UBS wins Enron auction

Beleaguered U.S. energy giant Enron Corp. said investment banker UBS Warburg was the winning bidder in an auction to buy control of its wholesale energy trading business, and Enron's Canadian trading operations are part of the package.

The troubled Houston-based Enron revealed Friday afternoon that UBS Warburg, a unit of Swiss financial services giant UBS AG, had won out over "numerous bids" for the trading operations, the crown jewel in Enron's assets that accounted for 90 per cent of its $101-billion (U.S.) of revenue in 2000. However, the company didn't disclose the value or any other terms of the proposed transaction, which is part of its restructuring plan after the company made the biggest Chapter 11 bankruptcy protection filing in U.S. history last month.

The company has debts totalling an estimated $40-billion.

Enron and UBS Warburg plan to file documents Monday with the U.S. bankruptcy court in New York providing details of the agreement, at which time Enron's long string of creditors will get their first look at the proposed deal.

The proposal will also be posted on Enron's Web site and a court Web site by 8:30 a.m. EST Monday.

The court plans to rule on the proposal Thursday.

While details of the proposed deal remain hazy, Enron spokeswoman Karen Denne indicated that the company's Canadian trading arm, Enron Canada Corp. of Calgary, is included in it.

"The business that has been part of this auction process does include the Canadian trading operations," she said, adding that the deal Enron negotiated with UBS was for the entire asset package the company put up for auction.

Enron's negotiations with the final two bidders - UBS and New York-based financial services heavyweight Citigroup Inc. - came down to the wire Friday, ending just an hour before a scheduled court hearing at noon EST. As a result, the companies had no time to complete final documentation to present to the court.

"We evaluated numerous bids and, after a period of intense negotiations, believe we have arrived at a deal that represents the highest and best offer for our creditors, shareholders and customers," Jeff McMahon, Enron's chief financial officer, said in a statement issued Friday.

Enron had been looking to sell 51 per cent of the trading business, while retaining 49-per-cent ownership. However, it is unclear what portion of the operations Enron would retain under the UBS offer.

The company said the plan calls for it to "retain a residual interest in the income of the business," but didn't elaborate.

Industry observers believe the Canadian trading operation is an attractive asset despite its parent's deep financial troubles. Enron Canada has asserted repeatedly in the past month that it is still solvent, and recently got a vital $220-million (Canadian) cash injection from the sale of an electricity purchase agreement in Alberta. However, the Canadian unit has said it is out more than $100-million as a result of customers who have walked away from their contracts with Enron Canada, after Enron Corp.'s bankruptcy filing raised grave doubts about the company's continued viability.

Enron Canada officials couldn't be reached for comment Friday. Larry Robinson, a lawyer representing parent Enron Corp. in Calgary, declined to comment on the UBS Warburg bid.

Enron has been shrouded in financial peril and scandal since the fall, when it said, first, that it had previously undisclosed debt that had been kept off its books, and then said its earnings since 1997 had been overstated by $600-million (U.S.). The scandal has widened in recent days, with revelations that the company had contact with several senior Bush administration officials last fall in hopes of getting White House help in securing credit extensions. Enron was a contributor to President George W. Bush's election campaign.

The U.S. Department of Justice and Securities and Exchange Commission are investigating Enron's accounting practices for illegalities. The investigation has now broadened to include Enron's accounting firm, Arthur Andersen LLP of Chicago, which revealed Thursday that some of its employees had destroyed documents related to Enron.

Trading in Enron's stock was halted early Friday by the New York Stock Exchange, pending news of the results of the auction process. Its price at the time of the halt was 67 cents, unchanged on the day. The stock didn't resume trading.