Enron reaches $255.5 million settlement with Nevada power utilities

By Caroline Salls

Pittsburgh, Nov. 16 - Enron Corp. has reached an agreement with Nevada Power Co. and subsidiaries Sierra Pacific Power Co. and Sierra Pacific Resources to settle all civil and contractual claims related to electricity and natural gas transactions in the Western United States from 1997 to 2003, according to a company news release.

The claims were filed in proceedings with the Federal Energy Regulatory Commission and the U.S. Bankruptcy Court for the Southern District of New York.

Under the settlement, as consideration for their mutual dismissal and release of claims against each other, Enron will receive a $129 million termination payment to be made by the Nevada companies arising under contracts for the sale of electricity that were terminated in 2002.

Also, the Nevada companies will receive a $126.5 million shared unsecured bankruptcy claim against Enron Power Marketing, Inc., an Enron subsidiary, which will entitle the companies to receive distributions under Enron's confirmed plan of reorganization.

According to the claim recovery rate under the plan, the settlement produces a net value of $100.03 million to Enron's creditors.

The settlement is subject to FERC and bankruptcy court approval.

"This settlement represents the latest in a series of significant claims that have been resolved in Enron's bankruptcy proceedings," Enron board chairman John Ray said in the release.

"We are pleased that this settlement enables us to collect additional value for the creditors and, at the same time, resolve claims against the estate so that we can accelerate distributions to all creditors."

According to a Sierra Pacific news release, the settlement resolves long-term, ongoing litigation involving more than $300 million in terminated contracts between Enron and Sierra Pacific's utility subsidiaries Nevada Power and Sierra Pacific Power.

Sierra Pacific said that after all terms of the agreement are finalized, the company expects its net payment for resolving its Enron-related issues will be no more than $89.9 million.

The Nevada utilities said they expect to realize at least 30% of the face value of the claim against the bankruptcy estate, which would guarantee that Sierra Pacific's total payment will be no more than the $89.9 million.

During 2003 and 2004, Sierra Pacific set aside $60 million in a cash escrow. With this security and the accrued interest, the company will now need to pay less than $30 million of additional cash to complete the settlement, according to the Sierra Pacific release.

Enron is a Houston-based energy company that emerged from bankruptcy on Nov. 18, 2004.

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