Enron to Create New Company for Assets Outside U.S. (Update5)
Houston, May 9 (<a href=quote.bloomberg.com>Bloomberg) -- Enron Corp., the world's largest energy trader before declaring bankruptcy in 2001, plans to form a company for most of its overseas utilities, plants and pipelines after failing to get adequate bids for the assets.
The new company will be governed by an independent board, turned over to creditors and protected from liabilities related to the bankruptcy, Enron said in a statement. The assets encompass 19 companies in 12 countries and Guam, including Elektro, an electric utility in Brazil, and SK-Enron, South Korea's largest natural-gas distributor.
Enron had said in August that it would auction the assets to help repay more than $50 billion to Citigroup Inc., J.P. Morgan Chase & Co. and other creditors. After reviewing bids, Enron interim Chief Executive Stephen Cooper and other company officials decided to keep the businesses.
The market response to these assets was very, very cool,'' said Robert McCullough, an energy consultant in Portland, Oregon, who has reviewed some of Enron's assets. This new effort is just another round in a sequence of attempts to package the same troubled assets.''
Houston-based Enron in December 2001 filed what was then the largest bankruptcy in U.S. history. Since then Cooper, a bankruptcy specialist who was named chief executive in January 2002, has been working on plans to repay the creditors, either by selling parts of the company or resurrecting its businesses.
New Company to Take Most Workers
About 8,000 of Enron's 12,000 employees will become part of the new company, temporarily named ``InternationalCo,'' spokesman John Ambler said. Shares of the new company will be given to creditors. He declined to disclose the value of the assets or say how much debt would be erased after the transfer is completed.
The decision has been made that the greatest value for the estate would be to continue to operate'' the international businesses, Ambler said. We consulted extensively with the creditors, and given the current circumstances, they concurred that this was the best approach.''
The new company's formation requires approval from the bankruptcy court and the consent of the Unsecured Creditors' Committee, the statement said. Other creditors include Bank of New York, ABN Amro Bank NV and the energy-trading unit of Duke Energy Corp.
Luc Despins, a lawyer who represents the creditors' committee, did not immediately return a call seeking comment.
Overseas Assets
Enron is continuing an auction for Portland General Electric, an Oregon utility, the statement said. The company also is still trying to auction off its 47.5 interest in Eco-Electrica, which has a liquefied-natural-gas terminal, a power plant and a desalinization plant in Puerto Rico; and a 40 percent interest in Sithe/Independence Power Partners, which has a power plant in Scriba, New York.
InternationalCo would include Enron's interests in power plants in Brazil, Poland, Turkey, Guatemala and the Dominican Republic.
The assets also include a 1,866-mile (3,002-kilometer) gas- pipeline system that transports fuel to consumers in Brazil from wells in Bolivia; Transredes, the largest oil and gas-collection and distribution network in Bolivia; Vengas, a distributor of liquefied petroleum gas in Venezuela; and CentraGas, a 357-mile gas pipeline in Colombia.
Formation of InternationalCo marks Cooper's third strategy to save Enron, which once ranked seventh on Fortune Magazine's list of the largest U.S. companies, said McCullough, the Portland consultant.
Cooper in May 2002 announced a plan to form ``OpCo Energy,'' which would emerge from bankruptcy as an energy production and distribution business in North, Central and South America. The company scrapped that plan when Enron said it would auction the assets.
Pipeline Company
Enron stopped efforts to auction its three North American natural-gas pipelines in March, when the company announced a plan to form ``PipeCo,'' which would emerge from bankruptcy as a creditor-owned operator of the pipelines.
Enron's international assets may have limited value, McCullough said. Elektro, the Brazilian utility, has been hurt by economic troubles in that country and a drought that has crimped its power supplies from hydroelectric dams, he said. And there are legal disputes over the ownership of the power plants in Turkey and Poland.
They're monetizing this grab bag of damaged assets by putting them in an entity large enough that people are supposed to overlook the faults,'' McCullough said. We've not reviewed one of these assets that really felt like an opportunity, and since there are so many assets on the market right now, it's awful hard to get this far down the list.''
Enron is trying to resolve the ownership questions before the new company is formed, said Ambler, the spokesman. And the problems with the Brazilian utility may be temporary.
Between now and the time that we form InternationalCo as part of the plan for the reorganization, we'll be working to resolve the outstanding issues involved in each of the businesses,'' Ambler said. The assets themselves all continue to have good cash flow.''
Last Updated: May 9, 2003 16:07 EDT