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Enron says will meet second quarter earnings target

Enron Corp's stock rebounded on Tuesday after the energy giant reiterated guidance that it would meet second-quarter and 2001 earnings targets, but the share price still hovered near an 18-month low.

Enron president and chief executive Jeff Skilling said the Houston-based energy marketer and trader remained "very confident" that it would meet consensus recurring earnings goals of 42 cents a share for the second quarter and $1.79 a share for the year.

Investors took him at his word, driving Enron stock up $1.48, or 3.3 per cent, to $46.18 in a flurry of late trading activity that followed the release of Skilling's statement just prior to the New York Stock Exchange's close.

Skilling's reassurance came a day after Enron's stock tanked 5 per cent to $44.70, its lowest level since Jan 5, 2000, and less than half its all-time peak of $90.56 on Aug 23, 2000.

The drop came as investors feared the fallout from the Federal Energy Regulatory Commission's decision on Monday to institute price controls in 11 western US states and as contractors on Sunday halted construction on the second phase of Enron's troubled Dabhol power plant in India.

Enron and other power generators and traders adamantly oppose the caps, which they say hinder investment in new, desperately needed power supplies in California. But they will not hurt Enron's earnings, Skilling said.

"Having reviewed the recent FERC action on price controls in the western US, we remain very confident that we will meet the market's consensus," he said in a statement.

Salomon Smith Barney analyst Raymond Niles said Enron's visibility as the prime mover in deregulated markets likely has made investors skittish as the chance of further regulation rears its head.

Enron's core business of electricity and natural gas trading remains strong and is growing, making the stock attractive at current price levels, he said. But it could be a short-term risk if this summer produces more regulation.

"We are concerned about the likelihood of increased controls down the road. We could see the regulators respond with a regulatory action rather than letting the markets work," Niles said.

California is not Enron's only power problem, though. Enron is in a messy pullout from Dabhol as its sole power customer, the Maharashtra State Electricity Board refusing to pay more than $48 million in overdue bills. If the two cannot work out their problems within the next six months, Enron, which owns 65 per cent of Dabhol, will pull out completely.

Stock still slumping

Dabhol is just one item in a persistent string of bad news that has hobbled Enron's stock since mid-March, when layoff talk at the broadband unit, the collapse of a 20-year video on-demand deal with Blockbuster Inc and word that a $3 billion sale of utility Portland General would not go through combined to hammer Enron's stock over sequential days.

Under financial siege then, Skilling reiterated guidance in a press release then flew home early from South America to hold a conference call the next day and assuage Wall Street's concerns.

It worked then, too. Enron shares rose nearly 8 per cent higher at the market's close on that day, March 23, but consider that the price then was $59.40. But Enron has limped ever since, never closing above $62.27 and underperforming the utility sector.

Analysts generally believe Enron, the world's biggest electricity and gas trader, which saw its stock shear off peak levels as investors sharply devalued technology and telecom plays earlier this year.

Enron surged to heady highs last year after unveiling its much-ballyhooed bandwidth trading operations, which gave it a then-attractive tech and telecom cache.

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