Lay tells Wall Street asset sales will boost Enron stock price

Maureen Lorenzetti
OGJ Online

NEW YORK CITY, Sept. 5 -- Enron Corp. Chairman Ken Lay Wednesday sought to reassure Wall Street analysts and investors the company will do whatever is necessary to restore 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 giving enough specifics about Enron's wide range of business operations.

Among the assets Enron plans to unload are power plants on the US West Coast and in India.

Whether those sales will be enough to pull Enron's $35-ish share price back to the historical highs of $80/share remain in doubt, although most analysts expect some kind of recovery in response to its proven balance sheet.

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 of "sustained rapid growth in earnings of 20% and higher (per share) per year."

The company's stock has taken a beating in the past several months because of the oversaturated broadband market in which Enron holds a sizeable stake. A depression in energy stock prices also contributed.

And the sudden and unexpected departure of CEO Jeffery Skilling last month have some analysts wondering if Skilling left for purely personal reasons or if more information will materialize that might have an impact on the company's performance.

Other observers speculate the Enron board may have demanded Skilling's departure following the drop in stock prices.

"Maybe Skilling was too good a salesman," said one large institutional investor.

In media interviews, Lay repeatedly has praised Skilling's performance and has offered no motives for his CEO's quick exit other than for personal reasons.

In his Lehman Brothers talk, Lay bluntly acknowledged the broadband services unit "obviously suffered a meltdown" which he attributed to the absence of creditworthy customers. But he expects the unit will regain strength in 2-3 years "and may become a significant area of growth for the company."

Lay was particularly enthusiastic about Enron's growing role as a nationwide wholesale energy supplier. Enron says that only 25% of the US electric wholesale market is available to competition. (Gas wholesale markets are open to interstate competition.)

But recent Federal Energy Regulatory Commission actions to form four regional transmission organizations is "very favorable" and could open the remaining 75% of the electric market to competition, Lay said.

Enron also plans to expand its energy marketing in Europe although restructuring of gas and electric markets there is "4-5 years behind the US."

Lay indicated in an interview that problems with the restructuring of California's electric market were unlikely to dampen wholesale and retail competition in other parts of the country.

In California, "less pressure, less name calling" has opened the opportunity to address some of the fundamental electricity market problems, he said.

Contact Maureen Lorenzetti at maureenl@ogjonline.com

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