What time is call and what is #?

	From:  Rebecca W Cantrell @ ECT                           12/12/2000 06:45 PM

To: Steve Montovano/NA/Enron@Enron, Jeff Dasovich/NA/Enron@Enron, Paul
Kaufman/PDX/ECT@ECT, Leslie Lawner/NA/Enron@Enron, Richard
Shapiro/NA/Enron@Enron, Steven J Kean/NA/Enron@Enron
cc:

Subject: Gas Issues paper

For discussion during the conference call tomorrow, attached is a revision of
Leslie's paper with an attachment illustrating the type of tariff information
we are capturing for the interstates.  If you think we need to capture any
additional information, please advise.

---------------------- Forwarded by Rebecca W Cantrell/HOU/ECT on 12/12/2000
06:37 PM ---------------------------
From: Leslie Lawner@ENRON on 12/12/2000 02:06 PM
To: Rebecca W Cantrell/HOU/ECT@ECT
cc:
Subject: Gas Issues paper

----- Forwarded by Leslie Lawner/NA/Enron on 12/12/2000 02:05 PM -----

	Leslie Lawner
	12/12/2000 02:05 PM

		 To: Steve Montovano/NA/Enron@Enron, Jeff Dasovich/NA/Enron@Enron, Paul
Kaufman/PDX/ECT@ECT, Leslie Lawner/NA/Enron@Enron, Richard
Shapiro/NA/Enron@Enron, Steven J Kean/NA/Enron@Enron
		 cc:
		 Subject: Gas Issues paper

Here is a working draft of the gas issues/diversion/penalties, etc. paper.
Becky is working on the interstate pipeline tariffs and we will insert them,
and Jeff Hidge will be sending something out about ENA legal issues, which I
will add in.  I am also going to work on this tonite, to make the individual
LDC diucssions follow a common template.  However, I wanted you to have
something to look at before the meeting tomorrow morning.  I still have a
couple of LDCs to add.  Thanks.


I stand corrected - we need to DASH everything over $500K.

Regards
Delainey
---------------------- Forwarded by David W Delainey/HOU/ECT on 11/03/2000
08:25 AM ---------------------------

David Gorte
11/02/2000 07:28 PM
To: David W Delainey/HOU/ECT@ECT
cc: Joseph Deffner/HOU/ECT@ECT, Mark E Haedicke/HOU/ECT@ECT, Rick
Buy/HOU/ECT@ECT, John J Lavorato/Corp/Enron@Enron
Subject: Re: Commodity / Embedded Finance Deals

Dave,

As of today, the Transaction Approval Process requires that any embedded
financing over $500,000 needs to be DASHed.  RAC, however, is close to
finishing a new process for commodity embedded financings--both prepaids and
tilted swaps--that would not require a full DASH but an abbreviated approval
document based upon specified credit ratings, financing amounts, and
maturities for transactions having standard credit documentation.  For
example, a $25 million, five-year exposure to a AAA counterparty with
standard documentation is contemplated to be approved via this abbreviated
approval document.  This abbreviated approval document would only be
available for transactions meeting these criteria if:  (i) structured
financing capacity were available, (ii) the funds flow issue created is
manageable (both (i) and (ii) as confirmed by EGF), and (iii) the pricing met
a threshold that included the structured financing cost, an appropriate
credit spread/reserve, and a syndication risk premium.

The abbreviated approval document is intended to expedite the approval of
relatively straightforward embedded financings where a full DASH is
impractical or inefficient.  It is presently contemplated that the
abbreviated approval document could be approved with two signatures:  the
Originator's and  a RAC signature (either Bill Bradford's or mine), with
business unit management and EGF receiving weekly updates on transactions
approved via this document, but I would welcome your thoughts on this.  In
any event, I will provide you with the proposed abbreviated process by you
for your review and concurrence before if it is implemented since the
preponderance of these transactions are expected to be originated by ENA.

Please let me know if you have any questions or comments.

Regards,

Dave

David W Delainey
11/02/2000 09:25 AM
To: Tim Belden/HOU/ECT@ECT
cc: David Gorte/HOU/ECT@ECT, Joseph Deffner/HOU/ECT@ECT, John J
Lavorato/Corp/Enron@Enron, Mark E Haedicke/HOU/ECT@ECT

Subject: Commodity / Embedded Finance Deals

Tim, I would argue that we should pursue this business as long as a) we are
being adequately compensated for the financing and underlying commodity risk;
b) we have very good paper; c) we are dealing with solid credits and are
charging an appropriate risk adjusted cost of capital for the underlying
financing; d) we have the ability to syndicate the capital or funds flow
position if needed to manage cash issues and e) that RAC is comfortable that
we are reaching these goals.

Any imbedded financing or $5M or more should be DASHED.  David, Joe and Mark
should be your key contacts to ensure we are adequately managing these issues
but I do not see any fatal flaw in the strategy if priced/managed well and we
watch the funds flow issues.

Regards
Delainey

---------------------- Forwarded by David W Delainey/HOU/ECT on 11/02/2000
09:15 AM ---------------------------

	From:  Tim Belden                           10/31/2000 01:54 PM

To: David W Delainey/HOU/ECT@ECT
cc:
Subject: Commodity / Embedded Finance Deals

---------------------- Forwarded by Tim Belden/HOU/ECT on 10/31/2000 10:57 AM
---------------------------
From: Tim Belden on 10/31/2000 11:54 AM
To: Dave Delainey
cc:
Subject: Commodity / Embedded Finance Deals

---------------------- Forwarded by Tim Belden/HOU/ECT on 10/31/2000 10:56 AM
---------------------------
From: Tim Belden on 10/31/2000 11:52 AM
To: John J Lavorato/Corp/Enron, Dave Delainey
cc: Christopher F Calger/PDX/ECT@ECT
Subject: Commodity / Embedded Finance Deals

We have closed the following deals where we deliver power two a muni in the
short term and get paid back power later on.  These deals have both a
commodity and a finance portion:

Counterparty    Loan Period  Repayment Period  Amount Financed

Grant County    7/01 to 7/06   7/06   $4.7 million
Grant County    5/01 to 7/06   7/06   $5.7 million
Avista/Kaiser    7/2000   7/2000 to 7/2006   $31.3 million
BPA/Kaiser    9/2000   7/2001 to 9/2001   $36 million
Clatskanie    11/2000 to 9/2001 10/2001 to 9/2006  $5 million
Eugene Water and Electric  1/2001 to 3/2002  11/2001 to 4/2002  $4.9 million
Eugene Water and Electric  7/2001 to 12/2002 5/2002 to 12/2002  $7.3 million

We are seeing demand for more of these.  For example, Tacoma City Light is
looking at $35,000,000 + in this type of structure.  What do you guys need to
know about this business and how much of an appetite do we have for this?


I must be working off the wrong group list, but I don't think you were on it
and Jeff Dasovich was on it and didn't know he was.  Anyway here is the mail
I sent out to kick things off the week before last and I'd welcome your
thoughts on how we might get the best out of the group.

Meeting in London is fine with me if you can all make it!  In the meantime,
it's probably worth having a conference call to discuss how we might do
things.

Loved Mr Woychick's comments about Philip by the way.  I've always thought he
was a prima donna and it was nice to hear Eric confirm it.

Cheers

Paul

---------------------- Forwarded by Paul Dawson/LON/ECT on 28/02/2000 13:35
---------------------------

Paul Dawson
18/02/2000 14:27
To: Structure Group
cc: Steven J Kean/HOU/EES@EES, Maureen McVicker/HOU/EES@EES, Mark
Schroeder/LON/ECT@ECT, Fiona Sayers/LON/ECT@ECT, Philip Davies/LON/ECT@ECT

Subject: Market structure group

My apologies for not kicking things off earlier, but the regulator here has
conspired to make the last few weeks a bit mad.  Consequently, it's taken me
a while to set down some thoughts on how we might get the best out of the
market structure group.  Attached below is an initial stab at some "terms of
reference" to describe the scope and objectives of the group.  I thought this
might help us to come to a common understanding of what we are trying to
achieve.   I'm conscious that the one area that is a bit lacking is
"Deliverables", ie, what will we come up with as the output from this
process?  This needn't be a formal "report" - indeed I suspect that
establishing a regular process of information exchange and discussion is
likely to provide more durable benefits.

I'd very much welcome your views on our scope and objective over the next few
days.  I'd also welcome a brief update on which issues you are all working as
a way introducing our interest in the topic of market structure.  This should
also help to kick-start the process of exchanging ideas.  My own contribution
is below.

I've also attached a couple of documents that I think may be useful.  One I
prepared for the Federal Energy Commission in Russia as a statement of "What
is a foreign investor looking for in a liberalised market?"  It was written
for an audience for whom a competitive electricity market is an alien
concept.  For example, we were attempting to change the FEC's mindset that
power marketers were an unnecessary layer of costs - because their "tariff"
added to other participants tariffs would increase prices.  As a result it is
very high level and conceptual.  However, it has some value as a basic
delineation of where the key market structure issues lie.  The other
documents relate to the proposals for New Trading Arrangements in England and
Wales  (further information on these reforms can be obtained from the
regulator's website at http://www.ofgas.gov.uk/).  While far from perfect,
these reforms provide a good example of wholesale trading arrangement reform
for use elsewhere (for good or bad).

I'll be on vacation next week, but on my return I'd like to set up a video
conference/conference call to discuss how we can take things further.  Any
suggestions for agenda items for that would be most welcome.

Regards

Paul

------------------------------------------

UK Electricity

The regulators - Ofgem and the DTI are is undertaking a massive programme of
reforming the electricity market in England and Wales.  These reforms have
followed the UK government's moratorium on new gas plant in late 1997 and are
designed to remove perceived "distortions" in the market.  The reforms centre
on:

New Electricity Trading Arrangements (NETA) to replace the Pool from October
this year.  We have had a significant input into the this process.  While
generally supportive of the proposals, we have opposed several undue
restrictions on managing risk.
Plant divestment by major mid-merit generators to increase competition in the
price-setting part of the market.  We were instrumental in this process,
following our analysis late in 1997 of the costs of generator market power to
electricity consumers.  Divestment has since significantly increased the
liquidity and competition in the wholesale market.  Despite this the
regulator is seeking greater powers to intervene in the wholesale market to
prevent market "manipulation".  We think this represents an unacceptable
extension of regulatory power and are therefore likely to oppose the
regulator at the Competition Commission enquiry into this.
New transmission access and pricing arrangements.  While these reforms may
have limited merit, in general we think they're a waste of time and our
existing asset positions are significantly exposed.  The regulator has just
started consulting on this and this is one area that I suspect your
experiences in the US and elsewhere might be useful to me.


To whom it may concern:

First, why does the Dell public website have more choices for upgrades then
the Enron website?  For example, the website available to the public has a
19" monitor (M991) for an extra $140.

Second, why is Dell charging Enron employees more for the same products it
offers to the general public?  For example, the website available to the
public allows an upgrade from the E770 monitor to the P991 monitor for $290.
The Enron website allows an upgrade from the E770 monitor to the P991 monitor
for $400.  Therefore, Enron employees are being charged an extra $110 for the
same upgrade.

I look forward to your response.

Andy
3-6278


Shirley,

$1,861.32
$ 709.39

Vince


---------------------- Forwarded by Phillip K Allen/HOU/ECT on 03/22/2000
01:46 PM ---------------------------

	From:  Colleen Sullivan                           03/22/2000 08:42 AM

To: Hunter S Shively/HOU/ECT@ECT, Phillip K Allen/HOU/ECT@ECT, Scott
Neal/HOU/ECT@ECT, Thomas A Martin/HOU/ECT@ECT
cc: Bhavna Pandya/HOU/ECT@ECT
Subject: Meeting-THURSDAY, MARCH 23 - 11:15 AM

Please plan on attending a meeting on Thursday, March 23 at 11:15 am in Room
3127.  This meeting will be brief.  I would like to take the time to
introduce Bhavna Pandya, and get some input from you on various projects she
will be assisting us with.  Thank you.


- 317970_1.DOC


USA: Dynegy sees no more nasty surprises from Enron.
Reuters English News Service, 11/12/01
USA: UPDATE 2-Enron, Dynegy shares rise despite mixed reviews.
Reuters English News Service, 11/12/01
Some Arb Traders View Enron Stock As Too Risky To Buy
Dow Jones News Service, 11/12/01
Energy Companies Still Shy On Enron Despite Dynegy Deal
Dow Jones Energy Service, 11/12/01
Dynegy, Enron officials confident merger will clear scrutiny
Associated Press Newswires, 11/12/01
Dynegy Call -4: Held Talks With Ratings Agencies
Dow Jones News Service, 11/12/01
Dynegy Conference Call Demand Jams Phone Lines, Internet
Dow Jones Energy Service, 11/12/01
S&P Says Doesn't Fully Understand All Enron Partnerships
Capital Markets Report, 11/12/01
INDIA: Utilities to value Enron's Indian assets - lender.
Reuters English News Service, 11/12/01
Fitch Downgrades Marlin Water Trust II and Osprey Trust I
Business Wire, 11/12/01
USA: Enron, Dynegy shares rise amid mixed investor view.
Reuters English News Service, 11/12/01
USA: Dynegy sees 15-20 pct earnings growth with Enron.
Reuters English News Service, 11/12/01
Markets Desk: Airline Stocks Rocked By Queens Crash; Dynegy & Enron Deal Update
CNNfn: Market Coverage - Morning, 11/12/01
Innogy Resumes Trading With Enron After 14-Day Break
Dow Jones Energy Service, 11/12/01
Dynegy Pres: Enron's Core Business Is Very, Very Strong
Dow Jones News Service, 11/12/01
USA: Enron advisors seen mulling investment-WSJ.
Reuters English News Service, 11/12/01
Duke Is Owed About $100 Mln By Enron, Executive Says (Update2)
Bloomberg, 11/12/01

Dynegy Shares Surge After It Agrees to Buy Enron (Update3)
Bloomberg, 11/12/01

Dynegy's Charles Watson (Transcript of Interview)
Bloomberg, 11/12/01

Dynegy Sees Enron Rating Remaining Investment Grade (Update5)
Bloomberg, 11/12/01

Dynegy Calls SEC's Probe of Enron `Financial Noise' (Update5)
Bloomberg, 11/12/01

USA: Dynegy sees no more nasty surprises from Enron.
By Andrew Kelly

11/12/2001
Reuters English News Service
(C) Reuters Limited 2001.
HOUSTON, Nov 12 (Reuters) - Dynegy Inc. said on Monday does not foresee any damaging disclosures from Enron Corp., slammed by news of murky off-balance sheet transactions, that could derail its planned takeover of the beleaguered energy trading giant.
However, Dynegy said it can drop its $9 billion offer if more bad news emerges, or if pending lawsuits against Enron lead to more than $3.5 billion in costs.
Dynegy also expressed confidence the takeover announced on Friday, will win U.S. regulatory approval.
"I really have a good deal of confidence, but not an absolute guarantee, that we are going to be fine here," said Dynegy Chief Executive Officer Chuck Watson, when pressed about the possibility of further troubling disclosures by Enron.
Watson said Dynegy had run the deal through worst-case scenarios and concluded that it made good business sense.
Investors apparently agreed, bidding up Dynegy shares $5.55, or 14.3 percent, to close at $44.31 on the New York Stock Exchange. Enron shares gained 61 cents, to 7.1 percent, to $9.24. The deal valued Enron stock at $10.41.
Enron agreed to a Dynegy buyout after it was overwhelmed by a series of problems, including a U.S. regulatory probe into the off-balance sheet dealings, a $1.2 billion cut in shareholder equity and damaging credit rating downgrades.
Watson has cause for concern about new disclosures from Enron, which last Thursday said an internal probe showed its earnings had been overstated by some $600 million since 1997.
In a conference call with analysts on Monday, Dynegy executives emphasized their confidence in the future of the combined company, including annual projected earnings-per-share growth of 15 percent to 20 percent over the next three years.
But they also fielded a barrage of questions about how well Dynegy has insulated itself against further surprises of the kind that had slashed Enron's market value last week to barely one-tenth the almost $80 billion it was valued in August 2000.
DYNEGY DOUBTS HUGE LIABILITIES
To ensure against unpleasant disclosures, Dynegy wrote so-called material adverse change clauses into the deal, allowing it to walk away from Enron if there is serious deterioration of its businesses or assets.
In particular, Dynegy can turn its back on the deal if pending litigation against Enron - including a stack of lawsuits filed by angry investors who have lost a fortune - leads to costs of more than $3.5 billion.
Chief Financial Officer Rob Doty said it was highly unlikely that this threshold would be reached, even if a "very substantial" settlement was reached in the stockholder suits.
Commerzbank Securities analyst Andre Meade said he was not yet convinced that the stream of bad news from Enron was over.
"I think Dynegy is making a big bet that they can successfully clean up the problems that Enron has had," he said.
But UBS Warburg analyst Jay Yannello said after hearing management discuss the deal, he was reassured it could address tough questions - a breath of fresh air after Enron's tight-lipped response to investors.
Some analysts have said the deal could be thwarted by regulators because of concerns that Dynegy would be too powerful after merging with Enron, currently North America's biggest buyer and seller of both natural gas and electricity.
Watson said Dynegy would have to work hard to explain the deal to regulators, led by the Federal Energy Regulatory Commission, but does not doubt it will eventually pass muster.
"We really are confident that up and down the line we are going to be able to convince them that this is really in the best interest of the energy industry as well as these two respective companies," he said.
GAS PIPELINE OPTION, BREAK-UP FEES
Dynegy executives also said there would be no complicated financing arrangements of the kind that triggered Enron's downfall, and that the new Dynegy will be able to keep top Enron executives and traders from defecting to rival firms.
Enron officials declined to comment on reports that its banks J.P. Morgan and Citigroup were considering pumping an extra $500 million of capital in to Enron.
Oil company ChevronTexaco Inc., a major Dynegy stockholder, has already agreed to inject $1.5 billion into Enron immediately to keep it afloat while the merger is completed, which Dynegy expects to take six to nine months.
If Enron backs out of the deal to accept a higher offer, it would have to pay a $350 million breakup fee to Dyegy.
And if the deal breaks down for any reason, Dynegy would be allowed to exercise an option to acquire Enron's Northern Natural Gas pipeline subsidiary.

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

USA: UPDATE 2-Enron, Dynegy shares rise despite mixed reviews.

11/12/2001
Reuters English News Service
(C) Reuters Limited 2001.
(New third paragraph points out gap between Enron stock
price and value of Dynegy offer)
By Janet McGurty
NEW YORK, Nov 12 (Reuters) - Shares of Enron Corp. climbed higher on Monday on investor enthusiasm over last week's $9 billion bid by rival energy trader Dynegy Inc. to take over the beleaguered energy giant.
Dynegy gained $5.55, or 14.3 percent, to $44.31 in afternoon trade on the New York Stock Exchange, while shares of Enron rose 69 cents, or 8 percent, to $9.32. The takeover announced Friday halted a free-fall in Enron's stock that lost about 75 percent of its market capitalization in the past month.
However, Enron's stock was trading well below the value of Dynegy's offer of 0.2685 Dynegy shares for each Enron share, which translates into $11.94 per share. Analysts said this likely reflected doubts in some investors minds as to whether the deal, which includes "escape clauses" for Dynegy, will go through.
Some industry analysts said they were impressed by the upfront details offered by Dynegy during a conference call with analysts, an about-face compared with calls with Enron. A lack of transparency from Enron about its off-balance sheet transactions, along with a U.S. regulatory investigation, had sparked widespread investor unease.
"I would say that after listening to the conference call, I am even more comfortable with my initial judgment that the projections are conservative," said Jay Yannello, an analyst with UBS Warburg.
Earlier, Yannello reiterated a "strong buy" on Dynegy, saying while the brokerage does not underestimate the enormous challenge at hand, the takeover should yield the biggest and most credible energy merchant in the world. Dynegy is about one-fifth the size of Enron when measured by revenues.
Enron's woes came to light in mid-October after the biggest energy trader in North America disclosed that some of its off-balance sheet partners contributed to a $1 billion charge and a $1.2 billion reduction in shareholder equity.
The takeover is an attractive transaction because of Enron's trading operations, which combined with Dynegy's above-board culture based on teamwork, strict values and honesty, should yield a formidable company, Yannello said.
"As Dynegy continues to do due diligence, we continue to be comfortable with the fact that, if there was another shoe to drop, they have more than adequate protection in this arrangement to either absorb the impact of that event or to get out of the deal, in the worst case scenario." he said.
"We view the both the near and long-term upside potential of this deal as staggering," he added.
LOW RISKS, HIGH REWARDS
However, last week some antitrust lawyers said the deal will be closely examined by the Federal Trade Commission because of the combined company's market share in energy trading, said Steve Newborn, formerly in charge of FTC merger enforcement.
On Monday, ratings agency Fitch downgraded the ratings of Marlin and Osprey, two Enron's off-balance sheet partnerships, covering about $3.3 billion in senior secured notes, on a deterioration of Enron's credit profile.
"We lowered our ratings to be consistent with actions we have taken on Enron," said Fitch credit analyst Ralph Pellecchia, who added he is not aware of any material impact the moves could have on Enron. The downgrade was expected.
Gordon Howald, an analyst at Credit Lyonnaise Securities, also said he is favorably disposed toward the takeover, which he called a "low risk-high reward proposition."
The most critical component is the immediate $1.5 billion equity infusion by Dynegy shareholder ChevronTexaco into Enron will bolster Enron and help keep it viable.
"It appears ... that Dynegy has enough 'out' clauses to at least protect itself if it decides not to pursue this transaction in the future," said Howald.
However, Howald said he is not convinced this is an offensive move by Dynegy, but rather a defensive to move to protect itself and the industry from a potential Enron bankruptcy.
But even if it is defensive, Dynegy walks away from the deal with the rights to Enron's Northern Natural Gas pipeline, which produced about about half of Enron's pipeline earnings, and $350 million in cash, he said.
DOUBTS PERSIST
Some analysts are less sanguine. They said Dynegy is making a big bet that it can successfully clean up Enron's balance sheet problems as well as integrate its trading and marketing business without losing a lot of key traders and volumes.
"Enron's principal - and most valuable asset - is its traders. And those people are mobile," said Andre Mead, an analyst at Commerzbank who said that he expects a six-to nine-month period of uncertainty in which both companies could lose their key trading personnel.
Meade also said that Enron's restatement of earnings has called into question the quality and sources of its earnings.
"I am not convinced that all the bad news related to those off-balance sheet vehicles are out and all disclosures concerning those entities have been made," he said.
"Dynegy put some bearish assumptions in there when they decided to bid for Enron. But the jury is out, Enron is a deeply troubled company," he said.

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

Some Arb Traders View Enron Stock As Too Risky To Buy
By Janet Whitman
Of DOW JONES NEWSWIRES

11/12/2001
Dow Jones News Service
(Copyright (c) 2001, Dow Jones & Company, Inc.)
NEW YORK -(Dow Jones)- Enron Corp.'s (ENE) stock price surged Monday on news that the beleaguered energy concern will be acquired by Dynegy Inc. (DYN). But some takeover traders view the stock is too risky to buy because of major uncertainties surrounding the proposed deal.
"I don't know why you'd buy Enron," said Tom Burnett of Merger Insight, an affiliate of Wall Street Access. "You might be better off buying the Enron bonds because at least then you might have some value if the thing doesn't go through, whereas the stock would be worthless if Enron ended up in Chapter 11."
Takeover traders, also known as arbitrageurs, typically bet on pending mergers by selling short shares of the acquirer and buying shares of the target, hoping to profit as the target's share price moves toward the buyer's offer.
In the case of Dynegy and Enron, however, some takeover traders don't like the deal's odds - and, particularly, the considerable downside risk for Enron if the deal fails.
Uncertainties - including possible opposition from regulators and the potential for more woes at Enron that would allow Dynegy to back out of the deal - are keeping some traders on the sidelines.
"Another shoe may drop," said one takeover trader. "I can't imagine Dynegy got their head around all of this in just two weeks."
Just as some takeover traders view buying Enron too risky, going short Dynegy also is a dicey prospect because of the company's upside potential, whether the deal fails or not.
If the deal fails, for instance, Dynegy still has the right to buy certain Enron assets. On the other hand, if the deal goes ahead, it is expected to be accretive to earnings.
"We're taking a passive view," said Burnett. "I would not go out and buy either one in this kind of environment."
Although some takeover traders steered clear of the deal, some other investors appeared to like it.
Enron's stock price swapped hands recently at $9.40 a share, up 9% on volume of 38.2 million shares, up from averaged daily volume of 16.1 million shares.
Dynegy rose 15% to $44.47 on volume of 14.6 million, compared to average daily volume of 2.5 million.
-By Janet Whitman, Dow Jones Newswires; 201-938-5248; janet.whitman@dowjones.com

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

Energy Companies Still Shy On Enron Despite Dynegy Deal
By Jon Kamp, John Edmiston and Andrew Dowell
Of DOW JONES NEWSWIRES

11/12/2001
Dow Jones Energy Service
(Copyright (c) 2001, Dow Jones & Company, Inc.)
NEW YORK -(Dow Jones)- Credit concerns led U.S. energy companies to continue to restrict their dealings with Enron Corp. (ENE) Monday, despite last week's announcement that the company has agreed to be acquired by Dynegy Inc. (DYN).
Trading counterparties in Enron's core North American electricity and natural gas markets said they were only doing necessary transactions and low-risk, short-term deals with the Houston-based giant as they monitored developments with Enron's credit rating.
"As of last week, our value at risk to Enron was down considerably from where it once was," said Al Butkus, spokesman for Aquila Corp. (ILA), a leading trader of North American power and gas. "It's down even further today."
In comments similar to those made by others in the market, Butkus said Aquila wants to see an improvement in Enron's credit rating and won't increase its exposure on the strength of the Dynegy announcement alone.
The $8.85 billion Dynegy buyout announced Friday isn't a done deal, and Enron remains a serious credit risk if the deal doesn't go through, a power trader working in the markets east of the Rockies said.
"There just seems to be some concern that Dynegy has quite a few opportunities to get out of it," the trader said.
Added another, "This announcement hasn't changed anything."
Enron spokesman Eric Thode said, to the contrary, that the company has seen a "dramatic" increase in trading business Monday from levels seen at the end of last week.
"Today's figures are on line to be much larger than Thursday or Friday," Thode said. "The certainty now of the deal with Dynegy takes away those fears, those question marks."
Volumes on EnronOnline, the company's Internet-based trading platform, are expected to top 5,000 transactions Monday, up from around 4,000 Thursday and Friday and near the 30-day rolling average of 5,600 to 5,800, Thode said. Volumes at the beginning of last week topped 6,000, he said.

To be sure, traders generally saw the Dynegy buyout announcement as a sign Enron's prospects have improved, and traders in some regions said they were seeing more normal activity on EnronOnline after last week's reduced volumes.
Still, credit concerns are preventing many in the market from doing business with Enron.
Standard & Poor's and Moody's Investors Service rate Enron's credit at the lowest level of investment grade, and both have the company on negative credit watch or review for a downgrade.
In the absence of a deal with Dynegy or one like it, Enron's ratings would fall into junk-bond territory, S&P analysts said on a conference call Monday.
As reported, Dynegy's acquisition agreement allows the company to walk away if Enron's additional legal and financial liabilities exceed $3.5 billion. There also are other "material adverse change" provisions, officials said.
The energy markets and ratings agencies are also waiting for Dynegy to make good on its pledge to inject $1.5 billion immediately into Enron to shore up its finances. An infusion of cash would be a "stabilizing event," Moody's said last week.
Charlie Sanchez, an energy marketing manager at Gilber & Associates in Houston, said his customers think Enron's prospects look a little better but still haven't received clearance from their credit-risk managers to trade with the company.
Traders in the U.S. natural gas markets confirmed that assessment.
"We're keeping a close watch on the volume of gas that we're doing business with them on," one trader of western gas said. "We're not doing anything substantial."
Gas traders said they were avoiding dealing with Enron if possible and doing only minor deals if transactions were inevitable.
Enron is the country's largest trader of natural gas and electricity, accounting for up to a quarter of both markets by some estimates.
Markets are liquid and stable, despite Enron's troubles, Butkus, of Aquila, said.
Energy companies began shying away from Enron over the past month, as concerns about its finances precipitated a 75% drop in its stock price and left its bonds trading at levels typically associated with distressed debt.
Enron's restatement of four and a half years' worth of earnings last Thursday and ratings downgrades Friday led some companies to stop doing business with Enron altogether, even if that meant paying higher prices or accepting lower bids to do so.
Enron's value as a company depends on its ability to transact in its core North American wholesale gas and power markets, Wall Street analysts and ratings agencies have said.
-By Andrew Dowell, Dow Jones Newswires; 201-938-4430; andrew.dowell@dowjones.com
(Jon Kamp in Chicago and John Edmiston in Houston contributed to this article.)

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

Dynegy, Enron officials confident merger will clear scrutiny
By JUAN A. LOZANO
Associated Press Writer

11/12/2001
Associated Press Newswires
Copyright 2001. The Associated Press. All Rights Reserved.
HOUSTON (AP) - Executives of Dynegy Inc. and Enron Corp. believe their plan to merge the nation's two dominant energy marketing companies will overcome federal antitrust scrutiny, leading to a completed deal by next summer.
"We really are confident that up and down the line we will be able to convince (federal regulators) this is in the best interest of the energy industry and the two companies," said Chuck Watson, chairman and chief executive officer of Dynegy.
Investors pleased with the deal to bail out the once mighty but now troubled Enron sent the shares of both companies soaring Monday - in midday trading Enron shares were up 10.5 percent, and Dynegy shares rose 12 percent.
Steve Bergstrom, Dynegy's president, said the closest regulatory scrutiny would come from the Federal Energy Regulatory Commission, but that he expected all antitrust hurdles would be cleared within the next six to nine months.
The deal, worth at least $9 billion, was announced Friday. Dynegy also will assume $13 billion of Enron debt.
Enron became a takeover target after its stock plunged about 80 percent in recent weeks because of concerns that the nation's top buyer and seller of natural gas wasn't revealing serious financial problems to shareholders.
Dynegy officials pledged Monday that they won't tolerate the sort of financial practices that prompted Enron to acknowledge last week that it overstated earnings by about 20 percent since 1997 and kept more than half a billion dollars in debt off the company's books.
Those financial practices included business partnerships now under investigation by the Securities and Exchange Commission.
"Dynegy will manage the new company in the way we've managed the old company. We will substantially simplify the balance sheet," said Rob Doty, Dynegy's chief financial officer.
After the merger is completed, the Enron name will disappear. Watson will serve as chairman and chief executive of the combined company. Dynegy's stockholders will own about 64 percent of the new company and Enron's stockholders will hold the rest.
Enron's stock price began to free fall after Enron announced a $618 million third quarter loss on Oct. 16 and disclosed a $1.2 billion reduction in shareholder equity related to the partnerships. That was followed by news of the SEC investigation.
Enron responded by firing its chief financial officer, Andrew Fastow, who ran the partnerships, and scrambled to get cash and increase credit lines to regain investor confidence. Investors didn't respond and dumped Enron shares, sending its stock plummeting.
The deal to merge the companies was announced after the stock markets closed on Friday, and investors reacted positively to the news Monday.
In midday trading, Dynegy shares rose $4.63 to $43.39 on the New York Stock Exchange. Enron shares were up 91 cents to $9.54 on the NYSE - but still much lower than the 52-week high of $84.87.

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

Dynegy Call -4: Held Talks With Ratings Agencies

11/12/2001
Dow Jones News Service
(Copyright (c) 2001, Dow Jones & Company, Inc.)
Dynegy's Bergstrom said he expects the acquisition of Enron will receive the needed regulatory approvals and close within the next six to nine months.
In addition to approval by the Securities and Exchange Commission, the deal must be approved by the Federal Energy Regulatory Commission.
"We expect FERC to be the pacesetter," Bergstrom said.
Until the deal closes, Dynegy expects Enron will have "sufficient interim liquidity," Doty said. "(The cash infusion) should immediately put to rest the liquidity concerns."
Based on conversations Dynegy had with the leading credit rating agencies management expects Enron's ratings to remain investment grade, Doty said. Meanwhile, Dynegy's ratings are expected to be affirmed at their current ratings, but be placed on watch for a downgrade until the transaction is completed, he said.
According to Doty, Dynegy expects its debt-to-capital ratio will be below 40% after the acquisition closes.
Enron said it wouldn't comment on reports published in The Wall Street Journal Monday that said its bankers, J.P. Morgan Chase & Co. (JPM) and Citigroup Inc. (C) are considering making an additional $500 million investment in Enron.

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

Dynegy Conference Call Demand Jams Phone Lines, Internet

11/12/2001
Dow Jones Energy Service
(Copyright (c) 2001, Dow Jones & Company, Inc.)
HOUSTON -(Dow Jones)- A Monday morning conference call by Dynegy Inc. (DYN) and Enron Corp. (ENE) to discuss their proposed merger had hundreds listening over the phone and thousands via a Website.
But an unknown number were unable to access either the call or the Webcast.
"We were able to accommodate 925 people on the phone," said Jennifer Rosser, a Dynegy spokeswoman. The company had originally reserved 750 phone lines for the conference call.
"Approximately 30,000 people logged onto the Webcast," Rosser said. "We had to limit it to that number before it crashed the Webcast."
Those unable to hear the call waited 10 minutes or more before being told that all the phone lines reserved for conference call were taken.
The Web site also took a potential user's information and then came back with a message saying the Webcast was unavailable.
The merger agreement by which Dynegy would purchase Enron for $8 billion to $9 billion plus debt was announced Friday.
"Monday morning was the first time for a lot of people to have the opportunity to hear the executives talk about (the merger)," Rosser said.
A replay of the conference call may be heard by calling (888) 568-0511. The replay will be available from 1 p.m. EST today through 6 p.m. EST Friday.
-By Erwin Seba, Dow Jones Newswires, 713-547-9214 erwin.seba@dowjones.com

A replay of a Monday morning conference call by executives of Dynegy Inc. (DYN) and Enron Corp. (ENE) is available at 1-888-568-0510.
(An item published at 12:24 p.m. EST (1724 GMT) misstated the phone number.)

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

S&P Says Doesn't Fully Understand All Enron Partnerships
By Christine Richard and Michael Barr
Of DOW JONES NEWSWIRES

11/12/2001
Capital Markets Report
(Copyright (c) 2001, Dow Jones & Company, Inc.)
NEW YORK -(Dow Jones)- Enron Corp. (ENE) has retained its investment grade rating because Dynegy Inc.'s (DYN) bid to take over the beleaguered company has restored some much needed investor confidence, Standard & Poor's analysts said Monday during a conference call.
In fact, in the absence of any deal, such as that put forward last week by Dynegy, Enron would be rated low double-B or high single-B, S&P analysts said. S&P recently lowered Enron's rating to triple-B minus from triple-B, leaving it one notch above speculative grade status.
That's important because Enron's substantial trading operations are heavily reliant on a strong credit rating to alleviate counterparty credit concerns.
S&P also said Monday that it was placing Dynegy's rating on review for possible downgrade following the news that Dynegy was making a stock-for-stock bid for Enron. S&P has assigned Dynegy a senior unsecured debt rating of triple-B.
S&P officials stressed that what has weighed most heavily on Enron's rating in the last few weeks has been declining investor confidence.
"The company is not in danger of imminent bankruptcy, or default," said Ron Barone, an S&P analyst.
However, the S&P read on investor confidence is that "Enron is not all that viable right now," said one analyst.

S&P analysts stated that they might not fully understand all the Enron partnerships.
"There is a little uncertainty about all the partnerships that Enron has," said Barone. But, S&P analysts added, they did understand the financial impact of the partnerships that have been disclosed.
Enron stock and bonds have been battered since the company revealed the extent of its dealings with partnerships set up and run by its former chief financial officer, Andrew Fastow.
While S&P is assuming Enron has disclosed all the relevant information about those partnerships, there may be more details forthcoming as a special committee established by Enron goes about its work, they added.
S&P's downgrade to of Enron to triple-B-minus was due to an erosion of investor confidence, analysts stressed. And, the Enron Negative CreditWatch "was a heads-up to Enron counterparties," said an analyst.
S&P analysts said that despite the decision to place Dynegy on Negative CreditWatch, the ratings could remain at the same level, at triple-B.
For that to happen, it will be necessary for Dynegy to dispose of non-core assets that "could impair the new Dynegy balance sheet," said an S&P analyst. It will also be necessary for the company to successfully integrate Enron's trading business into its own, retaining key employees. -By Michael C. Barr, Dow Jones Newswires; 201-938-2008;
michael.barr@dowjones.com
-By Christine Richard; Dow Jones Newswires, 201-938-2189;
christinerichard@dowjones.com

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

INDIA: Utilities to value Enron's Indian assets - lender.

11/12/2001
Reuters English News Service
(C) Reuters Limited 2001.
BOMBAY, Nov 12 (Reuters) - Two Indian private utilities will start valuing Dabhol Power Co's assets in a few days as a prelude to possibly buying U.S. energy major Enron Corp's majority stake, the Industrial Development Bank of India (IDBI) said on Monday.
The Tata Power Co and BSES Ltd wish to start "due diligence" - inspect the financial records and operations with a view to arriving at a offer price - of Dabhol's $2.9 billion power plant on the west coast of India, the project's lead lender said in a statement.
Enron has been seeking to exit the project since May, but its task of finding a buyer has taken on more urgency after its desperate financial troubles at home.
The largest U.S. energy trader has agreed to be bought out by a smaller rival, Dynegy Inc, as it tries to salvage its crumbling business empire.
IDBI's statement comes after three days of closed-door negotiations at the weekend in Singapore between the Indian lenders' representatives and Enron.
Officials from Tata Power, India's largest private power company, and another leading private utility, BSES Ltd, also attended the meeting.
The two companies have emerged as potential candidates for buying the entire 85 percent foreign holding in Dabhol, which was to build and run the 2,184 MW plant, the country's largest foreign direct investment.
Enron owns 65 percent of Dabhol, General Electric Co and Bechtel Corp own 10 percent each, and the Maharashtra State Electricity Board holds the remaining 15 percent.
"The sale price of the shareholding of Enron and its associates in DPC would be decided by the concerned parties through mutual negotiations," the statement from IDBI said.
Officials at the lending institutions said that given its troubles at home, Enron could now be willing to sell its stake at a considerable discount.
Indian banks and institutions have provided loans and guarantees of around $1.4 billion to the plant.
OLD DISPUTE
The first phase of Enron's controversial Indian project has been completed, but work on the second phase was abruptly stopped in June following a bitter dispute between Enron and a local utility, the Maharashtra State Electricity Board, the plant's sole buyer.
The cash-strapped Indian utility had in 1995 contracted to buy all the power from Dabhol but it later said it did not need all the power and that it was too costly.
While Dabhol has said it would prefer to resolve its dispute with the Board amicably, it felt the discussions with the power plant's Indian lenders and the government were not progressing.
If the current round of negotiations do not bear fruit, Enron may terminate the contract and file for damages in the International Court of Arbitration in London.
The country's largest term lender, IDBI and other Indian lenders in the consortium like ICICI Ltd and State Bank of India have already moved an Indian court to prevent DPC from issuing a final notice to terminate its contract with the loss-making Board.
They fear that if Enron is unable to sell its stake and terminates its contract with the utility, it could end up defaulting on its loans.
Dabhol served a preliminary notice in May to terminate the project and can serve a final notice if a six-month cooling-off period fails to produce a solution.
That six month deadline ends on November 19.

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

Fitch Downgrades Marlin Water Trust II and Osprey Trust I

11/12/2001
Business Wire
(Copyright (c) 2001, Business Wire)
NEW YORK--(BUSINESS WIRE)--Nov. 12, 2001--Fitch has downgraded the ratings of Marlin Water Trust II's (Marlin II's) approximately $915 million senior secured notes due 2003, and Osprey Trust's (Osprey's) approximately $2.4 billion senior secured notes due 2003 to `BB' from `BBB'.
The ratings are removed from Rating Watch Negative and placed on Rating Watch Evolving.
These rating actions are the result of deterioration in Enron's overall credit profile since the securities were placed on Rating Watch Negative on Oct. 26, 2001. As noted in previous press releases, the ratings of both transactions rely on various forms of support from Enron Corp. A significant factor in establishing the ratings for the two trusts was last Friday's announced agreement to merge between Enron and Dynegy Inc. and the positive implications the transaction has on Enron's credit profile.
The rating of the Marlin II notes is dependent on the overfund account (pre-funded interest) and equity commitment from Enron in the form of mandatorily convertible preferred stock. The overfund account is invested in Enron senior debt securities (rated 'BBB-', Rating Watch Evolving), with payments used to service interest to noteholders. Payment of principal ultimately relies on Enron's obligation to remarket mandatorily convertible preferred securities. Fitch currently rates Enron's preferred securities 'B+' Rating Watch Evolving. In addition, the transaction also benefits from rights under a $125 million loan to Azurix Europe Limited, rated `BBB+' by Fitch. Similarly, the rating of the Osprey I notes is based on the underlying ratings of the assets in an overfund account and the share trust used to support interest payments and an equity commitment from Enron to remarket mandatorily convertible preferred stock to fund principal payments. The assets supporting interest payments include Enron unsecured obligations as well as quarterly interest payments on the mandatorily convertible preferred stock, which has been issued and is being held in the share trust.
While various sources of repayment exist, such as sale or liquidation of the underlying assets or an equity offering, in each case primary credit support is derived from Enron's obligation to remarket mandatorily convertible preferred stock if an amount sufficient to repay the notes has not been deposited with the trustee on the 120th day prior to the maturity date, which is one of the Note Trigger Events. In the event that the issuance of the preferred stock yields less than the amount required to redeem the senior notes, Enron is required to deliver additional shares. If Enron cannot or does not deliver on this obligation, subject to certain standstill periods, then the amount of the deficiency becomes a payment obligation of Enron, representing a general unsecured claim. Considered in the ratings is Fitch's view that Enron's payment obligation is not equal to an Enron guarantee. Additional Note Trigger Events include a downgrade of Enron's senior unsecured debt below investment grade by any of the major rating agencies in conjunction with specified declines in Enron's closing stock price over three consecutive trading days, as well as customary events of default under the notes.

CONTACT: Fitch Donna DiDonato, 1-212-908-0637 Ralph Pellecchia 1-212-908-0586 Hugh Welton 1-212-908-0746, New York
10:40 EST NOVEMBER 12, 2001

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

USA: Enron, Dynegy shares rise amid mixed investor view.

11/12/2001
Reuters English News Service
(C) Reuters Limited 2001.
NEW YORK, Nov 12 (Reuters) - Shares of Enron Corp. rose early Monday after rival energy trader Dynegy Inc. agreed to buy out the beleaguered energy giant for about $9 billion, a deal on which analysts took a mixed view.
Shares of Dynegy gained $2.24, or 5.8 percent, to $41 in early trade on the New York Stock Exchange, while shares of Enron rose 73 cents, or 8.9 percent, to $9.40.
Industry analysts were divided on the outlook for Dynegy, a Houston-based energy trader that is about one-fifth the size in revenue terms to Enron, the biggest energy trader in North America.
Jay Yannello of UBS Warburg reiterated its "strong buy" on Dynegy, saying while the brokerage does not underestimate the enormous challenge at hand, the takeover should yield the biggest and most credible energy merchant in the world.
Enron's trading operations combined with Dynegy's above-board culture based on teamwork, strict values and honesty should yield a formidable company..
"We view the both the near and long-term upside potential of this deal as staggering," he said.
Gordon Howald, an analyst at Credit Lyonnaise Securities, also said he is favorably disposed toward the takeover, which he called a "low risk/high reward proposition." The most critical component is the immediate $1.5 billion equity infusion by Dynegy shareholder ChevronTexaco into Enron will bolster Enron and help keep it viable.
"It appears ... that Dynegy has enough 'out' clauses to at least protect itself if it decides not to pursue this transaction in the future," said Howald.
However, Howald said he is not convinced this is indeed an offensive move on Dynegy's part, but rather a defensive to move to protect itself and the industry from a potential Enron bankruptcy.
But even if it is defensive, Dynegy walks away from the deal with the rights to Enron's Northern Natural Gas pipeline, which produced about about half of Enron's pipeline earnings, and $350 million in cash, he said.
Carol Coale, an analyst with Prudential Financial in Houston who maintained a buy rating on Dynegy remains skeptical on the outcome of the merger, which looks good on paper but hinges on the certainty of Enron's future earnings per share.
She said because Enron restated its net income over the past four years, "we believe the accounting basis for other complex financial transactions will be called into question."

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

USA: Dynegy sees 15-20 pct earnings growth with Enron.

11/12/2001
Reuters English News Service
(C) Reuters Limited 2001.
HOUSTON, Nov 12 (Reuters) - Dynegy Inc. said on Monday it expects 15 to 20 percent annual earnings growth over the next three years following its planned acquisition of larger energy trading rival Enron Corp..
The earnings growth projection was made by Dynegy Chief Financial Officer Rob Doty in a conference call with analysts.
Dynegy said on Friday that it had agreed to buy Enron in a stock swap worth about $9 billion. It is offering Enron stockholders 0.2685 shares of Dynegy stock in exchange for each Enron share.
Dynegy will also assume some $2 billion in preferred stock and $13 billion in debt from Enron.
Dynegy launched its acquisition plan after Enron became engulfed in a series of problems including an investigation by U.S. regulators of off-balance-sheet financing deals and a series of damaging downgrades by credit rating agencies.

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

Business
Markets Desk: Airline Stocks Rocked By Queens Crash; Dynegy & Enron Deal Update
Rhonda Schaffler, Chris Huntington

11/12/2001
CNNfn: Market Coverage - Morning
(c) Copyright Federal Document Clearing House. All Rights Reserved.
RHONDA SCHAFFLER, CNNfn ANCHOR, MARKET CALL: We have to update you on the markets as well; we have seen the stocks turn around. In fact futures closed lower as this plane crashed in Queens and the markets that were poised to open higher began selling off. They have recovered somewhat.
What we`re going to do now is go to the "Markets Desk". Chris is tracking some things for us.
Chris?
CHRIS HUNTINGTON, CNNfn CORRESPONDENT, MARKETS DESK: Rhonda, as we`ve been telling you transportation issues hit very, very hard. The New York Transportation, that transportation index right now down more than 2.4 percent, down 56 points.
Let`s look some of the big movers. Obviously, airline stocks are being punished. We have Delta Air Lines (URL: http://www.delta-air.com/) down more than $3, Continental Airlines (URL: http://www.continental.com/) down more than $2. And UAL, (URL: http://www.ual.com) parent of United, down more than $1.30. AMR (URL: http://www.amrcorp.com/) parent of American down more than $2.60; USAirways (URL: http://www.usairways.com/) stock down nearly 10 percent.
Hotel stocks, again these are many of the same issues that were sold off sharply following the September 11th attacks, for obvious reasons. Hotel stocks, Four Seasons (URL: http://www.fshr.com) down nearly $3. Marriott down about $1.70; Starwood, (URL: http://www.starwoodlodging.com/) operator of big casinos, $1.35. And Host Marriott, (URL: http://www.hostmarriott.com/) and Hilton Hotels (URL: http://www.hilton.com/) also down sharply about 5 percent and 10 percent, respectively.
Aircraft parts makers and aircraft makers, Boeing (URL: http://www.boeing.com/) shares down about 5 percent. Lockheed Martin, (URL: http://www.lockheedmartin.com) even though the big defense stock moved up sharply after September 11th, a little bit of a sale now. You can see there, Lockheed Martin shares. General Electric (URL: http://www.ge.com/) shares down $1.11. There was believed to be possibly some kind of engine failure involved in this. That is preliminary, eyewitness reports. United Technologies (URL: http://www.utc.com/) also, Pratt & Whitney, parent company, down $2.91.
On the upside security related stock, again these are the typical knee-jerk reactions we`ve unfortunately become used to in this new market environment. Visionics (URL: http://www.visionics.com/) which is a maker of identification security systems, up $2 there; Envision technologies, (URL: http://www.edvcorp.com/) which is the the leading maker of bomb detection hardware for airport use. Theoretically, to detect bombs in checked baggage, up about a $1.58. Viisage Technology, (URL: http://www.viisage.com/) also an identification technology company; Magal Security, which concentrates on so-called perimeter security, motion detectors; and OSI Systems (URL: http://www.osi-systems.com/) a cargo checking provide cargo checking, provides cargo checking security systems, optically oriented in that way.
Now, another big business deal nothing to do with the plane crash situation. Dynegy (URL: http://www.dynegy.com/) and Enron (URL: http://.www.enron.com/) held a conference call this morning trying to explain to analysts and the media exactly how that deal transpired. As you may know, Dynegy agreeing to buy Enron, a stock swap. Trading basically, .27 shares each of Dynegy for Enron. No fixed pricing date set, so far. Typically the way these work is there is an average period of pricing. But basically, right now, Dynegy shares are up sharply.
I just took a look, if Dynegy shares close at $43 a share, that would price Enron at about $11.50, so a sharp premium where Enron closed on the weekend. And basically, nothing new coming out of the execs, the think it is a good deal. And the believe that all of the bad news about Enron`s books are on the table.
Rhonda?
SCHAFFLER: OK. Thank you, Chris. We are going to do is rejoin CNN`s coverage of crash of AMR flight 587.

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

Innogy Resumes Trading With Enron After 14-Day Break

11/12/2001
Dow Jones Energy Service
(Copyright (c) 2001, Dow Jones & Company, Inc.)
LONDON -(Dow Jones)- Innogy PLC (IOG) resumed trading with Enron Corp (ENE) Monday, after having ceased to trade with them for 14 days based on concerns about Enron's financial position, Innogy said in a statement Monday.
"We remain cautious, but we believe that Enron has turned the corner. The situation with Enron has had little impact on Innogy as we provide liquidity within the market and are not likely to be affected," said Brian Senior, director of trading and asset management at Innogy.
-By Sarah Spikes, Dow Jones Newswires; +44-(0)20-7842-9345; sarah.spikes@dowjones.com

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

Dynegy Pres: Enron's Core Business Is Very, Very Strong
By Christina Cheddar
Of DOW JONES NEWSWIRES

11/12/2001
Dow Jones News Service
(Copyright (c) 2001, Dow Jones & Company, Inc.)
NEW YORK -(Dow Jones)- Dynegy Inc. (DYN) Chairman Chuck Watson said he sees "nothing but upside" ahead from the company's planned acquisition of Enron Corp. (ENE), which was announced late Friday.
In addition to being a sound strategic move, the deal "injects confidence into the energy markets," said Watson, founder of the Houston energy trading firm, in a conference call held Monday to discuss the $8.85 billion takeover of Enron.
On Friday, Dynegy confirmed the widely speculated deal by announcing it would buy its cross-town rival in a stock swap that values each Enron share at 0.2685 of a Dynegy share.
The sale of Enron for only a quarter of its share price a month ago, or just a quarter of its all-time high of $90 a share reached just last year, follows an abrupt turn in Enron's fortunes.
Last week, Enron, which is the nation's biggest trader of natural gas and electricity, admitted its financial statements going back to 1997 couldn't be relied upon and would have to be restated. The company made accounting errors in recording transactions from some of its limited partnerships. The company also misstated its level of debt and its shareholder equity over this period.
Enron's partnership dealings are being investigated by the Securities and Exchange Commission, and have sparked a number of shareholder lawsuits.
Over the past month, new revelations about Enron's web of partnerships and off-balance sheet financing vehicles have been uncovered almost daily.
During the conference call, Kenneth Lay, Enron's chairman and chief executive, said it was a "very reflective time" for him.
When Lay transformed Enron from a natural gas pipeline company into a dynamic energy trading company that was a darling on Wall Street, this was clearly not what he had in mind.
Lay said, "I didn't expect to create the world's next leading energy trading company by merging Enron into another company."
Enron officials said they were continuing their internal investigations of its accounting practices.
"We have disclosed anything and everything we have found so far," Lay said.
Enron President and Chief Operating Officer Greg Whalley, who will remain with Dynegy after the merger as an executive vice president, said Enron will host a conference call "later this week" to further discuss recent events at the company. The call will likely be held on Wednesday, he said.

In light of the uncertainty surrounding Enron's financial dealings, it is not surprising that quite a number of questions during the conference call focused on the company's liquidity and the potential liabilities Dynegy would assume in the transaction.
Dynegy's acquisition agreement allows the company to walk away if Enron's additional legal and financial liabilities exceed $3.5 billion. There also are other "material adverse change," or MAC, provisions, officials said.
Upon the closing of the acquisition, Dynegy expects to post reserves to cover the cost of outstanding litigation, said Dynegy's Doty.
"We believe we have adequately bracketed the downside," said Dynegy's Watson. "There has to be a substantial, substantial material change in what we already know ... I don't want to minimize the impact. That's why we have MAC outs."
According to Dynegy's Bergstrom, the economics of the transaction assumed the potential risk from outstanding lawsuits.
"Even in that worst-case there is a substantial amount of economic value here," Watson said.
Dynegy expects to continue its due diligence in the months leading up to the deal's close, Bergstrom said.
Dynegy's examination of the business so far has turned up "no surprises" in Enron's core energy trading business, Bergstrom said. However, the merger agreement has provisions in case the company's examination does reveal any, Bergstrom said.
"We don't expect to find anything material," he said, adding that Enron's core energy business is "very, very strong."
Based on its current information, Dynegy expects the acquisition to increase earnings by 35%, or between 90 cents to 95 cents a share, before taking into account expected merger cost savings. As a result, Dynegy now expects its full year pro forma earnings for 2002 to be in the range of $3.40 to $3.50 a share.
According to Thomson Financial/First Call, analysts were expecting Dynegy to earn $2.57 a share next year. In 2000, the company earned $1.43 a share before items.
Dynegy has estimated cost savings from the acquisition at between $400 million to $500 million.
The ratio of stock Enron shareholders will be paid is fixed and there is no collar to limit its range, said a Dynegy spokeswoman.
There isn't a walkaway provision, but if the deal is terminated, Dynegy will own rights to Enron's Northern Natural Gas pipeline because of the $1.5 billion cash infusion it will provide to the company immediately.
Dynegy able to give Enron the cash infusion immediately because ChevronTexaco Corp. (CVX), which owns slightly more than a fourth of Dynegy, will invest $2.5 billion in Dynegy.
The deal has a $350 million "topping fee," a Dynegy spokeswoman said. She explained that if either party decided to terminated the transaction, that party would owe the other the "topping fee" if it were acquired by another party.

Dynegy's Bergstrom said he expects the acquisition of Enron will receive the needed regulatory approvals and close within the next six to nine months.
In addition to approval by the Securities and Exchange Commission, the deal must be approved by the Federal Energy Regulatory Commission.
"We expect FERC to be the pacesetter," Bergstrom said.
Until the deal closes, Dynegy expects Enron will have "sufficient interim liquidity," Doty said. "(The cash infusion) should immediately put to rest the liquidity concerns."
Based on conversations Dynegy had with the leading credit rating agencies management expects Enron's ratings to remain investment grade, Doty said. Meanwhile, Dynegy's ratings are expected to be affirmed at their current ratings, but be placed on watch for a downgrade until the transaction is completed, he said.
According to Doty, Dynegy expects its debt-to-capital ratio will be below 40% after the acquisition closes.
Enron said it wouldn't comment on reports published in The Wall Street Journal Monday that said its bankers, J.P. Morgan Chase & Co. (JPM) and Citigroup Inc. (C) are considering making an additional $500 million investment in Enron.

Dynegy officials said marketplace speculation that suggested Dynegy was acquiring Enron because it was afraid Enron would default on a liability it owed Dynegy was incorrect.
"Dynegy currently owes Enron an immaterial amount, less than $50 million," said Dynegy's Doty.
The chief financial officer also pledged to make the combined company's balance sheet more easy to understand than that of Enron.
But integrating the two energy trading companies will be more than just combining their balance sheets.
According to Enron's Whalley, the integration of Enron's non-core assets trading businesses will be rather simple, but combing the core trading businesses "will not be the easiest thing to do."
One prevalent concern is that Enron's trading talent will depart for other jobs, and erode the true value of the business, which is rooted in intellectual capital.
The employees have seen their value of compensation, which was partially paid in stock options, erode with the value of Enron's shares.
"I believe we will retain the people we already have," Whalley said. "Most traders want to be part of the winning team."
However, the officials didn't say whether they were making any specific efforts to retain staff.
Still, in the end, callers were most interested in learning more about Enron's past accounting practices and the potential effects it will have on the future Dynegy.
Officials from both companies said they couldn't tell yet if there were any additional details that needed to be revealed.
Enron's newly appointed chief financial officer, Jeff McMahon, said "Could there be more? Possibly. Do we expect more? No."
Mahon replaced Andrew Fastow, who resigned after questions arose related to a partnership he ran while chief financial officer of Enron. Fastow's activities are at the center of the SEC probe of Enron's financial dealings.
-By Christina Cheddar, Dow Jones Newswires; 201-938-5166; christina.cheddar@dowjones.com

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

USA: Enron advisors seen mulling investment-WSJ.

11/12/2001
Reuters English News Service
(C) Reuters Limited 2001.
NEW YORK, Nov 12 (Reuters) - Enron Corp. advisors J.P. Morgan Chase & Co. and Citigroup Inc. are considering investments of $250 million each in the troubled energy trading giant, The Wall Street Journal said on Monday.
Citing people familiar with the matter, the newspaper said word of the possible investment helped bolster Enron's financial outlook while it negotiated the $9 billion merger with Dynegy Inc. announced late on Friday.
Such a move would be unusual, as investment bankers traditionally don't put money into takeover deals they help negotiate, the Journal said. But it quoted its sources as saying word of the possible investments may have helped fend off a possible deal-breaking downgrade of Enron's debt by Moody's Investor Services.
On potential stumbling block to the Dynegy deal is the concern of credit-rating agencies, particularly Moody's, about the worsening financial condition of Enron, the Journal said.

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

Duke Is Owed About $100 Mln By Enron, Executive Says (Update2)
2001-11-12 17:07 (New York)

Duke Is Owed About $100 Mln By Enron, Executive Says (Update2)

     (Adds Duke's off-balance sheet debt in sixth paragraph.)

     Charlotte, Nov. 12 (Bloomberg) -- Duke Energy Corp., the
largest U.S. utility owner, said it is owed about $100 million
from energy trading with Enron Corp.

     ``Exposure that Duke has to Enron is not material,'' Jim
Donnell, chief executive of Duke's U.S. trading unit, Duke Energy
North America, said on a conference call.

     ``The vast majority of our transactions'' are backed by cash
or a bank, he said. ``For those that aren't, our maximum exposure
is no more than $100 million. We continue to trade with Enron
today as we have in the past.''

     Duke said last month third-quarter earnings before interest
and tax from trading and power generation more than doubled to
$618 million from the same time a year earlier. Shares of
Charlotte-based Duke rose 39 cents to $40.05. They've fallen 6
percent this year.

     Rivals including Mirant Corp. and Aquila Inc. have said
they've shifted transactions away from Enron, the biggest energy
trader. Enron agreed Friday to be purchased by Dynegy for $23
billion in stock and assumed debt after concerns about losses in
affiliated partnerships helped drive Enron's shares down 75
percent since Oct. 16.

     Duke has about $621 million of debt in three joint ventures
that isn't on its balance sheet, Chief Financial Officer Robert
Brace said. It hasn't created partnerships to take debt off its
books, he said.

     Duke expects ``minimal'' affect on its trading business from
Dynegy's acquisition of Enron, which the companies expect to
complete in the third quarter of next year, Donnell said on the
call. ``There are other trading platforms out there,'' he said,
``It doesn't concern us them getting together.''

     Shares of Dynegy surged $5.55, or 14 percent, to $44.31.
Enron rose 61 cents to $9.24. Both companies are based in Houston.

Dynegy Shares Surge After It Agrees to Buy Enron (Update3)
2001-11-12 17:05 (New York)

Dynegy Shares Surge After It Agrees to Buy Enron (Update3)

     (Adds Watson comment on importance of ChevronTexaco in 10th
paragraph.)

     Houston, Nov. 12 (Bloomberg) -- Dynegy Inc. shares rose 14
percent as Chief Executive Officer Chuck Watson told investors the
company's planned $23 billion purchase of Enron Corp. will boost
earnings by 35 percent next year.

     Shares of Dynegy rose $5.55 to $44.35. Enron rose 61 cents,
or 7.1 percent, to $9.24. The companies announced after the stock
market closed Friday that Enron, the largest energy trader, had
agreed to be acquired by smaller rival Dynegy for $8 billion in
stock and $15 billion in assumed debt.

     ``If this deal is consummated, 2003 could be a banner
earnings year for Dynegy,'' said Gordon Howald, a Credit Lyonnais
Securities analyst who raised his rating on Dynegy to ``buy'' from
``add'' and doesn't own the shares. ``It could significantly set
it apart from its peers and solidify its position as the energy
merchant market leader.''

     The purchase will add 90 to 95 cents a share to earnings in
2002, Dynegy predicted Friday. Dynegy, which had been expected to
earn $2.57 next year, now expects 2002 earnings of $3.40 to $3.50.

     Dynegy will have net income of more than $2 billion in 2003
if the merger closes, Chris Ellinghaus, an energy analyst at
Williams Capital Group, said in a report. Dynegy's 2000 net income
was $501 million.

                       ChevronTexaco Backing

     Robert Doty, Dynegy's chief financial officer, today
predicted Enron will keep its investment-grade rating until the
acquisition is completed. Doty said he expects a mid-`BBB' credit
rating for the combined company, near the lowest investment grade.
     If the rating falls below investment grade, Enron could be
forced to buy back bonds early from partnerships for as much as
$3.3 billion.

     A key element to Moody's maintaining its rating and backing
the buyout was ChevronTexaco Corp.'s support, Watson said.
ChevronTexaco will provide $1.5 billion to Enron immediately and
$1 billion to Dynegy after the merger closes.

     ChevronTexaco, the second-biggest U.S. oil company, owns 26
percent of Dynegy. By stepping in, it reassured investors that
Dynegy would have enough money to operate after the merger, even
if all the problems with Enron's partnerships have not been
disclosed, analysts and company officials said.

     ``I can't emphasize enough how important our relationship
with Chevron is to this company,'' Watson said.

     Enron has been battling a cash crunch and a loss of investor
confidence because of questions about partnerships it started and
put under the control of its senior executives. Investors feared
the company was using the partnerships to hide losses and debt.
Before today, its stock had plunged 90 percent this year.

                         `Financial Noise'

     Last week, Enron restated earnings for four years to include
losses from affiliated partnerships, reducing earnings by
$586 million. In an interview after the merger was announced,
Watson said he's convinced Enron's trading operations are sound
and described disclosures about affiliated partnerships as
``financial noise.'' Enron's trading provides 97 percent of its
revenue.

     ``All the financial noise about the partnerships, maybe it
has damaged the Enron brand a bit,'' Watson said. ``But I'll tell
you what it hasn't impacted, and that's the high regard that the
industry places on'' Enron's trading business, he said.

     If the acquisition is completed, Dynegy will get Enron's
energy-advising business, which helps other companies find ways to
cut electricity and natural-gas costs. Dynegy has been trying to
develop that business on its own, said Jim Walline, a fund manager
with Lutheran Brotherhood, which owned about 306,000 Dynegy shares
and 93,000 Enron shares on Sept. 30.

     The rise in Dynegy's share price increased the offer's value
to $11.85, one-fourth Enron's average stock price over the last 12
months.

     ``For Dynegy it looks like a steal,'' Walline said.
     Dynegy can cancel the acquisition if Enron's legal
liabilities exceed $3.5 billion, Doty said. That amount includes
possible awards against Enron because of shareholder lawsuits.
Shareholders have accused Enron executives of improperly profiting
from the partnerships, and of not disclosing the effects on the
company's earnings.

                      Protecting Shareholders

     ``I fully believe management has thought of every downside
scenario to protect Dynegy shareholders,'' said James Yannello, an
analyst at UBS Warburg. He rates Dynegy ``strong buy'' and doesn't
own its shares. ``I think the odds of exhausting that $3.5 billion
cushion are very low.''

     Dynegy officials said they don't plan to form limited
partnerships similar to those formed by Enron.

     ``We will run this company much more conservatively from a
financial point of view and wouldn't expect anything like this to
happen in the future,'' Doty said.

     Enron doesn't expect to find more losses from the
partnerships or affiliated companies it already has in place,
Enron Chief Financial Officer Jeffrey McMahon said.

     ``Could there be more? Possibly,'' McMahon said. ``Do we
expect more? No. We've done an awful lot of work, but it's fair to
say the investigation remains ongoing.''

     Moody's Investors Service on Friday lowered its rating on
Enron's long-term debt to ``Baa3,'' one notch above junk. The
credit-ratings company today placed Dynegy and its Illinova
utility units under review for a possible downgrade because of the
Enron buyout.

     Energy traders began limiting trade with Enron last month
because its plunging stock price prompted concerns about
creditworthiness. Some said today that they haven't resumed normal
dealings. ``We're continuing to trade with them on a very limited
basis, and we'll continue to do so until the proposed Dynegy
buyout develops further,'' said James Peters, a spokesman for
Atlanta-based energy trader Mirant Corp., an Enron and Dynegy
competitor.

                            Asset Sales

     Dynegy officials said they intend to sell Enron's non-trading
assets, though they haven't set a timeline for the sales. The
company said it expects to get regulator approval of the deal in
six to nine months. Dynegy Chief Operating Officer Stephen
Bergstrom said he expects U.S. Federal Energy Regulatory
Commission approval to come last.

     ``The market's a lot bigger than Enron,'' Mirant's Peters
said.
     On Friday, Dynegy said it will have annual revenue of more
than $200 billion, more than 22,000 megawatts of electric
generating capacity and 25,000 miles of pipeline after the merger.
The company will save as much as $500 million a year before tax by
``winding down'' Enron's business outside of trading and pipelines
and cutting costs, Dynegy said.

     ``If (the buyout happens), you'd have one of the most
attractive energy-related companies in the world,'' said Donald
Coxe, who manages 78,000 Enron shares in the Harris Insight Equity
Fund.

Dynegy's Charles Watson (Transcript of Interview)
2001-11-12 16:30 (New York)

     ****THE FOLLOWING IS AN UNOFFICIAL TRANSCRIPT.****
BLOOMBERG L.P. DOES NOT GUARANTEE THE ACCURACY OF THIS
TRANSCRIPT.

     New York, Nov. 12 (Bloomberg) -- The following is a
transcript of a Bloomberg interview with Charles Watson,
chief executive officer of Dynegy Inc.  The reporter is Dean
Shepherd.

     SHEPHERD:  Back to what would have been our top story,
before news of that plane crash.  Dynegy says it is
convinced that Enron's trading operations are sound.  The
company agreed late Friday, as you know, to buy its rival
for $23 billion in stock and debt.  The terms of the deal
break down like this:  Dynegy investors will get about 10.40
a share for each Enron share.  That's a 21 percent premium,
based on Friday's closing price.  Last week, Enron restated
its earnings for four years - actually, a bit more than
that, to include losses from three affiliated partnerships.
And taking a look at how Enron shares are trading right now,
there you see Enron continuing to rally, picking up another
99 cents to 9.62.  Dynegy up sharply - up 5.24 to $44 even.
And joining us here in the studio is Chuck Watson, the
chairman and CEO of Dynegy.

     Chuck, good morning.

     WATSON:  Good morning.

     SHEPHERD:  Good to see you again.

     WATSON:  Good to see you.

     SHEPHERD:  Why buy Enron?  Why buy into what, from all
appearances over the last month, has been a mess?

     WATSON:  Well, I think it's important to understand
that the mess that everybody is talking about was not in
their core business.  The mess is on the partnerships and
the litigation surrounding those partnerships.  The core
business has really not been materially impacted.  And we
knew that, being in the business and being counterparties to
Enron for some time.  So we had a little bit of a
competitive advantage, in terms of looking at this, because
we're in a unique position.  I mean, we know the people.
We're right there in Houston.  They're right across the
street from us.  We know a lot of the people.  We didn't
think the core business was affected.  They have a
tremendous pipeline operation that's been an outstanding
leader for years. And they've got this market trading
organization in North America and in Europe.  And what we
viewed was the core business, which we would retain, was
very sound and pristine and, in fact, it is and it's the
investments outside - some inside the U.S. and outside of
the U.S. that have not been stellar.

     SHEPHERD:  I wondered, as I've sat in this very chair
last week and reported that Enron was restating its
earnings, I wondered out loud whether they were restating as
a result of you going in and - with your team and taking a
look at their books?

     WATSON:  No, that's not true.  Actually, they've got a
- had an internal investigation going on for some time,
which provided us a lot of comfort, as well, because we have
the benefit of that, that had been going on for weeks,
before we even got in there.  So it had clearly been
something that they were doing on their own.  I think
they've been as forthcoming as they can.  As soon as they
know the facts, they've been reporting them.  And we had -
and we actually wanted to get that information out because
all that has been, you know, boiled into the economics of
this transaction.

     SHEPHERD:  What portions of the business do you expect
to shed?

     WATSON:  Well, obviously, they've already had about $4
billion of assets up for sale, including Portland General,
it's about 3 billion of that.

     SHEPHERD:  Right.

     WATSON:  And then most of the international assets,
we'll take a hard look at.  It's not really core to Dynegy
and, really, to this transaction.  But one of the things
that we've done by inserting with the Chevron Texaco and
Chevron's $2.5 billion and $1.5 billion up front with the
other money that Enron's being able to raise, that will give
us some time.  We don't have to have a fire sale or
anything, but fundamentally, the assets outside the U.S. are
something that were - are not core to our business.

     SHEPHERD:  Are you satisfied that all of the bad news
is out?  Are you satisfied there's not something they're
hiding in there that's going to throw a curve at you?

     WATSON:  Well, I'll tell you, as I said, they've had
internal investigation going on for a while.  We've had some
of the smartest attorneys we know in there and accountants,
and there's been an awful lot of work done in this.  And
everything that they've found has been disclosed.  We,
obviously, don't expect anything else, but to protect our
shareholders, of course, we've got some material adverse
changes conditions that, you know, could get us out of the
transaction if we do, you know, find something.

     SHEPHERD:  So you can walk away, if you see something
that.

     WATSON:  Sure.

     SHEPHERD:  How tough is it going to be to win
regulatory approval?  There's a lot of speculation that
you're really going to have your hands full convincing
regulators that this is a doable deal.

     WATSON:  Well, you know, there's several different
regulatory groups.  But if you think about it, the - from an
asset standpoint, their pipeline operation, interstate
pipeline operation, we don't have one of those, so there's
really not any overlap of assets.  So the discussion really
would be around the size of their marketing group and ours.
But if you look at the percentage of the market, which is
somewhat difficult to determine, this is going to be a
formidable competitor, but there's a bunch of competitors
out there.  There's a very liquid market.  There's no one
company that's ever going to have any particular grasp or
control of energy markets.

     SHEPHERD:  How long do you figure it'll take you to get
the deal done?

     WATSON:  Well, we're hoping that about six months,
maybe nine.  But you know, we're not taking lightly the
regulatory approvals that we have.  We just think we can
work through the issues and, hopefully, we'll get it done in
six to nine months.

     SHEPHERD:  All right.   Chuck Watson, thanks so much
for joining us today.

     WATSON:  Thank you.

     SHEPHERD:  We appreciate your time.

     WATSON:  Appreciate it.

Dynegy Sees Enron Rating Remaining Investment Grade (Update5)
2001-11-12 11:57 (New York)

Dynegy Sees Enron Rating Remaining Investment Grade (Update5)

     (Adds Dynegy expects mid-BBB rating for combined company in
third paragraph and Moody's reviews Dynegy for downgrade in last.)

     Houston, Nov. 12 (Bloomberg) -- Enron Corp., which is being
bought by rival energy trader Dynegy Inc., will keep its
investment grade rating until the acquisition is completed,
Dynegy's chief financial officer predicted.

     Enron's stock rose as much as 20 percent, and Dynegy gained
as much as 16 percent.

     ``From now until closing, we believe Enron will maintain its
investment grade ratings, although on the weak end of investment
grade,'' Dynegy CFO Robert Doty said on a conference call with
analysts and investors. Doty said he expects a mid-`BBB' credit
rating for the combined company.

     Dynegy agreed Friday to buy Enron for at least $23 billion in
stock and assumed debt, ending a financial crisis that threatened
to bankrupt Enron, the largest energy trader. Dynegy will pay more
than $8 billion in stock and assume $15 billion in debt.

     ``If (the buyout happens), you'd have one of the most
attractive energy-related companies in the world,'' said Donald
Coxe, who manages 78,000 Enron shares in the Harris Insight Equity
Fund.

     A federal investigation of Enron's accounting limited its
ability to finance its daily trading business. Dynegy can cancel
its purchase if it determines Enron's legal liabilities exceed
$3.5 billion, Doty said. That amount includes possible shareholder
lawsuits.

                     `Every Downside Scenario'

     ``I fully believe management has thought of every downside
scenario to protect Dynegy shareholders,'' said Jay Yannello, an
analyst at UBS Warburg. He rates Dynegy ``strong buy'' and doesn't
own its shares. ``I think the odds of exhausting that $3.5 billion
cushion are very low.''

     ChevronTexaco Corp., the second-biggest U.S. oil company and
owner of 26 percent of Dynegy, will provide Enron with $1.5
billion immediately. ChevronTexaco will give Dynegy $1 billion
after the merger closes.

     Shares of Enron rose 93 cents, or 11 percent, to $9.56 in
midday trading. Earlier, they reached $10.38. Dynegy gained $4.93,
or 13 percent, to $43.69. Earlier, the stock reached $45. Both
companies are based in Houston.

     Shares of ChevronTexaco, based in San Francisco, fell $1.04
to $88.45.

     Dynegy officials said they intend to sell Enron's non-trading
assets, though they haven't set a timeline for the sales.

     ``We don't necessarily feel like our backs are pinned against
the wall in these asset dispositions,'' Dynegy Chief Executive
Officer Chuck Watson said. ``It's important we get the greatest
value for shareholders.''

     Officials also said Dynegy doesn't plan to form limited
partnerships similar to those formed by Enron, which brought
increased scrutiny to the company's finances and helped push its
stock down 75 percent since Oct. 16.

                       `More Conservatively'

     ``We will run this company much more conservatively from a
financial point of view and wouldn't expect anything like this to
happen in the future,'' Doty said.

     Enron doesn't expect to find more losses from other such
partnerships or affiliated companies, Enron Chief Financial
Officer Jeffrey McMahon said.

     ``Could there be more, possibly,'' McMahon said. ``Do we
expect more, no. We've done an awful lot of work, but it's fair to
say the investigation remains ongoing.''

     Dynegy expects to get regulator approval of the deal in six
to nine months. Chief Operating Officer Stephen Bergstrom said he
expects U.S. Federal Energy Regulatory Commission approval to come
last.

     Moody's Investors Service placed Dynegy and its Illinova
utility units under review for a possible credit-rating downgrade
today because of the Enron buyout.

Dynegy Calls SEC's Probe of Enron `Financial Noise' (Update5)
2001-11-12 11:03 (New York)

Dynegy Calls SEC's Probe of Enron `Financial Noise' (Update5)

     (Updates share prices in 14th paragraph.)

     Houston, Nov. 12 (Bloomberg) -- Dynegy Inc. Chairman Chuck
Watson said he's convinced Enron Corp.'s trading operations are
sound and described disclosures about affiliated partnerships that
helped drive Enron's stock down 67 percent in three weeks as
``financial noise.''

     Dynegy agreed Friday to buy Enron for at least $23 billion,
including at least $8 billion in stock and $15 billion in assumed
debt. Dynegy shares rose as much as 16 percent today. Enron rose
as much as 20 percent.

     In an interview after the merger announcement, Watson and
Enron Chairman Kenneth Lay discussed how the Houston-based
companies reached agreement less than three weeks after Enron's
shares began plunging.

     ``All the financial noise about the partnerships, maybe it
has damaged the Enron brand a bit,'' Watson said. ``But I'll tell
you what it hasn't impacted, and that's the high regard that the
industry places on'' Enron's trading business, he said.

     Enron last week restated earnings for four years to include
losses from three affiliated partnerships, reducing earnings by
$586 million.

     Six employees, out of Enron's 20,000, may have improperly
benefited from the partnerships, Lay said.

     ``I'm sorry those six people seem to have gone somewhat over
the edge in their dealings or transactions, but you can't be
absolutely protected from that in any business,'' he said.

                        Lost Effectiveness

     Lay didn't specify which six people he was referring to. He
removed Andrew Fastow, who helped set up and ran many of the
affiliated partnerships, as chief financial officer on Oct. 24. An
Enron securities filing says Fastow made more than $30 million off
two of the partnerships.

    Fastow ``had lost his effectiveness because of all the press
coverage'' on the affiliates, Lay said.

     Treasurer Ben Glisan and Kristina Mordaunt, a managing
director and a corporate counsel for an Enron division, also were
fired, Enron said in a corporate filing on Thursday. Former
employees Michael Kopper, Kathy Lynn and Anne Yeager were in a
position to profit from partnerships, the filing said.

     ``You trust people, you accept their representations and
proposals,'' Lay said. ``Sometimes when you do that, you get
surprised and disappointed.''

      Both executives said they expect antitrust regulators to
approve the merger because the two companies own different types
of assets and won't dominate any market.

    ``There really isn't anything that lays on top of each
other,'' Watson said Friday night. ``We're not in the pipeline
business and they are. We're in the generation business, and
they're really not.''

     Dynegy shares rose 6.2 percent on Friday after terms of the
Enron purchase leaked to the press. Watson expects the acquisition
to add 90 cents to 95 cents a share, or 35 percent, to Dynegy's
2002 earnings. Enron is selling for $10.41 a share, one-fifth the
average price over the past 12 months.

     Enron stock climbed 97 cents, or 11 percent, to $9.60 in late
morning trading. Earlier, they touched $10.38. Dynegy rose $4.54,
or 12 percent, to $43.30 after touching $45.

                            Cash Crunch

     The rapid decline of Enron threatened to bankrupt the company
and disrupt energy markets. Enron handles an estimated one-quarter
of U.S. electricity and natural-gas trades. A falling credit
rating made it difficult for the company to raise capital needed
to back trades.

     As part of the purchase, ChevronTexaco Corp., which owns 26
percent of Dynegy, agreed to provide Enron with $2.5 billion.
     ``What we found when looked under the hood is that the core
of Enron was still there and working as well as ever,'' Watson
said. ``That business was pristine and had nothing to do with the
partnerships.''

     Dynegy began taking steps toward the acquisition in late
October, when Watson called Lay to offer assistance with Enron's
growing financial crisis, the two men said. That led to a Saturday
morning meeting in Lay's kitchen.

     ``He even made me a breakfast roll,'' Watson said.
     ``He didn't eat it,'' Lay said.
     Lay said he won't be an active manager in the new company.
Watson said Friday that he and Lay hadn't discussed a severance
package.

     As head of Enron, Lay had refocused the Houston operator of
U.S. natural-gas pipelines on trading and international expansion,
boosting reported revenue 20-fold since 1995 to $100.8 billion
last year. He said he doesn't regret the strategy.

     ``Clearly, Enron has gotten involved in business that hasn't
turned out well,'' Lay said, pointing to money-losers Azurix Inc.,
created to supply water and build related projects around the
world, and NewPower Holdings Inc., a seller of electricity to
homes and small businesses. ``But you have to keep in mind, too,
that 12 years ago we weren't in the wholesale merchant (trading)
business. Today that's an incredibly valuable franchise.''

     The trading business, which accounts for about 97 percent of
Enron's revenue, buys electricity, gas and other commodities from
producers and sells them to end users such as utilities and
industrial customers. It also advises big business customers on
energy use and sells them gas and electricity.

                     Reassessing Steel, Lumber

     Watson said the new company will keep trading coal, gas,
power and petroleum products, and plans to expand by buying assets
and using them to develop trading. ``We'll just have to reassess
over time whether we stay in'' trading of steel, lumber and other
non-energy commodities, he said.

     Enron wants to shed its 65 percent stake in Dabhol Power Co.
in India, which is owed $64 million in overdue bills from a state
government agency that has refused to pay the power prices Enron
was promised in contracts.

     ``We have strong legal remedies and we're heading down the
path toward arbitration, but we'd still very much like to work out
a settlement with the government,'' Lay said. Potential buyers
have balked at Enron's $1 billion asking price for Dabhol.

     Neither man would comment on whether Dynegy plans to cut jobs
after the merger, or what will happen to the naming rights to
Enron Field. The Major League baseball stadium is home to the
Houston Astros, and Enron paid $100 million to have its name on
the ballpark.

     ``The name of the company is now Dynegy,'' Watson said.
     Dynegy's acquisition requires approval from U.S. securities,
antitrust and energy regulators. Watson expects soon to share
details of the new Dynegy with regulators from the European Union
and U.K., where Enron operates a trading desk and owns a water
company and two power plants.

     ``I don't know if we are required to do so, but we will talk
to them anyway,'' Watson said.

     ``We don't think there are going to be any problems,'' Lay
said.


I have received questions about interpreting the ratio.   Let me use yesterday's closing price.   The merger probability is derived from a two scenario test, merger closure or merger non closure (there is also a competing offer scenario in reality).    Let's use a closing DYN price of $46.20 yesterday (note I had a typo), at the exchange ratio, (not taking into account timing and dividends), this yields a merged ENE price of $12.40 ($46.20 * .2685).   ENE closed at $10.00 yesterday.   Thus if the market thought there was complete certainty of merger, the prices would converge at $12.40.

Now comes the artful part, the non merger ENE price.    I included another tab (Merger) to sensitize this.  Say we pick an ENE price with no merger of $4.00.   Looking at a deterministic probability, one can look at the distance (difference) in dollars to calculate the probability.  For instance:

ENE merged           12.40
ENE close 14-Nov   10.00
ENE no merger         4.00

Probability of merger = (1-((12.40-10.00) / (12.40 - 4.00))) or 71.4%.

Said another way, there is a 71.4% chance of being worth $12.40 and a 28.6% chance of being worth $4.00, which yields a weighted price of $10.00  ($12.40 * 71.4%)+($4.00 * 28.6%).

I also included a $1 distressed ENE price and a $7 previously observed low end ENE price as scenarios.

Regards,

Michael


Hello Cara,

Please see comments showing below in RED
BTW, if you need me to unroute all daily route & term route for June 22, i will be happy to do so.

Thanks for taking your valuable time and help us to test

Regards,
dluu

From: 	Semperger, Cara
Sent:	Monday, September 24, 2001 8:13 PM
To:	Asem; Bentley, Corry; Poston, David; Smith, Will; Venkataswami, Vishwanatha
Cc:	Luu, Duong
Subject:	Testing the PSW

Good Evening,

We had agreed to just do a test to see what issues were still outstanding in the PSW and Path Confirmation.

I re-ran all the data for June 22 in the West, here are my findings:

Some little things seem to have changed, I am not sure why they changed

>PreSchedule Workspace - Pressing the Enter key makes the cursor go to the cell to the left, and no other way.  Enter+Shift moves the cursor to the right.  This function is different, the Enter key used to function much like it did in Excel, and I am not sure why this change has been made.
Problem fixed - in STAGE

>Path confrimation - The color Pallette is very different, and inferior. Did that get changed? Any color not on the main pallette is now grainy and difficult to read the path thru.
 also, the color on the path is the chosen color, but several fields show as dark grey no matter what color is chosen.  There also seems to be no pattern to why some cells are grey and some aren't.
We did not change color scheme, however, you can reset the default color by click on grid colors button on the tool bar

>The window for the error report now snaps up very small. It was defaulting to the same size as the PSW. This seems different and inferior.
Problem fixed - in STAGE

Functionality bug still to be fixed:

>I routed all of the deals for all the western points, and a spot check still shows that the Physical flag is not showing up properly in Deal Scheduling, although it does show properly in Path Confirmation. I checked many routed deals, not one showed the Physical flag checked.
Problem fixed - in STAGE

Pending features that I am not sure of the status on:

>The Real Time discussion that is currently part of Lotus, but spoke with Poston regarding and I believe he is heading up this effort with you all.
We are currently looking to the solution to this problem. If this feature prevent us from going live, i would suggest that Steve Nat, Dave Poston, you and i need to discuss.

>The Executive report that will replace the AGGSchedVol report and the Daily Excel Summary.
Yes, the new application is available under EnPower launchpad -> Tools -> Executive Report.

In summary:

All other functions seem to be working, and as soon as we nail down the routing one, I can pass the testing off to real time for their final changes before going to production.
It is my intention that once we go to production we have one entire month of parallell testing before the Lotus system is abandoned.

Thanks for your work, let me know when you are ready for me to test again.  I would like to re-test June 22 again if possible.

Thanks,

Cara


Hunter,

I spoke to David Woodstrom and he indicated that Rika had offered him a job in the power group?  I was wondering how they could find a spot in IT?  Just a heads up.

Chris


Ben,

Thanks for the information. I'm looking for a few more items you may be able
to provide,

1) Index for LV Cogeneration II LLC
2) Index for Las Vegas Cogeneration Limited Partnership
3) External Due Diligence Index for Pastoria Energy Facility.

Thanks,
                James J. Heckler
  Global Energy & Project Finance
  V:(212) 325-5809
  F: (212) 325-8323
  CREDIT | FIRST
  SUISSE | BOSTON

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