Message-ID: <4308151.1075841428989.JavaMail.evans@thyme> Date: Fri, 1 Feb 2002 13:24:01 -0800 (PST) From: ze.powergroup.inc.@mailman.enron.com To: kpresto@enron.com Subject: Energy Views: Are You Acting Prudently? Mime-Version: 1.0 Content-Type: text/plain; charset=us-ascii Content-Transfer-Encoding: quoted-printable X-From: ZE.PowerGroup.Inc.@mailman.enron.com@ENRON X-To: kpresto@enron.com X-cc: X-bcc: X-Folder: \ExMerge - Presto, Kevin M.\Deleted Items X-Origin: PRESTO-K X-FileName: kevin presto 2-7-02.pst =09[IMAGE] =09[IMAGE]=09 =09=09[IMAGE]=09 =09=09[IMAGE]=09 =09=09[IMAGE]=09 [IMAGE]=09=09[IMAGE]=09 [IMAGE]=09[IMAGE]=09[IMAGE]=09[IMAGE]=09[IMAGE]=09[IMAGE]=09 [IMAGE]=09[IMAGE]=09=09=09[IMAGE] The Energy industry seems to be in a some= what tenuous state. As credit and accounting standards have come unglued t= he integrity of the biggest players is called into question. Accounting fi= rms have claimed=09[IMAGE]=09 [IMAGE]=09[IMAGE]=09[IMAGE]=09[IMAGE]=09=09[IMAGE]=09 =09=09 About ZE Energy Views [IMAGE] [IMAGE] In our continuous efforts = to serve the industry, we have developed "Energy Views" as a platform to c= ommunicate with the industry on a regular basis in order to relate issues = and views we believe to have industry wide relevance. We hope you find be= nefit from reading the emails. Any and all feedback is welcome. [IMAGE] [= IMAGE] =09[IMAGE]=09=09[IMAGE]=09 [IMAGE]=09[IMAGE]=09[IMAGE]=09[IMAGE]=09=09[IMAGE]=09 =09=09 Having the Information and Doing Nothing About It [IMAGE] [IMAG= E] It seems evident that Anderson, the government and Enron itself, had pr= ivy to a lot of financial data that clearly indicated the eventual collaps= e of Enron. Andersen contemplated dropping Enron as a client nearly one = year ago because of concerns due to Enron's accounting methodology. The W= hite House oversaw a study in October 2001 of economic repercussions of an= Enron collapse. Sherron Watkins, a senior Enron Executive, wrote to Enron'= s chairman, Ken Lay, "I am incredibly nervous that we will implode in a w= ave of accounting scandals." last August 2001" The writing was clearly on t= he wall but most were unable to react to the intelligence. It all comes do= wn to the lemming factor; we can see the cliff but just cannot avoid jumpi= ng. Many in the industry suffer badly from the chronic inability to rea= ct in a timely manner. This failure often results in severe negative econo= mic impacts. Either policy is not in place to allow affirmative reaction o= r staff does not adhere to the policies that exist. Good corporate polic= y is the corner stone of sound market participation [IMAGE] [IMAGE] =09[= IMAGE]=09=09[IMAGE]=09 [IMAGE]=09[IMAGE]=09[IMAGE]=09[IMAGE]=09=09[IMAGE]=09 =09=09 ZEPG Products [IMAGE] [IMAGE] [IMAGE] ZE Market Ana= lyzer & Data Management Suite [IMAGE] [IMAGE] [IMAGE] ZE Fo= rward Price Views [IMAGE] [IMAGE] [IMAGE] ZE Credit Risk Ma= nager [IMAGE] [IMAGE] [IMAGE] =09[IMAGE]=09=09[IMAGE]=09 [IMAGE]=09[IMAGE]=09[IMAGE]=09[IMAGE]=09=09[IMAGE]=09 =09=09 About ZE PowerGroup [IMAGE] [IMAGE] ZE PowerGroup is a strategic= consulting firm that was incorporated to serve the emerging needs of an e= lectric industry in transition. Our company now offers a full spectrum of = services, from strategic planning and implementation through to technical= analysis and energy trade and transaction software development. [IMAGE] = [IMAGE] =09[IMAGE]=09=09[IMAGE]=09 [IMAGE]=09[IMAGE]=09[IMAGE]=09[IMAGE]=09their accounting practices to be "c= reative and aggressive" while their clients claim that there actions were = "not unethical", with apparent stress on the "not" part. One now battered= marketer has been specifically accused of "suspending the rules of corpor= ate ethics and perhaps even put corporate morality on vacation". Words = like scandal, allegations, suspicions and cover-up have become rank in the= industry. CEOs have been asked to leave their positions, executives have = been forcibly terminated while another commits suicide; and the investigat= ions continue, including criminal ones. The situation is sobering. It see= ms like these last few years have been full of bubbles bursting as we all = collectively share a cold bath of economic reality. The techs tumbled and = the stock markets followed, the electricity market (at least in California= ) imploded, real bombs are exploding all over the place and the mightiest = energy marketer has fallen; and it won't be getting back up. The biggest b= ankruptcy in US history will definitely leave its mark on all of us. To th= ink, we thought the troubles of PG&E and the Cal-PX was big news. Arthur= Levitt, former SEC boss, suggests that "Enron's collapse did not occur in= a vacuum ? (and was) ? was partly a result of a culture of gamesmanship a= mong go-go businesses that believe it's okay to bend the rules". This is a= fundamental folly of the industry as people with limited energy knowledge= (and integrity) play games with other peoples money and not understanding= or caring about the consequences. It is not surprising that the stock val= ue of other marketers is also beginning to plummet. So the question of th= e day is: are you acting prudently? It is insufficient to assume that migh= t is right or size is protection. Contracting with the largest does not se= cure your contract; no more than using the largest accounting firm ensures= your books are right. We all leave a paper trail and that trail is visibl= e in a moonless night during a California forced blackout, even if you ord= er your accounting firm to delete the emails and shred the "evidence". In= working with our clients, we have come to see that information does not r= eceive its due respect. Perhaps it's the fault of the Internet and the inf= ormation overload factor, but not respecting information is costly. We hav= e witnessed "lost deals" and poor follow-up. We have seen the cost of not = rigorously following corporate trade, risk credit procedures and surely we= have seen the result of blind faith in the big guys. To this end we activ= ely support our clients to equip themselves to effectively manage large am= ounts of market information. Energy market participants, more so than pe= rhaps other industries, must heed the requirement for prudence. For many p= rudence is a forgotten tradition from the franchise days. Prudence in comp= etitive markets, which all energy markets are to some degree, means a lot = more now than it did in the franchise era. We are all under the purvey of = the public, the investor and the regulators. Not to recognize this fact ca= n have severe economic ramifications. Prudence now means having trade, ris= k and credit policies and procedures, having the tools to manage and analy= ze data and foremost, developing the ability to internally make the right = judgment calls. Call us to see how ZE PowerGroup can help your organizati= on to manage its operation in uncertain markets. For more information vis= it www.ze.com or call Paul Seo at 604-244-1672 or by email paul@ze.com = =09[IMAGE]=09 [IMAGE]=09[IMAGE]=09[IMAGE]=09[IMAGE]=09[IMAGE]=09[IMAGE]=09 [IMAGE]=09=09=09=09=09[IMAGE]=09 [IMAGE]=09[IMAGE]=09=09=09=09You've received this newsletter because your e= mail address is on our mailing list. We hope you find our mailings useful = and insightful. However, if you'd like your name taken off the mailing lis= t through our opt-out system, you can do so by clicking Delete Me From Yo= ur Database . (This will open your default mail application with the subje= ct line already filled in.)=09 [IMAGE]=09[IMAGE]=09=09=09=09[IMAGE]=09