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The Birth of JEDI, an SPE or…. Enron’s End run

The Birth of JEDI, an SPE or…. Enron’s End run. Must Enron include SPEs on its balance sheet? Not if……. not in control of SPE and outsiders invest & have at risk at least 3% of total capital……… Why does Enron not want to consolidate?. 1993. CALPERS. ENRON. $250 Mil. JEDI. Enron

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The Birth of JEDI, an SPE or…. Enron’s End run

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  1. The Birth of JEDI, an SPE or…. Enron’s End run

  2. Must Enron include SPEs on its balance sheet? • Not if……. • not in control of SPE and • outsiders invest & have at risk at least 3% of total capital……… • Why does Enron not want to consolidate?

  3. 1993 CALPERS ENRON $250 Mil JEDI Enron Stock

  4. 1997 • CALPERSwants to cash out of JEDI. • Enron must figure out a way to redeem the CALPERSinvestment. They create Chewco to buy out CALPERS.

  5. ENRON CALPERS $383 Mil CHEWCO JEDI This is the plan….

  6. CHEWCO Needs $383 millionto give CALPERS…… It gets….. $240 mil loan from Barclay’s bank Guaranteed by Enron $132 mil credit from JEDI (only asset is Enron stock) Must get 3% from outside sources to avoid consolidation.

  7. CHEWCO Capital Structure Outside 3% $115,000 from M.Kopper (worked at time for Enron) $11.4 mil loans from Big and Little River (two new LLCs formed for this purpose who get a loan from Barclay’s Bank)

  8. CHEWCO Capital Structure Outside 3% CHEWCO $.115 m Big River $11.4 mil. Kopper Little River

  9. In the following slide… a solid line is actual cash transfer. All dollars are in millions. A dashed line is a loan.

  10. ENRON CALPERS 383 Chewco Kopper JEDI Enron now sole partner .115 132 240 Enron guar. 11.4 Barclay’s Bank 11.4 Big River Little River

  11. What causes trouble for Enron? • Barclay’s Bank begins to doubt the strength of the new LLCs – Big River and Little River- and requires a CASH reserve to be deposited (as security) for the $11.4 million dollar loans. This Cash Reserve is paid byJEDI, which by this time consists solely of Enron stock, putting Enron in the at risk position for this amount. • (See red arrow on the next slide.)

  12. ENRON CALPERS 383 Chewco Kopper JEDI Enron now sole partner .115 132 240 Enron guar. 11.4 6.6 Barclay’s Bank 11.4 Big River Little River

  13. Revenue Recognition? I.e. Profit to Enron? $10 mil in guarantee fee + fee based on loan balance to JEDI. A total of $25.7 mil revenues from this source.

  14. Other Profit to Enron? The increase in the price of Enron stock held by JEDI. Enron recognized $126 million in the first quarter of 2000 from this.

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