Enron slump continues

Enron disclosed to shareholders a $1.01bn charge in connection to its failed investments in telecommunications, retail energy and water businesses.

In a battle to win over investors, the US company devised a recovery plan. The most attractive aspect was the inclusion of asset sales, but the company’s poor performance slump in Europe and no sign of any improvement in the broadband offshoot overshadowed any good news.

Ken Lay, Chairman, said Enron planned to off load other assets after selling its electricity utility Portland General Electric to Northwest Natural Gas for $1.8bn last month. The news follows announcements from the Houston-based company that it plans to lay-off 500 staff from its European division.

John Sherriff, European CEO, said the group wanted to reduce the work force by between 5-10 per cent to cut costs. This year has proved one of the worst in Enron’s history as it has had to endure a number of setbacks with the Dabhol project in India along with its long-standing battle with the regulatory authorities in California.

Gordon Howald, energy analyst at Credit Lyonnais Securities in New York, said Enron had been criticized over its strategy to increase cash flows. He said: “They [Enron] are trying to slash their work force and are selling Portland General Electric. This is good timing. When financials are under pressure, it probably makes good sense.” Enron denied there would be further job cuts in the US.

One thing in Enron’s favour, is its joint venture with Swiss utility EWZ, for the city of Zurich, which was approved by the city council where both companies will focus on the wholesale markets in Switzerland and neighbouring countries. Currently, the Swiss market is not open to competition but electricity companies trade with each other and with counterparts in other countries. The Swiss are expected to vote on a referendum in June next year on electricity liberalization.

Mirant-Vattenfall talks collapse

Negotiations between US-based Mirant and Sweden’s Vattenfall to create the third biggest electricity group in Germany broke down as the two companies could not agree on a deal.

Despite this, Vattenfall will continue with the formation of the “Neue Kraft” dubbed project, within the German energy market without Bewag, which is 45 per cent owned by Mirant. Vattenfall is confident that the creation of Neue Kraft even without Bewag remains an attractive concept. Vattenfall and the city of Hamburg will now immediately begin planning the realisation of Neue Kraft, although it does not rule out the possibility that Bewag could once again become part of the negotiation process at a later date.

Lars G. Josefsson, president and CEO of Vattenfall said. “The door will always remain open for Bewag to join the Neue Kraft.

E.On aims to complete Powergen deal by spring 2002

E.On, is seeking to finalize its Powergen acquisition by the middle of next year after the deal was approved by the Federal Energy Regulatory Commission (FERC) last month. The companies’ good news follows on from previous approvals from state regulators in Kentucky and Virginia.

With no obstacles facing the German giants’ plans, officials remain confident of completing the deal within the year. E.On’s Ulrich Hartmann, CEO, notes: “We remain on track to complete the deal in spring 2002.”

Both E.On and Powergen announced this year a pre-conditional offer for the takeover for £9.6bn ($13.44bn). In order to continue, the deal requires approval from a number of regulatory authorities in the US, UK and the European Commission.

E.On supplies power to 12m customers compared to Powergen’s 2.4m customers.

Innogy delays Regenesys spin-off

Innogy has delayed the initial public offering of its proposed float of Regenesys, its electrical storage business. It is the latest of a series of initial public offerings (IPO) to be hit by the ailing economy.

The group earlier this year indicated that a 20-25 per cent stake of Regenesys could be floated this year. This was denied by Ralf Leicester, investor relations officer at Regenesys. He claimed that there was no specific time table for the company to proceed with the IPO. He adds: “People have assumed that we would float this year but Innogy has not said this at all. The main factor we look forward to, is to wait for the economy to bounce back before we make any further decisions.”

The Regenesys system works by storing electricity as electro-chemical potential in a system that is more efficient than conventional batteries.

Credit Suisse First Boston, Innogy’s house broker, has valued the off-shoot at £1bn ($1.4bn) but it could be worth as little as £70m under the current market conditions.

News digest

Amerada sell-off: Amerada Hess the US-based oil company has been forced to sell its British gas and electricity supply business due to increased competition from bigger rivals. The sale could reach sums of £150m ($222m). Interested parties could include Scottish and Southern Energy, Powergen, Scottish Power, Electricité de France, TXU and Innogy.

Duke gas sales rise: Duke Energy has reported a healthy third quarter profit, as natural gas and electricity sales in North America have soared to $796m against the $770m earnings generated last year. Duke’s gas future looks promising after it last month announced the acquisition of Canada’s West coast Energy for $8.5bn to expand its natural gas network.

Kvaerner refinances: Engineering and construction outfit Kvaerner concluded refinancing terms with its banks on short and long-term financing of the group. In addition, the banks will merge Kvaerner’s existing loan facilities with a three-year loan. The banks presume that a Rights Issue will be undertaken, securing proceeds of at least NOK2bn ($222m), based on preferential rights for existing investors.

Mirant donates $50m: Mirant will enter into a 10-year investment to fund $50m in initiatives in a bid to tackle the global climate changes. The research will enable the company to track its CO2 emissions and the progress of its mitigation measures.

Scottish profit blow: UK-based Scottish Power has learned its US subsidiary, PacifiCorp, had been asked by Utah regulators to refund $22m due to falling generation tariffs. The parent company revealed that it would lose around $500m by March 2002 as prices would continue to fall within its five state province. Officials at Scottish believe that the cash blow would mean a drop in group earnings by £166m or 9 pence a share.

UK’s 24seven in joint venture: The UK’s utility network operator 24seven, which operates electricity networks in London and East Anglia, announced plans to join forces with with a German regional utility Stadwerke Kiel in a 50/50 joint venture to manage electricity, gas and water distribution networks in the northern region of Germany. Commencing from April next year, the five-year deal will allow 24seven to operate Kiel’s networks which deliver gas, electricity and water to 350 000 customers.

Wärtsilä increases biopower: Finnish power supplier, Wärtsilä, will expand its business to include biomass fuelled plants by acquiring Finnish biofuel boiler company, Sermet Oy. The combined output of biomass fuelled power plants currently under construction in Europe totals 1000 MW.