Download - Enron Final Oct13

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Enron

Intro: Herman MarinEarly History: Tammekca HendersonLater International History: Calvin WongScandal: Rafa Eaton/ Ray VasquezRecovery: Mina ChoiConclusion: Herman Marin

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Intro

Herman Marin

The Enron Scandal: One of the largest bankruptcies in United States history

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Intro

• Enron was founded in Omaha, Nebraska in 1985 with the merger of Houston Natural Gas and Internorth.

• The company headquarters were originally in Omaha but moved to Houston by Kenneth Lay, the new CEO of Enron. Enron was one of the worlds leading electricity, natural gas, pulp and paper, and communication companies.

• Originally Enron was involved in transmitting and distributing electricity and natural gas through the U.S. then as the company developed they built and operated power plants and pipelines.

• Enron’s wealth grew due to its marketing and its high stock prices. In August 2000 the value of the stock hit its all time high of $90. From1996 to 2001 they were named “Americas Most Innovative Company” by Fortune magazine as well as “100 Best Companies to Work for in America” in 2001. By Aug. 2001 the stock prices fell to $42 and continued to fall and in Oct. it closed at $15 a stock. Then in Dec. 2001 Enron filed for bankruptcy.

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Early HistoryDomestic Markets

Tammekca Henderson

•Presentation Date: October 6, 2009•Macro Economics/ Professor name..


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Early History: Domestic Markets

• Began as Northern Natural Gas Company in Omaha, Nebraska (1932)

• Reorganized as leading subsidiary of holding company, InterNorth (1979)

• InterNorth largest natural gas pipeline in North America headquartered in Omaha, Nebraska

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• Merged with Houston Natural Gas Company, gas utility headquartered in Houston, Texas

• Former HNG CEO Kenneth Lay became CEO and chairman of merged company, renamed Enron Corporation (1985)

• In 1998, Enron created the Azurix Corporation, which it part-floated on the New York Stock Exchange in June 1999, retaining 35% ownership.


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• The company was formed with an initial public stock offering (IPO) of $800 million and an opening stock price of $22.00, which fell to $2.00 within two years.

• Enron sold Azurix North America and Azurix Industrial Operations to American Water Works for $141.5 million.


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• By 1994 Enron became the largest seller of electricity in the United States

• In 1997 Zond Corporation became subsidiary of newly formed Enron Renewable Energy Corporation

• May 2000, Enron and its new investors, IBM and America Online, launched the New Power Company


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International Markets

Calvin Wong

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• In an attempt to achieve additional growth, Enron pursued a diversification strategy.

• By 2001, Enron had become a corporation that both owned and operated gas pipelines, pulp and paper plants, broadband assets, electricity plants, and water plants internationally. The corporation also traded in financial markets for the same types of products and service

International Market

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• Enron is well known for its actions in India.

• Around 1992 India came to the United States to find energy investors to help India with its energy shortage problems.

• In December 1993, Enron inked a 20-year power-purchase contract with the Maharashtra State Electricity Board.

• The contract allowed Enron to construct a massive 2,015 megawatt power plant.

• Construction would be completed in two phases and Enron would form its own power company to help manage the plant, the Dabhol Power Company.

• The power project was the first step in a $20 billion scheme to help rebuild and stabilize India's power grid.


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• The plant was to be constructed in two phases. Phase one would burn a fuel called naphtha, a fuel similar to kerosene and gasoline.

• Phase one would produce 740 megawatts and help stabilize the local transmission grid.

• Phase two would burn Liquefied Natural Gas, or LNG. The LNG Infrastructure associated with the LNG Terminal at Dabhol was going to cost around $1 billion.


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• The first phase went online May 1999, almost two years behind schedule, and construction was started on phase two. Costs would now ultimately climb to $3 billion. Then everything came to halt.

• The MSEB refused to pay for all the power, and it became clear that getting the government to honor the guarantees would not be an easy task.

• Although Maharashtra still suffers from blackouts, it says it does not need and cannot afford Dabhol's power.

• India's energy sector still loses roughly $5 billion a year. Today, Dabhol, in which Enron had invested some $900 million, sits silent.

• The plant was taken over by Ratnagiri Gas and Power Private limited in July 2005.


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Scandal!

Rafael Eaton


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Decline and Fall

• Mainly stemmed from false profit reporting

• Enron was able to obscure its losses for almost five years


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Enron

• “America’s Most Innovative Company” for six consecutive years

-Fortune Magazine


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Legislation

• Scandal resulted in a lot of new legislation that:

-reformed accounting practices-heightened the ability of the SEC to investigate accounting fraud

• Example: Public Company Accounting Reform and Investor Protection Act (2002)


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Business as Usual

“Politicians… received millions of dollars in campaign donations from Enron during the period when the federal government deregulated the energy industry…”

-Diane Lindstrom


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April 2001:Enron reveals that it is owed more than five

hundred million dollars by bankrupt California energy companies

October 2001:On the 16th, Enron reports a third-quarter loss

of 618 million dollars.

The next day, Enron reveals that due to an error in accounting it had “overstated” the company’s worth by a billion dollars.


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November 2001Enron restates its earnings for the past 4 years,

saying its profits were 568 million dollars less than it had announced previously.

December 2001Enron files for Chapter 11 bankruptcy on

December 2nd

Experts don’t expect the company to “survive bankruptcy intact.”


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Recovery

Mina Choi

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To date Estate has returned total

$21.428 Bill ion

Recovery

October 1, 2008

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• Since November 2004, Enron Creditors Recovery Corp. has returned approximately $21,427,900,000 to creditors in twice-yearly distributions

• Enron will make an additional final distribution to creditors, likely in 2009, of any remaining assets.

• Enron Creditors Recovery Corp., today announced its twenty-fourth distribution to creditors of Enron and its affiliated Debtor companies. Today’s distribution to holders of allowed general unsecured claims and allowed guaranty claims (collectively, “creditors”) totals approximately $828,900,000, consisting of cash of approximately $740,500,000 and Portland General Electric Company (“PGE”) Common Stock equivalents (in the form of cash) of approximately $54,400,000, plus interest, dividends and gains of $34,000,000.

• “Today marks another important milestone in our efforts to maximize the distributions to creditors, as we are pleased to announce that all disputed claims have been successfully resolved and today we are returning the remaining funds from the Disputed Claims Reserve to creditors,” John J. Ray III, President and Chairman of the Board said.

• “The Board of Directors is gratified by our continued ability to generate value for our creditors, with most now receiving returns approaching 52 cents on the dollar, vastly exceeding original estimates under the plan.”

Recovery October 1, 2008

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• Since November 2004, Enron Creditors Recovery Corp. has returned approximately $21,427,900,000 to creditors in twice-yearly distributions

• Enron will make an additional final distribution to creditors, likely in 2009, of any remaining assets.

• Enron Creditors Recovery Corp., today announced its twenty-fourth distribution to creditors of Enron and its affiliated Debtor companies. Today’s distribution to holders of allowed general unsecured claims and allowed guaranty claims (collectively, “creditors”) totals approximately $828,900,000, consisting of cash of approximately $740,500,000 and Portland General Electric Company (“PGE”) Common Stock equivalents (in the form of cash) of approximately $54,400,000, plus interest, dividends and gains of $34,000,000.

• “Today marks another important milestone in our efforts to maximize the distributions to creditors, as we are pleased to announce that all disputed claims have been successfully resolved and today we are returning the remaining funds from the Disputed Claims Reserve to creditors,” John J. Ray III, President and Chairman of the Board said.

• “The Board of Directors is gratified by our continued ability to generate value for our creditors, with most now receiving returns approaching 52 cents on the dollar, vastly exceeding original estimates under the plan.”

Recovery October 1, 2008

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Conclusion

Herman Marin


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Conclusion

• With the fall of Enron due to the accounting fraud, many began to question the accounting practices corporations throughout the United States.

• The fall of Enron lead to the dissolution of the accounting firm Arthur Anderson. Which at the time was one of the “Big Five” accounting firms.

• Following the collapse of Enron the Sarbanes-Oxley Act was passed on July 2002. The act established the Public Company Accounting Oversight Board to oversee the auditors of public companies and to protect the interst of investors.

• In November 2004 Enron emerged from its bankrupsy and on September 2006 they sold Prisma Energy International Inc. their last buisness.

• As of 2007 Enron chenged it name to Enron Creditors Recovery Corporation.

Download - Enron Final Oct13

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