Enron Affirms Goals, Direction With Promotion of Executives

Enron reaffirmed its intention to keep commodities marketing and trading its main business with the naming of two executives from that group to the office of the chairman. Greg Whalley, 39, will become president and chief operating officer of the global commodities trading giant. Mark Frevert, 47, was promoted to vice chairman. They will join once and again Chairman and Chief Executive Kenneth L. Lay in the office. Whalley had been president and chief operating officer of Enron Wholesale Services, where Frevert was chairman and chief executive. Both have spent almost their entire Enron careers in the marketing and trading areas, though Frevert spent several years with the pipeline group. Expectations are that one of the two will succeed Lay as chief executive within two to three years. Lay reassumed the position earlier this month following the sudden departure of Jeff Skilling, who had been president and chief executive since February. Lay reiterated Enron's intent to stick with its "asset-light" policy of building markets with a minimum of capital investments. Instead, the company depends on contractual arrangements to ensure adequate supplies of natural gas, electricity, liquid hydrocarbons, and other products to support its massive trading and marketing operations. "Greg and Mark bring a wealth of talent and experience to the office of the chairman," he said in a statement. "In addition to having led Enron Wholesale Services, they have a collective 26 years of extensive experience across Enron's businesses, and both played key roles in increasing our deliveries of energy and other commodities in North America and Europe." Wall Street had the same interpretation of the personnel moves. "They are both young and apparently pretty talented," said John Olson, senior vice president of Sanders Morris Mundy in Houston. "The fact that they are from trading shows you where the emphasis in this company is going to be." And Enron's trading operations are going extremely well, with total volumes in the first half of 2001 up 62% over the same period a year ago, Olson noted. "They are running a great book of business right now. EnronOnline is a godsend for them." Whalley's and Frevert's promotions were not unexpected, said Carol Coale, senior vice president of Prudential Securities in Houston. "I don't see any surprises here, but the vice chairman's job historically has been the exit door," she said. Curt Launer of Credit Suisse First Boston doesn't see the appointment of two execs as part of any competition. "I think they are running the company with Ken Lay," he said, adding that this team will be running the company on a day-to-day basis while leading it to the next level of success. Neither Whalley nor Frevert is associated with Enron's troubled broadband business, which lost $102 million in the second quarter this year. When the company’s foray into telecommunications was announced in January 2000 the stock price soared $14 in a single day. The loss of a highly touted broadband-services contract with Blockbuster Video in March precipitated this year's stock slide. In fact, the appointments of the two marketing-trading execs may signal that Enron will be devoting less attention to the ancillary businesses such as broadband and water. As Olson pointed out, wholesale natural gas and electricity have been Enron's primary earnings drivers and are likely to remain so into the foreseeable future. The company's plans to sell more than half of its international assets further confirms that tactic. In a related development, two more top Enron executives have left the company. Ken Rice, most recently chairman and chief executive of Enron Broadband Services, has left to pursue other opportunities, according to company statement. Rice had been assisting in the transition of Enron Broadband Services to the company's wholesale services group. Kevin Hannon, a recent president of the broadband unit, has also left Enron. Hannon was most recently chairman and chief executive of Enron Global Assets. Following Hannon's departure, Stan Horton, chairman and chief executive of Enron Transportation Services, is assuming the additional role of head of Enron Global Assets. Investors responded in a marginally positive manner to the chairman's office appointments, as Enron common shares rose slightly to around $38/share after the new leadership team was announced, though a broad market downturn swept Enron's stock well lower at the close of the week. Industry observers said many investors want to see results before they push the stock back to the stratospheric levels of late 2000 and early 2001, when the price once topped $90 and stayed around $80 for several months. --Barbara Shook