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Enron Mail |
USA: Enron says recent woes to hurt profitability.
Reuters English News Service, 11/14/01 USA: Enron traders seen riding out storm, cuts likely. Reuters English News Service, 11/14/01 USA: Arbs tread lightly on Enron-Dynegy deal. Reuters English News Service, 11/14/01 USA: UPDATE 1-Enron CEO Lay admits to errors with mea culpa. Reuters English News Service, 11/14/01 Enron Receives Dynegy $1.5B Cash Infusion Tues. <DYN ENE Dow Jones News Service, 11/14/01 USA: Enron queried by EPA on oil pipeline spills. Reuters English News Service, 11/14/01 Enron to Sell Off Money-Losing Assets In Bid to Restore Its Financial Health Dow Jones Business News, 11/14/01 Cohen, Milstein, Hausfeld & Toll, P.L.L.C. Announces that Class Action Suits Against Enron Corporation Have Expanded their Class Periods Business Wire, 11/14/01 Enron Says 4th-Qtr Earnings Cut by Lost Business (Update6) Bloomberg, 11/14/01 Cauley Geller Bowman & Coates, LLP Expands Class Period in Class Action Lawsuit Against Enron Corp. Business Wire, 11/14/01 Fitch: Cinergy's Rating Outlook Negative Business Wire, 11/14/01 USA: Enron says recent woes to hurt profitability. 11/14/2001 Reuters English News Service (C) Reuters Limited 2001. HOUSTON, Nov 14 (Reuters) - Troubled energy trading giant Enron Corp. , which agreed last week to a buyout by smaller rival Dynegy Inc. , said on Wednesday it expects its recent woes to have a "temporary but negative impact" on fourth-quarter profitability. Enron executives said in a conference call with analysts and investors that fourth-quarter results would also be adversely affected by severance costs and other restructuring costs. It did not provide further details, but said it expects to issue fourth-quarter earnings guidance in two to three weeks. Enron also said it is seeking an additional $500 million to $1 billion in private equity to help rebuild confidence in the company and keep its core trading operations afloat in the nine months before the acquisition by Dynegy is expected to close. Enron, the nation's biggest buyer and seller of natural gas and electricity, agreed on Friday to be bought by Dynegy for about $9 billion in stock after investor unease over the company's business deals sapped its finances to the point of near-collapse. Enron has been under the gun from Wall Street since mid-October when it said shareholder equity had been cut by $1.2 billion because of off-balance sheet deals with partnerships run by former Chief Financial Officer Andrew Fastow, who was later replaced. The deals are under investigation by U.S. regulators. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. USA: Enron traders seen riding out storm, cuts likely. By Scott DiSavino 11/14/2001 Reuters English News Service (C) Reuters Limited 2001. NEW YORK, Nov 14 (Reuters) - Traders at Enron Corp., atop the energy trading world, are avidly being pursued by rivals but are holding out to see if there is a good deal awaiting them in the proposed buyout by Dynegy Inc. While a number of jobs are expected to go after the near collapse of North America's biggest energy trader, the new owners are expected to pull out all the stops to keep Enron's top traders - seen as the company's key assets. "I know (traders) are getting a ton of calls, but I don't think there is going to be a mass exodus from the trading floor," said Joe Baker, president of Houston-based Search Consultants International, a recruitment company that serves the energy and power marketing industry. Enron, known for turning out some of the industry's most aggressive traders, also has a reputation as a tough training ground for newcomers, handsomely rewarding those who "make their numbers" and quickly showing non-performers the door. Traders at other energy firms said experienced traders can earn six-figures salaries before annual bonuses, paid sometime between the beginning of January and the middle of March. A company recruiting traders before the bonus is paid would have to pay a larger sign on bonus. "The majority of the key traders are going to wait and see what kind of situation develops ... everyone's got their eyes open," Baker said. "Most people want to stick around to see what kind of bonus they are going to get." WAIT AND SEE Energy traders are clearly worried about the $9 billion takeover announced last week, an opportunity for Dynegy to chop head count. "There's a lot of overlap at both firms. I don't think there will be enough room for everyone," a trader at another Texas-based energy firm said. Enron is the nation's biggest buyer and seller of natural gas and electricity. Dynegy is about a fifth as big as Enron measured in terms of revenue. Despite the job uncertainty hanging over their heads, traders said they could not name a single Enron or Dynegy trader actively scouting out a new employer. "Everyone seems to be waiting to see what happens. There are only a few trader jobs open in the country right now. Those positions will likely be filled pretty quickly if this merger goes through," another trader said. "Some (traders) are going to be looking for work no matter whether they're laid off or leave on their own," the trader added. So far, it is mostly Enron support staff who are polishing off their resumes. Enron said Wednesday in an analyst meeting the company expects to take a charge for severance in the fourth quarter. However, no job cut numbers were discussed. Baker said the support staff feels their jobs are the ones most threatened by the proposed Dynegy merger. Dynegy is buying Enron for its trading operation and has said it is confident the best will stick around. Upon completion of the merger, the combined company, to be called Dynegy Inc., is expected to have revenues exceeding $200 billion and $90 billion in assets. Dynegy agreed to buy its larger cross-town rival after Enron investors lost faith in the company whose stock plummeted following its disclosure of off-balance sheet deals with partnerships run by its former chief financial officer. The stock was off 8 cents, or 0.8 percent, at $9.92 a share at the close on New York Stock Exchange trade Wednesday, well below its 52-week high of $84.88. Meanwhile, Dynegy stock fell $1.58, or 0.7 percent, to $46.20 a share. - Scott DiSavino, New York Power Desk, +646-223-6072, fax +646-223-6079, e-mail scott.disavino@reuters.com and Nigel Hunt, Los Angeles bureau +213-955-6752. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. USA: Arbs tread lightly on Enron-Dynegy deal. By Dane Hamilton 11/14/2001 Reuters English News Service (C) Reuters Limited 2001. NEW YORK, Nov 14 (Reuters) - Merger arbitragers say they're treading lightly in betting over prospects for the $9 billion stock-swap takeover of Houston energy trader Enron Corp. by rival Dynegy Inc. . These market pros, who bet on the likelihood a merger will be completed, say big questions about Enron's financial condition raise doubts about the deal and make them shy about risking heavy bets. Wednesday's conference call between Enron officials and investors did little to assuage that, they say. "People are very nervous about Enron," said one arb at a major New York brokerage. "They aren't sure if Enron is actually earning anything." Arbs who think a deal will eventually be completed may "short" the acquirer and buy target stock, reasoning that the acquirer's stock will fall and the target will rise on completion. But in recent days, Enron's stock has languished, while Dynegy's stock has gained more than 40 percent, although it was close to the same level a month ago. Some arbs said Dynegy's stock may have risen because it could gain valuable pipeline assets whether or not a deal is completed. Enron said it granted Dynegy an option to buy its Northern Natural Gas pipeline system for less than $975 million if the deal falls apart after the months-long due diligence review. "Now Dynegy has up to a year to look at the company and at worst, Dynegy comes away with a very good deal," said one arb. "Even if it's a disaster, they come away with a very valuable pipeline." Once a Wall Street high-flyer boasting a $90 share price just 15 months ago, Enron fell from grace after off-balance sheet transactions and financial reporting lapses prompted a regulatory investigation and senior official resignations. Looming debt and a collapsing share price led Enron to agree to a takeover by smaller Houston rival Dynegy last week then valued at $10.41 a share, a fraction of its former value. Enron officials on Wednesday said they were confident that the company was close to gaining a clear picture of its financial condition following restatement of earnings over several years. But it said the Securities and Exchange Commission investigation "could affect us on a go-forward basis." Even with commitments for billions of dollars in cash that Enron said it's obtained in recent days, some arbs worried that customers who buy and sell energy contracts through Enron may be abandoning the company, particularly for longer-term contracts. While Enron officials said customers and others are getting "comfortable in the short-dated market" energy market, arbs said longer-term customers may worry that further damaging disclosures may threaten its financial viability. "It may be that no one wants long-term agreements anymore with Enron," said one arb, who like others, asked not to be named. "I don't think they were completely open about that issue." Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. USA: UPDATE 1-Enron CEO Lay admits to errors with mea culpa. 11/14/2001 Reuters English News Service (C) Reuters Limited 2001. (Adds analyst comment and details of Lay compensation paragraphs 5 to 7) By Andrew Kelly HOUSTON, Nov 14 (Reuters) - Enron Corp. Chairman and Chief Executive Ken Lay on Wednesday acknowledged misjudgments and errors that pushed the nation's biggest energy trader to the brink of collapse and forced it to accept a humbling buyout by smaller rival Dynegy Inc. In a stunning mea culpa to analysts and investors, Lay admitted that Enron had made bad investments, overburdened itself with debt and conducted deals that led to conflicts of interest now under U.S. regulatory investigation. "We fully understand and regret that the combination of these events has resulted in the complete loss of investor confidence. We are fully committed to fixing the problems," he said. Lay's act of atonement came after Enron said he had decided to waive his right to a $60 million golden parachute as part of Dynegy's planned buyout, following a tense exchange with employees about his severance package on Tuesday. Lay received a base salary of $1.3 million from Enron for 2000 plus bonuses totaling $10.6 million. He has also made several million dollars this year by exercising options and selling Enron stock at prices which mostly ranged from $40 to $60, according to Enron filings. UBS Warburg analyst Ron Barone said Lay's candor could not undo damage already done but was welcome nevertheless. "The fact that he 'fessed up' is a step toward reestablishing credibility in himself and in the company," Barone said. Enron agreed on Friday to be taken over by Dynegy for about $9 billion in stock, after investor unease over Enron's off-balance sheet deals drove its stock price down to $7 last week from a high of $90.56 in August 2000. "In hindsight, we made some very bad investments in non-core businesses," Lay said in a 90-minute conference call. Many of those investments, such as an ill-fated venture into the water services business and a power plant project in India that became mired in a payments dispute, performed below Enron's worst expectations, Lay said. "The negative impact of these investments have been exacerbated through the extensive use of debt capital both on and off the balance sheet," Lay said. Deals between Enron and partnerships run by its former chief financial officer, Andrew Fastow, produced "various conflicts of interest, both real and perceived," he added. Fastow was recently replaced and the deals with the partnerships are now under investigation by the U.S. Securities and Exchange Commission. Lay, who built Enron into the dominant energy trading company in North America and Europe after it was formed by the merger of two natural gas pipeline companies in 1986, said the core wholesale energy businesses were fundamentally sound. In the short term, he said, Enron will focus on preventing further deterioration of its credit ratings and maintaining sufficient liquidity to keep the energy businesses running. Enron's president and chief operating officer, Greg Whalley, said the company expects its recent woes to have a "temporary but negative impact" on profitability. Whalley told analysts and investors that fourth-quarter results would also be adversely affected by severance costs and other restructuring costs. He did not provide details but said Enron will issue earnings guidance in two to three weeks. The reference to severance costs was the first allusion to job cuts that are widely viewed as inevitable. Enron also said it is seeking an additional $500 million to $1 billion in private equity to help rebuild confidence in the company and keep its core trading operations afloat in the nine months before the acquisition by Dynegy is expected to close. It has already received $1.5 billion in cash from oil company ChevronTexaco Corp. , which owns 26.5 percent of Dynegy. Enron has been under heavy fire from Wall Street since mid-October when it said shareholder equity had been cut by $1.2 billion because of deals with the Fastow partnerships. Dynegy has said that its agreement with Enron would allow it to back out of the acquisition if the company's problems, which include a stack of lawsuits from angry investors, turn out to be far worse than has already been disclosed. However, Dynegy Chairman and Chief Executive Chuck Watson has said he is confident this will not happen. Watson will head the combined company, which will retain the Dynegy name, and Dynegy will dominate the combined company's senior management and board of directors. Lay has said he has not yet made up his mind whether to accept Watson's offer of a seat on the board of the new company. The California Public Employees Retirement System (Calpers), the largest U.S. pension fund, said there should be no place for Lay or any other Enron directors on the new Dynegy board. "The interests of shareholders are best served by retiring all of the current directors from involvement in Enron's successor entities," said Michael Flaherman, chairman of the Calpers Investment Committee. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. Enron Receives Dynegy $1.5B Cash Infusion Tues. <DYN ENE By Christina Cheddar Of DOW JONES NEWSWIRES 11/14/2001 Dow Jones News Service (Copyright © 2001, Dow Jones & Company, Inc.) NEW YORK -(Dow Jones)- Dynegy Inc. (DYN) provided Enron Corp. (ENE) Tuesday with the $1.5 billion cash infusion envisioned in the companies' merger agreement, a Dynegy spokeswoman said. Dynegy received preferred stock and other rights in an Enron unit that owns the Northern Natural Gas pipeline in return for its investment. The cash infusion, which was made with the assistance of Dynegy's largest shareholder, ChevronTexaco Corp. (CVX), is aimed at providing Enron with additional cash liquidity to support its core energy marketing and trading operations. The rights provide Dynegy with the option to acquire the pipeline unit should the two companies fail to complete their merger. The deal, which still needs shareholder and regulatory approval, is expected to close within the next six to nine months. Dynegy is acquiring Enron for 0.2685 of a Dynegy share, or about $10 billion based on the recent price of Dynegy shares. The acquisition of Enron by its smaller rival follows a series of disclosures about Enron's financial dealings with partnerships run by some of its corporate officers. The dealings are under investigation by the Securities and Exchange Commission and at the center of more than a dozen of shareholder lawsuits. During the last month, Enron watched as its share price sunk to a small fraction of its earlier levels as shareholder confidence in the trading company evaporated. As credit-rating agencies began to cut Enron's debt ratings threatening the company's investment-grade status, the company scrambled to raise additional cash to shore up its balance sheet and protect confidence in its business. Industry experts viewed Dynegy's cash infusion as one way the companies sought to bolster confidence in the energy trader's liquidity, and protect its most valuable business. In a conference call earlier Wednesday, Enron said its core energy trading business has been temporarily hurt by the uncertainty created by recent events. According to Dynegy spokeswoman Jennifer Rosser, the preferred stock Dynegy has received for its investment in Enron is convertible into the common stock of the Enron pipeline unit. Dynegy also has the right to convert the preferred stock into Enron shares if it desires, the spokeswoman said. For example, if Enron were to cancel its merger with Dynegy in order to accept a higher bid from another suitor, Dynegy might decide to convert its preferred shares into Enron stock in order to reap the profits created by an increase in Enron's stock price, Rosser said. In either case, Dynegy wouldn't be required to pay any additional consideration. Dynegy was able to make the cash infusion after ChevronTexaco, of San Francisco, made an investment in Dynegy. If the acquisition closes as anticipated, ChevronTexaco, which owns about one-fourth of Dynegy, plans to make an additional $1 billion investment in the combined company. ChevronTexaco also has the right to purchase an additional $1.5 billion in Dynegy stock in the first three years following the close of the acquisition. Enron officials said they are monitoring the energy market's reaction to the cash infusion, and hopes it will restore the confidence of its counterparties. Enron remains on a credit watch at the credit-rating agencies. Moody's Investors Service and Standard & Poor's each have Enron rated one notch above speculative grade. -By Christina Cheddar, Dow Jones Newswires; 201-938-5166; christina.cheddar@dowjones.com Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. USA: Enron queried by EPA on oil pipeline spills. 11/14/2001 Reuters English News Service (C) Reuters Limited 2001. WASHINGTON, Nov 14 (Reuters) - The nation's biggest energy trader, Enron Corp. , already reeling from bad investments, too much debt and possible conflicts of interest, said on Wednesday that the government is seeking information on spills from pipelines operated by Enron and its subsidiaries. In a filing with the Securities and Exchange Commission, the Houston-based company said it received a request for information from the Environmental Protection Agency regarding certain spills and discharges since 1998 on oil pipelines operated by Enron and its subsidiaries. EOTT Energy Partners LLP is the only subsidiary of Enron that has extensive domestic oil pipeline operations, according to the filing. Enron's response was originally supposed to be filed with the EPA no later than Nov. 7, but it received an extension until Jan. 31. "EOTT cannot predict the outcome of the EPA inquiry," the company said in the filing. Enron agreed on Friday to be taken over by Dynegy Inc. for about $9 billion in stock after investor unease over off-balance sheet deals drove its stock price down to $7 last week from a high of $90.56 in August 2000. Many of those investments, such as an ill-fated venture into the water services business and a power plant project in India that became mired in a payments dispute, performed below Enron's worst expectations, Kenneth Lay, Enron's chairman and chief executive officer, said on Wednesday. In addition, deals between Enron and partnerships run by its former chief financial officer, Andrew Fastow, produced "various conflicts of interest, both real and perceived," he added. Fastow was recently replaced, and the deals with the partnerships are now under investigation by the SEC. Enron shares were down 3 cents to $9.96 while Dynegy lost 48 cents to $46.46, both in afternoon trading on the New York Stock Exchange. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. Enron to Sell Off Money-Losing Assets In Bid to Restore Its Financial Health 11/14/2001 Dow Jones Business News (Copyright © 2001, Dow Jones & Company, Inc.) A Wall Street Journal Online News Roundup HOUSTON -- Enron Corp., the once-mighty energy trader, is shedding money-losing assets and focusing on its core power-marketing business as it moves toward a merger with rival Dynegy Inc. The effort is aimed at improving Enron's financial health, following disclosures that the company inflated profit figures and didn't reveal large amounts of debt to shareholders, Enron President and Chief Executive Kenneth Lay told investors Wednesday. Businesses Enron (ENE) wants to sell include a high-speed Internet unit and power operations in India and Brazil, which Mr. Lay said "have performed far worse than we ever could have imagined when we made these investments." "In hindsight, we made some very bad investments in noncore businesses," Mr. Lay said during the conference call for investors and analysts. Last Friday Dynegy (DYN) said it agreed to buy Enron in a deal now worth $10.5 billion, and Mr. Lay said the company is focusing on conserving cash and getting the most out of the core businesses that Enron will keep. Enron Issues Warning About 4th Quarter Results Enron executives also said they expect the company's fourth-quarter earnings to be hurt by the ongoing financial problems. They didn't provide details, but said they would issue an outlook for fourth-quarter earnings in two weeks. In addition, the company said it wouldn't file its quarterly report for the third quarter with the Securities and Exchange Commission on Wednesday as it had expected. Jeff McMahon, Enron's newly appointed chief financial officer, said the company expects to make the filing "five days late." Under regulatory guidelines, publicly traded companies have 45 days from the end of a fiscal quarter to file their financial results with the SEC. Enron reported its third-quarter earnings in mid-October, but has yet to make a filing with the SEC. The filing would include Enron's balance sheet. In the past, Enron has received criticism for not providing a balance sheet with its quarterly earnings release. Enron officials on the call declined to provide specific details about the company's current cash position. That information is included on the balance sheet. Dynegy agreed to buy Enron after the energy-trading giant's stock price plunged about 80% in the weeks following Enron's posting of a $618 million third-quarter loss. Dynegy also will assume $13 billion of Enron's debt. The slide in Enron's share price primarily was a result of large-scale transactions it did with partnerships headed by Enron officers. Those transactions have produced hundreds of millions of dollars of write-offs and restatements in the past month. They are being investigated by the SEC and have helped spawn more than a dozen shareholder lawsuits. Enron ousted its chief financial officer, Andrew Fastow, who ran some of the partnerships, and restated its earnings back to 1997. But those actions failed to restore investor confidence. "I could not have ever contemplated the events we as a company and you as a stakeholder have faced over the last several weeks," Mr. Lay said Wednesday. "This has resulted in a complete loss of investor confidence. We are fully committed to fixing the problems." Enron executives didn't say how many of the company's 20,000 employees world-wide would lose jobs as businesses are sold, a process they said could take months. "Our debt balances too high and we need to raise cash," Mr. McMahon said. Mr. Lay said cash gained from asset sales also would support its core businesses. Enron is the country's top buyer and seller of natural gas, and the No. 1 wholesale power marketer. The company operates a 25,000-mile gas pipeline system and also markets and trades metals, paper, coal, chemicals, and fiber-optic bandwidth. Dynegy's purchase of Enron triggered a clause in Mr. Lay's contract giving him $20.2 million for each full calendar year remaining in his contract if there is a change in control of Enron. But Mr. Lay told Enron employees that he wouldn't accept the money -- a total of up to $60.6 million -- upon completion of the merger. He said nothing about that decision during Wednesday's conference call. Enron spokesman Vance Meyer said the compensation package, in Mr. Lay's contract since 1989, is the only merger-related payment Mr. Lay is eligible for from Enron. A Dynegy spokesman, John Sousa, said the company is unsure whether Mr. Lay can receive a retirement package from them. Dynegy executives have said that they hope to complete their acquisition of Enron by next summer. The Enron name will vanish when the deal is completed. Chuck Watson, Dynegy's chairman and chief executive, will retain those roles for the combined company. Mr. Lay will have no role in day-to-day management. He has been offered a seat on the combined company's board. Under the merger agreement, Enron retains the right to designate three directors of the combined company. So far, Enron President and Chief Operating Officer Greg Whalley has been designated to be the new company's executive vice president. Enron spokeswoman Karen Denne said Enron has yet to designate two other appointees. On Tuesday the California Public Employees' Retirement System Board of Administration announced that it would oppose appointment of any Enron board member to the combined company, charging that Enron's board may have failed to adequately monitor its corporate officers. Calpers owns about three million shares of Enron and also owns shares of Dynegy. Copyright © 2001 Dow Jones & Company, Inc. All Rights Reserved. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. Cohen, Milstein, Hausfeld & Toll, P.L.L.C. Announces that Class Action Suits Against Enron Corporation Have Expanded their Class Periods 11/14/2001 Business Wire (Copyright © 2001, Business Wire) WASHINGTON--(BUSINESS WIRE)--Nov. 14, 2001--The following notice is issued by the law firm of Cohen, Milstein, Hausfeld & Toll, P.L.L.C., on behalf of its client, who, along with other firms, previously filed a lawsuit in the United States District Court for the Southern District of Texas (Houston Division), on behalf of purchasers of the common stock of Enron Corporation ("Enron" or the "Company") (NYSE:ENE). The complaint alleges that the defendants violated section 10(b) of the Securities Exchange Act of 1934 ("The Exchange Act"), and Rule 10b-5 promulgated thereunder, and that defendants' wrongful conduct artificially inflated the price of Enron common stock during the Class Period. The prior complaints charged that during 2000 and 2001 the defendants misrepresented and concealed material facts concerning the Company's financial transactions with two partnerships established by Enron's then Chief Financial Officer, which resulted in substantial losses to Enron and a reduction in shareholders' equity of over $1 billion. As the result of the Company's November 8, 2001 announcements, however, the class period has been extended to encompass all purchasers of Enron common stock from October 19, 1998 through November 7, 2001. On November 8, 2001, prior to the markets opening, Enron announced it was restating its financial results for 1997, 1998, 1999 and 2000, and the first two quarters of 2001 to correct for errors which had inflated Enron's net income by hundreds of millions of dollars in those years and that audit reports for those years should not be relied upon. Upon these disclosures, Enron's stock dropped to $8.41 per share on November 8, 2001, down from a Class Period high of $90. Plaintiff's counsel -- Cohen, Milstein, Hausfeld & Toll, P.L.L.C. -- has significant experience in prosecuting investor class actions and actions involving financial fraud. The firm has offices in Washington, D.C., Seattle, Washington and New York, New York and is active in major litigation pending in federal and state courts throughout the nation. The firm's reputation for excellence has been recognized on repeated occasions by courts which have appointed the firm to lead positions in complex multi-district or consolidated litigation. Cohen, Milstein, Hausfeld & Toll, P.L.L.C. has taken a lead role in numerous important cases on behalf of defrauded investors, and has been responsible for a number of outstanding recoveries which, in the aggregate, total hundreds of millions of dollars or more. If you purchased shares of Enron stock during the Class Period, you may move the Court no later than December 21, 2001 to serve as lead plaintiff for the Class. In order to serve as lead plaintiff, you must meet certain legal standards. If you have any questions about this notice or the action, or with regard to your rights, please contact either of the following: Andrew N. Friedman, Esq. or Mary Ann Fink Cohen, Milstein, Hausfeld & Toll, P.L.L.C. 1100 New York Avenue, NW West Tower, Suite 500 Washington, DC 20005 Telephone: 888/347-4600 or 202/408-4600 E-mail: afriedman@cmht.com or mfink@cmht.com CONTACT: Cohen, Milstein, Hausfeld & Toll, P.L.L.C. Andrew N. Friedman, Esq. or Mary Ann Fink afriedman@cmht.com or mfink@cmht.com 888/347-4600 or 202/408-4600 12:50 EST NOVEMBER 14, 2001 Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. Enron Says 4th-Qtr Earnings Cut by Lost Business (Update6) 2001-11-14 16:13 (New York) Enron Says 4th-Qtr Earnings Cut by Lost Business (Update6) (Updates with closing share prices in 12th paragraph.) Houston, Nov. 14 (Bloomberg) -- Enron Corp., which averted bankruptcy last week by agreeing to a buyout by Dynegy Inc., said fourth-quarter earnings will be lowered by severance payments, reorganization costs and a drop in its energy-trading business. Enron didn't say how many jobs it plans to cut or what its expenses will be. Trading volumes declined last week and it's too soon to tell if the company will recover lost business, Chief Operating Officer Greg Whalley said during a conference call with investors. Traders including Mirant Corp. and Aquila Inc. have said they shifted transactions away from Enron after its plunging stock price prompted concerns about creditworthiness. ``Business has been affected in the last month,'' Enron Chief Executive Officer Kenneth Lay said. ``We're going to go back to basics and focus on our core energy business.'' The company will provide a more detailed fourth-quarter earnings projection in two to three weeks, Lay said. Dynegy CEO Charles Watson, who agreed on Friday to acquire bigger rival Enron in a transaction now valued at more than $24 billion, had said he is confident that Enron's trading business is sound. `Greater Acceptance' Enron has been criticized by investors and has seen its market value plunge in recent weeks because of concerns it was using affiliated partnerships to mask losses and hide debt. Dynegy is buying Enron for $9.27 billion in stock and about $15 billion in assumed debt. Both companies are based in Houston. Since the buyout was announced, Enron is ``seeing greater acceptance in the U.S. and Europe to our financial situation in short-term markets,'' Whalley said. ``It may be a couple of weeks before we can give comfort to our longer-dated customers. Hopefully, we'll move up to normal levels in the near future.'' Enron said it will be five days late in filing its third- quarter earnings statement with the Securities and Exchange Commission. The filing was supposed to be out by today. The company also will provide more details about earnings in the fourth quarter than it has in previous periods, Chief Financial Officer Jeffrey McMahon said. Enron spokesman Mark Palmer declined to provide further details about job cuts. ``Anything we say about layoffs, we're going to say to our employees first,'' he said. Dynegy spokesman John Sousa said he didn't know the number of job cuts or the cost of severance that Enron will have in the fourth quarter. Shares of Enron rose 2 cents to $10. Dynegy fell 74 cents to $46.20. ChevronTexaco Corp., which owns 26 percent of Dynegy, declined $3.55 to $86.62. Providing More Detail Enron been criticized by investors for not providing enough information about how it makes its money. The company was expected to earn 45 cents a share in the fourth quarter, the average estimate of analysts polled by Thomson Financial/First Call. In the third quarter, Enron had a $618 million loss because of failed investments in water, telecommunications and retail- energy sales that cost the company $1.01 billion. Investors expected Enron's fourth-quarter earnings to be cut by recent events, said Kathleen Vuchetich, who helps manage the $1.4 billion Strong American Utilities Fund, which owns 284,000 Dynegy shares. ``They'd have hurt their credibility if they'd said otherwise,'' Vuchetich said. $1.5 Billion Enron said it received $1.5 billion in cash yesterday from ChevronTexaco as part of the Dynegy buyout agreement. In return, Dynegy will acquire preferred stock and other rights in an Enron unit that owns the Northern Natural Gas pipeline. If the merger isn't completed, Dynegy will have the right to acquire Northern Natural Gas, Enron said today in a filing with the Securities and Exchange Commission. ChevronTexaco, the second- largest based U.S. oil company, will provide Dynegy with another $1 billion after the merger closes. McMahon also said the company is in talks with several private investors. The company expects to receive $500 million to $1 billion from these sources, McMahon said. ``Our debt balance is too high, and we need to raise equity capital,'' McMahon said. ``In this environment we can't raise public equity capital very efficiently so we need to go to other sources.'' The company said it is accelerating attempts to sell ``non- core assets'' such as its investment in an Indian power plant and its broadband telecommunications network. Enron has about $8 billion invested in these businesses, and it may take as long as a year to get rid of the broadband business, Whalley said. ``In hindsight, we made some very bad investments,'' Lay said. ``These have turned out far worse than we ever imagined.'' Lay, Enron's chairman since February 1986, was entitled to receive a severance package of more than $60 million after Dynegy took over Enron. Lay decided yesterday to waive the payment. Cauley Geller Bowman & Coates, LLP Expands Class Period in Class Action Lawsuit Against Enron Corp. 11/14/2001 Business Wire (Copyright © 2001, Business Wire) LITTLE ROCK, Ark.--(BUSINESS WIRE)--Nov. 14, 2001--The Law Firm of Cauley Geller Bowman & Coates, LLP announced today that a class action has been filed in the United States District Court for the Eastern District of Texas, Texarkana Division on behalf of purchasers of Enron Corp. ("Enron" or the "Company") (NYSE:ENE) common stock during the period between January 18, 1999 and November 8, 2001, inclusive (the "Class Period"). A copy of the complaint filed in this action is available from the Court, or can be viewed on the firm's website at http://www.classlawyer.com/pr/enron.pdf. The complaint charges Enron and certain of its officers and directors with violations of the federal securities laws. On November 8, 2001, Enron announced that it would restate its 1997, 1998, 1999, 2000 and 1Q and 2Q 2001 results because of various income statement and balance sheet adjustments required as the result of Enron's determination that three unconsolidated entities should have been consolidated in the financial statements pursuant to Generally Accepted Accounting Principles ("GAAP"), which caused Enron's 1997 through 2Q 2001 income and assets to be materially overstated. Throughout 1999 and 2000, the price of Enron common stock substantially increased -- rising from $32.50 per share on January 18, 1999 to $83.125 per share on December 29, 2000. The complaint alleges that a substantial basis for this huge gain was the Company's allegedly false and misleading reports of ever increasing revenues and profits. The effect of the restatement was dramatic. Rather than earning $698 million and $1.01 per share in 1998, Enron's restated earnings fell to $585 million and $0.86 per share. Net income was lowered $186 million in 1999 with EPS dropped from $1.10 to $0.79. Net income was lowered $132 million in 2000 and EPS correspondingly fell from $1.12 to $0.97. The restatement increased Enron's debt by $561 million in 1998, $685 million in 1999 and $629 million in 2000. Shareholder's equity was reduced by $448 million for 1998, $834 million for 1999, $1.16 billion for 2000, $1.226 billion for first quarter 2001 and $929 million for second quarter 2001. During the Class Period, Enron insiders disposed of over $73 million of their personally-held Enron common stock to unsuspecting investors. If you bought Enron common stock between January 18, 1999 and November 8, 2001, inclusive, and you wish to serve as lead plaintiff, you must move the Court no later than December 21, 2001. If you are a member of this class, you can join this class action online at http://www.classlawyer.com/sign_up.html. Any member of the purported class may move the Court to serve as lead plaintiff through Cauley Geller Bowman & Coates, LLP or other counsel of their choice, or may choose to do nothing and remain an absent class member. Cauley Geller Bowman & Coates, LLP has substantial experience representing investors in securities fraud class action lawsuits such as this. The firm has offices in Florida, Arkansas and California, but represents investors throughout the nation. If you have any questions about how you may be able to recover for your losses, or if you would like to consider serving as one of the lead plaintiffs in this lawsuit, you are encouraged to call or e-mail the Firm or visit the Firm's website at www.classlawyer.com. CAULEY GELLER BOWMAN & COATES, LLP Investor Relations Department: Jackie Addison, Sue Null or Shelly Nicholson Toll Free: 1-888-551-9944 E-mail: info@classlawyer.com CONTACT: Cauley Geller Bowman & Coates, LLP Charlie Gastineau or Sue Null, 888/551-9944 16:46 EST NOVEMBER 14, 2001 Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. Fitch: Cinergy's Rating Outlook Negative 11/14/2001 Business Wire (Copyright © 2001, Business Wire) NEW YORK--(BUSINESS WIRE)--Nov. 14, 2001--Fitch Inc. has changed the Outlook of Cinergy's (CIN) 'BBB+' senior unsecured debt to Negative from Stable due to increased leverage and planned environmental compliance expenditures. Cinergy is the parent holding company of The Cincinnati Gas & Electric Company (CGE) and PSI Energy, Inc. (PSI). Fitch rates the senior secured debt of both 'A-.' The negative outlook reflects the rise in debt leverage due mainly to the acquisition of two natural gas fired generating units from Enron Corp in March 2001. As of Sept. 30, 2001, debt was 63% of total capitalization, up from 59% and 56% at the end of fiscal years 2000 and 1999, respectively. The acquisition consists of Enron's 494- megawatt Brownsville generation facility located in Haywood County, Tennessee and the 504-megawatt Caledonia generation facility located in Lowndes County, Mississippi. To reduce leverage, CIN plans to use proceeds from non-core asset sales to reduce debt and to reinstitute the issuance of new shares to meet obligations under its dividend reinvestment plan and various employee stock plans. If the debt reduction is successful, the outlook could return to stable. Capital requirements related to CIN's compliance with environmental regulations are also a concern. In September 2000, CIN announced a plan for its subsidiaries to spend about $800 million system wide over the following five years to install pollution control equipment to reduce NOx emissions. A majority of these expenditures will be incurred by PSI, the regulated integrated utility, and should be recovered through rates. The company also reached a tentative agreement with the Environmental Protection Agency and other parties to reduce SO2 emissions by shutting down or re-powering with natural gas several coal-fired boilers and installing scrubbers and pollution control systems at several sites. The agreement, if finalized, would require CIN to spend an additional $700 million, mostly during 2008- 2013. CIN's ratings also take into account the significant earnings and cash flow contribution of its regulated utility businesses, and a revised business strategy for its non- regulated businesses that is less aggressive and more appropriate for this mid-size company. The new strategy emphasizes regional, asset-based energy trading and marketing, customer led origination, and its regulated utility operations. A large amount of CIN's non-regulated revenue will be derived from contractual sales with its subsidiaries, CGE and The Union Light, Heat and Power Company. CGE's electric restructuring plan provides substantial transition cost recovery and allows the company to transfer its generating facilities. CGE plans to transfer its generating assets to CIN's non-regulated affiliate, Cinergy Wholesale Energy, Inc. Another CIN subsidiary, PSI, remains a vertically integrated regulated company and restructuring is not expected in the mid-term. Regulated operations provide about 55% of earnings. CIN, through its subsidiaries CGE and PSI, provides electric and gas service in Ohio, Kentucky and Indiana to about 1.5 million electric and 500,000 gas customers. The company also has a growing merchant energy business and owns 13,000 megawatts of generation. CONTACT: Fitch, New York Orli Almog, 212/908-0894 or Robert Hornick, 212/908-0523 14:48 EST NOVEMBER 14, 2001 Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved.
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