SECTION ONE : INTRODUCTION
ENRON was established back in 1985 as an interstate pipeline company following the federal deregulation of natural gas pipelines. It was born from the merger of Houston Natural Gas and Omaha based InterNorth, a Nebraska pipeline company.
Enron incurred massive debt as a result of the merger which led to it losing exclusive rights to its pipelines. Enron at this point had to come up with a new innovative business strategy in order to survive. CEO, Kenneth Lay hired services of McKinsey & Co. to aid in the process of developing a business strategy. Jeffrey Skilling, a young consultant was assigned with the responsibility. Skilling proposed a revolutionary solution to convert operations from energy supply to energy trading.
Enron took on the role of a ‘gas bank’ and started operations in 1989, where, it bought gas from suppliers and sold it to consumers, profiting from a fee charged for carrying out the transaction. The company flourished under the business model which impressed Lay, who then created a new division called Enron Finance Corp in 1990 and assigned Skilling to take charge of operations. Enron Finance Corp. soon dominated the market with more contacts and contracts with regard to suppliers and consumers compared to any of its competitors.
In 1996, Skilling became President and COO and convinced Lay in the application of their ‘gas bank’ model in the market for trade in electrical energy as well which led to Enron’s acquisition of
Enron went into debt during the merger. Enron right from the start was forced to come up with a new way to make money and pay off their debts. Enron shortly after lost its exclusive pipeline rights and Kenneth Lay had a huge problem and need a solution, he enlisted the help of Jeremey Skilling from Mckinsey & Co to help come up with a solution. His solution was to build a ‘Gas Bank’. This was a concept that Enron would buy gas from network suppliers then sell it directly to consumers under a contract which would guarantee supply and price. This revolutionary idea lead to Skilling’s Employment at Enron in 1990 in a new division called Enron Finance Corp. Enron Finance Corp. had the responsibility of gaining access to suppliers and getting clients to sign contracts. They began to dominate the market and with such market power they were able predict future prices
Enron, an energy trading supply company, founded in 1985 was the product of a merger between the Houston Natural Gas Company and InterNorth Incorporated. Enron was able to flourish as a result of the Dotcom Bubble, a rapid rise in equity markets caused by investments in internet-based companies in the 1990s. Hoping to wreak more revenue through additional utilization of internet-based strategies, Enron created EOL, Enron Online, a computerized trading website. By the early 2000s, EOL was generating approximately $350 billion in trades. EOL’s success fueled Enron’s ambitions to create a broadband telecommunication network worth hundreds of millions of dollars. However, unlike EOL, this costly telecommunication network yielded minimal profits. Devastatingly, the financial blow was accentuated by the emergence of the Great Recession.
Enron began as a pipeline company in Houston in 1985. It profited by promising to deliver so many cubic feet to a particular utility or business on a particular day at a market price.
Enron was a company set up in 1985 by Kennet Lay, an ambitious and visionary man, who saw great potential from government deregulation in the energy market. Lay created Enron, through a merger between two small regional companies, Houston Natural Gas [1] and InterNorth [2]. The company
In 1990, Lay hired Jeffrey Skilling. Skilling’s job was to create a new business plan to get Enron out of the debt it had incurred during the merger of Houston Natural Gas Company and InterNorth. Skilling, who had a background in banking as well as asset and liability management, quickly rose to the top becoming COO in 1996 and CEO in 2001. One of Skilling’s business ideas was to create a “gas bank” for which Enron could buy gas from a network of suppliers and sell it. Enron would guarantee both the supply and the price to its consumer assuming all risks and charging fees for the transactions.
Enron was created from the joining of gas pipeline companies in 1985 and was responsible for natural gas, electricity, and communication products and services (Ferrell, et al, p.318). During the 1990’s,
In 1985, InterNorth, a large energy and natural gas pipeline company acquired Kenneth Lay’s company, Houston Natural Gas, in an attempt to thwart a takeover. The newly converged company would later be named Enron. Kenneth Lay was named chairman and CEO very early on post-merger and is considered to be the founder of Enron. Enron’s troubles began very earlier on. Need to bring this paragraph to an end but can use this to add length to the paper if needed.
Enron was a business conglomerate during the 1990s, formed by the merger of smaller oil and energy companies. Houston executives Kenneth Lay (Chairman), Jeffrey Skilling (chief executive officer (CEO) and Andrew Fastow (chief financial officer (CFO) parlayed their new mega-company into a favorite Wall Street company, bragging of record profits with negligible losses. During the 1990s, the three senior executives changed Enron from a traditional gas and electricity company into a $150 billion energy corporation. For instance, from 1998 to 2000 only, Enron’s returns rose from approximately $31 billion to over $100 billion, making the company to be the seventh biggest conglomerate of the Fortune 500. Unidentified to nearly everybody, this picture was the result of one of the largest swindles in financial history (Ferrell, Fraedrich & Ferrell, 2013).
Enron Corporation was founded in Omaha, Nebraska (US), and in 1985 Houston Natural Gas Consolidated with InterNorth to make, what is now established as the energy based company. The corporation based in Houston, Texas (founded in 1985) was known as the better enterprise in North America that accomplished one of the vast natural gas transmission networks. “Enron was a provider of products and services related to natural gas, electricity and communications to wholesale and retail costumers” (Chary, 112). The company had the position of the “Most Innovative” corporation for a couple of years. Nonetheless, back in December 2001, its bankruptcy held the biggest fraud scandals in the history of the US.
Enron Corporation began as a small natural gas distributor and, over the course of 15 years, grew to become the seventh largest company in the United States. Soon after the federal deregulation of natural gas pipelines in 1985, Enron was born by the merging of Houston Natural Gas and InterNorth, a Nebraska pipeline company. Initially, Enron was merely involved in the distribution of gas, but it later became a market maker in facilitating the buying and selling of futures of natural gas, electricity, broadband, and other products. However, Enron’s continuous growth eventually came to an end as a complicated financial statement, fraud, and multiple scandals sent Enron through a downward spiral to bankruptcy.
Enron was founded in 1985 as a result of a merger between Houston Natural Gas and InnerNorth of Omaha. During this time period there was a series of deregulations in the utilities industry which was highly regulated at the time. Enron original business was selling natural gas. Jeff Skilling developed the idea of a “gas bank” which was the middlemen for consumers and suppliers.
Enron’s competitive advantage, as well as its huge profit margins, had begun to erode by the end of 2000. Energy prices began to fall in the first quarter of 2001 and the world economy headed into a recession, thus dampening energy market unpredictability and reducing the opportunity for the large, rapid trading gains that had formerly made Enron so profitable. (1). Enron’s foundations were developing cracks and Skilling’s house of paper built on the stilts of trust had started to crumble and eventually was
“During the Enron debacle, it was workers who took the pounding, not bankers. Not only did Enron employees lose their jobs, many lost their retirement savings. That 's because they were at the bottom of the investing food chain.” In July of 1985, Houston Natural Gas merged with InterNorth, to create Enron, and Kenneth Lay became CEO the following year. In 1989, Enron began trading natural gas commodities. In 1997, Andrew Fastow devised the first steps to hide debts and inflate profits and one year later, he was named the CFO of Enron. In the year 2000, shares of Enron reached a peak of $90. Enron claimed $101 billion in revenues, and as a direct result of this, became the sixth largest energy company in the world. After all of these rapid
After a merger in 1985, between two relatively small regional companies Houston Natural Gas Co., and InterNorth Incorporated, Enron Corp was formed. Enron Corporation became one of the biggest energy, and service company across the united states. Following this merger, Kenneth lay, who was at the time the CEO of Houston Natural Gas, also became the CEO of the newly formed Enron Corp. With his savvy skills already adopted in the smaller regional natural gas company, Kenneth Lay, was ready to label Enron into the energy trader and supplier powerhouse. This dream of turning Enron into natural gas resource was
Jeffrey Skilling was hired by Lay in 1990 after working in a consulting capacity for three years. Skilling served in leadership roles within various Enron subsidiaries before becoming president and chief operating officer at Enron in 1997. He served as Chief Executive Officer of Enron for nine months in 2001 before resigning from the company for personal reasons. Skilling hired Andrew Fastow in 1990 because he was familiar with energy marketplace deregulation. Fastow worked in numerous capacities at Enron before ultimately being named Chief Financial Officer in 1998 and served in that position until the Securities and Exchange Commission commenced an investigation into irregularities in the company’s behavior.