They left behind big piles of money
Houston Chronicle, 11/18/01
Economic News Helps Stocks, Not Bonds
The New York Times, 11/18/01
Bullish, and Patient, on Energy Stocks
The New York Times, 11/18/01
Aquila Energy Makes Provision for Dynegy Withdrawal, FT Says
Bloomberg, 11/18/01
A tale of greed and hubris
Sarasota Herald-Tribune, 11/18/01
Counting Blessings Along With the Losses
Los Angeles Times, 11/18/01
Don't Be A Pudd'n'head, Diversify
The Washington Post, 11/18/01
Wessex Water `to be sold'
The Independent - London, 11/18/01
UK PRESS: WestLB Makes Grab For GBP1B Wessex Water
Dow Jones International News, 11/18/01
Quanta steels itself against takeover bid
Houston Chronicle, 11/17/01
Business briefs / Houston & Texas
Houston Chronicle, 11/17/01
AT ENRON, THE BIG DOGS ATE FIRST
Portland Oregonian, 11/17/01
FINANCE WEEK - From dealing to reeling.
Financial Times, 11/17/01
WORLD STOCK MARKETS - Bears take upper hand on Wall St.
Financial Times, 11/17/01
IN BRIEF / ENERGY Pension Funds Consider Action Against Enron
Los Angeles Times, 11/17/01
Enron Investors Hope Filing Will Shed More Light on Finances
Bloomberg, 11/17/01

UK: Trade, bank buyers circle Enron's Wessex Water-reports.
Reuters English News Service, 11/17/01
A user's guide to living in Calgary: People moving from Houston find the cities much alike
National Post, 11/17/01
WestLB Offers to Buy Enron's U.K. Water Unit, Newspaper Says
Bloomberg, 11/17/01

Enron Closes on $550 Million Loan From J.P. Morgan, Salomon
Bloomberg, 11/16/01

BUSINESS
Jim Barlow
They left behind big piles of money
JIM BARLOW
Staff

11/18/2001
Houston Chronicle
2 STAR
1
(Copyright 2001)

WILL wonders never cease? Last week a couple of heavy hitters left money on the table.
Mark McGwire, the home-run-hitting baseball player for St. Louis, retired. And he let it be known that he never signed a two-year, $30 million contract his agent negotiated last spring. Why? Because he wanted to find out if his injured right knee would allow him to play as well as he had before. It didn't, and he decided he wasn't worth that kind of money.
Then Ken Lay, chairman of Enron Corp., said he won't take the $60.6 million he had coming to him in a severance agreement that comes into play when Enron is sold to Dynegy Corp.
Of course, neither McGwire nor Lay will ever have to consider my fallback retirement plan - sacking groceries at the supermarket, carrying them to the car and hoping for a big tip. Still, it was a class act on both their parts. McGwire only hit .187 last season, well below his lifetime average. And Lay? Well, let's say that rarely in the history of American capitalism has a company sunk as fast as Enron.
Remember that earlier this year its stock hit a top of $82 a share. Now it's hovering in the single-digit level, and Enron is being forced to sell itself to a smaller rival.
The stock price incentive
How did Enron get into this position? Put the blame on the company's relentless drive to push up its stock price. And a big reason for that push comes from the way American companies compensate top executives.
In the last couple of decades, executive compensation has soared. The average chief executive officer today makes 531 times as much in salary, bonuses and stock options as the average factory worker.
Apologists for executive pay say these kinds of figures really aren't relevant. Most of the money top executives receive doesn't come from base pay or bonuses but from stock options.
Such options usually work this way. Executives are given hundreds or thousands of shares of stock that they can only buy from the company at a future date. The sales price can be anything from 10 cents to the price of the stock on the date the options were granted. If the stock increases past the exercise price in the option, the executive can buy the stock and then sell it, making big bucks. It the stock has dropped below the option price - it's underwater, in the jargon - then those options are worthless.
Granting options aligns the interests of the top executives with the shareholders, those who favor this sort of incentive say. And that's true, if you talking about in-and-out traders. But it's not true if we're looking out for the interests of the majority who hold stocks for the long term.
Keeping the debt hidden
Keeping its stock price soaring was what brought down Enron.
To hype the stock, Enron's execs were hiding the debt it took on to fuel its amazing growth and some of its dicier investments, in partnerships. Enron was supposedly only a minority partner in these deals. That way it could move a large portion of its debt off its books in that partnership. That, in turn, made the company's earnings look better.
When Enron's executives finally fessed up, they had to write down their profits over the past few years by 20 percent. But the real irony here is that 80 percent is still a heck of a lot of money. But by that time, the majority of shareholders simply had no faith in Enron's bookkeeping.
Now look at Lay's compensation. In 1999 he exercised stock options and made $44 million on them. In 2000, sales of options brought him $123 million, and this year about $26 million, according to a study published by Bloomberg News.
Was Lay deliberating deceiving investors to keep his stock options profitable? I don't think so. He was simply following the latest fad in corporate governance. He was aligning himself with the interests of the shareholders.
The shareholders were happy with that high stock price. Nobody - besides some stock analysts - complained about Enron's often- impenetrable bookkeeping until that stock price started to fall.
Would Enron's bookkeeping have been different if top executives received fewer stock options? Maybe.
Fewer stock options would mean lower pay for the top guys. And no one would want that job if he were only going to make $10 million a year instead of $100 million.
Just kidding.

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

Money and Business/Financial Desk; Section 3
DataBank
Economic News Helps Stocks, Not Bonds
By JONATHAN FUERBRINGER

11/18/2001
The New York Times
Page 17, Column 3
c. 2001 New York Times Company

Stocks rallied and bonds plunged last week as investors digested some positive reports about the economy. Inflation at the consumer level declined last month, retail sales surged after falling in September, and weekly initial unemployment claims slowed.
All this news led some investors to conclude that the economy might not be as troubled as it appeared to be in the aftermath of the terrorist attacks. That was good for the stock market, but very bad for the many bond investors who had been assuming the worst.
For the week, the Nasdaq composite index rose 70.10 points, or 3.8 percent, to 1,898.58, while the Dow Jones industrial average climbed 258.99 points, or 2.7 percent, to 9,866.99. The Standard & Poor's 500-stock index gained 18.33 points, or 1.6 percent, to 1,138.65.
But bond prices tumbled while yields, which move in the opposite direction, soared. The yield on the Treasury's 10-year note rose to 4.85 percent, from 4.31 percent a week ago, the biggest weekly move in percentage terms since the note was first regularly issued 25 years ago. The jump in rates also showed that many investors no longer expect Federal Reserve policy makers to cut short-term interest rates when they meet next month. JONATHAN FUERBRINGER

Chart: ''STOCKS IN THE NEWS'' AMR NYSE: AMR The stock of the parent company of American Airlines, along with other airline companies, rebounded on factors including lower oil prices and passage of the aviation security bill. Friday's Close: $20.06 Week's Change: +10.65% EST. '01 P/E: -- Dynegy NYSE: DYN As part of its planned $9 billion acquisition of Enron, Dynegy will receive the right to acquire Northern Natural Gas, a potentially lucrative pipeline system, even if the larger deal is not completed. Friday's Close: $42.47 Week's Change: +9.57% EST. '01 P/E: 20.29 Home Depot NYSE: HD The nation's largest home-improvement chain said its third-quarter profit rose 20 percent over the year-earlier period. Friday's Close: $45.80 Week's Change: +8.76% EST. '01 P/E: 36.03 Dell Computer NNM: DELL Rebounding from a loss in the second quarter, Dell reported a third-quarter profit of $429 mil lion. The company also predict d that PC sales would increase later this year. Friday's Close: $26.60 Week's Change: +3.30% EST. '01 P/E: 41.05 SunGard Data Systems NYSE: SDS An appeals court rejected the government's effort to stop SunGard from buying a unit of Comdisco, which filed for bankruptcy protection in July, while an antitrust investigation proceeds. Friday's Close: $28.64 Week's Change: +9.56% EST. '01 P/E: 32.11 Yahoo NNM: YHOO Wall Street analysts expressed confidence in the turnaround prospects of the company after it outlined plans to increase fee-based revenue and to reduce its work force. Friday's Close: $15.47 Week's Change: +12.76% EST. '01 P/E: 309.40 Philip Morris NYSE: MO Philip Morris says it plans to change its name to the Altria Group, pending approval by shareholders. Friday's Close: $48.13 Week's Change: +2.78% EST. '01 P/E: 11.90 CV Therapeutics NNM: CVTX The biotechnology company said clinical trials of ranolazine showed that the drug, which it developed, was effective in treating the chest pain of angina. Friday's Close: $51.67 Week's Change: +48.97% EST. '01 P/E: -- (Source: Bloomberg Financial Markets)
Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved.

Money and Business/Financial Desk; Section 3
Investing
Bullish, and Patient, on Energy Stocks
By JAN M. ROSEN

11/18/2001
The New York Times
Page 8, Column 2
c. 2001 New York Times Company

DESPITE last week's plunge in the price of crude oil and in shares of big oil companies, some Wall Street analysts remain upbeat about the long-term prospects for energy stocks.
''These very dramatic downturns are great buying opportunities,'' said Tina Vital, an oil and gas analyst at Standard & Poor's, who recommends a broad group of integrated oil companies, including Exxon Mobil, ChevronTexaco, Royal Dutch/Shell, BP and TotalFinaElf. ''They have excellent management, a top dividend yield and are a safe haven for investors,'' she said, provided that investors are patient and can bear short-term swings.
Last week's price declines were set off by Russian oil companies' refusal to accept demands by the Organization of the Petroleum Exporting Countries for big production cuts. They were a reminder that the sector is extremely volatile. ''Oil could go to $10 a barrel short term,'' she said, but there is no certainty of that. The oil producers could reach an agreement by January, sending prices upward. Over the long term, she expects to see production cuts.
Demand for energy has grown only 0.5 percent this year, and prices have been declining for some time for both crude oil and gasoline -- as drivers have seen at the gas pump. West Texas intermediate crude closed Friday at $18.03 on the New York Mercantile Exchange, up 58 cents from its Thursday close, the lowest since June 1999. But an economic recovery, expected by late 2002, could cause demand to pick up, analysts say.
As oil prices have dropped, so have the prices of most oil stocks, but not as much as the overall market since the beginning of 2000. Over that period, the S.& P. energy index has lost 8 percent, while the S.& P. 500-stock index is down 23 percent.
A report issued last week by the Energy Department said that while the Sept. 11 terrorist attacks had intensified the country's economic slowdown, ''they are not expected to result in any long-term volatility in energy markets.'' The report estimated that commercial energy demand would rise 1.7 percent a year through 2020, instead of the 1.2 percent predicted only a year ago. Its predictions assume increased use of computers and office equipment, and slower increases in fuel efficiency for cars and trucks.
WHILE they warn of the possibility of wild price shifts in the months ahead, other analysts are similarly bullish for the long term. L. Bruce Lanni, senior oil analyst at A. G. Edwards & Sons in New York, said that any potential price war was likely to be fairly short-lived, because neither OPEC nor non-OPEC countries could ''withstand low oil prices for a prolonged period of time,'' and prices should rebound sharply as a result, ''back up in the lower to mid-$20 range.''
Low prices could be painful for most of the oil companies in the short term, but Mr. Lanni, too, sees value in the stocks.
His top pick is Conoco, now trading at $24.30; his 12-month target is $34. ''We remain confident,'' he said, ''that the company's annual oil and gas production should grow by about 4 percent, on average, over the next several years.''
Conoco's debt, at 55 percent of capital, is relatively high, but he expects the company's strong cash flow -- it equaled $5.33 a share last year -- to reduce the debt level to 46 percent next year and to 38 percent in 2003. The company's after-tax interest cost is only 3.5 percent, he said.
Mr. Lanni also favors Kerr-McGee, a natural gas exploration and production company, and BP, calling both undervalued. He regards Exxon Mobil, Royal Dutch/Shell and ChevronTexaco as fully priced, so he is not recommending buying them now. ''If you own them, hold them,'' he said.
William Featherston, executive director and an oil and gas exploration analyst at UBS Warburg, said he felt ''near-term caution but medium-term optimism for sustainably higher'' natural gas prices. He said he would encourage investors to consider buying shares of exploration and production companies over the next two months. His top picks are Apache, Kerr-McGee and EOG Resources.
Such stocks are highly volatile, he said. They are ''trading-oriented vehicles, and short-term volatility in commodity prices generally provides the most attractive entry and exit points,'' he said. ''While natural gas prices declined throughout most of this year, prices rose at a startling pace, from $1.75 per million cubic feet at the end of September to over $3 per million cubic feet within weeks.''
He cited three reasons for the price rally: a decline in gas surpluses, predictions of a colder-than-normal winter and what he has called ''pathetic third-quarter natural gas production,'' despite record drilling activity.
The tangled finances of the Enron Corporation were also a factor in the recent price increase for natural gas futures, he said. Enron, which marketed 25 billion cubic feet a day of natural gas, or more than 40 percent of the nation's demand, is under investigation by the Securities and Exchange Commission and announced a $1.2 billion reduction in shareholder equity from deals with partnerships involving its former chief financial officer. It also reported a third-quarter loss and restated earlier earnings. Enron has agreed to be taken over by Dynegy, a smaller rival, for about $9 billion in stock. Dynegy is also assuming about $13 billion in debt.
Anxiety over whether the Enron investigation would disrupt deliveries or have other market repercussions led to an increase in prices. While it is ''difficult to quantify the Enron factor,'' Mr. Featherston said, the short-term effects on natural gas prices seem to be over.
OTHER factors, of course, could also mean a bumpy ride for energy investors over the next several months. The status of the war against terrorism, President Bush's decision to fill the Strategic Petroleum Reserve, thus helping OPEC in reducing excess global capacity, and a United Nations review of the food-for-oil deal with Iraq expected in December could each have a significant impact on battered oil prices.
Nevertheless, Ms. Vital said, for the long term, energy will probably be in short supply, and new sources must be developed. So she also likes the prospects of two drilling companies, Noble Drilling and Nabors Industries. Both took a beating last week, along with the oil companies, so again she sees buying opportunities.
Bern Fleming, portfolio manager of the AXP Utilities Income fund in Minneapolis, who has stakes in Dynegy, Duke Energy and Dominion Resources, said all three had good prospects for growth, thanks to a mix of assets, ''management I respect and solid business plans.''

Photo: Workers at an oil well near Lafayette, La. Although oil prices have plunged, analysts say there is still good long-term potential for the stocks of energy companies. (Marty Katz for The New York Times) Chart: ''Power Play'' Energy stocks have generally outperformed the overall market since the beginning of 2000. Graph shows CONOCO SHARES, S. & P. ENERGY COMPOSITE, and the S.& P. 500 INDEX since January 2000. (Source: Bloomberg Financial Markets)
Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved.

Aquila Energy Makes Provision for Dynegy Withdrawal, FT Says
2001-11-18 19:52 (New York)

     Houston, Nov. 19 (Bloomberg) -- Aquila Energy Corp. is one of
several energy traders limiting its trading with Enron Corp. in
case Dynegy Inc. pulls out of its bid for the company, the
Financial Times said, citing Aquila.

     Aquila said it began making contingency plans in case Dynegy
withdrew from its $24 billion takeover of Enron, the paper
reported.

     Enron, the largest energy trader, decided to sell after its
shares plunged this year and a federal investigation of accounting
irregularities limited its ability to finance operations. Enron's
collapse would have caused upheaval in energy markets, where the
company does one-quarter of all gas and power trades.

     Dynegy's agreement to buy Enron allows it to withdraw from
the transaction under certain circumstances, the FT said.

PERSPECTIVES
A tale of greed and hubris
Waldo Proffitt

11/18/2001
Sarasota Herald-Tribune
All
F2
(Copyright 2001)

For anyone not already disenchanted with the idea of total deregulation of public utilities, the most recent installment of the miserable Enron story as it unfolded last week should serve as a convincing example of the folly of relying on unregulated profit- driven enterprises to supply our energy.
A year ago Enron was the darling of Wall Street, the poster boy for the utility industry, its stock selling for about $85 a share. Last week its stock was worth about 10 percent of that and the company had agreed to be bought by a competitor. There was fear the company's bond rating might fall to the "junk" level.
What happened? It will take months, if not years, to untangle the details, but it is clear that the main culprit was greed, closely followed by hubris.
Not too many years ago Enron was a small, struggling, gas pipeline company in Houston. As deregulation spread to more and more states, Enron began acquiring pipelines, gas producers and utilities.
It also acquired friends in high places, especially the Bush family and their key political advisers. And, it discovered it could make money faster by selling and trading energy than by producing it. Enron sold many of its generating plants and became the biggest "power broker" in the nation.
Though it was by no means the largest winner in the con game that bilked California consumers of tens of billions of dollars, Enron was one of the first power barons to take advantage of California's flawed deregulation law -- virtually written by in-state and out-of- state utility companies.
The California fiasco soured (probably) most Americans on utility deregulation, but Enron was not singled out for calumny, and management saw no reason to examine its business ethics.
Contrarywise. management had visions of even greater profits, which it felt no obligation to share with ordinary stockholders. The chief financial officer and other high-ranking executives set up affiliated or subsidiary partnerships which made deals with Enron. I do not understand the details of these arrangements, but neither do independent accountants, the Securities and Exchange Commission or congressional investigators. It does seem clear that the Enron insiders made millions for themselves.
Enron acknowledges, without explaining, that stockholder equity dropped $1.2 billion in the last quarter and that it had for the last five years overstated profits by some $600 million. Whether this was by design or by mistake is in dispute, but it is the sort of thing which tends to undermine the confidence of investors.
So much for greed. Back to hubris. It seems not unlikely that Enron's leaders felt they might not be punished for a modest amount of corner-cutting because they had friends in high places.
The chief executive, Kenneth L. Lay, was and is a personal friend of George W. Bush and has easy access to the White House. For many months after the new administration took office, Karl Rove, Bush's top political strategist, owned Enron stock valued at $100,000 to $250,000, and sold it only after he had been able to secure a ruling that he did not have to pay capital gains tax immediately because he sold to avoid a conflict of interest. Lawrence Lindsey, the president's chief economic coordinator, and I. Lewis Libby, Vice President Cheney's chief of staff, owned stock in Enron, and Lindsey was paid $50,000 last year as a consultant for Enron.
Enron and its employees gave more than anyone else to Bush's four political campaigns -- one (unsuccessful) for Congress, two for governor and one for president. In 2000, Enron and its employees gave $113,000 to Bush's campaign, $250,000 to the Republican National Committee, and $300,000 to the Presidential Inauguration Committee.
Cabinet appointments affecting energy policy, key sub-Cabinet appointments, administration action or inaction in the California energy mess, and the overall energy policy of the administration could hardly have been more favorable to the interests of Enron.
And now a couple of questions: Is it possible the unusual financial maneuvers by Enron went unnoticed or even unsuspected by all the savvy Texas oilmen in the Bush administration? Were those of them with heavy investments in Enron unconcerned about the conduct of the company? Was Enron right in thinking its friends in government would not be in a hurry to investigate or to reprimand?
Or, in light of our preoccupation with terrorism, will the Enron case get much attention from the federal government? Or from voters?
Waldo Proffitt is the former editor of the Herald-Tribune.

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

Business; Financial Desk
MARKET BEAT
Counting Blessings Along With the Losses
TOM PETRUNO
TIMES STAFF WRITER

11/18/2001
Los Angeles Times
Home Edition
C-1
Copyright 2001 / The Times Mirror Company

Try finishing this sentence: "The best thing about my experience as an investor in 2001 was ... "
Many Americans, contemplating the losses they've suffered this year in the stock market, might say there was nothing "best" about what happened to them--in fact, nothing good at all, perhaps other than that it might have been worse.
With share prices on the rise again, the damage to portfolios has been lessened. Even so, stocks will have to post strong gains in the next six weeks to keep this from being the market's worst calendar year since 1977.
The blue-chip Standard & Poor's 500 index rose 1.6% last week, but it's still down 13.8% year to date.
Yet those losses, while certainly not trivial (especially when they're yours), can obscure what arguably are some very positive aspects of this year's experiences.
With investing, adversity can be a more important teacher than success. If you're having trouble this Thanksgiving week finding reasons to be thankful about anything investment-related, try these on for size:
* "Asset allocation" is no longer just a quaint theory. The paramount investing rule has always been to spread your money around to reduce risk. But it took the worst stock bear market in 25 years to bring this lesson home for many people who thought equities only rose in value.
Now, millions of investors have a far better appreciation for just how much they can lose in stocks--and how bonds and short-term cash savings can offset market losses and preserve capital.
It has been a hard lesson, to be sure. But investors who take asset allocation to heart will be laying a much more solid foundation for their money in the long run. And don't underestimate what that can mean for your peace of mind long term.
* The wisdom of saving money on a regular basis has been relearned. In the late 1990s, many economists lamented how the U.S. savings rate continued to shrink. Some people felt there was little need to put significant new sums into savings when the stocks or stock mutual funds they owned seemed to be rising nonstop.
In other words, many Americans were letting the stock market do their saving for them when share prices were rising 20% or more each year.
Now, with shares down and with the likelihood of much more moderate returns on stocks in this decade, it's clear that many people will have to find a way to save regularly if they're going to meet their long-term financial goals, especially retirement.
This may not be a pleasant reality, but it's better for most people to have faced this fact sooner rather than later, while there may be time to make up lost ground.
* A healthy skepticism has replaced mindless euphoria about stocks and those who tout them. The market's slide has discredited a legion of Wall Street analysts, money managers and others whose knowledge, understanding and judgment were clearly lacking, in retrospect.
Investors have come to see that having blind faith in those who present themselves as "experts" is a highly dangerous strategy, if it can be called a strategy at all.
Sure, it may have been more fun when technology stocks were shooting the moon and nobody had much use for reviewing a company's fundamentals. But that wasn't investing--it was speculating, and on a massive, and ultimately ruinous, scale.
People have learned to be less trusting about what others say about the market, and that is more likely to be beneficial than detrimental to their portfolios in the long run.
Just ask anyone who shifted their entire 401(k) retirement savings sum into aggressive-growth mutual funds in the first quarter of 2000--right before the market peaked--because of the bullish comments of some 25-year-old tech stock analyst. Those investors aren't likely to make a move like that again.
* Free-market forces are weeding out the weak players and the phonies. Capitalism may be harsh, but it's efficient when the good times end and it's time to find out which companies truly have talent and staying power--and deserve more capital.
Hundreds of dot-coms have failed, but who really misses them? Is it any harder to find what you want on the Internet? It probably would have been much worse for all concerned if those companies had sucked up investors' funds for another year instead of failing when they did.
But the market isn't just eliminating small companies that never had much of a future. The financial near-collapse of energy giant Enron Corp. exposed a business that twisted accounting rules to its own benefit--to the point that the company now concedes that financial statements all the way back to 1997 "should not be relied upon."
Also to be weeded out, though over a longer time period, will be mutual fund managers whose performance running other peoples' money has been a nightmare for those investors--meaning, the returns produced have been far worse than what the investors would have achieved in the average fund in that particular sector.
These managers know who they are--and, hopefully, their shareholders know by now as well, and will vote with their feet.
The free market also is reminding cartels just how tough it is to control prices.
Once again, the Organization of Petroleum Exporting Countries has lost its ability to prop up crude oil prices, which have sunk to two-year lows amid the weak global economy. That's lousy for OPEC, but it's great for every energy consumer.
* The market's woes have altered many investors' priorities for the better. The wild bull market of the late 1990s demanded peoples' attention, and got it.
For some, stocks became an obsession. Their portfolios dominated their lives, especially if they were actively trading shares. They believed they were going to be rich, or richer, and that it was all because of how smart they were.
Now, most people have been humbled by the market. In the process, some have realized that they don't want their mood determined by their portfolio's day-to-date price changes.
The Sept. 11 terrorist attacks, of course, also changed many peoples' view of what truly matters to them.
Money is important, but you aren't your stocks, and they aren't you. Life is more than a daily stock quote.
*
Tom Petruno can be reached at tom.petruno@latimes.com. For recent columns on the Web, go to www.latimes.com/petruno.

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

Financial
INVESTING James K. Glassman
Don't Be A Pudd'n'head, Diversify
James K. Glassman

11/18/2001
The Washington Post
FINAL
H01
Copyright 2001, The Washington Post Co. All Rights Reserved

Warren Buffett, who was probably the greatest investor of the 20th century, is fond of quoting the salacious actress Mae West as saying, "Too much of a good thing can be wonderful." In the market, such a motto would lead you to avoid diversification and instead concentrate your portfolio in stocks you really, really like.
Peter Lynch, who was probably the best mutual fund manager of the 20th century, calls spreading yourself too thin "diworseification."
Smart, witty and brilliant at picking stocks, Buffett and Lynch may not need diversification, but the rest of us do. When you own one stock, you're out on a limb. For example, very few analysts -- with or without a conflict of interest -- predicted that shares of Enron, the energy and trading company, would tumble by 90 percent in a year. Put all your eggs in a basket like that and you end up with a gooey mess. The more stocks you own -- as long as they are in different industries -- the more the overall riskiness of your portfolio is modulated.
The reason you don't want a super-risky portfolio is simple: While Warren Buffett may be calm and prescient enough to ride out severe dips in the value of his holdings, most investors are not. A portfolio that increases in price by 10 percent each and every year is worth exactly the same at the end of three years as a portfolio that falls by half the first year, rises by three-quarters the second and rises by 52 percent the third. But reasonable investors prefer the consistent ride. It prevents them from doing something stupid, such as selling all their stocks after losing half their money during that first disastrous year.
Consider the sad case of James D. McCall, who earlier this month resigned as manager of the Merrill Lynch Focus Twenty mutual fund. Two years ago, Merrill wanted McCall's services so desperately that the firm went to court to pry McCall away from his previous employer, Pilgrim Baxter, where he rang up impressive gains in the late 1990s. (His big success was called PBHG Large Cap 20.) And when they got McCall, Merrill's brokers raised more than $1.5 billion from their clients for him to invest. While the average growth-stock mutual fund owns about 100 stocks, with the top 10 holdings representing about one-fourth of the portfolio's total value, McCall specialized in what are called "concentrated portfolios." In the case of Merrill Lynch Focus Twenty, he owned, as the name implies, just 20 stocks. At last report, his top 10 holdings accounted for a whopping two-thirds of the fund's assets.
If McCall had spread his 20 stocks among, say, a dozen different industries, he might have smoothed his ride. Instead, 69 percent of his assets went to technology firms. The Focus fund and a smaller one that McCall ran called Premier Growth were launched in March 2000. Within just 17 months, all but $650 million of the clients' original $1.5 billion had vanished.
It is hard to imagine losing as much as Focus Twenty did even if you tried. As of Nov. 9, the week McCall resigned, the fund was down 72 percent for the year, compared with a loss of 14 percent for the Standard & Poor's 500-stock index, the benchmark for fund managers. According to the latest report from Morningstar Mutual Funds, 19 of McCall's 20 stocks had declined during 2001, the only exception being Harley-Davidson. More amazing, 16 of the 19 losers had fallen by at least half. (By the way, Enron was McCall's seventh-largest holding.)
"This fund has had a wretched existence," wrote Morningstar analyst Kunal Kapoor, who did admit a grudging admiration for McCall's perseverance. McCall's "faith may turn out to be well placed over time," Kapoor said. Unfortunately, time ran out.
My point here is not to pick on McCall but to reveal the perils of concentration. Buying Focus Twenty as a technology fund, and consigning it to no more than one-fifth of your holdings (with the rest of your assets in diversified, conventional stocks or funds) might have made sense, but Focus Twenty was touted as a "long-term capital appreciation" fund, not a sector fund. Here, it failed, but maybe it didn't have to.
The manager who made the concentrated fund popular, Tom Marsico, who ran Janus Twenty, took care to spread his holdings around. His successor, Scott Schoelzel, has suffered losses lately (he is down 28 percent year-to-date, but that's after a total gain of 546 percent in the preceding five years), but they have not been nearly so catastrophic -- and for good reason. Schoelzel's last report lists among his top 10 holdings three tech stocks, two financials, one drug company, one energy firm (whoops, Enron again), one industrial, one consumer-durables company and one services firm.
For investors in individual stocks, the important question is this: How much diversification is enough? Some risk is inherent in even the broadest portfolio. This is called market, or "systematic," risk. Over the past 75 years, market risk, as measured in standard deviation, has been about 20 percent. In other words, in two-thirds of the years the annual return of the S&P has fallen into a band ranging from 20 points lower to 20 points higher than its average return of 11 percent; that is, between a loss of 9 percent and a gain of 31 percent. That's still volatile, but if you invest in stocks you have to live with it.
What you don't have to live with is anything more volatile. So your objective in building a portfolio is to try to approximate systematic risk and avoid what is called "idiosyncratic," or extra, risk. A portfolio with just a few stocks, or one like McCall's, that is overloaded in a single sector, has lots of idiosyncratic risk. In 1977, an influential study found that investors could nearly eliminate that extra risk by owning just 20 stocks in a wide variety of sectors; in fact, owning eight or 10 stocks depressed risk sharply.
Recently, however, the market has appeared to be far more volatile, and a new study by a group of economists headed by John Campbell of Harvard found that many more stocks were needed -- around 50 -- to bring a portfolio down to the same level of riskiness as the broad market. What Campbell's group found was that neither the market itself nor individual sectors had become more volatile in the 1990s, but that stocks within those sectors had, so you need to own more of them.
But owning 50 stocks is a pain in the neck -- and it brings up the Buffett-Lynch admonitions about too much diversification. It is hard just to take the time to make the selections, but even buy-and-hold investors need to keep track of the companies they own to spot adverse changes in management, product failures or new competition (not to mention Enron-style accounting shenanigans) -- signs that it's time to sell.
One good answer is to achieve balance by owning a combination of mutual funds and stocks. For example, you might want to put 50 percent of the money you have allotted for stocks into a fund that mimics the S&P itself, like Vanguard Index 500, which charges rock-bottom expenses and guarantees that risk won't exceed systematic levels. You could also consider a broad fund that's managed by human beings, such as Meridian Value or Baron Growth, which are recommended by Sheldon Jacobs, editor of the No-Load Fund Investor newsletter. Then another 25 percent of your holdings can go into a few sector funds that specialize in technology, real estate, energy and small-caps, and the final 25 percent into a portfolio of 10 to 20 individual stocks. (I own 16, at last count.)
There are many valid variations. Just don't emulate Mark Twain.
In a letter to clients recently, Anthony M. Maramarco of David L. Babson & Co., the Cambridge, Mass., investment firm, recalled the aphorism of Twain's Pudd'n'head Wilson: "Put all your eggs in the one basket -- and watch that basket!" Unfortunately, such a philosophy emphatically does not work in stock investing -- as Twain himself learned when he sank nearly all his fortune into the Paige Linotype, a machine that flopped.
We all make mistakes. (It was Twain, after all, who pointed out that "human beings are the only animals that blush -- or need to.") But smart diversification helps investors avoid some of the worst of them.
James K. Glassman invites comments at jglassman@aei.org, but he cannot answer all queries.

http://www.washingtonpost.com
Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved.

Business
Wessex Water `to be sold'
Heather Tomlinson

11/18/2001
The Independent - London
FOREIGN
1
(Copyright 2001 Independent Newspapers (UK) Limited)

Wessex Water, the water and sewage company, is understood to be up for sale following an offer to take over its owner, Enron, by Dynegy, the US energy group.
Three years ago, Enron spent pounds 1.4bn on Wessex Water. But Dynegy is understood to want to concentrate on US and European energy assets and is not interested in non-core assets.
Any hope to regain the same amount of money could be derailed as the industry is put off by regulatory problems, and the company's results have worsened due to imposed price cuts over the past year.
"It is not that there is going to be a fire sale but most of [the international assets] are not core to the businesses we will continue to pursue," said an Enron spokesperson. "At the right price we will sell."
Scottish & Southern Energy and United Utilities have been touted as potential buyers, yet industry insiders believe that the UK regulator, Ofwat, will take a dim view of bids by UK water companies, as they are too large to buy it.

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

UK PRESS: WestLB Makes Grab For GBP1B Wessex Water

11/18/2001
Dow Jones International News
(Copyright (c) 2001, Dow Jones & Company, Inc.)

LONDON -(Dow Jones)- German state-owned bank WestLB Panmure is in talks to buy Wessex Water from its troubled U.S. parent Enron (ENE), reports the Sunday Telegraph.
WestLB is said to have made a formal approach within the last few days. It is thought to be one of a number of companies that have approached Enron to buy the British water utility valued at GBP1 billion.
Newspaper Web site: http://www.telegraph.co.uk
London Bureau, Dow Jones Newswires; 44-207-842-9289

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

BUSINESS
Quanta steels itself against takeover bid
NELSON ANTOSH
Staff

11/17/2001
Houston Chronicle
3 STAR
1
(Copyright 2001)

Quanta Services, which builds and maintains power and communications lines, said Friday it is fighting a "creeping takeover" by UtiliCorp United, one of the nation's largest utility holding companies.
On Thursday Quanta board members changed the Houston company's shareholder rights agreement - called a "poison pill" defense against takeovers - to deter UtiliCorp from acquiring a controlling stake.
The action was taken after negotiations with UtiliCorp fell apart and the Kansas City, Mo.-based company announced its intention to resume purchases of Quanta stock.
A spokesman told Bloomberg News on Oct. 4 that UtiliCorp wanted to increase its stake to the mid-40s percentage range, which would give it effective control, with a vote on management.
UtiliCorp invested $320 million in Quanta from September of 1999 through February of 2000, said UtiliCorp spokesman Ethan Hirsh, bringing its ownership up to 28 percent, and has been adding stock since then. It owned about 38 percent when a standstill agreement stopped further purchases in early October.
Part of the shareholder rights amendment limits further purchases by Quanta by reducing the trigger point for the poison pill to 39 percent of Quanta's outstanding shares, instead of the 49.9 percent that has been in effect just for UtiliCorp.
In addition to saying that UtiliCorp is no longer "an exempt" person under the 39 percent trigger, the amendments changed the kind of securities to be issued in the event the pill is triggered and how they could be exercised.
UtiliCorp had a higher trigger point that other potential acquirers because it already was a significant shareholder when the plan was initially drafted.
Hirsch didn't think the amendments would prevent his company from buying more.
UtiliCorp's interest in Houston acquisitions is not limited to Quanta. Its also said this week it would like to buy Enron's share of a United Kingdom power station that provides electricity sufficient to light 1.88 million homes.
It will soon get a 27 percent share in the station near London, known as the Teeside power station,through the purchase of a utility there. It would like the 42.5 percent that Enron owns, UtiliCorp President Robert Green said in a conference call.
Green said he understood that stake was on Enron's for-sale list.
UtiliCorp revealed in a Securities and Exchange Commission filing that it bought 1.538 million shares of Quanta's common stock on the open market, at a cost of more than $24 million, between Sept. 28 and Oct. 3.
Quanta's stock declined 27 cents to close Friday at $15.69, while UtiliCorp rose 10 cents to close at $27.50. Quanta's stock is down 51 percent for the year to date, and hit a 52-week low of $9.94 on Sept. 21.
"After many weeks of negotiations with UtiliCorp, we could not reach agreement upon a strategy that would allow UtiliCorp to consolidate our financial results for accounting purposes on terms acceptable to Quanta," John Colson, Quanta's chief executive officer, said in a written statement.
"In the face of UtiliCorp's communications last evening breaking off negotiations and stating its intent to resume open market purchases of Quanta stock, the board acted to protect the best interests of all Quanta stockholders against a change of control transaction which did not provide an appropriate benefit to all shareholders," he said.
Quanta has a mutually beneficial relationship with UtiliCorp and hopes negotiations can resume, Colson said.

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

BUSINESS
Business briefs
Business briefs / Houston & Texas
Staff, Bloomberg News, Reuters, Associated Press

11/17/2001
Houston Chronicle
3 STAR
2
(Copyright 2001)

Offer still on table for Canadian Hunter
Burlington Resources on Friday extended a $1.96 billion offer for Canadian Hunter Exploration Ltd. until Dec. 3 while Canadian regulators study the bid.
The cash offer was to expire Tuesday. Investment Canada, which oversees foreign ownership of Canadian companies, won't complete its review by then, Burlington said.
Houston-based Burlington agreed to buy Calgary-based Canadian Hunter on Oct. 9.
Azurix settles suit over Dynegy buyback
Azurix Corp., a wastewater-services management company, won a judge's approval Friday in Wilmington, Del., to settle shareholders' lawsuits over parent Enron Corp.'s $329 million stock buyback in March.
Houston-based Enron, soon to be bought by Dynegy, said in October 2000 it would pay $7 for each of Azurix's outstanding shares, or $275 million, to take the company private. Seven Azurix stock owners sued in Delaware Chancery Court seeking more money.
Enron eventually agreed to pay $8.375 per share, adding about $54 million to the offer, and stockholders agreed to settle the lawsuit, lawyers said.
SBC adds 2 states to long-distance rolls
San Antonio-based SBC Communications received permission Friday from the Federal Communications Commission to begin offering long- distance service to customers in Missouri and Arkansas.
The decision allows SBC to offer the service in the five states served by its SBC Southwestern Bell subsidiary. SBC has already received permission to compete in the long-distance market in Texas, Kansas and Oklahoma.
While the FCC's decision was unanimous, there was discussion on whether SBC has made its DSL high-speed Internet access service available for resale and if the federal law requires such resale. The commission will address the issue in another proceeding.
Airline canceling 200 layoffs of pilots
FORT WORTH - American Airlines Friday canceled the planned Dec. 2 layoffs of 200 pilots because military duty was extended for pilots called up on reserve and other employees took leaves.
American laid off 386 American pilots Sept. 28 and 200 more Nov. 1, as well as 120 at TWA Airlines. Those were among 20,000 jobs AMR eliminated as passenger demand fell. The company said it will bring employees back as demand improves.
Southwest drops suit against Orbitz site
DALLAS - Southwest Airlines Co. has agreed to drop a lawsuit that claimed Orbitz, an Internet travel site owned by five rival airlines, displayed incorrect information about Southwest's flights and fares.
"It gives Southwest Airlines the right to restart the litigation at its current point if Southwest fares are ever displayed on Orbitz again," said Linda Rutherford, a spokeswoman for the Dallas-based airline.

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

EDITORIAL
AT ENRON, THE BIG DOGS ATE FIRST

11/17/2001
Portland Oregonian
SUNRISE
D06
(Copyright (c) The Oregonian 2001)

Summary: Workers' ire over 401(k) plans is understandable
Watching Enron's bigwigs lose their jobs after inflating profits may offer some satisfaction to retirees and employees at the troubled energy marketer. But don't bank on it.
When corporate insiders can sell the company and stroll away with millions while workers and other stockholders are left with peanuts, it would be hard not to be bitter.
As Oregonian business writer Jeff Manning reported Friday, local employees of Portland General Electric, an Enron subsidiary, watched their retirement savings sink after Enron announced on Oct. 16 that it would lose $618 million in the fourth quarter. This came after Enron officers made more than $136 million selling stocks earlier in the year.
Then on Nov. 8, Enron dropped the other shoe: It admitted it had overstated earnings for four years by $586 million, or 20 percent. Over those few weeks, Enron shares plunged from $33.84 to its $9 close on Friday.
The four-year overstatement developed through some novel accounting methods. Enron and its auditor, Arthur Anderson, insist that its financial reports were all within proper standards, but the mechanics in this case included obscuring debt by placing it on the ledgers of other entities so that the parent company's profit picture appeared rosier than it actually was.
The weeks from mid-October to early November were wrenching for employees. Because the company was changing its fund manager, they were powerless to make any changes in their 401(k) plans. PGE chief executive Peggy Fowler points out that the change in 401(k) plan managers was announced last summer. And although employees could have gotten out of Enron stocks over the history of the plan, Enron seemed to be an attractive investment.
Company executives, though, were selling. Jeffrey Skilling, who was promoted to Enron chief executive early in the year but resigned in August, sold more than $5 million in company shares according to transaction records covering the first half of the year.
Former chief financial officer, Andrew Fastow, who was fired last month in an action related to the financial mess, made $14 million in stock sales betweeen March and November of last year. Kenneth Lay, Enron's chief executive, who returned after his protege Skilling left, made at least $20 million in stock sales from late last year. He has announced that he would decline his severance package.
Dynegy, another Texas energy marketing company, has made a bid to buy Enron. That probably means the best Enron and PGE employees can hope for now is that Dynegy will be a better corporate owner, or they can try their luck with one of the many shareholder lawsuits being filed.
The Securities and Exchange Commission is investigating Enron's activities. If its behavior was illegal, there will be consequences for company officers.
That's still not much to offer to workers who have seen their retirement savings dissolve. But for now it's all there is.

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

FINANCE WEEK - From dealing to reeling.
By BARRY RILEY.

11/17/2001
Financial Times
(c) 2001 Financial Times Limited . All Rights Reserved

FINANCE WEEK - From dealing to reeling - The legacy of the late 1990s stock market bubble remains with us, as does irrationality THE LONG VIEW - BARRY RILEY.
Optimism is back. Stock markets around the globe have typically rallied by 20 per cent since rock bottom was reached on September 21. Only 9 per cent of global fund managers believe equities will be lower in 12 months, according to a Merrill Lynch survey published this week.
But the legacy of the late 1990s stock market bubble remains with us. The challenge is how to minimise the level of irrationality. Two of the UK's biggest losers from crazy prices reported on Tuesday. Vodafone suffered #11.45bn of write-downs - but curiously, made no provisions against the sky-high #13.1bn it paid for third-generation mobile phone licences in 2000.
Such payments, argued Sir Christopher Gent, Voda-fone's chief executive, were merely what the market demanded at the time. It is interesting to note, too, that Paul Klemperer, the Oxford professor who is an expert in "auction theory" and advised the British government, has defended the disastrous outcome by arguing that the prices reflected the capital market's view of 3G's prospects. The common theme here is that it is nobody's fault if crazy prices are paid, because they are legitimised by the stock market.
Marconi, which is financially in a much worse state than the mobile phone giant, has written off most of the #4.1bn paid for US internet hardware companies in 1999. There has also been a great deal of controversy in the US during the past few weeks over the near-collapse of Enron, the power group being rescued by a takeover bid from its smaller rival Dynegy. There was an obvious failure by investors - and by stock market analysts - to assess the true risks at Enron.
Smart businessmen will sellat mad prices, but why on earth should they buy? The trouble is, too many academics have developed theories of value based on rational expectations. The real world is unfortunately very different.
Some of the distortions had obvious technical origins. The Vodafone bubble of 1999 reflected the cross-border takeover of Mannesmann and the artificial weighting shortages that developed from that transaction as Vodafone ballooned in market capitalisation to reach, at one stage, 16 per cent of the FTSE 100 Index. The market price was driven not by normal corporate fundamentals, but by the desire of most fund managers to reach a market weighting, at which point they were "safe" in terms of risk against the index benchmark.
That was the period when investment banks exploited the idea of low free-float new issues: internet companies, especially, were floated off with only 15 per cent of the stock made available, although anything up to 100 per cent went into the indices, creating serious shortages and bubble valuations. Changes now being made to the main stock market indices have reduced the problem, but there remains a basic irrationality in the concept that investment risk resides in an index rather than in the underlying stocks.
Takeovers have always been plagued by irrationality, and indeed this is an area where academics recognise the problem; over many years they have pointed out that all the benefits of deals, and often more than all, accrue to the shareholders of the companies taken over, while investors in the bidding companies suffer dilution. Investors know this, and in normal market conditions news of a takeover will depress the bidder's share price. But in a bubble market these prudent attitudes can be overwhelmed by euphoria, as well as technical factors relating to demand by fund managers so that they can maintain their weightings when a bidder is spraying around large quantities of new equity.
Also, it is irrational that many more deals are done when the stock market is high than when it is low. Two years ago, companies such as Marconi were engaged in buying sprees at daft prices. Now, when prices are much lower, hardly any acquisitions are being made (and investment banks are dismissing thousands of employees). An exception to the deal famine is gold mining, which just happens to have been one of the stock market's strongest sectors this year.
Another important source of irrationality has been the domination of stock market analysis by the stockbroking offshoots of the investment banks. Over recent years their earnings-per-share forecasts for the next calendar year have been on average 8 per cent too high. This has not just been a mistake; they have been paid to be over-optimistic. Admittedly, attempts are being made to restructure the incentives here, as the embarrassed investment banks come under pressure from the regulators and the courts for their errors of judgment during the bull market, but it remains to be seen whether much will really change.
The mystery is why anybody would take notice of these forecasts, and indeed many professional investors do not. That Merrill survey, incidentally, shows that fund managers on average expect no more than 4 per cent earnings per share growth over the next year, while the stockbrokers' analysts are still clinging to the hope that it will be 15 per cent.
A final source of distortion is the tendency of companies to offer their executives the wrong sort of incentives. The ruin of Marconi may appear irrational, when multi-billion-pound acquisitions are being declared worthless after only two years. But executives with lucrative stock option plans, which pay off if their gambles go right, combined with golden goodbye and pension packages that are triggered if things go wrong, may well consider it perfectly rational, from their viewpoint, to take much bigger risks than other shareholders, or employees, would consider acceptable.
Moreover, Sir Christopher Gent, shareholders of Vodafone will remember, received a controversial #10m personal bonus last year for clinching the Mannesmann takeover, a deal that requires #10bn of write-offs.
In normal market conditions the valuation of equities may be tolerably rational, but in a bubble market the rules are thrown out of the window. Many investors certainly like the idea of getting rich quickly. That is why many people subscribe so keenly to national lotteries in which the chance of winning is so small as to be not worth rational consideration.
barry.riley@ft.com.
(c) Copyright Financial Times Ltd. All rights reserved.
http://www.ft.com.

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

WORLD STOCK MARKETS - Bears take upper hand on Wall St.
By MARY CHUNG.

11/17/2001
Financial Times
(c) 2001 Financial Times Limited . All Rights Reserved

After an early game of tug-of-war, the bears took the upper hand as the Dow Jones Industrial Average closed 5.40 lower at 9,866.99. The S&P 500 index gave up 3.59 at 1,138.65 and the Nasdaq Composite slipped 1.98 at 1,898.59. Volume was fairly heavy with 1.34bn trades in the NYSE.
The indices were earlier bolstered by news that some of the leaders of the Taliban and the al-Qaeda terrorist network had been killed in bombing raids on Kabul and Kandahar this week.
However, the momentum faded as investors found little reason to keep sending stocks higher following a sharp decline in the US consumer price index. The index saw its steepest monthly drop since April 1986. Separately, the Federal Reserve reported another drop in industrial output last month.
Investors appeared more hesitant to step into the market and buy stocks after several weeks of sharp gains. However, the corporate picture looked to be improving for some companies such as Dell. The computer maker reported third-quarter results that beat analysts' estimates by a penny and predicted a small rise in sales for the current quarter. Shares, however, fell 4 per cent at $26.60.
Rivals Hewlett-Packard shed 2.7 per cent at $21.50 and Compaq gave up 3.7 per cent at $10.30. Yahoo!, the world's largest internet portal, jumped 4.3 per cent at $15.47 after it announced a restructuring and job cuts, but reaffirmed its guidance for the fourth quarter.
Shares in Starbucks fell 9 per cent at $17.50 in spite of the coffee company reporting a 22 per cent rise in earnings for the fourth quarter.
Energy prices rose in spite of the continuing dispute over oil production between Opec and Russia. Amerada Hess put on 2.5 per cent at $54.59 and Exxon Mobil added 1 per cent at $37.54. Enron, the embattled energy trading company, however, slid 5 per cent at $9. Most Dow components were lower as Alcoa slipped 1 per cent at $37.12, American Express shed 3.7 per cent to $33.13 and Wal-Mart fell 1.6 per cent at $55.10.
Toronto was little changed in morning trade in spite of a rally in technology and cyclical shares, the first sectors expected to respond to an improving economy.
However, at the close the S&P TSE-300 composite index was up 0.72 per cent at 7,315.30 as tech issues continued to strengthen.
Overall, 11 of the market's 14 sub-indexes were higher but safe-haven gold stocks suffered as hopes grew for a swift conclusion to the war in Afghanistan. The tech-heavy industrials sector enjoyed a 1.61 per cent gain. Electronics manufacturer Celestica charged ahead, rising 3.3 per cent to C$64.80.
Telecoms equipment heavyweight Nortel Networks jumped to C$12.69 as several investment firms raised targets.
(c) Copyright Financial Times Ltd. All rights reserved.
http://www.ft.com.

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

Business; Financial Desk
IN BRIEF / ENERGY Pension Funds Consider Action Against Enron
Reuters

11/17/2001
Los Angeles Times
Home Edition
C-2
Copyright 2001 / The Times Mirror Company

Some big pension funds that invested in Enron Corp. said they are considering legal options in the wake of the energy giant's stock collapse and a regulatory probe of its dealings.
Spokesmen for the New York state and city comptrollers and an official from Amalgamated Bank, a trustee of workers' retirement funds, said they were looking into lawsuits stemming from Enron's murky financial dealings and stock plunge.
Pension funds and mutual funds have been big holders of Enron, once a Wall Street darling whose stock has plunged 89% this year.
Five New York City pension funds hold about 2.9 million Enron shares, said David Neustadt, a spokesman for the New York City Comptroller's Office. The funds serve teachers, police and other city workers.
Enron shares fell 48 cents to $9 on the New York Stock Exchange.

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

Enron Investors Hope Filing Will Shed More Light on Finances
2001-11-17 11:06 (New York)

Enron Investors Hope Filing Will Shed More Light on Finances

     Houston, Nov. 17 (Bloomberg) -- Enron Corp. investors hope
the energy trader's third-quarter report to the U.S. Securities
and Exchange Commission will answer some of the questions that
sent its shares tumbling and led to a proposed sale to rival
Dynegy Inc.

     Enron, which has been criticized for failing to clearly
explain how it makes money, may disclose in Monday's filing more
on how much is owed by the company and affiliated partnerships, as
well as any planned job cuts and other cost-saving moves related
to Dynegy's $24 billion buyout.

     ``Investors will be looking for anything that affects the
likelihood of the (Dynegy) deal going through and the timing of
such a deal,'' said Edward Paik, who helps manage the Liberty
Utilities Fund, which owns 1.6 million in Enron shares.

     Enron agreed to sell after its stock plunged 67 percent in
three weeks amid an SEC investigation into partnerships run by
Enron executives. Investors worry that new disclosures, such as
previously unreported debt, might threaten Enron's credit rating
and scuttle the merger, possibly pushing Enron into bankruptcy.

     ``There's been so much skepticism about what Enron's
liabilities are with these partnerships, I'm looking to quantify
this,'' said Glen Hilton, a fund manager at Montgomery Asset
Management LP, which holds Dynegy shares.

     Enron Chairman Kenneth Lay admitted last week that failed
investments and a loss of investor confidence forced the sale to
Dynegy, and he and other executives pledged to be more open with
investors. Lay, 59, said last week he won't accept a severance
package of more than $60 million that he could have collected
following the takeover.

     Enron shares fell 48 cents yesterday to $9. Dynegy fell
$1.53, or 3.5 percent, to $42.47.

                           Balance Sheet

     Enron's third-quarter report, which had been expected last
week, was delayed by the Dynegy talks and a restatement of
earnings, Chief Financial Officer Jeffrey McMahon said. Enron
reduced net income for four years by a combined $586 million to
include losses from affiliated partnerships.

     Monday's filing, called a 10-Q, will include a balance sheet
summarizing assets and debts. Enron for years has omitted balance
sheets, which the SEC requires as part of the 10-Q, from its press
releases announcing earnings.

     Investors renewed their criticisms of the practice after Lay
mentioned during a conference call last month that dealings with
two partnerships had reduced Enron's shareholder equity, or its
assets minus liabilities, by $1.2 billion. The disclosure led to
the ouster of Chief Financial Officer Andrew Fastow.

     ``Everyone is trying to make their own assessment of what
(Enron's) ultimate liability will need to be,'' said Commerzbank
Securities analyst Andre Meade, who rates the shares ``hold'' and
doesn't own them.

     Monday's report probably won't give a complete answer, said
Louis Gagliardi, an analyst at John S. Herold Inc. While the
balance sheet will list liabilities for the partnerships, which
were set up to buy Enron assets and get debt off the company's
books, it won't spell out Enron's share, he said.

     ``What is the net liability off the balance sheet?''
Gagliardi said. ``We really don't know what that number is.''

                           Credit Rating

     Dynegy has said it can back out of the acquisition if Enron's
legal liabilities exceed $3.5 billion. The balance sheet ``will
help us see how good a deal this is for Dynegy,'' said Kathleen
Vuchetich, co-manager of the $1.4 billion Strong American
Utilities Fund, which owns 284,000 Dynegy shares.

     Both companies are based in Houston.

     The filing also might offer details on the SEC probe. ``It
may say what the SEC is looking for, and what the rating agencies
have told them,'' said Christopher Ellinghaus, an analyst at
Williams Capital Group. He added, though, ``I don't expect much.''

     Enron's stock drop led Moody's Investors Service to cut the
company's debt rating to the lowest investment grade. Dynegy held
off on a purchase agreement out of concern that the rating would
be cut to junk, jeopardizing Enron's ability to raise cash needed
to settle its daily power and natural-gas trades.

     Enron may reveal where it expects to cut jobs and how much it
will pay to departing employees, Paik said. Chief Operating
Officer Greg Whalley said last week that fourth-quarter profit
will be hurt by severance payments and reorganization costs. He
didn't give details.

     Jobs likely will be eliminated in businesses the company
plans to sell, including its money-losing telecommunications unit
and operations in Europe, analysts said.

     Enron has about 21,000 employees, two-thirds in the U.S. and
about a fifth in the U.K. Its 600 traders are divided between
London and Houston, where Enron employs about 7,500.

     Many Enron workers are already preparing for layoffs, said
Lyndon Taylor, a Houston-based recruiter for Heidrick & Struggles
International Inc., an executive placement firm.

     ``I got 56 resumes last week from Enron,'' Taylor said.
``That's equal to the number I got in the past year.''

--Margot Habiby in Dallas and Jim Polson in Princeton

UK: Trade, bank buyers circle Enron's Wessex Water-reports.

11/17/2001
Reuters English News Service
(C) Reuters Limited 2001.

LONDON, Nov 17 (Reuters) - Both financial and trade buyers are considering bids for Wessex Water, the UK utility owned by crisis-hit U.S. energy group Enron , weekend press reports said.
According to the UK trade magazine Utility Week, Enron's rescue buyer Dynegy wants to offload Wessex as soon as possible, and focus on integrating Enron's core energy businesses.
A report in the Sunday Telegraph newspaper named German bank WestLB as a possible buyer at a price of 1 billion pounds ($1.4 billion). WestLB is the financial backer of the management buyout team that owns another southern England regional utility, Mid Kent Water.
Utility Week raised the possibility that UK power utility Scottish & Southern might be interested.

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

Financial Post: Canada
A user's guide to living in Calgary: People moving from Houston find the cities much alike
Claudia Cattaneo
Financial Post

11/17/2001
National Post
National
FP7
(c) National Post 2001. All Rights Reserved.

U.S. oil companies are setting up shop all over downtown, usually picking high-quality office space with lots of open space. Anadarko Petroleum Corp. is located at Fifth Avenue Place, Burlington Resources Inc. is in Bow Valley Square and Devon Energy Corp. is in Canterra Tower. Some end up in the offices of the companies they acquire. Conoco Inc. has moved into Gulf Canada Square.
The big takeover wave has led to a reshuffling of downtown space. Today, there is a shortage of large spaces and an increase in small ones available for sublease.
Some would like to get the towers they occupy named after them but landlords resist this because naming a building after one tenant can be a disincentive for others.
Oilmen's favourite hangout is the Calgary Petroleum Club, founded by U.S. and Canadian oilmen in 1948 in the Palliser Hotel. Members have reciprocal membership at the Petroleum Club of Houston. But Calgary's Pete Club is a bargain compared to its Texas counterpart. The initiation fee in Calgary is $2,000, monthly dues are $65 and the minimum amount members must spend in a year is $600. The initiation fee for full membership at the Petroleum Club of Houston is US$3,500, monthly dues are US$110 and the minimum house account is US$75 per quarter.
U.S. executives running Canadian oil and gas operations earn substantially more than their Canadian counterparts because their compensation is competitive with the U.S. market.
When U.S. oil companies purchase Canadian operations, they like to keep as much of the Canadian staff as possible, since they are even more aware than their Canadian rivals of the "war for talent."
When recruiting locally, U.S. firms pay competitively but of course will pay what they must to get the best candidate. They also offer competitive benefits and stock-option plans. U.S. employers gulp at the generous holidays enjoyed by Canadian oilpatch employees.
There's no American neighbourhood in Calgary, although many recent arrivals are buying homes close to the city's core, particularly in such high-end neighbourhoods as Mount Royal, Elbow Park and Britannia, where homes sell for $500,000 to $2-million.
Some U.S. companies purchase condominiums in such areas as Eau Claire on the Bow River to house U.S. executives in transit.
Ted Zaharko, a broker-owner with Royal LePage, says Americans are driven by lifestyle choices and the fact that they can afford to buy expensive homes. Living near other Americans isn't important.
The cost of living is lower in Calgary than in many comparable U.S. cities. However, U.S. cities become more competitive for high-income earners because personal income taxes in Canada are higher than in the U.S. at the higher income levels. Offsetting factors include access to health care, clean air, a short commute to work and the nearby mountain playground, which tend to be important to affluent people.
U.S. oil types may have strange accents -- many come from the southern states -- but oilpatch jargon is pretty much the same. Calgarians and Americans understand one another when they talk of dry holes (no discovery), wildcat wells (exploration wells) or roughnecks (rig workers). The language of money is also the same: barrels and U.S. dollars.
Oilpatch humour is also borderless. One of the latest jokes circulating by e-mail, courtesy of oilpatch investment dealer Peters & Co., is called "Understanding Enron." The U.S. energy giant is in trouble over its use of off-balance-sheet transactions to keep debt off its books:
FEUDALISM You have two cows. Your lord takes some of the milk.
FASCISM You have two cows. The government takes both, hires you to take care of them and sells you the milk.
PURE COMMUNISM You have two cows. Your neighbours help take care of them and you all share the milk.
APPLIED COMMUNISM You have two cows. You must take care of them, but the government takes all the milk.
TOTALITARIANISM You have two cows. The government takes them both and denies they ever existed. Milk is banned.
MEXICAN DEMOCRACY You have two cows. The government takes both and drafts you into the army.
EUROPEAN DEMOCRACY You have two cows. The EU commission decides which regulations for feeding and milking apply. If there aren't any, they invent some. They pay you not to milk the cows. They take both cows, shoot one, milk the other and pour the milk down the drain. They then require you to fill out forms accounting for the missing cows.
AMERICAN DEMOCRACY The government promises to give you two cows if you vote for it. After the election, the President is impeached for speculating in cow futures. The press dubs the affair "cowgate," but supports the President. The cows sue you for breach of contract. Your legal bills exceed your annual income. You settle out of court and declare bankruptcy.
CAPITALISM You have two cows. You sell one and buy a bull. Your herd multiplies and the economy grows. You sell them and retire on the income.
ENRON VENTURE CAPITALISM You have two cows. You sell three of them to your publicly listed company, using letters of credit opened by your brother-in-law at the bank, then execute a debt/equity swap with an associated general offer so you get all four cows back, with a tax exemption for five cows. The milk rights of the six cows are transferred via an intermediary to a Cayman Island company secretly owned by the majority shareholder who sells the rights to all seven cows back to your listed company. The annual report says the company owns eight cows, with an option on one more.

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

WestLB Offers to Buy Enron's U.K. Water Unit, Newspaper Says
2001-11-17 20:01 (New York)

     London, Nov. 18 (Bloomberg) -- Westdeutsche Landesbank
Girozentrale, Germany's largest state-owned bank, is one of
several suitors talking to Enron Corp. about its Wessex Water
unit, which is valued at more than 1 billion pounds ($1.4
billion), the Sunday Telegraph said without citing sources.

     Dynegy Inc. of the U.S. is looking to buy Enron for $24
billion, and will sell some of its assets, including Wessex.
WestLB made a formal offer to Enron in the past few days in hopes
of striking a quick deal because Dynegy may want to avoid the
regulatory risk in such a sale; any bid for a water company in the
U.K. worth at least 30 million pounds must be referred to the
Competition Commission, the newspaper said.

     Enron bought Wessex for 1.4 billion pounds in 1998. RWE AG of
Germany, Europe's fourth-biggest power company, is also interested
in Wessex, but Enron thinks U.K. regulators won't approve an RWE
bid because the company already owns Thames Water, a large U.K.
water company.

     WestLB has also been reported to be preparing a buyout for
Railtrack Group Plc, the insolvent owner of the U.K.'s train
tracks and stations, the paper said.

Enron Closes on $550 Million Loan From J.P. Morgan, Salomon
2001-11-16 17:36 (New York)

Enron Closes on $550 Million Loan From J.P. Morgan, Salomon

     Houston, Nov. 16 (Bloomberg) -- Enron Corp. closed Wednesday
on a $550 million loan from J.P. Morgan Chase & Co. and Salomon
Smith Barney Inc. that was secured with assets of its Transwestern
Pipeline Co., spokesman Vance Meyer said.

     Enron, the largest energy trader, said Nov. 1 that it had
received a commitment for $1 billion in loans from the investment
banks that would be used for debt payments and to supplement cash
reserves.

     Enron secured the loans with the assets of Transwestern and
the Northern Natural Gas Co. The two pipeline systems combined are
about 19,000 miles long and can deliver as much as 6 billion cubic
feet of gas a day. The remaining $450 million loan, secured with
the Northern Natural Gas assets, is in the documentation stage and
is expected to close next week, Meyer said.

     Enron agreed a week ago to be acquired by Dynegy Inc. in a
transaction now valued at $24.7 billion in stock and assumed debt.
The move followed a loss in investor confidence -- the company's
shares had fallen 90 percent this year -- and amid a federal
investigation of accounting irregularities that limited its
ability to finance operations.

     ChevronTexaco Corp., the second-biggest U.S. oil company and
Dynegy's largest shareholder with 26 percent, provided Enron,
through Dynegy, with a $1.5 billion cash infusion on Tuesday as
part of the buyout agreement.

     In return, Dynegy acquired preferred stock and other rights
in the Enron unit that owns Northern Natural Gas. If the merger
isn't completed, Dynegy will have the right to acquire Northern
Natural Gas, Enron said in regulatory filing Wednesday.
ChevronTexaco will provide Dynegy with another $1 billion after
the merger closes to maintain its equity stake.

     The shares of Enron fell 48 cents to $9, while shares of
Dynegy fell $1.53 to $42.47. Both companies are based in Houston.
Shares of San Francisco-based ChevronTexaco fell 35 cents to
$83.45.

--Margot Habiby in the Dallas newsroom (214) 954-9452


This is the presentation that goes with the talking points that Andrew sent.


Yes sir, the call will take place at 4:30 PM (CDT) and the number is
1-800-283-1805.  (just a reminder, this call now takes place on Monday's &
Thursday's (only)).

gngr

From: Jeff Dasovich on 04/09/2001 02:42 PM
Sent by: Jeff Dasovich
To: Ginger Dernehl/NA/Enron@Enron
cc:

Subject: Is there a leadership call today?  Signed, always confused


Please disregard Parking receipt sent January 31, 2002.  Updated receipt will be sent shortly.

Thank You.


By now you have probably heard about three memos that discuss questionable trading strategies at Enron involving the California market. The memos were brought to the Board's attention several days ago, and the Board voted on Sunday to waive the attorney-client privilege with respect to those documents. On Monday, we turned the memos over to the Federal Regulatory Energy Commission and other appropriate agencies. There are likely to be a number of investigations into this issue, and as we have with all current investigations, we will cooperate fully with these efforts. If you should be contacted in regard to this matter, I encourage you to contact Bob Williams in our legal group at 713-345-2402. However, while these investigations continue to look into the past, our focus must be on the future and on moving this company forward.
Thanks for your continued efforts,
Steve Cooper


FYI!

-----Original Message-----
From: Sanvido, Terry
Sent: Sunday, January 13, 2002 6:29 PM
To: Brackett, Debbie R.; Hare, Bill D.; Hayden, Frank; Jaquet, Tammy; McLaughlin Jr., Errol; Moorer, Torrey; Rodriguez, Bernice; Sweitzer, Tara; Theriot, Kim S.; Winfree, O'Neal D.; Dupuy, Mark; Gillis, Brian; Heal, Kevin; McKeel, Richard; Reeves, Kathy; Seib, Dianne; Vander velde, Nikole; Anderson, Diane; Baker, Natalie; Baxter, Bryce; Bowen, Bob; Campos, Sylvia A.; Garcia, Clarissa; Hilliard, Marlene; Hunter, Larry Joe; Price, Wade R.; Richardson, Stacey; Schrab, Mark L.; Severson, Russ; Spears, Christopher; Sullivan, Patti; Wallumrod, Ellen; Wynne, Rita; Chitradurga, Sundar; Cinelli, Steve; Elwood, Richard; Franks, Shawn; Greig, Iain; Harmon, Kenneth M.; Hunter, Wade; Johnson, Jeff; Nolte, Ron; Powell, John D.; Ramesh, Ganapathy; Saleem, Aftab; Sanvido, Terry; Smith, Regan M.; Allen, Thresa A.; Aucoin, Evelyn; Bentley, Corry; Clemons, Amy; Dahlke, Andrea; Denton, Rhonda L.; Evans, Casey; Murphy, Melissa; Robinson, Rhonda; Stevens, Mechelle
Subject: Estate Integration Test - 1/13/2001

When you look back over the past few weeks, you realized that a tremendous amount of work was done and it resulted in only a few minor issues during today' s integration test. Everyone involved should give himself or herself a well-deserved pat on the back.

Thank You!

During the upcoming week, the integration test team will be concentrating on resolving any outstanding issues for Estate and completing the Netco integration tests. For the most part, we will use the same test scripts used for Estate; the major differences are EOL and SAP. The plan is to complete the testing by end of day on Friday, January 18th.

Problem resolution Monday - Wednesday - procedure

Contact the Bridgeline 800-711-8000 (Code #3454709) from 7am - 7pm.  This will be the most effective of tracking, dispatching to the application representatives.  The integration test team will be monitoring and have access to the escalation procedures.

For those individuals who work in Unify, please remember to logoff and log back into Windows prior to accessing Unify. Please pass this information on to your co-workers.

Just a reminder, for those individuals who participated in the testing, please clean up (zero out, un-officialize, etc.), do not kill the deal, any deals created during the testing for Sitara, TAGG, EnPower, Unify PM, Unify VM, Unify Settlements, CAS and ?????:

Thank You,

Integration Test Team


FYI
---------------------- Forwarded by Phillip M Love/HOU/ECT on 03/20/2001
03:15 PM ---------------------------
From: Patrick Mulvany/ENRON@enronXgate on 03/20/2001 03:11 PM
To: Andres Balmaceda/NA/Enron@ENRON, Anne Bike/Corp/Enron@Enron, Amy
Cavazos/NA/Enron@ENRON, Kristen Clause/ENRON@enronXgate, Sherry
Dawson/NA/Enron@Enron, Carole Frank/NA/Enron@ENRON, Darron C
Giron/HOU/ECT@ECT, Victor Guggenheim/HOU/ECT@ECT, Liz
Hillman/Corp/Enron@Enron, George Huan/ENRON@enronXgate, Luchas
Johnson/NA/Enron@Enron, Kyle R Lilly/HOU/ECT@ECT, Phillip M Love/HOU/ECT@ECT,
Souad Mahmassani/Corp/Enron@ENRON, Errol McLaughlin/Corp/Enron@ENRON, Bruce
Mills/Corp/Enron@ENRON, Ryan O'Rourke/ENRON@enronXgate, Scott L
PALMER/ENRON@enronxgate, Chance Rabon/ENRON@enronXgate, Jeff
Royed/Corp/Enron@ENRON, Patrick Ryder/NA/Enron@Enron, Elizabeth
Shim/Corp/Enron@ENRON, Laura Vargas/Corp/Enron@ENRON, O'Neal D
Winfree/HOU/ECT@ECT
cc: Richard Deming/NA/Enron@Enron, Kristine Best/ENRON@enronXgate, Larry Joe
Hunter/HOU/ECT@ECT
Subject: broker changes

The broker Amerex is no longer under the short name of AMERX in deal
capture.  From this point on, the short name is AMERG, which stands for
Amerex Natural Gas, Ltd.  AMERX will now default to Amerex Petroleum, which
is incorrect.  Also, the broker Spectron is no longer SPECT.  The new short
name is SPECI, which stands for Spectron Energy, Inc.

If you have any questions, please let me know.

Thanks,

Patrick Mulvany


The ever changing world of Enron

John Lavorato would like to speak to you today.  So Please come to a meeting at 2:30

 -----Original Message-----
From: 	Hall, Bob M
Sent:	Friday, January 11, 2002 1:48 PM
To:	Reeves, Leslie; Gossett, Jeffrey C.; White, Stacey W.; Keiser, Kam; Theriot, Kim S.; Baxter, Bryce; Wynne, Rita; Aucoin, Evelyn; Allen, Thresa A.; Mcclure, Mark; Miroballi, Angelo; Love, Phillip M.; Valdes, John; Severson, Russ; Dhont, Margaret; Winfree, O'Neal D.; Palmer, B. Scott; Giron, Darron C.; Couch, Greg; McLaughlin Jr., Errol
Subject:	Netco meeting today

I know we have moved this meeting already, but since I have very little info ( only what I read on Yahoo!)
I think we should wait till next week to meet.  So I am going to cancel.

I have given Leslie, Jeff , Stacey and Rita,  Enron BUCKS cards.  Make them buy you a drink.

Let me know if you hear anything.

Thanks for you patients and continued understanding.

bob


Does that mean you are in like swimwear?
PL


Jeff, here is the information you requested on where we were as of December 11th. Please note this is a snapshot and the situation is very fluid.

Bob Superty


(See attached file: hpl1004.xls)

 - hpl1004.xls


Sally:

Thanks for the updates on today's meeting.

I've worked with Enron for a long time, in Power Settlements with Leslie Reeves, I've also worked with Kim Theriot in Liquids.
Even thou I have no idea what will happen to our FX/IR settlements group, I was optimistic to hear that at least we will be considered
to new positions if these are available.

Thanks again for keeping us informed.

Ana Rizvi


I am very interested in pursuing this and I believe Enron presents an ideal
case study for the purposes you outlined.  I am copying Christie Patrick on
this message and asking her to coordinate this for us.  Christie has worked
on other case studies and will be very helpful in navigating Enron for you.

	Don Sull <dsull@hbs.edu>
	11/03/2000 10:46 AM

		 To: skean@enron.com
		 cc: pmarshall@hbs.edu, wsahlman@hbs.edu
		 Subject: Possible Harvard Business School event

Steve,

Wanted to thank you again for reviewing the strategy as simple rules
article.  It is forthcoming in the next Harvard Business Review and will send
you some reprints once the magazine hits the newsstands.

Also wanted to gauge your interest in a possible even at the Harvard Business
School in April 2001.  We are currently finalizing our plans for the
Entrepreneurial Manager--a first year course on entrepreneurship taken by all
1,000 of our MBA students.  As part of the course, we will feature an
entrepreneurial company as the capstone class in the course.  Last year we
featured Intuit, taught an Intuit case study and hosted Scott Cook who spoke
to the entire MBA class.  The session was a huge success--the highest rated
class in our course and had a lasting impact on how our students think about
entrepeneurship.  We were wondering whether you and your colleagues might be
interested in being our featured company this year.

If you decided to proceed, we would first write a case study focused on the
process of creating new ventures within Enron.    The case would probably
consist of three portions:  an overview of the Enron corporation, an in-depth
description of one or two ventures successfully formed in the past, and a
profile of someone currently attempting to start a new venture within
Enron.   In preparing the case, we would draw heavily on existing case
studies, articles, and book chapters profiling Enron to avoid duplicating
effort.   We would then supplement our desk research by interviewing
approximately 15-20 Enron employees, including top management team members
(especially Ken Lay and Jeff Skilling), some folks involved in past ventures,
and the people currently attempting to start a new venture.  Each interview
would take approximately 60 minutes.  We could probably complete the bulk of
the interviews in a two to three day visit to Enron, supplemented by
telephone interviews.  The ideal timing for these interviews from our
perspective would be the last week of November or the first few weeks of
December.  We would then return to Boston, write a draft of the case and then
submit that to you for review and clearance in January.  We could then make
any last minute changes before distributing the case to the students for the
April discussion.

In addition to writing the case study, we would like to invite a group of
Enron executives to HBS when we discuss the case in April.    The ideal date
would be the 27th of April, but we could schedule the Enron day the 23rd,
24th or 25th if the 27th were impossible for you.  Last year Intuit sent
along six folks--some junior, some senior--each of whom sat in at least one
of our class discussions.  In addition, Scott Cook spoke to the entire MBA
class.  We would like to follow the same format this year, so it would be
super if either Jeff or Ken (or in the best of all worlds, both!) could speak
to the MBAs as a whole.  With Intuit last year, we kicked off at about 8:30
and wrapped everything up by approximately 1:00.  We would shoot for roughly
similar timing this year.

Many of our students equate entrepreneurship with start-ups, and this day is
designed to show them that it is possible (although extremely difficult) for
large companies to be entrepreneurial.  As such, you and your colleagues
would be providing an invaluable service to our students, and we would be
deeply grateful for your contribution.  The event might also have some direct
benefits to Enron in terms of increased profile among our students.  If you
were interested, we could also explore opportunities to leverage this event
to further increase Enron's profile as a leader of the New Economy.  We
might, for instance, bundle the case study with a teaching note and edited
video as a module on "entrepreneurship in large companies" and distribute it
to other business schools through Harvard Business School press.  My
colleagues and I would be most grateful for your cooperation and would be
happy to explore ways that you might increase your return on the time
invested.

Please let me know if this opportunity might be of interest to you and your
colleagues and how you would like to proceed.  I very much look forward to
hearing from you.

Don

Donald N. Sull
South Hall 211
Harvard Business School
Boston, MA  USA  02163
dsull@hbs.edu
telephone:  617 496 7179
fax:  617 495-3817
home page:  http://www.people.hbs.edu/dsull/bio.html
assistant:  Maurie SuDock (617 495-6473)


Steve:  We need you to have a word with Senator Wyden about the transparency
legislation that I worked on with his office.  The bill is designed to
require transmission companies and generators to release operating data on a
real time basis.  Unfortunately, comments by Senator Wyden made at the FERC
nominee hearing left the impression that he is gunning for evil marketers,
including Enron.  Most importantly, that impression was left with McLane
Layton of Sen Nickles office who has been asked to support the bill.  Wyden
claims he was "misquoted".

 Nonetheless, impress upon him that Enron is sticking its neck out on the
bill because other marketers and generators do not necessarily agree that
more information should be disclosed and that we are not eagre to lend our
support if this is going to be turned against us.

I have attached the bill language (it has not been introduced).


FYI - When January 2002 invoices are run, please be advised that a manual adjustment will need to occur on ENA's contract 24924.  The deal was structured whereby TW would receive a marketing fee equal to 50% of the rate negotiated in excess of the original contracted rate between ENA and TW; the other 50% goes to ENA.

Here's the basics:
ENA's contract with TW is at a daily rate of $0.0600 (one-part)
The release to Burlington is at a daily rate of $0.0650 (demand only plus applicable commodity and fuel based on usage)
TW will bill Burlington through normal course of business (reservation of $34,125 [$0.0650 x 25,000 x 21days] plus applicable commodity fees)
ENA demand invoice will need to be adjusted so that they only receive a capacity release credit of $32,812.50  [($0.0650 - $0.0025) x 25,000 x 21days]
TW will need to book marketing fee revenues of $1,312.50 [$0.0025 x 25,000 x 21 days]  (Richard - do we need/have a separate account for these revenues??)

Michelle - I know you indicated that ENA is looking to get a payment of $1,312.50 for their portion of the incremental fee charged.  However, we will need to discuss further.  The invoice that will be generated to ENA will not represent a credit due them since we would still be billing them for the first 11 days prior to this release.

We can discuss further when the billing cycle approaches.  If you have any questions, please let me know.

Elizabeth

 -----Original Message-----
From: 	Brown, Elizabeth
Sent:	Thursday, January 10, 2002 10:27 AM
To:	Brown, Elizabeth; Giambrone, Laura; Hernandez, Bert; McEvoy, Christine; Miller, Beverly; Miller, Christopher; Minter, Tracy; Mulligan, Amy; Ward, Linda; Donoho, Lindy; Lindberg, Lorraine; Lohman, TK; Lokay, Michelle; Watson, Kimberly; McConnell, Mark; Y'barbo, Paul; Blair, Lynn; Buchanan, John; Kowalke, Terry; Cherry, Paul; Doll, Jeanette
Cc:	Dietz, Rick; Lee, Dennis; Eldridge, Dale; Williams, John
Subject:	RE: Transwestern Capacity Release Report for the period 1/1/2002 - 12/31/2003

As promised, please find the attached TW Capacity Release Report which has been revised to include a release from ENA to Burlington effective 1/11/02 - 1/31/02.  Let me know if you have any questions.

Thanks,
Elizabeth

 -----Original Message-----
From: 	Brown, Elizabeth
Sent:	Monday, December 31, 2001 12:59 PM
To:	Giambrone, Laura; Hernandez, Bert; McEvoy, Christine; Miller, Beverly; Miller, Chris L; Minter, Tracy; Mulligan, Amy; Ward, Linda; Donoho, Lindy; Lindberg, Lorraine; Lohman, TK; Lokay, Michelle; Watson, Kimberly; McConnell, Mark; Y'Barbo, Paul; Blair, Lynn; Buchanan, John; Kowalke, Terry; Cherry, Paul; Bianchi, Rita
Cc:	Dietz, Rick; Lee, Dennis; Eldridge, Dale; Williams, John
Subject:	Transwestern Capacity Release Report for the period 1/1/2002 - 12/31/2003

Attached is the Transwestern Capacity Release Report that lists all capacity release transactions for the period effective 1/1/2002.  All transactions were awarded at 100% of the applicable maximum tariff rates.

I have also been advised by Marketing that another posting may occur for January 2001 (partial month) but nothing has been finalized.  I will send an updated file if necessary.

If you have any questions, please feel free to contact me.

 << File: TW0102P.XLS >>

Thanks,
Elizabeth


We have confidence in Enron's ability to perform on our energy contracts.  We are pleased with the service Enron has provided to us and we have no doubt that Enron will deliver on their commitments.

Enron has saved our company XXX million in the first XXX months of 2001.


Yes, we will look at both of together tonight bunda.

Love
ME

 -----Original Message-----
From: 	raquel.nunes-thomas@us.abb.com@ENRON
Sent:	Monday, October 22, 2001 9:10 AM
To:	Thomas, Paul D.
Subject:	RE: Car Registration

Honey this is the last week for me to change my health plan!  Lets do this
tonight. I truly think we should be on the same one.
Love
me


Lydia McGowan (Chairman Frisbee)  410 767 8072
Christa Donahue (PFI in North Carolina -- 2024672778)
Greg Piper
Carol Dillon 503-464-8536
Kathleen -- Providence Gas (Mike McCall)
Linda Clemmons -- MIT forum at MIT


Just a heads-up - a long-winded email, but please see highlighted paragraphs.
I find it hard to believe the scenario portrayed here, but stranger things
have happened - will keep you posted.
---------------------- Forwarded by Fernley Dyson/LON/ECT on 29/11/2000 08:44
---------------------------

James New
28/11/2000 13:42
To: Ted Murphy/HOU/ECT@ECT, David Port/Market Risk/Corp/Enron@ENRON
cc: Mike Jordan/LON/ECT@ECT, Coralie Evans/LON/ECT@ECT, Fernley
Dyson/LON/ECT@ECT

Subject: Status update on the issues surrounding Continental Power
volatilities and correlations

As you know for some time we have been trying to get the Continental Power
traders to increase the volatilities they use for valuing their option
portfolio and for use in calculating their VAR as it has been obvious that
the market  has become more volatile but this was not being reflected in
their mark.

In looking at the impacts of this, various other issues came to light.
Firstly it raised issues over the correlation matrix used in the VAR model as
this was way out of date. We have worked with Jitendra and have now put in a
matrix that both the traders, risk and RAC are happy with. Secondly, as you
may be aware, in Portcalc swaptions currently use the volatility input on the
deal ticket and not off any volatility curve.

The current portfolio is 90% swaptions and so this represents a serious issue
for us in that it is not practical to manually change all the volatilities at
the deal ticket level every time the implied voaltilities change. We cannot
use the option functionality as this only values hourly or daily exercise
options and not fixed expiry swaptions or options. We also have not found any
way in Portcalc of valuing Asian options so we are having to 'force' in the
few we have. We have had the Houston based Portcalc IT team work on a 'new'
piece of swaption valuation code but currently it contains a number of
worrying bugs. These are primarily that the proposed code does not take the
correct underlying forward price and uses the volatility of (approximating)
the last day of the underlying rather than the implied volatility of the
underlying.

They are currently being hampered in that they do not have any IT personnel
who have sufficient option knowledge (I understand that the two most
experienced coders resigned to go to another Houston based energy company).
This is extremely worrying and I find it hard to believe that the whole of
Enron's power business is having to use the methodology of inputting the
volatility at the deal ticket level. This will almost certainly mean that
different volatilities are being used in the VAR as are being used to value
the swaption portfolio globally. As well as these issues we have concerns
over the use and accuracy of the smile adjustment in Portcalc (worryingly it
does not seem that you can 'switch' this off). Briefly it seems that Portcalc
calculates the delta used to adjust the volatility by comparing the strike
price to the forward price of the last day of the underlying rather than the
forward price of the underlying itself.

We have engaged London based  IT and are looking at the code we have used in
Power 99 to se if there is a way we can get something done quickly to start
to value all option products off a curve and to be able to book Asian options.

Once we get the above resolved we still have no way or extracting the vega or
gamma risk from Portcalc in it's current state as the information is just no
there (so we are told by IT). The system 'seems' (we cannot be 100% sure
given all the other errors) to produce a vega and gamma P&L number but what
the risk is remains a mystery. Again this is very worrying in that we have
Power option traders all over the world who can't get their underlying vega
or gamma risk position from the global valuation system. We are trying to
work on something manual to draw a line in the sand but I would really like
to know how the American based traders cope as they have this problem
(knowingly or not)  for years. What sign offs were gained for the
implementation of Enpower because it seems to us that using the current
system it is not possible to comply with the Global Risk policy. How do we
validate the inputs to the valuation if we do not know the risk ?

Despite the above we have now persuaded the traders to save out newer higher
volatilities a week ago and you should have seen a large move up in their
VAR. However, as it stands at the moment they are notable to save out a daily
remark as Jitendra is saying that he is not happy with their 'model' / vol
curve generator (I have today asked for a full explanation, details of any
testing etc etc and time lines so we can move to getting over this hurdle).
The swaptions have also not yet had the ticket volatility changed but the
impacts are expected to be positive as we are long volatility.

I would appreciate your comments on the above as it seems that we are pushing
the boundaries here on areas which we really expect to have already been
covered in Houston some time ago and could do with some help. We are having
to use a system which seems to us to have numerous bugs and short comings and
are having to spend an enormous amount of IT time overcoming the inadequacies
of Enpower wich I do not think most people are aware of. Consequently we have
not been able to deliver all the improvements we were required to do in
gaining the increased limits so 3 months ago but I would hope you agree that
it is not for a lack of trying.

Sorry it's so long but if there are any questions or any perceived
inaccuracies in any of the above then please let me know.

James


Please keep me posted.  I am off next week, but I would like to book lunch with you in the next couple of weeks just to catch up.  Twenty-six floors is too far away from you guys.  What does your calendar look like.  Throw me a couple of dates that may work for you.

Thanks,
K.

 -----Original Message-----
From: 	Buehler, Craig
Sent:	Tuesday, November 13, 2001 4:21 PM
To:	Lokay, Michelle
Subject:	Need a Meeting

Michelle

	How about a meeting?  I'm not sure how long I've known you but I know I've liked you since the first day.  You're a smart, capable Account Manager but we seem to be developing friction.  I know we both want the same thing; deals to go out as quickly and smoothly as possible... so where's our problem? It seems from my side (which could very well be WRONG) that we're constantly going over procedures, how the process works and what information I need... stuff everyone should know.  Maybe I'm wrong but it's very frustrating.  Maybe it's because NNG's system is automated and it's just harder to do TW deals.  Maybe it's because procedures weren't followed after Christine left and we've had to do lots of work to try and catch back up.  The Deal Capture team was also suppose to get a 3rd team member so it's VERY difficult to process all the NNG deals and TW deals at the end of each month... I think we did 75 deals in the last 4 days of October.  Let me know if you're available to talk this week... afternoons are best for me.

Craig