enron mentions wrap : dynegy terminates troubled merger pact with enron
dow jones news service , 11 / 28 / 01
enron ' s fall to spark volatility on pwr , natural gas mkts
dow jones energy service , 11 / 28 / 01
merger collapse , weak fed report , rattle investors at midafternoon
dow jones business news , 11 / 28 / 01
enron to temporarily suspend noncore payments
dow jones news service , 11 / 28 / 01
energy markets seen surviving enron ' s woes , but changed
dow jones energy service , 11 / 28 / 01
uk : enron - a pioneer of europe ' s new power markets .
reuters english news service , 11 / 28 / 01
usa : wrapup 2 - enron near collapse after dynegy pulls out .
reuters english news service , 11 / 28 / 01
usa : us energy regulator says " monitoring " enron situation .
reuters english news service , 11 / 28 / 01
usa : dynegy says no longer trading with enron .
reuters english news service , 11 / 28 / 01
usa : enron seeks to preserve value after dynegy pullout .
reuters english news service , 11 / 28 / 01
usa : update 1 - enrononline trading system shuts down .
reuters english news service , 11 / 28 / 01
usa : update 1 - key us lawmaker doesn ' t see govt solution on enron .
reuters english news service , 11 / 28 / 01
uk : uk power prices rally , enron news dims trade .
reuters english news service , 11 / 28 / 01
usa : nymex natgas tumbles late on bearish aga data .
reuters english news service , 11 / 28 / 01
usa : citigroup , j . p . morgan off on enron exposure .
reuters english news service , 11 / 28 / 01
stockwatch enron down 85 pct as dynegy walks out of merger deal
afx news , 11 / 28 / 01
enron temporarily suspends all payments except those needed to maintain ops
afx news , 11 / 28 / 01
calpers may discuss enron , action against co . in dec
dow jones energy service , 11 / 28 / 01
dynegy calls off $ 8 . 4 billion takeover of enron after credit downgrade
associated press newswires , 11 / 28 / 01
dynegy terminates merger with enron ; conference call scheduled for 12 : 30 cst , 1 : 30 p . m . est
business wire , 11 / 28 / 01
dynegy pull out of enron purchase ; credit ratings cut ( update 6 )
bloomberg , 11 / 28 / 01
enron ' s online trading unit has stopped , traders say ( update 2 )
bloomberg , 11 / 28 / 01
enron ' s 401 ( k ) plan was set up for fall : david wilson ( updatel )
bloomberg , 11 / 28 / 01
enron ' s credit rating cut to junk by s & p and moody ' s ( update 4 )
bloomberg , 11 / 28 / 01
enron expected to sell portland utility to northwest natural
bloomberg , 11 / 28 / 01
sempra energy interested in buying some enron assets ( update 2 )
bloomberg , 11 / 28 / 01
enron office tower project in limbo after dynegy ends purchase
bloomberg , 11 / 28 / 01
wrap : dynegy terminates troubled merger pact with enron
11 / 28 / 2001
dow jones news service
( copyright ( c ) 2001 , dow jones & company , inc . )
houston - ( dow jones ) - dynegy inc . ( dyn ) terminated its troubled merger agreement with enron corp . ( ene ) , backing away from the deal despite frantic last - minute attempts by both sides to save it .
dynegy wednesday cited enron ' s breaches of representations , warranties , convenants and agreements , including the material adverse change provision .
the announcement came after standard & poor ' s cut the beleaguered energy trader ' s debt rating to b - minus , essentially rendering it to junk status .
the downgrade triggered financial covenants and raised the possibility that enron will be forced to file for protection under chapter 11 of the federal bankruptcy code . that could be a fatal blow for enron , which needs huge sums of cheap money to keep its trading operations alive .
standard & poor ' s lowered its long - term rating on enron to b - minus from triple - b - minus , citing fears that dynegy would abandon its proposed purchase of enron .
the collapse of the dynegy purchase would create enormous pressure on enron ' s credit profile because of enron ' s limited access to capital at a time when extensive debt restructuring is necessary , s & p said .
" while it is regrettable to see a leading industry player in difficulties , this doesn ' t reflect a failure for the energy merchant business , " dynegy said in announcing its decision .
however , dynegy said its energy delivery network and core businesses are solid , and the company and its industry peers are ready to absorb any added volatility in the energy market as the result of the potential loss of enron .
in afternoon trading on the new york stock exchange , enron shares were down $ 2 . 91 , or 71 % , to $ 1 . 20 . dynegy , meanwhile , was down $ 4 . 08 , or 10 % , at $ 36 . 81 , also on the big board .
top executives of enron and dynegy had tried to salvage a deal to combine the two energy - trading companies amid growing signs that enron faced cash - flow problems as a result of a sharp downturn in its core trading business .
talks between enron and dynegy began in earnest over the weekend to cut the price of the all - stock transaction after enron ' s share price had plummeted in the wake of disclosures that its future earnings wouldn ' t be as high as originally anticipated . last month dynegy agreed to buy enron after the emergence of damaging revelations concerning a series of deals that allowed enron executives to profit personally at the expense of the company and its shareholders . those deals are now the subject of a securities and exchange commission investigation .
citing a person familiar with the situation , the wall street journal said wednesday that enron ' s board late tuesday had informally agreed to a new share - exchange ratio of 0 . 12 shares of dynegy for each enron share tendered , down more than 50 % from the original offer of 0 . 2685 dynegy share for each enron share .
that latest proposed share - exchange ratio valued enron at $ 4 . 91 a share , or a total of $ 4 . 17 billion . that would compare with the original value of $ 10 . 98 a share , or $ 9 . 33 billion . in exchange for reducing the purchase price , some members of the enron team were insisting on more control over the merged company . dynegy also was considering an additional $ 250 million cash investment in enron . dynegy , together with chevrontexaco inc . ( cvx ) , has already injected $ 1 . 5 billion into enron in an effort to stabilize the company .
while struggling to keep the planned merger alive , enron also has been seeking to extend the maturity dates of some of its borrowings . enron has a total of about $ 13 billion of debt , of which about $ 9 billion comes due by the end of next year . last month enron said in a filing with the sec that a cut in its rating to below investment grade by any of the three major credit rating agencies - along with a decline in its stock price below certain levels - would trigger the need to repay , refinance or cash collateralize facilities totaling $ 3 . 9 billion .
dynegy said wednesday that it will go through with its acquisition of enron natural gas pipeline unit northern natural , omaha , neb . , and said it has exercised its right to acquire the unit ' s common shares .
chevrontexaco , which owns 26 % of dynegy , contributed $ 1 . 5 billion to the proposed enron merger , and dynegy used that money to acquire the pipeline unit .
northern natural , which owns and operates 16 , 500 miles of interstate natural gas pipeline spanning from the permian basin of texas to the great lakes , has historically been a strong earnings contributor .
dynegy said the unit will be a positive addition to dynegy ' s own energy delivery network .
copyright ? 2000 dow jones & company , inc . all rights reserved .
enron ' s fall to spark volatility on pwr , natural gas mkts
11 / 28 / 2001
dow jones energy service
( copyright ( c ) 2001 , dow jones 403 - 531 - 2912 dina . omeara @ dowjones . com
copyright ? 2000 dow jones & company , inc . all rights reserved .
merger collapse , weak fed report , rattle investors at midafternoon
by stacy forster
11 / 28 / 2001
dow jones business news
( copyright ( c ) 2001 , dow jones & company , inc . )
the wall street journal online
blue - chip stocks remained weak wednesday , after a key survey of regional conditions from the federal reserve revealed that many sectors of the economy continued to struggle .
investors also were rattled by news that dynegy had pulled out of merger talks with fellow energy - provider enron .
in midafternoon trading , the dow jones industrial average was down 111 points to 9761 , after flirting with a return to 10000 over the last two sessions . the industrials finished down 110 . 15 points , or 1 . 1 % , at 9872 . 60 tuesday .
meanwhile , the nasdaq composite index lost 27 . 30 to 1908 . 70 , after declining 5 . 26 points to 1935 . 97 tuesday .
other indexes also fell . the standard & poor ' s 500 - stock index shed 13 . 20 to 1136 . 40 , the russell 2000 index declined 3 to 457 . 70 , and the new york stock exchange composite index dropped 4 . 90 to 579 . 70 .
the fed ' s so - called beige book indicated the economy remained soft in october and november . the survey showed " signs of further slowing outweighed signs of recovery " in early november . " the report rekindled speculation that the fed will reduce interest rates again in an effort to stimulate the economy .
investors already had been in the mood to take some money off the table , a trend that started tuesday after the conference board issued a disappointing report on consumer confidence , and federal reserve gov . laurence meyer said it is likely that u . s . economic output is continuing to shrink .
several other key indicators are due out over the next couple of days , including the commerce department ' s report friday on third - quarter gross domestic product .
investors also were rattled wednesday after standard the european union commission expects the companies to request approval for the merger " soon . " shares of compaq fell 2 . 1 % .
shares of handset phone makers slid after nokia said global sales of mobile phones across the industry will only grow 10 % to 15 % in 2002 after falling this year , weakening hopes of a recovery for the industry . abn amro trimmed its views on motorola following the forecast . shares of nokia fell 4 . 5 % , while motorola lost 2 % .
in major u . s . market action :
stocks slid . on the big board , where 819 million shares traded , 1 , 824 stocks fell and 1 , 258 rose . on the nasdaq , 1 . 2 billion shares traded hands .
bonds were mixed . the 10 - year treasury note gained 3 / 32 ; its yield , which moves inversely to its price , fell to 4 . 92 % . the 30 - year bond lost 4 / 32 to yield 5 . 34 % .
the dollar fell . the dollar declined against the euro to 88 . 65 cents , down from 88 . 64 cents , and weakened against the yen , falling to 123 . 14 yen , from 123 . 96 yen late tuesday in new york .
copyright ( c ) 2001 dow jones & company , inc .
all rights reserved .
copyright ? 2000 dow jones & company , inc . all rights reserved .
enron to temporarily suspend noncore payments
11 / 28 / 2001
dow jones news service
( copyright ( c ) 2001 , dow jones dow jones newswires ; 201 - 938 - 5400
copyright ? 2000 dow jones & company , inc . all rights reserved .
energy markets seen surviving enron ' s woes , but changed
by mark golden , john edmiston and andrew dowell
of dow jones newswires
11 / 28 / 2001
dow jones energy service
( copyright ( c ) 2001 , dow jones & company , inc . )
new york - ( dow jones ) - the energy markets built by enron corp . ( ene ) will survive the company ' s troubles , but they won ' t emerge unscathed , traders and analysts said wednesday .
energy companies have had weeks to adjust to serious concerns about the houston - based giant ' s creditworthiness , allowing a more or less orderly withdrawal of enron from the market before ratings agencies wednesday downgraded enron ' s credit to junk - bond levels .
nevertheless , liquidity in the north american natural gas and electricity markets is expected to suffer and credit requirements are likely to be tightened in general , creating difficulties for some energy traders .
" this doesn ' t spell the end of energy trading , " said one trading manager for an independent power producer . " the market is much bigger than enron , and that ' s why enron fell . this does spell the spell the end of trading for companies that don ' t have a strong physical asset base for at least a year or two as credit requirements are generally tightened , "
moreover , small producers of natural gas or electricity that hedged their 2002 output with enron earlier this year - when prices were much higher than they are now - will suffer if enron has trouble fulfilling those commitments .
enron warned in a filing with the securities and exchange commission last week that its ability to continue as a going concern would be threatened if its credit ratings were downgraded to noninvestment grade levels .
news of enron ' s downgrade added 5 cents to 10 cents to natural gas futures at the new york mercantile exchange , as traders covering short positions sent the december contract to $ 2 . 82 per million british thermal units , traders said .
midwestern and southeastern power prices were also said to have risen due to trading inefficiencies after enron turned off its internet - based trading platform enrononline and higher gas prices .
prices have in all those markets have since fallen , but the moves point to the increased volatility and lessened efficiency some analysts and traders expect should enron exit the market entirely .
kyle cooper , energy analyst at salomon smith barney , said traders will have to present wider bid - offer spreads in order to get deals done in markets in which enron provided critical liquidity .
" one less player , one less market , because of the illiquidity , " cooper said .
at one time , enron accounted for about a quarter of all trade in the north american gas and power markets .
copyright ? 2000 dow jones & company , inc . all rights reserved .
uk : enron - a pioneer of europe ' s new power markets .
by stuart penson
11 / 28 / 2001
reuters english news service
( c ) reuters limited 2001 .
london , nov 28 ( reuters ) - u . s . group enron , on the brink of collapse on wednesday , has been a pioneer of energy dealing in europe and its demise would rob utilities across the continent of a key trading partner .
with a european staff of 5 , 000 , offices in most major cities and a lavish headquarters overlooking london ' s buckingham palace , enron created the trading culture now embraced by previously sceptical european utilities as markets open up to competition .
until recently , enron had accounted for about 30 percent of german wholesale power trading . it was also a major player in uk gas and electricity and nordic power , and was driving forward a fledgling french power market .
" on average we are now doing around 200 deals a day with about 300 counterparties , " enron ' s director of continental power trading gregor baeumerich told reuters in an interview last month , days before the group was plunged into its current crisis .
britain ' s forward gas market rallied on wednesday as it emerged that a rescue deal from smaller rival dynegy had unravelled and enron looked to be skating dangerously close to bankruptcy .
enron ' s list of trading partners included major utilities such as german giants e . on and rwe and the uk ' s innogy and british energy
u . s . companies with trading desk in europe , such as txu , aep , dynegy and duke energy , also traded with enron .
the company ' s enrononline internet trading platform , suspended earlier on wednesday , set the standard for online trading , offering a blueprint followed by utilities and brokers .
enron did about 60 percent of its trade through the platform .
the group ' s presence in europe is not confined to trading . the company has around 4 , 000 megawatts of power generation , spanning italy , poland , greece and the uk where it owns one of the biggest plants at teesside .
the company built a reputation for hard - nosed trading expertise in europe ' s previously pedestrian utilities industry and its approach seemed almost evangelical .
in the summer , flushed with confidence , the company placed a bmw sports car in the lobby of its london office , a prize for employees successful in recruiting fresh talent for the enron cause .
copyright ? 2000 dow jones & company , inc . all rights reserved .
usa : wrapup 2 - enron near collapse after dynegy pulls out .
by c . bryson hull
11 / 28 / 2001
reuters english news service
( c ) reuters limited 2001 .
houston , nov 28 ( reuters ) - enron corp . swooned at the edge of one of the biggest corporate collapses in u . s . history on wednesday as its rescue by rival dynegy inc . blew apart .
dynegy accused enron of breaching the representations it made when a takeover agreement was negotiated on nov . 9 , invoking an escape clause that let it pull out of the all - stock deal valued at $ 9 . 3 billion at the time .
shares of enron , recently ranked no . 7 on the fortune 500 list of the biggest u . s . companies , had lost most of their value in the past three weeks , and all three major credit rating agencies had slashed their ratings on enron ' s bonds to junk status by the time dynegy made its announcement .
enron ' s latest disaster marked another low in a stunning free - fall that began innocently enough with the announcement of a $ 638 million quarterly loss six weeks ago . surprise disclosures , including the admission it overstated earnings by almost $ 600 million since 1997 and kept huge debts off its balance sheet , led investors to rapidly lose faith in a company valued at almost $ 80 billion a little more than a year ago .
on wednesday , its market value was less than $ 500 million .
in response to dynegy ' s announcements and credit rating downgrades , enron said it will temporary suspend all payments other than those necessary to maintain its core operations .
kenneth l . lay , enron ' s chairman and chief executive , said the company was evaluating and exploring other options to protect its core energy businesses .
the loss of enron ' s investment - grade credit rating forces some $ 3 . 9 billion in debts to come due immediately , a major problem for a company that has spent most of the $ 5 . 5 billion it sought in recent weeks to stay afloat . enron said in a recent regulatory filing that it was unlikely to " continue as a going concern " were its credit rating to be slashed to junk status .
it became increasingly clear , as dynegy sought to renegotiate the deal , that enron ' s tricky and often indecipherable accounting was becoming a sticking point , sources close to the negotiations said .
" while it is regrettable to see a leading industry player in difficulties , this does not reflect a failure of the merchant energy business , " dynegy chairman and chief executive officer chuck watson said in a statement .
dynegy said it would exercise its option to buy enron ' s northern natural gas pipeline with the $ 1 . 5 billion it and partner chevrontexaco put into the deal .
dynegy said it stopped trading with enron as of wednesday morning , pegging its exposure at $ 75 million .
a bad sign came earlier on wednesday , as energy traders said operations had stopped at enron ' s once highly lucrative online trading system , enrononline . the unit accounted for up to 90 percent of enron ' s earnings , and was considered the jewel of the trading franchise that dynegy coveted most in its planned $ 9 . 3 billion all - stock takeover .
risk management failures
enron , which touted itself as an agile risk manager , found its credit and debt had spiraled out of control as a series of partnerships designed to hide debt off of its balance sheet caused investors to lose faith in recent weeks .
the partnerships , which included top enron executives and are the subject of a u . s . securities and exchange investigation , provided financing in exchange for guarantees that enron ' s stock stay above certain levels and its credit remain investment - grade . but they came back onto the balance sheet with a vengeance , as enron found it would have to meet massive debt obligations as its shares and credit fell .
enron shares plunged $ 3 . 53 , or 85 percent , to 61 cents on wednesday , as the new york stock exchange twice halted trading of enron shares before announcements affecting the company . it ' s stock has fallen more than 98 percent this year .
the stock peaked at $ 90 . 56 in august 2000 , riding high on the cresting wave of the technology boom after enron took its trading outfit online and promised to bring its business model into the broadband communications arena .
" they ( enron ) entrapped the sophisticates , " said robert stovall , senior strategist at prudential securities , referring to what was once an almost fawning admiration for enron by institutional investors . " i think this is going to become a classic case . "
stovall , with nearly 50 years of wall street experience , said he could not recall any previous corporate unraveling that matches that of enron .
" you would have to go to pre - sec days for that , " he said , referring to the creation of the sec in the aftermath of the stock market crash of 1929 .
the final cuts
standard & poor ' s , moody ' s investors service and fitch all cut their ratings on the fallen energy trading giant ' s debt to junk status . s & p said it had lost confidence in enron ' s ability to complete the merger with dynegy , and said bankruptcy was a " distinct possibility " if the merger fails .
andre meade , a commerzbank analyst who has been consistently bearish on enron and the deal , said its core business deteriorated at an increasing pace in recent weeks , and the ratings agencies could not find the liquidity they wanted inside enron .
" the numbers were not enough to soothe them , " said meade , who downgraded enron to " sell " from " hold " on wednesday . " this company should have been downgraded to junk weeks ago . the ratings agencies had given them several weeks , and they just couldn ' t hold out anymore . "
dynegy on nov . 9 said it would take over enron in a deal valued at about $ 10 . 41 per enron share . chevrontexaco corp . , a major dynegy shareholder , pledged to immediately pump $ 1 . 5 billion into enron to bolster its withering finances .
deal advisers j . p . morgan chase and citigroup have already contributed $ 1 billion to the deal , and were expected to have to put up after enron was rebuffed by private equity firms it had approached seeking more cash .
representatives of dynegy and enron had haggled over new terms for the takeover late into tuesday , including a buyout offer half the original price , sources close to the talks said .
enron ' s crash began when it said it would take $ 1 . 01 billion in writedowns and charges against its third - quarter earnings for failed investments . it later admitted that it had to reduce stockholder equity by $ 1 . 2 billion to extract itself from partnerships in which now - ousted chief financial officer andrew fastow the managing partner .
those deals , in which fastow earned about $ 30 million in management fees , are the subject of an sec investigation and the . worse yet for enron , it was required to restate its earnings going back four years , shaving off $ 600 million in the process .
( additional reporting by brendan intindola , carolyn koo , joseph silha , david sinkman and jonathan stempel in new york and andrew kelly in houston . ) .
copyright ? 2000 dow jones & company , inc . all rights reserved .
usa : us energy regulator says " monitoring " enron situation .
11 / 28 / 2001
reuters english news service
( c ) reuters limited 2001 .
washington , nov 28 ( reuters ) - the u . s . agency that regulates interstate electricity markets said wednesday it was monitoring enron corp as the company ' s planned rescue by dynegy inc collapsed .
" we ' re monitoring the situation but we don ' t have any comment past that , " said a spokeswoman for the federal energy regulatory commission ( ferc ) .
u . s . electricity traders said operations were abruptly halted on wednesday morning at enron ' s online trading system , enron online . u . s . electricity and natural gas traders have scaled back deals with enron since the company ' s financial problems emerged a few weeks ago .
enron once ranked as the nation ' s largest trader of electricity and natural gas , with some experts estimating the company was involved with about 20 percent of daily trades .
ferc , an independent federal agency , oversees interstate electricity markets , natural gas pipelines and hydroelectric dams .
dynegy said it called off its plan to buy enron for $ 9 billion in stock , citing breaches in the merger agreement by enron .
copyright ? 2000 dow jones & company , inc . all rights reserved .
usa : dynegy says no longer trading with enron .
11 / 28 / 2001
reuters english news service
( c ) reuters limited 2001 .
new york , nov 28 ( reuters ) - energy trader dynegy inc . said on wednesday that its exposure to rival enron corp . is $ 75 million , in the wake of its failed purchase of the beleaguered enron .
houston - based dynegy said it is no longer trading with the company as of this morning .
it also said enron has 180 days to buy back the northern natural gas pipeline for $ 1 . 5 billion . upon the deal ' s collapse , dynegy exercised its option to buy the pipeline .
copyright ? 2000 dow jones & company , inc . all rights reserved .
usa : enron seeks to preserve value after dynegy pullout .
11 / 28 / 2001
reuters english news service
( c ) reuters limited 2001 .
houston , nov 28 ( reuters ) - enron corp . confirmed on wednesday that rival dynegy inc . had terminated its takeover offer for the company and said it was taking action to preserve value in its core trading and energy units .
enron said in a statement it had temporarily halted payments other than those necessary to maintain core operations . enron said it is also reviewing dynegy ' s actions .
" uncertainty during the past few weeks with respect to the merger has dramatically lowered the market ' s confidence in enron and its trading operations , " chairman and chief executive ken lay said . " with dynegy ' s termination of the merger and the ratings agency downgrades , we are evaluating and exploring other options to protect our core energy businesses . "
he said enron would work to retain the employees necessary to the continuing operations of its trading and other core energy businesses .
dynegy accused enron of breaching the representations it made when the takeover was negotiated on no . 9 , invoking an escape clause that let it pull out of the deal .
shares in enron plummeted $ 3 . 39 , or 82 percent , to 75 cents in afternoon trading on the new york stock exchange . they have fallen more than 98 percent this year , after reaching a peak of $ 90 . 56 in august 2000 .
copyright ? 2000 dow jones & company , inc . all rights reserved .
usa : update 1 - enrononline trading system shuts down .
11 / 28 / 2001
reuters english news service
( c ) reuters limited 2001 .
new york , nov 28 ( reuters ) - enron corp ' s internet - based energy and metals trading system was shut down on wednesday , shortly after a leading credit - rating agency downgraded the company ' s debt to " junk " status , energy traders said .
it was not clear whether the enrononline trading system was halted deliberately or by a technical problem . enron officials were not immediately available for comment .
" we were watching the board and suddenly it went blank , " said one northeast natural gas trader . activity on enrononline was halted just after 11 a . m . ( 1600 gmt ) , the trader said .
energy traders said the standard & poor ' s announcement that it was downgrading enron debt triggered a brief spike in new york mercantile exchange natural gas futures , to $ 2 . 82 per million btu , but prices later slipped to the low - $ 2 . 70 s , still up more than 11 cents from tuesday .
" we spiked on the enron news . people ran in to cover any exposure because of the uncertainty . i think they ' re expecting the company to file for chapter 11 ( bankruptcy ) , " said one midwest gas and power trader .
" the enron ( stock ) halt sent a shock through the ( power ) market and all trading stopped . the enron guys pulled all their numbers ( on enrononline ) , " another trader at a houston - based energy firm said .
u . s . natural gas and electricity firms have been steadily scaling back deals with enron for several weeks as fears mounted about the former energy giant ' s credit standing .
" people have been balancing their risk exposure over the last few weeks , " another midwest trader said .
enron was by far the largest u . s . natural gas and electricity trader , with industry analysts estimating it was once involved in some 20 percent of daily trade in those markets .
but since last month , when the company became the target of a securities and exchange commission investigation of financial dealings with partnerships , the houston - based company ' s market share has steadily eroded .
enrononline until recently accounted for about 60 percent of the daily trade volume handled by enron .
enron shares were briefly halted on the new york stock exchange this morning following the credit - rating downgrade . after the stock reopened , it dropped $ 2 . 84 to $ 1 . 30 on the new york stock exchange . enron shares closed tuesday at $ 4 . 14 .
copyright ? 2000 dow jones & company , inc . all rights reserved .
usa : update 1 - key us lawmaker doesn ' t see govt solution on enron .
by susan cornwell
11 / 28 / 2001
reuters english news service
( c ) reuters limited 2001 .
washington , nov 28 ( reuters ) - the chairman of the u . s . house energy and commerce committee said on wednesday he could not see how the government could come to the rescue of enron corp . , near collapse after rival energy trader dynergy inc . pulled out of a deal to buy it .
" i can ' t right now envision anything the government can do , other than encourage the parties who are discussing a merger to continue their efforts , " said billy tauzin , republican of louisiana .
but he said the government must watch carefully whether the troubles of the houston - based enron - once ranked as the nation ' s largest trader of electricity and natural gas - had implications for u . s . energy supplies and pricing .
tauzin noted that enron had been a " very big contributor " to energy supplies in california , which was rocked last winter by a tenfold jump in wholesale electricity prices , a string of black - outs and the bankruptcy of the state ' s largest utility .
" we ' ve got to watch that very carefully , obviously . we don ' t want to be in another session next year trying to deal with energy problems in california as a result of some of the events that are occurring right now with enron , " tauzin said .
the underlying cause of california ' s problems last winter was widely seen as the state ' s badly written electricity deregulation law , which did not allow power companies to pass through higher wholesale electricity costs to consumers .
tauzin said enron ' s decline was unfortunate . " it ' s a sad story . it ' s been a hugely successful enterprise . "
" i would hope they could work it out . we can ' t simply step into every bad market decision and every bad financing decision that occurs in american corporations in this country and work it out for them . we have to count on them to figure it out themselves . "
" our job is going to be to make sure in policy we haven ' t left a breach open where consumers are going to end up short or overpriced in the process , " he added .
enron ' s financial problems have steadily unravelled since last month , when it became the target of a securities and exchange commission investigation of some enron partnerships .
on wednesday , dynergy said it called off its plan to buy enron in a $ 9 billion stock deal , citing breaches in the merger agreement . the company ' s credit ratings were downgraded to junk status .
copyright ? 2000 dow jones & company , inc . all rights reserved .
uk : uk power prices rally , enron news dims trade .
11 / 28 / 2001
reuters english news service
( c ) reuters limited 2001 .
london , nov 28 ( reuters ) - british electricity prices rallied on wednesday but volumes thinned later in the day as traders took stock of news u . s . trader enron was on the brink of collapse after dynegy pulled out of a rescue deal .
" post enron , not much was done . most people pulled their bids , " said one trader , adding enron was one of the largest traders in the uk electricity market .
prompt prices firmed on a combination of colder than usual weather and production problems at some power stations which hit supplies , said traders .
the most striking jump was power for block five on thursday , covering peak time from 1500 to 1900 gmt , which sold at 101 pounds per megawatt hour - the highest price seen so far this winter , said traders .
prices for half hourly prompt contracts on the ukpx bourse were also high , they added .
day ahead baseload sold at 26 . 25 pounds and peak at 35 pounds , with the high prices boosting the forward curve .
ql 02 baseload went through at 19 . 88 pounds while summer 02 sold at 17 . 25 pounds and winter 02 at 19 . 35 pounds .
copyright ? 2000 dow jones & company , inc . all rights reserved .
usa : nymex natgas tumbles late on bearish aga data .
11 / 28 / 2001
reuters english news service
( c ) reuters limited 2001 .
san francisco , nov 28 ( reuters ) - nymex hub gas , up midday wednesday on enron corp . ' s financial troubles , tumbled late after bearish aga data was released this afternoon , traders said .
" healthy supplies continue to be confirmed week after week with these aga reports . until we see a guy in chicago with ice coming off his nose we will go lower because supplies are abundant and there ' s no demand , " one northeast trader said .
the trader said front - month nymex prices could fall below $ 2 per mmbtu in the days ahead if widespread and sustainable cold weather failed to materialize .
at 2 : 48 p . m . est , december was down 40 . 6 cents at $ 2 . 20 per million british thermal units ( mmbtu ) after aga data was released .
earlier in the session , december , which expires today , rocketed to $ 2 . 82 after standard & poor ' s cut energy trading giant enron ' s debt to junk status , a move that threw into question the company ' s ability to meet its financial obligations .
enron is by far the largest u . s . gas and electricity trader , with industry analysts estimating it was once involved in some 20 percent of daily trade in those markets .
aga storage data released this afternoon showed u . s . gas stocks for the week ended nov . 23 rose by 12 bcf , well above reuters survey estimates for an unchanged - to 5 bcf withdrawal number , the year - ago slide of 146 bcf and the five - year average pull of 66 bcf .
total inventories of 3 . 144 tcf jumped to 642 bcf , or 26 percent , above last year and 391 bcf above the five year average .
last week , storage , which stands at 95 percent full , broke the all - time record high of 3 . 127 tcf hit on nov . 6 , 1998 .
most analysts expect the gas glut to grow further in coming weeks , noting last year more than 1 tcf was drawn from inventory during a record cold november - december period .
eastern stocks were unchanged at 98 percent of capacity , about 15 percent above last year . consuming region west storage , which rose 3 bcf for the week , was 46 percent above year - ago levels . inventories in the producing region gained 13 bcf and stood 41 percent above 2000 levels .
the national weather service 6 - 10 day forecast , released late tuesday , called for above normal temperatures for the eastern two - thirds of the nation , with seasonal or below seasonal readings expected in the west .
chart traders said the technical picture remained bearish , particularly with cash still more than 70 cents below the screen , and most said they needed a december close below the november low of $ 2 . 482 to signal another leg lower .
below $ 2 . 482 , december support was pegged at the contract low of $ 2 . 415 and then in the $ 2 . 14 area and at $ 2 . 00 .
december resistance was seen first in the $ 3 . 00 area and then at the $ 3 . 15 - 3 . 208 gap and the high from four weeks ago of $ 3 . 44 .
in the cash today , henry hub swing quotes fell on average 43 cents to $ 2 . 30 . most cash dealers pinned the steep rise to cooler weather and uncertainty over enron ' s future .
midwest pipes jumped 20 to 30 cents to the $ 2 . 50 area . in the west , gas at waha hub in west texas was around 20 cents higher in the mid - $ 2 . 50 s .
swing gas on transco at the new york city gate soared about 60 cents to $ 2 . 72 , while chicago was almost 30 cents higher at $ 2 . 49 .
nymex said an estimated 33 , 265 henry hub contracts traded at 11 : 05 a . m . est .
nymex has been holding abbreviated floor trading sessions following the sept . 11 attacks on the world trade center .
nymex gas open outcry trade will run from 10 : 00 a . m . to 2 : 30 p . m . , with the internet - based access session held from 3 : 15 p . m . to 9 : 00 a . m . , through dec . 31 .
copyright ? 2000 dow jones & company , inc . all rights reserved .
usa : citigroup , j . p . morgan off on enron exposure .
11 / 28 / 2001
reuters english news service
( c ) reuters limited 2001 .
new york , nov 28 ( reuters ) - the collapse of troubled energy trader enron corp . ' s sale to dynegy inc . on wednesday triggered a drop in citigroup inc . and j . p . morgan chase & co . inc . shares , as both banks lent enron millions of dollars .
citigroup and j . p . morgan , which acted as advisors on the takeover deal , have a total exposure to enron of about $ 800 million , richard strauss , an analyst at goldman sachs group inc . , said in a research note . but strauss estimated total unsecured loans only amounted to $ 270 million .
citigroup shares were off $ 2 . 30 , or 4 . 55 percent , at $ 48 . 25 on the new york stock exchange , while j . p . morgan shares were off $ 2 . 37 , or nearly 6 percent , at $ 37 . 43 .
" the after - tax impact to ( earnings per share ) - should enron go completely under - based on citigroup ' s 5 . 2 billion shares outstanding and j . p . morgan ' s 2 billion shares outstanding would be less than $ 0 . 05 for citigroup and $ 0 . 10 for j . p . morgan , " strauss said .
analysts on average expect citigroup to earn 75 cents a share in the fourth quarter , according to market research firm thomson financial / first call . j . p . morgan is expected to earn 50 cents a share , based on the consensus analyst estimate .
three debt rating agencies have cut their enron bond ratings to " junk " status . enron shares were down $ 2 . 95 , or 71 . 3 percent , at $ 1 . 19 in trading on the new york stock exchange . at one point in the past year , the shares traded at $ 84 . 88 .
copyright ? 2000 dow jones & company , inc . all rights reserved .
stockwatch enron down 85 pct as dynegy walks out of merger deal
11 / 28 / 2001
afx news
( c ) 2001 by afp - extel news ltd
new york ( afx ) - shares of enron corp fell below 1 . 00 usd , losing 85 pct , in afternoon trade , after dynegy inc announced it has terminated the two companies ' merger agreement , fueling concerns that enron may file for bankruptcy protection , dealers said .
at 2 . 50 pm , enron was down 3 . 50 usd , or 85 . 0 pct , at 61 cents . dynegy was down 3 . 74 usd at 37 . 15 . the djia was down 102 . 55 at 9 , 770 . 05 and the s & p 500 was down 13 . 93 at 1 , 135 . 57 .
in a statement , dynegy cited " enron ' s breaches of representations , warranties , covenants , and agreements in the merger agreement , including the material adverse change provision " as reasons for the collapse of the deal .
earlier , both standard & poor ' s corp and moody ' s investors service had lowered their rating on enron ' s long - term debt to junk status , saying that enron may well have to file for bankruptcy should the deal fall through .
" a move by enron to seek protection from its creditors through a voluntary filing under chapter 11 of the us bankruptcy code is a distinct possibility if the merger falls through , " s & p had said .
enron , responding in a statement to the collapse of the deal and the ratings agencies downgrades , said it is temporarily suspending all payments other than those necessary to maintain its core operations .
ng / pav /
copyright ? 2000 dow jones & company , inc . all rights reserved .
enron temporarily suspends all payments except those needed to maintain ops
11 / 28 / 2001
afx news
( c ) 2001 by afp - extel news ltd
houston ( afx ) - enron corp said that , in response to the collapse of the propsoed merger with dynegy inc and debt downgrades by s & p and moody ' s , it is temporarily suspending all payments other than those necessary to maintain core operations .
in a statement released by the company shortly after dynegy announced it was pulling out from the tie - up , enron said it will take actions " designed to preserve value in the company ' s core trading and other energy businesses . "
chairman and chief executive officer kenneth lay said his company is also evaluating and exploring other options to protect its core energy operations . " to do this , " he added , " we will work to retain the employees necessary to the continuing operations of our trading and other core energy businesses . "
rdc / kl
copyright ? 2000 dow jones & company , inc . all rights reserved .
calpers may discuss enron , action against co . in dec
by jason leopold and jessica berthold
11 / 28 / 2001
dow jones energy service
( copyright ( c ) 2001 , dow jones dow jones newswires ; 323 - 658 - 3874 ; jason . leopold @ dowjones . com
( jessica berthold contributed to this article )
copyright ? 2000 dow jones less than a year ago , they were trading at $ 84 . 87 . dynegy shares were off $ 4 . 08 , or 10 percent , to $ 36 . 81 .
in a statement , dynegy said enron had breached its acquisition agreement , triggering a " material adverse " clause and causing it to call of the deal .
" while it is regrettable to see a leading industry player in difficulties , this does not reflect a failure of the energy merchant business , " said dynegy chairman and chief executive chuck watson .
the dynegy move came after standard & poor ' s and moody ' s investors service both cited a loss of confidence that the deal will be consummated , and said that dynegy ' s willingness to go through with the buyout has been compromised by continued erosion in investor confidence and enron ' s core energy trading business .
the downgrades make $ 3 . 9 billion of enron debt due immediately , and up to $ 16 billion in other debt originally due next year could come due earlier .
in its statement , dynegy also said it would exercise its right to purchase enron ' s northern natural gas pipeline , an option it received after it and chevrontexaco - which holds a 26 percent stake in dynegy - pumped $ 1 . 5 million into the ailing enron .
despite dynegy ' s claim to the pipeline , analysts are anticipating a battle over enron ' s assets in bankruptcy court .
" it ' s going to be a fight " between dynegy and enron ' s creditors , howald said .
spokesmen for both enron and dynegy didn ' t immediately return repeated calls seeking comment wednesday , though dynegy scheduled a conference call for later in the afternoon .
enron and dynegy , both based in houston , had spent the last several days trying to hammer out a revision to their nov . 9 merger agreement , which valued enron stock at more than $ 10 per share .
" this comes in response to the fact that they weren ' t able to craft a deal last night . they were working on getting more cash ( from banks shepherding the merger ) last night , but they didn ' t get it , " said a . g . edwards & sons analyst mike heim said . " i think bankruptcy ' s not too far away . "
raymond james analyst jon kyle cartwright predicted dynegy will survive with a few battle scars .
" i believe we all misunderstood how dramatic a credibility crisis can be in a recession in a bear market , " he said . " the speed at which enron collapsed caught us all off guard . "
enron last month revealed that partnerships run by its executives had allowed the company to keep about half a billion in debt off its books and allowed the executives to profit from the arrangements . enron ' s dealings with those partnerships are now the subject of a securities and exchange commission investigation .
the company ousted its top financial officer in october , and several weeks ago restated its earnings back to 1997 - eliminating more than $ 580 million in reported income .
- - -
on the net :
http : / / www . enron . com
http : / / www . dynegy . com
copyright ? 2000 dow jones conference call scheduled for 12 : 30 cst , 1 : 30 p . m . est
11 / 28 / 2001
business wire
( copyright ( c ) 2001 , business wire )
houston - - ( business wire ) - - nov . 28 , 2001 - - dynegy inc . ( nyse : dyn )
- - company exercises right to acquire common stock of northern
natural gas pipeline
- - dynegy ' s energy delivery network and core businesses solid
- - industry had time to prepare , market has adjusted
dynegy inc . ( nyse : dyn ) today reported that it has terminated its previously announced merger agreement with enron corp . ( nyse : ene ) . the company cited enron ' s breaches of representations , warranties , covenants and agreements in the merger agreement , including the material adverse change provision .
" while it is regrettable to see a leading industry player in difficulties , this does not reflect a failure of the energy merchant business , said dynegy chairman and ceo chuck watson . " dynegy ' s customer - based , asset - backed energy delivery network has been the driver of our 45 percent compounded annual growth rate for the past 16 years and will continue to provide us with earnings sustainability and future growth .
chevrontexaco , which owns 26 percent of dynegy ' s outstanding common shares , had contributed $ 1 . 5 billion to dynegy as a participant in the transaction . dynegy used the $ 1 . 5 billion to purchase 100 percent of the preferred stock of enron subsidiary , northern natural gas pipeline ( nng ) . dynegy has exercised its option to purchase all the membership interests in the entity which indirectly owns all of the common stock of nng , subject to satisfaction of closing conditions . northern natural , headquartered in omaha , nebraska , owns and operates 16 , 500 miles of interstate natural gas pipeline spanning from the permian basin of texas to the great lakes . it has historically been a strong earnings contributor , and will be a positive addition to dynegy ' s energy delivery network , said the company .
" the industry has reacted and adjusted well to the potential loss of a market participant over the past several weeks , " said dynegy president and chief operating officer steve bergstrom . " with our superior systems , technology infrastructure and people , dynegy and its industry peers are ready to absorb any added volatility in the energy markets . "
about dynegy inc .
dynegy inc . is one of the world ' s premier energy merchants . through its global energy delivery network and marketing , trading and risk management capabilities , dynegy provides innovative solutions to customers in north america , the united kingdom and continental europe .
conference call simulcast
dynegy will simulcast a conference call related to the terminated merger agreement live via the internet on wednesday , november 28 , 2001 at 12 : 30 p . m . ct , 1 : 30 p . m . et . the web cast can be accessed via www . dynegy . com ( click on " investor relations " ) .
certain statements included in this news release are intended as " forward - looking statements " under the private securities litigation reform act of 1995 . these statements include assumptions , expectations , predictions , intentions or beliefs about future events . dynegy cautions that actual future results may vary materially from those expressed or implied in any forward - looking statements . some of the key factors that could cause actual results to vary from those dynegy expects include changes in commodity prices for energy or communications products or services ; the timing and extent of deregulation of energy markets in the u . s . and europe ; the effectiveness of dynegy ' s risk management policies and procedures and the creditworthiness of customers and counterparties ; the liquidity and competitiveness of wholesale trading markets for energy commodities , including the impact of electronic or online trading in these markets ; operational factors affecting dynegy ' s power generation or dynegy ' s midstream natural gas facilities ; uncertainties regarding the development of , and competition within , the market for communications services in the u . s . and europe ; uncertainties regarding environmental regulations or litigation and other legal or regulatory developments affecting dynegy ' s business ; general political , economic and financial market conditions ; and any extended period of war or conflict involving the united states or europe . more information about the risks and uncertainties relating to these forward - looking statements are found in dynegy ' s sec filings , which are available free of charge on the sec ' s web site at http : / / www . sec . gov .
contact : dynegy inc . , houston analysts : margaret nollen , arthur shannon or katie pipkin , 713 / 507 - 6466 or media : john sousa or steve stengel , 713 / 767 - 5800
12 : 58 est november 28 , 2001
copyright ? 2000 dow jones credit ratings cut ( update 6 )
2001 - 11 - 28 13 : 09 ( new york )
dynegy pull out of enron purchase ; credit ratings cut ( update 6 )
( updates to add dynegy comment ; share price . )
new york , nov . 28 ( bloomberg ) - - dynegy inc . abandoned its
proposed purchase of enron corp . , said dynegy in a press
statement . the decision threatens to force enron , once the
country ' s largest energy trader , into bankruptcy .
standard & poor ' s corp . cut enron ' s credit rating to junk as
bankers failed to raise $ 1 . 5 billion enron needed to operate until
the deal was completed . the lack of funds and the prospect of a
downgrade contributed to dynegy ' s decision to scrap the
acquisition , which was valued at $ 23 billion on nov . 9 .
enron shares fell as much as 71 percent to $ 1 . 20 , its lowest
level in at least 19 years . the company ' s 6 . 4 percent bonds , which
mature in 2006 , were quoted at 20 cents on the dollar , down from
53 yesterday . at that price the bonds yield 57 percent .
` ` the reality is enron ' s going bankrupt , ' ' said michael
willingham , a risk manager at itochu international inc . ` ` enron
touted themselves as the king of risk management , but it doesn ' t
look like they ' ve managed their risk very well . ' '
bankers led by j . p . morgan chase & co . vice chairman james b .
lee tried for for two weeks to raise the cash enron needed .
investors including saudi prince alwaleed bin talal , the
blackstone group lp and the carlyle group inc . turned them down
because of concern enron wouldn ' t be able to pay its debts . that
concern was heightened after enron disclosed a previously
undisclosed $ 690 million interest payment due this week .
dynegy said in a statement distributed by business wire that
it terminated its agreement because enron breached covenants .
chairman and ceo chuck watson said dynegy would invoke its right
to purchase enron ' s northern natural gas pipeline . dynegy used an
investment of $ 1 . 5 billion from chevrontexaco corp . , which owns
one quarter of dynegy , to purchase the enron unit , which operates
16 , 500 miles of natural gas pipeline .
enron spokeswoman karen denne didn ' t return calls for
comment .
trading doubts
enron faced a cash crunch in part because some trading
partners lost confidence the company would have the cash to pay
bills . as a result , they either demanded more collateral to trade
or restricting trading with the houston - based company .
enrononline , enron corp . ' s online trading system , stopped
allowing trades and quit posting bids and offers for natural gas
late this morning , say traders who use the web site . enron said
yesterday that enrononline handles about 60 percent of its trading
business , or about $ 2 . 8 billion a day in trading on average over
the last 30 days .
` ` we can log in , but there is nothing there , nothing to buy
and nothing to sell , ' ' said juha laiho , an energy trader at
finland - based fortum oyj in houston . ` ` it went down some time
this morning . ' '
s in both 1998
and 1999 , it had been less than a majority .
participants in the plan , which had $ 2 . 14 billion in assets
available for benefits , could only do so much to diversify their
investments . enron , like many other companies , used stock rather
than cash to match employee contributions and restricted sales of
the shares .
and they could only guess at the year - end makeup of the plan ' s
assets until the end of june , reflecting sec disclosure standards
for savings plans . by that time , the stock ' s drop - - which reached
99 percent today - - was already well under way .
trio of lawsuits
enron later reported $ 1 . 01 billion in third - quarter charges ;
ousted chief financial officer andrew fastow , who ran partnerships
that accounted for some of the charges ; restated its results since
1997 ; became the target of an sec accounting investigation ; and
accepted a takeover bid from dynegy inc . , its biggest rival .
the company ' s shares , which ended last year at $ 83 . 13 , fell as
low as $ 1 . 05 today before a midday trading halt as enron ' s debt was
downgraded to junk - bond status and dynegy abandoned its offer .
in response to the plunge , employees in the 401 ( k ) plan - -
which allows workers to defer part of their pay and build tax - free
savings , and takes its name from a section of the internal revenue
service code - - have filed three lawsuits against enron .
the suits allege , among other things , that the houston - based
company prevented employees from shifting investments within the
plan between oct . 17 , the day after its disclosure of the charges ,
and nov . 19 as the company made administrative changes .
all three seek class - action status on behalf of the plan ' s
participants . the most recent filing came from the gottesdiener law
firm , based in washington , on monday . it covers the longest time
period : november 1995 to now .
falling percentages
enron shares accounted for 64 percent of the savings plan ' s
assets at the end of 1994 , the year before the period associated
with the gottesdiner suit began . the figure reflected a one - time
company contribution of preferred stock , and rose from 62 percent
in 1993 .
each preferred share has a face value of $ 100 and is
convertible into 27 . 304 common shares . this translates into a
conversion price of $ 3 . 66 a share , which was a bargain before
today ' s trading .
the plan also owned a stake in enron ' s former oil and gas
unit , which became eog resources inc . after gaining independence in
1999 . add in those shares , and company stock represented about two -
thirds of the 1994 assets .
enron ' s common and preferred shares fell to 60 percent of
401 ( k ) assets available for benefits in 1995 , 58 percent in 1996
and 53 percent in 1997 as the u . s . stock market rallied , lifting
the value of participants ' investments in equity mutual funds .
the shares represented 49 percent of the plan ' s assets in
1998 . the proportion hit bottom at 46 percent in 1999 , when the
assets more than doubled - - exceeding the 56 percent increase in
enron ' s share price that year - - to $ 1 . 62 billion .
how much choice ?
then came last year , when the common shares recorded their
best performance in more than two decades even as u . s . stocks
stumbled . enron rallied 87 percent amid soaring electricity and
natural gas prices , while the standard & poor ' s 500 index , a market
benchmark that includes the company , fell 10 percent .
company shares in the plan rose in value by $ 652 . 7 million ,
according to an sec filing . the total includes shares bought and
sold throughout the year . by contrast , mutual - fund holdings fell by
$ 47 million and ` ` other investments ' ' rose by just $ 134 , 000 , the
filing said .
at year - end , the 401 ( k ) plan owned 13 . 9 million enron common
shares and 70 , 000 preferred shares , valued at $ 1 . 32 billion . this
total encompasses not only enron ' s matching contributions to the
plan , but also employees ' investments with their own money .
the company generally provides a 50 percent match , in stock ,
for the first 6 percent of pay that goes into the plan . employees
can ' t sell the shares and move the proceeds into other investment
choices until they reach the age of 50 .
company contributions accounted for about 11 percent of the
plan ' s stock holdings , said karen denne , an enron spokeswoman . the
figure suggests employees invested more heavily in their company
than usual for 401 ( k ) participants .
waiting for data
for the average u . s . plan account , company stock amounted to
19 percent of assets at the end of last year , according to a study
done by the employee benefit research institute and the investment
company institute and published last week .
in any case , enron ' s approach to matching ensures that as much
as one - third of the contribution to an employee ' s account takes the
form of shares that they can ' t sell right away .
anyone who wanted to gauge how this approach , and enron ' s
stock performance , affected the plan ' s financial position last year
had to wait until june 27 . that ' s when the filing cited earlier
arrived at the sec .
employee savings and stock - purchase plans , such as 401 ( k )
plans , don ' t have to submit annual reports until 180 days after
their fiscal year ends . they can even get a 15 - day extension of the
deadline if they need one .
by the time enron ' s plan made its annual report , it was
already a bit too late to act on the information . the company ' s
shares dropped 44 percent between the end of 2000 and the date of
the submission . as the filing demonstrated , employees looking to
save for retirement had been set up for a fall .
enron ' s credit rating cut to junk by s & p and moody ' s ( update 4 )
2001 - 11 - 28 14 : 38 ( new york )
enron ' s credit rating cut to junk by s & p and moody ' s ( update 4 )
( updates with analyst comment in third paragraph , fitch
rating in fourth paragraph and shares in sixth paragraph . )
new york , nov . 28 ( bloomberg ) - - standard & poor ' s , moody ' s
investors service and fitch , inc . slashed enron corp . ' s credit
rating to junk status as rival energy trader dynegy inc . rescinded
its buyout bid for the company .
the cut could force enron into bankruptcy . at least $ 3 . 9
billion in debt comes due immediately because of the rating cut ,
and the company struggles with a cash crunch as it suspends its
online trading unit and some ` ` non - core ' ' payments . enron ' s
trading business is also faltering as trading partners lose faith
in the company ' s ability to meet its obligations .
` ` this is a disaster , ' ' said jon kyle cartwright , a debt
analyst at raymond james and associates . ` ` it is difficult , if not
impossible , for anyone to do trades with enron ' s trading
operations in light of junk ratings across the board and dynegy
walking away from the deal . ' '
s & p reduced enron ' s long - term grade six levels to ` ` b - ' ' from
` ` bbb - ' ' and withdrew its ` ` a ' ' short - term rating . moody ' s cut
enron ' s credit rating to ` ` b 2 , ' ' five levels below investment
grade , from ` ` baa 3 , ' ' the lowest investment level . moody ' s
affirmed its ` ` not - prime ' ' rating on enron ' s commercial paper .
fitch cut enron ' s senior unsecured rating 10 levels , to
` ` cc ' ' from ` ` bbb - , ' ' and its short term rating to its second -
lowest ` ` c ' ' from ` ` f 3 . ' ' fitch said a ` ` default of some kind
appears probable . ' '
deterioration
` ` we saw the deterioration in the trading operations , and
that threw the merger in doubt , ' ' said s & p analyst todd shipman
and the author of the report .
enron has $ 15 . 5 billion of debt outstanding , according to
bloomberg data . its shares , which have fallen 99 . 2 percent so far
this year , lost $ 3 . 34 cents today and are now trading at 77 cents .
enron ' s stock had fallen by more than 50 percent since nov .
19 amid growing skepticism that the dynegy would complete the
acquisition .
` ` we became a lot more concerned when the stock didn ' t
stabilize , ' ' said john diaz , moody ' s managing director for energy
and one of the authors of the report . ` ` the drop in the stock
price put pressure on dynegy to renegotiate the deal . ' '
cash burn
shipman said in his report that ` ` the willingness of dynegy
to complete its planned acquisition of enron has been compromised
by the continued drop in confidence in the capital markets that
the transaction would hold . ' '
credit analysts also focused on enron ' s ` ` cash burn ' ' rate ,
diaz said . enron said in its most recent filing last week that it
had $ 1 billion in cash , which was a lot less than the market had
expected , diaz said .
` ` it came as a surprise to us and to others , ' ' he said . ` ` we
expected at least $ 2 . 5 billion so they would have staying power . ' '
enron expected to sell portland utility to northwest natural
2001 - 11 - 28 15 : 07 ( new york )
enron expected to sell portland utility to northwest natural
portland , oregon , nov . 28 ( bloomberg ) - - enron corp . , the
nearly bankrupt energy trader , is expected to go through with the
sale of its portland general electric co . unit to northwest
natural gas co . , a spokesman for the utility owner said .
enron last month agreed to sell pge to northwest natural for
$ 2 . 9 billion in cash , stock and assumed debt . dynegy inc . today
called off its planned purchase of enron , saying the energy trader
breached covenants in the merger agreement . dynegy had supported
the pge sale .
northwest natural filed its application to buy pge with the
oregon public utility commission today . enron representatives have
given the portland , oregon - based company no indication that they
plan to call off the sale , northwest natural spokesman steve
sechrist said .
` ` we think the transaction will be completed , ' ' sechrist
said . ` ` whatever happens to enron , the deal has significant
benefits for customers and shareholders of both their company and
our company . ' '
a spokeswoman for houston - based enron didn ' t return calls for
comment . pge spokesman scott simms said he couldn ' t comment on
enron ' s planned sale of the utility .
northwest natural shares fell 32 cents to $ 24 . 02 in
midafternoon trading . enron shares fell $ 2 . 91 to $ 1 . 20 before
trading was halted for dynegy ' s announcement . enron shares have
dropped 99 percent since the first of the year .
commission ' s role
marc hellman , the administrator responsible for mergers and
acquisitions at the oregon public utility commission , said he is
unsure what would happen if enron were to file for bankruptcy
protection .
` ` i can ' t recall it ever happening , and i ' ve been here for
22 years , ' ' hellman said . ` ` if it went all the way to the end ,
where they ' re liquidating assets , you can ' t sell utility property
without commission approval . there are probably some issues where
our attorney general ' s office may look into it . ' '
hellman said he has heard nothing to indicate northwest
natural ' s purchase of pge wouldn ' t go forward .
` ` enron was getting cash from northwest natural for the
purchase , as well as shares , ' ' hellman said . ` ` that aspect of the
transaction becomes a little curious if enron is going through
bankruptcy . ' '
debt downgrades
moody ' s investors service today downgraded pge ' s senior
secured debt to a 3 from a 2 . moody ' s also downgraded pge ' s
unsecured debt , its junior subordinated debt and its preferred
stock .
the ratings service said it had expected to downgrade pge ' s
ratings once northwest natural completed its acquisition of the
utility .
` ` however , today ' s rating action is being taken in advance of
the expected closing of that transaction to reflect moody ' s
concerns surrounding portland general ' s ability to remain fully
insulated from the many financial challenges currently being faced
by its parent , enron corp . , due in large part to lost investor
confidence in enron , ' ' moody ' s said in a statement .
sempra energy interested in buying some enron assets ( update 2 )
2001 - 11 - 28 15 : 39 ( new york )
sempra energy interested in buying some enron assets ( update 2 )
( adds enron comment in sixth paragraph , updates shares in
fourth . )
san diego , nov . 28 ( bloomberg ) - - sempra energy , an owner of
electric and natural - gas utilities , is interested in buying some
of enron corp . ' s assets now that the energy trader ' s planned
merger with dynegy inc . has failed , a sempra spokesman said .
` ` we are interested in some of enron ' s hard assets and our
interest would lie in those assets that would have synergies with
our own operations , ' ' sempra spokesman doug kline said . ` ` beyond
that i couldn ' t give you more specifics . ' '
dynegy today called off its purchase of enron , saying the
energy trader breached covenants in the merger agreement . dynegy
had agreed to buy enron for at least $ 23 billion in stock and
assumed debt this month . a federal investigation of accounting
irregularities at enron had limited its ability to finance
operations and sent its shares plunging .
sempra shares fell 39 cents to $ 22 . 66 in late trading . enron
shares fell $ 3 . 48 to 63 cents once they resumed trading after a
halt for dynegy ' s announcement . enron shares have dropped
99 percent since the first of the year .
houston - based enron has an ownership interest in argentina ' s
4 , 104 - mile natural - gas pipeline system , the largest pipeline
system in south america . sempra energy international owns a
43 percent stake in two natural - gas utility holding companies in
argentina . sempra also is the owner of the san diego gas &
electric and southern california gas co . utilities .
` ` we are looking at selling our global assets that are not
core to our business , and so we ' ll be continuing with an asset -
sale program , ' ' enron spokeswoman karen denne said . ` ` we are not
going to comment on who we ' ve had discussions with or what the
status of those is . ' '
in addition to its interest in enron assets , sempra has had
discussions with enron employees who want to leave the company ,
kline said .
` ` a number of enron employees have approached us , as we ' re
aware they ' ve approached other firms , ' ' kline said .
enron office tower project in limbo after dynegy ends purchase
2001 - 11 - 28 15 : 42 ( new york )
enron office tower project in limbo after dynegy ends purchase
houston , nov . 28 ( bloomberg ) - - enron corp . ' s 1 . 17 - million -
square - foot office tower project in downtown houston has been
thrown into limbo after dynegy inc . abandoned its proposed
purchase of the country ' s largest energy trader .
the 40 - story tower at 1500 louisiana , next to enron ' s
current headquarters , is scheduled to be completed in january ,
according to hines interests , the construction manager .
the building , the first new houston skyscraper since 1987 ,
features floors as large as 52 , 00 square feet to accommodate
enron ' s trading activities and a circular sky bridge nicknamed
` ` the saturn ring ' ' that connects the new tower with enron ' s
existing building and a parking garage .
` ` dynegy occupies 700 , 000 square feet in houston and the
thinking was that after they bought enron they would move their
operations into the new tower , ' ' said will penland , senior
managing director at property broker cb richard ellis ' s houston
office . ` ` i guess that has fallen by the wayside now . ' '
enron ' s shares tumbled $ 3 . 42 to 69 cents in late trading as
investors and analysts said the company may be forced into
bankruptcy . standard & poor ' s corp . cut enron ' s credit rating to
junk as bankers failed to raise $ 1 . 5 billion enron needed to
operate until the deal was completed . enron said it is suspending
all payments other than those necessary to maintain its core
operations .
the cesar pelli & associates - designed tower , called enron
center south , is clad in reflective glass and metal panels , and
features sun shades on its south face , according to hines . the
building ' s seven - story base includes five 52 , 000 square - foot
floors . each of the top 33 stories is 25 , 000 square feet .
when the project was announced two years ago , enron needed
more space to house a growing workforce . its stock price hit a
peak of $ 90 a share in august 2000 .
the project kicked off a building boom for houston , with
three other buildings now under construction that would add 2 . 05
million square feet to the city ' s office supply , according to
prudential financial . the largest of these is a reliant resources
project at 100 main street .
this activity , combined with falling energy prices and job
cuts at compaq computer corp . , continental airlines inc . , and
other houston employers , may cause the city ' s downtown office
vacancy rate to rise to the ` ` mid - teens ' ' in 2002 from 8 . 2
percent at the end of september , according to james sullivan ,
prudential ' s real estate analyst .
enron mentions
wrap : dynegy terminates troubled merger pact with enron
dow jones news service , 11 / 28 / 01
enron ' s fall to spark volatility on pwr , natural gas mkts
dow jones energy service , 11 / 28 / 01
merger collapse , weak fed report , rattle investors at midafternoon
dow jones business news , 11 / 28 / 01
enron to temporarily suspend noncore payments
dow jones news service , 11 / 28 / 01
energy markets seen surviving enron ' s woes , but changed
dow jones energy service , 11 / 28 / 01
uk : enron - a pioneer of europe ' s new power markets .
reuters english news service , 11 / 28 / 01
usa : wrapup 2 - enron near collapse after dynegy pulls out .
reuters english news service , 11 / 28 / 01
usa : us energy regulator says " monitoring " enron situation .
reuters english news service , 11 / 28 / 01
usa : dynegy says no longer trading with enron .
reuters english news service , 11 / 28 / 01
usa : enron seeks to preserve value after dynegy pullout .
reuters english news service , 11 / 28 / 01
usa : update 1 - enrononline trading system shuts down .
reuters english news service , 11 / 28 / 01
usa : update 1 - key us lawmaker doesn ' t see govt solution on enron .
reuters english news service , 11 / 28 / 01
uk : uk power prices rally , enron news dims trade .
reuters english news service , 11 / 28 / 01
usa : nymex natgas tumbles late on bearish aga data .
reuters english news service , 11 / 28 / 01
usa : citigroup , j . p . morgan off on enron exposure .
reuters english news service , 11 / 28 / 01
stockwatch enron down 85 pct as dynegy walks out of merger deal
afx news , 11 / 28 / 01
enron temporarily suspends all payments except those needed to maintain ops
afx news , 11 / 28 / 01
calpers may discuss enron , action against co . in dec
dow jones energy service , 11 / 28 / 01
dynegy calls off $ 8 . 4 billion takeover of enron after credit downgrade
associated press newswires , 11 / 28 / 01
dynegy terminates merger with enron ; conference call scheduled for 12 : 30 cst , 1 : 30 p . m . est
business wire , 11 / 28 / 01
dynegy pull out of enron purchase ; credit ratings cut ( update 6 )
bloomberg , 11 / 28 / 01
enron ' s online trading unit has stopped , traders say ( update 2 )
bloomberg , 11 / 28 / 01
enron ' s 401 ( k ) plan was set up for fall : david wilson ( updatel )
bloomberg , 11 / 28 / 01
enron ' s credit rating cut to junk by s & p and moody ' s ( update 4 )
bloomberg , 11 / 28 / 01
enron expected to sell portland utility to northwest natural
bloomberg , 11 / 28 / 01
sempra energy interested in buying some enron assets ( update 2 )
bloomberg , 11 / 28 / 01
enron office tower project in limbo after dynegy ends purchase
bloomberg , 11 / 28 / 01
wrap : dynegy terminates troubled merger pact with enron
11 / 28 / 2001
dow jones news service
( copyright ( c ) 2001 , dow jones & company , inc . )
houston - ( dow jones ) - dynegy inc . ( dyn ) terminated its troubled merger agreement with enron corp . ( ene ) , backing away from the deal despite frantic last - minute attempts by both sides to save it .
dynegy wednesday cited enron ' s breaches of representations , warranties , convenants and agreements , including the material adverse change provision .
the announcement came after standard & poor ' s cut the beleaguered energy trader ' s debt rating to b - minus , essentially rendering it to junk status .
the downgrade triggered financial covenants and raised the possibility that enron will be forced to file for protection under chapter 11 of the federal bankruptcy code . that could be a fatal blow for enron , which needs huge sums of cheap money to keep its trading operations alive .
standard & poor ' s lowered its long - term rating on enron to b - minus from triple - b - minus , citing fears that dynegy would abandon its proposed purchase of enron .
the collapse of the dynegy purchase would create enormous pressure on enron ' s credit profile because of enron ' s limited access to capital at a time when extensive debt restructuring is necessary , s & p said .
" while it is regrettable to see a leading industry player in difficulties , this doesn ' t reflect a failure for the energy merchant business , " dynegy said in announcing its decision .
however , dynegy said its energy delivery network and core businesses are solid , and the company and its industry peers are ready to absorb any added volatility in the energy market as the result of the potential loss of enron .
in afternoon trading on the new york stock exchange , enron shares were down $ 2 . 91 , or 71 % , to $ 1 . 20 . dynegy , meanwhile , was down $ 4 . 08 , or 10 % , at $ 36 . 81 , also on the big board .
top executives of enron and dynegy had tried to salvage a deal to combine the two energy - trading companies amid growing signs that enron faced cash - flow problems as a result of a sharp downturn in its core trading business .
talks between enron and dynegy began in earnest over the weekend to cut the price of the all - stock transaction after enron ' s share price had plummeted in the wake of disclosures that its future earnings wouldn ' t be as high as originally anticipated . last month dynegy agreed to buy enron after the emergence of damaging revelations concerning a series of deals that allowed enron executives to profit personally at the expense of the company and its shareholders . those deals are now the subject of a securities and exchange commission investigation .
citing a person familiar with the situation , the wall street journal said wednesday that enron ' s board late tuesday had informally agreed to a new share - exchange ratio of 0 . 12 shares of dynegy for each enron share tendered , down more than 50 % from the original offer of 0 . 2685 dynegy share for each enron share .
that latest proposed share - exchange ratio valued enron at $ 4 . 91 a share , or a total of $ 4 . 17 billion . that would compare with the original value of $ 10 . 98 a share , or $ 9 . 33 billion . in exchange for reducing the purchase price , some members of the enron team were insisting on more control over the merged company . dynegy also was considering an additional $ 250 million cash investment in enron . dynegy , together with chevrontexaco inc . ( cvx ) , has already injected $ 1 . 5 billion into enron in an effort to stabilize the company .
while struggling to keep the planned merger alive , enron also has been seeking to extend the maturity dates of some of its borrowings . enron has a total of about $ 13 billion of debt , of which about $ 9 billion comes due by the end of next year . last month enron said in a filing with the sec that a cut in its rating to below investment grade by any of the three major credit rating agencies - along with a decline in its stock price below certain levels - would trigger the need to repay , refinance or cash collateralize facilities totaling $ 3 . 9 billion .
dynegy said wednesday that it will go through with its acquisition of enron natural gas pipeline unit northern natural , omaha , neb . , and said it has exercised its right to acquire the unit ' s common shares .
chevrontexaco , which owns 26 % of dynegy , contributed $ 1 . 5 billion to the proposed enron merger , and dynegy used that money to acquire the pipeline unit .
northern natural , which owns and operates 16 , 500 miles of interstate natural gas pipeline spanning from the permian basin of texas to the great lakes , has historically been a strong earnings contributor .
dynegy said the unit will be a positive addition to dynegy ' s own energy delivery network .
copyright ? 2000 dow jones & company , inc . all rights reserved .
enron ' s fall to spark volatility on pwr , natural gas mkts
11 / 28 / 2001
dow jones energy service
( copyright ( c ) 2001 , dow jones 403 - 531 - 2912 dina . omeara @ dowjones . com
copyright ? 2000 dow jones & company , inc . all rights reserved .
merger collapse , weak fed report , rattle investors at midafternoon
by stacy forster
11 / 28 / 2001
dow jones business news
( copyright ( c ) 2001 , dow jones & company , inc . )
the wall street journal online
blue - chip stocks remained weak wednesday , after a key survey of regional conditions from the federal reserve revealed that many sectors of the economy continued to struggle .
investors also were rattled by news that dynegy had pulled out of merger talks with fellow energy - provider enron .
in midafternoon trading , the dow jones industrial average was down 111 points to 9761 , after flirting with a return to 10000 over the last two sessions . the industrials finished down 110 . 15 points , or 1 . 1 % , at 9872 . 60 tuesday .
meanwhile , the nasdaq composite index lost 27 . 30 to 1908 . 70 , after declining 5 . 26 points to 1935 . 97 tuesday .
other indexes also fell . the standard & poor ' s 500 - stock index shed 13 . 20 to 1136 . 40 , the russell 2000 index declined 3 to 457 . 70 , and the new york stock exchange composite index dropped 4 . 90 to 579 . 70 .
the fed ' s so - called beige book indicated the economy remained soft in october and november . the survey showed " signs of further slowing outweighed signs of recovery " in early november . " the report rekindled speculation that the fed will reduce interest rates again in an effort to stimulate the economy .
investors already had been in the mood to take some money off the table , a trend that started tuesday after the conference board issued a disappointing report on consumer confidence , and federal reserve gov . laurence meyer said it is likely that u . s . economic output is continuing to shrink .
several other key indicators are due out over the next couple of days , including the commerce department ' s report friday on third - quarter gross domestic product .
investors also were rattled wednesday after standard the european union commission expects the companies to request approval for the merger " soon . " shares of compaq fell 2 . 1 % .
shares of handset phone makers slid after nokia said global sales of mobile phones across the industry will only grow 10 % to 15 % in 2002 after falling this year , weakening hopes of a recovery for the industry . abn amro trimmed its views on motorola following the forecast . shares of nokia fell 4 . 5 % , while motorola lost 2 % .
in major u . s . market action :
stocks slid . on the big board , where 819 million shares traded , 1 , 824 stocks fell and 1 , 258 rose . on the nasdaq , 1 . 2 billion shares traded hands .
bonds were mixed . the 10 - year treasury note gained 3 / 32 ; its yield , which moves inversely to its price , fell to 4 . 92 % . the 30 - year bond lost 4 / 32 to yield 5 . 34 % .
the dollar fell . the dollar declined against the euro to 88 . 65 cents , down from 88 . 64 cents , and weakened against the yen , falling to 123 . 14 yen , from 123 . 96 yen late tuesday in new york .
copyright ( c ) 2001 dow jones & company , inc .
all rights reserved .
copyright ? 2000 dow jones & company , inc . all rights reserved .
enron to temporarily suspend noncore payments
11 / 28 / 2001
dow jones news service
( copyright ( c ) 2001 , dow jones dow jones newswires ; 201 - 938 - 5400
copyright ? 2000 dow jones & company , inc . all rights reserved .
energy markets seen surviving enron ' s woes , but changed
by mark golden , john edmiston and andrew dowell
of dow jones newswires
11 / 28 / 2001
dow jones energy service
( copyright ( c ) 2001 , dow jones & company , inc . )
new york - ( dow jones ) - the energy markets built by enron corp . ( ene ) will survive the company ' s troubles , but they won ' t emerge unscathed , traders and analysts said wednesday .
energy companies have had weeks to adjust to serious concerns about the houston - based giant ' s creditworthiness , allowing a more or less orderly withdrawal of enron from the market before ratings agencies wednesday downgraded enron ' s credit to junk - bond levels .
nevertheless , liquidity in the north american natural gas and electricity markets is expected to suffer and credit requirements are likely to be tightened in general , creating difficulties for some energy traders .
" this doesn ' t spell the end of energy trading , " said one trading manager for an independent power producer . " the market is much bigger than enron , and that ' s why enron fell . this does spell the spell the end of trading for companies that don ' t have a strong physical asset base for at least a year or two as credit requirements are generally tightened , "
moreover , small producers of natural gas or electricity that hedged their 2002 output with enron earlier this year - when prices were much higher than they are now - will suffer if enron has trouble fulfilling those commitments .
enron warned in a filing with the securities and exchange commission last week that its ability to continue as a going concern would be threatened if its credit ratings were downgraded to noninvestment grade levels .
news of enron ' s downgrade added 5 cents to 10 cents to natural gas futures at the new york mercantile exchange , as traders covering short positions sent the december contract to $ 2 . 82 per million british thermal units , traders said .
midwestern and southeastern power prices were also said to have risen due to trading inefficiencies after enron turned off its internet - based trading platform enrononline and higher gas prices .
prices have in all those markets have since fallen , but the moves point to the increased volatility and lessened efficiency some analysts and traders expect should enron exit the market entirely .
kyle cooper , energy analyst at salomon smith barney , said traders will have to present wider bid - offer spreads in order to get deals done in markets in which enron provided critical liquidity .
" one less player , one less market , because of the illiquidity , " cooper said .
at one time , enron accounted for about a quarter of all trade in the north american gas and power markets .
copyright ? 2000 dow jones & company , inc . all rights reserved .
uk : enron - a pioneer of europe ' s new power markets .
by stuart penson
11 / 28 / 2001
reuters english news service
( c ) reuters limited 2001 .
london , nov 28 ( reuters ) - u . s . group enron , on the brink of collapse on wednesday , has been a pioneer of energy dealing in europe and its demise would rob utilities across the continent of a key trading partner .
with a european staff of 5 , 000 , offices in most major cities and a lavish headquarters overlooking london ' s buckingham palace , enron created the trading culture now embraced by previously sceptical european utilities as markets open up to competition .
until recently , enron had accounted for about 30 percent of german wholesale power trading . it was also a major player in uk gas and electricity and nordic power , and was driving forward a fledgling french power market .
" on average we are now doing around 200 deals a day with about 300 counterparties , " enron ' s director of continental power trading gregor baeumerich told reuters in an interview last month , days before the group was plunged into its current crisis .
britain ' s forward gas market rallied on wednesday as it emerged that a rescue deal from smaller rival dynegy had unravelled and enron looked to be skating dangerously close to bankruptcy .
enron ' s list of trading partners included major utilities such as german giants e . on and rwe and the uk ' s innogy and british energy
u . s . companies with trading desk in europe , such as txu , aep , dynegy and duke energy , also traded with enron .
the company ' s enrononline internet trading platform , suspended earlier on wednesday , set the standard for online trading , offering a blueprint followed by utilities and brokers .
enron did about 60 percent of its trade through the platform .
the group ' s presence in europe is not confined to trading . the company has around 4 , 000 megawatts of power generation , spanning italy , poland , greece and the uk where it owns one of the biggest plants at teesside .
the company built a reputation for hard - nosed trading expertise in europe ' s previously pedestrian utilities industry and its approach seemed almost evangelical .
in the summer , flushed with confidence , the company placed a bmw sports car in the lobby of its london office , a prize for employees successful in recruiting fresh talent for the enron cause .
copyright ? 2000 dow jones & company , inc . all rights reserved .
usa : wrapup 2 - enron near collapse after dynegy pulls out .
by c . bryson hull
11 / 28 / 2001
reuters english news service
( c ) reuters limited 2001 .
houston , nov 28 ( reuters ) - enron corp . swooned at the edge of one of the biggest corporate collapses in u . s . history on wednesday as its rescue by rival dynegy inc . blew apart .
dynegy accused enron of breaching the representations it made when a takeover agreement was negotiated on nov . 9 , invoking an escape clause that let it pull out of the all - stock deal valued at $ 9 . 3 billion at the time .
shares of enron , recently ranked no . 7 on the fortune 500 list of the biggest u . s . companies , had lost most of their value in the past three weeks , and all three major credit rating agencies had slashed their ratings on enron ' s bonds to junk status by the time dynegy made its announcement .
enron ' s latest disaster marked another low in a stunning free - fall that began innocently enough with the announcement of a $ 638 million quarterly loss six weeks ago . surprise disclosures , including the admission it overstated earnings by almost $ 600 million since 1997 and kept huge debts off its balance sheet , led investors to rapidly lose faith in a company valued at almost $ 80 billion a little more than a year ago .
on wednesday , its market value was less than $ 500 million .
in response to dynegy ' s announcements and credit rating downgrades , enron said it will temporary suspend all payments other than those necessary to maintain its core operations .
kenneth l . lay , enron ' s chairman and chief executive , said the company was evaluating and exploring other options to protect its core energy businesses .
the loss of enron ' s investment - grade credit rating forces some $ 3 . 9 billion in debts to come due immediately , a major problem for a company that has spent most of the $ 5 . 5 billion it sought in recent weeks to stay afloat . enron said in a recent regulatory filing that it was unlikely to " continue as a going concern " were its credit rating to be slashed to junk status .
it became increasingly clear , as dynegy sought to renegotiate the deal , that enron ' s tricky and often indecipherable accounting was becoming a sticking point , sources close to the negotiations said .
" while it is regrettable to see a leading industry player in difficulties , this does not reflect a failure of the merchant energy business , " dynegy chairman and chief executive officer chuck watson said in a statement .
dynegy said it would exercise its option to buy enron ' s northern natural gas pipeline with the $ 1 . 5 billion it and partner chevrontexaco put into the deal .
dynegy said it stopped trading with enron as of wednesday morning , pegging its exposure at $ 75 million .
a bad sign came earlier on wednesday , as energy traders said operations had stopped at enron ' s once highly lucrative online trading system , enrononline . the unit accounted for up to 90 percent of enron ' s earnings , and was considered the jewel of the trading franchise that dynegy coveted most in its planned $ 9 . 3 billion all - stock takeover .
risk management failures
enron , which touted itself as an agile risk manager , found its credit and debt had spiraled out of control as a series of partnerships designed to hide debt off of its balance sheet caused investors to lose faith in recent weeks .
the partnerships , which included top enron executives and are the subject of a u . s . securities and exchange investigation , provided financing in exchange for guarantees that enron ' s stock stay above certain levels and its credit remain investment - grade . but they came back onto the balance sheet with a vengeance , as enron found it would have to meet massive debt obligations as its shares and credit fell .
enron shares plunged $ 3 . 53 , or 85 percent , to 61 cents on wednesday , as the new york stock exchange twice halted trading of enron shares before announcements affecting the company . it ' s stock has fallen more than 98 percent this year .
the stock peaked at $ 90 . 56 in august 2000 , riding high on the cresting wave of the technology boom after enron took its trading outfit online and promised to bring its business model into the broadband communications arena .
" they ( enron ) entrapped the sophisticates , " said robert stovall , senior strategist at prudential securities , referring to what was once an almost fawning admiration for enron by institutional investors . " i think this is going to become a classic case . "
stovall , with nearly 50 years of wall street experience , said he could not recall any previous corporate unraveling that matches that of enron .
" you would have to go to pre - sec days for that , " he said , referring to the creation of the sec in the aftermath of the stock market crash of 1929 .
the final cuts
standard & poor ' s , moody ' s investors service and fitch all cut their ratings on the fallen energy trading giant ' s debt to junk status . s & p said it had lost confidence in enron ' s ability to complete the merger with dynegy , and said bankruptcy was a " distinct possibility " if the merger fails .
andre meade , a commerzbank analyst who has been consistently bearish on enron and the deal , said its core business deteriorated at an increasing pace in recent weeks , and the ratings agencies could not find the liquidity they wanted inside enron .
" the numbers were not enough to soothe them , " said meade , who downgraded enron to " sell " from " hold " on wednesday . " this company should have been downgraded to junk weeks ago . the ratings agencies had given them several weeks , and they just couldn ' t hold out anymore . "
dynegy on nov . 9 said it would take over enron in a deal valued at about $ 10 . 41 per enron share . chevrontexaco corp . , a major dynegy shareholder , pledged to immediately pump $ 1 . 5 billion into enron to bolster its withering finances .
deal advisers j . p . morgan chase and citigroup have already contributed $ 1 billion to the deal , and were expected to have to put up after enron was rebuffed by private equity firms it had approached seeking more cash .
representatives of dynegy and enron had haggled over new terms for the takeover late into tuesday , including a buyout offer half the original price , sources close to the talks said .
enron ' s crash began when it said it would take $ 1 . 01 billion in writedowns and charges against its third - quarter earnings for failed investments . it later admitted that it had to reduce stockholder equity by $ 1 . 2 billion to extract itself from partnerships in which now - ousted chief financial officer andrew fastow the managing partner .
those deals , in which fastow earned about $ 30 million in management fees , are the subject of an sec investigation and the . worse yet for enron , it was required to restate its earnings going back four years , shaving off $ 600 million in the process .
( additional reporting by brendan intindola , carolyn koo , joseph silha , david sinkman and jonathan stempel in new york and andrew kelly in houston . ) .
copyright ? 2000 dow jones & company , inc . all rights reserved .
usa : us energy regulator says " monitoring " enron situation .
11 / 28 / 2001
reuters english news service
( c ) reuters limited 2001 .
washington , nov 28 ( reuters ) - the u . s . agency that regulates interstate electricity markets said wednesday it was monitoring enron corp as the company ' s planned rescue by dynegy inc collapsed .
" we ' re monitoring the situation but we don ' t have any comment past that , " said a spokeswoman for the federal energy regulatory commission ( ferc ) .
u . s . electricity traders said operations were abruptly halted on wednesday morning at enron ' s online trading system , enron online . u . s . electricity and natural gas traders have scaled back deals with enron since the company ' s financial problems emerged a few weeks ago .
enron once ranked as the nation ' s largest trader of electricity and natural gas , with some experts estimating the company was involved with about 20 percent of daily trades .
ferc , an independent federal agency , oversees interstate electricity markets , natural gas pipelines and hydroelectric dams .
dynegy said it called off its plan to buy enron for $ 9 billion in stock , citing breaches in the merger agreement by enron .
copyright ? 2000 dow jones & company , inc . all rights reserved .
usa : dynegy says no longer trading with enron .
11 / 28 / 2001
reuters english news service
( c ) reuters limited 2001 .
new york , nov 28 ( reuters ) - energy trader dynegy inc . said on wednesday that its exposure to rival enron corp . is $ 75 million , in the wake of its failed purchase of the beleaguered enron .
houston - based dynegy said it is no longer trading with the company as of this morning .
it also said enron has 180 days to buy back the northern natural gas pipeline for $ 1 . 5 billion . upon the deal ' s collapse , dynegy exercised its option to buy the pipeline .
copyright ? 2000 dow jones & company , inc . all rights reserved .
usa : enron seeks to preserve value after dynegy pullout .
11 / 28 / 2001
reuters english news service
( c ) reuters limited 2001 .
houston , nov 28 ( reuters ) - enron corp . confirmed on wednesday that rival dynegy inc . had terminated its takeover offer for the company and said it was taking action to preserve value in its core trading and energy units .
enron said in a statement it had temporarily halted payments other than those necessary to maintain core operations . enron said it is also reviewing dynegy ' s actions .
" uncertainty during the past few weeks with respect to the merger has dramatically lowered the market ' s confidence in enron and its trading operations , " chairman and chief executive ken lay said . " with dynegy ' s termination of the merger and the ratings agency downgrades , we are evaluating and exploring other options to protect our core energy businesses . "
he said enron would work to retain the employees necessary to the continuing operations of its trading and other core energy businesses .
dynegy accused enron of breaching the representations it made when the takeover was negotiated on no . 9 , invoking an escape clause that let it pull out of the deal .
shares in enron plummeted $ 3 . 39 , or 82 percent , to 75 cents in afternoon trading on the new york stock exchange . they have fallen more than 98 percent this year , after reaching a peak of $ 90 . 56 in august 2000 .
copyright ? 2000 dow jones & company , inc . all rights reserved .
usa : update 1 - enrononline trading system shuts down .
11 / 28 / 2001
reuters english news service
( c ) reuters limited 2001 .
new york , nov 28 ( reuters ) - enron corp ' s internet - based energy and metals trading system was shut down on wednesday , shortly after a leading credit - rating agency downgraded the company ' s debt to " junk " status , energy traders said .
it was not clear whether the enrononline trading system was halted deliberately or by a technical problem . enron officials were not immediately available for comment .
" we were watching the board and suddenly it went blank , " said one northeast natural gas trader . activity on enrononline was halted just after 11 a . m . ( 1600 gmt ) , the trader said .
energy traders said the standard & poor ' s announcement that it was downgrading enron debt triggered a brief spike in new york mercantile exchange natural gas futures , to $ 2 . 82 per million btu , but prices later slipped to the low - $ 2 . 70 s , still up more than 11 cents from tuesday .
" we spiked on the enron news . people ran in to cover any exposure because of the uncertainty . i think they ' re expecting the company to file for chapter 11 ( bankruptcy ) , " said one midwest gas and power trader .
" the enron ( stock ) halt sent a shock through the ( power ) market and all trading stopped . the enron guys pulled all their numbers ( on enrononline ) , " another trader at a houston - based energy firm said .
u . s . natural gas and electricity firms have been steadily scaling back deals with enron for several weeks as fears mounted about the former energy giant ' s credit standing .
" people have been balancing their risk exposure over the last few weeks , " another midwest trader said .
enron was by far the largest u . s . natural gas and electricity trader , with industry analysts estimating it was once involved in some 20 percent of daily trade in those markets .
but since last month , when the company became the target of a securities and exchange commission investigation of financial dealings with partnerships , the houston - based company ' s market share has steadily eroded .
enrononline until recently accounted for about 60 percent of the daily trade volume handled by enron .
enron shares were briefly halted on the new york stock exchange this morning following the credit - rating downgrade . after the stock reopened , it dropped $ 2 . 84 to $ 1 . 30 on the new york stock exchange . enron shares closed tuesday at $ 4 . 14 .
copyright ? 2000 dow jones & company , inc . all rights reserved .
usa : update 1 - key us lawmaker doesn ' t see govt solution on enron .
by susan cornwell
11 / 28 / 2001
reuters english news service
( c ) reuters limited 2001 .
washington , nov 28 ( reuters ) - the chairman of the u . s . house energy and commerce committee said on wednesday he could not see how the government could come to the rescue of enron corp . , near collapse after rival energy trader dynergy inc . pulled out of a deal to buy it .
" i can ' t right now envision anything the government can do , other than encourage the parties who are discussing a merger to continue their efforts , " said billy tauzin , republican of louisiana .
but he said the government must watch carefully whether the troubles of the houston - based enron - once ranked as the nation ' s largest trader of electricity and natural gas - had implications for u . s . energy supplies and pricing .
tauzin noted that enron had been a " very big contributor " to energy supplies in california , which was rocked last winter by a tenfold jump in wholesale electricity prices , a string of black - outs and the bankruptcy of the state ' s largest utility .
" we ' ve got to watch that very carefully , obviously . we don ' t want to be in another session next year trying to deal with energy problems in california as a result of some of the events that are occurring right now with enron , " tauzin said .
the underlying cause of california ' s problems last winter was widely seen as the state ' s badly written electricity deregulation law , which did not allow power companies to pass through higher wholesale electricity costs to consumers .
tauzin said enron ' s decline was unfortunate . " it ' s a sad story . it ' s been a hugely successful enterprise . "
" i would hope they could work it out . we can ' t simply step into every bad market decision and every bad financing decision that occurs in american corporations in this country and work it out for them . we have to count on them to figure it out themselves . "
" our job is going to be to make sure in policy we haven ' t left a breach open where consumers are going to end up short or overpriced in the process , " he added .
enron ' s financial problems have steadily unravelled since last month , when it became the target of a securities and exchange commission investigation of some enron partnerships .
on wednesday , dynergy said it called off its plan to buy enron in a $ 9 billion stock deal , citing breaches in the merger agreement . the company ' s credit ratings were downgraded to junk status .
copyright ? 2000 dow jones & company , inc . all rights reserved .
uk : uk power prices rally , enron news dims trade .
11 / 28 / 2001
reuters english news service
( c ) reuters limited 2001 .
london , nov 28 ( reuters ) - british electricity prices rallied on wednesday but volumes thinned later in the day as traders took stock of news u . s . trader enron was on the brink of collapse after dynegy pulled out of a rescue deal .
" post enron , not much was done . most people pulled their bids , " said one trader , adding enron was one of the largest traders in the uk electricity market .
prompt prices firmed on a combination of colder than usual weather and production problems at some power stations which hit supplies , said traders .
the most striking jump was power for block five on thursday , covering peak time from 1500 to 1900 gmt , which sold at 101 pounds per megawatt hour - the highest price seen so far this winter , said traders .
prices for half hourly prompt contracts on the ukpx bourse were also high , they added .
day ahead baseload sold at 26 . 25 pounds and peak at 35 pounds , with the high prices boosting the forward curve .
ql 02 baseload went through at 19 . 88 pounds while summer 02 sold at 17 . 25 pounds and winter 02 at 19 . 35 pounds .
copyright ? 2000 dow jones & company , inc . all rights reserved .
usa : nymex natgas tumbles late on bearish aga data .
11 / 28 / 2001
reuters english news service
( c ) reuters limited 2001 .
san francisco , nov 28 ( reuters ) - nymex hub gas , up midday wednesday on enron corp . ' s financial troubles , tumbled late after bearish aga data was released this afternoon , traders said .
" healthy supplies continue to be confirmed week after week with these aga reports . until we see a guy in chicago with ice coming off his nose we will go lower because supplies are abundant and there ' s no demand , " one northeast trader said .
the trader said front - month nymex prices could fall below $ 2 per mmbtu in the days ahead if widespread and sustainable cold weather failed to materialize .
at 2 : 48 p . m . est , december was down 40 . 6 cents at $ 2 . 20 per million british thermal units ( mmbtu ) after aga data was released .
earlier in the session , december , which expires today , rocketed to $ 2 . 82 after standard & poor ' s cut energy trading giant enron ' s debt to junk status , a move that threw into question the company ' s ability to meet its financial obligations .
enron is by far the largest u . s . gas and electricity trader , with industry analysts estimating it was once involved in some 20 percent of daily trade in those markets .
aga storage data released this afternoon showed u . s . gas stocks for the week ended nov . 23 rose by 12 bcf , well above reuters survey estimates for an unchanged - to 5 bcf withdrawal number , the year - ago slide of 146 bcf and the five - year average pull of 66 bcf .
total inventories of 3 . 144 tcf jumped to 642 bcf , or 26 percent , above last year and 391 bcf above the five year average .
last week , storage , which stands at 95 percent full , broke the all - time record high of 3 . 127 tcf hit on nov . 6 , 1998 .
most analysts expect the gas glut to grow further in coming weeks , noting last year more than 1 tcf was drawn from inventory during a record cold november - december period .
eastern stocks were unchanged at 98 percent of capacity , about 15 percent above last year . consuming region west storage , which rose 3 bcf for the week , was 46 percent above year - ago levels . inventories in the producing region gained 13 bcf and stood 41 percent above 2000 levels .
the national weather service 6 - 10 day forecast , released late tuesday , called for above normal temperatures for the eastern two - thirds of the nation , with seasonal or below seasonal readings expected in the west .
chart traders said the technical picture remained bearish , particularly with cash still more than 70 cents below the screen , and most said they needed a december close below the november low of $ 2 . 482 to signal another leg lower .
below $ 2 . 482 , december support was pegged at the contract low of $ 2 . 415 and then in the $ 2 . 14 area and at $ 2 . 00 .
december resistance was seen first in the $ 3 . 00 area and then at the $ 3 . 15 - 3 . 208 gap and the high from four weeks ago of $ 3 . 44 .
in the cash today , henry hub swing quotes fell on average 43 cents to $ 2 . 30 . most cash dealers pinned the steep rise to cooler weather and uncertainty over enron ' s future .
midwest pipes jumped 20 to 30 cents to the $ 2 . 50 area . in the west , gas at waha hub in west texas was around 20 cents higher in the mid - $ 2 . 50 s .
swing gas on transco at the new york city gate soared about 60 cents to $ 2 . 72 , while chicago was almost 30 cents higher at $ 2 . 49 .
nymex said an estimated 33 , 265 henry hub contracts traded at 11 : 05 a . m . est .
nymex has been holding abbreviated floor trading sessions following the sept . 11 attacks on the world trade center .
nymex gas open outcry trade will run from 10 : 00 a . m . to 2 : 30 p . m . , with the internet - based access session held from 3 : 15 p . m . to 9 : 00 a . m . , through dec . 31 .
copyright ? 2000 dow jones & company , inc . all rights reserved .
usa : citigroup , j . p . morgan off on enron exposure .
11 / 28 / 2001
reuters english news service
( c ) reuters limited 2001 .
new york , nov 28 ( reuters ) - the collapse of troubled energy trader enron corp . ' s sale to dynegy inc . on wednesday triggered a drop in citigroup inc . and j . p . morgan chase & co . inc . shares , as both banks lent enron millions of dollars .
citigroup and j . p . morgan , which acted as advisors on the takeover deal , have a total exposure to enron of about $ 800 million , richard strauss , an analyst at goldman sachs group inc . , said in a research note . but strauss estimated total unsecured loans only amounted to $ 270 million .
citigroup shares were off $ 2 . 30 , or 4 . 55 percent , at $ 48 . 25 on the new york stock exchange , while j . p . morgan shares were off $ 2 . 37 , or nearly 6 percent , at $ 37 . 43 .
" the after - tax impact to ( earnings per share ) - should enron go completely under - based on citigroup ' s 5 . 2 billion shares outstanding and j . p . morgan ' s 2 billion shares outstanding would be less than $ 0 . 05 for citigroup and $ 0 . 10 for j . p . morgan , " strauss said .
analysts on average expect citigroup to earn 75 cents a share in the fourth quarter , according to market research firm thomson financial / first call . j . p . morgan is expected to earn 50 cents a share , based on the consensus analyst estimate .
three debt rating agencies have cut their enron bond ratings to " junk " status . enron shares were down $ 2 . 95 , or 71 . 3 percent , at $ 1 . 19 in trading on the new york stock exchange . at one point in the past year , the shares traded at $ 84 . 88 .
copyright ? 2000 dow jones & company , inc . all rights reserved .
stockwatch enron down 85 pct as dynegy walks out of merger deal
11 / 28 / 2001
afx news
( c ) 2001 by afp - extel news ltd
new york ( afx ) - shares of enron corp fell below 1 . 00 usd , losing 85 pct , in afternoon trade , after dynegy inc announced it has terminated the two companies ' merger agreement , fueling concerns that enron may file for bankruptcy protection , dealers said .
at 2 . 50 pm , enron was down 3 . 50 usd , or 85 . 0 pct , at 61 cents . dynegy was down 3 . 74 usd at 37 . 15 . the djia was down 102 . 55 at 9 , 770 . 05 and the s & p 500 was down 13 . 93 at 1 , 135 . 57 .
in a statement , dynegy cited " enron ' s breaches of representations , warranties , covenants , and agreements in the merger agreement , including the material adverse change provision " as reasons for the collapse of the deal .
earlier , both standard & poor ' s corp and moody ' s investors service had lowered their rating on enron ' s long - term debt to junk status , saying that enron may well have to file for bankruptcy should the deal fall through .
" a move by enron to seek protection from its creditors through a voluntary filing under chapter 11 of the us bankruptcy code is a distinct possibility if the merger falls through , " s & p had said .
enron , responding in a statement to the collapse of the deal and the ratings agencies downgrades , said it is temporarily suspending all payments other than those necessary to maintain its core operations .
ng / pav /
copyright ? 2000 dow jones & company , inc . all rights reserved .
enron temporarily suspends all payments except those needed to maintain ops
11 / 28 / 2001
afx news
( c ) 2001 by afp - extel news ltd
houston ( afx ) - enron corp said that , in response to the collapse of the propsoed merger with dynegy inc and debt downgrades by s & p and moody ' s , it is temporarily suspending all payments other than those necessary to maintain core operations .
in a statement released by the company shortly after dynegy announced it was pulling out from the tie - up , enron said it will take actions " designed to preserve value in the company ' s core trading and other energy businesses . "
chairman and chief executive officer kenneth lay said his company is also evaluating and exploring other options to protect its core energy operations . " to do this , " he added , " we will work to retain the employees necessary to the continuing operations of our trading and other core energy businesses . "
rdc / kl
copyright ? 2000 dow jones & company , inc . all rights reserved .
calpers may discuss enron , action against co . in dec
by jason leopold and jessica berthold
11 / 28 / 2001
dow jones energy service
( copyright ( c ) 2001 , dow jones dow jones newswires ; 323 - 658 - 3874 ; jason . leopold @ dowjones . com
( jessica berthold contributed to this article )
copyright ? 2000 dow jones less than a year ago , they were trading at $ 84 . 87 . dynegy shares were off $ 4 . 08 , or 10 percent , to $ 36 . 81 .
in a statement , dynegy said enron had breached its acquisition agreement , triggering a " material adverse " clause and causing it to call of the deal .
" while it is regrettable to see a leading industry player in difficulties , this does not reflect a failure of the energy merchant business , " said dynegy chairman and chief executive chuck watson .
the dynegy move came after standard & poor ' s and moody ' s investors service both cited a loss of confidence that the deal will be consummated , and said that dynegy ' s willingness to go through with the buyout has been compromised by continued erosion in investor confidence and enron ' s core energy trading business .
the downgrades make $ 3 . 9 billion of enron debt due immediately , and up to $ 16 billion in other debt originally due next year could come due earlier .
in its statement , dynegy also said it would exercise its right to purchase enron ' s northern natural gas pipeline , an option it received after it and chevrontexaco - which holds a 26 percent stake in dynegy - pumped $ 1 . 5 million into the ailing enron .
despite dynegy ' s claim to the pipeline , analysts are anticipating a battle over enron ' s assets in bankruptcy court .
" it ' s going to be a fight " between dynegy and enron ' s creditors , howald said .
spokesmen for both enron and dynegy didn ' t immediately return repeated calls seeking comment wednesday , though dynegy scheduled a conference call for later in the afternoon .
enron and dynegy , both based in houston , had spent the last several days trying to hammer out a revision to their nov . 9 merger agreement , which valued enron stock at more than $ 10 per share .
" this comes in response to the fact that they weren ' t able to craft a deal last night . they were working on getting more cash ( from banks shepherding the merger ) last night , but they didn ' t get it , " said a . g . edwards & sons analyst mike heim said . " i think bankruptcy ' s not too far away . "
raymond james analyst jon kyle cartwright predicted dynegy will survive with a few battle scars .
" i believe we all misunderstood how dramatic a credibility crisis can be in a recession in a bear market , " he said . " the speed at which enron collapsed caught us all off guard . "
enron last month revealed that partnerships run by its executives had allowed the company to keep about half a billion in debt off its books and allowed the executives to profit from the arrangements . enron ' s dealings with those partnerships are now the subject of a securities and exchange commission investigation .
the company ousted its top financial officer in october , and several weeks ago restated its earnings back to 1997 - eliminating more than $ 580 million in reported income .
- - -
on the net :
http : / / www . enron . com
http : / / www . dynegy . com
copyright ? 2000 dow jones conference call scheduled for 12 : 30 cst , 1 : 30 p . m . est
11 / 28 / 2001
business wire
( copyright ( c ) 2001 , business wire )
houston - - ( business wire ) - - nov . 28 , 2001 - - dynegy inc . ( nyse : dyn )
- - company exercises right to acquire common stock of northern
natural gas pipeline
- - dynegy ' s energy delivery network and core businesses solid
- - industry had time to prepare , market has adjusted
dynegy inc . ( nyse : dyn ) today reported that it has terminated its previously announced merger agreement with enron corp . ( nyse : ene ) . the company cited enron ' s breaches of representations , warranties , covenants and agreements in the merger agreement , including the material adverse change provision .
" while it is regrettable to see a leading industry player in difficulties , this does not reflect a failure of the energy merchant business , said dynegy chairman and ceo chuck watson . " dynegy ' s customer - based , asset - backed energy delivery network has been the driver of our 45 percent compounded annual growth rate for the past 16 years and will continue to provide us with earnings sustainability and future growth .
chevrontexaco , which owns 26 percent of dynegy ' s outstanding common shares , had contributed $ 1 . 5 billion to dynegy as a participant in the transaction . dynegy used the $ 1 . 5 billion to purchase 100 percent of the preferred stock of enron subsidiary , northern natural gas pipeline ( nng ) . dynegy has exercised its option to purchase all the membership interests in the entity which indirectly owns all of the common stock of nng , subject to satisfaction of closing conditions . northern natural , headquartered in omaha , nebraska , owns and operates 16 , 500 miles of interstate natural gas pipeline spanning from the permian basin of texas to the great lakes . it has historically been a strong earnings contributor , and will be a positive addition to dynegy ' s energy delivery network , said the company .
" the industry has reacted and adjusted well to the potential loss of a market participant over the past several weeks , " said dynegy president and chief operating officer steve bergstrom . " with our superior systems , technology infrastructure and people , dynegy and its industry peers are ready to absorb any added volatility in the energy markets . "
about dynegy inc .
dynegy inc . is one of the world ' s premier energy merchants . through its global energy delivery network and marketing , trading and risk management capabilities , dynegy provides innovative solutions to customers in north america , the united kingdom and continental europe .
conference call simulcast
dynegy will simulcast a conference call related to the terminated merger agreement live via the internet on wednesday , november 28 , 2001 at 12 : 30 p . m . ct , 1 : 30 p . m . et . the web cast can be accessed via www . dynegy . com ( click on " investor relations " ) .
certain statements included in this news release are intended as " forward - looking statements " under the private securities litigation reform act of 1995 . these statements include assumptions , expectations , predictions , intentions or beliefs about future events . dynegy cautions that actual future results may vary materially from those expressed or implied in any forward - looking statements . some of the key factors that could cause actual results to vary from those dynegy expects include changes in commodity prices for energy or communications products or services ; the timing and extent of deregulation of energy markets in the u . s . and europe ; the effectiveness of dynegy ' s risk management policies and procedures and the creditworthiness of customers and counterparties ; the liquidity and competitiveness of wholesale trading markets for energy commodities , including the impact of electronic or online trading in these markets ; operational factors affecting dynegy ' s power generation or dynegy ' s midstream natural gas facilities ; uncertainties regarding the development of , and competition within , the market for communications services in the u . s . and europe ; uncertainties regarding environmental regulations or litigation and other legal or regulatory developments affecting dynegy ' s business ; general political , economic and financial market conditions ; and any extended period of war or conflict involving the united states or europe . more information about the risks and uncertainties relating to these forward - looking statements are found in dynegy ' s sec filings , which are available free of charge on the sec ' s web site at http : / / www . sec . gov .
contact : dynegy inc . , houston analysts : margaret nollen , arthur shannon or katie pipkin , 713 / 507 - 6466 or media : john sousa or steve stengel , 713 / 767 - 5800
12 : 58 est november 28 , 2001
copyright ? 2000 dow jones credit ratings cut ( update 6 )
2001 - 11 - 28 13 : 09 ( new york )
dynegy pull out of enron purchase ; credit ratings cut ( update 6 )
( updates to add dynegy comment ; share price . )
new york , nov . 28 ( bloomberg ) - - dynegy inc . abandoned its
proposed purchase of enron corp . , said dynegy in a press
statement . the decision threatens to force enron , once the
country ' s largest energy trader , into bankruptcy .
standard & poor ' s corp . cut enron ' s credit rating to junk as
bankers failed to raise $ 1 . 5 billion enron needed to operate until
the deal was completed . the lack of funds and the prospect of a
downgrade contributed to dynegy ' s decision to scrap the
acquisition , which was valued at $ 23 billion on nov . 9 .
enron shares fell as much as 71 percent to $ 1 . 20 , its lowest
level in at least 19 years . the company ' s 6 . 4 percent bonds , which
mature in 2006 , were quoted at 20 cents on the dollar , down from
53 yesterday . at that price the bonds yield 57 percent .
` ` the reality is enron ' s going bankrupt , ' ' said michael
willingham , a risk manager at itochu international inc . ` ` enron
touted themselves as the king of risk management , but it doesn ' t
look like they ' ve managed their risk very well . ' '
bankers led by j . p . morgan chase & co . vice chairman james b .
lee tried for for two weeks to raise the cash enron needed .
investors including saudi prince alwaleed bin talal , the
blackstone group lp and the carlyle group inc . turned them down
because of concern enron wouldn ' t be able to pay its debts . that
concern was heightened after enron disclosed a previously
undisclosed $ 690 million interest payment due this week .
dynegy said in a statement distributed by business wire that
it terminated its agreement because enron breached covenants .
chairman and ceo chuck watson said dynegy would invoke its right
to purchase enron ' s northern natural gas pipeline . dynegy used an
investment of $ 1 . 5 billion from chevrontexaco corp . , which owns
one quarter of dynegy , to purchase the enron unit , which operates
16 , 500 miles of natural gas pipeline .
enron spokeswoman karen denne didn ' t return calls for
comment .
trading doubts
enron faced a cash crunch in part because some trading
partners lost confidence the company would have the cash to pay
bills . as a result , they either demanded more collateral to trade
or restricting trading with the houston - based company .
enrononline , enron corp . ' s online trading system , stopped
allowing trades and quit posting bids and offers for natural gas
late this morning , say traders who use the web site . enron said
yesterday that enrononline handles about 60 percent of its trading
business , or about $ 2 . 8 billion a day in trading on average over
the last 30 days .
` ` we can log in , but there is nothing there , nothing to buy
and nothing to sell , ' ' said juha laiho , an energy trader at
finland - based fortum oyj in houston . ` ` it went down some time
this morning . ' '
s in both 1998
and 1999 , it had been less than a majority .
participants in the plan , which had $ 2 . 14 billion in assets
available for benefits , could only do so much to diversify their
investments . enron , like many other companies , used stock rather
than cash to match employee contributions and restricted sales of
the shares .
and they could only guess at the year - end makeup of the plan ' s
assets until the end of june , reflecting sec disclosure standards
for savings plans . by that time , the stock ' s drop - - which reached
99 percent today - - was already well under way .
trio of lawsuits
enron later reported $ 1 . 01 billion in third - quarter charges ;
ousted chief financial officer andrew fastow , who ran partnerships
that accounted for some of the charges ; restated its results since
1997 ; became the target of an sec accounting investigation ; and
accepted a takeover bid from dynegy inc . , its biggest rival .
the company ' s shares , which ended last year at $ 83 . 13 , fell as
low as $ 1 . 05 today before a midday trading halt as enron ' s debt was
downgraded to junk - bond status and dynegy abandoned its offer .
in response to the plunge , employees in the 401 ( k ) plan - -
which allows workers to defer part of their pay and build tax - free
savings , and takes its name from a section of the internal revenue
service code - - have filed three lawsuits against enron .
the suits allege , among other things , that the houston - based
company prevented employees from shifting investments within the
plan between oct . 17 , the day after its disclosure of the charges ,
and nov . 19 as the company made administrative changes .
all three seek class - action status on behalf of the plan ' s
participants . the most recent filing came from the gottesdiener law
firm , based in washington , on monday . it covers the longest time
period : november 1995 to now .
falling percentages
enron shares accounted for 64 percent of the savings plan ' s
assets at the end of 1994 , the year before the period associated
with the gottesdiner suit began . the figure reflected a one - time
company contribution of preferred stock , and rose from 62 percent
in 1993 .
each preferred share has a face value of $ 100 and is
convertible into 27 . 304 common shares . this translates into a
conversion price of $ 3 . 66 a share , which was a bargain before
today ' s trading .
the plan also owned a stake in enron ' s former oil and gas
unit , which became eog resources inc . after gaining independence in
1999 . add in those shares , and company stock represented about two -
thirds of the 1994 assets .
enron ' s common and preferred shares fell to 60 percent of
401 ( k ) assets available for benefits in 1995 , 58 percent in 1996
and 53 percent in 1997 as the u . s . stock market rallied , lifting
the value of participants ' investments in equity mutual funds .
the shares represented 49 percent of the plan ' s assets in
1998 . the proportion hit bottom at 46 percent in 1999 , when the
assets more than doubled - - exceeding the 56 percent increase in
enron ' s share price that year - - to $ 1 . 62 billion .
how much choice ?
then came last year , when the common shares recorded their
best performance in more than two decades even as u . s . stocks
stumbled . enron rallied 87 percent amid soaring electricity and
natural gas prices , while the standard & poor ' s 500 index , a market
benchmark that includes the company , fell 10 percent .
company shares in the plan rose in value by $ 652 . 7 million ,
according to an sec filing . the total includes shares bought and
sold throughout the year . by contrast , mutual - fund holdings fell by
$ 47 million and ` ` other investments ' ' rose by just $ 134 , 000 , the
filing said .
at year - end , the 401 ( k ) plan owned 13 . 9 million enron common
shares and 70 , 000 preferred shares , valued at $ 1 . 32 billion . this
total encompasses not only enron ' s matching contributions to the
plan , but also employees ' investments with their own money .
the company generally provides a 50 percent match , in stock ,
for the first 6 percent of pay that goes into the plan . employees
can ' t sell the shares and move the proceeds into other investment
choices until they reach the age of 50 .
company contributions accounted for about 11 percent of the
plan ' s stock holdings , said karen denne , an enron spokeswoman . the
figure suggests employees invested more heavily in their company
than usual for 401 ( k ) participants .
waiting for data
for the average u . s . plan account , company stock amounted to
19 percent of assets at the end of last year , according to a study
done by the employee benefit research institute and the investment
company institute and published last week .
in any case , enron ' s approach to matching ensures that as much
as one - third of the contribution to an employee ' s account takes the
form of shares that they can ' t sell right away .
anyone who wanted to gauge how this approach , and enron ' s
stock performance , affected the plan ' s financial position last year
had to wait until june 27 . that ' s when the filing cited earlier
arrived at the sec .
employee savings and stock - purchase plans , such as 401 ( k )
plans , don ' t have to submit annual reports until 180 days after
their fiscal year ends . they can even get a 15 - day extension of the
deadline if they need one .
by the time enron ' s plan made its annual report , it was
already a bit too late to act on the information . the company ' s
shares dropped 44 percent between the end of 2000 and the date of
the submission . as the filing demonstrated , employees looking to
save for retirement had been set up for a fall .
enron ' s credit rating cut to junk by s & p and moody ' s ( update 4 )
2001 - 11 - 28 14 : 38 ( new york )
enron ' s credit rating cut to junk by s & p and moody ' s ( update 4 )
( updates with analyst comment in third paragraph , fitch
rating in fourth paragraph and shares in sixth paragraph . )
new york , nov . 28 ( bloomberg ) - - standard & poor ' s , moody ' s
investors service and fitch , inc . slashed enron corp . ' s credit
rating to junk status as rival energy trader dynegy inc . rescinded
its buyout bid for the company .
the cut could force enron into bankruptcy . at least $ 3 . 9
billion in debt comes due immediately because of the rating cut ,
and the company struggles with a cash crunch as it suspends its
online trading unit and some ` ` non - core ' ' payments . enron ' s
trading business is also faltering as trading partners lose faith
in the company ' s ability to meet its obligations .
` ` this is a disaster , ' ' said jon kyle cartwright , a debt
analyst at raymond james and associates . ` ` it is difficult , if not
impossible , for anyone to do trades with enron ' s trading
operations in light of junk ratings across the board and dynegy
walking away from the deal . ' '
s & p reduced enron ' s long - term grade six levels to ` ` b - ' ' from
` ` bbb - ' ' and withdrew its ` ` a ' ' short - term rating . moody ' s cut
enron ' s credit rating to ` ` b 2 , ' ' five levels below investment
grade , from ` ` baa 3 , ' ' the lowest investment level . moody ' s
affirmed its ` ` not - prime ' ' rating on enron ' s commercial paper .
fitch cut enron ' s senior unsecured rating 10 levels , to
` ` cc ' ' from ` ` bbb - , ' ' and its short term rating to its second -
lowest ` ` c ' ' from ` ` f 3 . ' ' fitch said a ` ` default of some kind
appears probable . ' '
deterioration
` ` we saw the deterioration in the trading operations , and
that threw the merger in doubt , ' ' said s & p analyst todd shipman
and the author of the report .
enron has $ 15 . 5 billion of debt outstanding , according to
bloomberg data . its shares , which have fallen 99 . 2 percent so far
this year , lost $ 3 . 34 cents today and are now trading at 77 cents .
enron ' s stock had fallen by more than 50 percent since nov .
19 amid growing skepticism that the dynegy would complete the
acquisition .
` ` we became a lot more concerned when the stock didn ' t
stabilize , ' ' said john diaz , moody ' s managing director for energy
and one of the authors of the report . ` ` the drop in the stock
price put pressure on dynegy to renegotiate the deal . ' '
cash burn
shipman said in his report that ` ` the willingness of dynegy
to complete its planned acquisition of enron has been compromised
by the continued drop in confidence in the capital markets that
the transaction would hold . ' '
credit analysts also focused on enron ' s ` ` cash burn ' ' rate ,
diaz said . enron said in its most recent filing last week that it
had $ 1 billion in cash , which was a lot less than the market had
expected , diaz said .
` ` it came as a surprise to us and to others , ' ' he said . ` ` we
expected at least $ 2 . 5 billion so they would have staying power . ' '
enron expected to sell portland utility to northwest natural
2001 - 11 - 28 15 : 07 ( new york )
enron expected to sell portland utility to northwest natural
portland , oregon , nov . 28 ( bloomberg ) - - enron corp . , the
nearly bankrupt energy trader , is expected to go through with the
sale of its portland general electric co . unit to northwest
natural gas co . , a spokesman for the utility owner said .
enron last month agreed to sell pge to northwest natural for
$ 2 . 9 billion in cash , stock and assumed debt . dynegy inc . today
called off its planned purchase of enron , saying the energy trader
breached covenants in the merger agreement . dynegy had supported
the pge sale .
northwest natural filed its application to buy pge with the
oregon public utility commission today . enron representatives have
given the portland , oregon - based company no indication that they
plan to call off the sale , northwest natural spokesman steve
sechrist said .
` ` we think the transaction will be completed , ' ' sechrist
said . ` ` whatever happens to enron , the deal has significant
benefits for customers and shareholders of both their company and
our company . ' '
a spokeswoman for houston - based enron didn ' t return calls for
comment . pge spokesman scott simms said he couldn ' t comment on
enron ' s planned sale of the utility .
northwest natural shares fell 32 cents to $ 24 . 02 in
midafternoon trading . enron shares fell $ 2 . 91 to $ 1 . 20 before
trading was halted for dynegy ' s announcement . enron shares have
dropped 99 percent since the first of the year .
commission ' s role
marc hellman , the administrator responsible for mergers and
acquisitions at the oregon public utility commission , said he is
unsure what would happen if enron were to file for bankruptcy
protection .
` ` i can ' t recall it ever happening , and i ' ve been here for
22 years , ' ' hellman said . ` ` if it went all the way to the end ,
where they ' re liquidating assets , you can ' t sell utility property
without commission approval . there are probably some issues where
our attorney general ' s office may look into it . ' '
hellman said he has heard nothing to indicate northwest
natural ' s purchase of pge wouldn ' t go forward .
` ` enron was getting cash from northwest natural for the
purchase , as well as shares , ' ' hellman said . ` ` that aspect of the
transaction becomes a little curious if enron is going through
bankruptcy . ' '
debt downgrades
moody ' s investors service today downgraded pge ' s senior
secured debt to a 3 from a 2 . moody ' s also downgraded pge ' s
unsecured debt , its junior subordinated debt and its preferred
stock .
the ratings service said it had expected to downgrade pge ' s
ratings once northwest natural completed its acquisition of the
utility .
` ` however , today ' s rating action is being taken in advance of
the expected closing of that transaction to reflect moody ' s
concerns surrounding portland general ' s ability to remain fully
insulated from the many financial challenges currently being faced
by its parent , enron corp . , due in large part to lost investor
confidence in enron , ' ' moody ' s said in a statement .
sempra energy interested in buying some enron assets ( update 2 )
2001 - 11 - 28 15 : 39 ( new york )
sempra energy interested in buying some enron assets ( update 2 )
( adds enron comment in sixth paragraph , updates shares in
fourth . )
san diego , nov . 28 ( bloomberg ) - - sempra energy , an owner of
electric and natural - gas utilities , is interested in buying some
of enron corp . ' s assets now that the energy trader ' s planned
merger with dynegy inc . has failed , a sempra spokesman said .
` ` we are interested in some of enron ' s hard assets and our
interest would lie in those assets that would have synergies with
our own operations , ' ' sempra spokesman doug kline said . ` ` beyond
that i couldn ' t give you more specifics . ' '
dynegy today called off its purchase of enron , saying the
energy trader breached covenants in the merger agreement . dynegy
had agreed to buy enron for at least $ 23 billion in stock and
assumed debt this month . a federal investigation of accounting
irregularities at enron had limited its ability to finance
operations and sent its shares plunging .
sempra shares fell 39 cents to $ 22 . 66 in late trading . enron
shares fell $ 3 . 48 to 63 cents once they resumed trading after a
halt for dynegy ' s announcement . enron shares have dropped
99 percent since the first of the year .
houston - based enron has an ownership interest in argentina ' s
4 , 104 - mile natural - gas pipeline system , the largest pipeline
system in south america . sempra energy international owns a
43 percent stake in two natural - gas utility holding companies in
argentina . sempra also is the owner of the san diego gas &
electric and southern california gas co . utilities .
` ` we are looking at selling our global assets that are not
core to our business , and so we ' ll be continuing with an asset -
sale program , ' ' enron spokeswoman karen denne said . ` ` we are not
going to comment on who we ' ve had discussions with or what the
status of those is . ' '
in addition to its interest in enron assets , sempra has had
discussions with enron employees who want to leave the company ,
kline said .
` ` a number of enron employees have approached us , as we ' re
aware they ' ve approached other firms , ' ' kline said .
enron office tower project in limbo after dynegy ends purchase
2001 - 11 - 28 15 : 42 ( new york )
enron office tower project in limbo after dynegy ends purchase
houston , nov . 28 ( bloomberg ) - - enron corp . ' s 1 . 17 - million -
square - foot office tower project in downtown houston has been
thrown into limbo after dynegy inc . abandoned its proposed
purchase of the country ' s largest energy trader .
the 40 - story tower at 1500 louisiana , next to enron ' s
current headquarters , is scheduled to be completed in january ,
according to hines interests , the construction manager .
the building , the first new houston skyscraper since 1987 ,
features floors as large as 52 , 00 square feet to accommodate
enron ' s trading activities and a circular sky bridge nicknamed
` ` the saturn ring ' ' that connects the new tower with enron ' s
existing building and a parking garage .
` ` dynegy occupies 700 , 000 square feet in houston and the
thinking was that after they bought enron they would move their
operations into the new tower , ' ' said will penland , senior
managing director at property broker cb richard ellis ' s houston
office . ` ` i guess that has fallen by the wayside now . ' '
enron ' s shares tumbled $ 3 . 42 to 69 cents in late trading as
investors and analysts said the company may be forced into
bankruptcy . standard & poor ' s corp . cut enron ' s credit rating to
junk as bankers failed to raise $ 1 . 5 billion enron needed to
operate until the deal was completed . enron said it is suspending
all payments other than those necessary to maintain its core
operations .
the cesar pelli & associates - designed tower , called enron
center south , is clad in reflective glass and metal panels , and
features sun shades on its south face , according to hines . the
building ' s seven - story base includes five 52 , 000 square - foot
floors . each of the top 33 stories is 25 , 000 square feet .
when the project was announced two years ago , enron needed
more space to house a growing workforce . its stock price hit a
peak of $ 90 a share in august 2000 .
the project kicked off a building boom for houston , with
three other buildings now under construction that would add 2 . 05
million square feet to the city ' s office supply , according to
prudential financial . the largest of these is a reliant resources
project at 100 main street .
this activity , combined with falling energy prices and job
cuts at compaq computer corp . , continental airlines inc . , and
other houston employers , may cause the city ' s downtown office
vacancy rate to rise to the ` ` mid - teens ' ' in 2002 from 8 . 2
percent at the end of september , according to james sullivan ,
prudential ' s real estate analyst .