EnronOnline Competitor Reports Record Trading Volumes
Dow Jones Energy Service, 11/13/01
Fitch Dwngr Portland General Electric; On Rtg Watch Evolving
Business Wire, 11/13/01
USA: Enron chief could walk away with $80 million.
Reuters English News Service, 11/13/01
US Spot Coal:Prices Drift Lower On Slack Demand, Enron
Dow Jones Energy Service, 11/13/01
Dynegy Deal Sets Path Of Resolution For Enron - Analyst
Dow Jones News Service, 11/13/01
Enron Corp. to Hold Conference Call and Webcast to Provide Investor Update
PR Newswire, 11/13/01
UK: Enron Metals say business normal, no changes seen.
Reuters English News Service, 11/13/01
INTERVIEW: Dynegy To Continue Asset Push In Europe
Dow Jones Energy Service, 11/13/01
S&P Lowers Rtg on Enron-Related Synthetic Obligations
Business Wire, 11/13/01
UK: INTERVIEW-U.S. Dynegy still hungry for assets in Europe.
Reuters English News Service, 11/13/01
Help Wanted: Enron Trader Resumes Hit The Streets
Dow Jones Energy Service, 11/13/01
USA: ICE sets record energy, metals trade volume.
Reuters English News Service, 11/13/01
UK: Dynegy sees no problem for BG Storage deal.
Reuters English News Service, 11/13/01
Enron Direct and the Alberta Urban Municipalities Association ("AUMA") Seal a Natural Gas Supply Deal
Canada NewsWire, 11/13/01
Enron CEO May Get at Least $60.6 Million After Buyout (Update6)
Bloomberg, 11/13/01

Dynegy Saved Enron Merger With Last Minute Pact (Update1)
Bloomberg, 11/13/01

Enron Corp. Raised to `Maintain Position' at Edward Jones
Bloomberg, 11/13/01

Lemon Laws Won't Save Dynegy
RealMoney.com, 11/13/01

Dynegy asked FERC to revise regs 
CBSMarketWatch.com, 11/13/01

Compaq, Continental Eliminate Jobs, Houston Feels the Pain
Bloomberg, 11/13/01





EnronOnline Competitor Reports Record Trading Volumes

11/13/2001
Dow Jones Energy Service
(Copyright (c) 2001, Dow Jones & Company, Inc.)
NEW YORK -(Dow Jones)- IntercontinentalExchange, an Internet-based energy and metals trading operation, saw record trading volumes last week, due in part to troubles at Enron Corp. (ENE), an ICE press release said Tuesday, without mentioning Enron by name. 
Investors have been watching to see if Enron's trading partners in its core business - North American gas and power marketing - significantly reduce activities with the financially troubled top energy marketer. ICE is considered a primary alternative to Enron's Internet-based commodities market, EnronOnline.
ICE's volume of North American bulk power trades last week totaled a record 54 million megawatt-hours, a 34% increase over the October weekly average. North American natural gas volumes rose 13% from October to 950 billion cubic feet last week. Oil trading rose 45% to a record 55 million barrels, and metals trading volumes was up 66%. 
"We believe that this has resulted, in part, from the uncertainty that has been exhibited in several key energy trading venues over the pas several months," said ICE chief executive, Jeffry Sprecher. 
EnronOnline is different from ICE because EnronOnline is a mechanism for companies to buy from, and sell to, Enron. ICE is a neutral multiparty exchange, allowing energy trading companies to trade with all other members. 
ICE's trading system, which has been installed in 7,000 desktops worldwide, covers 600 commodity and derivative contract types. ICE also owns the International Petroleum Exchange of London, Europe's largest energy futures exchange. 
ICE is owned by companies including American Electric Power (AEP), Aquila Energy (ILA), BP Amoco PLC (BP), Deutshe Bank AG (G.DBK), El Paso Corp. (EPG), Goldman Sachs Group (GS), Morgan Stanley Dean Witter & Co. (MWD), Reliant Energy (REI), Royal Dutch/Shell Group (RD), Societe General SA (F.SGF), Mirant Corp. (MIR) and TotalFina Elf SA (TOT). 

-By Mark Golden, Dow Jones Newswires; 201-938-4604; mark.golden@dowjones.com



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

Fitch Dwngr Portland General Electric; On Rtg Watch Evolving

11/13/2001
Business Wire
(Copyright (c) 2001, Business Wire)
NEW YORK--(BUSINESS WIRE)--Nov. 13, 2001--Fitch has lowered Portland General Electric Co.'s (PGE) securities as follows: senior secured debt to 'BBB+' from 'A'; senior unsecured debt to 'BBB' from 'A-'; preferred stock to 'BBB-' from 'BBB+'. The Rating Watch status has been revised to Evolving from Negative for all intermediate- to long-term securities. A Rating Watch Evolving means the ratings may be raised, lowered or maintained. PGE's commercial paper has been downgraded to 'F2' from 'F1', with a Stable Outlook. 
The downgrades for PGE reflect substantial ongoing uncertainty at its parent, Enron (ENE). ENE's senior unsecured debt is rated 'BBB-', with a Rating Watch Evolving. ENE's financial flexibility has been severely impaired as a result of recent developments primarily surrounding its investment in structured transactions. On Oct. 16, 2001, ENE announced a $1 billion after tax charge to third quarter 2001 earnings and a $1.2 billion reduction to balance sheet equity relating to the unwinding of structured transactions. In addition, the company has restated its financial results for the 1997-2000 period, incorporating off-balance sheet entries related to the structured transactions and is the subject of a Securities and Exchange Commission (SEC) investigation focusing on the company's accounting for the partnerships.
These events badly eroded investor confidence in the company, effectively blocking its ability to access capital markets, and forcing management to seek a corporate suitor. On Nov. 9, 2001, Dynegy (DYN) announced that it reached a definitive agreement to acquire ENE in a stock-for-stock transaction under which ENE shareholders will receive a fixed amount of DYN shares. The proposed DYN transaction will provide significant financial support to ENE, and should enable ENE to fund its cash needs through the first quarter of 2002 under expected business conditions, despite ENE's significant refinancing risk. The merger requires regulatory approvals, including Hart-Scott-Rodino, the SEC, and the Federal Regulatory Energy Commission; assuming regulators approve the merger, we would expect the transaction to close in six- to nine-months. The merger agreement includes termination provisions that add an element of uncertainty to its completion. Fitch anticipates that the surviving company's rating would move to the mid-'BBB' range assuming the successful execution of its interim plans to delever its capital structure and the completion of the merger. If the merger were terminated Fitch believes ENE's ability to manage its business would be severely impaired and would expect to downgrade its securities to highly speculative levels. 
PGE's new ratings also recognize its strong standalone credit profile, the prospective regulatory ring-fencing required by Oregon regulators, and the pending sale of PGE to Northwestern Natural Gas (NWN), in addition to its interim status as a subsidiary of ENE. The Evolving status for PGE recognizes that its ratings could drop if the ENE/DYN merger were terminated, or improve, if ENE's credit rating is upgraded in the future. 
PGE's credit quality ratios and financial strength are expected to temporarily weaken in 2001, reflecting the absence of cash recovery of unusually high wholesale power costs. In August 2001, the Oregon Public Utility Commission (OPUC) authorized higher PGE rates, effective October 1, 2001, to recover such costs. Importantly, the commission order adopted a power cost adjustment mechanism that will allow the company to pass through the lion's share of its power procurement costs to customers on a timely basis in the future. The cash recovery of power procurement costs allowed in the OPUC order, combined with declining wholesale power procurement costs over the balance of this year should alleviate financial pressure at PGE and facilitate improving credit measures in 2002. 
The PGE ratings consider Fitch's assessment of NWN's acquisition funding plan and the anticipated post-merger holding company structure. NWN recently announced an agreement to acquire PGE from ENE in a transaction valued at $2.9 billion, including the assumption of $1.1 billion of PGE debt. The transaction is expected to close by the end of 2002 and requires several regulatory approvals, including the SEC, the OPUC, and the Washington Utilities and Transportation Commission. As part of the transaction, NWN expects to form a new holding company (HoldCo), which will raise the new debt and equity required to complete the purchase of PGE. Post-merger, PGE and NWN will operate as wholly owned first tier subsidiaries of HoldCo. As currently contemplated, the approximate $1.8 billion cash portion will be funded at HoldCo with approximately 78% debt and 22% common equity and hybrid convertible preferred stock. As a result, HoldCo's consolidated and individual credit measures are expected to be relatively weak, as consolidated debt to capitalization could reach 75% at closing. 
PGE's ultimate post-merger ratings will depend on several factors, including, the ability to gain operating synergies from its affiliation with NWN, the credit ratings Fitch assigns to HoldCo, and the structural protections provided PGE investors by state utility regulators. The current regulatory ring-fencing applied by the OPUC requires PGE to maintain a 48% common equity ratio, thereby limiting the amount of cash PGE can dividend up to its parent company. It is expected that similar ring-fencing from the OPUC will continue under the new HoldCo structure.

CONTACT: Fitch, New York Philip Smyth, 1-212/908-0531 Ralph Pellecchia, 1-212/908-0586 
15:54 EST NOVEMBER 13, 2001 


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

USA: Enron chief could walk away with $80 million.

11/13/2001
Reuters English News Service
(C) Reuters Limited 2001.
NEW YORK, Nov 13 (Reuters) - Enron Corp.'s top executive could walk away with more than $80 million if the acquisition of the financially troubled energy trader by its smaller rival Dynegy Corp. closes this year, according to an Enron filing with the Securities and Exchange Commission. 
Under the terms of his employment, Enron Chairman and Chief Executive Ken Lay will receive $20.2 million annually through 2005 for each full calendar year following the close of the Dynegy deal or any material change in control of Enron.
If the Dynegy takeover closes this year, he will receive four such payments starting in 2002; if the transaction closes next year, he will receive three of the payments, starting in 2003. 
According to Lay's contract, the company would also pay his taxes if the annual payments were deemed to be an "excess parachute payment" for income tax purposes. 
Lay reassumed the posts of president and chief executive in August following the resignation of Jeffrey Skilling. His Enron contract expires on Dec. 31, 2005. 
Lay is considered by many as the visionary who presided over Enron's growth from a medium-sized natural gas pipeline company, created in 1986 in the merger of Houston Natural Gas and InterNorth, to the world's largest and most innovative energy trader. 
Enron's market capitalization has fallen almost $19 billion in just the the past month as investor confidence has waned amid a regulatory probe of off-balance-sheet transactions. 
Dynegy has agreed to acquire Enron in a stock swap worth some $9 billion, a fraction of what Enron was worth a year ago. 
Shares of Enron were up 43 cents, or 4.65 percent, at $9.67 in afternoon trade on the New York Stock Exchange.



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

US Spot Coal:Prices Drift Lower On Slack Demand, Enron

11/13/2001
Dow Jones Energy Service
(Copyright (c) 2001, Dow Jones & Company, Inc.)
NEW YORK -(Dow Jones)- Coal prices continued to drift lower last week, as trading was slowed by Enron Corp's (ENE) much publicized financial woes, traders and brokers said Monday. 
Market participants also said trading was slowed by mild weather, which has kept utility stockpiles higher than usual in the East.
Prices have slackened due to the lack of demand. The over-the-counter price for Central Appalachian coal, with a heat rate of 12,000 British thermal units, has slipped more than $6 a ton since it peaked at $42.75 a ton in August. 
"A lot of emotion went into the run up, and now reality is factoring in," a trader said. "The East is finding its floor." 
In the West, the price of Powder River Basin coals with heat rates of 8,800 BTU and 8,400 BTU remained mostly unchanged in very thin trade. 
On the New York Mercantile Exchange, the price of the December contract settled at $31.50 a ton Monday. Open interest was 25, down from 54 on Nov. 5, when the contract settled at $33.75 a ton. 
"Nymex coal is cheap, but no one is buying," one market watcher said. 
Another coal trader attributed the inactivity to companies' unwillingness to do business with Enron, the energy giant which saw its credit ratings downgraded to the lowest investment-grade level last week. 
"You take a big market-maker out, and it's bound to have an effect," he said. 
In the East, Central Appalachian barges for calendar year 2002 slid 50 cents to $31.75 a ton free on board from last week's level. Five barges for delivery in calendar year 2003 traded at $31.50 a ton FOB Monday. 
Five barges traded at $31.50 a ton FOB for December delivery to the Big Sandy River, losing 50 cents. 
Rail deliveries were pegged between $36 and $38 a ton FOB. No deals were confirmed. 
In the West, Powder River Basin coal with a heat rate of 8,800 BTU traded on Wednesday at $7.25 a ton for prompt delivery, down 30 cents. Other PRB prices were steady. Deals for calendar year 2002 were done between $8.10 and $8.15 a ton, unchanged from last week. 
PRB 8,400 BTU for delivery in calendar year 2002 traded at $6.45 a ton, but traders said very few deals were done. 
According to the Energy Information Agency, total U.S. coal production through Nov. 3, the latest date for which figures were available, ticked upward by 4% over the comparable week of 2000 to 22.7 million tons. 
Appalachian coal production, year to date, was 1.9% ahead of last year. Total Appalachian production in 2001 is 365,211 tons, up from 358,356 tons in the same period last year. 
U.S. Western coal production year to date remains steady at 6.4% ahead of 2000 figures. EIA reports total western coal production through Nov. 3 at 458,068 tons, up from 430,636 tons in the year-earlier period. 
Railcar loadings through Nov. 3 were 5% higher than comparable 2000 figures, according the EIA. 
U.S. Spot Coal Prices 
Deals done in Nov Dollars/ton;Averages not Volume Weighted 
4Q'01 1Q'02 CAL 2002 
Central Appalachia Low Sulfur 
F.O.B. Barge $30.00-31.50 $31.50-32.00 $31.00-31.75 
Average/Change 30.75/-1.15 31.75/-0.37 31.37/-1.13 

F.O.B. Rail $36.00-38.00 N/A $36.00-38.00 
Average/Change 37.00/ 0.00 N/A 37.00/ 0.00 

Powder River Basin 
8400 B.T.U. $5.75-6.00 $6.45-6.60 $6.35-6.45 
Average/Change 5.85/ 0.00 6.50/ 0.00 6.40/ 0.00 

8800 B.T.U. $7.00-7.50 $8.10-8.25 $8.10-8.25 
Average/Change 7.25/-0.25 ' 8.12/-0.13 8.12/-0.03 

Note to U.S. spot coal prices: 
Prices are dollars per short ton, based on actual deals done during the month for the delivery period indicated. 
Averages are straight mathematical averages and aren't volume weighted. 
Change is from the average of deals done in the previous month. 
The Central Appalachian low-sulfur category uses benchmark of 12,000 British thermal units per pound. Barge delivery is to the Big Sandy River. Rail delivery is to the Norfolk Southern. 
For Central Appalachian coal, prices are accepted for coal within 500 Btu of the benchmark Btu and standardized adjustments are made. 
Powder River Basin categories are quoted FOB mine. 
-By Jennifer Morrow, Dow Jones Newswires; 201-938-4377; jennifer.morrow@dowjones.com



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

Dynegy Deal Sets Path Of Resolution For Enron - Analyst
By Christina Cheddar
Of DOW JONES NEWSWIRES

11/13/2001
Dow Jones News Service
(Copyright (c) 2001, Dow Jones & Company, Inc.)
NEW YORK -(Dow Jones)- Dynegy Inc.'s (DYN) proposed acquisition of Enron Corp. (ENE) "creates a clear path for the resolution" of the liquidity and financial issues plaguing Enron, said Ted Izatt, a high-grade debt research analyst at Lehman Brothers Holdings Inc. (LEH). 
Izatt made the comments during a conference call held Tuesday with bondholders to discuss the proposed acquisition, which was announced late last Friday. 
Lehman's investment bankers advised Dynegy on the transaction. Enron was advised by J.P. Morgan Chase & Co. (JPM) and Citigroup Inc. (C).
On Monday, the marriage of the two Houston energy traders received a warm reception as equity investors bid up shares of both companies. 
Recently, Enron shares traded at $9.25, up 1 cent, or 0.2%, while Dynegy shares changed hands at $45.00, up 69 cents, up 1.6%. 
Enron shares had fallen more than 80% in the weeks leading up to the transaction as the company posted more than $1 billion in write-offs of failed investments and was forced to restate its earnings going back to 1997 because it improperly accounted for the results at some of its partnerships. The restatement reduced Enron's profits over the period by 20% and added millions to its debt level. Also, the Securities and Exchange Commission launched an investigation of the financial dealings of Enron's former chief financial officer, Andrew Fastow. 
The chain of events prompted a series of credit rating downgrades and raised doubts about Enron's liquidity. Eventually, the concerns threatened Enron's core energy marketing and trading business because a perception of creditworthiness is vital to the business. 
Izatt said a combination of $1 billion in newly secured bank lines and the $1.5 billion equity infusion from Dynegy has bolstered Enron's financial position. 
With this additional cash on hand, the greatest risk to bondholders is whether the deal closes, said Izatt. 
The analyst added he expects the merger to close because both companies are committed to the deal, and he expects regulators to approve the transaction. 
"There is a lot of commitment to get the deal done," he said. 
However, if the transaction doesn't close, Izatt said he believes Dynegy's bondholders are "very well protected" in the transaction. 
According to Izatt, Dynegy's bonds are at an "attractive level." The spread on the bonds had widened ahead of the announcement of the deal as rumors began to leak into the market, leaving the price of the bond in a weaker position. 
But Izatt does expect Dynegy will merge with Enron, and the resulting company will emerge as a "much stronger company," he said. 
For example, the analyst expects Dynegy has the potential to achieve more than $400 million to $500 million in pretax, merger cost savings Dynegy is projecting. 
Also, Izatt said Dynegy's cash infusion and purchase will help Enron to retain its position in the energy market. 
"Dynegy is there for real," Izatt said. "They intend to see this through to fruition and energy players will view this and (feel confident enough to trade with Enron.)" 
Under terms of the acquisition, Dynegy will pay Enron shareholders 0.2685 of a Dynegy share for each Enron share outstanding. The value of the stock swap at the close of the market Monday was $10.12 billion. 
Dynegy is making an immediate cash investment in Enron with the assistance of ChevronTexaco Corp. (CVX). Later, when the deal closes, ChevronTexaco will make an additional $1 billion investment in the combined company. 
-By Christina Cheddar, Dow Jones Newswires; 201-938-5166; christina.cheddar@dowjones.com



Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. 	
Enron Corp. to Hold Conference Call and Webcast to Provide Investor Update

11/13/2001
PR Newswire
(Copyright (c) 2001, PR Newswire)
HOUSTON, Nov. 13 /PRNewswire/ -- Enron Corp. (NYSE: ENE) will hold a conference call and webcast to provide an investor update on Wednesday, Nov. 14, 2001 at 9:30 a.m. EST. A live webcast of the call will be available through the "Investors" section of www.enron.com . 
Enron is one of the world's leading energy, commodities and services companies. The company markets electricity and natural gas, delivers energy and other physical commodities, and provides financial and risk management services to customers around the world. Enron's Internet address is www.enron.com . The stock is traded under the ticker symbol "ENE". Karen Denne 
713-853-9757 
MAKE YOUR OPINION COUNT - Click Here 
http://tbutton.prnewswire.com/prn/11690X17125372

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

UK: Enron Metals say business normal, no changes seen.

11/13/2001
Reuters English News Service
(C) Reuters Limited 2001.
LONDON, Nov 13 (Reuters) - Enron Metals said on Tuesday it is trading normally with counterparties and customers and will maintain its current role within the market after its U.S. parent company Enron Corp agreed to be taken over. 
"It is business as usual - yesterday was our second highest day in terms of turnover. Today looks like it will be up there as well. Our clients and counterparties are happy to trade with us," Mike Hutchinson, Managing Director of Enron Metals Ltd, told Reuters.
Some talk had circulated on Monday that Enron Metals may downsize its activities after the troubled parent Enron agreed to a $9 billion takeover by Dynegy Inc. . 
However, Hutchinson said that Enron Metals was not currently altering its status within the market. This includes its position on the London Metal Exchange (LME). 
Enron Metals is the former MG Plc, which was bought by Enron in May 2000. The company is one of the 11 ring-dealing members (RDMs) of the LME. 
Enron Corp, which is North America's biggest buyer and seller of both natural gas and electricity, agreed to a Dynegy buyout after it was overwhelmed by problems, including a U.S. regulatory probe into the off-balance sheet dealings, a $1.2 billion cut in shareholder equity and credit rating downgrades.



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

INTERVIEW: Dynegy To Continue Asset Push In Europe
By Sarah Wachter
Of DOW JONES NEWSWIRES

11/13/2001
Dow Jones Energy Service
(Copyright (c) 2001, Dow Jones & Company, Inc.)
PARIS -(Dow Jones)- Even before Enron's (ENE) financial woes were made public, Dynegy Inc. (DYN) was discussing ways of beefing up its European operations by consolidating with a U.S. company such as Enron. 
Dynegy Europe Ltd. CEO, Gary Cardone, told Dow Jones Newswires Tuesday from the company's European headquarters in London: "We floated the Enron balloon about six to eight weeks ago." Enron was one of a couple of U.S. companies Dynegy was considering at the time for a merger of technology and assets in Europe. Houston-based Dynegy plans to buy Enron Corp. in a stock swap worth close to $10.12 billion.
In Europe, the deal is tantamount to a grasshopper swallowing a sow. Enron has a huge regional presence, while Dynegy is small by comparison, and trading is focused on the U.K. Enron has close to 5,400 employees and 28 offices in Europe. Dynegy has 150 people in five locations. Enron owns or manages 4,374 megawatts of power production and also owns Wessex Water in southwest England. Dynegy doesn't own or operate power plants, although this year it did acquire its first big European asset, BG Storage Ltd., from BG Gas Group PLC for $590 million. 
The most important synergy Dynegy will get by acquiring Enron is to catapult Dynegy's trading presence - in the U.K., Germany, the Netherlands and Scandinavian countries, boosting wholesale trading and expanding Dynegy's scope in the retail market. 
But the deal hasn't curbed Dynegy's appetite for bidding on power generation assets, or from seeking other partners, Cardone said. 
"We'll continue to pursue joint ventures and acquisitions, where appropriate," he said, naming Italy, Germany, Spain and the Netherlands as key expansion areas. Dynegy is widely expected to make the short list of bidders for Eurogen, Italian utility Enel's next and largest tranche of power generation assets for sale. 
Cardone added that assets are for sale in the Netherlands. He also expects power assets to come on the block in the next 18 months in Germany. A new German power company, Neue Kraft is in the midst of forming, and is seeking partners. 
While Dynegy's European CEO said it's too soon to discuss the details of how Enron and Dynegy will merge their European operations, one area he said was ripe for consolidation will be the two group's commercial offices. Dynegy and Enron each have offices in Madrid, London, Milan and in Switzerland. 
But once the deal is done and dusted, Dynegy expects the combined group to conquer a sizable slice of the European Union gas and power markets, which are gradually deregulating and where trading is starting to develop on the Continent. 
"Europe is the next growth engine, with $400 billion in electricity and natural gas sales. It's a huge market. There's no reason that Dynegy and Enron (together) can't obtain 10% of this across Europe," Cardone said. 
-By Sarah Wachter, Dow Jones Newswires; 331-4017-1740; sarah.wachter@dowjones.com



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

S&P Lowers Rtg on Enron-Related Synthetic Obligations

11/13/2001
Business Wire
(Copyright (c) 2001, Business Wire)
LONDON--(BUSINESS WIRE)--Standard & Poor's--Nov. 13, 2001-- Standard & Poor's today lowered its rating on the GBP200 million 8.75% series 2000-A linked Enron obligations issued by Yosemite Securities Co. Ltd. to 'BBB-' from 'BBB'. 
The rating action is a consequence of the lowering of Enron Corp.'s senior unsecured debt rating, which acts as support to Yosemite Securities Co. Ltd., to 'BBB-' from 'BBB' on Nov. 9, 2001.
The downgrade of Enron Corp. was prompted by the credit implications of the company's restatement of financial statements going back to 1997 due in part to a legal and accounting review of certain related-party transactions by a special committee of Enron's board of directors. 
The rating on the series 2000-A obligations was lowered on Nov. 7, 2001 following Enron Corp.'s previous downgrade on Nov. 1. For information on all rating actions please see the related press releases on RatingsDirect, Standard & Poor's Web-based credit analysis system.

CONTACT: Standard & Poor's, London Perry Inglis, (44) 20-7826-3857 or Rebecca Geen, (44) 20-7826-3857 
12:21 EST NOVEMBER 13, 2001 


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

UK: INTERVIEW-U.S. Dynegy still hungry for assets in Europe.
By Stuart Penson

11/13/2001
Reuters English News Service
(C) Reuters Limited 2001.
LONDON, Nov 13 (Reuters) - U.S. energy group Dynegy wants to buy power stations in Europe as it looks to underpin an energy trading business boosted beyond recognition by its audacious takeover of stricken American rival Enron . 
Dynegy Europe's president and chief executive officer Gary Cardone said his company would retain its strategy of backing wholesale energy trading with physical assets, rather than adopting Enron's "pure trading" approach to European energy markets.
"This will be an asset-backed trading business coupled with (Enron's) market-making capabilities," he told Reuters in an interview on Tuesday. 
"Our approach has been different (to Enron's)," he added. "They have believed in pure trading. We have believed in a very disciplined approach to assets," he added. 
Dynegy has agreed to buy its bigger rival Enron in a $9 billion rescue deal. 
The deal, announced last week, came after Enron suffered a share-price collapse and damaging credit downgrades triggered by a regulatory probe into off-balance sheet dealings. 
Cardone said he considered Spain, Italy, the Netherlands and Belgium as attractive hunting grounds for assets, though he said Dynegy would remain a cautious buyer. 
Some new entrants to Europe's liberalising energy markets had overpaid for assets in recent deals, he said. 
Cardone declined to comment on speculation that Dynegy was a bidder for two power stations in Britain, bought last month for $960 million by U.S. group American Electric Power Co. . 
Earlier this year Dynegy agreed to buy the gas storage business of Britain's BG Group for 421 million pounds ($608 million). 
NO RUSH TO SELL ENRON ASSETS 
Cardone said Dynegy would not rush to dispose of Enron assets in Europe, which include some power generation. 
"Our back is not up against the wall to do a fire sale. We will look at each (Enron) asset individually," he said. 
Enron has interests in around 4,500 megawatts of electricity generating capacity in Italy, Spain, Poland, Turkey and the UK. 
On a trading level, Cardone said the takeover of Enron would lead to consolidation but he declined give details. 
Both companies have set up offices across Europe in recent years as market liberalisation has triggered an increase in energy trading. 
Including BG's storage operation, Dynegy has a European staff of about 400. 
Enron, which has piled into European energy trading in recent years and has been a major driver of liquidity, has a European staff of around 5,000. The company is among the top gas and power traders in the UK and Germany. 
Cardone said Dynegy would operate with only one online trading platform. Enron does much of its trading via its EnronOnline Internet platform while Dynegy is trying to build liquidity on its own DynegyDirect system. 
"Our initial thoughts are that EnronOnline is an outstanding platform," said Cardone, adding Dynegy might consider selling or renting out its DynegyDirect. "We will only work with one portal," he said. "EnronOnline was a great concept, although we are not convinced that we are so far behind it with DynegyDirect." 
He said Dynegy would rebrand EnronOnline and all Enron products. "There will be nothing called Enron, all trade marks will be Dynegy."



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

Help Wanted: Enron Trader Resumes Hit The Streets
By Kristen McNamara and Jennifer Morrow

11/13/2001
Dow Jones Energy Service
(Copyright (c) 2001, Dow Jones & Company, Inc.)
NEW YORK -(Dow Jones)- "Noah's Ark" should be the name of the company that emerges from the planned combination of Enron Corp. (ENE) and Dynegy Inc. (DYN), according to energy markets lore these days. 
After all, the logic goes, there will be two of everyone.
Enron gas and electricity traders aren't so sure of that, as job recruiting firms can attest. 
"In the past 60 days, the number of resumes from Enron personnel has increased substantially," said William Begley, head of the energy and utilities practice at Heidrick & Struggles (HSII), an executive recruiting firm in Houston. 
Resumes are coming from all units at Enron, but the number of those from traders has grown significantly during the period, he added. Other recruiting firms said that Enron traders have become more receptive to unsolicitied headhunting calls lately. 
No one knows for sure how jobs will shake out at Enron, as the company goes through hard times and faces a merger with Dynegy. Recruiters and Enron employees are mixed over how much actual fallout there will be. 
One thing they agree on, though, is that if Enron traders do leave, they aren't guaranteed to find new jobs quickly despite their credentials -- which are regarded as sterling in the energy industry. If energy markets contract as a result of Enron's troubles, the job market for traders could flood. 
Dynegy plans to acquire Enron in a stock swap currently valued at $10.12 billion. The companies confirmed the deal late last week. Shares in both companies rose in heavy trading Monday as investors weighed the planned deal. Some uncertainty remains around the fate of the merger, partly because of the numerous regulatory hurdles it faces. 
Enron, still the largest energy trading company in the world, has suffered a massive setback in the past month. Four weeks ago, a $1.2 billion reduction of shareholder equity kicked off a slide in the company's share price, and prompted a U.S. Securities and Exchange Commission investigation. 
Recruiters started seeing more resumes from Enron before the company's troubles came to a head. As early as this summer when former Enron executive Jeffrey Skilling left the company, employees at the company's non-core units have been looking for jobs, recruiters said. 
Electricity and natural gas traders at Enron have long been considered some of the smartest participants in U.S. energy markets. The company is a market maker in both gas and electricity, meaning that its prices for both commodities are benchmarks for traders throughout the markets. 
Enron led the effort to deregulate U.S. power markets, and has been one of the most vocal lobbyists for deregulation at the state and federal levels over the years. 
"Because Enron is such a large counterparty in the energy trading sector, all of its trading partners, everyone, is hoping the thing gets resolved," said Bruce Peterson, managing director at Korn/Ferry Intl (KFY) in Houston, an executive search company. "The whole industry is definitely affected by what has happened at Enron. Until it's sorted out, you have a tremendous amount of uneasiness. It needs to get resolved." 
It will be essential for Dynegy to keep some of the core leadership from Enron, analysts say. By retaining the best, Dynegy should be able to secure other strong Enron employees. 
"In our view, Enron's energy trading and marketing personnel are arguably the most talented and definitely the most profitable group in the industry," Prudential Securities analyst M. Carol Coale said in a research note Monday. "We believe that Dynegy must focus on retaining these valuable traders and marketers if the new company is to realize its full potential in the wholesale segment." 
Enron President and Chief Operating Officer Greg Whalley, who will be at Dynegy after the merger as an executive vice president, said in a conference call on Monday that he believes the new company will retain its traders. "Most traders want to be part of the winning team," he said. 
Some recruiters believe that although many Enron employees are floating resumes, there won't be much actual fallout. Enron's trading operation employs between 1,000 and 1,500 people in North America; Dynegy's operation is staffed by 300. 
"But with a few trimmings here and there you won't see a lot of Enron traders on the street, unless they don't like what they hear from Dynegy," said Jack Carr managing director of Prime Energy Partnership, a search and recruiting company based in the UK, with an office in Greenwich, Connecticut. 
An experienced energy trader with four years of experience can earn $125,000-$150,000 plus a bonus, according to Carr. 
Right now, Enron traders are feeling disappointed and confused, according to one trader at another company who wouldn't allow his name to be used. 
"I think they're very nervous," the trader said. "The Enron people think they're better than the Dynegy people, and the Dynegy people think 'we're buying them, so we can just pick through their stuff.'" 
- By Kristen McNamara; Dow Jones Newswires; 201-938-2061; kristen.mcnamara@dowjones.com; Jennifer Morrow; 201-938-4377; jennifer.morrow@dowjones.com



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

USA: ICE sets record energy, metals trade volume.

11/13/2001
Reuters English News Service
(C) Reuters Limited 2001.
NEW YORK, Nov 13 (Reuters) - The InterContinental Exchange (ICE), an Atlanta-based electronic marketplace, said on Tuesday it set several new trading records last week and recorded its strongest weekly performance since it began operation 13 months ago. 
"There has been a clear shift of energy and metal trading activity during October into ICE markets," CEO Jeffrey Sprecher said in a statement.
Sources said recent concerns over Enron Corp's crumbling credit rating helped divert on-line business to ICE. 
Trading volumes in oil and refined products set a new weekly record of 55 million barrels, or 11 million barrels per day, a 45 percent increase over the October daily average. 
North American power volumes totaled a record 54 million megawatt hours (MWh) for the week, or almost 11 million MWh per day, a 34 percent gain over October activity. 
North American natural gas traded 950 billion cubic feet, a 13 percent rise from October. 
ICE said the number of natural gas transactions was up more than 30 percent, indicating smaller average trade sizes. 
Precious metals trading for the week rose 66 percent from October levels, with almost 3 million gold-equivalent ounces trading. 
As an open-access marketplace, ICE has seen steady gains in liquidity over the last year, with more than 400 of the world's largest commodity trading firms now participating. 
The ICE electronic trading system is installed on over 7,000 desktops worldwide and offers traders more than 600 listed commodity and derivative contract types. 
Products traded on ICE include natural gas, power, crude oil and refined products, precious metals and emissions allowances. 
Contracts include physical delivery as well as financially settled swaps, spreads, differentials and options based on a variety of fixed and floating price indices. 
ICE was founded last year by BP, Deutsche Bank, Goldman Sachs, Morgan Stanley Dean Witter, Royal Dutch/Shell, Societe Generale and TotalFinaElf. 
Additional partners that helped launch the gas trading operation include Reliant Energy, Aquila Energy, American Electric Power, Duke Energy, El Paso Energy and Mirant. 
ICE also has offices in New York, Houston, Chicago, London and Singapore.



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

UK: Dynegy sees no problem for BG Storage deal.

11/13/2001
Reuters English News Service
(C) Reuters Limited 2001.
LONDON, Nov 13 (Reuters) - U.S. energy group Dynegy said on Tuesday it does not expect its planned takeover of rival American group Enron to jeopardize its purchase of the natural gas storage business of Britain's BG Group . 
"We haven't heard from the (UK) regulators but I can't imagine why the acquisition of Enron would change anything for (BG) Storage," Dynegy Europe's president and chief executive Gary Cardone told Reuters.
Dynegy, which is taking over troubled Enron in a $9 billion rescue deal, agreed in July to buy BG Storage for 421 million pounds ($608 million) in cash. 
But the British government in September said Dynegy would have to provide assurances to address potential competition worries about the deal. 
A spokesman for UK energy regulator Ofgem said it was too early to say whether Dynegy's takeover of Enron would influence the regulator's view of the BG Storage deal. 
Dynegy and Enron are both significant traders on the UK spot gas market. 
BG storage owns 30 wells with five offshore platforms, nine salt caverns, about 19 miles (30 km) of pipelines and an onshore natural gas processing terminal. 
Cardone said he wanted to boost BG Storage's industrial customer base to around 60 by the end of next year, from 26-30 currently. 
"(BG Storage) will give us the ability to aggregate new volume and the potential for a hub to bring in new gas from Norway," he said. 
He said Dynegy would look to expand its storage operations on the back of the BG deal. "We will look at all opportunities in storage," he said. 
The ability to store natural gas is becoming more of an issue as the UK's ageing gas fields lose swing - the capacity to rapidly change output and thus smooth out demand/supply blips.



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

Enron Direct and the Alberta Urban Municipalities Association ("AUMA") Seal a Natural Gas Supply Deal

11/13/2001
Canada NewsWire
(Copyright Canada NewsWire 2001)
CALGARY, Nov. 13 /CNW/ - Enron Direct Canada Corp. (Enron Direct), a subsidiary of Enron Corp. (NYSE:ENE) is pleased to announce that it has entered into a long-term natural gas supply and services contract with the Alberta Urban Municipalities Association ("AUMA"). 
AUMA regular and associate members have looked to Enron Direct's innovative and flexible energy solutions to answer AUMA's requirements of excellent customer service, competitive pricing and contract flexibility. "Enron Direct is providing AUMA's regular and associate members with a natural gas supply and energy services plan to help them better manage their energy costs. Enron Direct is pleased to be assisting the AUMA and its members by providing energy solutions that will deliver significant financial security." said Darren Cross, Chief Operating Officer of Enron Direct Canada Corp.
"In this time of uncertainty, municipalities were very interested in attaining a stable price for their utility needs. Predictable gas price will ensure stability, so crucial to municipal budgets." said Lorne Olsvik, President of Alberta Urban Municipalities Association. "The AUMA was looking for a supplier who understood the need for competitive pricing as well as membership flexibility and independence. Alberta municipalities, both small and large, understand how a volatile energy market can affect their bottom line and needed to find a solution to help them manage their gas costs. Enron Direct's innovative products and services meet AUMA's goals and provide the value we are looking for," said John McGowan, Executive Director of the Alberta Urban Municipalities Association. 
Regular and associate members of the AUMA include over 200 cities, towns, villages and summer villages as well as municipally related non-profit organizations, boards and commissions. The Alberta Urban Municipalities Association provides leadership in advocating local government interests to the provincial government and other organizations in addition to providing services that address the needs of its membership. 
Enron is one of the world's leading energy, commodities and services companies. The company markets electricity and natural gas, delivers energy and other physical commodities, and provides financial and risk management services to customers around the world. Enron's Internet address is www.enron.com. The stock is traded under the ticker symbol "ENE." 
Visit Enron Direct's website at www.enrondirect.com.

/For further information: Laura Renouf, Public Relations Coordinator of Enron Direct, (403) 663-2823/ 09:30 ET 


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

Enron CEO May Get at Least $60.6 Million After Buyout (Update6)
2001-11-13 17:14 (New York)

Enron CEO May Get at Least $60.6 Million After Buyout (Update6)

     (Adds in sixth graph that Lay has proposed taking pay in
``non-cash form,'' probably Dynegy stock, and will use some of it
to set up a fund for former Enron employees.)

     Houston, Nov. 13 (Bloomberg) -- Enron Corp. Chairman and
Chief Executive Officer Kenneth Lay may get $60.6 million or more
in severance if he leaves after Enron's sale to Dynegy Inc.,
according to a regulatory filing.

     Lay is entitled to receive a lump sum payment equal to $20.2
million, multiplied by the number of full calendar years remaining
on his contract, if he terminates his employment under certain
circumstances, such as the acquisition by Dynegy, Enron said in a
filing with the Securities and Exchange Commission.

    ``That's a ridiculous amount of money for a man who's already
made himself probably tens of millions of dollars,'' said Andrew
Whalley, manager of the Legg Mason International Utilities Trust,
which sold a $5 million stake in Enron in April because of concern
about its bookkeeping.

     Dynegy says its buyout of Enron, the biggest energy trader,
is expected to close in 2002's third quarter. Lay's contract runs
through the end of 2005. His contract provides that he also
receives an amount to cover tax penalties if the payment he gets
is deemed to be an ``excess parachute payment'' under tax rules,
the filing said.

     If the Enron buyout were to close this year, or if there were
another form of ``change of control'' at Enron, Lay may receive
$80.8 million, the Enron filing indicates. Lay had gains of $123.4
million from the exercise of options in 2000, in addition to his
regular salary.

                         Financial Crisis

    Lay will propose to Dynegy that he take two-thirds of his
severance pay in ``non-cash form,'' presumably Dynegy stock, Enron
spokesman Mark Palmer said. Lay plans to use half of the stock to
set up a fund to provide ``need-based assistance'' to former Enron
employees, Palmer said.

     The remaining third would be in cash so Lay could use it to
pay taxes on the severance package, Palmer said.

      Enron agreed on Friday to be acquired by rival Dynegy for at
least $23 billion in stock and assumed debt, ending a financial
crisis that threatened to bankrupt Enron and disrupt U.S. power
and natural-gas markets.

     Lay, 59 years old, has said he won't be an active manager in
the new company, which will be led by Dynegy Chairman and CEO
Charles Watson. No decision has been made about whether he might
serve on Dynegy's board, the companies said.

     ``They need Ken Lay to close the deal because of his skill
with regulators,'' said Mark Maloney, who helps manage $1.1
billion in the John Hancock Patriot Funds, who attended a
presentation to investors by the two companies in Boston today.
``Lay is close to the Bush administration, and that couldn't
hurt.''  The Patriot Funds don't own shares of Enron or Dynegy.

      Robert Doty, Dynegy's chief financial officer, refused to
discuss severance packages for departing Enron executives at the
Boston meeting. Enron officials declined to elaborate on the
filing on Lay's compensation.

                            Pay Package

     Lay has been chairman since February 1986. His contract was
extended by two years, to the end of 2005, when he resumed the
CEO's job following the departure of Jeffrey Skilling in August.
Skilling didn't get a severance package because he quit, Enron has
said.

     The company more than tripled Lay's pay package last year to
$18.3 million following its best share-price performance in 20
years, according to a proxy filed in March with the SEC. Enron
shares have plunged 90 percent this year. Lay made $5.97 million
in 1999, according to Enron's proxy.

     Lay also received options to buy 782,830 shares over seven
years, most at $47.31 each, the March filing said. Those options
are now worthless because Enron's stock price is below the price
at which they could be exercised.

     Members of Enron's board of directors each made $50,000 last
year, as well as $1,250 for each meeting attended, according to
the proxy statement. The chairman of the compensation committee,
Charles LeMaistre, received an additional $10,000. LeMaistre, a
medical doctor, is president emeritus of the University of Texas
M.D. Anderson Cancer Center.

     The other members of the compensation committee were Norman
Blake Jr., chairman and chief executive of Comdisco Inc.; John
Duncan, the former president of Gulf & Western Industries; Robert
Jaedicke, emeritus professor of accounting at Stanford University;
and Frank Savage, former chairman of Alliance Capital
International. Savage also sits on the board of Bloomberg L.P.,
owner of Bloomberg News.

                            Cash Crunch

     Enron has been battling a cash crunch and a loss of investor
confidence this year because of questions about partnerships it
started and put under the control of its senior executives.

     ``I suppose it's important for Dynegy to keep (Lay) on
because of loyalty among the staff,'' Legg Mason's Whalley said.
``But after a textbook financial collapse where he obviously had
some knowledge of what was going on, this (severance package) is
pretty poor.''

     After the Enron acquisition, Watson and Dynegy President and
Chief Operating Officer Stephen Bergstrom will retain the top two
positions. The other two members of the office of the chairman,
which plots company strategy, will be Dynegy's Doty, who will
continue as CFO; and Enron's Greg Whalley, as executive vice
president. Greg Whalley is Enron's president and chief operating
officer.

     Shares of Enron rose 74 cents to $9.98. Dynegy rose $2.63 to
$46.94. Both companies are based in Houston.



Dynegy Saved Enron Merger With Last Minute Pact (Update1)
2001-11-13 15:02 (New York)

Dynegy Saved Enron Merger With Last Minute Pact (Update1)

     (Adds Lehman's Izatt previously worked at Moody's.)

     Houston, Nov. 13 (Bloomberg) -- Dynegy Inc. Chief
Executive Officer Charles Watson got word at about 7:00 a.m.
Thursday that his plan to take over Enron Corp., the largest
energy trader, was in danger because Moody's Investors
Service planned to lower Enron's credit rating to junk.

     With barely an hour before Moody's was to announce the
downgrade, Watson enlisted his bankers, including Lehman
Brothers Holding Inc. Chief Executive Richard Fuld, to lobby
the credit rating agency to hold off. One argument: with the
U.S. economy contracting after the Sept. 11 terrorist
attacks, the country didn't need another bankruptcy.

     The lobbying succeeded -- at a price. The executives
persuaded Moody's to lower its rating one level so Enron
remained an investment grade credit in exchange for six
concessions, including one which made it harder for Dynegy
to walk away from the $23 billion acquisition. Twenty-four
hours later, an agreement was reached.

     ``The Moody's decision was critical,'' Watson said in
an interview. ``I don't even want to think about what would
have happened to Enron had it been downgraded to junk.''

     Frances Laserson, Moody's vice president of corporate
communications, declined to comment. ``Our discussions with
clients are highly confidential,'' she said.

                        Critical Role

     Moody's played a critical role in part because Enron
was already having trouble raising money. The company had
had its rating lowered in October and a slowdown in the
economy had prompted some banks to restrict credit. A
downgrade to junk by Moody's, which rates more than $85
trillion in securities, would have created a cash crisis by
forcing Enron to repay early $3.3 billion of bonds and
limiting its ability to sell short-term debt.

     A junk rating would have prompted Dynegy to abandon the
acquisition, said Watson, and cost Lehman, J.P. Morgan Chase
& Co. and Salomon Smith Barney Inc. a collective $105
million in fees for advising the two companies.

     In seeking to salvage the rating, the executives argued
a downgrade to junk would lead Enron to file for bankruptcy
protection. They said Moody's would shoulder the blame,
according to people involved in the conversations.

     On Thursday morning, Moody's was willing to take that
risk. Executives at the ratings company, led by Chief
Administration Officer Debra Perry, told Watson and his
bankers at Lehman that it was about to issue a press release
cutting Enron to junk.

     Moody's officials said Enron couldn't keep an
investment grade rating because the company had no access to
the commercial paper market. A probe by the Securities and
Exchange Commission into its accounting practices and a 90
percent plunge in its shares had eroded investor confidence.

                     Calling on Friends

     With little time to respond, Watson and senior Wall
Street bankers swung into action. Watson called his friend
David O'Reilly, chief executive officer of ChevronTexaco
Inc., Dynegy's largest shareholder. O'Reilly didn't have
time at such short notice to push Enron's case, Watson said.

     Next he enlisted John Watson, ChevronTexaco's chief
financial officer, and Darald Callahan, a member of the
boards of Dynegy and ChevronTexaco, to call Moody's.
Lehman's CEO Fuld and chief fixed-income analyst Ted Izatt
also pitched in, as did J.P. Morgan CEO Harrison and Michael
Carpenter, who runs Salomon, a Citigroup Inc. unit.

     Izatt, the No. 1 ranked analyst for investment grade
energy companies according to Institutional Investor
magazine, previously worked as a managing director at
Moody's. J.P. Morgan Chase and Salomon were advising Enron.

     Officials at Lehman, J.P. Morgan Chase and Salomon
declined to comment through spokespeople.

                            Fees

     Watson said he and other bankers argued a combined
Dynegy and Enron would be a much stronger company given a
$1.5 billion cash injection from ChevronTexaco, which owns
26 percent of Dynegy.

     ``To be honest, I didn't understand why Moody's was
having difficulties making this happen,'' Watson said.

     Later that day, Moody's executives told Dynegy they
were prepared to keep Enron at investment grade as long as
six changes were made to the proposed acquisition, according
to Watson. Most of the changes focused around the ``material
adverse change'' clause, which allowed Dynegy to cancel the
deal under certain conditions.

     One of those changes would have required Dynegy to
eliminate a clause that allowed the company to walk away if
Enron's debt ratings were cut to junk. Watson said he agreed
to the changes.

     ``If things got bad enough at Enron that it had to be
taken to junk, there would probably be a material change in
its business that would allow us to walk away,'' he said.

                        ChevronTexaco

     Watson and Kenneth Lay, Enron's ceo, signed off on the
revised terms on Thursday. ChevronTexaco, however, had yet
to agree.

     O'Reilly first heard of the changes from Lehman bankers
at a dinner on Thursday night celebrating Chevron Corp.'s
$45.8 billion acquisition of Texaco Inc., that was being
held at the Victor Stewart steakhouse in Walnut Creek, San
Francisco, according to people at the dinner.

     Lehman's bankers, including Steve Wolitzer, co-head of
mergers and acquisitions, and two colleagues, Carlos Fierro
and Grant Porter, flew to San Francisco that day to
participate because they had advised Chevron on the deal.
During the flight they received emails on their Blackberry
pagers from colleagues in Houston detailing the concessions
that Moody's had sought.

                         Tuna Steaks

     After discussing the new terms with O'Reilly over tuna
steaks and filet mignon, the group agreed to reconvene at
Chevron's offices in San Ramon, California at 6:45 a.m.
local time Friday morning.

     While the officials were deliberating, Moody's cut its
rating on Enron to ``Baa3,'' one level above junk. John
Diaz, a managing director who follows the company for
Moody's, said at the time that Enron now needs to ``shore up
confidence in the company so that counter-parties continue
to trade with it.'' Moody's maintained its negative outlook.

     Chevron still needed more time to consider the terms.
At 5:50 p.m. New York time O'Reilly called Dynegy's Watson
to tell him Chevron's board had agreed. About 15 minutes
later, Enron and Dynegy announced the purchase.

     ``It's amazing how this deal came together,'' Watson
said.



Enron Corp. Raised to `Maintain Position' at Edward Jones
2001-11-13 10:44 (New York)

     Princeton, New Jersey, Nov. 13 (Bloomberg Data) -- Enron Corp. (ENE US)
was raised to ``maintain position'' from ``reduce'' by analyst Brian
Youngberg at Edward Jones.



Lemon Laws Won't Save Dynegy
By Peter Eavis <<mailto:peavis@thestreet.com>>
Senior Columnist
RealMoney.com
11/13/2001 07:21 AM EST

If you believe Dynegy's (DYN:NYSE - news - commentary) account of its planned purchase of energy-trading rival Enron (ENE:NYSE - news - commentary) , it's getting a slightly damaged Mercedes for the price of a Pinto. 
At face value, it appears to be a fabulous deal. Dynegy is acquiring a weakened-but-repairable competitor on the cheap. So what's not to like? 
The problem is, Dynegy seems to be taking a rather sunny view of Enron's future. Recent earnings restatements and other revelations suggest Enron may actually be a junker when it comes to profitability, though Enron's disclosure practices make it impossible to know for sure. Then there are indications that Dynegy doesn't expect to write down the value of Enron assets by large amounts, which, if true, will certainly raise eyebrows, given the poor performance of many Enron businesses. 
If Dynegy proves to have been optimistic in its merger math, investors may start betting against this deal. Such an outcome would increase suspicions that Dynegy rushed into this merger because an Enron collapse would've cratered its business. 
Echoing statements from Dynegy executives on a Monday conference call, company spokesman Steve Stengel denied his company is doing the merger because it feared being damaged by an Enron collapse. Dynegy actually owes Enron money, rather than the other way 'round, he said. "Enron's core business is strong, and that was a key reason Dynegy undertook merger discussions with Enron," Stengel remarks. 
Both stocks rose sharply Monday, Enron adding 61 cents to $9.24 and Dynegy rising $5.55, or 14%, to $44.31. Still, Enron remains 22% below Dynegy's implied acquisition price. The stock action suggests the market is deeply divided over the deal. The deep discount on Enron is a sign that the deal won't get done. Yet Dynegy's leap implies solid investor backing for the transaction and its economics. Until we know more about Enron's numbers, we won't be able to judge whether Dynegy investors are right to be bullish, however. 
Strong Indeed
Among the deal's avid supporters were a number of sell-side analysts who are longtime Enron bulls. They particularly liked Dynegy's prediction that the combined entity, to be called Dynegy, would post earnings 35% above current 2002 estimates for stand-alone Dynegy. And these bulls point out that this accretion number doesn't include any merger synergies and it assumes Enron's 2002 earnings are $1.50, which is 25% lower than analysts currently expect. 
Dynegy executives repeatedly stated Monday that they wanted to get rid of Enron's noncore operations and keep the trading business, which has contributed the lion's share of Enron earnings, as well as pipeline assets. Clearly, Dynegy believes that Enron's core trading business made real profits. How much of a leap of faith is that? A considerable one. As this column has noted, Enron doesn't make it possible to break out profit margins for trading, which is included in the wholesale line in Enron's income statements. 
In fact, the wholesale line includes substantial asset gains, many of which are probably one-time in nature. Enron's deals with obscure partnerships gave a huge boost to profits, according to earnings restatements made last week. Don't forget that it's these partnership dealings that are under investigation by the Securities and Exchange Commission. Without them, and excluding one-time sales, Enron's traders may actually make very little. 
Marky Mark
One fear was that Dynegy would have to mark down Enron's underperforming assets by billions of dollars. Charges erode equity. Lower equity would possibly mean a higher debt-to-capital ratio (calculated by taking debt as a percentage of total capital, or debt plus equity). If this ratio gets above 50% to 55%, rating agencies might consider downgrading Dynegy, which could deter counterparties from trading with it. But Dynegy expects the debt-to-capital ratio to be about 40% in the merged institution. 
Somewhat implausibly, Dynegy's forecasts don't appear to factor in big markdowns in Enron equity. In the third quarter of next year, Enron's equity is expected to be $9.5 billion. That's only slightly below what it probably was at the end of this year's third quarter (Enron still hasn't released a third-quarter balance sheet). How can it not decrease over the next 12 months? 
A person familiar with the matter says that Dynegy also expects to mark up Enron assets at the time of the deal's closing. These markups are expected to at least partially offset any markdowns, this person adds. But it's tough to identify any Enron assets that could qualify for hefty positive adjustments, while it's easier to point out assets that deserve negative ones. Dynegy needs to break out markups and markdowns and reveal which assets are being subject to the adjustments. 
Dynegy's Stengel didn't comment on the question of equity writedowns. 
By stretching too far in its assumptions, Dynegy may be trying to dress up a risky merger as a safe one. But a risky merger may, in Dynegy's view, have been preferable to having Enron go down. Again and again Monday, Dynegy execs said they've done their due diligence and they believe that there aren't any huge skeletons in Enron's closet that could upset the merger. 
But contrast this stance with that of Standard & Poor's analysts, who said Friday that they would've downgraded Enron's debt to junk status if Dynegy hadn't agreed to buy Enron. One of the S&P analysts said Friday that they didn't have a full understanding of all the partnerships that Enron has been dealing with. If S&P, which, like other rating agencies, has been locked in deep and detailed discussions with Enron for weeks, doesn't know the effect of all the partnerships, how can Dynegy? 
"Dynegy has been doing business with Enron for 16 years. We know them and they know us," Stengel replies. "We are comfortable with the due diligence we have conducted thus far and will continue to look at Enron and their operations in the coming weeks and months." 
Until Dynegy comes up with more details, assume Enron is a Pinto. 



Dynegy asked FERC to revise regs 
CBSMarketWatch.com, 11/13/01
Lisa Sanders
HOUSTON (CBS.MW) -- Long before Enron and its Northern Natural Gas Pipeline entered the picture, Dynegy complained to the Federal Energy Regulatory Commission about companies with pipeline systems crowding out competitors from the natural gas transmission market.
In a filing dated Jan. 5, 2001, Dynegy (DYN ) asked to speak in front of the FERC about what it characterized as "affiliate abuse and structural preferences," which are "alive and growing in the gas industry."
Now, even if Dynegy's $9 billion takeover of Enron fails, the power generator can keep the energy trader's Northern Natural Gas Pipeline, according to the merger agreement.
"They're kind of complaining about themselves now," said Raymond Plank, chairman and chief executive of natural gas and oil producer Houston-based Apache Corp. (APA ), in an interview. 
Northern Natural is Enron's (ENE ) largest transmission system with 17,000 miles of pipeline.
"Our position has not changed," Dynegy spokesman Steve Stengel said in an e-mail to CBS.MarketWatch.com. "We do not believe that companies should be able to 'abuse' their power within a market and we also believe that regulators need to continue to monitor markets to ensure market abuse does not occur."
In a subsequent e-mail, Stengel said "We are going to comply fully with FERC regulations." The answer was in response to a question about how Dynegy plans to guard against abuse once it owns a pipeline system.
In the executive summary Dynegy filed to the FERC, the company claimed that structural affiliate preference "is a far greater threat to market participants in coming years."
Dynegy contended that a pipeline or transmission company affiliate "can always pay more, or withstand greater risk from, services purchased from home pipelines because of the benefits inuring to the parent holding company." Dynegy also alleged that because affiliates control the pipelines, they crowd out competitors.
One concern Dynegy listed is the "vertical overlapping" of gas pipeline companies and utilities. Dynegy owns the electric and gas utility Illinois Power.
In its comments, Dynegy advocated structural changes to the affiliate relationship in order to prevent abuse of the system and eliminate the preference problem. Dynegy also recommended that if "rampant" abuse is found, the company should be required to divest the non-regulated affiliate."
On Sept. 26, the FERC issued a statement proposing a set of uniformly applied regulations to oversee the relationship between regulated transmission providers and their energy affiliates.
Citing the sweeping changes in both the gas and electricity markets, the FERC said that current rules "fail to address the sharing of confidential shipper information and transportation information with all energy affiliates."
The FERC proposed that the employees of transmission providers involved in the operation of transmission systems function apart from the providers' sales or marketing employees and energy affiliates.
"In addition, the prohibition on preferential sharing of transmission information would be broadened to include all energy affiliates," the FERC stated.
Apache's Plank said his company is in the process of figuring out how best to help. Apache wants to take the volatility out of the energy market, and he pegs Dynegy and Enron as major contributors to the situation. 
"The government says they believe in transparency, but they believe it applies to everyone (else)," he said. "If they let us know what they're looking for, we could be very helpful in the interest of the U.S."
Shares of Dynegy added 89 cents to $45.20 in Tuesday trading, while Enron advanced by 15 cents to $9.39.
Lisa Sanders is a Dallas-based reporter for CBS.MarketWatch.com.


Compaq, Continental Eliminate Jobs, Houston Feels the Pain
2001-11-13 17:20 (New York)

Compaq, Continental Eliminate Jobs, Houston Feels the Pain

     Houston, Nov. 13 (Bloomberg) -- Houston, you have a problem.
     The fourth-largest U.S. city has been shaken by declines at
three of its biggest employers -- Continental Airlines Inc.,
Compaq Computer Corp. and now Enron Corp., which last week agreed
to a takeover by local rival Dynegy Inc. amid a financial crisis.

     The airline and the computer maker are cutting tens of
thousands of jobs because of a slumping economy and reduced demand
following the Sept. 11 terrorist attacks. Analysts said business
growth will slow in Houston, home to President George W. Bush and
Halliburton Co., the oilfield-services company once run by Vice-
President Dick Cheney, and the city's largest employer.

     ``Having a couple of favored sons in the White House doesn't
seem to matter when everything else is going wrong at once,'' said
Mark Vitner, an economist at Wachovia Securities Inc. ``This
historically has been a boom and bust city and now, for a host of
reasons, the floor is crumbling beneath it.''

     Houston's identity is closely tied to its businesses. The
Houston Astros baseball team plays in Enron Field, the downtown
retractable-roof stadium. Enron paid $100 million to put its name
on the 42,000-seat stadium. The Compaq Center is home to the
Houston Rockets basketball team.

     The city, for decades a symbol of the oil and energy
industries, in the last 10 years has become more representative of
the U.S. economy. Federal Reserve Chairman Alan Greenspan, one of
the guardians of that economy, is scheduled to speak at the James
A. Baker Institute for Public Policy at Houston's Rice University
today.

     Houston is home to 21 Fortune 500 companies and last year
rose to become the world's 30th largest economy by gross domestic
product from 34th. Houston's GDP rose on average 4.5 percent in
each of the last four years. That growth rate slowed to 1.3
percent through the first nine months of 2001.

                         Cutbacks

     Continental, the fifth-biggest airline in the U.S. and
Houston's second-biggest biggest employer, said in September that
it would cut 12,000 jobs as the attacks in New York City and
Washington kept travelers at home.

     Compaq, Houston's fifth-largest employer, has agreed to be
bought by rival Hewlett-Packard Co. in a transaction that is being
met with skepticism by analysts and investors. If the transaction
does go through, the companies plan to chop 15,000 jobs. Analysts
and investors said last month they expected the total number of
job cuts to approach 30,000 at both companies.

     Dynegy executives say their $23 billion acquisition of Enron
will result in a more-profitable energy trading company. The
combination also will cause job reductions at the companies'
overlapping businesses, analysts said.

     ``The Houston economy will take a hit from the job cuts,''
said Robyn Kapiloff of Moody's Investors Service, a credit rating
company. ``We're taking a wait and see approach.''

     Moody's rates the city's bonds `AA3,' a high investment
grade. Houston's airport bonds are rated `A1.'

                         Optimism

     Houston officials say their city will rebound.

     ``People in Houston take kind of a New York attitude to the
economic problems,'' said Sharon Adams, Houston's deputy
controller. ``They say we've been there before when times were
hard in the 1980s, and we'll come out of it stronger.''

     Last month, Houston was put on the short list of U.S.
finalists to bid for the 2012 Summer Olympics, along with New
York, Washington D.C., and San Francisco.

     ``In the long run, this city has a great quality of life and
the infrastructure to absorb these losses,'' said Barton Smith,
director of the Institute for Regional Forecasting at the
University of Houston.