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Online energy trading in shambles, traders pulling the plug. (News).(Brief Article)
Online energy electricity trading, which once had companies lining up to get in on the action, now sees companies scrambling to get out of the business in order to convince investors they're not the next Enron. Fast-growing operations and glitzy trading floors are out, and tangible, gritty assets such as pipelines and power plants are in as investors and debt-rating agencies have become increasingly skeptical about the viability of the business.
As of this writing, based on news reports from a variety of sources, here's how some of the major companies have fared:
* Dynegy Inc. halted energy trading on its Dynegydirect online system on June 20 only hours after it replaced its top financial officer and announced it was laying off 16% of the staff of its trading operations. Dynegy said it would let go about 340 employees company-wide, including 50 trading-floor staff.
A spokesperson for the Houston energy-trading company said Dynegy was announcing "a discontinuation, not a termination" of Dynegydirect's electronic trading activities. "If and when conditions improve-- and the company says it has no idea if or when that will happen--then Dynegydirect will be switched back on," the spokesperson told the Wall Street Journal.
While Dynegydirect is offline, the company will continue to conduct energy trading by telephone.
* El Paso Corp. cut its 600-person trading floor staff in half, shedding 300 jobs. El Paso, a Houston energy concern with interests in natural-gas production and pipelines, said it would reduce its working-capital investment in the business to $1 billion this year and significantly reduce the company's reliance on trading-related earnings.
* CMS Energy Corp. has decided to eliminate its energy-trading business, resulting in a cutback of 50 jobs in its marketing unit. It will continue its efforts to sell more assets and decrease its earnings outlook for 2002 in order to reduce debt and return to a healthy balance sheet. The company has been in a downward spin since it revealed that CMS Marketing Services and Trading, its marketing arm, had engaged in roundtrip trading.
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