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Strategies & Market Trends : Mr. Pink's Picks: selected event-driven value investments
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To: Kevin Podsiadlik who wrote (17179)10/11/2002 2:51:03 PM
From: ItsAllCyclical  Read Replies (1) of 18998
 
>> Enronitis Germ Lives on in Utilities <<

Here is the crux of Cramer's problem in comparing ENE to EP. ENE went under precisely because they shed all their physical assets (their E&P side) looking to become a pure-play in the trading sector. When they ran into problems they had no reserves so to speak. The IPP's are going down due to debt load and reliance upon ENE and that sub-sector of the energy business.

EP still has substantial physical assets. Only a small part of their business came from ENE type transactions. Only 800 mil of EP's debt is coming due next year and they have cash flow of over 3 bil. When the CA crisis hit EP didn't go out and build massive amounts of infrasture like some of the IPP's (CPN). As such their debt is very manageable.

In a worst case scenario they can always cut the dividend which is about 500 mil/year. If they don't cut it soon the shorts surely aren't going to enjoy paying the 15% annual dividend as it comes due quarterly.

Is anyone out there saying that TYC is going to 0? No. In spite of their accounting issues they still have substantial assets. But because EP has a small portion of their business in Merchant trading it's suddenly painted with the same brush as ENE.

ABSURD.
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