CalPERS and Enron Create $1-Billion Energy Fund

The California Public Employees’ Retirement System on Tuesday said it is creating a $1-billion energy fund with Enron Corp., their second such venture.

The $126-billion CalPERS, the largest U.S. public pension fund, and Houston-based Enron, one of the biggest U.S. natural-gas companies, will each put $500 million into Enron II, which will invest in energy-related properties and businesses involved in natural gas, crude oil and electricity.

The first fund, created in 1993 with $250 million from both sides, returned about 23% a year until the fund was liquidated last year, CalPERS said.

“Enron is a high-quality partner with an excellent track record,” said Charles Valdes, chairman of CalPERS’ investment committee.

The new fund will invest as much as 40% of its assets overseas. The first fund was limited to investments within North America.

Enron hopes to duplicate the “enormous success” of the first venture with CalPERS, said Enron spokeswoman Karen Denne.

“We’ve got a great track record with CalPERS, and this fund is a source of substantial capital with one investor,” she said.

In related development, Enron II and the Ontario Teachers Pension Plan Board completed the purchase of 7% of Enron’s retail energy business for $130 million to offset the cost of expanding retail energy sales.

Enron’s shares fell $1.25 to close at $38.75 on the New York Stock Exchange as the company’s news was overshadowed by concern about falling oil prices, analysts said.

Enron was created in 1997 to provide natural gas and electricity in states preparing to deregulate.