ENRON

Presented By : GROUP 1
Abhishek Sharma
Aashna Kaur
Arpit Mishra
Amit Nagpal
 INTRODUCTION

Enron Corporation was an American energy, commodities, and services company based in
Houston, Texas
Founded in 1985 as a natural gas pipeline company.
Fortune named Enron "America's Most Innovative Company" for six consecutive years.
It was also an extensive futures trader, including sugar, coffee, grains, hog, and other meat
futures.
At the time of its bankruptcy filing in December 2001, Enron structured into seven distinct
business units.
Enron, the 7th largest U.S. company in 2001, filed for bankruptcy in December 2001.
Enron investors and retirees were left with worthless stock.
Enron was charged with securities fraud (fraudulent manipulation of publicly reported financial
results, lying to SEC,)
 THE FALL IN AN YEAR : TIMELINE OF ENRONS
COLLAPSE
Date Event
20 February, 2001 Fortune Magazine story calls Enron a highly impenetrable company and stock was
overpriced.
14 August, 2001 Jeff skilling resigned as CFO, citing personal reasons. Kenneth Lay became CEO once again.

12 October, 2001 Arthur Anderson legal counsel instructs workers who audit Enrons books to destroy all but
the most basic documents.
16 October, 2001 Enron reports a third quarter loss of $618 million.
24 October, 2001 CFO Andrew Fastow who ran some of the controversial SPEs was replaced

8 November, 2001 The company took the highly unusual move of restating its profits for the past four years. It
admitted accounting errors, inflating income by $586 million since 1997. It effectively
admitted that it had inflated its profits by concealing debts in the complicated partnership
arrangements.
2 December, 2001 Enron filed for bankruptcy protection on the same day hit Dynegy corporation with a $10
billion breach of contract lawsuit.
12 December, Anderson CEO Jo Berardino testifies that his firm discovered possible illegal acts committed
2001 by Enron.
9 January, 2002 US justice department launches criminal investigations.
 BUSINESS MODEL

In 1985 Enron's life began as an interstate pipeline company throughthe merger of Houston
Natural Gas and Omaha-based InterNorth.
Kenneth Lay, the former chief executive officerof Houston Natural Gas,became CEO, and the
next year wonthe post of chairman.
The firm's business model evolved to focus on two related themes:
the acquisition and operation of power plants and electric distribution companies, and
trading operations in which Enron created markets for trading gas and electricity and
financial securities based on those commodities.
Deregulation generally led to lower prices and increased supply, it also introduced increased
volatility in gas prices
Standard contract(old)--- allowed suppliers to interrupt gas supply without legal penalties.
Creating a natural gas bank(Enron)----Enron began offering utilities long-term fixed price
contracts for natural gas, typically at prices that assumed long-term declines in spot prices.
 BUSINESS MODEL
Off-balance sheet financing vehicles---Special Purpose Entities(SPE) , to finance many of these
transactions.
The gas trading model was a huge success. By 1992, Enron was the largest merchant of natural gas in
North America.
During 1990s Enron hired Jeff Skilling who had helped Enron develop its Gas Bank idea calling for the firm
to become an intermediary between suppliers and end-users in the natural gas market.

In 1999, Enron made several significant advances in extending the trading model including the launch of:
EnronOnline (EOL), the firm's energy trading business that became the world's largest business-to-
business web site. In
Enron Broadband,
Enron NetWorks (focusing on eCommerce), and
Enron Energy Services (providing retail energy products and services to business customers) were
created and appeared to be adding to the firm's bottom line
Growth in enrons trading businesses reflected in segment results
revenue growth of 168%
earning growth of 240%
INTERNATIONAL BUSINESSES

Enron was active in the international energy-asset construction business.

Beginning in 1991, Enron built its first overseas $1.4 billion power plant in Teesside, UK, which
became the largest gas-fired cogeneration plant in the world with 1,875 megawatts.
Dabhol power plant in the western Indian state of Maharastra worth $2.8 billion, was held up by
embittered local politicians.
Subsequently, Enron built power plants in industrial and developing nations all over the world: Italy,
Turkey, Argentina, China, India, Brazil, Guatemala, Bolivia, Colombia, the Dominican Republic, the
Philippines, and others. By 1996, earnings from these projects accounted for 25 percent of total
company earnings before interest and taxes.
In 1998, Wessex Water Co. headquartered in Bath, England as the nucleus for her international
water development company.
Wessex Water was acquired and a new Enron company called Azurix was created.
In 1999 Enron sold 76% on Azurix in a IPO on the New York Stock Exchange.