relative rights and preferences 
of the stock of Enron that such trusts hold, and such trusts will make 
distributions to the holders of their trust interests. Distributions 
from the Preferred Equity Trust will be made based upon the relative 
rights and preferences allocated among its trusts interests. The Common 
Equity Trust Agreement and the Preferred Equity Trust Agreement do not 
provide for compensation of SFC as trustee, which compensation is, 
instead, provided for in the Reorganized Debtor Plan Administration 
Agreement (the ``Plan Administration Agreement'').
---------------------------------------------------------------------------

    \4\ SFC has provided management services to the debtors during 
the course of their bankruptcy. Also, prior to the Effective Date, 
Stephen Cooper, a member of SFC, has acted as Interim President, 
Interim Chief Executive Officer and Chief Restructuring Officer of 
the Company.
---------------------------------------------------------------------------

    On November 17, 2004, Enron and certain of its affiliates 
consummated the sale of 100% of the equity interests of CrossCountry 
Energy, LLC (``CrossCountry'') to CCE Holdings, LLC, a joint venture of 
Southern Union Company and GE Commercial Finance Energy Financial 
Services, an affiliate of the General Electric Corporation. 
CrossCountry was formed in June 2003 to hold interests in and operate 
Enron's interstate natural gas pipeline assets,

[[Page 40077]]

including Enron's interest in Transwestern Pipeline Company, Citrus 
Corp. and Northern Plains Natural Gas Company. CCE Holdings, LLC paid 
Enron and its affiliates a net cash purchase price of approximately 
$2.1 billion.
2. Portland General
    Portland General, incorporated in 1930, is a single, integrated 
electric utility engaged in the generation, purchase, transmission, 
distribution, and retail sale of electricity in the State of Oregon. 
Portland General also sells wholesale electric energy to utilities, 
brokers, and power marketers located throughout the western United 
States. Portland General's service area is located entirely within 
Oregon and covers approximately 4,000 square miles. It includes 52 
incorporated cities, of which Portland and Salem are the largest. 
Portland General estimates that at the end of 2004 its service area 
population was approximately 1.5 million, comprising about 43% of the 
state's population. As of December 31, 2004, Portland General served 
approximately 767,000 retail customers. For the 12 months ended 
December 31, 2004, Portland General and its subsidiaries had operating 
revenues of $1,454 million and net income of $92 million on a 
consolidated basis. As of December 31, 2004, Portland General and its 
subsidiaries had retained earnings of $637 million and assets of $3,403 
million on a consolidated basis.
3. Prisma Energy International Inc.
    Prisma Energy International Inc. (``Prisma'') is a foreign utility 
company (``FUCO''). Prisma is a Cayman Islands limited liability 
company that was organized on June 24, 2003, for the purpose of 
acquiring the Prisma assets consisting principally of non-U.S. electric 
and gas utility businesses and related intercompany loans and 
contractual rights. Enron and its affiliates have contributed the 
Prisma assets to Prisma in exchange for shares of Prisma Common Stock 
commensurate with the value of the Prisma assets contributed. Prisma is 
engaged in the generation and distribution of electricity, the 
transportation and distribution of natural gas and liquefied petroleum 
gas, and the processing of natural gas liquids.

II. Requested Authority

    The Applicants request authorization for certain financing, 
nonutility corporate reorganizations, dividends, affiliate sales of 
goods and services and related transactions until July 31, 2008 
(``Authorization Period''), to allow Enron and its subsidiaries to 
continue to operate their businesses. In particular, Applicants request 
authorization for intrasystem extensions of credit, cash management 
arrangements among Enron group companies other than Portland General, 
and for the issuance of debt by Portland General. Applicants state 
that, generally, the authorizations requested extend, during the 
Authorization Period, the authorizations granted by the Commission in 
the Omnibus and Supplemental Orders.

A. Letters of Credit

    Under the Omnibus Order, as amended by the Supplemental Order, 
Enron extended or replaced the letters of credit that were outstanding 
under its Second Amended DIP Credit Agreement (as defined in the 
Omnibus Order) with a new agreement with Wachovia Bank National 
Association. Under this agreement, Enron and certain other Reorganized 
Debtors were authorized to issue letters of credit on a secured basis, 
in an amount not to exceed $25 million, in order to replace the 
existing letters of credit outstanding under the Second Amended DIP 
Credit Agreement. Applicants, other than Portland General, seek 
authorization to replace or extend such letters of credit and to enter 
into one or more new letter of credit agreements for the issuance of 
letters of credit in an aggregate amount of up to $25 million, as 
necessary, during the Authorization Period.
    The replacement letters of credit would be cash collateralized and 
would not be guaranteed by any subsidiaries of Enron, including 
Portland General. To the extent that a letter of credit is issued on 
behalf of an Enron subsidiary, such subsidiary would post the cash 
collateral. The reimbursement obligations in connection with the 
letters of credit would not be secured by a pledge of Portland General 
stock under the facilities authorized in this Application. In addition, 
no letters of credit would be issued on behalf of Portland General.

B. Enron Cash Management

    Following the Effective Date and consistent with the Plan, 
Applicants have managed cash on a centralized basis to facilitate 
implementation of the Plan. In the normal course of operations and as 
approved by the Amended Cash Management Order issued by the Bankruptcy 
Court, Enron and its subsidiaries have an active cash management system 
and overhead cost allocations that result in significant intercompany 
transactions recorded as intercompany payables, receivables and debt. 
With respect to activity in which one party is a Reorganized Debtor, an 
interest rate equal to one month London Interbank Offered Rate 
(``LIBOR'') plus 250 basis points is charged on outstanding balances. 
With respect to activity between non-debtors, no interest is charged.
    Applicants seek Commission authorization for associate companies, 
other than Portland General, to continue to borrow and lend funds 
during the Authorization Period under these terms. Portland General is 
not a lender to Enron or any other Enron group company and will not 
make loans under the authorization requested. Applicants maintain that 
except as noted below Portland General does not seek authorization in 
this Application to lend to Enron or any other Enron group company.

C. Portland General Cash Management Agreements

    Portland General has entered into agreements with its wholly-owned 
subsidiaries for cash management. Applicants state that the cash 
management agreements, like typical money pools, permit the efficient 
use of cash resources. Under the agreements, Portland General 
periodically transfers from the bank accounts of each subsidiary any 
cash held in the subsidiary's bank account. If the subsidiary has cash 
needs in excess of any amount remaining in the account, upon request, 
Portland General transfers the required amount into the subsidiary's 
bank account. Portland General does not pay interest on the amounts 
transferred from a subsidiary's account unless the closing balance of 
the amount transferred at the end of any month exceeds $500,000. Any 
interest paid is at an annual rate of three percent (3%) and is 
retained by Portland General until returned to the subsidiary to meet 
its cash needs. All administrative expenses are borne by Portland 
General. Portland General seeks authorization to continue to perform 
under such cash management agreements.

D. Global Trading Contract and Asset Settlement and Sales Agreements

    Certain settlement agreements and asset sales entered into by Enron 
and its subsidiaries may involve extensions of credit among associate 
companies subject to section 12(b) of the Act and rule 45(a). Enron's 
subsidiaries were extensively engaged in retail and/or wholesale 
trading in various commodities including, but not limited to, energy, 
natural gas, paper pulp, oil and currencies. Subsequent to the 
bankruptcy filings, these companies

[[Page 40078]]

now are engaged in settling these contracts with unaffiliated 
counterparties. The settlement agreements often take the form of global 
contract or asset settlements whereby several Enron subsidiaries seek 
to settle numerous retail or wholesale trading and related contracts or 
claims to assets with a group of related counterparties. Settlements of 
energy trading contracts entered into by Portland General are not 
addressed in this section. In addition, asset or stock sale agreements 
may be entered into between Enron and/or its subsidiaries and 
unaffiliated counterparties. The settlements and sales may involve 
extensions of credit among associate companies, guaranties and 
indemnifications. Some of the claims resolved in these settlements are 
in-the-money to the settling Enron companies (i.e., money is owed to 
the settling Enron companies). Other claims (which will be resolved 
through the claims process and result in distributions after the 
approval of the Plan) are out-of-the money (i.e., money is owed by the 
settling Enron companies to the settling counterparty companies). Under 
a settlement agreement, or asset or stock sale agreement, the value 
associated with a group of contracts or claims may be netted into a 
single aggregate payment to be paid to or by the appropriate 
Reorganized Debtor(s) to resolve all claims between the settling Enron 
companies and the settling counterparty companies. Although undefined 
at the time of the settlement, each settling company presumably has 
some right to a portion of the settlement proceeds or a liability for a 
portion of the settlement payment, so, arguably, collecting or paying 
the funds centrally would create a form of an intercompany extension of 
credit. Applicants seek to continue to execute settlement agreements 
and asset or stock sale agreements in this fashion, as an efficient 
manner of resolving numerous complex claims and converting them to 
cash. Applicants state that it would be much less efficient for the 
creditors to first litigate the allocation of claims among the numerous 
Enron subsidiaries and then to negotiate individually with 
counterparties to settle these claims individually. Any settlement or 
sale proceeds or costs aggregated as a result of a settlement will be 
allocated among the Enron companies pursuant to the Plan.

E. Portland General Financing

    Portland General seeks authorization to issue debt with a maturity 
of less than one year.\5\ Portland General requests authorization to 
issue short-term debt in the form of bank or other institutional 
borrowings, bid notes, commercial paper or as otherwise necessary to 
fund short-term capital requirements.
---------------------------------------------------------------------------

    \5\ Portland General is subject to the jurisdiction of the 
Oregon Public Utility Commission (``OPUC'') with respect to the 
issuances and sales of securities with maturities of one year or 
longer. OPUC approval also is required for Portland General to enter 
into an agreement under which securities are issued for less than 
one year if the agreement itself has a maturity of more than one 
year. The issuance of securities by Portland General to finance the 
utility's business with a maturity of one year or longer would be 
conducted under OPUC authorization and in reliance on the exemption 
provided by rule 52(a) under the Act.
---------------------------------------------------------------------------

    All issuances of short-term debt would not exceed $600 million in 
aggregate principal amount outstanding (``Short-Term Debt Limit''). In 
addition, Portland General will not issue any additional short-term 
debt if Portland General's common stock equity as a percentage of total 
capitalization is less than 30%, after giving effect to the issuance. 
The effective cost of capital on short-term debt will not exceed 
competitive market rates available at the time of issuance for 
securities having the same or reasonably similar terms and conditions 
issued by similar companies of reasonably comparable credit quality; 
provided that in no event will the effective cost of capital on short-
term debt exceed 500 basis points over the London Interbank Offered 
Rate (``LIBOR'').
    Portland General further commits that it would not issue short-term 
debt under the authorization requested unless, at the time of issuance, 
(i) the security to be issued, if rated, is rated investment grade, and 
(ii) all outstanding Portland General securities that are rated are 
rated investment grade, in each case by at least one nationally 
recognized statistical rating organization.\6\ Applicants request that 
the Commission reserve jurisdiction over the issuance by Portland 
General of any short-term debt that is rated below investment grade 
pending completion of the record.
---------------------------------------------------------------------------

    \6\ The term ``nationally recognized statistical rating 
organization'' shall have the same meaning as in rule 15c3-
1(c)(2)(vi)(F), 17 CFR 240.15c3-1(c)(2)(vi)(F). Investment grade 
long-term debt is denoted by the Standard & Poor's ratings of AAA, 
AA, A and BBB, with some ratings also including a + or - to further 
differentiate creditworthiness. Moody's Investors Service uses the 
ratings Aaa, Aa, A and Baa to denote investment grade long-term 
debt.
---------------------------------------------------------------------------

    Portland General has two revolving credit facilities with a group 
of commercial banks totaling $150 million, consisting of a $50 million 
364-day facility which expired on May 23, 2005, and a $100 million 
three-year facility. Portland General plans to enter into a new 
unsecured five-year $400 million revolving credit agreement to replace 
the 364-day facility and the three-year facility, which will be 
terminated on execution of the new facility. The facility would allow 
Portland General to issue letters of credit, in addition to borrowings, 
totaling up to the full amount of the facility, and will contain a 
``term out'' option that would allow Portland General to extend the 
final maturity of the facility prior to its initial and each subsequent 
expiration date for up to an additional year. The new credit facility 
would be subject to approval by the OPUC. Portland General requests 
authorization to borrow or issue letters of credit in the aggregate 
amount of $400 million under the new facility.
    Portland General also seeks authorization to issue additional 
short-term debt generally in the form of, but not limited to, 
borrowings from banks and other institutions, commercial paper and bid 
notes or as otherwise may be necessary to replace, extend, rearrange, 
modify or supplement the facilities described above. Portland General 
may sell commercial paper, from time to time, in established U.S., 
Canadian or European commercial paper markets.
    Within the financing parameters described above, Portland General 
also may establish bank lines of credit, directly or indirectly through 
one or more financing subsidiaries. Loans under these lines will have 
maturities of less than one year from the date of each borrowing. 
Alternatively, if the notional maturity of short-term debt is greater 
than 364 days, the debt security will include put options at 
appropriate points in time to cause the security to be accounted for as 
a current liability under US generally accepted accounting principles. 
Portland General also proposes to engage in other types of short-term 
financing generally available to borrowers with comparable credit 
ratings and credit profile, as it may deem appropriate in light of its 
needs and market conditions at the time of issuance, provided that any 
such issuance of short-term debt complies with the financing parameters 
included in this Application.

F. Foreign Assets

    Enron's foreign pipeline, gas and electricity distribution and 
power generation assets typically have FUCO status or exempt wholesale 
generator (``EWG'') status at the project level. Many of the foreign 
assets have been transferred into Prisma which also is a FUCO. As noted 
above, the shares of Prisma may be issued to creditors in connection 
with the Plan or Prisma may

[[Page 40079]]

be sold and the proceeds will then be distributed to creditors.
    Some Enron group companies, however, are related to the business of 
Prisma, but may not qualify for FUCO status because they may not 
directly or indirectly own or operate foreign utility assets. Such 
companies may, for example, have loans outstanding to a FUCO or a 
subsidiary of a FUCO. In other cases, such as settlements or asset 
reorganizations, the securities of a FUCO may be acquired by Enron 
group companies. Accordingly, Enron and its subsidiaries that are not 
FUCOs or subsidiaries of FUCOs, excluding Portland General, request 
authorization under section 33(c) and rule 53(c) under that Act, to 
issue new securities for the purpose of financing FUCOs and to acquire 
FUCO securities in connection with financings, settlements and 
reorganizations. Such authorization would be limited to an aggregate 
amount of $100 million in new FUCO investments during the Authorization 
Period.\7\ Authorization to restructure (e.g., to amend the terms of 
existing financings) or refinance existing FUCO investments would not 
be limited. In addition, investments made by Prisma and its direct and 
indirect subsidiaries in foreign energy-related businesses that are not 
supported by an Enron guarantee would be exempt under section 33 and 
not subject to the limit stated above. Such investments may be made 
from time-to-time to improve the value of the assets held by Prisma and 
to acquire the interests of unaffiliated partners in certain foreign 
utility projects in order to simplify the ownership of such projects.
---------------------------------------------------------------------------

    \7\ As of June 30, 2005, no new investments in existing FUCOs 
had been made.
---------------------------------------------------------------------------

    FUCO financings would be conducted principally to maintain and 
preserve the value of the foreign assets in the bankruptcy estate and 
not to develop significant new projects. The proposed FUCO investments, 
financings and reorganizations would not adversely affect Enron's 
financial condition and would be entered into consistent with the Plan, 
as necessary to support the FUCO businesses pending their disposition 
under the Plan. Portland General will not provide any financing or 
guarantees in connection with the FUCO-related transactions proposed.

G. The Sale of Nonutility Companies

    The Reorganized Debtors, non-debtor associates, and certain other 
related companies have completed a number of significant asset sales as 
part of the process of simplifying the Enron group and assembling 
assets for eventual distribution to creditors. These asset sales have 
been completed by numerous Reorganized Debtors, non-debtor associates, 
and other related companies, and the sale proceeds have, in certain 
instances, been used to repay indebtedness or other claims, and may be 
further subjected to a variety of claims from related and unrelated 
parties.
    In most cases, the sale transactions are for all cash 
consideration. Some sales may involve the acquisition of a security 
from the purchaser or the company being sold. A security would be 
accepted only when the transaction could not otherwise be negotiated 
for all cash consideration. For example, a purchaser may insist on an 
escrow of part of the sales proceeds to cover claims that may arise 
post-sale under an indemnification agreement. To give the seller a 
secured interest in the escrow, the purchaser would issue a note to the 
seller in the amount of the escrow with a right to set off amounts due 
under the note for allowed claims under the indemnification agreement. 
For the most part, the Reorganized Debtors would seek to convert 
securities into cash. Any security not converted into cash by the time 
the assets of the estates are distributed to creditors would reside in 
the Remaining Assets Trust,\8\ and creditors would receive an interest 
in that liquidating trust.
---------------------------------------------------------------------------

    \8\ As defined more completely under the Plan, the Remaining 
Assets Trust is one or more entities formed on or after the 
Confirmation Date (i.e., July 15, 2004) for the benefit of holders 
of certain allowed claims to hold assets of the Reorganized Debtors 
other than cash, certain litigation trust claims, Plan Securities 
and certain other claims and causes of action.
---------------------------------------------------------------------------

    Indemnifications and guarantees by and between companies in the 
Enron group also may be part of the sale of nonutility assets, 
nonutility securities or settlements on claims with third parties. In 
the case of sales to third parties, Enron would seek to limit 
indemnifications to no more than the amount of the sale proceeds 
received by the seller. Applicants request indemnification and 
guarantee authority to provide them with the flexibility to manage the 
process of selling the assets of the estates in a manner that would 
maximize their value.
    Applicants seek authorization for transactions involving the 
acquisition of securities, indemnifications and guarantees described 
above as they would occur in the context of the sale of any Enron group 
company (except Portland General) if such sale is in the ordinary 
course of business of a reorganized debtor and in furtherance of the 
Plan. In addition, litigation with respect to claims may result in an 
Enron group company receiving the securities of a party to the 
litigation as a settlement or a judgment. Applicants request 
authorization to acquire securities in this context also, where the 
litigation is in the ordinary course of business of a Reorganized 
Debtor. Applicants assert that the transactions proposed would not 
involve indemnifications or guarantees made by Portland General and 
would not have an adverse impact on that company.

H. Dividends Out of Capital or Unearned Surplus

    Applicants request general relief from the dividend and 
acquisition, retirement and redemption restrictions under section 12(c) 
of the Act and the rules under the Act as necessary to continue the 
administration of the Plan. The relief requested also would apply to 
partnership distributions to the extent they are from capital and 
subject to the restrictions under the Act. According to the Applicants, 
the proposed relief is necessary to reorganize and reallocate value in 
the Enron group that will ultimately be distributed to creditors. The 
relief requested would not apply to any transaction involving Portland 
General.
    The Applicants seek an exception from the dividend restrictions 
under the Act as applied to all nonutility subsidiaries in the Enron 
group subject to the conditions noted above. The Applicants represent 
that they will pay dividends and distributions in accordance with 
applicable law and will comply with the terms of any agreements that 
restrict the amount and timing of distribution to investors. Applicants 
request authorization for the Enron group companies, other than 
Portland General, to acquire, retire and redeem securities that they 
have issued.\9\
---------------------------------------------------------------------------

    \9\ As of December 31, 2004, Portland General had 219,727 shares 
of its preferred 7.75% Series Cumulative Preferred Stock (no par 
value) outstanding. The preferred stock is mandatorily redeemable 
and is classified as long-term debt in accordance with SFAS No. 150. 
The preferred stock is redeemable by operation of a sinking fund 
that requires the annual redemption of 15,000 shares at $100 per 
share beginning in 2002, with all remaining shares to be redeemed by 
sinking fund in 2007. At its option, Portland General may redeem, 
through the sinking fund, an additional 15,000 shares each year. 
Open market share purchases can be applied towards the annual 
redemption requirement. During 2004, Portland General redeemed 
30,000 shares, consisting of 15,000 shares for the annual sinking 
fund requirement and 15,000 additional shares acquired at its 
option. Should Portland General exercise its right to redeem any of 
its preferred stock, it would rely on the exemption under rule 42 
for the acquisition of stock from unaffiliated entities.

---------------------------------------------------------------------------

[[Page 40080]]

I. Simplifying Complex Corporate Structure and Dissolving Existing 
Subsidiaries

    Enron continues to restructure many of its subsidiaries in 
conjunction with administering the Plan. Enron also is liquidating or 
divesting approximately 1,000 surplus legal entities and businesses in 
which it no longer intends to engage. Eventually, substantially all of 
the Reorganized Debtors, including Enron, will be liquidated or 
divested. Applicants state that reorganizing complex structures may 
involve the creation of new holding companies and liquidating or other 
trusts formed for the benefit of the Reorganized Debtors' estates and 
their creditors. In the context of restructuring assets and entities, 
Enron group companies may receive distributions or other returns of 
capital and may make capital contributions, share exchanges, 
guarantees, indemnifications, and other transactions to move companies, 
assets and liabilities within the Enron group as necessary to implement 
a less complex and more sound corporate structure and as necessary to 
implement settlements with third parties or to resolve or recover 
claims. For example, a Reorganized Debtor with no cash, but a valuable 
claim against a third party, may borrow from an associate company 
(other than Portland General) to fund litigation to resolve or recover 
a claim. Contracts may be assigned from one subsidiary to another Enron 
group company or a third party. The assignment of contracts that have 
value among Enron group companies could be viewed as a dividend or 
capital contribution.
    Portland General is assisting in the sale of the subsidiaries of 
PGH II, Inc. (``PGH II''), a nonutility Enron subsidiary and, in the 
case of the sale of substantially all of the assets of the subsidiary, 
in the winding up and dissolution of the subsidiary. PGH II is a 
holding company with subsidiaries engaged in telecommunications, 
district heating and cooling, and real estate infrastructure 
development and construction. PGH II and its subsidiaries have been 
managed historically by Portland General. With the exception of the 
transactions related to these sales, Portland General and its 
subsidiaries would not be involved in any of the proposed 
reorganization and simplification transactions.
    Applicants seek Commission authorization to restructure, 
rationalize and simplify or dissolve, as necessary, all of their 
nonutility businesses and to implement settlements (which may involve 
transactions as described above regarding substantially all of their 
remaining direct and indirect assets) as necessary to simplify and 
restructure their businesses in furtherance of the Plan. As previously 
requested, Applicants seek authorization to acquire, redeem and retire 
securities and to pay dividends out of capital and unearned surplus 
provided that such transactions are consistent with applicable 
corporate or partnership law and any applicable financing covenants. 
Applicants also seek authorization to form, merge, reincorporate, 
dissolve, liquidate or otherwise extinguish companies. Any newly formed 
entity would engage only in businesses that the Enron group continues 
to engage in throughout the administration of the Plan. Further, 
Applicants seek authorization to restructure, forgive or capitalize 
loans and other obligations and to change the terms of outstanding 
nonutility company securities held by other Enron group companies for 
the purpose of facilitating settlements with creditors, simplifying the 
business of the group and maximizing the value of the Reorganized 
Debtors' estates.

J. Affiliate Transactions

    Applicants request authorization to engage in certain affiliate 
transactions described below. Portland General has entered into a 
master service agreement (``MSA'') with certain affiliates, including 
Enron. The MSA allows Portland General to provide affiliates with the 
following general types of services: printing and copying, mail 
services, purchasing, computer hardware and software support, human 
resources support, library services, tax and legal services, accounting 
services, business analysis, product development, finance and treasury 
support, and construction and engineering services. The MSA also allows 
Enron to provide Portland General with the following services: 
executive oversight, general governance, financial services, human 
resource support, legal services, governmental affairs service, and 
public relations and marketing services. Portland General would provide 
services to affiliates at cost under the MSA and affiliate services 
provided to Portland General also would be priced at cost, in 
accordance with section 13(b) of the Act. If cost based pricing of 
particular services provided under the MSA would conflict with the 
affiliate transaction pricing rules of the OPUC, Portland General and 
Enron would refrain from providing or requesting such services, unless 
they have first obtained specific authorization from the OPUC to use 
cost based pricing for such services.
    During 2004 Enron provided certain employee health and welfare 
benefits, 401(k) retirement savings plan, and insurance coverages to 
Portland General under the MSA that were directly charged to Portland 
General based upon Enron's cost for those benefits and coverages. In 
2004, Enron passed through to Portland General approximately $25 
million for medical/dental benefits and retirement savings plan 
matching and $3 million for insurance coverage. Beginning on January 1, 
2005, administration of the medical/dental benefit and retirement 
savings plan was returned to Portland General from Enron. As a result, 
Enron no longer passes through costs to Portland General for these 
services. However, Enron has continued to incur costs related to the 
resolution of issues associated with the bankruptcy and litigation with 
regard to certain of the employee benefit plans. Enron bills Portland 
General for a portion of these costs.
    Portland General provides certain administrative services to 
Enron's subsidiary Portland General Holdings, Inc. (``PGH'') and its 
subsidiaries under the MSA that are allocated or directly charged to 
PGH and its subsidiaries based upon the cost for those services. The 
cost of these services for the year 2004 in the aggregate was 
approximately $1 million.
    The nonutility subsidiaries in the Enron group also are engaged in 
providing services to one another. Prisma, Enron and certain associate 
companies have entered into ancillary agreements, including Transition 
Services Agreements, a tax matters agreement, and a Cross License 
Agreement.\10\ The employees of Enron and its associates who have been 
supervising and managing the Prisma Assets since December 2001, became 
employees of a subsidiary of Prisma effective on or about July 31, 
2003. As approved by the Bankruptcy Court, Enron and its associates 
entered into four separate Transition Services Agreements pursuant to 
which such employees continue to supervise and manage the Prisma Assets 
and other international assets and interests owned or operated by Enron 
and its associates. These ancillary agreements, together with the 
Prisma Contribution and Separation Agreement,\11\ govern the

[[Page 40081]]

relationship between Prisma and Enron, provide for the performance of 
certain interim services, and define other rights and obligations until 
the distribution of shares of capital stock of Prisma pursuant to the 
Plan or the sale of the stock to a third party.
---------------------------------------------------------------------------

    \10\ The Cross License Agreement between Enron and Prisma 
permits each entity to continue to use certain intellectual property 
such as computer software necessary to operate and maintain systems 
after the separation of Prisma from the Enron group.
    \11\ On August 31, 2004, Enron, certain of its debtor affiliates 
and Prisma executed a Contribution and Separation Agreement, which 
provided for the contribution of certain assets to Prisma in 
exchange for Prisma shares. The form of the Contribution and 
Separation Agreement had been previously approved by the Bankruptcy 
Court. The contributed assets included equity interests in 
international energy infrastructure projects, inter-company 
receivables relating to these assets and infrastructure (telephones, 
computers, video conferencing equipment, etc.) in use by Prisma at 
the time of the execution of the agreement and required by Prisma to 
effectively own and manage the assets.
---------------------------------------------------------------------------

    Applicants, other than Enron, that are providing goods and services 
at terms other than cost to associate companies, other than Portland 
General, also seek an exemption under section 13(b) from the at cost 
rules under the Act through the Authorization Period to the extent that 
rule 91(d) does not exempt such transactions. Applicants state that 
these transactions are in the ordinary course of business and would not 
involve Portland General.

K. Tax Allocation Agreements

    The Omnibus Order authorized Enron to enter into an agreement with 
Portland General for the payment and allocation of tax liabilities on a 
consolidated group basis. Enron entered into such an agreement whereby 
Portland General is responsible for the amount of income tax that 
Portland General would have paid on a ``stand alone'' basis, and Enron 
is obligated to make payments to Portland General as compensation for 
the use of Portland General's losses and/or credits to the extent that 
such losses and/or credits have reduced the consolidated income tax 
liability. It is contemplated that the existing tax allocation 
agreement with Portland General may be amended to provide that Enron 
would pay Portland General for certain Oregon state tax credits 
generated by Portland General but not used on the consolidated Oregon 
tax return. Enron and Portland General also seek authorization to amend 
the Portland General tax allocation agreement accordingly.
    Under the agreement, Enron is responsible for, among other things, 
the preparation and filing of all required consolidated returns on 
behalf of Portland General and its subsidiaries, making elections and 
adopting accounting methods, filing claims for refunds or credits and 
managing audits and other administrative proceedings conducted by the 
taxing authorities. Enron and Portland General will continue to be 
parties to this tax sharing agreement, or a new agreement on similar 
terms, until Enron and Portland General no longer file consolidated tax 
returns. It is intended that Enron and Portland General will file 
consolidated tax returns until Enron no longer owns 80% of the capital 
stock of Portland General. Applicants state that the consolidated tax 
filing agreement does not technically comply with rule 45(c) under the 
Act because Enron shares in the tax savings from the consolidation 
ratably with Portland General. In particular, to the extent Enron's 
losses or tax credits reduce the consolidated tax liability, Enron 
would retain the resulting tax savings. Enron and Portland General seek 
authorization to continue to perform under such agreement or a new 
agreement under similar terms. Under such agreement, the consolidated 
tax liability for each taxable period would be allocated to Enron, 
Portland General and its subsidiaries in proportion to the corporate 
taxable income of each company, provided that the tax apportioned to 
any company shall not exceed the separate return tax of such company.
    Enron also has entered into a tax matters agreement with Prisma. 
Applicants state that the Prisma tax matters agreement is not an 
agreement to file a consolidated tax return or to share a consolidated 
tax liability within the meaning of rule 45(c), but rather it is an 
agreement for Enron to prepare and file all required returns that 
relate to Prisma and its subsidiaries and for Prisma to cooperate 
therewith. In addition, Prisma agrees to make dividend distributions to 
its shareholders in certain minimum amounts (to the extent of available 
cash) for so long as Enron or any affiliate or the Disputed Claims 
Reserve \12\ is required to include amounts in income for federal 
income tax purposes in respect of the ownership of Prisma shares.
---------------------------------------------------------------------------

    \12\ The Disputed Claims Reserves, as more fully defined in the 
Plan, are trusts/escrows held by the disbursing agent for the 
benefit of each holder of a disputed claim and an allowed claim, 
consisting of cash, Plan securities, operating trust interests, 
other trust interests and any dividends, gains or income 
attributable thereto. The Disbursing Agent, also defined in the 
Plan, is the agent appointed by the Bankruptcy Court to effectuate 
distributions pursuant to the Plan.
---------------------------------------------------------------------------

L. Form U-6B-2

    The Applicants also seek authorization to report any debt issued 
under rule 52 on the Rule 24 report for the corresponding quarter in 
lieu of filing a form U-6B-2.

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Jill M. Peterson,
Assistant Secretary.
[FR Doc. E5-3663 Filed 7-11-05; 8:45 am]
BILLING CODE 8010-01-P