Layoffs Possible As Enron Reduces Broadband Burn Rate
Dow Jones Energy Service, 07/12/01

USA: Losses widen to $102 million for Enron Broadband.
Reuters English News Service, 07/12/01

Enron's 2nd-Qtr Profit Rises 40% on Electricity Sales (Update5)
Bloomberg, 07/12/01

Enron's Skilling Sees California Energy Crisis Easing (Update2)
Bloomberg, 07/12/01

Jeff Skilling Inteview
CNBC, 07/12/01

Enron Expects To Cash In On New U.S. Federal Mandate For Open Wholesale Power
Markets
CNNfn: Market Coverage - Morning, 07/12/01

Jeff Skilling Interview
Bloomberg Information TV, 07/12/01

USA: INTERVIEW-Enron chief sees California problems fading.
Reuters English News Service, 07/12/01

Enron CEO:Foreseeable Business Prospects Remain Excellent
Dow Jones News Service, 07/12/01

Enron 2Q Net Rises 40% As Trading Revenue Soars
Dow Jones News Service, 07/12/01

USA: UPDATE 3-Enron quarterly earnings rise, beat estimates.
Reuters English News Service, 07/12/01

Enron reports earnings increase of almost 40 percent
Associated Press Newswires, 07/12/01

Venture capital chasing next big - and little - thing in energy
Associated Press Newswires, 07/12/01

A Volt From Blue, U.S. Grid Rules Get Power Co's Abuzz
Dow Jones Energy Service, 07/12/01

Marlin Water Trust II Taps Euro And Dollar Bond Markets
Capital Markets Report, 07/12/01

FERC Power Grid Orders Will Open Markets for Traders (Update2)
Bloomberg, 07/12/01

Enron CEO Skilling on California Crisis, FERC Talks: Comment
Bloomberg, 07/12/01

Enron Chief Executive Sees California's Energy Crisis Easing
Bloomberg, 07/12/01

FERC Transmission Decision Will Open Power Markets for Traders
Bloomberg, 07/12/01

California Not Due Cash Refunds for Power Purchases (Update1)
Bloomberg, 07/12/01

Layoffs Possible As Enron Reduces Broadband Burn Rate
By Erwin Seba
Of DOW JONES NEWSWIRES

07/12/2001
Dow Jones Energy Service
(Copyright (c) 2001, Dow Jones & Company, Inc.)

HOUSTON -(Dow Jones)- Enron Broadband Services executives said staff
redeployments, including possible layoffs and an office closure were part of
the plans to reduce losses at the telecommunications unit of Enron Corp.
(ENE).
The news came shortly after Enron President and Chief Executive Jeffrey
Skilling told an investor call Thursday morning that Broadband Services lost
$102 million in the second quarter of this year.
"We've got to get that burn rate down," Skilling said. "And we will get the
burn rate down in the next two weeks."
Broadband Services Senior Vice President Kelly Kimberly said Enron hadn't yet
determined the exact number of the unit's approximately 1,000 employees to be
redeployed.
"We will be moving some commercial support people to corporate," Kimberly
said. "There will be redeployments. There may be some severances."
Commercial support employees are in departments like human resources and
legal support offices.
Also, the unit will close its Portland, Ore., office, but its back-up network
operations center (NOC) there will remain in operation.
Portland employees will be offered redeployment in Houston or other offices.
Those who do not accept redeployment will be offered severance packages,
Kimberly said.
EBS's primary NOC is in northeast Houston, one of the areas hardest hit by
Tropical Storm Allison. In spite of heavy rains and flooding last month, the
Houston NOC continued functioning. However, Enron officials did activate the
Portland NOC in case the Houston center could not remain open.
This is the second redeployment of Broadband Services employees this year.
The earlier redeployment was attributed by executives to the transition from
building the EBS optical fiber network to operating the network.
Revenues Victim Of Crash In Telecom Prices
Skilling blamed the crash of telecommunications prices for the decline in
revenues in the second quarter.
"There is a meltdown out there," Skilling said during the conference call.
Skilling said many potential counterparties among carriers can do only
short-term deals in the bandwidth market because their creditworthiness is so
weak.
The company believes it will be one or two years before the bandwidth market
gets to the point Enron had expected it to be this year, Skilling said.
Enron is the primary market maker in the bandwidth arena. Skilling and
Kimberly said the company will continue to develop the commoditized market.
That leadership has left Enron feeling increasingly lonely in recent weeks,
said an industry analyst.
"Enron was trying to move this market fast," said William Bandt of Arthur
Andersen L.L.P. "They've been working to get out at the front of this market.
Sometimes that's like being at the end of the high-dive board all by
yourself."
Overall, Enron is in good financial shape because of its core energy
industry.
For the second quarter this year, Enron reported net income, excluding
non-recurring items, of $404 million on revenues of $50.1 billion. In the
second quarter of 2000, the company reported net income of $289 million on
net revenues of $16.9 billion.
The earnings per diluted share for the quarter is 45 cents compared with 34
cents a year ago. Skilling said the company expects to achieve $1.80 in
recurring earnings per diluted share this year.
Broadband Services reported a loss of $102 million in the second quarter on
$16 million in revenues before interest and taxes. In the same period of
2000, the unit reported revenues of $151 million and a loss before interest
and taxes of $8 million.
EBS had 759 transactions in the second quarter 2001 compared with 23 in the
second quarter of 2000. The company added 45 new customers in the second
quarter, giving it a total of 165 customers, Skilling said.
Carriers and network services providers made up more than 70% of Enron's
broadband customers and accounted for about one-third of its transactions, he
said.
In the second quarter of this year, the company delivered 98,478 terabytes of
data compared with 13,692 a year ago.
For the year so far, EBS has delivered 141,878 terabytes of data compared
with 19,697 in same period a year ago.
Broadband Services has a goal of delivering 570,000 terabytes this year.
Enron has signed a long-term contract with MSN to provide broadband services,
Skilling said. The deal will allow MSN to provision and pay for bandwidth as
it's needed. The company will give more information on that deal later,
-By Erwin Seba, Dow Jones Newswires, 713-547-9214 erwin.seba@dowjones.com

Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved.

USA: Losses widen to $102 million for Enron Broadband.
By C. Bryson Hull

07/12/2001
Reuters English News Service
(C) Reuters Limited 2001.

HOUSTON, July 12 (Reuters) - The revenue rug got pulled out from under Enron
Corp.'s broadband division in the second quarter, leading to a
wider-than-expected loss inside the nascent unit, the company said on
Thursday.
Enron Broadband lost $102 million on revenue of $16 million in the second
quarter. In the year-ago quarter, when the telecom sector was much stronger,
the unit brought in $151 million in revenue and lost just $8 million.
The losses and the shrinking revenue opportunities caused by severe weakness
in the telecommunications market led Enron President and Chief Executive Jeff
Skilling to announce a restructuring that will include an unspecified amount
of job cuts within Enron Broadband Services.
"This quarter was the absolute evidence that there is a serious problem in
the telecom industry," Skilling told Reuters in an interview. "Revenue
opportunities just dried up. People are not contracting."
The telecom and Internet network carriers that are Enron Broadband's target
customers are suffering from credit problems and other financial difficulties
preventing them from entering into the long-term deals that are the unit's
bread and butter.
Enron plans to turn bandwidth into a tradeable commodity that can be sold and
packaged much like natural gas. Enron believes bandwidth capacity is
essentially the same as gas pipeline capacity, and can be traded the same
way.
Skilling said the worse-than-expected telecom weakness should push back plans
for profitability inside the unit by about a year. Initially, Enron planned
to turn a profit from broadband by at least 2002.
But Skilling said near-term cost cutting, the company's agility and small
asset position should enable it to quickly react to lower revenue targets.
Workers whose jobs are removed from Enron Broadband will be redeployed to
other positions within the company, Skilling said.
One encouraging sign was the increase in transactions in sequential quarters,
from 580 deals in the first quarter to 759 deals in the second, Salomon Smith
Barney analyst Ray Niles said.
"It was a little bit below our expectations, but the volumes are still up
sequentially. The key metric remains growth in transactions. At the end of
the day, given enough transactions, it should become a profitable business,"
Niles said.
The flashy unit, which gave Enron a once-valuable telecom cache that drove
its stock to record highs last summer, has fallen from grace recently as the
telecom market tanked earlier this year.
Enron Broadband cut jobs earlier this year and also reduced its capital
budget by a half-billion to $250 million as the telecom market first dropped
sharply.
Broad telecom weakness as well as the California power crisis and a
struggling power project in India combined to push the energy giant's stock
down 15.7 percent in the quarter. It underperformed the broader Standard &
Poor's utility index, which was down 6.32 percent in the same period. Enron
shares were down 48 cents, or 1 percent, at $48.62 in afternoon trading on
the NYSE.

Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved.

Enron's 2nd-Qtr Profit Rises 40% on Electricity Sales (Update5)
2001-07-12 16:25 (New York)

Enron's 2nd-Qtr Profit Rises 40% on Electricity Sales (Update5)

     (Updates shares.  Adds analyst comment in fourth paragraph.)

     Houston, July 12 (Bloomberg) -- Enron Corp., the top energy
trader, said second-quarter profit rose 40 percent as its sales of
natural gas and electricity surged in the U.S. and Europe.
     Net income rose to $404 million, or 45 cents a share, from
$289 million, or 34 cents, in the year-earlier period, Enron said.
Revenue almost tripled to $50.1 billion. The Houston-based company
sold almost twice as much power in North America and five times as
much in Europe than in the year-earlier quarter.
     Though electricity and natural-gas prices surged in
California, Enron Chief Executive Jeff Skilling said the state
``is just not a big factor'' in Enron's increasing profits. The
Houston-based company boosts earnings by increasing sales of
energy and other commodities such as lumber and steel rather than
raising prices, analysts said.
     ``That's the nature of the commodities business,'' said Zach
Wagner, an analyst with Edward Jones & Co. who has a ``buy''
rating on Enron. ``As markets open up, their volumes will grow.
Their margins are basically flat.''
     Enron's profit margin was less than 1 percent last year and
has averaged 2.1 percent during the past five years, based on
Bloomberg data. That compares to a profit margin of 6.5 percent
for Exxon Mobil Corp., the largest publicly traded energy company.
     Shares of Enron have dropped 31 percent during the past year
despite steadily increasing earnings, and sales that now rival
those of Exxon Mobil.

                         Broadband Meltdown

      Investors are concerned about lackluster results from the
company's broadband business, which was set up to trade space on
fiber-optic telecommunications networks. Enron shares surged
87 percent last year when the boom in Internet and
telecommunications businesses seemed certain to increase demand
for broadband capacity. Enron shares fell 40 percent this year as
the boom fizzled.
     The broadband business had a loss before interest, minority
interests and taxes of $102 million in the second quarter,
compared with an $8 million loss a year earlier. Broadband revenue
plunged 89 percent to $16 million from $151 million. Enron said it
is firing broadband staff to reduce costs.
     ``There's a meltdown out there,' Skilling said. ``You have to
do very short-term transactions (in broadband) because people
don't have the credit to do long-term transactions.''
     Investors are questioning whether Enron can continue to post
huge gains in sales in its energy and commodity businesses,
analysts said. The earnings news today left the stock up
45 cents, or less than 1 percent, to $49.55.
     ``It was telecommunications that took the stock to its lofty
height . . .  and disappointment with telecommunications that has
held the stock back,'' Wagner said. ``What they're trading at now
is purely as an energy company.''
      Spokeswoman Karen Denne declined to say how many people will
be fired or where the cuts would take place in the company's
broadband business. Enron has broadband staff in Houston, London,
Singapore and Portland, Oregon. Denne said Enron would try to find
internal jobs for the broadband workers and only cut those
employees it can't place.
     In a conference call, Skilling said the broadband business
still has potential.
    ``We're getting a negative impact on our stock price from the
broadband business, and I don't think that's right,'' Skilling
said.

                         Buyer and Seller

     Skilling and his predecessor, Ken Lay, have transformed a
natural gas-pipeline company into the biggest competitor in the
business of trading commodities such as gas and power. Enron also
uses financial instruments such as futures contracts to help
protect customers from swings in energy prices.
     Enron says it makes money regardless of whether prices go up
or down in California because it is both a buyer and a seller in
the markets where it operates, making much of its money from fees
for arranging trades. It also profits from selling risk management
contracts to utilities and other companies that want to lock in
energy prices.
     Enron was expected to make 42 cents a share in the quarter,
the average estimate of analysts polled by First Call/Thomson
Financial. Enron reiterated its 2001 profit forecast of $1.80 a
share and said it expects to make $2.15 in 2002. The First Call
estimate for 2002 was $2.12.
     Enron's revenue tripled from $16.9 billion in the year-
earlier quarter. Most of the gain came from Enron's Wholesale
Services business, which includes commodities trading and
development of energy projects such as power plants.
     Earlier this year, Enron estimated it was owed as much as
$500 million for California energy sales. Skilling said he thinks
California prices have stabilized and the state is going to get
through the summer ``just fine.'' While electricity and natural
gas prices in the West are up from a year ago, they are down from
the first quarter.
     ``The financial impact on Enron is over now,'' Skilling said.

                         European Expansion

     Enron had first-half revenue of $100.2 billion, almost equal
its revenue for all of last year. Skilling has predicted revenue
will top $200 billion this year, rivaling Exxon Mobil's
$232 billion in 2000 sales.
     Enron is continuing to expand its trading business in Europe.
The company entered Europe ahead of its competition and became the
dominant trader there, said Bob Christensen, a First Albany
analyst who rates Enron a ``strong buy.''
     ``We have just started down the path in Europe,'' Skilling
said. ``Look for great things from Europe in the future.''
     In California and other parts of the U.S., Enron has a
growing business in contracts that manage energy supply for big
customers such as Owens-Illinois Inc. and Eli Lilly & Co.
Contracts increased 89 percent to $7.2 billion in the quarter,
Enron said.
     The energy-services unit's profit increased 30 percent to $60
million in the quarter, and the business is on track to make $225
million this year, more than double 2000's results, Enron said.
     Profit was little changed at Enron's pipeline and utility
businesses, which are more closely regulated than the trading
operations. Enron has a 25,000-mile gas pipeline system and owns
Portland General, an Oregon utility.
     The company reported a loss of $109 million for higher
``corporate-wide expenses.'' About a quarter of that was from its
Azurix water unit, Skilling said. The loss compares with profit of
$17 million a year earlier.

Enron's Skilling Sees California Energy Crisis Easing (Update2)
2001-07-12 16:17 (New York)

Enron's Skilling Sees California Energy Crisis Easing (Update2)

     (Updates with closing share price.)

     Houston, July 12 (Bloomberg) -- Enron Corp. Chief Executive
Jeffrey Skilling said higher retail prices for electricity in
California has curtailed power demand and should lead to fewer
blackouts than expected this summer.
     ``The expectation of higher retail prices has dampened demand
considerably,'' Skilling said in a conference call with analysts
and investors. ``I think we're going to get through the summer
just fine in California. That will ultimately lead to lower
wholesale prices for power.''
     The state had been facing about 15 hours of blackouts a week
this summer, the North American Electric Reliability Council, a
national group that monitors and coordinates U.S. power supplies,
said in May. California has been spared outages recently because
of conservation efforts, cooler temperatures and new power plants.
     Prices for power and natural gas in California should stay
close to current levels because of the drop in demand, Skilling
said in an interview with Bloomberg Television.
     Power plants producing enough energy for about 1.2 million
homes have opened this summer in California, California Governor
Gray Davis said yesterday in a statement.
     ``We're not out of the woods yet, but we are making
progress,'' Davis said.
     California is seeking $8.9 billion in refunds from generators
such as Houston-based Enron, the biggest energy trader, for power
bought in the last year. Under the formula used by California to
derive that figure, Enron is actually owed $44 million because it
bought more power than it sold since May 2000, Skilling said.
     Shares of Enron rose 45 cents to $49.55. The company said
today second-quarter profit rose 40 percent as higher sales of
electricity more than made up for a loss in its telecommunications
business.
     Enron stock has fallen 40 percent this year. The political
rhetoric surrounding the California crisis and negotiations over
possible refunds has hurt Enron's stock price, Skilling said.
     ``All this noise from California has obscured the performance
of the company,'' Skilling said.

    Date      July 12, 2001
    Time      09:00 AM - 10:00 AM
    Station   CNBC
    Location  Network
    Program   The Squawk Box

              Mark Haines, anchor:

              Energy earnings:  Enron reporting second quarter earnings,
              forty-five cents a share, beating expectations of forty-two
              cents a share.  Surpassing last year's earnings of
              thirty-four cents.  Net income roes forty percent to
              four-hundred-four million dollars.  Revenue up one-hundred
              and ninety-five percent to fifty-billion.  (Graphic:  Enron
              (ENE):  Actual $0.45, Estimate $0.42, Year Ago $0.34,
              Revenue up 195% to $50.06b, Net Income up 40% to $404m)
              Enron said revenue numbers were driven by a surge in
              wholesale services business.  Stock is trading at a
              fifty-two week range, forty-two to ninety.  Right now at
              the low end, around forty-nine yesterday.  Let's take a
              closer look at the numbers.  Joining us now is Enron CEO
              Jeffrey Skilling.  And in the spirit of full disclosure, I
              have some shares of Enron in my IRA.

              Mr. Skilling, how does revenue go up so much and the
              bottom line doesn't benefit more?

              Jeffrey Skilling (Chairman and Chief Executive Officer,
              Enron):  Well we had a net income increase, Mark, of over
              forty percent and earnings per share up thirty-two
              percent, so I think it was a real good quarter.

              Haines:  Yeah, but that doesn't answer the question, well,
              how can revenue grow like a hundred and fifty and--and the
              bottom line only benefits forty--forty percent?

              Skilling:  What--what drives our net income, Mark, is the
              increase in physical volumes delivered.  Revenues are
              impacted by price levels and price levels really don't
              impact us because we don't own generation facilities, we
              don't own gas production assets.  So prices move up, prices
              move down, that impacts our revenue.  But what really
              matters to us is how much volume are we delivering to
              customers and our volumes this quarter up fifty-eight
              percent, which drove that increase in our wholesale income.

              Haines:  How unusual should we consider the--the last few
              quarters?

              Skilling:  I think the most lasting legacy of the problems
              in California may be an order that came out of the Federal
              Energy Regulatory Commission yesterday.  And what they did
              is they forced open--moved to four mandatory, what they
              call regional transmission organizations.  (Graphic:  Enron
              (ENE) 8-Quarter Earnings History Chart)  This will make the
              marketplace for electricity in North America open.  And
              what that means is there is a tremendous additional amount
              of growth, we believe, in the electricity markets in North
              America as these markets open up for competition.
              Similarly Europe--Europe is really just starting.  I don't
              know if you saw our numbers in Europe, but our gas volumes
              were up over a hundred percent.  Our electricity volumes
              were up over four hundred percent in Europe.  That market's
              just starting to open and has tremendous future
              opportunities in it.  (Graphic:  One of the world's leading
              electricity, natural gas and communications companies;
              Delivers physical commodities and financial & risk mgmt.
              services to customers around the world)

              Joe Rivkin (Citigroup Investments):  Mr. Skilling, I--you
              are building a global fiber-optic network, which is in
              effect owning some capacity that you're going to be selling
              or trading.  Can you help us understand the logic behind
              that?  And, also, what will make that network different
              from several of the other networks that are out there or
              under construction?  (Graphic:  Has developed an
              intelligent network platform to facilitate online business;
              Divides its business into four core areas:  Wholesale,
              Broadband, Energy and Transportation Services)

              Skilling:  Yeah.  Thanks, Jack.  It's--it's a very, very
              different network than what you'll see anywhere else in the
              world.  If you look at most networks, the capacity to input
              data and the capacity to output data is very similar to
              what the long-haul capacity is.  In our network it's very
              different, the capacity input and output is enormous
              relative to the amount of long-haul capacity we have.  That
              allows us to bring data into our system, move it on to
              other people's systems by creating a marketplace for
              bandwidth, to get customers lower prices.  We think this is
              the future, particularly given the melt down in client and
              prices for bandwidth around the world.  We think this is
              exactly the right strategy to have.  We're focussing on
              those areas where we--we believe that marketplace will be
              good in the future.  In fact, we announced in the press
              release this morning a contract with Microsoft.  A
              multi-year contract to provide bandwidth services that is
              really geared towards providing instantaneous access to
              bandwidth for customers, which is really a new product
              which we think is going to be very important for the
              future.  (Graphic:  Formed in July 1985 as a result of the
              merger of Houston Natural Gas and InterNorth of Omaha,
              Nebraska;  Headquarters in Houston, Texas;  Approximately
              20,000 employees; Yearly High:  90.75, Yearly Low:  42.35;
              Market Cap:  36.6b; Top Competitors:  AEP, Duke Energy,
              Reliant Energy)

              Haines:  Does this get you into the technology business?
              Because if you're dealing with what's coming into a pipe
              and what has to go out of it, there's--there's a lot of
              effort going into place to either compress the information
              or expand the information or route the information...

              Skilling:  Right.

              Haines:  ...how are you dealing with that?

              Skilling:  Well, really, what we're doing in the
              telecommunications business is identical to what we do in
              the natural gas and electricity business.  They're pipes,
              and the data moves through the pipes.  If they can crush
              more--more data into the same amount of pipes, that's good,
              that opens the market, provides additional capacity.  What
              we do is we purchase and sell that capacity and make it
              available through our switching capabilities to any
              customer that wants to get real time access to bandwidth.
              (Enron Corp (ENE) 3-Month Stock Chart and 6-Month Stock
              Chart)

              Haines:  How much of a cloud on the horizon is this
              California energy situation?  The--you are suing the state
              of California, California is asking for documents, you're
              refusing to provide them.  The situation doesn't look too
              pleasant.  (Graphic:  Enron Corp (ENE) 1-Year Stock Chart
              and 3-Year Stock Chart)

              Skilling:  Well, Mark, you know, I think--I think the
              entire California thing I think is past the high water
              mark.  Prices now are moving up in California and economics
              101 demand's going down.  I think we're going to get
              through this summer all right.  As Joe was saying, the
              weather's pretty cool out in California.  I think that's
              going to keep the demand for electricity down.  As prices
              come down in California, I think the whole tone of
              discussion in California will get better.  And as I said,
              this whole thing with the Federal Energy Regulatory
              Commission--they recognize now it's important to open the
              grid, it is critical to create efficient markets for
              electricity.  And the step yesterday, I think, is a
              landmark step in opening that market and I think that's
              going to reduce the problems from California.  (Graphic:
              Enron Corp (ENE) 5-Year Stock Chart)

              Haines:  All right, sir, thank you very much.  We
              appreciate your bringing us up to date.

              Skilling:  Thanks, Mark.

              Haines:  Jeffrey Skilling, CEO of Enron.

                        # # #

Business
Enron Expects To Cash In On New U.S. Federal Mandate For Open Wholesale Power
Markets
Rhonda Schaffler, Barry Hyman

07/12/2001
CNNfn: Market Coverage - Morning
(c) Copyright Federal Document Clearing House. All Rights Reserved.

RHONDA SCHAFFLER, CNNfn ANCHOR, MARKET CALL: The nation`s number one buyer
and seller of energy posted strong second quarter numbers. Enron (URL:
http://.www.enron.com/) earned 45 cents a share, beating estimates by 3 cents
and the year-ago quarter by 11 cents. Revenue surging almost 200 percent and
the company says it`s on track to meet not just expectations this year but
expectations for next year.
Shares, though, have been slashed in half in the past six months due mostly
to the California power crisis and weakness in the broadband market, as Enron
continues to build its` global fiber optic network.
Joining us from Houston to talk about all this is Jeff Skilling, CEO and
president at Enron.
Jeff, good to have you back on "Market Call".
JEFF SKILLING, CEO, PRESIDENT, ENRON: Thanks, Rhonda. Good to be here.
SCHAFFLER: Congrats on the quarter. But it`s an interesting quarter for you
in that, for a change, not everything`s firing on all cylinders.
SKILLING: Well, you know, it`s a little bit of the tale of two cities. You
know, the energy business is very strong. As you can see from our numbers, we
had a great quarter-another great quarter in the energy business. Broadband
business is suffering from some of the problems the broadband business has,
but luckily, in Enron, it`s a very small portion of our net income. So, the
real story for Enron is this strong, strong growth and strong profitability
of our energy business.
BARRY HYMAN, CNNfn GUEST HOST, MARKET CALL: Jeff, I just want to concentrate
on the broadband part for a second. You`re significantly cutting costs there
and your stock seems to have gotten hit as almost a technology stock since
the beginning of this year. Where do you see the broadband part going
forward? And how you can make money in that particular sector? Or is it
really a viable place to be?
SKILLING: Yeah. Barry, I really do believe that they`ve taken all the value
of broadband business out of our stock completely. It`s gone. And we`ve also
been hurt a little bit by what`s going in California, in spite of the fact
that we continue to hit our numbers.
We`ve hit our estimates, or exceeded estimates, very quarter for the last
four years. But I think people are just a little nervous about us. As far as
broadband goes, it is a tough, tough market. The revenues have dried up in
that business.
There are two areas where we have focused, which have been our primary area
focus. One is to create a market place-a real-time market place for
bandwidth. We feel very good about that. That is continuing to grow. And a
content delivery service where we provide a turnkey service for customers.
We just announced, in fact, in the earnings release, a new contract with MSN
that really provides that dynamic provisioning of bandwidth for customers.
And those are the two areas we`re focusing on. The rest of the market we are
just going to eliminate our activities there and just focus on those two
activities. And we see those as having enormous future potential for
customers. It`s going to be tough for the next year or so as that market kind
of digs itself out of a hole. But I think longer-term it`s a great place to
be and we have exactly the right strategy for pursing that market.
SCHAFFLER: Can you tell us a little bit about what you`re doing in Europe
with the energy markets there? Because Europe`s an interesting story as well,
because of concerns about the slowdown there?
SKILLING: Yeah, it`s interesting, Rhonda. Our volumes in Europe were
incredible. Our gas volumes were up over 100 percent. Our electricity volumes
were up over 400 percent.
What you`re seeing there is, in spite of the slowdown in the economy in
Europe, they`re opening up their markets to competition so the non- regulated
portion of the energy market, which is the only portion of the market where
we compete, is just exploding. It`s growing by leaps and bounds. And so we
expect Europe to be a significant contributor to future growth.
Similarly, even in North America, as we`re seeing the economy here slowdown.
We had a landmark decision come out of Federal Energy Regulatory Commission
yesterday. They have mandated now the establishment of four regional
transmission organizations. And this sounds kind of technical, but
essentially what it does is it is going to force fully open-force fully the
North American wholesale power markets in North American. And that, I think,
will provide significant new growth opportunities for us in North America.
So, I think the North America and the European gas and electric markets are
really not dependent on economic activity, as far as Enron`s concerned.
They`re really dependent on how quickly we move to open competitive markets
and we`re seeing a very, very fast transition there-and great news out of the
FERC yesterday.
SCHAFFLER: Jeff Skilling, CEO of Enron. Nice to see you again. Congrats on
the quarter. We`ll talk soon.
SKILLING: Thanks, Rhonda.

Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved.

    Date      July 12, 2001
    Time      12:30 PM - 01:00 PM
    Station   Bloomberg Information TV
    Location  Network
    Program   Newsline

              Suzy Assaad, anchor:

              There's a lot ahead for you in this next half hour.  We're
              going to talk live with the CEO of Enron, Jeffrey Skilling.
              His broadband division is having some troubles and we're
              going to ask him why he thinks he can turn it around.

                                         * * *

              Assaad:  Enron came out with earnings and they actually
              beat the Street.  The energy and communications company
              earned forty-five cents a share from continuing operations
              and that was three cents better than what the Street was
              expecting.  (Graphic:  Enron (ENE) 2Q, 2001 > Actual EPS
              $0.45 > Estimated EPS $0.42  Earnings Alert) The news sent
              shares of Enron sharply higher in the early part of the
              session.  On the day, though, they have managed to turn a
              little bit to the downside.  (Graphic:  Enron intraday
              stock chart)

              Enron, though, is having problems with its broadband
              division.  The company is projecting lower revenues for
              broadband and it is going to eliminate jobs to lower costs.
              Now can broadband be turned around and if not, what will
              they do about it?  Joining us live from Houston is the CEO
              of Enron, Jeffrey Skilling.  (Graphic:  Enron.  Enron 2Q
              profit rises 40% to $404 million as higher sales of
              electricity more than made up for a loss in its
              telecommunications business)

              Mr. Skilling, thank you for being on the show and let's
              start off with that question.  How do you plan to turn
              broadband around, if--continue to keep it or get rid of it?
              What are your plans for there?

              Jeffrey Skilling (Chief Executive Officer, Enron):  Well we
              believe longer term the broadband business is going to be a
              good business.  It's clear, though--absolutely clear that
              we're going through a meltdown in the business right now.
              And so what we need to do is we just need to get our cost
              structure in line with the current view of what revenues
              can be in that business and that's what we're in the
              process of doing.  (Graphic:  Enron.  Net income at the top
              energy trader rose to $404 million, or $0.45/share from
              $289 million or $0.34/share a year earlier) I think, given
              our strategy--our strategy has not been an asset-heavy
              strategy--we should be able to do this pretty easily and
              pretty quickly.  As you've seen from our numbers that we
              announced today, we have extremely strong growth on the
              energy side of our business, so we'll end up redeploying
              people from the broadband business back into our energy
              business.  So we think we can move pretty quickly on it.
              (Graphic:  Enron.  Houston-based company says it sold
              almost twice as much power in North America and five times
              as much in Europe in the quarter)

              Assaad:  That's--that's quite a drain then.  I mean in a
              year where you're having such great numbers, to have the
              broadband be such a drain on your bottom line.

              Skilling:  Well it's not that big in the grand scheme of
              things.  You know our energy business is a big business,
              it's growing very quickly.  Our revenues in energy this
              quarter were over fifty billion dollars.  So that's really
              the big part of our business and, sure, the
              telecommunications business I think long term is going to
              be an opportunity.  I wish it were an opportunity right now
              but I think what we need to do is just get that burn rate
              down, get it consistent with what the revenue opportunity
              is in the industry.  We'll be a survivor and when this
              business comes back, I think it has all the promise that we
              all know it has, it's just going to be a little delayed
              from what we thought before.

              Assaad:  Could we actually get your outlook, Mr. Skilling,
              on energy prices going forward?

              Skilling:  Sure.  It's--it's--

              Assaad:  Is it a one-way street up?

              Skilling:  I don't think so.  We've been really surprised
              by the decline in demand.  If you look at demand for
              electricity and natural gas in North America, it is way
              down this year, almost unprecedented decline in demand for
              a developed economy.  I've never seen anything like it
              before.  And--and I think it's been triggered by the fact
              that prices went up last year and customers--sort of
              Economics 101--customers have decided that there are
              cheaper alternatives and so the demand has gone down and
              that has really driven down prices.  You know gas prices
              are way off from what they were earlier this year.  Power
              prices all across the country are way down from what they
              were earlier this year.  And so I think it's just natural
              economics taking effect.  But what I think it means is that
              the current price level that we're seeing for gas and
              electricity are probably likely to be the prices that we'll
              see for--for some time now.  They're on the low side of the
              range that everyone was expecting but I think that's what
              it looks like.  (Graphic:  Enron.  President, CEO Jeffrey
              Skilling has predicted that revenue will top $200 billion
              this year)

              Assaad:  In terms of what's going on in California,
              it's--it's said that that has put some pressure on your
              stock price as of late.  What are your predictions down
              that end?

              Skilling:  Well it has put pressure on our stock price.
              You know we've--we've hit earnings or exceed earnings
              expectations every quarter for the last four years and yet
              our stock's down this year.  I think the reason for that is
              that all of this noise from California has obscured the
              performance of the company.  (Graphic:  Enron.  In places
              including CA, Enron has a growing business in contracts
              that manage energy supply for big clients such as
              Owens-Corning, Lilly)

              But I think we're now, because prices are
              dropping--wholesale prices are dropping for power, I really
              think we've seen the high water mark of the problems in
              California.  (Graphic:  Enron.  Contracts increased 89% to
              $7.2 bln in the quarter, Enron says) It's been cool in
              California, prices are down and I think as this works its
              way through the system, I think a lot of the noise and a
              lot of the antagonism will start to go away and I think--in
              fact I think probably the greatest legacy of this whole
              California debacle will be what happened yesterday in the
              Federal Energy Regulatory Commission.  You know they came
              out with an order that most people weren't really, I don't
              think, looking at that carefully.  But this--this order
              requires the development of a very, very efficient
              marketplace for electricity in North America.  (Graphic:
              Enron.  While California power prices were double year-ago
              levels, Enron reiterated its 2001 profit forecast of
              $1.80/share and said it made no difference to Enron's
              bottom line) It's a huge step forward, it's very, very
              positive.  And so while it's technical in nature, I think
              ultimately it will have probably the most impact going
              forward in time, more than this whole California things has
              had.

              Assaad:  Interesting.  In terms though of--of going forward
              from here, it's also said that a lot of your wholesale
              margins, a lot of certainly your volumes are going to be
              dependent on the development of Europe, that this is really
              the area of growth for you right now.  Do you agree with
              that and where do you see Europe going for you in the next
              year?

              Skilling:  Well, Europe is important and Europe is just
              starting the process of liberalizing markets, the
              continental countries.  And so we think there's enormous
              growth opportunities there.  Gas volumes were up over a
              hundred percent.  Our power volumes were up over four
              hundred percent.  So I think there's great opportunity
              there and that will be a source of growth in the future.
              (Graphic:  Enron.  That's because Enron's risk-management
              business makes money it expects to make $2.15 in 2002;
              First Call estimate for 2002 was $2.12, whether power
              prices rise or fall, analysts say)

              Assaad:  Mr. Skilling, do you think there's greater
              opportunity for Enron in Europe than there currently is
              here in the U.S.?

              Skilling:  No.  And that's--I was about to say that with
              this change in the federal policy, this--currently only
              about twenty percent of the wholesale market for power is
              accessible.  You can only get to about twenty percent of
              the locations in the country because of flawed regulation
              in North America.  If these rules go through, as was
              dictated yesterday by the Federal Energy Regulatory
              Commission, the entire U.S. market opens up and so this is
              an enormous growth opportunity.  And--and because this is
              our biggest business, we think it will have more effect
              than Europe.  (Graphic:  Enron.  Enron's ability to boost
              profit and sales even as its broadband business slumped
              shows it can manage changing market conditions, analysts
              say) But longer term, Europe's a great market, great
              business for us.

              Assaad:  Absolutely.  Thank you very much for joining us
              today.  Jeffrey Skilling, joining us to talk about Enron.

                        # # #

USA: INTERVIEW-Enron chief sees California problems fading.
By C. Bryson Hull

07/12/2001
Reuters English News Service
(C) Reuters Limited 2001.

HOUSTON, July 12 (Reuters) - The thus-far cool summer in California and the
emergence of specifics about Enron Corp's limited involvement in the
embattled California power market should ease pressure on the energy giant's
stock, the company's chief executive said on Thursday.
"I think we are going to get through the summer just fine. In terms of the
financial impact on Enron, it's pretty much over," Enron President and Chief
Executive Officer Jeff Skilling told Reuters in an interview.
The rhetorical attacks on the Houston company as an out-of-state generator
ignore key facts about how much power Enron sold into California, he said.
"I don't know how they can keep using us as the poster child when all of the
numbers keep coming out. The poster child ought to be the Los Angeles
Department of Water and Power," Skilling said.
According to sales records maintained by the California Independent System
Operator, which manages most of the state's power grid, Enron accounted for
0.4 percent of the alleged $9 billion in overcharges.
The U.S. Federal Energy Regulatory Commission is slated to decided if there
was an overcharge to California, and if so, how much should be refunded.
The same records show that the L.A. municipal utility and other municipal
utilities in the state overcharged PG&E Corp.'s Pacific Gas and Electric and
Edison International's Southern California Edison utilities millions more
than Enron did.
"I believe ultimately in the longer term, as people become more knowledgeable
about the data and statistics, I don't think they'll harp on Enron so much,"
Skilling said.
Skilling has personally felt the nasty nature of the duel between California
and "out-of-state power producers," the label California Gov. Gray Davis, a
Democrat, has used to blast energy companies like Enron. During a June 21
speech in San Francisco, a demonstrator threw a cream pie and hit Skilling in
the face.
"I knew something was going to happen out there, but we wanted to get our
facts out and show our commitment to getting the facts out," Skilling said of
the reason for his visit.
After he was hit with the pie, Skilling calmly explained his and Enron's
belief for the reasons behind California's power woes.
While Davis blames Enron and others for jacking up wholesale energy prices,
the companies pinpoint California's flawed deregulation scheme and a rise in
the price for natural gas as the main problems.
The latest manifestation of the flat-out war between California politicians
and Enron is a California legislative committee's finding that Enron is in
contempt for refusing to hand over confidential business documents in a probe
into price gouging.
The California Senate believes the finding gives them the power to fine Enron
and possibly jail its senior officers.
But just before the Senate Select Committee to Investigate Market
Manipulation voted to hold Enron in contempt on Wednesday, the Houston
company sued in a California court on a claim the legislature has no
jurisdiction over them.

Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved.

Enron CEO:Foreseeable Business Prospects Remain Excellent
By Bob Sechler
Of DOW JONES NEWSWIRES

07/12/2001
Dow Jones News Service
(Copyright (c) 2001, Dow Jones & Company, Inc.)

AUSTIN, Texas -(Dow Jones)- Flush from reporting a 40% year-over-year
increase in net income for the second quarter and substantially beating Wall
Street expectations, Enron Corp. (ENE) Chief Executive Jeff Skilling said
Thursday that prospects for his company remain extremely strong.
"We are well-positioned for future growth," Skilling told analysts during a
conference call.
Skilling also downplayed ongoing controversy regarding the power crisis in
California - which has contributed to a pall over Enron stock - saying he
thinks the issue already has reached "a high-water mark" and should subside.
California likely will make it through the summer without much additional
power problems, he said, helped by lower prices and cooler weather.
Enron, Houston, reported second-quarter net income Thursday of $404 million,
40% more than net income of $289 million in the year-go period.
The company surpassed Wall Street expectations for the quarter, reporting
earnings of 45 cents a share on revenue of $50 billion. Enron had been
expected to earn 42 cents a share, according to the consensus of analysts
polled by Thomson Financial/First Call.
Enron earned 34 cents a share on $16.8 billion in revenue in the year-ago
period.

CEO Skilling also heralded the decision Wednesday by the Federal Energy
Regulatory Commission ordering that four large electric-transmission
organizations be formed to optimize the flow of electricity nationwide.
The move will lead to a major improvement in business conditions for
companies such as Enron, he said, because it will create a solid foundation
for competitive power markets across the country. Enron officials estimated
that they'll eventually be able to compete in more than 90% of U.S. power
markets because of the commission's order, as opposed to the 20% the company
forecasts now.
Enron is the nation's largest electricity trader and marketer.
"This is a major, major step forward," Skilling said. "All the lights are
green right now" for Enron's wholesale-services division, which accounted for
about 97% of Enron revenue in the second quarter.
Skilling expressed confidence that Enron will meet Wall Street's full-year
earnings expectations of $1.80 a share. In addition, he said the company will
earn $2.15 a share in 2002, an increase from current 2002 expectations of
$2.12 a share.
Still, Enron's otherwise solid second-quarter results were marred by the
performance of its broadband-services division, where among other activities
it has been a pioneer in creating a trading market for broadband, or
high-speed Internet capacity. The division lost $102 million in the quarter
before interest, minority interests and taxes, compared with an $8 million
loss in the year-ago period.
Skilling said the division has been the victim of an overall "meltdown" in
the broadband industry.
"Revenue this quarter, or revenue opportunities, just dried up" in broadband,
he said.
The business climate eventually will rebound and bear fruit for Enron,
Skilling said, but that is probably one to two years away.
In the interim, Enron is planning to overhaul the broadband unit, cutting
costs and narrowing its scope to focus strictly on intermediation, or
trading, activities and on providing specific bandwidth to large enterprise
customers. Enron didn't reveal details of the planned cuts Thursday.
Still, Skilling did note that he thinks investors already have penalized
Enron for the broadband unit, or at best given it no value as reflected in
the stock price. He said he thinks that reaction is unwarranted and
understates the future potential of the broadband unit.

Later, in an interview with Dow Jones Newswires, Chief Executive Skilling
reiterated that California's ongoing efforts to resolve its power crisis will
have no negative impact on Enron.
He also dismissed as "all politics" a move Wednesday by a California Senate
committee to forward a contempt charge against Enron to the full California
Senate. The committee initiated the action because Enron has refused to
provide certain financial documents that the committee has requested as part
of an investigation into wholesale power prices in the state.
"They have no jurisdiction, and they've made it clear they won't keep
confidential" the information that they have requested, Skilling said
Thursday. "In the absence of that, we don't particularly want to turn over to
them information."
Enron shares recently traded at $48.80, down 30 cents, despite the company's
strong second-quarter results. Skilling said the stock was being held back
because of its tie to the energy sector, which has been struggling overall.
"Give it a couple of days," he said. "I think we've hit the low-water mark on
our stock price, and I think we have a lot of upside."
-Bob Sechler, Dow Jones Newswires; 512-236-9637

Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved.

Enron 2Q Net Rises 40% As Trading Revenue Soars
By Bob Sechler
Of DOW JONES NEWSWIRES

07/12/2001
Dow Jones News Service
(Copyright (c) 2001, Dow Jones & Company, Inc.)

AUSTIN, Texas -(Dow Jones)- Enron Corp.'s (ENE) second-quarter net income
rose 40%, led by a huge uptick in revenue at its wholesale services division,
which includes energy trading operations.
"The numbers were excellent, no question about it," said John Olson, an
analyst with Sanders Morris Harris. "It was a good quarter, and management
has clearly raised the bar for 2001 and 2002."
The company reported second-quarter net income Thursday of $404 million, or
45 cents a share, compared with year-ago net income of $289 million, or 34
cents a share. Enron had been expected to earn 42 cents a share, according to
Thomson Financial/First Call.
Revenue ballooned to $50.06 billion from $16.89 billion in the year-ago
period.
However, the strong results didn't prevent Enron stock from falling modestly
in Thursday's trading. The shares traded recently at $48.80, down 0.6%.
Analysts cited a host of reasons for the lack of investor response, not the
least of which is lingering uncertainty regarding California's energy crisis
and the outcome of energy deregulation efforts overall. Enron is the nation's
largest electricity trader and marketer.
"There's a perception there that's hurting Enron's stock, creating
uncertainty about it," said Louis Gagliardi, of John S. Herold Inc. Enron is
"still under the shadow of the California situation and deregulation."
Gagliardi and others said they tend to agree with Enron Chief Executive Jeff
Skilling that California's efforts to resolve its power problems won't hurt
the company. But they said investors are jittery nonetheless.
For his part, Skilling blamed the lack of enthusiasm in the stock market
Thursday on his company's perceived tie to the overall energy sector, which
is slumping after a period of strong growth. He said he expects the stock to
respond over the next few days once investors "digest" the strong
second-quarter results.
"I think we've hit the low-water market on our stock price, and I think we
have a lot of upside," he told Dow Jones Newswires in an interview.
Skilling told analysts Thursday that Enron will meet full-year earnings
expectations of $1.80 a share, and he also raised the forecast for 2002
earnings to $2.15 a share from $2.12 a share.

Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved.

USA: UPDATE 3-Enron quarterly earnings rise, beat estimates.
By C. Bryson Hull

07/12/2001
Reuters English News Service
(C) Reuters Limited 2001.

HOUSTON, July 12 (Reuters) - Energy marketing and trading powerhouse Enron
Corp. said on Thursday its second-quarter earnings rose almost 40 percent to
beat Wall Street estimates on robust growth in its workhorse wholesale energy
business.
The Houston-based company, the No. 1 U.S. natural gas and electricity
marketer, reported net income excluding non-recurring items of $404 million,
or 45 cents a share, compared with $289 million, or 34 cents a share, in the
same period a year ago.
Analysts had expected earnings in the range of 40 to 44 cents a share, with
an average of 42 cents, according to Thomson Financial/First Call.
Enron also said it was confident it would reach its target of $1.80 for
recurring earnings per diluted share for the full year 2001, while saying it
expected to earn a slightly better-than-expected $2.15 per diluted share in
2002.
Initially, Wall Street reacted favorably and pushed the stock up by as much
as $1.70, but the stock reversed in early afternoon trading on the New York
Stock Exchange, shedding 27 cents to move to $48.83.
One of the only black marks in the quarterly report was widening losses -
$102 million - in Enron's nascent broadband unit due to weak demand for those
telecom services.
Volume growth in Enron's core wholesale energy business drove all but $1.5
billion of $50.06 billion in second-quarter revenues. Revenues more than
doubled from $16.88 billion in the year-ago quarter.
"Our wholesale and retail energy businesses continue to dramatically expand
business activity and increase profitability," Enron President and Chief
Executive Officer Jeff Skilling said in a statement.
Total energy volumes, including natural gas, oil and power, increased 58
percent to 74 trillion British thermal unit equivalents per day, the company
said. Global power volumes led the growth as they more than doubled to 285
million megawatt-hours, with three-quarters of that coming from North
America.
Salomon Smith Barney analyst Ray Niles said the wholesale segment was the key
earnings driver, propelled by volume growth, high trading volatility and the
liquidity added by EnronOnline, the company's marquee Internet trading
platform.
EUROPEAN OPERATIONS
Another key factor, Niles said, is the emergence of Enron's European
wholesale operations, which swelled with power volumes nearly quintupling to
73 million megawatt-hours. Gas volumes doubled.
"Europe is kicking butt and it's about a quarter of their activity, nearly
double what it was last year. And that is a new market that is the size of
the U.S.," Niles said.
Growth in Europe is coming faster than expected, Skilling told analysts in a
conference call.
"It's surprising how quickly this thing is opening up and how the volumes are
growing," he said.
Enron nearly doubled new retail energy services contracts year-over-year,
moving to $7.2 billion in total value from $3.8 billion. That growth
accounted for $60 million in pre-tax income, up from $46 million a year ago.
Skilling said the U.S. Federal Energy Regulatory Commission's order on
Wednesday to create four regional power grids should help increase Enron's
retail business as larger entities look for ways to package power costs.
Enron's retail arm does that by managing costs and trimming usage for large
retail customers.
"People want direct access, and right now we are the only player that can
provide it," Skilling said.
On the negative side of the balance sheet, Enron reported a $109 million
pre-tax, pre-interest loss attributable to unexpected expenses and the failed
spinoff of water company Azurix Inc.
BROADBAND BUSINESS HURTING
Skilling acknowledged that Enron's budding broadband business endured a rough
quarter with $102 million in losses compared to $8 million a year ago.
The flashy unit, which gave Enron a once-valuable telecom cache that drove
its stock to record highs last summer, has fallen from grace recently as the
telecom market tanked earlier this year and revenue dried up from credit-poor
customers.
Broad telecom weakness, as well as the California power crisis and a
struggling power project in India combined to pressure the energy giant's
stock down 15.7 percent in the quarter. It underperformed the broader
Standard & Poor's utility index, which was down 6.32 percent in the same
period.
Since the close of the quarter, the stock has been hovering near $49, just
over half an all-time high of $90.25 reached last August. It had traded at
more than $81 as recently as mid-February.

Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved.

Enron reports earnings increase of almost 40 percent

07/12/2001
Associated Press Newswires
Copyright 2001. The Associated Press. All Rights Reserved.

HOUSTON (AP) - Enron Corp. reported a nearly 40 percent increase in
second-quarter earnings on Thursday and beat analysts' expectations due to
robust growth in its power marketing and energy management businesses in the
United States and Europe.
The Houston-based energy wholesaler and retailer earned $404 million for the
quarter ended June 30, or 45 cents per share. That compared with $289
million, or 34 cents per share a year earlier.
Analysts surveyed by Thomson Financial/First Call predicted earnings of 42
cents per share.
Despite continued growth in its natural gas and electricity trading business,
though, Enron's stock has faltered in the past year due to unmet expectations
for its high-speed Internet business.
Enron's broadband business reported a $102 million loss, compared with an $8
million loss for the same quarter a year ago.
Enron President and Chief Executive Jeff Skilling said Enron would
"significantly" reduce spending in its broadband unit "to match the reduced
revenue opportunities currently available."
Enron reported $50.1 billion in revenue for the second quarter of 2001,
almost triple the $16.9 billion reported for the same quarter a year ago.
Company officials expressed confidence of reaching $1.80 per share in
earnings for the full year 2001 and $2.15 per share for 2002.
"Our wholesale and retail energy businesses continue to dramatically expand
business activity and increase profitability," said Skilling.
Enron has been embroiled in the conflict over California's energy woes, with
a committee of that state's Senate issuing subpoenas to the corporation and
other generating companies earlier this year in connection with an
investigation of possible price manipulation in energy markets.
Shares of Enron were up 26 cents to $49.36 on the New York Stock Exchange on
Thursday Morning. Enron's stock was trading above $70 a share at this time
last year.

Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved.

Venture capital chasing next big - and little - thing in energy
By JUSTIN POPE
AP Business Writer

07/12/2001
Associated Press Newswires
Copyright 2001. The Associated Press. All Rights Reserved.

BOSTON (AP) - Not so long ago, investing in the energy industry meant buying
into oil wells, hydroelectric dams and the smokestacks of big, clunky utility
companies straight off of a Monopoly board.
No longer. Deregulation has unleashed competition, and headlines from the
California power crisis have sent entrepreneurs and investors scurrying into
the energy sector.
While old economy energy companies have attracted much of the attention,
there's growing interest in smaller companies that comprise an emerging
sector called "energy technology." It encompasses everything from software to
microturbines to Internet tools that manage, monitor and even trade
electricity.
A recent energy industry venture capital fair, which organizers said was the
first of its kind, drew 75 start-up companies to Boston - an event many
investors who attended said would have been unimaginable even a few years
ago.
The companies and VCs are after the "$300 billion jump ball" made possible by
electricity deregulation, said Todd Klein, managing director of Kinetic
Ventures, a Chevy Chase, Md.-based VC firm.
Their monopolies gone, power companies are being forced like never before to
improve productivity. Start-ups are trying to help them with a new generation
of high-tech gadgets.
Meanwhile, technology companies are demanding cheaper and more reliable power
sources. Entrepreneurial talent also is drifting to energy. And finally,
several technologies developed in government labs have recently become
commercially viable.
"We have been following these technologies 10 years, and they never were
anything more than science experiments," said Jeff Miller of Boston's Beacon
Group, which manages $1.6 billion in two energy VC funds. "Now you've got the
demand coming from the marketplace and very serious managers with very
focused business plans."
Offsetting the flurry of enthusiasm is tighter funding from the VCs.
According to research firm Venture Economics, 77 companies took in more than
$1.2 billion in funding in the sector last year, but so far this year just 17
companies have raised a total of $132 million. That pales in comparison to
the old economy energy companies, which have raised $7 billion in IPOs this
year.
David Lincoln, founder of EnerTech Capital in Wayne, Pa., told entrepreneurs
at the conference that nobody is in a hurry to make deals, and the conditions
that VCs impose now "were virtually unheard of 18 months ago."
Still, new public energy companies accounted for a third of all IPOs in the
first six months of the year. And the power crisis has caused the entire
investment community to take notice.
"Three or four years ago, when we were looking at certain deals, we'd go to
the banks and we'd never know who to talk to," Lincoln said. "Do you talk to
the utility bankers, or the technology bankers?"
Now, every major investment bank has begun tracking a sector.
"Everybody's backing out of the dot-coms and telecoms," said Bradley Johnson,
president of Washington, D.C.-based Pepco Technologies, which was seeking
funding here. "They're saying the next new thing is energy, but they haven't
figured it out yet. The management groups at these energy funds are sitting
back, figuring out where they want to be."
They are chasing some of the relative success stories like Chatsworth,
Calif.-based Capstone, which makes freestanding microturbines that allow
businesses to produce their own electricity. Company shares have traded as
high as $100, but have fallen under $20, and the company still hasn't turned
a profit.
The sector "still hasn't seen its Netscape," Klein said.
The upshot - and the lesson from last month's venture capital fair - is that
the next little thing is on the minds of VCs as much as the next big one.
That means technologies that don't necessarily revolutionize how electricity
is produced so much as help traditional companies produce it, and customers
use it, even just a little bit more efficiently.
"I think with the events which occurred in California and which are
threatening to occur in other parts of the company, people are focused on
immediate solutions to those problems," Klein said.
Many companies touting those types of solutions were at the fair, such as
Encinitas, Calif.-based PredictPower, which builds systems to help companies
manage their electrical use. Others showed flywheels, which store electricity
on site to guarantee a perfectly steady stream of power for sensitive
equipment. And some are still fighting to break into the already crowded
online electricity exchange market.
Other companies target the power companies themselves, with everything from
software to satellite meter-readers.
"There's just a lot more focussing on taking away the antiquities inherent in
the old utilities system," said David Smith, who follows the sector for
Solomon Smith Barney.
Especially at the venture capital level, where backers tend to be looking for
smaller investments and quicker returns. That's meant short shrift for some
early-stage "green" companies.
"Everybody's supply side," lamented R.W. Cushing, an entrepreneur whose
Austin, Texas, alternative energy marketing company generally got the cold
shoulder from VCs. "Nobody thinks in demand terms."
In fact, alternative energy firms raised $2 billion last year from IPOs and
VCs, according to Clean Edge, a research firm that tracks "green" investment.
But renewable energy requires deep pockets and patience, and tends to be
backed by big power companies which, if they can make alternative energy
work, will have the infrastructure in place to connect it to the grid.
Many big power companies ensuring they get the needed technology by backing
start-ups themselves. Houston-based conglomerate Enron, for instance, has
invested $90 million in 12 companies it sees as strategic partners, two of
which have gone public.
"I don't think there is a dearth of interest or investment in renewable
technologies," Lincoln said. "(But)... the reason why you see such a strong
level of interest in helping the supply-side companies is, right now, that's
where the capital is being spent."

With AP Photo

Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved.

A Volt From Blue, U.S. Grid Rules Get Power Co's Abuzz
By Arden Dale
Of DOW JONES NEWSWIRES

07/12/2001
Dow Jones Energy Service
(Copyright (c) 2001, Dow Jones & Company, Inc.)

NEW YORK -(Dow Jones)- Energy companies, beware. This could mean you win, and
it could mean you lose. Not today, not next week, but down the road.
Big changes in the way power companies control the U.S. electricity grid are
looming because of orders announced by the Federal Energy Regulatory
Commission on Wednesday. At stake are billions of dollars companies could
make buying and selling electricity.
Power companies across the U.S. scrambled Thursday to learn details of the
orders, which haven't actually been issued yet. They will probably be
available by Friday, FERC spokespeople said.
Companies that may benefit most, including Enron Corp. (ENE), Dynegy Inc.
(DYN), Duke Energy Corp.(DUK) and Williams Co. (WMB), market electricity but
don't own power lines. Big transmission-owners such as Southern Co. (SO),
American Electric Power Co. (AEP) and Entergy Corp. (ETR), stand to lose
control over their assets, according to analysts.
"This is a major, major step forward," Enron Chief Executive Officer Jeffrey
Skilling said of the FERC orders in a conference call on the company's
earnings Thursday.
On Wednesday, the FERC said it would direct transmission owners to form huge
regional power grid operators by merging groups that already operate in the
Northeast and Southeast. It said it would assign judges to start mediating
right away with companies over a 45-day period to work toward compliance.
The new grid operating giants must be up and running by December 2001,
according to FERC spokesperson Celeste Miller. The FERC is widely expected to
issue similar orders for the West and Midwest.
The move this week accelerates a push the FERC's been making for several
years to form regional transmission operators, or RTOs. In 1999, the agency
issued a rule known as Order 2000 that directed companies to come up with
plans to form RTOs. Many utilities missed deadlines to file plans, and
companies including Enron criticized the FERC for not giving stronger
directives and setting more aggressive deadlines.
California's energy crisis has also prompted harsh criticism of the FERC, and
may have helped push the agency to take stronger actions, according to some
observers.
Energy companies and Wall Street analysts said the action this week took them
by surprise, more because of how fast the agency wants change to occur than
because of what it wants done. Some said they doubt change will happen that
fast.
"It's a departure from the slower transition to the new market, which has
been supported by companies like American Electric Power Co. and Southern
Co.," said Christine Uspenski, an analyst at Schwab Capital Markets L.P.
(SCH) "That doesn't mean necessarily that the older companies won't survive,
but clearly FERC is moving to catch up to the trailblazers in the industry."
Utilities and other power companies have already formed a number of grid
operating organizations. Three are up and running in the East, including one
in the New England, one in New York and another in the Mid-Atlantic region.
Those groups will be joined under one of the new orders.
The orders are intended, in part, to address complaints by some companies
that they can't move power freely around the grid to maximize their profits.
They say utilities sometimes manipulate markets unfairly by claiming lines
are congested and denying others access.
"Clearly, there is a benefit for the marketplace," said David Clement,
associate director at the Cambridge Energy Research Associates. "It simply
makes it easier for wholesale power marketers to do business."
Enron expects the orders will open up U.S. wholesale markets dramatically,
according to spokesman Mark Palmer. Right now, the market is about 20% open
to competitors: after companies comply with the order, it will be more like
90% open, Palmer said.
The FERC's orders this week didn't have an impact on energy company stocks.
That's partly because changes won't occur immediately, and because
transmission assets aren't huge profit centers for companies, according to
Steve Fleishman, an analyst at Merrill Lynch & Co. (MER).
Transmission lines do offer their owners benefits, however. "They're not as
sexy as growth businesses, but they're great cash generators," said Uspenski.
The FERC's orders will help to stimulate sorely needed investment in power
lines and power plants, said a number of analysts. The U.S. grid is straining
under the weight of increased power flows due to deregulation, but
investments have been stymied by uncertainty over how the grid will be run,
among other factors.
"We think it's important that the FERC has put a template out there that
indicates what it's next steps are going to be," said Pat McMurray, a
spokesperson for the Edison Electric Institute, a utility group.
EEI, along with a number of utilities, couldn't comment extensively on the
orders yet because it hadn't seen them. Southern Co. was among them.
(Kristen McNamara contributed to this article.)
- By Arden Dale, Dow Jones Newswires; 201-938-2052

Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved.

Marlin Water Trust II Taps Euro And Dollar Bond Markets
By Richard A. Bravo
Of DOW JONES NEWSWIRES

07/12/2001
Capital Markets Report
(Copyright (c) 2001, Dow Jones & Company, Inc.)

NEW YORK -(Dow Jones)- Marlin Water Trust II tapped the investment-grade
corporate bond market Thursday with a $475 million issue and a EUR515 million
issue.
Marlin Water is a special purposes vehicle that was created by Enron Corp.
(ENE) in 1998 to finance its purchase of U.K.-based water utility Wessex
Water PLC. The current issue was a refinancing of that debt transaction.
All interest payments are pre-funded from Enron Credit and principal
repayment is backed by Enron equity.
The transaction was done through Marlin Water Trust II in order to keep the
debt off Enron Corp.'s balance sheet, said syndicate officials involved with
the deal.
The U.S. portion of the deal was a $475 million offering of Rule 144a debt
that was priced to yield 6.31%, or 2.25 percentage points over Treasurys.
Gray market levels were quoted at 2.25 percentage points over Treasurys, a
level that investors and traders said was a strong showing.
"These levels are reasonably positive on a day when the corporate market is
so jittery," said Stephen Kane, portfolio manager at Metropolitan West Asset
Management.
Corporate spreads to Treasurys were out five to 10 basis points on the day.
Marlin Water Trust II also priced a EUR 515 million piece, which was priced
to yield 6.19%.
Credit Suisse First Boston Corp. and Deutsche Bank Alex. Brown were co-leads
on both transactions.
Enron Corp. officials weren't available for comment.
-By Richard A. Bravo, Dow Jones Newswires; 201 938-2087
richard.bravo@dowjones.com

Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved.

FERC Power Grid Orders Will Open Markets for Traders (Update2)
2001-07-12 17:03 (New York)

FERC Power Grid Orders Will Open Markets for Traders (Update2)

     (Adds comment from utility consultant in fourth paragraph.)

     Washington, July 12 (Bloomberg) -- The U.S. Federal Energy
Regulatory Commission's decision to restructure the U.S.
electricity grid opens the country's power markets to further
competition, analysts said, even as California struggles with the
aftermath of its deregulation.
     ``The only reason for doing this is so you can have
competition,'' said Christopher Ellinghaus, an analyst at Williams
Capital Group LP. ``It's so you can build a transmission system
that lets generators deliver power across utility boundaries
without interference by the utilities themselves.''
     The FERC wants four regional transmission organizations in
the U.S. -- one for the Southeast, one for the Northeast, one for
the Midwest and one for the West -- that would allow more trading
among regions. Florida has the option not to join, and Texas is
exempt from FERC jurisdiction.
     ``The FERC had given some hints,'' said Larry Winter, a
partner at Accenture Ltd. who has consulted with utilities forming
transmission organizations. ``Now they are telling the utilities,
at least in the Northeast and Southeast, exactly what they want.''
     Energy traders such as Enron Corp., Mirant Corp. and Aquila
Inc. stand to benefit as barriers to electricity transmission
fall, Enron officials said.
     ``We'll have the chance to match hundreds of potential supply
sources with thousands of markets,'' Enron Executive Vice
President Steve Kean said on a conference call with analysts and
investors. ``It's a significant expansion of the market in a very
short time.''

                         California Crisis

     California's two biggest utilities have racked up about
$14 billion in debt because power prices surged after the state
deregulated its market, and the utilities weren't allowed to pass
higher prices on to customers. The state began buying power on the
utilities' behalf in January. A power shortage led to blackouts
for millions of Californians this year.
     Politics and different market rules are the major obstacles
to consolidating the transmission organizations that utilities
proposed, Winter said.
     The commission wants the transmission systems of New England,
New York and the mid-Atlantic states to combine.
     ``New York is not on the same page'' as New England's grid
operator, which based its rules on those of PJM Interconnection
LLC, the grid manager for Pennsylvania, Delaware, and eastern
Maryland and New Jersey, Winter said.
     Enron shares rose 45 cents $49.55. They have fallen 31
percent in the past year. Aquila fell 45 cents to $25.55. Mirant
fell $1.20 cents to $36.58.

Enron CEO Skilling on California Crisis, FERC Talks: Comment
2001-07-12 15:12 (New York)

     Houston, July 12 (Bloomberg) -- Enron Corp. Chief Executive
Jeffrey Skilling comments on the company's ongoing dispute with
the state of California about power sales and the settlement talks
on the issue being led by an administrative law judge at the
Federal Energy Regulatory Commission.
     Skilling's remarks were made in a telephone interview
following the release of Enron's second-quarter earnings.
     Houston-based Enron's shares have fallen 41 percent this
year.

On the settlement talks:

     ``It's pretty clear that the state has no particular interest
in resolving this. It makes for good political fodder, and so I
think they'll spend a lot of time making a lot of noise about it,
and basically nothing will happen until the judge comes in, and
the judge will set some kind of conclusion.''

     Skilling said the $8.9 billion in refunds California has
requested from power generators and sellers ``has no relevance to
any true or valid claim the state of California has.
     ``They want their $8.9 billion, and then they say they'll
continue to sue after the fact. That's not the basis of a
settlement.''

On the outlook for the California power crisis:

     ``If you look at the impetus for this whole thing, it was
very, very high prices in the wholesale market. Those prices have
abated now. They're down significantly, and I think that's going
to reduce the noise level in California.''

On Enron's links to the Republican Party and its relationship with
California:

     ``I think our connection and (Enron Chairman) Ken Lay's
connection with the Republican Party has sort of set us up to be
their target, but the reality is our business is based on a lot of
things, and California is just one of them.''

     Enron and its employees gave $113,800 to President George W.
Bush's election campaign, making them jointly Bush's 12th-largest
contributor, according to the Center for Responsive Politics,
which tracks campaign finance. Lay gave the $2,000 maximum for an
individual.
     Lay also gave more than $325,000 in unlimited and largely
unregulated ``soft money'' to Republican committees that helped
finance Bush's campaign. That was part of at least $1.6 million
contributed during the election by Enron and its officers, two-
thirds of which went to Republicans, according to FECInfo, which
also tracks campaign finance.
     California Governor Gray Davis is a Democrat, and both houses
of the state legislature are controlled by Democrats.

Enron Chief Executive Sees California's Energy Crisis Easing
2001-07-12 12:39 (New York)

Enron Chief Executive Sees California's Energy Crisis Easing

     Houston, July 12 (Bloomberg) -- Enron Corp. Chief Executive
Jeffrey Skilling said higher retail prices for electricity in
California has curtailed power demand and should lead to fewer
blackouts than expected this summer.
     ``The expectation of higher retail prices has dampened demand
considerably,'' Skilling said in a conference call with analysts
and investors. ``I think we're going to get through the summer
just fine in California. That will ultimately lead to lower
wholesale prices for power.''
     The state had been facing about 15 hours of blackouts a week
this summer, the North American Electric Reliability Council, a
national group that monitors and coordinates U.S. power supplies,
said in May. California has been spared outages recently because
of conservation efforts, cooler temperatures and more power plants
starting.
     California Governor Gray Davis said that power plants
producing enough energy for about 1.2 million homes have opened
this summer in California.
     ``We're not out of the woods yet, but we are making
progress,'' Davis said in a statement yesterday.
     California is seeking $8.9 billion in refunds from generators
such as Houston-based Enron, the biggest energy trader, for power
bought in the last year. Under the formula used by California to
derive that figure, Enron is actually owed $44 million because it
bought more power than it sold since May 2000, Skilling said.
     Shares of Enron fell 20 cents to $48.90 in early afternoon
trading. The company said earlier today second-quarter profit rose
40 percent as higher sales of electricity more than made up for a
loss in its telecommunications business.

FERC Transmission Decision Will Open Power Markets for Traders
2001-07-12 12:20 (New York)

FERC Transmission Decision Will Open Power Markets for Traders

     Washington, July 12 (Bloomberg) -- The Federal Energy
Regulatory Commission decision to restructure the U.S. electricity
grid opens the country's power markets to further competition,
analysts said, even as California struggles with the aftermath of
its deregulation.
     ``The only reason for doing this is so you can have
competition,'' said Christopher Ellinghaus, an analyst at Williams
Capital Group LP. ``It's so you can build a transmission system
that lets generators deliver power across utility boundaries
without interference by the utilities themselves.''
     The FERC wants four regional transmission organizations in
the nation -- one for the Southeast, one for the Northeast, one
for the Midwest and one for the West -- that would allow for
increased trading between different regions. Florida has the
option not to join any RTO, and Texas is exempt from FERC
jurisdiction.
     Energy traders such as Enron Corp., Mirant Corp. and Aquila
Inc. stand to benefit as barriers to electric transmission fall,
Enron officials said.
     ``We'll have the chance to match hundreds of potential supply
sources with thousands of markets,'' Enron Executive Vice
President Steve Kean said on a conference call with analysts and
investors. ``It's a significant expansion of the market in a very
short time.''
     California's two biggest utilities have racked up about
$14 billion in debt because power prices surged after the state
deregulated its market, and the utilities weren't allowed to pass
higher prices on to its customers. The state began buying power on
the utilities' behalf in January. A shortage of power led to
blackouts for millions of Californians this year.
     Shares of Enron fell 3 cents in midday trading to $49.07.
They had fallen 31 percent in the past year. Aquila fell 44 cents
to $25.56. Mirant fell 52 cents to $37.26.

California Not Due Cash Refunds for Power Purchases (Update1)
2001-07-12 18:01 (New York)

California Not Due Cash Refunds for Power Purchases (Update1)

     (Adds comment from judge's recommendation in third paragraph,
background in fourth.)

     Washington, July 12 (Bloomberg) -- California should not
receive any cash refund for claims it was overcharged for
electricity, a federal judge overseeing settlement talks said in a
report to federal regulators.
     California's debts to power sellers for electricity they sold
in the state is higher than any refund the state can claim,
Administrative Law Judge Curtis Wagner wrote in a report to the
Federal Energy Regulatory Commission.
     ``While there are vast sums due for overcharges, there are
even larger amounts owed to energy sellers'' by California and its
utilities, Wagner wrote in his report. He said California is owed
``hundreds of millions of dollars, probably more than a billion
dollars.''
     FERC ordered Wagner to hold settlement talks on California's
claim it was overcharged by $8.9 billion for electricity. The
sides failed to reach an agreement and FERC ordered the judge to
make a recommendation to the commission. FERC plans to decide on
the size of any refunds.


---------------------- Forwarded by Raimund Grube/Corp/Enron on 03/29/2001
08:04 AM ---------------------------

Peter Hoyt
03/28/2001 04:10 PM
To: Raimund Grube/Corp/Enron@ENRON
cc:

Subject: athens map

Here's the map-let me know if you need any changes. Topo map to follow after
I download the file.

Pete


Well, it's upon us again and that means X-Mas party.

Joseph and I have begun (barely) to plan for this year's festivities.  But
before we get to far along, tried and true democratic (small "d") principles
call for a wee bit of polling.

Because we're already in the middle of October we need your responses
pronto.  If we don't receive your responses by COB Thursday, then democracy's
out the window, and good ol' dictatorship takes over.

Of course, it will be difficult to grant everyone's wishes, but all
suggestions will be given great (and equal) weight.  Here are the questions:

Would you prefer just dinner, or dinner plus an activity?

Joseph and I are leaning toward dinner and an activity, but wanted to hear
from other folks.  If yes, Joseph has come up with a couple of very fun ideas
for an activity but suggestions are greatly encouraged and welcome.  Same
goes for a restaurant (understanding that the choice of activity may
influence where we eat).  Sue has put in her vote for Fleur de Lys.

Should we try to organize the event with the rest of the SF office (i.e., EES
and ENA) or confine it to GA?
Should we expand to include Western GA or keep it to SFGA?
We choose for dates the 7th or 8th or 14th or 15th of December.  What's your
preference.  Is there a day that just won't work?

Joseph, if I've missed anything, please tack on.

Best,
Jeff


Nancy Rivera-Brooks of the LA Times just called.  Said she'd heard that Ken
Lay and Governor are in frequent talks discussing the possibility of Enron
buying Edison's transmission system.  I told her that Enron is not in the
market for transmission systems.  Next thing you know, we'll want to buy the
nukes.

Best,
Jeff