January 7, 2017
• The rise of Enron and its innovative growth:
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 …show more content…
The first of these improvements was that Enron invested in over seas companies. The main target of investment was overseas energy companies. The second strategy of maximizing profits was the shift from energy, to being known as a company which acted as an investment firm. This operation was headed by Jeffrey Skilling who went to Southern Methodist University, and received his MBA from Harvard University. He had a great touch when it came to business. He was able to run these operations by making profits from certain products Enron traded, and these products were traded through what was mentioned above the “gas bank”. Seeing success in these operations, Skilling looked to expand Enron Capital & trade department and did so by hiring Andrew Fastow, who became one of the key figures in Enron off Balance sheet special purpose Entities.
After the merger, seeing that Enron is running with growing profits, Enron decided to take its first hack at an overseas company. This company was based in England and was commonly known as the Natural Gas Power Plant, which at the time provided electricity to up to 3% of England’s electricity demands. After the acquisition in England, Enron co. expanded its assets overseas to countries such as Brazil, Bolivia, Germany, France, Turkey, and many more. These locations were the newly developed division named Enron International which began its operations. These divisions were growing in rapid pace
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 Corporation was once known as Northern Natural Gas Company, Founded in 1932 in Omaha, Nebraska as a provider of natural gas. Through its early stages, Northern Natural Gas Company was unsuccessful in their business venture. They experienced problems in persuading consumers to use natural gas to heat their homes because of fear that natural gas leaks lead to explosions. Thanks to the great depression, many people were taking the risk because of how relatively cheap natural gas was. As the company’s revenues and profit grew, northern began to acquire many of its smaller competitors resulting in their apparent growth as a company. In 1947 its stock was listed on the New York stock exchange, providing the company with more finances which it needed to continue its growth in acquiring its competitors to becoming the largest natural gas supplier in the United States.
During the 1990s, Kenneth Lay, Enron’s CEO, and his top subordinate, Jeffrey Skilling, transformed the company from a conventional natural gas supplier into an energy trading company.
Enron’s history dates back to the Omaha-based Northern Natural Gas Company, an interstate pipeline company formed in 1932. In 1979, the Northern Natural Gas Company merged under their holding company InterNorth. Accordingly, InterNorth branched into a more diversified energy company working in natural gas marketing, production, and transmission alongside plastics innovation and other energy-related products. In 1985, during the reorganization of the merger between Houston Natural Gas and InterNorth, the company named itself “HNG/InterNorth Inc.” and built a large headquarter complex in Omaha, much of it being formed with pink granite (locally dubbed as the “Pink Palace”). Six months after the reorganization of the company, Samuel Segnar, the company’s first CEO, departed--paving way for Kenneth Lay (HNG’s former CEO) to replace Segnar. The next year, Lay received the post of chairman. Following Lay’s entrance into HNG/InterNorth Inc., chapter two began with a running start.
The Enron corporation was an amalgamation of Houston Natural Gas and Internorth two of the largest natural gas suppliers in the United States. It was built upon the company 's ability to convince congress to deregulate the sale of natural gas through supplying electrical pieces at market prices. This allowed Enron to begin to sell power at higher prices therefore driving their revenue up. The company also began to spread its grasp out of natural gas and into a myriad of other power sources across the globe including water, pulp and paper plants. This was all done through a massive series of loopholes and massive amounts of money being funneled into Congress to lobby against regulations of such activities.
Headquartered in Houston, Texas, Enron was one of fortune 500 top companies ranking in at number 7 by 2000. During their 7 year tenure, Fortune named Enron one the Most Innovative companies 6 of those 7 years. Enron is known for its Natural gas and Electricity expanding a total of 36,000 mile radius. Enron formed as a merger of two companies. Houston Natural Gas, which concentrated on its production and exploration of gas to retail businesses during 1976 and by 1984, Houston Natural Gas, had reached sale and assists totaling a whopping $5.7 billon with profits of $123 million dollars. Formally known as Northern Gas Company back in 1930, the other merger was InterNorth. Northern Gas Company originated in Omaha, Nebraska. The merge begin when,
Enron cooperation was an American energy, commodities, and services company located in Huston, Texas. It emerged in 1985 after the collaboration between Houston Natural Gas and InterNorth. Before Enron's bankruptcy, it had more than 20,000 employers and was one of the largest electricity and natural gas companies in the world, with profits of over $101 billion. Fortune magazine has named Enron as "America's most innovative company" for six years in a row. By the end of the year 2001, the company’s stock price dropped from $90,000 to less than one dollar because of some misleading financial reports, too much borrowed money, and an unwillingness to give investors information that left them in doubt of its financial reports, therefore, the company
According to the movie "Gibney, A. (2005). Enron: The Smartest Guys in the Room" the practices that allowed Enron to achieve such success started with manipulation of earnings by Traders who were destroying daily trading records and gambling beyond their limits to a point where they lost in 5 days an amount of $90 million, losing with it all of the company’s reserves. To cover this up they mis-reported the company´s net worth. They needed a new idea and Jeff Skilling proposed to convert Enron into a stock market for natural gas, treating it as a commodity and with it granting the possibility to trade it like bonds and stocks.
Enron was an energy company based in Houston, Texas that dealt with the energy trade on an international and domestic basis. Enron formed in 1985 when Houston Natural Gas merged with InterNorth. After several years of international and domestic expansion involving complicated deals and contracts, Enron became billions of dollars in debt. All of this debt was concealed from shareholders through partnerships with other companies, fraudulent accounting, and illegal loans. By 1989 Enron diversified into trading energy-related commodities. In a few years, Enron had become the largest merchant of energy in the United States. By 1994 Enron had
Enron began by merger of two Houston pipeline companies in 1985, although as a new company Enron faced a lot of financial difficulties in the starting years, though the company was able to survive these financial problems (Enron Ethics, 2010). In 1988 the deregulation of the electrical power markets came into action and flipped the company from up to down, after deregulation company business updated from delivering energy to becoming an energy broker and soon after this Enron once a company struggling
In 1985, Houston Natural Gas and InterNorth, a natural gas pipeline company, merged, and Lay became CEO of both houses. In 1986, after many changes and more growth, the firm changes its name to Enron and relocated to Lay’s hometown of Houston, Texas. At this time Enron was both a natural gas and oil company. The company specialized in the moving of natural gas through its pipelines, extending thousands of miles across the continental United States. As the firm continued to flourish, it reformed its commercial approach by becoming a leading producer and distributer of energy in both the United States and the U.K., as well as becoming more involved in the trading market. Ambition and determination truly carried Enron to new heights, helping it to become one of the most powerful and innovative companies in the United States, even being “voted Most Innovative among FORTUNE'S Most Admired Companies” for “six years running” (Helyar). However, with much success, temptation arose, and good intentions were led astray. Damaging arrogance, risky behavior, and deception ultimately warranted the demise of the mighty Enron.
Jeff Skilling was a numbers man that loved the stock market. He convinced Lay that Enron need to open a trading desk selling oil, and natural gas in an open market. Skilling only request was that he be allowed to use a different type of accounting and that was Market to Market accounting. Skilling told Lay this was the only way that the trading desk would work. Market to market accounting always the company to book the profits from deals now even if they would not see the money until years later in the deal. Enron then became about the deal, and what kind of money they could bring in for the company, and with market to market accounting it was the start of the
Ethics in the business world can often times become a second priority behind the gaining of profits and success as a company. This is the controversial issue that led to the Enron scandal and ultimately the fall of this company. Enron Corporation was an energy company, and in the peaks of their success, they were the top supplier of natural gas and electricity throughout America. Enron Corporation came about from a merger between Houston Natural Gas and InterNorth. Houston Natural Gas was a gas providing company formed in Houston during the 1920’s. InterNorth was a company formed in Nebraska during the 1930’s and owned one of America’s largest pipeline networks. In 1985, Sam Segnar, the CEO of InterNorth bought out Houston Natural Gas for $2.4 billion. A year later in 1986, Segnar retired and was replaced by Kenneth Lay, who renamed the company and created Enron. Enron was the owner of the second largest pipeline in America that measured over 36,000 miles. The company was also the creator of the “Gas Bank”, which was a new way to trade and market natural gas and served as an intermediary between buyers and sellers. As the company continued to develop, it became more of a trader rather than a producer of gas. This trading extended into coal, steel, water and many other areas. One of Enron’s largest successes was their creation of a website called, “Enron Online” in 1999, which quickly became one of the top trading cites in the world. By the year 2000 Enron as a company was
The story of Enron begins in 1985, with the merger of two pipeline companies, orchestrated by a man named Kenneth L. Lay (1). In its 15 years of existence, Enron expanded its operations to provide products and services in the areas of electricity, natural gas as well as communications (9). Through its diversification, Enron would become known as a corporate America darling (9) and Fortune Magazine’s most innovative company for 5 years in a row (10). They reported extraordinary profits in a short amount of time. For example, in 1998 Enron shares were valued at a little over $20, while in mid-2000, those same shares were valued at just over $90 (10), the all-time high during the company’s existence (9).
Enron, was the world’s largest energy company in 2001. Enron forerunner, Northern Gas Company was incorporated in Delaware on April 25, 1930. From this date through July 1985, Enron had hundreds of purchases and new sub-entity constructions when they acquired Houston Natural Gas Inc. (Kastantin, 2005). On April 10, 1986, the company changed its name to Enron Corporation. Enron was an interstate and intrastate natural gas pipeline company,