Announcement

Dynegy Inc.’s announcement Tuesday that its sale of Northern Natural Gas Co. (NNG) to MidAmerican Energy Holdings Co. will be completed as planned this month helped the energy marketer to buoy investor confidence Tuesday. After falling with the rest of the market on Monday, the Houston company closed up 35% to $1.90.

Dynegy Inc. began last week with the announcement that its pre-tax charge to second-quarter earnings would be $50 million more than the $450 million it projected in late June, due to an increase in an expected non-cash charge in the company’s natural gas marketing business. The company also reported it completed $200 million in interim financing, and had enough liquidity to meet its current obligations and commitments. The furor over the higher pre-tax charge had all but died down by Friday, but then the bombshell came.

In a surprising announcement last week, California’s Independent System Operator (Cal-ISO) revealed that it fired an employee Monday for violating the grid operator’s rules by seeking a specific bid and price from Enron Corp. The issue surfaced last week from some state legislative subpoenaed tape recordings from Enron Corp. The incident at this point is thought to be an isolated case with a market impact of less than $100,000. No criminal or civil charges are contemplated at this time.

Williams’ share price tumbled 10% to $14.66/share by mid-day Monday following an announcement by its former communications subsidiary, Williams Communications (WCG), that it will include voluntary Chapter 11 bankruptcy reorganization as a potential option as part of its financial restructuring plan. Williams already is examining the possibility that it will be obligated to cover WCG’s $2.2 billion in debt if the communications company defaults on its loans.

Following up on the merger announcement made earlier this year between Calgary-based PanCanadian Energy Corp. and its neighbor Alberta Energy Co. (AEC), analyst groups have been divided on expectations for the merger’s future following reports of decreased earnings and production declines from both companies for the fourth quarter 2001.

In a surprise announcement last Wednesday, UtiliCorp United said it plans to buy back the 20% of its trading and risk management arm, Aquila Inc., that it sold to the public earlier this year and adopt Aquila as its corporate name. The move comes as a strategic reversal apparently prompted by the weakening economy and industry changes. Executives dodged questions as to whether the move was spurred by the financial troubles at the energy industry’s largest trading house, Enron Corp.

Natural gas futures prices stabilized late Wednesday after sinking to a new two-day low following the AGA announcement that 22 Bcf had been withdrawn from underground storage last week. The January contract settled at $2.719, down 8.4 cents for the session but well above its late-session low of $2.63. Estimated volume was light, as just 67,503 contracts changed hands.

As early as today an announcement may be forthcoming that downtown Houston rival Dynegy Corp. may ride to the rescue of Enron Corp. in either a merger or a $2 billion cash infusion through its 27% shareholder ChevronTexaco. Several sources, including the The Wall Street Journal, report that the companies’ directors were in talks to work out a deal to revive Enron — still responsible for 25% of the energy trades made around the world. Neither Dynegy nor Enron would comment.

The announcement last Tuesday by the North American Electric Reliability Council (NERC) that it is aiming to become the standards-setter for the wholesale power industry puts it on a collision course with the Gas Industry Standards Board (GISB), which already has announced it is expanding into setting standards for power industry business practices (see NGI, Sept. 24).