A MERGER AHEAD FOR ENRON?
BusinessWeek, 11/19/01
See you in court
The Economist, 11/17/01
Did Ken Lay Understand What Was Happening at Enron?
The New York Times, 11/16/01
A Quick Change in Fortune Dulls the Glimmer of Houston
The New York Times, 11/16/01
Johnson and Longley Hurting Bottom Line
The New York Times, 11/16/01
The Five Dumbest Things on Wall Street This Week
TheStreet.com, 11/16/01
GLOBAL INVESTING - Fidelity reveals a rise in its Enron exposure.
Financial Times, 11/16/01
FRONT PAGE - COMPANIES & MARKETS - HP and Compaq chiefs to forego $22m.
Financial Times, 11/16/01
Stock drop cuts Enron retirement package
Associated Press Newswires, 11/16/01
City - International Power looks for purchases.
The Daily Telegraph, 11/16/01
India Dabhol Project Due Diligence To Start Next Week
Dow Jones International News, 11/16/01
Britain clears purchase of Enron's Indian oil assets
The Daily Deal, 11/16/01
U.S. firms get in on Alaska pipeline
The Globe and Mail, 11/16/01
New Power faults data flow but opposes program delay
Houston Chronicle, 11/16/01
Consortium's return sparks renewed hope in gas pipeline project
Associated Press Newswires, 11/15/01
USA: Janus funds dumped EMC in third quarter.
Reuters English News Service, 11/15/01

Cash Infusion Little Comfort To Enron Counterparties
Dow Jones Energy Service, 11/15/01

Dynegy May Want Some Of Enron's Broadband Assets
Dow Jones Energy Service, 11/15/01



In Business This Week
A MERGER AHEAD FOR ENRON?
Edited by Monica Roman

11/19/2001
BusinessWeek
50
(Copyright 2001 McGraw-Hill, Inc.)

With its stock falling to new lows and its credit rating battered, energy giant Enron is desperately searching for new capital. Sources close to the Houston company say it's considering deals with other energy-trading companies, private-equity firms, and blue-chip saviors such as GE Capital. The Wall Street Journal and CNBC reported that Dynegy is in merger talks with Enron. The company's financial crisis was sparked by disclosures about some of its off-balance-sheet partnership deals negotiated by former Chief Financial Officer Andrew Fastow. A Securities & Exchange Commission investigation and the threat of liabilities from shareholder lawsuits could make it tough for Enron to land a new investor.


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


Finance & Economics
See you in court

11/17/2001
The Economist
Copyright (C) 2001 The Economist; Source: World Reporter (TM) - FT McCarthy

The company's trials have just begun 
LAWYERS are swarming all over Enron's old financial statements and press releases in the hope of reaping huge fees from securities litigation. More than 20 class-action lawsuits have been filed in recent weeks, and new ones are popping up every day. A formal process has been started to consolidate litigation in Houston, where the troubled energy company is based, with all lawyers interested in the case required to stake their claims by December 21st.
The broadest accusations will be of fraud and material misstatement, legal ways of saying that the company's financial statements were garbage. This week, Enron's founder and chairman, Kenneth Lay, decided to forgo a severance package worth over $60m while admitting that the company's problems "had been exacerbated by the extensive use of debt capital, both on and off the balance sheet". America's Financial Accounting Standards Board (FASB) is looking again at off-balance-sheet financing, having fretted about it on and off for a decade. 
There will also be charges of insider trading, because even as Enron was issuing securities amid glowing profits reports, top executives were dumping over $1 billion of Enron shares to "unsuspecting investors", a group that includes anybody who, however briefly, has held one of the company's 750m shares in the past two years. "The number of class members will be huge," says Maurice Pesso, a lawyer at a New York firm that has filed a claim. 
There are, however, limits to the company's liability. It has already restated its results going back five years, but federal law restricts litigation to the past three. Moreover, Enron will not take the rap alone. Its auditor, Arthur Andersen (now plain Andersen), is also named as a defendant in at least one of the complaints already filed. The litigation comes after a rough decade for Andersen. It has had to pay hundreds of millions of dollars in settlements after sloppy audits on such companies as Waste Management, Sunbeam and Discovery Zone. 
Because Enron evolved from an energy company into a financial firm, it became much like an unregulated bank. The lack of supervision meant that the role of the company's auditor was crucial. Andersen was certainly paid as if it was. In 2000, it collected $25m for auditing Enron's books and another $27m for consulting services. Now how do you account for that?

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

Business/Financial Desk; Section C
Did Ken Lay Understand What Was Happening at Enron?
By FLOYD NORRIS

11/16/2001
The New York Times
Page 1, Column 2
c. 2001 New York Times Company

WHAT a tangled web was weaved by Enron. Both investors and managers seem to have been misled. 
''Enron became overleveraged,'' Kenneth L. Lay, Enron's chairman and chief executive, said this week, adding that things went wrong in ways that ''I could not have ever contemplated.'' He pointed to investments that ''performed far worse than we ever could have imagined.''
That was the first time that Enron had admitted it had a leverage problem, and it came only after the brutal reality had become apparent to many others. Mr. Lay says he understood what was going on, but I suspect he had left crucial details to others who have since departed and did not fully grasp the reality that was obscured by Enron's soothing financial statements. 
When Enron was riding high, it could easily have sold stock to raise capital that it now desperately wants. Mr. Lay and other executives sold stock, but the company did not. Just a month ago, Mr. Lay spoke enthusiastically of how great the company's continuing earnings were. 
The leverage was not easy to find. A lot of it was carried off Enron's balance sheet. Partnerships and special-purpose entities that Enron set up borrowed money and funneled the cash to Enron. Enron guaranteed the debt but did not have to show it on its own balance sheet because it could meet its obligations by issuing stock. As undisclosed losses built up in those entities, it became more likely they could not pay their bills, leaving Enron to do so. 
It is also clear that the bond rating agencies did not understand Enron's plight until the last couple of weeks. When they figured it out, it took a $1.5 billion equity infusion that is part of the Dynegy takeover to keep Enron's rating above junk level. 
Now Enron has a board committee investigating various transactions, and promises to release details as they are uncovered. Officials speak as if they are learning what happened for the first time, and perhaps they are. Jeffrey Skilling, Mr. Lay's protege, was Enron's chief financial engineer until he quit this summer. And Enron's chief financial officer and treasurer were ousted as Enron unraveled. 
Some investors would say none of that matters now, that the only important fact is that Dynegy is buying Enron anyway. Chuck Watson, Dynegy's chief executive, is convinced that Enron's energy trading business is a gem that more than justifies the price Dynegy is paying. He figures the losses from the bad investments can be contained. 
The big question now may be whether Mr. Watson will retain his enthusiasm after his people study Enron's trading positions. Enron has always said it hedged its big derivative positions -- positions that can contain huge leverage that does not show up on the balance sheet -- but some of that hedging was with affiliated companies. If big surprises are found, Dynegy could back out of the deal. 
There is plenty of blame to go around here, and suits have been filed against Enron, its current and former officials, and its auditor, Arthur Andersen. But investors also bear responsibility. Enron's financial statements were, as Mr. Lay conceded this week, ''opaque and difficult to understand.'' Investors and analysts knew they did not know what was going on. They bought anyway. 
Enron was viewed as a company that always made its numbers. An old-line gas pipeline company had been transformed into a brilliant trader that could apply its magic around the world. Investors did not care how Enron made the numbers. Now, when it is too late, they do.

Graph tracks the monthly closes of Enron's stock price from 1998 through 2001. Yesterday's close: $9.48 
Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. 	



National Desk; Section A
A Quick Change in Fortune Dulls the Glimmer of Houston
By JIM YARDLEY

11/16/2001
The New York Times
Page 14, Column 1
c. 2001 New York Times Company

HOUSTON, Nov. 15 -- On a day when oil prices plunged to two-year lows, when the hometown Enron Corporation continued its ugly free fall and when gloomy projections showed the local economy headed for a decidedly rough patch, George Alcorn lunched on Chilean sea bass at the downtown Petroleum Club and decided that the sky was not falling. 
''I've been an optimist all my life,'' said Mr. Alcorn, 69, who owns an independent exploration company and survived the oil bust years of the mid-1980's. ''The opportunities in this town have always been large. I don't think it's going to change at all.''
That Mr. Alcorn could sound upbeat in such seemingly grim economic times is hardly surprising in a city largely built on pluck and buoyant optimism. Until recently, economists had predicted that the economic downturn plaguing the rest of the nation would largely bypass Houston, the nation's energy capital. In June, The Economist magazine, citing Houston's increasingly diverse economy, even promoted it as a candidate for the world's next great international city and business center. 
But June is a long time ago. By then, the city had already lost 2,000 jobs from the struggling computer maker Compaq and will probably now lose thousands more if the company's merger with Hewlett-Packard is approved. In the aftermath of the Sept. 11 terrorist attacks, Continental Airlines, which is based here, announced 12,000 layoffs, some likely to come in Houston. The Texas Medical Center, one of the largest medical complexes in the world, is facing financial peril after flooding in June caused an estimated $2 billion in damages. 
The latest blow to the economy as well as the local psyche is the plight of Enron, the energy company that some analysts said tottered near bankruptcy before a merger with its local rival, Dynegy, was announced last week. Even if the merger goes through, the city is expected to feel a crunch; local real estate analysts say the merger could produce a glut of downtown office space at a time when new towers are under construction, including one by Enron. 
One visible symbol of the changing fortunes is that two of the city's sports stadiums, Enron Field and Compaq Center, are named for companies that soon may not exist. This week, the National Association of Purchasing Management, which measures business activity and industrial production, released a report showing that Houston's economy had contracted in October after 32 consecutive months of expansion. 
''Over the first half of this year, you had to feel pretty good,'' said Bill Gilmer, an economist at the Federal Reserve Bank of Dallas and an authority on Houston. But Mr. Gilmer said that much of the city's recent job growth was driven by oil and gas companies and that the decline in prices meant the sector was ''running out of steam.'' 
''The national economy,'' Mr. Gilmer added, ''is not helping out right now.'' 
The fact that the ailing national economy is dragging on Houston is, oddly enough, evidence of the city's success in recovering from the 1980's oil bust. Then, with the local economy dominated by oil and gas, the drop in prices crushed the city and prompted civic leaders to preach economic diversification. And it worked: Compaq, Continental, the Texas Medical Center as well as dramatic growth in small business helped Houston recover and grow even faster, becoming the nation's fourth-largest city. The new generation of sophisticated energy companies, led by Enron, then created a boom. 
Economists say the next several months are likely to be slow. There could be substantial layoffs if Compaq and Enron mergers take place. Mr. Gilmer said the price of oil still played a large role in the city's economy; the number of exploration rigs has dropped to roughly 1,000 from about 1,300 in recent months. 
Yet no one is predicting a reprise of the bust, when downtown office buildings stood practically empty. Instead, economists point to a relatively quick rebound. Ray Perryman, a Texas economist who runs the Perryman Group, said Houston still had an infrastructure envied by most other cities, including the city's bustling port, the nation's second largest. The city was recently named as one of four finalists to become the American entry to be host of the 2012 Olympic Games. Voters recently approved construction of a starter light rail line, and federal environmental officials recently signed off on a plan to greatly reduce air pollution. 
''We're sitting here with over two million jobs,'' said former Mayor Bob Lanier. 
The downfall of Enron, though, a company whose value dropped almost 90 percent because of accounting problems and financial distress, has been the most highly publicized and unexpected blow to the city's economy. The company had embodied the self-image that Houston business leaders hold dear: it was entrepreneurial, aggressive and ground breaking. It was also a generous civic benefactor; the company's chairman, Kenneth L. Lay, a close friend of President Bush, had even been rumored as a potential mayoral candidate. 
But this week, Enron's lost glory became painfully evident. In a hall at Rice University on Tuesday, Mr. Lay presented Alan Greenspan, the Federal Reserve chairman, with a lifetime achievement award, the Enron Prize, which Mr. Lay's company had endowed and named in flush times. The next morning, an article in The Houston Chronicle said no decision had been made on whether the name of the prize would be changed.

Photos: Compaq Center, home of the N.B.A. Houston Rockets, is named for a company that soon may not exist. Enron, above, may soon be acquired by a rival energy company. (Photographs by F. Carter Smith for The New York Times) 
Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. 	

Sports Desk; Section S
SPORTS BUSINESS
Johnson and Longley Hurting Bottom Line
By Richard Sandomir

11/16/2001
The New York Times
Page 3, Column 5
c. 2001 New York Times Company

Larry Johnson and Luc Longley are gone from the Knicks' roster, but clearly not forgotten by their former employers at Cablevision. 
There will be no corporate tributes to Johnson, who retired, and Longley, who was waived. There will be no statues erected in their honor outside Madison Square Garden, a division of Cablevision.
But Johnson and Longley live on in Cablevision's third-quarter financial report, even though their names go unmentioned. The Garden has paid them the $48 million they had remaining on their contracts, then wrote them off because they are no longer performing for their money; the players lost the value they had when they first arrived at the Garden. Now they are nonperforming assets, not a small power forward and a bulky 7-foot-2-inch center. 
At least Johnson was, for a time after his acquisition in 1996, a key part of the team, even if his bad back kept him from scoring or rebounding as he had with the Charlotte Hornets. But the injured Longley's contribution last season was minuscule. 
So the Garden, which was hurt by fewer shows at the Garden and Radio City Music Hall, took a one-time hit and wrote off the value of Johnson's and Longley's contracts. For the third quarter, which ended Sept. 30, the Garden's operating cash-flow deficit was $32.4 million, compared with $29.6 million in operating cash flow last year for the same period. (Operating cash flow at Cablevision is defined as operating profit before depreciation and amortization.) 
Insurance will cover some of the cost of the Johnson-Longley payouts. 
''The team looks healthy,'' Jim Dolan, the president of Cablevision, said on Tuesday during a conference call with analysts. ''I don't expect any more write-offs.'' 
Whether that turns out to be true depends on whether any currently hearty player sustains a career-ending injury. But Cablevision could have avoided this financial circumstance had it paid attention to the physical conditions of Johnson and Longley. In each case, the Garden knew it was acquiring damaged goods. 
In his second season in Charlotte, Johnson hurt his back, and he has never been the same. Maybe the Garden was swayed that he was well enough, because he averaged 20.5 points and 8.4 rebounds in the season before it traded Anthony Mason for him. But the persistence of his back problems in the last few seasons attests to the riskiness of getting him in the first place. The back compromised his skills, often limiting him to being a symbol of the Knicks' grit. He also spelled ''L'' with his bended arm quite nicely, yet not worth an average of $7 million a year. 
When Longley arrived from Phoenix last year in the four-team deal that sent Patrick Ewing to Seattle, he said he had told the Knicks that he had a degenerative ankle condition. 
''I brought up my ankle in my physical with the Knicks,'' he said in July, ''and they said, 'Have you been playing?' I said, 'Yes,' and that was it.'' The fact was, he played for the Australian Olympic team in Sydney last year, but pain from his ankle kept him from practicing. 
Should have been a tip-off. 
The Naming Rights Dance 
Enron Field, home of the Houston home run, is bound to be called something different next season when Jimy Williams starts his tenure as the Astros' manager. 
Enron, the world's largest energy trader, agreed to pay $100 million to put its name on the ballpark for 30 years, a deal that began last year. But Enron is in trouble. It has lost nearly $60 billion in its market value; the company recently said it had overstated its profits for the past five years by nearly $600 million and it agreed to be acquired by Dynergy for $9 billion. 
In another part of Houston, the Compaq Center could take on another name now that the computer maker it was named for in 1997 (at $900,000 annually for six years) is planning to merge with Hewlett-Packard. In 2003, the Rockets will move to a new arena. 
Named stadiums and arenas have changed monikers before. A takeover turned Philadelphia's Comcast Center into the First Union Center. The TWA Dome in St. Louis is now the Dome at America's Center to reflect TWA's purchase by American Airlines. Marine Midland Arena in Buffalo now has HSBC's name. 
Meanwhile, Pro Player Stadium near Miami is named for a defunct division of the bankrupt Fruit of the Loom. 
Two other N.F.L. stadiums, one being built, the other three years old, are named for ailing companies. In Foxboro, Mass., CMGI Field is being readied for play next season by the New England Patriots. In the 12 months ended July 31, CMGI, an Internet development company, lost $4.4 billion (twice the annual network TV payments to the N.F.L.). CMGI will pay $114 million over 15 years for its naming deal -- if it lasts that long. 
PSInet, an Internet communications services provider that is paying $105.5 million over 20 years to be the name atop the Baltimore Ravens' stadium, filed for Chapter 11 bankruptcy protection earlier this year after losing $3.2 billion in the quarter ending March 31. 
The Conseco Fieldhouse in Indiana, the home of the Pacers, is named for a finance and insurance company that recently posted a $410 million quarterly loss. 
The financial state of some airlines since Sept. 11 may affect some of the arenas and stadiums named for them. Besides the dome in St. Louis, six other facilities are named for airlines (two for American). Last year, the Canadian Airlines Saddledome, where the Calgary Flames play, changed its name when its namesake went bankrupt and was bought by Air Canada. Now it is the Pengrowth Saddledome.

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

The Five Dumbest Things on Wall Street This Week
By K.C. Swanson <mailto:kcswanson@thestreet.com>
Staff Reporter
TheStreet.com
11/16/2001 07:22 AM EST
URL: <http://www.thestreet.com/markets/dumbest/10004082.html>

1. Fund Companies Gouge Investors
More gouging for clueless investors: Yet another fund company has said it will tack a sales charge onto its mutual funds. In December, Credit Suisse Warburg Pincus Funds will start selling its funds through brokers in a bid to attract more assets. 
The decision fits into a lamentable trend among fund companies adding sales charges to funds that previously had been sold directly. Others who've done it include Scudder, Strong and Invesco. 
Sure, it's no surprise that fund marketers are out to rack up more sales, and working through brokers is an easy way to do that (especially for funds with lousy reputations, which are less likely to attract direct investments without outside intervention). 
But that doesn't change the fact that load funds are almost always a rotten deal for investors. Legally, funds with loads are allowed to charge up to 8.5% of the initial investment in sales fees. 
In effect, paying a load reduces the size of an initial investment. When you consider the effects of compounding, that lost money could add up to a whopping amount in foregone returns over time. And now more than ever, investors can't afford to give up one iota of potential yields. 
2. Cipro Is No Savior for Bayer
A coda to the Cipro investment story, which we argued earlier was unconvincing: Sure enough, a recent earnings report from Bayer (BAYZY:OTC BB ADR - news - commentary) , the German chemical conglomerate that produces Cipro, shows that the company's other operational screwups more than outweighed the small gains it received from sales of the anti-anthrax drug. 
For its latest quarter, Bayer reported a loss of 183 million euros, compared with a profit of 534 million euros a year ago. 
The company acknowledged "substantial" extra business from Cipro shipments, including the U.S. government's order of 100 million tablets. But it said the additional sales were "nowhere near enough to compensate" for difficulties in other pharmaceutical lines, notably the damaging withdrawal of its cholesterol-lowering drug Lipobay/Baycal from the market in August after it was implicated in a number of deaths. 
Bayer's stock, which had dropped in the wake of the terrorist attacks, rose sharply as anthrax cases hit the news. From its low point on Sept. 21, the stock jumped 37.3% to its peak on Oct. 12. Since then, with anthrax fears abating and the news of disappointing earnings, the stock has lost 8.3%. 
3. Ken Lay, Playing It by the Book 
You almost have to admire the gall of Enron (ENE:NYSE - news - commentary) CEO Kenneth Lay, who, in exchange for presiding over the company's brisk slide into mayhem, tried to slip out the door with a $60.6 million pay package. 
He backed off that plan, according to press reports, on news that Enron employees were apoplectic about the deal. Some of them may lose their jobs in the merger with Dynegy (DYN:NYSE - news - commentary) , which came about after Enron's stock cratered on revelations about its fly-by-night accounting practices. 
To be sure, Lay's employment agreement had provided for the payout if he left the company within 60 days of a change in control. We can only assume that at the time it was drawn up, the agreement's authors didn't see the need to mention that he should leave the company in one piece. 
By the way, lest we convey the impression that Lay has acted cavalierly, he says he's put on his thinking cap lately. "As might be expected, this is a very reflective time for me," he said on a merger-related conference call this week. We're a little skeptical of that claim, given that he said in the same call, "We don't have anything to hide. Quite to the contrary, I think we've been very forthcoming." Enron is currently under investigation by the Securities and Exchange Commission; fleeing investors have bid the stock down about 90% from its high last fall. 
4. A Blodget Blunder?
Speaking of folks who lost money for investors, analyst Henry Blodget is taking part in a buyout at Merrill Lynch, reportedly exiting the firm with a severance package of about $2 million. (Bwah-ha-ha-ha-ha.) 
Blodget won notoriety for talking up the prospects of many Internet issues that later went belly-up or were acquired on the cheap, including such resounding losers as Pets.com, PSINet and uBid. 
Last summer one irate investor, claiming he'd lost half a million dollars by taking Blodget's advice, extracted $400,000 in compensation from Merrill Lynch. 
But despite the lousy stock calls, in retrospect Blodget looks pretty smart. He cultivated a momentarily outsized (if short-lived) cult of personality -- worth doing once during a lifetime, in our humble opinion -- and secured a tidy payout on the way out the door. 
We note his exit from the scene not because he was dumb, but because his passage represents the end of an ignominiously silly era -- one in which ordinary investors tossed money into dubious ideas (like Pets.com), then were ungraceful enough to complain they'd gotten bad advice. There's no question analysts may have meted out absurdly bullish stock forecasts. The bigger problem is that investors, suckered by the potential of outlandish profits, acted like they believed them. 
5. Unflagging American Opportunists
While we salute the unflagging American entrepreneurial spirit, we note that it also can metamorphose into enthusiastic fraud. Such was the case with three opportunists flagged by the SEC this week: companies claiming to have products that protect against bioterrorism. 
Most inventive of the three was from R-Tec Technologies (RTTC.OB:OTC BB - news - commentary) , which claimed to have developed a "Chemical and Biological Alarm and Neutralization Defense system," or in trumped-up military lingo, "C-BAND." The company said it's the first "mechanically-operated" (with a wind-up key in back?) system to protect citizens from such attacks. 
R-Tec has admitted that it's never tested the device, doesn't have any plans to manufacture it and doesn't actually hold a patent on it. But it gets bonus fraud points for the cool acronym. 
More straightforward scams were from Disease Sciences (DISE.OB:OTC BB - news - commentary) and The Classica Group (TCGI:Nasdaq SC - news - commentary) , which said they had technology capable of killing anthrax in the mail. Disease Science touted its "High Pressure Pulse" processing, a fairly intensive-sounding application that, the SEC notes, it does not have a license to use. The Classica Group's alleged microwave technology likewise got a thumbs-down from the SEC. 


GLOBAL INVESTING - Fidelity reveals a rise in its Enron exposure.
By ELIZABETH WINE.

11/16/2001
Financial Times
(c) 2001 Financial Times Limited . All Rights Reserved

Fidelity, the world's largest mutual fund company, boosted its exposure to troubled energy trader Enron by about 20 per cent in the third quarter, just as the stock began to collapse amid regulatory scrutiny. 
In filings to the Securities and Exchange Commission released this week, the Boston-based company reported that it owned 20.8m shares of Enron on September 30 - up from 16.5m on June 30. The group reports its holdings with a two-month delay.
The filings do not detail the holdings of individual funds. The group's managers could also have sold some of their holdings since the filing period ended. 
Morningstar analyst Scott Cooley noted that even after the increase, assuming no shares had been sold, Fidelity would own about 3 per cent of Enron's outstanding shares, a small amount for such a large fund manager. With more than $800bn under management, the group holds sizeable positions in many companies. Mr Cooley said the increase was characteristic of Fidelity "buying on the dip". 
Enron shares began falling in September, as news emerged that the company's financial statements were more complex than investors realised, featuring several off-balance sheet partnerships, now under SEC investigation. 
Enron's shares plunged nearly 66 per cent in the fourth quarter. 
(c) Copyright Financial Times Ltd. All rights reserved. 
http://www.ft.com.

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

FRONT PAGE - COMPANIES & MARKETS - HP and Compaq chiefs to forego $22m.
By SCOTT MORRISON.

11/16/2001
Financial Times
(c) 2001 Financial Times Limited . All Rights Reserved

FRONT PAGE - COMPANIES & MARKETS - HP and Compaq chiefs to forego $22m - Revelation comes amid shareholder concern over $24bn acquisition. 
The chief executives of Hewlett-Packard and Compaq Computer will forego more than $22m in retention bonuses to which they would be entitled if the agreed merger of their two companies goes ahead.
The revelation, contained in a regulatory filing on Thursday, comes amid widespread shareholder concern about HP's planned acquisition of Compaq for about $24bn. 
The sons of HP's two co-founders have criticised the deal, raising doubts that shareholders would back HP's takeover of its rival. Their opposition has prompted speculation that Carly Fiorina, HP's chief executive, would be forced out if the deal was voted down. 
She would have been entitled to receive retention bonuses totalling $8m, equal to double the sum of her current salary and target annual bonus. But she has declined to accept the right to participate in this programme. 
Michael Capellas, her counterpart at Compaq, was eligible to receive retention bonuses totaling $14.4m, equivalent to three times the sum of his current base salary and target annual bonus. 
Their decisions are shown in a so-called S-4 formal merger prospectus prepared by HP and filed with the Securities and Exchange Commission. The filing outlines the managements' arguments for the merger. 
Despite Ms Fiorina's decision, HP has agreed to a retention payment programme for key executives that could total about $33m if all of them remain employed until payment of the second installment of their retention bonuses. In addition, Ms Fiorina and several other officials are negotiating new contracts that would give them higher salaries, the potential for bonuses and stock options. 
The compensation plan could cost as much as $22.4m if all key figures remain with the merged company for a certain period of time. 
The decision by Ms Fiorina and Mr Capellas comes after Ken Lay, chairman and chief executive of Enron, was prompted by shareholder outcry to announce he would not take the more than $60m he was entitled to after Enron agreed a rescue bid by rival energy group Dynegy. 
The S-4 noted that Walter Hewlett, the lone HP director who has opposed the combination, is a member of HP's compensation committee. 
Meanwhile, the US Federal Trade Commission has asked Hewlett-Packard and Compaq to provide them with additional information and other material concerning their proposed merger. While it is a standard regulatory practice, the companies warned that the request under federal law would in effect extend the waiting period for completion of the merger until August 30 next year. 
The S-4 did not provide a date for the shareholder votes required to consummate the $24bn deal. 
HP on Wednesday surprised the market by posting fiscal fourth quarter results that far exceeded analysts' expectations. 
(c) Copyright Financial Times Ltd. All rights reserved. 
http://www.ft.com.

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


Stock drop cuts Enron retirement package

11/16/2001
Associated Press Newswires
Copyright 2001. The Associated Press. All Rights Reserved.

PORTLAND, Ore. (AP) - Employees of Portland General Electric are in shock after watching their retirement savings dry up along with the stock of energy giant Enron, PGE's parent company. 
The sting isn't helped by the fact that the selloff coincided with a lockdown that forced employees to hold the stock in their 401(k) retirement plans.
Stock prices have plummeted more than 70 percent since Oct. 16, when Enron announced a $618 million third-quarter loss. 
The loss stemmed largely from investment write-offs that led to the dismissal of the company's chief financial officer and now are being investigated by the Securities and Exchange Commission. 
On Oct. 17, Houston-based Enron "locked down" the 401(k) accounts, meaning employees were not allowed to sell their Enron stock or make any other changes to their plans. The freeze lasted until Wednesday. 
Peggy Fowler, PGE chief executive officer, said the lockdown was the result of a long-planned change in retirement fund managers and acknowledged that "the timing couldn't have been worse." 
For 2,700 PGE employees with Enron 401(k) plans, the slump has decimated their nest eggs. 
"We couldn't get out, we just sat there and watched our nest eggs go down to nothing," said Roy Rinard, a PGE lineman from Boring with all of his 401(k) plan in Enron stock. Rinard, 54, said his account has dropped in value from more than $472,000 a year ago to $238,000 at the time of the freeze to about $70,000 now. 
"I just feel like I've been stolen from and lied to," said Alan Kaseweter, 43, a PGE service department employee who had almost all of his 401(k) invested in Enron stock. Kaseweter, of Redlands, said his account has dwindled from $348,000 a year ago to $115,500 at the time of the freeze to $36,000. 
Enron and PGE employees must accept Enron stock as the company's matching contribution to their 401(k) accounts. Only employees over 50 and retirees are allowed to roll it over to another investment. 
Enron seemed like a good bet. The stock climbed 475 percent between 1995 and Dec. 31, 2000. 
Enron purchased PGE in 1997, while it was reinventing itself into a cutting-edge energy trading company. It took staple products such as natural gas and electricity and attempted to trade them like other commodities. 
Reports surfaced about partnerships founded by Enron Chief Financial Officer Andrew Fastow. The partnerships borrowed money on Enron's behalf, which allowed Enron to keep the debt off its books. 
Fastow left the company, and the U.S. Securities and Exchange Commission opened an investigation. 
On Nov. 8, Enron said it was restating earnings for the past five years, in effect admitting that it had inflated profits. 
At the same time, Enron froze employees' 401(k) accounts. Enron decided in July that it would hire new administrators for the retirement program. The changeover required about a month. 
Enron directors and executives dumped stock through much of the past 12 months, selling more than $136 million worth in all - a fact prominently mentioned in recent shareholder lawsuits against the company. 
Investors have also filed five lawsuits against Enron's executives and directors, including former PGE chief executive Kenneth L. Harrison.

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

City - International Power looks for purchases.
By Roland Gribben.

11/16/2001
The Daily Telegraph
P36
(c) Telegraph Group Limited, London, 2001

INTERNATIONAL Power, the electricity generator spun off after last year's break-up of National Power, yesterday signalled it was limbering up for a fresh round of acquisitions. 
A number of companies in the markets where International operates are putting assets up for sale amid uncertainties about the power and financial outlook.
International is also keeping a close watch on developments at Enron, the American power generator and major market trader, in the throes of being rescued by rival Dynegy. 
Phil Cox, finance director, said: "There are more opportunities opening up and we are looking at them. Our balance sheet is strong enough to accommodate the best of them." 
International, with a generating portfolio spanning Europe, North America, the Middle East and Australia, produced pre-tax profits of #186m in the first nine months this year, compared with a loss of #80m in the corresponding period last year. 
The company has added five gas-fired plants to its America portfolio this year and hopes to get approval for two others in the state of New York. The shares rose 11 1/2 to 223 1/2 p.

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



India Dabhol Project Due Diligence To Start Next Week

11/16/2001
Dow Jones International News
(Copyright (c) 2001, Dow Jones & Company, Inc.)

NEW DELHI -(Dow Jones)- Prospective buyers of the 85% foreign equity in India's 2,184-megawatt Dabhol Power Co. will start due diligence of the project next week, A.K. Doda, executive director of Industrial Development Bank of India (P.IDB), told Dow Jones Newswires Friday. 
The possible buyers are Tata Power Co. Ltd. (P.TPW) and BSES Ltd. (P.BSX)
"After the due diligence is completed, price negotiations will start and thereafter, the transfer of shares and transfer of ownership will take place," Doda said. 
U.S. energy company Enron Corp. (ENE) has a controlling 65% equity stake in Dabhol and wants to sell it because of payment defaults by the plant's sole customer - the Maharashtra State Electricity Board - and the Indian federal government's failure to honor payment guarantees. In August the U.S. company said it was willing to sell its equity at cost. 
Dabhol is India's largest single foreign investment to date. MSEB has 15%, while U.S.-based companies General Electric Co. (GE) and Bechtel (X.BTL) own 10% each in DPC. 
"The share price of the shareholding of Enron and its associates in DPC would be decided by the concerned parties, through mutual negotiations. Indian financial institutions propose to continue their efforts to ensure quick resolution of all issues at the earliest," Doda said. 
Doda denied local media reports saying that India's state-owned firm National Thermal Power Corp. (P.NTP) was also a potential buyer of the foreign equity in Dabhol. 
"So far, I am aware of only two companies - Tata Power and BSES. NTPC haven't sent us any expression of interest yet for the Dabhol project," he said. 
-By Himendra Kumar; Dow Jones Newswires; 91-11-461-9426; himendra.kumar@dowjones.com

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

InPlay
Britain clears purchase of Enron's Indian oil assets

11/16/2001
The Daily Deal
Copyright (c) 2001 The Deal LLC

Vinson & Elkins llp - Allen & Overy - Lehman Brothers Inc. - Reliance Industries Ltd. - Oil & Natural Gas Corp. - Enron Corp. - Enron Oil & Gas India Ltd. - BG Group plc 
The U.K.'s Department of Trade & Industry said it cleared BG Group plc's proposed acquisition of Enron Oil & Gas India Ltd., a unit of ailing energy merchant Enron Corp. of Houston, for $388 million. The two first announced the deal Oct. 3. The assets include 30% stakes in the Tapti gas field and the Panna/Mukta oil and gas fields and 63% of Enron India's CB OS/1 exploration rights, mostly off the western coast of India. The assets hold reserves of around 170 million barrels of oil equivalent. Indian media reports have suggested that the government wants the operatorship of the assets to pass to two of Enron's joint venture partners, state owned Oil & Natural Gas Corp. and Reliance Industries Ltd. Such a move could make the deal unattractive to BG and possibly quash it. Lehman Brothers Inc. and Allen & Overy advised BG on the transaction, while Vinson & Elkins llp assisted Enron. -Claire Poole www.TheDeal.com


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

Report on Business: Canadian
U.S. firms get in on Alaska pipeline
LILY NGUYEN

11/16/2001
The Globe and Mail
Metro
B1
"All material Copyright (c) Bell Globemedia Publishing Inc. and its licensors. All rights reserved."

CALGARY -- Six powerhouse U.S. players are joining TransCanada PipeLines Ltd. and Westcoast Energy Inc. in an attempt to inject new momentum into a bid to build a multibillion-dollar pipeline from Alaska. 
The partnership, which includes energy services and transportation giants Williams Cos., Duke Energy Corp., Enron Corp., as well as major utilities El Paso Corp., PG&E Corp. and Sempra Energy Utilities Ventures,have agreed to work together with TransCanada and Westcoast to put a proposal before the Alaska gas producers before the end of the year. The group, which laid out its intentions in a memorandum of understanding signed yesterday, said they believe a gas pipeline running along the Alaska Highway can be built by 2008.
Murray Birch, senior vice-president of Westcoast, said the partners lend expertise, deep pockets and scale to the mammoth project, which is estimated to cost well over $10-billion (U.S.). 
"It's in our best interest to involve them. This project is a large project, and certainly Westcoast and TransCanada would have been stretched to do it by ourselves," said Mr. Birch, who is also the co-chief executive officer of Foothills Pipe Lines Ltd. a joint venture co-owned by Westcoast and TransCanada. Foothills holds the regulatory permits to the proposed Alaska Highway pipeline. 
Mr. Birch said the equity position of each company in the project is still to be worked out. Rocco Cianco, a Foothills spokesman, said that is in part because some of the companies are in a state of flux. Westcoast is in the process of being taken over by Duke, while Houston-based Enron is in the process of being bought by hometown rival Dynegy Corp. 
The partnership brings back to the table all nine of the original participants in a similar pipeline project that was proposed in the 1970s and shelved because of weakening commodity prices and native opposition. 
Mr. Birch noted that it also removes a legal question hanging over the pipeline project, of whether the six U.S. companies had any claim on the project based on their capital investment in the 1970s project. They withdrew from that project on the understanding that if it was to restart, they would be able to recover that initial investment, which some have pegged at up to $4-billion including interest, he said. In getting back on board, the six companies have agreed to waive that claim, he said. 
Scott Kent, the Minister of Economic Development for Yukon, a vocal proponent of the proposed pipeline, said the removal of the legal question lifts a huge barrier to the project. 
"There was a chance this could have ended up in a lengthy court battle that would have significantly hampered" the project, he said. "It's certainly very good news." 
Winfried Fruehauf, an analyst at National Bank Financial in Toronto, said the six U.S. companies as well as Westcoast, TransCanada and Foothills are trying to make sure they're first in line to move the gas from burgeoning Alaskan fields to market. 
"Everybody and his and her uncle wants to be in this pipeline, there's so many 'me toos' that they just want to position themselves," he said. 
The market understanding is that the Alaska producers, which include Exxon Mobil Corp., Phillips Petroleum Co., BP Amoco PLC and Chevron Corp., will ultimately decide who will build and operate a pipeline because the cost of such a project would be recovered from them in the form of pipeline tolls. 
Gina Taylor, a spokeswoman for Enron, said the partners got together with an eye on approaching producers to get an answer from them on whether the project can go ahead. 
"Marketplace approval is key to us moving forward with this," she said. 
"That's why we put the [memorandum] in place, so we could go out and revisit with the producers." 
But Curtis Thayer, a spokesman for the Alaska producers, said it is too early to talk about who will build or operate the pipeline, because his group has not even decided to proceed with one yet. 
He noted that a preliminary analysis done as part of a $100-million study the group has undertaken indicates a pipeline couldn't pay for itself at current commodity prices. 
However, no decision has been made, he insisted. 
Some of the other options floated include building a pipeline off the north shore of Alaska and Yukon to gas fields in the Northwest Territories, then down the Mackenzie Valley of the NWT, or a pipeline going over land in Yukon to the NWT. There are various backers for each proposal and the Alaskan producers have not ruled out undertaking a project themselves. 
Joe Handley, the Minister of Finance for the NWT, said news of the partnership is a spur to participants in the proposed Mackenzie Valley pipeline. 
The territory's government has consistently said an NWT pipeline must be built first or risk being derailed by an Alaska pipeline that would flood the market with product. 
"If we don't keep on our toes, [an Alaska pipeline] could pass us and leave us in the bush," he said. 
Foothills announced earlier this week that it reached a preliminary agreement with the Kaska Nation, removing another potential hurdle to the Alaska pipeline proposal.

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

Nov. 16, 2001
Houston Chronicle
New Power faults data flow but opposes program delay 
By LAURA GOLDBERG 
Copyright 2001 Houston Chronicle 
The New Power Co., a major player in the state's test pilot of electricity deregulation, said Thursday that problems getting data from other entities have caused it to send out customer bills late and without all the appropriate charges. 
But New Power, an electricity provider, is hopeful problems can be resolved and doesn't believe the state should delay the planned Jan. 1 start of electricity deregulation. 
Delays and computer glitches have plagued the pilot program, which let a limited number of consumers across the state choose power providers before the opening of the full market. 
New Power and other electricity companies made comments Thursday in filings with the Public Utility Commission. The PUC will use them as it evaluates whether to move forward on Jan. 1. Several other companies also cited some ongoing problems. 
New Power, which enrolled more than 61,000 customers in the pilot, said a majority of its customers are getting late bills and that it has issued initial customer bills for lower amounts than what's due. 
Before New Power can issue accurate bills, it needs information from separate companies that maintain electricity transmission and metering systems. That information is sent to New Power through the Electric Reliability Council of Texas, which runs a variety of computer systems need for deregulation. 
A New Power spokeswoman said executives have met with the companies and ERCOT about the problem and the situation seems to be improving. 
Reliant Resources, the Houston parent of electricity provider Reliant Energy Retail Services, said in its filing that it is "confident that any remaining significant issues will be overcome" in time to open the market Jan. 1. 
Near the end of last month, nine retail electricity providers told the PUC they opposed delaying the planned start date of deregulation. 
A coalition of consumer groups has called for a delay, saying the state isn't ready for a variety of reasons. 
But the electricity companies, which included Reliant and New Power, said the market shortcomings the consumer groups cited either don't exist or can be fixed and don't require a delay. 


Consortium's return sparks renewed hope in gas pipeline project
By MIKE CHAMBERS
Associated Press Writer

11/15/2001
Associated Press Newswires
Copyright 2001. The Associated Press. All Rights Reserved.

JUNEAU (AP) - A natural gas consortium plans to resurrect its proposal to build a 1,700-mile gas pipeline through Alaska to the Lower 48, sparking renewed hope in the massive undertaking just as oil companies were doubting its viability. 
The nine American and Canadian companies announced plans on Thursday to offer to build and maintain the pipeline in an effort to ship 36 trillion cubic feet of North Slope natural gas.
The group intends to make a proposal to the three major oil companies by December, a spokesman for the consortium said. 
"The economic benefits of this multi-billion dollar project would impact most regions of the U.S. and Canada," said Mike Stewart, co-chief executive officer of Foothills Pipe Lines. 
Foothills reached the agreement with TransCanada PipeLines, Westcoast Energy and American companies Williams, Duke Energy, El Paso Corp., Enron, PG&E Corp. and Sempra Energy International. 
The groups comprise the original Alaskan Northwest Natural Gas Transportation Company which had first proposed building this project in the 1970s. 
Under the terms of the agreement, the companies plan to dismiss $4 billion in costs and interest associated with the dormant project that would have been charged to developers of the pipeline. The money represents their original investment, with interest. 
"Their intention is to remove that as an issue," said Foothills spokesman Rocco Ciancio. 
That was seen as a key roadblock to building an all-Alaska pipeline to the Lower 48 by officials with the state, which would own 12.5 percent of any natural gas pumped out of the North Slope. 
"Now that that's been resolved, it's time the producers come to the table with pipeline companies, the State of Alaska and other players to get this project underway," said Gov. Tony Knowles. 
Exxon Mobil, Phillips and BP have spent millions studying the viability of the project and, so far, have determined it is not profitable. 
Knowles and other state officials have been pressuring the oil companies to build a route that generally follows the trans-Alaska Oil Pipeline and the Alaska Highway to Alberta. 
It would provide jobs for Alaskans, cheap natural gas to communities and revenues for state services, Knowles said. 
But Canadian officials have pushed for a Beaufort Sea route that taps into rich reserves stranded in the Mackenzie Delta. 
The oil companies estimate the Canadian route would cost $15.1 billion compared to the Alaska Highway route, which would cost $17 billion. 
Ciancio said his group estimates a pipeline would cost $9.7 billion to construct and would get the natural gas to market quicker than other proposals. 
The consortium has held permits to build the all-Alaska route since 1976. 
"We're estimating it would take a greenfield (start up) project somewhere near two to three years to reach the same state of readiness as this project," Ciancio said. 
The consortium's project proposes running a 42-inch pipe from Prudhoe Bay to Alberta where the companies have other pipelines to ship natural gas to Chicago and San Francisco, he said. 
If agreements are reached quickly with the oil companies, the pipeline could be in operation by 2008, Ciancio said. 
A spokesman for the oil producers team which is studying the project greeted the news and said it would welcome any pipeline plan that would be profitable. 
"We're happy to see efforts being made to support an Alaska pipeline project," said Dave MacDowell, spokesman for the oil producer's group. "We're absolutely open to folks coming forward with efficient economic projects."

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

USA: Janus funds dumped EMC in third quarter.
By Christopher Noble

11/15/2001
Reuters English News Service
(C) Reuters Limited 2001.

BOSTON, Nov 15 (Reuters) - Mutual fund giant Janus Capital Corp. dumped 40 million shares of data storage leader EMC Corp. in the third quarter, cutting deeply into its stake in the one time high flyer while the company's stock plunged 59 percent. 
According to regulatory filings, Janus, a unit of Stilwell Financial Inc. ended the third quarter with 6.38 million shares in EMC, down from 46.44 million at the end of the second quarter.
Janus funds also cut storage software maker Veritas Software Co. , dropping nearly eight million shares in the quarter. But Janus added about 570,000 shares to its holding of Network Appliance , bringing it to 1.97 million shares. 
A spokeswoman for Janus declined to comment on the sale of EMC stock, but the company ran into trouble as revenue shrank due to stiffer competition and a steep downturn in corporate spending on information technology. 
Another big move was the sale of about 43.6 million shares of mobile phone maker Nokia . Janus ended the quarter with 183.2 million shares of Nokia, down from 226.8 million in the previous quarter, the filing showed. 
The filing shows more sales of technology companies but does not indicate a big move out of the tech sector the way previous quarterly data sometimes has. 
For instance, its second-quarter filing showed big moves out of many of the biggest names of the Internet revolution, including Cisco Systems , EMC, Oracle Corp and Sun Microsystems , the so-called "four horsemen" of the Web, that helped drive the expansion of the "New Economy." 
While Janus again cut sharply into its stake in Sun - dropping 14.7 million shares - its holdings of Cisco and Oracle were nearly unchanged in the quarter, the filing showed. 
Janus also cut about 12.6 million shares of Advanced Micro Devices Inc. . On the other hand, the company added some 13.6 million shares of Microsoft Corp. and boosted its stakes in JDS Uniphase and EBay Inc. . 
The funds also more than doubled their holdings in Berkshire Hathaway Inc. to 320,691 shares. 
The filing showed that Janus made almost no change in the third quarter to its holding of Enron Corp. , the energy trading company whose stock collapsed amid a U.S. regulatory probe. At the end of the quarter, Janus held 41.36 million shares in Enron. 
The Janus spokeswoman would not comment on the Enron shares, but said that the filings are dated and don't necessarily reflect current holdings. 
Shares of Enron plunged in mid-October as investors rebelled over the company's off-the-balance-sheet deals that are now under investigation. 
Enron whose stock is off 63 percent so far in the fourth quarter. The company agreed last week to be acquired by smaller rival Dynegy Inc. for about $9 billion in stock. 
Janus's stake in Exxon Mobil Corp. more than doubled to 39.8 million shares in the quarter. 
Janus's stock holdings were worth $102.09 billion at the end of the quarter, down from $141.05 billion at the end of the second quarter.

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

Cash Infusion Little Comfort To Enron Counterparties
By Andrew Dowell
Of DOW JONES NEWSWIRES

11/15/2001
Dow Jones Energy Service
(Copyright (c) 2001, Dow Jones & Company, Inc.)

NEW YORK -(Dow Jones)- One and a half billion dollars doesn't go as far as it used to. 
Despite a cash injection of that size from Dynegy Inc. (DYN) this week, U.S. energy companies continue to restrict their dealings with Enron Corp. (ENE), traders in the U.S. power and natural gas markets said Wednesday.
Traders said they were doing deals with the Houston-based energy giant when necessary, and some reported that activity appears to have picked up. But traders said they were continuing to limit their exposure and doing business with other parties if possible until Enron's credit rating improves. 
"It's a company with one foot on a banana peel and one foot in the grave," said Ed Kennedy, a Miami-based trader with Pioneer Futures. 
Both Moody's Investors Service and Standard & Poor's rate Enron one notch above speculative grade. Moody's has Enron's ratings on review for a downgrade, and S&P has Enron on negative credit watch. Enron's ability to do business in the energy markets depends on its maintaining investment-grade ratings. 
Tuesday's infusion of cash from Dynegy, which has agreed to buy Enron in a stock-swap currently worth about $10 billion, isn't enough to change the outlook for Enron, said Todd Shipman, a director in the U.S. utilities group at S&P. 
Instead, the firm will be watching to see whether Enron can hold on to its core business of trading North American gas and power. If it does, S&P may revisit Enron's credit-watch status after New Year's with an eye to upgrading it to "positive," Shipman said. 
Circular Reasoning 

That sets up a staredown of sorts between the ratings agency and the energy markets, with each waiting for the other to take the first step. 
"It always has been a sort of face-off," Shipman said. "For the time being, we're standing pat unless the situation at Enron gets significantly worse." 
Moody's wasn't immediately available for comment. 
Traders and their companies said consistently that until Enron's credit ratings improve, they will continue to watch their exposure to Enron carefully, with trades limited to short-term deals. 
Mirant Corp. (MIR) is trading with Enron on "a very limited basis" that won't be broadened until Enron's credit situation improves, spokesman Chuck Griffin said. 
Aquila Corp. (ILA) CEO Keith Stamm said the company was heartened by Dynegy's injection of cash and was continuing to monitor Enron's condition. 
"The $1.5 billion has improved their situation with us, and we'll keep watching the situation," Stamm said. 
On Monday, Aquila said it had whittled down its exposure to Enron significantly. 
Enron spokesman Eric Thode said 30-day-moving-average volumes on EnronOnline, the Internet-based trading platform on which Enron is the counterparty in every deal, have improved to a more typical 5,700 transactions per day with a notional value of $2.7 billion. 
"Volumes have returned to the normal range," he said. 
Some traders said Enron's short-term business does appear to have picked up from earlier this week. 
Staffing Changes A Concern 

Enron is the country's largest trader of natural gas and electricity, accounting for up to a quarter of both markets by some estimates. 
Even when companies aren't prohibiting their traders from doing business with Enron, some traders are taking steps on their own to limit exposure. 
One funds analyst said the possibility of staffing changes at Enron are contributing to traders' reluctance to do business with the company. 
"You have headhunters out there," the analyst said. "Why tie yourself down with a five-year deal with someone who may not be there?" 
Enron currently employes about 1,500 people in its trading operation, and Dynegy employes some 300. The acquisition is expected to produce cuts, but Dynegy hasn't said to what degree. 
Energy companies began shying away from Enron over the past month, as concerns about its finances precipitated a 75% drop in its stock price and left its bonds trading at levels typically associated with distressed debt. 
Enron's restatement of four and a half years' worth of earnings last Thursday and ratings downgrades Friday led some companies to severely restrict their business with Enron, even if that meant paying higher prices or accepting lower bids to do so. 
Enron's ability to recover that business is critical to its future, S&P's Shipman said. A stable trading operation will keep Dynegy interested in the buyout, which is the key to keeping Enron's credit ratings out of junk-bond territory. 
"That's the crown jewel, and that's what Enron needs to protect," he said. If counterparties pull back, "then I think we would have a little more cause for worry about the Dynegy deal." 
-By Andrew Dowell, Dow Jones Newswires; 201-938-4430; andrew.dowell@dowjones.com 
(John Edmiston in Houston, Jon Kamp in Chicago and Mark Golden in New York contributed to this article.)

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

Dynegy May Want Some Of Enron's Broadband Assets
By Erwin Seba
Of DOW JONES NEWSWIRES

11/15/2001
Dow Jones Energy Service
(Copyright (c) 2001, Dow Jones & Company, Inc.)

HOUSTON -(Dow Jones)- Enron Corp. (ENE) may be planning to unwind its Broadband Services unit, but before it can do so, it may have to gain approval from its future new owner. 
Dynegy Inc. (DYN) is just beginning to look at which assets it wants to keep from Enron's non-core businesses.
"What we're saying at this point very, very early on is that we want to look and see if there are pieces of (the optical fiber network) that complement our strategy," Dynegy spokeswoman Jennifer Rosser told Dow Jones Newswires. "And we're going to take the opportunity to review that." 
One thing is clear, though: Enron is leaving the bandwidth market in which the company has been the principal market-maker. 
"I think we've made it pretty clear what our non-core businesses are," Enron Broadband Services spokeswoman Shelly Mansfield told Dow Jones. "We're going to be exiting those businesses in an orderly fashion." 
But Thursday morning Enron bandwidth traders said they haven't been told what will become of them. Many of them came to the bandwidth desk from the company's energy trading operations. 
"I've not been given any definitive information," a trader said. 
Traders and brokers who are counterparties to Enron said Enron's traders remain active in the bandwidth market, regularly showing prices for various contracts. 
Dynegy traders are also present in the market, but not as pervasively as Enron traders have been, said one broker. 
Dynegy's traders regularly show a high offer price without presenting a bid price, a broker said. Usually Dynegy traders will stay with that high offer expecting buyers in the market to come to them. 
Also, the broker said, Dynegy seems most active with contracts on the New York-Miami route. 
In addition to deciding what to do with Enron's network, Dynegy also faces decisions about whether to retain Enron's bandwidth traders and the contracts the company still holds for bandwidth services. 
Guiding Dynegy's decisions will be a continuing commitment to its own bandwidth strategy. 
"Dynegy has been focused on building very long-term customer relationships," Rosser said. "We are focused, just as we have been in our energy business, on being a value-added provider to our customers. We have maintained a focus on the wholesale market...and large enterprise consumers of bandwidth. We have maintained focus on structured transactions and not trading, primarily because we don't think a true trading environment exists yet." 
While Enron may attempt to sell its network in the nine to 12 months before the merger is completed, it may be unable to do so, brokers of physical assets and bandwidth said. 
Most optical networks are being broken up for sale, said physical assets brokers. 
-By Erwin Seba, Dow Jones Newswires, 713-547-9214 erwin.seba@dowjones.com

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