Subject: FW: JP Morgan Conference Call on Enron
From: [email-masked]
To: [email-masked], [email-masked], [email-masked], [email-masked], [email-masked], [email-masked], [email-masked], [email-masked], [email-masked]
Cc: [email-masked]
Date: Wed, 31 Oct 2001 08:50:28 -0800 (PST)

Some good news on Enron!

Dave

 -----Original Message-----
From: 	Reed, Andrea V.  
Sent:	Wednesday, October 31, 2001 10:33 AM
To:	Allan, David; Determeyer, Peggy; Hutchinson, Elizabeth; Singh, Vikram; Perez, Eugenio; Maxwell, David; Forster, Avril
Subject:	FW: JP Morgan Conference Call on Enron

Some positive and accurate news?for a change!!!! 
avr

 -----Original Message-----
From: 	Helfrich, Christopher A.  
Sent:	Wednesday, October 31, 2001 10:29 AM
To:	Malcolm, Rodney; Reed, Andrea V.
Subject:	FW: JP Morgan Conference Call on Enron

 -----Original Message-----
From: 	Seyfried, Bryan  
Sent:	Wednesday, October 31, 2001 1:52 AM
To:	DL-Lon Enron Credit London; DL-Enron Credit Houston; Blesie, Brad; Zipter, Rudi
Subject:	FW: JP Morgan Conference Call on Enron

 -----Original Message-----
From: 	Seyfried, Bryan  
Sent:	31 October 2001 07:28
To:	Sherriff, John; Brown, Michael - COO London; Edgley, Anne; Murphy, Ted; Gold, Joe; Lewis, Richard; Scrimshaw, Matthew; Dyson, Fernley; Lien, Thor
Cc:	Valnek, Tomas
Subject:	FW: JP Morgan Conference Call on Enron

below is a summary, prepared by Tomas Valnek, of the JP Morgan conference call to fixed income and equity investors.  The consensus view of our team is the call was very positive and should provide a platform for stability absent new, negative surprises.

 -----Original Message-----
From: 	Valnek, Tomas  
Sent:	30 October 2001 22:44
To:	Seyfried, Bryan
Subject:	JP Morgan Conference Call on Enron

JPM Morgan (JPM) held a conference call on 30 October on the recent events surrounding Enron. Below, the main points are summarised.

The overall tone was positive for three reasons: The two analysts (one equity and fixed income) made a very good effort to clarify the current situation; They gave a positive view on Enron in general; And, they capped the value of the potential off-balance sheet liabilities.

In their view, there are no issues with the core business.

The fundamental issue is short-term liquidity. To alleviate this issue, they would like to see extra credit lines of about USD 1.5-2bn, and the extension of a revolver maturing in May 2002;

They think that the liability from Osprey and Marlin is likely to be in the region of USD 400-500m. This assumes that there are no other contingent liabilities form other off-balance sheet commitments;

To resolve the situation surrounding this issue and to potentially avoid a downgrade, Enron must primarily restore confidence and improve disclosure of information surrounding the off-balance sheet liabilities.

One of the first things pointed out by the equity analyst was that he considered little permanent damage on the equity side, and importantly that there were no major with Enron's core business. But in their view, the fundamental issue was related to credit markets, short term liquidity in particular. To alleviate this issue, the analyst would like to see the following:

That Enron secures an extra USD 1-2bn in credit lines, preferably USD 1.5-2bn;

That the maturity of the USD 2.25bn revolver maturing in May 2002 is extended.

From the commodity side, they were confident that there no immediate liquidity issues. They had been in touch with trading counterparties like Dynegy, El Paso, Williams... and had not sensed that any of them would radically reduce their trading with Enron. (However, they noted that a weakening in trading activities could mean smaller market shares, which could negatively affect earnings.)

On the debt side, one overall concern was the actual amount of debt, which they estimated to about USD 17.5bn, and related potential debt servicing problems. This includes debt actually held by Enron (about USD 12bn), debt attributable to Enron through unconsolidated equity affiliates, and the Marlin, Osprey and Yosemite debt.

Much focus was on the Marlin and Osprey potential equity liabilities, as the analysts had no information indicating that any liability could arise from the equity affiliates or Yosemite. From Marlin and Osprey, Enron's worst case liability would be about USD 3.4bn (implying zero asset value), but they estimated that a likely outcome would be a liability of about USD 400-500m. (This liability only concerns Marlin and Osprey, and thus assumes that there no liabilities related to the equity affiliates and Yosemite.) It was noted that this liability did not necessarily have to be settled through a share issue, but could be settled through cash raised in asset sales.

The issue of getting downgraded below investment grade was discussed. The analysts did not seem to think that this was a likely outcome, but that a downgrade to BBB-/Baa3 was a possibility. They considered that if Enron wants to avoid a downgrade, the following measures should be implemented:

Restore confidence in Enron. In particular, improve disclosure, give a better background to the LJM partnership and specify the nature and the value of the assets held in the trusts;

Develop a cash flow plan to show how assets are to be monetised to pay down debt;

Streamline operations;

Provide information about the USD 600m broadband investments.

Finally, mark-to-market accounting was discussed as well. The analysts had no issue with that noting that for Enron's type of business this was an appropriate way to account for revenues. They considered the average daily VaR number of USD 60m to be low, thus not showing any evidence of aggressive accounting. Also, the retention of key staff would become very important in the future.

Regards

Tomas