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Enron Mail |
Layoffs Possible As Enron Reduces Broadband Burn Rate
Dow Jones Energy Service, 07/12/01 USA: Losses widen to $102 million for Enron Broadband. Reuters English News Service, 07/12/01 Enron's 2nd-Qtr Profit Rises 40% on Electricity Sales (Update5) Bloomberg, 07/12/01 Enron's Skilling Sees California Energy Crisis Easing (Update2) Bloomberg, 07/12/01 Jeff Skilling Inteview CNBC, 07/12/01 Enron Expects To Cash In On New U.S. Federal Mandate For Open Wholesale Power Markets CNNfn: Market Coverage - Morning, 07/12/01 Jeff Skilling Interview Bloomberg Information TV, 07/12/01 USA: INTERVIEW-Enron chief sees California problems fading. Reuters English News Service, 07/12/01 Enron CEO:Foreseeable Business Prospects Remain Excellent Dow Jones News Service, 07/12/01 Enron 2Q Net Rises 40% As Trading Revenue Soars Dow Jones News Service, 07/12/01 USA: UPDATE 3-Enron quarterly earnings rise, beat estimates. Reuters English News Service, 07/12/01 Enron reports earnings increase of almost 40 percent Associated Press Newswires, 07/12/01 Venture capital chasing next big - and little - thing in energy Associated Press Newswires, 07/12/01 A Volt From Blue, U.S. Grid Rules Get Power Co's Abuzz Dow Jones Energy Service, 07/12/01 Marlin Water Trust II Taps Euro And Dollar Bond Markets Capital Markets Report, 07/12/01 FERC Power Grid Orders Will Open Markets for Traders (Update2) Bloomberg, 07/12/01 Enron CEO Skilling on California Crisis, FERC Talks: Comment Bloomberg, 07/12/01 Enron Chief Executive Sees California's Energy Crisis Easing Bloomberg, 07/12/01 FERC Transmission Decision Will Open Power Markets for Traders Bloomberg, 07/12/01 California Not Due Cash Refunds for Power Purchases (Update1) Bloomberg, 07/12/01 Layoffs Possible As Enron Reduces Broadband Burn Rate By Erwin Seba Of DOW JONES NEWSWIRES 07/12/2001 Dow Jones Energy Service (Copyright © 2001, Dow Jones & Company, Inc.) HOUSTON -(Dow Jones)- Enron Broadband Services executives said staff redeployments, including possible layoffs and an office closure were part of the plans to reduce losses at the telecommunications unit of Enron Corp. (ENE). The news came shortly after Enron President and Chief Executive Jeffrey Skilling told an investor call Thursday morning that Broadband Services lost $102 million in the second quarter of this year. "We've got to get that burn rate down," Skilling said. "And we will get the burn rate down in the next two weeks." Broadband Services Senior Vice President Kelly Kimberly said Enron hadn't yet determined the exact number of the unit's approximately 1,000 employees to be redeployed. "We will be moving some commercial support people to corporate," Kimberly said. "There will be redeployments. There may be some severances." Commercial support employees are in departments like human resources and legal support offices. Also, the unit will close its Portland, Ore., office, but its back-up network operations center (NOC) there will remain in operation. Portland employees will be offered redeployment in Houston or other offices. Those who do not accept redeployment will be offered severance packages, Kimberly said. EBS's primary NOC is in northeast Houston, one of the areas hardest hit by Tropical Storm Allison. In spite of heavy rains and flooding last month, the Houston NOC continued functioning. However, Enron officials did activate the Portland NOC in case the Houston center could not remain open. This is the second redeployment of Broadband Services employees this year. The earlier redeployment was attributed by executives to the transition from building the EBS optical fiber network to operating the network. Revenues Victim Of Crash In Telecom Prices Skilling blamed the crash of telecommunications prices for the decline in revenues in the second quarter. "There is a meltdown out there," Skilling said during the conference call. Skilling said many potential counterparties among carriers can do only short-term deals in the bandwidth market because their creditworthiness is so weak. The company believes it will be one or two years before the bandwidth market gets to the point Enron had expected it to be this year, Skilling said. Enron is the primary market maker in the bandwidth arena. Skilling and Kimberly said the company will continue to develop the commoditized market. That leadership has left Enron feeling increasingly lonely in recent weeks, said an industry analyst. "Enron was trying to move this market fast," said William Bandt of Arthur Andersen L.L.P. "They've been working to get out at the front of this market. Sometimes that's like being at the end of the high-dive board all by yourself." Overall, Enron is in good financial shape because of its core energy industry. For the second quarter this year, Enron reported net income, excluding non-recurring items, of $404 million on revenues of $50.1 billion. In the second quarter of 2000, the company reported net income of $289 million on net revenues of $16.9 billion. The earnings per diluted share for the quarter is 45 cents compared with 34 cents a year ago. Skilling said the company expects to achieve $1.80 in recurring earnings per diluted share this year. Broadband Services reported a loss of $102 million in the second quarter on $16 million in revenues before interest and taxes. In the same period of 2000, the unit reported revenues of $151 million and a loss before interest and taxes of $8 million. EBS had 759 transactions in the second quarter 2001 compared with 23 in the second quarter of 2000. The company added 45 new customers in the second quarter, giving it a total of 165 customers, Skilling said. Carriers and network services providers made up more than 70% of Enron's broadband customers and accounted for about one-third of its transactions, he said. In the second quarter of this year, the company delivered 98,478 terabytes of data compared with 13,692 a year ago. For the year so far, EBS has delivered 141,878 terabytes of data compared with 19,697 in same period a year ago. Broadband Services has a goal of delivering 570,000 terabytes this year. Enron has signed a long-term contract with MSN to provide broadband services, Skilling said. The deal will allow MSN to provision and pay for bandwidth as it's needed. The company will give more information on that deal later, -By Erwin Seba, Dow Jones Newswires, 713-547-9214 erwin.seba@dowjones.com Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. USA: Losses widen to $102 million for Enron Broadband. By C. Bryson Hull 07/12/2001 Reuters English News Service (C) Reuters Limited 2001. HOUSTON, July 12 (Reuters) - The revenue rug got pulled out from under Enron Corp.'s broadband division in the second quarter, leading to a wider-than-expected loss inside the nascent unit, the company said on Thursday. Enron Broadband lost $102 million on revenue of $16 million in the second quarter. In the year-ago quarter, when the telecom sector was much stronger, the unit brought in $151 million in revenue and lost just $8 million. The losses and the shrinking revenue opportunities caused by severe weakness in the telecommunications market led Enron President and Chief Executive Jeff Skilling to announce a restructuring that will include an unspecified amount of job cuts within Enron Broadband Services. "This quarter was the absolute evidence that there is a serious problem in the telecom industry," Skilling told Reuters in an interview. "Revenue opportunities just dried up. People are not contracting." The telecom and Internet network carriers that are Enron Broadband's target customers are suffering from credit problems and other financial difficulties preventing them from entering into the long-term deals that are the unit's bread and butter. Enron plans to turn bandwidth into a tradeable commodity that can be sold and packaged much like natural gas. Enron believes bandwidth capacity is essentially the same as gas pipeline capacity, and can be traded the same way. Skilling said the worse-than-expected telecom weakness should push back plans for profitability inside the unit by about a year. Initially, Enron planned to turn a profit from broadband by at least 2002. But Skilling said near-term cost cutting, the company's agility and small asset position should enable it to quickly react to lower revenue targets. Workers whose jobs are removed from Enron Broadband will be redeployed to other positions within the company, Skilling said. One encouraging sign was the increase in transactions in sequential quarters, from 580 deals in the first quarter to 759 deals in the second, Salomon Smith Barney analyst Ray Niles said. "It was a little bit below our expectations, but the volumes are still up sequentially. The key metric remains growth in transactions. At the end of the day, given enough transactions, it should become a profitable business," Niles said. The flashy unit, which gave Enron a once-valuable telecom cache that drove its stock to record highs last summer, has fallen from grace recently as the telecom market tanked earlier this year. Enron Broadband cut jobs earlier this year and also reduced its capital budget by a half-billion to $250 million as the telecom market first dropped sharply. Broad telecom weakness as well as the California power crisis and a struggling power project in India combined to push the energy giant's stock down 15.7 percent in the quarter. It underperformed the broader Standard & Poor's utility index, which was down 6.32 percent in the same period. Enron shares were down 48 cents, or 1 percent, at $48.62 in afternoon trading on the NYSE. Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. Enron's 2nd-Qtr Profit Rises 40% on Electricity Sales (Update5) 2001-07-12 16:25 (New York) Enron's 2nd-Qtr Profit Rises 40% on Electricity Sales (Update5) (Updates shares. Adds analyst comment in fourth paragraph.) Houston, July 12 (Bloomberg) -- Enron Corp., the top energy trader, said second-quarter profit rose 40 percent as its sales of natural gas and electricity surged in the U.S. and Europe. Net income rose to $404 million, or 45 cents a share, from $289 million, or 34 cents, in the year-earlier period, Enron said. Revenue almost tripled to $50.1 billion. The Houston-based company sold almost twice as much power in North America and five times as much in Europe than in the year-earlier quarter. Though electricity and natural-gas prices surged in California, Enron Chief Executive Jeff Skilling said the state ``is just not a big factor'' in Enron's increasing profits. The Houston-based company boosts earnings by increasing sales of energy and other commodities such as lumber and steel rather than raising prices, analysts said. ``That's the nature of the commodities business,'' said Zach Wagner, an analyst with Edward Jones & Co. who has a ``buy'' rating on Enron. ``As markets open up, their volumes will grow. Their margins are basically flat.'' Enron's profit margin was less than 1 percent last year and has averaged 2.1 percent during the past five years, based on Bloomberg data. That compares to a profit margin of 6.5 percent for Exxon Mobil Corp., the largest publicly traded energy company. Shares of Enron have dropped 31 percent during the past year despite steadily increasing earnings, and sales that now rival those of Exxon Mobil. Broadband Meltdown Investors are concerned about lackluster results from the company's broadband business, which was set up to trade space on fiber-optic telecommunications networks. Enron shares surged 87 percent last year when the boom in Internet and telecommunications businesses seemed certain to increase demand for broadband capacity. Enron shares fell 40 percent this year as the boom fizzled. The broadband business had a loss before interest, minority interests and taxes of $102 million in the second quarter, compared with an $8 million loss a year earlier. Broadband revenue plunged 89 percent to $16 million from $151 million. Enron said it is firing broadband staff to reduce costs. ``There's a meltdown out there,' Skilling said. ``You have to do very short-term transactions (in broadband) because people don't have the credit to do long-term transactions.'' Investors are questioning whether Enron can continue to post huge gains in sales in its energy and commodity businesses, analysts said. The earnings news today left the stock up 45 cents, or less than 1 percent, to $49.55. ``It was telecommunications that took the stock to its lofty height . . . and disappointment with telecommunications that has held the stock back,'' Wagner said. ``What they're trading at now is purely as an energy company.'' Spokeswoman Karen Denne declined to say how many people will be fired or where the cuts would take place in the company's broadband business. Enron has broadband staff in Houston, London, Singapore and Portland, Oregon. Denne said Enron would try to find internal jobs for the broadband workers and only cut those employees it can't place. In a conference call, Skilling said the broadband business still has potential. ``We're getting a negative impact on our stock price from the broadband business, and I don't think that's right,'' Skilling said. Buyer and Seller Skilling and his predecessor, Ken Lay, have transformed a natural gas-pipeline company into the biggest competitor in the business of trading commodities such as gas and power. Enron also uses financial instruments such as futures contracts to help protect customers from swings in energy prices. Enron says it makes money regardless of whether prices go up or down in California because it is both a buyer and a seller in the markets where it operates, making much of its money from fees for arranging trades. It also profits from selling risk management contracts to utilities and other companies that want to lock in energy prices. Enron was expected to make 42 cents a share in the quarter, the average estimate of analysts polled by First Call/Thomson Financial. Enron reiterated its 2001 profit forecast of $1.80 a share and said it expects to make $2.15 in 2002. The First Call estimate for 2002 was $2.12. Enron's revenue tripled from $16.9 billion in the year- earlier quarter. Most of the gain came from Enron's Wholesale Services business, which includes commodities trading and development of energy projects such as power plants. Earlier this year, Enron estimated it was owed as much as $500 million for California energy sales. Skilling said he thinks California prices have stabilized and the state is going to get through the summer ``just fine.'' While electricity and natural gas prices in the West are up from a year ago, they are down from the first quarter. ``The financial impact on Enron is over now,'' Skilling said. European Expansion Enron had first-half revenue of $100.2 billion, almost equal its revenue for all of last year. Skilling has predicted revenue will top $200 billion this year, rivaling Exxon Mobil's $232 billion in 2000 sales. Enron is continuing to expand its trading business in Europe. The company entered Europe ahead of its competition and became the dominant trader there, said Bob Christensen, a First Albany analyst who rates Enron a ``strong buy.'' ``We have just started down the path in Europe,'' Skilling said. ``Look for great things from Europe in the future.'' In California and other parts of the U.S., Enron has a growing business in contracts that manage energy supply for big customers such as Owens-Illinois Inc. and Eli Lilly & Co. Contracts increased 89 percent to $7.2 billion in the quarter, Enron said. The energy-services unit's profit increased 30 percent to $60 million in the quarter, and the business is on track to make $225 million this year, more than double 2000's results, Enron said. Profit was little changed at Enron's pipeline and utility businesses, which are more closely regulated than the trading operations. Enron has a 25,000-mile gas pipeline system and owns Portland General, an Oregon utility. The company reported a loss of $109 million for higher ``corporate-wide expenses.'' About a quarter of that was from its Azurix water unit, Skilling said. The loss compares with profit of $17 million a year earlier. Enron's Skilling Sees California Energy Crisis Easing (Update2) 2001-07-12 16:17 (New York) Enron's Skilling Sees California Energy Crisis Easing (Update2) (Updates with closing share price.) Houston, July 12 (Bloomberg) -- Enron Corp. Chief Executive Jeffrey Skilling said higher retail prices for electricity in California has curtailed power demand and should lead to fewer blackouts than expected this summer. ``The expectation of higher retail prices has dampened demand considerably,'' Skilling said in a conference call with analysts and investors. ``I think we're going to get through the summer just fine in California. That will ultimately lead to lower wholesale prices for power.'' The state had been facing about 15 hours of blackouts a week this summer, the North American Electric Reliability Council, a national group that monitors and coordinates U.S. power supplies, said in May. California has been spared outages recently because of conservation efforts, cooler temperatures and new power plants. Prices for power and natural gas in California should stay close to current levels because of the drop in demand, Skilling said in an interview with Bloomberg Television. Power plants producing enough energy for about 1.2 million homes have opened this summer in California, California Governor Gray Davis said yesterday in a statement. ``We're not out of the woods yet, but we are making progress,'' Davis said. California is seeking $8.9 billion in refunds from generators such as Houston-based Enron, the biggest energy trader, for power bought in the last year. Under the formula used by California to derive that figure, Enron is actually owed $44 million because it bought more power than it sold since May 2000, Skilling said. Shares of Enron rose 45 cents to $49.55. The company said today second-quarter profit rose 40 percent as higher sales of electricity more than made up for a loss in its telecommunications business. Enron stock has fallen 40 percent this year. The political rhetoric surrounding the California crisis and negotiations over possible refunds has hurt Enron's stock price, Skilling said. ``All this noise from California has obscured the performance of the company,'' Skilling said. Date July 12, 2001 Time 09:00 AM - 10:00 AM Station CNBC Location Network Program The Squawk Box Mark Haines, anchor: Energy earnings: Enron reporting second quarter earnings, forty-five cents a share, beating expectations of forty-two cents a share. Surpassing last year's earnings of thirty-four cents. Net income roes forty percent to four-hundred-four million dollars. Revenue up one-hundred and ninety-five percent to fifty-billion. (Graphic: Enron (ENE): Actual $0.45, Estimate $0.42, Year Ago $0.34, Revenue up 195% to $50.06b, Net Income up 40% to $404m) Enron said revenue numbers were driven by a surge in wholesale services business. Stock is trading at a fifty-two week range, forty-two to ninety. Right now at the low end, around forty-nine yesterday. Let's take a closer look at the numbers. Joining us now is Enron CEO Jeffrey Skilling. And in the spirit of full disclosure, I have some shares of Enron in my IRA. Mr. Skilling, how does revenue go up so much and the bottom line doesn't benefit more? Jeffrey Skilling (Chairman and Chief Executive Officer, Enron): Well we had a net income increase, Mark, of over forty percent and earnings per share up thirty-two percent, so I think it was a real good quarter. Haines: Yeah, but that doesn't answer the question, well, how can revenue grow like a hundred and fifty and--and the bottom line only benefits forty--forty percent? Skilling: What--what drives our net income, Mark, is the increase in physical volumes delivered. Revenues are impacted by price levels and price levels really don't impact us because we don't own generation facilities, we don't own gas production assets. So prices move up, prices move down, that impacts our revenue. But what really matters to us is how much volume are we delivering to customers and our volumes this quarter up fifty-eight percent, which drove that increase in our wholesale income. Haines: How unusual should we consider the--the last few quarters? Skilling: I think the most lasting legacy of the problems in California may be an order that came out of the Federal Energy Regulatory Commission yesterday. And what they did is they forced open--moved to four mandatory, what they call regional transmission organizations. (Graphic: Enron (ENE) 8-Quarter Earnings History Chart) This will make the marketplace for electricity in North America open. And what that means is there is a tremendous additional amount of growth, we believe, in the electricity markets in North America as these markets open up for competition. Similarly Europe--Europe is really just starting. I don't know if you saw our numbers in Europe, but our gas volumes were up over a hundred percent. Our electricity volumes were up over four hundred percent in Europe. That market's just starting to open and has tremendous future opportunities in it. (Graphic: One of the world's leading electricity, natural gas and communications companies; Delivers physical commodities and financial & risk mgmt. services to customers around the world) Joe Rivkin (Citigroup Investments): Mr. Skilling, I--you are building a global fiber-optic network, which is in effect owning some capacity that you're going to be selling or trading. Can you help us understand the logic behind that? And, also, what will make that network different from several of the other networks that are out there or under construction? (Graphic: Has developed an intelligent network platform to facilitate online business; Divides its business into four core areas: Wholesale, Broadband, Energy and Transportation Services) Skilling: Yeah. Thanks, Jack. It's--it's a very, very different network than what you'll see anywhere else in the world. If you look at most networks, the capacity to input data and the capacity to output data is very similar to what the long-haul capacity is. In our network it's very different, the capacity input and output is enormous relative to the amount of long-haul capacity we have. That allows us to bring data into our system, move it on to other people's systems by creating a marketplace for bandwidth, to get customers lower prices. We think this is the future, particularly given the melt down in client and prices for bandwidth around the world. We think this is exactly the right strategy to have. We're focussing on those areas where we--we believe that marketplace will be good in the future. In fact, we announced in the press release this morning a contract with Microsoft. A multi-year contract to provide bandwidth services that is really geared towards providing instantaneous access to bandwidth for customers, which is really a new product which we think is going to be very important for the future. (Graphic: Formed in July 1985 as a result of the merger of Houston Natural Gas and InterNorth of Omaha, Nebraska; Headquarters in Houston, Texas; Approximately 20,000 employees; Yearly High: 90.75, Yearly Low: 42.35; Market Cap: 36.6b; Top Competitors: AEP, Duke Energy, Reliant Energy) Haines: Does this get you into the technology business? Because if you're dealing with what's coming into a pipe and what has to go out of it, there's--there's a lot of effort going into place to either compress the information or expand the information or route the information... Skilling: Right. Haines: ...how are you dealing with that? Skilling: Well, really, what we're doing in the telecommunications business is identical to what we do in the natural gas and electricity business. They're pipes, and the data moves through the pipes. If they can crush more--more data into the same amount of pipes, that's good, that opens the market, provides additional capacity. What we do is we purchase and sell that capacity and make it available through our switching capabilities to any customer that wants to get real time access to bandwidth. (Enron Corp (ENE) 3-Month Stock Chart and 6-Month Stock Chart) Haines: How much of a cloud on the horizon is this California energy situation? The--you are suing the state of California, California is asking for documents, you're refusing to provide them. The situation doesn't look too pleasant. (Graphic: Enron Corp (ENE) 1-Year Stock Chart and 3-Year Stock Chart) Skilling: Well, Mark, you know, I think--I think the entire California thing I think is past the high water mark. Prices now are moving up in California and economics 101 demand's going down. I think we're going to get through this summer all right. As Joe was saying, the weather's pretty cool out in California. I think that's going to keep the demand for electricity down. As prices come down in California, I think the whole tone of discussion in California will get better. And as I said, this whole thing with the Federal Energy Regulatory Commission--they recognize now it's important to open the grid, it is critical to create efficient markets for electricity. And the step yesterday, I think, is a landmark step in opening that market and I think that's going to reduce the problems from California. (Graphic: Enron Corp (ENE) 5-Year Stock Chart) Haines: All right, sir, thank you very much. We appreciate your bringing us up to date. Skilling: Thanks, Mark. Haines: Jeffrey Skilling, CEO of Enron. # # # Business Enron Expects To Cash In On New U.S. Federal Mandate For Open Wholesale Power Markets Rhonda Schaffler, Barry Hyman 07/12/2001 CNNfn: Market Coverage - Morning © Copyright Federal Document Clearing House. All Rights Reserved. RHONDA SCHAFFLER, CNNfn ANCHOR, MARKET CALL: The nation`s number one buyer and seller of energy posted strong second quarter numbers. Enron (URL: http://.www.enron.com/) earned 45 cents a share, beating estimates by 3 cents and the year-ago quarter by 11 cents. Revenue surging almost 200 percent and the company says it`s on track to meet not just expectations this year but expectations for next year. Shares, though, have been slashed in half in the past six months due mostly to the California power crisis and weakness in the broadband market, as Enron continues to build its` global fiber optic network. Joining us from Houston to talk about all this is Jeff Skilling, CEO and president at Enron. Jeff, good to have you back on "Market Call". JEFF SKILLING, CEO, PRESIDENT, ENRON: Thanks, Rhonda. Good to be here. SCHAFFLER: Congrats on the quarter. But it`s an interesting quarter for you in that, for a change, not everything`s firing on all cylinders. SKILLING: Well, you know, it`s a little bit of the tale of two cities. You know, the energy business is very strong. As you can see from our numbers, we had a great quarter-another great quarter in the energy business. Broadband business is suffering from some of the problems the broadband business has, but luckily, in Enron, it`s a very small portion of our net income. So, the real story for Enron is this strong, strong growth and strong profitability of our energy business. BARRY HYMAN, CNNfn GUEST HOST, MARKET CALL: Jeff, I just want to concentrate on the broadband part for a second. You`re significantly cutting costs there and your stock seems to have gotten hit as almost a technology stock since the beginning of this year. Where do you see the broadband part going forward? And how you can make money in that particular sector? Or is it really a viable place to be? SKILLING: Yeah. Barry, I really do believe that they`ve taken all the value of broadband business out of our stock completely. It`s gone. And we`ve also been hurt a little bit by what`s going in California, in spite of the fact that we continue to hit our numbers. We`ve hit our estimates, or exceeded estimates, very quarter for the last four years. But I think people are just a little nervous about us. As far as broadband goes, it is a tough, tough market. The revenues have dried up in that business. There are two areas where we have focused, which have been our primary area focus. One is to create a market place-a real-time market place for bandwidth. We feel very good about that. That is continuing to grow. And a content delivery service where we provide a turnkey service for customers. We just announced, in fact, in the earnings release, a new contract with MSN that really provides that dynamic provisioning of bandwidth for customers. And those are the two areas we`re focusing on. The rest of the market we are just going to eliminate our activities there and just focus on those two activities. And we see those as having enormous future potential for customers. It`s going to be tough for the next year or so as that market kind of digs itself out of a hole. But I think longer-term it`s a great place to be and we have exactly the right strategy for pursing that market. SCHAFFLER: Can you tell us a little bit about what you`re doing in Europe with the energy markets there? Because Europe`s an interesting story as well, because of concerns about the slowdown there? SKILLING: Yeah, it`s interesting, Rhonda. Our volumes in Europe were incredible. Our gas volumes were up over 100 percent. Our electricity volumes were up over 400 percent. What you`re seeing there is, in spite of the slowdown in the economy in Europe, they`re opening up their markets to competition so the non- regulated portion of the energy market, which is the only portion of the market where we compete, is just exploding. It`s growing by leaps and bounds. And so we expect Europe to be a significant contributor to future growth. Similarly, even in North America, as we`re seeing the economy here slowdown. We had a landmark decision come out of Federal Energy Regulatory Commission yesterday. They have mandated now the establishment of four regional transmission organizations. And this sounds kind of technical, but essentially what it does is it is going to force fully open-force fully the North American wholesale power markets in North American. And that, I think, will provide significant new growth opportunities for us in North America. So, I think the North America and the European gas and electric markets are really not dependent on economic activity, as far as Enron`s concerned. They`re really dependent on how quickly we move to open competitive markets and we`re seeing a very, very fast transition there-and great news out of the FERC yesterday. SCHAFFLER: Jeff Skilling, CEO of Enron. Nice to see you again. Congrats on the quarter. We`ll talk soon. SKILLING: Thanks, Rhonda. Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. Date July 12, 2001 Time 12:30 PM - 01:00 PM Station Bloomberg Information TV Location Network Program Newsline Suzy Assaad, anchor: There's a lot ahead for you in this next half hour. We're going to talk live with the CEO of Enron, Jeffrey Skilling. His broadband division is having some troubles and we're going to ask him why he thinks he can turn it around. * * * Assaad: Enron came out with earnings and they actually beat the Street. The energy and communications company earned forty-five cents a share from continuing operations and that was three cents better than what the Street was expecting. (Graphic: Enron (ENE) 2Q, 2001 < Actual EPS $0.45 < Estimated EPS $0.42 Earnings Alert) The news sent shares of Enron sharply higher in the early part of the session. On the day, though, they have managed to turn a little bit to the downside. (Graphic: Enron intraday stock chart) Enron, though, is having problems with its broadband division. The company is projecting lower revenues for broadband and it is going to eliminate jobs to lower costs. Now can broadband be turned around and if not, what will they do about it? Joining us live from Houston is the CEO of Enron, Jeffrey Skilling. (Graphic: Enron. Enron 2Q profit rises 40% to $404 million as higher sales of electricity more than made up for a loss in its telecommunications business) Mr. Skilling, thank you for being on the show and let's start off with that question. How do you plan to turn broadband around, if--continue to keep it or get rid of it? What are your plans for there? Jeffrey Skilling (Chief Executive Officer, Enron): Well we believe longer term the broadband business is going to be a good business. It's clear, though--absolutely clear that we're going through a meltdown in the business right now. And so what we need to do is we just need to get our cost structure in line with the current view of what revenues can be in that business and that's what we're in the process of doing. (Graphic: Enron. Net income at the top energy trader rose to $404 million, or $0.45/share from $289 million or $0.34/share a year earlier) I think, given our strategy--our strategy has not been an asset-heavy strategy--we should be able to do this pretty easily and pretty quickly. As you've seen from our numbers that we announced today, we have extremely strong growth on the energy side of our business, so we'll end up redeploying people from the broadband business back into our energy business. So we think we can move pretty quickly on it. (Graphic: Enron. Houston-based company says it sold almost twice as much power in North America and five times as much in Europe in the quarter) Assaad: That's--that's quite a drain then. I mean in a year where you're having such great numbers, to have the broadband be such a drain on your bottom line. Skilling: Well it's not that big in the grand scheme of things. You know our energy business is a big business, it's growing very quickly. Our revenues in energy this quarter were over fifty billion dollars. So that's really the big part of our business and, sure, the telecommunications business I think long term is going to be an opportunity. I wish it were an opportunity right now but I think what we need to do is just get that burn rate down, get it consistent with what the revenue opportunity is in the industry. We'll be a survivor and when this business comes back, I think it has all the promise that we all know it has, it's just going to be a little delayed from what we thought before. Assaad: Could we actually get your outlook, Mr. Skilling, on energy prices going forward? Skilling: Sure. It's--it's-- Assaad: Is it a one-way street up? Skilling: I don't think so. We've been really surprised by the decline in demand. If you look at demand for electricity and natural gas in North America, it is way down this year, almost unprecedented decline in demand for a developed economy. I've never seen anything like it before. And--and I think it's been triggered by the fact that prices went up last year and customers--sort of Economics 101--customers have decided that there are cheaper alternatives and so the demand has gone down and that has really driven down prices. You know gas prices are way off from what they were earlier this year. Power prices all across the country are way down from what they were earlier this year. And so I think it's just natural economics taking effect. But what I think it means is that the current price level that we're seeing for gas and electricity are probably likely to be the prices that we'll see for--for some time now. They're on the low side of the range that everyone was expecting but I think that's what it looks like. (Graphic: Enron. President, CEO Jeffrey Skilling has predicted that revenue will top $200 billion this year) Assaad: In terms of what's going on in California, it's--it's said that that has put some pressure on your stock price as of late. What are your predictions down that end? Skilling: Well it has put pressure on our stock price. You know we've--we've hit earnings or exceed earnings expectations every quarter for the last four years and yet our stock's down this year. I think the reason for that is that all of this noise from California has obscured the performance of the company. (Graphic: Enron. In places including CA, Enron has a growing business in contracts that manage energy supply for big clients such as Owens-Corning, Lilly) But I think we're now, because prices are dropping--wholesale prices are dropping for power, I really think we've seen the high water mark of the problems in California. (Graphic: Enron. Contracts increased 89% to $7.2 bln in the quarter, Enron says) It's been cool in California, prices are down and I think as this works its way through the system, I think a lot of the noise and a lot of the antagonism will start to go away and I think--in fact I think probably the greatest legacy of this whole California debacle will be what happened yesterday in the Federal Energy Regulatory Commission. You know they came out with an order that most people weren't really, I don't think, looking at that carefully. But this--this order requires the development of a very, very efficient marketplace for electricity in North America. (Graphic: Enron. While California power prices were double year-ago levels, Enron reiterated its 2001 profit forecast of $1.80/share and said it made no difference to Enron's bottom line) It's a huge step forward, it's very, very positive. And so while it's technical in nature, I think ultimately it will have probably the most impact going forward in time, more than this whole California things has had. Assaad: Interesting. In terms though of--of going forward from here, it's also said that a lot of your wholesale margins, a lot of certainly your volumes are going to be dependent on the development of Europe, that this is really the area of growth for you right now. Do you agree with that and where do you see Europe going for you in the next year? Skilling: Well, Europe is important and Europe is just starting the process of liberalizing markets, the continental countries. And so we think there's enormous growth opportunities there. Gas volumes were up over a hundred percent. Our power volumes were up over four hundred percent. So I think there's great opportunity there and that will be a source of growth in the future. (Graphic: Enron. That's because Enron's risk-management business makes money it expects to make $2.15 in 2002; First Call estimate for 2002 was $2.12, whether power prices rise or fall, analysts say) Assaad: Mr. Skilling, do you think there's greater opportunity for Enron in Europe than there currently is here in the U.S.? Skilling: No. And that's--I was about to say that with this change in the federal policy, this--currently only about twenty percent of the wholesale market for power is accessible. You can only get to about twenty percent of the locations in the country because of flawed regulation in North America. If these rules go through, as was dictated yesterday by the Federal Energy Regulatory Commission, the entire U.S. market opens up and so this is an enormous growth opportunity. And--and because this is our biggest business, we think it will have more effect than Europe. (Graphic: Enron. Enron's ability to boost profit and sales even as its broadband business slumped shows it can manage changing market conditions, analysts say) But longer term, Europe's a great market, great business for us. Assaad: Absolutely. Thank you very much for joining us today. Jeffrey Skilling, joining us to talk about Enron. # # # USA: INTERVIEW-Enron chief sees California problems fading. By C. Bryson Hull 07/12/2001 Reuters English News Service (C) Reuters Limited 2001. HOUSTON, July 12 (Reuters) - The thus-far cool summer in California and the emergence of specifics about Enron Corp's limited involvement in the embattled California power market should ease pressure on the energy giant's stock, the company's chief executive said on Thursday. "I think we are going to get through the summer just fine. In terms of the financial impact on Enron, it's pretty much over," Enron President and Chief Executive Officer Jeff Skilling told Reuters in an interview. The rhetorical attacks on the Houston company as an out-of-state generator ignore key facts about how much power Enron sold into California, he said. "I don't know how they can keep using us as the poster child when all of the numbers keep coming out. The poster child ought to be the Los Angeles Department of Water and Power," Skilling said. According to sales records maintained by the California Independent System Operator, which manages most of the state's power grid, Enron accounted for 0.4 percent of the alleged $9 billion in overcharges. The U.S. Federal Energy Regulatory Commission is slated to decided if there was an overcharge to California, and if so, how much should be refunded. The same records show that the L.A. municipal utility and other municipal utilities in the state overcharged PG&E Corp.'s Pacific Gas and Electric and Edison International's Southern California Edison utilities millions more than Enron did. "I believe ultimately in the longer term, as people become more knowledgeable about the data and statistics, I don't think they'll harp on Enron so much," Skilling said. Skilling has personally felt the nasty nature of the duel between California and "out-of-state power producers," the label California Gov. Gray Davis, a Democrat, has used to blast energy companies like Enron. During a June 21 speech in San Francisco, a demonstrator threw a cream pie and hit Skilling in the face. "I knew something was going to happen out there, but we wanted to get our facts out and show our commitment to getting the facts out," Skilling said of the reason for his visit. After he was hit with the pie, Skilling calmly explained his and Enron's belief for the reasons behind California's power woes. While Davis blames Enron and others for jacking up wholesale energy prices, the companies pinpoint California's flawed deregulation scheme and a rise in the price for natural gas as the main problems. The latest manifestation of the flat-out war between California politicians and Enron is a California legislative committee's finding that Enron is in contempt for refusing to hand over confidential business documents in a probe into price gouging. The California Senate believes the finding gives them the power to fine Enron and possibly jail its senior officers. But just before the Senate Select Committee to Investigate Market Manipulation voted to hold Enron in contempt on Wednesday, the Houston company sued in a California court on a claim the legislature has no jurisdiction over them. Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. Enron CEO:Foreseeable Business Prospects Remain Excellent By Bob Sechler Of DOW JONES NEWSWIRES 07/12/2001 Dow Jones News Service (Copyright © 2001, Dow Jones & Company, Inc.) AUSTIN, Texas -(Dow Jones)- Flush from reporting a 40% year-over-year increase in net income for the second quarter and substantially beating Wall Street expectations, Enron Corp. (ENE) Chief Executive Jeff Skilling said Thursday that prospects for his company remain extremely strong. "We are well-positioned for future growth," Skilling told analysts during a conference call. Skilling also downplayed ongoing controversy regarding the power crisis in California - which has contributed to a pall over Enron stock - saying he thinks the issue already has reached "a high-water mark" and should subside. California likely will make it through the summer without much additional power problems, he said, helped by lower prices and cooler weather. Enron, Houston, reported second-quarter net income Thursday of $404 million, 40% more than net income of $289 million in the year-go period. The company surpassed Wall Street expectations for the quarter, reporting earnings of 45 cents a share on revenue of $50 billion. Enron had been expected to earn 42 cents a share, according to the consensus of analysts polled by Thomson Financial/First Call. Enron earned 34 cents a share on $16.8 billion in revenue in the year-ago period. CEO Skilling also heralded the decision Wednesday by the Federal Energy Regulatory Commission ordering that four large electric-transmission organizations be formed to optimize the flow of electricity nationwide. The move will lead to a major improvement in business conditions for companies such as Enron, he said, because it will create a solid foundation for competitive power markets across the country. Enron officials estimated that they'll eventually be able to compete in more than 90% of U.S. power markets because of the commission's order, as opposed to the 20% the company forecasts now. Enron is the nation's largest electricity trader and marketer. "This is a major, major step forward," Skilling said. "All the lights are green right now" for Enron's wholesale-services division, which accounted for about 97% of Enron revenue in the second quarter. Skilling expressed confidence that Enron will meet Wall Street's full-year earnings expectations of $1.80 a share. In addition, he said the company will earn $2.15 a share in 2002, an increase from current 2002 expectations of $2.12 a share. Still, Enron's otherwise solid second-quarter results were marred by the performance of its broadband-services division, where among other activities it has been a pioneer in creating a trading market for broadband, or high-speed Internet capacity. The division lost $102 million in the quarter before interest, minority interests and taxes, compared with an $8 million loss in the year-ago period. Skilling said the division has been the victim of an overall "meltdown" in the broadband industry. "Revenue this quarter, or revenue opportunities, just dried up" in broadband, he said. The business climate eventually will rebound and bear fruit for Enron, Skilling said, but that is probably one to two years away. In the interim, Enron is planning to overhaul the broadband unit, cutting costs and narrowing its scope to focus strictly on intermediation, or trading, activities and on providing specific bandwidth to large enterprise customers. Enron didn't reveal details of the planned cuts Thursday. Still, Skilling did note that he thinks investors already have penalized Enron for the broadband unit, or at best given it no value as reflected in the stock price. He said he thinks that reaction is unwarranted and understates the future potential of the broadband unit. Later, in an interview with Dow Jones Newswires, Chief Executive Skilling reiterated that California's ongoing efforts to resolve its power crisis will have no negative impact on Enron. He also dismissed as "all politics" a move Wednesday by a California Senate committee to forward a contempt charge against Enron to the full California Senate. The committee initiated the action because Enron has refused to provide certain financial documents that the committee has requested as part of an investigation into wholesale power prices in the state. "They have no jurisdiction, and they've made it clear they won't keep confidential" the information that they have requested, Skilling said Thursday. "In the absence of that, we don't particularly want to turn over to them information." Enron shares recently traded at $48.80, down 30 cents, despite the company's strong second-quarter results. Skilling said the stock was being held back because of its tie to the energy sector, which has been struggling overall. "Give it a couple of days," he said. "I think we've hit the low-water mark on our stock price, and I think we have a lot of upside." -Bob Sechler, Dow Jones Newswires; 512-236-9637 Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. Enron 2Q Net Rises 40% As Trading Revenue Soars By Bob Sechler Of DOW JONES NEWSWIRES 07/12/2001 Dow Jones News Service (Copyright © 2001, Dow Jones & Company, Inc.) AUSTIN, Texas -(Dow Jones)- Enron Corp.'s (ENE) second-quarter net income rose 40%, led by a huge uptick in revenue at its wholesale services division, which includes energy trading operations. "The numbers were excellent, no question about it," said John Olson, an analyst with Sanders Morris Harris. "It was a good quarter, and management has clearly raised the bar for 2001 and 2002." The company reported second-quarter net income Thursday of $404 million, or 45 cents a share, compared with year-ago net income of $289 million, or 34 cents a share. Enron had been expected to earn 42 cents a share, according to Thomson Financial/First Call. Revenue ballooned to $50.06 billion from $16.89 billion in the year-ago period. However, the strong results didn't prevent Enron stock from falling modestly in Thursday's trading. The shares traded recently at $48.80, down 0.6%. Analysts cited a host of reasons for the lack of investor response, not the least of which is lingering uncertainty regarding California's energy crisis and the outcome of energy deregulation efforts overall. Enron is the nation's largest electricity trader and marketer. "There's a perception there that's hurting Enron's stock, creating uncertainty about it," said Louis Gagliardi, of John S. Herold Inc. Enron is "still under the shadow of the California situation and deregulation." Gagliardi and others said they tend to agree with Enron Chief Executive Jeff Skilling that California's efforts to resolve its power problems won't hurt the company. But they said investors are jittery nonetheless. For his part, Skilling blamed the lack of enthusiasm in the stock market Thursday on his company's perceived tie to the overall energy sector, which is slumping after a period of strong growth. He said he expects the stock to respond over the next few days once investors "digest" the strong second-quarter results. "I think we've hit the low-water market on our stock price, and I think we have a lot of upside," he told Dow Jones Newswires in an interview. Skilling told analysts Thursday that Enron will meet full-year earnings expectations of $1.80 a share, and he also raised the forecast for 2002 earnings to $2.15 a share from $2.12 a share. Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. USA: UPDATE 3-Enron quarterly earnings rise, beat estimates. By C. Bryson Hull 07/12/2001 Reuters English News Service (C) Reuters Limited 2001. HOUSTON, July 12 (Reuters) - Energy marketing and trading powerhouse Enron Corp. said on Thursday its second-quarter earnings rose almost 40 percent to beat Wall Street estimates on robust growth in its workhorse wholesale energy business. The Houston-based company, the No. 1 U.S. natural gas and electricity marketer, reported net income excluding non-recurring items of $404 million, or 45 cents a share, compared with $289 million, or 34 cents a share, in the same period a year ago. Analysts had expected earnings in the range of 40 to 44 cents a share, with an average of 42 cents, according to Thomson Financial/First Call. Enron also said it was confident it would reach its target of $1.80 for recurring earnings per diluted share for the full year 2001, while saying it expected to earn a slightly better-than-expected $2.15 per diluted share in 2002. Initially, Wall Street reacted favorably and pushed the stock up by as much as $1.70, but the stock reversed in early afternoon trading on the New York Stock Exchange, shedding 27 cents to move to $48.83. One of the only black marks in the quarterly report was widening losses - $102 million - in Enron's nascent broadband unit due to weak demand for those telecom services. Volume growth in Enron's core wholesale energy business drove all but $1.5 billion of $50.06 billion in second-quarter revenues. Revenues more than doubled from $16.88 billion in the year-ago quarter. "Our wholesale and retail energy businesses continue to dramatically expand business activity and increase profitability," Enron President and Chief Executive Officer Jeff Skilling said in a statement. Total energy volumes, including natural gas, oil and power, increased 58 percent to 74 trillion British thermal unit equivalents per day, the company said. Global power volumes led the growth as they more than doubled to 285 million megawatt-hours, with three-quarters of that coming from North America. Salomon Smith Barney analyst Ray Niles said the wholesale segment was the key earnings driver, propelled by volume growth, high trading volatility and the liquidity added by EnronOnline, the company's marquee Internet trading platform. EUROPEAN OPERATIONS Another key factor, Niles said, is the emergence of Enron's European wholesale operations, which swelled with power volumes nearly quintupling to 73 million megawatt-hours. Gas volumes doubled. "Europe is kicking butt and it's about a quarter of their activity, nearly double what it was last year. And that is a new market that is the size of the U.S.," Niles said. Growth in Europe is coming faster than expected, Skilling told analysts in a conference call. "It's surprising how quickly this thing is opening up and how the volumes are growing," he said. Enron nearly doubled new retail energy services contracts year-over-year, moving to $7.2 billion in total value from $3.8 billion. That growth accounted for $60 million in pre-tax income, up from $46 million a year ago. Skilling said the U.S. Federal Energy Regulatory Commission's order on Wednesday to create four regional power grids should help increase Enron's retail business as larger entities look for ways to package power costs. Enron's retail arm does that by managing costs and trimming usage for large retail customers. "People want direct access, and right now we are the only player that can provide it," Skilling said. On the negative side of the balance sheet, Enron reported a $109 million pre-tax, pre-interest loss attributable to unexpected expenses and the failed spinoff of water company Azurix Inc. BROADBAND BUSINESS HURTING Skilling acknowledged that Enron's budding broadband business endured a rough quarter with $102 million in losses compared to $8 million a year ago. The flashy unit, which gave Enron a once-valuable telecom cache that drove its stock to record highs last summer, has fallen from grace recently as the telecom market tanked earlier this year and revenue dried up from credit-poor customers. Broad telecom weakness, as well as the California power crisis and a struggling power project in India combined to pressure the energy giant's stock down 15.7 percent in the quarter. It underperformed the broader Standard & Poor's utility index, which was down 6.32 percent in the same period. Since the close of the quarter, the stock has been hovering near $49, just over half an all-time high of $90.25 reached last August. It had traded at more than $81 as recently as mid-February. Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. Enron reports earnings increase of almost 40 percent 07/12/2001 Associated Press Newswires Copyright 2001. The Associated Press. All Rights Reserved. HOUSTON (AP) - Enron Corp. reported a nearly 40 percent increase in second-quarter earnings on Thursday and beat analysts' expectations due to robust growth in its power marketing and energy management businesses in the United States and Europe. The Houston-based energy wholesaler and retailer earned $404 million for the quarter ended June 30, or 45 cents per share. That compared with $289 million, or 34 cents per share a year earlier. Analysts surveyed by Thomson Financial/First Call predicted earnings of 42 cents per share. Despite continued growth in its natural gas and electricity trading business, though, Enron's stock has faltered in the past year due to unmet expectations for its high-speed Internet business. Enron's broadband business reported a $102 million loss, compared with an $8 million loss for the same quarter a year ago. Enron President and Chief Executive Jeff Skilling said Enron would "significantly" reduce spending in its broadband unit "to match the reduced revenue opportunities currently available." Enron reported $50.1 billion in revenue for the second quarter of 2001, almost triple the $16.9 billion reported for the same quarter a year ago. Company officials expressed confidence of reaching $1.80 per share in earnings for the full year 2001 and $2.15 per share for 2002. "Our wholesale and retail energy businesses continue to dramatically expand business activity and increase profitability," said Skilling. Enron has been embroiled in the conflict over California's energy woes, with a committee of that state's Senate issuing subpoenas to the corporation and other generating companies earlier this year in connection with an investigation of possible price manipulation in energy markets. Shares of Enron were up 26 cents to $49.36 on the New York Stock Exchange on Thursday Morning. Enron's stock was trading above $70 a share at this time last year. Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. Venture capital chasing next big - and little - thing in energy By JUSTIN POPE AP Business Writer 07/12/2001 Associated Press Newswires Copyright 2001. The Associated Press. All Rights Reserved. BOSTON (AP) - Not so long ago, investing in the energy industry meant buying into oil wells, hydroelectric dams and the smokestacks of big, clunky utility companies straight off of a Monopoly board. No longer. Deregulation has unleashed competition, and headlines from the California power crisis have sent entrepreneurs and investors scurrying into the energy sector. While old economy energy companies have attracted much of the attention, there's growing interest in smaller companies that comprise an emerging sector called "energy technology." It encompasses everything from software to microturbines to Internet tools that manage, monitor and even trade electricity. A recent energy industry venture capital fair, which organizers said was the first of its kind, drew 75 start-up companies to Boston - an event many investors who attended said would have been unimaginable even a few years ago. The companies and VCs are after the "$300 billion jump ball" made possible by electricity deregulation, said Todd Klein, managing director of Kinetic Ventures, a Chevy Chase, Md.-based VC firm. Their monopolies gone, power companies are being forced like never before to improve productivity. Start-ups are trying to help them with a new generation of high-tech gadgets. Meanwhile, technology companies are demanding cheaper and more reliable power sources. Entrepreneurial talent also is drifting to energy. And finally, several technologies developed in government labs have recently become commercially viable. "We have been following these technologies 10 years, and they never were anything more than science experiments," said Jeff Miller of Boston's Beacon Group, which manages $1.6 billion in two energy VC funds. "Now you've got the demand coming from the marketplace and very serious managers with very focused business plans." Offsetting the flurry of enthusiasm is tighter funding from the VCs. According to research firm Venture Economics, 77 companies took in more than $1.2 billion in funding in the sector last year, but so far this year just 17 companies have raised a total of $132 million. That pales in comparison to the old economy energy companies, which have raised $7 billion in IPOs this year. David Lincoln, founder of EnerTech Capital in Wayne, Pa., told entrepreneurs at the conference that nobody is in a hurry to make deals, and the conditions that VCs impose now "were virtually unheard of 18 months ago." Still, new public energy companies accounted for a third of all IPOs in the first six months of the year. And the power crisis has caused the entire investment community to take notice. "Three or four years ago, when we were looking at certain deals, we'd go to the banks and we'd never know who to talk to," Lincoln said. "Do you talk to the utility bank
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