Today, Enron hosted a conference call to give investors a current overview =
of the company. Here's an update of what we discussed during the call.
We told investors that we're doing everything we can to protect their inter=
ests and to regain their confidence. Our focus remains on our credit qualit=
y, balance sheet and liquidity, which are essential for our continued succe=
ss and expansion of our wholesale businesses.
It took more than a few weeks to get where we are today. Here's a snapshot =
of significant events that led to our current situation:
-- In hindsight, we definitely made some very bad investments in our non-co=
re businesses over the past several years. Those include investments in Azu=
rix, India and Brazil. They have performed far worse that we could have eve=
r imagined when we made these investments;
-- Because of these bad investments, we've become over-leveraged as a compa=
ny. The negative impact of those investments was exacerbated through the ex=
tensive use of debt capital both on and off our balance sheet;
-- We also entered into related party transactions that led to a loss of in=
vestor confidence, which has been very damaging;
-- We've been criticized for our lack of transparency and our hard-to-under=
stand financial and operating disclosures; and
-- On top of it all, we discovered errors in our financial statements, as d=
iscussed in our 8-K filing last week, that required a restatement of previo=
usly reported earnings.
We've taken a new look at our businesses and have separated them into three=
areas: core businesses, non-core businesses, and businesses under review.
Our core businesses remain strong and consistent sources of significant ear=
nings and cash flows for the company. They're our competitive advantage. Th=
-- Natural gas pipeline businesses;
-- Gas and power businesses in North America and Europe;
-- Retail businesses in North America and Europe; and
-- Coal businesses in North America and Europe.
The events of the past few weeks have had a temporary negative impact on ou=
r projected fourth quarter profitability. It's too early to tell at this ti=
me what impact this might have on our operating results. We are considering=
these actions now so that we can quickly return to normal business in 2002=
I also remain optimistic that the actions we've taken over the past couple =
of weeks have addressed our customer and counterparty credit and liquidity =
concerns. According to our business unit leaders, we have definitely seen i=
mprovement in our counterparty relationships.
Our non-core businesses include our global assets group and our broadband d=
ivision. We have invested more than $8 billion in these businesses, and the=
return from them has been dismal.
We have an aggressive program in place to exit these businesses and expect =
that the sale of these businesses will generate billions of dollars in cash=
that we can use to repay debt and reinvest in our core businesses. We alre=
ady have more than $800 million in assets contracted for sale this year. Th=
ey include CEG Rio, a gas LDC in Brazil; EcoElectrica, a power plant and LN=
G receiving terminal in Puerto Rico; and asset sales of offshore oil and ga=
s properties in India. The approximately $2.9 billion Portland General sale=
is also on target to close in late 2002 pending regulatory approvals.
Businesses Under Review
These businesses are comprised of those operations outside our power and ga=
s wholesale businesses and include global and industrial markets. While sev=
eral of these businesses have very strong future prospects, we need to dete=
rmine if their capital requirements and near-term growth prospects are suff=
icient enough in terms of earnings and cash generation.
Reviewing our businesses this way will help determine where we need to make=
reductions to our work force. More information will follow as soon as it b=
Credit Rating/10-Q Filing
We continue to meet regularly with credit rating agencies and believe that =
our liquidity enhancements and scheduled asset sales will strengthen our ba=
lance sheet and maintain our investment grade credit rating. Our current cr=
edit ratings by the three major rating agencies are as follows:
-- Moody's at Baa3 "Under Review for Further Downgrade"
-- Fitch at BBB- "Evolving Status"
-- S&P at BBB- "CreditWatch Negative"
We also discussed our existing financial vehicles, including Osprey, Marlin=
and Yosemite, in further detail. We told investors that we will file our 1=
0-Q five days late due to our current activities. It will be filed on Nov. =
We will continue to have updates with investors over the coming weeks as we=
ll as our frequent updates with you. The full transcript of our conference =
call will be filed with the Securities and Exchange Commission in the next =
few days. It will also be posted on our web site at www.enron.com/corp/inve=
stors under "SEC Filings."
In connection with the proposed transactions, Dynegy and Enron will file a =
joint proxy statement/prospectus with the Securities and Exchange Commissio=
n. Investors and security holders are urged to carefully read the joint pro=
xy statement/prospectus regarding the proposed transactions when it becomes=
available, because it will contain important information. Investors and se=
curity holders may obtain a free copy of the joint proxy statement/prospect=
us (when it is available) and other documents containing information about =
Dynegy and Enron, without charge, at the SEC's web site at www.sec.gov. Cop=
ies of the joint proxy statement/prospectus and the SEC filings that will b=
e incorporated by reference in the joint proxy statement/prospectus may als=
o be obtained for free by directing a request to either: Investor Relations=
, Dynegy Inc., 1000 Louisiana, Suite 5800, Houston, TX 77002, Phone: (713) =
507-6466, Fax: (713) 767-6652; or Investor Relations, Enron Corp., Enron Bu=
ilding, 1400 Smith Street, Houston, TX 77002, Phone: (713) 853-3956, Fax: (=
In addition, the identity of the persons who, under SEC rules, may be consi=
dered "participants in the solicitation" of Dynegy and Enron shareholders i=
n connection with the proposed transactions, and any description of their d=
irect or indirect interests, by security holdings or otherwise, are availab=
le in an SEC filing under Schedule 14A made by each of Dynegy and Enron.