Dynegy Inc Chairman Chuck Watson said he's convinced Enron Corp's trading operations are sound and described disclosures about affiliated partnerships that helped drive Enron's stock down 67 percent in three weeks as "financial noise."
Dynegy agreed Friday to buy Enron for at least US$23 billion, including at least US$8 billion in stock and US$15 billion in assumed debt. In an interview after the merger announcement, Watson and Enron Chairman Kenneth Lay discussed how the Houston-based companies reached agreement less than three weeks after Enron's shares began plunging.
"All the financial noise about the partnerships, maybe it has damaged the Enron brand a bit," Watson said. "But I'll tell you what it hasn't impacted, and that's the high regard that the industry places on" Enron's trading business, he said.
Enron last week restated earnings for four years to include losses from three affiliated partnerships, reducing earnings by US$586 million.
Six employees, out of Enron's 20,000, may have improperly benefited from the partnerships, Lay said.
"I'm sorry those six people seem to have gone somewhat over the edge in their dealings or transactions, but you can't be absolutely protected from that in any business," he said.
Lay didn't specify which six people he was referring to. He removed Andrew Fastow, who helped set up and ran many of the affiliated partnerships, as chief financial officer on Oct. 24. An Enron securities filing says Fastow made more than US$30 million off two of the partnerships.
Fastow "had lost his effectiveness because of all the press coverage" on the affiliates, Lay said.
Treasurer Ben Glisan and Kristina Mordaunt, a managing director and a corporate counsel for an Enron division, also were fired, Enron said in a corporate filing on Thursday. Former employees Michael Kopper, Kathy Lynn and Anne Yeager were in a position to profit from partnerships, the filing said.
"You trust people, you accept their representations and proposals," Lay said. "Sometimes when you do that, you get surprised and disappointed."
Both executives said they expect antitrust regulators to approve the merger because the two companies own different types of assets and won't dominate any market.
"There really isn't anything that lays on top of each other," Watson said Friday night. "We're not in the pipeline business and they are. We're in the generation business, and they're really not."
Dynegy shares rose 6.2 percent on Friday after terms of the Enron purchase leaked to the press. Watson expects the acquisition to add US$0.90 to US$0.95 a share, or 35 percent, to Dynegy's 2002 earnings. Enron is selling for US$10.41 a share, one-fifth the average price over the past 12 months.
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