Trade Winds Blowing Enron Further South

Enron (ENE Quote) appears to be relying on asset sales to offset weakness in its high-profile energy trading operation.

A billion-dollar sale of power plants likely made a hefty contribution to the energy giant's second-quarter profits, which are supposed to owe their rapid growth to the company's well-publicized trading acumen. A smaller sale of impaired assets to an affiliate company also may have helped nudge second-quarter numbers past Wall Street earnings estimates. One energy market source alleges the price tag on this deal was inflated. Complicating matters, Enron's financials make it difficult to determine exactly how much these deals may have contributed to earnings.

For its part, Enron flatly denies that it used one-time gains to meet estimates or that the price of the impaired-assets sale was inflated. But dependence on asset sales would mark a big step backwards for Houston-based Enron, which has long told investors that trading is its future. By shrewdly capturing a dominant position in the nation's fast-growing energy market, Enron has expanded trading profits exponentially over the last couple of years. Operating earnings from trading surged 160% in 2000 to $1.6 billion, causing the stock to double. ...