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Enron Mail |
UK: U.S. Enron shuts down Finland Office.
Reuters English News Service, 11/06/01 USA: Enron shares fall below $10, first time since 1992. Reuters English News Service, 11/06/01 Enron Used Partnerships to Mask Debt, Holders Charge (Update1) Bloomberg, 11/06/01 Enron Falls on Credit, Private-Financing Concerns (Update2) Bloomberg, 11/06/01 Platform Aims To Trade Tailored Power Products Online Dow Jones Energy Service, 11/06/01 USA: Bush ties give Enron sympathetic ear in Washington. Reuters English News Service, 11/06/01 USA: UPDATE 1-Enron shares hit new lows on credit worries. Reuters English News Service, 11/06/01 UK: U.S. Enron shuts down Finland Office. 11/06/2001 Reuters English News Service (C) Reuters Limited 2001. LONDON, Nov 6 (Reuters) - U.S. energy group Enron said on Tuesday it had closed its offices in Finland as part of a restructuring in Scandinavia. "This was planned for some time, we will continue to service our Finnish clients from our Oslo office," said a spokeswoman for Enron's European headquarters in London. Enron's Finland office had a staff of two. The spokeswoman said the closure in Finland was unconnected with the group's recent problems. Bankers say Houston-based Enron may have to sell assets as it seeks to head off a credit crunch and restore investor confidence. The company's stock has more than halved in value since mid-October and its credit has been downgraded after it emerged the U.S. Securities and Exchange Commission was investigating off-balance-sheet transactions that led to a $1 billion charge and a $1.2 billion write-down of shareholder equity. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. USA: Enron shares fall below $10, first time since 1992. 11/06/2001 Reuters English News Service (C) Reuters Limited 2001. HOUSTON, Nov 6 (Reuters) - Shares of beleaguered energy giant Enron Corp. hit the latest in a recent series of new lows on Tuesday when they dipped below the $10 mark for the first time since May 1992. In mid-morning trading, Enron's stock was down $1.24, or 11.1 percent per share, at $9.93, after touching a low of $9.88. For the year, Enron shares have shed 88 percent of their value. Enron, North America's biggest wholesale marketer and trader of electricity and natural gas, has held talks with private-equity firms and power-trading companies for a capital infusion of at least $2 billion, The Wall Street Journal reported on Tuesday. Enron has seen its stock hammered in recent weeks as concerns about its complex finances have undermined investor confidence in a company that was a Wall Street favorite until early this year. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. Enron Used Partnerships to Mask Debt, Holders Charge (Update1) 2001-11-06 15:05 (New York) Enron Used Partnerships to Mask Debt, Holders Charge (Update1) (Updates shares in 5th paragraph.) Houston, Nov. 6 (Bloomberg) -- Enron Corp., the largest energy trader, quickly found a buyer when it decided to sell 14 power plants in 1999: a joint venture Enron had created, called Whitewing. The venture, run by former Enron Chief Financial Officer Andrew Fastow, received $807 million in financing from bonds issued by another partnership, also created by Enron and headed by Fastow, this one called Osprey. The two partnerships are among 33 affiliates formed by Enron in the 1990s as the company shifted to energy trading from owning plants and pipelines. Investors allege in lawsuits that Enron used partnerships to move debt off its books, concealing the company's true financial state. The debts of partnerships such as Whitewing and Osprey remain Enron's responsibility, the suits contend. ``Many of the details of these transactions were hidden from the public,'' reads a class-action lawsuit filed in federal court in Texas, one of 14 actions filed against Enron in the past two weeks. The company ``used these asset sales to falsely improve Enron's balance sheet, thereby maintaining Enron shares at artificially inflated prices,'' the suit alleges. Shares of Houston-based Enron have plunged 86 percent in the past year. They fell $1.56 to $9.61 in midafternoon trading after bond-rating agency Fitch Inc. said it may cut the company's credit rating to junk status. Enron said three weeks ago it was taking third-quarter losses of $1.01 billion from failed investments, including two partnerships run by Fastow. The company also bought back 62 million shares from a partnership, reducing Enron shareholder equity by $1.2 billion. Investigation The Securities and Exchange Commission last week started a formal investigation into Enron's transactions with its affiliates. Enron spokeswoman Karen Denne declined to comment on the suits, saying the company doesn't discuss matters under litigation. She also declined to respond to specific questions about Enron's relationships with the partnerships, including Whitewing and Osprey. Shareholders say Enron's financial statements are vaguely worded and incomplete. In reading Enron's filings, it is almost impossible to find a clear reference to any transactions between Enron and its affiliates, shareholders say. ``Investor discontent is reflecting a feeling that nobody is totally coming clean,'' said James Walline, who manages $1.1 billion in two Lutheran Brotherhood funds, including 98,000 Enron shares. ``We're going to hang in there. I think it's a short- term negative. I hope I'm not making a mistake.'' Risks Osprey, as well as two other Enron affiliates, Marlin and Atlantic, could put Enron at risk for another $3.3 billion, according to bond prospectuses. If those affiliates can't sell the assets they bought from Enron for enough to pay back the bonds that supplied the purchase money, Enron would be responsible for any shortfall. Information from the lawsuits and from bond prospectuses for Enron affiliates give insight into how the partnerships worked. Enron was once the fastest-growing company in the energy business, its sales rising from $9 billion in 1994 to $101 billion last year and $147.8 billion so far this year. The Houston-based company took on debt to finance its growth. In the mid-1990s, Enron's long-term debt almost tripled, reaching $7.36 billion in 1998. The company had been acquiring plants worldwide, including the $3.2 billion purchase of Portland General Corp. in 1997; the $1.27 billion acquisition of an electric plant in Brazil in 1998; and the $2.51 billion purchase of a water company in the United Kingdom in 1998. New Plans In the late 1990s, Enron executives changed course. The company said that it would sell pipelines and power plants to make money almost entirely from trading energy, rather than producing it. The plan succeeded. Last year, 97 percent of Enron's revenue came from trading and advising industrial customers on energy use. ``I think our legacy will be that we proved you can build a business on intellectual capital, not physical assets,'' former Chief Executive Officer Jeffrey Skilling said in May. Skilling left Enron in August, citing personal reasons, and was replaced by his predecessor, Kenneth Lay. Central to the Enron plan to sell its hardware was the creation of affiliates to buy the pipelines and plants, and to sell bonds to finance the transactions. Enron posted information on its Web site last week saying it had created affiliates to raise money for Enron projects. Officials Involved Incorporation papers in Texas and Delaware show that the 33 companies formed by Enron list Enron executives or employees as officers. Fastow served as an officer or director for all 33 affiliates. One Enron affiliate, OBI-1 Holdings LLC, lists 24 Enron employees and executives as directors. Another affiliate, Oilfield Business Investments-1 LLC, lists 29. Enron spokesman Mark Palmer has said the executives served as officers and directors of the affiliates only to represent Enron's interests. None of them receives any compensation except Fastow, he said. Fastow was permitted by Enron to earn a bonus of 2 percent of the total amount one partnership invested. Selling assets to company-controlled affiliates isn't uncommon, said Columbia University securities law professor John Coffee. ``It's not suspect by itself,'' Coffee said. ``Companies do it to make balance sheets look better.'' The practice isn't embraced by everyone. ``That sort of thing wouldn't be part of Duke's business plan,'' said Jim Donnell, chief executive of Duke Energy Corp.'s wholesale power unit. ``You have a different objective if you sell to an interested special purpose vehicle.'' Profit Potential Earlier this year, former CFO Fastow was in an unusual position. Enron's board permitted him to manage two partnerships, LJM Cayman and LJM2 Co-Investment, and personally profit from buying and selling assets. LJM entered into agreements that bound it to buy Enron stock at a predetermined price six months later. A lawsuit filed by shareholder Fred Greenberg says Fastow used advance knowledge that Enron shares would fall to rework the agreement. That allowed LJM to buy the shares two months early, bringing $10.5 million in profit. If the agreement hadn't been renegotiated, the partnership would have lost money, the suit alleges. Enron has acknowledged potential conflict of interest by allowing executives to serve as directors of affiliates. A bond offering for the Whitewing affiliate says ``certain individuals that serve as officers and directors of Enron may also serve as directors of Whitewing . . . Therefore, the duties of the directors and officers of Enron may conflict with the duties of the directors and officers of Whitewing.'' Ouster Enron ousted Fastow as CFO on Oct. 24, the day after the company said the SEC had questions about the partnerships. Shareholders also say in lawsuits that Enron executives benefited from not fully disclosing the company's financial position. They cite insider sales of $73 million in shares ahead of a 26 percent drop in the company's stock in February and March. The executives included Lay, who sold stock worth $11.2 million; Skilling, who sold stock for $6.41 million; and Vice Chairman Mark Frevert, who sold shares totaling $14.2 million. ``This trading was unusual and suspicious given its timing,'' a shareholder class-action suit says. ``They had access to adverse, undisclosed information.'' Enron Falls on Credit, Private-Financing Concerns (Update2) 2001-11-06 14:18 (New York) Enron Falls on Credit, Private-Financing Concerns (Update2) (Adds bond ratings in 10th-11th paragraphs. Adds information on Enron bond repayment in eighth paragraph. Updates shares.) Houston, Nov. 6 (Bloomberg) -- Enron Corp. shares fell as much as 15 percent after bond-rating agency Fitch Inc. said it may cut the company's credit rating to junk status and the Wall Street Journal reported the No. 1 energy trader is seeking cash from private investors. Enron shares fell $1.55 to $9.62 in midafternoon trading. They earlier touched $9.55, their lowest price since May 1992. ``There's concern that the company is getting desperate,'' said Zach Wagner, an energy analyst at Edward Jones. ``They're really in desperate need of cash and investors don't like to see that.'' Wagner rates Enron ``reduce'' and doesn't own its shares. Former Enron Chief Executive Officer Jeffrey Skilling canceled a planned appearance today at a Milken Institute conference near Los Angeles after he was subpoenaed to testify in Washington, said Ross DeVol, an official at the institute. DeVol wouldn't say who had subpoenaed Skilling or for what reason. Enron spokeswoman Karen Denne said she was unaware of any testimony by Skilling and didn't know where he might be expected to testify. Skilling resigned as Enron CEO in August. Enron is seeking $2 billion in cash from private investors, the Wall Street Journal reported. The company, whose shares have fallen 88 percent this year, held talks with Blackstone Group LP and Clayton, Dubilier & Rice Inc. to discuss a cash investment, and a number of unidentified power-trading companies have expressed an interest in investing in Enron, the paper said. Fitch Downgrade Fitch said it may cut Houston-based Enron's credit rating to below investment grade if it fails to cut debt or if its business slows further. Yesterday it cut Enron's long-term credit rating two notches to the lowest investment grade, or to ``BBB-,'' from ``BBB+.'' Enron uses its investment-grade credit rating to borrow money for the cash it needs every day to settle commodities trades and to keep trading partners. A lower credit rating also would trigger early repayment of $3.3 billion in Enron bonds that aren't due until 2002 and 2003. The U.S. Securities and Exchange Commission is investigating Enron partnerships run by its former chief financial officer. The partnerships bought and sold Enron shares and assets, with the trades costing Enron $35 million and $1.2 billion in lost shareholder equity. Enron ousted Chief Financial Officer Andrew Fastow last month. Standard & Poor's on Thursday lowered Enron's long-term credit rating to ``BBB,'' the second-lowest investment grade, from ``BBB+.'' Enron's short-term debt rating was cut to ``A-3,'' the lowest investment grade, from ``A-2.'' On Oct. 29 Moody's Investors Service lowered Enron's long- term credit rating to ``Baa2'' from ``Baa1,'' two notches above junk status. It also placed the company's ``P-2'' rating for commercial paper on review for possible downgrade. Platform Aims To Trade Tailored Power Products Online By Kristen McNamara Of DOW JONES NEWSWIRES 11/06/2001 Dow Jones Energy Service (Copyright © 2001, Dow Jones & Company, Inc.) NEW YORK -(Dow Jones)- A new online trading platform that will allow power buyers and sellers to anonymously customize electricity deals is expected to begin operating in the U.S. Northeast later this year. Nine companies, including unregulated units of PPL Corp. (PPL) and AES Corp. (AES), have signed on to use the trading platform developed by E-lecTrade Inc., which hopes to create a market for structured, or nonstandard, power trades. "A system like that would make structured products more accessible and more liquid," said Dave Selkregg, manager of price risk at PPL EnergyPlus. E-lecTrade hopes to sell highly individualized products - the tailored suits of the power business - over the Internet. Such deals account for about 15% of the power traded in the U.S. - or 500 million megawatt-hours - according to Anil Suri, a former risk management consultant who developed the platform. About half of that 500 million is now traded on the spot market, about 200 million is handled through requests for proposals and about 50 million is handled through brokers, Suri said. One advantage of the electronic platform for buyers is that they don't have to disclose their market positions to the power marketers who currently put together structured packages. Users will pay E-lecTrade a fee for every deal they transact. The platform faces a number of challenges, however, including attracting enough participants and competing with the energy companies that have developed profitable lines of business handling structured transactions, traders and energy experts said. Competing with brokers at energy companies will be "difficult but not impossible," said Edward Krapels, director of gas and power services at Energy Security Analysis, a research firm based outside of Boston. "If they have the staying power and a good marketing group, they might be able to make something work. If these guys provide a neutral and objective platform, people may find that attractive now." Most electricity east of the Rockies is packaged in 50-megawatt units and traded for delivery in 16-hour blocks covering the periods of highest demand, on weekdays, or eight-hour or 24-hour blocks covering periods of low demand during nights and weekends. Power companies can already buy and sell these basic blocks of wholesale power anonymously on systems like Enron Corp.'s (ENE) EnronOnline or the IntercontinentalExchange, but those blocks don't always neatly match a utility or generator's needs. For example, a power plant may have 25 megawatts available for trade all the time, while a utility may have customers that need 2 megawatts of power. Companies that want to do nonstandard deals now must trade power at the last minute in the spot market to cover their odd requirements, contract with a broker or issue a request for proposals, which takes time and broadcasts their positions to other market participants. The online program is designed to allow companies to tailor their energy needs quickly and anonymously. "To the extent that we're able to do any style of transaction that fits any level of load profile, the less risk we have to wear," said Dan McLaughlin, vice president of supply origination for AES NewEnergy. E-lecTrade will begin operating in New York, New England, the Mid-Atlantic and parts of the Midwest in early to mid-December, Suri said. -By Kristen McNamara, Dow Jones Newswires; 201-938-2061; kristen.mcnamara@dowjones.com Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. USA: Bush ties give Enron sympathetic ear in Washington. By Jeff Franks 11/06/2001 Reuters English News Service (C) Reuters Limited 2001. HOUSTON, Nov 6 (Reuters) - Enron Corp. has few friends on Wall Street these days, but should it ever need a sympathetic ear it can always turn to Washington where it has a long list of pals, including President George W. Bush. Due to a generous campaign of political giving, Enron and its Chief Executive Ken Lay have close ties to Bush; Vice President Dick Cheney; and, in general, the Republican power structure now running the show in the nation's capital. Whether those contacts will need to be tapped as Enron struggles through a corporate crisis touched off by questionable financial dealings remains to be seen. But companies usually give money to candidates so they will have friends in high places when they need them, experts said. "(Enron) will probably have to use a lot of their goodwill. That's what they build it up for anyway," said energy analyst Dale Steffes, head of Planning and Forecasting Consultants in Houston. Enron, which dominates natural gas and electricity markets in the United States, has come under investigation by the U.S. Securities and Exchange Commission following disclosures that it did off-balance sheet deals with partnerships run by then-Chief Financial Officer Andrew Fastow. The financial world, concerned about possible conflicts of interest and angry that Enron has yet to explain what transpired, has abandoned the stock in recent weeks, causing a 70 percent drop in value since mid-October. Enron, trying to bolster investor confidence, has tapped more than $4 billion in new and existing credit lines in recent days, but its credit rating has been cut to near junk status over worries about a possible cash crunch. POLITICAL CAPITAL HIGH No such problems afflict Enron on the political side. Lay is a long time political benefactor of the Bush family and is believed by some experts to be the biggest single contributor to George W. Bush's various campaigns. Last year, Lay earned the title of Bush "Pioneer" for having raised at least $100,000 in contributions to the presidential campaign. By some estimates, he has given about $1 million to Bush over the years. Lay has said his political contributions are not aimed at gaining influence. "When I make contributions to a candidate, it's not for some special favor... it's because I'm supporting a candidate I strongly believe in personally," Lay said in an interview on PBS' news program "Frontline." When Bush was governor of Texas, Lay served on his Governor's Business Council, which helped push the Bush legislative agenda, and he was a key energy adviser during the presidential campaign. Lay came under criticism when he was one of a handful of business bigwigs called in for a private meeting with Cheney as the administration formulated its controversial energy plan. "Ken's been a friend," Cheney explained to Frontline. Enron's network of political connections extends into Congress where it gives money to many in the House and Senate. According to the Center for Responsive Politics, which tracks money in politics, Enron and its employees gave $2.4 million in contributions in the 2000 election year, more than than any other energy company. Of that amount, 72 percent went to Republicans, said the Washington-based center. Its ties to U.S. Senator Phil Gramm of Texas, the ranking Republican on the powerful Senate Banking Committee, are particularly close because his wife, Wendy Gramm, is on Enron's board of directors. From 1988 to 1993, under then President George H.W. Bush, she chaired the U.S. Commodity Futures Trading Commission, which played a role in deregulating energy markets that Enron now dominates. She raised eyebrows when she joined Enron's board just five weeks after leaving the commission. Gramm's selection was not all that unusual for Enron, said Andrew Wheat, research director for Texans for Public Justice, a campaign finance watchdog group in Austin. He told Reuters the company has used former Washington officials to help secure business deals here and in other countries. Last week, Enron hired William McLucas, a former head of the SEC's enforcement division, as its attorney in the probe into its business dealings. "I think Enron has astronomical power, both in this state and in this country ... and with Bush, they are unparalleled," Wheat said. STILL NO GUARANTEES Steffes said that Enron's connections do not guarantee Washington's help if the company needs some kind of bailout. "The energy industry is just not that well liked," he said. More likely, he believes, is that energy industry peers would chip in by taking a financial interest in the company simply because they need Enron. Experts worry that without Enron, which controls about 25 percent of energy trading, the markets would become too volatile. But Wheat said the idea that Enron is "too big to fail" is not likely to be lost on an administration that, following the attacks on Sept. 11, engineered a bailout of the airlines and may do the same for other industries. And Enron comes with a big advantage, he said. "It's got a pretty clear path to the White House," Wheat said. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. USA: UPDATE 1-Enron shares hit new lows on credit worries. 11/06/2001 Reuters English News Service (C) Reuters Limited 2001. HOUSTON, Nov 6 (Reuters) - Enron Corp. shares sank below the $10 mark for the first time in almost a decade on Tuesday, amid persistent concerns the beleaguered energy giant's deteriorating credit ratings could hamper its core natural gas and electricity marketing and trading business. In afternoon trading, Enron's stock was down $1.55, or 13.9 percent, at $9.62 per share, after hitting a new nine-year low of $9.55. Enron was the most actively traded issue on the New York Stock Exchange on Tuesday, with more than 20 million shares changing hands, and the fourth-biggest percentage loser. So far this year, shares of the former Wall Street favorite have lost 88 percent of their value. The stock last traded below $10 in May 1992. "You're seeing continuing concern over their credit rating," said CIBC World Markets analyst William Hyler. Its stock was hammered particularly hard as concerns about its complex finances and a lack of disclosure undermined investor confidence in Enron following its release of third-quarter earnings. The stock plunge began after Oct. 16, when Enron reported its first quarterly loss in four years, took a $1 billion charge for ill-fated investments and soon after disclosed a $1.2 billion cut in shareholder equity. An investigation by the U.S. Securities and Exchange Commission into dealings related to Chief Financial Officer Andrew Fastow further undermined investor confidence, and led to Fastow's ouster. Share prices tried to rebound last week, but renewed their plunge after an announcement on Monday by credit rating agency Fitch that it had cut its rating for Enron's senior unsecured debt to one notch above junk-bond status. Fitch also said it would make further downgrades if Enron were unable to make progress in reducing debt. The other two main rating agencies, Moody's Investors Service and Standard & Poor's, had already cut their credit ratings for Enron. Enron is North America's biggest marketer and trader of electricity and natural gas, but analysts say that holding on to investment-grade credit ratings is vital to maintaining the confidence of the companies that it trades with each day. Traders in both markets said on Tuesday that they are monitoring Enron closely but that there are no signs of anybody cutting back on their business with the company for fear that it might not be able to honor its obligations. As part of ongoing efforts to strengthen its finances and restore confidence, Enron has held talks with private equity firms and power-trading companies about a capital injection of at least $2 billion, The Wall Street Journal reported on Tuesday. Investors willing to provide fresh capital to Enron would receive an equity stake in Enron or preferred stock that would be convertible into common stock if Enron's stock price recovers to a certain level, the Journal said. Hyler said it was difficult to judge whether this would be welcomed by existing investors who could see their existing ownership stake in Enron diluted by such a move. "It depends on the cost of that equity and how much they have to give up," he said. Another analyst, who spoke on condition of anonymity, said short-term, rather than long-term financing is currently uppermost in most investors' minds. "Can they get to a permanent solution or do they have to fold in the light of short-term credit worries," he said. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved.
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