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USA: Enron worker warned execs on accounting - lawmakers. Reuters English News Service, 01/14/2002 USA: Enron says to delay release of trading unit sale. Reuters English News Service, 01/14/2002 USA: Lawmaker sees insider trading "evidence" at Enron. Reuters English News Service, 01/14/2002 USA: Senate banking committee says sets hearing on Enron. Reuters English News Service, 01/14/2002 USA: Former Enron CEO Skilling shorted competitor's stock. Reuters English News Service, 01/14/2002 Source: Buyer of Enron's power trading division to share profits with Enron and creditors Associated Press Newswires, 01/14/2002 At Enron, Ignorance Was Bliss Forbes.com, 01/14/2002 Dabhol Power on the verge of shutting operations Business Standard, 01/15/2002 BG Remains In Talks With Enron For Indian Upstream Assets Dow Jones International News, 01/14/2002 POINT OF VIEW: The Enron Saga Reaches A Whole New Level Dow Jones News Service, 01/14/2002 TALES OF THE TAPE: Energy Traders Hammer Out Debt Fix Dow Jones News Service, 01/14/2002 Rhonda`s Roundtable CNNfn: Market Coverage - Morning, 01/14/2002 _________________________________________________________________________ USA: Enron worker warned execs on accounting - lawmakers. 01/14/2002 Reuters English News Service (C) Reuters Limited 2002. WASHINGTON, Jan 14 (Reuters) - An Enron Corp. employee warned the energy giant's top executive in August 2001 about potential problems with how it accounted for certain transactions, Congressional investigators said on Monday. The unidentified employee wrote Enron Chief Executive Kenneth Lay raising several areas of concern, including ownership interests in certain partnerships, how accountant Andersen treated partnerships on Enron's books and the potential impact on Enron's financial statements, Reps. Billy Tauzin and James Greenwood said. The employee described a "veil of secrecy" around some of the partnerships in question, the lawmakers said in letters to Enron and its auditor Andersen seeking more information. On Oct. 16, Enron reported its first quarterly loss in over four years, taking a $1.2 billion charge against shareholder equity relating to dealing with partnerships run by then Enron Chief Financial Officer Andrew Fastow. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. USA: Enron says to delay release of trading unit sale. 01/14/2002 Reuters English News Service (C) Reuters Limited 2002. NEW YORK, Jan 14 (Reuters) - Attorneys for Enron Corp. , the bankrupt energy company, said on Monday they will delay the release of details about Enron's trading unit sale to UBS AG until 11 p.m. EST. Enron on Friday said it would sell a controlling stake in its key energy trading unit to UBS Warburg, the investment banking unit of Switzerland's largest bank. It said at the time it would release details of the sale at 2 p.m. EST on Monday. Attorneys for Weil Gotshal and Manges didn't disclose reasons for the delay, which Enron said would be posted on its Web site, www.enron.com, and on the Web site of the U.S. Bankruptcy Court for the Southern District of New York, which is adjudicating Enron's bankruptcy case. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. Enron Gets No Cash Upfront In Deal With UBS Warburg By Kathy Chu and Carol S. Remond 01/14/2002 Dow Jones News Service (Copyright © 2002, Dow Jones & Company, Inc.) Of DOW JONES NEWSWIRES NEW YORK -(Dow Jones)- Although the deal between Enron Corp. (ENE) and UBS Warburg (U.UBS) has yet to be finalized, details are beginning to emerge. Under a plan to revive Enron's energy-trading operations, UBS will acquire 100% ownership of the bankrupt company's core business. Meanwhile, Enron and its creditors will get 33% of the new business' pretax profits for at least two years, people familiar with the matter said. Enron will get no cash upfront. "We got the best that the best people could get," Enron lawyer Martin Bienenstock said Friday at a court hearing in which the deal was announced. Under the proposed 10-year plan, UBS will have the option to reduce and eventually to eliminate payouts to Enron after two years. UBS may get an option to reduce profit-royalty payments to Enron to 22% in the third year, 11% the year after that, and eventually down to nothing, according to people familiar with the deal. But if the Swiss financial institution doesn't exercise its options by the end of the fifth year, Enron may get an incremental increase in the energy-trading operation's profits - up to 45% by the end of the agreement. Also under the agreement, UBS is expected to pay rent on Enron's Houston office space and to hire most of the company's energy-trading employees. Jeffrey McMahon, Enron's chief financial officer, has said that the unit employs between 400 and 1,000 workers, including traders and marketing staff. -By Kathy Chu; Dow Jones Newswires; 201-938-5392 kathy.chu@dowjones.com (Carol S. Remond contributed to this report.) Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. USA: Lawmaker sees insider trading "evidence" at Enron. 01/14/2002 Reuters English News Service (C) Reuters Limited 2002. WASHINGTON, Jan 14 (Reuters) - The ranking Democrat on the House Energy and Commerce Committee said on Monday there was "pretty strong evidence" of insider trading as well as false accounting in the fall of the energy-trading giant Enron Corp. Rep. John Dingell of Michigan, whose committee is one of those investigating Enron , spoke on CBS television's "The Early Show." "There's pretty strong evidence of insider trading," at Enron, Dingell said, adding that there was "clear evidence of failure to file honest and correct annual reports" required by the Securities and Exchange Commission. "There may be a number of other things here which were going on, including possible insider trading and possible misuse of insider accounts," the lawmaker continued. "False accounting appears to be a very major problem, and it appears that both Enron and the accounting firm were involved in this matter." Andersen, Enron's accounting firm, has admitted that it destroyed a number of Enron documents. Spokesmen for Enron and Andersen could not immediately be reached for comment. Thousands of employees lost their pensions and life savings in the downfall of Enron last year after the company acknowledged several hundred million dollars of previously undisclosed liabilities. The company filed for bankruptcy on Dec 2. Some Enron shareholders have filed a lawsuit accusing a group of 29 Enron executives and directors of "unlawful insider trading" and misleading the investing public. Several congressional committees are investigating Enron's demise, and some lawmakers on those committees have said they want to probe whether Enron employees and shareholders were deceived. The Justice Department and the Securities and Exchange Commission are also investigating. Rep. Henry Waxman, a California Democrat, wrote to Enron Chairman Kenneth Lay over the weekend to ask him to explain why he sent out optimistic e-mails to Enron employees in August about the company's prospects. Dingell is one of 188 House members who received campaign contributions from Enron. The donations to Dingell's campaign totaled $9,000 since 1989, according to the Center for Responsive Politics, a watchdog group. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. USA: Senate banking committee says sets hearing on Enron. 01/14/2002 Reuters English News Service (C) Reuters Limited 2002. WASHINGTON, Jan 14 (Reuters) - The powerful Senate Banking Committee said on Monday it will hold a Feb. 12 hearing on Enron Corp., the energy trading giant whose bankruptcy filing last year threw thousands out of work, devastated investors and raised questions about its accounting practices. Banking, Housing and Urban Affairs Committee Chairman Paul Sarbanes, a Maryland Democrat, said the hearing will focus on "accounting and investor protection issues surrounding the problems with Enron Corporation and other public companies." The Houston, Texas-based company, once ranked No. 7 on the Fortune 500 list of large corporations, is being probed by five other congressional committees, the market-regulating Securities and Exchange Commission and the Labor Department. The Justice Department has launched a criminal probe of Enron. The committee said Sarbanes has invited five former chairmen of the Securities and Exchange Commission to testify. The following former chairmen of the SEC have been invited to testify: Roderick Hills (1975-77); Harold Williams (1977-81); David Ruder (1987-89); Richard Breeden (1989-93); and Arthur Levitt (1993-2000), the committee said. Once the world's largest energy trader, Enron slid in mere weeks late last year from Wall Street stardom to making the largest bankruptcy filing in U.S. history on Dec. 2. Its downfall threw thousands out of work and devastated investors. The episode sapped the life savings of many Enron employees whose 401(k) plans were heavily invested in Enron stock, while top executives allegedly pocketed fat profits by selling ahead of a dizzying plunge in the share price. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. USA: Former Enron CEO Skilling shorted competitor's stock. 01/14/2002 Reuters English News Service (C) Reuters Limited 2002. NEW YORK, Jan 14 (Reuters) - Jeffrey Skilling, the former chief executive of Enron Corp. , sold short AES Corp.'s stock last summer in a bet that the competing power company's share price would fall, his spokeswoman said on Monday. Skilling's spokeswoman said he decided to short the stock after reading a newspaper article that reported AES would be hurt by Brazil's weakening currency. AES, based in Arlington, Virginia, has a significant power business in Brazil. "He was well aware of what a challenging environment Brazil was for companies at that time," said spokeswoman Judy Leon. Skilling, however, did not trade on any inside information he may have received during his job as CEO of Enron, his spokeswoman said. She declined to discuss specifics of the trade, including how much money was involved. "We're not commenting on his personal finances," Leon said. The trade was initiated on Aug. 24, or about 10 days after Skilling resigned as Enron's president and CEO, according to the Wall Street Journal, which first reported the short sale. The Wall Street Journal said the trade could have made Skilling a profit of more than $15 million, depending when he closed out the trade, since shares of AES fell steadily in the weeks after he shorted the stock. Indeed, on Sept. 26 shares of AES dropped almost 50 percent after it warned it would fall well short of 2001 earnings estimates. Shares of other energy companies also fell during the period. Skilling - who along with other past and present Enron executives is facing shareholder lawsuits because of the company's collapse - has denied any wrongdoing in Enron's spiral into bankruptcy. Skilling joined Enron in 1990 after leaving McKinsey & Co.'s energy czz Co.'s energy czz. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. Source: Buyer of Enron's power trading division to share profits with Enron and creditors By ALAN CLENDENNING AP Business Writer 01/14/2002 Associated Press Newswires Copyright 2002. The Associated Press. All Rights Reserved. NEW YORK (AP) - The Swiss investment bank that is buying Enron Corp.'s power trading business will share a third of its profits with Enron and its creditors, a source familiar with the situation said Monday. The plan, being presented in bankruptcy court, also calls for UBS Warburg to purchase the unit without paying any cash up front, said the source, who spoke on condition of anonymity. The terms were expected to be made public Monday afternoon in U.S. Bankruptcy Court. Representatives of UBS Warburg and Enron didn't immediately return telephone calls seeking comment Monday. Enron and its creditors will get 33 percent of the new business' pretax profits for at least two years, the source said. Stamford, Conn.-based UBS Warburg, a division of Switzerland's UBS AG, will have the option of buying one-third of Enron's stake after three years, and to buy the rest of its stake in subsequent years. Enron collapsed late last year amid revelations of complex partnerships used to keep billions of dollars in debt off its books and mask financial problems so it could continue to get cash and credit to run the trading business. UBS Warburg won the bidding Friday for the trading operation, beating out rival suitor Citigroup Inc., a large Enron creditor. The deal must be approved by Bankruptcy Judge Arthur J. Gonzalez; a hearing is set for Friday. Enron's energy trading business generated about 90 percent of the company's $101 billion in revenue in 2000. The deal does not include existing contracts Enron has to supply power, valued at between $6 billion and $7 billion. Trading of Enron shares, which sold for $83 a year ago but have changed hands at no higher than $1 since December, were halted Friday and Monday on the New York Stock Exchange for the sale announcement. UBS' U.S.-traded shares fell 44 cents to $49.51 Monday morning on the NYSE. Before its collapse late last year, Enron was the world's largest energy merchant and the nation's seventh-largest company by revenue. Enron differed from competitors in its penchant for complex bets on everything under the sun - advertising space, broadband, the weather, paper and more than 1,000 other products. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. Top of the News At Enron, Ignorance Was Bliss Dan Ackman, Forbes.com, 01.14.02, 8:50 AM ET NEW YORK - What did he know and when did he know it? This is the question famously asked about President Nixon and Watergate. It will now be asked about Enron. It is being asked about President George W. Bush. But it will also be asked more pointedly, for now, about Enron Chairman Kenneth Lay; its briefly serving chief executive, Jeffrey Skilling; and their top executives. Over the weekend, Treasury Secretary Paul O'Neill and Commerce Secretary Donald Evans said they had not told the president about calls from Lay that alerted them to Enron's impending doom. They also said they had done nothing to bail out the ailing energy trader after its president, Greg Whalley, had asked a senior Treasury official to help arrange bank loans in late October and early November. O'Neill said took he two calls--one at his home on Sunday, Oct. 28, the other at his office on Nov. 8 or 9--from Lay. Mr. Lay offered "a heads-up" about the corporation's credit crisis but asked for nothing, O'Neill said. "I didn't think this was worthy of me running across the street and telling the president," Mr. O'Neill told Fox News on Sunday. "I frankly think what Ken told me over the phone was not new news." Not news? If Enron was too far gone for help at this point, Enron certainly wasn't admitting the fact. Indeed, at this point, Enron was in feverish negotiations with Dynegy, its smaller rival, about a buyout. Enron, to this day says a merger at that date would have been fruitful and is suing Houston-based Dynegy for backing out of it. In late October, Enron, also based in Houston, was still borrowing heavily. On Oct. 25, it said it had drawn $1 billion from banks against its existing unsecured credit lines. On Nov. 1, it announced that J.P. Morgan Chase and Solomon Smith Barney, a unit of Citigroup, had agreed to lend it another $1 billion in secured credit. On Oct. 29, Lay called Evans to ask about reviews of Enron's business by credit agencies, and Lay did ask for help. Evans said he did nothing to assist Lay or Enron, but also said Lay did not make him aware of the full story. "When I was talking to Ken I wasn't thinking about bankruptcy," Evans said in an interview with NBC's Meet the Press. "I was thinking maybe their credit rating would be dropped some ... but it wasn't the crisis yet that ensued some 30 days later." Evans said he was not told any information that had not already been made public. In other words, what O'Neill said was old news, Evans said was still an unfolding saga. Enron, for its part, was still, it appears, spinning a happier story to creditors and possible merger partners. Unlike O'Neill, Evans said he did inform the White House--not the president himself but Chief of Staff Andrew Card Jr. about the call. He also said he generally discussed Enron's problems with President Bush several times in November and December. Evans told Bush "how sad it was to see what was happening to that once great company," but he omitted mention of Lay's calls. Evans said he never considered doing a favor for Lay. "If I had stepped in, I think it would have been an egregious abuse of the office of secretary of commerce," he said on Meet the Press. It is not clear what kind of help Evans might have provided. He might have offered a subtle nudge to bankers or credit agencies. Evans could possibly have bought the company some time, if nothing else. But the irony here is that Enron was so politically connected, and its political connections so well known, that any effort to bail out the company in November or December of 2001 would have been politically impossible, even assuming it would have been sound policy. Enron was too hot to handle, at least in any public way. Enron's demise, however, does not seem to have caused a ripple in the economy or even the energy sector, beyond its devastating effect on Enron's employees and retirement plan members, whose savings were wiped out with the deflation of Enron's shares. Enron's demise has also affected Houston's cultural community, which Enron helped fund. But the fact that the company--the nation's seventh largest, according to its claimed revenue--could file for bankruptcy and cease its most lucrative operations without wider effect suggests how economically inconsequential Enron was all along. Enron did have an impact in the political sector. Nearly half of the current members of the House of Representatives and about three-quarters of all senators received contributions from the company. Enron has contributed a total of $5.7 million to both political parties since 1989, 73% to Republicans, according to the Center for Responsive Politics. Lay and other Enron employees were among the president's largest political benefactors. They doled out $623,000 over the course of his political career, according to another group that favors an overhaul of campaign finance, the Center for Public Integrity. While Enron got no help from the government on its death bed, its seeding of the nation's political system no doubt bore fruit along the way. Enron was tight with politicians and with Wall Street, whose analysts almost universally backed the company even after Lay was placing calls to Cabinet officers. As a result, in both the financial community and in the political community, few questions were asked during Enron's rise. Dabhol Power on the verge of shutting operations S Ravindran Mumbai 01/15/2002 Business Standard 2 Copyright © Business Standard The cash-strapped Enron-promoted Dabhol Power Company (DPC) is on the verge of shutting its operations in India. Close on the heels of handing out pink slips to about 200 of its employees in the country last month, it may now have to lay off its support staff which had been retained as consultants. DPC has already shut its Delhi office and is now taking preliminary steps to close its Mumbai office. "We had retained a core team after the last round of lay offs. For the last few months, we have not paid their salaries. But, it is very difficult to say if the core team will be asked to go at this point of time. We have also asked employees in the Mumbai office not to attend work as we are not in a position to pay even the electricity bills," a DPC spokesman said. DPC may even lay off the security personnel at the 2,184 mw project site at Ratnagiri district in Maharashtra. The project site has about 300 security personnel. "Since the security of the assets is essential, withdrawing the already insufficient security staff can only be the last resort. But, if immediate funding is not forthcoming, even that might happen," the spokesman added. DPC has squarely put the blame for the present state of affairs on the default on bill payments by the Maharashtra State Electricity Board (MSEB) and the refusal by the lenders to use the existing DPC funds or infuse fresh funds. DPC executives say that the lenders had at their last meeting in Singapore informally agreed to release funds in the trust and retention account, but have not done so till date. The trust and retention account, with around $8 to $10 million funds, is being operated by the Bank of America. DPC cannot touch this money without the consent of the lenders. Enron, General Electric and Bechtel, which hold a combined stake of 85 per cent in DPC, have decided to exit the project following a payments dispute with MSEB. Tata Power, BSES, Shell and the Gas Authority of India Ltd are in the fray for acquiring their stake. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. BG Remains In Talks With Enron For Indian Upstream Assets By Michael Wang Of DOW JONES NEWSWIRES 01/14/2002 Dow Jones International News (Copyright © 2002, Dow Jones & Company, Inc.) LONDON -(Dow Jones)- U.K. oil and gas concern BG Group PLC (BRG) said Monday it remained in talks with Enron Corp. (ENE) to renegotiate a $388 million deal to acquire the financially-stricken U.S. company's upstream assets in India. "We are continuing to negotiate a new deal with Enron," said BG spokesman Robin O'Kelly. Johan Zaayman, a spokesman at the Houston-based Enron which recently filed a Chapter 11 bankruptcy petition, said "we are still trying to iron out the details." He declined to elaborate. The two sides have been forced to rework the original transaction, signed Oct. 3, when BG missed a Dec. 20 deadline to clinch a separate, but related, agreement with Indian partners on management rights to three offshore oil and gas fields. Since late December, BG has been in separate negotiations with Enron and state-owned Indian oil and gas company Oil and Natural Gas Corp., or ONGC, in a bid to salvage a major expansion program in the sub-continent. O'Kelly wouldn't say when BG last talked with Enron and wouldn't be drawn on a likely date when the transaction will be re-signed. BG has faced acute embarrassment having thrice failed to meet self-imposed deadlines on resolving the thorny issue of operatorship, or day-to-day management, of the Panna, Mukta and Tapti fields with ONGC. ONGC holds a 40% stake in the fields and BG is aiming to acquire Enron's 30% interest and inherit its operatorship of the assets. Indian petrochemicals company Reliance Industries Ltd. owns the remaining 30% of the three fields. A source close to the talks denied BG is trying to take advantage of Enron's financial problems and renegotiate a sweeter deal. "If we get this deal with Enron at a lower price, than that's a bonus," the source said. "We're still very happy with $388 million (as the price tag)." Nevertheless, O'Kelly expressed concern that with Enron in Chapter 11 bankruptcy protection, the process of renegotiation could become complicated as it will involve a bankruptcy judge. "It doesn't make it any easier," he said. BG's negotiations with ONGC appear at a standstill. According to ONGC officials, BG has twice offered cash payments to ONGC in exchange for operatorship rights. The first, in late November for $7.5 million, was rejected by ONGC as inadequate. A second offer, which analysts believe was around $8.5-$9.0 million, was also dismissed. Indian-based analysts reckon a cash offer close to $18 million would secure operatorship for BG. According to one London-based analyst, the British exploration and production company has also reportedly dangled, without luck, slices of some of its Brazilian offshore acreage. O'Kelly wouldn't comment on the state of discussions with ONGC. But, a two-day international oil and gas conference in New Delhi beginning Tuesday may offer the opportunity for both sides to rekindle talks. BG India Chief Executive Nigel Shaw is scheduled to make a presentation at the conference on Wednesday. -By Michael Wang, Dow Jones Newswires; +44-20-7842-9386; michael.wang@dowjones.com Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. POINT OF VIEW: The Enron Saga Reaches A Whole New Level By Michael Rapoport 01/14/2002 Dow Jones News Service (Copyright © 2002, Dow Jones & Company, Inc.) A Dow Jones Newswires Column NEW YORK -(Dow Jones)- So the Enron Corp. (ENE) scandal has finally gone nuclear. Not that this comes as a tremendous surprise. So far, Enron has sullied the reputation of just about everyone who's had anything much to do with it, from its auditor, Arthur Andersen LLP, to one of its primary bankers, J.P. Morgan Chase & Co. (JPM), to the rest of the energy-trading industry. Why should George W. Bush be any different? All along, the only thing this saga of financial hanky-panky has been missing - the element to give this story the critical mass to push it from the business pages to the front page - is a real whiff of political hanky-panky. A concrete indication that Enron had tried to use its status as a major benefactor of the president of the United States to its own advantage. That's what we got last week, when it was revealed that Enron executives had called Bush administration officials as the company spiraled toward bankruptcy, to try to coax them to take action to help save the company. Administration officials have said they took no such action, but that hardly matters at the moment. For purposes of determining the significance the public and press assign this story in the scheme of things, what matters is that Enron made the attempt at all. Outside the narrow confines of Wall Street, most people don't know from conflict-ridden off-balance-sheet partnerships or shady accounting practices ... but everyone understands influence-peddling and how wrong it is. A scandal-ridden company asks for special favors from an administration it helped pay to put in office? Oh, boy. Or, to use President Bush's now-well-publicized nickname for Enron's chief executive: Oh, Kenny Boy. Combine that with the near-simultaneous news that Arthur Andersen has shredded Enron-related documents - destruction of evidence being another bit of scandalous behavior that a layman can easily understand - and all of a sudden a complex financial story has been elevated to a thoroughly mainstream, they'll-talk-about-it-on-the-street-as-well-as-the-Street scandal. You want to know how mainstream this story is now? The three major network Sunday-morning talk shows, not usually renowned for their explorations of financial fraud, all spent copious amounts of time on the Enron story this Sunday. Dennis Miller cracked before Saturday night's NFL playoff game that the New York Jets, who had traveled between New York and California three times in a week, "have been flying back and forth across this country more frequently than a bagman for Enron." The topic of this week's Top Ten List contest on David Letterman's Web site: "Top Ten Excuses of Enron's Executives." That's how mainstream. The fact that there's no credible indication as yet that anyone in the Bush administration did anything improper about Enron isn't going to slow down the story one bit. The questions the Bushies face over Enron are at least as legitimate as the questions their predecessors the Clintonites faced for years over the Whitewater affair, and after congressional Republicans battered Bill Clinton for years with investigation after investigation, you'd better believe the Democrats are smelling payback. (Of course, the Democrats have to tread carefully; many of them got contributions from Enron too.) And it's an interesting quirk of timing, at the very least, that Bush's first in-depth public comments about the Enron fiasco came last week, just before the disclosures that may turn Enron into a major problem for his administration. It's kind of ironic: For weeks, the plight of thousands of Enron employees who've lost their retirement savings - Bush's fellow Texans, the bulk of them - couldn't make the broad public take much note of the Enron scandal, especially while the war in Afghanistan dominated the news. The prospect of a few highly placed people facing hard questions about what they did or didn't do on Enron's behalf has made people sit up and take notice virtually overnight. Where the investigation goes from here, no one can know. But for the first time, it appears President Bush, like others before him, may yet rue the day he first heard of Enron. -By Michael Rapoport, Dow Jones Newswires; 201-938-5976; michael.rapoport@dowjones.com Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. TALES OF THE TAPE: Energy Traders Hammer Out Debt Fix By Christina Cheddar 01/14/2002 Dow Jones News Service (Copyright © 2002, Dow Jones & Company, Inc.) Of DOW JONES NEWSWIRES NEW YORK -(Dow Jones)- Homeowners know it only takes one lousy neighbor to ruin it for everyone else on the block. For the power sector, the spoiler was Enron Corp. (ENE). The one-time industry leader's questionable financial practices and rapid descent into bankruptcy sent jitters through the market, forcing investors to re-evaluate whether the sector was on the wrong side of the tracks. Ratings agencies - particularly Moody's Investors Service - acting like a zealous neighborhood watch, tightened standards and gave ultimatums. Both Calpine Corp. (CPN) and Mirant Corp. (MIR) were faced with a credit rating downgrade that placed the companies below investment grade, while the ratings of Dynegy Inc. (DYN) and NRG Energy Inc. (NRG) were put on watch for the same. Each energy merchant responded the best way it could. One by one, the companies began renovating balance sheets and launching recapitalization programs. Some threw out loans with triggers linked to credit ratings like bad shingles threatening to bring the roof down. Other firms moved off-balance sheet debt back onto financial statements, and announced ways to reduce debt and lower spending. Like so many corporate garage sales, assets - power plants, oil and gas properties, and even a refinery - went on the auction block, and new equity offerings were held. In other words, each company tried every way possible to show that despite the misdeeds of one neighbor, they were were all good corporate citizens. Investors and industry watchers may not agree on whether these balance sheet renovations were necessary improvements. But most will agree the changes are more than cosmetic, and will place the companies on the road to stronger performance. Susan Abbott, managing director at Moody's Investors Services, said the plans "aren't just window dressing." But she warned the magic will be in the execution. She is concerned that some companies may have difficulty raising additional funds through asset sales in what has quickly become a buyers' market. "From our perspective, the companies should sell assets that do not fit into the strategic plan," Abbott said. "What are they doing owning these assets anyway?" She expects oil and gas properties that have proven reserves will be among the first assets that will be divested, possibly in as little as 30 days. Other assets will take longer to sell. In some cases, equity offerings have bought firms some time to find the right buyer. (Unfortunately, at the expense of some value from current shareholders.) Equity Offerings Bought Time For Asset Sales "Mirant raised equity," Abbott said. "That's a good thing for them. Their ability to sell $1.5 billion of assets ... that will be the execution part we will be anxiously waiting to see." If Mirant achieves its goals, and Moody's restores Mirant's investment grade status, the upgrade will be a catalyst for the stock, said Richard Giesen, manager of the Munder Power Plus fund. Giesen said he took advantage of Mirant's equity offering to add shares to his portfolio. "I do think there's a good possibility Moody's could reverse (its downgrade) after the meeting with the company (this week)," Giesen said. The Power Plus fund has roughly 9% of its assets invested in companies with energy trading operations, he said. As an investor in the sector, Giesen said he wishes the companies weren't forced to issue additional equity because of the earnings dilution. "I wish they hadn't done it, but I realize it was a necessary evil given the circumstances," he said. To get a sense of the impact, Merrill Lynch analyst Steve Fleishman said his 2002 earnings estimates were reduced by an average of 15% for those companies who announced recapitalization programs. But earnings dilution wasn't the only reason why investors appeared to be universally critical of Moody's decision to raise the bar for sector. Many said it was wrong to change the rules overnight. Moody's Abbott said she is aware of the criticism. "These companies have a need to grow," Abbott said, "but the first step is to repair the balance sheets and establish a good relationship between cash flow and debt. ... Then the companies can focus on growth, but they can do it in a more balanced fashion, which means slower." Market Waiting To Hear More During Earnings Season Fourth-quarter conference calls, which will begin this week, will give some of the companies in the group another chance to outline goals for the year. According to several portfolio managers, the market isn't likely to view aggressive growth plans favorably. Still, the portfolio managers aren't writing off the growth potential for the sector. "California dodged a major bullet because of unseasonably mild weather," Giesen said. Mild weather and a weak economy are masking regional supply shortages and transmission grid problems that could again result in higher energy prices and improved earnings power in the sector, according to the portfolio manager. Plus, the potential for oversupplied markets has been reduced as some companies cancel plans for power plants, said Merrill's Fleishman. "We note, however," the analyst said, "that most of the 2002-2003 plants are already being built, so the benefit is mainly in 2004 and beyond." There also is the chance of stock appreciation, even if the sector doesn't win back its growth moniker and the associated price-to-earnings multiples. According to Basu Mullick, portfolio manager of the Neuberger Berman Partners fund, relative to expectations, some in the sector are not even trading at utility valuations, which means there is room to rise. Mullick favors El Paso Corp. (EP), which closed Friday at $41.77, and Williams Cos. (WMB), which ended the day at $25.50. Both stocks have come off the 52-week lows hit amid the heightened credit concerns last month, but the stocks remain sharply below their price ceilings. Investors said they were impressed by the ability of company managers to react to the new credit requirements. As a result, investors expect fourth-quarter conference calls to continue to stress debt reduction. The stocks could get a kick if the companies report they have been gaining market share in the wake of Enron's exit. This is most likely to come from market players such as Duke Energy Corp. (DUK), that had strong credit quality going into this period of uncertainty, some investors said. Going forward, Fleishman said he thinks it also is the companies with strong balance sheets that will be able to benefit from acquiring new assets on the cheap. He cited Duke, Entergy Corp. (ETR) and American Electric Power Corp. (AEP). The bottom line is most investors feel the short-term liquidity issues have been addressed, and now it is just a matter of waiting for energy prices to firm. "For the patient investor, the risk-reward looks pretty good," said Glen Hilton, portfolio manager at Montgomery Asset Management. -By Christina Cheddar, Dow Jones Newswires; 201-938-5166; christina.cheddar@dowjones.com Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. Business Rhonda`s Roundtable Rhonda Schaffler, Allan Chernoff 01/14/2002 CNNfn: Market Coverage - Morning © Copyright Federal Document Clearing House. All Rights Reserved. RHONDA SCHAFFLER, CNNfn ANCHOR, MARKET CALL: Welcome back to MARKET CALL. One of the many angles of the Enron (URL: http://.www.enron.com/) mess is what is happening to the trading unit. Allan Chernoff has been following that story for us and he`s got an update. Allan? ALLAN CHERNOFF, CNNfn CORRESPONDENT, MARKET CALL: Right. You know, Rhonda, the details of this were supposed to have been released at 8:30 this morning - they are now being pushed back to 3 p.m. But the "Houston Chronicle," this morning, does have a report. And we understand from sources that it is a reliable source - reliable report - and in fact, the "Chronicle" is quoting Chief Financial Officer Jeff McMahon. So here is what the "Houston Chronicle" is reporting this morning in terms of the UBS (URL: http://www.ubs.com/) deal to buy Enron`s energy trading businesses. First of all, there will be no cash paid right up front and Enron will not have an ownership stake in the trading business. What will happen apparently, is that UBS is likely to give Enron 1/3 of the pre-tax profits from the energy trading business. That would be for year one and year two. And according to the report, in year three that would be pushed down if an option is exercised to 22 percent, then down to 11 percent, and then finally, down to zero percent. So again, the headline there is that he would be receiving 33 percent at the beginning. There you have all the details. Now apparently, UBS would be hiring most of the 800 traders and marketers that work at the Houston headquarters, and UBS would also be paying rent for the office space that it is using. So, Rhonda, that`s the latest that we have on that front. RHONDA SCHAFFLER, CNNfn ANCHOR, MARKET CALL: All right, thanks so much, Allan. At least those people get it keep their jobs if we try to . CHERNOFF: We`ll see if it all happens. SCHAFFLER: Yes. Exactly. So 2 p.m. Eastern is when some more details . CHERNOFF: That`s when they`re releasing the details. Keep in mind, the judge still has to sign off on that. Originally, he was supposed to do that Tuesday. It was then pushed off to Thursday, and now it`s Friday. SCHAFFLER: OK. With that, we kick off the Roundtable. Andy Serwer of "Fortune" is here and our guest host, Todd Eberhard, joins me as well. Andy, what`s on your mind this morning? ANDY SERWER, EDITOR-AT-LARGE, "FORTUNE": Well, you know, here we go again with the negative sentiment own Wall Street, sort of a real bearish morning. Rich Bernstein at Merrill Lynch cutting that firm`s allocation of stocks and very important downgrades. Over at Lehman, one report, I think, is really having a negative effect comes out of S&P. It concerns corporate bankruptcies. Not a surprise, 2001 was a record for corporate bankruptcies; 211 companies worldwide declaring bankruptcy; $115 billion of debt. Here`s what struck me, though: It breaks the old record of 2,000, when 132 companies declared bankruptcy for $43 billion. So we went from $43 billion to $115 billion. And, you know, last year we had Enron (URL: http://.www.enron.com/) and PG&E (URL: http://www.pgecorp.com/) in California, you know, the utilities. So, are we going to go for a trifecta (ph) this year? Let`s hope now. That is a tremendous jump in two years in a row, records like that. So, not having a good effect on the Street. SCHAFFLER: And, of course, there are all these scattered, you know, rumors out there, whether it`s K-Mart (URL: http://www.kmart.com/) seems to be the one in focus as a possible company that could go next. But, those are clearly alarming figures. And if things don`t turn around . TODD EBERHARD, GUEST HOST, MARKET CALL: Well, that`s the question: Are we now through the worst for - into `02 or the first half of `02. It may continue to be bad, but is the second half going to turn around. And if you start to see a lessening in those bankruptcies and start to see a turnaround in some corporate profits, I mean, that becomes a statistics from the bygone era, to a degree, and maybe focus forward, not backward. SCHAFFLER: There`s a lot of maybes in there. EBERHARD: Well, yes. It`s true. SCHAFFLER: Did you catch that? CHERNOFF: And, the Street really is worried about what happens going forward. EBERHARD: Sure. CHERNOFF: I mean, we`re not - we know that we`ve had an awful year. We know that the recession is always under way. We know there are a lot of bankruptcies. The story is, do we turn around in terms of profits? SERWER: And the problem is, again - that we keep wrestling with here over the past couple days - is we`ve already come back so far from the Nader in late September. And now the feeling is we`ve gone too far, we`ve gotten ahead of ourselves. Holly Becker of Lehman Brothers downgrading eBay (URL: http://www.ebay.com/) this morning for just that kind of reason. She`s saying, take profits. This thing is back up. It`s up. It`s the only Internet stock that matters. It`s the only Internet stock that has held up. CHERNOFF: Well, it`s the best run Internet company bar none, by far. SERWER: Right, right, and the stock reflects that. CHERNOFF: And we`re not going to include AOL Time Warner (URL: http://www.aol.com/) as an Internet company. SCHAFFLER: Oh, Allan. That would be like unplugging this media company . SERWER: "CBS MarketWatch" had a report this morning on their Web site rating the AOL Time Warner, giving it a "D." SCHAFFLER: For what? SERWER: For just performance - and compared it to Disney (URL: http://www.disney.com/) . It compared it to the HHH, which is the Merrill Lynch Internet index, and said that it lagged all those. And so, the one-year anniversary, good folks at "CBS MarketWatch" gave AOL Time Warner a "D." SCHAFFLER: Even with all the great inflation out there these days. CHERNOFF: The good competitors . SERWER: Yes. SCHAFFLER: There you go. SERWER: There`s a connection with Viacom (URL: http://www.viacom.com/) there, too, if my understanding is correct. SCHAFFLER: You know, Todd, if we`re in this situation here where we`re raising these questions: hey, when is it going to get better? Have we gone up too far? The market can really stagnate for months. I hate to raise that point, but if it doesn`t go down it can also go nowhere. EBERHARD: That`s a perfect example of what I think we`ve seen over the last week or two, to some degree. I mean, we`ve seen pullback, but I have to argue the other side for a second. With all this bad news on Enron, with all the bad news coming out of Ford Motor (URL: http://www.ford.com/) with layoffs, with all the bad news of all the dot-coms and everything else that occurred over the last 18 months, let`s call it, and the market getting killed, we have seen it stagnate, which is not a bad thing, to find that bottom, theoretically. SCHAFFLER: That would be our base building? EBERHARD: In theory, yes. You find that base building and then it builds from there. And it may take three months, six months to get really going again or maybe even longer. But at least it`s not heading lower with all the bad news coming out at this point. SERWER: Well, that`s sort of like having . SCHAFFLER: A positive spin. SERWER: Yes. How do you analyze Greenspan`s speech on Friday? Was it a half-empty speech? EBERHARD: That`s right. SERWER: A glass half-empty or a glass half-full? You know, he said, well, I don`t see any real signs on recovery. On the other hand, things aren`t getting worse, basically. You know, It`s hard for me to really sit here and see the market doing a whole lot first half of the year. I mean, I hate to say it but . SCHAFFLER: Yes. See? That`s what I`m wondering, too, because it just seems in the last week we had a couple of brokerages coming out and just saying, you know, in this particular group, valuations looked like they got ahead of themselves. Wireless, for instance, there was another wireless downgrade today. So it looks like there`s pockets where people are saying, all right, 100 percent recovery since September is enough. CHERNOFF: Rhonda, I really don`t buy what these brokerage analysts write at all. The bottom line is . EBERHARD: Allan . CHERNOFF: If you get a few companies coming out with halfway decent news, people are going to back in there bidding them up. It`s as simple as that. EBERHARD: Do you mean these guys who said that the dot-coms were going to go on forever and ever? CHERNOFF: Yes. SERWER: No, no, the guys who said that Enron was a buy. Those guys. EBERHARD: Oh, those guys. CHERNOFF: Oh! SCHAFFLER: That would be all of them, I think. CHERNOFF: They worked across the hall from here. SERWER: Absolutely. EBERHARD: It`s true, though. What you`re saying is accurate. If one or two companies do start to show numbers, and look at Intel (URL: http://www.intel.com/) , going back a short time ago; they came out with an OK number or "we think we`re doing better," and all of a sudden we`re off to the races again. And there`s a lot of cash out there to be placed, eventually. It may not be tomorrow or the next day. But, eventually, we will enter . SCHAFFLER: Nobody will want to miss that rally. So basically, we need somebody, right, where even though there are no fundamentals here and technically the stock is in bad shape, buy it anyway? That would make you happy? CHERNOFF: If there`s some halfway decent news, I think you`ll get people just jumping in once again. The turn is here. The turn`s here. SCHAFFLER: Last call, Andy. You`re first. SERWER: More fallout from Enron. I mean, it just permeates. Northern Trust (URL: http://www.ntrs.com/) , the big Chicago bank, today saying its earnings are down 18 percent. Big exposure to Enron is the reason why there is a write-off there. Stock`s not doing too badly. It still has a pretty high multiple. But we`ll see things like this happen. SCHAFFLER: Allan? CHERNOFF: Well, Rhonda, we certainly want to pay attention to what happens here with the UBS deal, but also the House Energy and Commerce Committee is really the focus of where the action is right now. They`re the ones who uncovered this memo, apparently, that had been issued by an in-house lawyer at Andersen to tell people, you can get rid of some of those documents. More details are definitely going to be coming out very shortly. SCHAFFLER: And they will be interesting. That`s for sure. Todd? EBERHARD: I think we will see more details and more hiccups on this Enron, as well as other deals that go on, and other people who are connected with it. But I think the market has absorbed most of it. So I`m not too concerned about that affecting valuations at this level. SCHAFFLER: That is our roundtable. "MARKET CALL" continues. In the next hour, we head back to the New York Stock Exchange and the Nasdaq to find out what stocks are moving at this hour. President Bush visits America`s heartland to talk about the economy. And Microsoft has plenty of cash on happened, but should that money go to paying out dividends? We`ll explore that on our "Tough Call" segment. END TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 888-CNNFN-01 OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT WWW.FDCH.COM THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED. Content and programming copyright 2002 Cable News Network, Inc. ALL RIGHTS RESERVED. Prepared by eMediaMillWorks, Inc. (f/k/a Federal Document Clearing House, Inc.) No license is granted to the user of this material other than for research. User may not reproduce or redistribute the material except for user`s personal or internal use and, in such case, only one copy may be printed, nor shall user use any material for commercial purposes or in any fashion that may infringe upon Cable News Network, Inc.`s copyright or other proprietary rights or interests in the material; provided, however, that members of the news media may redistribute limited portions (less than 250 words) of this material without a specific license from CNN so long as they provide conspicuous attribution to CNN as the originator and copyright holder of such material. This is not a legal transcript for purposes of litigation. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. Sarah Palmer Internal Communications Manager Enron Public Relations (713) 853-9843
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