Monthly Archives: September 2005

Duke Energy sheds wholesale power and trading assets

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duke energy.gifIn a move that was widely-anticipated in energy circles, Duke Energy Corporation plan to shut most of its money-losing wholesale power and trading businesses and take a third-quarter pretax charge of about $1.3 billion. Duke is shedding most of its wholesale power business as it expands its traditional utility operations through a planned $8.98 billion acquisition of Cinergy Corp.
Duke started paring its wholesale power business after the bankruptcy of Enron Corp. in December 2001 and the ensuing collapse of the wholesale electricity markets and related trading business. Government investigations into trading practices followed, which resulted in criminal indictments that furthered soured Duke on the trading business. In the meantime, buyout firms, hedge funds and investment banks such as Goldman Sachs and Morgan Stanley have become much more active in buying power plants and trading electricity.

Good news from the Port of New Orleans

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port of NO.jpgThe Port of New Orleans re-opened on a limited basis yesterday and plans to be at 80% of capacity within three months. Moreover, the nearby Port of South Louisiana and Port Fourchon on the Gulf Coast have also partially restored service, and the Port of Pascagoula, Miss. expects to resume service by early October. Although the focus of analysis on the economic effect of Hurricane Katrina has been on the oil and gas industry, the economic impact on shipping along the Mississippi River and Gulf of Mexico has also been severe, so the reopening of the ports in the New Orleans area is good news.

Blogging at the big Houston shelters

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astrodome9.jpgFormer Houstonian Christine Hurt of the Conglomerate blog passes along a new Houston-based blog by two South Texas College of Law professors — Tracy McGaugh and Kathy Bergin — who are making daily treks to Reliant Park and sometimes to the George R. Brown Convention Center to provide insight into the experience of the evacuees at both locations. The new blog is called White Washing the Black Storm: We Are Watching.
Each day, the profs volunteer at the medical aid table and ask what medicine is needed. Then, the profs go to a local drugstore and buy the medicine needed. The blog has a link where you can donate to the cost of the medicine, which the profs have been largely subsidizing.
The blog also provides somewhat unvarnished commentary on the goings on at each shelter, which is an important component of the complete story regarding Houston’s extraordinary effort to provide for the evacuees. It’s not all peaches and cream out there, folks.

One of the benefits of takeover battles

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Six Flags Astroworld.gifFinancially-strapped Six Flags, Inc. — the subject of an ongoing takeover battle — announced yesterday that it would close Houston’s AstroWorld theme park at the end of October and that it had engaged Cushman & Wakefield to market the valuable 109-acre site just south of the Reliant Park complex for sale.
The 37 year old theme park is overdue for finally being put to rest. AstroWorld was not originally a Six Flags Park, so it was not as well-planned as most other Six Flags Parks. Moreover, the park was landlocked from expansion and had poor relations with Harris County with regard to parking issues at adjacent Reliant Park. Consequently, Six Flags minimized capital expenditures at the park, which turned it into a decaying mess over the past several years. Thankfully, the value of the land is finally prompting Six Flags to put the underperforming park out of its misery.

Update on Katrina’s economic ripples

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oil-rigsmall.gifPetroleum futures fell to pre-Hurricane Katrina levels for the first time since the storm yesterday on news of heavy losses in refined products and market concern that that high gasoline prices have depressed demand for product. Earlier posts on the developing economic effects of Katrina over the past couple of weeks are here, here, here, here, here, here, here, and here.
Benchmark light, sweet crude oil futures for October settled at $63.34 a barrel on the Nymex Exchange, while Nymex gasoline futures for October settled down 8.60 cents at $1.8737 a gallon. Losses in heating oil futures on the Nymex were also substantial as the October contract settled down 8.22 cents at $1.8143 a gallon.
Despite the downward trend in the gasoline futures market, news on the Gulf oil and gas production front remained measured. Although operations at the Louisiana Offshore Oil Port were fully restored yesterday for the first time since the storm, oil production in the Gulf of Mexico showed only marginal improvement during the weekend as about 57.4% of daily output remains offline. Almost 60% of the daily total was offline as of this past Friday.

Westar executives convicted

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westar2.jpgA federal jury in Kansas City yesterday found former Westar Energy Inc. Chief Executive Officer David Wittig and chief strategy officer Douglas Lake guilty of looting the electric utility of millions of dollars. Previous posts on the hotly-contested case — which included a previous trial that ended in a hung jury — are here and here.
The prosecution against the two former Westar executives was similar to the prosecution of former Tyco executives Dennis Kozlowski and Mark Swartz in that the prosecution alleged that Messrs. Wittig and Lake engineered extravagant salaries and benefits for themselves at the expense of Westar shareholders while hiding their actions from the company’s board and federal regulators. As in the Tyco trial, Messrs. Wittig and Lake denied the charges and contended that all of their actions were legal, approved by the company’s directors and disclosed in the company’s regulatory filings. The jury found Messrs. Wittig and Lake guilty of conspiracy, wire fraud, circumventing internal controls and money laundering.
Mr. Wittig became CEO of Westar in 1998 and hired Mr. Lake, a former colleague at Salomon Brothers, to become his chief aide. After some initial success, Mr. Wittig’s quick-deal strategy faltered and Westar’s stock price fell from $44 to $9 as the company came under pressure from shareholders and regulators. As in the Tyco case, an outside law firm hired by Westar’s board eventually uncovered many of the actions of Messrs. Wittig and Lake that led to the indictment against the former executives.

2006 — The Enron Trial Year

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enron gavel.jpgOver four years after Enron’s descent into bankruptcy, 2006 is shaping up as the year of the Enron criminal trials.
First, in mid-January, the trial of the Enron Task Force’s legacy Enron case — i.e., the trial that everyone will remember — cranks up against former Enron chairman Ken Lay, former CEO Jeff Skilling, and former chief accountant, Richard Causey.
Then, in May, the first retrial of defendants in this year’s mistrial in the Enron Broadband case will take place against Kevin Howard, former chief financial officer of EBS, and Michael Krautz, former senior accounting director at EBS.
Following that trial, the second retrial of one of the Enron Broadband defendants will proceed in June against Scott Yeager, the former senior vice president of business development. Finally, the final two of the five Broadband defendants — Joe Hirko, former co-CEO of Enron Broadband Services, and Rex Shelby, former senior vice president of engineering and operations at EBS, will be retried in September. Mary Flood’s article on the Enron Broadband retrials is here.
Thus, 2006 is shaping up as quite a season for Enron-related criminal trials. And you thought the NFL season lasted a long time?

Andruw Jones for MVP?

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andruw jones2.jpgI enjoy the writing of Chronicle sportswriter Richard Justice, but he occasionally gets carried away, as with this note on his blog today:

“Andruw Jones will be the National League’s Most Valuable Player. The balloting won’t be close if voters have been paying attention. He’s leading the NL in both home runs and RBIs. He carried the Braves while their young players were establishing themselves. He’s the man.”

Andruw Jones for National League MVP? Yes, he did hit his 48th and 49th homers yesterday and is having his best season, but Jones (32 RCAA/.360 OBA/.612 SLG/.972 OPS) is not even close to being the best hitter in the National League this season. The best hitters are the Cubs’ Derrick Lee (84/.422/.670/1.092) and Albert Pujols (76/.434/.631/1.065), both of whom have created over 40 more runs for their respective teams than Jones has for the Braves. Heck, Andruw Jones is not even clearly the best hitter named Jones on the Braves — Chipper is hitting 30/.418/.570/.988. There are at least eight other players in the National League — including the Stros’ Morgan Ensberg (34/.384/.564/.948) — who are having at least as good or better a season hitting the baseball as Andruw Jones.
Inasmuch as Pujols has been the best player in the National League not named Bonds over the past several seasons, he should win the National League MVP this season. Lee would not be a bad choice, either, although my sense is that he is having a career year and Pujols deserves it more because of his previous MVP-quality seasons. However, one thing is clear — despite all those taters, Andruw Jones is not the National League MVP this season.

Woody Hayes’ advice to defense counsel in the Enron cases

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woody.jpgPeter Henning over at the White Collar Criminal Prof Blog is skeptical that U.S. District Judge Sim Lake’s letter-writing campaign is going to induce any of the recalcitrant witnesses in the criminal case against former Enron executives Ken Lay, Jeff Skilling and Richard Causey to come forward in the face of the prosecution’s intimidation tactics and confer with the defendants and their counsel. Professor Henning concludes as follows:

It’s a little bit like the old Woody Hayes view of passing: only three things can happen if you meet with the defense lawyers, and two of them can be bad, so why take the risk? I will be surprised if many of the 38 letter recipients agree to meet with the defense team.

Many folks down here in Texas believe that former Texas coach Darrell Royal popularized that pithy quote about passing in football, but I believe that Professor Henning is correct that Coach Royal picked it up from Coach Hayes.

Bush = Carter?

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jimmy_carter.jpgThe inimitable Professor Bainbridge is not happy with President Bush for a variety of valid reasons, and recently observed that the President may be becoming the Republican Party’s equivalent of what former President Jimmy Carter has been for the Democratic Party.
The Professor’s criticism of President Bush has merit. Regardless of what one thinks about the Administration’s venture into Iraq, the Bush Administration has overseen a tremendously damaging criminalization of business interests, largely ignored health care finance reform and income tax simplification, increasd farm subsidies, installed tariffs for various products (including steel, lumber, and even shrimp), created a massive new prescription drug benefit, promoted dubious amendments to the U.S. Bankruptcy Code and nationalized airline security by folding it into a huge and ineffectual bureaucracy. That’s not exactly a slate of accomplishments that exudes Presidential greatness.
But as bad as Jimmy Carter? No way. Refresh your memory of just how bad Mr. Carter was (and continues to be) in these reviews (here and here) of Steven F. Hayward‘s book about Mr. Carter, The Real Jimmy Carter. Even as bad as President Bush has been, he cannot limbo under the low bar that Mr. Carter established.
Along these lines, this Opinion Journal piece discusses a recent poll of historians who ranked Mr. Bush’s performance as average among Presidents. Mr. Carter ranked as below-average, just a cut above “failure.”