Premiums Stay High on Enron's Near Options, And `Doubling Up' Date Looms for Tax Losses
The Wall Street Journal, 11/23/01
Dynegy Deal To Buy Enron Hits Crossroads
The Wall Street Journal, 11/23/01
Enron Faces Suits by 401(k) Plan Participants
The Wall Street Journal, 11/23/01
From Sunbeam to Enron, Andersen's Reputation Suffers
The New York Times, 11/23/01
Chase and J. P. Morgan's Paper Anniversary
A Year After the Merger, Rosy Plans Meet Reality
The New York Times, 11/23/01
COMPANIES & FINANCE THE AMERICAS - Enron 'awaiting' capital injections, say officials.
Financial Times, 11/23/01
USA: UPDATE 2-Enron bleeds again as Dynegy deal doubts grow.
Reuters English News Service, 11/23/01
USA: Enron avoids junk status, but observers wonder how.
Reuters English News Service, 11/23/01
USA: US Corp Bonds-Enron slips again in quiet market.
Reuters English News Service, 11/23/01
USA: Enron shares seesaw on concerns over Dynegy deal.
Reuters English News Service, 11/23/01
TALES OF THE TAPE: Energy Traders' Perfect Storm Stalls
Dow Jones News Service, 11/23/01
U.S. Energy Exhange May Scrap Online Platform Plans
Dow Jones Energy Service, 11/23/01
Enron Woes May Endanger Plans For Mozambique Steel Proj
Dow Jones International News, 11/23/01
STOCKWATCH Enron down, Dynegy up on lingering merger uncertainty
AFX News, 11/23/01
USA: Houston economy seen weathering major layoffs.
Reuters English News Service, 11/23/01
Dabhol Pwr Confirms Arbitrator Panel Mtg In Singapore Sat
Dow Jones International News, 11/23/01
Enron SEC filing contained information Dynegy was unaware of - report
AFX News, 11/23/01
Dynegy's Decision to Buy Enron Hits Crossroads Amid Rising Financial Woes
Dow Jones Business News, 11/23/01

Employees' Lawuit Says Enron Hurt Retirement Funds Courts: The suit claims the energy firm urged workers to invest in company stock just before it plunged.
Los Angeles Times, 11/23/01
Portland utility's fate tied to Enron's future
The Seattle Times, 11/23/01
Enron Shares and Bonds Fall on Concern About Takeover (Update5)
Bloomberg, 11/23/01

KKR, Blackstone Are Among Likely Enron Investors, Analyst Says
Bloomberg, 11/23/01

Microsoft MSN Fast Web Access Expansion Slowed by Enron Suit
Bloomberg, 11/23/01

Options Report
Premiums Stay High on Enron's Near Options, And `Doubling Up' Date Looms for Tax Losses
By Kopin Tan
Dow Jones Newswires

11/23/2001
The Wall Street Journal
C11
(Copyright (c) 2001, Dow Jones & Company, Inc.)

NEW YORK -- Volatility and premiums on Enron's near-month options remain extremely high. It is a sign that investors are willing to pay a rich price for option protection and expect the stock to be unsettled as the Houston company sorts through its credit and debt problems and seeks to calm frazzled investors.
Enron near-month defensive puts traded heavily in an otherwise quiet session Wednesday, as investors bought them to hedge. The December 5 puts traded more than 10,000 contracts and jumped 45 cents to $1.10 at the Chicago Board Options Exchange. The stock closed down $1.98, or 28%, to $5.01, as of 4 p.m. in New York Stock Exchange composite trading.
Enron's calls traded actively as some investors sold them to generate income. Traders noted some call buying -- especially after Enron procured a three-week extension on a $690 million note -- as some hopeful investors bet on Enron pulling through its troubles and proceeding with its merger with Dynegy Inc. Enron's December 5 calls traded more than 14,500 contracts, compared with open interest of 710, as they fell $1.45 to $1.15 at the CBOE.
For investors who want to book a tax loss on beaten-down stocks, the "wash sale" rule can be a hurdle, because it essentially prevents taxpayers from selling stock or securities at a loss and then reacquiring "substantially identical" securities within a 30-day period before or after that loss. This poses a problem for those who want to book a loss yet own stocks whose prices now make them attractive "buy" candidates.
In addition, the Internal Revenue Service has taken the position that the wash-sale rule will disallow a loss if the investor sells an in-the-money put, because there is a strong likelihood that stock will be put to or acquired by the investor.
So investors typically get around the wash-sale rule by "doubling up": buying additional stock or options, waiting at least 31 days, and then selling the original stock to book the loss. Investors double up by buying calls, which locks a price to buy stock and achieves the same effect as buying additional stock.

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

Dynegy Deal To Buy Enron Hits Crossroads
By Rebecca Smith and John R. Emshwiller
Staff Reporters of The Wall Street Journal

11/23/2001
The Wall Street Journal
A3
(Copyright (c) 2001, Dow Jones & Company, Inc.)

Even as it reiterated its intention to purchase Enron Corp., Dynegy Inc. is coming under increasing pressure to renegotiate or walk away from the multibillion-dollar deal.
The pressure is stemming from the continuing slide in the price of Enron shares and the mounting financial problems at the Houston energy-trading company, the nation's biggest marketer of electricity and natural gas. During the past month, Enron has taken a $1 billion write-off of assets, revised downward the earnings of the past several years and taken a $1.2 billion reduction in shareholder equity.
The problems have been due largely to dealings Enron had with private partnerships, run by some of its own executives, under investigation by the Securities and Exchange Commission. In an SEC filing Monday, Enron disclosed hundreds of millions of potential additional write-offs as well as the possibility that its weakening financial condition could force it to repay more than $2 billion in loans by the end of the year.
As of 4 p.m. Wednesday in New York Stock Exchange composite trading, Enron shares fell $1.98, or 28%, to $5.01 each after having dropped 23% Tuesday. In excess of 115 million shares traded Wednesday, more than four times the volume of any other Big Board stock. Enron's bonds also again traded sharply lower, market observers said.
The turmoil spilled over to Dynegy's stock, which also was among the most actively traded on the New York Stock Exchange. As of 4 p.m. Wednesday, Dynegy shares fell $1.94 to $39.76 each.
On Wednesday, Dynegy issued a statement in which Chairman and Chief Executive Chuck Watson said his company was working "to accelerate the regulatory approvals required to complete the merger in accordance with the previously announced agreement" though it continued to perform "due diligence" on Enron.
Under the merger agreement, Dynegy has opportunities to renegotiate or walk away from the deal if Enron's financial and legal problems become severe enough. However, some observers said it can be difficult to invoke these so-called material adverse change clauses. They point to a decision earlier this year by a Delaware Chancery Court judge who forced Tyson Foods Inc. to complete a planned purchase of IBP Inc. even though Tyson, a Springdale, Ark., food-products company, had wanted to cancel the transaction because of a drop in IBP's earnings and accounting problems at an IBP unit.
Dynegy officials didn't return calls seeking comment. To complete the deal, two-thirds of Dynegy shareholders and a majority of Enron shareholders would have to give their approval. No dates for those votes have been set.
One person familiar with the merger plans said the SEC filing Monday by Enron contained information Dynegy hadn't known about. Dynegy representatives planned to work through the weekend evaluating the importance of this new information as part of the company's due diligence, this person said. It couldn't be determined what the new information was.
The merger agreement, announced Nov. 9, calls for Dynegy to exchange 0.2685 share for each of Enron's roughly 850 million fully diluted shares, giving the purchase a value of about $9 billion at Dynegy's current stock price. However, from a price standpoint, the deal is appearing less attractive to Dynegy.
On the day of the merger announcement, Enron shares were trading at about $8.63 each, or about 83% of the purchase price under the exchange ratio. As of Wednesday, Enron's market price was only about 47% of the merger-formula price. Such a sharp deterioration is unusual following a merger announcement, when the stock price of the company being acquired generally begins trading relatively close to the offering price.
Sentiment among Wall Street analysts also is turning against the merger. Initially, many analysts lauded the merger as a move that would rescue Enron and provide a major boost to Houston-based Dynegy. Dynegy and Enron officials have predicted that the merger, supposed to be completed late next year, would significantly and immediately increase Dynegy's earnings.
Now analysts are challenging that assumption. Ron Barone, managing director at UBS Warburg LLC, said he believes that because of Enron's financial problems, a combined company would actually have lower earnings next year than Dynegy would have by itself. Mr. Barone said he thinks a "likely scenario" is that the merger formula will be renegotiated sharply down to about 0.15 Dynegy share for each Enron share.
Such a ratcheting down wouldn't be without precedent in the deal. According to one person familiar with the merger negotiations, Dynegy reduced the exchange formula at least once prior to the Nov. 9 announcement because of Enron's rapidly sinking stock price, which at the beginning of this year was above $80 a share.
In perhaps the most significant sign of the turning tide on Wall Street, Goldman Sachs analyst David Fleischer lowered his ratings on Enron and Dynegy. A longtime Enron fan, Mr. Fleischer issued a report expressing doubts that the merger would help Dynegy's earnings and whether Enron could "recover the significant business that has been lost" in its giant energy-trading operations. "The Enron machine continues to sputter," Mr. Fleischer wrote.
Some observers say that if Dynegy walked away from the deal or tried to renegotiate the terms significantly, Enron might be pushed into a bankruptcy-law filing. Without the Dynegy acquisition and continued support from its bankers and customers, an Enron bankruptcy-court filing "is highly possible," said Ralph Pellecchia, a senior director at Fitch, a credit-ratings agency. On Wednesday, Fitch maintained its credit rating on Enron at just one notch above noninvestment-grade, or "junk," status. But Fitch also said it believed Enron's trading partners had made "significant cash collateral calls" in recent days that are "well in excess of previous expectations," contributing to "liquidity pressures."
Among the advisers Enron has hired during its current crisis is the law firm of Weil, Gotshal & Manges, which specializes in bankruptcy and corporate-workout situations. Asked about a possible bankruptcy filing, an Enron spokeswoman said the company expects the Dynegy deal to go through and therefore doesn't expect to have to look at alternatives to the merger. Since the merger announcement, Enron Chairman Kenneth Lay has said his company had alternatives to the Dynegy deal but he has declined to identify them. Enron said it made some progress improving its financial position. The company said it reached a final agreement with units of J.P. Morgan Chase & Co. and Citigroup Inc. on the remaining $450 million of a previously announced $1 billion in secured credit lines. Enron said lenders had agreed to extend repayment of an existing $690 million note to mid-December from next week. The spokeswoman said a restructuring of that obligation is expected to be completed next month so that repayment wouldn't be required this year.
---
Thaddeus Herrick and Robin Sidel contributed to this article.

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

Enron Faces Suits by 401(k) Plan Participants
By Theo Francis and Ellen Schultz
Staff Reporters of The Wall Street Journal

11/23/2001
The Wall Street Journal
C1
(Copyright (c) 2001, Dow Jones & Company, Inc.)

Enron Corp., the embattled Houston energy and trading company, has been sued by members of its employee-retirement plan, which has suffered losses because of Enron's plummeting stock price.
Two separate lawsuits, filed in federal court in Houston, allege Enron misled participants in its 401(k) retirement plan about the risks of investing in the company's shares and note that the company forced the employees to remain invested in its stock even as the shares fell. Amid growing disclosures of financial problems in recent weeks, the company "locked down" the retirement plan from Oct. 17 to Nov. 19 to make administrative changes, which prevented employees from selling Enron shares as the share price collapsed.
Enron, which recently agreed to be acquired by Dynegy Inc., Houston, because of mounting financial problems, has seen its stock price fall to $5.01 on Wednesday from a peak of nearly $90 a share last year. The decline has been costly to participants in Enron's retirement plan because more than 60% of the 401(k) assets were invested in Enron shares at the end of last year, according to one of the suits.
The first suit was filed Nov. 13 on behalf of plan participants by Campbell Harrison & Wright LLP, a Houston law firm, and the second was filed Tuesday by Seattle-based Hagens Berman LLP. Both seek class-action certification.
Enron said its corporate policy is not to comment on pending lawsuits. A spokeswoman also said the company's 401(k) plan offers participants 18 investment choices, one of which is company stock.
The company's stock has fallen amid mounting losses and disclosures that it had extensive off-balance-sheet dealings with a web of partnerships headed by former company officials. The Securities and Exchange Commission has launched a formal investigation into the company's accounting, and Enron has said it will restate years of financial information.
The suits against Enron are the latest of a series of suits filed against companies over losses in the company-stock portion of their 401(k) plans. The suits allege the plan trustees breached their fiduciary duties by continuing to offer company stock, even after they became aware of serious business problems that would hurt the stock price. All the suits are pending.
As with most of these companies, Enron matches employee contributions to the 401(k) with shares of Enron stock, and also offers Enron stock as an investment choice, in addition to a variety of mutual funds. About $1.3 billion of the plan's $2.1 billion in assets was invested in Enron shares at the end of 2000, according to the suit filed by Campbell Harrison.
Pamela Tittle, a participant in the 401(k) plan who worked in the finance department and a named plaintiff in the Enron suit filed by Campbell Harrison & Wright, had roughly 2,000 shares of Enron stock in her retirement account and has suffered losses of about $140,000 as a result of the stock's decline. The suit alleges that the trustees of the Enron 401(k) plan violated their fiduciary duties by not informing plan participants that the company stock was in peril.
The suit filed by Hagens Berman, also alleges that the company failed to warn participants about risks of remaining invested in Enron stock. In addition, it accuses Enron of systematically misrepresenting its financial results since 1998 in connection with the partnerships under investigation by the SEC.
Roy E. Rinard, a lineman for Enron in Oregon who is a named plaintiff in the suit filed by Hagens Berman, has seen the value of his retirement plan fall to $70,000 from $470,000, largely as a result of the decline in Enron's stock. "I feel like I have been betrayed," Mr. Rinard said in press release issued by his lawyers. "I lost my savings, my plans for the future, everything."
Under federal pension law, companies are allowed to offer their own stock in retirement plans, and are allowed to force employees to hold onto the stock. Enron doesn't let employees diversify out of shares they receive as matching contributions to the 401(k) plan until age 50.
However, plan trustees are supposed to operate the plan in the best interests of the participants, which includes choosing prudent investments. Generally, to prove that the plan's administrators breached their fiduciary duties, employees must show that the trustees knew the stock was a bad investment. This presents a high hurdle, so it is not surprising that prior lawsuits over losses in company stock in 401(k) plans have generally come in the wake of allegations of accounting irregularities.
Lynn Sarko, one of Ms. Tittle's attorneys with Seattle's Keller Rohrback LLP, is also co-lead counsel in a similar lawsuit against Lucent Technologies Inc., Murray Hill, N.J. Another firm representing Ms. Tittle is Dalton Gotto Samson & Kilgard PLC, which is lead counsel in a similar suit against Ikon Office Solutions Inc., Malvern, Pa. The two law firms are representing Ms. Tittle with Campbell Harrison & Wright.
The suits against Lucent and Ikon, like the suit against Enron, allege that then-current plan trustees kept offering company stock in the plan despite knowing of serious business problems that would hurt the stock price. Representatives for Ikon and Lucent say their companies didn't require employees to invest in the company stock, and educated employees about the need for diversification.
The suit in which Mr. Rinard is plaintiff notes that on Oct. 17, a day after Enron announced the company was taking a nonrecurring charge totaling $1.01 billion in the third quarter, Enron "locked down" the 401(k) plan's assets, preventing participants from selling Enron shares. (A "lock-down" occurs when a retirement plan is transferred from one administrator to another, and generally lasts several weeks, during which time participants can't make changes in their investment choices).
The lock-down was lifted on Nov. 19. In the interim, on Nov. 8, Enron announced it would be forced to restate downward its reported financial results from 1997 through 2000. By the time the lock-down was lifted, as a result of all the negative news the shares had fallen to below $9 a share from $32.20 on Oct. 17, when the lockup started, Hagens Berman attorney Karl Barth said.
"They were locked into it right when Enron knew it was going to be announcing some really bad news," Mr. Barth said. "Mr. Rinard's looking at having no retirement savings now. It's a horrible thing to have to start over in your 50s."

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

Business/Financial Desk; Section C
From Sunbeam to Enron, Andersen's Reputation Suffers
By FLOYD NORRIS

11/23/2001
The New York Times
Page 1, Column 2
c. 2001 New York Times Company

THIS has been the worst year ever for Arthur Andersen, the accounting firm that once deserved the title of conscience of the industry. The Securities and Exchange Commission filed civil fraud complaints against the Andersen partner who audited Sunbeam and against the firm itself in the Waste Management case.
Now Enron has repudiated the financial statements that were certified by Arthur Andersen, in the process shaving more than half a billion dollars from the company's reported profits in recent years.
All of which raises the question: Has Arthur Andersen become the black sheep of the accounting industry?
It is not an easy question to answer, and not everyone is willing to rush to judgment. ''If you want to attack Andersen for Enron, you need to know more than we know,'' Arthur Levitt, the former chairman of the Securities and Exchange Commission, said this week.
But if there is a thread connecting what is known about the three cases, it is materiality. In all three cases, Andersen auditors spotted bad accounting but were persuaded it was immaterial and therefore allowed it to go ahead.
Materiality is one of those flexible concepts that can get accountants into trouble. The idea is that it doesn't much matter if a few little things were gotten wrong. But they can add up.
At Enron, however, they did not add up to that much -- a total of $93 million over four years. The biggest restatement of Enron profits concerns a related party that Enron now says should have been consolidated. It is not clear if Andersen had the facts needed to make that decision at the time.
To those who treasure the role of auditors, the humiliation of Andersen is painful. Back in the 1950's, it was Leonard Spacek, Andersen's managing partner, who warned that ''the profession's existence is in peril'' because it was not showing enough independence. His public prodding was crucial in making the industry do a better job. Two decades ago, when the issue on the table was pension accounting, Andersen was the only major accounting firm to break with clients and push for good rules.
Now Andersen's backbone is open to question. It was evidence that senior people at Andersen repeatedly gave in to pressure from Waste Management that led the S.E.C. to bring that suit, which the firm chose to settle without admitting it had done anything wrong. The partner that the S.E.C. says looked the other way at Sunbeam is fighting the accusations, and Andersen says he acted properly.
Lynn Turner, who was chief accountant of the S.E.C. at the time and is now director of the Center for Quality Financial Reporting at Colorado State University, says what is happening to Andersen now is reminiscent of what happened to Coopers & Lybrand when he was a partner there and the firm had a series of highly publicized blown audits.
''We got bludgeoned to death in the press,'' he said. ''People did not even want to see us at their doorsteps. It was brutal, but we deserved it. We had gotten into this mentality in the firm of making business judgment calls.'' By that he meant that the firm paid too much attention to not offending clients and not enough to good accounting.
For Andersen to avoid that fate, its relatively new chief executive, Joseph Berardino, who declined to be interviewed for this column, will need to set a tone inside the firm making clear that he expects auditors to show the backbone that Mr. Spacek epitomized. And then he will have to convince the public of that.

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

Business/Financial Desk; Section C
Chase and J. P. Morgan's Paper Anniversary
A Year After the Merger, Rosy Plans Meet Reality
By RIVA D. ATLAS

11/23/2001
The New York Times
Page 1, Column 5
c. 2001 New York Times Company

When William B. Harrison Jr. speaks of last year's $31 billion merger of J. P. Morgan and the Chase Manhattan Corporation, he speaks proudly of a deal that he considers to be a capstone to his 34-year career of helping build a giant of the banking business.
''This is the first merger I've been part of,'' said Mr. Harrison, the chief executive of the combined bank, ''where I feel our core business is complete.''
The Chase-J. P. Morgan combination helped advance the bank into the investment banking elite, just as Mr. Harrison intended. But with Wall Street and the economy in far different places today than they were when the deal was put together, the many mergers, stock sales and other money-making opportunities that were supposed to justify the high-priced acquisition have largely dried up for now.
Consequently, deal makers and analysts who follow the bank are already speculating that Mr. Harrison, 58, may ultimately be compelled to do yet another large deal, this time to diversify his business away from its heavy emphasis on Wall Street.
J. P. Morgan Chase has won some prominent assignments, like handling the revampings of troubled giants like Lucent and, more recently, Enron, the beleaguered energy trading company.
But while J. P. Morgan Chase is proud of serving alongside Citigroup as both lead lender and adviser to Enron on its acquisition by Dynegy, the dual role it has worked to achieve sometimes proves complicated for the bank. With Enron's shares in free fall as more information comes out about its hidden debts, J. P. Morgan Chase has been scrambling to maintain the support of other banks while simultaneously keeping the merger with Dynegy on track.
Thanks largely to the slump on Wall Street, J. P. Morgan Chase's profits fell by two-thirds in the third quarter, to $449 million from $1.4 billion in the period a year ago. Its stock has dropped 15 percent this year, more than other banks' shares. The bank's stock is ahead of investment banks like Goldman Sachs, with which J. P. Morgan Chase increasingly competes.
''The jury is still out in many respects on this merger,'' said Judah Kraushaar, an analyst at Merrill Lynch. Nevertheless, he likes J. P. Morgan Chase's stock, he said, because ''expectations are very low.''
All J. P. Morgan Chase's competitors are suffering from the slowdown on Wall Street. But some, like Citigroup, are better diversified and have greater involvement in old-fashioned consumer banking, which is proving to be a strong moneymaker this year.
Nearly a third of J. P. Morgan Chase's revenues are consumer-oriented. By contrast, its chief New York rival, Citigroup, gets half its revenues from consumer businesses.
''The timing of the merger was bad,'' said Steven Wharton, a banking analyst at Loomis, Sayles & Company, which owns about a million J. P. Morgan Chase shares. ''There's no disputing that.''
Actually, Mr. Harrison disputes it. ''I can't tell you how happy I am about having done this merger,'' he said in a recent interview. ''While there are pluses and minuses to operating in a weak economic environment, we have a much stronger platform to manage with during this difficult time.''
In Mr. Harrison's favor is his battle-tested team of top executives who have worked together for a decade or more. Few executives remain in the top spots from the old J. P. Morgan. Instead, most major posts are filled by managers who have worked with Mr. Harrison since his days at Chemical Bank, where he spent most of his career. Mr. Harrison's team successfully gobbled up Manufacturers Hanover Bank in 1991, then followed that with Chemical's merger with Chase Manhattan in 1996 before incorporating Morgan into the fold last year.
The group of Chemical veterans includes Marc J. Shapiro, who oversees finance and risk management at J. P. Morgan Chase; Donald H. Layton, one of two leaders of investment banking; and James B. Lee Jr., the bank's senior deal maker. The team also includes Dina Dublon, the bank's chief financial officer.
Two other senior executives have also lived through big deals. Geoffrey T. Boisi, the other investment banking leader, was the one-time investment banking chief at Goldman, Sachs. David A. Coulter, in charge of Chase's retail bank, had been chief executive of Bank of America before it was bought by NationsBank.
''There aren't many teams that have gone through as many mergers as Bill Harrison and his team,'' said Mark G. Solow, managing principal at GarMark Advisors, an investment firm, and a former senior executive at Chemical.
Still, Ms. Dublon acknowledged that the tough economy was making the J. P. Morgan takeover more difficult than the earlier combinations.
''In general, mergers are very hard on morale,'' she said. ''There is no question that this one has a tougher emotional toll.''
The bank's executives are making the best of a bad situation. They have taken advantage of the slowdown to cut around 8 percent of the combined banks' staff, or about 2,500 more employees than anticipated at the time the merger was announced.
Many of these job cuts were aimed at high-cost investment bankers: J. P. Morgan Chase expects that 6,000 jobs in its investment banking division will have been eliminated by the end of the year.
''We have focused on the tougher jobs to cut,'' Ms. Dublon said.
In some ways the overall market turmoil has made it easier for J. P. Morgan Chase to overhaul its staff. With fewer jobs available on Wall Street, Mr. Shapiro said, the employees who are left behind are less apt to complain about changes in their jobs. ''People have fewer options,'' he said, ''so you have a little more control over the process.''
Thanks partly to these cuts, the bank estimates the saving from cost cutting will be $3.6 billion annually, compared with an original projection of $2 billion at the time of the merger.
The cost cutting has helped compensate somewhat for a sharp drop in profits in the bank's core businesses. ''What we can control and are managing very aggressively is the expenses of the company,'' Ms. Dublon said in a conference call with reporters on Oct. 17, the day earnings were announced.
Aside from cost cuts, the weakness on Wall Street makes it hard for the bank's executives to point to tangible gains in investment banking, where fees were down 24 percent in the third quarter. But Mr. Harrison points to market-share gains the bank has achieved at the expense of competitors on Wall Street. He hopes that when the investment banking business revives, J. P. Morgan Chase will hold on to these gains.
The bank is particularly proud of its standing in two areas: mergers and acquisitions, and the underwriting of large investment-grade bond deals.
The bank ranked 5th worldwide in the highly profitable category of advising on mergers during the first nine months of 2001, up from Chase's 12th-place finish and J. P. Morgan's 10th-place standing during the same period last year, according to Thomson Financial Securities data.
The merger and acquisitions business, which Chase had been slowly building for years, is stronger following the merger with J. P. Morgan, said Mr. Lee, a vice chairman at the bank. As a result, the bank is able to win assignments providing advice to customers who dealt with the old Chase only for loans.
Mr. Lee remains proud of the bank's work with Enron, the energy company, despite its troubles. J. P. Morgan Chase, along with Citigroup, raised $1 billion in bank financing for Enron earlier this month. It was also hired to advise the company, which hopes to be saved from collapse by being taken over by Dynegy.
The old Chase, long a lending powerhouse, would have had a good shot at leading the bank financing, but an advisory role would have been less certain. Mr. Lee said the investment banker advising Enron came from the old J. P. Morgan. But with merger activity slow, there are few such deals to go around.
The bank is also proud of its strength in long-term investment-grade bonds, another area that business executives say has been enhanced by the merger. It moved up to second place in that area so far this year, compared with sixth place a year ago.
The bank has taken advantage of a boom in large corporate bond offerings, a surge driven by today's low interest rates. In May J. P. Morgan Chase raised $12 billion in bonds for WorldCom, the telecommunications company, in the largest corporate debt deal in the United States on record.
Unfortunately for J. P. Morgan Chase, the fees for underwriting investment-grade debt are small compared with the money to be earned coordinating offerings of stock, where J. P. Morgan Chase remains a second-tier competitor.
The bank actually lost market share in the rankings for underwriters of stock, falling to 9th place this year, compared with the old J. P. Morgan's 6th-place finish a year ago. (Chase was 11th.)
Mr. Harrison said the bank was taking advantage of the slowdown in stock offerings to build momentum slowly in that business. ''We think we have a chance in the second half of this year to be in the top five,'' he said.
Given the slowdown, some bankers predict that Mr. Harrison will ultimately do another deal, either to expand his consumer banking business or to bolster weak areas in investment banking, like the equity division.
''The general view is that the combination with J. P. Morgan didn't do enough,'' one investment banker said.
Mr. Harrison disagrees: ''I don't feel,'' he said, ''we need to do another large deal to be successful.''

Photo: William B. Harrison Jr., the chief executive, says he has no doubts about the wisdom of forming J. P. Morgan Chase, even though the the economy has slowed since then. ''I can't tell you how happy I am about having done this merger,'' he said. (Associated Press) Chart: ''Still Looking for the Right Mix'' When J. P. Morgan and Chase announced their merger in September 2000, the combination's strength in investment banking seemed sure to be successful. But the bank's stock has suffered with Wall Street's slump, and its more consumer-oriented and better-diversified rival, Citigroup, has fared better. Graph tracks the daily closing prices of Citigroup and J. P. Morgan Chase shares from September 2000 through November 2001. A DIFFERENT BLEND OF BANKING Based on revenue, before overhead expenses (first nine months of 2001). J. P. MORGAN CHASE* Consumer and small business: 32% Investment management and private: 9% Corporate and investment: 58% CITIGROUP Consumer and small business: 54% Investment management and private: 4% Corporate and investment: 42% *Does not add to 100 because of rounding. (Sources: Bloomberg Financial Markets; company reports)
Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved.

COMPANIES & FINANCE THE AMERICAS - Enron 'awaiting' capital injections, say officials.
By ROBERT CLOW.

11/23/2001
Financial Times
(c) 2001 Financial Times Limited . All Rights Reserved

Officials working to shore up Enron's balance sheet yesterday said the struggling energy trader hoped to receive capital injections of more than $1.5bn as early as next week.
Enron is in talks about $250m investments with JP Morgan Chase and Citigroup and is also hoping to raise at least $1bn from private equity investors.
People close to Enron declined to comment on which buyout firms might wish to invest in Enron. However, the Blackstone Group, which was reported to be talking to the company before Dynegy made its $9bn rescue bid, is understood no longer to be doing so.
Members of the 20-strong bank lending group, led by JP Morgan Chase and Citigroup, are being asked to defer the maturities of their upcoming debt until after the completion of the merger.
The moves comes as reports from Goldman Sachs and Fitch, the credit rating agency, raised questions about the company's cash flow and its medium-term viability.
David Fleischer, a Goldman Sachs analyst, argued that cash balances were inadequate to meet $2.8bn of debt obligations falling due before the end of the year.
People close to Enron say that nearly $1bn of that debt has already been restructured.
The Fitch report said that if the Dynegy deal was not completed, Enron would struggle to meet $9bn of obligations due before the end of next year.
People close to Enron insisted that Dynegy remained committed to the merger and played down talk of renegotiation.
Dynegy would shortly issue a statement reasserting its commitment to the deal, they predicted.
(c) Copyright Financial Times Ltd. All rights reserved.
http://www.ft.com.

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

USA: UPDATE 2-Enron bleeds again as Dynegy deal doubts grow.

11/23/2001
Reuters English News Service
(C) Reuters Limited 2001.

(dateline previous NEW YORK, changes byline, updates with bond prices, details throughout)
By C. Bryson Hull
HOUSTON, Nov 23 (Reuters) - A long weekend of work faced Dynegy Inc. and proposed acquisition Enron Corp.,, whose worsening stock woes on Friday whipped up fear that the deal could be renegotiated or collapse entirely.
Houston-based Dynegy and its advisers were expected to spend the long holiday weekend reviewing larger cross-town rival Enron's complex books, as both parties race against the decline in Enron's stock to complete the thorough financial examinations a merger requires.
Enron shares ended down more than 5 percent, or 27 cents, to $4.74 at the close of abbreviated Friday trading on the New York Stock Exchange. Dynegy shares closed up 64 cents, or 1.61 percent, to $40.40.
Dynegy on Nov. 9 agreed to pay about $9 billion in stock for Enron. But, after falling 45 percent by Friday's close amid fears it could run out of cash before the deal closes, Enron's market capitalization is only about $4.03 billion.
At Dynegy's current stock price, its offer for Enron is worth about $10.85 a share - more than twice Enron's current share price.
Executives and advisers from both companies are in the final stages of the review, known as due diligence, sources familiar with the matter told Reuters. The sources said renegotiations had not been discussed as of Friday afternoon, and that such discussions could not occur until the due diligence review is finished.
But should it turn up any more unpleasant surprises that qualify as a "material adverse change" in Enron's business, the likelihood increases of Dynegy invoking escape clauses or renegotiating, analysts and observers say.
"You've got to believe there is that possibility. There is a 90 percent spread on the deal," said one analyst. "There's unquestionably continued malaise in Enron's core business and Dynegy has left itself open to renegotiate with Enron."
UBS Warburg analyst Ron Barone on Wednesday wrote in a research report that the likelihood was "soaring" that Dynegy might discover a material adverse change.
Enron spokeswoman Karen Denne said that, to her knowledge, Dynegy was not renegotiating the terms of the acquisition.
She repeated that Enron was working on obtaining an additional $500 million to $1 billion in private equity funding to help shore up the balance sheet.
Dynegy spokesman John Sousa said due diligence was continuing and said the company remains optimistic about the merger.
TRADERS FEARING RENEGOTIATION
Enron's recent admission that lower volumes at its trading business - the crown jewel of Enron that Dynegy most covets - could cause low fourth-quarter earnings raises the possibility that the trading business is losing its profitability. Continued losses there would remove a key attraction for Dynegy.
Electricity traders said the latest developments are making it seem more likely that Dynegy will renegotiate the deal or back out entirely, a move they said would leave Enron vulnerable to creditors and a possible bankruptcy.
This week rating agency Fitch Investors said that if Dynegy stepped away from the merger, Enron's credit situation seemed untenable and a bankruptcy filing was highly possible.
Traders, speaking on condition on anonymity, said they expected Dynegy to scramble over the weekend to narrow the growing share price gap. Enron's depleted market value and the shrinking volume in its EnronOnline trading system makes it more likely Dynegy could pull out, traders said.
Meanwhile, energy traders reiterated that they would shy away from long-term deals with Enron unless they received substantial assurances the company's credit rating would soon improve.
Enron's bonds on Friday were again talked at junk-bond levels, but even lower than before.
Enron's 6.4 percent notes maturing in 2006 and its 6.75 percent notes were bid Friday at 57 cents on the dollar, down from a respective 62 and 60 cents on Wednesday, according to a trader. The notes yield to maturity a respective 21.5 percent and 17 percent. Its 20-year zero-coupon convertible bonds fell about 1 cent on the dollar to just over 33 cents.
Enron is hovering at the edge of investment-grade as the three main credit trading agencies consider whether to cut them again, and some observers wonder how Enron has avoided it.
"A bond trading in the 50s has nothing to do with an investment-grade security," said Scott Smith, a principal at Wells Capital Management in San Francisco, where he invests $6 billion in debt and does not own Enron.
(Additional reporting by Jim Jelter in San Francisco, Andrew Kelly in Houston and Carolyn Koo, Arindam Nag, David Howard Sinkman and Jonathan Stempel in New York)).

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

USA: Enron avoids junk status, but observers wonder how.
By Jonathan Stempel

11/23/2001
Reuters English News Service
(C) Reuters Limited 2001.

NEW YORK, Nov 23 (Reuters) - It is rare that holding onto investment-grade credit ratings means as much to a company as it does now to beleaguered energy trader Enron Corp. , and some observers are wondering why a cut to junk status is taking so long.
"The sum of all knowledge is in the valuation of the stock and the bonds," said Scott Smith, a principal at Wells Capital Management in San Francisco, where he invests $6 billion in debt, and does not own Enron. "A bond trading in the 50s has nothing to do with an investment-grade security."
Enron's 6.4 percent notes maturing in 2006 and 6.75 percent notes were bid Friday at 57 cents on the dollar, down from a respective 62 and 60 cents on Wednesday, a trader said. The notes yield to maturity 21.5 percent and 17 percent.
Meanwhile, Enron's shares have sunk 94 percent this year. Since October 16, when it released third-quarter results, which it has since revised downward, its shares have fallen 86 percent, and its bonds by nearly half.
Houston-based Enron, which is trying to merge with smaller cross-town rival Dynegy Inc. , has been rocked this year by accounting problems, earnings restatements, a federal investigation and a top management shuffle.
Its advisers were expected this weekend to pore over the company's books, which could lead to a renegotiation of the merger, sources familiar with the matter said.
Moody's Investors Service and Standard & Poor's have cut its senior unsecured debt ratings twice in the last month to their current "Baa3" and "BBB-minus," their lowest investment grades. Fitch has cut its equivalent rating to "BBB-minus," and all three agencies have warned of more possible cuts.
The stakes could hardly be higher.
CASH CRUNCH
A downgrade to "junk" status could imperil Enron's trading business, force it to pay off as much as $3.9 billion of debt issued mostly by two trusts, and possibly force it to seek bankruptcy protection, analysts said.
Enron said in a securities filing it recently had less than $2 billion of available cash and credit lines.
S&P said on Tuesday that Enron faces "liquidity issues," but enjoys an "alignment of interests" with its banks and a near-term financial position that "is expected to be sufficient" to allow the Dynegy merger.
Fitch, meanwhile, said on Wednesday that "our present 'BBB-minus' rating rests on the merger possibility and continued support of the lending banks."
If Dynegy walks away, it said, "Enron's credit situation seems untenable with a bankruptcy filing highly possible."
Enron said on Monday it had $9.15 billion of obligations due through next year, and a $690 million note that could come due next Tuesday. It later said it got a three-week reprieve.
INVESTMENT BANKS
Sean Egan, managing director of Egan-Jones Ratings Co. in Philadelphia, likened Enron's ratings situation to those of California's two largest utilities, Pacific Gas & Electric Co. and Southern California Edison .
Despite investor unease, those utilities kept their investment-grade ratings only until they defaulted on debt in January, as California's power crisis worsened.
On November 8, a day before the Dynegy merger was announced, senior officials from Enron's lead banks - William Harrison, chief executive of J.P. Morgan Chase & Co. , and Michael Carpenter, who runs Citigroup Inc.'s investment banking arm - met with Moody's to help allay that agency's concerns, a person familiar with the meeting said.
A day later, Moody's, which issued no statement on Enron this week, downgraded the company's senior unsecured debt rating, but only to its current "Baa3."
"Pressure is coming from the investment banks, which have a vested interest in seeing the Dynegy deal go through," said Egan, whose agency rates Enron's debt "BB," its second-highest junk grade. "Investment banking fees will be substantial."
Companies pay for Moody's and S&P ratings, which they need to obtain financing. Egan said his agency receives no such payments.
Citigroup and J.P. Morgan declined to comment. Moody's and S&P did not immediately return phone calls. Fitch was not immediately available for comment. Dynegy and Enron on Wednesday, however, reaffirmed their commitment to the merger.
Wells Capital's Smith isn't sure what to expect.
"Enron will remain definitively investment grade if the merger as billed goes through, ... but there are half a dozen things that could go wrong," he said. "Obviously, the equity markets are telling you it's very skeptical the merger will go through, and the bond market is following its lead."
(Additional reporting by Carolyn Koo and Arindam Nag.).

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

USA: US Corp Bonds-Enron slips again in quiet market.
By Jonathan Stempel

11/23/2001
Reuters English News Service
(C) Reuters Limited 2001.

NEW YORK, Nov 23 (Reuters) - The U.S. corporate bond market saw very little activity on Friday, with many traders leaving even in advance of the early close, though Enron Corp.'s bonds weakened for a third straight session amid concern over the energy trader's liquidity, and whether its merger with Dynegy Inc. can go through.
"Deadly" was how one trader described activity. Spreads, the yield difference between investment-grade bonds and comparable maturity U.S. Treasuries, finished unchanged on balance, as did junk bond prices, traders said.
Enron's 6.4 percent notes maturing in 2006 and its 6.75 percent notes were bid at 57 cents on the dollar, down from a respective 62 and 60 cents on Wednesday, according to a trader. The notes yield to maturity a respective 21.5 percent and 17 percent. Its 20-year zero-coupon convertible bonds fell about 1 cent on the dollar to just over 33 cents.
Meanwhile, Enron's shares fell 5.4 percent, as its advisers prepared this weekend to pore over the company's books, sources familiar with the matter said. Analysts said there could be a renegotiation of the Dynegy merger.
"The sum of all knowledge is in the valuation of the stock and the bonds," said Scott Smith, a principal at Wells Capital Management in San Francisco, where he invests $6 billion of debt, none from Enron. "A bond trading in the 50s has nothing to do with an investment-grade security."
Ten-year Treasuries closed down 12/32, as their yields rose to 5.011 percent.
JUNK BOND FUNDS ENJOY INFLOWS
Separately, investors poured cash into U.S. junk bond mutual funds for a second straight week amid a newfound tolerance for riskier assets.
Investors added a net $628.5 million of cash to the funds in the week ending Tuesday, on top of $816.3 million in the prior week, according to AMG Data Services.
The two-week inflow is the largest since the second and third week of January. The bonds rose more than 6 percent that month, according to Merrill Lynch & Co.
"Financial markets have rallied on hopes that the economy will get better in the not-too-distant future," said Jan Hatzius, senior economist at Goldman Sachs & Co. "A lot of the optimism right now is hope rather than reality, but we should see signs of improvement in a month or two."
Through Thursday, junk bonds have returned 2.93 percent in November alone, beating all other bonds, and are up 4.71 percent this year, Merrill Lynch data show. The bonds still yield 7.98 percentage points more than Treasuries, but that's down from 9.29 percentage points at the start of the month.
Companies this week sold about $3.83 billion of investment-grade, $533 million of junk, and $3.3 billion of convertible debt. Investors expect about three more weeks of overall active issuance before the usual year-end slowdown.

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

USA: Enron shares seesaw on concerns over Dynegy deal.

11/23/2001
Reuters English News Service
(C) Reuters Limited 2001.

NEW YORK, Nov 23 (Reuters) - Shares of Enron Corp. fluctuated wildly on Friday morning, as concerns grew over rival Dynegy Inc.'s $9 billion acquisition of the beleaguered energy trader.
Enron shares were down 8 cents, or 1.6 percent, to $4.93 in Friday morning trading on the New York Stock Exchange, after diving more than 8 percent earlier.
The shares are down because of talk that the terms of Dynegy's deal with Enron could be changed or that the deal could collapse.
Dynegy originally agreed to pay about $9 billion in stock for Enron. But, after falling 42 percent since then by Wednesday's close, Enron now sports a market capitalization of only about $4.26 billion.
In a report on Wednesday, Ronald Barone, an analyst at UBS Warburg, suggested that the deal's current exchange ratio of 0.2685 share of Dynegy for each share of Enron could well be readjusted.
He suggested that a much lower exchange ratio of 0.15 was more realistic.
"You've got to believe there is that possibility. There is a 90 percent spread on the deal," said one analyst, referring to a potential renegotiation.
"There's unquestionably continued malaise in Enron's core business and Dynegy has left itself open to renegotiate with Enron," he continued.
Some of Enron's trading partners have scaled back their activity, causing that "malaise." Lower volumes at its trading business, which is the largest and most coveted portion of its operation, could cause fourth-quarter earnings to come in below expectations, Enron has said.

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

TALES OF THE TAPE: Energy Traders' Perfect Storm Stalls
By Christina Cheddar
Of DOW JONES NEWSWIRES

11/23/2001
Dow Jones News Service
(Copyright (c) 2001, Dow Jones & Company, Inc.)

NEW YORK -(Dow Jones)- Here's one 2001 outlook that couldn't have been more wrong.
Around this time last year, pundits and fund managers were touting "the perfect storm" of market forces that were coming together to make the energy trading business one to watch in 2001.
Then came the California power crisis, and allegations of price-gouging and fears of credit defaults began to cloud the outlook for the group. That was followed by renewed volatility in power prices, and this time the prices were headed down, not up.
And then came a crushing blow against trading firms - the unraveling of the industry's largest player, Enron Corp. (ENE).
Simply put, the perfect storm stalled, and a business once buoyed by high gas prices, strong demand and tight supply now lies in tatters.
The stocks of companies whom some say should be valued more like growth stocks than utilities are instead mired at around nine-times earnings - about where traditional utilities trade.
And the chance for recovery in 2002?
Basu Mullick, portfolio manager of the Neuberger Berman Partners fund, is willing to bet there is. He thinks energy traders deserve at least the same price-to-earnings multiple as the broader market's median, which is currently between 16- to 17-times future earnings, he said. It's just a matter of time before the stocks get there.
"They were just recovering from Gray Davis," Mullick said, referring to the governor of California, who had accused "out-of-state" energy traders of artificially inflating the price of power in the state, and triggering the state's energy crisis. "Now, they are recovering from Enron."
The fund manager also blames lower commodity prices, warm weather and poor demand for the recent weak performance in the group.
"Energy convergence companies are putting up terrific growth rates," he said. "I don't think they should get the same valuation as a garden-variety utility."
Still, others think the stock market is continuing to make distinctions between the energy traders by taking a harder look at the companies' strategies and financial disclosures.
Enron's precarious financial situation underscores the importance of accounting issues. Although many of Enron's financial problems aren't solely the fault of mark-to-market accounting issues, there has been growing attention paid to this form of financial reporting because of the earnings volatility it can create.
Answers Elude Investors

Investors are asking hard questions, and not always getting the answers they want.
Using mark-to-market methods, a company calculates the fair market value of a commodity position - whether it's a contract, an option, a swap, etc. - at the time, even if the value of the position is realized over a longer period. The problem with this method is the actual cash a company realizes from the position might not be the same value the company calculated in its original assessment. Also, sometimes it isn't easy to calculate the fair value of the commodity position. This is particularly true in instances where the market for the commodity isn't liquid.
Over time, companies with the highest level of disclosure regarding their mark-to-market gains will most likely trade at higher multiples to counterparts that provide little or no disclosure, said ABN AMRO Inc. analyst Paul Patterson.
Encouragingly, it appears companies may already be responding to the call for added disclosure. According to a survey Patterson conducted, more companies with energy trading units were willing to disclose the details of their mark-to-market accounting practices during third-quarter conference calls compared with those in the second quarter.
Patterson said he prefers earnings that are cash-based.
"All things being equal, we believe reported earnings that more closely reflect the timely realization of cash have a higher quality associated with them than earnings that do not," he said.
He expects investors to become smarter and learn to distinguish between earnings growth through accrual accounting and growth fueled by mark-to-market accounting.
At the end of the day, it is not a matter of simply producing profits, but being able to say where those earnings came from, said one investor, who manages a pension fund.
Some investors also may be placing a greater emphasis on the cash flow the energy merchants produce.
Tim O'Brien, portfolio manager of the Gabelli Utilities Fund, said energy merchants that own the physical power assets to back up their trading positions should trade at a premium to an independent power producers and traditional utility companies. Still, the stocks should be valued at less than the growth rate of the company because of their heavy exposures to commodity prices.
Energy merchants include companies such as Dynegy Inc. (DYN), Duke Energy Corp. (DUK) and Dominion Resources Inc. (D).
According to O'Brien, the group never deserved to have the price-to-earnings multiples above 20- to 30-times earnings, which were once paid for the stocks.
"We all got sucked up by the up-leg of the cycle and forgot just how cyclical these companies are," O'Brien said, adding that the average multiple should be in the high single-digits to the high-teens.
As for independent power producers - which are companies without regulated operations that own power plants to generate electricity to sell and trade in the wholesale market - the group may wind up being valued on the basis of the replacement costs of the assets in their portfolio, according to O'Brien.
"One analogy is that they are basically like commercial real-estate plays," O'Brien said.
That could mean stocks such as Calpine Corp. (CPN), which is already in the lower-half of its trading range, may have further to fall.
-By Christina Cheddar, Dow Jones Newswires; 201-938-5166; christina.cheddar@dowjones.com

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

U.S. Energy Exhange May Scrap Online Platform Plans
By Stephen Parker
Of DOW JONES NEWSWIRES

11/23/2001
Dow Jones Energy Service
(Copyright (c) 2001, Dow Jones & Company, Inc.)

NEW YORK -(Dow Jones)- The world's largest energy futures exchange is taking a second look at plans to launch a major new electronic trading platform known as eNymex, and may decide to scrap them.
Management changes at the New York Mercantile Exchange, along with the success of Access, an online platform the exchange expanded in September, have prompted the move.
Nymex may decide to combine parts of eNymex with Access, according to sources close to the matter. It is also exploring the idea of alliances with other exchanges, and considering developing "e-mini" contracts - smaller energy contracts for Internet-based trade by retail investors.
"There's new management in place at the exchange," said Nymex spokeswoman Nachamah Jacobovits. "They're rethinking all of our business strategies, and one very massive strategy was the idea of this major eNymex B2B (business-to-business) system launch with a whole new slate of products."
Nymex and GlobalView Software Inc., a company that initially worked on building the eNymex trading system, have sued each other in a dispute over work on the project.
Kiodex, an electronic-trading technology firm that has developed the back end of the eNymex system, took on added development work for the project after GlobalView departed. The trade engine Kiodex was asked to build is "substantially complete, but the company can't speak to Nymex's overall electronic-trading strategy," a Kiodex source said.
The eNymex platform was conceived as a forum for trading over-the-counter energy products, but Nymex has already moved ahead with plans for trading some of them on Access, initially an overnight trading system that was expanded in September. It hopes, for example, to launch gas swaps based on delivery at the Henry Hub within the next six weeks on Access, Jacobovits said.
"We've expedited plans for a Henry Hub natural gas swap contract," Jacobovits said. "Traders could be looking for OTC clearing on a neutral-based platform, which is a factor in that decision."
Before Sept. 14, Access was used only to trade energy futures at night, after the day's Nymex session had ended. Use was limited to Nymex members with dedicated phone systems.
The exchange had been planning to expand use of Access, but ended up doing so sooner than it had expected. On Sept. 14, it started offering Access trading over the Internet, a move that will eventually allow Nymex to open up trade to more users.
The move was intended to help keep futures markets liquid after the Sept. 11 attack on the World Trade Center. Nymex's building, located near where the trade towers stood, was shut down for several days after the attacks. Expanding its already existent Access system to the Internet helped ease potential liquidity problems that could have arisen from shortened floor trading hours after Nymex reopened.
Development of the eNymex system began last year under the direction of former Nymex Chairman Daniel Rappaport. In August, Nymex said it would launch the eNymex platform within four to eight months. New Nymex President J. Robert "Bo" Collins Jr. said then that vendor problems had slowed development of the system's front-end technology and caused the delays. But he still expected eNymex to launch without any meaningful changes to its original product line.
If Nymex combines parts or all of the platform originally intended as eNymex with Access, the new system may end up being known as eNymex.
"eNymex right now is looking for a new mission," said an industry source close to Nymex. "You know how politics works. We don't scrap it, we just rename it. Anything we do electronically is now going to be called eNymex. But the original deal and concept that Rappaport initiated is done."
Nymex's reconsideration comes as the energy-trading world undergoes rapid change. The two most successful online energy trading platforms -- Enron Corp.'s (ENE) EnronOnline, and IntercontinentalExchange, or ICE -- have seen their luck turn - in opposite directions.
Enron Corp. (ENE), which accounts for about 25% of the trade in U.S. power and gas markets, faces questions about its creditworthiness as the Securities and Exchange Commission investigates complicated financial dealings. Enron's possible merger with Dynegy Inc. (DYN), now appears to be in doubt, and energy trading companies are pulling back their exposure to the company.
Enron executes about 60% of its power and gas trades on EnronOnline. When Enron's troubles surfaced last month, Nymex quickly moved to extend its clearing services to over-the-counter natural gas derivatives, a move the trading community saw as an attempt to grab market share.
ICE, on the other hand, is moving ahead with plans to capture more energy trade on its electronic format. ICE closed a deal this summer to acquire the London-based International Petroleum Exchange - Nymex's chief competitor and Europe's largest traditional energy exchange. It plans to move all IPE energy contracts to its Internet-based system and offer clearing services for some over-the-counter contracts.
Nymex is exploring alliances that could give it a better footing in the new competitive landscape. One idea under review is a joint venture with the Chicago Mercantile Exchange to offer e-mini contracts for Nymex products on CME's Globex electronic-trading system, the person close to Nymex said.
Nymex officials wouldn't confirm whether they're talking with the CME, but they said the relationship between the exchanges is a warm one.
"Nymex is always open to strategic alliances," Jacobovits said. "There's nothing we've agreed to at this point, but we have open dialogue with a number of exchanges concerning strategic alliances. We have a good relationship with the Chicago Merc, and we certainly would be open to working with them."
Shortly after the Sept. 11 terrorist attacks in New York shut down the Nymex trading floor, the CME said it would be willing to offer Nymex products on its Globex system until Nymex resumed operations, Jacobovits said.
-By Stephen Parker, Dow Jones Newswires; 201-938-4426; stephen.parker@dowjones.com

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

Enron Woes May Endanger Plans For Mozambique Steel Proj

11/23/2001
Dow Jones International News
(Copyright (c) 2001, Dow Jones & Company, Inc.)

MAPUTO, Mozambique (AP)--The recent downturn in fortunes for U.S. energy company Enron Corp. (ENE) may quash hopes for the construction of a natural gas-fueled factory to produce steel slabs for export in Mozambique, officials said Friday.
One of the largest companies in the U.S., Enron is struggling amid potentially new cash-flow and earnings problems. The Houston-based company was to invest $1.1 billion in the Maputo Iron and Steel Project, a factory that once built, was expected to produce two million tons of steel slabs a year.
But Mozambican Prime Minister Pacoal Mocumbi said that the government hoped that, "Enron's current difficulties will not lead to the cancellation of the project."
"My government wants to know from Enron what is going on so that we are not held hostage to a lack of information," Mocumbi said.
No immediate comment was available from Enron officials in Mozambique.
The planned project is part of long-standing efforts to exploit vast natural gas reserves in Mozambique and transport and sell the product into the industrial heartland of South Africa.
Mozambique has two massive gas fields: Temane is operated by the U.S.'s Atlantic Richfield Co., Sasol of South Africa, and Zarara Petroleum of Dubai, while Pande is operated by Enron.

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

STOCKWATCH Enron down, Dynegy up on lingering merger uncertainty

11/23/2001
AFX News
(c) 2001 by AFP-Extel News Ltd

NEW YORK (AFX) - Enron Corp shares were lower, while Dynegy Inc was slightly higher in late morning trade on lingering uncertainty about their proposed merger following a news report that Enron's SEC filing last Monday contained details that were not known to acquirer Dynegy, dealers said.
At 11.15 am, Enron shares were trading down 17 cents at 4.84, a decline of 3.3 pct. Dynegy was up 44 cents at 40.20.
The DJIA was up 57.70 points at 9,892.86. The S&P 500 was up 6.24 points at 1,143.27. The Nasdaq composite was up 11.94 points at 1,886.99
Earlier, the Wall Street Journal quoted an unnamed source as saying Monday's SEC filing contained information on the company which was unknown to proposed buyer Dynegy.
Dynegy representatives are planning to work through the weekend evaluating the significance of this information as part of their due diligence on Enron, the paper said. It did not specify the nature of the information.
In the filing, Enron revealed a number of new financial problems including a possible obligation to repay a 690 mln usd note due Nov 27.
On Wednesday, the company said it had received an extension on the repayment until mid-December, which it said was enough time to restructure the debt.
The company also said it was in active talks with its creditors and expected to be able to restructure other debt and remain solvent long enough for the merger with Dynegy to be completed.
Dynegy welcomed the news and said it will push ahead in seeking regulatory approval for the merger. But investors are concerned that the constant surprises in restated earnings and revelations of liquidity problems at Enron may cause Dynegy to walk away from the deal.
UBS Warburg analyst Ronald Barone lowered Enron's fourth-quarter earnings per share estimate to a loss of 25 cents from earnings of 25 cents, arguing that its business will suffer until its liquidity problems are resolved.
The analyst cut his full year estimate to 1.10 usd from 1.60 usd and 2002 estimate to 75 cents from 1.65 cents.
If his figures prove to be correct, they would make Dynegy's current merger exchange terms -- of 0.2685 Dynegy shares for each Enron share owned -- moderately dilutive.
"We reiterate that if the merger with Dynegy were to run into obstacles (or fall through entirely) Enron shares could come under severe pressure as investors may question its ability to sustain liquidity (and normal business activities) for an extended period of time," Barone said in a note. "Under such a scenario, bankruptcy would not be out of the question."
Credit Suisse First Boston analyst Curt Launer was more upbeat, and said the share's decline in recent sessions has been overdone.
"Our industry contacts and discussions with traders indicate that while trading with Enron has slowed, it certainly has not stopped," said Launer.
For Dynegy, the merger with Enron still "represents a dramatic plus," he said.
cl/gc For more information and to contact AFX: www.afxnews.com and www.afxpress.com

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

USA: Houston economy seen weathering major layoffs.
By Ellen Chang

11/23/2001
Reuters English News Service
(C) Reuters Limited 2001.

HOUSTON, Nov 23 (Reuters) - Houston's economy, buffered by a broad and diverse tax base, should be able to weather thousands of layoffs from some of the city's major corporations, including energy powerhouse Enron Corp., economists and analysts said.
Financially ailing Enron Corp. , which has 21,000 employees worldwide and is in talks to be bought by Houston-based rival Dynegy Inc. , is the third major employer in the city to announce severe financial problems in recent months. Analysts expect layoffs if the merger occurs.
Continental announced a layoff of 3,000 employees after the Sept. 11 attacks and Hewlett-Packard Co.'s plan to buy Compaq Computer Corp. will, if finalized, result in 15,000 layoffs at the two companies. Compaq also announced 8,000 layoffs worldwide in July.
"It's fair to say that the potential layoffs at Enron and the layoffs at Continental, taken alone, are negative factors, although probably small in the grand scope of the Houston economy," said Phil Scheps, director of Houston's finance and administration department.
Since last month when Enron became a target of a Securities and Exchange Commission investigation into financial dealings with partnerships, the energy giant's market share has steadily eroded.
While neither Enron nor Dynegy have given any indication of the number of layoffs that could hit Houston, Barton Smith, director of the Institute for Regional Forecasting at the University of Houston, said the layoffs "will be spread out over a long period of time and will not be excessive."
Robin Kapiloff, an analyst at Moody's Investors Service, said the city's efforts to diversify its economy over the past decade will protect its revenue collections, even as some of the city's biggest employers suffer. "We're watching to see where things go now," she said.
Alex Fraser, a director at Standard & Poor's, said the ratings agency isn't concerned about Houston's credit position at this point. "While Enron is certainly a large player and prominent corporation, we're unclear on what the impact would be."
While the fourth largest city in the country experienced a bit of a slowdown since the Sept. 11 attacks, Houston has outperformed the rest of the nation.
With a tax base of $87.3 billion in 2001, Houston is also buffered by the Texas Medical Center, the city's largest employer. Next year the city's tax base is estimated to grow to $95 billion.
Still, the national recession, energy price weakness in general, and the initial loss of consumer confidence related to the attacks has caused the city to reduce its estimate of sales tax growth to 1.5 percent from 5 percent. That revised estimate equals a $13 million reduction in the city's $1.4 billion budget.
But the city's property tax revenue has not been affected. Only a small change in property tax collections is expected in 2002 because valuations are based on Jan. 1 data and for most of 2001, real estate growth was very large, Scheps said.
While recent economic indicators appear positive, and consumer confidence has quickly rebounded, a better read on the strength of Houston's tax revenue collections will be available in February when the city receives data for the December holiday season, Scheps said.

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

Dabhol Pwr Confirms Arbitrator Panel Mtg In Singapore Sat

11/23/2001
Dow Jones International News
(Copyright (c) 2001, Dow Jones & Company, Inc.)

NEW DELHI -(Dow Jones)- An official from India's Dabhol Power Co. confirmed Friday that a panel of arbitrators will meet in Singapore Saturday to discuss international arbitration proceedings initiated by DPC against Maharashtra state government.
Dabhol, a 2,184 megawatt power project in the western Indian state of Maharashtra, is a unit of the U.S.-based energy company Enron Corp. (ENE).
Dabhol Power Co. initiated the arbitration against the state government for not honoring its guarantees on power bills due for December 2000 and January, following Maharashtra State Electricity Board's failure to meet payments.
The Singapore meeting is likely to be followed by the actual arbitration process in the London court, according to a Friday report in the Hindu Business Line daily.
The panel, which has been appointed by DPC and the Maharashtra state government, includes an independent observer.
-By Himendra Kumar; Dow Jones Newswires; 91-11-461-9426; himendra.kumar@dowjones.com

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

Enron SEC filing contained information Dynegy was unaware of - report

11/23/2001
AFX News
(c) 2001 by AFP-Extel News Ltd

NEW YORK (AFX) - Monday's SEC filing by Enron's Corp contained information that proposed buyer Dynegy Inc had not known about, the Wall Street Journal quoted a person familiar with the merger plans as saying.
Dynegy representatives plan to work through the weekend evaluating the importance of this new information as part of the company's due diligence on Enron, the source said, without specifying what the new information was.
In the filing, Enron disclosed hundreds of millions of dollars of potential additional write-offs as well as the possibility that its weakening financial condition could force it to repay more than 2 bln usd in loans by the end of the year.
Dynegy announced Wednesday that it is working to accelerate regulatory approvals required to complete the acquisition in accordance with the previously announced agreement.
The Journal quoted analysts as saying Dynegy is coming under increasing pressure to renegotiate or walk away from the deal.
It also cited Fitch director Ralph Pellecchia as saying that, without the Dynegy acquisition and continued support from its bankers and customers, an Enron bankruptcy-court filing "is highly possible".
jms For more information and to contact AFX: www.afxnews.com and www.afxpress.com

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

Dynegy's Decision to Buy Enron Hits Crossroads Amid Rising Financial Woes

11/23/2001
Dow Jones Business News
(Copyright (c) 2001, Dow Jones & Company, Inc.)

Even as it reiterated its intention to purchase Enron Corp., Dynegy Inc. is coming under increasing pressure to renegotiate or walk away from the multibillion-dollar deal, Friday's Wall Street Journal reported.
The pressure is stemming from the continuing slide in the price of Enron (ENE) shares and the mounting financial problems at the Houston energy-trading company, the nation's biggest marketer of electricity and natural gas. During the past month, Enron has taken a $1 billion write-off of assets, revised downward the earnings of the past several years and taken a $1.2 billion reduction in shareholder equity.
The problems have been due largely to dealings Enron had with private partnerships, run by some of its own executives, under investigation by the Securities and Exchange Commission. In an SEC filing Monday, Enron disclosed hundreds of millions of potential additional write-offs as well as the possibility that its weakening financial condition could force it to repay more than $2 billion in loans by the end of the year.
As of 4 p.m. Wednesday in New York Stock Exchange composite trading, Enron shares fell $1.98, or 28%, to $5.01 each after having dropped 23% Tuesday. In excess of 115 million shares traded Wednesday, more than four times the volume of any other Big Board stock. Enron's bonds also again traded sharply lower, market observers said.
The turmoil spilled over to Dynegy's stock, which also was among the most actively traded on the New York Stock Exchange. As of 4 p.m. Wednesday, Dynegy (DYN) shares fell $1.94 to $39.76 each.
On Wednesday, Dynegy issued a statement in which Chairman and Chief Executive Chuck Watson said his company was working "to accelerate the regulatory approvals required to complete the merger in accordance with the previously announced agreement" though it continued to perform "due diligence" on Enron.
Under the merger agreement, Dynegy has opportunities to renegotiate or walk away from the deal if Enron's financial and legal problems become severe enough. However, some observers said it can be difficult to invoke these so-called material adverse change clauses. They point to a decision earlier this year by a Delaware Chancery Court judge who forced Tyson Foods Inc. to complete a planned purchase of IBP Inc. even though Tyson, a Springdale, Ark., food-products company, had wanted to cancel the transaction because of a drop in IBP's earnings and accounting problems at an IBP unit.
Dynegy officials didn't return calls seeking comment. To complete the deal, two-thirds of Dynegy shareholders and a majority of Enron shareholders would have to give their approval. No dates for those votes have been set.
One person familiar with the merger plans said the SEC filing Monday by Enron contained information Dynegy hadn't known about. Dynegy representatives planned to work through the weekend evaluating the importance of this new information as part of the company's due diligence, this person said. It couldn't be determined what the new information was.
The merger agreement, announced Nov. 9, calls for Dynegy to exchange 0.2685 share for each of Enron's roughly 850 million fully diluted shares, giving the purchase a value of about $9 billion at Dynegy's current stock price. However, from a price standpoint, the deal is appearing less attractive to Dynegy.
On the day of the merger announcement, Enron shares were trading at about $8.63 each, or about 83% of the purchase price under the exchange ratio. As of Wednesday, Enron's market price was only about 47% of the merger-formula price. Such a sharp deterioration is unusual following a merger announcement, when the stock price of the company being acquired generally begins trading relatively close to the offering price.
Sentiment among Wall Street analysts also is turning against the merger. Initially, many analysts lauded the merger as a move that would rescue Enron and provide a major boost to Houston-based Dynegy. Dynegy and Enron officials have predicted that the merger, supposed to be completed late next year, would significantly and immediately increase Dynegy's earnings.
Now analysts are challenging that assumption. Ron Barone, managing director at UBS Warburg LLC, said he believes that because of Enron's financial problems, a combined company would actually have lower earnings next year than Dynegy would have by itself. Mr. Barone said he thinks a "likely scenario" is that the merger formula will be renegotiated sharply down to about 0.15 Dynegy share for each Enron share.
Copyright (c) 2001 Dow Jones & Company, Inc.
All Rights Reserved.

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

Business; Financial Desk
Employees' Lawuit Says Enron Hurt Retirement Funds Courts: The suit claims the energy firm urged workers to invest in company stock just before it plunged.
From Associated Press

11/23/2001
Los Angeles Times
Home Edition
C-2
Copyright 2001 / The Times Mirror Company

HOUSTON -- Two Enron Corp. workers are suing the company, claiming it endangered their retirement funds.
The lawsuit, filed in federal court in Houston under the Employee Retirement Income Security Act, asserts that Enron encouraged the employees to invest more heavily in company stock just before the stock tanked. The lawsuit was filed by Portland, Ore., utility lineman Roy Rinard and co-worker Steve Lacey.
Enron shares have plunged more than 90% over the last several months since the departure of the company's chief executive and an accounting controversy that prompted the firm to restate its earnings since 1997, eliminating more than $580 million of reported income.
Steve Berman, managing partner for the law firm of Hagens Berman in Seattle, said Enron touted the value of its shares and encouraged employees to put their entire portfolio into Enron stock.
Enron officials didn't emphasize the risk and instead painted the situation as positive, especially when the company's stock began to slide, said Berman, who is hoping to get the suit certified as a class action.
Berman wants to prove that the company's 401(k) plan executives failed to act responsibly when they knew about serious business problems. He's also hoping to break new legal ground with his case.
The lawsuit is patterned after a case against Lucent Technologies in which Lucent employees sued their employer this summer for matching their 401(k) contributions with company stock that tanked. That case is still in litigation.
Earlier this year, Rinard, 54, had $472,000 in his Enron 401(k) plan, which had been growing for 21 years.
Today, his plan is worth about $40,000. Enron gives its employees their 401(k) match in company stock.
In January, Enron was trading for $84.87. Wednesday it closed at $5.01 a share on the New York Stock Exchange.
The problem was compounded when many employees, including Rinard, saw Enron's stock doing so well that they decided to put their entire account into Enron stock.
Enron executives had talked about how the stock price was poised to climb above $100 a share, Rinard told the Houston Chronicle.
In addition, Enron employees were not allowed to make trades in the 401(k) plan for about a month, starting Oct. 17. That was the day after Enron surprised the market with the news it was taking a $1.01-billion after-tax third-quarter charge to get out of bad investments.
Enron officials, who could not be reached, have said they had planned the lockdown for several months because the company was changing plan administrators.

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

Business
Portland utility's fate tied to Enron's future
Nigel Hunt
Reuters

11/23/2001
The Seattle Times
Fourth
C2
(Copyright 2001)

LOS ANGELES -- Oregon's largest utility, Portland General Electric, faces an uncertain future as its parent Enron fights for its life amid a deepening financial crisis, industry experts said Wednesday.
Another Oregon utility, Northwest Natural Gas, is due to file next week with state regulators for approval to take over Portland General. Those same regulators could soon be faced with a similar application from Dynegy as part of a still-pending deal to acquire cash-strapped Enron.
If Enron were to file for bankruptcy before Portland General has been sold, its future could be thrown into the hands of a Texas bankruptcy court, experts said.
Northwest Natural Gas agreed Oct. 8 to acquire Portland General for around $1.8 billion, plus about $1.1 billion in assumed debt and preferred stock. A month later, Enron announced it had agreed to be acquired by Houston-based Dynegy.
"We've been watching this from afar to see how it could impact that sale (Portland General's acquisition by Northwest Natural Gas)," said Roy Hemmingway, chairman of the Oregon Public Utility Commission.
"We have authority if that sale doesn't go through to rule on whether Dynegy can take over Enron," he said.
Ratings agency Fitch last week cut Portland General's debt ratings due to "uncertainty at its parent Enron." Wednesday, the same agency said a bankruptcy filing by Enron was "highly possible" if the proposed rescue by Dynegy collapses.
"We haven't seen any credit problems so far, and Portland General isn't in the market (buying power for its customers) right now in a big way," Hemmingway said.
However, he noted that, "If they really were unable to conduct their business because they were not creditworthy we would have to use whatever instruments are available" to make sure service to customers is maintained. Earlier this year, California was forced to take over buying power for the PG&E unit of Pacific Gas & Electric and Edison International subsidiary Southern California Edison after the two utilities saw their credit ratings cut to junk status.
Federal regulators have insisted the sellers of wholesale power have the right to sell to a creditworthy buyer.
California's largest utility, Pacific Gas & Electric, chose to file for bankruptcy because of its mounting debt. In a parallel, consumer advocates fear the fate of the biggest utility in neighboring Oregon could end up in the hands of a bankruptcy judge.
Hemmingway said the Oregon Public Utility Commission recently had granted Portland General a rate increase and the utility has "plenty of cash flow currently to handle its obligations."
"This is nothing like California where that was not the case," he said.
Northwest Natural Gas, which is also based in Portland, has set a target of filing next Wednesday with the Oregon commission to take over the utility, spokesman Steve Sechrist said.
"We have no concerns whatsoever at this point. The deal is moving forward and there is no reason we can see why it should not" he said, noting the delay to the filing was the result of the complexities of the acquisition.
Jason Eisdorfer, a lawyer for the Citizens' Utility Board of Oregon, said major questions would be raised if Enron went under before the deal were completed.
"Would the (bankruptcy) judge let the terms of the agreement go forward. I don't know. There is a risk that Portland General will become an asset to be disposed of under bankruptcy," Eisdorfer said.
Copyright [copyright] Seattle Times Company, All Rights Reserved. You must get permission before you reproduce any part of this material.

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

Enron Shares and Bonds Fall on Concern About Takeover (Update5)
2001-11-23 15:55 (New York)

Enron Shares and Bonds Fall on Concern About Takeover (Update5)

     (Updates with Dynegy comment in fifth paragraph.)

     Houston, Nov. 23 (Bloomberg) -- Enron Corp. shares and bonds
fell for a third day on concern the company's weakened financial
condition and plunging stock price may lead Dynegy Inc. to try to
cancel or rework a takeover of the biggest energy trader.

     Shares of Enron, the most-active U.S. stock, dropped
30 cents, or 6 percent, to $4.71. They fell 45 percent Tuesday and
Wednesday after Enron said it may have to pay more than $9 billion
in debt due by 2003. Enron 6.4 percent bonds due in July 2006 were
bid at 55 cents on the dollar, down from 62 cents on Wednesday,
traders said.

     Enron shares are trading at less than half the value of
Dynegy's offer, which shows investors are questioning whether the
buyout will be completed on the terms agreed to two weeks ago.
Enron's financial woes may prove to be a drag on Dynegy's earnings
next year if the transaction is completed, analysts said.

     ``There are continued doubts about the deal,'' said UBS
Warburg analyst Ronald Barone, who rates Dynegy a ``strong buy''
and doesn't own shares in either company. ``Enron's earnings
aren't what they used to be because they've lost trading business.
Given that, Dynegy has an opportunity to renegotiate the price.''

     Dynegy spokesman John Sousa said the company ``remains
optimistic for the potential of the merger.'' Enron agreed Nov. 9
to the takeover, now valued at about $23 billion in stock and
assumed debt, after a financial crisis threatened it with
bankruptcy.

     On Wednesday, Enron got a three-week reprieve from lenders on
a $690 million note due next week, giving the company more time to
restructure its finances. Dynegy Chief Executive Officer Chuck
Watson said he was ``encouraged'' by the commitment to extend the
note payment, as well as the closing of a $450 million credit
facility, and that Dynegy remained committed to the purchase.

     More than 40 million Enron shares changed hands today, almost
twice their three-month daily average, in a session shortened
because of the Thanksgiving holiday. Enron was the most-active
U.S. stock on Wednesday, with 116 million shares traded. Dynegy
shares rose 64 cents to $40.40 today.

                       Less Than $2 Billion

     In a Securities & Exchange Commission filing Monday, Enron
said it has less than $2 billion in cash and credit lines left. If
the company's cash reserves run too low, Enron is in danger of
seeing its credit rating cut below investment grade. That would
trigger $3.9 billion in debt repayments for two affiliated
partnerships.

     Enron's bankers have met with unidentified investors,
including leveraged buyout firms and two industrial companies, in
a bid to shore up the energy trader's finances with an injection
of as much as $2 billion, the New York Times reported yesterday,
citing unidentified executives close to the companies.

     Enron spokeswoman Karen Denne said the company is seeking
$500 million to $1 billion. Enron needs to raise $1 billion to
$1.5 billion in cash within the next 45 days, said Sean Egan,
managing director of Egan-Jones Rating Co.

     ``Their trading operation has burned through cash faster than
the market had expected,'' Egan said.

                         Trading Business

     Traders including Mirant Corp. and Aquila Inc. have said they
shifted transactions away from Enron after its plunging stock
price prompted concerns about creditworthiness. Enron has said
fourth-quarter earnings would be reduced partly by a drop in its
energy-trading business.

     Watson said after the Enron buyout was announced he expected
it to increase 2002 earnings by 35 percent. Analysts said that
can't happen unless Enron recovers lost trading business. Several
have cut their 2002 estimates for Enron. The average estimate of
analysts polled by Thomson Financial/First Call for next year is
now $1.68 a share, down from $2.14 a month ago.

     Dynegy can cancel or renegotiate if Enron can't meet debt
payments, its trading market collapses, banks demand more
collateral or raise the interest rate for loans, Enron's credit
rating is cut to junk, the SEC cites Enron for securities fraud,
or if Enron's legal liabilities including shareholder suits exceed
$3.5 billion, Egan said.

                     Will Dynegy Renegotiate?

     Dynegy officials were considering whether to try and
renegotiate terms of its agreement with Enron, according to the
New York Times report. Dynegy and Enron are both based in Houston.

     ``Dynegy investors would like to see the company negotiate a
lower price for Enron,'' said Credit Lyonnais securities analyst
Gordon Howald, who rates Dynegy ``buy'' and owns no shares.

     Under the Nov. 9 terms, Enron investors would receive 0.2685
Dynegy share for each share held. At today's closing price, that
values Enron stock at $10.85. A year ago, Enron traded at almost
$80.

     Investors worry that a cancellation of the merger would push
Enron into bankruptcy.

     ``The market is saying there seems to be no obvious Plan B
for Enron and that is what has investors concerned,'' said Eric
Bergson, who helps manage $9 billion of fixed-income assets at
Northern Trust Co. in Chicago. ``The lower bond prices go, what
the market is saying is that there's less chance of this deal
going through.''

--Jim Polson in Princeton, (609) 750-4658 or jpolson@Bloomberg.net

KKR, Blackstone Are Among Likely Enron Investors, Analyst Says
2001-11-23 16:20 (New York)

KKR, Blackstone Are Among Likely Enron Investors, Analyst Says

     Houston, Nov. 23 (Bloomberg) -- Kohlberg, Kravis Roberts &
Co., the Blackstone Group and the Carlyle Group are among the
likely candidates to be approached by Enron Corp. for a private
equity investment to shore up the company's balance sheet, said
industry analyst David Snow of PrivateEquityCentral.Net.

     The firms have cash on hand and have invested in energy
companies in the past. An investment in Enron may look attractive
now that its shares have plunged by 94 percent this year.

     ``Many of the larger, more traditional buyout firms would
find this deal attractive,'' said Snow. ``This is a company that
has real assets that is down in the dumps and has need of capital
when capital is scarce.''

     Enron's bankers met recently with leveraged buyout firms and
two industrial companies to seek an investment, the New York Times
reported, citing executives close to the companies. Enron's stock
fell for a fifth day in six on concern the company's weakened
financial condition may lead Dynegy Inc. to try to cancel or
rework its planned purchase of the rival Houston company.

     Investors may inject as much as $2 billion under arrangements
that would protect them from further declines in Enron's stock,
the Times said. The new investments would be in Enron's
Transwestern Pipeline, which connects natural-gas fields in Texas
to the California market, the newspaper said.

     J.P. Morgan Chase & Co. and Citigroup Inc. agreed to terms
that give each of them a $250 million equity stake as part of a
transaction to be completed Monday, officials told the newspaper.

     Buyout firms sometimes make collective bids, pooling their
money and distributing the risk. The firms also like to invest in
industries that are out of favor with public investors and to do
so in partnership with corporate investors, like Dynegy, said
Snow.

     ``You need to know enough about the (energy) business to know
whether it's a good deal, and then you need to be confident in the
Dynegy team,'' he said.

                                KKR

     KKR, the second-biggest private equity firm with $24 billion
in assets, declined comment on Enron through spokeswoman Molly
Morse of Kekst & Co.

     The New York-based firm invested more than $1.3 billion in
DPL Inc., a utility in Dayton, Ohio, and will receive $550 million
of that back from the company after DPL sold $700 million of bonds
in August.

     ``KKR very much gets involved in deals where there's a
corporate partner and they don't have a majority stake,'' Snow
said. ``They would possibly hold it for years, because they like
slow exits.'' KKR is also a possible candidate because it recently
raised a new $5 billion buyout fund.

     Any LBO firm would need assurance about how it will get its
money back on an Enron investment, said Snow.

     ``The thing they have to be cautious about is the exit,'' he
said. ``If there's a chance Dynegy would agree to buy out (the LBO
firms') stake over time, that would give some confidence. But if
the only exit is the public market, that's a little bit dicier.''

     Any private investment also must be large enough to make a
meaningful difference: Enron's market value is $3.7 billion and
Dynegy has proposed paying $23 billion in stock and assumption of
debt. That means the private equity portion would have to approach
$1 billion or more.

     The 20 largest private equity firms have assets of more than
$5 billion under management each, according to Asset Alternatives,
a Wellesley, Massachusetts industry research firm. Still, many of
those firms don't have enough free capital to undertake an
investment of $500 million or more.

     An announcement of an investment may come soon, analysts say.
Energy trading firms such as Mirant Corp. and Aquila Inc. are
doing fewer trades with Enron because of concern that the company
won't be able to finance its business. Enron shares have fallen by
almost half in the past three sessions.

     ``They're going to need this investment within 30 to 45
days,'' said Sean Egan of Egan-Jones Ratings Co. ``They're
spiraling downward and they're going to need some more beyond the
$1.5 billion contributed by'' ChevronTexaco Corp., which owns 26
percent of Dynegy.

                            Other LBOs

     Here's a rundown of the other most likely private equity
partners for Enron:

     --The Carlyle Group could invest through a $1 billion energy
fund it's raising, as well as its general U.S. buyout fund, said
Snow. Carlyle's vice president for corporate communications, Chris
Ullman, declined to comment.

     --Blackstone, which has a history of investing alongside
other corporate partners, recently closed on a $4 billion buyout
fund. Blackstone spokesman John Ford declined to comment on
whether Enron had approached the firm.

     --Hicks, Muse, Tate & Furst, which is based in Texas like
Dynegy and Enron. Hicks Muse counts Triton Energy Ltd., an energy
exploration company, among its best investments. The firm recently
raised about $1.5 billion for new investments, about one-third of
what it had hoped to raise, and has said it will focus on ``back-
to-basics'' investments in food, manufacturing and media. Mark
Semer, a spokesman for Hicks Muse who also works for Kekst,
declined comment on Enron.

     Spokesmen for two other firms, Warburg Pincus & Co. and
Credit Suisse First Boston's private equity arm, didn't return
calls seeking comment.

--Randy Whitestone in the New York newsroom (212) 940-1805

Microsoft MSN Fast Web Access Expansion Slowed by Enron Suit
2001-11-23 11:59 (New York)

Microsoft MSN Fast Web Access Expansion Slowed by Enron Suit

     Redmond, Washington Nov. 23 (Bloomberg) -- Microsoft Corp.'s
plans to expand its MSN high-speed Internet service have been
delayed by a lawsuit from Enron Corp., which could cost the
company customers during the holiday season, analysts said.

     MSN had planned to have fast Internet access over telephone
lines available, with help from energy trader Enron, in 45 markets
starting Oct. 25. Instead, the service is now on sale in about 30
markets, said MSN Product Manager Lisa Gurry.

     The latest delay follows a string of apparent bad luck that
has delayed the rollout of Microsoft's fast Internet access
service over the last year. The holidays are typically a popular
time for customers to buy so-called broadband access, often along
with new personal computers purchased or received as gifts.

     ``They have a track record of picking broadband partners that
don't quite work out,'' said Joe Laszlo, senior analyst at market
researcher Jupiter Media Metrix Inc. ``It definitely hurts them
with customers who want broadband right now.''

     Subscribers to fast Internet access services are expected to
grow fourfold by 2006, according to estimates by Jupiter Media
Metrix, while sales of slower Internet access plans decline. Fast
Internet service over phone lines uses digital subscriber line, or
DSL, technology.

                         On Track

     Gurry said Redmond, Washington-based Microsoft is still on
track to have fast access for sale by the end of March to 90
percent of the 45 million to 50 million households that have DSL
available in their neighborhoods.

     ``There is very little growth left in the dial-up access
space for Microsoft or anybody, which leaves them with broadband
as the only potential growth area for the MSN access business,''
said Youssef Squali, an analyst at FAC/Equities, who rates
Microsoft Internet competitor AOL Time Warner Inc. a ``buy.''

     Microsoft also wants to deliver consumer services like music
and video and software updates, which require fast Internet access
for smooth downloads.

     The company originally began a service with NorthPoint
Communications Group Inc., a now-bankrupt provider of fast Web
access. Microsoft has also had difficulty finding partners among
cable companies who use their networks for high-speed service.

     Now Houston-based Enron, which agreed in June to provide the
backbone for a nationwide expansion of MSN's service, is suing.
Enron claimed in its lawsuit that it isn't required to deliver
broadband services if Microsoft hasn't first provided a billing
and ordering system that the biggest software company agreed to
build.

     Enron, which is being acquired by rival Dynegy Inc., recently
disclosed debts of $9.15 billion due by 2003 and restated earnings
for four years.

                        Slower Expansion

     MSN has been selling high-speed access in 14 states under
partnership with Qwest Communications International Inc. for the
last few months. MSN has begun the planned service expansion
outside of those states by working with Enron competitors that MSN
Marketing Director Bob Visse declined to name. The company is also
talking to Enron, he said. Enron didn't return calls for comment.

     Because of the Enron suit the expansion is moving slower than
expected, Visse said. Since Oct. 25, MSN has added service in Los
Angeles, San Francisco, San Diego and Sacramento, California, and
Houston, Dallas, San Antonio and Austin, Texas, giving Microsoft a
total of about 30 markets rather than 45. Plans to expand
marketing are also on hold, Visse said.

     ``It is very unfortunate that we are in the position we are
in,'' said Microsoft Chief Executive Steve Ballmer.

     Top U.S. Internet service provider America Online, owned by
AOL Time Warner Inc., has also been slow to get into the high-
speed market, analysts said.

     That doesn't mean Microsoft is in the clear. Laszlo said both
MSN and AOL might pay for their sluggishness with tougher
competition from third-place EarthLink Inc. and from cable and
telephone companies that have more experience selling high-speed
Internet access.

     America Online has more than 31 million subscribers to MSN's
7 million. EarthLink Inc. has 4.77 million subscribers. Laszlo
doesn't think MSN or America Online can build the kind of lead in
the high-speed market that America Online has in the slower dial-
up access market.

                       `Not a Permanent Blow'

     Not that anyone need worry about Microsoft. MSN will be able
to expand its fast Internet access business even with the delays,
Laszlo said.

     ``They are already late in the broadband market so this means
they get a little later,'' he said. ``But broadband will continue
to grow over the next few years and this is definitely not a
permanent blow.''

     Analysts also say Microsoft still needs to find a cable
partner that will let MSN use its network to sell fast access over
cable lines. Cable is more popular than DSL with customers looking
for fast Web service. The five largest cable providers control 51
percent of the U.S. high-speed Internet market. The five largest
sellers of access via phone lines and DSL technology account for
about 33 percent, according to market researcher ARS Inc.

     Microsoft MSN Vice President Yusuf Mehdi said last month the
company may be interested in an investment in AT&T Corp.'s cable-
television unit, which AT&T is considering selling. Ballmer
declined to comment on Microsoft's plans.

--Dina Bass in Seattle (206) 521-5981, or dbass2@bloomberg.net

Metropolitan Desk; Section A
Corrections

11/22/2001
The New York Times
Page 2, Column 4
c. 2001 New York Times Company

Because of an editing error, an article in World Business yesterday about the Enron Corporation's prospects for selling its interest in the Dabhol Power project in India misstated the size of its stake. It is 65 percent, not 70.

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