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-----Original Message----- From: =09Border, Mary =20 Sent:=09Monday, October 29, 2001 8:06 AM To:=09Anaya, Jessica; Anderson, Peter N.; Boots, Kelly H.; Boyle, Dan; Cast= agnola, Daniel; Delacey, Charles; Heineman, Sarah; Hudler, Shirley A.; Jens= , Felipe; Mckean, George; Mckillop, Gordon; Mills, Jana; Mitchell, David; M= urphy, Brendan J. (Houston); Olivier, Phenicia; Randolph, Trevor; Richardso= n, James; Schnapper, Barry; Simien, Jimmy; Siurek, Ryan; Swinford, Brian; W= alden, Clint; Wenz, Michelle; Wesner-Soong, Sarah; Winfrey, Travis; Wolfe, = Tony Subject:=09FW: Enron Mentions=20 -----Original Message----- From: =09Schmidt, Ann M. =20 Sent:=09Monday, October 29, 2001 8:04 AM Subject:=09Enron Mentions=20 Enron Discusses Credit Line of $1 Billion to $2 Billion With Banks The Wall Street Journal, 10/29/01 Manager's Journal: How Enron Ran Out of Gas The Wall Street Journal, 10/29/01 Enron Seeks Additional Financing The New York Times, 10/29/01 GLOBAL INVESTING: Enron stock plunge deals a heavy blow to mutual funds=20 Financial Times; Oct 29, 2001 COMMENT & ANALYSIS - Enron flickers. Financial Times, 10/29/01 FRONT PAGE - COMPANIES & MARKETS - Enron asks banks for additional credit. Financial Times, 10/29/01 Enron Seeks Further Credit to Reassure Investors, WSJ Says Bloomberg, 10/29/01 USA: REPEAT-Electric cowboys get roped in at the energy corral. Reuters English News Service, 10/29/01 Enron seeks new credit line; reportedly for 1-2 bln usd AFX (AP), 10/29/01 Enron Said Seeking New Credit Lines American Banker, 10/29/01 USA: Enron in talks for $1-2 bln credit line - WSJ. Reuters English News Service, 10/29/01 JAPAN: Japan's Teijin, Enron study coal-fired power plant. Reuters English News Service, 10/29/01 Enron, Teijin to Build Power Plant in Japan, Report Says Bloomberg, 10/29/01 Once-Mighty Enron Strains Under Scrutiny The New York Times, 10/28/01 Plumbing Mystery Of Deals By Enron The New York Times, 10/28/01 Investors Seem to Ignore Discouraging News The New York Times, 10/28/01 Enron Asks Banks for More Credit After Stock Slide, FT Reports Bloomberg, 10/28/2001 Enron Asks Banks For Additional Credit -FT Dow Jones Energy Service, 10/28/01 Week in Review TOP STORIES OCT. 22-26 Lockheed Edges Out Boeing for Contrac= t Los Angeles Times, 10/28/01 Devon Energy makes building its own with major lease Houston Chronicle, 10/28/01 INDIA PRESS: Enron Plans To Exit LNG Shipping JV Dow Jones International News, 10/28/01 Enron Taps All Its Credit Lines To Buy Back $3.3 Billion of Debt The New York Times, 10/27/01 COMPANIES & FINANCE INTERNATIONAL - Enron's bond prices drop to warning lev= els. Financial Times, 10/27/01 SHORTS - Enron bond prices under pressure. Financial Times, 10/27/01 Enron taps credit line; stock slides Associated Press Newswires, 10/27/01 Enron Decline Continues Los Angeles Times, 10/27/01 Enron taps credit line; stock slides / Company says cash will boost confide= nce Houston Chronicle, 10/27/01 Enron says Microsoft breached contract Houston Chronicle, 10/27/01 How to Lose a War The New York Times, 10/27/01 City - Enron directors cash in shares. The Daily Telegraph, 10/27/01 INDIA: Lenders to meet over Enron's Dabhol on Nov 3. Reuters English News Service, 10/27/01 Enron sues Microsoft for breach of contract ; Move could block high-speed s= ervice The Seattle Times, 10/27/01 Enron Discusses Credit Line of $1 Billion to $2 Billion With Banks By Jathon Sapsford and John Emshwiller Staff Reporters of The Wall Street Journal 10/29/2001 The Wall Street Journal A10 (Copyright © 2001, Dow Jones & Company, Inc.) Enron Corp., scrambling to restore confidence in its finances, is negotiati= ng with banks for a new credit line of between $1 billion and $2 billion, a= nd is likely to close a deal within days, according to officials familiar w= ith the matter.=20 The new credit line is intended to bolster Enron's financial condition and = head off a potentially devastating loss of investor and business confidence= . The new credit would supplement existing lines, which are largely tapped = out after Enron last week drew down about $3 billion to increase cash reser= ves and calm fears in the stock, bond and energy markets. An Enron spokesman confirmed that the company is negotiating a new credit l= ine, but said he couldn't supply any further details.=20 Houston-based Enron is the nation's biggest energy trader and a principal i= n nearly one-quarter of all electricity and natural-gas trades. Once a favo= rite of Wall Street, the company now is in the unfamiliar position of convi= ncing a deeply concerned investment community that, despite difficulties, i= ts finances remain sound.=20 Confidence in Enron's financial situation was shaken after Enron earlier th= is month announced a $618 million third-quarter loss and disclosed a $1.2 b= illion erosion of shareholder equity related to controversial transactions = it had done with entities connected to its then-chief financial officer, An= drew Fastow.=20 Last week, Enron replaced Mr. Fastow and said that the Securities and Excha= nge Commission was looking into the transactions. The company has consisten= tly said that the transactions were proper and legal.=20 Enron's stock price fell again Friday. As of 4 p.m., in composite trading o= n the New York Stock Exchange, Enron shares were down 95 cents at $15.40. E= nron shares have fallen 50% in the past two weeks and are down 83% from a S= ept. 18, 2000, high of $89.63.=20 Late last week, Enron tapped its existing credit lines, with part of that m= oney being used to redeem nearly $2 billion of its outstanding commercial p= aper, or short-term corporate IOUs. Ron Barone of credit-rating agency Stan= dard & Poor's said he believes that Enron was "getting a bit more resistanc= e" recently in rolling over its commercial paper as it came due. Thus, Enro= n probably decided it would be easier simply to redeem the paper outstandin= g, he said.=20 The Enron spokesman yesterday said that paying off the commercial paper and= still leaving the company with an additional roughly $1 billion cash on ha= nd would give it more financial flexibility.=20 Also last week, credit-rating agencies warned investors they were reviewing= Enron's debt and commercial-paper ratings for a possible downgrade. A lowe= r rating could hamper Enron's core trading businesses.=20 Behind the worries among these agencies, in part, is the loss of investor c= onfidence, which one of the rating companies, Fitch, said in a report last = week could impair "Enron's financial flexibility and access to capital mark= ets, therefore impacting its ability to conduct its business."=20 The Enron spokesman said yesterday that the company's trading partners are = doing business with Enron on "essentially the same terms" as they have in t= he past. "There has been no significant change in the credit conditions," h= e said. Trading partners demanding significantly stricter terms from Enron = would be a sign of further deteriorating confidence in the energy giant's f= inances.=20 The banks involved in the current negotiations, including J.P. Morgan Chase= & Co. and Citigroup Inc., are asking Enron for stricter covenants on the n= ew credit line than they had asked for in the past, one official said.=20 Bankers involved with the company say the goal of the new credit line is to= show the investment community that Enron can meet its commitments. "Confid= ence in this company was lost," said one bank official involved in the nego= tiations for a new credit line. "But confidence will be restored."=20 Corporations of Enron's size commonly establish credit lines only to demons= trate to the investment community that in case of an emergency, they have a= ccess to cash. In practice, few companies actually make use of these lines.= Thus, drawing down credit lines, while providing immediate cash, also illu= strates the pressure Enron is feeling. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Manager's Journal: How Enron Ran Out of Gas By Paul Kedrosky 10/29/2001 The Wall Street Journal A22 (Copyright © 2001, Dow Jones & Company, Inc.) Is troubled Enron Corp. the Long Term Capital Management of the energy mark= ets, or merely yet another mismanaged company whose executives read too man= y of their own press releases? Or is poor Enron just misunderstood? Those a= re the questions after another week of Chinese water torture financial rele= ases from the beleaguered Houston-based energy concern.=20 A year ago Enron was the hottest of the hot. While tech stocks were tanking= , Enron's shares gained 89% during 2000. Even die-hard Enron skeptics -- of= which there are many -- had to concede that last year was a barnburner for= the company. Earnings were up 25%, and revenues more than doubled. Not bad, considering where the company came from. A decade ago 80% of Enron= 's revenues came from the staid (and regulated) gas-pipeline business. No l= onger. Enron has been selling those assets steadily, partly fuelling revenu= es, but also expanding into new areas. By 2000, around 95% of its revenues = and more than 80% of its profits came from trading energy, and buying and s= elling stakes in energy producers.=20 The stock market applauded the move: At its peak, Enron was trading at arou= nd 55 times earnings. That's more like Cisco's once tropospheric valuation = than the meager 2.5 times earnings the market affords Enron competitor Duke= Energy.=20 But Enron management wanted more. It was, after all, a "new economy" Web-ba= sed energy trader where aggressive performers were lucratively rewarded. Ac= cording to Enron Chairman and CEO Ken Lay, the company deserved to be value= d accordingly. At a conference early this year he told investors the compan= y's stock should be trading much higher -- say $126, more than double its p= rice then.=20 Then the new economy motor stalled. The company's president left under stra= nge circumstances. And rumors swirled about Enron's machinations in Califor= nia's energy markets. Investors pored over Enron's weakening financial stat= ements. But Enron analysts must have the energy and persistence of Talmudic= scholars to penetrate the company's cryptic financials. In effect, Enron's= troubles were hiding in plain sight.=20 It should have been a warning. Because of the poor financial disclosure the= re was no way to assess the damage the economy was doing to the company, or= how it was trying to make its numbers. Most analysts blithely concede that= they really didn't know how Enron made money -- in good markets or bad.=20 Not that Enron didn't make money, it did -- albeit with a worrisomely low r= eturn on equity given the capital required -- but sometimes revenues came f= rom asset sales and complex off-balance sheet transactions, sometimes from = energy-trading revenues. And it was very difficult to understand why or how= -- or how likely it was Enron could do it again next quarter.=20 Enron's financial inscrutability hid stranger stuff. Deep inside the compan= y filings was mention of LJM Cayman, L.P., a private investment partnership= . According to Enron's March 2000 10-K, a "senior officer of Enron is the m= anaging member" of LJM. Well, that was a puzzler. LJM was helping Enron "ma= nage price and value risk with regard to certain merchant and similar asset= s by entering into derivatives, including swaps, puts, and collars." It was= , in a phrase, Enron's house hedge fund.=20 There is nothing wrong with hedging positions in the volatile energy market= -- it is crucial for a market-maker. But having an Enron executive managin= g and benefiting from the hedging is something else altogether, especially = when the Enron executive was the company's CFO, Andrew Fastow. While he sev= ered his connection with LJM (and related partnerships) in July of this yea= r -- and left Enron in a whirl of confusion last week -- the damage had bee= n done.=20 As stories in this paper have since made clear, Mr. Fastow's LJM partnershi= p allegedly made millions from the conflict-ridden, board-approved LJM-Enro= n relationship. And recently Enron ended the merry affair, taking a billion= -dollar writedown against equity two weeks ago over some of LJM's wrong-foo= ted hedging. Analysts, investors, and the Securities & Exchange Commission = were left with many questions, and very few answers.=20 To be fair, I suppose, Enron did disclose the LJM arrangement more than a y= ear ago, saying it had erected a Chinese wall between Fastow/LJM and the co= mpany. And in a bull market, no one paid much attention to what a bad idea = that horribly conflicted relationship was -- or questioned the strength of = the wall. Now it matters, as do other Enron-hedged financings, a number of = which look to have insufficient assets to cover debt repayments due in 2003= .=20 We didn't do anything wrong is Mr. Lay's refrain in the company's current r= ound of entertainingly antagonistic conference calls. That remains to be se= en, but at the very least the company has shown terrible judgment, and hero= ic arrogance in its dismissal of shareholders interests and financial trans= parency.=20 Where has Enron's board of directors been through all of this? What kind of= oversight has this motley collection of academics, government sorts, and r= etired executives exercised for Enron shareholders? Very little, it seems. = It is time Enron's board did a proper investigation, and then cleaned house= -- perhaps neatly finishing with themselves.=20 ---=20 Mr. Kedrosky is a professor of business at the University of British Colomb= ia. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 National Desk; Section A Enron Seeks Additional Financing By RICHARD A. OPPEL Jr. 10/29/2001 The New York Times Page 9, Column 4 c. 2001 New York Times Company DALLAS, Oct. 28 -- The Enron Corporation, still struggling to reassure inve= stors it can weather a financial crisis over complicated transactions invol= ving its former chief financial officer, is seeking $1 billion to $2 billio= n in additional financing from banks, an industry official said today.=20 Last week, Enron, the nation's largest energy-trading concern, used about $= 3 billion in available credit lines and spent about $2 billion to pay off c= ommercial paper. Now, by obtaining even more financing, Enron is hoping to = convince investors and other energy-trading firms that it will not face a c= ash squeeze that could lead trading partners to refuse to extend credit or = do business with it. Enron's board, which has been holding meetings by telephone over the last t= wo weeks to monitor the company's financial situation, held another meeting= this afternoon. ''The board is meeting frequently and will announce any ac= tions when appropriate,'' an Enron spokesman said.=20 Two weeks ago, Enron disclosed that its shareholder equity had been reduced= by $1.2 billion because of deals with investment partnerships involving it= s former chief financial officer, Andrew S. Fastow, who was ousted last wee= k. The company also disclosed about $1 billion in separate write-offs, and = it said last week that the Securities and Exchange Commission had made an i= nquiry into its financial accounting.=20 Enron hopes to maintain its investment-grade credit rating, which is crucia= l to ensuring that other energy traders continue to do business with it. La= tely, Enron's bonds have been trading at prices more like junk bonds, and t= wo major credit-rating agencies are considering whether to downgrade the co= mpany's rating. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 GLOBAL INVESTING: Enron stock plunge deals a heavy blow to mutual funds=20 Financial Times; Oct 29, 2001 By AGENCIES: AGENCY MATERIAL and ELIZABETH WINE Enron shares plunged 40 per cent in the last week,doing severe damage to mu= tual funds, the company's largest institutional ownership bloc, and the hav= oc may continue.=20 More than 15 per cent of the 4,000 US equity funds held shares in the embat= tled company's shares as of the most recent reporting period, according to = fund tracker Morningstar.=20 Mutual funds held a fifth of Enron's shares, but that percentage is likely = to be much lower now, say fund analysts, who suggest much of the stock's ha= lving in October is due to large sales by institutional holders.=20 Janus, the growth fund specialist, was the largest institutional shareholde= r according to the most recent filings, dated June 30, with more than 42m s= hares representing a stake worth Dollars 2.1bn.=20 The stake - if still held in its entirety - would be worth Dollars 659m at = Friday's closing price of Dollars 15.40. Enron shares dropped 95 cents, or = 5.81 per cent on Friday, taking its total fall to nearly 41 per cent last w= eek on concerns over accounting questions and some limited partnerships cre= ated by Andrew Fastow, former chief financial officer. On Friday, several l= eading rating agencies put the company's debt on credit watches, and Enron = bond prices plunged. The company's stock is down 81 per cent since January.= =20 Most fund managers, including those at Janus, refuse to discuss a company i= n which they are actively trading. However, several mutual fund groups with= large Enron stakes have said their listed positions are "dated", implying = that the funds' positions in the company have changed.=20 Morningstar analyst Christine Benz, who follows the Janus funds, said manag= ers of the group's larger funds had been "lightening up" their Enron holdin= gs this year. She said Blaine Rollins, who manages the Dollars 23bn flagshi= p Janus fund, said that in September he had sold some of his stake - listed= as 2.15 per cent of outstanding shares as of April 30 - but did not say wh= en.=20 Ken Zschappel, manager of the Dollars 11bn Aim Constellation fund, also dec= lined to discuss his holdings, listed as 0.27 per cent of outstanding share= s as of March 31. But Aim said the position had since been "trimmed substan= tially".=20 Other top fund owners, as of the most recent filings, included the Alliance= Premier Growth fund, the Janus Twenty, Janus Mercury and Janus Growth & In= come funds, Fidelity Magellan, AXP New Dimensions Fund, Putnam Investors, P= utnam Voyager and Putnam New Opportunities funds and Morgan Stanley Dividen= d Growth fund.=20 Copyright: The Financial Times Limited COMMENT & ANALYSIS - Enron flickers. By SIMON LONDON and SHEILA MCNULTY. 10/29/2001 Financial Times © 2001 Financial Times Limited . All Rights Reserved COMMENT & ANALYSIS - Enron flickers - Once a paragon of the new economy, th= e US energy group is under scrutiny for its opaque accounting and free-whee= ling management, write Simon London and Sheila McNulty.=20 Enron has some explaining to do. For the past decade or more, the Texas-bas= ed company has basked in the admiration of investors and business school pr= ofessors eager to understand its transformation from staid utility to fast-= growing energy trader. Now it faces scrutiny of a more unwelcome kind. Its share price has been falling since the beginning of this year. The US S= ecurities and Exchange Commission is investigating multi-million dollar dea= ls with a private equity fund associated with its own chief financial offic= er, which resulted in a $1.2bn reduction in shareholders' equity. A hastily= -convened conference call last week with analysts raised as many questions = as it answered about these "related-party transactions". The departure of A= ndy Fastow, the aforementioned CFO, soon followed.=20 With its credit rating under review by two leading ratings agencies, Enron = has also been forced to draw down bank credit lines. Yesterday if confirmed= it was trying to establish additional lines of liquidity.=20 "This marks the end of Enron's walk on the wild side," observes Curt Launer= , an analyst with Credit Suisse First Boston, the investment bank.=20 On the surface, events at Enron can be explained by the combination of dete= riorating trading conditions, a complex capital structure and poor investor= relations. But the root causes go back further. The entrepreneurial cultur= e and dynamic management that fuelled Enron's growth in the 1990s appear to= have also sown some of the seeds of the present crisis. Therein may lie a = cautionary tale for all executives trying to sprinkle "new economy" magic o= n to old economy companies.=20 Enron's transformation began in earnest in 1990 with the arrival of Jeffrey= Skilling, who was hired from McKinsey, the management consulting firm, to = develop energy trading.=20 For the previous decade Enron had been emerging as a force in the deregulat= ing US energy markets under the guidance of Kenneth Lay, a former deputy un= der-secretary of energy. Mr Lay remains chairman. But it was Mr Skilling wh= o spearheaded the move into trading energy as well as generating and supply= ing it.=20 The two sides of the business - trading and generation/supply - have always= been strange bedfellows. The former demands an entrepreneurial spirit more= likely to be found on Wall Street than in a utility. Mr Skilling's answer = in the early 1990s was to bring in talent from outside the company. One of = his first recruits was Mr Fastow, an expert in securitisation, the repackag= ing of financial assets so they can be traded in financial markets.=20 The energy trading division tried from the start to differentiate itself. A= management structure was introduced with only four layers - vice-president= , director, manager and associate/ analyst - much like a consulting firm. E= mployees were free to take as much holiday as they liked, so long as they d= elivered results. As one of Mr Skilling's early recruits recalled: "It was = all about creating an atmosphere and deliberately breaking the rules."=20 The seemingly free-wheeling style was based on a "loose-tight" management m= odel expounded by Tom Peters and Bob Waterman, the management writers and M= cKinsey alumni. At Enron this meant that employees in the merchant energy b= usiness were encouraged by huge bonuses to pursue new ideas and innovate in= existing markets.=20 Up-and-coming employees moved freely between projects in pursuit of glory. = Louise Kitchen, the 32-year-old British executive who was the creative forc= e behind Enron Online, the group's internet-based trading platform, changed= jobs or was promoted seven times in five years.=20 Balancing these loose management practices were tight central control of ri= sk, legal commitments, finance and performance evaluation/remuneration. Mr = Skilling once described the approach in this way: "As long as you clear you= r deals or business ideas through those screens, you can do whatever you wa= nt around here."=20 This approach did deliver growth and innovation. As well as making markets = in its core energy products, Enron now trades everything from weather deriv= atives - which enable companies to insure themselves against unfavourable c= limatic conditions - to broadband telecommunications capacity and metals. T= he success of Enron Online allows the group to describe itself as the world= 's leading e-commerce company.=20 It has also started marketing electricity to US consumers through a joint v= enture with International Business Machines and America Online, the interne= t service provider.=20 In February this year Mr Skilling got his reward: he became chief executive= of a group ranked seventh in Fortune magazine's list of the 500 most power= ful US corporations - ahead of such corporate giants as IBM, AT&T, Bank of = America and Boeing.=20 In retrospect, however, this breakneck pace of growth and innovation was ac= hieved at a price. First was the personal cost to Mr Skilling. In August he= abruptly resigned after only six months in the top job. Personal, non-heal= th related reasons were cited and investors have received no further explan= ation.=20 A second cost was an enormous increase in financial complexity. In order to= avoid a ballooning of assets and liabilities as the group expanded, Enron = used a range of off-balance sheet vehicles to help finance expansion. LJM, = the private equity fund in which Mr Fastow played a role, is just one of a = cast of characters to be found in the footnotes to Enron's accounts. Other = financing vehicles include Osprey, Marlin, Whitewing, Atlantic Water Trust = and Azurix. "They went after too many things too quickly," says Stephen Moo= re of Moody's Investors Service, the credit ratings agency.=20 A third cost, associated with the last, was a loss of financial transparenc= y. The group's extensive use of swaps, options and other derivative financi= al instruments in its merchant energy business means that investors have li= ttle idea of how Enron actually makes its money - or the underlying risks t= o which it is exposed.=20 David Fleischer, an analyst at Goldman Sachs, summed up the views of many i= nvestors during last week's conference call. He told the group's management= : "The company's credibility is being severely questioned and there is a ne= ed for much more disclosure. There is an appearance that you are hiding som= ething or that there is something going on beneath the surface that may be = questionable."=20 The fourth cost was a loss of strategic focus. "The problems, in our view, = stem from Enron venturing too aggressively in areas outside of its core ski= lls," argues Raymond Niles, analyst at Salomon Smith Barney. "Power plants = in India, water companies, extension of their franchise to the mass retail = market, and using a fibre-optic network to deliver content over the interne= t are all unrelated, or only tangentially related, to their core merchant e= nergy business."=20 Enron executives also appeared to get carried away with the prospects for s= ome of these ventures. This time last year Mr Skilling was arguing that Enr= on Broadband was a business worth $35bn ( #24bn) in its own right. This hel= ped push the share price to all-time highs - and storing up trouble when tr= ading volumes failed to materialise.=20 "They over-promised on the new business they created," says Chris Bartlett,= a professor at Harvard Business School and long-time watcher of the compan= y. "Enron was trying to ride the dotcom bubble with Enron Online and the br= oadband business. To some extent they are now paying the price."=20 Will Enron weather the storm? Notwithstanding the risk of further out-of-th= e-blue financial shocks, most analysts believe that it will. The merchant e= nergy business remains powerful and profitable. Mr Niles at Salomon Smith B= arney points out that this side of the group drives more than 80 per cent o= f earnings and has shown consistent 30-40 per cent annual growth over the p= ast three years. Assets totalling more than $4bn were also earmarked for di= sposal before the current crisis erupted, underlining that there is plenty = of realisable value within the group's portfolio of physical energy assets.= =20 And yet the doubts remain. It is, ultimately, a question of confidence and = credibility. Investors suspect that the balance between loose and tight man= agement methods has tilted too far towards the former. Mr Lay and his team = will have to tighten up.=20 © Copyright Financial Times Ltd. All rights reserved.=20 http://www.ft.com. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 FRONT PAGE - COMPANIES & MARKETS - Enron asks banks for additional credit. By SHEILA MCNULTY and GARY SILVERMAN. 10/29/2001 Financial Times © 2001 Financial Times Limited . All Rights Reserved Enron, the troubled US energy group, was attempting yesterday to persuade b= anks to provide additional credit to bolster its position after a sharp fal= l in its share price.=20 The Houston-based company was also due last night to hold a special board m= eeting to consider confidence-building measures after surprise financial di= sclosures damaged its reputation among US investors. Last week the company raised $3.3bn (Euros 3.7bn) in cash to bolster its fi= nancial position but Enron admitted yesterday that it was still looking for= additional finance. The company insisted, however, that it was in good fin= ancial health and that its core energy trading business remained strong.=20 Mark Palmer, an Enron spokesman, said he hoped the company would have somet= hing to announce in coming days from its latest effort to "establish additi= onal lines of liquidity". "Once we are able to get the liquidity position s= hored up, that will put a lot of fears of the unknown to rest," Mr Palmer s= aid.=20 The company's problems have become public since an announcement on October = 16 that it would take a $1.01bn special charge and write down shareholders'= equity by another $1.2bn. The moves followed losses arising from a private= equity operation run by Andrew Fastow, its former chief financial officer,= who was forced to take a leave of absence last week.=20 Enron's share price has fallen more than 50 per cent since the October 16 a= nnouncement and its bonds have been trading at levels that are technically = "junk" status, though its official ratings are still investment grade.=20 "Our concern is that a reduction in the debt rating could impair their abil= ity to operate their trading and marketing operations," said Raymond Niles = of Salomon Smith Barney. "These activities require at least an investment g= rade credit rating, or Enron could be subject to an increase in margin requ= irements."=20 The controversy over Enron's balance sheet adjustment has resulted in a req= uest for information from the Securities and Exchange Commission. Enron fli= ckers, Page 22.=20 © Copyright Financial Times Ltd. All rights reserved.=20 http://www.ft.com. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Enron Seeks Further Credit to Reassure Investors, WSJ Says 2001-10-29 04:30 (New York) Houston, Oct. 29 (Bloomberg) -- Enron Corp., the largest energy trader, asked banks to provide a further credit line of as much as $2 billion in a bid to restore investor confidence in the company, the Wall Street Journal reported, citing unidentified officials close to negotiations. The new credit line is additional to the $3.3 billion credit line it tapped last week, the paper said, and should be completed within days. Investors have shunned the company since Oct. 16 when Enron reported a third quarter loss of $618 million and wrote down shareholders' equity by another $1.2 billion, the Journal said. The stock has fallen by 54 percent since the announcement. The company's shares were further dented after an investor sued Enron last month, saying dealings with two partnerships run by former Chief Financial Officer Andrew Fastow, cost the company $35 million. The suit also called Fastow's leadership of the partnerships, set up to cut Enron's debt, a conflict of interest. USA: REPEAT-Electric cowboys get roped in at the energy corral. By Janet McGurty 10/29/2001 Reuters English News Service (C) Reuters Limited 2001. NEW YORK, Oct 26 (Reuters) - Last year, Enron Corp. was a darling of invest= ors and analysts, but the freewheeling trader of electricity and natural ga= s now faces a credibility crisis due to a lack of transparency in its busin= ess dealings.=20 Enron, trying to shake investor jitters over a possible downgrade of its cr= edit worthiness and their unease over the company's complex financial trans= actions, has seen its shares shed more than half their market value in the = past week. But the largest natural gas and electricity marketer in the United States i= s not alone in getting its wings clipped as energy prices come down and the= market volatility that drove earnings last year eases.=20 While Enron's problems differ from more traditional utilities, many other p= ower producers are returning to their roots. They are scrapping plans for s= plitting operations and questioning whether more risky overseas operations = can be supported by lower prices brought on by a slowing economy.=20 Paul Patterson, an energy analyst with ABN Amro, said there are common them= es affecting the industry.=20 "One is lower power prices and the margins that are associated with them. A= nd two is lower stock prices and the ability to finance more asset driven g= rowth," Patterson said.=20 As earnings fall and forward earnings guidance is revised downward, some po= wer companies are seeking strategies to address the bleaker environment. An= d plans to spin off units have been postponed or called off.=20 Shares of Enron slid $1.05, or 6.4 percent, to $15.30 in afternoon trade on= the New York Stock Exchange on Friday.=20 THE WORLD HAS CHANGED=20 AES Corp. , a global power producer whose earnings fell for a second consec= utive quarter on a poor showing from operations in Brazil and Britain, said= Thursday it would revamp its organization and did not rule out selling off= assets.=20 "It's a different place," AES' chief executive officer Dennis Bakke said of= the business climate facing utilities today compared with last year's powe= rful growth. On Friday, Constellation Energy Group , parent company of Balt= imore Gas & Electric, scrapped plans to split its power generation and trad= ing operations into two company because of economic changes. Constellation = also hired a new chief executive and severed ties with Goldman Sachs, which= planned to make an equity investment in the company.=20 "The utility industry and energy markets, and indeed the entire U.S. econom= y, have changed considerably in the past year. As a combined company, we wi= ll be better positioned to seize opportunities to grow and deliver," said C= hristian Poindexter, Constellation's chairman.=20 RETURN TO TRADITIONAL VALUES=20 Bakke said one prong of AES's brave, new world scenario was a renewed empha= sis on the traditionally profitable, long-term contract generation business= .=20 It makes sense for power generating companies to sign about 75 percent to 8= 0 percent of their generating capacity into long-term contracts because it = provides stability and a level of profitability in a period of flat growth,= according to Gordon Howald, energy analyst with Credit Lyonnaise.=20 "Calpine does it already," he said, referring to the California-based indep= endent power producer that has the lion's share of the power it generates c= ontracted out. "What drove the valuations in all these companies last year = was that power markets were very inefficient. Physical reserve margins were= low. But with flat to down demand in 2001 - as it appears to be the case -= there is very little to lead us to believe that power prices will be anywh= ere near that level," he added.=20 Howald said with all the new generation coming on, natural gas prices shoul= d remain high but power prices should come down further, squeezing spark sp= reads, or profit margins, for solely gas fired companies.=20 SMALLER COMPANIES ALSO RETHINK STRATEGIES=20 As lower power prices impact earnings, many power companies are turning bac= k to U.S. markets to try to maximize their bottom line.=20 "Earnings for the quarter is not the big deal. The big deal is that for 200= 2 they are not going to earn as much as people expected. It's a downward re= vision of earnings guidance." said Patterson.=20 Michigan-based CMS Energy Corp. cut its earnings estimates for the second t= ime to $2 to $2.05 for 2002, down from $2.79 and said it would sell off cer= tain overseas assets and focus future growth primarily in North America.=20 CMS, whose earnings were down for the third quarter, said it took a charge = for planned divestitures, includingdiscontinued South American energy distr= ibution units as well as other international investments.=20 Allegheny Energy Inc. also changed its strategy after reporting a fall in t= hird quarter earnings.=20 The Maryland-based company said while it is continuing to work towards gett= ing necessary regulatory approvals for a initial public offering to hold it= s unregulated assets, it will not proceed with the offering at this time.= =20 "The company will integrated until market conditions are such that demonstr= ated value can and will be created for shareholders," Allegheny said. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Enron seeks new credit line; reportedly for 1-2 bln usd 10/29/2001 AFX (AP) Copyright 2001 AFX News; Source: World Reporter (TM) NEW YORK (AFX) - Enron Corp is negotiating with banks for a new credit line= , a spokesman told the Wall Street Journal.=20 The company is in talks to raise between 1-2 bln usd and is likely to close= a deal within days, it quoted officials familiar with the matter as saying= . The deal, which is intended to head off a potential loss of investor and bu= siness confidence, would supplement existing lines. These are largely tappe= d out after Enron last week drew down about 3 bln usd to increase cash rese= rves and calm market fears.=20 Enron earlier this month announced a heavy third quarter loss and erosion o= f shareholder equity related to controversial transactions it had done with= entities connected to its then chief financial officer, Andrew Fastow.=20 jms For more information and to contact AFX: www.afxnews.com and www.afxpre= ss.com Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Markets Enron Said Seeking New Credit Lines BY LAURA MANDARO and ALISSA SCHMELKIN 10/29/2001 American Banker 31 Copyright © 2001 Thomson Financial, Inc. All Rights Reserved. The Texas energy and telecommunications giant Enron Corp. was reportedly ne= gotiating with its lenders about new credit lines Friday, a day after it dr= ew down billions on its existing lines.=20 J.P. Morgan Chase & Co. and Citigroup Inc. are the two banking companies wi= th the largest lending exposure to the $67 billion-asset Houston company, w= ith an estimated $400 to $500 million in bank debt outstanding "in addition= to derivatives and other structured product exposures," according to Goldm= an Sachs Group Inc. analyst Lori Applebaum. Morgan Chase and Citi were the book runners on a 364-day, $2.25 billion loa= n facility to Enron that closed in May, according to Thomson Financial Secu= rities Data. Credit Suisse First Boston was the sole bookrunner on a $582 m= illion loan to the company that closed in March and matures in March 2004, = the data company said. Bank of America, Citigroup, and Deutsche Bank also p= articipated, Securities Data said.=20 On Thursday, Enron issued a statement that "in order to dispel uncertainty = in the financial community," it had drawn on its committed lines of credit = to provide over $1 billion of cash liquidity. The Wall Street Journal repor= ted on Friday that Enron drew down about $3 billion from a credit line and = was in talks about obtaining a new multibillion-dollar line.=20 "We continue to have conversations new our creditors about new liquidity --= that's nothing out of the ordinary," said Enron spokesman Eric Thode.=20 The developments followed a $638 million loss for the third quarter, the de= parture of Enron's chief financial officer, and a Securities and Exchange C= ommission inquiry.=20 Enron, a natural gas company that has broadened its focus to include energy= trading, transport, risk-management, and telecommunications products and s= ervices, has relationships with banks that extend beyond credit lines.=20 "Citi, J.P. Morgan, and possibly Wachovia and Bank of America also invested= along with Enron in some of its partnerships," said Ms. Applebaum. A spoke= sman for Morgan Chase confirmed that the bank was a lender but said he did = not know the amount of its exposure.=20 Many other regional banks have participated in credit facilities to Enron. = Bank of America Corp. is estimated to have about $200 million to $300 milli= on of exposure; Bank One Corp. about $100 million; and Wachovia Corp., SunT= rust Banks Inc., and FleetBoston Financial Corp. about $50 million each, ac= cording to Goldman Sachs estimates. Bank of New York has between $50 to $10= 0 million of exposure, and Northern Trust, U.S. Bancorp and KeyCorp also ha= ve some lending exposure, Ms. Applebaum said.=20 Representatives of these banks would not comment on their relationships wit= h Enron, or did not return phone calls by deadline. http://www.americanbanker.com=20 Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 USA: Enron in talks for $1-2 bln credit line - WSJ. 10/29/2001 Reuters English News Service (C) Reuters Limited 2001. NEW YORK, Oct 29 (Reuters) - Energy trading giant Enron Corp. is negotiatin= g with banks for a new credit line of between $1 billion and $2 billion and= could close a deal within days, the Wall Street Journal reported in its on= line edition on Monday.=20 According to officials close to the situation, the new credit would supplem= ent existing credit lines, largely tapped out after the company drew down a= bout $3 billion last week to increase cash reserves and calm jittery invest= ors' fears, the Journal reported. The paper said that an Enron spokesman had confirmed that the company is ne= gotiating a new credit line, but could not supply any further details.=20 Confidence in Enron has been shattered following disclosures about its invo= lvement in complex partnerships. Its stock has tumbled amid a U.S. Securiti= es and Exchange Commission inquiry into the company's ousted Chief Financia= l Officer's links to some of the partnerships. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 JAPAN: Japan's Teijin, Enron study coal-fired power plant. 10/29/2001 Reuters English News Service (C) Reuters Limited 2001. TOKYO, Oct 29 (Reuters) - Japan's major polyester manufacturer, Teijin Ltd = , said on Monday it would conduct a feasibility study with U.S. energy gian= t Enron Corp on building a coal-fired power plant.=20 Teijin said in a statement that it and E Power Corp, a Japanese affiliate o= f Enron Corp, would look into building the 70,000 kilowatt coal-burning the= rmal power plant in Matsuyama, Ehime prefecture, on the southwestern island= of Shikoku, where Teijin has a polyester plant. "We are beginning to consider selling surplus power to third parties other = than our own plants, with eyes on further deregulation in Japan's power mar= ket," a Teijin spokesman said.=20 Japan is in the process of deregulating its power market. Since March last = year, large-lot consumers have been free to choose their suppliers.=20 In its polyester business, Teijin has expanded overseas output while reduci= ng domestic production, a trend which would leave it with surplus power. It= is thus looking at how to make good use of any surplus.=20 The two firms were also considering expanding the capacity of Teijin's exis= ting power generator in Matsuyama, Teijin said. It hopes to reduce costs at= the inefficient small plant with the help of Enron.=20 Enron Corp said earlier this year it had presented plans to build a liquefi= ed natural gas (LNG) fired power plant in northern Japan, aiming to become = the first foreign company to build such a power plant in Japan.=20 The Teijin spokesman said the two firms hoped to conclude the feasibility s= tudy by June 2002.=20 Teijin's shares ended the day down 13 yen or 2.68 percent at 472 yen. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Enron, Teijin to Build Power Plant in Japan, Report Says 2001-10-28 23:39 (New York) Tokyo, Oct. 29 (Bloomberg) -- Enron Corp. and Teijin Ltd. will jointly build a coal-fired power plant in southwestern Japan as early as 2004, the Nihon Keizai newspaper said on its wire service, without citing sources. Enron, the world's biggest energy trader, and synthetic- fiber maker Teijin will together spend 1 billion yen ($8.16 million) to build the 70,000-kilowatt plant in Ehime, southwest of Tokyo, the report said. Enron wants to eventually build bigger plants and sell electricity directly to large commercial users without going through exiting utilities, the report said. Money and Business/Financial Desk; Section 3 Once-Mighty Enron Strains Under Scrutiny By ALEX BERENSON and RICHARD A. OPPEL Jr. 10/28/2001 The New York Times Page 1, Column 2 c. 2001 New York Times Company IS time running out for Enron?=20 At the beginning of this year, the Enron Corporation, the world's dominant = energy trader, appeared unstoppable. The company's decade-long effort to pe= rsuade lawmakers to deregulate electricity markets had succeeded from Calif= ornia to New York. Its ties to the Bush administration assured that its vie= ws would be heard in Washington. Its sales, profits and stock were soaring. And under the leadership of Jeffrey K. Skilling, its chief executive, Enron= 's arrogance had grown even more quickly.=20 The company, based in Houston, dripped contempt for the regulators and cons= umer groups that stood between it and fully deregulated markets -- for elec= tricity, water and everything else. Everyone would win under deregulation, = Enron said -- especially its shareholders, whose stock would soar as the co= mpany profited from creating new markets.=20 ''We are on the side of angels,'' Mr. Skilling said in March, dismissing th= ose who saw the company as a profiteer in California's energy crisis. ''Peo= ple want to have open, competitive markets. They want fair competition. It'= s the American way.''=20 But less than a year later, everybody seems to have lost, especially Enron'= s investors. Enron's stock is plunging, and questions about its finances ar= e mounting.=20 Some experts in the energy industry worry that if the crisis at the company= worsens, trading in natural gas and electricity could be seriously disrupt= ed and energy prices could grow more volatile. In a worst-case outlook, Enr= on could become the 2001 version of Long-Term Capital Management, the huge = hedge fund whose collapse roiled financial markets during the fall of 1998.= Enron's shares have fallen more than 80 percent this year, erasing $50 bil= lion in shareholder value.=20 Enron closed on Friday at $15.40, down 95 cents, after hitting a 52-week lo= w of $15.04 earlier in the day.=20 The future of electricity deregulation is in doubt, thanks to blackouts and= soaring power prices in California earlier this year -- a crisis that ende= d only when that state contradicted deregulation's basic tenets by interven= ing deeply in the power market. Enron's efforts to become a profit-making w= ater supplier and to create a new market in broadband communications capaci= ty have been expensive failures. In August, Mr. Skilling quit, forcing Kenn= eth L. Lay, his predecessor as chief executive and still Enron's chairman, = to resume day-to-day control of the company.=20 The company declined to make senior executives, including Mr. Lay, availabl= e for comment, and asked that questions be submitted in writing. Mr. Skilli= ng could not be reached.=20 Enron's problems boiled over earlier this month, when it disclosed that its= shareholders' equity, a measure of the company's value, dropped by $1.2 bi= llion in the last quarter because of a deal disclosed only very hazily in E= nron's regular financial statements. The Securities and Exchange Commission= is looking into the company's financial reporting, and some investors ques= tion whether Enron has overstated profits at its primary business of tradin= g electricity and natural gas.=20 THE slump in the company's shares accelerated after Enron revealed the fall= in its shareholders' equity. On Wednesday, the company forced out its chie= f financial officer, Andrew S. Fastow, who is at the center of the controve= rsy over Enron's confusing finances. The company, which six months ago seem= ed to be reaping billions of dollars from California's energy crisis, today= faces a potential cash crunch.=20 The surprise about shareholder equity inflamed investors' smoldering concer= n about Enron's opaque financial statements. Now, with Wall Street analysts= and bond-rating agencies demanding more information about the complex tran= sactions that have fueled the company's profits, Enron has been reduced to = issuing news releases assuring investors that it has adequate access to cas= h.=20 Enron does not appear to be in immediate danger of running out of cash. On = Thursday, the company drew down a $3.3 billion credit line it had previousl= y arranged with a group of banks led by Citigroup and J. P. Morgan Chase, w= hich have each extended at least $400 million. But because of Enron's impor= tance in the natural gas and electricity markets, industry experts say that= any problem at the company could disrupt energy trading nationwide.=20 The supply of natural gas and electricity would probably not be affected ev= en if the company failed, because Enron is mainly a trader, rather than a p= roducer, of energy. But a crisis at the company might increase the volatili= ty of energy prices, which have swung wildly in the last year.=20 Philip K. Verleger Jr., an energy-markets economist, emphasized that he tho= ught Enron would survive this crisis. But he said it was not clear what wou= ld happen if Enron ran out of cash or if traders that use the company's Enr= onOnline Internet trading marketplace defaulted on their obligations.=20 ''You suddenly have all these positions they have taken on there -- are the= y good? Are the firm's hedges good? What's the situation?'' Mr. Verleger sa= id. ''It's got everyone scared.''=20 In the short run, Enron's credit rating may be its biggest problem. If the = company's rating falls below investment grade, Enron could be forced to iss= ue tens of millions of shares of stock to cover loans that it has guarantee= d. But creating new shares would make the shares that already exist less va= luable, because those shares would no longer represent full ownership of th= e company.=20 A drop in the company's credit rating could also prompt other energy trader= s and producers to back away from doing business with Enron, hurting the co= mpany's sales and profits.=20 Enron's credit rating stands several notches above the critical point. But = its bonds, which are publicly traded, have fallen so low that they are now = offering interest rates of almost 10 percent, comparable with many junk bon= ds. Two of the three major credit-rating agencies, Moody's Investors Servic= e and Fitch Investors Service, have put Enron's bonds on review for possibl= e downgrades.=20 ''The issue that's in the front of everybody's mind right now is credit,'' = said Mark Gurley, senior vice president and general manager for trading at = Aquila Inc., one of the nation's largest energy traders. Aquila is based in= Kansas City, Mo.=20 For now, Aquila and other major energy traders and producers, including Rel= iant Energy, the El Paso Corporation and Dynegy, are continuing to do busin= ess with Enron. And Mr. Gurley said that Enron's own trading in the electri= city and natural gas markets did not suggest the sort of frenzied selling r= eminiscent of the collapse of Long-Term Capital Management in 1998.=20 ''They haven't done anything trading-wise that gives me any indication they= are closing their books down,'' he said.=20 Still, some executives at other companies said they were looking more caref= ully at transactions with Enron, especially long-term contracts. They also = said risk-management and credit officers were calling each other regularly = to discuss the situation.=20 Mark Palmer, an Enron spokesman, said on Friday that no energy-trading comp= any had stopped doing business with Enron. He declined to say whether any o= f the company's trading partners had suspended or altered credit terms. He = said the company was continuing to see normal volumes of business.=20 But the crisis that Enron will face if its credit rating is downgraded is j= ust a symptom of the bigger problem the company must confront. For years, t= he details of Enron's finances have been a mystery even to the Wall Street = analysts whose job it is to follow the company, and to the investors who ow= n its stock and bonds. When Enron's profits were soaring and it was creatin= g lucrative new markets, shareholders did not seem to care about the impene= trability of its financial statements.=20 Now they do. Yet the company seems incapable of offering straight answers t= o the questions investors ask.=20 To others in the industry, the opaqueness of the company's financial statem= ents parallels Enron's efforts to keep its energy-trading business lightly = regulated and free of disclosure requirements. Though they do not expect En= ron to crumble like Long-Term Capital Management, they say that, like the g= iant hedge fund, Enron uses a lot of debt, regulatory oversight is limited = and outsiders have a difficult time figuring out its finances.=20 The most pressing concerns are a series of partnerships and trusts Enron cr= eated to move some of its assets and debt off its balance sheet. With names= like Marlin and Osprey, the partnerships have at least $3.3 billion in bon= ds outstanding, backed by assets like a stake in Azurix, Enron's water comp= any subsidiary. Enron has promised that if the partnerships' debts exceed t= he value of their assets, Enron will issue enough new shares to make up the= difference.=20 DEALS with partnerships formed by Mr. Fastow, who was chief financial offic= er when they were organized, led to the $1.2 billion write-off in sharehold= ers' equity that Enron announced last week. The company has offered only sk= impy details of its transactions with those partnerships.=20 Enron ended its relationships with those partnerships in the last quarter, = after being criticized by shareholders. In the process, it wrote off a prom= issory note that it had carried on its books, reducing its shareholders' eq= uity by $1.2 billion. But, because of complex accounting rules, the transac= tion was not apparent in Enron's quarterly earnings report.=20 The transaction disturbs investors because it suggests that Enron may have = found a way to hide losses, throwing the accuracy of its financial statemen= ts into question. When Enron released third-quarter earnings on Oct. 16, it= reported a loss from $1 billion in write-offs on failed investments. The e= arnings statement did not mention the additional $1.2 billion equity write-= down. But the company said its core business had been solidly profitable, a= nd its shares rose.=20 In a conference call with analysts after the announcement, Mr. Lay, Enron's= chairman, also disclosed the reduction in shareholder equity. The referenc= e was a brief one, however, and some listeners did not catch it. Those anal= ysts were angered when they found out the next day what Enron had done, and= many were confused by the accounting procedure. Enron's stock began to sli= de, and investors clamored for more information about the write-off. But so= far, the company's efforts to clear up the situation have further unnerved= investors.=20 Mr. Lay has met with investors during the last two weeks to try to explain = the deals, but some on Wall Street say they have come away with doubts abou= t Mr. Lay's grasp of the situation. They say that the two people at Enron w= ho appear to have been most knowledgeable about the deals -- Mr. Skilling a= nd Mr. Fastow -- have both left the company.=20 In an interview in late August, Mr. Lay said he did not know some details a= bout the deals involving Mr. Fastow. In response to one question about them= , he said, ''You're getting way over my head.''=20 Mr. Palmer of Enron disputed any suggestion that Mr. Lay did not have a gra= sp of the investments at issue, saying Mr. Lay was handicapped in talking a= bout them because of the S.E.C. investigation. ''There is not a whole lot w= e can say, or should say, about them,'' Mr. Palmer said. He also said the c= ompany expected to generate about $3 billion in cash through asset sales by= the end of next year.=20 In a conference call on Tuesday, analysts pressed Mr. Lay and other top Enr= on executives to reveal more information about the LJM write-down and its o= ther partnerships. Instead, they offered only vague explanations of the dea= l, leaving Wall Street worried that more write-offs might be coming.=20 David Fleischer, a Goldman, Sachs analyst and a longtime supporter of the c= ompany, was among those who came away concerned. ''If Enron is unable to cl= arify its off-balance-sheet transactions and restore confidence in the very= near term by assuring investors that no more surprises are forthcoming tha= t would affect the balance sheet or liquidity position, then the company wi= ll likely lose access to the capital markets,'' he wrote in a research note= after the call.=20 To try to reassure investors, Enron said late Thursday that EnronOnline, it= s Internet-based trading exchange, executed more than 8,400 trades that day= , a higher-than-normal volume.=20 ''We know we have our work cut out for us if we are to rebuild our credibil= ity with the investment community -- and we're working on that,'' Mr. Lay s= aid in a statement. ''But in the meantime, the best evidence of our strengt= h is the willingness of customers to bring their business to Enron.''=20 But those reassurances apparently are no longer enough for Wall Street. Enr= on's stock tumbled almost 6 percent Friday, to its lowest levels in six yea= rs.=20 Now analysts are scrambling to figure out the extent of Enron's off-balance= -sheet debt and to assess the risk that the company will have to issue new = shares to make good on its partnership guarantees.=20 Carol Coale, an analyst at Prudential Securities in Houston, calculates tha= t Enron may have close to $9 billion in off-balance-sheet debt. She said th= at Enron had for two years been trying to sell about $6 billion in foreign = assets -- including properties in Latin America and a power plant in India = embroiled in a dispute with the state government -- and she worries about t= hose prospects for sale in light of Enron's problems and the souring econom= y.=20 ''As Enron is forced to sell assets to keep the ratings agencies off their = backs, they may have to write those assets down,'' Ms. Coale said. On Wedne= sday, she downgraded her rating on Enron to ''sell'' from ''neutral.''=20 ''The bottom line is, it's really difficult to recommend an investment when= management does not disclose the facts,'' Ms. Coale said.=20 Short-sellers, who attacked Enron's accounting even before the company disc= losed the write-off, say the company's problems may run even deeper than an= alysts fear. Enron may have used the partnerships not just to finance money= -losing investments but to hide losses in its core trading business, they s= ay.=20 ''The company still isn't disclosing enough to know whether the core busine= ss, the trading business, is profitable,'' said Mark Roberts, director of r= esearch at Off Wall Street, which recommended shorting Enron's stock on May= 7, when it stood at $59.43. ''The issue remains: why are they doing these = transactions? Our theory has been that the core operations aren't that prof= itable.''=20 James Chanos, a leading short-seller who has bet that Enron's stock will fa= ll, said, ''Is Enron booking gains when it has real profits, but hiding the= losses when deals go against it?'' Mr. Palmer of Enron said the company st= ood by its reported energy-trading profits.=20 Even traders at other energy companies say they do not have a clear picture= of Enron's positions. Enron maintains that it is in no danger of being wip= ed out by a sharp move in electricity or gas prices because it keeps its tr= ading book balanced -- meaning the energy it has agreed to sell is offset, = in roughly equivalent amounts, by energy it has agreed to buy.=20 ''With these guys, they tell us -- and all you've got is their word -- that= they're hedged,'' said Mr. Verleger, the economist.=20 IN fact, Enron has lobbied forcefully over the years to limit regulation an= d disclosure of its trading operations. Last year, the company successfully= lobbied Congress to effectively ensure that its Internet-trading platform = would be exempted from regulation by the Commodity Futures Trading Commissi= on.=20 Enron and other power traders do file limited information in reports to the= Federal Energy Regulatory Commission, the agency that oversees wholesale e= lectricity and natural gas markets. But the commission does not keep track = of specific transactions and prices.=20 Large-scale energy trading has existed for only about a half-dozen years. E= nron pioneered the business, and now dominates it, accounting for about one= -quarter of all trading in the United States.=20 Before Congress and federal regulators opened up the market for wholesale e= lectricity, a process that began in earnest a decade ago, the power busines= s was a simpler affair. Utilities were given areas of monopoly service, and= their rates -- and ability to deliver enough electricity -- were overseen = by state regulators. But with the move to deregulate the business, independ= ent and unregulated generators and traders have flourished, providing an ev= er-growing portion of the nation's power.=20 Beginning in the 1980's, the sale and transportation of natural gas was als= o deregulated, spurring Enron, which used to be primarily a gas-pipeline co= mpany, to move into the trading business.=20 The company's shift to trading gas and electricity accelerated in the mid-1= 990's, with the ascension of Mr. Skilling, who became chief executive in Fe= bruary, just six months before his unexpected resignation. Underscoring the= change in direction, in securities filings this year Enron described its p= rincipal business as ''security brokers, dealers and flotation.'' Before, i= t had said it was in the business of ''wholesale-petroleum and petroleum pr= oducts.''=20 For most of its ascent, Enron reported outstanding profit figures and Wall = Street accepted them with pleasure. A year ago, when it disclosed the first= transactions with partnerships led by Mr. Fastow, the company's former chi= ef financial officer, analysts who asked questions were told that the deals= were routine and were being disclosed only because of Mr. Fastow's involve= ment.=20 Enron does not appear to face an immediate cash crunch. But the bank credit= lines that it drew on last week to pay off its short-term debt will have t= o be renegotiated next spring. The controversial partnerships do not have t= o pay their debts until the following year -- unless Enron loses its invest= ment-grade credit rating before that.=20 ENRON will also need to maintain its large trading positions, which could s= uffer if participants in those markets grow more nervous about Enron's cred= it. When Long-Term Capital was stumbling in 1998, some Wall Street rivals s= old the securities they thought Long-Term owned, trying to force Long-Term = to sell its positions quickly and at a loss. Something similar in energy ma= rkets might be possible. If so, Enron might find, as Long-Term did, that po= sitions that should offset each other do not.=20 Enron's new chief financial officer may yet persuade investors that in fact= the company's profits are real, and that its condition is better than the = short-sellers believe. As questions are answered, confidence, and the share= price, could rebound.=20 But for now, investors are skittish, and some competitors are eager to take= advantage of Enron's plight. Photos: Enron, which is building a new headquarters in Houston, grew with d= eregulation. But with deregulation in doubt, Enron stock has dropped. (Phil= lippe Diederich for The New York Times); Enron owns 65 percent of the power= plant in Dabhol, India, but has had trouble collecting payments. (The New = York Times)(pg. 13); 'We know we have our work cut out for us,' says Kennet= h L. Lay, Enron's chief. (WGBH/''Frontline'')(pg. 1) Chart: ''Enron's Board= '' Directors have not addressed the compan
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