Enron Transaction Raises New Questions --- A Company Executive Ran Entity That Received $35 Million in March
The Wall Street Journal, 11/05/01
What Enron's Financial Reports Did -- and Didn't -- Reveal --- Enron Short Seller Detected Red Flags In Regulatory Filings
The Wall Street Journal, 11/05/01
What Enron's Financial Reports Did -- and Didn't -- Reveal --- Auditor Could Face Scrutiny on Clarity Of Financial Reports
The Wall Street Journal, 11/05/01
Enron Offers Only Questions 
RealMoney.com, 11/05/01
COMPANIES & FINANCE INTERNATIONAL - Unions seek reform at Enron.
Financial Times, 11/05/01
USA: Enron made $35 mln purchase from co run by officer - WSJ.
Reuters English News Service, 11/05/01
Enron made 35 mln usd purchase from entity run by officer of company - report
AFX News, 11/05/01
Enron Transaction With Entity Run by Executive Raises Questions
Dow Jones Business News, 11/05/01
Enron may have to sell assets
National Post, 11/05/01
Enron's Indian Unit Serves Asset Transfer Notice To MSEB
Dow Jones International News, 11/05/01
UK: U.S. stocks edge higher in Europe, futures firm.
Reuters English News Service, 11/05/01
BG: Technically Qualified To Operate Enron India Fields
Dow Jones Energy Service, 11/05/01
UK PRESS: US Unions Call For Corp Reform At Enron
Dow Jones International News, 11/05/01
INDIA: Enron's India lenders to discuss $2.9 bln project.
Reuters English News Service, 11/05/01

Enron Starts Valuing India Unit, Claim for Canceled Power Pact
Bloomberg, 11/05/01    


Enron in Talks to Sell 50% Stake in Korean Gas Unit (Update3)
Bloomberg, 11/05/01 



Enron Transaction Raises New Questions --- A Company Executive Ran Entity That Received $35 Million in March
By John R. Emshwiller
Staff Reporter of The Wall Street Journal

11/05/2001
The Wall Street Journal
A3
(Copyright (c) 2001, Dow Jones & Company, Inc.)

In a transaction that raises new questions about Enron Corp.'s financial dealings with its management, the company in March made a $35 million purchase from an entity run by a company officer. 
That payment appears to have been the last step in a complex series of transactions that allowed Enron to keep hundreds of millions of dollars of debt off its balance sheet for the past three years, during which the Houston-based energy-trading giant has grown rapidly. In recent weeks, Enron's labyrinth of financial transactions, particularly with members of company management, has come under intense scrutiny from investors and regulators, who are seeking information about the impact of the transactions on the company and whether Enron adequately disclosed the deals to the public. Enron last week disclosed that the Securities and Exchange Commission had begun a formal investigation.
Enron officials have said repeatedly that all their actions were legal and properly disclosed. They have promised to cooperate with the SEC probe. 
Enron officials wouldn't discuss the $35 million transaction. What has been learned about it was gleaned from interviews with others familiar with the matter, snippets from Enron SEC filings and private partnership documents. Based on these sources, the Enron officer involved in the transaction was Michael Kopper, a former managing director of the company's Enron North America unit. The entity receiving the $35 million was Chewco Investments LP. It wasn't clear from the available information what form the payment took or what, if any, gain Chewco or Mr. Kopper realized. 
Mr. Kopper, who a company spokesman says left Enron in July, didn't return phone calls seeking comment. In the past, he has declined to be interviewed. 
At Enron, Mr. Kopper was an associate of Andrew Fastow, the company's chief financial officer until last month. In 1999, they set up and subsequently ran a private partnership known as LJM2 Co-Investment LP, which was involved in billions of dollars of transactions with Enron, according to private-partnership documents and company SEC filings. Those partnership documents indicate Mr. Fastow and possibly a handful of Enron associates, including Mr. Kopper, made millions of dollars in fees and investment gains from LJM2. 
Last month, in response to mounting controversy over the partnership dealings, Enron replaced Mr. Fastow as chief financial officer. Mr. Fastow hasn't responded to numerous interview requests. 
Chewco is mentioned in a brief biography of Mr. Kopper that is part of a 1999 offering memorandum for the LJM2 partnership. The document said Mr. Kopper, besides being a "principal" of LJM2, "manages the general partner of Chewco, an investment fund with approximately $400 million in capital commitments that was established in 1997 to purchase from Enron an interest in a defined pool of Enron assets." The document doesn't specify what assets were purchased. 
Chewco's name also appears as the debtor in a 1997 filing with the office of the Texas secretary of state. The secured party, and presumably the lender, on that debt was a limited partnership called Joint Energy Development Investments LP. 
Known as JEDI, this limited partnership was created in 1993 by Enron and the huge California Public Employees' Retirement System to make energy-related investments. According to Enron SEC filings, the company and Calpers each put in $250 million and an Enron affiliate served as JEDI general partner and operator. 
Besides bringing in outside equity, entities such as JEDI allowed Enron to borrow large sums for asset purchases without that debt showing up on Enron's balance sheet. In recent years, top Enron officials have said publicly that keeping down debt load was vital to protecting the company's credit rating and sustaining its tremendous growth. At the end of 1995, Enron had $13.2 billion in assets; as of June 30, it had $63.4 billion. 
Messrs. Kopper and Fastow had "extensive involvement in the organization, investment activity and operations" of JEDI, according to the 1999 LJM2 private-offering memorandum. JEDI invested $2.1 billion in 63 separate transactions, the document said. After accounting for JEDI's $500 million in equity, this indicates the partnership borrowed as much as $1.6 billion. 
In 1997, Calpers sold its interest in JEDI back to Enron for about $375 million. At about the same time, Calpers put $500 million into a new Enron partnership, known as JEDI II. 
At this point, Enron could have held on to all of JEDI, but that probably would have entailed consolidating the partnership and its debts into the company's financial statements. 
That, apparently, is where Chewco came in. (Chewco got its name, says one person familiar with the matter, from the character Chewbacca in the "Star Wars" movies, where Jedi warriors also roamed.) Chewco bought from Enron the JEDI interest formerly held by Calpers, according to documents and interviews. It couldn't be determined what the terms of that transaction were. However, the fact that Chewco shows up as a debtor to JEDI in the Texas state filing suggests that money for the purchase was borrowed from JEDI itself. 
The available information on the chain of transactions raises questions about how separate JEDI and Chewco really were from Enron and whether JEDI's assets and liabilities should have been folded into the company's financial statements. 
In a March 2000 SEC filing, Enron makes a brief reference to its new JEDI partner, which Enron doesn't identify but presumably is Chewco. The filing said "an officer of Enron has invested in the limited partner of JEDI and from time to time acts as agent on behalf of the limited partner's management." While the officer isn't named, the description is similar to that given for Mr. Kopper in relation to Chewco in the LJM2 offering memorandum. 
In March of this year, Enron moved to purchase the balance of JEDI that it didn't already own. In an SEC filing earlier this year, Enron said it acquired for $35 million "the limited partner's interests" in JEDI. Again, the partner wasn't named, but presumably was Chewco. 
Enron consolidated JEDI's assets and liabilities into the company. The SEC filing said JEDI's holdings included 12 million shares of Enron stock. Enron said it also paid off about $620 million of JEDI "third-party debt." The third party or parties weren't named. 
--- A Jedi's Journey

-- 1993: Enron and California Public Employees' Retirement System, or 
Calpers, form JEDI limited partnership and each commit $250 million to
make energy investments.

-- 1997: Enron purchases Calpers' share in JEDI for about $375
million and then resells it to an entity, believed to be Chewco
Investments. Chewco formed with $400 million in capital commitments
and run by Enron officer to purchase Enron assets.

-- 2001: Enron repurchases all of JEDI and consolidates it into the
company.

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

Heard on the Street
What Enron's Financial Reports Did -- and Didn't -- Reveal --- Enron Short Seller Detected Red Flags In Regulatory Filings
By Cassell Bryan-Low and Suzanne McGee
Staff Reporters of The Wall Street Journal

11/05/2001
The Wall Street Journal
C1
(Copyright (c) 2001, Dow Jones & Company, Inc.)

In October 2000, short seller James Chanos labored through Enron Corp.'s annual report, underlining complicated passages and scribbling exclamation points and question marks. 
The exercise set in motion an ultimately lucrative investment for the 43-year-old money manager, whose Kynikos Associates Ltd. long has been one of the largest and most visible of the firms that make bets that a stock will fall. Enron's books may have been hard to figure out. But Mr. Chanos spotted enough to bet that the then-highflying stock ultimately should tumble, because the company's success appeared to him less than met the eye.
Mr. Chanos, like any analyst either on the bull or bear side, isn't always right, of course. But he got this one right -- Enron shares have plummeted 86% this year to $11.30 -- and the details of how he did it are illuminating. Over time, he would build up an 18-inch stack of regulatory filings and other material about Enron. While even he found the filings hard to understand, to him they raised multiple red flags. As it turns out, Enron shares have been hammered by some of the very things that alarmed Mr. Chanos as he sat in his 43rd-floor Manhattan office a year ago. 
In Mr. Chanos's view, Enron had plenty of assets such as pipelines and utilities businesses, but it appeared to him to be a "hedge fund in disguise." Specifically, much of Enron's growth came from taking positions in the trading of energy contracts. To Mr. Chanos, that was similar to how a hedge fund -- those largely unregulated investment pools for the wealthy -- or a brokerage firm trades securities. But with one important qualification: By Mr. Chanos' measure, it wasn't as profitable as the average hedge fund. So why was it such a pricey stock? Mostly, Wall Street loved it because it consistently met or beat earnings targets. 
No longer, of course. Enron stunned investors on Oct. 16 when it announced a third-quarter loss, and since then it has revealed a regulatory probe into its complex transactions with off-balance-sheet partnerships, some involving the company's own executives. Enron says its board has formed an independent committee to review the transactions. 
Mr. Chanos, president of Kynikos, declines to discuss specifics of his gains from shorting Enron stock (which entails selling borrowed shares and replacing them later with cheaper ones), other than to say it has been a successful move. He continues to maintain a short position, declining as well to comment on whether it has been or is now being scaled back. His short-only funds -- about half of the total $1 billion under management -- boast returns of 24% so far this year, according to people familiar with the returns. That is a big contrast to some of the tough years endured during the raging bull market of the 1990's. For the past decade, the return is a negative 4.5%. (One of his bad calls: America Online, whose stock price soared after he bet that it would fall.) 
Of short sellers such as Mr. Chanos, an Enron spokeswoman says: "It was in their financial interest to drive the stock price down, and they raised whatever doubts and whatever issues they could to further their own financial gain." 
But Mr. Chanos says he was simply crunching whatever numbers he could find. "What struck us was, despite their market-leadership position, just how poorly they were doing in terms of returns." Mr. Chanos calculated that the company's return on invested capital, including debt, was roughly 7% for the year through Sept. 30, 2000, below his estimate of the company's cost of capital, between 9% and 12%. He felt the return on capital should be three to five points above the cost of capital to justify an investment. Enron has dismissed comparisons with a trading company in the past; it had no immediate comment Friday. 
Enron shares were trading at about six times the company's book value in late 2000. By comparison, Wall Street brokerage firms typically trade at two or three times book value and hedge funds in effect are priced at book value. 
Among the pages of the 1999 report that Mr. Chanos marked with yellow Post-it notes and scribbled comments was one detailing the related-party transactions. He underlined a sentence stating that one of Enron's senior officers is the "managing member" of a private investment company with which Enron had entered into a series of transactions. "We read the disclosure over and over and over again, and we just didn't understand it -- and we read footnotes for a living." he says. But at the time, he concedes, "it was just an odd footnote to us." 
He started telephoning analysts at Wall Street firms to determine what aspects of the bulls' case he was missing. What he heard excited him further. Part of the bullishness focused on Enron's strategy of trading broadband-network capacity. Mr. Chanos, who already had placed bearish bets on some telecommunications bandwidth providers, was convinced that the industry already suffered from overcapacity and that the situation would only get worse. His conclusion: if Enron "couldn't see the looming train wreck coming in telecom, what else were they missing? Maybe they weren't as infallible in the energy area as people had thought." 
Another warning signal was insider stock sales through the second half of 2000, he says. That sat awkwardly with the common refrain from Wall Street analysts that investors had to just trust management given the difficulty of analyzing how earnings were derived. The company didn't immediately comment on the sales on Friday. 
"You look for patterns in my business," says Mr. Chanos. "The fact that this was a `trust me' story, while management was voting with its feet was another check. While we didn't have a smoking gun, we certainly saw a reason to perhaps not trust management at its word that these earnings were what they said they were." 
Those factors led Mr. Chanos to begin shorting the stock in late November of last year, when it was fluctuating between $65 and $80; he won't provide details. Overall, the level of short interest, or short-selling positions not yet closed out, on Enron shares jumped 2.2 million shares to 7.9 million shares for the month through mid December, from the same period in the previous month. 
As other red flags surfaced, in February Mr. Chanos and other short sellers significantly ramped up the bearish positions. Mr. Chanos first discussed his view of Enron with those outside the firm that month in Miami, where he hosted his annual "Bears in Hibernation" conference. Attendees bring two ideas to present, and one of his was Enron. 
With Enron's stock trading at $72 at that time, or roughly 40 times 2001's per-share earnings estimates, "the market is priced for perfection here," Mr. Chanos told the 25 or so attendees, "whereas it looks like things may be anything but." 
Back in New York, Mr. Chanos arranged a second round of sessions with bullish analysts. "Here's our thesis," he told them. "What are we missing?" 
Mr. Chanos came out of those meetings with a "heightened conviction that we were right." For one thing, he sensed frustration brewing about the level of trust required with Enron. 
As the spring progressed, Mr. Chanos became increasingly confident, adding to his short position. On a widely reported conference call in April, Jeffrey Skilling, then Enron's chief executive, responded to another short seller's criticism that Enron hadn't provided a balance sheet by calling him an "ah." For the first time, "I got a sense that the company was now getting tough questions and was not happy about it," Mr. Chanos says. 
For their part, Wall Street analysts argue that they have limited time and resources for the in-depth research that Mr. Chanos prefers. Many cover dozens of companies. Still, some say they have learned lessons from Enron's fall from grace. Salomon Smith Barney analyst Raymond Niles, for one, says he will "pursue warning signs relentlessly and go by gut instinct" when he senses a looming problem. Says Mr. Niles, who covers Enron: "I think shorts play a very valuable role in the market, reminding us of what can go wrong." 
(See related article: "Auditor Could Face Scrutiny on Clarity Of Financial Reports" -- WSJ Nov. 5, 2001)

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

What Enron's Financial Reports Did -- and Didn't -- Reveal --- Auditor Could Face Scrutiny on Clarity Of Financial Reports
By Jonathan Weil
Staff Reporter of The Wall Street Journal

11/05/2001
The Wall Street Journal
C1
(Copyright (c) 2001, Dow Jones & Company, Inc.)

As Enron Corp.'s independent auditor, Arthur Andersen LLP has the job of making sure the Houston energy trader's financial statements not only are accurate and complete in all material respects, but also are understandable. 
Now for the really tricky part: Understandable to whom?
For Andersen, this isn't just an academic question. Once again, the accounting practices of one of the Big Five firm's most prized clients have come under intense scrutiny from regulators and shareholders. Questions could well turn to whether Andersen fulfilled its obligation to protect investors' interests. And an important focus is likely to be whether Andersen should have required Enron to better explain its dealings with partnerships run by former Chief Financial Officer Andrew S. Fastow before agreeing to bless the company's financial statements. 
Enron revealed last month, in a conference call, that its shareholder equity had fallen by $1.2 billion during the third quarter as a result of transactions in which a partnership controlled by Mr. Fastow was at least at times involved, fueling a steep dive in the stock price amid growing concerns about the company's financial health. Many Wall Street analysts, including die-hard Enron bulls, long have grumbled that parts of Enron's financial statements are indecipherable. 
"The heart of disclosure is intelligibility," says Alan Bromberg, a professor of securities law at Southern Methodist University in Dallas. "If the people to whom it's addressed can't understand it, it hasn't been adequately disclosed. There's clearly a qualitative, as well as a factual, component to disclosure." 
Under generally accepted accounting principles, the rules for disclosing related-party transactions seem straightforward enough. Among other things, companies must describe the "information deemed necessary to an understanding of the effects of the transactions on the financial statements." But the nation's accounting-standard setters never have offered any clear guidance on whether companies' disclosures should be understandable to a broad audience or merely to financially sophisticated individuals with specialized training. And even sophisticated investors are prone to being stumped now and then. 
To be sure, the adequacy of a company's related-party disclosures can be determined only when all the information about the transactions is out in the open. For its part, Enron -- which is hardly the only large energy company with complex partnership dealings -- maintains its off-balance-sheet transactions were legal and properly disclosed. "They comply with reporting requirements," says Enron spokeswoman Karen Denne, adding that Andersen was aware of the transactions and reviewed them. "To the extent that an investor doesn't understand them, they are able to ask questions." And in the end, she notes, investors who didn't understand the transactions didn't have to buy Enron stock. 
Enron's disclosure practices stand out, however, because they have been a source of complaints for so long. Even some top-flight accounting professors say they can't make heads or tails of the company's transactions with Mr. Fastow or Enron's motives for entering them. If they can't figure them out, it raises the question of whether any outsider could. 
One thing is certain: The stakes for Andersen could be high. Since Enron's disclosure of the reduction in shareholder equity, its stock has plunged 67% to $11.30 as of 4 p.m. in New York Stock Exchange composite trading Friday -- a drop that wipes $20 billion off the company's market value and potentially exposing Enron and Andersen to massive shareholder liability. Already, Enron's dealings with the partnerships are the subject of a formal investigation by the Securities and Exchange Commission. That creates the possibility that Andersen itself could become a focus of the probe at some point, should regulators find Enron's accounting and disclosure practices deficient. Meanwhile, the law firm for a special committee set up by Enron's board has hired accounting firm Deloitte & Touche LLP to help review the partnerships' activities. 
An Andersen spokesman, David Tabolt, says the firm "will continue to cooperate with [Enron's] special committee, lawyers and accounting advisers" and "will also cooperate with other official investigations as requested." So far, he says, the SEC hasn't told Andersen it is a subject of the Enron probe. Beyond that, he declines to comment on Enron, citing client-confidentiality obligations. 
How murky are the related-party disclosures in Enron's audited financial statements? Here is a summary of a section in Enron's 2000 year-end financial statements describing certain transactions with the Fastow-operated partnerships. The company said it transferred assets valued at $1.2 billion, including $150 million in notes payable, 3.7 million restricted Enron shares and the right to receive as many as 18 million Enron common shares in March 2003, subject to certain conditions. It also transferred to the partnerships other assets valued at $309 million, including a $50 million note payable and "an investment in an entity that indirectly holds warrants convertible into common stock of an Enron equity method investee." 
In return, Enron said it received "economic interests in the entities," $309 million in notes receivable and an additional $1.2 billion in notes receivable as part of a "special distribution." The disclosure went on to mention a series of purchases by Enron of "share-settled options from the entities" on shares of Enron common stock. 
The raw numbers may all be there. But "any objective person would be hard pressed to understand the effects of these disclosures on the financial statements," says Douglas Carmichael, an accounting professor at Baruch College in New York. "The quality of the disclosure is low, which creates uncertainty about the quality of their accounting." 
Further, he says, Enron's explanation of why it entered the transactions "seems to defy imagination." In the year-end financial statement, Enron said the purpose was "to hedge certain merchant investments and other assets," a category that includes energy assets whose values are prone to wide price fluctuations. Yet the disclosure shows that Enron chose to use shares and options of its own stock as its chief hedging instrument, even though their price movements wouldn't appear to be directly related to the value of the investments Enron was trying to hedge. 
"I don't see how that possibly hedges any of Enron's risks or assets," Mr. Carmichael says. Indeed, the disclosures have given rise to widespread speculation that Enron's actual purpose was to use its off-balance-sheet transactions to shift losses off its books to avoid running them through its income statement. Asked whether that was Enron's purpose, Ms. Denne declines to comment. She says Enron stands by its earlier statement that Enron was trying to hedge certain investments. 
To date, Andersen hasn't been named as a defendant in any of the numerous shareholder lawsuits filed against Enron, which paid Andersen $52 million last year, including $25 million in audit fees. Enron's woes come during a year already filled with embarrassments for Andersen. In June, the SEC fined Andersen and three partners $7 million over their audits of Waste Management Inc.'s financial statements, the largest SEC fine ever against an accounting firm. Andersen, which neither admitted nor denied the SEC's fraud allegations, paid $75 million in 1998 to settle its portion of a shareholder lawsuit over the Houston-based garbage hauler. Also this year, without admitting wrongdoing, Andersen agreed to pay $110 million to settle a shareholder lawsuit over audits it conducted for Sunbeam Corp. 
(See related article: "Heard on the Street: Enron Short Seller Detected Red Flags In Regulatory Filings" -- WSJ Nov. 5, 2001)

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


Enron Offers Only Questions
By James J. Cramer <mailto:jjcletters@thestreet.com>

RealMoney.com
11/05/2001 08:10 AM EST
URL: <http://www.thestreet.com/p/rmoney/jamesjcramer/10003479.html>

The journalists on this Enron (ENE:NYSE - news - commentary) story seem oblivious to the big issue here: Why did Enron need to do the partnerships in the first place? 
That, to me, is the issue -- because the only reason you would set up all of these "perfectly legal" partnerships, as they keep calling them down there, is to hide something. 
What would they be trying to hide? Let's step aside for a second and ask a few hypotheticals. 
If you had information about how a market was doing, you might want to do something with that information that you didn't want anyone to know about. For example, let's say you had access to all of the trading information about where electricity was going -- you had access to the grid -- you might be able to take advantage of that information with an off-book partnership. You would need that off-book partnership because you wouldn't want any of those people from whom you took the data thinking that you were taking advantage of those data. 
Or if you knew that a market was about to be squeezed upward and you wanted to facilitate that squeeze, you could buy electricity and keep it from, say, California, until rates went up, and then dump it in California once the squeeze was complete. 
Or you might just want to make a few bucks on the side that you didn't want to share with shareholders and you needed to have something special, something hidden from shareholders, to make those few bucks. 
Or the parent company didn't know anything about these partnerships, and the people running them were just living large without much oversight. 
Or the parent company was worried about its credit rating, so it wanted to hide debt. 
I don't know, can someone come up with better reasons you would do this? I can't. Can someone come up with something that's not nefarious? 
Please email me. 
I want to know why anyone would do this, a good reason that we would all appreciate as shareholders. 

COMPANIES & FINANCE INTERNATIONAL - Unions seek reform at Enron.
By SHEILA MCNULTY.

11/05/2001
Financial Times
(c) 2001 Financial Times Limited . All Rights Reserved

The AFL-CIO, a federation of US trade unions, is calling for sweeping governance reform measures at Enron, the embattled energy trader, to restore investor confidence amid a probe by federal regulators into its finances. 
"America's working families are significant shareholders of Enron stock through their pension, health and welfare benefit funds," said the AFL-CIO, which is the American Federation of Labor and Congress of Industrial Organizations.
The union-sponsored funds under the AFL-CIO, which represents 13m Americans, hold 3.1m Enron shares. The Amalgamated Bank, the trustee of Long View Funds, which holds 251,304 Enron shares, has also joined in the call for corporate reform. Those funds are investment trusts managing equity assets on behalf of workers' pension funds. 
The two were the first big shareholders to make demands on Enron since the crisis of confidence in the company began on October 16 with the surprise disclosure of a $1.2bn balance sheet adjustment. 
They said the mandate of the Special Committee, created by Enron's board to examine the transactions in question and liaise with the Securities and Exchange Commission during its investigation, was too narrow. 
They want the committee to examine all transactions with entities in which Enron employees or directors have an interest, adopt procedures for reviewing insider participation in investments, start an extraordinary review of executive compensation, adopt a stricter definition of director independence and, finally, disclose director conflicts of interest. 
(c) Copyright Financial Times Ltd. All rights reserved. 
http://www.ft.com.

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



USA: Enron made $35 mln purchase from co run by officer - WSJ.

11/05/2001
Reuters English News Service
(C) Reuters Limited 2001.

NEW YORK, Nov 5 (Reuters) - Enron Corp. made a $35 million purchase from an entity run by a company officer, raising new questions about financial dealings with its management, the Wall Street Journal reported in its online edition on Monday. 
The report comes as the former Wall Street high flyer faces a full-scale probe by U.S. regulators into questionable financial dealings and as the company's market value has fallen by more than $17 billion in less than three weeks.
The Journal said the Enron officer involved in the transaction was Michael Kopper, a former managing director of the company's Enron North America unit, and that the company receiving the money was Chewco Investments LP. 
It said that Kopper was an associate of Andrew Fastow, the company's former chief financial officer who has been linked to transactions now under investigation by government regulators. 
In 1999, the two set up a private partnership known as LJM2 Co-Investment LP, which was involved in billions of dollars of transactions with Enron, according to private-partnership documents and company SEC filings, the paper said. 
Chewco is mentioned in a brief biography of Kopper that is part of a 1999 offering memorandum for the LJM2 partnership, the Journal said. 
The document said Kopper, besides being a "principal" of LJM2, "manages the general partner of Chewco, an investment fund with approximately $400 million in capital commitments that was established in 1997 to purchase from Enron an interest in a defined pool of Enron assets." 
The paper said Kopper didn't return phone calls seeking comment. Enron officials wouldn't discuss the transaction, the paper said.

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

Enron made 35 mln usd purchase from entity run by officer of company - report

11/05/2001
AFX News
(c) 2001 by AFP-Extel News Ltd

WASHINGTON (AFX) - Enron Corp in March made a 35 mln usd purchase from an entity run by a company officer, the Wall Street Journal reported. 
The payment appears to have been the last step in a series of transactions that allowed the company to keep hundreds of millions of dollars of debt off its balance sheet for the past three years, the newspaper said.
Based in interviews with others familiar with the matter, extracts from Enron SEC filings and private partnership documents, the Enron officer involved in the transaction was Michael Kopper, a former managing director of the Enron North America unit. 
The entity receiving the 35 mln usd was Chewco Investments LP. It wasn't clear from the available information what form the payment took or what, if any, gain Chewco or Kopper realized. 
Kopper, who a company spokesman says left Enron in July, was an associate of Andrew Fastow, the company's chief financial officer until last month. 
They set up and subsequently ran the LJM2 Co-Investment LP private partnership, which was involved in billions of dollars of transactions with Enron, according to official filings. 
Enron officials, who have said repeatedly that all their actions were legal and properly disclosed, declined to discuss the 35 mln usd transaction. 
jms For more information and to contact AFX: www.afxnews.com and www.afxpress.com

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

Enron Transaction With Entity Run by Executive Raises Questions

11/05/2001
Dow Jones Business News
(Copyright (c) 2001, Dow Jones & Company, Inc.)

In a transaction that raises new questions about Enron Corp.'s financial dealings with its management, the company in March made a $35 million purchase from an entity run by a company officer, Monday's Wall Street Journal reported. 
That payment appears to have been the last step in a complex series of transactions that allowed Enron to keep hundreds of millions of dollars of debt off its balance sheet for the past three years, during which the Houston-based energy-trading giant has grown rapidly. In recent weeks, Enron's labyrinth of financial transactions, particularly with members of company management, has come under intense scrutiny from investors and regulators, who are seeking information about the impact of the transactions on the company and whether Enron adequately disclosed the deals to the public. Enron last week disclosed that the Securities and Exchange Commission had begun a formal investigation.
Enron (ENE) officials have said repeatedly that all their actions were legal and properly disclosed. They have promised to cooperate with the SEC probe. 
Enron officials wouldn't discuss the $35 million transaction. What has been learned about it was gleaned from interviews with others familiar with the matter, snippets from Enron SEC filings and private partnership documents. Based on these sources, the Enron officer involved in the transaction was Michael Kopper, a former managing director of the company's Enron North America unit. The entity receiving the $35 million was Chewco Investments LP. It wasn't clear from the available information what form the payment took or what, if any, gain Chewco or Mr. Kopper realized. 
Mr. Kopper, who a company spokesman says left Enron in July, didn't return phone calls seeking comment. In the past, he has declined to be interviewed. 
At Enron, Mr. Kopper was an associate of Andrew Fastow, the company's chief financial officer until last month. In 1999, they set up and subsequently ran a private partnership known as LJM2 Co-Investment LP, which was involved in billions of dollars of transactions with Enron, according to private-partnership documents and company SEC filings. Those partnership documents indicate Mr. Fastow and possibly a handful of Enron associates, including Mr. Kopper, made millions of dollars in fees and investment gains from LJM2. 
Last month, in response to mounting controversy over the partnership dealings, Enron replaced Mr. Fastow as chief financial officer. Mr. Fastow hasn't responded to numerous interview requests. 
Chewco is mentioned in a brief biography of Mr. Kopper that is part of a 1999 offering memorandum for the LJM2 partnership. The document said Mr. Kopper, besides being a "principal" of LJM2, "manages the general partner of Chewco, an investment fund with approximately $400 million in capital commitments that was established in 1997 to purchase from Enron an interest in a defined pool of Enron assets." The document doesn't specify what assets were purchased. 
Chewco's name also appears as the debtor in a 1997 filing with the office of the Texas secretary of state. The secured party, and presumably the lender, on that debt was a limited partnership called Joint Energy Development Investments LP. 
Known as JEDI, this limited partnership was created in 1993 by Enron and the huge California Public Employees' Retirement System to make energy-related investments. According to Enron SEC filings, the company and Calpers each put in $250 million and an Enron affiliate served as JEDI general partner and operator. 
Besides bringing in outside equity, entities such as JEDI allowed Enron to borrow large sums for asset purchases without that debt showing up on Enron's balance sheet. In recent years, top Enron officials have said publicly that keeping down debt load was vital to protecting the company's credit rating and sustaining its tremendous growth. At the end of 1995, Enron had $13.2 billion in assets; as of June 30, it had $63.4 billion. 
Messrs. Kopper and Fastow had "extensive involvement in the organization, investment activity and operations" of JEDI, according to the 1999 LJM2 private-offering memorandum. JEDI invested $2.1 billion in 63 separate transactions, the document said. After accounting for JEDI's $500 million in equity, this indicates the partnership borrowed as much as $1.6 billion. 
Copyright (c) 2001 Dow Jones & Company, Inc. 
All Rights Reserved.

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

Financial Post: News
Enron may have to sell assets
Reuters

11/05/2001
National Post
National
FP3
(c) National Post 2001. All Rights Reserved.

NEW YORK - Struggling energy giant Enron Corp. may have to sell power plants, pipelines and even some of its energy trading assets as it seeks to head off a credit crunch and restore investor confidence, investment bankers said yesterday. 
While Houston-based Enron lined up US$1-billion of new credit last Thursday, it still suffered a second credit rating cut amid concerns about questionable financial transactions that have triggered an investigation by the U.S. Securities and Exchange Commission.
The deteriorating picture, including a drop of almost 70% in its share price in less than a month, has close watchers of the company saying it will probably have to break itself up if it is to stay independent. 
"It will have to refocus on its core strengths and get out of other businesses," said one investment banker close to Enron.

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



Enron's Indian Unit Serves Asset Transfer Notice To MSEB

11/05/2001
Dow Jones International News
(Copyright (c) 2001, Dow Jones & Company, Inc.)

NEW DELHI -(Dow Jones)- Dabhol Power Co., the Indian subsidiary of U.S. energy company Enron Corp. (ENE), said Monday that it has served a notice of asset transfer to its sole customer, the Maharashtra State Electricity Board. 
Enron wants to sell its equity in Dabhol because of payment defaults by MSEB, and the Indian federal government's failure to honor payment guarantees. Back in August, the U.S. company said it was willing to sell its equity at cost.
Enron has a controlling 65% equity stake in the $2.9 billion, 2,184 megawatt Dabhol power project, located in the western Indian state of Maharashtra. 
Local media reports over the past two months have said that Enron wants $1 billion for its stake in Dabhol. 
"This notice formally sets in motion the valuation process of Dabhol's assets in connection with the termination of the power purchase agreement," Dabhol said Monday in a statement. 
"Following this transfer notice, the final termination notice is likely to be served in the near future to continue the legal process against MSEB." 
The statement noted that Dabhol's talks with the government of India and Indian financial institutions regarding the sale of its equity had yielded "no significant progress toward a fair and reasonable solution." 
"Consequently, Dabhol is left with little choice other than to serve the transfer notice to MSEB, which draws us closer to final termination notice of the PPA (power purchase agreement) and the ultimate recovery of damages as allowed under the project documents," the company said. 
Dabhol is India's largest single foreign investment to date. MSEB has a 15% stake in Dabhol, while General Electric Co. (GE) and Bechtel Group Inc. (X.BTL) own 10% each. 
-By Himendra Kumar, Dow Jones Newswires; 91-11-461-9426; himendra.kumar@dowjones.com

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

UK: U.S. stocks edge higher in Europe, futures firm.

11/05/2001
Reuters English News Service
(C) Reuters Limited 2001.

LONDON, Nov 5 (Reuters) - U.S. shares edged higher in European trade on Monday and index futures pointed to a higher opening on Wall Street amid expectations of a rate cut this week. 
The December futures of the tech-heavy Nasdaq Composite rose 14 points to 1,446.5 by 1200 GMT and the equivalent S&P 500 contract was up 4.9 points 1,094.4.
"We have seen some buying interest this morning, the futures are higher and we are looking for a higher opening on Wall Street," said one dealer in London. 
Investors were betting the Federal Reserve would cut interest rates by another half a point at its meeting on Tuesday in a bid to support the weakening economy. 
Struggling energy giant Enron Corp. stood at $11.65, having fallen six percent on Friday to $11.27. On Sunday, the UK's Independent reported that energy giant Royal Dutch/Shell Group may mount an $11 billion bid for Enron. 
Investment bankers said Enron may have to sell power plants, pipelines and even some of its energy trading assets as it seeks to head off a credit crunch and restore investor confidence. 
Cisco Systems Inc. , which makes the networking gear which helps power the Internet, rose to $17.75 from a close of $17.26. 
Sun Microsystems Inc. edged up to $11.65 from $11.44. 
Stocks were little changed in after-hours trading on Friday amid a dearth of earnings news, after blue-chip stocks rose in the regular session as investors looked past huge job losses and bet on a recovery next year. 
Stericycle Inc. rose to $49.90 after-hours from a close at $49.01 on the Nasdaq after the medical waste management provider reported a rise in its third-quarter net profit. 
Networking equipment makers such as Juniper Networks had dropped sharply on news that the voice and data services firm Qwest Communications International Inc. halted work on its network, analysts said. 
The Dow Jones industrial average rose 0.64 percent to end at 9,323.54. The tech-heavy Nasdaq Composite fell 0.03 percent to 1,745.73. 
The National Association of Purchasing Management releases its October non-manufacturing index at 1500 GMT. Economists in a Reuters survey on average forecast a reading of 45.9 versus 50.2 in September.

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

BG: Technically Qualified To Operate Enron India Fields

11/05/2001
Dow Jones Energy Service
(Copyright (c) 2001, Dow Jones & Company, Inc.)

SINGAPORE -(Dow Jones)- U.K. oil and gas company BG Group PLC (BRG) reiterated Monday its claim for operator status of the Indian upstream assets of Enron Corp. (ENE), saying it was best qualified due to its upstream technical experience. 
BG paid US$388 million for Enron's 30% stake in oil and gas fields offshore western India in October, but the sale is subject to a number of consents and conditions including confirmation from Enron and Gas India's joint venture partners - Oil & Natural Gas Corp. (P.ONG) and Reliance Industries Ltd. (P.REL) - that BG will inherit field operator status from Enron.
ONGC and Reliance Industries are challenging BG's goal of acquiring Enron's operatorship of the offshore Tapti gas field and the Panna/Mukti oil and gas field. 
A spokesman for the BG Group's unit in India, BG India, said the company sought operator status as it was more technically experienced in operating offshore oil and gas fields than ONGC and Reliance Industries. 
"BG would be far more comfortable operating the fields itself. It makes greater business sense than being a sleeping partner. It has a lot of experience operating fields," the spokesman said. 
The spokesman said the operator's contract doesn't include any fiscal incentives for the operator itself. "It's pretty much enshrined in the contract that the operator works on a 'no profit, no loss' basis," he said. 
As reported Thursday, BG said it will extend the negotiation period on the operatorship of the fields indefinitely. 
Analysts say BG's bid for operator status will continue to face stiff resistance from ONGC and Reliance. 
Enron's upstream oil and gas assets in India hold proven and probable reserves of around 170 million barrels of oil equivalent. 
-By Sri Jegarajah, Dow Jones Newswires; 65-415-4066; sri.jegarajah@dowjones.com

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


UK PRESS: US Unions Call For Corp Reform At Enron

11/05/2001
Dow Jones International News
(Copyright (c) 2001, Dow Jones & Company, Inc.)

LONDON -(Dow Jones)- The AFL-CIO, a U.S. trade union federation, has called for sweeping corporate governance reform at embattled energy trader Enron (ENE) amid a probe by federal regulators into the company's finances, the Financial Times reports Monday. 
The group said reform measures would help restore investor confidence in the company. Union-sponsored funds under the AFL-CIO - which represents 13 million U.S. workers - hold 3.1 million Enron shares, the report said.
Newspaper Web site: http://www.ft.com 

-London Bureau, Dow Jones Newswires; 44 (0)20 7842 9320

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

INDIA: Enron's India lenders to discuss $2.9 bln project.

11/05/2001
Reuters English News Service
(C) Reuters Limited 2001.

BOMBAY, Nov 5 (Reuters) - Lenders to an Indian power plant that is majority-owned by troubled Enron Corp will meet in Singapore with the U.S. energy giant to discuss the $2.9 billion project, a banking source said on Monday. 
Houston-based Enron is seeking to head off a credit crunch and restore investor confidence, damaged after its credit rating was cut and U.S. authorities began investigating its financial transactions.
The meeting in Singapore this weekend will examine offers that two Indian companies have put forward to buy Enron's 65 percent stake in Dabhol Power Company (DPC), which is building the controversial project, the banking source told Reuters. 
"The meeting will gauge the interest of the two bidders," the source said. 
Enron has been in talks with Tata Power , India's largest private electricity firm, and BSES Ltd about selling the stake, a deal in the works well before the recent crisis of confidence. 
BSES and Tata Power officials were not immediately available for comment. 
Enron's assets in Dabhol are estimated to be worth $870 million, analysts said. 
WHO BLINKS FIRST 
"It is a matter of who blinks first," said one banker familiar with the negotiations. "But given Enron's recent troubles, we expect them to sell at a substantial discount." 
Sources at the lending banks told Reuters Enron was willing to sell its holding in Dabhol Power at a 10 to 15 percent discount. 
An Enron spokesman said he was unable to comment. 
But in August, Houston-based Enron said it and its foreign partners were ready to sell their stakes in Dabhol for no less than $1.0 billion, an amount said to be sufficient to cover their costs and direct financial investment in the project. 
Enron's deteriorating position, including a drop of almost 70 percent it is share price in less than a month, has close watchers of the company saying it will probably have to break itself up if it is to stay independent. 
Analysts say that while Enron had lined up $1 billion in credit last Thursday, it may have to sell power plants, pipelines and some of its energy trading assets. The company could also be the object of a takeover bid. 
BITTER DISPUTE 
The first phase of the controversial 2,184 MW Dabhol Power Plant, India's largest foreign direct investment, has been completed. But work on the second phase was abruptly stopped in June following a bitter dispute between Enron and the plant's sole buyer, a loss-making Indian utility. 
The meeting in Singapore will take place a few days before the expiry of Enron's six-month notice to the utility expressing its intention to terminate the power purchase agreement. 
This contract governs the terms of the sale of power by Dabhol to the state-run Maharashtra State Electricity Board (MSEB), the nearly bankrupt power distribution monoply in the state where the plant is located. 
After November 19, Enron will be entitled - under the terms of the contract - to submit the dispute to binding arbitration by the International Court of Arbitration in London. 
U.S. conglomerate General Electric and construction firm Bechtel Corp each own 10 percent in the project, with the remaining 15 percent held by MSEB.

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



Enron Starts Valuing India Unit, Claim for Canceled Power Pact
2001-11-05 06:31 (New York)

Enron Starts Valuing India Unit, Claim for Canceled Power Pact

     Mumbai, Nov. 5 (Bloomberg) -- Dabhol Power Co., which runs
Enron Corp.'s $3 billion power plant, said it started valuing its
assets to assess a claim for cancellation of a sales contract with
the Maharashtra State Electricity Board because of unpaid bills.

     Enron on May 19 issued the first notice to cancel the power
supply contract with the board in six months unless the bills were
paid. The deadline ends on Nov. 19.

     Enron owns 65 percent of Dabhol Power, India's biggest
foreign investment. It wants to exit the venture as it's owed $64
million by the board, its sole customer, in bills not paid for ten
months. The board in May stopped buying the power, saying it was
too expensive.

     ``DPC is left with little choice other than to serve the
transfer notice to MSEB, which draws us closer to final
termination of the power purchase agreement and the ultimate
recovery of damages,'' the company said in a statement.

     The so-called asset transfer notice starts a process of
valuing Dabhol's assets and is followed by cancellation of the
power supply contract.

     Enron began looking to sell its stake after a government-
appointed panel of negotiators failed to get other buyers for the
plant's power. Enron has invested $875 million in the project and
has offered to sell its stake to the government at cost.

     Industrial Development Bank of India and other local banks,
which have lent $1.4 billion to the project, have begun looking
for a buyer for the plant. They are at greatest risk if Enron
pulls out as their loans aren't guaranteed by the federal
government.

     General Electric Capital and the closely held Bechtel group
together own 20 percent of Dabhol, while the electricity board
owns the remaining 15 percent.

--Ravil Shirodkar in the Mumbai newsroom (91-22) 233-9029


Enron in Talks to Sell 50% Stake in Korean Gas Unit (Update3)
2001-11-05 02:57 (New York)

Enron in Talks to Sell 50% Stake in Korean Gas Unit (Update3)

     (Adds analyst's comments in fourth paragraph, closes shares
in final paragraph.)

     Seoul, Nov. 5 (Bloomberg) -- Enron Corp., which has lost more
than 86 percent of its market value this year, is in talks to sell
its half stake in a natural gas joint venture with SK Corp., an
official of Korea's top oil refiner said.

     The official, who declined to be named, said talks had taken
place since at least August. He wouldn't give details. Enron said
in 1998 the gas distribution venture with SK would have a
capitalization of about $450 million. Enron officials weren't
immediately available to comment.

     The world's largest energy trader is facing difficulties
raising cash after the U.S. Securities and Exchange Commission
started investigating partnerships run by its former chief
financial officer and its long-term credit rating was cut by
Standard & Poor's to the second-lowest investment grade, or
``BBB,'' from ``BBB+.''

     ``Enron will probably sell its Korean operations at a loss
because of its financial problems,'' said Lee Kwang Hoon, an
analyst at Good Morning Securities Co. in Seoul. Enron's
difficulties raising funds may prompt it to pull out of all of its
overseas ventures except for China, he said.

     Goldman Sachs Group Inc. refused to participate in a $1
billion loan to Enron because it was unwilling to risk its capital
on a client with falling credit ratings that has been using its
investment-banking services less often, according to people
familiar with the matter.

     Enron selected Goldman Sachs to manage negotiations to sell
its Korean gas assets, and sent ``investment guide letters'' to
companies that may be interested, Korea Oil News reported today,
citing people it didn't name. Foreign companies that are
interested include El Paso Corp., BP Plc and Exxon Mobil Corp.,
the report said.

     As SK has a preferential right to negotiate for the stake, it
may buy back Enron's share, the report cited an unnamed SK
official as saying.

     Enron plans to receive letters of intent from interested
companies by the end of November, and conclude the sale by the end
of this year or early next year, the report said. Korea Oil News
is published by state-run Korea National Oil Corp.

     SK Corp. shares rose 300 won, or 2.6 percent, to 12,000.
Enron's shares on Friday fell 69 cents, or 5.6 percent, to $11.30.

--Youngsam Cho at ycho2@bloomberg.net in Seoul (822) 3702-1639 /rb