UBS Warburg expects to begin operations this month of its newest unit, UBS Warburg Energy, after completing the deal to obtain Enron Corp.’s exclusive license to the technology to operate the once unbeatable North American natural gas and power trading operations. The new business’ online site will be branded www.UBSWenergy.com.

UBSWenergy.com will push to duplicate what was once the energy industry’s leading trading unit by using Enron’s e-commerce technology to provide real-time bid and offer prices for North American natural gas and power products. UBS cut a deal last month to obtain the energy trading unit through the Southern District of the U.S. Bankruptcy Court in New York, which is handling Enron’s bankruptcy (see NGI, Jan. 21).

UBS Warburg basically picked up the unit for no money down, assuming none of Enron’s past, current or future liabilities or trading positions. Terms of the transaction call for Enron to receive a royalty calculated as a percentage of the income of the business, which in the first five years translates to about 33% of the revenue.

UBS Warburg also announced that the senior management team that built the Enron energy trading operation into the market leader has officially joined the firm in Houston. Greg Whalley, formerly president and COO of Enron, has been named managing director and head of UBS Warburg Energy. He will report to Michael Hutchins, co-head of Credit Fixed Income for UBS Warburg.

“Combining the leading energy trading platform and more than 600 talented staff with UBS Warburg’s risk management skills and AA+ credit rating will make UBS Warburg Energy a formidable competitor,” said John P. Costas, UBS Warburg CEO. “We look forward to reestablishing the business by reaching out to clients one by one and to providing them with superior products and service.”

Nearly 650 former Enron employees in the trading unit are said to be ready to begin selling and buying energy contracts once UBS is given the green light, with most of the workforce based in Houston. Some employees will be based in former Enron offices in Toronto, Calgary and Seattle as well.

An energy executive recruiter based in Houston said he has talked with about 10 Enron traders in recent weeks who indicated UBS Warburg offered as much as $8 million in retention packages, but UBS declined to verify the amount. The traders offered contracts also would be prevented from leaving UBS for an undisclosed period of time. “We’re confident in the people we have hired,” said UBS Warburg’s Michael Hutchins, who helps run the global credit fixed income unit.

UBS Warburg spokesman David Walker also said that Enron traders have begun to contact former customers, but there are no indications on whether former customers are willing to return.

If Enron’s trading unit were simply liquidated instead of restarted, experts believe its current value is less than $50 million. In the past two years, experts estimate that despite dubious deals throughout the company, the trading unit actually made close to $3 billion in pre-tax profits. Still unclear is whether the trading unit can successfully merge into the marketplace again. Jeff Dietert, an analyst with Simmons & Co., said it’s still “not clear how successful UBS is going to be…UBS knows that. That’s why it wasn’t willing to pay anything up front.”

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