IN THE MONEY: Another Sign Investors Don't Trust Enron
Dow Jones News Service, 11/26/01
Dynegy Board Silent On Status Of Enron Takeover >ENE DYN
Dow Jones News Service, 11/26/01
Enron, Banks Formalize $690M Debt Extension To Dec. 14
Dow Jones News Service, 11/26/01
Citigroup Has $2.38B Less To Lose On Enron Due To Swaps
Dow Jones Capital Markets Report, 11/26/01
Enron Is Sued Over 401(k) Plan; Plaintiffs Seek $850M
Dow Jones News Service, 11/26/01
STOCKWATCH Enron falls 14 pct on mounting concerns over Dynegy deal
AFX News, 11/26/01
USA: UPDATE 1-Enron shares slide lower as merger doubts intensify.
Reuters English News Service, 11/26/01
USA: Enron lawsuit seen as wake-up call for pensions.
Reuters English News Service, 11/26/01
USA: US Corp Bonds-Bonds tighten, analysts fret on Enron.
Reuters English News Service, 11/26/01
Petrobras, Petros, close to buying Enron's stakes in CEG/CEG Rio - report
AFX News, 11/26/01
TALES OF THE TAPE: Energy Traders' Perfect Storm Stalls
Dow Jones News Service, 11/26/01
INDIA: UPDATE 1-India's AV Birla group denies bid for Enron unit.
Reuters English News Service, 11/26/01
Enron's Stock, Bonds Drop on Concern for Dynegy Bid (Update8)
Bloomberg, 11/26/01

Dynegy Bonds Slip as Enron Purchase May Harm Credit Rating
Bloomberg, 11/26/01

ENRON SHARES SLIDES TO ALL-TIME LOW
CBS.MarketWatch.com, 11/26/01




IN THE MONEY: Another Sign Investors Don't Trust Enron
By Michael Rapoport

11/26/2001
Dow Jones News Service
(Copyright (c) 2001, Dow Jones & Company, Inc.)
A Dow Jones Newswires Column 

NEW YORK -(Dow Jones)- If you needed any further proof that investors no longer trust Enron Corp. (ENE), here's another piece of evidence - one that goes to the heart of the recent plunge in the company's stock.
Enron doesn't simply trade for less than its book value; it fell below that milestone weeks ago. No, now it trades for less than ONE-THIRD of its book value. 
That's a rare level for a company of Enron's size and prominence. And it may mean, among other things, that investors have decided that they simply can't place any further faith in the veracity of Enron's earnings and balance-sheet figures, much-revised as they've been - something that has unnerving implications for any attempt to value the company fairly. 
First, let's be clear about what this means. Enron stock is currently about $4 a share; the company's reported book value is about $12.90 a share. In other words, Enron stock sells for less than one-third of what shareholders would get if the company were to liquidate - were to turn all its assets into cash, pay off all its liabilities on its balance sheet and give what's left over to shareholders. 
This is an uncommonly dismal level for any company, even a troubled one. For comparison's sake, Dynegy Inc. (DYN), which has agreed to buy Enron, trades at about three times book value, as does El Paso Corp. (EPG), a competitor of both companies. In fact, Enron has the second-lowest price-to-book ratio of any company in the Standard & Poor's 500-stock index - only Conseco Inc. (CNC), another troubled company, is lower, by an eyelash. 
Part of the problem is undoubtedly the continuing fear among investors that Dynegy's agreement to buy Enron will fall apart, and the belief that Enron will have to file for bankruptcy if it does, in which case Enron shareholders would be hard-pressed to realize any value. The Dynegy deal now amounts to about $10.60 per Enron share, itself well under Enron's book value; the huge premium that level offers over Enron's current stock price is an indication of the big risk investors see that the deal won't be consummated in its current form. 
But given Enron's current woes, it's certainly also possible that Enron is trading at such a big discount to book value because investors don't feel they can trust the earnings and balance-sheet numbers coming out of Enron. Those numbers, after all, are the raw material that form the basis for valuing Enron, or any other company, by computing figures like price-to-book and price-to-earnings ratios. 
And the Enron debacle has been all about the quality of those numbers, with Enron shifting assets off its balance sheet to outside limited partnerships from which some of its executives benefitted. In terms of those numbers, the ground has shifted underneath investors three separate times now - when the company slashed its reported shareholder equity by $1.2 billion to unwind its transactions with one of those partnerships, when it restated nearly five years' worth of earnings downward by a total of $586 million, and when it revealed that it could take further charges and was facing an imminent deadline to post collateral on a $690 million note. (That deadline has now been extended until Dec. 14.) 
When you've gotten punched in the face three times, it's not unreasonable to fear there'll be a fourth blow, no matter how much the puncher assures you there won't be. Given Enron's insanely complicated structure, and the way bad financial news has dribbled out of the company over the past several weeks, who can guarantee there aren't more such shocks yet to come? 
That's what investors appear to be fearing, and that may be part of the reason Enron stock has fallen so precipitously. Thanks to Enron's repeated demonstrations that its numbers can't be relied on, investors no longer have a firm, trustworthy basis on which to value the stock. And so, not surprisingly, the value is getting ratcheted down to the most conservative, bare-minimum level. 
An Enron spokesman couldn't be reached for comment. 
It's ironic, in a way. For a long time, it was hard to properly value Enron because its structure and finances were so complex and hard to decipher. Now it's hard to properly value Enron because the company's attempts to clarify its finances have made it clear that it's hard to expect investors to trust in their accuracy. 
-By Michael Rapoport, Dow Jones Newswires; 201-938-5976; michael.rapoport@dowjones.com



Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. 	
Dynegy Board Silent On Status Of Enron Takeover >ENE DYN
By Christina Cheddar
Of DOW JONES NEWSWIRES

11/26/2001
Dow Jones News Service
(Copyright (c) 2001, Dow Jones & Company, Inc.)
NEW YORK -(Dow Jones)- As the market continues to speculate about the status of Dynegy Inc.'s (DYN) takeover of Enron Corp. (ENE), Dynegy's board isn't offering its opinion. 
"Any comments coming out of Dynegy are coming from the company's executives," said Jerry Johnson, a Dynegy board member who also is an executive vice president at Safeguard Scientifics Inc. (SFE).
Johnson declined to comment on any matters related the pending acquisition of its larger rival, and wouldn't say whether the board has been meeting to discuss the transaction. 
Three other board members, through their representatives, declined to comment as well. Other non-executive directors on the 14-member board either weren't immediately available to comment or couldn't be reached. 
As for Dynegy's management, spokesman John Sousa said the company's opinion on the deal remains the same since its last comments on Wednesday. 
At that time, Dynegy Chairman and Chief Executive Chuck Watson said Dynegy was continuing its due diligence and was looking to accelerate regulatory approval of the deal. 
According to Sousa, Dynegy worked through the holiday weekend gathering information as part of its due diligence efforts. 
Meanwhile, Enron continued its discussions to raise between $500 million to $1 billion of additional financing, said Enron spokeswoman Karen Denne. The company also is working to restructure its debt by mid-December, she said. 
But investors appear to be voting with their feet. Enron shares were recently down 18.3%, or 86 cents, to $3.85, while Dynegy shares slipped 2.7%, or $1.06, to $39.34. As a result, the already huge discount to the deal's offer price has grown even bigger as the market continues to signal the deal won't get completed on its original terms. 
Under the terms of the transaction, Enron shareholders are to receive 0.2685 of a Dynegy share for each share outstanding, or about $8.98 billion, based on Dynegy's recent stock price. 
At Enron's recent level, the stock is trading at a 64% discount to the Dynegy offer. 
Neither Sousa or Denne would comment on the stock movement. 
Dynegy has already provided Enron with a $1.5 billion cash infusion that is secured by Enron's pipeline assets. While that investment has helped Enron's near-term liquidity position, it remains unclear how long the company can remain solvent without any added investments. 
-By Christina Cheddar, Dow Jones Newswires; 201-938-5166; christina.cheddar@dowjones.com



Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. 	
Enron, Banks Formalize $690M Debt Extension To Dec. 14
By Carol S. Remond and Christina Cheddar

11/26/2001
Dow Jones News Service
(Copyright (c) 2001, Dow Jones & Company, Inc.)
Of Dow Jones Newswires 

NEW YORK -(Dow Jones)- Enron Corp. (ENE) and a group of banks last week formalized an agreement to extend the due date on a $690 million syndicated loan by three weeks to Dec. 14.
The loan relates to one of Enron's consolidated limited partnerships that owns minority interests in power and energy projects around the world. Enron said last week that Standard & Poor's downgrade of its credit rating to "BBB-" had triggered an obligation to repay the loan by Nov. 27. 
People familiar with the matter said last week that lead banks J.P. Morgan Chase & Co. and Citigroup Inc. and Enron will use the extension to negotiate a further postponement of the debt to the middle of 2002 when other Enron bank loans come due. About $1.75 billion of Enron's $3.5 billion in syndicated bank loans come due in May 2002 and will likely need to be restructured. 
About $250 million of the assets securing the $690 million loan are in the process of being sold and will be used to pay down the loan, reducing the outstanding portion of the loan that will need to be restructured, those people familiar with the matter said. 
Enron's shares and bonds continue to suffer from mounting uncertainties about the company's finances and whether those could force one-time rival Dynegy Inc. (DYN) to reconsider its offer to buy Enron, an offer that many see as Enron's only chance to avoid bankruptcy. Enron stock was recently down 18% to $3.84. Meanwhile, Enron bonds are also lower, with the 6.4% bonds due 2004 recently trading at a distressed level of 48 cents on the dollar. 
Carol S. Remond; 201-938-2074; Dow Jones Newswires; carol.remond@dowjones.com 
and Christina Cheddar; Dow Jones Newswires; 201-938-5166



Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. 	
Citigroup Has $2.38B Less To Lose On Enron Due To Swaps
By Christine Richard
Of DOW JONES NEWSWIRES

11/26/2001
Dow Jones Capital Markets Report
(Copyright (c) 2001, Dow Jones & Company, Inc.)
NEW YORK -(Dow Jones)- Citigroup Inc. (C) is expected to extend a hand to Enron Corp. (ENE) by renegotiating a $690 million payment due Nov. 27. 
But investors shouldn't be concerned that the financial services giant is too exposed to the embattled energy trading company. Citigroup already may have laid off the loan and other exposure via a series of credit default swap transactions. That means more institutional investors left holding the bag if Enron isn't ultimately rescued from financial collapse by a takeover proposed by Dynegy Inc. (DYN).
Over the last few years, Citigroup has entered into at least six transactions that effectively would allow the bank to lay off the equivalent of $2.384 billion in Enron exposure. 
Citigroup was instrumental in setting up Enron Credit Linked Notes Trust, Enron Credit Linked Notes Trust II and Yosemite Securities Trust I, which together raised $1.750 billion; Enron Sterling Credit Linked Notes Trust and Yosemite Securities Co., which raised a combined GBP325 million; and Enron Euro Credit Linked Notes Trust, which issued EUR200 million. 
Citigroup, which acts as the default swap counterparty to the trusts, receives the return on the portfolio of single-A-plus-or-better-rated securities, purchased with the proceeds of the offerings, in exchange for providing the payout on the Enron exposure, according to Mary Ryan, director of synthetic securities ratings at Standard & Poor's. 
As long as Enron remains out of bankruptcy, Citigroup continues to make payments on the notes, Ryan said. 
If Enron defaults, Citigroup would cease making payments to the trust. The single-A-plus-or-higher-rated securities in the trusts would go to Citigroup in exchange for the same nominal amount of now in-default Enron debt obligations. And with speculation mounting that Dynegy will reduce, or maybe even scrap, its offer to buy Enron, the chances of a such a default-driven transfer would appear to be rising. 
These notes essentially are synthetic Enron debts, meaning they act like Enron bonds in many respects, but lack key components that make holders true creditors of Enron. 
For instance, the holders of these notes, because they don't possess actual Enron obligations - and won't unless the company defaults - are not involved in negotiations to restructure or rollover debt. It has been reported that Enron is engaged in active negotiations over the terms of its debts with creditors. 
The synthetic notes all carry a rating equivalent to Enron's rating of triple-B-minus from Standard & Poor's and Baa3 from Moody's Investors Service. 
The rating on the securities has been downgraded in recent weeks to reflect the downgrades in Enron's ratings. 
Citigroup officials did not respond to requests for further details on the transactions. -By Christine Richard, Dow Jones Newswires; 201-938-2189; 
christine.richard@dowjones.com



Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. 	
Enron Is Sued Over 401(k) Plan; Plaintiffs Seek $850M

11/26/2001
Dow Jones News Service
(Copyright (c) 2001, Dow Jones & Company, Inc.)
NEW YORK -(Dow Jones)- Enron Corp. (ENE) was sued Monday in the latest of at least three purported employee class action suits the company faces over lost 401(k) retirement savings due to the recent collapse of the price of Enron stock. 
In a press release Monday, Eli Gottesdiener, a Washington, D.C. attorney who filed the latest suit on behalf of employees, said it seeks $850 million in plan losses, in part because the company sold Enron stock to its employees knowing the price was artificially inflated.
An Enron spokeswoman declined to comment. 
Unlike two similar, recently filed suits against Enron, the latest also contends that Enron offered the stock without the required prospectus. 
If proven, the sale without a prospectus "give workers the automatic right to rescind their purchases and receive their money back with interest," Gottesdiener said in a statement. 
Enron "locked down" the retirement plan from Oct. 17 to Nov. 19, to make administrative changes, which prevented employees from selling Enron shares as the share price collapsed amid growing disclosures of financial problems. 
Earlier this month, Houston-based Dynegy Inc. (DYN) offered to buy its far larger competitor in an all-stock deal that values Enron shares at $10.85 a piece, or about $9.2 billion. 
Enron later disclosed that its future earnings would be substantially less than expected and shares fell sharply. 
Enron currently trades at $4.05 a share, down from their 52-week high of $84.88 a share in December 2000. 
The first suit was filed Nov. 13 on behalf of plaintiffs by Campbell Harrison & Wright LLP in Houston. A second was filed last week by Seattle-based Hagens Berman LLP. 
-John Seward; Dow Jones Newswires; 201-938-5400 

(Corrected 04:34 PM)



Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. 	
STOCKWATCH Enron falls 14 pct on mounting concerns over Dynegy deal

11/26/2001
AFX News
(c) 2001 by AFP-Extel News Ltd
NEW YORK (AFX) - Shares of Enron Corp were down 14 pct in midsession trading as concerns continued to mount over the energy giant's acquisition by Dynegy Inc, with investors focusing more and more on the deal's breaking clause, dealers said. 
At 12.45 pm, Enron shares were trading down 65 cents at 4.06 usd, a decline of 14.0 pct. Dynegy was down 1.60 usd at 38.80, amid broad declines in energy shares as crude prices sank.
The DJIA was up 57.70 points at 9,892.86. The S&P 500 was up 6.24 points at 1,143.27. The Nasdaq composite was up 11.94 points at 1,886.99. 
Dealers said that with Enron shares having slid well below the Dynegy offer price of 9.85 usd a share, the ChevronTexaco affiliate may well reconsider its offer, or walk away from the deal all together. 
"People are making the bet that perhaps Dynegy may cancel the deal, and that's there a lot more risk in playing the arbitrage," said Jefferies & Co market strategist Art Hogan. 
The deal with Dynegy contains a "material adverse change" clause, which could be invoked to call the deal off, he said. 
As part of its due diligence, Dynegy is examining details of Enron's filing with the Securities and Exchange Commission last week, which reportedly contained information it had not received previously. 
Enron shares have plunged further since the filing, in which Enron revealed a number of new financial problems including a possible obligation to repay a 690 mln usd note due Nov 27. 
Enron subsequently received an extension on the repayment until mid-December. 
Since the beginning of the year, Enron shares have lost over 90 pct of their value after it was revealed that the company would post hefty third-quarter charges linked to risky investments by the firm's former chief financial officer. 
"At this point, with so much smoke around the fire, I think the shares are rightly valued," said Jefferies' Hogan. 
ng/gc



Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. 	
USA: UPDATE 1-Enron shares slide lower as merger doubts intensify.
By Janet McGurty

11/26/2001
Reuters English News Service
(C) Reuters Limited 2001.
NEW YORK, Nov 26 (Reuters) - Shares of troubled energy giant Enron Corp. continued to lose ground on Monday amid fears that the proposed acquisition of the company by smaller rival Dynegy Inc. will fall through. 
Enron stock was down 61 cents, or 12.9 percent, at $4.13 in active midmorning trade on the New York Stock Exchange. Dynegy has agreed to pay $10.55 per share for Enron.
"The market is acting like the deal is not going through or not going through at the original terms," said Michael Heim, an industry analyst at A.G. Edwards & Sons. 
Heim said that among three possible scenarios - the deal goes through as planned, it is canceled, or it is restructured - the first is the least likely. 
"Escape clauses" built into the Dynegy-Enron deal give the buyer the option to back out if there is serious deterioration in Enron's business or assets. 
"Dynegy has a good claim that the 'material adverse condition' clause has already been triggered, either by the $690 million loan being accelerated, earnings (being) down or the ongoing trading business weakness," he said. 
Last week Enron said it could be forced to pay a $690 million debt this week because of a credit downgrade, but the payment deadline has been delayed until mid-December. 
Enron's recent admission that lower volumes at its trading business - the crown jewel that Dynegy most covets - could cause low fourth-quarter earnings raises the possibility that the trading business is losing its profitability. Continued lower volumes there would remove a key attraction for Dynegy. 
"Every day that goes by where Enron trading volumes become less, it decreases the value of the assets Dynegy was trying to buy in the first place," Heim said. "Besides trading and marketing, what value does Enron have?" 
The majority of Enron's physical assets are spoken for, with partnerships and creditors getting first dibs and Dynegy getting the first right to exercise its option to acquire Enron's Northern Natural Gas pipeline. 
Dynegy, which is 26.5 percent-owned by energy giant ChevronTexaco , is to swap 0.2685 share of its own stock for each share of Enron. Shares of Dynegy were down $1.27, or 3.1 percent, at $39.13 in midmorning NYSE trade. 
Enron agreed to a Dynegy buyout after it was overwhelmed by a series of problems, including a U.S. regulatory probe of off-balance-sheet dealings by its officers, a $1.2 billion cut in shareholder equity, and cuts in its credit ratings. 
Enron subsequently restated its earnings, but investor unease snowballed and its share began tumbling. The shares were above $90 in August 2000. 
Heim said he was not sure that EnronOnline, Enron's online trading platform, is the premier property it once was. 
"Two years ago it had some value, but now others have been able to duplicate it. It's not the computer systems - it's the traders and network that Enron had. If those go away, the value lessens.



Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. 	
USA: Enron lawsuit seen as wake-up call for pensions.

11/26/2001
Reuters English News Service
(C) Reuters Limited 2001.
HOUSTON, Nov 26 (Reuters) - A Washington, D.C., lawyer said Monday he hopes heavy losses suffered by Enron Corp. employees will spur Congress to limit employee investments in their employers' stock through 401 (k) retirement plans. 
"How many workers have to lose both their jobs and their retirement savings before Congress steps in and puts a stop to this by placing a cap on the amount of company stock that can be in a 401 (k) plan?" lawyer Eli Gottesdiener asked.
Gottesdiener released a statement Monday saying he had filed a lawsuit on behalf of employees of the beleaguered energy giant who have lost an estimated $850 million on Enron stock held in their 401 (k) retirement accounts. 
The suit is the third one filed against Enron that alleges the company breached its fiduciary duty to employees by encouraging them to invest in its stock at artificially inflated prices. All three suits seek class-action status. 
Enron's shares have fallen from a high of $90 in August 2000 to less than $5 today, their decline accelerating since Oct 16 amid a series of disclosures about its deteriorating finances. 
Like many other companies, Enron makes matching contributions to its employees' 401 (k) retirement accounts in its own stock. It also requires them to hold the stock they receive in matching contributions until they turn 50. 
Enron employees were also prevented from selling Enron stock held in retirement accounts for several weeks from mid-October due to a change in the retirement plan's administrator. 
Gottesdiener said investment advisors recommend investing no more than 15 percent of a portfolio in a single stock, but that participants in 401 (k) plans offering employer stock as a choice typically hold 33 percent of their portfolio in that stock. 
"Congress sensibly placed a 10 percent limit on company stock in traditional defined benefit plans back in 1974, but at the behest of the corporate lobby, it placed no such cap on defined contribution plans," he said. 
The absence of such a cap in defined-contribution 401 (k) plans was "completely indefensible," he said. 
Gottesdiener's suit alleges that Enron violated federal securities law by offering and selling Enron stock to employees without issuing a prospectus. If proven, this would give workers the right to reverse their purchases, he said. 
Gottesdiener is also involved in class action pensions litigation against New York Life Insurance Co. and SBC Communications Inc..



Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. 	
USA: US Corp Bonds-Bonds tighten, analysts fret on Enron.

11/26/2001
Reuters English News Service
(C) Reuters Limited 2001.
By Jonathan Stempel 
NEW YORK, Nov 26 (Reuters) - U.S. corporate bonds outperformed
Treasuries on Monday as traders edged back to their desks 
following the Thanksgiving Day weekend, in the midst of a broad 
revival for corporate bonds of all stripes. 
In secondary trading, spreads, the yield difference between 
the bonds and comparable maturity U.S. Treasuries, tightened about 
0.01 percentage point. 
"I would expect a continuation of the tightening, especially 
with Treasury interest rates going up," said one trader. "Absolute 
corporate yields are starting to look pretty attractive." 
Corporate bonds, especially junk bonds, have outperformed 
Treasuries this month as investors developed a new tolerance for 
risk. Though absolute returns for investment-grade corporate bonds 
are negative, they are even worse in the Treasury market, where 
investors appear more convinced that the current U.S. economic 
downturn won't be deep or long. 
"The successes in Afghanistan and some milder-than-anticipated 
economic data have combined to increase investor appetite for 
risk," wrote fixed-income research service CreditSights Inc. in a 
report dated Monday. "While the severity and swiftness of the bond 
market's correction was a surprise, it hasn't changed our basic 
view of U.S. corporate bonds and we continue to recommend 
overweight positions." 
This week's forward calendar remains quiet. 
In early trading, 10-year Treasuries rose 10/32, as their 
yields fell to 4.971 percent. 
ENRON 
Market participants are closely watching Houston-based Enron 
Corp. as the largest U.S. energy trader tries to merge 
with smaller cross-town rival Dynegy Inc. , keep its 
investment-grade credit ratings, and manage a load of $9.15 
billion of debt and other obligations, much of which is unsecured 
and coming due within 13 months. 
Of this debt amount, $690 million could come due by 
mid-December, and $3.9 billion immediately if Enron falls to junk 
status. The key to resolution of this matter, some observers 
believe, is Enron's banks. 
"The goal of the banks now is to re-cut their exposure to gain 
as much structural seniority or asset liens as possible, take out 
fees, raise rates, take down total exposure, and generally improve 
their risk-profile under multiple scenarios," said CreditSights. 
"The very bankers who are supplying liquidity through new 
secured bank lines and who are rumored to be considering equity 
investments are the ones on the hook (and unsecured) for $3 
billion in bank loans," wrote Carol Levenson, an analyst for 
GimmeCredit, another fixed-income research service. "If Dynegy 
backs out (in the interest of self-preservation), these vital bank 
renegotiations might save Enron but leave unsecured bondholders as 
the patsies." 
Enron's existing 6.4 percent notes maturing in 2006 and 6.75 
percent notes maturing in 2009 were bid on Friday at 57 cents on 
the dollar, down from around par on October 12, before Enron first 
reported third quarter results, which it later revised downward. 
Enron shares have fallen 94 percent this year to their lowest 
level since early 1989. 
DATA 
Investment-grade and junk bond spreads narrowed 0.1 and 0.27 
percentage point last week, respectively, to 1.68 and 7.84 
percentage points, according to Merrill Lynch & Co. Junk bond 
spreads have narrowed 1.45 percentage points this month. 
For the month, junk bonds have returned 2.996 percent, while 
investment-grade corporate bonds have lost 2.355 percent and 
Treasuries 3.488 percent, Merrill Lynch said. For the year, the 
respective bonds are up 4.777, 9.634 and 6.565 percent. 
For a complete list of upcoming or recently priced bond deals, 
please click on .



Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. 	
Petrobras, Petros, close to buying Enron's stakes in CEG/CEG Rio - report

11/26/2001
AFX News
(c) 2001 by AFP-Extel News Ltd
SAO PAULO (AFX) - Petroleo Brasileiro SA and its pension fund Petros are close to winning regulatory approval to purchase Enron Corp's stakes in gas distributors CEG and CEG Rio, daily Valor Economico reported. 
Valor said Petrobras last week reached an agreement with the Regulatory Agency for Public Service Concessions of Rio de Janeiro local authorities, under which it agreed to undertake a series of investments in exchange for approval to acquire Enron's 13.38 pct stake in CEG and its 33.75 pct stake in CEG Rio.
It said the deal now passes to Rio de Janeiro governor Anthony Garotinho for approval. 
as For more information and to contact AFX: www.afxnews.com and www.afxpress.com



Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. 	
TALES OF THE TAPE: Energy Traders' Perfect Storm Stalls
By Christina Cheddar

11/26/2001
Dow Jones News Service
(Copyright (c) 2001, Dow Jones & Company, Inc.)
Of DOW JONES NEWSWIRES (This story was published originally Friday) 

NEW YORK -(Dow Jones)- Here's one 2001 outlook that couldn't have been more wrong.
Around this time last year, pundits and fund managers were touting "the perfect storm" of market forces that were coming together to make the energy trading business one to watch in 2001. 
Then came the California power crisis, and allegations of price-gouging and fears of credit defaults began to cloud the outlook for the group. That was followed by renewed volatility in power prices, and this time the prices were headed down, not up. 
And then came a crushing blow against trading firms - the unraveling of the industry's largest player, Enron Corp. (ENE). 
Simply put, the perfect storm stalled, and a business once buoyed by high gas prices, strong demand and tight supply now lies in tatters. 
The stocks of companies whom some say should be valued more like growth stocks than utilities are instead mired at around nine-times earnings - about where traditional utilities trade. 
And the chance for recovery in 2002? 
Basu Mullick, portfolio manager of the Neuberger Berman Partners fund, is willing to bet there is. He thinks energy traders deserve at least the same price-to-earnings multiple as the broader market's median, which is currently between 16- to 17-times future earnings, he said. It's just a matter of time before the stocks get there. 
"They were just recovering from Gray Davis," Mullick said, referring to the governor of California, who had accused "out-of-state" energy traders of artificially inflating the price of power in the state, and triggering the state's energy crisis. "Now, they are recovering from Enron." 
The fund manager also blames lower commodity prices, warm weather and poor demand for the recent weak performance in the group. 
"Energy convergence companies are putting up terrific growth rates," he said. "I don't think they should get the same valuation as a garden-variety utility." 
Still, others think the stock market is continuing to make distinctions between the energy traders by taking a harder look at the companies' strategies and financial disclosures. 
Enron's precarious financial situation underscores the importance of accounting issues. Although many of Enron's financial problems aren't solely the fault of mark-to-market accounting issues, there has been growing attention paid to this form of financial reporting because of the earnings volatility it can create. 
Answers Elude Investors 

Investors are asking hard questions, and not always getting the answers they want. 
Using mark-to-market methods, a company calculates the fair market value of a commodity position - whether it's a contract, an option, a swap, etc. - at the time, even if the value of the position is realized over a longer period. The problem with this method is the actual cash a company realizes from the position might not be the same value the company calculated in its original assessment. Also, sometimes it isn't easy to calculate the fair value of the commodity position. This is particularly true in instances where the market for the commodity isn't liquid. 
Over time, companies with the highest level of disclosure regarding their mark-to-market gains will most likely trade at higher multiples to counterparts that provide little or no disclosure, said ABN AMRO Inc. analyst Paul Patterson. 
Encouragingly, it appears companies may already be responding to the call for added disclosure. According to a survey Patterson conducted, more companies with energy trading units were willing to disclose the details of their mark-to-market accounting practices during third-quarter conference calls compared with those in the second quarter. 
Patterson said he prefers earnings that are cash-based. 
"All things being equal, we believe reported earnings that more closely reflect the timely realization of cash have a higher quality associated with them than earnings that do not," he said. 
He expects investors to become smarter and learn to distinguish between earnings growth through accrual accounting and growth fueled by mark-to-market accounting. 
At the end of the day, it is not a matter of simply producing profits, but being able to say where those earnings came from, said one investor, who manages a pension fund. 
Some investors also may be placing a greater emphasis on the cash flow the energy merchants produce. 
Tim O'Brien, portfolio manager of the Gabelli Utilities Fund, said energy merchants that own the physical power assets to back up their trading positions should trade at a premium to an independent power producers and traditional utility companies. Still, the stocks should be valued at less than the growth rate of the company because of their heavy exposures to commodity prices. 
Energy merchants include companies such as Dynegy Inc. (DYN), Duke Energy Corp. (DUK) and Dominion Resources Inc. (D). 
According to O'Brien, the group never deserved to have the price-to-earnings multiples above 20- to 30-times earnings, which were once paid for the stocks. 
"We all got sucked up by the up-leg of the cycle and forgot just how cyclical these companies are," O'Brien said, adding that the average multiple should be in the high single-digits to the high-teens. 
As for independent power producers - which are companies without regulated operations that own power plants to generate electricity to sell and trade in the wholesale market - the group may wind up being valued on the basis of the replacement costs of the assets in their portfolio, according to O'Brien. 
"One analogy is that they are basically like commercial real-estate plays," O'Brien said. 
That could mean stocks such as Calpine Corp. (CPN), which is already in the lower-half of its trading range, may have further to fall. 
-By Christina Cheddar, Dow Jones Newswires; 201-938-5166; christina.cheddar@dowjones.com



Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. 	
INDIA: UPDATE 1-India's AV Birla group denies bid for Enron unit.

11/26/2001
Reuters English News Service
(C) Reuters Limited 2001.
(Recasts with denial, comments from financial institution in paragraphs 5-6) 
BOMBAY, Nov 26 (Reuters) - The Aditya Vikram Birla Group, a leading Indian conglomerate, on Monday denied newspaper reports it was looking to buy U.S. energy giant Enron Corp's 65-percent stake in the beleaguered Dabhol Power Company.
"There has been no expression of interest in Dabhol. We are not interested," a top AV Birla group official told Reuters. 
Two leading Indian business dailies earlier said the group, whose interests range from textiles to cement and carbon black, is eyeing Dabhol to expand its interests in the domestic power sector. 
The Economic Times and the Financial Express said the group was exploring the possibility of submitting an expression of interest to Indian financial institutions to buy Enron's stake in the company. 
An official of state-run Industrial Development Bank of India, the leading financier of the $2.9 billion project in the western state of Maharashtra, said he has not heard from the Birla group. 
"We have not received any official communication from them," the official, who did not wish to be identified, told Reuters. 
The spokesman for Dabhol was not available for comment. 
FIGHTING FOR SURVIVAL 
Enron Corp, which is fighting for survival in the United States amidst investor doubts over its corporate governance practices, owns 65 percent of Dabhol. General Electric Co and Bechtel own 10 percent each, while the Maharashtra State Electricity Board (MSEB) owns 15 percent. 
Dabhol and MSEB have been fighting over payment defaults and high tariffs for over a year. The dispute has affected India's efforts to attract foreign investment in the power sector and caused Enron and its U.S. partners to announce plans to exit the project. 
Tata Power Company Ltd, India's largest private sector utility firm, and BSES Ltd, another utility company and a member of India's largest conglomerate, the Reliance Group, are already in talks to buy Enron's stake. 
The AV Birla Group has adopted the route of mergers and acquisitions in recent years to consolidate its position in key industries. 
Last week, one of its group companies, Grasim Industries Ltd, bought a 10-percent stake in India's largest cement maker, Larsen & Toubro Ltd 
Earlier this year, Indian Rayon & Industries Ltd, another group company, entered the information technology sector by buying out France's Groupe Bull SA's 50.35 percent stake in PSI Data Systems 
But the group's track record in the power sector has been less than impressive. 
Two joint ventures with Britain's Powergen Plc to produce over 1,000 megawatts of electricity in two Indian states have not made much headway since they were announced in the mid-1990s.



Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. 	
Enron's Stock, Bonds Drop on Concern for Dynegy Bid (Update8)
2001-11-26 16:45 (New York)

Enron's Stock, Bonds Drop on Concern for Dynegy Bid (Update8)

     (Adds analyst comment in 4th paragraph.)

     New York, Nov. 26 (Bloomberg) -- Enron Corp.'s stock price
declined to a 14-year low and its bonds plunged 10 points on
concern the company won't secure $1 billion in fresh capital,
threatening its plan to be acquired by Dynegy Inc.

     ``The clock is definitely ticking,'' said Jon Kyle
Cartwright, a debt analyst at Raymond James and Associates. ``The
question is the survivability of Enron.''

     J.P. Morgan Chase & Co. and Citigroup Inc. executives met
today to line up investors for as much as $2 billion of bonds
convertible into stock. The company needs the money to operate
until Dynegy completes its $23 billion purchase. Dynegy unveiled
its plan to make the acquisition on Nov. 9.

     Enron shares and bonds, which opened lower, tumbled after 1
p.m. when no announcement for fresh financing was made. Enron's
6.4 percent notes that mature in 2006 plunged to 48 cents on the
dollar, down from 55 cents on Friday. The bonds now yield 26
percent. Enron shares declined 15 percent, or 70 cents, to $4.01.

     Concern that rival Dynegy may change or cancel its bid for
Enron has pushed Enron's stock down 55 percent in the past week.
Enron's shares had plummeted 86 percent since mid-October after
the company reported a $618 million third-quarter loss and said
expansion into water, telecommunications and retail-energy sales
cost it $1.01 billion.

     ``You haven't heard anything from Dynegy today, and that is a
bit scary,'' said Andy Palmer, who doesn't hold Enron bonds in the
$2 billion he helps manage at ASB Capital Management Inc. in
Washington.

     Part of the third-quarter charge was connected with limited
partnerships run by the chief financial officer. He was ousted,
and the U.S. Securities and Exchange Commission started an
investigation into Enron's accounting. The company earlier this
month restated its earnings for the past four years.

                        Talks on $1 Billion

     Under the buyout, Enron investors would receive 0.2685 Dynegy
share for each share held. That valued Enron at $10.41 a share, 21
percent more than Enron's share price that day.

     On Friday, the buyout valued Enron at $10.85 a share, more
than double Enron's closing price of $4.71. The widening of the
difference between the value of the offer and Enron's stock price
indicates investors doubt the buyout will go through.

     Shares of Enron traded as low as $3.76 today, rebounding to
close at $4.01. The stock was the most active in U.S. trading
Wednesday and Friday. Dynegy dropped $1.15, or 2.85 percent, to
$39.25. The stock has fallen 30 percent this year. Both companies
are based in Houston.

     Egan-Jones Ratings Co. lowered its rating on Enron's credit
today to ``BB-'' from ``BB.'' ``Dynegy needs to show its support,
or Enron will slide,'' the firm said in a report.

     Moody's Investors Service hasn't issued a report on Enron
since the company filed its 10-Q quarterly report with the SEC a
week ago. The ratings agency's analysts haven't returned calls for
comment.

     Moody's cut Enron's long-term credit rating on Nov. 9, though
it maintained an investment grade.

                          `More Problems'

     ``Time is not Enron's friend,'' said Stewart Morel, co-head
of investment grade debt research at UBS Warburg LLC. ``There is
increased concern in the market that there may be more problems
that are yet to be disclosed.''

     On Wednesday, Enron got a three-week reprieve from lenders on
a $690 million note due this week, giving the company more time to
restructure its finances. Dynegy Chief Executive Officer Chuck
Watson said he was ``encouraged'' by the commitment to extend the
note payment, as well as the closing of a $450 million credit
facility, and that Dynegy remained committed to the merger.

     Terms of the $690 million note were outlined for the first
time in the Enron filing a week ago. Enron also said that it has
less than $2 billion in cash and credit lines left. If the
company's cash reserves run too low, Enron's credit rating may be
cut below investment grade. That would trigger $3.9 billion in
debt repayments for two affiliated partnerships.

     Enron said in the filing that fourth-quarter profit might be
hurt by a drop in its trading business. Companies such as Aquila
Inc. and Mirant Corp. have reduced their activity with Enron
because of credit concerns.

     ``Should the Dynegy deal fall through, we don't view it
likely that Enron would be able to remain as a stand-alone
company,'' Youngberg of Edward Jones said. ``Without Dynegy, the
credit rating will fall, causing their trading business to dry up
further.''

     Enron, the biggest energy trader, once handled about a
quarter of U.S. gas and power transactions.

     Enron's bankers met with leveraged buyout firms and two
industrial companies to seek an investment, the New York Times
reported last week. J.P. Morgan Chase & Co. and Citigroup Inc.
agreed to terms that give each of them a $250 million equity stake
as part of a transaction to be completed today.



Dynegy Bonds Slip as Enron Purchase May Harm Credit Rating
2001-11-26 15:16 (New York)

Dynegy Bonds Slip as Enron Purchase May Harm Credit Rating

     New York, Nov. 26 (Bloomberg) -- Dynegy Inc. bonds have
fallen as much as 9 percent this month on investor concern the
energy trader's proposed $23 billion purchase of rival Enron Corp.
will erode its credit rating.

     Dynegy's 6.88 percent coupon notes due in 2011 are trading at
$932 per $1,000 face value, down from $1,024 last month, according
to Merrill Lynch & Co. data. Yield on the debt has risen to 7.9
percent from 6.5 percent as investors demand more return to
compensate for the increased risks of the securities.

     Dynegy's credit is rated ``Baa3'' at Moody's Investors
Service, the lowest rung of investment grade, and ``BBB+'' at
Standard & Poor's, two levels higher. Each ratings company said it
may cut Dynegy's credit rating if it buys Enron, which comes with
about $15 billion in debt and a regulatory inquiry into financial
partnerships set up to keep debt off its books.

     ``If you put Dynegy and Enron together it will have a
detrimental effect on Dynegy's credit rating,'' said Tim Nelson,
senior credit analyst at U.S. Bancorp Piper Jaffray Cos. in
Minneapolis, which holds Dynegy bonds.

     Dynegy's 7.45 percent coupon notes due in 2006 are trading at
$1,019 per $1,000 face value, down from $1,085 last month,
according to Merrill. The notes yield almost 7 percent, up from
5.4 percent.

     Enron's credit is rated ``Baa3'' at Moody's and ``BBB-'' at
S&P, the lowest level of investment grade. Both ratings companies
are reviewing the credit for a possible downgrade and say Dynegy's
buyout plan is what's keeping the grades above junk.

     ``I don't think right now anybody knows exactly what Enron
is,'' said Mark Simenstad, who holds Dynegy bonds in the $5
billion he helps manage at Lutheran Brotherhood.

     ``Dynegy has proven to be pretty well-managed over the years
so you have to give them the benefit of the doubt here,''
Simenstad said. ``The hope is that if there's something they don't
understand they'll walk away.''

     Dynegy has $3.9 billion of bonds outstanding, most of which
come due between 2002 and 2011, according to Bloomberg data.

     Shares of Houston-based Dynegy, which topped $47 two weeks
ago after Chief Executive Chuck Watson said the Enron purchase
would boost earnings by at least 35 percent next year, fell $1.30
to $39.10 in mid-afternoon trading today. Enron's shares, down 92
percent this year, fell as much as 80 cents, or 17 percent, to
$3.91, a the lowest since 1987.



ENRON SHARES SLIDES TO ALL-TIME LOW

By CBS.MarketWatch.com

4:53 PM ET Nov 26, 2001

HOUSTON (CBS.MW) -- Enron shares fell as much as 20 percent Monday,
crashing through the $4 level for part to set an all-time low and cast
additional doubt on the energy merchant's plan to be acquired by rival
Dynegy.

Enron (ENE) set a new all-time low of $3.76 Monday afternoon before
closing at $4.01, off 70 cents. More than 60 million shares changed
hands, making it the most active issue on the New York Stock Exchange.

The stock has lost about half its value since Dynegy announced an
agreement to buy Enron on Nov. 9 and more than 85 percent of its value
in the past month.

Meanwhile, shares of Dynegy (DYN) lost $1.15, or 2.8 percent, to stand
at $39.25.

The collapse in Enron's share price has made it more likely that Dynegy
and Enron will have to renegotiate the terms of their original deal, in
which 0.2685 of a Dynegy share would be exchanged for each outstanding
Enron share.

However, the Financial Times reported that Dynegy remains confident of
its ability to complete a deal for Enron, which has been seeking $500
million in private equity capital to shore up its finances.

"We continue to hear reports the Enron's energy marketing and trading
business, once the crown jewel of the company, has eroded badly with
counterparties only willing to do shorter-term deals," A.G. Edwards
&amp; Sons analysts Charles Fishman and Douglas Fischer wrote in a
research note Friday.

Enron investors do not believe that the merger is likely to occur under
the current terms, the analysts said.



Chance of Dynegy backing out

_______________________________________________________________________

On Monday, Michael Heim, also of A.G. Edwards, attributed Enron's
latest stock drop to "growing belief that the likelihood of the (merger)
deal is not so likely."

He pointed out that the outlook for Enron is "not very favorable" but
in the meantime, it's doing everything it can to stay "afloat" while
working on closing the deal.


Last week, Enron said it got a bank extension on a $690 million note to
mid-December. The note was originally set to come due in 2003, but was
bumped up to Nov. 26 due to a rating downgrade at Standard &amp; Poor's.
<http://cbs.marketwatch.com/news/story.asp?guid=%7B81418CA4%2D11A5%2D4C7C%2DA602%2DCF3DA4BCAA7B%7D>

The payment by itself is manageable because Enron has about $2 billion
in cash on its hands, Heim said, but "the event moves Enron's merger one
step closer to the point in which Dynegy is able to exercise the
merger's material adverse condition clauses and back out of, or
restructure, the merger deal."

Heim has a "sell" rating on the stock.