Although many might want Enron Corp.’s once remarkable trading platform to resume as soon as possible, several factors may delay a quick start-up of the proposed UBS AG-Enron wholesale trading arm. The two companies may have come to terms in a 10-year deal, but the transaction faces the scrutiny and ultimate decision of the bankruptcy court handling Enron’s case and several federal authorities. It also faces the blessing of creditors, who would have 10 days following a court’s decision to appeal.

Judge Arthur J. Gonzalez of the Southern District of New York Bankruptcy Court held a hearing on the transaction on Friday but no decision was made prior to press time.

What UBS bought, for basically no money down, is Enron’s intellectual capital — its software and employee skills. In a 68-page master agreement released Tuesday, the Swiss-based investment banker agreed to split the profits from Enron’s wholesale energy trading and marketing unit over a 10-year period. Enron Corp., Enron North America Corp. and Enron Net Works LLC signed a master agreement with UBS that was worked out over the weekend and finally released in the early morning hours last Tuesday.

Under terms of the agreement, UBS Warburg, a unit of UBS AG, would take over the trading unit and pay Enron 33% of the profits over a period of up to 10 years. UBS would assume no liabilities from Enron’s business. UBS Warburg would have the right to buy one-third of Enron’s royalty interest in the third year based on an amount of the previous year’s profit. UBS Warburg then could buy another one-third of Enron’s business in the fourth year of the contract and another one-third in the fifth year, according to the agreement.

UBS would license “certain intellectual property used in the gas and power business, receive from them information technology support services necessary to operate the gas and power business…lease certain office space from them for the conduct of the …business and employ certain of their personnel relating to the…business.” The master agreement noted that “Enron and certain of its subsidiaries intend to continue in the management and possession of their assets and businesses as debtors-in-possession in the Chapter 11 case.”

One employee who will work for UBS is current Enron President Lawrence “Greg” Whalley, but most of the 800 or so employees still being paid by the bankrupt company may be expected to work for UBS as well — including about 100 energy traders. Whalley has worked for Enron since 1992, beginning as an associate in the finance division. He later held positions in risk management and natural gas trading. In 1996, he headed the European commodity trading divisions, including oil and refined products. Whalley was chairman and CEO of Enron Net Works, president and COO of Enron North America and CEO of global risk management for Enron Corp. Before being tagged by CEO Kenneth Lay last August to assume the president’s role, Whalley was president and COO of Enron Wholesale Services.

Enron received a $25 million deposit check on behalf of UBS, which will be returned at closing. Closing is scheduled for the first business day following the date when all of the conditions have been “satisfied or waived,” which is expected to be within 30 days.

UBS Warburg would lease from Enron the trader’s office space in Houston and also would lease office space from Enron in Portland, Toronto and Calgary. Portland is headquarters of Portland General Electric, which Enron is in the process of selling to Northwest Natural Gas Co.

Besides bankruptcy court approval, the agreement also has to have approval by the Federal Trade Commission and the Department of Justice, and the companies said last week they planned to file with them “within five business days,” according to documents filed last Tuesday with the Bankruptcy Court.

“This is an extremely positive deal for Enron and its creditors that confirms the substantial value of Enron’s trading operation,” said Enron CFO Jeff McMahon. “We believe this is the first step among many towards an overall plan of reorganization and planned emergence from bankruptcy.”

How positive is the deal for UBS? Although the company paid no upfront cash for Enron’s crown jewel, it will most likely have to invest up to $2 billion to start up the energy trading operation and resurrect the once untouchable business. Of the 800 employees still being paid by Enron (of what was once around 19,000), about 100 of them are within the trading unit and have had little if anything to do since December. Already, IntercontinentalExchange, Dynegydirect, Aquila and Mirant have indicated that their trading businesses have substantially improved since Enron imploded.

However, UBS, one of the leading investment banking companies in the world, was interested in making money, noted a source. “They’ve got some of the best in the business [at Enron] ready to do some deals. I couldn’t put a timetable on it, but once they get the green light, you might see a lot of people coming back,” said one analyst. “UBS is AA-plus rated…their deal is making money for other people. It will take some time, but if the traders are patient, eventually, the good ones will win out.”

It’s still too early to tell what sort of business the new company would become, noted other analysts, most of whom remained tight-lipped about the transaction. With Enron’s reputation destroyed in such a short period of time, many may still be “shell-shocked” and not want to have anything to do with the company. “That’s something UBS is going to have to overcome,” said one analyst who did not want to be identified. “Enron’s name is basically dirt right now.”

However, he noted that some of what UBS has to overcome will be in the details. Since UBS is buying into the intellectual capital of the company as much as anything, its incredibly efficient EnronOnline platform may hold the key. It was the platform of choice for many, once so dominant that it stood in a class by itself. If, as he pointed out, Enron is allowed to “franchise” the system by offering it to other traders, UBS stands to make a lot of money — and Enron will share in the profits.

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