UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report September 17, 1997
Commission File Number 1-13159
ENRON CORP.
(Exact name of registrant as specified in its charter)
Oregon 47-0255140
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
Enron Building
1400 Smith Street
Houston, Texas 77002
(Address of principal executive (Zip Code)
Offices)
(713) 853-6161
(Registrant's telephone number, including area code)
<PAGE>
Item 5. Other Events.
On July 1, 1997, Enron Corp. acquired Portland General
Corporation ("PGC") by merger pursuant to the Amended and Restated
Agreement and Plan of Merger by and among Enron Corp., PGC and Enron
Oregon Corp., dated as of July 20, 1996 and amended and restated as
of September 24, 1996 and as further amended by the First Amendment
dated April 14, 1997 (the "Amended Merger Agreement"). Pursuant to
the Amended Merger Agreement, on July 1, 1997, Enron Corp., a
Delaware corporation, merged with and into Enron Oregon Corp., an
Oregon corporation (the "Reincorporation Merger"), and the name of
Enron Oregon Corp. was changed to Enron Corp. ("Enron" or, the
"Registrant"). Also on July 1, 1997, promptly following the
Reincorporation Merger, PGC merged with and into Enron (the "PGC
Merger"), with Enron continuing in existence as the surviving
corporation (the Reincorporation Merger and the PGC Merger are
collectively referred to herein as the "Mergers"). Each share of
PGC common stock issued and outstanding (other than shares owned by
PGC, Enron Corp., Enron Oregon Corp. or any of their respective
subsidiaries, which were canceled) was converted into 0.9825 shares
of Enron common stock. In addition, pursuant to the terms of the
Amended Merger Agreement, Enron consolidated PGC's debt
(approximately $1.1 billion at June 30, 1997) and accounted for the
transaction on a purchase accounting basis. The amount of such
consideration was the result of an agreed negotiation between the
two companies, and the mergers were approved by each company's
shareholders.
For a further discussion of PGC, Portland General Electric
Company ("PGE") and the Amended Merger Agreement, see the Amended
Merger Agreement included as Annex A to the Proxy Statement/
Prospectus included in the Registrant's Registration Statement
on Form S-4, File No. 333-13791, in addition to the other documents
listed in Item 7(c) hereto and incorporated by reference herein.
The following unaudited pro forma combined balance sheet as of June
30, 1997 and the unaudited pro forma combined statements of income
for the six months ended June 30, 1997 and the year ended December
31, 1996, give effect to the Mergers based on the historical
consolidated financial statements of Enron and PGC under the
assumptions and adjustments set forth in the accompanying notes to
the pro forma financial statements.
The unaudited pro forma combined balance sheet assumes the Mergers
were consummated on June 30, 1997. The unaudited pro forma combined
statements of income assume that the Mergers were consummated on
January 1, 1996. Enron will account for the transaction as a
purchase for financial reporting purposes.
These unaudited pro forma combined financial statements should be
read in conjunction with the notes thereto and with the historical
consolidated financial statements and related notes thereto of Enron
and PGC. The unaudited pro forma combined financial statements have
been prepared based upon assumptions deemed appropriate by the
management of Enron and PGC. These unaudited pro forma combined
financial statements have been prepared for informational purposes
only and are not necessarily indicative of the actual or future
results of operations or financial condition that would have been
achieved had the Mergers occurred at the dates assumed.
<PAGE>
<TABLE>
ENRON CORP.
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
June 30, 1997
(in millions)
<CAPTION>
PRO FORMA
ENRON PGC* ADJUSTMENTS COMBINED
<S> <C> <C> <C> <C>
Current Assets
Cash and cash equivalents $ 211 $ 25 $ (19)(A) $ 209
(8)(B)
Trade and other receivables 1,165 169 1,334
Assets from price risk
management activities 1,119 -- 1,119
Other 1,327 51 1,378
Total Current Assets 3,822 245 (27) 4,040
Investments and Other Assets
Investments in and advances to
unconsolidated subsidiaries 1,927 -- 1,927
Assets from price risk
management activities 999 -- 999
Unamortized regulatory assets 258 856 1,114
Other 1,877 653 (14)(A) 2,516
Total Investments and Other
Assets 5,061 1,509 (14) 6,556
Property, Plant and Equipment, net 7,202 1,792 8,994
Goodwill -- -- 1,091 (C) 1,091
Total Assets $16,085 $3,546 $1,050 $20,681
Current Liabilities
Accounts payable and accrued
liabilities $ 1,550 $ 149 $ $ 1,699
Liabilities from price risk
management activities 1,006 -- 1,006
Other 724 246 17 (D) 987
Total Current Liabilities 3,280 395 17 3,692
Long-Term Debt 4,537 877 20 (E) 5,434
Deferred Credits and Other
Liabilities
Deferred income taxes 1,980 642 (148)(F) 2,474
Liabilities from price risk
management activities 581 -- 581
Trojan decommissioning and
transition obligation -- 349 349
Other 542 228 131 (D) 1,092
191 (G)
Total Deferred Credits and
Other Liabilities 3,103 1,219 174 4,496
Minority Interests 770 -- 770
Company-Obligated Preferred
Securities of Subsidiaries 964 30 1 (E) 995
Shareholders' Equity
Convertible preferred stock 134 -- 134
Common stock 26 193 1,670 (H) 3,770
1,881 (I)
Additional paid in capital 1,881 586 (586)(H) --
(1,881)(I)
Retained earnings 1,692 247 (239)(H) 1,692
(8)(B)
Other (302) (1) 1 (H) (302)
3,431 1,025 838 5,294
Total Liabilities and Shareholders'
Equity $16,085 $3,546 $ 1,050 $20,681
Common Stock outstanding as of
June 30, 1997 256 51 307
<FN>
- ---------------
* Certain amounts have been reclassified to conform to Enron's
presentation.
</TABLE>
<PAGE>
ENRON CORP.
NOTES TO UNAUDITED PRO FORMA COMBINED BALANCE SHEET
A. To reflect approximately $33 million for transaction costs related
to the PGC Merger incurred by Enron, of which $14 million has been
paid and deferred, including Enron's required contribution to the
PGE Foundation of $10 million.
B. To reflect approximately $8 million for PGC transaction costs
related to the Mergers expected to be incurred subsequent to June
30, 1997.
C. To reflect the recognition of the purchase price allocation to
goodwill. The significant adjustments comprising the purchase
price allocated to goodwill are as follows (in millions):
<TABLE>
<S> <C>
Consideration paid in excess of PGC's net book value $ 846
Increase in long-term debt and preferred stock 21
Guaranteed obligation to PGE customers 148
Reserves for contractual, environmental and benefit
obligations 191
Decrease in deferred income tax liability (148)
Transaction costs 33
$ 1,091
</TABLE>
As a condition to the Oregon Public Utility Commission's ("OPUC")
approval of the Mergers and consistent with Enron's intended use
of PGC's assets, Enron has filed a disaggregation plan to separate
PGC's generating assets from its transmission and distribution
assets. Enron has not completed its plan or its estimate of the
impact of such plan on the valuation of PGE's generating assets in
a competitive environment. For purposes of these Pro Forma
Combined Financial Statements, the assets and liabilities acquired
reflect their net book value as recorded by PGC, except as
reflected above. The allocation of the purchase price is
preliminary because valuations and other studies related to PGC's
regulated and unregulated businesses have not been finalized. The
ultimate fair values of the assets and liabilities of PGC's
regulated and unregulated businesses may vary significantly from
the historical basis of the assets and liabilities recorded by
PGC. Enron is currently unable to estimate the impact of these
matters on its purchase price allocation to goodwill.
D. To reflect Enron's obligation to provide guaranteed merger-related
benefits to PGE's customers. The total undiscounted guaranteed
obligation of $141 million (which will accrue interest at above-
market rates) has been reflected at Enron's incremental current
borrowing rate.
E. To increase long-term debt and company-obligated preferred securities
of subsidiary, PGE, by $20 million and $1 million, respectively,
to reflect fair value based on the quoted market prices for the same
or similar issues or on the current rates offered to PGC for debt of
similar remaining maturities.
F. To reduce deferred income tax liabilities for the tax effect
of the basis differences between the fair value of certain
liabilities and PGC's corresponding historical net book values. It
is assumed there will be no change in the tax basis of PGC's assets
and liabilities. For purposes of the pro forma calculations, a
statutory income tax rate of 41% has been utilized.
G. To reflect reserves related to valuing certain contractual
obligations to current market values, estimated environmental
liabilities and certain benefit related and other obligations.
The determination of these reserves is preliminary pending
completion of Enron's final studies and valuations.
H. To reflect the issuance of approximately 50.5 million shares of
Enron Common Stock, without par value, for the PGC Common Stock
issued and outstanding as of the effective date of the PGC Merger
(based upon the PGC Conversion Ratio of 0.9825 shares of Enron
Common Stock for each share of PGC Common Stock) at $36.88 per
share (reflecting the average share price of Enron Common Stock
for two trading days before and after the announcement of the
First Amendment) and to eliminate PGC common shareholders' equity
of $1,025 million.
I. To reflect the reclassification of Enron's additional paid in
capital to common stock due to Enron Common Stock being without a
par value upon completion of the Reincorporation Merger.
<PAGE>
<TABLE>
ENRON CORP.
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
Six Months Ended June 30, 1997
(in millions, except per share amounts)
<CAPTION>
PRO FORMA
ENRON PGC* ADJUSTMENTS COMBINED
<S> <C> <C> <C> <C>
Revenues $ 8,595 $ 677 $ $ 9,272
Costs and Expenses
Costs of gas and other products 8,018 285 8,303
Operating expenses 581 115 696
Oil and gas exploration expenses 46 -- 46
Depreciation, depletion and
amortization 249 78 14 (A) 341
Taxes, other than income taxes 69 29 98
8,963 507 14 9,484
Operating Income (368) 170 (14) (212)
Other Income and Deductions, net 249 20 2 (B) 271
Income before Interest, Minority
Interests and Income Taxes (119) 190 (12) 59
Interest and Related Charges, net 149 38 4 (C) 191
Dividends on Preferred Stock of
Subsidiaries 31 1 32
Minority Interests 36 -- 36
Income Taxes (137) 67 (1)(D) (71)
Net Income (198) 84 (15) (129)
Preferred Stock Dividends 8 -- 8
Earnings on Common Stock $ (206) $ 84 $(15) $ (137)
Earnings Per Share of Common Stock
Primary $ (0.83) $1.63 $ (0.46)
Fully diluted $ (0.83) $1.63 $ (0.46)
Average Number of Common Shares
Used in Primary Computation 248 51 - 299 (E)
<FN>
- ---------------
* Certain amounts have been reclassified to conform to Enron's
presentation.
</TABLE>
<PAGE>
<TABLE>
ENRON CORP.
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
Year Ended December 31, 1996
(in millions, except per share amounts)
<CAPTION>
PRO FORMA
ENRON PGC* ADJUSTMENTS COMBINED
<S> <C> <C> <C> <C>
Revenues $ 13,289 $ 1,112 $ $ 14,401
Costs and Expenses
Costs of gas and other products 10,478 317 10,795
Operating expenses 1,421 253 1,674
Oil and gas exploration expenses 89 -- 89
Depreciation, depletion and
amortization 474 155 27 (A) 656
Taxes, other than income taxes 137 52 189
12,599 777 27 13,403
Operating Income 690 335 (27) 998
Other Income and Deductions, net 548 (21) 23 (B) 550
Income before Interest, Minority
Interests and Income Taxes 1,238 314 (4) 1,548
Interest and Related Charges, net 274 78 8 (C) 360
Dividends on Preferred Stock of
Subsidiaries 34 3 37
Minority Interests 75 -- 75
Income Taxes 271 103 7 (D) 381
Net Income 584 130 (19) 695
Preferred Stock Dividends 16 -- 16
Earnings on Common Stock $ 568 $ 130 $ (19) $ 679
Earnings Per Share of Common Stock
Primary $ 2.31 $ 2.53 $ 2.29
Fully diluted $ 2.16 $ 2.53 $ 2.15
Average Number of Common Shares
Used in Primary Computation 246 51 (1) 296 (E)
<FN>
- ----------------
* Certain amounts have been reclassified to conform to Enron's
presentation.
</TABLE>
<PAGE>
ENRON CORP.
NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENTS OF INCOME
The adjustments to the Unaudited Pro Forma Condensed Combined
Statements of Income do not give effect to any nonrecurring costs
directly associated with the Mergers that might be incurred within
the next twelve months. The pro forma financial data also do not
give effect to any potential cost savings and synergies that could
result from the Mergers.
A. To reflect a 40-year amortization of the purchase price allocated
to goodwill.
B. To remove the effect of PGC's recognition of expenses related to
the Mergers in the six months ended June 30, 1997 and the year
ended December 31, 1996.
C. To reflect amortization of the excess of fair value over book
value from revaluation of PGC's long-term debt and company-
obligated preferred securities and interest expense related to
Enron's obligation to provide guaranteed merger-related benefits
to PGE's customers.
D. To reflect income tax expense for the effects of the above items
except for item A. For purposes of the pro forma calculations, a
statutory income tax rate of 41% has been utilized.
E. The average number of common shares used in primary
computation have been determined using the PGC Conversion Ratio of
0.9825 shares of Enron Common Stock for each share of PGC Common
Stock.
<PAGE>
Item 7. Financial Statements and Exhibits.
(a) Financial statements of business acquired.
<TABLE>
PORTLAND GENERAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME FOR THE
THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
1997 1996 1997 1996
(Thousands of Dollars)
<S> <C> <C> <C> <C>
OPERATING REVENUES $ 308,523 $ 233,425 $ 676,598 $ 534,006
OPERATING EXPENSES
Purchased power and fuel 127,835 44,875 284,514 125,091
Production and distribution 20,982 20,018 41,093 41,970
Maintenance and repairs 13,663 11,845 21,609 25,094
Administrative and other 26,732 27,566 51,885 55,251
Depreciation and amortization 39,113 38,550 78,404 76,083
Taxes other than income taxes 13,649 12,766 28,946 27,659
241,974 155,620 506,451 351,148
OPERATING INCOME BEFORE
INCOME TAXES 66,549 77,805 170,147 182,858
INCOME TAXES 20,778 25,558 60,326 62,607
NET OPERATING INCOME 45,771 52,247 109,821 120,251
OTHER INCOME (DEDUCTIONS)
Interest expense (19,118) (19,835) (38,237) (39,603)
Allowance for funds used
during construction 334 500 630 742
Preferred dividend requirement -
PGE (582) (645) (1,163) (1,631)
Other - net of income taxes (2,186) 1,412 12,545 3,282
NET INCOME $ 24,219 $ 33,679 $ 83,596 $ 83,041
COMMON STOCK
Average shares outstanding 51,407,635 51,109,790 51,391,493 51,086,325
Earnings per average share $ 0.47 $ 0.66 $ 1.63 $ 1.63
Dividends declared per share $ 0.32 $ 0.32 $ 0.64 $ 0.64
<FN>
The accompanying notes are an integral part of these consolidated
statements of income.
</TABLE>
<PAGE>
<TABLE>
PORTLAND GENERAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS FOR THE
THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
1997 1996 1997 1996
(Thousands of Dollars)
<S> <C> <C> <C> <C>
BALANCE AT BEGINNING OF PERIOD $ 240,210 $ 168,365 $ 197,812 $ 135,885
NET INCOME 24,219 33,679 83,596 83,041
ESOP TAX BENEFIT AND OTHER (529) (605) (1,059) (1,135)
263,900 201,439 280,349 217,791
DIVIDENDS DECLARED ON
COMMON STOCK 16,452 16,358 32,901 32,710
BALANCE AT END OF PERIOD $ 247,448 $ 185,081 $ 247,448 $ 185,081
<FN>
The accompanying notes are an integral part of these consolidated
statements of retained earnings.
</TABLE>
<PAGE>
<TABLE>
PORTLAND GENERAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 1997 AND DECEMBER 31, 1996
<CAPTION>
(Unaudited)
June 30 December 31
1997 1996
(Thousands of Dollars)
ASSETS
<S> <C> <C>
ELECTRIC UTILITY PLANT - ORIGINAL COST
Utility plant (includes Construction
Work in Progress of $34,554 and $36,919) $ 2,966,497 $ 2,899,746
Accumulated depreciation (1,179,782) (1,124,337)
1,786,715 1,775,409
Capital leases - less amortization
of $31,880 and $30,569 5,438 6,750
1,792,153 1,782,159
OTHER PROPERTY AND INVESTMENTS
Leveraged leases 149,782 150,695
Trojan decommissioning trust, at market value 82,030 78,448
Corporate owned life insurance, less loans
of $26,411 and $26,411 91,389 83,666
Contract termination receivable 107,565 111,447
Other investments 30,252 29,745
461,018 454,001
CURRENT ASSETS
Cash and cash equivalents 24,917 29,802
Accounts and notes receivable 130,421 125,314
Unbilled and accrued revenues 39,066 53,317
Inventories, at average cost 35,300 32,903
Prepayments and other 15,236 17,613
244,940 258,949
DEFERRED CHARGES
Unamortized regulatory assets
Trojan investment 263,770 275,460
Trojan decommissioning 269,887 282,131
Income taxes recoverable 183,477 195,592
Debt reacquisition costs 26,823 28,063
Conservation investments - secured 76,904 80,102
Energy efficiency programs 14,318 11,974
Other 20,583 22,575
WNP-3 settlement exchange agreement 158,884 163,217
Miscellaneous 33,236 29,026
1,047,882 1,088,140
$ 3,545,993 $ 3,583,249
<FN>
The accompanying notes are an integral part of these consolidated
balance sheets.
</TABLE>
<PAGE>
<TABLE>
PORTLAND GENERAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 1997 AND DECEMBER 31, 1996
<CAPTION>
(Unaudited)
June 30 December 31
1997 1996
(Thousands of Dollars)
CAPITALIZATION AND LIABILITIES
<S> <C> <C>
CAPITALIZATION
Common stock equity
Common stock, $3.75 par value per share,
100,000,000 shares authorized, 51,411,133
and 51,317,828 shares outstanding $ 192,784 $ 192,442
Other paid-in capital - net 585,902 584,272
Unearned compensation (1,144) (3,072)
Retained earnings 247,448 197,812
1,024,990 971,454
Cumulative preferred stock of subsidiary
Subject to mandatory redemption 30,000 30,000
Long-term debt 876,741 933,042
1,931,731 1,934,496
CURRENT LIABILITIES
Long-term debt and preferred stock due
within one year 95,826 92,559
Short-term borrowings 125,087 92,027
Accounts payable and other accruals 135,310 149,255
Accrued interest 13,481 14,372
Dividends payable 954 17,386
Accrued taxes 24,551 30,985
395,209 396,584
OTHER
Deferred income taxes 597,025 614,576
Deferred investment tax credits 45,248 47,314
Deferred gain on contract termination 107,840 112,697
Trojan decommissioning and transition obligation 349,058 357,844
Miscellaneous 119,882 119,738
1,219,053 1,252,169
$ 3,545,993 $3,583,249
<FN>
The accompanying notes are an integral part of these consolidated
balance sheets.
</TABLE>
<PAGE>
<TABLE>
PORTLAND GENERAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW FOR THE
THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
1997 1996 1997 1996
(Thousands of Dollars)
<S> <C> <C> <C> <C>
CASH PROVIDED (USED) BY OPERATIONS:
Net income $ 24,219 $ 33,679 $ 83,596 $ 83,041
Adjustment to reconcile net income
to net cash provided by operations:
Depreciation and amortization 31,873 30,503 63,374 59,616
Amortization of WNP-3 exchange
agreement 2,166 864 4,333 2,160
Amortization of Trojan investment 6,440 5,935 12,491 11,760
Amortization of Trojan decommissioning 3,510 3,511 7,020 7,021
Amortization of deferred charges - other (6,400) 1,355 (2,899) (118)
Deferred income taxes - net (8,680) (7,087) (8,128) (11,859)
Other noncash revenues (770) (416) (1,119) (799)
Changes in working capital:
(Increase) Decrease in receivables 14,989 22,321 10,066 22,725
(Increase) Decrease in inventories (590) 590 (2,397) 69
Increase (Decrease) in payables (68,949) (59,441) (20,683) (32,545)
Other working capital items - net 12,314 8,821 2,377 283
Trojan decommissioning expenditures (3,573) (1,609) (6,199) (2,139)
Deferred items - other 7,252 13,709 2,038 11,626
Miscellaneous - net (2,304) (1,557) 3,870 3,147
11,497 51,178 147,740 153,988
INVESTING ACTIVITIES:
Utility construction - new resources - (4) - (15)
Utility construction - other (37,629) (56,922) (73,461) (90,196)
Energy efficiency programs (1,800) (4,694) (3,546) (7,405)
Rentals received from leveraged leases 10,245 10,516 15,956 16,092
Nuclear decommissioning trust deposits (3,510) (3,511) (7,020) (7,950)
Nuclear decommissioning trust withdrawals 3,349 91 6,074 1,447
Other (5,438) (3,594) (9,688) (10,602)
(34,783) (58,118) (71,685) (98,629)
FINANCING ACTIVITIES:
Short-term borrowings - net 51,665 54,133 33,060 56,284
Borrowings from corporate owned life
insurance - - - 1,312
Long-term debt issued - - - 35,000
Long-term debt retired (26,355) (5,066) (51,786) (87,661)
Repayment of nonrecourse borrowings for
leveraged leases (8,828) (9,516) (13,794) (14,390)
Preferred stock retired - (20,000) - (20,000)
Common stock issued (883) 353 912 1,786
Dividends paid (32,907) (16,757) (49,332) (32,060)
(17,308) 3,147 (80,940) (59,729)
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (40,594) (3,793) (4,885) (4,370)
CASH AND CASH EQUIVALENTS
AT THE BEGINNING OF PERIOD 65,511 11,342 29,802 11,919
AT THE END OF PERIOD $ 24,917 $ 7,549 $ 24,917 $ 7,549
Supplemental disclosures of cash flow
information
Cash paid during the period:
Interest, net of amounts capitalized $ 19,463 $ 19,273 $ 35,996 $ 36,174
Income taxes 80,600 67,670 82,794 67,670
<FN>
The accompanying notes are an integral part of these consolidated
statements of cash flow.
</TABLE>
<PAGE>
Portland General Corporation and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
Note 1 - Principles of Interim Statements
The interim financial statements have been prepared by Portland
General Corporation (PGC) and, in the opinion of management,
reflect all material adjustments which are necessary to a fair
statement of results for the interim period presented. Certain
information and footnote disclosures made in the last annual report
on Form 10-K have been condensed or omitted for the interim
statements. Certain costs are estimated for the full year and
allocated to interim periods based on the estimates of operating
time expired, benefit received or activity associated with the
interim period. Accordingly, such costs are subject to year-end
adjustment. It is PGC's opinion that, when the interim statements
are read in conjunction with the 1996 Annual Report on Form 10-K,
the disclosures are adequate to make the information presented not
misleading.
Reclassifications - Certain amounts in prior years have been
reclassified for comparative purposes.
Note 2 - Legal Matters
Trojan Investment Recovery - In April 1996 a circuit court judge in
Marion County, Oregon found that the OPUC could not authorize PGE,
PGC's principal operating subsidiary, to collect a return on its
undepreciated investment in the Nuclear Plant ("Trojan"),
contradicting a November 1994 ruling from the same court. The
ruling was the result of an appeal of PGE's 1995 general rate order
which granted PGE recovery of, and a return on, 87 percent of its
remaining investment in Trojan.
The November 1994 ruling, by a different judge of the same court,
upheld the Commission's 1993 Declaratory Ruling (DR-10). In DR-10
the OPUC ruled that PGE could recover and earn a return on its
undepreciated Trojan investment, provided certain conditions were
met. The Commission relied on a 1992 Oregon Department of Justice
opinion issued by the Attorney General's office stating that the
Commission had the authority to set prices including recovery of and
on investment in plant that is no longer in service.
The 1994 ruling was appealed to the Oregon Court of Appeals and
stayed pending the appeal of the Commission's March 1995 order.
Both PGE and the OPUC have separately appealed the April 1996 ruling
which was combined with the appeal of the November 1994 ruling at
the Oregon Court of Appeals.
Management believes that the authorized recovery of and on the
Trojan investment and decommissioning costs will be upheld and that
these legal challenges will not have a material adverse impact on
the results of operations or financial condition of PGC for any
future reporting period.
Other Legal Matters - PGC and certain of its subsidiaries are party
to various other claims, legal actions and complaints arising in the
ordinary course of business. These claims are not considered
material to PGC's financial position or results of operations.
Note 3 - Subsequent Event
Business Combination - On July 1, 1997 PGC consummated a merger
transaction pursuant to the Amended and Restated Agreement and
Plan of Merger by and among Enron Corp., PGC and Enron Oregon Corp.
dated as of July 20, 1996 and amended and restated as of September
24, 1996 and as further amended by the First Amendment dated April
14, 1997 (Amended Merger Agreement). Pursuant to the Amended Merger
Agreement, Enron Corp., a Delaware corporation merged with and into
Enron Oregon Corp., an Oregon corporation (Reincorporation Merger)
and the name of Enron Oregon Corp. was changed to Enron Corp. (Enron).
Promptly following the Reincorporation Merger, PGC merged with and
into Enron (PGC Merger), with Enron continuing in existence as the
surviving corporation.
(c) Exhibits. The following exhibits to the Form 8-K Current
Report are incorporated by reference to the filings
indicated below:
(i) The following documents filed with the Commission by
Enron Corp., an Oregon corporation, are incorporated herein by
reference:
(a) Form 8-B Registration Statement filed on
July 2, 1997 pursuant to the Securities Exchange Act of
1934;
(b) Amended and Restated Agreement and Plan of
Merger dated as of July 20, 1996 and amended and
restated as of September 24, 1996 among Enron Corp.,
Enron Oregon Corp., and PGC, as amended by the First
Amendment thereto dated April 14, 1997 (Annex A to the
Proxy Statement/Prospectus included in the Registrant's
Registration Statement on Form S-4, File No. 333-13791).
(c) Restated Articles of Incorporation of Enron
(Annex E to the Proxy Statement/Prospectus included in
the Registrant's Registration Statement on Form S-4,
File No. 333-13791).
(d) Articles of Merger of Enron Oregon Corp., an
Oregon corporation, and Enron Corp., a Delaware
corporation (Exhibit 3.02 to Registrant's Post-Effective
Amendment No. 1 to Form S-3 Registration Statement, File
No. 33-60417).
(e) Articles of Merger of Enron Corp., an Oregon
corporation, and Portland General Corporation, an Oregon
corporation (Exhibit 3.03 to Registrant's Post-Effective
Amendment No. 1 to Form S-3 Registration Statement, File
No. 33-60417).
(f) Bylaws of Enron (Exhibit 3.04 to the
Registrant's Post-Effective Amendment No. 1 to Form S-3
Registration Statement, File No. 33-60417.
(g) Form of Series Designation for the Enron
Convertible Preferred Stock (Annex F to the Proxy
Statement/Prospectus included in the Registrant's
Registration Statement on Form S-4, File No. 333-13791).
(h) Form of Series Designation for the Enron
9.142% Preferred Stock (Annex G to the Proxy
Statement/Prospectus included in the Registrant's
Registration Statement on Form S-4, File No. 333-13791).
(ii) The following documents filed by PGC with the Commission
are incorporated herein by reference:
(a) Annual Report on Form 10-K for the fiscal
year ended December 31, 1996, as amended by Form 10-K/A
Amendment No. 1; and
(b) Quarterly Report on Form 10-Q for the
quarter ended March 31, 1997.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
Enron Corp.
Date: September 17, 1997 By: RICHARD A. CAUSEY
Richard A. Causey
Senior Vice President
and Chief Accounting and
Information Officer
