Dynegy Is in Talks on Purchasing Enron --- Deal Would Include Infusion Of Cash to Assist Firm In Shoring Up Finances
The Wall Street Journal, 11/08/01
Dynegy Is Said to Be Near to Acquiring Enron for $8 Billion
The New York Times, 11/08/01
Trading Places: Fancy Finances Were Key to Enron's Success, And Now to Its Distress --- Impenetrable Deals Have Put Firm in Position Where It May Lose Independence --- Talks With Rival Dynegy
The Wall Street Journal, 11/08/01
Unit of Enron Is Challenged
The New York Times, 11/08/01
Enron in Takeover Talks With Dynegy
Los Angeles Times, 11/08/01
FRONT PAGE - FIRST SECTION: Enron board considering takeover by rival Dynegy: Energy trader seeks emergency talks with banks amid fears over cash crisis 
Financial Times; Nov 8, 2001
FRONT PAGE - COMPANIES & MARKETS: Dynegy in last-ditch attempt to save Enron 
Financial Times; Nov 8, 2001

COMPANIES & FINANCE THE AMERICAS: Enron in crunch banks meeting 
Financial Times; Nov 8, 2001

Dynegy may acquire Enron
Houston Chronicle, 11/08/01
Enron deals downshifted at breakneck speed
Houston Chronicle, 11/08/01
Azurix completes sales of two units
Houston Chronicle, 11/08/01
Troubled Enron Negotiates Sale To Rival Dynegy
The Washington Post, 11/08/01

Dynegy May Offer as Much as $8 Billion for Enron: WSJ (Update1)
2001-11-08 05:32 (New York)

Reports: Dynegy close to deal to buy Enron for $8 billion
Associated Press Newswires, 11/08/01
ChevronTexaco affiliate Dynegy in talks to buy Enron for 7-8 bln usd - report
AFX News, 11/08/01
USA: UPDATE 1-Fund alleges fat fees biased Andersen on Enron.
Reuters English News Service, 11/08/01
Enron's power company reverses itself, says it is meeting with Indian representatives in Singapore
Associated Press Newswires, 11/08/01
Enron India unit's lenders issue court challenge to prevent project pullout
AFX News, 11/08/01
Dabhol Pwr Co Confirms Creditors Mtg In Singapore Thu
Dow Jones Energy Service, 11/08/01

India: Enron not to move on termination till Friday
Business Line (The Hindu), 11/08/01
Dabhol agrees to meet FIs after a day-long drama
Business Standard, 11/08/01
Dynegy Holds Talks to Buy Enron, Inject $1.5 Billion to Shore Up Firm
Dow Jones Business News, 11/07/01
Dynegy reportedly close to deal to buy Enron for $8 billion
Associated Press Newswires, 11/07/01
USA: WRAPUP 2-Enron, Dynegy in merger talks.
Reuters English News Service, 11/07/01
Dynegy Looking to Acquire Enron
TheStreet.com 11/07/01
Azurix Corp. Closes Sale of Azurix North America
PR Newswire, 11/07/01





Dynegy Is in Talks on Purchasing Enron --- Deal Would Include Infusion Of Cash to Assist Firm In Shoring Up Finances
By Robin Sidel and Rebecca Smith
Staff Reporters of The Wall Street Journal

11/08/2001
The Wall Street Journal
A3
(Copyright (c) 2001, Dow Jones & Company, Inc.)

Dynegy Inc., the Houston-based energy trading and power company, was attempting to strike a deal yesterday evening to buy Enron Corp., its beleaguered hometown rival, for roughly $7 billion to $8 billion in stock, one-tenth of what Enron was worth 15 months ago. 
Because any merger of the two would likely be scrutinized for many months and Enron needs to shore up its beleaguered finances now, Dynegy also is expected to inject an additional $1.5 billion into Enron immediately, people familiar with the matter said. ChevronTexaco Corp., which owns a 26% stake in Dynegy, is expected to provide Dynegy with the funds for the cash infusion and is playing a significant role in the negotiations. ChevronTexaco then will inject an additional $1 billion into the combined company once the deal is concluded so that its stake in Dynegy isn't substantially reduced and so the combined company has a healthy balance sheet.
With Enron in a weak bargaining position, Dynegy, which is one-fifth Enron's size, was hoping to clinch a deal which would have it paying little, if any, premium for Enron. The boards of Dynegy, Chevron and Enron were meeting yesterday to discuss a potential deal, but a seesawing Enron stock price and the complexity of a transaction yet could derail a deal, people familiar with the matter warned. "This is far from over," said one person familiar with the negotiations. Several important points, including the exchange ratio, were still being worked out. Dynegy expects to argue that Enron shareholders will benefit from the upside of combining the two companies and that a transaction will add to Dynegy's earnings because of potential synergies. 
Spokesmen from Enron and Dynegy declined to comment. 
If approved by regulators, the deal would be a stunning development for Enron, which transformed itself from a staid natural-gas-pipeline company into a highflying power-trading giant only to see its share price -- and hefty market valuation -- plummet in a matter of weeks. And for Enron to sell itself for a low price is sure to stun investors. 
Under the terms being worked out last night, Enron Chairman Kenneth Lay would have a seat on the combined company's board, but wouldn't hold any formal management position, said the people familiar with the matter. Mr. Lay may take on a consulting role. Meanwhile, Chuck Watson, chairman and chief executive of Dynegy, would be CEO of the combined company, while his No. 2, Stephen Bergstrom, will president. 
Enron has been scrambling for days to line up quick financing from a prominent outside investor and has been in discussions with private-equity firms and power-trading companies. The company desperately needs to win back its credibility on Wall Street following the disclosure that the Securities and Exchange Commission was investigating the partnerships created to serve as a hedge against fluctuating market conditions. Discussions between Dynegy and Enron began about 10 days ago, but intensified last weekend. 
Enron also is expected today to disclose more financial dealings about the partnerships. A person close to Dynegy said the potential acquirer feels it understands Enron's business and is apprised of the liabilities, which have been factored into the transaction. 
Should Enron strike a deal, it hopes to stabilize its stock price. Enron fell 6.4%, or 62 cents, to $9.05 at 4 p.m. composite trading on the New York Stock Exchange. At one point yesterday morning, Enron's stock had fallen 25% on news reports that Enron's efforts to line up investors had failed. The stock recovered after CNBC and Dow Jones Newswires reported the talks with Dynegy. The shares are at a new 52-week low and far from the 52-week high of $84.88. 
Dynegy fell $3, or 8.3%, to $33, at 4 p.m. in Big Board trading. However, some investors believed the company's share price could benefit from the deal. 
Jason Selch, an energy analyst at Wanger Asset Management in Chicago, a large Dynegy shareholder, said the company has a history of pulling off complicated deals and added that because Enron is in such bad shape, Dynegy could dictate the terms of the deal, shielding itself from potential losses due to shareholder lawsuits or problems with Enron's complicated off-balance sheet dealings. 
"If they make an offer, they will be making an offer in order to get a steal," said Mr. Selch, who says Enron's core energy-trading business is being valued at about half the normal market valuation of these operations. "I think they will be acquiring a business that will launch them into the No. 1 market-share position in energy trading," Mr. Selch added. 
Whether a deal with Dynegy materializes, the fact that Enron is willing to consider a sale shows how its fortunes have sagged and underscores how desperate it is for a savior. The company, which was at the pinnacle of its success just a year earlier, boasted a market capitalization of $71 billion about a year ago and is now valued at about $7 billion. 
In exchange for the immediate capital infusion, Dynegy is expected to get convertible preferred stock. In that type of deal, an investor receives a safe, bondlike interest payment and then can convert that holding into common stock after the share price rises to a specified level. Enron also had been soliciting interest from private equity firms, but any discussions with those parties were proceeding on a slower track. 
People familiar with the negotiations said it was possible the financial players could still play some sort of role in any Enron transaction, although details weren't immediately available. Buyout firms Clayton, Dubilier & Rice and Blackstone Group, which had been approached by Enron to make an investment, decided against doing so, according to people familiar with the matter. Indeed, Enron's move to publicly disclose new information about the partnerships could provide intriguing details to any other potential bidders who are interested in a deal, but were reluctant to pursue Enron without knowing more about those transactions. And because Dynegy may only be paying a small premium, another suitor may be able to step up to the plate. 
The deal, if agreed to, will add to Dynegy's earnings in the first year. The new entity will focus on the core business of North American and European wholesale, commercial and industrial energy markets and will capitalize on the opportunities generated by the combined, diversified asset-backed network supported by the strongest intellectual capital in the industry. 
Aside from restoring confidence among its investors, Enron has faced growing pressure from its trading partners. The company is offering special protections to some trading partners, hoping to prevent a mass exodus due to fears it could face further credit downgrades or wind up seeking the protection of a federal bankruptcy court. 
The protection takes the form of a "netting agreement" that permits a trading partner to offset the sums it is owed by various Enron entities against the amounts that it owes the Enron concerns. 
Without such an arrangement, a company might owe money to one Enron entity but have to stand in a long, slow line to collect sums owed by a different Enron concern should the company seek bankruptcy-court protection. With netting, positions could cancel each other out, at least to some extent, and reduce a firm's ultimate credit exposure. 
Enron spokesman Mark Palmer said the company has plenty of cash and has no need or intention of seeking protection from creditors, with whom it is current. 
--- 
Jathon Sapsford, Robert Frank and Ken Brown contributed to this article.

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

Business/Financial Desk; Section C
Dynegy Is Said to Be Near to Acquiring Enron for $8 Billion
By RICHARD A. OPPEL Jr. and ANDREW ROSS SORKIN

11/08/2001
The New York Times
Page 1, Column 2
c. 2001 New York Times Company

The board of Dynegy Inc. tentatively approved a deal last night to acquire the Enron Corporation, the once-mighty energy-trading company laid low by a financial crisis and government investigation, executives close to the transaction said. 
A deal would enable Dynegy to buy the much bigger Enron at a fire-sale price -- about $8 billion in stock, or roughly $10 a share, for a company that less than a year ago had a market value of nearly $70 billion. But with stock and bond investors fleeing, some of its trading partners refusing to do business with it, Enron had few choices but to talk to Dynegy.
As part of the deal, Chevron Texaco, which owns a 27 percent stake in Dynegy, would give Enron a cash infusion of at least $1.5 billion up front and an additional $1 billion when the deal closed. 
The executives said the companies hope to finalize the details and announce the deal today. 
If completed, a takeover by Dynegy, a company only about one-quarter its size in revenue, would represent a remarkable humbling of Enron, the nation's biggest buyer and seller of natural gas and electricity. Enron had $139.7 billion in revenue for the first nine months of the year. 
As recently as last spring Enron was lionized by investors as an innovator that had in many ways created and cleverly dominated the nation's deregulated energy markets. It would also vindicate not only Dynegy, which took a more measured approach to doing business in those markets, but also critics uncomfortable with energy deregulation who said Enron's energy trading was ruthless, its finances murky and its power and influence too extensive. 
The company's chairman and chief executive, Kenneth L. Lay, is a close friend of President Bush. He has been one of Mr. Bush's largest campaign contributors, and no other energy company gave more money to Republican causes last year than Enron. Mr. Lay would be on the board of the combined companies, the executives said, but it was unclear if he would have an operational role. 
Enron's problems came to light last month when the company disclosed $1 billion in write-downs and an unusual $1.2 billion reduction in shareholder equity. The reduction in equity arose from transactions with investment partnerships involving Andrew Fastow, the chief financial officer, who was forced to resign on Oct. 24. The Securities and Exchange Commission is investigating those transactions. 
Enron is expected today to send the S.E.C. answers to questions the agency has posed in its investigation. The answers have been reviewed by Dynegy officials, the executives said, and are expected to be released publicly. 
Enron is scheduled to meet its creditors tomorrow about the company's continuing crisis -- and about the merger deal, if there is one. 
People close to the deal say the company hopes that a deal with Dynegy, and the release of the answers to the S.E.C., will calm the crisis that has engulfed the company and led other energy companies that trade with Enron to curtail their credit exposure to the company. 
Besides worries about the huge losses and the S.E.C. investigation, investors and creditors are nervously watching Enron's credit rating. Moody's Investors Service and Standard and Poor's have already cut the rating to two notches above junk status, and on Monday, Fitch Inc. cut it to one notch above junk. 
As part of the acquisition, Dynegy would be taking on Enron's $12.8 billion debt load -- a number that does not include billions of dollars of other debt, accumulated off the balance sheet, that has played a major role in Enron's current problems. The executives said they expected the deal would lead to the sale of some Enron assets to pay down the $12.8 billion debt. 
Should Enron lose its investment grade rating, other energy trading companies could curtail their business with the company even further, and Enron could be forced to issue tens of millions of shares of stock to cover off-balance sheet debts that it has guaranteed. 
Early Wednesday, shares of Enron plunged 28 percent, to about $7, on fears that the company was unable to line up new investors. 
But the stock took back most of its losses in the afternoon after CNBC reported the talks with Dynegy. Shares of Enron closed at $9.05, off 62 cents. Dynegy shares closed at $33, down $3. 
In addition to both companies' very large presence in energy trading, Enron owns the Portland General Electric Company, a utility in Oregon it had already agreed to sell, and Dynegy owns the Illinova Corporation, a retail electricity and natural gas utility in Illinois. 
Regulators may take a hard look at those utilities in reviewing a merger deal, said Jeff Dietert, an analyst with Simmons & Company in Houston. ''Then you've got concerns about market power,'' he said. ''It's just a lot of different issues to deal with before we get too excited that this deal is going to get done.'' 
The acquisition would combine Enron, which dominates United States trading of electricity and natural gas and has been shedding its hard assets, with Dynegy, a company that has pursued a much different strategy of using trading to maximize earnings from its power plants. 
Enron has always concentrated on sophisticated financial trading strategies, a senior executive at a rival energy-trading firm, said. ''Dynegy has always been more of a logistical player of physical assets,'' he said. ''Those are very different cultures and very different mentalities.'' The executive noted that there had been an immense talent drain from Enron in the last two weeks. ''It has become a frenzy,'' he said.

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


Trading Places: Fancy Finances Were Key to Enron's Success, And Now to Its Distress --- Impenetrable Deals Have Put Firm in Position Where It May Lose Independence --- Talks With Rival Dynegy
By Rebecca Smith and John R. Emshwiller
Staff Reporters of The Wall Street Journal

11/08/2001
The Wall Street Journal
A1
(Copyright (c) 2001, Dow Jones & Company, Inc.)

When Enron Corp. convened its annual conference with credit analysts and bond investors in Houston last February, the energy-trading giant was soaring and looking to climb higher. 
The company's stock was trading at about $80 a share, giving it a stock market value of $70 billion. Though up fourfold from three years earlier, the stock price wasn't nearly high enough, Enron's new chief executive, Jeffrey Skilling, told the audience. With its dominant position in energy-trading markets and its highly touted new moves into telecommunications, Enron stock should be at $126 a share, Mr. Skilling argued.
All in all, a vintage performance for a company not known for being bashful. "A lot of hype. A lot of spin," recalls Todd Shipman, a Standard & Poor's analyst who attended the conference. "That was Enron." 
Yesterday, Enron stock closed at $9.05 in New York Stock Exchange trading. Mr. Skilling is no longer around to promote the stock. In August, he unexpectedly resigned as chief executive after only six months in the top job. Chief financial officer Andrew Fastow was replaced last month as controversy escalated over his role in running private partnerships involved in billions of dollars of transactions with Enron. Kenneth Lay, Enron's chief executive, has had to give up retirement plans to return to the helm. 
Lately, the company has been offering special credit protection to increasingly nervous trading partners, including Reliant Energy Inc. and Entergy Corp. The goal: to provide assurance that Enron is a creditworthy partner and to prevent an exodus of customers. Enron's trading operation generates 90% of the company's profits. 
It looked yesterday as if the endgame might be beginning. Mr. Lay and Enron's board were discussing a possible acquisition of Enron by its much-smaller hometown energy-trading rival, Dynegy Inc., in a stock swap valued at $7 billion to $8 billion. (See related article on page A3.) 
Any merger of the two companies would probably face lengthy regulatory scrutiny, so Dynegy is also considering injecting $1.5 billion into Enron immediately to help stabilize the company's finances, according to people familiar with the situation. The deal would also include a significant role for oil powerhouse ChevronTexaco, which owns a 26% stake in Dynegy and would be likely to provide much of the cash for any Enron transaction. 
Dynegy's emergence as a serious bidder for Enron could indicate to other interested parties that Enron's problems can be solved. In fact, the collapse in Enron's stock price would make it fairly easy for another large energy player to top any Dynegy offer. Royal Dutch/Shell Group is one such prominent company. 
A takeover by Dynegy or any other company would almost certainly presage the departure of the 59-year-old Mr. Lay. He oversaw the transformation of Enron from a nondescript natural-gas pipeline company with annual revenue of under $5 billion in the late 1980s to a global energy colossus with revenue that is expected to approach $200 billion this year. 
It has turned out that the formula behind that transformation contained the seeds for the company's current troubles. Executives created an ever-more-labyrinthine financial structure to support Enron's explosive growth rate. Billions of dollars of debt -- which could have weakened Enron's credit rating and slowed growth -- was kept off the balance sheet through tangled webs of transactions with dozens of related entities. As the financial demands became greater and the transactions more complex, Enron officials began creating and heading some of the entities, raising serious conflict-of-interest questions. 
Neither Enron nor Dynegy would comment. Royal Dutch/Shell also declined to comment. Messrs. Lay, Skilling and Fastow either declined to comment or didn't return phone calls seeking interviews. 
Enron officials have maintained that the markets are overreacting to a spate of bad, but nonfatal, news. On Oct. 16, the company announced a $618 million third-quarter loss and disclosed a $1.2 billion reduction of shareholder equity due in part to dealings with the Fastow-related partnerships. The company has said that its ongoing businesses are strong and it has the financial wherewithal to weather the crisis. All of its actions have been legal and properly disclosed, Enron has stressed. 
Still, its predicament is daunting. The Securities and Exchange Commission has started a formal investigation into possible violations of federal securities law involving the Fastow-related partnerships. Several shareholder lawsuits seeking class-action status have been filed against top company officials, alleging fraud and seeking to recover some of the $20 billion in market value that Enron shares have lost in the past month. To address growing jitters in the energy and financial markets, Enron has drawn down billions of dollars of credit lines, negotiated new ones and sought a new equity infusion. 
As turmoil has engulfed the company, Mr. Lay and other top Enron executives have kept largely out of public view -- in sharp contrast to the company's normally outspoken public persona. The one recent public-relations initiative, a conference call for analysts and big investors, turned into what even Enron officials concede privately was a debacle. It left company executives looking evasive and defensive rather than open and confident. 
How did Enron, which routinely made published lists of the most-admired and innovative companies in America, fly so high and fall so fast? The answer lies in a combination of brilliance and overconfidence on a scale rarely seen in the business world. 
In the process, the company helped redefine much of the energy marketplace on matters as fundamental as how power is bought and sold and how a company produces a profit from doing so. For example, the company helped create an electricity-trading market in which participants rarely take physical delivery of the commodity but instead merely tally profits or losses from transactions. 
In the accounting realm, it pioneered techniques that allowed energy companies to record profits or losses on long-term contracts that hadn't yet produced any revenue. "We caught a little flak in the early 1990s from people who, I guess, thought we were pulling a fast one," Enron's chief accounting officer, Richard Causey, said in an interview in August. He added that this accounting method was the most accurate way to measure energy-trading results. 
Enron's audacity and success sent other energy companies scrambling to emulate it, a process that ABN Amro analyst Paul Patterson calls "Enron envy." 
The company tested the limits of securities and accounting rules. For example, Enron's SEC filings have included statements about the Fastow-related transactions that might meet the letter of disclosure laws but are so complex that even some Wall Street analysts and accounting professors have found them indecipherable. 
Enron's seemingly impenetrable financial structure, hardly noticed by Wall Street in the company's heyday, is now a matter of serious concern in a suddenly skeptical investment community. "It's not easy to regain something as basic as trust," says Goldman Sachs analyst David Fleischer, a longtime Enron fan. In the recent conference call with Enron executives, Mr. Fleischer pleaded with the company to be more forthcoming about its operations -- something it has been promising to do for months. 
While Enron employs some 20,000 people, its rise and fall can, in large measure, be traced to three men: Messrs. Lay, Skilling and Fastow. Mr. Lay joined the company in 1984 when it was still called Houston Natural Gas, a regional pipeline operator. Back then, the natural-gas industry was a largely regional business and about as exciting as watching a pipeline operate. 
But Mr. Lay had big plans for his company, always preaching that natural gas was the fuel of the future. His prediction has been largely borne out when it comes to such functions as fueling electric-power plants. 
He wanted to take the company beyond natural gas. Enron bought an electric utility in Portland, Ore., and built power plants around the world. It developed its potent energy-trading operation, which buys and sells contracts to provide electricity in the same way that contracts for wheat and pork bellies are traded. These deals were done with utilities, industrial power users and other trading firms. 
To help enlarge this empire, he recruited aggressive young executives. None was brighter or more assertive than Mr. Skilling, a Harvard Business School graduate and former McKinsey & Co. consultant who joined Enron in 1990. 
Under Messrs. Lay and Skilling, the company pushed zealously for the deregulation of energy markets -- particularly that bastion of monopoly businesses, the electric-utility industry. Enron officials argued that open, competitive markets could help consumers and, not coincidentally, provide huge profit opportunities in energy trading. 
Mr. Skilling called the energy-trading business "a once-in-a-lifetime opportunity to establish a position to last for the next 100 years." By the late 1990s, Enron had evolved into primarily a trading company, rather than an owner of power plants and pipelines. 
In pursuit of their deregulation goals, Enron officials became major players in American politics. Mr. Lay has given nearly $2 million to President Bush during his political career and is a personal friend of the president, Vice President Cheney and several members of the cabinet. 
One of Mr. Skilling's early hires after joining Enron was Mr. Fastow, at the time a 29-year-old MBA from Northwestern's Kellogg School who had been working on leveraged buyouts and other complicated deals at Continental Bank in Chicago. Former Enron officials and others say that Mr. Skilling quickly became Mr. Fastow's mentor in the same way that Mr. Lay had become Mr. Skilling's. 
As Mr. Skilling oversaw the building of Enron's vast trading operation, Mr. Fastow saw to the financing of it. "Andy was the guy you saw when you wanted money" for a project, says one former Enron senior manager. 
Mr. Skilling was named Enron's chief operating officer in 1997. Mr. Fastow got the top finance job a year later, at the age of 36. Under Mr. Fastow, Enron's finance department tripled in size, to more than 100 people. 
Enron needed the added financial brainpower. As it expanded, debt and liquidity were constant concerns. What's more, the company's ambitions were roving beyond therms and kilowatts as it began to make markets in everything from water to weather. 
Enron's most highly touted non-energy initiative, and Mr. Skilling's pet project, came in the area of telecommunications. The company built a coast-to-coast fiber-optic network and envisioned trading "bandwidth," or network capacity, the way it traded electricity or natural gas. Enron has invested several hundred million dollars so far in the project, which has produced losses of over $400 million. Yet at the February analyst meeting in Houston, Mr. Skilling unabashedly valued Enron's fiber-optic business at $36 billion, according to people who were at the meeting. 
But to make all of its growth dreams possible, Enron had to make sure that its balance sheet didn't become too laden with debt. Too much debt would lead major ratings agencies, such as Moody's Investors Service and Standard & Poor's, to lower Enron's credit rating. Such downgrades could significantly increase the company's cost of borrowing and make it more difficult to finance its continued expansion. 
In typically aggressive fashion, Enron lobbied the ratings agencies with the same vigor that it lobbied legislators. At the February meeting, Mr. Fastow urged analysts to raise Enron's credit rating on long-term debt from triple-B-plus to single-A-minus. But the analysts shrugged off Mr. Fastow's entreaties. They didn't see the cash flow, earnings, or debt coverage required for such an upgrade, says one attendee. 
Undeterred, Mr. Fastow said the higher rating would strengthen the company's basic finances, which could then justify the higher rating. This circular argument provoked derision among analysts, and Enron didn't get its `A' rating. Instead, the company was recently downgraded by the major ratings agencies as a result of its financial turmoil. 
In moves that kept down its reported debt burden, Enron turned increasingly to off-balance-sheet transactions through limited partnerships with outside parties. In such an arrangement, Enron could contribute money, stock or other assets to the partnership. The partnership could then borrow large sums to purchase assets or do business deals without the debt showing up on Enron's books. 
While such partnership transactions had long been used in the natural-gas industry to finance deals, Enron took the practice to new heights of complexity. Leading that effort was Mr. Fastow and his team of young financial experts. 
In recent years, Enron has done myriad deals with more than 30 partnerships. By far the most controversial to come to light, so far, are the ones it has done with two partnerships -- known as LJM Cayman LP and LJM2 Co-Investment LP -- which were formed and operated by Mr. Fastow. The company has said that its transactions with these partnerships were designed to hedge against fluctuating market values of company assets and energy contracts. 
It isn't clear why Enron would allow its chief financial officer to be in a fiduciary position at partnerships that stood to profit, possibly at the company's expense, from doing deals with it. To make matters worse, private LJM partnership documents indicate that Mr. Fastow personally made millions of dollars from the partnerships -- much more than he was being paid as Enron's chief financial officer. 
Enron officials have repeatedly said that Mr. Fastow's actions were reviewed and approved by top management and the board of directors. However, the company has refused to answer numerous specific questions about its dealings with the partnerships. Enron has said that Mr. Fastow formally severed his ties with the partnerships in July in the face of rising discomfort about the arrangements on the part of analysts and major company investors. 
It is nearly impossible to stitch together anything comprehensible about the partnership deals from Enron's SEC filings. The only thing clear is that millions of shares of Enron stock and billions of dollars of assets and notes were involved in the transactions. 
--- 
Robin Sidel and Jathon Sapsford contributed to this article.

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

Business/Financial Desk; Section C
Unit of Enron Is Challenged

11/08/2001
The New York Times
Page 12, Column 6
c. 2001 New York Times Company

A consortium of Indian lenders to the Enron Corporation's power company in India asked the Bombay High Court today to prevent the unit, the Dabhol Power Company, from pulling out of a distressed energy project. 
The consortium, led by the Industrial Development Bank of India, sought a stay on the final termination notice and stopping the transfer of Dabhol's assets. In response, Dabhol canceled a meeting with the Indian lenders scheduled for later this week.
Dabhol Power has been wrangling with the state utility for the last several months over unpaid bills, and the 2,184 megawatt plant is now shut down. Indian financial institutions have a combined exposure of about $1.5 billion in the $2.9 billion project in the form of loans and guarantees.

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



Business; Financial Desk
Enron in Takeover Talks With Dynegy
THOMAS S. MULLIGAN; JAMES FLANIGAN; NANCY RIVERA BROOKS
TIMES STAFF WRITERS

11/08/2001
Los Angeles Times
Home Edition
C-1
Copyright 2001 / The Times Mirror Company

NEW YORK -- Enron Corp., the troubled energy-trading giant, was in talks Wednesday over a possible takeover by Houston neighbor and rival Dynegy Inc., industry sources said. 
The boards of both companies were meeting late Wednesday concerning a potential deal, which almost certainly would mean the end of the line for Chairman and Chief Executive Kenneth Lay, architect of Enron's emergence as the dominant force in the relatively new electronic markets for natural gas and electricity.
The Houston Chronicle reported that ChevronTexaco Corp., which owns 27% of Dynegy, would inject an immediate $1.5 billion to enable Enron to maintain its investment-grade credit status, without which it would have to suspend its crucial trading operations. 
Enron, Dynegy and ChevronTexaco representatives declined to comment. 
Enron appeared to be running out of options short of an outright sale, as its stock had plunged toward 10-year lows, its credit had been downgraded and it had failed to secure emergency financing from parties that would let it retain its independence. 
Enron's shares plunged again Wednesday but then recovered on the news, first reported by CNBC, that it had opened talks with Dynegy. 
Enron shares sank as low as $7 on the New York Stock Exchange but rebounded to close down 62 cents at $9.05, still the lowest since April 1992; the stock is down 89% year to date. Dynegy shares also moved on the speculation, losing $3 to close at $33. 
At Wednesday's closing price, Enron has a market value of $6.8billion, down from an August 2000 peak of $63.6 billion. 
The catalyst for Enron's shocking slide was the disclosure last month that the company had taken a $1.2-billion equity reduction connected with off-balance-sheet partnerships from which Enron managers had profited. 
The matter is being investigated by the Securities and Exchange Commission. 
Enron also reported an unexpected $618-million loss in the third quarter. 
The energy market's confidence in Enron's ability to meet its obligations has ebbed along with the company's stock price, and trading partners have begun shying away from entering new long-term transactions with Enron, industry sources said. 
Competitors Reliant Energy Inc., Aquila Inc. and El Paso Corp. all reported a pickup in business as companies attempt to reduce their exposure to Enron. 
In addition, energy brokers on the New York Mercantile Exchange are demanding higher margin deposits from Enron, according to Platts, a private energy news service. Enron in recent days has been raising cash by turning over trading positions to other companies at a sizable discount, Platts said. 
Banking sources told the Financial Times in London that Enron has called an emergency meeting of its lenders to persuade them to extend credit lines. 
Enron last week won a commitment for a $1-billion credit line from J.P. Morgan Chase and Salomon Smith Barney, but other banks declined to join in. To get the financing, Enron had to pledge some natural gas pipeline assets. 
Although there has been no crisis akin to a run on a bank, Enron cannot survive for long without a major infusion of capital, Todd A. Shipman, analyst for Standard & Poor's, said Wednesday. 
"There's a difference between reducing exposure to Enron and not doing business or demanding cash upfront," he said, but he added that the company's trading partners have been "reexamining their attitude towards Enron every moment of every day." 
Energy analysts and executives said Wednesday that Dynegy Chairman and CEO Charles L. Watson could be taking a big risk buying into Enron. 
"Chuck Watson is a brave guy but also a smart one," one expert said. "I have to assume he knows what he's getting with Enron." 
Would-be partners Watson and Lay have competed for prominence in Houston, arguing over stadiums and investing to bring the National Football League to the city. 
Consumer activists wasted no time protesting a potential merger of Enron and Dynegy. 
Dynegy, which owns California power plants in partnership with NRG Energy Inc. that are capable of generating 2,800 megawatts of electricity, was among the companies Gov. Gray Davis and other politicians have repeatedly slammed as "pirates" that charged the state too much for electricity during its recent energy crisis. 
"The energy cartel already has done so much damage in California, and the only thing worse than that would be a more tightly controlled energy cartel," said Doug Heller of the Foundation for Taxpayer & Consumer Rights in Santa Monica. "These are two lawless cowboys forming a single bandit." 
As board meetings continued Wednesday night in Houston, sources said a deal was probable at about $8 billion, or $10 to $11 an Enron share. 
Despite Enron's serious troubles, its trading business remains potentially powerful. Even in the company's duress, the trading operation has gone forward, accounting for more than 25% of all electric power and natural gas traded globally. Enron, which took in $147 billion in revenue in the first nine months of this year, processes transactions worth an estimated $2billion a day. 
If Dynegy were to add the immense trading operations of Enron and prove able to hold the franchise together, it would become a major power in global energy tradingDynegy also has a trading operation, but mostly it trades for the benefit of its own electric power and natural gas holdings; partner ChevronTexaco, the recently merged oil giant, would gain a significant edge in energy trading over its competitors. 
"Dynegy is conservative, while Enron has been very aggressive in trading," said Mark Gurley, senior vice president of Aquila. 
* 
Mulligan reported from New York, Flanigan and Rivera Brooks from Los Angeles.

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

FRONT PAGE - FIRST SECTION: Enron board considering takeover by rival Dynegy: Energy trader seeks emergency talks with banks amid fears over cash crisis 
Financial Times; Nov 8, 2001
By ROBERT CLOW, ANDREW EDGECLIFFE-JOHNSON, WILLIAM LEWIS, SHEILA MCNULTY and PETER THAL LARSEN

The board of Enron, the embattled US energy trading group, was meeting last night to discuss a takeover by its rival Dynegy. 
Terms of the proposed deal remain under discussion but are understood to involve an all-stock bid from Dynegy at an undetermined premium to its Dollars 6.8bn market capitalisation. 
ChevronTexaco, which owns about 27 per cent of Dynegy, was expected to provide about Dollars 1.5bn of financial support. An announcement could come this morning, though people familiar with the talks cautioned that they might still fail. 
Enron agreed to call an urgent meeting of its banks for tomorrow amid growing concerns on Wall Street that it would not be able to survive its financial crisis without a strategic partner. 
If Enron's board rejects the full takeover offer, other potential options include an equity injection by Dynegy to save the troubled energy trader from a deeper financial crisis. 
Dynegy, which trades with Enron, has an interest in keeping the struggling group in business to maintain stability in the energy market but also sees an opportunity to expand its own market share. 
Banks are describing tomorrow's meeting at Enron's headquarters in Houston as "make or break". One bank executive said: "This is a pivotal meeting. There are lots of credit lines due in the next six months and we need to talk." Enron drew down Dollars 3.3bn in credit lines in the last month, in an attempt to build confidence. 
With time running out for the company and pressure increasing on Kenneth Lay, its chief executive, Enron has urgently explored several options in recent days. Shell-owned Coral Energy has also been approached and there have been calls to private equity groups. 
If the Dynegy deal goes through, Mr Lay will stay on at Enron, at least until the takeover is complete. 
But the efforts have been hampered by the Securities and Exchange Commission investigation into Enron's dealings with funds associated with the former chief financial officer of the company. Bankers say that companies that do not already know Enron intimately have been put off entering negotiations because of the uncertainty. 
If the company fails to complete a deal ahead of tomorrow's crucial meeting, it will need to persuade the banks to extend credit lines, as it battles to shore up confidence among investors and its trading counterparties. 
The banks with the greatest exposure to Enron include Credit Suisse, Deutsche Bank, Citigroup and Barclays. Off-balance-sheet vehicles affiliated to Enron have Dollars 8bn-Dollars 9bn in debt. Enron itself is carrying Dollars 12.8bn in debt. Its bonds ended the day bid at 74 cents in the dollar. Enron's share price had dropped as low as Dollars 7 early in the day but finished at Dollars 9.05, down 62 cents, after reports of Dynegy's interest. 
Investors' concern about Dynegy assuming Enron's liabilities sent Dynegy shares down 8.3 per cent to Dollars 33 yesterday, giving it a market value of Dollars 10.8bn. 
Enron has been under pressure since October 16, when it disclosed a surprise balance sheet adjustment that exacerbated concerns about lack of transparency. Lex, Page 16 www.ft.com/energy 
Copyright: The Financial Times Limited


FRONT PAGE - COMPANIES & MARKETS: Dynegy in last-ditch attempt to save Enron 
Financial Times; Nov 8, 2001
By ANDREW EDGECLIFFE-JOHNSON, WILLIAM LEWIS, SHEILA MCNULTY and PETER THAL LARSEN

Dynegy is in talks about a possible equity injection into Enron, in a last-ditch attempt to save the troubled US energy trader from a deeper financial crisis. The talks could lead to a full merger between the rival energy groups, according to people familiar with the negotiations. 
Enron also agreed to call an emergency meeting of its banks tomorrow amid growing concerns on Wall Street that the troubled energy trader will not be able to survive its financial crisis unless it finds a strategic partner. 
Detailed terms of a deal with Dynegy remained under discussion yesterday afternoon, but an announcement could come as early as this morning. 
The purpose of the talks was to inject Enron with sufficient liquidity to avert a growing crisis of confidence. 
Dynegy, as a major counter-party to Enron, wants to keep Enron in business to maintain stability in the energy trading market. 
Dynegy's interest prompted speculation of how the group would fund an equity infusion or fuller merger, with analysts saying that it may require approval and funding from ChevronTexaco, which owns about 27 per cent of Dynegy. 
Banks with approximately Dollars 3.3bn of exposure to Enron are describing Friday's meeting at Enron's headquarters in Houston as "make or break". One bank executive said: "This is a pivotal meeting. There are lots of credit lines due in the next six months and we need to talk." 
With time running out for the company, Enron executives were yesterday making frantic efforts to secure a deal with rival energy group Dynegy. Some at the company hoped to be able to announce a deal today. Shell-owned Coral Energy has been approached and there have been calls to private equity groups such as Blackstone Group. 
But the efforts have been hampered by the Securities and Exchange Commission investigation into Enron's dealings with funds associated with former executives of the company. Lex, Page 22 www.ft.com/energy 
Copyright: The Financial Times Limited

COMPANIES & FINANCE THE AMERICAS: Enron in crunch banks meeting 
Financial Times; Nov 8, 2001
By WILLIAM LEWIS

Enron has called an emergency meeting of its banks tomorrow amid concerns on Wall Street that the troubled energy trader will not be able to survive its financial crisis unless it finds a strategic partner. 
Banks with approximately Dollars 3.3bn of exposure to Enron are describing the meeting at its headquarters in Houston, Texas, as "make or break". 
One bank executive said: "This is a pivotal meeting. There are lots of credit lines due in the next six months and we need to talk." 
With time running out for the company, Enron executives were yesterday making frantic efforts to secure a deal with rival energy group Dynegy. Some at the company hoped to be able to announce a deal today. 
Shell-owned Coral Energy has also been approached, and there have been calls to private equity groups such as Blackstone Group. 
But the efforts have been hampered by the SEC investigation into Enron's dealings with funds associated with former executives of the company. Bankers say that companies that do not already know Enron intimately have been put off entering negotiations because of the uncertainty. 
If the company fails to complete a deal ahead of the meeting, it will need to persuade the banks to extend credit lines, as it fights to shore up confidence among investors and trading counterparties. The banks with the greatest exposure to Enron include Credit Suisse, Deutsche Bank, Citigroup and Barclays. 
Off-balance-sheet vehicles affiliated to Enron have Dollars 8bn-Dollars 9bn in debt. Enron is carrying Dollars 12.8bn in debt. 
The company has been under increasing pressure since October 16, when it disclosed a surprise balance sheet adjustment that only exacerbated concerns about a lack of transparency at the energy trading group. 
Enron is the principal in a quarter of all electricity and natural gas trades in the US. Yesterday the company did not immediately return calls seeking comment. 
Its share price had lost 21.92 per cent by midday, at Dollars 7.55. 
"What we have here is a run on the bank by equity investors," said John Olson, vice-president of research at Sanders Morris Harris, an investment banking and securities firm. "And they have done nothing to alleviate it." 
Enron's competitors have begun taking business away from the US's biggest energy trading company. 
Shahid Malik, president of trading and marketing at Reliant Energy, a big participant in the trading that is central to Enron's business, said: "We're seeing more business come our way." 
He said Reliant had maintained normal relations with Enron, noting it was still creditworthy. But he added: "We are monitoring the situation." 
Copyright: The Financial Times Limited



Nov. 8, 2001
Houston Chronicle
Dynegy may acquire Enron 
Merger talks in advanced stage 
By LAURA GOLDBERG 
Copyright 2001 Houston Chronicle 
Dynegy was in advanced talks Wednesday night to acquire troubled rival Enron Corp., according to people familiar with the matter. 
The sources said a merger could be announced as early as today between the two Houston-based energy traders, which had been talking for about a week. 
If the smaller Dynegy does buy Enron -- known as a pioneer in the world of energy trading -- it would mark a surprising end for a company that until early this year was among Wall Street's darlings. 
Since then, a series of problems has tarnished the image of Enron, which based on revenues is Houston's largest company. Enron's woes quickly multiplied after it made troubling financial disclosures in its third-quarter earnings report last month. 
After the report, Enron's stock price plummeted, the Securities and Exchange Commission launched an investigation into certain Enron dealings and the company's credit rating has been downgraded, leaving it in a weakened state. 
That's where Dynegy comes in. 
Dynegy proposed a stock swap with a modest premium over Enron's stock price, the sources said, adding that Enron had been pressing for a higher premium than Dynegy offered. Shares in Enron closed down 62 cents Wednesday, at $9.05. Based on Enron's market capitalization, the stock deal is likely to be worth more than $7 billion. 
As part of the deal being discussed, ChevronTexaco Corp., which owns about 27 percent of Dynegy, would also immediately give $1.5 billion to Enron, the people said. 
The money would be intended to help Enron keep its investment-grade credit rating, which it needs to keep running its energy trading business. 
Wall Street has been questioning Enron's ability to maintain that core business, which relies heavily on access to credit and cash. 
Enron's board started meeting around 6:30 p.m. Wednesday, while Dynegy's board began meeting earlier during the day. 
Spokesmen for Dynegy, Enron and ChevronTexaco declined comment Wednesday. 
Enron is significantly larger than Dynegy, which last year reported $29.4 billion in revenues and as of earlier this year had almost 1,600 employees in Houston. Enron reported $100.8 billion in revenues last year and as of earlier this year had more than 7,000 Houston employees. 
The two energy traders have complementary capabilities, said Jeff Dietert, an analyst with Houston-based Simmons & Co. International who follows Dynegy and Enron. 
Enron excels in the area of financial tools and contracts used by businesses to manage risk, while Dynegy has strong physical assets, including power plants and natural gas storage facilities, he said. 
Without the specifics of the deal, Dietert said it was hard to evaluate whether it made sense for Dynegy. 
But he noted that Chuck Watson, Dynegy's chairman and chief executive, has a history of doing complex deals that have boosted the company's earnings. 
Both Enron and Dynegy grew from natural gas companies. Both expanded into the business of trading energy, but Dynegy has also focused on acquiring assets such as power plants. 
Enron's current strategy has been to shed assets and expand its trading into a variety of commodities ranging from paper to metals. 
Enron has been under heavy fire since Oct. 16 when it released third-quarter earnings. It disclosed that day it had taken a $35 million loss and reduced shareholders equity by $1.2 billion related to ending business dealings with two investment partnerships formerly run by Andrew Fastow, its chief financial officer. 
The disclosures served to heighten Wall Street's ongoing concerns that Enron's financial reporting was too difficult to understand and skimped on details. It also led to fears that Enron would be on the hook for billions of dollars related to other financial vehicles. 
Days later, Enron revealed that the SEC was investigating transactions between Enron and the partnerships, called LJM Cayman and LJM2 Co-investment. It also replaced Fastow and has been hit with a growing number of shareholder lawsuits. 
In the last couple days, Wall Street has grown more concerned at Enron's silence. It's led to speculation the company has more problems than are publicly known. Since Oct. 16, Enron's closing share price has declined by 73 percent. 
There have also been increasing questions about the stability of Enron's core wholesale energy trading business, which is responsible for generating the vast majority of Enron's profits. 
Enron's attempts so far to bolster investor confidence have failed. 
Last week, it announced it had lined up $1 billion in new credit lines, but some investors reacted negatively to the fact that Enron used a significant portion of its pipeline assets as collateral. 
The week before, Enron tapped into $3.3 billion in credit lines that weren't secured by collateral. It banked about $1.1 billion and is using the rest to pay off short-term debt obligations. 
Even before the earnings release, shares in Enron -- which in late January hit a closing high for the year of $82 -- had been under pressure for a variety of reasons, including a troubled power project in India, problems with its new broadband unit and the unexpected resignation of CEO Jeff Skilling, who stepped down in August, citing personal reasons. 
Until the deal is announced, it's difficult to gauge how many layoffs could result, what could happen to Enron's two downtown headquarters towers, Enron Chairman and Chief Executive Officer Ken Lay's fate, and whether the Enron name will disappear, including from Enron Field. 


Nov. 8, 2001, 12:07AM
Enron deals downshifted at breakneck speed 
Bottom fell out of creative accounting 
By TOM FOWLER 
Copyright 2001 Houston Chronicle 
Many companies say hard work and vision are secrets to success. For Enron Corp., the cornerstone of its late-1990s triumphs was something more obscure: innovative finance. 
Under the leadership of former Chief Financial Officer Andrew Fastow, the company took a widely used accounting procedure, off-balance-sheet financing, and raised it to an art form. 
The practice, which sets up partnerships with investors to buy large assets, allowed the company to grow quickly without adding significant debt or assets to its books. 
Fastow's prowess with these partnerships earned him gushing praise from Wall Street and superstar status among his peers. As one analyst said in a 1999 interview with CFO Magazine during the height of Enron's glory, "Fastow has invented a groundbreaking strategy." 
But the once rock-solid strategy turned to loose gravel under Enron's feet. 
A number of the complex off-balance-sheet deals came undone in recent months, leading the company to report close to $1 billion in related write-offs last month. This brought renewed interest to Fastow's dual roles as Enron CFO and general partner in some of the deals, from which he is reported to have profited personally. The Securities and Exchange Commission has launched a formal investigation. Even if Enron comes clean on the deals, giving the details Wall Street has demanded for weeks, it may be too little too late. 
Pressure from investors, a stock price plummet of more than 75 percent and downgrades from the major credit rating agencies all have followed. The fall has come so steep and so fast that local competitor Dynegy Corp. is now working to acquire Enron in a multibillion-dollar deal. 
Off-balance-sheet financing is a common tool among many capital-intense businesses. 
In the simplest of terms, a company can grow without showing additional debt on its balance sheet, said Ron Singer, a University of Houston professor of economics. Too much debt can cut cash flow and make a company look like a higher-risk borrower. 
While there are many variations, creating an off-balance-sheet vehicle is relatively straightforward. 
"You create an entity in which you have less than a 50 percent equity stake, so you can claim you don't have a controlling interest," Singer said. "You finance it with a large amount of debt from other investors, but that debt doesn't appear on your balance sheet." 
Continental Airlines and other carriers have used a type of off-balance-sheet financing to buy planes, while truck rental company Ryder creates partnerships that fund the purchase of fleets that Ryder leases from the partnerships. 
Enron's most troubling deals are different from others in three ways: 
First, they were complex, involving many layers of partnerships. Investments were in more than hard assets, including securities like equity stakes in companies and even stock options. 
Second, Fastow's direct involvement in the partnerships created the appearance of a conflict of interest, something most companies avoid by not having corporate officers in leadership roles. The company maintains it carefully monitored the partnerships, double-checking them with a legal fine-toothed comb. 
Third, and perhaps most important, Enron was loath to share details of the financing and their consequences, even after they began to unravel. The relative silence left investors and analysts to assume the worst. 
Houston-based El Paso Corp. uses two types of off-balance-sheet financing vehicles for major asset purchases. Under one model, the company works with a bank to create a 50/50 partnership to finance something like the construction of a power plant. 
The bank's loan would have a particularly long term and low interest rate, and would be paid back using revenue generated by the power plant. 
The other model, used most recently at El Paso, went into two special purpose projects: Project Electron, funding the purchase of U.S. power-producing operations, and Project Gem Stone, funding the creation of energy generation facilities in Brazil. 
Under the two projects El Paso puts some of its own funds into the partnerships; institutional investors put up the lion's share of the money. The institutional investors, which can include pension funds, hedge funds, banks and other corporations, have their investments backed by the hard assets of the partnership. 
Enron used simple off-balance-sheet deals in the past, but its strategy became more complex in the late 1990s as it began fueling aggressive growth plans. 
In 1997 the company's growth from a pipeline company into a leading gas and energy trading business led it to a huge debt load that didn't match up with its credit ratings. Maintaining that rating was crucial to the company's electricity and gas trading, which involved negotiated contracts with dozens of partners. 
The company could have put up its hard assets as backing to continue financing acquisitions and purchases, but Enron's top brass were reluctant. Instead, under Fastow's guidance, Enron's finance department became the equivalent of a bank, with a mission to raise capital. 
"We transformed finance into a merchant organization, one engaged in the intermediation of both commodity and capital risk positions," Fastow told CFO Magazine in 1999. "Essentially, we would buy and sell risk positions." 
The company also needed to raise more cash but couldn't issue equity, which would dilute shareholders' value, or issue more debt, a threat to its credit rating. 
Fastow's solution was to make it clear to the rating agencies that he was serious about keeping the good ratings by generating fast-growing cash flow, even though the company would issue more stock. A roadshow for analysts was organized to outline the plan and demonstrate the finance team's skills at maintaining the high-wire act. 
The sales pitch worked. When Enron issued 17.2 million shares in an offering and raised about $800 million, rating agencies liked it and share values didn't drop. 
The second part of the plan involved selling off nonstrategic assets, such as pipelines and other business units, to create even more cash flow. That cash was reinvested. 
Under this new, more aggressive strategy, Enron grew in different ways. For example, in October 1998 the company acquired three New Jersey power plants from Cogen Technologies by going to the capital markets to issue about $1.5 billion in equity and debt. Enron kept that capital off its own balance sheets by creating a special-purpose entity to which it sold a 50 percent interest in the plants. 
Another deal involved Enron's $2.3 billion purchase of Wessex Water, a British water company, in 1998. Enron created a special off-balance-sheet partnership named Atlantic Water Trust and issued $1.3 billion in Enron shares into it. The trust then went to the capital markets to raise $1 billion in debt that was backed by those shares. 
The trust purchased Wessex, and because Enron owned no more than 50 percent of Wessex, it didn't experience earnings dilution and didn't have that $1 billion in debt counted on its books. 
These complex deals won Fastow and his team praise and industry awards. 
So what went wrong? 
While many of Enron's off-balance-sheet deals worked with little controversy, the accounting innovation eventually worked against the company. 
Details on the more complicated deals, particularly the partnerships named LJM Cayman and LJM2 Co-Investment, which left the company with a $1 billion charge last quarter, have been hard to come by so far. But they appear to have been used to hedge against the risk of some of the company's newer lines of business beyond its core. 
"Power plants in India, water companies, extension of their franchise to the mass retail market and using a fiber optic network to deliver content over the Internet are all unrelated or only tangentially related to their core merchant energy business," said Ray Niles, an analyst with Salomon Smith Barney. "All of the write-offs appear to be in these noncore, nonenergy merchant areas." 
The off-balance-sheet partnerships also went on to buy the stock of other companies, said John Olson, an analyst with Sanders Morris Harris. 
"They own pieces of a variety of companies they've done asset trades with, oil-services companies, producers," Olson said. "And many of those shares are underwater right now." 
The partnerships also appear to have invested in options to buy shares of Enron at a fixed price with plans to make money by later selling them at a higher price. 
"It was perfectly sound logic when their stock was going up, but when it started to go down, it came as quite a shock," Olson said. 
While the details of Enron's partnerships remain elusive for the time being, there's little doubt that unraveling their true nature will be difficult for even the keenest financial and legal minds. 
"There's a saying that in Houston there are three major law firms: Vinson & Elkins, Baker Botts and Enron," Olson said. "Enron is overstaffed with many smart, smart lawyers, creating these complex and sophisticated contracts. The problem is they're all in the same room just canceling each other out." 


Nov. 8, 2001
Houston Chronicle
Briefs: City and state 
Azurix completes sales of two units 
An Enron Corp. subsidiary has closed the sales of two of its divisions that contributed to the company's steep loss this past quarter. 
Azurix Corp. sold Azurix North America Corp. and Azurix Industrial Corp. to American Water Works Co. for $141.5 million. The sale includes American Water Works assuming $6.1 million of debt. 
Azurix counted for $287 million of the $1.01 billion in losses Enron reported for the third quarter. 


Financial
Troubled Enron Negotiates Sale To Rival Dynegy
Peter Behr
Washington Post Staff Writer

11/08/2001
The Washington Post
FINAL
E01
Copyright 2001, The Washington Post Co. All Rights Reserved

Officials of Enron Corp. are negotiating a sale of their embattled energy-trading company to Houston-based rival Dynegy Inc. for about $8 billion in stock and an immediate cash infusion, according to sources familiar with the talks. 
The deal would include a $1.5 billion contribution to Enron by ChevronTexaco Corp. which owns 27 percent of Dynegy, sources said.
Representatives of Enron and Dynegy declined to comment. 
The fortunes of Enron, the largest trader of natural gas and electric power and one of the early apostles of utility deregulation, have plunged since late last month, when it announced a $638 million third-quarter loss and disclosed that the value of shareholder equity had dropped by $1.2 billion because of complex investment deals with outside partnerships. 
Enron dismissed its chief financial officer, Andrew Fastow, who had run some of the largest of these partnerships in what some investors allege was a conflict of interest, according to civil lawsuits filed against Enron. 
It also revealed a Securities and Exchange Commission investigation of the investments, and it has had to scramble for additional capital as its credit rating was downgraded. Today, Enron is expected to make public answers about the partnership transactions that it has furnished to the SEC. 
In August, Enron's chief executive, Jeffrey Skilling, resigned unexpectedly, citing personal reasons, a month after Fastow severed his ties with the partnerships. With Skilling's resignation, Enron Chairman Ken Lay -- the nation's most visible energy executive because of his close friendship with President Bush -- resumed the chief executive's duties. 
Last week, Enron secured a $1 billion loan from J.P. Morgan Chase & Co. and Salomon Smith Barney Inc. to help cover debt payments and trading obligations, but it had to use some of its most valuable pipeline assets to secure the loan. 
Enron's stock has fallen from a high of $90 a share in August 2000 to $9.05 yesterday, off 62 cents from Tuesday's closing price, after the talks were reported by CNBC. The steepest price decline followed its third-quarter earnings report last month. 
But earnings for Enron's core energy businesses increased 26 percent from the year before, before write-offs, demonstrating the value of these operations to other energy companies, according to Will McNamara, energy analysis director for Scientech Inc. in Albuquerque. 
Any transactions involving Enron must cope with the uncertainty about the impact of more than a score of confidential partnership investments on the company's debt level and stock value, analysts said. 
Two of the partnerships in which Enron has a stake, named Osprey and Marlin, have borrowed $3.4 billion to purchase and then resell Enron energy assets and to make other investments, according to analysts. 
"The issue is how much of that is considered debt of Enron," said Ralph G. Pellechia, an analyst with Fitch Inc. Fitch and other bond-rating firms have sharply downgraded Enron's debt this month. 
In one of a growing number of lawsuits against Enron's board of directors, Fred Greenberg, a Texas shareholder, alleged that Fastow had engaged in a conflict of interest by serving as Enron's chief financial officer while running the private partnerships that purchased power plants and other assets from Enron. Fastow was entitled to a share in partnership profits, even if that was contrary to Enron shareholders' interests, Greenberg's suit contends. 
In public filings with the SEC, Enron disclosed that key corporate officers were involved with the partnerships and declared that its board had reviewed and approved the relationships. 
A confidential offering seeking investments in an Osprey partnership in September 2000 described one of those relationships in different terms. The funds raised by Osprey would be turned over to another partnership, named Whitewing, to which Enron was contributing $1.2 billion, the offering document said. Whitewing would use the funds to purchase Enron assets and make other investments. 
The duties of Enron's corporate directors and officers may conflict with the duties of Whitewing's officers and directors, the document said. "In addition, certain other conflicts of interest exist and may arise in the future" because of the close relationship between Enron, Whitewing and its subsidiaries, it added.


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

Dynegy May Offer as Much as $8 Billion for Enron: WSJ (Update1)
2001-11-08 05:32 (New York)

Dynegy May Offer as Much as $8 Billion for Enron: WSJ (Update1)

     (Adds German trading in fifth paragraph, details on ratings
in 14th paragraph and SEC probe in 16th paragraph.)

     Houston, Nov. 8 (Bloomberg) -- Dynegy Inc. may offer to buy
Enron Corp. for as much as $8 billion in stock after shares of the
biggest energy trader fell 89 percent this year, the Wall Street
Journal, New York Times and Associated Press reported, citing
unidentified people familiar with the situation.

     The boards of Dynegy, a Houston-based energy trader,
ChevronTexaco Corp., which owns about 27 percent of Dynegy, and
Enron met yesterday to negotiate terms of the transaction, which
would value Enron at about $10 a share, according to the reports.
A transaction may be announced as early as today, AP said.

     Enron's stock and credit ratings have declined in the wake of
a Securities and Exchange Commission investigation into
partnerships run by former chief financial officer Andrew Fastow.
The company has drawn down $3 billion in credit lines and is
seeking new financing to reassure trading partners.

     ``Enron is running out of time and that's what's pushing them
to the bargaining table,'' said Zach Wagner, an analyst with
Edward Jones & Co., who cut his recommendation on Enron to
``reduce'' from ``accumulate'' on Oct. 23.

     Shares of Enron traded in Germany rose 28 cents $9.33. The
stock reached a record $90.75 in August 2000 and fell 62 cents to
$9.05 yesterday in U.S. trading. It has a market value of about
$6.79 billion.

     Dynegy would gain a wholesale energy business, the leading
energy manager for commercial and small-industrial customers, and
an Internet energy trading operation many times larger than its
own, said UBS Warburg LLC analyst James Yanello.

                          `Stingy' Buyer

     ``If history is any guide, Dynegy is stingy when it comes to
acquisitions, so I don't expect them to do anything stupid'' such
as overpaying for Enron, said Yanello. ``A deal could provide
Dynegy with tremendous opportunity.'' He rates Dynegy ``strong
buy'' and doesn't own shares of either company.

     Enron Chairman and Chief Executive Officer Kenneth Lay
wouldn't hold a management position with the combined company
under terms being discussed Wednesday, the Wall Street Journal
reported. He would get a seat on the board, the paper added.

     ChevronTexaco is considering adding $1.5 billion to the
transaction to help Enron. It would provide another $1 billion
when the purchase is closed, the New York Times and Wall Street
Journal reported.

     The companies agreed on a breakup fee providing Dynegy with
about $400 million if Enron accepts a higher offer, people
familiar with the talks said.

     Dynegy spokesman Steve Stengel, Enron spokesman Mark Palmer
and ChevronTexaco spokesman Fred Gorell declined to comment.

                         Losing Confidence

     Companies that trade natural gas, electricity and other
commodities with Enron may pull back if Enron's finances
deteriorate to the point that it loses its investment-grade credit
rating, investors say.

     ``Dynegy has to act fast,'' said Roger Hamilton, a money
manager with John Hancock Advisers Inc., which sold its Enron
shares in recent weeks. ``If Enron can't get financing and its
bonds go to junk, they lose counterparties and their marvelous
business vanishes.''

     Moody's Investors Service lowered its rating on Enron's bonds
to ``Baa2'' and Standard & Poor's cut the debt to ``BBB.'' in the
past two weeks.

     Federal regulators may overlook antitrust concerns in order
to keep Enron afloat, Hamilton said.

                             SEC Probe

     Securities regulators are investigating trading by
partnerships run by Fastow, the former financial director. The
entities bought and sold Enron shares and assets, with trades
costing Enron $35 million and $1.2 billion in lost shareholder
equity. Enron ousted CFO Andrew Fastow last month.

     Shares of Dynegy, the fifth-largest U.S. natural gas
marketer, fell $3 to $33 yesterday, while ChevronTexaco rose 48
cents to $87.28.

     Enron shares and bonds have tumbled in the past month. One of
its bonds, an issue paying 6.725 percent that matures in November
2008, fell to 69.11 cents on the dollar, according to Bloomberg
data, down from 71.90 cents yesterday.

     ``We would be very surprised if Dynegy buys the whole
company,'' said Tim Ghriskey, president of Ghriskey Capital
Partners, which doesn't own Enron or Dynegy shares. ``All the
(Dynegy) board has to do is look at what's happening to their
stock price today, and you'd wonder why they would want to do it
in the face of what's happening with the stock.'' Ghriskey made
his comments on Wednesday.

                       Enron Meets Creditors

     Enron is to meet with J.P. Morgan Chase & Co., Citigroup Inc.
and other lenders on Friday to discuss merger plans and a possible
increase in the amount the company pays for existing credit lines,
according to bankers familiar with the matter.

     The company has invited more than 300 creditors to its
offices in Houston to listen to presentations by Enron's financial
team, led by its new chief financial officer, Jeffrey McMahon, the
bankers said.

     Dynegy began in 1985 as Natural Gas Clearinghouse, a gas-
trading company. In 1998, the company took the name Dynegy -- a
combination of the words dynamic and energy -- to reflect its
expansion beyond natural gas. Chuck Watson, the company's
president from 1985, became chairman and chief executive in 1989.

     Watson is an investor with Enron CEO Lay in the Houston
Texans, who begin playing in the National Football League next
year, and is a board member at Baker Hughes Inc. As of an April
filing with the SEC, Watson owned 12.3 million Dynegy shares, or
about 5.1 percent of the common stock.

--George Stein in New York, (212) 893-3934 

Reports: Dynegy close to deal to buy Enron for $8 billion

11/08/2001
Associated Press Newswires
Copyright 2001. The Associated Press. All Rights Reserved.

HOUSTON (AP) - Dynegy Inc. is reportedly in the late stages of discussions with rival Enron Corp. to buy the embattled energy-trading company for about $8 billion in stock, or roughly $10 per share. 
Under the terms of the deal, Enron would receive an immediate $1.5 billion cash infusion from oil giant Chevron Texaco, which holds a 27 percent stake in Dynegy, the New York Times reported on its Web site Wednesday night, citing executives close to the discussion.
Chevron Texaco would provide an additional $1 billion injection at a later date, the Times reported, while Dynegy would assume $12.8 billion in Enron debt, plus billions of dollars in other debt that has been kept off the beleaguered company's balance sheet and has been a significant contributor to its current problems. 
Enron Chairman Kenneth Lay would not be given any formal management position in the combined company, although he would have a seat on its board, The Wall Street Journal reported, citing people familiar with the matter. 
The boards of both companies were meeting late Wednesday and could announce the deal as early as Thursday, although the Journal reported that the transaction could still be derailed. 
Enron did not return calls seeking comment. Dynegy spokesman Steve Stengel said the company would not respond to "rumor and speculation." 
In Wednesday trading, Dynegy's shares were down $3 to close at $33 on the New York Stock Exchange, while Enron's stock was off 62 cents and closed at $9.05. Shares of ChevronTexaco rose 48 cents to $87.28 on the NYSE. 
Enron's stock is off more than 79 percent since Oct. 16, when the company said shareholder equity had been reduced by $1.2 billion, in part due to partnerships managed by Enron's former chief financial officer, Andrew Fastow. 
At the same time, Enron reported a $618 million third quarter loss last month, dragged down by a one-time charge of $1.01 billion attributed to various losses. Fastow was ousted a week later. 
The company's financial stability was further weakened after the Securities and Exchange Commission began an inquiry, which was upgraded to a formal investigation, of the partnerships and possible conflicts of interest resulting from them. 
Jeff Skilling, Enron's former chief executive, has been called to testify before the SEC, although it remains unclear when that will occur, said Denis Calabrese, a spokesman for Skilling. 
Enron's woes have prompted considerable speculation about a possible takeover of the company. Before Wednesday, companies mentioned as possible suitors included General Electric's GE Capital unit and Royal Dutch/Shell Group. 
Duane Grubert, an analyst with Sanford C. Bernstein and Co., said a merger between Enron and Dynegy makes sense. 
"I think Dynegy could be a very good fit in terms of understanding the merchant business, having a similar culture," Grubert said. "Enron was initially proactive at teaming up with non-competitors but once it exhausted that route" it went in another direction. 
In the past few weeks, Enron has cashed in about $3 billion in revolving credit it has with various banks to shore up investor confidence. Last week, Enron secured $1 billion in new financing, using some of its natural gas and pipeline assets as collateral. 
Meanwhile, Standard & Poor's Corp. on Wednesday lowered its ratings on some of Enron's credit linked notes and placed them on CreditWatch. S&P said Enron's plan to repair its damaged balance sheet through asset sales and other means will be insufficient. 
Moody's Investors Service and Fitch Inc. have also downgraded the company's credit ratings. 
Last week, Enron announced it created a special committee headed by University of Texas law school dean William Powers to respond to the SEC investigation. 
--- 
On the Net: 
http://www.dynegy.com 
http://www.enron.com

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


ChevronTexaco affiliate Dynegy in talks to buy Enron for 7-8 bln usd - report

11/08/2001
AFX News
(c) 2001 by AFP-Extel News Ltd

NEW YORK (AFX) - Energy trading and power company Dynegy Inc, a ChevronTexaco Corp affiliate, is negotiating to buy Enron Corp for around 7-8 bln usd in stock, the Wall Street Journal reported, quoting people familiar with the matter. 
Because Enron needs to shore up its finances now, Dynegy also is expected to inject an additional 1.5 bln usd into Enron immediately, the sources said.
ChevronTexaco, which holds 26 pct of Dynegy, is expected to provide Dynegy with the funds for the cash infusion and is playing a significant role in the negotiations. 
ChevronTexaco will inject an additional 1 bln usd into the combined company once the deal is concluded so that its stake in Dynegy is not substantially reduced and so the combined company has a healthy balance sheet, the Journal said. 
The boards of Dynegy, Chevron and Enron met yesterday to discuss a deal, but a seesawing Enron stock price and the complexity of a transaction yet could derail the transaction, the newspaper added. 
Under the terms being worked out last night, Enron Chairman Kenneth Lay would have a seat on the combined company's board, but would not hold a formal management position. 
jms For more information and to contact AFX: www.afxnews.com and www.afxpress.com

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


USA: UPDATE 1-Fund alleges fat fees biased Andersen on Enron.
By Kevin Drawbaugh

11/08/2001
Reuters English News Service
(C) Reuters Limited 2001.

WASHINGTON, Nov 7 (Reuters) - Enron Corp. paid one of the largest audit bills in corporate America last year to Arthur Andersen, regulatory filings showed on Wednesday, as the Big Five accounting firm faced a lawsuit in Oregon alleging its high-priced audit of the battered energy giant was flawed. 
Houston-based Enron, rocked by a federal investigation and trading at historic lows, paid Arthur Andersen $52 million last year in audit and non-audit fees, according to Enron's 2001 proxy filed with the Securities and Exchange Commission.
That figure topped the fees paid by all similarly sized utility companies listed along with Enron on the Dow Jones utility index, and all but a handful of the 30, mostly much larger companies in the Dow Jones industrial average. 
The huge revenues taken in by Arthur Andersen from Enron - comprising $25 million in audit fees and $27 million in other fees - amounted to about $1 million a week last year. 
That rich revenue flow influenced the accounting firm's judgment when it came to examining some unusual outside partnership arrangements involving Enron now being probed by the SEC, alleged a lawsuit filed last week in Oregon. 
The SEC declined to comment. 
"Arthur Andersen enjoyed a lucrative, long-standing business relationship with Enron's senior management for which they received millions of dollars," said the lawsuit filed by the Southern Electrical Retirement Fund, an electricians' pension fund, against Enron officers and Arthur Andersen. 
"Maintaining the client relationship was highly dependent on the individual defendants, particularly Enron's CEO (Kenneth) Lay, and Arthur Andersen compromised themselves to do so," alleged Southern Electrical, which owns Enron shares. 
A spokesman for Arthur Andersen said the Chicago-based firm had not seen the Oregon lawsuit and declined comment. He also declined to comment on the relative size of Enron's fees. 
The troubles of Enron beginning last month have led to numerous lawsuits against company officers, but the Oregon action was the first known to target its auditor, as well. 
As the first anniversary of the issuance of SEC auditor independence rules approaches next week, the Enron-Arthur Andersen relationship was coming under increased scrutiny by regulators, plaintiffs' attorneys and institutional investors. 
CRITICS SAY ANDERSEN SHOULD HAVE DONE MORE 
Arthur Andersen should have done more as auditor for Enron to alert investors to the outside partnerships that are now being investigated by authorities, accounting experts said. 
"It certainly has to raise a lot of eyebrows, especially in the independence and objectivity issue," said Jay Nisberg, an accounting consultant based in Ridgefield, Connecticut. 
Arthur Andersen should have pushed harder for more and clearer disclosure of the partnerships' potential for conflicts of interest and financial risk to Enron, critics said. 
Enron last month ousted its chief financial officer Andrew Fastow. He was replaced by another Enron executive. Fastow was instrumental in setting up and managing the partnerships - LJM2 Co-Investment LP and LJM Cayman LP - that did complex financial transactions with Enron, Fastow's employer. 
The transactions were disclosed to Enron investors in annual 10K filings and proxy statements issued in 2000 and 2001. But Andersen should have done more to put the disclosures in plain English and highlight their potential for possible conflicts and risk to Enron's finances, said critics. 
"The activities of these particular partnerships and the role of Enron in them, it's not the kind of thing you stick in the proxy statement at the back somewhere in a series of innocuous paragraphs," said Mark Cheffers, who heads accounting consultancy AccountingMalpractice.com in Massachusetts. 
Enron - a former natural gas pipeline group that transformed itself into the nation's largest energy trader - said last month it was taking a $1 billion charge against earnings, as well as cutting shareholder equity by $1.2 billion largely due to soured transactions with Fastow's partnerships. 
Enron spokeswoman Karen Denne has said that Arthur Andersen knew about the LJM partnerships and "reviewed them to the extent they deemed necessary." 
ANDERSEN'S WOES WITH WASTE MANAGEMENT 
Earlier on Wednesday, Waste Management Inc. said Andersen would pay the firm $20 million to settle a professional malpractice suit related to an accounting scandal the garbage hauler was embroiled in more than two years ago. 
Waste Management itself agreed to pay $457 million to settle a class action lawsuit filed against it related to the scandal and problems that hammered its share price. 
The impact of the settlement, coupled with criticism of Andersen's handling of Enron, is likely to hurt Andersen's brand and influence the type of advice and services it provides clients in the future, Cheffers said. 
"It's obviously a jolt to their reputation," he said. "But the bigger question is if they're going to reevaluate the advice they give their clients." 
In June, Arthur Andersen was fined $7 million by the SEC to settle charges it filed false and misleading audit reports of Waste Management in the largest ever civil penalty against a Big Five accounting firm, according to the SEC. Andersen did not admit or deny the charges. 
(Additional reporting by Deepa Babington in New York).

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


Enron's power company reverses itself, says it is meeting with Indian representatives in Singapore
By SATISH NANDGAONKAR
Associated Press Writer

11/08/2001
Associated Press Newswires
Copyright 2001. The Associated Press. All Rights Reserved.

BOMBAY, India (AP) - The U.S.-based Enron Corp.'s power company in India reversed itself and said it was attending meetings in Singapore Thursday and Friday to discuss a negotiated settlement with four Indian creditors who had filed suit to demand the stalled Dabhol power project resume operations. 
The Dabhol Power Co., owned by Houston-based Enron, said in a statement Thursday that it had received assurances late Wednesday that the Indian government and state lenders "intend to present new proposals at the Singapore meeting with respect to a negotiated settlement of this dispute. ..."
Enron has objected to previous attempts by some of the parties in the dispute to go to the courts. 
The Dabhol Power Co. had said Wednesday it would skip the meeting to discuss bids by two Indian companies to acquire a stake in the troubled dlrs 2.9 billion project in Maharashtra state. 
That announcement was made after the state-linked Indian lenders asked the Bombay High Court on Wednesday to prevent Dabhol Power Co. from serving a final termination notice and winding up its operations at the 2,184 megawatt project on Nov. 19. A preliminary notice was filed earlier this week. 
Indian lenders, including the Industrial Finance Corp. of India., had asked the court to order work on the project to resume so that the lenders can recover their money. 
In May, Enron stopped construction of the 90 percent completed project - India's biggest ever foreign investment - and halted supply of electricity on the portion already finished because the Maharashtra State Electricity Board said it could no longer afford the fees it agreed to pay when the contract was signed seven years ago. 
"Upon personal requests from senior representatives of the government of India and the Indian banks, (Dabhol) agreed to attend the meetings in Singapore on Nov. 8 and 9 to discuss an amicable resolution of the Dabhol issue," the company said in Thursday's statement. 
Meanwhile, the court case was due to come up for a hearing on Friday in Bombay. 
Indian lenders' exposure in the power project is estimated to 61 billion rupees (dlrs 1.3 billion), while Enron and its partners, General Electric and Bechtel Corp., say they have invested dlrs 1 billion. 
(str/lak)

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

Enron India unit's lenders issue court challenge to prevent project pullout

11/08/2001
AFX News
(c) 2001 by AFP-Extel News Ltd

BOMBAY (AFX) - A consortium of lenders to Enron Corp's Indian unit, Dabhol Power Co, asked the Bombay High Court to prevent the unit from pulling out of a 2.9 bln usd energy project, the New York Times reported. 
The consortium, led by the Industrial Development Bank of India, sought a stay on the final termination notice and stopping the transfer of Dabhol's assets.
In response, Dabhol canceled a meeting with the Indian lenders scheduled for later this week. 
On Tuesday, Enron said it would serve a final termination notice to officially close the power project in western Maharashtra state after Nov 19, when a six-month deadline for resolving a payment dispute ends. 
Enron holds a 65 pct stake in Dabhol. 
jms For more information and to contact AFX: www.afxnews.com and www.afxpress.com

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


Dabhol Pwr Co Confirms Creditors Mtg In Singapore Thu

11/08/2001
Dow Jones Energy Service
(Copyright (c) 2001, Dow Jones & Company, Inc.)

SINGAPORE -(Dow Jones)- India's Dabhol Power Co. confirmed Thursday a two-day meeting in Singapore between a consortium of Indian lenders and DPC officials will go-ahead, despite DPC's earlier cancelation of the talks Wednesday prompted by a lawsuit filed by the lenders. 
The two-day meeting, scheduled to begin in Singapore Thursday, will discuss bids by two Indian companies to acquire a stake in Dabhol Power Co. DPC is the Indian unit of U.S. energy company Enron Corp. (ENE).
"Under personal requests from senior representatives of the government of India and the Indian banks, DPC agreed to attend the meetings in Singapore on Nov. 8 and 9 to discuss an amicable resolution to the Dabhol issue," DPC's director of corporate communications Jimmy Mogal said in a statement. 

"Late last evening (Wednesday), DPC received assurances from the government of India and the Indian banks that they intend to present new proposals at the Singapore meeting with respect to a negotiated settlement of this dispute, including the purchase of foreign sponsor equity by the government of India and the Indian banks," Mogal added. 
As reported earlier Thursday, the Industrial Development Bank of India (P.IDB) - a major creditor of DPC Co. - said the Singapore meeting would go-ahead, although DPC officials were unable to confirm this at the time. 
"All major Indian lenders will be present at the meeting. We are trying to find an amicable solution to this crisis," V.K. Saxena, IDBI's chief general manager told Dow Jones Newswires. 
"The lenders have potential buyers like BSES Ltd. (P.BSX) and Tata Power Co. Ltd. (P.TPW) who are interested in buying out Enron's stake in Dabhol Power Co.," Saxena added. 
DPC's domestic lenders include ICICI Ltd. (P.ICC), Industrial Development Bank of India (P.IDB), IFCI Ltd. (P.ICI) and State Bank of India (P.SBI). 
Domestic lenders have provided US$1.4 billion of the project's total projected cost of US$2.9 billion. IDBI's exposure is in the excess of 20 billion rupees ($1=INR47.97), and the bank runs the risk of going deep into the red if this project goes bust. 

DPC's Mogal declined to disclose the venue of the talks in Singapore "at the request of the Indian financial institutions. 
DPC Managing Director K. Wade Cline is attending the Singapore talks, Mogal said. 
The Indian creditors filed a lawsuit in the Bombay High Court against DPC and three other parties earlier this week to protect their interests and demand that the energy project resume operations. 
"The first hearing was initiated (Wednesday), but has been posted to Friday," Mogal said although this couldn't be confirmed by the domestic lenders at the time of writing. 
The DPC is embroiled in a power supply dispute with the Maharashtra state government and over what the state government claims are "unaffordable" power tariffs. 
DPC has come under fire because of the relatively high cost of its power. Critics object to DPC charging INR7.1 a kilowatt-hour for its power, compared to INR1.5 per kWh charged by other suppliers. 
The problems with DPC have only added to Enron's much-publicized financial troubles. 
Investor confidence in the Houston-based energy company dropped after Enron posted a third quarter loss of US$618 million and disclosed a US$1.2 billion decrease in investor equity related to partnership transactions undertaken with the company's former chief financial officer, Andrew Fastow. 
-By Sri Jegarajah and Himendra Kumar, Dow Jones Newswires; 65-415-4066; sri.jegarajah@dowjones.com

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

India: Enron not to move on termination till Friday

11/08/2001
Business Line (The Hindu)
Fin. Times Info Ltd-Asia Africa Intel Wire. Business Line (The Hindu) Copyright (C) 2001 Kasturi & Sons Ltd. All Rights Res'd

MUMBAI, Nov. 7 THE Enron-promoted Dabhol Power Company (DPC) today agreed before the Mumbai High Court not to take any steps towards termination till Friday when the court would hear arguments on a joint petition filed by the lenders, IDBI, ICICI, IFCI and SBI. 
Meanwhile, a multilateral meeting scheduled to be held in Singapore on November 8 and 9 to sort out issues on the Dabhol project has been called off. According to DPC, the cancellation followed the legal action taken by Indian lenders.
The company stated that it would "not take any steps pursuant to the preliminary termination notices (PTN) issued on May 19 and September 10 and the asset transfer notice issued on November 5 until Friday evening." 
Mr Justice J.A. Patil has posted the petition for hearing on Friday. 
The DPC Managing Director, Mr K. Wade Cline, in a communication to the IDBI Chairman, Mr P.P. Vora, and the ICICI Executive Director, Mr S. Mukherji, said the legal action by the Indian institutions was an effort to prevent DPC's foreign investors from exercising their previously agreed contractual rights. 
He said DPC was amazed at the FIs' move to file the suit when they and the Centre had specifically requested meetings with Enron in Singapore and Washington DC to discuss an "amicable" solution of the Dabhol issue. 
In a sudden move yesterday, the Indian lenders - IDBI, ICICI, IFCI and State Bank of India - filed a suit in the Mumbai High Court seeking a stay on termination proceedings by DPC. Mr Harish Salve, counsel for the lenders, told the court today that the institutions had no way to protect their security other than approach the court. 
The lenders want the court to stay the termination process and also a direction to re-start the first phase of the project which has been mothballed following the spat between DPC and Maharashtra State Electricity Board (MSEB). 
Mr Salve told the court that the Indian lenders had put in more than Rs 6,000 crore, either through direct lending or guarantees, into the project. The lenders are caught between MSEB, which has "repudiated" the power purchase agreement (PPA), and DPC, which is proceeding "as per the PPA". 
On November 19, a six-month "cooling" period after the serving of the first PTN expires, and DPC becomes eligible to serve the final termination notice (FTN) as per the PPA. 
A third-party sale of the plant would not be possible once the company serves the FTN and MSEB would be obliged to take over the plant. As per the PPA, in such a situation, MSEB has to pay back the entire debt upfront. In the current circumstances, this is near-impossible, especially since MSEB would not agree to the transfer of assets as it does not acknowledge the PPA. 
FIs fear that the company would serve the FTN any time after November 19. If it does, the chances of Tata Power or BSES Ltd -currently the only two contenders for the project - acquiring the project may vanish. 
Our Bureau

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

Dabhol agrees to meet FIs after a day-long drama
Our Bureaux Mumbai

11/08/2001
Business Standard
2
Copyright (c) Business Standard

In a day of dramatic developments, the Enron-promoted Dabhol Power Company (DPC) initially decided against attending a meeting convened by the Indian financial institutions in Singapore in retaliation to a case lodged against it at the Bombay High Court, but subsequently, reversed its stand. 
"The Indian government and the institutions informed us that there will be a new proposal from the latter to buy Enron's equity in Dabhol Power Company," said a senior official of DPC.
FI sources, though, confirmed that DPC representatives had agreed to attend the meeting in Singapore, but denied that they had agreed to come up with a new proposal to buy Enron's equity. "It is going to be a closed door meeting where various issues will be discussed," they said, but declined to reveal further details. 
Earlier in the day, DPC had issued a statement saying that it had called off the scheduled meeting with the Indian financial institutions in Singapore on Thursday and Friday following a case lodged in the Bombay High Court by the latter. 
Indian financial institutions and banks had filed a case in the High Court pleading for an injunction against DPC. They had asked the Court to restrain DPC from serving the final termination notice to the Maharashtra State Electricity Board (MSEB). Earlier this week, DPC had served a transfer of assets notice, thereby, setting the stage for serving the final termination notice. 
Tata Power and BSES, the two companies which have evinced keen interest in buying Enron's 65 per cent stake in DPC, are also slated to attend the meeting. The proposals of these two companies are likely to be discussed at the meeting. 
Earlier, DPC had said it was "disappointed" with the legal action taken by the Indian lenders. DPC had also expressed surprise that the legal action had been initiated on the eve of Prime Minister Atal Behari Vajpayee's visit to the US.

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


Dynegy Holds Talks to Buy Enron, Inject $1.5 Billion to Shore Up Firm

11/07/2001
Dow Jones Business News
(Copyright (c) 2001, Dow Jones & Company, Inc.)

Dynegy Inc., the Houston-based energy trading and power company, was attempting to strike a deal Wednesday evening to buy Enron Corp., its beleaguered hometown rival, for $7 billion to $8 billion in stock, The Wall Street Journal reported. 
Because any merger of the two would likely be scrutinized for many months and Enron (ENE) needs to shore up its beleaguered finances now, Dynegy (DYN) also is expected to inject $1.5 billion into Enron immediately, people familiar with the matter said.
ChevronTexaco Corp. (CVX), which owns a 26% stake in Dynegy, is expected to provide Dynegy with the funds for the cash infusion and is playing a significant role in the negotiations. ChevronTexaco then will inject another $1 billion into the combined company once the deal is concluded so that its stake in Dynegy isn't substantially reduced. 
Under the terms being worked out Wednesday night, Enron Chairman Kenneth Lay would have a seat on the combined company's board, but wouldn't hold any formal management position, said the people familiar with the matter. Mr. Lay may take on a consulting role. 
The boards of Dynegy, Chevron and Enron were meeting Wednesday to discuss a potential deal, but a seesawing Enron stock price and the complexity of a transaction yet could derail a deal, people familiar with the matter warned. 
Several important points, including the exchange ratio, were still being worked out, but Dynegy is expected to pay a very modest premium for Enron's stock, arguing that Enron shareholders will benefit from the upside of combining the two companies. 
Enron also is expected Thursday to disclose more financial dealings about the controversial partnerships. Spokesmen from Enron and Dynegy declined to comment. 
If approved by regulators, the deal would be a stunning development for Enron, which transformed itself from a staid natural-gas-pipeline company into a highflying power trading giant only to see its share price -- and hefty market valuation -- plummet in a matter of weeks. 
Enron has been scrambling for days to line up quick financing from a prominent outside investor and has been in discussions with private-equity firms and power-trading companies. The company desperately needs to win back its credibility on Wall Street following the disclosure that the Securities and Exchange Commission was investigating the partnerships created to serve as a hedge against fluctuating market conditions. Discussions between Dynegy and Enron began about 10 days ago, but intensified last weekend. 
Should Enron strike a deal, it hopes to stabilize its stock price. Enron fell 6.4%, or 62 cents, to $9.05 at 4 p.m. composite trading on the New York Stock Exchange. At one point Wednesday morning, Enron's stock had fallen 25% on news reports that Enron's efforts to line up investors had failed. The stock recovered after CNBC and Dow Jones Newswires reported the talks with Dynegy. The shares are at a new 52-week low and far from the 52-week high of $84.88. 
Dynegy fell $3, or 8.3%, to $33, at 4 p.m. in Big Board trading. However, some investors believed the company's share price could benefit from the deal. 
Copyright (c) 2001 Dow Jones & Company, Inc. 
All Rights Reserved.

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

Dynegy reportedly close to deal to buy Enron for $8 billion

11/07/2001
Associated Press Newswires
Copyright 2001. The Associated Press. All Rights Reserved.

HOUSTON (AP) - Dynegy Inc. was reportedly in the late stages of discussions Wednesday night with rival Enron Corp. to buy the embattled energy-trading company for about $8 billion in stock, or roughly $10 per share. 
Under the terms of the deal, Enron would receive an immediate $1.5 billion cash infusion from oil giant Chevron Texaco, which holds a 27 percent stake in Dynegy, the New York Times reported on its Web site, citing executives close to the discussion.
Chevron Texaco would provide an additional $1 billion injection at a later date, the Times reported, while Dynegy would assume $12.8 billion in Enron debt, plus billions of dollars in other debt that has been kept off the beleaguered company's balance sheet and has been a significant contributor to its current problems. 
Enron Chairman Kenneth Lay would not be given any formal management position in the combined company, although he would have a seat on its board, The Wall Street Journal reported, citing people familiar with the matter. 
The boards of both companies were meeting late Wednesday and could announce the deal as early as Thursday, although the Journal reported that the transaction could still be derailed. 
Enron did not return calls seeking comment. Dynegy spokesman Steve Stengel said the company would not respond to "rumor and speculation." 
In Wednesday trading, Dynegy's shares were down $3 to close at $33 on the New York Stock Exchange, while Enron's stock was off 62 cents and closed at $9.05. Shares of ChevronTexaco rose 48 cents to $87.28 on the NYSE. 
Enron's stock is off more than 79 percent since Oct. 16, when the company said shareholder equity had been reduced by $1.2 billion, in part due to partnerships managed by Enron's former chief financial officer, Andrew Fastow. 
At the same time, Enron reported a $618 million third quarter loss last month, dragged down by a one-time charge of $1.01 billion attributed to various losses. Fastow was ousted a week later. 
The company's financial stability was further weakened after the Securities and Exchange Commission began an inquiry, which was upgraded to a formal investigation, of the partnerships and possible conflicts of interest resulting from them. 
Jeff Skilling, Enron's former chief executive, has been called to testify before the SEC, although it remains unclear when that will occur, said Denis Calabrese, a spokesman for Skilling. 
Enron's woes have prompted considerable speculation about a possible takeover of the company. Before Wednesday, companies mentioned as possible suitors included General Electric's GE Capital unit and Royal Dutch/Shell Group. 
Duane Grubert, an analyst with Sanford C. Bernstein and Co., said a merger between Enron and Dynegy makes sense. 
"I think Dynegy could be a very good fit in terms of understanding the merchant business, having a similar culture," Grubert said. "Enron was initially proactive at teaming up with non-competitors but once it exhausted that route" it went in another direction. 
In the past few weeks, Enron has cashed in about $3 billion in revolving credit it has with various banks to shore up investor confidence. Last week, Enron secured $1 billion in new financing, using some of its natural gas and pipeline assets as collateral. 
Meanwhile, Standard & Poor's Corp. on Wednesday lowered its ratings on some of Enron's credit linked notes and placed them on CreditWatch. S&P said Enron's plan to repair its damaged balance sheet through asset sales and other means will be insufficient. 
Moody's Investors Service and Fitch Inc. have also downgraded the company's credit ratings. 
Last week, Enron announced it created a special committee headed by University of Texas law school dean William Powers to respond to the SEC investigation. 
--- 
On the Net: 
http://www.dynegy.com 
http://www.enron.com

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

USA: WRAPUP 2-Enron, Dynegy in merger talks.
By Andrew Kelly

11/07/2001
Reuters English News Service
(C) Reuters Limited 2001.

HOUSTON, Nov 7 (Reuters) - Dynegy Inc. is in talks to buy troubled Enron Corp. in a deal that would involve a stock swap and a $1.5 billion capital infusion from ChevronTexaco, which has a big stake in Dynegy, a source close to the talks said on Wednesday. 
The deal, which could be announced officially this week, was expected to give what the source called a "modest premium" to Enron shareholders, whose stock has plummeted in value as a fast-moving financial crisis enveloped the company.
For Dynegy, the merger would catapult it to the top of the energy trading industry now dominated by Enron. Last year, the company had $29 billion in revenues, compared to $100 billion for Enron. 
For Enron, it would cap an astonishingly rapid fall from grace for a company that not long ago was ballyhooed as one of the world's most innovative, not to mention profitable. 
The source said the form of ChevronTexaco's capital infusion was not yet clear. Chevron, which recently merged with Texaco, was one of Dynegy's founding investors and still owns 26.5 percent of the company. 
STOCK HAMMERED 
Enron has seen its stock hammered and credit ratings lowered in recent weeks after reporting its first quarterly loss in four years and taking a $1.2 billion equity writedown linked to financial transactions under investigation by the U.S. Securities and Exchange Commission. 
Enron shares, which traded as high as $90 in August of last year, dropped to a 10-year-low of $7 during Wednesday's trading session before rallying on news of the Dynegy talks. 
The stock ended down 62 cents at $9.05 on volume of 72.4 million shares, the day's most active issue on the New York Stock Exchange. Dynegy stock fell $3 to $33. 
Enron, the nation's largest trader of natural gas and electricity, has been under fire for failing to explain off-balance sheet transactions conducted with partnerships run by ousted chief financial officer Andrew Fastow. Investors said they reeked of conflict of interest and demanded a full explanation they never got. 
Fastow left the company last month in what has become a growing line of high-profile departures from Enron, topped by the August resignation of chief executive Jeff Skilling after just six months on the job. 
The crisis has undermined confidence in Enron's financial stability, which in turn has forced the company to seek cash and credit to back the energy trading operations that provide most of its revenue and earnings. 
The New York Times said on Wednesday Enron had approached at least a dozen buyout firms and investor Warren Buffett, chairman of Berkshire Hathaway Inc. ., but none took the bait. 
Analysts have said would-be investors are wary because no one knows what financial liabilities, if any, lurk in Enron's labyrinthine books. 
FIRESALE 
But Andre Meade of Commerzbank Securities said the firesale price for Enron apparently was too attractive to pass up. 
"Certainly, Enron at $9 a share appeals to some energy companies. Dynegy appears to be one of them and is looking at putting something together," he said. 
In contrast to Dynegy, rival El Paso Corp. said on Wednesday it wanted no part of Enron, except perhaps for a few hard assets. El Paso also said Enron was perhaps neither as big or important to markets as analysts believe. 
"If Enron goes away, which we don't think is going to happen and we hope it doesn't happen, we don't see the market missing a beat, frankly," Ralph Eads, head of El Paso's merchant energy business, told a meeting of analysts. 
Eads said El Paso calculates that Enron accounts for about 10 percent of trading in U.S. wholesale gas and power, well below the 25 percent usually attributed to them by analysts. 
At least one company, Apache Corp. , said it ended some hedging agreements because of concerns about increasing risk in the energy derivatives market caused by the Enron crisis. 
Pat Wood, chairman of the Federal Energy Regulatory Commission, told reporters the agency was keeping an eye on the markets, watching for an Enron effect. 
"We're watching the impact that Enron or any other firm would have on the overall workings of the market, but we're not intervening where other agencies have jurisdiction," he said.

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

Dynegy Looking to Acquire Enron
By Peter Eavis <mailto:peavis@thestreet.com> and Christopher Edmonds <mailto:cedmonds@thestreet.com>
Staff Reporters
TheStreet.com
11/07/2001 10:45 PM EST
URL: <http://www.thestreet.com/markets/marketfeatures/10003656.html>

Updated from 7:56 p.m. 
Dynegy is holding talks to buy Enron in a deal that has significant backing from oil giant ChevronTexaco, according to media reports. 
The Wall Street Journal reported that Dynegy (DYN:NYSE - news - commentary) would buy the embattled Enron (ENE:NYSE - news - commentary) for $7 billion to $8 billion in stock. 

The Houston Chronicle and Bloomberg reported that the companies are expected to announce a merger that involves cash from Chevron (CVX:NYSE - news - commentary) ; Bloomberg says Chevron, which has a 27% stake in Dynegy, will add $1.5 billion to the deal. 

The deal is expected to be a stock swap at a small premium to Enron's Wednesday closing price of $9.05. Enron was off 7 cents in after-hours trading while Dynegy was up 34 cents, to $33.34. 

A merger would amount to a rescue of Houston energy-trading giant Enron, whose stock has plunged nearly 90% in recent weeks after the company revealed that a shadowy deal caused a $1.2 billion hit to equity. 

The controversial deal is under investigation by the Securities and Exchange Commission and has led to the ousting of the company's CFO, Andrew Fastow. The deluge of bad news has prompted other energy companies to reduce their dealings with Enron, a serious development for a trading company. 

Dynegy's board was meeting Wednesday afternoon to discuss the merger, while Enron's board was scheduled to consider the combination Wednesday evening. A Dynegy spokesman declined to comment, citing a company policy of not commenting on market rumors. Enron spokespersons did not return calls. Chevron declined to comment. 

Chevron's involvement appears critical if the deal is to gain the approval of rating agencies. Dynegy's balance sheet is not strong enough to acquire Enron on its own. Therefore, Chevron is expected to raise its stake in Dynegy and possibly make an immediate cash infusion into Enron. The size of any infusions will be a good indication of how bad things have gotten at Enron. 

With the stock plummeting and Enron facing a mounting debt crisis -- $12 billion in direct debt and nearly $9 billion in potential liabilities from affiliates -- the company is running out of options. It recently drew down about $3 billion in existing credit lines and gained an additional $1 billion in credit secured by its pipeline business. Enron debt has been downgraded in recent days by the three main credit-rating agencies. 

Sources say a number of potential investors have been approached -- from Warren Buffett's Berkshire Hathaway (BRKA:NYSE - news - commentary) to Royal Dutch/Shell (RD:NYSE ADR - news - commentary) -- with little success. ??General Electric's (GE:NYSE - news - commentary) capital division is said to have held multiple talks with Enron with no resolution. ?Dynegy may be motivated by its significant exposure to Enron. If Enron had failed, Dynegy could have faced serious disruption and large losses because the two firms are trading partners on a number of contracts. In such a relationship, Dynegy could have contracts to purchase a commodity like power or natural gas from Enron and be committed to sell that commodity to another buyer. If Enron failed to deliver, the domino effect could have a significant economic impact on Dynegy. While other energy trading firms have exposure, sources speculate Dynegy's exposure is more significant than its peers. ?Enron was down as much as 20% during the day. Dynegy stock was off 8% in the regular session, while its bonds also skidded on rumors of a deal. ???Azurix Corp. Closes Sale of Azurix North America??11/07/2001?PR Newswire?(Copyright (c) 2001, PR Newswire)??HOUSTON, Nov. 7 /PRNewswire/ -- Azurix Corp. announced today that it has completed the sale of its wholly owned subsidiaries, Azurix North America Corp. and Azurix Industrial Corp., to American Water Works Company, Inc. The contract price, payable in cash, is $141.5 million, subject to customary adjustments. The sale also includes American Water Works assuming $6.1 million of debt. ?"This transaction demonstrates the progress we are making in our previously announced decision to sell certain Azurix assets," said John Garrison, Azurix president and CEO. "Even though it no longer fits our plans, Azurix North America is an excellent business and we are pleased that its employees and operations are being taken on by American Water Works, a clear industry leader."?Azurix Corp., an affiliate of Enron Corp., is a global company that owns, operates and manages water and wastewater assets, and provides water and wastewater related services. ?With revenues of $1.5 billion, American Water Works Company is the nation's largest publicly traded enterprise devoted exclusively to the water and wastewater business. Its 6,300 associates provide ongoing water resource management services to businesses and communities in 27 U.S. states and three Canadian provinces. More information can be found on the Web at www.amwater.com . ?MAKE YOUR OPINION COUNT - Click Here ?http://tbutton.prnewswire.com/prn/11690X27241226???/CONTACT: John Ambler of Azurix Corp., +1-713-646-6423/ 19:00 EST ?Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. 	???