The head of the once-mighty energy trading company Enron Corp. admitted Wednesday that the company had made some "very bad" investment decisions in the past, as it continues to push through the buyout deal by Dynegy Inc.
But whether Enron President Ken Lay's mea culpa is strong enough for him to forfeit a tidy profit was not made clear in a conference call Wednesday with investors and industry analysts. Lay made no comment then on whether he has declined the so-called golden parachute retirement package. According to his contract, the Enron head is legally entitled to $20.2 million in cash for every remaining year of his contract if he leaves the company within the 60 days of the company being taken over.
That entitles him to a $60.6 million pay-off, but he reportedly told several company officials that he would forsake that sum. Yet, Lay also sold Enron shares between January and July this year before the collapse of the company's share prices for an estimated $27.5 million. Company shares currently are valued around $7.5 billion, compared to their peak of $65.9 billion last August.
Enron is the biggest wholesale power marketing company in the world, operating a gas pipeline system extending 25,000 miles. The company, however, had begun to over-extend itself beyond its core operations, and Lay told investors that it would want to shed its high-speed Internet as well as power operations in India and Brazil.
"In hindsight, we made some very bad investments in non-core businesses," Lay said. He also admitted that the company had overburdened itself with debt, and conducted deals that led to conflicts of interest, which are now under U.S. regulatory investigation.
Enron reported earlier this month of posting a loss of $618 million in the third quarter, and it sees fourth quarter earnings remaining weak as well. Officials said Wednesday that they would be issuing guidance on the current quarter's earnings within the next fortnight, but did not offer any further details.
Last Friday, Dynegy said it would buy out Enron for $10.5 billion, on the agreement that it would also assume $13 billion of Enron's debt. But while the two companies have publicly declared that they hope the deal will be completed by next summer, there is mounting concern that combining the two energy giants would violate antitrust regulations. The Federal Energy Regulatory Commission and U.S. antitrust agencies, as well as various other state and federal institutions must review the negotiations. Issues raised will include what the competitions would be, the total market size, and how and if the companies could be divested.
There is little Enron can actually do in the meantime. Indeed, when questioned about the ongoing investigations about the legality of the buyout, Lay merely stated that Enron would continue to comply with the need of government authorities as needed.
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