Enron, a ticking time bomb
THE EDITOR: Prior to the collapse of Enron Corp the Company had divested itself of substantial interest in Enron Oil and Gas Company Ltd. The explanation for this separation was to facilitate the rationalisation of the two businesses. The latter was renamed EOG Resources Ltd and its financial potential was great. It was well-positioned to take advantage of the oil bonanza that had its genesis in US strategy to re-invigorate its "strategic oil reserve," pushed by Mr Clinton. EOG shares went from less than $10 during the later 1990s, to more than $80 today. In other words, Enron itself became a "ticking time bomb" as from the moment of this divestiture. It left behind in Enron a deficit of real wealth for supporting its obligations. The promise was that its newfound "e-business in energy futures" would "dominate" that market (as yet to be seen) and roll in mega-profits, to meet its commitments in time and surpass them. That did not materialise. It is likely that the off-balance-sheet commitments they would have inherited or gone into, or both, were only dealt with in the way permitted then, based on resources that had, for the time being, been limited and stretched; and the whole thing came crashing down when those derivatives turned the other way, with only emaciated Enron assets to fall back on, remaining. A rational explanation for what those charged with fraud, etc, did, would be that they were only doing what is commonly done in the corporate world there, legally working within and even alongside, a legitimate business plan that had emerged and had been accepted — arguably credible, if they had no control over the framing of the divestiture and were uninvolved in EOG itself. Divestiture failure, designed or coincidental, is well known in the histories of publicly traded companies of the US and Canada, but the scale in this case and the enormity of damage, was novel. ELIAS GALY Port-of-Spain
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"Enron, a ticking time bomb"