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Enron to Restate Earnings Since ’97

November 8, 2001

NEW YORK (AP) _ Beleaguered Enron Corp. announced Thursday it would restate its earnings since 1997, in part to reflect a controversial $1.2 billion reduction in shareholder equity that sparked a Securities and Exchange Commission investigation.

Enron, whose stock price has fallen roughly 80 percent in the past three weeks, also said it was holding talks with Dynegy Inc. relating to some form of business transaction. Dynegy is reportedly in talks to buy out its larger hometown rival for as much as $8 billion.

In a filing with the SEC, Enron said financial statements from 1997 through the first half of 2001 ``should not be relied upon″ and that partnerships run by Enron officials during that period should have been consolidated into the financial results of the Houston-based company.

``We believe that the information we have made available addresses a number of the concerns that have been raised by our shareholders and the SEC about these matters,″ said Ken Lay, Enron chairman and chief executive.

``We will continue our efforts to respond to investor requests for information about our operational and financial condition so they can evaluate, appreciate and appropriately value the strength of our core businesses.″

Enron also said it was firing two employees, including Treasurer Ben Glisan, because of dealings related to the partnerships. Previously, Enron had ousted chief financial officer Andrew Fastow, who was in charge of some of the partnerships.

Shares of Enron were up 36 cents, or 4 percent, to $9.41 in heavy trading on the New York Stock Exchange.

Enron said it believes the restatement will include a reduction to net income of about $96 million in 1997, $113 million in 1998, $250 million in 1999 and $132 million in 2000, increases of $17 million for the first quarter of 2001 and $5 million for the second quarter and a reduction of $17 million for the third quarter of 2001.

Enron’s stock has plunged since Oct. 16, when the company posted a $618 million third quarter loss and revealed that its shareholder equity had been reduced.

Despite the company’s decision to terminate Fastow, Enron continued to come under pressure after the SEC began an inquiry, which was upgraded to a formal investigation, of the partnerships and possible conflicts of interest resulting from them.

Jeff Skilling, Enron’s former chief executive who left in August, has been called to testify before the SEC, although it remains unclear when that will occur, said Denis Calabrese, a spokesman for Skilling.

Enron’s woes have prompted considerable speculation about a possible takeover of the company.

Besides Dynegy, companies mentioned as possible suitors included General Electric’s GE Capital unit and Royal Dutch/Shell Group.

On Thursday, both Dynegy and Enron released statements confirming they were in talks, but declined to provide any details.

The New York Times reported earlier that Dynegy is considering paying about $8 billion in stock, or roughly $10 per share.

Under the terms of the deal, Enron would receive an immediate $1.5 billion cash infusion from oil giant Chevron Texaco, which holds a 27 percent stake in Dynegy, the Times said, citing executives close to the discusssion.

Chevron Texaco would provide an additional $1 billion injection at a later date, the Times reported, while Dynegy would assume $12.8 billion in Enron debt, plus billions of dollars in other debt that has been kept off the beleaguered company’s balance sheet and has been a significant contributor to its current problems.

Enron’s Kenneth Lay would not be given any formal management position in the combined company, although he would have a seat on its board, The Wall Street Journal reported, citing people familiar with the matter.

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