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Enron asset sales could mean end of the road

C Bryson Hull in Houston

Bankrupt Enron Corp put the bulk of its top assets up for sale on Tuesday in a move that, if successful, would dash its plans to rebuild as a stripped-down power and pipeline company.

Enron sources acknowledged that the sale of 12 major assets -- which include Oregon-based utility Portland General and Enron's interest in three major pipelines -- would leave too little behind to allow the restructuring and would be tantamount to a liquidation.

People familiar with the discussions between Enron and its creditors said the sale will also serve the function of deciding whether a liquidation sale would yield more money for creditors than would the restructuring proposed by interim chief executive Stephen Cooper.

"Cooper said the assets were worth more as a going concern than sold separately, and the creditors said 'prove it.' This is designed to see what they're worth," said one of these people, speaking on condition of anonymity. "But if we get good prices for these, you'd better believe they would be sold."

Houston-based Enron said it would not sell if the bids came in too low, a distinct possibility in the currently depressed environment for utility assets -- about $10 billion of which are on the block industrywide, bankers have said -- and the lack of strong buyers.

Final bids for the assets are expected to be due in November, pending bankruptcy court approval. The sale encompasses about 90 per cent of what is left at the bankrupt energy trader, which had plans to be reborn as OpCo Energy Company.

"If all 12 of these things were sold, you wouldn't have an OpCo left," said another Enron source speaking anonymously. "The whole thing is maximising value for the asset. If a sale is the better value, then the asset is sold."

Cooper has always stated that his main concern was squeezing the most money he could out of the Enron estate for creditors.

"This process continues our efforts to maximize value and enhance recovery for our creditors," Cooper said in a statement.

Up for sale are the Transwestern Pipeline that extends from west Texas to California, Enron's half-interest in the parent of the Florida Gas Transmission Co, its indirect interest in the Northern Border Pipeline, plus several Brazilian power plants and transmission assets.

Several other power plants, a Puerto Rican liquified natural gas facility, a small natural gas exploration and production company in the US, and a Canadian paper mill fill out the other offerings.

GOODBYE ENRON?

Cooper, a founder and principal in turnaround firm Zolfo Cooper LLC, has always allowed for the possibility of liquidation if that was the more valuable route, but has said he believes that the assets are worth more as a stripped-down pipeline and power company worth about $10.8 billion.

In May, Cooper and Enron presented to the bankruptcy court plans to create OpCo Energy, predicting that it could earn $1.3 billion in earnings in 2003. Most of the assets now up for sale would have formed the smaller company, which was foreseen to employ about 12,000 of Enron's current 23,000 employees.

The current sale would leave Enron with a smattering of smaller assets, and even those would be sold for the right price, sources said. They include a few Caribbean power plants and some North American gas distribution systems.

Earlier this year, Enron almost sold its Portland General asset to Northwest Natural Gas Co for $1.8 billion, but the deal fell through when Enron said it planned to keep the utility to help build OpCo. Portland General serves over 740,000 retail customers in northwest Oregon.

The Blackstone Group is advising Enron on most of the sales, while Batchelder & Partners Inc is advising on the sale of Mariner, the natural gas exploration company up for sale.

Enron plunged into bankruptcy last December after investor confidence collapsed amid revelations that it hid billions of debt and inflated earnings via a series of questionable off-balance-sheet transactions that led to a massive earnings restatement.

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