The NewPower Co., the national retail energy provider founded by Enron, IBM and America Online in May of last year, said Enron’s bankruptcy has forced it to terminate its supply contracts with the company and take an expected fourth quarter charge of about $110 million. The company, however, said its previous fourth quarter estimate of a loss of 65 cents to 73 cents per share remains on target.

“We expect NewPower’s economic position, liquidity and operational capabilities to be substantially unaffected by the termination of these contracts,” said CEO H. Eugene Lockhart. “Because of the required accounting treatment for the liquidation of these contracts, we believe our prospects for further margin expansion in 2002 and beyond are enhanced. We do not anticipate any credit exposure to Enron resulting from its filing for bankruptcy.”

When the national retailer was formed last year, analysts and observers were concerned about Enron’s exposure to NewPower, the first company to embark on what many saw as a very risky business with years of losses and a difficult future given the state of deregulation and the small margins to be made in retail. But now NewPower has been forced to cut all its commodity supply and forward contracts with its founding partner, the largest energy marketer in the nation. NewPower expects to replace Enron’s supply with other providers without missing delivery to customers or suffering any material economic loss, it said.

Based on the difference between the current market price and the contractual price with Enron, as well as other costs associated with entering into new trades, NewPower estimates the current collateral posted with Enron to be about $110 million of which $70 million is in cash with the balance secured by inventories and receivables of NewPower. It expects to present the settlement amount in a manner that permits the release of an existing lien that has secured Enron’s interests in the company’s receivables and inventory. It also expects to take non-recurring charges in the fourth quarter related to employee severance, the AOL contract and for terminating the Enron contracts.

“NewPower remains fully committed to this business,” said Lockhart. “We are particularly encouraged that we can demonstrate our ability to remain operational, independent of Enron, with no material adverse economic impact on the business.”

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