No Sweethearts in This Deal

In late 1998 -- just before Reliant Resources (RRI) began a doomed expansion overseas -- Goldman Sachs (GS) went to work on its own energy venture.

Goldman already had forged a partnership, called Orion, with Constellation Energy (CEG) a year earlier. And Orion was now ready to execute its plan: It would snatch up as many power plants as possible and then sell the electricity for a bundle in newly deregulated wholesale markets.

Orion started with a modest purchase, buying a single 105-megawatt plant in Syracuse, N.Y., and quickly grew from there. By the time it went public in late 2000 -- selling more stock at a higher price than most had expected -- Orion owned a fleet of 80 plants capable of powering millions of homes. And it was still buying.

Then it stopped, with impeccable timing, and put itself up for sale. In September 2001, Reliant suddenly showed up with a generous offer -- representing a 40% premium over Orion's stock price -- after several industry peers had already kicked the tires and moved on.

By then, the 2000-01 energy crisis was clearly over. Merchant energy profits -- almost obscene a couple of quarters earlier -- were dropping rapidly. And the World Trade Center, hit by terrorists two weeks before, was fallen.

The world had changed. But Reliant's strategy had not.

In February 2002 -- two months after Enron went bankrupt -- Reliant closed on the Orion deal and saddled itself with another $4.8 billion in debt. Goldman just scooped up its profits and moved on.

Jeff Dietert, an analyst at Simmons, told RealMoney's Christopher Edmonds back in September 2001: "They [Goldman] view the generation business as coming into balance and are cashing out."

Goldman pulled in far more winnings than its partner in the deal. Indeed, Goldman's relationship with Constellation -- the energy brains of Orion -- proved to be the real jackpot for the bank.