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the winner in the auction for control of embattled



wholesale trading business, analysts say it isn't clear what it won, or, in the end, if anyone really wins at all.

The Swiss banking concern prevailed in a marathon auction process, which started Thursday and ended around noon Friday.

The victory will give UBS control of parts of Enron's trading business, including Enron Online, the electronic trading platform Enron used to revolutionize the trading of electricity and natural gas.

The price paid and exactly what assets are included in the transaction were not released Friday. The secrecy made hazarding guesses about the purchase price nearly impossible.

"It's hard to know the price without knowing what is really included. Everyone has been making assumptions, but potentially, even the assets in the deal have been shifting as negotiations continued," said Jeff Dietert, power analyst Simmons & Co. and a member of the


Energy Roundtable.

Both UBS and Enron say the results of the auction, overseen by U.S. Bankruptcy Judge Arthur J. Gonzales in Manhattan, are scheduled for release Monday and aren't scheduled for an approval hearing until Thursday. Between now and then, Enron creditors are expected to scrutinize the deal.


At the apex, Enron's trading business was the foundation that supported the company's prosperity, accounting for nearly 90% of $101 billion in revenue in 2000. However, as Enron

unraveled, so, too, did its trading business. And, regardless of what UBS paid, some pundits say it's too much.

"We are talking about a business that will be a small fraction of its former self and will take a lot of time to rebuild," says Dietert. "And, it's going to be hard to attract business that bolted when Enron's demise halted trading."

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Under the expected terms of the deal, Enron will still control 49% of the trading unit, to be known as "Netco," or new energy trading company.

Other energy traders expect little from Enron's rebirth. "They will have to recreate everything," says one trader who asked to remain unnamed. "Their positions are nonexistent, and very few traders will be willing to give them another chance."

UBS faces a plethora of challenges as it attempts to rebuild the fallen trading giant, including the brain drain after the company declared bankruptcy in December. "A number of Enron traders have left and won't go back," says the trader.

And with Enron Online crippled, competitors usurped market share. For example, the IntercontinentalExchange -- or ICE, a competing online energy-trading platform -- saw a 65% increase in its business in November after Enron began to implode. The number of ICE registered users increased 30%.

"ICE had a tremendous year in 2001, emerging as a key player in electronic-trading exchanges," said Chuck Vice, COO of IntercontinentalExchange. "We attribute our strong market position to the stability of our organization combined with our ability to meet the demands of the market via our many-to-many trading platform."

The ability of ICE to handle the business as Enron Online was unplugged, combined with the memories of losses suffered, make rebuilding a daunting task. "Enron ended up owing most of its counterparties money," says Dietert. "If I'm one of those counterparties I'm not going to be anxious to trade with the new organization."

A number of counterparties and creditors in the bankruptcy proceeding are said to be considering objecting to the sale until the use of the proceeds is detailed. Some counterparties are likely to argue that the entire trading operation should be sold to raise funds to repay creditors.

Such a motion, if considered by Gonzales, could derail the new energy-trading company even before the lights are on.

Dim Bulb

Regardless of the outcome of the auction, Enron shareholders will

walk away empty-handed.

"It's interesting that Enron stock has been halted all day," notes Dietert. "Enron shareholders are holding out hope it will be a big number. But, frankly, it doesn't matter. I can't figure out how there will be anything left for Enron's common shareholders. This is not a reorganization; it will be a liquidation." Late Friday, the

New York Stock Exchange

said trading in Enron stock would remain halted pending the release of the transaction's details.

Ironically, Dietert says the sale may be a needed reality check for Enron shareholders.

"This is the data point that could very well indicate liquidation," he says. "Knowing the price could be the trigger that causes investors to finally give up on the equity price. I think the number will be disappointing relative to what shareholders need to recover anything from the stock."

With more than $30 billion in liabilities, and potentially billions more waiting to be discovered, shareholders should turn off the lights and shut the door.

Christopher S. Edmonds is president of Resource Dynamics, a private financial consulting firm based in Atlanta. At time of publication, neither Edmonds nor his firm held positions in any securities mentioned in this column, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. While Edmonds cannot provide investment advice or recommendations, he welcomes your feedback and invites you to send it to

Chris Edmonds.