Rebecca Mark Quits as Azurix CEO, Leaves Enron Board:
8/25/00 1:45:00 PM
Source: Bloomberg News
URL: cnetinvestor.com
Houston, Aug. 25 (Bloomberg) -- Rebecca Mark, one of the highest-ranking women in U.S. business, quit as chairman and chief executive of Azurix Corp., a water company formed by Enron Corp. two years ago.
Mark, 46 years old, also resigned from Enron's board. She joined Enron in 1982, and rose through the ranks, helping create an international power-plant and energy sales business for what had been just a U.S. pipeline company. One of her best-known accomplishments was helping rescue a $2.5 billion power-plant project in India that ran afoul of local politics.
Enron picked Mark in September 1998 to head Azurix. Disappointing profits have pushed down Azurix shares by 74 percent since Enron sold two-thirds of the company to investors last year. The drop undermined Mark's plan to buy water treatment and sewage businesses using the company's stock, analysts said.
''The goal was to buy up water properties globally,'' said Barry Hyman, chief market strategist at Ehrenkrantz King Nussbaum Inc., owner of a mutual fund that has been buying Azurix shares. ''It turned out to be a feeble attempt.''
Azurix named John Garrison, 39, the company's president and chief operating officer, as Mark's replacement. Herbert Winokur, an Azurix director, was named interim chairman. The company will begin a ''thorough review of our all our businesses, our cost structure and our strategy,'' Garrison said in a statement.
Mark now will be a private investor in other water businesses, Azurix said.
Enron May Sell
Houston-based Enron formed Azurix after buying London-based Wessex Water Plc in 1998 for $2.8 billion in cash and assumed debt. Because of the drop in its stock price, Azurix now has a market value of less than $600 million.
Shares of Azurix, also based in Houston, were sold to investors for $19 a share in June of last year. The shares dropped 9/16 to 5 on the New York Stock Exchange today. Earlier, they touched a record low of 4 5/8. Enron fell 5/8 to 84 7/8.
Municipal water systems around the world are selling their water systems or hiring companies to manage expansion and reduce maintenance costs. Azurix, formed to exploit what analysts expected to be a $300 billion a year business, found the competition for contracts more difficult than it thought. It bought water companies and rights to municipal water companies in Argentina, Mexico and Brazil, but lost the bidding to buy a 49 percent stake in Berlin's water utility to Vivendi SA, a French water company that's much bigger than Azurix.
Enron, the world's largest energy trader, doesn't consider water a core business and will likely spin off or sell its one- third stake in Azurix within a couple years, said Andre Meade, an analyst at Commerzbank Capital Markets Corp.
''They thought they had the in-house expertise to transfer over to the water sector and do well,'' Meade said. ''They've been disappointed. . . and their interest in Azurix is pretty small at this point.''
Azurix shares fell 40 percent on Nov. 4 when the company warned that fourth-quarter profit would miss analysts' expectations. Azurix said earnings would be lower because of costs of expanding and developing new businesses.
Scaling Back
That day ''was the beginning of the end'' for Azurix's strategy because it crimped the company's ability to make acquisitions using stock, Hyman said. On Aug. 8, Azurix shares fell 12 percent when it warned second-half profit would miss estimates as well.
Azurix has scaled back its expansion plans and is now focusing more on entering into joint ventures in the U.S., Hyman said.
''The resignation really means nothing,'' said Hyman, who has no rating on Azurix. ''The best headlines we could see would be Enron, the parent, saying it will still support Azurix.''
Enron and Marlin Water Trust, a private investment group, now each own one-third of Azurix. Azurix had $618 million in sales last year, 1.5 percent of Enron's $40.1 billion. Azurix had $24.2 million in cash as of June 30.
Until July of last year, Mark was a vice chairman at Enron and chairman of the company's international unit. Fortune magazine named Mark as one of the 50 most powerful women in business in 1998 and 1999.
The international business that Mark helped create has grown rapidly for Enron. The company got $9.9 billion in sales outside the U.S. in 1999, more than triple its international sales in 1997.
Conflict in India
Mark's best-known challenge at Enron was staving off the cancellation of its Dabhol project, a $2.5 billion Indian power plant that's big enough to light more than 2 million U.S.-sized homes.
Hindu nationalists accused Enron of bribing local officials to win the project, and used the issue to help get control of the government of Maharashtra state in a 1994 election. The Maharashtra government canceled the project in 1996.
Mark and Enron saved its investment by agreeing to cut electricity rates and giving the state government the right to buy a 30-percent stake. In return, the government increased the size of the plant.
Enron's stock has almost doubled this year as the company's electricity and natural gas trading business has grown, and the company has expanded into telecommunications, including the trading of space on fiber-optic networks.
Mark sold 104,240 Enron shares on May 3 for $74.59 each, or $7.8 million, according to Washington Service, which tracks insider buying and selling. The sale brought Mark's Enron holdings to 31,528 shares.
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