January 31, 2002

Acting Enron CEO Voices Optimism About Possibility of Salvaging Firm

Enron Corp.'s acting chief executive said he believes that the troubled energy company is salvageable, and he pledged to move "at light speed" to get it out of bankruptcy court.

Yet the surviving corporation that he described -- one "dedicated to movement of natural gas and generation of electricity" -- would be tiny, even when compared with the Enron of a decade ago. In fact, it would resemble the very thing that Enron has disparaged in recent years: a utility.

In a conference call with reporters Wednesday, acting CEO Stephen Cooper said his primary motivation is to maximize value for creditors and "preserve as many jobs as possible. ... There are a lot of people here that deserve our best shot at reorganizing this company."

Mr. Cooper, a restructuring expert whose 20-year-old firm, Zolfo Cooper, has presided over many of the nation's biggest bankruptcies, was named to the Enron job on Tuesday. He succeeds Kenneth Lay, who resigned last week. Houston-based Enron continues to search for a new chairman, a position also formerly held by Mr. Lay.

Asked about the questionable off-balance-sheet transactions and accounting practices that sank Enron, Mr. Cooper declined to comment. "Not only do I not know" what brought the company down, he said, "but it's literally of no interest to me."

Nor would Mr. Cooper speculate about the prospects for liquidation. When you "liquidate in a situation like this," he said, "you have the patina of distress" that pulls down the prices that assets might otherwise fetch.

Mr. Cooper did acknowledge that the company's creditors, in the end, are likely to be treated disparately because of the "extensive nature of the legal entities in the Enron universe." In other words, Enron pledged so many assets to so many different companies, especially as it created a web of off-balance-sheet partnerships, many creditors may find there isn't enough left to meet their claims.

If it does emerge from bankruptcy proceedings, Enron is likely to be a fraction of its former size. Mr. Cooper said he envisions a company "based on hard assets with predictable revenues and cash flow." That is precisely the business model that, until recently, Enron rejected as old-fashioned as it pushed into a world of "virtual assets," anchored by a massive energy-trading operation. Meanwhile, Enron this month lost its biggest and most profitable hard asset -- the Northern Natural Gas Pipeline -- as a condition of its failed merger agreement with rival Dynegy Inc.

Turning to another matter, Mr. Cooper said he expects the results of a special internal investigation, launched as the company slid toward bankruptcy late last year, to be released in coming days. He said senior executives would take "whatever actions are appropriate" in consultation with the creditors' committee to respond to the report's findings. The investigation has been conducted with assistance from William McLucas, former enforcement chief at the Securities and Exchange Commission, and accountants from Deloitte & Touche LLP. Mr. McLucas is now an attorney with the firm Wilmer Cutler Pickering in Washington.

Also Wednesday, Enron President Jeff McMahon said the company is continuing to interview accounting firms, looking for a replacement for Arthur Andersen LLP.

Write to Rebecca Smith at rebecca.smith@wsj.com²

Updated January 31, 2002 12:01 a.m. EST