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Enron gets bids for trading operations

Two banks have submitted bids for a controlling stake in Enron Corp's dormant energy trading business, moves that may allow the once-dominant business to revive in coming weeks, people familiar with the company's plans said on Tuesday.

Enron, which declared bankruptcy on December 2, received bids from Citicorp Inc and UBS Warburg for a majority stake in the Houston-based energy trading operations.

But a third financial institution that previously expressed interest, J P Morgan Chase & Co declined to submit a bid by last night, the deadline for bids for the Enron assets, these people said.

Citicorp, UBS Warburg and J P Morgan declined to comment on any interest in Enron assets.

Analysts said it's difficult to value the once-powerful trading operation that has virtually shut down, hobbled by worries over Enron's murky finances. The assets being auctioned make up the bulk of Enron's wholesale services business, which generated $94.9 billion in 2000, with $2.2 billion in revenue.

John Olson, an analyst with Houston-based Sanders Morris Harris, estimated the trading business stake could go for $1 billion to $1.5 billion, since ''this thing is going to have to crawl before it can walk.''

However, Robert Chambers, analyst with Lehman brothers, said he anticipated bids of no more than $100 million, since he said Enron is basically auctioning off only ''people, computers and software, but not the book,'' referring to contracts that Enron had forged before its bankruptcy.

''Chances of getting a $2 billion auction bid are impossible, given that they are not selling the book,'' said chambers.

He acknowledged being 'bearish' on Enron, but said there is still Enron, particularly its distressed bonds, which he values at 35 cents on the dollar, even though they are trading at 24 cents.

Another analyst, who asked to remain unnamed, said the operation could command a value of 10 times earnings, or about $10 billion, and any valuation depends on ''a big caveat of whether this trading operation will come back.''

In addition to the banks, British oil giant BP Plc also said it may be interested in the Enron operations, once the world's biggest trader of contracts for natural gas and other energy commodities.

BP said it had submitted a bid of $25 million for a small portion of Enron's assets, including some back office functions and information technology assets. A spokesperson for the London-based company it said it may be interested in other assets but declined to elaborate.

Enron has all but shut down its Houston-based trading operations while it seeks a financial backer that could guarantee contracts for the myriad commodities that it has traded. Enron trading operations generated the bulk of its $101 billion in revenue in 2000.

The company is slated to decide on Thursday whether to accept a bid. Enron lawyers previously stated that the company is not looking for cash bids, but rather an ownership stake of up to 51 per cent. The stake would give the bidder cash flow from the operations, but it would agree to guarantee contracts.

Any bid for the trading operations must be approved by Judge Arthur Gonzalez of the southern district of New York bankruptcy court, which is overseeing Enron's Chapter 11 bankruptcy case.

Enron is offloading the trading operations to generate cash to pay off as much as $40 billion in debt.

Enron collapsed after disclosures of hidden debt in off-balance sheet transactions destroyed investor confidence in the Houston-based company.

Enron's advisors have made it a priority to revive the trading operations, which have all but stalled in the wake of the bankruptcy filing.

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