4 Jan 2002 – Enron said today it would allow Dynegy to exercise an option to buy the lucrative Northern Natural Gas pipeline, which was a feature of the abortive merger terms between the two companies. Dynegy had been pursuing a legal action to force Enron to honour the terms of the deal and this action will now be dropped.
Access to the Northern Natural Gas pipeline significantly increases Dynegy’s position in the gas market although Dynegy said it would extend Enron’s option to buy back the pipeline to 30 June.
Dynegy entered into discussions to rescue Enron following a collapse of market confidence but the talks ended in December. Enron is seeking $10bn in damages for claimed breaches in the merger pact and this action is continuing.
Dynegy said it would pay Enron a $23m exercise price at the closing of the pipeline deal, subject to some adjustment. Dynegy originally filed its suit over the 16 500-mile pipeline, the heart of Enron’s system, as collateral in a proposed merger deal between the two.