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Enron Mail |
A Dynegy-Enron Deal Faces Significant Regulatory Review
Dow Jones Energy Service, 11/08/01 US Physical Gas Prices Mostly Down; No Demand Dow Jones Energy Service, 11/08/01 USA: NewPower shares advance on revised guidance. Reuters English News Service, 11/08/01 Enron Investors Still Perplexed - And Stock Shows It Dow Jones News Service, 11/08/01 USA: UPDATE 1-FirstEnergy sells $4.0 bln in 3-part debt sale. Reuters English News Service, 11/08/01 USA: WRAPUP 1-Enron, Dynegy confirm possible merger talks. Reuters English News Service, 11/08/01 IN THE MONEY: Enron Transparency Not Transparent Enough Dow Jones News Service, 11/08/01 S&P Lowers Rating on Yosemite Securities Trust I; On Watch Negative PR Newswire, 11/08/01 RPT Dynergy sharply higher, Enron lower on merger talks AFX News, 11/08/01 US Spot Coal: Prices Weaken As Buying For 2002 Slows Dow Jones Energy Service, 11/08/01 STOCKWATCH Dynergy sharply higher, Enron flat on merger talks AFX News, 11/08/01 UK: Rivals eye Enron's metals trading business. Reuters English News Service, 11/08/01 WRAP: Enron To Restate Results; Confirms Dynegy Talks Dow Jones News Service, 11/08/01 USA: Enron fires two employees linked to partnerships. Reuters English News Service, 11/08/01 Enron restates net income for periods from 1997 to Q3 2001 AFX News, 11/08/01 Enron restates earnings as company confirms talks with Dynegy Associated Press Newswires, 11/08/01 USA: UPDATE 1-Enron provides financing data, restates earnings. Reuters English News Service, 11/08/01 Is Enron Too Big To Fail? Bailout Seen Unlikely Dow Jones Energy Service, 11/08/01 Enron Bonds Give Back Gains as Firm Restates Profit (Update3) Bloomberg, 11/08/01 Apache to Cut 2002 Drilling Budget 70% on Gas Prices (Update1) Bloomberg, 11/08/01 Enron Fires Treasurer, Alleges Improper Investment (Update2) Bloomberg, 11/08/01 Dynegy Rises on Optimism It May Get Enron for Bargain (Update2) Bloomberg, 11/08/01 NewPower 3rd-Qtr Loss Narrows After Adding Customers (Update4) Bloomberg, 11/08/01 Enron Restates Years of Profits, in Talks With Dynegy (Update4) Bloomberg, 11/08/01 DJ FABER REPORT: More On Enron/Dynegy <ENE Bloomberg, 11/08/01 Dynegy, Enron negotiating merger Enron fires two officers; financial results to be restated CBSMarketWatch.com, 11/08/01 A Dynegy-Enron Deal Faces Significant Regulatory Review By Bryan Lee 11/08/2001 Dow Jones Energy Service (Copyright © 2001, Dow Jones & Company, Inc.) OF DOW JONES NEWSWIRES WASHINGTON -(Dow Jones)- Any merger deal that may emerge between Dynegy Inc. (DYN) and Enron Corp. (ENE) will face a complicated and time-consuming regulatory-review process, legal experts said Thursday. Any equity deal would require approvals from numerous U.S. federal regulatory agencies and state utility regulators, as well as survive Canadian and European antitrust reviews, energy attorneys contacted by Dow Jones Newswires said. A merger would require approvals from the Federal Energy Regulatory Commission, Securities and Exchange Commission, Department of Justice and Federal Trade Commission. And the Illinois Commerce Commission likely would weigh into the mix, since Dynegy owns Illinova's Illinois Power Co. Any effort to strike a deal quickly also could be complicated by Enron's ownership of Portland General Electric Co. While Enron has entered into an agreement to sell the utility to Northwest Natural Gas Co. (NWN), a previous attempt to sell the company fell through because of regulatory complications. A key issue for federal regulators scrutinizing a potential Enron-Dynegy merger will be the degree of electricity market concentration such a transaction would entail, the attorneys said. Financially wounded Enron is the nation's largest electricity and natural gas trader with an extensive network of gas pipelines. Dynegy is ranked sixth nationally in both electricity and natural gas marketing. The transaction would receive the greatest scrutiny at FERC, where the merger application would challenge the commission's merger-review policy, attorneys said. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. US Physical Gas Prices Mostly Down; No Demand 11/08/2001 Dow Jones Energy Service (Copyright © 2001, Dow Jones & Company, Inc.) HOUSTON -(Dow Jones)- U.S. natural gas physical prices mostly fell Thursday, dipping on low demand and a shorter-than-usual trading session as Enron's online trading service went off the board, traders said. With Dynegy and Enron Corp. talking takeover matters, traders felt Enron's gas traders simply covered positions and got out of the market quickly. Marketers felt Enron's trading positions have eased in the last two weeks as the company reported a $1.2 billion erosion of investor equity related to questionable partnerships. Also, traders pointed to no incremental or storage demand and a lack of weather-driving prices downward. Fundamentals for the market remain bearish: Storage is near all-time highs, and injection season ended with Wednesday's 10 billion cubic feet build. Otherwise, some floor traders said gas marketers were shying away from trading with giant Enron Corp. December settled Thursday at $2.960 per million British thermal units, up 9.0 cents. Traders are looking ahead hopefully to colder weather at the end of the month, in time for the Thanksgiving holiday. At the benchmark Henry Hub in south Louisiana, traders paid $2.60-$2.77/MMBtu, down 1 cent-8 cents. First-of-month November index is $3.16/MMBtu, traders said. Deals at Transcontinental Gas Pipe Line Station No. 65 were done at $2.60-$2.74/MMBtu, down 5 cents-8 cdents. November first-of-month index is $3.19/MMBtu, a trader said. At the Arizona-California Border, where gas from El Paso's pipeline begins delivery to Southern California, buyers paid $2.54-$2.65/MMBtu, up 1 cent on the bid, down 2 cents on the offer as traders feared curtailments on the pipeline. November first-of-month index is $2.95/MMBtu. At the Katy hub in East Texas, buyers paid $2.56-$2.74/MMBtu, down 7 cents on the bid, up 3 cents on the offer. November index is $3.01/MMBtu, a trader said Thursday. At Waha in West Texas, buyers paid $2.44-$2.57/MMBtu, down 3 cents on the bid, up 1 cent on the offer. November index is $2.86/MMBtu. -By John Edmiston, Dow Jones Newswires,713-547-9209; john.edmiston@dowjones.com Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. USA: NewPower shares advance on revised guidance. 11/08/2001 Reuters English News Service (C) Reuters Limited 2001. NEW YORK, Nov 8 (Reuters) - National power and gas marketer NewPower Holdings Inc. revised its 2001 loss guidance downward on Thursday and saw its stock post its best one-day gain in two months. The projection came in NewPower's report of a third quarter net loss of $67.1 million, or $1.15 per share, compared to a net loss of $69.9 million, or $2.96 per share for the third quarter of 2000. Analysts had expected a per-share loss of $1.15 to $1.18, according to research firm Thomson Financial/First Call, which put the consensus at $1.16. Purchase, New York-based NewPower is the parent of The New Power Co., which says it is the first national provider of electricity and natural gas to residential and small commercial customers in the United States. It said total customers increased 155 percent to 805,000 compared to the third quarter of 2000. Revenues were $54.7 million in the latest quarter, an increase of 201 percent from the third quarter of 2000. During the third quarter, NewPower said, it gained about 80,000 new customers through the company's marketing efforts, primarily in the residential sector. NewPower recently increased its emphasis on small business customers and at the end of September had over 25,000 small business accounts. NewPower expects this to increase to more than 35,000 by the end of the year. Providing revised guidance for the rest of the year, the company said it expects a net loss of $41 million to $46 million or a loss per share of 65 cents to 73 cents for the fourth quarter. The full year net loss is estimated to be between $210 million and $215 million, or $3.55 to $3.63 per share. Analysts' estimates of the year per share loss range from $3.68 to $3.74, resulting in a consensus per share loss projection of $3.71. NewPower said it projects the year-end customer count will be between 840,000 and 860,000, of which the fourth-quarter increase is expected to be achieved entirely through marketing. It said the revised forecast reflects a reduction in the number of customers the company expects to acquire through portfolio acquisitions and the impact of delays in switching Texas customers to NewPower, partly offset by the company's modified marketing strategies and continued cost reductions. NewPower shares reached a high of $1.25 in Thursday afternoon trading and were still up 48.15 percent, or 39 cents, at $1.20 in the final half hour of trading. The company is 44 percent owned by Enron Corp. , NewPower's largest provider of electricity and natural gas. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. Enron Investors Still Perplexed - And Stock Shows It By Christina Cheddar Of DOW JONES NEWSWIRES 11/08/2001 Dow Jones News Service (Copyright © 2001, Dow Jones & Company, Inc.) NEW YORK -(Dow Jones)- Even as more facts are revealed regarding Enron Corp.'s (ENE) financial dealings, investors can agree: Things remain as clear as mud. Earlier Thursday, Enron and Dynegy Inc. (DYN) confirmed the neighboring rivals were talks for a potential "business combination." An agreement hasn't been reached yet, and neither company will make any further comment until a contract is signed or the talks end. Separately, Enron restated its earnings from 1997 through the second quarter of 2001. As the news hit the tape, Enron shares, after being briefly halted, seemed to hunt for a direction. The stock traded as high as $10, and as low as $8.40. Currently, the shares were at $8.67, down 38 cents, or 4.2%. Wednesday, the shares zigzagged. Meanwhile, Dynegy shares, which had fallen Wednesday as news of the talks began to leak out, regained lost ground and then added some. Dynegy shares were recently trading up $4.54, or 13.8%, at $37.54. "There's a lot of news to digest," said Glen Hilton, a portfolio manager at San Francisco-based Montgomery Asset Management. Enron shares have been in a downward spiral since it revealed last month that the unwinding of off-balance sheet transaction with a partnership run by its chief financial officer, Andrew Fastow, had resulted in the loss of $1.2 billion in shareholder equity. That bad news led to more bad news, including the downgrades of its credit ratings, which are essential to the health of its core wholesale energy marketing and trading business. Meanwhile, investor confidence eroded as market watchers asked Enron to come clean. The move in Enron and Dynegy shares Thursday was unusual for companies considering a merger. Typically, shares of the acquirer will fall, while shares of the target climb. Investors explained the move several ways. Some said it was a reflection of the lack of a premium Enron shareholders will be paid. Their views were based on a report in The Wall Street Journal, which cited a source familiar with the matter who said Dynegy is considering paying $7 billion to $8 billion in stock, or about one-tenth of what Enron was worth 15 months ago. Others agreed, and said given recent events they're being cautious. Larry Alberts, a buy-side analyst at American Express Financial Advisors, said he was questioning how serious Dynegy is about the transaction. He also said there is still the possibility of more bad news to come from Enron. As for the restatement of earnings going back to 1997, investors said it was clearly having a negative impact on Enron's stock even though some had been expecting it. John Waterman, of Rittenhouse Financial Services, said the information Enron disclosed in a filing with the Securities and Exchange Commission was "hard to sort through." Waterman said he was encouraged that the restatement didn't reflect any revenue recognition issues, and it still showed that there was growth in the business - albeit not as much as previously reported. Enron had to restate the earnings because it should have included three of its off-balance sheet financing vehicles - Chewco Investments LP, Joint Energy Development Investments LP, or JEDI, and a unit of LJM Cayman LP - in its consolidated financial statements under the guidelines of generally accepted accounting principles. Revelations about the involvement of Enron's Fastow in LJM are at the center of an investigation by the Securities and Exchange Commission, and led to demands from the financial community that he be terminated. On Wednesday, Enron disclosed it has fired its treasurer, Ben Glisan, and its general counsel, Kristina Mordaunt, as well. Gilsan, Mordaunt, and two former Enron employees were partners of LJM while serving at Enron. Enron continues to say it had controls in place relating to Fastow's involvement with the partnerships. The board required review and approval of each transaction by the office of the chairman, the chief accounting officer and the chief risk officer. Whether these controls and procedures were followed will be investigated by a special committee Enron has named. Many expect that if Enron remains independent, more executive departures could be in store. "The bottom line from my perspective is that Ken Lay, Jeff Skilling, and the board seemed to be aware (of Fastow's dealings with the LJM partnerships)," said Andre Meade, an analyst at Commerzebanc Securities. "Everyone's hands are dirty, including Ken Lay. ... The firing the CFO and treasurer are not going to single-handedly solve the problems at Enron," he continued. Others also are questioning the role of Arthur Andersen LLP, Enron's independent auditor. "People like us have to rely on people like them," said Rittenhouse's Waterman. According to its restated financial information, Enron had close to $13 billion in debt at Sept. 30. Liquidity issues remain the chief concern among investors, who continue to fret that the latest disclosure will result in a further deterioration of Enron's credit rating. "The clock is ticking on Enron," said Montgomery's Hilton. "Each day brings a new piece of incremental news." Following the release of Enron's earnings last month, Hilton had a hunch the company would likely write off additional investments as it had in the third quarter. However, he was committed to the stock, and at the time he didn't plan to sell his stake, which accounted for 2% of the close to $100 million in assets he manages. Since that time, Hilton has sold his Enron stock. He said he began selling after news of the SEC probe broke. "It just got too scary to hold," he said. Still, Hilton, who owns shares of Dynegy as well, isn't concerned about the possibility of a merger of the two Houston energy traders. "It's David taking Goliath," he said, adding that he is convinced that Dynegy's management will not enter into a transaction that will threaten the company's stability. Several Dynegy investors echoed Hilton's sentiment with their own expressions of confidence in Dynegy's management. However, at times these convictions were almost betrayed by a nervousness brought on by the sense that what one doesn't know could be hurtful. Some investors remain concerned by Dynegy's motivation. According to Hilton, investors don't know what would happen to the market - and as a result, to Dynegy - if Enron fails. So, what reason truly is motivating Dynegy? "It's probably both," Hilton speculated. -By Christina Cheddar, Dow Jones Newswires; 201-938-5166; christina.cheddar@dowjones.com Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. USA: UPDATE 1-FirstEnergy sells $4.0 bln in 3-part debt sale. By Dena Aubin 11/08/2001 Reuters English News Service (C) Reuters Limited 2001. NEW YORK, Nov 8 (Reuters) - Utility holding company FirstEnergy Corp. sold $4 billion of five-, 10-and 30-year debt on Thursday, helped by investors' preference for defensive sectors as the U.S. economy stalls. FirstEnergy was able to lower its borrowing costs, trimming yields from initial indications. The sale originally was expected to offer generous yields as heavy bond issuance, weak wholesale power prices and investor jitters over the troubles of energy trading firm Enron Corp. weighed on the utility sector. Akron, Ohio-based FirstEnergy will use proceeds for corporate purposes and to help pay for its recent purchase of Morristown, New Jersey-based GPU Inc. . FirstEnergy purchased GPU for about $4.5 billion in cash and stock, plus the assumption of about $7.2 billion in debt. The sale closed on Tuesday. Utility bonds are typically viewed as a conservative investments because of the industry's stable income during uncertain economic times. The sector has been under a cloud, though, as Houston-based Enron has struggled with a cash squeeze and writedowns from off-balance-sheet transactions. "Enron was held up as a model, growing extremely quickly, and the recent financial disclosures are just a shock," said Kelly Perl, a project director at New York utility consulting firm Applied Economic Research. Spreads, or the yield gaps between utility bonds and U.S. Treasuries, have widened about 0.15 to 0.20 percentage point over the past two weeks, while spreads on gas and pipeline companies have widened about 0.30 percentage points, strategists said. SALE TERMS FirstEnergy sold $1 billion of 5.5 percent five-year notes at 99.888 cents on the dollar, yielding 5.526 percent or 1.98 percentage points more than similar-maturity U.S. Treasuries. It also sold $1.5 billion of 6.45 percent 10-year notes at 99.651 cents on the dollar, yielding 6.498 percent or 2.25 percentage points more than Treasuries, and $1.5 billion of 7.375 percent 30-year bonds, yielding 7.389 percent or 2.45 percentage points more than the old long Treasury bond. Initial price guidance had called for spreads as high as 2.20, 2.35 and 2.60 percentage points more than Treasuries for the five-, 10-and 30-year debt. FirstEnergy's sale was helped by a 0.50 percentage point interest rate cut by the U.S. Federal Reserve on Tuesday and signs that the Fed could cut rates again. "There is the perception that the Fed is going to aggressively ease and err on the side of caution," said Peter Palfrey, portfolio manager for Loomis Sayles & Co. in Boston. Investors are betting that the Fed will engineer an economic recovery, helping corporate profits and spurring price gains in corporate bonds, Palfrey said. Analysts said FirstEnergy's acquisition of GPU should benefit its credit quality. "It adds further diversity to their cash flow from regulated distribution companies," said Fitch analyst Robert Hornick. Falling wholesale power prices also should benefit FirstEnergy, Hornick said. "They're not a big seller of wholesale energy at this point," Hornick said. "They don't own generation facilities and need to buy (electricity) in the market, so to the extent wholesale prices are lower, they can benefit," he said. Standard & Poor's rates FirstEnergy's senior unsecured notes "BBB-minus," its lowest investment grade. Moody's Investors Service rates FirstEnergy's long-term debt "Baa2," roughly one notch higher, while Fitch rates them "BBB." Salomon Smith Barney, Barclays Capital and Morgan Stanley arranged the sale. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. USA: WRAPUP 1-Enron, Dynegy confirm possible merger talks. By Jeff Franks 11/08/2001 Reuters English News Service (C) Reuters Limited 2001. HOUSTON, Nov 8 (Reuters) - Enron Corp., plagued by investor doubts and under the gun to shore up its crumbling finances, said on Thursday it was talking with power trading rival Dynegy Inc. about a possible merger. The company, whose stock and credit ratings have plummeted amid an uproar about questionable business transactions, admitted it made bookkeeping errors and restated earnings for the last four years. It also said former Chief Financial Officer Andrew Fastow, who abruptly left the company last month, had made $30 million managing partnerships linked to the deals. The deals, which were off the balance sheet, are now under investigation by the U.S. Securities and Exchange Commission for possible conflict of interest. Two other executives, managing director and treasurer Ben Glisan and Enron division general counsel Kristina Mordaunt, were both believed to have links to the Fastow-led partnerships and have been fired, the company disclosed. The announcements threw a spotlight on Enron's stark situation, in which the nation's top energy trader has gone from Wall Street darling to pariah in a few weeks and now faces a cash crunch so dire it is seeking a merger with the much-smaller Dynegy. Its credit ratings have fallen to near-junk levels in recent weeks, making it difficult to get money to boost investor confidence and back the trading operations that provide 90 percent of Enron's income. The company reportedly has been seeking investors to provide a cash infusion for an equity stake. MODERATE PREMIUM Word about a possible Dynegy-Enron deal leaked out on Wednesday, and on Thursday the two companies confirmed talks about a possible "business combination" were underway, but said no agreement had been reached. Sources told Reuters that the two Texas rivals, whose headquarters are a few blocks apart in downtown Houston, were talking about a stock swap with a moderate premium for shareholders and a $1.5 billion capital infusion from ChevronTexaco Corp., which owns 26.5 percent of Dynegy. The stock swap is valued at about $8 billion, or about $10 a share, The New York Times reported on Thursday. A merger would catapult Dynegy to the top of the energy trading industry now dominated by Enron. Last year, the company had $29 billion in revenues, compared to $100 billion for Enron. For Enron, it would cap an astonishingly rapid fall from grace. Enron stock has lost $19 billion in market value since its crisis began in mid-October and was down another 45 cents to $8.60 in Thursday trading. Dynegy shares rose $3.87 to $36.87. Enron restated its earnings going back to 1997, saying its auditors advised that the off-the-balance sheet deals in question should have been included in the company's financial statements. The restated results reduced Enron's net income by $591 million, or 22 percent, from 1997 to 2000, and increased its debt by $628 million, or 6 percent, after two of the partnership's financial statements were consolidated into Enron's earnings. Enron said the restatement reflects a $1.2 billion reduction to shareholders' equity that touched off the current controversy when the company offhandedly disclosed it last month. Angry shareholders suddenly worried that Enron was hiding other liabilities in its complex financial statements and began demanding more information. In a statement, Enron chief executive Ken Lay said the company hoped it had allayed Wall Street fears with Thursday's announcements. "We believe that the information we have made available addresses a number of the concerns that have been raised by our shareholders and the SEC about these matters," he said. Analysts, wary after last month's surprise revelations, said Enron may have more to release, but they were pleased it was finally coming forth with information. "It's an attempt to come clean," said Raymond Moore, an analyst with Weatherly Securities. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. IN THE MONEY: Enron Transparency Not Transparent Enough By Michael Rapoport 11/08/2001 Dow Jones News Service (Copyright © 2001, Dow Jones & Company, Inc.) A Dow Jones Newswires Column NEW YORK -(Dow Jones)- So Enron Corp. (ENE) says it wants to be more transparent - to make its impenetrable financial results and corporate structure easier for investors and analysts to understand. Based on its announcements Thursday, however, it still has a heck of a long way to go. With Enron's restatement Thursday of nearly five years' worth of earnings and additional information about the maze of off-balance-sheet deals related to it, we now have a lot more information about the mess at Enron than we had 24 hours ago. But we're not much closer to understanding just what HAPPENED to leave Enron in such a mess - and that's because the company's explanations of all this continue to be dense, confusing and next to impossible to grasp. Try this tidbit, from the Form 8-K Enron filed about the restatements Thursday with the Securities and Exchange Commission: "In addition, Enron's net income is reduced for specific JEDI revenues previously allocated to Chewco, relating to the appreciation in value of Enron stock, which eliminate upon consolidation. This, in effect, reduces Enron's share of JEDI's earnings." Huh? And no, it doesn't help you to know that "Chewco" is an entity that wasn't included in Enron's financial results but which Enron now admits should have been. Or that "JEDI" isn't a "Star Wars" reference but a limited partnership in which both Enron and Chewco had invested. It's still impenetrable. Then there are the times when Enron just plain doesn't give enough information. The company says its decision that Chewco should be included in its results after all "is based on current information that Chewco did not meet the accounting criteria to qualify as ... unconsolidated..." Uh - okay. WHY didn't it meet the criteria, and why did Enron previously believe that it did? Enron doesn't say. Finally, Enron makes some assertions that just make you scratch your head. The company says part of the restatement of its earnings stems from unspecified "prior-year proposed audit adjustments and reclassifications which were determined to be immaterial in the year originally proposed." Hmmm. Beyond the fact that Enron doesn't elaborate on the nature of these "audit adjustments and reclassifications," or why they were originally considered immaterial, consider that according to Enron's own figures in the 8-K, they add up to a negative earnings impact of $87 million since 1997. That amount doesn't sound like any definition of "immaterial" I've ever heard. An Enron spokesman couldn't immediately be reached for comment. In fairness, this lack of clarity may be all but inevitable given Enron's Byzantine structure, which involves dealings with outside but related entities that also have third parties involved, which in one case have a subsidiary that allowed Enron to hedge the risks of an investment, and in another case is selling assets purchased from Enron to OTHER entities in order to finish paying Enron for the original transaction, and ... you get the idea. It's next to impossible to make clear because Enron's structure is just too baroque to understand in the first place. The market is plenty puzzled by all this, even in the wake of Enron's attempt to clarify things. Take a look at the company's drunken-sailor stock chart from Thursday. After news of the restatements hit, Enron stock first jumped higher, going as high as $10 a share, then soon dropped back, to as low as $8.40, as investors started to digest the details of the news. Then up again to about $9.25, then down again to its current level of around $8.50. There's no reason investors should be confused like this. There is absolutely no reason that a reasonably intelligent layman, with an elementary working knowledge of corporate finance, should be unable to understand the regulatory filings, structure, earnings and balance sheet of any public company. If that happens, it's the company's fault, not the investor's - either because the company hasn't explained things well enough or because its structure is needlessly complicated to begin with. If Enron wants to get back the market's confidence, fixing that problem, one way or the other, would be a good place to start. -By Michael Rapoport, Dow Jones Newswires; 201-938-5976; michael.rapoport@dowjones.com Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. S&P Lowers Rating on Yosemite Securities Trust I; On Watch Negative 11/08/2001 PR Newswire (Copyright © 2001, PR Newswire) NEW YORK, Nov. 8 /PRNewswire/ -- Standard & Poor's today lowered its rating on Yosemite Securities Trust I to triple-'B' from triple-'B'-plus and placed it on CreditWatch with negative implications (see list). The lowered rating and CreditWatch placement reflects the Nov. 1, 2001 rating action taken on Enron Corp., which was based on Standard & Poor's belief that Enron Corp.'s plan to employ asset sales and other means to repair its damaged balance sheet will be insufficient to restore its long-term credit quality to the historical triple-'B'-plus level. Also, the CreditWatch placement reflects the uncertainties surrounding the company and its credit quality in the short run due to the possibility of further unanticipated developments in the capital markets. Yosemite Securities Trust I is a synthetic issue that utilizes a credit default swap referencing Enron Corp. The rating on the credit-linked notes reflects the current senior unsecured rating of Enron Corp. Yosemite Securities Trust I $750 Million credit linked notes Rating To From BBB/Watch Neg BBB+ /CONTACT: Mary Ryan, +1-212-438-2090, or Frank J Trick, +1-212-438-1108, both of Standard & Poor's/ 13:26 EST Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. RPT Dynergy sharply higher, Enron lower on merger talks 11/08/2001 AFX News © 2001 by AFP-Extel News Ltd (Repeating to show in headline, lead that Enron is trading lower) NEW YORK (AFX) - Shares of Dynergy Inc were sharply higher, while Enron Corp lost ground in midsession trading after the two companies confirmed that they are holding merger talks. At 12.25 pm, Dynergy was up 3.17 usd, or 9.6 pct, at 36.17, Enron fell 0.34 usd, or 3.7 pct, to 8.71 usd and ChevronTexaco dropped 0.18 usd to 87.10. The DJIA was up 110.22 points at 9,664.59, the S&P 500 index gained 12.88 points to 1,128.68 and the Nasdaq composite rose 34.35 points to 1,871.88. Enron share price today was hurt after the company announced a restatement of its net income from 1997 to the third quarter of 2001. The revisions were, for the most part, reductions in the bottom-line figure. The 8 bln usd tie-up talks, which come at a time when Enron is being investigated by the US Securities and Exchange Commission and the markets are losing faith in the energy trader, are seen as particularly positive for Dynergy. Analysts see a tie-up as highly accretive for Dynergy, which is 26 pct owned by ChevronTexaco, with many synergies also possible. Banc of America analyst William Maze, who rates Dynergy 'Strong Buy', said: "If this transaction comes to fruition, we would be aggressive buyers of Dynergy given its accretive nature as well as the lifting of Enron's credibility issues that has been plaguing the entire industry." CIBC World Markets analyst William Hyler, who rates Enron 'Buy', added: "The move would also catapult (Dynergy) into a leadership role at what could prove near the bottom of the gas/power pricing cycle." On the other hand, Enron's position would improve as its credibility within the trading world and in the face of its trading counterparties would recover somewhat. To that end, Dynergy would provide a yet unspecified cash injection, believed to be approximately 1.5-2.0 bln usd, to improve Enron's standing and shore up its finances. ChevronTexaco, which is expected to provide a substantial part of the financing needed for the merger, also stands to gain from the situation as it would retain effective control of the combined company. rdc/lj For more information and to contact AFX: www.afxnews.com and www.afxpress.com Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. US Spot Coal: Prices Weaken As Buying For 2002 Slows 11/08/2001 Dow Jones Energy Service (Copyright © 2001, Dow Jones & Company, Inc.) NEW YORK -(Dow Jones)- Coal prices slumped in physical markets last week, as mild weather in the East, a slowing economy and high utility inventories undercut demand, sources said Wednesday. Over-the-counter prices for Central Appalachian barges for calendar year 2002 slid $1.75 from last week to $32.00 a ton on Tuesday, trading several times at that level, people in the market said. With major coal producers sold out for the remainder of this year and most of next year, traders said, prices could move higher if there were a sudden rise in demand. "Utilities are comfortable in their stockpiles, a trader said. "The only thing that would make this market bounce a little bit would be some cold weather in the East." The cut in Enron Corp's (ENE) credit rating and a Security and Exchange Commission investigation into its transactions with off-balance-sheet partnerships was making the energy giant's coal customers anxious about getting paid, people in the market said. A coal broker said counterparties were watching Enron's credit and limiting longer-term business with the company. "Everyone is nervous," a buyer at a Midwestern utility said. Major coal producers and coal-burning utilities interviewed by Dow Jones Newswires on Wednesday said they hadn't suspended trading with Enron. Physical prices were largely unaffected by the turmoil in the trading business and continued the downward trend that began in mid-October. In the East, where prices softened in light trade, Central Appalachian barge deals for November delivery to the Big Sandy River were done in late October as low as $30.75 free on board, down from $33.50 a ton. December and the first quarter of 2002 traded several times Tuesday at $32.00 and $32.25 a ton, down $1.50 since late October. Rail deliveries were pegged between $36.00 and $38.00 a ton FOB. No deals were confirmed. In the West, Powder River Basin coal with a heat rate of 8,800 British thermal units slipped to $7.55 a ton for November, down a nickel since late October. Deals for calendar year 2002 were done at $8.10 and $8.15 a ton, down about 10 cents. PRB 8,400 Btu coal traded very little, sources said. November deliveries deals were done at $5.90 a ton, down from $6.25 a ton at the end of October. Calendar year 2002 was pegged between $6.35 and $6.45 a ton, down 10 cents. According to the Energy Information Agency, total U.S. coal production through Oct. 27, the latest date for which figures were available, ticked upward by 445,000 short tons to 21.8 million tons. Appalachian coal production, year to date, was 2% ahead of last year. Total Appalachian production in 2001 is 356,557 tons, up from 349,711 tons in the same period last year. U.S. Western coal production year to date remains steady at 6.4% ahead of 2000 figures. EIA reports total western coal production through Oct. 27 at 447,308 tons, up from 420,353 tons in the year-earlier period. Railcar loadings through the end of October were 5% higher than comparable 2000 figures, according the EIA. Activity on the New York Mercantile Exchange, which came to virtual standstill last week, picked up on Tuesday. On Tuesday, open interest for the December coal contract was at 217. The December contract, which expires Nov. 27, settled Tuesday at $31.75 a ton, down $2 from Oct. 30. U.S. Spot Coal Prices Deals done in Nov Dollars/ton;Averages not Volume Weighted 4Q'01 1Q'02 CAL 2002 Central Appalachia Low Sulfur F.O.B. Barge $31.75-32.00 $32.00-32.25 $32.00-33.00 Average/Change 31.90/-1.85 32.12/-1.63 32.50/-1.00 F.O.B. Rail $36.00-38.00 N/A $36.00-38.00 Average/Change 37.00/-1.25 N/A 37.00/-0.75 Powder River Basin 8400 B.T.U. $5.75-6.00 $6.45-6.60 $6.35-6.45 Average/Change 5.85/-0.15 6.50/ 0.00 6.40/-0.10 8800 B.T.U. $7.25-7.75 $8.10-8.40 $8.10-8.20 Average/Change 7.50/-0.10 ' 8.25/ 0.00 8.15/-0.15 Note to U.S. spot coal prices: Prices are dollars per short ton, based on actual deals done during the month for the delivery period indicated. Averages are straight mathematical averages and aren't volume weighted. Change is from the average of deals done in the previous month. The Central Appalachian low-sulfur category uses benchmark of 12,000 British thermal units per pound. Barge delivery is to the Big Sandy River. Rail delivery is to the Norfolk Southern. For Central Appalachian coal, prices are accepted for coal within 500 Btu of the benchmark Btu and standardized adjustments are made. Powder River Basin categories are quoted FOB mine. -By Jennifer Morrow, Dow Jones Newswires; 201-938-4377; jennifer.morrow@dowjones.com Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. STOCKWATCH Dynergy sharply higher, Enron flat on merger talks 11/08/2001 AFX News © 2001 by AFP-Extel News Ltd NEW YORK (AFX) - Shares of Dynergy Inc were sharply higher, while Enron Corp continued to lose ground, in midsession trading after the two companies confirmed that they are holding merger talks. At 12.25 pm, Dynergy was up 3.17 usd, or 9.6 pct, at 36.17, Enron fell 0.34 usd, or 3.7 pct, to 8.71 usd and ChevronTexaco dropped 0.18 usd to 87.10. The DJIA was up 110.22 points at 9,664.59, the S&P 500 index gained 12.88 points to 1,128.68 and the Nasdaq composite rose 34.35 points to 1,871.88. Enron share price today was hurt after the company announced a restatement of its net income from 1997 to the third quarter of 2001. The revisions were, for the most part, reductions in the bottom-line figure. The 8 bln usd tie-up talks, which come at a time when Enron is being investigated by the US Securities and Exchange Commission and the markets are losing faith in the energy trader, are seen as particularly positive for Dynergy. Analysts see a tie-up as highly accretive for Dynergy, which is 26 pct owned by ChevronTexaco, with many synergies also possible. Banc of America analyst William Maze, who rates Dynergy 'Strong Buy', said: "If this transaction comes to fruition, we would be aggressive buyers of Dynergy given its accretive nature as well as the lifting of Enron's credibility issues that has been plaguing the entire industry." CIBC World Markets analyst William Hyler, who rates Enron 'Buy', added: "The move would also catapult (Dynergy) into a leadership role at what could prove near the bottom of the gas/power pricing cycle." On the other hand, Enron's position would improve as its credibility within the trading world and in the face of its trading counterparties would recover somewhat. To that end, Dynergy would provide a yet unspecified cash injection, believed to be approximately 1.5-2.0 bln usd, to improve Enron's standing and shore up its finances. ChevronTexaco, which is expected to provide a substantial part of the financing needed for the merger, also stands to gain from the situation as it would retain effective control of the combined company. rdc/lj For more information and to contact AFX: www.afxnews.com and www.afxpress.com Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. UK: Rivals eye Enron's metals trading business. By Andy Blamey 11/08/2001 Reuters English News Service (C) Reuters Limited 2001. LONDON, Nov 9 (Reuters) - U.S. energy trading giant Enron Corp. , whose shares have tumbled amid a regulatory probe and doubts about its ability to raise cash, may lose or offload its metals business, senior industry sources said on Thursday. In the wings are several interested parties looking to snap up the company's metals customer base. "There are people out there with the experience and the contacts who see this time as a good opportunity to get into the market," a senior metals market source told Reuters on Thursday. Such a move for Enron's metals portfolio would involve the acquisition of an existing organisation as a vehicle, the source added. "We do not comment on rumours," an Enron spokeswoman said, declining further comment. Other Enron Metals assets were also said to be in play, including the Henry Bath warehousing company, which operates LME-registered warehouses in the UK, the Netherlands, Singapore and the United States. MAJOR PLAYER Houston-based Enron became a major player in the metals trade in May last year when it acquired MG plc, a leading independent international metals dealing firm in London, in a deal worth around 300 million pounds. The company is a ring-dealing member of the London Metal Exchange (LME), able to participate in open-outcry floor trade, and is active in screen-based metals trade via its EnronOnline platform (www.enrononline.com). The company no longer has a stake in online metals trading platform EMETRA (www.emetra.com), having sold its holding to other EMETRA shareholders this summer. But while Enron may be a heavy hitter in the metals sector, base metals trading could hardly be regarded as one of its core businesses. The company's third-quarter 2001 results statement shows income before interest, minority interests and taxes (IBIT) from "Europe and other commodity markets" - which includes metals and steel alongside European gas and power, among others - of $53 million, unchanged from the year-earlier period. This compares with IBIT from Enron's gas and power market-making operations and merchant energy activities in North and South America of $710 million over the same period. But the third-quarter figure that has slashed the value of the company's shares is a $1.2 billion write-down of shareholder equity related to off-balance sheet transactions. On Thursday the company said it would restate its earnings for 1997 to 2001 to reflect the transactions - a move which wipes $613 million of the company's reported net income from 1997 through the first half of this year. The company's stock has dropped by almost 78 percent since Enron released its earnings results on October 16, falling to nine-year lows amid concerns about the company's ability to raise cash. The story added an extra twist on Wednesday as news broke that U.S.-based energy trading and marketing firm Dynegy Inc. was in talks to buy out Enron. Against this background speculation is rife about the future of the metals operation, fuelled by the company's decision last month to trim between 10 and 20 percent of its metals workforce as part of a wider staff reduction by Enron Europe. UNLIKELY TO REMAIN INTACT Any decision by Enron or a possible future purchaser to offload its metals operations would be unlikely to see Enron Metals remain intact, traders said. "They paid $450 million for MG. Would they get $450 million for Enron Metals? I don't think so," said one. "Why buy the whole concern when you can cherry-pick the best traders and the clients will follow?" added another. An increasing emphasis on screen trading at the expense of personal contacts may already have persuaded some Enron clients to jump ship. "We've picked up a fair amount of small and mid-sized trade-type business in Europe from people who've said 'I'm not going to be told just to trade on a screen,'" said one trader. Another trader said: "A lot of this business revolves around who you've been trading with and talking to over a period of time. It's about individuals," he said. "Enron Online...should be seen as an 'added value' product, not as the only way of trading. Customers still want to talk to their broker, and are willing to pay commission for the service," the senior source said. Enron's financial position could also prompt customers to consider other options, the first trader said. "As a customer, you want to place your business where there's financial stability. If a company isn't financially stable, you'll move elsewhere." Enron's trade counterparties are also keeping a close eye on the company's financial situation, said a trader at one LME brokerage. "People aren't particularly concerned about short-term trading (with Enron), but when it comes to OTC business done outside the clearing market they're backing off a bit," he said. (Additional reporting by Martin Hayes). Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. WRAP: Enron To Restate Results; Confirms Dynegy Talks 11/08/2001 Dow Jones News Service (Copyright © 2001, Dow Jones & Company, Inc.) HOUSTON -(Dow Jones)- Enron Corp. (ENE) said it will restate its financial results from 1997 through the second quarter of 2001, as the embattled energy company and Dynegy Inc. both confirmed they are in talks on a possible business combination. In a filing Thursday with the Securities and Exchange Commission, Enron said its financial and audit reports are unreliable for those periods. Enron said that three "unconsolidated entities should have been included in its consolidated financial statements," based on generally accepted accounting principles. These entities are Chewco Investments LP, Joint Energy Development Investments LP and a wholly owned unit of LJM Cayman LP. Enron said it has established a special committee to review all transactions. The committee will specifically review all "economic results" related to transactions between Enron and LJM. Last month Enron took a $1.01 billion charge in the third quarter related to write-downs of investments. Of this, $35 million was attributed to partnerships run until recently by Chief Financial Officer Andrew Fastow, who has since been replaced. Enron also disclosed it shrank shareholder equity by $1.2 billion, as a result of several transactions including ones undertaken with Fastow's investment vehicle. Later, Enron said the SEC would investigate the company's "related party transactions," including those with the Fastow partnerships. The restatement will reflect the $1.2 billion reduction in shareholders' equity, as well as various income-statement and balance-sheet adjustments determined by Enron and its auditors. "We believe that the information we have made available addresses a number of the concerns that have been raised by our shareholders and the SEC about these matters," said Chairman and Chief Executive Kenneth Lay Over the past couple of days, Enron has been scrambling to line up quick financing from a prominent outside investor and has been in discussions with private-equity firms and power-trading companies. Earlier, The Wall Street Journal reported that Dynegy was trying to buy Enron for $7 billion to $8 billion in stock. Both are Houston-based energy-trading and power companies. Because any combination of the two would likely be scrutinized for many months, and Enron needs to shore up its finances now, Dynegy reportedly is expected to inject $1.5 billion into Enron immediately, people familiar with the matter said. ChevronTexaco Corp. (CVX), which owns a 26% stake in Dynegy, is expected to provide Dynegy with the funds for the cash infusion and is playing a significant role in the negotiations, the Journal said. The boards of Dynegy, Chevron and Enron reportedly met Wednesday to discuss a potential deal. Enron's stock has plunged since Oct. 16, when the company posted a $618 million third-quarter loss and revealed that its shareholder equity had been reduced. The talks between Enron and Dynegy follow a sharp decline in Enron's stock over the past several weeks. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. USA: Enron fires two employees linked to partnerships. 11/08/2001 Reuters English News Service (C) Reuters Limited 2001. NEW YORK, Nov 8 (Reuters) - Enron Corp. , the embattled energy trader, said on Thursday fired its treasurer and a counsel who the company said were part-owners of one of its off-balance sheet partnerships now under investigation by U.S. regulators. Enron said it was terminating the employment of Ben Glisan, managing director and treasurer of Enron Corp., and Kristina Mordaunt, a managing director and counsel of an Enron division. Enron said it believes that these two employees, along with four other former Enron employees, were involved as partners in a limited partnership called the LJM1 that had dealings with Enron. Shares of Enron were trading down 5 cents or .55 percent at $9 on the New York Stock Exchange. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. Enron restates net income for periods from 1997 to Q3 2001 11/08/2001 AFX News © 2001 by AFP-Extel News Ltd HOUSTON (AFX) - Enron Corp announced it is restating its net results for 1997 to 2000 and for the first three quarters of 2001 to take account of various related party and off-balance sheet transactions in which the company was involved. The restatement have no effect on Enron's current financial position, it said. In its restated figures, Enron posted reductions to net income of 96 mln usd in 1997, 113 mln usd in 1998, 250 mln in 1999 and 132 mln in 2000, as well as increases of 17 mln usd for the first quarter of 2001 and 5 mln for the second, but reduced the third quarter figure by 17 mln usd. The restatement will have no negative impact on the company's reported earnings for the nine month period ending Sept 2001, however, it said. The company said its changes to net income are the result of the retroactive consolidation of Joint Energy Development Investments LP and Chewco Investments LP beginning in November 1997, the consolidation of the LJM1 subsidiary for 1999 and 2000 and prior year proposed audit adjustments. The JEDI and Chewco consolidations will increase Enron's debt by about 711 mln usd in 1997, 561 mln in 1998, 685 mln in 1999 and 628 mln in 2000, the company said. kgd/jkm/ For more information and to contact AFX: www.afxnews.com and www.afxpress.com Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. Enron restates earnings as company confirms talks with Dynegy By BRAD FOSS AP Business Writer 11/08/2001 Associated Press Newswires Copyright 2001. The Associated Press. All Rights Reserved. NEW YORK (AP) - Beleaguered energy trading giant Enron Corp. announced Thursday it would restate its earnings since 1997, in part to reflect a controversial dlrs 1.2 billion reduction in shareholder equity that has sparked a Securities and Exchange Commission investigation. Enron, whose stock price has fallen roughly 80 percent in the past three weeks, also said it was holding talks with Dynegy Inc. relating to some form of business transaction. The New York Times reported that Dynegy was considering buying Enron, its larger hometown rival for dlrs 8 billion. In a filing with the SEC, Enron said financial statements from 1997 through the first half of 2001 "should not be relied upon" and that partnerships run by Enron officials during that period should have been consolidated into the financial results of the Houston-based energy trading giant. These partnerships are Chewco Investments L.P., Joint Energy Development Investments L.P., and a wholly owned unit of LJM Cayman L.P. "We believe that the information we have made available addresses a number of the concerns that have been raised by our shareholders and the SEC about these matters," said Kenneth Lay, Enron's chairman and chief executive. By its own assessment, Enron's restatement reduces previously reported net income by roughly dlrs 586 million and increases its debt by dlrs 2.59 billion. The change reflects the financial impact of retroactively consolidating the partnerships. The company also fired two executives on Thursday: Ben Glisan, its treasurer, and Kristina Mordaunt, general counsel for one of its divisions. Previously, Enron had ousted chief financial officer Andrew Fastow, who was in charge of some of the partnerships. Shares of Enron were off 10 cents to dlrs 8.95 in heavy trading on the New York Stock Exchange. Enron said it believes the restatement will include a reduction to net income of about dlrs 96 million in 1997, dlrs 113 million in 1998, dlrs 250 million in 1999 and dlrs 132 million in 2000, increases of dlrs 17 million for the first quarter of 2001 and dlrs 5 million for the second quarter and a reduction of dlrs 17 million for the third quarter of 2001. Enron, the top buyer and seller of natural gas and the top wholesale marketer in the United States, had become one of the nation's 10 largest companies, recording revenue of dlrs 100.8 billion in 2000. But the company has been beset by huge investment losses and questions about its financial stability. In particular, its stock has plunged since Oct. 16, when the company posted a dlrs 618 million third quarter loss and revealed that its shareholder equity had been reduced. Enron's woes have prompted considerable speculation about a possible takeover of the company. Besides Dynegy, companies mentioned as possible suitors included General Electric's GE Capital unit and Royal Dutch/Shell Group. On Thursday, both Dynegy and Enron released statements confirming they were in talks, but declined to provide any details. The New York Times reported earlier that Dynegy is considering paying about dlrs 8 billion in stock, or roughly dlrs 10 per share. Under the terms of the deal, Enron would receive an immediate dlrs 1.5 billion cash infusion from oil giant Chevron Texaco, which holds a 27 percent stake in Dynegy, the Times said, citing executives close to the discusssion. Chevron Texaco would provide an additional dlrs 1 billion injection at a later date, the Times reported, while Dynegy would assume dlrs 12.8 billion in Enron debt, plus billions of dollars in other debt that has been kept off the beleaguered company's balance sheet and has been a significant contributor to its current problems. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. USA: UPDATE 1-Enron provides financing data, restates earnings. 11/08/2001 Reuters English News Service (C) Reuters Limited 2001. HOUSTON, Nov 8 (Reuters) - Enron Corp. said on Thursday it provided U.S. regulators with more information about off-balance sheet deals, and other transactions that led to a shattering of the company's credibility and to an investigation by the U.S. Securities and Exchange Commission. Enron, the once high-flying Houston-based energy trading company, also confirmed it was in talks with its hometown rival Dynegy Inc. over a possible business combination. Terms of any deal have not been agreed on, the two companies said. Enron said that it will restate its earnings from 1997 to 2000 and the first two quarters of 2001 as the company addresses concerns raised by the SEC and shareholders. Shares of Enron dropped 20 cents, or 2.2 percent, to $8.85 in Thursday morning trading on the New York Stock Exchange. Enron, the largest trader of electricity and natural gas in North America, said the required restatement reflects the surprising - and controversial - $1.2 billion reduction to shareholders' equity the company recently disclosed. The restatement also reflects adjustments to the company's income statement and balance sheet, now that Enron has decided that the financial activities of Chewco Investments, L.P., Joint Energy Development Investments Limited Partnership (JEDI) and a wholly-owned subsidiary of LJM1 should indeed have been included in the company's consolidated financial statements. As a result of the restatement, Enron is reducing its 1997 net income by about $96 million, 1998 net income by $113 million, 1999 net income by $250 million and 2000 net income by $132 million. It is also restating first quarter 2001 results with a $17 million net income increase, second quarter 2001 results with a $5 million increase and third quarter 2001 results with a $17 million net income decrease. Consolidating Chewco and JEDI also increases Enron's debt by about $711 million in 1997, $561 million in 1998, $685 million in 1999 and $628 million in 2000. "We believe that the information we have made available addresses a number of the concerns that have been raised by our shareholders and the SEC about these matters," said Chairman and Chief Executive Ken Lay in a statement. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. Is Enron Too Big To Fail? Bailout Seen Unlikely By Jason Leopold 11/08/2001 Dow Jones Energy Service (Copyright © 2001, Dow Jones & Company, Inc.) OF DOW JONES NEWSWIRES (This story initially ran late Wednesday.) LOS ANGELES (Dow Jones)--Maybe Enron Corp. (ENE) is just too big to fail. Maybe not. Is the embattled energy trading company important enough to qualify for a federal bailout? Not likely, according to a number of analysts who believe that there are enough big energy companies in the U.S. to keep markets liquid if Enron goes under. For that reason, a federal bailout is probably not in the cards, even though Enron controls about 25% of U.S. natural gas and electricity markets, they added. "A bailout would only occur if needed to maintain liquidity in the energy markets in order to avoid potential for skyrocketing prices and avoid reliability risks," said Merrill Lynch & Co. (MER) analyst Steven Fleishman. "In the end, government is most interested in keeping the lights and the heat on at a reasonable price." Once a Wall Street darling, Enron's stock has fallen about by 75% in a mere three weeks, and the company is now the subject of a U.S. Securities and Exchange Commission investigation. Because it's so big, energy companies have watched Enron's troubles closely, and speculated about what they could mean for energy markets overall. A number have said they've started to cut back on their exposure to the company. Enron's stock has been falling all year, but it plunged several weeks ago after it disclosed a $1.2 billion writedown of shareholder equity. The SEC subsequently launched an investigation into Enron partnerships associated with the writedown. Enron spokesperson Karen Denne said the company wouldn't speculate on the idea of a bailout. "First of all I can't speculate, and second of all we're not even going to entertain worst case scenarios," Denne said. "As far as I know no one has approached Washington about a federal bailout." But one source inside Enron said the company isn't ruling out the possibility of approaching Washington if "things get really bad." A bailout would require federal legislation. To qualify, Enron would have to argue that a bailout is an economic necessity, according to Christine Uspenski, an analyst at Schwab Capital Markets (SCH). Quite Different Cup Of Tea From Chrysler Unlike the situation that led to a $1.2 billion federal bailout of Chrysler Corp. in 1980, hundreds of thousands of jobs aren't now at risk. Enron is nowhere near the size of Chrysler. "When Chrysler was bailed out there were senators and congressman who were going to have unemployed constituents so they proposed federal legislation to give the company a $1.2 billion loan," Uspenski said. "A bailout would need federal legislation proposed by Texas delegation. It would be hard because Enron is not the size of an employer like Chrysler. The one caveat is bailouts happen to be the fashion of the moment. Enron would have to make a compelling case that this is an economic necessity. They would have to quantify the risk to the energy market and there's such bad karma around the energy market right now." Robert Christensen, an analyst with FAC Equities in New York, agreed. "I can't even imagine something like that happening," Christensen said. "It's so far-fetched." A merger, on the other hand, would funnel billions of dollars into Enron, keep the company afloat and might help the company's stock recover, analysts said. On Wednesday, the Wall Street Journal reported that Enron is in talks for a capital infusion and possible acquisition by Dynegy Inc. (DYN). Also, Enron said Thursday it will restate its financial statements from 1997 through the second quarter of 2001, saying its financial and audit reports are unreliable for all those periods. The company fired its treasurer and general counsel. Andrew Meade, an analyst with Commerzbank in New York, said a bailout would likely never materialize because there are other large traders of energy commodities in the marketplace, such as Duke Energy (DUK), Dynegy, Reliant Energy Inc. (REI) and Williams Cos. (WMB), that can provide liquidity to the market. A merger would be a better route for the company, but would pose its own set of problems, Meade added. "With a merger or an equity infusion, Enron can certainly survive," Meade said. "Enron has a lot of nice attributes, it is a great trading and marketing platform and companies are certainly smart to take a look at it. But merging with or buying Enron is not an easy thing to do because of troublesome issues like a federal investigation and a range of assets that would be pretty tough to sell." Enron's best assets "get up and go home everyday," Meade said, referring to energy traders at the company. If Enron were to get into a friendly merger or buyout, he added, the company should lock in its top 50 or 100 traders with non-compete clauses. It would be much easier for Dynegy or other Houston energy companies to simply hire Enron employees rather than buy the company. Other analysts also pointed to risks in a merger with Enron. "A merger is certainly an option, but it gives you pause if it asks you to be the white knight," Uspenski said. A proposed merger could turn out to be a "minefield and there would certainly be a pretty sizable exposure. It would definitely make shareholders nervous." Gerald Keenan, a partner in PWC Consulting in Chicago, was skeptical about the proposed reports of a merger between Dynegy and Enron. "Dynegy is not that big a company," Keenan said. "It has a market cap of about $14 billion. What Enron needs is someone to carry it. How is an entity like Dynegy going to carry Enron? Enron has a small market cap but a huge balance sheet." Keenan also said Enron wouldn't be likely to secure a federal bailout. "The only caveat would be if the bailout would have some kind of significant effect on energy commodity markets," Keenan said. "Other than that, it's unlikely the federal government will bail Enron out." -By Jason Leopold, Dow Jones Newswires; 323-658-3874; jason.leopold@dowjones.com Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. Enron Bonds Give Back Gains as Firm Restates Profit (Update3) 2001-11-08 16:40 (New York) Enron Bonds Give Back Gains as Firm Restates Profit (Update3) (Updates bond and stock prices.) New York, Nov. 8 (Bloomberg) -- Enron Corp. bonds pared earlier gains as the biggest energy trader said it restated earnings for more than four years, increasing concern that Dynegy Inc. won't buy out the company. Enron's 7.88 percent coupon notes due in 2003 traded at 77 cents on the dollar to yield 27 percent, down from a bid of 82 cents this morning, traders said. The debt, which was trading near 100 last month, was bid at 77 cents yesterday. Enron shares, down 75 percent in the last month, fell 64 cents to $8.41 today. Dynegy said today it's in talks to acquire Enron in what people familiar with the situation said would likely be a stock transaction worth $8 billion. An acquisition would bolster Enron's credit rating, which was recently lowered, traders said. ``Enron bonds justifiably rallied on the good news of Dynegy. They naturally settled back down as the market assesses the significance of the restatement,'' said Glenn Reynolds, an analyst at CreditSights Inc. ``The whole problem goes away and sighs of relief all around if they come to terms with Dynegy.'' Enron's 6.4 percent notes due in 2006 were bid at around 70 cents, down from this morning when the debt traded at 84 cents. Yesterday, the notes were priced between 72 cents and 74 cents. The difference between bid and ask prices for Enron debt widened to about 4 cents to 5 cents -- ``monster'' spreads, Reynolds said -- from 2 cents this morning, indicating few investors are willing to buy or sell the bonds without more news. While Moody's Investors Service rates Enron's credit as ``Baa2'', one rung higher than its ``Baa3'' grade for Dynegy, other ratings companies including Standard & Poor's and Fitch Inc. have assigned Dynegy a higher rating. Also, Enron's ratings have been cut in recent weeks and face further reduction, while Dynegy's credit outlook is stable. Enron bonds and shares have tumbled in recent weeks on concern about partnerships run by the company's former chief financial officer and concerns the company's trading business will be hurt by the credit downgrades. Enron and Dynegy are both based in Houston. Enron has $15.8 billion of bonds outstanding, more than double the $6.8 billion market value of its stock, according to Bloomberg data. Apache to Cut 2002 Drilling Budget 70% on Gas Prices (Update1) 2001-11-08 16:34 (New York) Apache to Cut 2002 Drilling Budget 70% on Gas Prices (Update1) (Updates with closing share price in fifth paragraph and closing Nymex gas price in last paragraph.) Houston, Nov. 8 (Bloomberg) -- Apache Corp., an oil and natural-gas producer, plans to cut spending on drilling next year by 70 percent, blaming wide swings in gas prices caused by traders s
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