This post from a couple of weeks ago noted this WSJ profile on Texas Pacific Group, the Fort Worth-based investment fund founded by former bankruptcy lawyer David Bonderman and business whiz Jim Coulter in 1993.
Well, it appears that TPG may be getting more than it bargained for in its proposed $2.35 billion cash and debt acquisition of Portland General Electric, which is Enron’s Pacific Northwest utility, a deal that is still awaiting regulatory approval.
In the meantime, this Williamette Week Online article reports that TGP’s proposed acquisition of Portland General is running into rough waters. Earlier this week, TPG released hundreds of pages of internal documents in response to the Williamette Week article as it tries to allay widespread skepticism among Oregonians about its intentions for the utility.
The documents lay out different scenarios that TPG is considering for for making the utility more profitable, including cuts in a customer-service department. TPG contends that the analysis was preliminary and is not going to be used as the basis of actual changes in utility operations. Despite the assurances, several Oregon officials are opposing TGP’s acquisition of Portland General as the Oregon Public Utility Commission has begun final deliberations over regulatory approval.
TGP has proposed to put day-to-day control of the utility in the hands of a new Oregon company that would have a board comprised mainly of Oregonians. Nevertheless, TPG — the 80% owner of the Oregon company — would retain the right to overrule the Oregon company’s board regarding key decisions. After Enron, Oregonians apparently do not trust anyone from Texas.
The main complaint of Oregonians that oppose the deal is that TPG’s turnaround strategies could degrade utility service in Portland and surrounding communities. Oregon and Washington consumers already have been hammered by sharply higher electric rates as a result of rising natural-gas prices and continued fallout from the California energy crisis of 2000-2001.
Meanwhile, the economic bargaining continues. TPG has offered rate reductions totaling $43 million spread out over five years beginning in 2007 if the deal is approved. However, Commission staff and consumer advocates contend that the rate reductions are inadequate and are pushing for further concessions. To date, TPG is holding firm.

This NY Times article provides a decent overview of the recent news that two Canadian energy companies had discovered an oilfield in the Gulf of Mexico under Cuba’s control that has estimated reserves of 100 million barrels, albeit with the usual Times over-analysis regarding the business and political implications of the find.
Given that Cuba’s business infrastructure and capital resources are utterly incapable of developing such a field, Castro will have to import those resources. Given his typical business instincts, a meaningful development deal will likely not get done anytime soon. Unlike the Times, I view Cuba’s entry into exploration and production competition as a good thing. Unfortunately, Castro doesn’t know how to compete, so the impact will likely be minimal.

Following last week’s news that the price of a New York Stock Exchange seat had fallen to $1 million (a 63% drop from the peak price in 1999), this NY Times article examines the market forces that have caused the lackluster interest in the Exchange’s seats. As usual, the marketplace is the main reason, as it reacts to the NYSE’s increasingly obsolescent business model that has traditionally eschewed automation:

On an average day, the New York Stock Exchange trades 1.5 billion shares worth about $50 billion. Unlike almost all its competitors, it has traders on the floor who execute customer orders as well as their own orders in an effort to get the best price. Now the exchange has to decide how to maintain that identity while allowing more trades to be executed electronically.

The NYSE’s new business model is called the “hybrid market” model:

The . . . exchange’s ability to employ the automated market, called the hybrid market (humans in an auction, and computers matching orders) will determine whether the Big Board will keep attracting orders. If it fails, market share could fall.
. . . [T]he hybrid market will serve the exchange’s customers while maintaining the strengths of an auction market – namely the ability to get better prices rather than just deliver what appears on a computer screen. “The reason people come here is we have the best price 90 percent of the time and we have the best liquidity,” [said John Thain, the CEO of the NYSE]. “The more liquidity you have the better able you are to offer the best price, the more you have the best price, the more often the order flow comes to you. You cannot have one without the other.”

Nevertheless, the competition still expects the NYSE to continue losing market share, even under its new business model:

According to critics, more automation means that the New York Stock Exchange may lose its information advantage – the knowledge of what trades large players, such as mutual funds, are planning. Losing that knowledge could mean fewer orders. “There is a spiraling effect. As you lose the information, one customer takes his order off the floor, that translates to less information and less of an advantage,” said Chris Concannon, executive vice president at the Nasdaq exchange. He said he believed that the S.E.C.’s new rules and a hybrid model would erode the Big Board’s market share. “No single large electronic pool of liquidity will have more than 50 percent” of Big Board stock trading, he said.

And the NYSE’s changing nature better happen fast:

Critics and supporters agree that the New York Stock Exchange is not blessed with time. “The New York Central Railroad saw itself as a national icon and it was obliterated,” said Thomas Caldwell, chairman of Caldwell Asset Management and a buyer of four Big Board seats in the last year. “It ceased to exist. So many did. New York has to have a newer vision of itself and confidence in that vision.”

Now, I ask you, isn’t this a more effective and efficient way to change the NYSE than the method examined in this post and this post?