"Mr Lay would remain on the board following the takeover, sources said, but it was unclear if he would have an operational role."
Ah, so they've added a meeting room in the public area of the penitentiary now, huh ?
business.scotsman.com.
ENRON, the US energy trading giant whose fortunes have collapsed in recent weeks, could be forced to sell its main British assets under the terms of
a £5.5 billion takeover being considered by smaller rival Dynegy.
Enron owns Wessex Water, which it bought for £1.4bn in 1998, and several gas-fired power stations in Britain, including a 1900MW Teesside plant.
It recently announced deals to run the energy management operations of Sainsbury’s and Guinness.
However, Dynegy - which is paying £421 million for BG’s gas storage business in a deal expected to be concluded next month - is famed for its
tight-fisted financial management and has previously shied away from the British power generation business, citing inflated prices.
As part of the acquisition Dynegy would be taking on Enron’s £8.8bn debt, and sources close to the deal said Dynegy would quickly look to sell some
of Enron’s non-core assets to pay down the debt.
The two firms confirmed yesterday that they were in talks about a takeover, which would see Dynegy pay a fire-sale price of about one tenth of the
£48bn Enron was valued at just one year ago. Enron’s shares have lost 90 per cent of their value this year, going into free fall in the past two weeks
after it sacked finance director Andrew Fastow for unusual partnership transactions off-balance sheet.
These forced it to take a £688m one-off charge and cut shareholder equity by £826m.
Two other senior officials, including Enron’s treasurer, were fired yesterday following their involvement in the Fastow deals, which are being
investigated by the US Securities and Exchange Commission.
As part of the purchase deal, Chevron Texaco, which owns a 27 per cent stake in Dynegy, would give Enron a cash infusion of at least £1bn up front
and an additional £680m when the deal closed. The final deal could be announced as early as this afternoon.
A takeover by Dynegy would represent a remarkable humbling of Enron, America’s largest energy trader. As recently as last spring, Enron was
idolised by investors as an innovator that had dominated the US’s deregulated energy markets.
It would also vindicate Dynegy, which took a more measured approach to doing business in those markets, and other critics of energy deregulation
who said Enron’s energy trading was ruthless, its finances murky and its power and influence too extensive.
The company’s chairman and chief executive, Kenneth Lay, is a close friend of US President George W Bush. He has been one of Mr Bush’s largest
campaign contributors, and no other energy company gave more money to Republican causes last year than Enron. Mr Lay would remain on the board
following the takeover, sources said, but it was unclear if he would have an operational role.
Meanwhile, Enron was due to meet its creditors today about the company’s continuing crisis.
Sources close to the deal said the company hoped that a deal with Dynegy would calm the storm that has engulfed the company and led other energy
companies that trade with Enron to curtail their credit exposure to the company.
Besides worries about the huge losses and the SEC investigation, investors and creditors are nervously watching Enron’s credit rating. Moody’s
Investors Service and Standard and Poor’s have already cut the rating to two notches above junk status, and on Monday, Fitch cut it to one notch
above junk. |
