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British firm may buy PacifiCorp Would be first foreign takeover of U.S. utility Wire and staff reports PORTLAND -- Scottish Power announced its intention to buy PacifiCorp on Monday in a $7.9 billion deal will be the first foreign takeover of an American utility, if it makes it through a regulatory maze that includes a law limiting overseas ownership of utilities. PacifiCorp is the holding company for Pacific Power, which serves Oregon and six other western states, and Utah Power. The deal, approved by both companies' boards on Sunday, would create a company with 7 million customers in Britain and the United States and 23,500 employees, making it by some measures one of the world's top 10 utilities. "This is a strong partnership in a strong part of the U.S. with opportunities to grow and expand," said Alan Richardson, Scottish Power's director of power systems. While other foreign companies have invested in power plants in the United States, this would be the first purchase of an entire U.S. electric utility by a foreign company. It likely will take at least nine months to win the approval of the Securities and Exchange Commission, the Federal Energy Regulatory Commission, the Nuclear Regulatory Commission and state utility commissions. In the meantime, PacifiCorp officials said they don't expect anything to change for current customers. One sticking point in the approval process could be a 1935 federal law that was designed to limit the long-distance buying of utilities by requiring that they have some kind of physical transmission connection. The law was amended in 1992, however, to allow American utilities to buy foreign utilities. PacifiCorp, for example, owns an Australian distribution company, Powercor, which has 550,000 customers. With the Scottish deal, the SEC will have to decide, among other things, whether a foreign buyer will be treated similarly. Scottish Power's Richardson said Monday he didn't expect a problem. "This is not going to be a complicated question for regulators." Some analysts were less sanguine. "There is skepticism about how likely it is that this deal will be consummated," said James Bellessa, analyst with D.A. Davidson & Co. in Great Falls, Mont. Investors also seemed to be taking a cautious approach: Both company's stock values dropped slightly on Monday. Beyond the federal approval, regulators in the western states where PacifiCorp provides electricity to 1.4 million customers may want to add restrictions to ensure the reliability and affordability of power. PacifiCorp is the third-largest utility west of the Mississippi River, operating in Oregon, Washington, Montana, Idaho, Utah, California and Wyoming. The Citizens Utility Board of Oregon, a consumer watchdog group, raised concerns about whether decision-making would be moved from the Northwest. "There's always potential risks to customers when decisions are no longer being made locally," said executive director Bob Jenks. "There is no benefit to customers being proposed. The basis of approving a merger under Oregon law is that there has to be benefits for customers." "I need to see why it is that we ought to be turning control of a Utah basic resource -- power -- over to an entity in Scotland," said Utah Gov. Mike Leavitt. "I'm having a hard time at this point seeing what the benefit will be to Utah ratepayers." PacifiCorp spokeswoman Leslie Carlson said details about decision-making power have yet to be worked out. "That's not set in stone," she said. "For the next six to nine months, PacifiCorp will be managed as always and those issues will be worked out." Some of PacifiCorp's 10,000 employees may lose their jobs after the merger is completed. Scottish Power said it will minimize the cuts through hiring reductions, attrition and employee retraining. Scottish Power is Scotland's largest utility and supplies gas, water, electricity and phone services to 5 million British homes and has some 15,000 employees. Under the terms of the deal, Scottish Power will pay stock worth $25.13 per share at Friday's close for each share of PacifiCorp. Scottish Power also will assume PacifiCorp's $4.9 billion debt. The new company will be based in Glasgow, but PacifiCorp would run Scottish Power's U.S. operations from Portland. Both companies have tried before to strike a transatlantic deal. ScottishPower's previous attempts -- with Florida Progress Corp., and then Cinergy -- foundered on disagreements about management. In May, PacifiCorp lost a bid to acquire Britain's Energy Group PLC. The most surprising aspect of the PacifiCorp takeover is that it didn't come domestically, said analyst Douglas Christopher with Crowell Weedon & Co. in Los Angeles. "The company's current management strategy is focused and makes sense for anyone that is looking to be involved in U.S. power," he said. "It's surprising that a foreign company could come in and snatch it out of U.S. hands." Today's Business Index Mail Tribune Copyright � The Mail Tribune 1998, Medford, Oregon USA