Enron Canada Corp., which was on the brink of being dragged down by the troubles of its U.S. parent, is making debt payments and now expects to avoid insolvency, its lawyer says.
"Enron Canada has made its payment obligations and intends to continue making its payment obligations," Robert Anderson, a lawyer with Blake Cassels & Graydon of Calgary, said in an interview this week.
The Canadian energy trading unit of fallen Enron Corp. was placed on death watch by the industry last month after its parent and credit guarantor sought U.S. bankruptcy protection, triggering a clause that allowed Enron Canada clients to cancel their contracts.
In a failed court bid last month, Calgary-based Enron Canada had sought an order holding clients to their contracts for 30 days, despite its guarantor's loss of investment-grade status. At the time, Mr. Anderson had argued that cancellation of the contracts -- and clients reneging on payment obligations -- would force the solvent company out of business.
But in the recent interview, Mr. Anderson said enough clients have been making their debt payments that the company has in turn been able to meet its financial obligations, including payments due at the end of December.
"The key factor was sufficient people that owed Enron Canada money paid," he said.
He confirmed the company intends to make payments due tomorrow for the settlement of financial contracts, and on Jan. 25 for the settlement of gas delivery contracts.
So is the company out of the woods?
"The best I could say is Enron Canada is optimistic," he said.
He added that whether the company will carry on new trading business in the long term is still in question.
Two recent developments could help its cause of continuing as a going concern. One was Enron Canada affiliate Enron Canada Power Corp.'s sale of its power contract for the output of the Sundance B generating plant outside Edmonton.
The contract was sold to a joint venture of AltaGas Services Inc. and TransCanada PipeLines Ltd. for $220-million last week. The other was a court victory over IMC Canada Ltd., an Enron client asking to be released from payment obligations of $2.3-million. IMC, which failed in its request, has not made its payments yet.
But while both events could eventually inject more money into the Calgary trader's pockets, when and how much is still unclear.
Meanwhile, the company has lost many of its largest customers in the fallout.
Chris Dawson, a spokesman for Petro-Canada in Calgary, confirmed his company has cancelled its contracts with Enron Canada and does not anticipate entering into new ones at this time.
Brian O'Leary, a lawyer with Burnet Duckworth & Palmer in Calgary, who represented 13 energy companies opposed to Enron Canada's court bid, said most of his clients have taken similar actions.
"Most of my clients have terminated their contracts, and they're not entering new ones," he said.
Attention is now focusing on U.S. bankruptcy court, which is overseeing an auction of Enron Corp.'s trading businesses next week. Observers said the Canadian trading unit could be picked up by a buyer with investment-grade status, potentially giving the Calgary unit a new backer for its business.
Mr. Anderson said the auction could be an important factor to Enron Canada.