[ENRON LOGO] Enron
P.O.Box 1188
Houston, TX 77251-1188
Mark Palmer
(713) 853-4738
ENRON PROVIDES ADDITIONAL INFORMATION ABOUT RELATED PARTY AND OFF-BALANCE SHEET
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TRANSACTIONS; COMPANY TO RESTATE EARNINGS FOR 1997-2001
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FOR IMMEDIATE RELEASE: Thursday, Nov. 8, 2001
HOUSTON - Enron Corp. (NYSE: ENE) today provided additional
information about various related party and off-balance sheet transactions in
which the company was involved. The information was posted today on the
company's website at www.enron.com/corp/sec and also made available in a Form
8-K Report filed today with the Securities and Exchange Commission (SEC).
Specifically, Enron's filing provides information about:
o a required restatement of prior period financial statements to
reflect the previously disclosed $1.2 billion reduction to
shareholders' equity, as well as various income statement and
balance sheet adjustments required as the result of a
determination by Enron and its auditors, based on current
information, that certain off-balance sheet entities should have
been included in Enron's consolidated financial statements
pursuant to generally accepted accounting principles;
o the restatement of its financial statements for 1997 through 2000
and the first two quarters of 2001. As a result, financial
statements for these periods and the audit reports relating to
the year-end financial statements for 1997 through 2000 should
not be relied upon;
o the accounting basis for the above-mentioned reduction to
shareholders' equity;
o the special committee appointed by the Enron Board of Directors
to review transactions between Enron and related parties;
o information regarding the two LJM limited partnerships formed by
Enron's then Chief Financial Officer, his role in the
partnerships, the business relationships and transactions between
Enron and the partnerships, and the economic results of those
transactions as known thus far; and
o transactions between Enron and certain other Enron employees.
"We believe that the information we have made available addresses a
number of the concerns that have been raised by our shareholders and the SEC
about these matters," said Ken Lay, Enron Chairman and CEO. "We will continue
our efforts to respond to investor requests for information about our
operational and financial condition so they can evaluate, appreciate and
appropriately value the strength of our core businesses."
Restatement of Earnings
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As further described on Enron's website, and its Form 8-K Report,
Enron will restate prior years' financial statements to reflect its review of
current information concerning the transactions discussed below. After taking
into account Enron's previously disclosed adjustment to shareholders' equity in
the third quarter of 2001, these restatements have no effect on Enron's current
financial position.
Based on this review, Enron has determined that:
o the financial activities of Chewco Investments, L.P. (Chewco), a
related party which was an investor in Joint Energy Development
Investments Limited Partnership (JEDI), should have been
consolidated beginning in November 1997;
o the financial activities of JEDI in which Enron was an investor
and which was consolidated into Enron's financial statements
during the first quarter of 2001, should have been consolidated
beginning in 1997; and
o the financial activities of a wholly-owned subsidiary of LJM1,
which engaged in structured transactions with Enron that were
designed to permit Enron to mitigate market risks of an equity
investment in Rhythms NetConnections, Inc., should have been
consolidated into Enron's financial statements beginning in 1999.
Enron's current assessment indicates that the restatement will include
a reduction to reported net income of approximately $96 million in 1997, $113
million in 1998, $250 million in 1999 and $132 million in 2000, increases of
$17 million for the first quarter of 2001 and $5 million for the second quarter
and a reduction of $17 million for the third quarter of 2001. These changes to
net income are the result of the retroactive consolidation of JEDI and Chewco
beginning in November 1997, the consolidation of the LJM1 subsidiary for 1999
and 2000 and prior year proposed audit adjustments. The consolidation of JEDI
and Chewco also will increase Enron's debt by approximately $711 million in
1997, $561 million in 1998, $685 million in 1999 and $628 million in 2000. The
restatement will have no negative impact on Enron's reported earnings for the
nine month period ending Sept. 2001.
Enron is one of the world's leading energy, commodities and services
companies. The company markets electricity and natural gas, delivers energy and
other physical commodities, and provides financial and risk management services
to customers around the world. Enron's Internet address is www.enron.com. The
stock is traded under the ticker symbol "ENE."
This press release includes forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. The Private Securities Litigation Reform Act of 1995
provides a safe harbor for forward-looking statements made by Enron or on its
behalf. These forward-looking statements are not historical facts, but reflect
Enron's current expectations, estimates and projections. All statements
contained in this press release which address future operating performance,
events or developments that are expected to occur in the future (including
statements relating to earnings expectations) are forward-looking statements.
Important factors that could cause actual results to differ materially from
those in the forward-looking statements herein include results of the Special
Committee's review and results of the S.E.C. investigation.
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