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January 4, 2002
1300 IST
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Enron says Dynegy to exercise option on pipeline

Enron said on Thursday it would agree to allow Dynegy Inc to exercise its option to buy the lucrative Northern Natural Gas pipeline, in yet another concession by the former high-flying energy trader.

In a separate statement, Dynegy said it would extend Enron's option to buy back the pipeline to June 30.

Dynegy said it would pay Enron a $23 million exercise price at the closing of the pipeline deal, subject to some adjustments. Dynegy originally filed its suit over the 26,554 km pipeline, the heart of Enron's system, as collateral in a proposed merger deal between the two that broke down.

"We acquired the pipeline under the terms originally agreed upon by the two companies, with the exception of the date extension," Chuck Watson, Dynegy's chairman and chief executive said in a statement.

A speedy takeover of the pipeline is critical for Dynegy, as credit rating agencies consider the legal brawl a potentially major negative issue that could lead them to junk the trader's credit.

The uncertainty around the litigation has also sheared off roughly half of Dynegy's stock value since it pulled out of its $9 billion rescue merger with Enron.

Enron said it was still pursuing a separate suit against Dynegy seeking $10 billion in damages, but said it would settle a Texas suit regarding Dynegy's option to buy the pipeline.

Enron had wanted the Texas case considered in a federal bankruptcy court in New York, which would have automatically put it on hold pending resolution of its Chapter 11 reorganisation. That case, the largest such bankruptcy in US history, is expected to take at least a year.

Enron had claimed that Dynegy's merger pullout was improper and nullified Dynegy's option to buy the pipeline. It was put up as collateral for the $1.5 billion cash Dynegy injected into Enron when they announced their merger plans November 9.

Dynegy said it plans to "fully pursue its claims against Enron" for what it called breaches of the merger pact.

Enron filed a suit against Dynegy on December 2 in New York when it filed for Chapter 11 bankruptcy reorganisation.

ALSO READ:
The Enron Saga

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