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Enron Mail |
ENE: The Balance Sheet Matters; Prospects For Further Writedowns * ENE shares have declined due to concern over writedowns, actual and prospective, in our view. While management announced $2.21 billion in charges ($1.01 billion through the income statement and $1.2 billion as a direct charge to shareholders equity) when they reported earnings (see our 10/16/01 note), the prospect of further charges has spooked the stock * We think further write-offs are likely at non-core global assets (Dabhol and South America) and possibly at their broadband unit (already partially written off). Several other complex off-balance sheet vehicles have raised concern. * Offsetting these potential hits to shareholders equity are likely reductions in debt from the proceeds of various asset sales over the balance of the year * Moody's has captured these concerns by putting Enron's senior debt on review for possible downgrade. * We are evaluating these issues and currently maintain our 1H rating. <<ENE Write-Off 10-19-01.pdf<< <<ENE Write-Off 10-19-01.doc<< Raymond C. Niles Power/Natural Gas Research Salomon Smith Barney (212) 816-2807 ray.niles@ssmb.com s ADDITIONAL INFORMATION AVAILABLE UPON REQUEST Salomon Smith Barney ("SSB"), including its parent, subsidiaries and/or affiliates ("the Firm"), usually makes a market in the U.S.-traded over the counter securities recommended in this report and may sell to or buy from customers, as principal, securities recommended in this report. The Firm or employees preparing this report may have a position in securities or options of any company recommended in this report. An employee of the Firm may be a director of a company recommended in this report. The Firm may perform or solicit investment banking or other services from any company recommended in this report. Securities recommended, offered, or sold by SSB: (i) are not insured by the Federal Deposit Insurance Corporation; (ii) are not deposits or other obligations of any insured depository institution (including Citibank); and (iii) are subject to investment risks, including the possible loss of the principal amount invested. Although information has been obtained from and is based upon sources SSB believes to be reliable, we do not guarantee its accuracy and it may be incomplete or condensed. All opinions and estimates constitute SSB's judgment as of the date of the report and are subject to change without notice. This report is for informational purposes only and is not intended as an offer or solicitation for the purchase or sale of a security. Investing in non-U.S. securities, including ADRs, by U.S. persons may entail certain risks. Investors who have received this report may be prohibited in certain U.S. states from purchasing securities mentioned in this report from SSB. Please ask your financial consultant for additional details. This report has been approved for distribution in the United Kingdom by Salomon Brothers International Limited, which is regulated by the Securities and Futures Authority. The investments and services contained herein are not available to private customers in the UK and South Africa. This report was prepared by SSB and, if distributed in Japan by Nikko Salomon Smith Barney Limited, is being so distributed under license. This report is made available in Australia through Salomon Smith Barney Australia Securities Pty Ltd. (ABN 64 003 114 832), a Licensed Securities Dealer, and in New Zealand through Salomon Smith Barney New Zealand Limited, a member firm of the New Zealand Stock Exchange. This report does not take into account the investment objectives or financial situation of any particular person. Investors should obtain advice based on their own individual circumstances before making an investment decision. Salomon Smith Barney Securities (Proprietary) Limited is incorporated in the Republic of South Africa (company registration number 2000/025866/07) and its registered office is at Grosvenor Corner, 195 Jan Smuts Avenue, Rosebank, 2198, Republic of South Africa. Salomon Smith Barney is a service mark of Salomon Smith Barney Inc. ? Salomon Smith Barney Inc., 2001. All rights reserved. Any unauthorized use, duplication or disclosure is prohibited by law and may result in prosecution.
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