FW: Enron For Sale List

-----Original Message-----
From: Martin, Thomas A.
Sent: Thursday, November 15, 2001 11:37 AM
To: Schwieger, Jim; Brawner, Sandra F.
Subject: FW: Enron For Sale List

Looks like $1.25 billion write-off coming from Marlin and Osprey in 4th quarter.

Tom

-----Original Message-----
From: Bryan, Gary
Sent: Thursday, November 15, 2001 11:15 AM
To: Martin, Thomas A.
Subject: FW: Enron For Sale List

-----Original Message-----
From: Roberts, Linda
Sent: Thursday, November 15, 2001 11:01 AM
To: Quick, Joan; Zivley, Jill T.; Bryan, Gary
Subject: FW: Enron For Sale List

-----Original Message-----
From: O'Toole, Sharon [mailto:Sharon.OToole@ElPaso.com]
Sent: Thursday, November 15, 2001 10:08 AM
To: 'Blanca Daugherty'; 'Debbie Chance-HM'; 'Diana Naylor Knox'; 'Kevin O'Toole'; Roberts, Linda; 'Martha Senf'; Baden, Pamela; 'Stacy Franz'; Miller, Stephanie; 'Steve McGough'
Subject: FW: Enron For Sale List

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Nov. 15, 2001, 12:15AM

Enron plans asset sell-off to slash debt

'We made some very bad investments,' Lay admits

By TOM FOWLER
Copyright 2001 Houston Chronicle

Enron Corp. officials admitted they made serious investment errors in recent years and will step up the pace of selling off those investments, including its broadband services group and some international operations.

RESOURCES
Check stock quotes.

Enter ticker for Enron: ENE

Enter ticker for Dynegy: DYN

Fractions
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Those business units, which are worth as much as $8 billion, could be sold off or spun out over the next year, the company said in a conference call with analysts on Wednesday. That would bring in more cash to pay down debt and trim away money-losing operations.

Enron Chief Executive Officer Ken Lay surprised many with a blunt assessment of the company's poor judgment in recent years that led to the rapid implosion of the energy trading giant's reputation and value in the past month.

"In hindsight, we made some very bad investments in noncore businesses," Lay said. "The negative impact of these investments has been exacerbated through the extensive use of debt capital both on and off the balance sheet. We fully understand and regret that the combination of these events has resulted in the complete loss of investor confidence."

To help make the cuts, the company is breaking its businesses into three groups: those that are the most profitable and part of its core business, such as energy and gas trading; those that are unprofitable and nonessential, such as overseas power plants; and those that have good profit potential in the near future that are under review, such as its steel, pulp and paper-trading operations.

The noncore operations will be sold or closed down in an orderly fashion in the next year, said President and Chief Operating Officer Greg Whalley. Those operations under review will be studied to see if they can contribute to the company's bottom line any time soon

"These are businesses that have strong prospects and that we feel have good potential, but we'll need to look at each carefully," he said.

The company's central businesses of energy and gas trading are not expected to be cut back significantly, Whalley said, and should remain intact until the merger. Despite reports that many employees are leaving those business groups, company officials have said repeatedly that is not the case and that top employees are being retained. A stipulation of the Dynegy-Enron merger agreement prevents Dynegy from recruiting or hiring Enron staff for a certain period, in case the purchase is not completed.

The $8 billion in business units that could be sold in the coming year do not include Portland General Electric, the Oregon power company that was already under contract to sell for $2.9 billion next year. Nor do they include about $800 million in asset sales that are expected to close by year's end, Chief Financial Officer Jeff McMahon said. That includes about $250 million for a Brazilian gas distribution business, $266 million for a power plant in Puerto Rico and $332 million for certain offshore energy properties in India.

The company did not file a final version of its third-quarter financial statement Wednesday as previously expected but rather said it would be five days late with the document. Enron did, however, share some more details about some of its financing partnerships, including the Marlin and Osprey investment vehicles.

Marlin is a vehicle created to acquire Azurix, an Enron unit that owns British water utility Wessex. It has over $900 million of debt that's due in July 2003. McMahon said that if the value of Wessex is 25 percent below its current book value of $2.6 billion when Marlin's debt falls due, this would result in a charge of $650 million against earnings and stockholders' equity for Enron.

Osprey was created to acquire energy assets and other assets, and has $2.4 billion of debt that falls due in January 2003. McMahon said that if the Osprey assets were valued at less than 25 percent of their current book value when the debt falls due it would result in a charge of $600 million against earnings and stockholders' equity for Enron.

Analysts asked repeatedly if executives were confident that no other surprise liabilities were hiding in the books, referring to the $1 billion in equity write-downs the company reported last quarter due to several off-balance-sheet financing deals, and a restatement of 4 1/2 years of financial statements to include an additional $600 million in losses.

McMahon said the company has gone through the books carefully, but he noted that the Securities and Exchange Commission and a special committee of the Enron board of directors were still conducting their own investigations.

"Everything we know, you now know," Lay told the analysts.

Lay said the fourth-quarter results are expected to be hampered by severance and restructuring costs, however, but couldn't provide more details. He said the company is also seeking an additional $500 million to $1 billion in private equity investments.

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