enron mentions at enron , that run - down feeling
businessweek , 10 / 29 / 01
press release : enron corp outlook now negative by s & p
2001 - 10 - 25 17 : 24 ( new york )
concerned energy cos make few changes in enron dealings
dow jones energy service , 10 / 25 / 01
enron woes fuel online energy trade jitters
reuters , october 25 , 2001
enron ' s trading partners say it ' s business as usual ( correct )
bloomberg , 10 / 25 / 01
kenneth lay resigns from i 2 board of directors
business wire , 10 / 25 / 01
average investors need access to good info about bonds
realmoney . com , 10 / 25 / 01
enron shares finish lower
cbsmarketwatch . com , 10 / 25 / 01
selective buying wipes out early losses
associated press newswires , 10 / 25 / 01
stock of the day : enron
cnnfn : the money gang , 10 / 25 / 01
in business this week
at enron , that run - down feeling
edited by john protos
10 / 29 / 2001
businessweek
40
( copyright 2001 mcgraw - hill , inc . )
the good times are looking even farther away for enron . the company ' s inability to extend its energy - trading model to some other commodities is proving increasingly costly . on oct . 16 , the nation ' s top natural - gas trader and leading wholesale electricity marketer reported a $ 1 . 01 billion charge . among other things , that covers recent forays into broadband and water trading - - as well as the unraveling of a pair of limited partnerships . those partnerships had raised questions about conflicts of interest . until recently , they had been overseen by the company ' s cfo , andrew fastow , even though they were outside entities that bought assets from enron . the aftertax charge was one reason the company posted a $ 618 million loss in the third quarter , vs . a profit of $ 292 million in the year - ago period . without the charge , enron would have shown a profit of $ 393 million for the quarter .
copyright ? 2000 dow jones & company , inc . all rights reserved .
press release : enron corp outlook now negative by s & p
2001 - 10 - 25 17 : 24 ( new york )
following is a press release from standard & poor ' s :
new york ( standard & poor ' s ) oct . 25 , 2001 - - standard & poor ' s today affirmed
its ratings on enron corp . ( triple - ' b ' - plus / ' a - 2 ' ) and subsidiaries and revised
its long - term ratings outlook to negative due to concerns that the significant
drop in market capitalization in the past week has adversely affected the
company ' s financial flexibility and could impede management ' s ability to pursue
plans to rebuild its balance sheet . ( a complete list of ratings is available on
ratingsdirect , standard & poor ' s on - line credit research service , or by calling
the standard & poor ' s ratings desk at ( 1 ) 212 - 438 - 2400 . ) ratings for portland
general electric co . remain on creditwatch with negative implications pending
the announced acquisition of portland by northwest natural gas co .
enron expects to use asset sales proceeds over the next year to restore its
balance - sheet strength to a level that is consistent with the current ratings .
the negative outlook acknowledges the potential for erosion of the company ' s
credit quality as investor confidence in the company ' s management has waned and
concerns have arisen about the possible long - term effects on their core
marketing and trading business . standard & poor ' s is closely monitoring enron ' s
capital needs and liquidity position , which are crucial to the continued
success of its core business operations , and does not believe the company is
threatened by liquidity concerns . enron will be challenged to economically
convert its sizable portfolio of non - strategic assets into cash to reduce debt
and strengthen its balance sheet .
despite the negative outlook , several factors supportive of enron ' s credit
quality have been sustained throughout the uncertainty surrounding the company .
the fundamental strength of enron ' s energy marketing and trading franchise has
remained steady . standard & poor ' s has detected no lapses in the company ' s risk
management practices and trading discipline . no significant deterioration in
trading volumes or willingness of counterparties to transact with enron has
been revealed to standard & poor ' s in contacts with major energy market
participants .
moreover , the strategic direction of the company is likely to become more
credit - positive in the wake of recent management changes . the prior emphasis on
growth initiatives and the constant need for new capital to fund those
initiatives have constrained credit quality , and if the company is led to
concentrate on its core energy businesses and refrain from committing capital
to more speculative ventures in the future , the credit profile will improve as
the company proceeds with the strengthening of its financial position .
assurances from the top levels of enron management that the company will
maintain its commitment to its credit quality and that no steps are being taken
to support the company ' s common stock price at the expense of credit quality
provide further support for enron ' s ratings . outlook : negative the negative
outlook for enron is based on the considerable challenges facing the company as
it attempts to reduce balance - sheet leverage through asset dispositions in a
timely manner . any shortfall in the company ' s willingness or ability to restore
the balance sheet through sales proceeds and new equity issuances would result
in a ratings downgrade . current ratings will be stabilized if the company can
successfully reduce financial risk while maintaining the ability of its
operations to produce sustainable cash flow and earnings without increasing its
business risk .
concerned energy cos make few changes in enron dealings
by mark golden , kristen mcnamara , jon kamp and john edmiston
of dow jones newswires
10 / 25 / 2001
dow jones energy service
( copyright ( c ) 2001 , dow jones 201 - 938 - 4604 ; mark . golden @ dowjones . com
( kristen mcnamara , jon kamp in chicago and john edmiston in houston contributed to this article . )
copyright ? 2000 dow jones & company , inc . all rights reserved .
enron woes fuel online energy trade jitters
october 25 , 2001 04 : 31 pm et
reuters
by gelu sulugiuc
new york , oct 25 ( reuters ) - enron corp . ' s ( ene . n ) almost daily revelations of fresh troubles has prompted concerns its powerful position in online energy trading could prompt a credit crunch and rock the fast - growing industry .
though experts said on thursday that enrononline , enron ' s web trading platform , should survive , investors are skittish about the no . 1 u . s . natural gas and electricity marketer .
since last week enron has shed more than $ 13 billion in market value as shares plunged , forcing it on wednesday to replace its chief financial officer , who was linked to transactions now under investigation by government regulators .
in the latest blow , credit rating agency fitch on thursday placed enron debt securities on negative credit watch , saying the erosion of investor confidence , if unabated , would impair the company ' s access to capital markets
" we put them on a list of concerns two months ago and made sure our books were balanced just as the first stage of precaution , " said one energy trader active on enrononline .
about 60 percent of all transactions by enron are captured through enrononline , and so far traders have kept faith .
on wednesday , enrononline - - in which trades always involve enron as either the buyer or seller - - conducted 8 , 000 transactions through its site , with a notional value of $ 4 billion , more than daily its average of $ 3 . 5 billion .
" people are transacting at higher levels as they prepare their portfolios for the winter and to protect themselves from price volatility , " said vance meyer , an enron spokesman .
runaway success
not even enron itself anticipated the success of enrononline , which enjoys the highest volume of any platform in the cut - throat field of internet energy trade .
initially , the company set a yearly trading volume target of $ 30 billion to 40 billion - - business it now does in 10 days alone .
yet traders worry enron ' s spectacular fall from grace could make it a less solid counterparty in certain eyes after transactions with two limited parterships run by andrew fastow sparked investigations by the u . s . securities and exchange commission . enron replaced fastow as its cfe on wednesday in the hope it would restore investor confidence .
enron shares closed down 6 cents , or 0 . 4 percent , to $ 16 . 35 on thursday . the stock has lost 80 percent so far this year .
" i haven ' t seen any sign of them slowing down or not making a good market on enrononline , but until things get squared away , i will keep a tight leash on the credit issue , " one trader said .
" the only thing that bothers me is it takes a lot of capital to do what they ' re doing , and with the stock price down , i wonder how much credit they have left , " he added .
credit line
enron said this week that it can tap a $ 3 . 35 billion credit line to support its trading and marketing business , which can experience wide swings in cash flow depending on commodity prices .
" in the event of a ' push - comes - to - shove ' liquidity crunch , we believe the company could generate substantial cash by selling a variety of other assets , " said ron barone , an analyst at ubs warburg .
if enrononline does lose steam , the big winner will be its main rival atlanta - based ( ice ) - - which already routinely trades more than $ 1 billion a day .
" this ( recent news ) shows there may be some kinks in the armor and some people may stop using enrononline , " said kyle cooper , analyst at salomon smith barney . " clearly ice could benefit or any other alternative online platform . "
enrononline is still a force to be reckoned with , experts said . " enron clearly will survive and enrononline will still remain a dominant force " in internet energy trading , said barone .
nonetheless , traders are playing it safe .
" credit is the main game nowadays , so as long as you ' re not exposed too greatly to any one entity , you live to play another day if something happens , " one trader said . reuters
enron ' s trading partners say it ' s business as usual ( correct )
2001 - 10 - 25 16 : 36 ( new york )
enron ' s trading partners say it ' s business as usual ( correct )
( corrects enron ' s commercial paper total to $ 1 . 85 billion in
19 th paragraph . )
houston , oct . 25 ( bloomberg ) - - concerns enron corp . will run
short on cash haven ' t prevented commodities traders from doing
business with the largest energy broker , customers say .
enron handles about 25 percent of u . s . power and natural - gas
trading , said john kilduff , vice president of energy risk
management for fimat usa . it ' s also a leader in complex
derivatives that allow others to hedge against the risk of
fluctuating commodities prices .
so far , there are no signs that the houston - based energy
trader , the world ' s largest , is doing less business , kilduff said .
` ` if they were unable to perform , it would be a major
problem , ' ' kilduff said . ` ` it could get like long - term capital if
things really broke down because the numbers are that big . ' '
long - term capital management , a private investment fund for
the wealthy , incurred massive losses making bond trades during the
1998 russian currency crisis . the fund ' s portfolio plunged . more
than a dozen banks bailed out the fund at a cost of $ 3 . 6 billion
to avoid a collapse .
enron ' s credit rating is on watch for possible downgrade at
moody ' s investors service after $ 1 . 01 billion in third - quarter
losses from the declining value of some soured business
investments .
cash upfront ?
falling below investment grade would force enron to risk more
upfront cash for its trades , trading partners said , and
substantially raise the cost of borrowing for a company dependent
on affordable credit .
enron , based in houston , ousted chief financial officer
andrew fastow yesterday , two days after the u . s . securities and
exchange commission began asking questions about partnerships he
ran that invested in company shares . those trades cost enron
$ 35 million . enron shares have fallen 49 percent in the past week .
they fell 6 cents to $ 16 . 35 today .
the company also faces questions from investors about
$ 3 . 3 billion in potential liabilities from affiliated companies
formed to buy and sell enron assets such as power plants .
the affiliates owe payments to bond investors and plan to
meet them by selling assets . enron doesn ' t know if the sales
proceeds will cover the debt . the company would have to make good
on any shortfall .
needs cash daily
enron trades electricity , natural gas , coal and other
commodities worldwide , as well as complex financial instruments to
hedge against price swings in the goods .
` ` as of now , enron is active in the markets , ' ' kilduff said .
` ` no one is cutting trading lines that i can see , or demanding
different terms than before . ' '
companies that trade as heavily as enron require cash every
day to settle positions , said kilduff , whose company swaps natural
gas and other energy investments with enron .
some days , fimat will bet that natural gas prices will fall ,
while enron bets that they will rise . natural gas usually does one
or the other every day , and someone pays the difference .
` ` the liquidity of your trading partners is a risk factor , ' '
kilduff said . ` ` someone is paying someone else every day . ' '
enron said on a conference call tuesday that it has enough
money to operate normally , and can fall back on $ 3 . 4 billion in
bank credit lines if necessary . it ' s determined to protect the
credit rating , an enron spokesman said .
little time to pacify market
enron asked citicorp inc . on tuesday to arrange a
$ 750 million loan to ensure it would have access to credit if its
cut out of the money markets .
based on bloomberg composite ratings , most of enron ' s long -
term debt is rated at bbb 2 and bbbl , two or three levels above
investment grade . fitch , standard & poor ' s and moody ' s all rate
the company ' s debt at investment grade .
enron had about $ 1 . 85 billion of commercial paper , or short -
term unsecured debt , outstanding as of tuesday , traders said . the
company , which has a $ 3 billion program , has had difficulty
finding buyers for new commercial paper sales since the sec
investigation was announced , the traders said .
today , enron offered two - week commercial paper at a 3 percent
yield , 10 to 15 basis points above comparably rated companies .
` ` there appears to be enough liquidity to give them enough
time to get their house in order , ' ' said jon kyle cartwright ,
senior energy credit analyst at raymond james romesh wadhwani , vice - chairman and greg brady , ceo ; from i 2 ; sandeep tungare , chairman and ceo of vistaar ; robert crandall , former chairman and ceo , amr corporation / american airlines ; and harvey b . cash , general partner , interwest partners .
about i 2
for more than a decade , i 2 has been a leader in supply chain management . i 2 has extended its technology and expertise to dynamic value chain management - - solutions to help companies collaborate on decision - making processes not only across functions within a single company , but across multiple companies . i 2 solutions span the value chain interactions , including customer relationship management , supply chain management and supplier relationship management . established in 1988 , i 2 is the only software solutions provider that measures , audits , and reports total value provided to its customers , with a mission to deliver $ 75 billion in value by 2005 . learn more at www . i 2 . com .
i 2 is a registered trademark of i 2 technologies , inc . and its subsidiaries .
contact : i 2 technologies , inc . brent anderson , 469 / 357 - 7347 brent _ anderson @ i 2 . com
16 : 07 edt october 25 , 2001
copyright ? 2000 dow jones lay resigns from i 2 board
cbsmarketwatch . com , 10 / 25 / 01
new york ( cbs . mw ) - - shares of enron finished lower for the 7 th straight session thursday , one day after the energy merchant replaced its chief financial officer in a move the company said should help restore shareholder confidence .
on thursday , fitch placed enron ' s securities on watch for a potential downgrade . the company ' s credit is already under review by moody ' s investors service .
also thursday , chief executive ken lay resigned from the board at i 2 technologies , citing increasing responsibilities at enron .
enron , which traded as high as $ 17 . 95 during the session , closed at $ 16 . 35 , down 6 cents , after 39 million shares changed hands .
on wednesday , a day after issuing a public vote of confidence in cfo andy fastow , enron chief executive ken lay ousted him in the latest in a two - week series of events that have cut the company ' s share price by more than half .
enron named jeff mcmahon its new chief financial officer . the move follows tuesday ' s conference call , a failed attempt by enron to restore investor confidence in the company .
" andy fastow was a very well - regarded , low profile individual at enron , and he ' s been unfairly pilloried in the press , " said john olson , an analyst at sanders morris harris in houston . " but the weight of circumstantial evidence and the material stock price decline made this inevitable . "
olson predicted wednesday that the cfo swap would improve enron ' s credibility with wall street . fastow could not immediately be reached for comment .
analysts unsatisfied
enron has been under fire since last week as questions have surfaced about its accounting practices , especially in regard to two limited partnerships created by fastow in 1999 and since dissolved .
" fastow was integral to the transactions that are currently under scrutiny . . . as such , his ' leave of absence ' raises more questions than it answers , " banc of america securities ' analyst will maze told clients thursday .
enron said fastow had taken a leave of absence and that mcmahon , most recently chairman and ceo of the industrial markets group and treasurer from 1998 to 2000 , would take over .
" in my continued discussions with the financial community , it became clear to me that restoring investor confidence would require us to replace andy as cfo , " said lay , in a statement .
karen denne , a spokesperson for enron , said numerous discussions tuesday and wednesday led to the decision . she said she did not know when fastow would return .
" the management change was designed to instill some badly needed investor confidence , however , we find fastow ' s departure unsettling given management ' s strong endorsement one day prior , " maze noted . he downgraded the stock thursday to " market performer " from " strong buy . "
morningstar analyst rob plaza said using fastow as a scapegoat does nothing to address the issues at enron .
" enron needs to be more forthcoming with its off - balance - sheet deals and transparent with its financial statements in order to answer its critics , " plaza said .
more criticism
olson called tuesday ' s conference call a " missed opportunity , " saying enron had a real opportunity to show the investing public that it had become more " forthright and open . "
" unfortunately enron is overloaded with lawyers , " said olson , who has not recommended the stock until recently . " this company has been very much abused and maligned by people on wall street . they have some excellent businesses , and they have been carrying some losers . " enron has " an excellent growth profile and tremendous profitability in their growth businesses , and excellent surplus cash flow , " olson said .
enron expects to generate $ 3 billion of cash flow this year , and with $ 500 million devoted to dividends and $ 1 billion to maintenance capital spending , the company will have $ 1 . 5 billion free .
several wall street firms cut their ratings on enron shares wednesday , including prudential securities . the firm advised clients to sell the stock , a rare recommendation . prudential had rated the company ' s shares a " hold . "
" after much consideration , we are lowering our rating . . . not because of things we know but because of things we potentially don ' t know about the company , " wrote prudential analyst carol coale in a note .
on monday , enron announced that related - party transactions within the limited partnerships are under review by the securities and exchange commission . several shareholder lawsuits have subsequently been filed .
olson said it ' s unlikely that enron , with its coterie of lawyers , would allow the creation of illegal investment vehicles , but as to whether it the decision was " right , " he conceded it was probably not .
ubs warburg ron barone on thursday raised the idea of enron as an acquisition target , if further deterioration is seen in the share price .
enron would be a good catch for larger and better - capitalized companies that want to make inroads in the unregulated wholesale and retail energy markets , he said . enron ' s strength lies in those areas .
fitch weighs in
fitch said thursday it ' s reviewing the ratings on enron ' s debt , preferred stock and commercial paper . the agency also placed the debt of two enron subsidiaries on " rating watch negative . "
fitch said its action is in response to enron ' s recent disclosures concerning the limited partnerships .
" the loss of investor and counterparty confidence , if it continues , would impair enron ' s financial flexibility and access to capital markets , therefore , impacting its ability to conduct its business , " fitch wrote .
fitch also voiced concern about two limited liability companies - marlin water trust ii and osprey - which have combined debt of $ 3 . 2 billion .
" enron has not verified that the underlying assets have adequate market value to fully pay down the associated debt , " fitch said .
denne said the company plans to use proceeds from asset sales to pay off the debt .
lisa sanders is a dallas - based reporter for cbs . marketwatch . com .
selective buying wipes out early losses
by seth sutel
ap business writer
10 / 25 / 2001
associated press newswires
copyright 2001 . the associated press . all rights reserved .
new york ( ap ) - selected buying of technology and energy shares pulled the stock market higher thursday , reversing a morning slide triggered by a pair of grim economic reports .
shares of semiconductor makers and equipment manufacturers did particularly well , as did energy traders , led by a surprisingly strong performance from williams cos . , a tulsa - based energy firm that had an 83 percent jump in third quarter net earnings .
by late afternoon , the dow jones industrial average was up 103 . 16 at 9 , 448 . 78 , reversing an earlier deficit of 167 points . the nasdaq composite index was up 36 . 29 at 1 , 767 . 83 and the standard & poor ' s 500 index was up 12 . 79 to 1 , 097 . 99 .
earlier , a pair of dismal economic reports had compounded worries about the fallout from last month ' s terror attacks to send stocks lower . but as in recent sessions investors absorbed the bad news and focused on good news regarding individual companies .
the williams cos . surpassed analysts ' estimates for the third quarter and raised its forecasts for full - year earnings for 2001 and 2002 . investors rewarded the company by driving its shares up $ 1 . 42 to $ 27 . 32 , bringing several other parts of the energy sector along with it .
even the shares of enron rose , a day after the embattled company dismissed its chief financial officer and replaced him with an another executive from within the company . enron was up 28 cents to $ 16 . 69 .
semiconductor shares also rebounded , led by industry bellwether intel , up 44 cents at $ 25 . 92 and applied materials , up $ 1 . 35 at 36 . 69 . leading data storage maker emc was also up $ 1 . 06 at $ 13 . 54 .
traders said that afternoon passage by the senate of an anti - terrorism legislation was also helping to lift investor sentiment . late wednesday , the house passed a $ 100 billion economic stimulus package to combat the effects of the terrorist attacks on the economy .
a surprisingly large drop in orders for durable goods had weighed heavily on the market in the morning , as did poor earnings results from american international group and worldcom .
the commerce department reported orders plunged in september for the fourth consecutive month . the 8 . 5 percent decline was far worse than the 1 . 3 percent dip many analysts had forecast .
the labor department also reported that the number of newly laid - off americans filing for unemployment benefits rose by 8 , 000 last week to 504 , 000 , the second - highest figure in nearly a decade and a level that is generally associated with recessions .
the russell 2000 index , the barometer of smaller company stocks , rose 6 . 97 to 434 . 62 .
advancing issues outnumbered declining ones by a 9 - to - 7 margin on the new york stock exchange , where volume came to 1 . 02 billion shares , slightly below wednesday ' s pace .
overseas , japan ' s nikkei stock average ended the day up 0 . 7 percent . in afternoon trading , germany ' s dax index was down 2 . 9 percent , france ' s cac - 40 fell 2 . 4 percent percent , and britain ' s ft - se 100 declined 1 . 6 percent .
- - -
on the net :
new york stock exchange : http : / / www . nyse . com
nasdaq stock market : http : / / www . nasdaq . com
copyright ? 2000 dow jones this after defending him over the past few days .
( graphic : enron ( ene ) cfo andrew fastow takes leave of
absence ) and named jeff mcmahon to take his place .
( graphic : enron names jeff mcmahon new cfo )
now the company says it did this in order to restore
investor confidence , that ' s no surprise . well the stock
has plummeted ever since reports said that the cfo had
invested in controversial partnerships and the sec is
inquiring into those partnerships that were led by andrew
fastow . ( graphic : enron ( ene ) down 52 % last 2 - weeks )
now , you can see what ' s happened to the stock over the last
two weeks . a tailspin since its third - quarter earnings
release and the sec inquiry . but if you look at it over
the past year , it ' s down even more ; down eighty percent .
( graphic : enron ( ene ) down 80 % year - to - date ) it was just
a few months ago in august when the ceo jeff skilling
suddenly resigned and other senior managers had left the
company even before that .
the steps that were taken by rena - - putting a new cfo on the
spot , re - - ron baron ( ? ) an analyst at ubs warburg says it ' s
a step in the right direction . ( graphic : enron ( ene ) up
87 % in 2000 ) but carole cole ( ? ) over at prudential says
sell . and she says it ' s because of the things we don ' t
know about the company .
what we do know about the company is that the stock was up
eighty - seven percent in the year 2000 . it was a wall
street darling back then . it was basically an old - economy
pipeline that was transformed into a new - economy company
with pipes of fiber . yes , the company got into online
wholesale trading of energy products and into the broadband
business . it formed a sexy partnership with blockbuster
video in which it would basically stream bought
blockbuster ' s videos into the home using its own fibers
( sic ) . that deal fell apart . and then later on , the tech
boom went bust and this stock that used to trade like a
tech stock went south .
now here are some of the issues that are facing the
company . one , it - - there are 3 . 3 billion dollars in notes
that are due in the next twenty months . now according to
the wall street journal , the company thinks it can pay them
back without having to issue new stocks . some analysts
think otherwise . is the company overly diversified ? it ' s
in businesses such as broadband , which by the way extended
its losses to eighty million dollars in the third quarter
from twenty million last year ; and it ' s in the water and
waste water company in the company xurex ( ? ) . it ' s facing
an sec inquiry ; an inquiry that prudential ' s carole cole
says could lead to probes of other partnerships
transactions . and if other partnerships end up being
dissolved , the company could face a stock hit of at least
one billion dollars . finally , the company faces lower
energy prices on power and gas . so customers are trying to
renegotiate their contracts so they can get a better deal .
some of the many issues that are facing enron . ( graphic :
issues facing enron )
pat and ali .
pat kiernan , co - anchor :
fred , thank you . stay with us here . let ' s get more on
enron from an analyst who follows the company .
velshi : curt launer covers natural gas and oil companies
for credit suisse first boston . he joins us now from the
firm ' s new york office .
curt , thanks for being here .
curt launer ( credit suisse first boston ) : good afternoon .
thank you .
velshi : curt , i ' m just looking at - - at some of the - - the
chart stuff on enron . i mean , this stock was in a sixty to
eighty - dollar band from february of 2000 almost for more
than a year until may of this year . even this year ' s
fifty - two - week range about seventeen dollars to eighty - five
dollars ; now trading at - - from fifteen dollars to
eighty - five dollars . now trading about sixteen dollars and
change . what are your thoughts on the stock ' s performance ?
launer : well clearly it ' s had a horrific decline and there
are a lot of reasons behind it . just the way that it was
probably unreal for a lot of reasons for enron to trade at
fifty times earnings a little bit more than a year ago , i
think it ' s equally unreal for it to be trading at about
eight times earnings right now . that was an
everything - going - right scenario a year and a little bit
ago . the scenario we have right now is the one that says
the price is telling us everything is going to go wrong . i
didn ' t think that everything was going to go right , nor do
i think that everything is going to go wrong at this point .
katayama : curt , what should the company do about
broadband ? i mean , that was highly touted a year ago .
it ' s losses are mounting , demand is weakening .
launer : broadband is really not part of the story very
much anymore . part of the write - offs taken with enron
during the third - quarter earnings report that you referred
to before really got the company to a level where the
broadband investment on the books is very , very small .
there probably are some additional tag - in write - offs that
could be taken in the broadband business , but in large
measure , the bro - - broadband portion of the business for
bandwidth trading has been moved into enron ' s wholesale
business and the content services business , which was at
one time high flying with that blockbuster deal , has
basically been dismantled .
kiernan : curt , has the company addressed the problems here
in the past twenty - four hours ? i mean , are they building
some credibility back with investors ?
launer : i - - it ' s going to be a long stretch before they
build what i would call real credibility back . ( graphic :
enron ( ene ) 16 . 91 up . 50 ) but you ' ve got to start
somewhere . the placing of the leave of absence of andy
fastow is a step of the right direction . clearly he had
lost his credibility personally . there ' s a lot of
questions remaining relative to these partnerships ; how
they were put in place and why . i don ' t see anything
untoward in them from an accounting point of view . and i
don ' t believe that the sec inquiry is going to come up with
anything untoward because there ' s been extensive reporting
about these partnerships over the last couple of years that
they ' ve been in existence . the questions come up now
because of the financial ramifications that you referred to
before ; 3 . 3 billion dollars of asset value that to some
degree is unaccounted for currently in terms of the assets
that are in those partnerships .
ultimately , we think this is going to be resolved , perhaps
partially with the issuance of some equity that - - to the
debt holders behind those partnerships . but once they get
cleared up and the credibility is restored , this is a very
attractive valuation with which to own enron .
velshi : all right . curt , thanks very much for joining us
today .
launer : thank you .
velshi : curt launer is a natural gas analyst at credit
suisse first boston . fred katayama is our stocks editor .
enron , our " stock of the day . "
# # #
enron mentions
at enron , that run - down feeling
businessweek , 10 / 29 / 01
press release : enron corp outlook now negative by s & p
2001 - 10 - 25 17 : 24 ( new york )
concerned energy cos make few changes in enron dealings
dow jones energy service , 10 / 25 / 01
enron woes fuel online energy trade jitters
reuters , october 25 , 2001
enron ' s trading partners say it ' s business as usual ( correct )
bloomberg , 10 / 25 / 01
kenneth lay resigns from i 2 board of directors
business wire , 10 / 25 / 01
average investors need access to good info about bonds
realmoney . com , 10 / 25 / 01
enron shares finish lower
cbsmarketwatch . com , 10 / 25 / 01
selective buying wipes out early losses
associated press newswires , 10 / 25 / 01
stock of the day : enron
cnnfn : the money gang , 10 / 25 / 01
in business this week
at enron , that run - down feeling
edited by john protos
10 / 29 / 2001
businessweek
40
( copyright 2001 mcgraw - hill , inc . )
the good times are looking even farther away for enron . the company ' s inability to extend its energy - trading model to some other commodities is proving increasingly costly . on oct . 16 , the nation ' s top natural - gas trader and leading wholesale electricity marketer reported a $ 1 . 01 billion charge . among other things , that covers recent forays into broadband and water trading - - as well as the unraveling of a pair of limited partnerships . those partnerships had raised questions about conflicts of interest . until recently , they had been overseen by the company ' s cfo , andrew fastow , even though they were outside entities that bought assets from enron . the aftertax charge was one reason the company posted a $ 618 million loss in the third quarter , vs . a profit of $ 292 million in the year - ago period . without the charge , enron would have shown a profit of $ 393 million for the quarter .
copyright ? 2000 dow jones & company , inc . all rights reserved .
press release : enron corp outlook now negative by s & p
2001 - 10 - 25 17 : 24 ( new york )
following is a press release from standard & poor ' s :
new york ( standard & poor ' s ) oct . 25 , 2001 - - standard & poor ' s today affirmed
its ratings on enron corp . ( triple - ' b ' - plus / ' a - 2 ' ) and subsidiaries and revised
its long - term ratings outlook to negative due to concerns that the significant
drop in market capitalization in the past week has adversely affected the
company ' s financial flexibility and could impede management ' s ability to pursue
plans to rebuild its balance sheet . ( a complete list of ratings is available on
ratingsdirect , standard & poor ' s on - line credit research service , or by calling
the standard & poor ' s ratings desk at ( 1 ) 212 - 438 - 2400 . ) ratings for portland
general electric co . remain on creditwatch with negative implications pending
the announced acquisition of portland by northwest natural gas co .
enron expects to use asset sales proceeds over the next year to restore its
balance - sheet strength to a level that is consistent with the current ratings .
the negative outlook acknowledges the potential for erosion of the company ' s
credit quality as investor confidence in the company ' s management has waned and
concerns have arisen about the possible long - term effects on their core
marketing and trading business . standard & poor ' s is closely monitoring enron ' s
capital needs and liquidity position , which are crucial to the continued
success of its core business operations , and does not believe the company is
threatened by liquidity concerns . enron will be challenged to economically
convert its sizable portfolio of non - strategic assets into cash to reduce debt
and strengthen its balance sheet .
despite the negative outlook , several factors supportive of enron ' s credit
quality have been sustained throughout the uncertainty surrounding the company .
the fundamental strength of enron ' s energy marketing and trading franchise has
remained steady . standard & poor ' s has detected no lapses in the company ' s risk
management practices and trading discipline . no significant deterioration in
trading volumes or willingness of counterparties to transact with enron has
been revealed to standard & poor ' s in contacts with major energy market
participants .
moreover , the strategic direction of the company is likely to become more
credit - positive in the wake of recent management changes . the prior emphasis on
growth initiatives and the constant need for new capital to fund those
initiatives have constrained credit quality , and if the company is led to
concentrate on its core energy businesses and refrain from committing capital
to more speculative ventures in the future , the credit profile will improve as
the company proceeds with the strengthening of its financial position .
assurances from the top levels of enron management that the company will
maintain its commitment to its credit quality and that no steps are being taken
to support the company ' s common stock price at the expense of credit quality
provide further support for enron ' s ratings . outlook : negative the negative
outlook for enron is based on the considerable challenges facing the company as
it attempts to reduce balance - sheet leverage through asset dispositions in a
timely manner . any shortfall in the company ' s willingness or ability to restore
the balance sheet through sales proceeds and new equity issuances would result
in a ratings downgrade . current ratings will be stabilized if the company can
successfully reduce financial risk while maintaining the ability of its
operations to produce sustainable cash flow and earnings without increasing its
business risk .
concerned energy cos make few changes in enron dealings
by mark golden , kristen mcnamara , jon kamp and john edmiston
of dow jones newswires
10 / 25 / 2001
dow jones energy service
( copyright ( c ) 2001 , dow jones 201 - 938 - 4604 ; mark . golden @ dowjones . com
( kristen mcnamara , jon kamp in chicago and john edmiston in houston contributed to this article . )
copyright ? 2000 dow jones & company , inc . all rights reserved .
enron woes fuel online energy trade jitters
october 25 , 2001 04 : 31 pm et
reuters
by gelu sulugiuc
new york , oct 25 ( reuters ) - enron corp . ' s ( ene . n ) almost daily revelations of fresh troubles has prompted concerns its powerful position in online energy trading could prompt a credit crunch and rock the fast - growing industry .
though experts said on thursday that enrononline , enron ' s web trading platform , should survive , investors are skittish about the no . 1 u . s . natural gas and electricity marketer .
since last week enron has shed more than $ 13 billion in market value as shares plunged , forcing it on wednesday to replace its chief financial officer , who was linked to transactions now under investigation by government regulators .
in the latest blow , credit rating agency fitch on thursday placed enron debt securities on negative credit watch , saying the erosion of investor confidence , if unabated , would impair the company ' s access to capital markets
" we put them on a list of concerns two months ago and made sure our books were balanced just as the first stage of precaution , " said one energy trader active on enrononline .
about 60 percent of all transactions by enron are captured through enrononline , and so far traders have kept faith .
on wednesday , enrononline - - in which trades always involve enron as either the buyer or seller - - conducted 8 , 000 transactions through its site , with a notional value of $ 4 billion , more than daily its average of $ 3 . 5 billion .
" people are transacting at higher levels as they prepare their portfolios for the winter and to protect themselves from price volatility , " said vance meyer , an enron spokesman .
runaway success
not even enron itself anticipated the success of enrononline , which enjoys the highest volume of any platform in the cut - throat field of internet energy trade .
initially , the company set a yearly trading volume target of $ 30 billion to 40 billion - - business it now does in 10 days alone .
yet traders worry enron ' s spectacular fall from grace could make it a less solid counterparty in certain eyes after transactions with two limited parterships run by andrew fastow sparked investigations by the u . s . securities and exchange commission . enron replaced fastow as its cfe on wednesday in the hope it would restore investor confidence .
enron shares closed down 6 cents , or 0 . 4 percent , to $ 16 . 35 on thursday . the stock has lost 80 percent so far this year .
" i haven ' t seen any sign of them slowing down or not making a good market on enrononline , but until things get squared away , i will keep a tight leash on the credit issue , " one trader said .
" the only thing that bothers me is it takes a lot of capital to do what they ' re doing , and with the stock price down , i wonder how much credit they have left , " he added .
credit line
enron said this week that it can tap a $ 3 . 35 billion credit line to support its trading and marketing business , which can experience wide swings in cash flow depending on commodity prices .
" in the event of a ' push - comes - to - shove ' liquidity crunch , we believe the company could generate substantial cash by selling a variety of other assets , " said ron barone , an analyst at ubs warburg .
if enrononline does lose steam , the big winner will be its main rival atlanta - based ( ice ) - - which already routinely trades more than $ 1 billion a day .
" this ( recent news ) shows there may be some kinks in the armor and some people may stop using enrononline , " said kyle cooper , analyst at salomon smith barney . " clearly ice could benefit or any other alternative online platform . "
enrononline is still a force to be reckoned with , experts said . " enron clearly will survive and enrononline will still remain a dominant force " in internet energy trading , said barone .
nonetheless , traders are playing it safe .
" credit is the main game nowadays , so as long as you ' re not exposed too greatly to any one entity , you live to play another day if something happens , " one trader said . reuters
enron ' s trading partners say it ' s business as usual ( correct )
2001 - 10 - 25 16 : 36 ( new york )
enron ' s trading partners say it ' s business as usual ( correct )
( corrects enron ' s commercial paper total to $ 1 . 85 billion in
19 th paragraph . )
houston , oct . 25 ( bloomberg ) - - concerns enron corp . will run
short on cash haven ' t prevented commodities traders from doing
business with the largest energy broker , customers say .
enron handles about 25 percent of u . s . power and natural - gas
trading , said john kilduff , vice president of energy risk
management for fimat usa . it ' s also a leader in complex
derivatives that allow others to hedge against the risk of
fluctuating commodities prices .
so far , there are no signs that the houston - based energy
trader , the world ' s largest , is doing less business , kilduff said .
` ` if they were unable to perform , it would be a major
problem , ' ' kilduff said . ` ` it could get like long - term capital if
things really broke down because the numbers are that big . ' '
long - term capital management , a private investment fund for
the wealthy , incurred massive losses making bond trades during the
1998 russian currency crisis . the fund ' s portfolio plunged . more
than a dozen banks bailed out the fund at a cost of $ 3 . 6 billion
to avoid a collapse .
enron ' s credit rating is on watch for possible downgrade at
moody ' s investors service after $ 1 . 01 billion in third - quarter
losses from the declining value of some soured business
investments .
cash upfront ?
falling below investment grade would force enron to risk more
upfront cash for its trades , trading partners said , and
substantially raise the cost of borrowing for a company dependent
on affordable credit .
enron , based in houston , ousted chief financial officer
andrew fastow yesterday , two days after the u . s . securities and
exchange commission began asking questions about partnerships he
ran that invested in company shares . those trades cost enron
$ 35 million . enron shares have fallen 49 percent in the past week .
they fell 6 cents to $ 16 . 35 today .
the company also faces questions from investors about
$ 3 . 3 billion in potential liabilities from affiliated companies
formed to buy and sell enron assets such as power plants .
the affiliates owe payments to bond investors and plan to
meet them by selling assets . enron doesn ' t know if the sales
proceeds will cover the debt . the company would have to make good
on any shortfall .
needs cash daily
enron trades electricity , natural gas , coal and other
commodities worldwide , as well as complex financial instruments to
hedge against price swings in the goods .
` ` as of now , enron is active in the markets , ' ' kilduff said .
` ` no one is cutting trading lines that i can see , or demanding
different terms than before . ' '
companies that trade as heavily as enron require cash every
day to settle positions , said kilduff , whose company swaps natural
gas and other energy investments with enron .
some days , fimat will bet that natural gas prices will fall ,
while enron bets that they will rise . natural gas usually does one
or the other every day , and someone pays the difference .
` ` the liquidity of your trading partners is a risk factor , ' '
kilduff said . ` ` someone is paying someone else every day . ' '
enron said on a conference call tuesday that it has enough
money to operate normally , and can fall back on $ 3 . 4 billion in
bank credit lines if necessary . it ' s determined to protect the
credit rating , an enron spokesman said .
little time to pacify market
enron asked citicorp inc . on tuesday to arrange a
$ 750 million loan to ensure it would have access to credit if its
cut out of the money markets .
based on bloomberg composite ratings , most of enron ' s long -
term debt is rated at bbb 2 and bbbl , two or three levels above
investment grade . fitch , standard & poor ' s and moody ' s all rate
the company ' s debt at investment grade .
enron had about $ 1 . 85 billion of commercial paper , or short -
term unsecured debt , outstanding as of tuesday , traders said . the
company , which has a $ 3 billion program , has had difficulty
finding buyers for new commercial paper sales since the sec
investigation was announced , the traders said .
today , enron offered two - week commercial paper at a 3 percent
yield , 10 to 15 basis points above comparably rated companies .
` ` there appears to be enough liquidity to give them enough
time to get their house in order , ' ' said jon kyle cartwright ,
senior energy credit analyst at raymond james romesh wadhwani , vice - chairman and greg brady , ceo ; from i 2 ; sandeep tungare , chairman and ceo of vistaar ; robert crandall , former chairman and ceo , amr corporation / american airlines ; and harvey b . cash , general partner , interwest partners .
about i 2
for more than a decade , i 2 has been a leader in supply chain management . i 2 has extended its technology and expertise to dynamic value chain management - - solutions to help companies collaborate on decision - making processes not only across functions within a single company , but across multiple companies . i 2 solutions span the value chain interactions , including customer relationship management , supply chain management and supplier relationship management . established in 1988 , i 2 is the only software solutions provider that measures , audits , and reports total value provided to its customers , with a mission to deliver $ 75 billion in value by 2005 . learn more at www . i 2 . com .
i 2 is a registered trademark of i 2 technologies , inc . and its subsidiaries .
contact : i 2 technologies , inc . brent anderson , 469 / 357 - 7347 brent _ anderson @ i 2 . com
16 : 07 edt october 25 , 2001
copyright ? 2000 dow jones lay resigns from i 2 board
cbsmarketwatch . com , 10 / 25 / 01
new york ( cbs . mw ) - - shares of enron finished lower for the 7 th straight session thursday , one day after the energy merchant replaced its chief financial officer in a move the company said should help restore shareholder confidence .
on thursday , fitch placed enron ' s securities on watch for a potential downgrade . the company ' s credit is already under review by moody ' s investors service .
also thursday , chief executive ken lay resigned from the board at i 2 technologies , citing increasing responsibilities at enron .
enron , which traded as high as $ 17 . 95 during the session , closed at $ 16 . 35 , down 6 cents , after 39 million shares changed hands .
on wednesday , a day after issuing a public vote of confidence in cfo andy fastow , enron chief executive ken lay ousted him in the latest in a two - week series of events that have cut the company ' s share price by more than half .
enron named jeff mcmahon its new chief financial officer . the move follows tuesday ' s conference call , a failed attempt by enron to restore investor confidence in the company .
" andy fastow was a very well - regarded , low profile individual at enron , and he ' s been unfairly pilloried in the press , " said john olson , an analyst at sanders morris harris in houston . " but the weight of circumstantial evidence and the material stock price decline made this inevitable . "
olson predicted wednesday that the cfo swap would improve enron ' s credibility with wall street . fastow could not immediately be reached for comment .
analysts unsatisfied
enron has been under fire since last week as questions have surfaced about its accounting practices , especially in regard to two limited partnerships created by fastow in 1999 and since dissolved .
" fastow was integral to the transactions that are currently under scrutiny . . . as such , his ' leave of absence ' raises more questions than it answers , " banc of america securities ' analyst will maze told clients thursday .
enron said fastow had taken a leave of absence and that mcmahon , most recently chairman and ceo of the industrial markets group and treasurer from 1998 to 2000 , would take over .
" in my continued discussions with the financial community , it became clear to me that restoring investor confidence would require us to replace andy as cfo , " said lay , in a statement .
karen denne , a spokesperson for enron , said numerous discussions tuesday and wednesday led to the decision . she said she did not know when fastow would return .
" the management change was designed to instill some badly needed investor confidence , however , we find fastow ' s departure unsettling given management ' s strong endorsement one day prior , " maze noted . he downgraded the stock thursday to " market performer " from " strong buy . "
morningstar analyst rob plaza said using fastow as a scapegoat does nothing to address the issues at enron .
" enron needs to be more forthcoming with its off - balance - sheet deals and transparent with its financial statements in order to answer its critics , " plaza said .
more criticism
olson called tuesday ' s conference call a " missed opportunity , " saying enron had a real opportunity to show the investing public that it had become more " forthright and open . "
" unfortunately enron is overloaded with lawyers , " said olson , who has not recommended the stock until recently . " this company has been very much abused and maligned by people on wall street . they have some excellent businesses , and they have been carrying some losers . " enron has " an excellent growth profile and tremendous profitability in their growth businesses , and excellent surplus cash flow , " olson said .
enron expects to generate $ 3 billion of cash flow this year , and with $ 500 million devoted to dividends and $ 1 billion to maintenance capital spending , the company will have $ 1 . 5 billion free .
several wall street firms cut their ratings on enron shares wednesday , including prudential securities . the firm advised clients to sell the stock , a rare recommendation . prudential had rated the company ' s shares a " hold . "
" after much consideration , we are lowering our rating . . . not because of things we know but because of things we potentially don ' t know about the company , " wrote prudential analyst carol coale in a note .
on monday , enron announced that related - party transactions within the limited partnerships are under review by the securities and exchange commission . several shareholder lawsuits have subsequently been filed .
olson said it ' s unlikely that enron , with its coterie of lawyers , would allow the creation of illegal investment vehicles , but as to whether it the decision was " right , " he conceded it was probably not .
ubs warburg ron barone on thursday raised the idea of enron as an acquisition target , if further deterioration is seen in the share price .
enron would be a good catch for larger and better - capitalized companies that want to make inroads in the unregulated wholesale and retail energy markets , he said . enron ' s strength lies in those areas .
fitch weighs in
fitch said thursday it ' s reviewing the ratings on enron ' s debt , preferred stock and commercial paper . the agency also placed the debt of two enron subsidiaries on " rating watch negative . "
fitch said its action is in response to enron ' s recent disclosures concerning the limited partnerships .
" the loss of investor and counterparty confidence , if it continues , would impair enron ' s financial flexibility and access to capital markets , therefore , impacting its ability to conduct its business , " fitch wrote .
fitch also voiced concern about two limited liability companies - marlin water trust ii and osprey - which have combined debt of $ 3 . 2 billion .
" enron has not verified that the underlying assets have adequate market value to fully pay down the associated debt , " fitch said .
denne said the company plans to use proceeds from asset sales to pay off the debt .
lisa sanders is a dallas - based reporter for cbs . marketwatch . com .
selective buying wipes out early losses
by seth sutel
ap business writer
10 / 25 / 2001
associated press newswires
copyright 2001 . the associated press . all rights reserved .
new york ( ap ) - selected buying of technology and energy shares pulled the stock market higher thursday , reversing a morning slide triggered by a pair of grim economic reports .
shares of semiconductor makers and equipment manufacturers did particularly well , as did energy traders , led by a surprisingly strong performance from williams cos . , a tulsa - based energy firm that had an 83 percent jump in third quarter net earnings .
by late afternoon , the dow jones industrial average was up 103 . 16 at 9 , 448 . 78 , reversing an earlier deficit of 167 points . the nasdaq composite index was up 36 . 29 at 1 , 767 . 83 and the standard & poor ' s 500 index was up 12 . 79 to 1 , 097 . 99 .
earlier , a pair of dismal economic reports had compounded worries about the fallout from last month ' s terror attacks to send stocks lower . but as in recent sessions investors absorbed the bad news and focused on good news regarding individual companies .
the williams cos . surpassed analysts ' estimates for the third quarter and raised its forecasts for full - year earnings for 2001 and 2002 . investors rewarded the company by driving its shares up $ 1 . 42 to $ 27 . 32 , bringing several other parts of the energy sector along with it .
even the shares of enron rose , a day after the embattled company dismissed its chief financial officer and replaced him with an another executive from within the company . enron was up 28 cents to $ 16 . 69 .
semiconductor shares also rebounded , led by industry bellwether intel , up 44 cents at $ 25 . 92 and applied materials , up $ 1 . 35 at 36 . 69 . leading data storage maker emc was also up $ 1 . 06 at $ 13 . 54 .
traders said that afternoon passage by the senate of an anti - terrorism legislation was also helping to lift investor sentiment . late wednesday , the house passed a $ 100 billion economic stimulus package to combat the effects of the terrorist attacks on the economy .
a surprisingly large drop in orders for durable goods had weighed heavily on the market in the morning , as did poor earnings results from american international group and worldcom .
the commerce department reported orders plunged in september for the fourth consecutive month . the 8 . 5 percent decline was far worse than the 1 . 3 percent dip many analysts had forecast .
the labor department also reported that the number of newly laid - off americans filing for unemployment benefits rose by 8 , 000 last week to 504 , 000 , the second - highest figure in nearly a decade and a level that is generally associated with recessions .
the russell 2000 index , the barometer of smaller company stocks , rose 6 . 97 to 434 . 62 .
advancing issues outnumbered declining ones by a 9 - to - 7 margin on the new york stock exchange , where volume came to 1 . 02 billion shares , slightly below wednesday ' s pace .
overseas , japan ' s nikkei stock average ended the day up 0 . 7 percent . in afternoon trading , germany ' s dax index was down 2 . 9 percent , france ' s cac - 40 fell 2 . 4 percent percent , and britain ' s ft - se 100 declined 1 . 6 percent .
- - -
on the net :
new york stock exchange : http : / / www . nyse . com
nasdaq stock market : http : / / www . nasdaq . com
copyright ? 2000 dow jones this after defending him over the past few days .
( graphic : enron ( ene ) cfo andrew fastow takes leave of
absence ) and named jeff mcmahon to take his place .
( graphic : enron names jeff mcmahon new cfo )
now the company says it did this in order to restore
investor confidence , that ' s no surprise . well the stock
has plummeted ever since reports said that the cfo had
invested in controversial partnerships and the sec is
inquiring into those partnerships that were led by andrew
fastow . ( graphic : enron ( ene ) down 52 % last 2 - weeks )
now , you can see what ' s happened to the stock over the last
two weeks . a tailspin since its third - quarter earnings
release and the sec inquiry . but if you look at it over
the past year , it ' s down even more ; down eighty percent .
( graphic : enron ( ene ) down 80 % year - to - date ) it was just
a few months ago in august when the ceo jeff skilling
suddenly resigned and other senior managers had left the
company even before that .
the steps that were taken by rena - - putting a new cfo on the
spot , re - - ron baron ( ? ) an analyst at ubs warburg says it ' s
a step in the right direction . ( graphic : enron ( ene ) up
87 % in 2000 ) but carole cole ( ? ) over at prudential says
sell . and she says it ' s because of the things we don ' t
know about the company .
what we do know about the company is that the stock was up
eighty - seven percent in the year 2000 . it was a wall
street darling back then . it was basically an old - economy
pipeline that was transformed into a new - economy company
with pipes of fiber . yes , the company got into online
wholesale trading of energy products and into the broadband
business . it formed a sexy partnership with blockbuster
video in which it would basically stream bought
blockbuster ' s videos into the home using its own fibers
( sic ) . that deal fell apart . and then later on , the tech
boom went bust and this stock that used to trade like a
tech stock went south .
now here are some of the issues that are facing the
company . one , it - - there are 3 . 3 billion dollars in notes
that are due in the next twenty months . now according to
the wall street journal , the company thinks it can pay them
back without having to issue new stocks . some analysts
think otherwise . is the company overly diversified ? it ' s
in businesses such as broadband , which by the way extended
its losses to eighty million dollars in the third quarter
from twenty million last year ; and it ' s in the water and
waste water company in the company xurex ( ? ) . it ' s facing
an sec inquiry ; an inquiry that prudential ' s carole cole
says could lead to probes of other partnerships
transactions . and if other partnerships end up being
dissolved , the company could face a stock hit of at least
one billion dollars . finally , the company faces lower
energy prices on power and gas . so customers are trying to
renegotiate their contracts so they can get a better deal .
some of the many issues that are facing enron . ( graphic :
issues facing enron )
pat and ali .
pat kiernan , co - anchor :
fred , thank you . stay with us here . let ' s get more on
enron from an analyst who follows the company .
velshi : curt launer covers natural gas and oil companies
for credit suisse first boston . he joins us now from the
firm ' s new york office .
curt , thanks for being here .
curt launer ( credit suisse first boston ) : good afternoon .
thank you .
velshi : curt , i ' m just looking at - - at some of the - - the
chart stuff on enron . i mean , this stock was in a sixty to
eighty - dollar band from february of 2000 almost for more
than a year until may of this year . even this year ' s
fifty - two - week range about seventeen dollars to eighty - five
dollars ; now trading at - - from fifteen dollars to
eighty - five dollars . now trading about sixteen dollars and
change . what are your thoughts on the stock ' s performance ?
launer : well clearly it ' s had a horrific decline and there
are a lot of reasons behind it . just the way that it was
probably unreal for a lot of reasons for enron to trade at
fifty times earnings a little bit more than a year ago , i
think it ' s equally unreal for it to be trading at about
eight times earnings right now . that was an
everything - going - right scenario a year and a little bit
ago . the scenario we have right now is the one that says
the price is telling us everything is going to go wrong . i
didn ' t think that everything was going to go right , nor do
i think that everything is going to go wrong at this point .
katayama : curt , what should the company do about
broadband ? i mean , that was highly touted a year ago .
it ' s losses are mounting , demand is weakening .
launer : broadband is really not part of the story very
much anymore . part of the write - offs taken with enron
during the third - quarter earnings report that you referred
to before really got the company to a level where the
broadband investment on the books is very , very small .
there probably are some additional tag - in write - offs that
could be taken in the broadband business , but in large
measure , the bro - - broadband portion of the business for
bandwidth trading has been moved into enron ' s wholesale
business and the content services business , which was at
one time high flying with that blockbuster deal , has
basically been dismantled .
kiernan : curt , has the company addressed the problems here
in the past twenty - four hours ? i mean , are they building
some credibility back with investors ?
launer : i - - it ' s going to be a long stretch before they
build what i would call real credibility back . ( graphic :
enron ( ene ) 16 . 91 up . 50 ) but you ' ve got to start
somewhere . the placing of the leave of absence of andy
fastow is a step of the right direction . clearly he had
lost his credibility personally . there ' s a lot of
questions remaining relative to these partnerships ; how
they were put in place and why . i don ' t see anything
untoward in them from an accounting point of view . and i
don ' t believe that the sec inquiry is going to come up with
anything untoward because there ' s been extensive reporting
about these partnerships over the last couple of years that
they ' ve been in existence . the questions come up now
because of the financial ramifications that you referred to
before ; 3 . 3 billion dollars of asset value that to some
degree is unaccounted for currently in terms of the assets
that are in those partnerships .
ultimately , we think this is going to be resolved , perhaps
partially with the issuance of some equity that - - to the
debt holders behind those partnerships . but once they get
cleared up and the credibility is restored , this is a very
attractive valuation with which to own enron .
velshi : all right . curt , thanks very much for joining us
today .
launer : thank you .
velshi : curt launer is a natural gas analyst at credit
suisse first boston . fred katayama is our stocks editor .
enron , our " stock of the day . "
# # #
