Search the Internet          Tips  Sites: Finance, Investment

Enron axes European staff as Dynegy fires salvo

Enron Corp. axed workers at its European unit on Friday, as employees elsewhere awaited their fates and former suitor Dynegy Inc. said it would take ownership of the demolished energy trader's key pipeline despite an expected bankruptcy filing.

Out of the 5,000 people employed in Europe, Enron Europe retained about 250 staff members to help wind down the business. It fired 1,100 employees in London alone.

Sources said the company had closed its positions on all mainland European power grids and stopped delivering electricity on Friday.

The dismantling of Enron Europe, which went into the British equivalent of Chapter 11 bankruptcy -- administration -- on Thursday, is seen as a bellwether for its corporate parent in Houston.

An Enron worker in Houston said massive layoffs were expected on Monday -- "thousands upon thousands of people." That source and another close to Enron's bankruptcy efforts said a Chapter 11 filing was likely to happen on Monday or Tuesday. Both stressed that the date was tentative.

Dynegy, which pulled out of its Nov. 9 rescue deal on Wednesday, warned Enron that a bankruptcy would not stop it from taking the Northern Natural Gas Pipeline, since Dynegy would have to approve any such action undertaken by the separate pipeline entity.

Dynegy's $1.5-billion cash injection into Enron on the announcement of the Nov. 9 merger announcement bought it the option to purchase the pipeline, the heart of Enron's system. Dynegy exercised the option on Thursday.

In an interview at his office on Friday, Dynegy chairman and chief executive officer Chuck Watson expressed frustration with the persistent rumor that Enron would sue to block the pipeline acquisition.

"This is a company that has been attacked by the media, the market and their customers as not having integrity, not having credibility," Watson said. "They sat down at a table three weeks ago and negotiated this particular pipeline deal.

"Don't you think it's a little disingenuous to jump up now and say everything we did three weeks ago we don't believe, or we're going to challenge?"

Enron would not comment on its plans or on Dynegy's stance on the 16,500 mile pipeline, stretching from northern Texas to the upper U.S. Midwest. The pipeline was the core asset when Enron was formed in 1985 and is one of the most vital physical assets the company owns in North America.

"There are smart people at Dynegy and they are entitled to their opinion," Enron spokesman Vance Meyer said.

Enron shares, the most visible sign of the company's spectacular collapse, took another tumble, closing down 10 cents, or 27.8 percent, at 26 cents in New York Stock Exchange trade. When the company was riding high, the share price hit a high of $90.56 in August 2000.

End of an era?

An end-of-an-era mood surrounded Enron headquarters, where several television trucks kept up their days-long vigil and the once-buzzing core of Enron was subdued. Three sources said that a group of traders were drinking from kegs of beer on the trading floor as they awaited the bankruptcy filing and their layoff notices.

Meyer said Enron would not comment on rumors.

"I will tell you that there are thousands of Enron people around the world, hard at work today, and keeping our tradition of excellence alive in these difficult times," Meyer said.

With a bankruptcy a near-certainty, banks, lenders and insurers worked hard to figure their exposure to Enron, and the tally rose into the billions. Credit rating agency Fitch said it "anticipates a lengthy and contentious battle over Enron's assets."

In a sign of the complexity of Enron's myriad financial dealings, Lehman Brothers, the financial adviser to Dynegy in its failed takeover bid, said the resolution of a bankruptcy would take years to sort out.

The free-fall was sparked in mid-October when Enron posted its first quarterly loss in more than four years and investors soured on the company valued at almost $80 billion a little more than a year ago after disclosures of murky dealings. The stock now trading for less than the price of a U.S. postage stamp peaked at $90.56 in August 2000.

The fall prompted the U.S. House and Senate to each launch their own probes, and has the U.S. Securities and Exchange Commission is already looking into conflict-of-interest matters involving off-balance sheet partnerships in which Enron executives were also managing partners.

Its trading operations, once the bread and butter and the envy of the trading world, were mostly idle as its partners finished pulling out.

Enron spokesman Eric Thode said there were no metals products listed on EnronOnline, the Internet-based trading system that was the company's highly profitable crown jewel.

Energy traders said there were few forward quotes for natural gas on EnronOnline. Enron was the biggest online trader of natural gas since it helped to create deregulated power markets.

YOU MAY ALSO WANT TO READ:
BG confident it will close Enron India deal
S&P cuts Enron again, warns bankruptcy likely
Fitch sees long, bitter bankruptcy for Enron
The Enron Saga

Tell us what you think of this report