Enron Conducts Auction of Its Key Trading Business

Struggling to stay alive, Enron Corp. conducted an auction Thursday for control of its core energy trading business and is expected to reveal the winner today in U.S. Bankruptcy Court.

Enron has virtually shut down its once-dominant trading operation since it filed the largest bankruptcy in U.S. history Dec. 2, but has been able to hold on to many of its valuable traders by paying hefty retention bonuses, even as the company laid off more than 4,000 workers with a payment of $4,500 each.

Enron conducted the auction Thursday with several bidders in the office of its New York bankruptcy lawyers, Weil, Gotshal & Manges.

At least six companies reportedly are trying to buy part of the trading operation which once handled an estimated 25% of the wholesale trading of electricity, natural gas and other energy products in the United States. Enron wants to retain a 49% stake in the trading business.

Citicorp Inc., a big Enron creditor, has confirmed that it submitted a bid, and UBS, another large bank, also reportedly is among the bidders. BP, the London-based oil giant, has said it submitted a $25-million offer for assets that include the computer system that runs Enron’s trading operation.

Analysts have estimated that Enron’s trading business could pull in as much as $1.5 billion, a tiny fraction of its former worth. In 2000, the trading business generated about 90% of Enron’s nearly $101 billion in annual revenue.

The Houston-based company is expected to bring the winning offer to Bankruptcy Court for the Southern District of New York this morning, although the company said it could request more time from Judge Arthur J. Gonzalez if necessary. Some creditors have already asked Gonzalez to delay the decision or place the proceeds in an escrow account so that the money would be available to repay creditors. A spokesman for Enron’s lawyers said a deal probably would be announced either in Bankruptcy Court or shortly before this morning’s hearing.

Enron attorney Martin Bienenstock told Bloomberg News Service that at least six companies were working on bids.

“Every bidder has a different offer and some proposals are more complete than others,” he said.

Despite its woes, Enron struggled to maintain its trading business, which processed an estimated $2 billion in transactions a day. But since early December, Enron has not run its electronic operation, EnronOnline. Instead, customers were directed to conduct trading over the telephone.

Competitors have reported an increase in business since Enron’s troubles began.

Enron shares fell 12 cents to 67 cents on the New York Stock Exchange.