ENE: The Balance Sheet Matters; Prospects For Further Writedowns

*	ENE shares have declined due to concern over writedowns, actual and
prospective, in our view.  While management announced $2.21 billion in
charges ($1.01 billion through the income statement and $1.2 billion as a
direct charge to shareholders equity) when they reported earnings (see our
10/16/01 note), the prospect of further charges has spooked the stock
*	We think further write-offs are likely at non-core global assets
(Dabhol and South America) and possibly at their broadband unit (already
partially written off).  Several other complex off-balance sheet vehicles
have raised concern.
*	Offsetting these potential hits to shareholders equity are likely
reductions in debt from the proceeds of various asset sales over the balance
of the year
*	Moody's has captured these concerns by putting Enron's senior debt
on review for possible downgrade.
*	We are evaluating these issues and currently maintain our 1H rating.


 <<ENE Write-Off 10-19-01.pdf>>  <<ENE Write-Off 10-19-01.doc>> 

                                                  
Raymond C. Niles
Power/Natural Gas Research
Salomon Smith Barney
(212) 816-2807
ray.niles@ssmb.com

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