Enron Corp. Chairman Ken Lay Wednesday sought to reassure Wall Street analysts and investors the company will do whatever is necessary to rebuild faith in its sagging stock price.
He said that includes divesting $4-5 billion in assets within 2 years, and doing a better job breaking down specific performance numbers on the energy conglomerate’s business units.
“We’re going to have a pretty interesting report card to show,” at year’s end, Lay told the Lehman Brothers Energy CEO Conference. Wall Street analysts have criticized the company for not detailing enough specifics about its operations.
Among the items Enron plans to unload in the near future include power plants on the US West Coast and India. Whether those asset sales will be enough to pull Enron back to highs of $80/share remain in doubt, although most analysts expect some kind of recovery. The stock was off $2.55 to $32.45 in mid-afternoon trading.
Lay said in a brief interview following his remarks that his primary message to Wall Street analysts is to look at the company’s track record: “sustained rapid growth in earnings of 20% and higher (per share) per year.”
The company’s stock had taken a major beating in the past several months because of the oversaturated broadband market in which Enron holds a sizeable stake. And an across the board depression in energy stocks helped drive stock prices down as well.
Adding insult to injury was the sudden and unexpected departure of Lay’s successor Jeff Skilling last month. Some analysts remain unsatisfied that Skilling left for purely personal reasons, and are waiting to see if more information materializes later that might have an impact on the company’s future performance.
Other Enron market watchers say that Enron’s board of directors may have demanded Skilling’s departure following the dramatic drops the stock price suffered after the bottom fell out of the broadband market.
“Maybe Skilling was too good a salesman,” noted one large institutional investor.
Lay in repeated interviews to the media has praised Skilling’s performance and offered no ulterior motives for his CEO’s quick exit other than for personal reasons.
In his remarks before Lehman Brothers, Lay however bluntly acknowledged that broadband services unit “obviously suffered a meltdown” which he attributed to the absence of creditworthy customers. But he added he expects the unit to regain strength within 2-3 years “and may become a significant area of growth for the company.”
Lay was particularly enthusiastic about what he sees as Enron’s growing role as a wholesale energy supplier nationwide. Enron said currently only about 25% of the US electric wholesale market is available to competition. (Gas wholesale markets are been open to interstate competition).
But recent action by the Federal Energy Regulatory Commission to move toward formation of four regional transmission organizations (RTOs) is “very favorable” and could open up the remaining 75% of the electric market to competition, Enron said. The company also said it hoped to expand its energy marketing presence in Europe, although energy restructuring of gas and electric market is “4-5 years behind the US.”
Lay later indicated in an interview that concerns over the botched restructuring of California’s electric wholesale and retail markets were unlikely to dampen wholesale and retail competition in other parts of the country.
“There is less pressure, less name calling” in California, he said, and now more time to get down to the business of fixing some of the fundamental problems that occurred in the past year, he said.