Dynegy, Enron in court over Northern Natural Gas Pipeline

Enron Corp. and Dynegy Inc. have gone to court over ownership of Enron's largest pipeline Northern Natural Gas, after Dynegy terminated a proposed merger deal between the two Houston energy companies. As one of its core businesses, Enron excluded the pipeline group from its bankruptcy protection filing Sunday in a New York federal court.

By the OGJ Online Staff

HOUSTON, Dec. 3 -- Enron Corp. and Dynegy Inc. have gone to court over ownership of Enron's largest pipeline Northern Natural Gas, after Dynegy terminated a proposed merger deal between the two Houston energy companies.

As one of its core businesses, Enron excluded the pipeline group from its bankruptcy protection filing Sunday in a New York federal court. "The transportation business is open and operating as usual," Enron said in a statement.

Enron asked the court to reject Dynegy's claim to the 16,500-mile Northern Natural Gas Pipeline, which extends from Texas to the Great Lakes region. In a lawsuit filed in Harris County district court Monday, Dynegy asked a judge to enforce a deal awarding the pipeline to Dynegy in exchange for $1.5 billion in cash, under terms of the now-terminated merger agreement with Enron.

Dynegy claimed it gets the pipeline in exchange for the cash infusion that Dynegy's major stakeholder ChevronTexaco Corp. contributed to the proposed deal. Dynegy said it has the right to take possession of the pipeline in 2 weeks.

But in a Monday conference call, Dynegy Chairman Chuck Watson admitted that it might be as long as 6 months until Dynegy gets the "keys" to the pipeline since both companies claim it. "We have protected the pipeline economically, even if we can't get immediate possession," Watson said. "It's irritating when we have a clear right to the pipeline."

If Dynegy wins possession of the pipeline, it would also take on an additional $950 million in debt, including a $450 million cash infusion extended to Enron recently by an investment bank and collateralized by the pipeline.

Enron said as soon as it receives debtor-in-possession financing, the company will be able to "fulfill obligations associated with operating its business including its employee payroll and payments to vendors for goods and services."

The pipeline subsidiaries excluded from the bankruptcy filing include Northern Natural Gas Pipeline, Transwestern Pipeline, and Florida Gas Transmission. Northern Natural Gas has a maximum capacity of 4.3 bcfd.

Transwestern, with 1.7 bcfd of capacity, serves California from the San Juan, Permian, and Anadarko basins. Florida Gas has current capacity of 1.5 bcfd with expansion plans for 600 MMcfd. Total throughput for the system in 2000 was 9.13 bcfd.

The pipeline group contributed $391 million to Enron's income before income taxes in 2000. Besides the utility Portland General Electric Co., which is being sold, the pipelines contributed more to earnings than any other Enron segment, excluding the marketing and trading group that is now essentially shut down.

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