IBEW 125 reacts to EnronĄs proposed sale of PGE

By DON McINTOSH, Associate Editor

Workers at Portland General Electric have been wondering what would become of their employer since PGE owner Enron declared bankruptcy. On Nov. 18, two weeks after their union helped defeat at the polls a proposed people’s utility district, they found out, along with everyone else.

Enron announced it had agreed to sell PGE to Oregon Electric Utility Company, LLC, a newly-formed outfit put together by a private investment firm known as Texas Pacific Group (TPG), and joined by a trio of well-connected Northwest business leaders: Neil Goldschmidt, Gerald Grinstein and Tom Walsh.

After the announcement, Local 125 Business Manager Bill Miller met privately with Goldschmidt and the TPG investors.

“Whoever put this together, with whatever means they used, somebody had their act together,” Miller said. “Those guys are sharp and they know what they’re doing.”

Miller said he supports the sale to Texas Pacific without reservation, largely based on the positive reputation of Goldschmidt. “People with deep roots in Oregon are going to be running it.”

Goldschmidt is supposed to be named chairman of the board if the sale gets approval from various governmental entities.

Goldschmidt’s connections to Oregon’s richest and most powerful go back decades. A one-time mayor of Portland, he served as secretary of transportation under President Jimmy Carter, presiding over the deregulation of the trucking, railroad and airline industries. He was international vice president of Nike from 1981 to 1985, and president of Nike Canada from 1986 to 1987. From 1987 to 1991, he was governor of Oregon, where he appointed Ted Kulongoski to his first statewide office — insurance commissioner. The two led an overhaul of the workers’ compensation system.

Now Goldschmidt is a lobbyist, having created the firm Goldschmidt Imeson Carter. If there was a major business deal going down in Oregon in the last few years, there’s a good chance Goldschmidt or his firm took part in it. He helped facilitate the sale of Willamette Industries to Weyerhaeuser; helped win city support for a proposed aerial tram from Oregon Health & Science University to the planned South Macadam development; and represented the Goodman parking dynasty’s real estate interests in a proposed expansion of the downtown Portland park blocks. He also owns a vineyard in the Willamette Valley and has worked as a well-paid private consultant/adviser to the director of the quasi-public SAIF (State Accident Insurance Fund) Corp.

Early this year he was hired to co-chair a national airline industry coalition to push a bill in Congress that would ban the right of airline unions to strike. In October, he campaigned against the ballot initiative for the people’s utility district in PGE’s territory. A week before the PGE sale announcement, Governor Kulongoski appointed Goldschmidt chair of the Oregon Board of Higher Education.

Goldschmidt’s brother Steve is the human resources head for Portland Public Schools (PPS), responsible for contracting out the custodial department. And his wife, Diana Goldschmidt, is a former PPS interim superintendent and a member of the Oregon Investment Council, which decides where the Oregon Public Employees Retirement Fund and other state funds will be invested.

There are two other Northwest partners in the proposed PGE purchase:

• Developer Tom Walsh, a former head of Tri-Met, has served as chairman of the Oregon Board of Forestry and vice chairman of the Oregon Transportation Commission.

• Seattle businessman Gerald Grinstein, former chief executive officer of Burlington Northern, is a current board member at PACCAR, Vans and The Brinks Company. A long-serving member of the board at Delta Air Lines, Grinstein was made chief executive officer of Delta a week after the PGE sale was announced. Grinstein told the press his responsibilities at Delta would not interfere with his ability to lead PGE.

As for TPG, not too much is known about it; it’s privately held, with headquarters in San Francisco and Texas, and the company prefers to keep a low profile. Some of its better known investments have included Continental Airlines, Burger King, J. Crew and America West Airlines.

The sale price — $2.35 billion —includes an agreement by TPG to assume $1.1 billion of PGE/Enron debt; thus TPG must come up with $1.25 billion in cash. To do that, TPG’s plan is to borrow $725 million from commercial lenders and put in $525 million of investors’ money. At least $300 million of that latter amount is money that was recently invested by the Oregon Investment Council for the Oregon Public Employees Retirement Fund. Diana Goldschmidt voted to approve the TPG investment, bringing the total the state has invested in TPG to $950 million.

The sale must be approved by a federal bankruptcy court, the Oregon Public Utility Commission, the Federal Energy Regulatory Commission, the Securities and Exchange Commission and several other agencies.

Miller said he wouldn’t be testifying for or against the sale, the same stance the union adopted when Enron was seeking approval for its purchase of PGE.

“The name on the truck doesn’t mean a whole lot as far as we’re concerned,” Miller said. “It’ll be our guys doing the work no matter who owns it.”

Local 125 members have a successor clause in their union contract with PGE, meaning the contract remains in force if the company is sold. That contract expires in March 2004.

The sale also won’t affect the union’s legal battle with PGE over its members’ enormous pension losses. While Enron’s top managers sold their stock before they announced that the company had lied in its financial reports, PGE workers were locked out from changing their stock allocations after the misconduct was revealed. Workers lost millions of dollars. Some filed suit as individuals. Local 125 also filed grievances under the union contract, arguing that PGE had failed to act prudently to protect workers pensions. The grievance got to step two of the process, but then PGE decided the issue was outside the scope of the grievance process and filed suit against the union, asking a judge to rule that the issue was not subject to arbitration.

State Circuit Court Judge Pro Tem Michael Zussman ruled in favor of PGE, but the union is appealing his decision.

Miller was a member of the committee set up by Portland Mayor Vera Katz to explore the possibility that the city might buy PGE. But he says his biggest priority is to ensure that PGE is not broken up into different parts, and the TPG sale does that.

Miller said he fought the people’s utility district ballot measure because it would have broken up PGE, not because he has anything against public power. He said he has no preference as to whether PGE should be a public or private utility. Of Local 125’s 3,300 members, about 1,500 work for private utilities. Miller said you could put the public utility and private utility union contracts side by side and see no difference.

The bankruptcy court is expected to take about three months to decide whether to approve the sale of PGE. If the other entities approve, the sale could be finalized in late 2004.

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