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Enron Mail |
Under the Radar: Enron's Only White Knight Is Itself
TheStreet.com, 11/02/01 BANDWIDTH BEAT: Playing '20 Questions' With Enron Execs Dow Jones Energy Service, 11/02/01 USA: Stung Californians not crowing at Enron's troubles. Reuters English News Service, 11/02/01 Enron Portland Genl Sale Seen Going Smoothly This Time Dow Jones Energy Service, 11/02/01 Nymex/Lowers Costs -2: Retroactive To Thurs Transactions Dow Jones Commodities Service, 11/02/01 Under the Radar: Enron's Only White Knight Is Itself By Christopher Edmonds <mailto:cedmonds@thestreet.com< Special to TheStreet.com 11/02/2001 03:15 PM EST URL: <http://www.thestreet.com/comment/chrisedmonds/10003396.html<; There is no suitor-in-waiting for Enron (ENE:NYSE - news - commentary) .=20 Despite a speculation-filled week, Warren Buffett's Berkshire Hathaway (BRK= A:NYSE - news - commentary) probably isn't waiting in the wings to gobble u= p the troubled energy giant. The risk profile doesn't fit Royal Dutch Shell= (RD:NYSE - news - commentary) , and it's unlikely General Electric (GE:NYS= E - news - commentary) is ready to jump at the chance to rescue the Houston= energy firm from its troubles with the SEC and disgruntled investors. ?And= while the recent slide in Enron's stock price might seem to make it an att= ractive target, it's implausible that an Enron competitor would step up to = the plate and make an offer to acquire its troubled peer. ?"We do not belie= ve there is a high probability of a bailout offer at a price significantly = above the current price, as there is too much uncertainty about the capital= structure and shareholder lawsuits," says Jeff Dietert, independent power = analyst at Simmons & Co., a Houston energy investment firm and a member of = the TSC Energy Roundtable. ?Many metrics suggest the stock is inexpensive. = Merrill Lynch analyst Donato Eassey recently calculated Enron's asset value= to be between $16 and $24 per share, which may make Enron's current price = of less than $12 look cheap. But in nearly the same breath, Eassey downgrad= ed Enron stock to neutral from "accumulate." Merrill Lynch has provided ban= king services for Enron. ?"While we have not altered our view of Enron's fu= ndamentals or its ability to weather this long-term storm, from a practical= standpoint we believe noise surrounding the SEC's move to a formal investi= gation will outweigh any [earnings] analysis or net asset value calculation= ," Eassey told clients in a report Thursday. ?For Buffett: Intriguing But .= ..?Reports that famed value investor Warren Buffett is looking at Enron may= be correct. He is an opportunistic investor and has an interest in the pow= er business. And, Berkshire's ownership of Mid-American Energy provides a p= latform for an Enron deal. ?However, interest and action are two different = things. While Buffett has said he wants additional power holdings, he seems= more focused on the traditional, regulated utilities rather than the more = aggressive opportunities represented by Enron. Buffett's track record shows= he craves certainty and that is something Enron can't provide, especially = now. ?There are also pragmatic issues. If Enron considered a deal, it would= have to be one that was both rich and immediate, something Buffett can't o= ffer. Constrained by the Public Utility Holding Company Act, or PUHCA, Berk= shire might not be able to purchase Enron until the sale of Portland Genera= l, the Oregon utility, is completed sometime next year. ?The Enron culture = could also keep Buffett away. Enron is well known for its employee stock op= tion program that made millions of dollars for people like ex-CEO Jeffrey S= killing while creating little value for shareholders. Buffett is a tireless= critic of such shenanigans. Buffett also generally looks for companies wit= h a management team committed to remaining in place, and Ken Lay has no des= ire to remain at the helm of Enron for the long haul, and future leadership= is uncertain. ?And while Buffett still may take a look, price could be the= ultimate stumbling block. "I think he understands the derivative trading b= usiness better than most," says Robert Hagstrom, portfolio manager of the L= egg Mason Focus Trust and author of The Essential Buffett: Timeless Princip= les for the New Economy. "I wouldn't be surprised if it's caught his eye, b= ut I don't think he would get his price. He won't pay a premium for Enron."= ?As for Buffett, he won't comment on anything, let alone rumors like this.= ?Shell: Burned Out on Gas??Another rumored suitor is Royal Dutch Shell (RD= :NYSE - news - commentary) . Speculation has escalated to the point of sugg= esting that Shell and Enron have signed a confidentiality agreement to allo= w for exchange of privileged financial data. ?A Shell spokeswoman in London= would not comment on the speculation. An Enron spokesman also declined to = comment. ?Shell wants to expand its gas business and in its bid for Barrett= Resources, showed it will pay a premium for the right assets. ?But Enron i= s more an energy trading company than an exploration and production company= . Shell's problems growing both its Coral trading subsidiary and its Tejas = Gas unit -- a costly acquisition -- probably would make it shy away from go= ing there again, Dietert says. ?Shell and Enron are very different companie= s, he adds. "Culturally, it's a tough deal to imagine." ?GE Capital: Enligh= tened Investor??The final name bandied about is GE Capital. This one is mor= e difficult to figure, but an investment in Enron by the finance unit of Ge= neral Electric isn't out of the question. However, sources tell me an outri= ght bid is unlikely. ?"They are a potential investor," says Dietert. "If pu= sh comes to shove, Enron would be willing to issue 30% to 40% more equity r= ather than face bankruptcy. And, GE Capital could participate in such a dea= l." ?However, any move is just speculation at this point. And General Elect= ric won't comment on speculation. ?Even if an offer for Enron emerged, pric= e would clearly be an issue. Current uncertainty suggests any offer would b= e well below a price Enron would consider reasonable. Hence, while a bid fo= r Enron isn't out of the question, it's likely Enron will stand to fight it= s current battles alone. ???BANDWIDTH BEAT: Playing '20 Questions' With Enr= on Execs?By Michael Rieke??11/02/2001?Dow Jones Energy Service?(Copyright (= c) 2001, Dow Jones & Company, Inc.)??A Dow Jones Newswires Column ??HOUSTON= -(Dow Jones)- Since Enron Corp. (ENE) is such a hot topic these days, here= 's a suggestion for a new game.?If you worked for the Securities and Exchan= ge Commission, with its subpoena powers, what questions would you ask in yo= ur current investigation of Enron? ?You could even break it down into categ= ories, like the game show "Jeopardy." ?The first category is Enron trading = counterparties run by Enron executives. ?How many of those counterparties w= ere run by Enron employees such as former Chief Financial Officer Andrew Fa= stow and Michael Kopper, a former managing director of Enron's Global Equit= y Markets Group? ?We know that Fastow ran two private investment companies = that Enron traded with - LJM Cayman and LJM2 Cayman. Kopper ran one called = Chewco Investments ?What does LJM stand for? (If you know that answer to th= at one, you're ahead of an Enron spokeswoman who told Bandwidth Beat that s= he didn't know what the letters stood for.) ?Sometimes companies use letter= s that are actually initials of investors names. Are any of the investors i= n the LJM partnerships an Enron executive whose last name starts with L, J = or M? (The Enron spokeswoman hasn't called back with an answer to that one = either.) ?Who was meant to profit and who was meant to lose in Enron's comp= licated financial transactions with the LJM partnerships and others? ?If th= e partnerships were meant to profit, what will Enron's shareholders (and th= eir class-action lawsuit attorneys) have to say about it? ?If Enron was mea= nt to profit from the transactions, was it because the deals allowed the co= mpany to hide underperforming assets, making its quarterly reports look bet= ter? If the answer to that question is yes, what will Enron's shareholders = (and their class-action lawsuit attorneys) have to say about it? ?A related= category might be geography. Start with an easy one: In what body of water= are the Cayman Islands located? ?Then move to more interesting questions. = Why were the two LJM private investment partnerships located in the Caymans= ? Does it have anything to do with the fact that the Caymans are a tax-free= jurisdiction even for non-residents? Does it have anything to do with the = strict confidentiality laws governing business transactions there? ?The nex= t category is politics. Again, start with an easy one: How much money did E= nron Chairman Ken Lay give to George W. Bush's presidential campaign fund? = (That one is easy because, by law, the limit is $1,000 per person for hard = money contributions.) ?How much soft money did Lay and Enron each give to t= he Republican Party during the 1999-2000 campaign cycle? ?How much did Lay = give to Bush's presidential primary campaign fund? (That one is more diffic= ult. Bush decided not to accept government matching funds for his primary c= ampaign, so there wasn't any limit on individual contributions.) ?How much = money did Ken Lay help raise for Bush's presidential primary campaign? (Her= e's a hint: He was a member of the Bush Pioneers, each of whom pledged to r= aise at least $100,000 for the fund.) ?Still in the politics category, how = much will those campaign contributions affect the current SEC investigation= of Enron? (That's another easy one. All contributors to political campaign= s will tell you that they expect nothing in return.) ?Now for the history c= ategory. In an April conference call with analysts, who was the analyst who= criticized Enron for not disclosing enough information about its finances?= ?What expletive did Enron's former Chief Executive Jeff Skilling call the = analyst? (Here's a hint: In reporting the name-calling incident, a radio ne= wsman said Skilling had "called the analyst a type of hole.") ?At the time,= Skilling said the analyst was a "short-seller." That means the analyst had= borrowed Enron stock and sold it, expecting the share price to decline ove= r time. He then would buy it back at a lower price and make a profit. ?If t= hat investment strategy qualified the analyst to be called a particular typ= e of hole, what do you call the Enron executives who have sold more than $5= 00 million in company shares since Jan. 1, 2000? ?In answering that questio= n, remember that short-sellers have to buy the stock back at some point in = order to make money. Also remember that the Enron executives didn't have to= buy back any of the stock they sold. ?Join in the fun. If you want to play= and have questions to add to the list, refer to the e-mail address and pho= ne number below. ?-By Michael Rieke, Dow Jones Newswires; 713-547-9207; mic= hael.rieke@dowjones.com??Copyright ? 2000 Dow Jones & Company, Inc. All Rig= hts Reserved. =09??USA: Stung Californians not crowing at Enron's troubles.= ?By Leonard Anderson??11/02/2001?Reuters English News Service?(C) Reuters L= imited 2001.??SAN FRANCISCO, Nov 2 (Reuters) - If there's one market that m= ight applaud the mounting financial woes facing energy giant Enron Corp., i= t's California, whose power sector was shattered by the market deregulation= that Enron tirelessly champions. ?Last summer, angry Californians tossed a= pie at Enron ex-Chief Executive Jeff Skilling during a speech here in whic= h he blamed state regulators for causing the energy crisis.?California offi= cials, led by Governor Gray Davis, blasted Houston-based Enron and other ou= t-of-state power companies for creating the emergency, accusing them of man= ipulating the market and jacking up prices. ?But with Enron now facing a cr= edit crunch and a full-scale probe by U.S. regulators into questionable fin= ancial dealings, California officials are holding back their harshest criti= cism, saying instead there are lessons to be learned from Enron's predicame= nt. ?And some of Enron's toughest critics, among them Davis and Loretta Lyn= ch, president of the state's Public Utilities Commission (CPUC), would not = discuss the company's woes. ?"You reap what you sow, but I don't think anyo= ne wants to pile on them right now," said a state government source. ?Many = Californians cited ongoing business and creditor links with Enron as reason= s not to hurl stones at the energy giant. ?Enron is by far the nation's lar= gest trader of electricity and natural gas, with energy analysts estimating= it is involved in some 25 percent of daily trade in those markets. ?Transa= ctions on the company's widely watched Internet-based EnronOnline trading s= ystem are estimated currently to average $3 billion to $4 billion a day. ?'= BUSINESS CYCLES' ?"Business cycles come and go," said Greg Pruett, spokesma= n for San Francisco-based energy company PG&E Corp. , whose Pacific Gas & E= lectric unit, California's biggest utility, filed for federal bankruptcy pr= otection in April in the wake of the energy mess. ?"We are wrestling with o= ur own situation, and you can appreciate what Enron is going through. We ha= ve done business with Enron for a long time and will continue to do busines= s with them in the future," Pruett said. ?California's power agencies, forc= ed into buying emergency electricity for the state earlier this year when t= he state's investor-owned utilities ran out of credit and cash, said they h= ave financial ties with Enron. ?"Their situation is not ringing alarm bells= for us," said Gregg Fishman, a spokesman for the Independent System Operat= or (ISO), which manages the state power grid. ?The ISO owes Enron money for= purchases of daily power supplies but Fishman declined to say how much. ?A= side from a 30-day supply contract earlier this year, Enron does not have a= ny current power deals with the state's Department of Water Resources, said= Oscar Hidalgo, spokesman for the agency which negotiates long-term agreeme= nts. ?One top California energy regulator, however, said Enron's troubles o= ffer an important lesson for energy markets. ?Carl Wood, a CPUC commissione= r, said the deregulation of markets for basic services like electricity "th= reatens as much financial volatility and instability as we have seen in the= telecommunications and the dot-com industries." ?Wood said, "Enron is the = flagship for deregulation, but there are definite dangers of venturing into= unregulated market behavior. Enron itself apparently is becoming a victim = of sorts. Our largest utility is in bankruptcy. One obvious conclusion is t= o keep the energy industry on a pretty short regulatory leash." ?"The unreg= ulated energy industry rises faster, but it also falls further," said Doug = Heller of the Foundation for Taxpayers and Consumer Rights, an advocacy gro= up in Santa Monica, California. ?"It's okay for a free market to operate fo= r things like computers and other goods but energy is different. Regulatory= structures are needed to protect customers," he said.??Copyright ? 2000 Do= w Jones & Company, Inc. All Rights Reserved. =09??Enron Portland Genl Sale = Seen Going Smoothly This Time?By Jessica Berthold?Of DOW JONES NEWSWIRES??1= 1/02/2001?Dow Jones Energy Service?(Copyright © 2001, Dow Jones & Company= , Inc.)??LOS ANGELES -(Dow Jones)- Enron Corp's (ENE) current troubles won'= t jeopardize its $1.8 billion sale of utility Portland General Electric to = Northwest Natural Gas Co. (NWN), analysts and the companies said. ?In contr= ast to Enron's previous attempt to sell the utility to Sierra Pacific Resou= rces (SRP), which foundered earlier this year on regulatory issues, the sal= e to the Portland, Ore.-based gas utility is expected to go smoothly.?It wi= ll need to, as Enron has said it is counting on sales of assets, including = Portland General, to pay off $3.3 billion in notes coming due during the ne= xt 20 months. ?"Enron has wanted out of this asset for a very long time," s= aid Susan Abbott, an analyst with Moody's Investor Services. "Right now, th= ey need to sell some assets, and this would be a larger one that would give= them some cash." ?The energy giant's shares have lost about two-thirds of = their value in the past three weeks and its credit ratings have been downgr= aded to within two steps of noninvestment grade levels due to uncertainties= about its extremely complex financial structure. ?Those uncertainties were= sparked Enron's $1.2 billion reduction in shareholder equity related to tr= ansactions with entities headed by former Chief Financial Officer Andrew Fa= stow. The notes coming due are also related to those entities. Enron's deal= ings with those entities are the subject of an investigation by the Securit= ies and Exchange Commission, and have raised investor hackles over a percei= ved lack of transparency. ?Analysts said none of this will change plans for= the Portland General sale - which will bring Enron $1.55 billion in cash, = $200 million in Northwest Natural Gas preferred stock, and $50 million in c= ommon stock. ?Earlier Problems Not Seen Repeated ??In April, a two-year old= deal to sell the utility to Nevada company Sierra Pacific Resources (SRP) = for $2 billion collapsed due to changes in that state's laws that would hav= e forbidden the utility's recovery of power costs if the sale went through.= The deal had already been doomed for months due to Sierra Pacific's tenuou= s financial position. ?But Northwest Natural's financial house is in order,= and there is no apparent law or regulation that threatens to block the dea= l in Oregon or Washington, the two states where approval is needed, analyst= s said. ?"Northwest Natural is very well-regarded by regulators in both sta= tes, and I think there's quite a bit of interest on the part of regulators = to have the utility in local hands as opposed to somewhere down in Texas," = said Gerald Keenan, utility analyst for PricewaterhouseCoopers. ?Concerns a= bout the quality of Enron's credit may encourage state regulators to act mo= re quickly on the sale, an analyst said. ?"If I were a regulator, I'd be mu= ch more interested in having Portland General out from under Enron," the an= alyst said. ?The Oregon Public Utilities Commission hopes to expedite its r= eview of the sale so that it is complete in six months, rather than the usu= al 10, commission spokesman Bob Valdez said. ?"Given the fact that we are f= amiliar with the management and regulatory affairs of both companies and ha= ve dealt with them extensively, we hope it will take no longer than six mon= ths," said Valdez, adding that the commission expected to receive a filing = on the sale Nov. 7. ?The Washington Utilities and Transportation Commission= hasn't received a filing, but once it does there is no statutory time limi= t on review, a spokeswoman said. ?Federal Review Seen Uneventful ??In addit= ion to Oregon and Washington utilities regulators, the sale must be approve= d by the Federal Energy Regulatory Commission, the U.S. Securities and Exch= ange Commission, the Federal Trade Commission, the U.S. Department of Justi= ce and the U.S. Nuclear Regulatory Commission. ?None has received filings y= et on the sale, which is slated for completion in the fourth quarter of 200= 2. ?"We are shooting for mid-November as far as submitting our request to t= he state commissions," Northwest Natural Gas spokesman Steve Sechrist said.= "Those will be the first major hurdle, then we'll move on to the federal f= ilings." ?Shareholders must also approve the acquisition. They will likely = vote in spring of 2002, Sechrist said. ?Northwest Natural, Enron and analys= ts said they don't expect hangups at the federal level. ?The only thing tha= t might create a problem for the sale, Keenan said, would be a "significant= deterioration" of the natural gas or electricity markets harming the compa= nies. Right now, however, things look good on that front. ?"The market is m= uch more stable than it was when Sierra Pacific tried to buy the utility. A= nd the deal is much more practical this time: the price is lower and the te= rms are better," he said. "Clearly it's important for Enron to be able to g= et this done, and I think they will." ?-By Jessica Berthold, Dow Jones News= wires; 323-658-3872; jessica.berthold@dowjones.com??Copyright ? 2000 Dow Jo= nes & Company, Inc. All Rights Reserved. =09??Nymex/Lowers Costs -2: Retroa= ctive To Thurs Transactions??11/02/2001?Dow Jones Commodities Service?(Copy= right © 2001, Dow Jones & Company, Inc.)??NEW YORK -(Dow Jones)- The New = York Mercantile Exchange, the world's largest energy futures marketplace, s= aid Friday it lowered the cost of exchange-of-futures-for-swaps transaction= s retroactive to Thursday, when the new instruments were introduced. ?In a = press release Friday, Nymex said it cut the cost of EFS transactions to $2.= 50 a contract per side from $10 a contract per side.?The exchange introduce= d the contracts in its natural gas futures market Thursday, in a move the t= rading community saw as an attempt by Nymex to grab market share from Enron= Corp. (ENE) by extending its clearing services to the over-the-counter mar= ket for natural gas derivatives. ?Enron, which accounts for about 25% of th= e trade in U.S. power and gas markets, has seen its creditworthiness questi= oned as a result of complicated financial dealings that led to a $1.2 billi= on writedown of shareholder equity, a 65% drop in the company's stock in tw= o weeks and an investigation by the Securities and Exchange Commission. ?In= the first full day of trading on Nymex, 11,000 EFS contracts changed hands= , Nymex said. ?EFS transactions are similar to exchange-of-futures-for-phys= icals, or EFP, transactions. Two parties will privately negotiate integrate= d over-the-counter swaps and a related futures transaction. The transaction= must involve approximately equal, but opposite, side-of-market quantities = of futures and swap exposures in commodities that are similar or related. ?= The EFS transactions will be allowed to liquidate, initiate and transfer ma= rket positions between the two parties involved in the transaction. ?-By An= drew Dowell, Dow Jones Newswires; 201-938-4430; andrew.dowell@dowjones.com?= ?Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09??
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