Enron Reports 40% Increase in Profit
Energy trader Enron Corp. said Thursday that second-quarter profit rose 40% as its sales of natural gas and electricity surged in California and elsewhere.
Net income rose to $404 million, or 45 cents a share, from $289 million, or 34 cents, in the year-earlier period.
Revenue almost tripled to $50.1 billion. The Houston firm sold almost twice as much power in North America and five times as much in Europe as it did in the year-earlier quarter. The company was expected to earn 42 cents.
Though the prices of electricity and natural gas have soared in California over the last year, Enron Chief Executive Jeff Skilling contended that the state “is just not a big factor” in Enron’s increasing profit. The company boosts earnings by increasing sales of energy and other commodities such as lumber and steel rather than by raising prices, analysts said.
But Enron’s stock has fallen about 30% in the last year. Skilling said the political rhetoric surrounding the California energy crisis, and negotiations over possible power-cost refunds, have hurt the stock price.
“All this noise from California has obscured the performance of the company,” Skilling said.
California is seeking $8.9 billion in refunds from Enron and other traders and generators for power bought in the last year. Skilling said that under the formula used by California to derive that figure, Enron is owed $44 million because it bought more power than it has sold since May 2000.
On Thursday, Enron shares rose 45 cents to close at $49.55 on the New York Stock Exchange.
Investors question whether Enron can continue to post huge gains in sales in its energy and commodity businesses, analysts said. Also, its broadband telecom business has been lackluster, and the unit lost $102 million in the second quarter, compared with an $8-million loss a year ago. Enron said it is firing broadband staff to reduce costs.
Enron was expected to make 42 cents a share in the quarter.
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Flagging Energy
Enron’s stock has lost about 30% of its value over the last year despite steadily increasing profit and sales of electricity and natural gas. But the company’s broadband business has been lackluster.
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Enron, monthly closes and latest on the New York Stock Exchange
Thursday: $49.55, up 45 cents
Source: Bloomberg News
