January 11, 2002
Enron Canada 'critical' to auction in U.S. 
Unit remains solvent: Part of package to sell trading business, Milnthorp says
Claudia Cattaneo, Calgary Bureau Chief 
Financial Post; with files from Bloomberg News 
CALGARY - Enron Canada Corp. cut half its staff and halted its trading operations while waiting for an auction in the United States that could yield a buyer today for Enron's trading business, the president and chief executive of the Canadian unit said yesterday.
Robson Milnthorp said the Canadian arm will be "critical" to a deal to sell Enron Corp.'s trading business because it has been the most profitable in the company.
The unit remains solvent, with more than $220-million in cash and more than $100-million owed by counterparties -- partners with whom it has contracts -- that are refusing to honour their obligations, he said in an interview.
If there's no bid for the Canadian operation, Enron Canada will look for a white knight of its own, he said.
"We have been very careful not to jeopardize the efforts made on Houston's part with respect to the [auction]. But if that was to fall through, Canada would attempt to find its own white knight, so to speak. We had numerous expressions of interest and none of those have been pursued at this time."
Houston-based Enron Corp. was negotiating yesterday with at least six potential buyers for its wholesale trading business in an auction that was part of efforts to reorganize itself under Chapter 11 bankruptcy protection. The auction was expected to continue into the evening.
In Manhattan, U.S. bankruptcy judge Arthur J. Gonzalez scheduled a hearing for today to approve the sale.
Enron Canada was Canada's largest market maker of natural gas and power until it was swept up in the failure of its indirect parent, which unraveled after disclosures that Enron Corp. had shifted billions of dollars in debt off its books. It was left saddled with at least US$40-billion in debt.
Enron Corp.'s troubles deepened this week with revelations that the U.S. Justice Department has begun a criminal investigation. There was also an admission yesterday by the firm that audited Enron's books, Arthur Andersen LLP, that a "significant but undetermined" number of documents related to the company had been destroyed.
Mr. Milnthorp said the investigation "has nothing to do with Enron Canada."
The Canadian unit attempted last month to distance itself from the parent and re-emerge as an independent company but gave up after losing a bid in an Alberta court to keep counterparties from unwinding contracts, its major asset.
Mr. Milnthorp said the Canadian arm was packaged as part of a deal to sell Enron's overall trading business, which buys and sells oil, petroleum products, natural gas, electricity, metals, coal, forest products and steel, and a variety of contracts and derivatives. The company would get cash and a 49% stake in a new partnership called "Netco," short for New Energy Trading Company, under the proposed sale. The trading unit generated about 90% of Enron Corp.'s US$100.8- billion in revenue in 2000.
Mr. Milnthorp said 75 employees in Calgary and Toronto were laid off after last month's court proceedings and trading was suspended because of lack of confidence in the market.
"To be successful in this business, you need a very solid balance sheet that creates the confidence necessary to enter into long-term transactions. That's been one of the key criteria through the auction process," he said.
Enron Canada's remaining employees are "trying to manage the estate and trying to work hard to co-operate with our customers to get them paid," he said.
The unit is cash rich from the sale last month of its interest in the Sundance B power-generating plant outside of Edmonton.
Bidders for all or parts of the trading operation include Citigroup Inc., the largest financial services company, UBS AG, the largest Swiss bank, and BP PLC, one of the largest oil and gas companies.
ccattaneo@nationalpost.com <mailto:ccattaneo@nationalpost.com>