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Player Avatar CaymanBrew (92.95) Submitted: 11/11/2006 5:39:04 PM : Outperform Start Price: $18.78 POR Score: +21.58

Portland General is a very solid small utility that has been largely hidden under Enron’s cloud. However, it was always run as a separate unit and was never caught up in any of Enron’s questionable activities. The company has a stable business in a region that is showing reasonable growth. Its debt level is modest for a utility. Yet, its stock looks cheap by most measures when compared to other similar regional utilities. The stock is cheap for several reasons.

1) It is virtually unfollowed by Wall Street because of its history. Many analysts probably don’t even realize that Portland General is now an independent company again.

2) The stock may be depressed because many of the Enron creditors who receive the stock sell it as soon as possible. They want to cash out and put their memories of the Enron debacle as far behind them as
they can. It will be some time before all of the stock has been distributed, but eventually this artificial selling pressure will disappear.

3) The company has recently paid its first dividend (22.5 cents a quarter for about a 3.5% yield), many reporting services still show the stock as having little or no yield because it does not have a full year of dividend history. This deters most utility investors, who are very yield sensitive, from looking at the stock.
All of these factors depressing the stock are temporary and will gradually disappear. Once they are gone, the stock could go to 35 or 40. Moreover, while the stock is waiting to move up, a nice dividend (which could easily be increased over time as the company becomes more comfortable with its status as a public
company).

Also, as Portland General becomes disentangled from the Enron mess, it could be an attractive acquisition target for another utility looking to expand. Patient investors who purchase the stock now, before the Enron cloud has fully dissipated, will be well rewarded, and the stock could probably be bought up to 33.

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