Message-ID: <5428447.1075840932062.JavaMail.evans@thyme> Date: Thu, 8 Nov 2001 05:11:04 -0800 (PST) From: m..schmidt@enron.com Subject: Enron Mentions Mime-Version: 1.0 Content-Type: text/plain; charset=ANSI_X3.4-1968 Content-Transfer-Encoding: quoted-printable X-From: Schmidt, Ann M. X-To: X-cc: X-bcc: X-Folder: \ExMerge - Kitchen, Louise\'Americas\SEC media X-Origin: KITCHEN-L X-FileName: louise kitchen 2-7-02.pst Dynegy Is in Talks on Purchasing Enron --- Deal Would Include Infusion Of C= ash to Assist Firm In Shoring Up Finances The Wall Street Journal, 11/08/01 Dynegy Is Said to Be Near to Acquiring Enron for $8 Billion The New York Times, 11/08/01 Trading Places: Fancy Finances Were Key to Enron's Success, And Now to Its = Distress --- Impenetrable Deals Have Put Firm in Position Where It May Lose= Independence --- Talks With Rival Dynegy The Wall Street Journal, 11/08/01 Unit of Enron Is Challenged The New York Times, 11/08/01 Enron in Takeover Talks With Dynegy Los Angeles Times, 11/08/01 FRONT PAGE - FIRST SECTION: Enron board considering takeover by rival Dyneg= y: Energy trader seeks emergency talks with banks amid fears over cash cris= is=20 Financial Times; Nov 8, 2001 FRONT PAGE - COMPANIES & MARKETS: Dynegy in last-ditch attempt to save Enro= n=20 Financial Times; Nov 8, 2001 COMPANIES & FINANCE THE AMERICAS: Enron in crunch banks meeting=20 Financial Times; Nov 8, 2001 Dynegy may acquire Enron Houston Chronicle, 11/08/01 Enron deals downshifted at breakneck speed Houston Chronicle, 11/08/01 Azurix completes sales of two units Houston Chronicle, 11/08/01 Troubled Enron Negotiates Sale To Rival Dynegy The Washington Post, 11/08/01 Dynegy May Offer as Much as $8 Billion for Enron: WSJ (Update1) 2001-11-08 05:32 (New York) Reports: Dynegy close to deal to buy Enron for $8 billion Associated Press Newswires, 11/08/01 ChevronTexaco affiliate Dynegy in talks to buy Enron for 7-8 bln usd - repo= rt AFX News, 11/08/01 USA: UPDATE 1-Fund alleges fat fees biased Andersen on Enron. Reuters English News Service, 11/08/01 Enron's power company reverses itself, says it is meeting with Indian repre= sentatives in Singapore Associated Press Newswires, 11/08/01 Enron India unit's lenders issue court challenge to prevent project pullout AFX News, 11/08/01 Dabhol Pwr Co Confirms Creditors Mtg In Singapore Thu Dow Jones Energy Service, 11/08/01 India: Enron not to move on termination till Friday Business Line (The Hindu), 11/08/01 Dabhol agrees to meet FIs after a day-long drama Business Standard, 11/08/01 Dynegy Holds Talks to Buy Enron, Inject $1.5 Billion to Shore Up Firm Dow Jones Business News, 11/07/01 Dynegy reportedly close to deal to buy Enron for $8 billion Associated Press Newswires, 11/07/01 USA: WRAPUP 2-Enron, Dynegy in merger talks. Reuters English News Service, 11/07/01 Dynegy Looking to Acquire Enron TheStreet.com 11/07/01 Azurix Corp. Closes Sale of Azurix North America PR Newswire, 11/07/01 Dynegy Is in Talks on Purchasing Enron --- Deal Would Include Infusion Of C= ash to Assist Firm In Shoring Up Finances By Robin Sidel and Rebecca Smith Staff Reporters of The Wall Street Journal 11/08/2001 The Wall Street Journal A3 (Copyright (c) 2001, Dow Jones & Company, Inc.) Dynegy Inc., the Houston-based energy trading and power company, was attemp= ting to strike a deal yesterday evening to buy Enron Corp., its beleaguered= hometown rival, for roughly $7 billion to $8 billion in stock, one-tenth o= f what Enron was worth 15 months ago.=20 Because any merger of the two would likely be scrutinized for many months a= nd Enron needs to shore up its beleaguered finances now, Dynegy also is exp= ected to inject an additional $1.5 billion into Enron immediately, people f= amiliar with the matter said. ChevronTexaco Corp., which owns a 26% stake i= n Dynegy, is expected to provide Dynegy with the funds for the cash infusio= n and is playing a significant role in the negotiations. ChevronTexaco then= will inject an additional $1 billion into the combined company once the de= al is concluded so that its stake in Dynegy isn't substantially reduced and= so the combined company has a healthy balance sheet. With Enron in a weak bargaining position, Dynegy, which is one-fifth Enron'= s size, was hoping to clinch a deal which would have it paying little, if a= ny, premium for Enron. The boards of Dynegy, Chevron and Enron were meeting= yesterday to discuss a potential deal, but a seesawing Enron stock price a= nd the complexity of a transaction yet could derail a deal, people familiar= with the matter warned. "This is far from over," said one person familiar = with the negotiations. Several important points, including the exchange rat= io, were still being worked out. Dynegy expects to argue that Enron shareho= lders will benefit from the upside of combining the two companies and that = a transaction will add to Dynegy's earnings because of potential synergies.= =20 Spokesmen from Enron and Dynegy declined to comment.=20 If approved by regulators, the deal would be a stunning development for Enr= on, which transformed itself from a staid natural-gas-pipeline company into= a highflying power-trading giant only to see its share price -- and hefty = market valuation -- plummet in a matter of weeks. And for Enron to sell its= elf for a low price is sure to stun investors.=20 Under the terms being worked out last night, Enron Chairman Kenneth Lay wou= ld have a seat on the combined company's board, but wouldn't hold any forma= l management position, said the people familiar with the matter. Mr. Lay ma= y take on a consulting role. Meanwhile, Chuck Watson, chairman and chief ex= ecutive of Dynegy, would be CEO of the combined company, while his No. 2, S= tephen Bergstrom, will president.=20 Enron has been scrambling for days to line up quick financing from a promin= ent outside investor and has been in discussions with private-equity firms = and power-trading companies. The company desperately needs to win back its = credibility on Wall Street following the disclosure that the Securities and= Exchange Commission was investigating the partnerships created to serve as= a hedge against fluctuating market conditions. Discussions between Dynegy = and Enron began about 10 days ago, but intensified last weekend.=20 Enron also is expected today to disclose more financial dealings about the = partnerships. A person close to Dynegy said the potential acquirer feels it= understands Enron's business and is apprised of the liabilities, which hav= e been factored into the transaction.=20 Should Enron strike a deal, it hopes to stabilize its stock price. Enron fe= ll 6.4%, or 62 cents, to $9.05 at 4 p.m. composite trading on the New York = Stock Exchange. At one point yesterday morning, Enron's stock had fallen 25= % on news reports that Enron's efforts to line up investors had failed. The= stock recovered after CNBC and Dow Jones Newswires reported the talks with= Dynegy. The shares are at a new 52-week low and far from the 52-week high = of $84.88.=20 Dynegy fell $3, or 8.3%, to $33, at 4 p.m. in Big Board trading. However, s= ome investors believed the company's share price could benefit from the dea= l.=20 Jason Selch, an energy analyst at Wanger Asset Management in Chicago, a lar= ge Dynegy shareholder, said the company has a history of pulling off compli= cated deals and added that because Enron is in such bad shape, Dynegy could= dictate the terms of the deal, shielding itself from potential losses due = to shareholder lawsuits or problems with Enron's complicated off-balance sh= eet dealings.=20 "If they make an offer, they will be making an offer in order to get a stea= l," said Mr. Selch, who says Enron's core energy-trading business is being = valued at about half the normal market valuation of these operations. "I th= ink they will be acquiring a business that will launch them into the No. 1 = market-share position in energy trading," Mr. Selch added.=20 Whether a deal with Dynegy materializes, the fact that Enron is willing to = consider a sale shows how its fortunes have sagged and underscores how desp= erate it is for a savior. The company, which was at the pinnacle of its suc= cess just a year earlier, boasted a market capitalization of $71 billion ab= out a year ago and is now valued at about $7 billion.=20 In exchange for the immediate capital infusion, Dynegy is expected to get c= onvertible preferred stock. In that type of deal, an investor receives a sa= fe, bondlike interest payment and then can convert that holding into common= stock after the share price rises to a specified level. Enron also had bee= n soliciting interest from private equity firms, but any discussions with t= hose parties were proceeding on a slower track.=20 People familiar with the negotiations said it was possible the financial pl= ayers could still play some sort of role in any Enron transaction, although= details weren't immediately available. Buyout firms Clayton, Dubilier & Ri= ce and Blackstone Group, which had been approached by Enron to make an inve= stment, decided against doing so, according to people familiar with the mat= ter. Indeed, Enron's move to publicly disclose new information about the pa= rtnerships could provide intriguing details to any other potential bidders = who are interested in a deal, but were reluctant to pursue Enron without kn= owing more about those transactions. And because Dynegy may only be paying = a small premium, another suitor may be able to step up to the plate.=20 The deal, if agreed to, will add to Dynegy's earnings in the first year. Th= e new entity will focus on the core business of North American and European= wholesale, commercial and industrial energy markets and will capitalize on= the opportunities generated by the combined, diversified asset-backed netw= ork supported by the strongest intellectual capital in the industry.=20 Aside from restoring confidence among its investors, Enron has faced growin= g pressure from its trading partners. The company is offering special prote= ctions to some trading partners, hoping to prevent a mass exodus due to fea= rs it could face further credit downgrades or wind up seeking the protectio= n of a federal bankruptcy court.=20 The protection takes the form of a "netting agreement" that permits a tradi= ng partner to offset the sums it is owed by various Enron entities against = the amounts that it owes the Enron concerns.=20 Without such an arrangement, a company might owe money to one Enron entity = but have to stand in a long, slow line to collect sums owed by a different = Enron concern should the company seek bankruptcy-court protection. With net= ting, positions could cancel each other out, at least to some extent, and r= educe a firm's ultimate credit exposure.=20 Enron spokesman Mark Palmer said the company has plenty of cash and has no = need or intention of seeking protection from creditors, with whom it is cur= rent.=20 ---=20 Jathon Sapsford, Robert Frank and Ken Brown contributed to this article. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Business/Financial Desk; Section C Dynegy Is Said to Be Near to Acquiring Enron for $8 Billion By RICHARD A. OPPEL Jr. and ANDREW ROSS SORKIN 11/08/2001 The New York Times Page 1, Column 2 c. 2001 New York Times Company The board of Dynegy Inc. tentatively approved a deal last night to acquire = the Enron Corporation, the once-mighty energy-trading company laid low by a= financial crisis and government investigation, executives close to the tra= nsaction said.=20 A deal would enable Dynegy to buy the much bigger Enron at a fire-sale pric= e -- about $8 billion in stock, or roughly $10 a share, for a company that = less than a year ago had a market value of nearly $70 billion. But with sto= ck and bond investors fleeing, some of its trading partners refusing to do = business with it, Enron had few choices but to talk to Dynegy. As part of the deal, Chevron Texaco, which owns a 27 percent stake in Dyneg= y, would give Enron a cash infusion of at least $1.5 billion up front and a= n additional $1 billion when the deal closed.=20 The executives said the companies hope to finalize the details and announce= the deal today.=20 If completed, a takeover by Dynegy, a company only about one-quarter its si= ze in revenue, would represent a remarkable humbling of Enron, the nation's= biggest buyer and seller of natural gas and electricity. Enron had $139.7 = billion in revenue for the first nine months of the year.=20 As recently as last spring Enron was lionized by investors as an innovator = that had in many ways created and cleverly dominated the nation's deregulat= ed energy markets. It would also vindicate not only Dynegy, which took a mo= re measured approach to doing business in those markets, but also critics u= ncomfortable with energy deregulation who said Enron's energy trading was r= uthless, its finances murky and its power and influence too extensive.=20 The company's chairman and chief executive, Kenneth L. Lay, is a close frie= nd of President Bush. He has been one of Mr. Bush's largest campaign contri= butors, and no other energy company gave more money to Republican causes la= st year than Enron. Mr. Lay would be on the board of the combined companies= , the executives said, but it was unclear if he would have an operational r= ole.=20 Enron's problems came to light last month when the company disclosed $1 bil= lion in write-downs and an unusual $1.2 billion reduction in shareholder eq= uity. The reduction in equity arose from transactions with investment partn= erships involving Andrew Fastow, the chief financial officer, who was force= d to resign on Oct. 24. The Securities and Exchange Commission is investiga= ting those transactions.=20 Enron is expected today to send the S.E.C. answers to questions the agency = has posed in its investigation. The answers have been reviewed by Dynegy of= ficials, the executives said, and are expected to be released publicly.=20 Enron is scheduled to meet its creditors tomorrow about the company's conti= nuing crisis -- and about the merger deal, if there is one.=20 People close to the deal say the company hopes that a deal with Dynegy, and= the release of the answers to the S.E.C., will calm the crisis that has en= gulfed the company and led other energy companies that trade with Enron to = curtail their credit exposure to the company.=20 Besides worries about the huge losses and the S.E.C. investigation, investo= rs and creditors are nervously watching Enron's credit rating. Moody's Inve= stors Service and Standard and Poor's have already cut the rating to two no= tches above junk status, and on Monday, Fitch Inc. cut it to one notch abov= e junk.=20 As part of the acquisition, Dynegy would be taking on Enron's $12.8 billion= debt load -- a number that does not include billions of dollars of other d= ebt, accumulated off the balance sheet, that has played a major role in Enr= on's current problems. The executives said they expected the deal would lea= d to the sale of some Enron assets to pay down the $12.8 billion debt.=20 Should Enron lose its investment grade rating, other energy trading compani= es could curtail their business with the company even further, and Enron co= uld be forced to issue tens of millions of shares of stock to cover off-bal= ance sheet debts that it has guaranteed.=20 Early Wednesday, shares of Enron plunged 28 percent, to about $7, on fears = that the company was unable to line up new investors.=20 But the stock took back most of its losses in the afternoon after CNBC repo= rted the talks with Dynegy. Shares of Enron closed at $9.05, off 62 cents. = Dynegy shares closed at $33, down $3.=20 In addition to both companies' very large presence in energy trading, Enron= owns the Portland General Electric Company, a utility in Oregon it had alr= eady agreed to sell, and Dynegy owns the Illinova Corporation, a retail ele= ctricity and natural gas utility in Illinois.=20 Regulators may take a hard look at those utilities in reviewing a merger de= al, said Jeff Dietert, an analyst with Simmons & Company in Houston. ''Then= you've got concerns about market power,'' he said. ''It's just a lot of di= fferent issues to deal with before we get too excited that this deal is goi= ng to get done.''=20 The acquisition would combine Enron, which dominates United States trading = of electricity and natural gas and has been shedding its hard assets, with = Dynegy, a company that has pursued a much different strategy of using tradi= ng to maximize earnings from its power plants.=20 Enron has always concentrated on sophisticated financial trading strategies= , a senior executive at a rival energy-trading firm, said. ''Dynegy has alw= ays been more of a logistical player of physical assets,'' he said. ''Those= are very different cultures and very different mentalities.'' The executiv= e noted that there had been an immense talent drain from Enron in the last = two weeks. ''It has become a frenzy,'' he said. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Trading Places: Fancy Finances Were Key to Enron's Success, And Now to Its = Distress --- Impenetrable Deals Have Put Firm in Position Where It May Lose= Independence --- Talks With Rival Dynegy By Rebecca Smith and John R. Emshwiller Staff Reporters of The Wall Street Journal 11/08/2001 The Wall Street Journal A1 (Copyright (c) 2001, Dow Jones & Company, Inc.) When Enron Corp. convened its annual conference with credit analysts and bo= nd investors in Houston last February, the energy-trading giant was soaring= and looking to climb higher.=20 The company's stock was trading at about $80 a share, giving it a stock mar= ket value of $70 billion. Though up fourfold from three years earlier, the = stock price wasn't nearly high enough, Enron's new chief executive, Jeffrey= Skilling, told the audience. With its dominant position in energy-trading = markets and its highly touted new moves into telecommunications, Enron stoc= k should be at $126 a share, Mr. Skilling argued. All in all, a vintage performance for a company not known for being bashful= . "A lot of hype. A lot of spin," recalls Todd Shipman, a Standard & Poor's= analyst who attended the conference. "That was Enron."=20 Yesterday, Enron stock closed at $9.05 in New York Stock Exchange trading. = Mr. Skilling is no longer around to promote the stock. In August, he unexpe= ctedly resigned as chief executive after only six months in the top job. Ch= ief financial officer Andrew Fastow was replaced last month as controversy = escalated over his role in running private partnerships involved in billion= s of dollars of transactions with Enron. Kenneth Lay, Enron's chief executi= ve, has had to give up retirement plans to return to the helm.=20 Lately, the company has been offering special credit protection to increasi= ngly nervous trading partners, including Reliant Energy Inc. and Entergy Co= rp. The goal: to provide assurance that Enron is a creditworthy partner and= to prevent an exodus of customers. Enron's trading operation generates 90%= of the company's profits.=20 It looked yesterday as if the endgame might be beginning. Mr. Lay and Enron= 's board were discussing a possible acquisition of Enron by its much-smalle= r hometown energy-trading rival, Dynegy Inc., in a stock swap valued at $7 = billion to $8 billion. (See related article on page A3.)=20 Any merger of the two companies would probably face lengthy regulatory scru= tiny, so Dynegy is also considering injecting $1.5 billion into Enron immed= iately to help stabilize the company's finances, according to people famili= ar with the situation. The deal would also include a significant role for o= il powerhouse ChevronTexaco, which owns a 26% stake in Dynegy and would be = likely to provide much of the cash for any Enron transaction.=20 Dynegy's emergence as a serious bidder for Enron could indicate to other in= terested parties that Enron's problems can be solved. In fact, the collapse= in Enron's stock price would make it fairly easy for another large energy = player to top any Dynegy offer. Royal Dutch/Shell Group is one such promine= nt company.=20 A takeover by Dynegy or any other company would almost certainly presage th= e departure of the 59-year-old Mr. Lay. He oversaw the transformation of En= ron from a nondescript natural-gas pipeline company with annual revenue of = under $5 billion in the late 1980s to a global energy colossus with revenue= that is expected to approach $200 billion this year.=20 It has turned out that the formula behind that transformation contained the= seeds for the company's current troubles. Executives created an ever-more-= labyrinthine financial structure to support Enron's explosive growth rate. = Billions of dollars of debt -- which could have weakened Enron's credit rat= ing and slowed growth -- was kept off the balance sheet through tangled web= s of transactions with dozens of related entities. As the financial demands= became greater and the transactions more complex, Enron officials began cr= eating and heading some of the entities, raising serious conflict-of-intere= st questions.=20 Neither Enron nor Dynegy would comment. Royal Dutch/Shell also declined to = comment. Messrs. Lay, Skilling and Fastow either declined to comment or did= n't return phone calls seeking interviews.=20 Enron officials have maintained that the markets are overreacting to a spat= e of bad, but nonfatal, news. On Oct. 16, the company announced a $618 mill= ion third-quarter loss and disclosed a $1.2 billion reduction of shareholde= r equity due in part to dealings with the Fastow-related partnerships. The = company has said that its ongoing businesses are strong and it has the fina= ncial wherewithal to weather the crisis. All of its actions have been legal= and properly disclosed, Enron has stressed.=20 Still, its predicament is daunting. The Securities and Exchange Commission = has started a formal investigation into possible violations of federal secu= rities law involving the Fastow-related partnerships. Several shareholder l= awsuits seeking class-action status have been filed against top company off= icials, alleging fraud and seeking to recover some of the $20 billion in ma= rket value that Enron shares have lost in the past month. To address growin= g jitters in the energy and financial markets, Enron has drawn down billion= s of dollars of credit lines, negotiated new ones and sought a new equity i= nfusion.=20 As turmoil has engulfed the company, Mr. Lay and other top Enron executives= have kept largely out of public view -- in sharp contrast to the company's= normally outspoken public persona. The one recent public-relations initiat= ive, a conference call for analysts and big investors, turned into what eve= n Enron officials concede privately was a debacle. It left company executiv= es looking evasive and defensive rather than open and confident.=20 How did Enron, which routinely made published lists of the most-admired and= innovative companies in America, fly so high and fall so fast? The answer = lies in a combination of brilliance and overconfidence on a scale rarely se= en in the business world.=20 In the process, the company helped redefine much of the energy marketplace = on matters as fundamental as how power is bought and sold and how a company= produces a profit from doing so. For example, the company helped create an= electricity-trading market in which participants rarely take physical deli= very of the commodity but instead merely tally profits or losses from trans= actions.=20 In the accounting realm, it pioneered techniques that allowed energy compan= ies to record profits or losses on long-term contracts that hadn't yet prod= uced any revenue. "We caught a little flak in the early 1990s from people w= ho, I guess, thought we were pulling a fast one," Enron's chief accounting = officer, Richard Causey, said in an interview in August. He added that this= accounting method was the most accurate way to measure energy-trading resu= lts.=20 Enron's audacity and success sent other energy companies scrambling to emul= ate it, a process that ABN Amro analyst Paul Patterson calls "Enron envy."= =20 The company tested the limits of securities and accounting rules. For examp= le, Enron's SEC filings have included statements about the Fastow-related t= ransactions that might meet the letter of disclosure laws but are so comple= x that even some Wall Street analysts and accounting professors have found = them indecipherable.=20 Enron's seemingly impenetrable financial structure, hardly noticed by Wall = Street in the company's heyday, is now a matter of serious concern in a sud= denly skeptical investment community. "It's not easy to regain something as= basic as trust," says Goldman Sachs analyst David Fleischer, a longtime En= ron fan. In the recent conference call with Enron executives, Mr. Fleischer= pleaded with the company to be more forthcoming about its operations -- so= mething it has been promising to do for months.=20 While Enron employs some 20,000 people, its rise and fall can, in large mea= sure, be traced to three men: Messrs. Lay, Skilling and Fastow. Mr. Lay joi= ned the company in 1984 when it was still called Houston Natural Gas, a reg= ional pipeline operator. Back then, the natural-gas industry was a largely = regional business and about as exciting as watching a pipeline operate.=20 But Mr. Lay had big plans for his company, always preaching that natural ga= s was the fuel of the future. His prediction has been largely borne out whe= n it comes to such functions as fueling electric-power plants.=20 He wanted to take the company beyond natural gas. Enron bought an electric = utility in Portland, Ore., and built power plants around the world. It deve= loped its potent energy-trading operation, which buys and sells contracts t= o provide electricity in the same way that contracts for wheat and pork bel= lies are traded. These deals were done with utilities, industrial power use= rs and other trading firms.=20 To help enlarge this empire, he recruited aggressive young executives. None= was brighter or more assertive than Mr. Skilling, a Harvard Business Schoo= l graduate and former McKinsey & Co. consultant who joined Enron in 1990.= =20 Under Messrs. Lay and Skilling, the company pushed zealously for the deregu= lation of energy markets -- particularly that bastion of monopoly businesse= s, the electric-utility industry. Enron officials argued that open, competi= tive markets could help consumers and, not coincidentally, provide huge pro= fit opportunities in energy trading.=20 Mr. Skilling called the energy-trading business "a once-in-a-lifetime oppor= tunity to establish a position to last for the next 100 years." By the late= 1990s, Enron had evolved into primarily a trading company, rather than an = owner of power plants and pipelines.=20 In pursuit of their deregulation goals, Enron officials became major player= s in American politics. Mr. Lay has given nearly $2 million to President Bu= sh during his political career and is a personal friend of the president, V= ice President Cheney and several members of the cabinet.=20 One of Mr. Skilling's early hires after joining Enron was Mr. Fastow, at th= e time a 29-year-old MBA from Northwestern's Kellogg School who had been wo= rking on leveraged buyouts and other complicated deals at Continental Bank = in Chicago. Former Enron officials and others say that Mr. Skilling quickly= became Mr. Fastow's mentor in the same way that Mr. Lay had become Mr. Ski= lling's.=20 As Mr. Skilling oversaw the building of Enron's vast trading operation, Mr.= Fastow saw to the financing of it. "Andy was the guy you saw when you want= ed money" for a project, says one former Enron senior manager.=20 Mr. Skilling was named Enron's chief operating officer in 1997. Mr. Fastow = got the top finance job a year later, at the age of 36. Under Mr. Fastow, E= nron's finance department tripled in size, to more than 100 people.=20 Enron needed the added financial brainpower. As it expanded, debt and liqui= dity were constant concerns. What's more, the company's ambitions were rovi= ng beyond therms and kilowatts as it began to make markets in everything fr= om water to weather.=20 Enron's most highly touted non-energy initiative, and Mr. Skilling's pet pr= oject, came in the area of telecommunications. The company built a coast-to= -coast fiber-optic network and envisioned trading "bandwidth," or network c= apacity, the way it traded electricity or natural gas. Enron has invested s= everal hundred million dollars so far in the project, which has produced lo= sses of over $400 million. Yet at the February analyst meeting in Houston, = Mr. Skilling unabashedly valued Enron's fiber-optic business at $36 billion= , according to people who were at the meeting.=20 But to make all of its growth dreams possible, Enron had to make sure that = its balance sheet didn't become too laden with debt. Too much debt would le= ad major ratings agencies, such as Moody's Investors Service and Standard &= Poor's, to lower Enron's credit rating. Such downgrades could significantl= y increase the company's cost of borrowing and make it more difficult to fi= nance its continued expansion.=20 In typically aggressive fashion, Enron lobbied the ratings agencies with th= e same vigor that it lobbied legislators. At the February meeting, Mr. Fast= ow urged analysts to raise Enron's credit rating on long-term debt from tri= ple-B-plus to single-A-minus. But the analysts shrugged off Mr. Fastow's en= treaties. They didn't see the cash flow, earnings, or debt coverage require= d for such an upgrade, says one attendee.=20 Undeterred, Mr. Fastow said the higher rating would strengthen the company'= s basic finances, which could then justify the higher rating. This circular= argument provoked derision among analysts, and Enron didn't get its `A' ra= ting. Instead, the company was recently downgraded by the major ratings age= ncies as a result of its financial turmoil.=20 In moves that kept down its reported debt burden, Enron turned increasingly= to off-balance-sheet transactions through limited partnerships with outsid= e parties. In such an arrangement, Enron could contribute money, stock or o= ther assets to the partnership. The partnership could then borrow large sum= s to purchase assets or do business deals without the debt showing up on En= ron's books.=20 While such partnership transactions had long been used in the natural-gas i= ndustry to finance deals, Enron took the practice to new heights of complex= ity. Leading that effort was Mr. Fastow and his team of young financial exp= erts.=20 In recent years, Enron has done myriad deals with more than 30 partnerships= . By far the most controversial to come to light, so far, are the ones it h= as done with two partnerships -- known as LJM Cayman LP and LJM2 Co-Investm= ent LP -- which were formed and operated by Mr. Fastow. The company has sai= d that its transactions with these partnerships were designed to hedge agai= nst fluctuating market values of company assets and energy contracts.=20 It isn't clear why Enron would allow its chief financial officer to be in a= fiduciary position at partnerships that stood to profit, possibly at the c= ompany's expense, from doing deals with it. To make matters worse, private = LJM partnership documents indicate that Mr. Fastow personally made millions= of dollars from the partnerships -- much more than he was being paid as En= ron's chief financial officer.=20 Enron officials have repeatedly said that Mr. Fastow's actions were reviewe= d and approved by top management and the board of directors. However, the c= ompany has refused to answer numerous specific questions about its dealings= with the partnerships. Enron has said that Mr. Fastow formally severed his= ties with the partnerships in July in the face of rising discomfort about = the arrangements on the part of analysts and major company investors.=20 It is nearly impossible to stitch together anything comprehensible about th= e partnership deals from Enron's SEC filings. The only thing clear is that = millions of shares of Enron stock and billions of dollars of assets and not= es were involved in the transactions.=20 ---=20 Robin Sidel and Jathon Sapsford contributed to this article. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Business/Financial Desk; Section C Unit of Enron Is Challenged 11/08/2001 The New York Times Page 12, Column 6 c. 2001 New York Times Company A consortium of Indian lenders to the Enron Corporation's power company in = India asked the Bombay High Court today to prevent the unit, the Dabhol Pow= er Company, from pulling out of a distressed energy project.=20 The consortium, led by the Industrial Development Bank of India, sought a s= tay on the final termination notice and stopping the transfer of Dabhol's a= ssets. In response, Dabhol canceled a meeting with the Indian lenders sched= uled for later this week. Dabhol Power has been wrangling with the state utility for the last several= months over unpaid bills, and the 2,184 megawatt plant is now shut down. I= ndian financial institutions have a combined exposure of about $1.5 billion= in the $2.9 billion project in the form of loans and guarantees. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Business; Financial Desk Enron in Takeover Talks With Dynegy THOMAS S. MULLIGAN; JAMES FLANIGAN; NANCY RIVERA BROOKS TIMES STAFF WRITERS 11/08/2001 Los Angeles Times Home Edition C-1 Copyright 2001 / The Times Mirror Company NEW YORK -- Enron Corp., the troubled energy-trading giant, was in talks We= dnesday over a possible takeover by Houston neighbor and rival Dynegy Inc.,= industry sources said.=20 The boards of both companies were meeting late Wednesday concerning a poten= tial deal, which almost certainly would mean the end of the line for Chairm= an and Chief Executive Kenneth Lay, architect of Enron's emergence as the d= ominant force in the relatively new electronic markets for natural gas and = electricity. The Houston Chronicle reported that ChevronTexaco Corp., which owns 27% of = Dynegy, would inject an immediate $1.5 billion to enable Enron to maintain = its investment-grade credit status, without which it would have to suspend = its crucial trading operations.=20 Enron, Dynegy and ChevronTexaco representatives declined to comment.=20 Enron appeared to be running out of options short of an outright sale, as i= ts stock had plunged toward 10-year lows, its credit had been downgraded an= d it had failed to secure emergency financing from parties that would let i= t retain its independence.=20 Enron's shares plunged again Wednesday but then recovered on the news, firs= t reported by CNBC, that it had opened talks with Dynegy.=20 Enron shares sank as low as $7 on the New York Stock Exchange but rebounded= to close down 62 cents at $9.05, still the lowest since April 1992; the st= ock is down 89% year to date. Dynegy shares also moved on the speculation, = losing $3 to close at $33.=20 At Wednesday's closing price, Enron has a market value of $6.8billion, down= from an August 2000 peak of $63.6 billion.=20 The catalyst for Enron's shocking slide was the disclosure last month that = the company had taken a $1.2-billion equity reduction connected with off-ba= lance-sheet partnerships from which Enron managers had profited.=20 The matter is being investigated by the Securities and Exchange Commission.= =20 Enron also reported an unexpected $618-million loss in the third quarter.= =20 The energy market's confidence in Enron's ability to meet its obligations h= as ebbed along with the company's stock price, and trading partners have be= gun shying away from entering new long-term transactions with Enron, indust= ry sources said.=20 Competitors Reliant Energy Inc., Aquila Inc. and El Paso Corp. all reported= a pickup in business as companies attempt to reduce their exposure to Enro= n.=20 In addition, energy brokers on the New York Mercantile Exchange are demandi= ng higher margin deposits from Enron, according to Platts, a private energy= news service. Enron in recent days has been raising cash by turning over t= rading positions to other companies at a sizable discount, Platts said.=20 Banking sources told the Financial Times in London that Enron has called an= emergency meeting of its lenders to persuade them to extend credit lines.= =20 Enron last week won a commitment for a $1-billion credit line from J.P. Mor= gan Chase and Salomon Smith Barney, but other banks declined to join in. To= get the financing, Enron had to pledge some natural gas pipeline assets.= =20 Although there has been no crisis akin to a run on a bank, Enron cannot sur= vive for long without a major infusion of capital, Todd A. Shipman, analyst= for Standard & Poor's, said Wednesday.=20 "There's a difference between reducing exposure to Enron and not doing busi= ness or demanding cash upfront," he said, but he added that the company's t= rading partners have been "reexamining their attitude towards Enron every m= oment of every day."=20 Energy analysts and executives said Wednesday that Dynegy Chairman and CEO = Charles L. Watson could be taking a big risk buying into Enron.=20 "Chuck Watson is a brave guy but also a smart one," one expert said. "I hav= e to assume he knows what he's getting with Enron."=20 Would-be partners Watson and Lay have competed for prominence in Houston, a= rguing over stadiums and investing to bring the National Football League to= the city.=20 Consumer activists wasted no time protesting a potential merger of Enron an= d Dynegy.=20 Dynegy, which owns California power plants in partnership with NRG Energy I= nc. that are capable of generating 2,800 megawatts of electricity, was amon= g the companies Gov. Gray Davis and other politicians have repeatedly slamm= ed as "pirates" that charged the state too much for electricity during its = recent energy crisis.=20 "The energy cartel already has done so much damage in California, and the o= nly thing worse than that would be a more tightly controlled energy cartel,= " said Doug Heller of the Foundation for Taxpayer & Consumer Rights in Sant= a Monica. "These are two lawless cowboys forming a single bandit."=20 As board meetings continued Wednesday night in Houston, sources said a deal= was probable at about $8 billion, or $10 to $11 an Enron share.=20 Despite Enron's serious troubles, its trading business remains potentially = powerful. Even in the company's duress, the trading operation has gone forw= ard, accounting for more than 25% of all electric power and natural gas tra= ded globally. Enron, which took in $147 billion in revenue in the first nin= e months of this year, processes transactions worth an estimated $2billion = a day.=20 If Dynegy were to add the immense trading operations of Enron and prove abl= e to hold the franchise together, it would become a major power in global e= nergy tradingDynegy also has a trading operation, but mostly it trades for = the benefit of its own electric power and natural gas holdings; partner Che= vronTexaco, the recently merged oil giant, would gain a significant edge in= energy trading over its competitors.=20 "Dynegy is conservative, while Enron has been very aggressive in trading," = said Mark Gurley, senior vice president of Aquila.=20 *=20 Mulligan reported from New York, Flanigan and Rivera Brooks from Los Angele= s. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 FRONT PAGE - FIRST SECTION: Enron board considering takeover by rival Dyneg= y: Energy trader seeks emergency talks with banks amid fears over cash cris= is=20 Financial Times; Nov 8, 2001 By ROBERT CLOW, ANDREW EDGECLIFFE-JOHNSON, WILLIAM LEWIS, SHEILA MCNULTY an= d PETER THAL LARSEN The board of Enron, the embattled US energy trading group, was meeting last= night to discuss a takeover by its rival Dynegy.=20 Terms of the proposed deal remain under discussion but are understood to in= volve an all-stock bid from Dynegy at an undetermined premium to its Dollar= s 6.8bn market capitalisation.=20 ChevronTexaco, which owns about 27 per cent of Dynegy, was expected to prov= ide about Dollars 1.5bn of financial support. An announcement could come th= is morning, though people familiar with the talks cautioned that they might= still fail.=20 Enron agreed to call an urgent meeting of its banks for tomorrow amid growi= ng concerns on Wall Street that it would not be able to survive its financi= al crisis without a strategic partner.=20 If Enron's board rejects the full takeover offer, other potential options i= nclude an equity injection by Dynegy to save the troubled energy trader fro= m a deeper financial crisis.=20 Dynegy, which trades with Enron, has an interest in keeping the struggling = group in business to maintain stability in the energy market but also sees = an opportunity to expand its own market share.=20 Banks are describing tomorrow's meeting at Enron's headquarters in Houston = as "make or break". One bank executive said: "This is a pivotal meeting. Th= ere are lots of credit lines due in the next six months and we need to talk= ." Enron drew down Dollars 3.3bn in credit lines in the last month, in an a= ttempt to build confidence.=20 With time running out for the company and pressure increasing on Kenneth La= y, its chief executive, Enron has urgently explored several options in rece= nt days. Shell-owned Coral Energy has also been approached and there have b= een calls to private equity groups.=20 If the Dynegy deal goes through, Mr Lay will stay on at Enron, at least unt= il the takeover is complete.=20 But the efforts have been hampered by the Securities and Exchange Commissio= n investigation into Enron's dealings with funds associated with the former= chief financial officer of the company. Bankers say that companies that do= not already know Enron intimately have been put off entering negotiations = because of the uncertainty.=20 If the company fails to complete a deal ahead of tomorrow's crucial meeting= , it will need to persuade the banks to extend credit lines, as it battles = to shore up confidence among investors and its trading counterparties.=20 The banks with the greatest exposure to Enron include Credit Suisse, Deutsc= he Bank, Citigroup and Barclays. Off-balance-sheet vehicles affiliated to E= nron have Dollars 8bn-Dollars 9bn in debt. Enron itself is carrying Dollars= 12.8bn in debt. Its bonds ended the day bid at 74 cents in the dollar. Enr= on's share price had dropped as low as Dollars 7 early in the day but finis= hed at Dollars 9.05, down 62 cents, after reports of Dynegy's interest.=20 Investors' concern about Dynegy assuming Enron's liabilities sent Dynegy sh= ares down 8.3 per cent to Dollars 33 yesterday, giving it a market value of= Dollars 10.8bn.=20 Enron has been under pressure since October 16, when it disclosed a surpris= e balance sheet adjustment that exacerbated concerns about lack of transpar= ency. Lex, Page 16 www.ft.com/energy=20 Copyright: The Financial Times Limited FRONT PAGE - COMPANIES & MARKETS: Dynegy in last-ditch attempt to save Enro= n=20 Financial Times; Nov 8, 2001 By ANDREW EDGECLIFFE-JOHNSON, WILLIAM LEWIS, SHEILA MCNULTY and PETER THAL = LARSEN Dynegy is in talks about a possible equity injection into Enron, in a last-= ditch attempt to save the troubled US energy trader from a deeper financial= crisis. The talks could lead to a full merger between the rival energy gro= ups, according to people familiar with the negotiations.=20 Enron also agreed to call an emergency meeting of its banks tomorrow amid g= rowing concerns on Wall Street that the troubled energy trader will not be = able to survive its financial crisis unless it finds a strategic partner.= =20 Detailed terms of a deal with Dynegy remained under discussion yesterday af= ternoon, but an announcement could come as early as this morning.=20 The purpose of the talks was to inject Enron with sufficient liquidity to a= vert a growing crisis of confidence.=20 Dynegy, as a major counter-party to Enron, wants to keep Enron in business = to maintain stability in the energy trading market.=20 Dynegy's interest prompted speculation of how the group would fund an equit= y infusion or fuller merger, with analysts saying that it may require appro= val and funding from ChevronTexaco, which owns about 27 per cent of Dynegy.= =20 Banks with approximately Dollars 3.3bn of exposure to Enron are describing = Friday's meeting at Enron's headquarters in Houston as "make or break". One= bank executive said: "This is a pivotal meeting. There are lots of credit = lines due in the next six months and we need to talk."=20 With time running out for the company, Enron executives were yesterday maki= ng frantic efforts to secure a deal with rival energy group Dynegy. Some at= the company hoped to be able to announce a deal today. Shell-owned Coral E= nergy has been approached and there have been calls to private equity group= s such as Blackstone Group.=20 But the efforts have been hampered by the Securities and Exchange Commissio= n investigation into Enron's dealings with funds associated with former exe= cutives of the company. Lex, Page 22 www.ft.com/energy=20 Copyright: The Financial Times Limited COMPANIES & FINANCE THE AMERICAS: Enron in crunch banks meeting=20 Financial Times; Nov 8, 2001 By WILLIAM LEWIS Enron has called an emergency meeting of its banks tomorrow amid concerns o= n Wall Street that the troubled energy trader will not be able to survive i= ts financial crisis unless it finds a strategic partner.=20 Banks with approximately Dollars 3.3bn of exposure to Enron are describing = the meeting at its headquarters in Houston, Texas, as "make or break".=20 One bank executive said: "This is a pivotal meeting. There are lots of cred= it lines due in the next six months and we need to talk."=20 With time running out for the company, Enron executives were yesterday maki= ng frantic efforts to secure a deal with rival energy group Dynegy. Some at= the company hoped to be able to announce a deal today.=20 Shell-owned Coral Energy has also been approached, and there have been call= s to private equity groups such as Blackstone Group.=20 But the efforts have been hampered by the SEC investigation into Enron's de= alings with funds associated with former executives of the company. Bankers= say that companies that do not already know Enron intimately have been put= off entering negotiations because of the uncertainty.=20 If the company fails to complete a deal ahead of the meeting, it will need = to persuade the banks to extend credit lines, as it fights to shore up conf= idence among investors and trading counterparties. The banks with the great= est exposure to Enron include Credit Suisse, Deutsche Bank, Citigroup and B= arclays.=20 Off-balance-sheet vehicles affiliated to Enron have Dollars 8bn-Dollars 9bn= in debt. Enron is carrying Dollars 12.8bn in debt.=20 The company has been under increasing pressure since October 16, when it di= sclosed a surprise balance sheet adjustment that only exacerbated concerns = about a lack of transparency at the energy trading group.=20 Enron is the principal in a quarter of all electricity and natural gas trad= es in the US. Yesterday the company did not immediately return calls seekin= g comment.=20 Its share price had lost 21.92 per cent by midday, at Dollars 7.55.=20 "What we have here is a run on the bank by equity investors," said John Ols= on, vice-president of research at Sanders Morris Harris, an investment bank= ing and securities firm. "And they have done nothing to alleviate it."=20 Enron's competitors have begun taking business away from the US's biggest e= nergy trading company.=20 Shahid Malik, president of trading and marketing at Reliant Energy, a big p= articipant in the trading that is central to Enron's business, said: "We're= seeing more business come our way."=20 He said Reliant had maintained normal relations with Enron, noting it was s= till creditworthy. But he added: "We are monitoring the situation."=20 Copyright: The Financial Times Limited Nov. 8, 2001 Houston Chronicle Dynegy may acquire Enron=20 Merger talks in advanced stage=20 By LAURA GOLDBERG=20 Copyright 2001 Houston Chronicle=20 Dynegy was in advanced talks Wednesday night to acquire troubled rival Enro= n Corp., according to people familiar with the matter.=20 The sources said a merger could be announced as early as today between the = two Houston-based energy traders, which had been talking for about a week.= =20 If the smaller Dynegy does buy Enron -- known as a pioneer in the world of = energy trading -- it would mark a surprising end for a company that until e= arly this year was among Wall Street's darlings.=20 Since then, a series of problems has tarnished the image of Enron, which ba= sed on revenues is Houston's largest company. Enron's woes quickly multipli= ed after it made troubling financial disclosures in its third-quarter earni= ngs report last month.=20 After the report, Enron's stock price plummeted, the Securities and Exchang= e Commission launched an investigation into certain Enron dealings and the = company's credit rating has been downgraded, leaving it in a weakened state= .=20 That's where Dynegy comes in.=20 Dynegy proposed a stock swap with a modest premium over Enron's stock price= , the sources said, adding that Enron had been pressing for a higher premiu= m than Dynegy offered. Shares in Enron closed down 62 cents Wednesday, at $= 9.05. Based on Enron's market capitalization, the stock deal is likely to b= e worth more than $7 billion.=20 As part of the deal being discussed, ChevronTexaco Corp., which owns about = 27 percent of Dynegy, would also immediately give $1.5 billion to Enron, th= e people said.=20 The money would be intended to help Enron keep its investment-grade credit = rating, which it needs to keep running its energy trading business.=20 Wall Street has been questioning Enron's ability to maintain that core busi= ness, which relies heavily on access to credit and cash.=20 Enron's board started meeting around 6:30 p.m. Wednesday, while Dynegy's bo= ard began meeting earlier during the day.=20 Spokesmen for Dynegy, Enron and ChevronTexaco declined comment Wednesday.= =20 Enron is significantly larger than Dynegy, which last year reported $29.4 b= illion in revenues and as of earlier this year had almost 1,600 employees i= n Houston. Enron reported $100.8 billion in revenues last year and as of ea= rlier this year had more than 7,000 Houston employees.=20 The two energy traders have complementary capabilities, said Jeff Dietert, = an analyst with Houston-based Simmons & Co. International who follows Dyneg= y and Enron.=20 Enron excels in the area of financial tools and contracts used by businesse= s to manage risk, while Dynegy has strong physical assets, including power = plants and natural gas storage facilities, he said.=20 Without the specifics of the deal, Dietert said it was hard to evaluate whe= ther it made sense for Dynegy.=20 But he noted that Chuck Watson, Dynegy's chairman and chief executive, has = a history of doing complex deals that have boosted the company's earnings.= =20 Both Enron and Dynegy grew from natural gas companies. Both expanded into t= he business of trading energy, but Dynegy has also focused on acquiring ass= ets such as power plants.=20 Enron's current strategy has been to shed assets and expand its trading int= o a variety of commodities ranging from paper to metals.=20 Enron has been under heavy fire since Oct. 16 when it released third-quarte= r earnings. It disclosed that day it had taken a $35 million loss and reduc= ed shareholders equity by $1.2 billion related to ending business dealings = with two investment partnerships formerly run by Andrew Fastow, its chief f= inancial officer.=20 The disclosures served to heighten Wall Street's ongoing concerns that Enro= n's financial reporting was too difficult to understand and skimped on deta= ils. It also led to fears that Enron would be on the hook for billions of d= ollars related to other financial vehicles.=20 Days later, Enron revealed that the SEC was investigating transactions betw= een Enron and the partnerships, called LJM Cayman and LJM2 Co-investment. I= t also replaced Fastow and has been hit with a growing number of shareholde= r lawsuits.=20 In the last couple days, Wall Street has grown more concerned at Enron's si= lence. It's led to speculation the company has more problems than are publi= cly known. Since Oct. 16, Enron's closing share price has declined by 73 pe= rcent.=20 There have also been increasing questions about the stability of Enron's co= re wholesale energy trading business, which is responsible for generating t= he vast majority of Enron's profits.=20 Enron's attempts so far to bolster investor confidence have failed.=20 Last week, it announced it had lined up $1 billion in new credit lines, but= some investors reacted negatively to the fact that Enron used a significan= t portion of its pipeline assets as collateral.=20 The week before, Enron tapped into $3.3 billion in credit lines that weren'= t secured by collateral. It banked about $1.1 billion and is using the rest= to pay off short-term debt obligations.=20 Even before the earnings release, shares in Enron -- which in late January = hit a closing high for the year of $82 -- had been under pressure for a var= iety of reasons, including a troubled power project in India, problems with= its new broadband unit and the unexpected resignation of CEO Jeff Skilling= , who stepped down in August, citing personal reasons.=20 Until the deal is announced, it's difficult to gauge how many layoffs could= result, what could happen to Enron's two downtown headquarters towers, Enr= on Chairman and Chief Executive Officer Ken Lay's fate, and whether the Enr= on name will disappear, including from Enron Field.=20 Nov. 8, 2001, 12:07AM Enron deals downshifted at breakneck speed=20 Bottom fell out of creative accounting=20 By TOM FOWLER=20 Copyright 2001 Houston Chronicle=20 Many companies say hard work and vision are secrets to success. For Enron C= orp., the cornerstone of its late-1990s triumphs was something more obscure= : innovative finance.=20 Under the leadership of former Chief Financial Officer Andrew Fastow, the c= ompany took a widely used accounting procedure, off-balance-sheet financing= , and raised it to an art form.=20 The practice, which sets up partnerships with investors to buy large assets= , allowed the company to grow quickly without adding significant debt or as= sets to its books.=20 Fastow's prowess with these partnerships earned him gushing praise from Wal= l Street and superstar status among his peers. As one analyst said in a 199= 9 interview with CFO Magazine during the height of Enron's glory, "Fastow h= as invented a groundbreaking strategy."=20 But the once rock-solid strategy turned to loose gravel under Enron's feet.= =20 A number of the complex off-balance-sheet deals came undone in recent month= s, leading the company to report close to $1 billion in related write-offs = last month. This brought renewed interest to Fastow's dual roles as Enron C= FO and general partner in some of the deals, from which he is reported to h= ave profited personally. The Securities and Exchange Commission has launche= d a formal investigation. Even if Enron comes clean on the deals, giving th= e details Wall Street has demanded for weeks, it may be too little too late= .=20 Pressure from investors, a stock price plummet of more than 75 percent and = downgrades from the major credit rating agencies all have followed. The fal= l has come so steep and so fast that local competitor Dynegy Corp. is now w= orking to acquire Enron in a multibillion-dollar deal.=20 Off-balance-sheet financing is a common tool among many capital-intense bus= inesses.=20 In the simplest of terms, a company can grow without showing additional deb= t on its balance sheet, said Ron Singer, a University of Houston professor = of economics. Too much debt can cut cash flow and make a company look like = a higher-risk borrower.=20 While there are many variations, creating an off-balance-sheet vehicle is r= elatively straightforward.=20 "You create an entity in which you have less than a 50 percent equity stake= , so you can claim you don't have a controlling interest," Singer said. "Yo= u finance it with a large amount of debt from other investors, but that deb= t doesn't appear on your balance sheet."=20 Continental Airlines and other carriers have used a type of off-balance-she= et financing to buy planes, while truck rental company Ryder creates partne= rships that fund the purchase of fleets that Ryder leases from the partners= hips.=20 Enron's most troubling deals are different from others in three ways:=20 First, they were complex, involving many layers of partnerships. Investment= s were in more than hard assets, including securities like equity stakes in= companies and even stock options.=20 Second, Fastow's direct involvement in the partnerships created the appeara= nce of a conflict of interest, something most companies avoid by not having= corporate officers in leadership roles. The company maintains it carefully= monitored the partnerships, double-checking them with a legal fine-toothed= comb.=20 Third, and perhaps most important, Enron was loath to share details of the = financing and their consequences, even after they began to unravel. The rel= ative silence left investors and analysts to assume the worst.=20 Houston-based El Paso Corp. uses two types of off-balance-sheet financing v= ehicles for major asset purchases. Under one model, the company works with = a bank to create a 50/50 partnership to finance something like the construc= tion of a power plant.=20 The bank's loan would have a particularly long term and low interest rate, = and would be paid back using revenue generated by the power plant.=20 The other model, used most recently at El Paso, went into two special purpo= se projects: Project Electron, funding the purchase of U.S. power-producing= operations, and Project Gem Stone, funding the creation of energy generati= on facilities in Brazil.=20 Under the two projects El Paso puts some of its own funds into the partners= hips; institutional investors put up the lion's share of the money. The ins= titutional investors, which can include pension funds, hedge funds, banks a= nd other corporations, have their investments backed by the hard assets of = the partnership.=20 Enron used simple off-balance-sheet deals in the past, but its strategy bec= ame more complex in the late 1990s as it began fueling aggressive growth pl= ans.=20 In 1997 the company's growth from a pipeline company into a leading gas and= energy trading business led it to a huge debt load that didn't match up wi= th its credit ratings. Maintaining that rating was crucial to the company's= electricity and gas trading, which involved negotiated contracts with doze= ns of partners.=20 The company could have put up its hard assets as backing to continue financ= ing acquisitions and purchases, but Enron's top brass were reluctant. Inste= ad, under Fastow's guidance, Enron's finance department became the equivale= nt of a bank, with a mission to raise capital.=20 "We transformed finance into a merchant organization, one engaged in the in= termediation of both commodity and capital risk positions," Fastow told CFO= Magazine in 1999. "Essentially, we would buy and sell risk positions."=20 The company also needed to raise more cash but couldn't issue equity, which= would dilute shareholders' value, or issue more debt, a threat to its cred= it rating.=20 Fastow's solution was to make it clear to the rating agencies that he was s= erious about keeping the good ratings by generating fast-growing cash flow,= even though the company would issue more stock. A roadshow for analysts wa= s organized to outline the plan and demonstrate the finance team's skills a= t maintaining the high-wire act.=20 The sales pitch worked. When Enron issued 17.2 million shares in an offerin= g and raised about $800 million, rating agencies liked it and share values = didn't drop.=20 The second part of the plan involved selling off nonstrategic assets, such = as pipelines and other business units, to create even more cash flow. That = cash was reinvested.=20 Under this new, more aggressive strategy, Enron grew in different ways. For= example, in October 1998 the company acquired three New Jersey power plant= s from Cogen Technologies by going to the capital markets to issue about $1= .5 billion in equity and debt. Enron kept that capital off its own balance = sheets by creating a special-purpose entity to which it sold a 50 percent i= nterest in the plants.=20 Another deal involved Enron's $2.3 billion purchase of Wessex Water, a Brit= ish water company, in 1998. Enron created a special off-balance-sheet partn= ership named Atlantic Water Trust and issued $1.3 billion in Enron shares i= nto it. The trust then went to the capital markets to raise $1 billion in d= ebt that was backed by those shares.=20 The trust purchased Wessex, and because Enron owned no more than 50 percent= of Wessex, it didn't experience earnings dilution and didn't have that $1 = billion in debt counted on its books.=20 These complex deals won Fastow and his team praise and industry awards.=20 So what went wrong?=20 While many of Enron's off-balance-sheet deals worked with little controvers= y, the accounting innovation eventually worked against the company.=20 Details on the more complicated deals, particularly the partnerships named = LJM Cayman and LJM2 Co-Investment, which left the company with a $1 billion= charge last quarter, have been hard to come by so far. But they appear to = have been used to hedge against the risk of some of the company's newer lin= es of business beyond its core.=20 "Power plants in India, water companies, extension of their franchise to th= e mass retail market and using a fiber optic network to deliver content ove= r the Internet are all unrelated or only tangentially related to their core= merchant energy business," said Ray Niles, an analyst with Salomon Smith B= arney. "All of the write-offs appear to be in these noncore, nonenergy merc= hant areas."=20 The off-balance-sheet partnerships also went on to buy the stock of other c= ompanies, said John Olson, an analyst with Sanders Morris Harris.=20 "They own pieces of a variety of companies they've done asset trades with, = oil-services companies, producers," Olson said. "And many of those shares a= re underwater right now."=20 The partnerships also appear to have invested in options to buy shares of E= nron at a fixed price with plans to make money by later selling them at a h= igher price.=20 "It was perfectly sound logic when their stock was going up, but when it st= arted to go down, it came as quite a shock," Olson said.=20 While the details of Enron's partnerships remain elusive for the time being= , there's little doubt that unraveling their true nature will be difficult = for even the keenest financial and legal minds.=20 "There's a saying that in Houston there are three major law firms: Vinson &= Elkins, Baker Botts and Enron," Olson said. "Enron is overstaffed with man= y smart, smart lawyers, creating these complex and sophisticated contracts.= The problem is they're all in the same room just canceling each other out.= "=20 Nov. 8, 2001 Houston Chronicle Briefs: City and state=20 Azurix completes sales of two units=20 An Enron Corp. subsidiary has closed the sales of two of its divisions that= contributed to the company's steep loss this past quarter.=20 Azurix Corp. sold Azurix North America Corp. and Azurix Industrial Corp. to= American Water Works Co. for $141.5 million. The sale includes American Wa= ter Works assuming $6.1 million of debt.=20 Azurix counted for $287 million of the $1.01 billion in losses Enron report= ed for the third quarter.=20 Financial Troubled Enron Negotiates Sale To Rival Dynegy Peter Behr Washington Post Staff Writer 11/08/2001 The Washington Post FINAL E01 Copyright 2001, The Washington Post Co. All Rights Reserved Officials of Enron Corp. are negotiating a sale of their embattled energy-t= rading company to Houston-based rival Dynegy Inc. for about $8 billion in s= tock and an immediate cash infusion, according to sources familiar with the= talks.=20 The deal would include a $1.5 billion contribution to Enron by ChevronTexac= o Corp. which owns 27 percent of Dynegy, sources said. Representatives of Enron and Dynegy declined to comment.=20 The fortunes of Enron, the largest trader of natural gas and electric power= and one of the early apostles of utility deregulation, have plunged since = late last month, when it announced a $638 million third-quarter loss and di= sclosed that the value of shareholder equity had dropped by $1.2 billion be= cause of complex investment deals with outside partnerships.=20 Enron dismissed its chief financial officer, Andrew Fastow, who had run som= e of the largest of these partnerships in what some investors allege was a = conflict of interest, according to civil lawsuits filed against Enron.=20 It also revealed a Securities and Exchange Commission investigation of the = investments, and it has had to scramble for additional capital as its credi= t rating was downgraded. Today, Enron is expected to make public answers ab= out the partnership transactions that it has furnished to the SEC.=20 In August, Enron's chief executive, Jeffrey Skilling, resigned unexpectedly= , citing personal reasons, a month after Fastow severed his ties with the p= artnerships. With Skilling's resignation, Enron Chairman Ken Lay -- the nat= ion's most visible energy executive because of his close friendship with Pr= esident Bush -- resumed the chief executive's duties.=20 Last week, Enron secured a $1 billion loan from J.P. Morgan Chase & Co. and= Salomon Smith Barney Inc. to help cover debt payments and trading obligati= ons, but it had to use some of its most valuable pipeline assets to secure = the loan.=20 Enron's stock has fallen from a high of $90 a share in August 2000 to $9.05= yesterday, off 62 cents from Tuesday's closing price, after the talks were= reported by CNBC. The steepest price decline followed its third-quarter ea= rnings report last month.=20 But earnings for Enron's core energy businesses increased 26 percent from t= he year before, before write-offs, demonstrating the value of these operati= ons to other energy companies, according to Will McNamara, energy analysis = director for Scientech Inc. in Albuquerque.=20 Any transactions involving Enron must cope with the uncertainty about the i= mpact of more than a score of confidential partnership investments on the c= ompany's debt level and stock value, analysts said.=20 Two of the partnerships in which Enron has a stake, named Osprey and Marlin= , have borrowed $3.4 billion to purchase and then resell Enron energy asset= s and to make other investments, according to analysts.=20 "The issue is how much of that is considered debt of Enron," said Ralph G. = Pellechia, an analyst with Fitch Inc. Fitch and other bond-rating firms hav= e sharply downgraded Enron's debt this month.=20 In one of a growing number of lawsuits against Enron's board of directors, = Fred Greenberg, a Texas shareholder, alleged that Fastow had engaged in a c= onflict of interest by serving as Enron's chief financial officer while run= ning the private partnerships that purchased power plants and other assets = from Enron. Fastow was entitled to a share in partnership profits, even if = that was contrary to Enron shareholders' interests, Greenberg's suit conten= ds.=20 In public filings with the SEC, Enron disclosed that key corporate officers= were involved with the partnerships and declared that its board had review= ed and approved the relationships.=20 A confidential offering seeking investments in an Osprey partnership in Sep= tember 2000 described one of those relationships in different terms. The fu= nds raised by Osprey would be turned over to another partnership, named Whi= tewing, to which Enron was contributing $1.2 billion, the offering document= said. Whitewing would use the funds to purchase Enron assets and make othe= r investments.=20 The duties of Enron's corporate directors and officers may conflict with th= e duties of Whitewing's officers and directors, the document said. "In addi= tion, certain other conflicts of interest exist and may arise in the future= " because of the close relationship between Enron, Whitewing and its subsid= iaries, it added. http://www.washingtonpost.com=20 Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Dynegy May Offer as Much as $8 Billion for Enron: WSJ (Update1) 2001-11-08 05:32 (New York) Dynegy May Offer as Much as $8 Billion for Enron: WSJ (Update1) (Adds German trading in fifth paragraph, details on ratings in 14th paragraph and SEC probe in 16th paragraph.) Houston, Nov. 8 (Bloomberg) -- Dynegy Inc. may offer to buy Enron Corp. for as much as $8 billion in stock after shares of the biggest energy trader fell 89 percent this year, the Wall Street Journal, New York Times and Associated Press reported, citing unidentified people familiar with the situation. The boards of Dynegy, a Houston-based energy trader, ChevronTexaco Corp., which owns about 27 percent of Dynegy, and Enron met yesterday to negotiate terms of the transaction, which would value Enron at about $10 a share, according to the reports. A transaction may be announced as early as today, AP said. Enron's stock and credit ratings have declined in the wake of a Securities and Exchange Commission investigation into partnerships run by former chief financial officer Andrew Fastow. The company has drawn down $3 billion in credit lines and is seeking new financing to reassure trading partners. ``Enron is running out of time and that's what's pushing them to the bargaining table,'' said Zach Wagner, an analyst with Edward Jones & Co., who cut his recommendation on Enron to ``reduce'' from ``accumulate'' on Oct. 23. Shares of Enron traded in Germany rose 28 cents $9.33. The stock reached a record $90.75 in August 2000 and fell 62 cents to $9.05 yesterday in U.S. trading. It has a market value of about $6.79 billion. Dynegy would gain a wholesale energy business, the leading energy manager for commercial and small-industrial customers, and an Internet energy trading operation many times larger than its own, said UBS Warburg LLC analyst James Yanello. `Stingy' Buyer ``If history is any guide, Dynegy is stingy when it comes to acquisitions, so I don't expect them to do anything stupid'' such as overpaying for Enron, said Yanello. ``A deal could provide Dynegy with tremendous opportunity.'' He rates Dynegy ``strong buy'' and doesn't own shares of either company. Enron Chairman and Chief Executive Officer Kenneth Lay wouldn't hold a management position with the combined company under terms being discussed Wednesday, the Wall Street Journal reported. He would get a seat on the board, the paper added. ChevronTexaco is considering adding $1.5 billion to the transaction to help Enron. It would provide another $1 billion when the purchase is closed, the New York Times and Wall Street Journal reported. The companies agreed on a breakup fee providing Dynegy with about $400 million if Enron accepts a higher offer, people familiar with the talks said. Dynegy spokesman Steve Stengel, Enron spokesman Mark Palmer and ChevronTexaco spokesman Fred Gorell declined to comment. Losing Confidence Companies that trade natural gas, electricity and other commodities with Enron may pull back if Enron's finances deteriorate to the point that it loses its investment-grade credit rating, investors say. ``Dynegy has to act fast,'' said Roger Hamilton, a money manager with John Hancock Advisers Inc., which sold its Enron shares in recent weeks. ``If Enron can't get financing and its bonds go to junk, they lose counterparties and their marvelous business vanishes.'' Moody's Investors Service lowered its rating on Enron's bonds to ``Baa2'' and Standard & Poor's cut the debt to ``BBB.'' in the past two weeks. Federal regulators may overlook antitrust concerns in order to keep Enron afloat, Hamilton said. SEC Probe Securities regulators are investigating trading by partnerships run by Fastow, the former financial director. The entities bought and sold Enron shares and assets, with trades costing Enron $35 million and $1.2 billion in lost shareholder equity. Enron ousted CFO Andrew Fastow last month. Shares of Dynegy, the fifth-largest U.S. natural gas marketer, fell $3 to $33 yesterday, while ChevronTexaco rose 48 cents to $87.28. Enron shares and bonds have tumbled in the past month. One of its bonds, an issue paying 6.725 percent that matures in November 2008, fell to 69.11 cents on the dollar, according to Bloomberg data, down from 71.90 cents yesterday. ``We would be very surprised if Dynegy buys the whole company,'' said Tim Ghriskey, president of Ghriskey Capital Partners, which doesn't own Enron or Dynegy shares. ``All the (Dynegy) board has to do is look at what's happening to their stock price today, and you'd wonder why they would want to do it in the face of what's happening with the stock.'' Ghriskey made his comments on Wednesday. Enron Meets Creditors Enron is to meet with J.P. Morgan Chase & Co., Citigroup Inc. and other lenders on Friday to discuss merger plans and a possible increase in the amount the company pays for existing credit lines, according to bankers familiar with the matter. The company has invited more than 300 creditors to its offices in Houston to listen to presentations by Enron's financial team, led by its new chief financial officer, Jeffrey McMahon, the bankers said. Dynegy began in 1985 as Natural Gas Clearinghouse, a gas- trading company. In 1998, the company took the name Dynegy -- a combination of the words dynamic and energy -- to reflect its expansion beyond natural gas. Chuck Watson, the company's president from 1985, became chairman and chief executive in 1989. Watson is an investor with Enron CEO Lay in the Houston Texans, who begin playing in the National Football League next year, and is a board member at Baker Hughes Inc. As of an April filing with the SEC, Watson owned 12.3 million Dynegy shares, or about 5.1 percent of the common stock. --George Stein in New York, (212) 893-3934=20 Reports: Dynegy close to deal to buy Enron for $8 billion 11/08/2001 Associated Press Newswires Copyright 2001. The Associated Press. All Rights Reserved. HOUSTON (AP) - Dynegy Inc. is reportedly in the late stages of discussions = with rival Enron Corp. to buy the embattled energy-trading company for abou= t $8 billion in stock, or roughly $10 per share.=20 Under the terms of the deal, Enron would receive an immediate $1.5 billion = cash infusion from oil giant Chevron Texaco, which holds a 27 percent stake= in Dynegy, the New York Times reported on its Web site Wednesday night, ci= ting executives close to the discussion. Chevron Texaco would provide an additional $1 billion injection at a later = date, the Times reported, while Dynegy would assume $12.8 billion in Enron = debt, plus billions of dollars in other debt that has been kept off the bel= eaguered company's balance sheet and has been a significant contributor to = its current problems.=20 Enron Chairman Kenneth Lay would not be given any formal management positio= n in the combined company, although he would have a seat on its board, The = Wall Street Journal reported, citing people familiar with the matter.=20 The boards of both companies were meeting late Wednesday and could announce= the deal as early as Thursday, although the Journal reported that the tran= saction could still be derailed.=20 Enron did not return calls seeking comment. Dynegy spokesman Steve Stengel = said the company would not respond to "rumor and speculation."=20 In Wednesday trading, Dynegy's shares were down $3 to close at $33 on the N= ew York Stock Exchange, while Enron's stock was off 62 cents and closed at = $9.05. Shares of ChevronTexaco rose 48 cents to $87.28 on the NYSE.=20 Enron's stock is off more than 79 percent since Oct. 16, when the company s= aid shareholder equity had been reduced by $1.2 billion, in part due to par= tnerships managed by Enron's former chief financial officer, Andrew Fastow.= =20 At the same time, Enron reported a $618 million third quarter loss last mon= th, dragged down by a one-time charge of $1.01 billion attributed to variou= s losses. Fastow was ousted a week later.=20 The company's financial stability was further weakened after the Securities= and Exchange Commission began an inquiry, which was upgraded to a formal i= nvestigation, of the partnerships and possible conflicts of interest result= ing from them.=20 Jeff Skilling, Enron's former chief executive, has been called to testify b= efore the SEC, although it remains unclear when that will occur, said Denis= Calabrese, a spokesman for Skilling.=20 Enron's woes have prompted considerable speculation about a possible takeov= er of the company. Before Wednesday, companies mentioned as possible suitor= s included General Electric's GE Capital unit and Royal Dutch/Shell Group.= =20 Duane Grubert, an analyst with Sanford C. Bernstein and Co., said a merger = between Enron and Dynegy makes sense.=20 "I think Dynegy could be a very good fit in terms of understanding the merc= hant business, having a similar culture," Grubert said. "Enron was initiall= y proactive at teaming up with non-competitors but once it exhausted that r= oute" it went in another direction.=20 In the past few weeks, Enron has cashed in about $3 billion in revolving cr= edit it has with various banks to shore up investor confidence. Last week, = Enron secured $1 billion in new financing, using some of its natural gas an= d pipeline assets as collateral.=20 Meanwhile, Standard & Poor's Corp. on Wednesday lowered its ratings on some= of Enron's credit linked notes and placed them on CreditWatch. S&P said En= ron's plan to repair its damaged balance sheet through asset sales and othe= r means will be insufficient.=20 Moody's Investors Service and Fitch Inc. have also downgraded the company's= credit ratings.=20 Last week, Enron announced it created a special committee headed by Univers= ity of Texas law school dean William Powers to respond to the SEC investiga= tion.=20 ---=20 On the Net:=20 http://www.dynegy.com=20 http://www.enron.com Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 ChevronTexaco affiliate Dynegy in talks to buy Enron for 7-8 bln usd - repo= rt 11/08/2001 AFX News (c) 2001 by AFP-Extel News Ltd NEW YORK (AFX) - Energy trading and power company Dynegy Inc, a ChevronTexa= co Corp affiliate, is negotiating to buy Enron Corp for around 7-8 bln usd = in stock, the Wall Street Journal reported, quoting people familiar with th= e matter.=20 Because Enron needs to shore up its finances now, Dynegy also is expected t= o inject an additional 1.5 bln usd into Enron immediately, the sources said= . ChevronTexaco, which holds 26 pct of Dynegy, is expected to provide Dynegy = with the funds for the cash infusion and is playing a significant role in t= he negotiations.=20 ChevronTexaco will inject an additional 1 bln usd into the combined company= once the deal is concluded so that its stake in Dynegy is not substantiall= y reduced and so the combined company has a healthy balance sheet, the Jour= nal said.=20 The boards of Dynegy, Chevron and Enron met yesterday to discuss a deal, bu= t a seesawing Enron stock price and the complexity of a transaction yet cou= ld derail the transaction, the newspaper added.=20 Under the terms being worked out last night, Enron Chairman Kenneth Lay wou= ld have a seat on the combined company's board, but would not hold a formal= management position.=20 jms For more information and to contact AFX: www.afxnews.com and www.afxpre= ss.com Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 USA: UPDATE 1-Fund alleges fat fees biased Andersen on Enron. By Kevin Drawbaugh 11/08/2001 Reuters English News Service (C) Reuters Limited 2001. WASHINGTON, Nov 7 (Reuters) - Enron Corp. paid one of the largest audit bil= ls in corporate America last year to Arthur Andersen, regulatory filings sh= owed on Wednesday, as the Big Five accounting firm faced a lawsuit in Orego= n alleging its high-priced audit of the battered energy giant was flawed.= =20 Houston-based Enron, rocked by a federal investigation and trading at histo= ric lows, paid Arthur Andersen $52 million last year in audit and non-audit= fees, according to Enron's 2001 proxy filed with the Securities and Exchan= ge Commission. That figure topped the fees paid by all similarly sized utility companies l= isted along with Enron on the Dow Jones utility index, and all but a handfu= l of the 30, mostly much larger companies in the Dow Jones industrial avera= ge.=20 The huge revenues taken in by Arthur Andersen from Enron - comprising $25 m= illion in audit fees and $27 million in other fees - amounted to about $1 m= illion a week last year.=20 That rich revenue flow influenced the accounting firm's judgment when it ca= me to examining some unusual outside partnership arrangements involving Enr= on now being probed by the SEC, alleged a lawsuit filed last week in Oregon= .=20 The SEC declined to comment.=20 "Arthur Andersen enjoyed a lucrative, long-standing business relationship w= ith Enron's senior management for which they received millions of dollars,"= said the lawsuit filed by the Southern Electrical Retirement Fund, an elec= tricians' pension fund, against Enron officers and Arthur Andersen.=20 "Maintaining the client relationship was highly dependent on the individual= defendants, particularly Enron's CEO (Kenneth) Lay, and Arthur Andersen co= mpromised themselves to do so," alleged Southern Electrical, which owns Enr= on shares.=20 A spokesman for Arthur Andersen said the Chicago-based firm had not seen th= e Oregon lawsuit and declined comment. He also declined to comment on the r= elative size of Enron's fees.=20 The troubles of Enron beginning last month have led to numerous lawsuits ag= ainst company officers, but the Oregon action was the first known to target= its auditor, as well.=20 As the first anniversary of the issuance of SEC auditor independence rules = approaches next week, the Enron-Arthur Andersen relationship was coming und= er increased scrutiny by regulators, plaintiffs' attorneys and institutiona= l investors.=20 CRITICS SAY ANDERSEN SHOULD HAVE DONE MORE=20 Arthur Andersen should have done more as auditor for Enron to alert investo= rs to the outside partnerships that are now being investigated by authoriti= es, accounting experts said.=20 "It certainly has to raise a lot of eyebrows, especially in the independenc= e and objectivity issue," said Jay Nisberg, an accounting consultant based = in Ridgefield, Connecticut.=20 Arthur Andersen should have pushed harder for more and clearer disclosure o= f the partnerships' potential for conflicts of interest and financial risk = to Enron, critics said.=20 Enron last month ousted its chief financial officer Andrew Fastow. He was r= eplaced by another Enron executive. Fastow was instrumental in setting up a= nd managing the partnerships - LJM2 Co-Investment LP and LJM Cayman LP - th= at did complex financial transactions with Enron, Fastow's employer.=20 The transactions were disclosed to Enron investors in annual 10K filings an= d proxy statements issued in 2000 and 2001. But Andersen should have done m= ore to put the disclosures in plain English and highlight their potential f= or possible conflicts and risk to Enron's finances, said critics.=20 "The activities of these particular partnerships and the role of Enron in t= hem, it's not the kind of thing you stick in the proxy statement at the bac= k somewhere in a series of innocuous paragraphs," said Mark Cheffers, who h= eads accounting consultancy AccountingMalpractice.com in Massachusetts.=20 Enron - a former natural gas pipeline group that transformed itself into th= e nation's largest energy trader - said last month it was taking a $1 billi= on charge against earnings, as well as cutting shareholder equity by $1.2 b= illion largely due to soured transactions with Fastow's partnerships.=20 Enron spokeswoman Karen Denne has said that Arthur Andersen knew about the = LJM partnerships and "reviewed them to the extent they deemed necessary."= =20 ANDERSEN'S WOES WITH WASTE MANAGEMENT=20 Earlier on Wednesday, Waste Management Inc. said Andersen would pay the fir= m $20 million to settle a professional malpractice suit related to an accou= nting scandal the garbage hauler was embroiled in more than two years ago.= =20 Waste Management itself agreed to pay $457 million to settle a class action= lawsuit filed against it related to the scandal and problems that hammered= its share price.=20 The impact of the settlement, coupled with criticism of Andersen's handling= of Enron, is likely to hurt Andersen's brand and influence the type of adv= ice and services it provides clients in the future, Cheffers said.=20 "It's obviously a jolt to their reputation," he said. "But the bigger quest= ion is if they're going to reevaluate the advice they give their clients."= =20 In June, Arthur Andersen was fined $7 million by the SEC to settle charges = it filed false and misleading audit reports of Waste Management in the larg= est ever civil penalty against a Big Five accounting firm, according to the= SEC. Andersen did not admit or deny the charges.=20 (Additional reporting by Deepa Babington in New York). Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Enron's power company reverses itself, says it is meeting with Indian repre= sentatives in Singapore By SATISH NANDGAONKAR Associated Press Writer 11/08/2001 Associated Press Newswires Copyright 2001. The Associated Press. All Rights Reserved. BOMBAY, India (AP) - The U.S.-based Enron Corp.'s power company in India re= versed itself and said it was attending meetings in Singapore Thursday and = Friday to discuss a negotiated settlement with four Indian creditors who ha= d filed suit to demand the stalled Dabhol power project resume operations.= =20 The Dabhol Power Co., owned by Houston-based Enron, said in a statement Thu= rsday that it had received assurances late Wednesday that the Indian govern= ment and state lenders "intend to present new proposals at the Singapore me= eting with respect to a negotiated settlement of this dispute. ..." Enron has objected to previous attempts by some of the parties in the dispu= te to go to the courts.=20 The Dabhol Power Co. had said Wednesday it would skip the meeting to discus= s bids by two Indian companies to acquire a stake in the troubled dlrs 2.9 = billion project in Maharashtra state.=20 That announcement was made after the state-linked Indian lenders asked the = Bombay High Court on Wednesday to prevent Dabhol Power Co. from serving a f= inal termination notice and winding up its operations at the 2,184 megawatt= project on Nov. 19. A preliminary notice was filed earlier this week.=20 Indian lenders, including the Industrial Finance Corp. of India., had asked= the court to order work on the project to resume so that the lenders can r= ecover their money.=20 In May, Enron stopped construction of the 90 percent completed project - In= dia's biggest ever foreign investment - and halted supply of electricity on= the portion already finished because the Maharashtra State Electricity Boa= rd said it could no longer afford the fees it agreed to pay when the contra= ct was signed seven years ago.=20 "Upon personal requests from senior representatives of the government of In= dia and the Indian banks, (Dabhol) agreed to attend the meetings in Singapo= re on Nov. 8 and 9 to discuss an amicable resolution of the Dabhol issue," = the company said in Thursday's statement.=20 Meanwhile, the court case was due to come up for a hearing on Friday in Bom= bay.=20 Indian lenders' exposure in the power project is estimated to 61 billion ru= pees (dlrs 1.3 billion), while Enron and its partners, General Electric and= Bechtel Corp., say they have invested dlrs 1 billion.=20 (str/lak) Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Enron India unit's lenders issue court challenge to prevent project pullout 11/08/2001 AFX News (c) 2001 by AFP-Extel News Ltd BOMBAY (AFX) - A consortium of lenders to Enron Corp's Indian unit, Dabhol = Power Co, asked the Bombay High Court to prevent the unit from pulling out = of a 2.9 bln usd energy project, the New York Times reported.=20 The consortium, led by the Industrial Development Bank of India, sought a s= tay on the final termination notice and stopping the transfer of Dabhol's a= ssets. In response, Dabhol canceled a meeting with the Indian lenders scheduled fo= r later this week.=20 On Tuesday, Enron said it would serve a final termination notice to officia= lly close the power project in western Maharashtra state after Nov 19, when= a six-month deadline for resolving a payment dispute ends.=20 Enron holds a 65 pct stake in Dabhol.=20 jms For more information and to contact AFX: www.afxnews.com and www.afxpre= ss.com Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Dabhol Pwr Co Confirms Creditors Mtg In Singapore Thu 11/08/2001 Dow Jones Energy Service (Copyright (c) 2001, Dow Jones & Company, Inc.) SINGAPORE -(Dow Jones)- India's Dabhol Power Co. confirmed Thursday a two-d= ay meeting in Singapore between a consortium of Indian lenders and DPC offi= cials will go-ahead, despite DPC's earlier cancelation of the talks Wednesd= ay prompted by a lawsuit filed by the lenders.=20 The two-day meeting, scheduled to begin in Singapore Thursday, will discuss= bids by two Indian companies to acquire a stake in Dabhol Power Co. DPC is= the Indian unit of U.S. energy company Enron Corp. (ENE). "Under personal requests from senior representatives of the government of I= ndia and the Indian banks, DPC agreed to attend the meetings in Singapore o= n Nov. 8 and 9 to discuss an amicable resolution to the Dabhol issue," DPC'= s director of corporate communications Jimmy Mogal said in a statement.=20 "Late last evening (Wednesday), DPC received assurances from the government= of India and the Indian banks that they intend to present new proposals at= the Singapore meeting with respect to a negotiated settlement of this disp= ute, including the purchase of foreign sponsor equity by the government of = India and the Indian banks," Mogal added.=20 As reported earlier Thursday, the Industrial Development Bank of India (P.I= DB) - a major creditor of DPC Co. - said the Singapore meeting would go-ahe= ad, although DPC officials were unable to confirm this at the time.=20 "All major Indian lenders will be present at the meeting. We are trying to = find an amicable solution to this crisis," V.K. Saxena, IDBI's chief genera= l manager told Dow Jones Newswires.=20 "The lenders have potential buyers like BSES Ltd. (P.BSX) and Tata Power Co= . Ltd. (P.TPW) who are interested in buying out Enron's stake in Dabhol Pow= er Co.," Saxena added.=20 DPC's domestic lenders include ICICI Ltd. (P.ICC), Industrial Development B= ank of India (P.IDB), IFCI Ltd. (P.ICI) and State Bank of India (P.SBI).=20 Domestic lenders have provided US$1.4 billion of the project's total projec= ted cost of US$2.9 billion. IDBI's exposure is in the excess of 20 billion = rupees ($1=3DINR47.97), and the bank runs the risk of going deep into the r= ed if this project goes bust.=20 DPC's Mogal declined to disclose the venue of the talks in Singapore "at th= e request of the Indian financial institutions.=20 DPC Managing Director K. Wade Cline is attending the Singapore talks, Mogal= said.=20 The Indian creditors filed a lawsuit in the Bombay High Court against DPC a= nd three other parties earlier this week to protect their interests and dem= and that the energy project resume operations.=20 "The first hearing was initiated (Wednesday), but has been posted to Friday= ," Mogal said although this couldn't be confirmed by the domestic lenders a= t the time of writing.=20 The DPC is embroiled in a power supply dispute with the Maharashtra state g= overnment and over what the state government claims are "unaffordable" powe= r tariffs.=20 DPC has come under fire because of the relatively high cost of its power. C= ritics object to DPC charging INR7.1 a kilowatt-hour for its power, compare= d to INR1.5 per kWh charged by other suppliers.=20 The problems with DPC have only added to Enron's much-publicized financial = troubles.=20 Investor confidence in the Houston-based energy company dropped after Enron= posted a third quarter loss of US$618 million and disclosed a US$1.2 billi= on decrease in investor equity related to partnership transactions undertak= en with the company's former chief financial officer, Andrew Fastow.=20 -By Sri Jegarajah and Himendra Kumar, Dow Jones Newswires; 65-415-4066; sri= .jegarajah@dowjones.com Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 India: Enron not to move on termination till Friday 11/08/2001 Business Line (The Hindu) Fin. Times Info Ltd-Asia Africa Intel Wire. Business Line (The Hindu) Copyr= ight (C) 2001 Kasturi & Sons Ltd. All Rights Res'd MUMBAI, Nov. 7 THE Enron-promoted Dabhol Power Company (DPC) today agreed b= efore the Mumbai High Court not to take any steps towards termination till = Friday when the court would hear arguments on a joint petition filed by the= lenders, IDBI, ICICI, IFCI and SBI.=20 Meanwhile, a multilateral meeting scheduled to be held in Singapore on Nove= mber 8 and 9 to sort out issues on the Dabhol project has been called off. = According to DPC, the cancellation followed the legal action taken by India= n lenders. The company stated that it would "not take any steps pursuant to the prelim= inary termination notices (PTN) issued on May 19 and September 10 and the a= sset transfer notice issued on November 5 until Friday evening."=20 Mr Justice J.A. Patil has posted the petition for hearing on Friday.=20 The DPC Managing Director, Mr K. Wade Cline, in a communication to the IDBI= Chairman, Mr P.P. Vora, and the ICICI Executive Director, Mr S. Mukherji, = said the legal action by the Indian institutions was an effort to prevent D= PC's foreign investors from exercising their previously agreed contractual = rights.=20 He said DPC was amazed at the FIs' move to file the suit when they and the = Centre had specifically requested meetings with Enron in Singapore and Wash= ington DC to discuss an "amicable" solution of the Dabhol issue.=20 In a sudden move yesterday, the Indian lenders - IDBI, ICICI, IFCI and Stat= e Bank of India - filed a suit in the Mumbai High Court seeking a stay on t= ermination proceedings by DPC. Mr Harish Salve, counsel for the lenders, to= ld the court today that the institutions had no way to protect their securi= ty other than approach the court.=20 The lenders want the court to stay the termination process and also a direc= tion to re-start the first phase of the project which has been mothballed f= ollowing the spat between DPC and Maharashtra State Electricity Board (MSEB= ).=20 Mr Salve told the court that the Indian lenders had put in more than Rs 6,0= 00 crore, either through direct lending or guarantees, into the project. Th= e lenders are caught between MSEB, which has "repudiated" the power purchas= e agreement (PPA), and DPC, which is proceeding "as per the PPA".=20 On November 19, a six-month "cooling" period after the serving of the first= PTN expires, and DPC becomes eligible to serve the final termination notic= e (FTN) as per the PPA.=20 A third-party sale of the plant would not be possible once the company serv= es the FTN and MSEB would be obliged to take over the plant. As per the PPA= , in such a situation, MSEB has to pay back the entire debt upfront. In the= current circumstances, this is near-impossible, especially since MSEB woul= d not agree to the transfer of assets as it does not acknowledge the PPA.= =20 FIs fear that the company would serve the FTN any time after November 19. I= f it does, the chances of Tata Power or BSES Ltd -currently the only two co= ntenders for the project - acquiring the project may vanish.=20 Our Bureau Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Dabhol agrees to meet FIs after a day-long drama Our Bureaux Mumbai 11/08/2001 Business Standard 2 Copyright (c) Business Standard In a day of dramatic developments, the Enron-promoted Dabhol Power Company = (DPC) initially decided against attending a meeting convened by the Indian = financial institutions in Singapore in retaliation to a case lodged against= it at the Bombay High Court, but subsequently, reversed its stand.=20 "The Indian government and the institutions informed us that there will be = a new proposal from the latter to buy Enron's equity in Dabhol Power Compan= y," said a senior official of DPC. FI sources, though, confirmed that DPC representatives had agreed to attend= the meeting in Singapore, but denied that they had agreed to come up with = a new proposal to buy Enron's equity. "It is going to be a closed door meet= ing where various issues will be discussed," they said, but declined to rev= eal further details.=20 Earlier in the day, DPC had issued a statement saying that it had called of= f the scheduled meeting with the Indian financial institutions in Singapore= on Thursday and Friday following a case lodged in the Bombay High Court by= the latter.=20 Indian financial institutions and banks had filed a case in the High Court = pleading for an injunction against DPC. They had asked the Court to restrai= n DPC from serving the final termination notice to the Maharashtra State El= ectricity Board (MSEB). Earlier this week, DPC had served a transfer of ass= ets notice, thereby, setting the stage for serving the final termination no= tice.=20 Tata Power and BSES, the two companies which have evinced keen interest in = buying Enron's 65 per cent stake in DPC, are also slated to attend the meet= ing. The proposals of these two companies are likely to be discussed at the= meeting.=20 Earlier, DPC had said it was "disappointed" with the legal action taken by = the Indian lenders. DPC had also expressed surprise that the legal action h= ad been initiated on the eve of Prime Minister Atal Behari Vajpayee's visit= to the US. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Dynegy Holds Talks to Buy Enron, Inject $1.5 Billion to Shore Up Firm 11/07/2001 Dow Jones Business News (Copyright (c) 2001, Dow Jones & Company, Inc.) Dynegy Inc., the Houston-based energy trading and power company, was attemp= ting to strike a deal Wednesday evening to buy Enron Corp., its beleaguered= hometown rival, for $7 billion to $8 billion in stock, The Wall Street Jou= rnal reported.=20 Because any merger of the two would likely be scrutinized for many months a= nd Enron (ENE) needs to shore up its beleaguered finances now, Dynegy (DYN)= also is expected to inject $1.5 billion into Enron immediately, people fam= iliar with the matter said. ChevronTexaco Corp. (CVX), which owns a 26% stake in Dynegy, is expected to= provide Dynegy with the funds for the cash infusion and is playing a signi= ficant role in the negotiations. ChevronTexaco then will inject another $1 = billion into the combined company once the deal is concluded so that its st= ake in Dynegy isn't substantially reduced.=20 Under the terms being worked out Wednesday night, Enron Chairman Kenneth La= y would have a seat on the combined company's board, but wouldn't hold any = formal management position, said the people familiar with the matter. Mr. L= ay may take on a consulting role.=20 The boards of Dynegy, Chevron and Enron were meeting Wednesday to discuss a= potential deal, but a seesawing Enron stock price and the complexity of a = transaction yet could derail a deal, people familiar with the matter warned= .=20 Several important points, including the exchange ratio, were still being wo= rked out, but Dynegy is expected to pay a very modest premium for Enron's s= tock, arguing that Enron shareholders will benefit from the upside of combi= ning the two companies.=20 Enron also is expected Thursday to disclose more financial dealings about t= he controversial partnerships. Spokesmen from Enron and Dynegy declined to = comment.=20 If approved by regulators, the deal would be a stunning development for Enr= on, which transformed itself from a staid natural-gas-pipeline company into= a highflying power trading giant only to see its share price -- and hefty = market valuation -- plummet in a matter of weeks.=20 Enron has been scrambling for days to line up quick financing from a promin= ent outside investor and has been in discussions with private-equity firms = and power-trading companies. The company desperately needs to win back its = credibility on Wall Street following the disclosure that the Securities and= Exchange Commission was investigating the partnerships created to serve as= a hedge against fluctuating market conditions. Discussions between Dynegy = and Enron began about 10 days ago, but intensified last weekend.=20 Should Enron strike a deal, it hopes to stabilize its stock price. Enron fe= ll 6.4%, or 62 cents, to $9.05 at 4 p.m. composite trading on the New York = Stock Exchange. At one point Wednesday morning, Enron's stock had fallen 25= % on news reports that Enron's efforts to line up investors had failed. The= stock recovered after CNBC and Dow Jones Newswires reported the talks with= Dynegy. The shares are at a new 52-week low and far from the 52-week high = of $84.88.=20 Dynegy fell $3, or 8.3%, to $33, at 4 p.m. in Big Board trading. However, s= ome investors believed the company's share price could benefit from the dea= l.=20 Copyright (c) 2001 Dow Jones & Company, Inc.=20 All Rights Reserved. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Dynegy reportedly close to deal to buy Enron for $8 billion 11/07/2001 Associated Press Newswires Copyright 2001. The Associated Press. All Rights Reserved. HOUSTON (AP) - Dynegy Inc. was reportedly in the late stages of discussions= Wednesday night with rival Enron Corp. to buy the embattled energy-trading= company for about $8 billion in stock, or roughly $10 per share.=20 Under the terms of the deal, Enron would receive an immediate $1.5 billion = cash infusion from oil giant Chevron Texaco, which holds a 27 percent stake= in Dynegy, the New York Times reported on its Web site, citing executives = close to the discussion. Chevron Texaco would provide an additional $1 billion injection at a later = date, the Times reported, while Dynegy would assume $12.8 billion in Enron = debt, plus billions of dollars in other debt that has been kept off the bel= eaguered company's balance sheet and has been a significant contributor to = its current problems.=20 Enron Chairman Kenneth Lay would not be given any formal management positio= n in the combined company, although he would have a seat on its board, The = Wall Street Journal reported, citing people familiar with the matter.=20 The boards of both companies were meeting late Wednesday and could announce= the deal as early as Thursday, although the Journal reported that the tran= saction could still be derailed.=20 Enron did not return calls seeking comment. Dynegy spokesman Steve Stengel = said the company would not respond to "rumor and speculation."=20 In Wednesday trading, Dynegy's shares were down $3 to close at $33 on the N= ew York Stock Exchange, while Enron's stock was off 62 cents and closed at = $9.05. Shares of ChevronTexaco rose 48 cents to $87.28 on the NYSE.=20 Enron's stock is off more than 79 percent since Oct. 16, when the company s= aid shareholder equity had been reduced by $1.2 billion, in part due to par= tnerships managed by Enron's former chief financial officer, Andrew Fastow.= =20 At the same time, Enron reported a $618 million third quarter loss last mon= th, dragged down by a one-time charge of $1.01 billion attributed to variou= s losses. Fastow was ousted a week later.=20 The company's financial stability was further weakened after the Securities= and Exchange Commission began an inquiry, which was upgraded to a formal i= nvestigation, of the partnerships and possible conflicts of interest result= ing from them.=20 Jeff Skilling, Enron's former chief executive, has been called to testify b= efore the SEC, although it remains unclear when that will occur, said Denis= Calabrese, a spokesman for Skilling.=20 Enron's woes have prompted considerable speculation about a possible takeov= er of the company. Before Wednesday, companies mentioned as possible suitor= s included General Electric's GE Capital unit and Royal Dutch/Shell Group.= =20 Duane Grubert, an analyst with Sanford C. Bernstein and Co., said a merger = between Enron and Dynegy makes sense.=20 "I think Dynegy could be a very good fit in terms of understanding the merc= hant business, having a similar culture," Grubert said. "Enron was initiall= y proactive at teaming up with non-competitors but once it exhausted that r= oute" it went in another direction.=20 In the past few weeks, Enron has cashed in about $3 billion in revolving cr= edit it has with various banks to shore up investor confidence. Last week, = Enron secured $1 billion in new financing, using some of its natural gas an= d pipeline assets as collateral.=20 Meanwhile, Standard & Poor's Corp. on Wednesday lowered its ratings on some= of Enron's credit linked notes and placed them on CreditWatch. S&P said En= ron's plan to repair its damaged balance sheet through asset sales and othe= r means will be insufficient.=20 Moody's Investors Service and Fitch Inc. have also downgraded the company's= credit ratings.=20 Last week, Enron announced it created a special committee headed by Univers= ity of Texas law school dean William Powers to respond to the SEC investiga= tion.=20 ---=20 On the Net:=20 http://www.dynegy.com=20 http://www.enron.com Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 USA: WRAPUP 2-Enron, Dynegy in merger talks. By Andrew Kelly 11/07/2001 Reuters English News Service (C) Reuters Limited 2001. HOUSTON, Nov 7 (Reuters) - Dynegy Inc. is in talks to buy troubled Enron Co= rp. in a deal that would involve a stock swap and a $1.5 billion capital in= fusion from ChevronTexaco, which has a big stake in Dynegy, a source close = to the talks said on Wednesday.=20 The deal, which could be announced officially this week, was expected to gi= ve what the source called a "modest premium" to Enron shareholders, whose s= tock has plummeted in value as a fast-moving financial crisis enveloped the= company. For Dynegy, the merger would catapult it to the top of the energy trading i= ndustry now dominated by Enron. Last year, the company had $29 billion in r= evenues, compared to $100 billion for Enron.=20 For Enron, it would cap an astonishingly rapid fall from grace for a compan= y that not long ago was ballyhooed as one of the world's most innovative, n= ot to mention profitable.=20 The source said the form of ChevronTexaco's capital infusion was not yet cl= ear. Chevron, which recently merged with Texaco, was one of Dynegy's foundi= ng investors and still owns 26.5 percent of the company.=20 STOCK HAMMERED=20 Enron has seen its stock hammered and credit ratings lowered in recent week= s after reporting its first quarterly loss in four years and taking a $1.2 = billion equity writedown linked to financial transactions under investigati= on by the U.S. Securities and Exchange Commission.=20 Enron shares, which traded as high as $90 in August of last year, dropped t= o a 10-year-low of $7 during Wednesday's trading session before rallying on= news of the Dynegy talks.=20 The stock ended down 62 cents at $9.05 on volume of 72.4 million shares, th= e day's most active issue on the New York Stock Exchange. Dynegy stock fell= $3 to $33.=20 Enron, the nation's largest trader of natural gas and electricity, has been= under fire for failing to explain off-balance sheet transactions conducted= with partnerships run by ousted chief financial officer Andrew Fastow. Inv= estors said they reeked of conflict of interest and demanded a full explana= tion they never got.=20 Fastow left the company last month in what has become a growing line of hig= h-profile departures from Enron, topped by the August resignation of chief = executive Jeff Skilling after just six months on the job.=20 The crisis has undermined confidence in Enron's financial stability, which = in turn has forced the company to seek cash and credit to back the energy t= rading operations that provide most of its revenue and earnings.=20 The New York Times said on Wednesday Enron had approached at least a dozen = buyout firms and investor Warren Buffett, chairman of Berkshire Hathaway In= c. ., but none took the bait.=20 Analysts have said would-be investors are wary because no one knows what fi= nancial liabilities, if any, lurk in Enron's labyrinthine books.=20 FIRESALE=20 But Andre Meade of Commerzbank Securities said the firesale price for Enron= apparently was too attractive to pass up.=20 "Certainly, Enron at $9 a share appeals to some energy companies. Dynegy ap= pears to be one of them and is looking at putting something together," he s= aid.=20 In contrast to Dynegy, rival El Paso Corp. said on Wednesday it wanted no p= art of Enron, except perhaps for a few hard assets. El Paso also said Enron= was perhaps neither as big or important to markets as analysts believe.=20 "If Enron goes away, which we don't think is going to happen and we hope it= doesn't happen, we don't see the market missing a beat, frankly," Ralph Ea= ds, head of El Paso's merchant energy business, told a meeting of analysts.= =20 Eads said El Paso calculates that Enron accounts for about 10 percent of tr= ading in U.S. wholesale gas and power, well below the 25 percent usually at= tributed to them by analysts.=20 At least one company, Apache Corp. , said it ended some hedging agreements = because of concerns about increasing risk in the energy derivatives market = caused by the Enron crisis.=20 Pat Wood, chairman of the Federal Energy Regulatory Commission, told report= ers the agency was keeping an eye on the markets, watching for an Enron eff= ect.=20 "We're watching the impact that Enron or any other firm would have on the o= verall workings of the market, but we're not intervening where other agenci= es have jurisdiction," he said. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Dynegy Looking to Acquire Enron By Peter Eavis and Christopher Edmonds Staff Reporters TheStreet.com 11/07/2001 10:45 PM EST URL: Updated from 7:56 p.m.=20 Dynegy is holding talks to buy Enron in a deal that has significant backing= from oil giant ChevronTexaco, according to media reports.=20 The Wall Street Journal reported that Dynegy (DYN:NYSE - news - commentary)= would buy the embattled Enron (ENE:NYSE - news - commentary) for $7 billio= n to $8 billion in stock.=20 The Houston Chronicle and Bloomberg reported that the companies are expecte= d to announce a merger that involves cash from Chevron (CVX:NYSE - news - c= ommentary) ; Bloomberg says Chevron, which has a 27% stake in Dynegy, will = add $1.5 billion to the deal.=20 The deal is expected to be a stock swap at a small premium to Enron's Wedne= sday closing price of $9.05. Enron was off 7 cents in after-hours trading w= hile Dynegy was up 34 cents, to $33.34.=20 A merger would amount to a rescue of Houston energy-trading giant Enron, wh= ose stock has plunged nearly 90% in recent weeks after the company revealed= that a shadowy deal caused a $1.2 billion hit to equity.=20 The controversial deal is under investigation by the Securities and Exchang= e Commission and has led to the ousting of the company's CFO, Andrew Fastow= . The deluge of bad news has prompted other energy companies to reduce thei= r dealings with Enron, a serious development for a trading company.=20 Dynegy's board was meeting Wednesday afternoon to discuss the merger, while= Enron's board was scheduled to consider the combination Wednesday evening.= A Dynegy spokesman declined to comment, citing a company policy of not com= menting on market rumors. Enron spokespersons did not return calls. Chevron= declined to comment.=20 Chevron's involvement appears critical if the deal is to gain the approval = of rating agencies. Dynegy's balance sheet is not strong enough to acquire = Enron on its own. Therefore, Chevron is expected to raise its stake in Dyne= gy and possibly make an immediate cash infusion into Enron. The size of any= infusions will be a good indication of how bad things have gotten at Enron= .=20 With the stock plummeting and Enron facing a mounting debt crisis -- $12 bi= llion in direct debt and nearly $9 billion in potential liabilities from af= filiates -- the company is running out of options. It recently drew down ab= out $3 billion in existing credit lines and gained an additional $1 billion= in credit secured by its pipeline business. Enron debt has been downgraded= in recent days by the three main credit-rating agencies.=20 Sources say a number of potential investors have been approached -- from Wa= rren Buffett's Berkshire Hathaway (BRKA:NYSE - news - commentary) to Royal = Dutch/Shell (RD:NYSE ADR - news - commentary) -- with little success. ??Gen= eral Electric's (GE:NYSE - news - commentary) capital division is said to h= ave held multiple talks with Enron with no resolution. ?Dynegy may be motiv= ated by its significant exposure to Enron. If Enron had failed, Dynegy coul= d have faced serious disruption and large losses because the two firms are = trading partners on a number of contracts. In such a relationship, Dynegy c= ould have contracts to purchase a commodity like power or natural gas from = Enron and be committed to sell that commodity to another buyer. If Enron fa= iled to deliver, the domino effect could have a significant economic impact= on Dynegy. While other energy trading firms have exposure, sources specula= te Dynegy's exposure is more significant than its peers. ?Enron was down as= much as 20% during the day. Dynegy stock was off 8% in the regular session= , while its bonds also skidded on rumors of a deal. ???Azurix Corp. Closes = Sale of Azurix North America??11/07/2001?PR Newswire?(Copyright (c) 2001, P= R Newswire)??HOUSTON, Nov. 7 /PRNewswire/ -- Azurix Corp. announced today t= hat it has completed the sale of its wholly owned subsidiaries, Azurix Nort= h America Corp. and Azurix Industrial Corp., to American Water Works Compan= y, Inc. The contract price, payable in cash, is $141.5 million, subject to = customary adjustments. The sale also includes American Water Works assuming= $6.1 million of debt. ?"This transaction demonstrates the progress we are = making in our previously announced decision to sell certain Azurix assets,"= said John Garrison, Azurix president and CEO. "Even though it no longer fi= ts our plans, Azurix North America is an excellent business and we are plea= sed that its employees and operations are being taken on by American Water = Works, a clear industry leader."?Azurix Corp., an affiliate of Enron Corp.,= is a global company that owns, operates and manages water and wastewater a= ssets, and provides water and wastewater related services. ?With revenues o= f $1.5 billion, American Water Works Company is the nation's largest public= ly traded enterprise devoted exclusively to the water and wastewater busine= ss. Its 6,300 associates provide ongoing water resource management services= to businesses and communities in 27 U.S. states and three Canadian provinc= es. More information can be found on the Web at www.amwater.com . ?MAKE YOU= R OPINION COUNT - Click Here ?http://tbutton.prnewswire.com/prn/11690X27241= 226???/CONTACT: John Ambler of Azurix Corp., +1-713-646-6423/ 19:00 EST ?Co= pyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09???