Kenneth Lay, chairman & CEO of Enron

This is a partial transcript from Your World with Neil Cavuto, October 16, 2001.

NEIL CAVUTO, HOST: Tell me what you think is wrong with this picture: Bombs dropping, oil prices dropping. The oil prices dropping part is the strange thing. True enough, but in case you're thinking things stay that way, the chairman of energy giant Enron has a warning for you: Don't necessarily count on it.

I caught up with Kenneth Lay earlier today and got his take on where we go from here.

(BEGIN VIDEOTAPE)

KENNETH LAY, CHAIRMAN & CEO, ENRON: Well, I think what's primarily happening there, of course, is the economy. I mean, the worldwide economy is so weak that we're seeing demand off quite a bit, and of course, in the U.S. you're seeing a lot less travel by, probably the U.S. and elsewhere, but a lot less travel.

So I think unless you have an interruption or a major curtailment by the OPEC producers oil prices could stay kind of soft for a while.

CAVUTO: So you don't see that curtailment happening, or even, for example, something more orchestrated, like a production cut?

LAY: No, I think that could happen, but I think it would take something like that to turn it around just because of the demand situation.

CAVUTO: Do you find it, though, surprising, before we get to your earnings, that this is happening as bombs are falling over there? Normally just the opposite occurs.

LAY: Yeah, but the bombs thus far are not calling where the oil is. Now, that would change it enormously if the bombs started falling somewhere close to some major production.

CAVUTO: All right. Let's talk a little bit about, you know, you beat Street estimates, some of these numbers. You managed a rebound in your stock from where we were when Jeff Skilling left. But there are a lot of concerns out there as to whether you ever revisit those heady days of 84, 85 dollars a share. What say you?

LAY: Well, I think we will, but it'll take a little bit of time. I mean, I think, at the same token that we may not see 80 to 90 dollar prices for a while, I think by most valuation techniques, why, we're certainly still worth a lot more than 33, 34 dollars when we have the kind of strong earnings growth we've been demonstrating in our core businesses

CAVUTO: Does it bug you, Ken, that no one makes a big deal of it when your stock is in the dumper, but everyone was coming after you and demanding energy roll-backs and that sort of thing when you were sky-high?

LAY: That's true. Of course, I guess you're speaking primarily on the California situation.

CAVUTO: Right.

LAY: And certainly, our shareholders -- and Enron, too -- would have been a lot better off had the California situation never occurred. And we did our best to try to help them solve that problem, but at least back in the early days of the problem, why, there didn't seem much interest in trying to solve it. They just wanted to find somebody to blame it on.

CAVUTO: You know, a lot of the power trading activity in this country was cut off right after the September 11th attacks. I don't remember, in the case of Enron, for how long. But can you update us on that?

LAY: Well, as a matter of fact, we did close down early on September 11th, but our people were back working the next morning at 7 o'clock. I think, that first day, we only stayed in business or at least kept Enron online and in business for about half a day, but by the day after that, we were back into full business. And so we really had very little interruption because of September the 11th.

CAVUTO: Now, I know you're very close to the Bush administration and to the President Bush himself, and the president, of course, is trying to sell the American people on the notion that this could be a multi-year effort. Is the corporate community on board with that?

LAY: Oh, I think we are. I think right now virtually all Americans are on board for that. And I think the main reason is that we understand the alternative. I mean, we just cannot continue to live in fear of these terrorist attacks.

CAVUTO: But do you worry that as a major oil player yourself that the boomerang, at least from the Middle East, is on you guys, that you look to be in the hip pocket of the administration, so bash those guys, penalize those guys, make life difficult for those guys?

LAY: There may be some of that, but certainly we don't see that having any adverse impact on our businesses, and as you know, Neil, we're much, much larger in natural gas and electricity in Europe and North America than we are oil out of the Middle East.

CAVUTO: And we should stress that with the 6 percent increase in natural gas bonds, a 77 percent surge in power lines, this is a very different story.

Having said that, though, the recession word is constantly banded about. It's something that stays with us a while. What do you say?

LAY: I think we'll come out of it next year. I can't say if it's going to be the second quarter or their quarter or maybe even fourth quarter, although I'd probably pick one of the earlier quarters versus the later quarters.

But again, we've shown, this most recent quarter, where the economy was very soft, gas and electricity prices were pretty low, that, in fact, we can still make very good money even in a slow economy.

CAVUTO: All right. Now, when Jeff Skilling left after only six months on the job as your president and CEO, your successor, they brought you back. As I was joking before we came on here, bring back Yoda. But there's a concern that there isn't much depth after you, Ken. I don't mean to besmirch your lieutenants. But there is a concern that after you it is slim pickings. How can you assure Wall Street that's not the case?

LAY: Well, it's really quite the contrary. I will say, Neil, that I have the strongest management team now than I've ever had at Enron, and I've had some pretty strong teams, as you know. Going back over 15 years, I've never had the bench strength or depth that I have right now.

(END VIDEOTAPE)

CAVUTO: All right. Kenneth Lay of Enron.

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