Enron Ascending

Part IIINatural Gas, Natural Politics: 1990–1993

 

Introduction

“Enron enters the 1990s with a focused business strategy, a strong set of values, and a vision to become the premier integrated natural gas company in the world,” Ken Lay and Richard Kinder reported to investors, customers, and employees. The well-focused company had four major divisions: exploration and production, pipelines, liquids, and cogeneration—all profitable enough to overcome the parent’s extraordinary debt load (chapter 6). Another area would soon break out as Enron’s fifth major division—gas marketing, the subject of Part IV.

Significant progress had been made in a tough business environment. Enron led the nation with 18 percent of the gas market. Take-or-pay liabilities in pipeline contracts, as high as $1.2 billion in mid-1987, were under control, leaving each interstate with double-digit profitability, quite unlike troubled peers Transcontinental Pipe Line and Columbia Gas Transmission. Enron’s debt-to-capitalization ratio, at a precarious 73 percent after the 1985 merger, was in the low 60s and falling. Enron, by all counts, was ready to capitalize on what its annual report described as “the decade for natural gas.”

A wave of legislative and regulatory change was propelling the company. Inhibiting 1970s regulation on natural gas was being removed in the surplus era. Political capitalism was also providing a major boost: Federal regulation of sulfur dioxide (SO₂) emissions, associated with acid rain—as ...