Clock Ticking for Enron to Save Trading Operation

Time may be running out on Enron Corp.'s plan to resurrect its energy trading operation from bankruptcy's ruins, as customers that fled during its collapse become harder to recapture, experts say.

Enron's gas and electricity trading unit, which powered the Houston-based company to the No. 7 slot on the Fortune 500 list of large companies, still has its best traders and its state-of-the-art EnronOnline Internet trading platform.

But nearly all of Enron's clients have taken their business to solvent trading houses, and winning them back becomes a taller order as they become comfortable elsewhere, analysts said. That could lead such banks as J.P. Morgan Chase & Co. and Citigroup that Enron is wooing to back its trading operation to desist, if a deal is not closed soon.

"Enron did a good job of creating a market. But (EnronOnline) is just software and people. The longer it takes, the less likely it will ever be revived," said one Houston-based electricity trader.

Ultimately, he said Enron's Chapter 11 bankruptcy filing two weeks ago had dealt EnronOnline a fatal blow. The filing for creditor protection was the biggest in U.S. history.

The early big winner in capturing Enron's burned customers is the Atlanta-based IntercontinentalExchange (ICE), which has been setting trading volume records since Enron disintegrated.

ICE has the added advantage of being owned by a consortium of some of the biggest financial houses and energy trading operations in North America, providing ready liquidity to the fledgling exchange. Enron wants to reconstitute itself in that image, and it may yet prove an effective strategy.

Chief Financial Officer Jeff McMahon on Wednesday said Enron is talking with three bidders for a controlling stake in the trading unit, which sources have identified as J.P. Morgan and Citicorp, two of Enron's biggest creditors, and UBS Warburg. Enron may auction the unit to attract other buyers and raise the price it might command, McMahon said.

Regardless of the big names and seriousness of the talks, some doubt the viability of Enron teaming up with a bank.

"Three banks and a bankruptcy judge running EnronOnline? Can you imagine it?" Sanders Morris Harris analyst John Olson joked during a recent speech in front of petroleum executives, drawing guffaws of laughter.

Olson suggested that a large oil and gas company would have a better chance of success, with its money and credit to back the operation, and the savvy to run it well.


Enron is banking on expectations clients will return if it can offer the best prices, as the company once was able to do because of its massive volumes. As recently as six weeks ago, Enron daily handled a quarter of all of the gas and power trades in North America.

"It's fine with us if EnronOnline is revived. If they can get the credit, we'll trade with them," a Texas-based natural gas dealer said.

That remains to be seen. Enron is doing its best to keep the core moneymaker intact, recently paying 75 traders a total of $50 million to stay with the company long enough for it to arrange the sale and put the unit back into action.

"Certainly the great majority of our gas and power business people are still present and employed," Enron spokesman Eric Thode said, referring to the roughly 500 traders, analysts and other support people that work there.

EnronOnline is up, Thode said, but in a read-only mode that requires anyone interested in conducting business with Enron to do it the old-fashioned way: by telephone. In television ads that ran in heavy rotation on cable networks, EnronOnline was touted as replacing the "dark" way of trading -- which it depicted with screaming traders shouting into telephones -- with Internet ease.

When asked how much trading activity was going on, Thode answered: "I couldn't say."