The Crooked E: History of Enron as a Trading Company that Put Swagger in Energy
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– An old testament biblical style story of rise, pride and ensuing fall.
– Center of an era filled with Young smart and ambitious people working at these uber trading firms in Houston that dominated energy trading around the world. Downtown renaissance. Energy firms were putting technology innovations out that rivaled what Silicon Valley was doing at that time.
– They were visioning the future – Broadband trading. Did a deal with Blockbuster that was a pre-runner to Netflix.
– Energy industry lost its swagger when Enron collapsed.
– Note how despite the speed and size of Enron’s fall, Fed did not have to get involved, no systemic risk, no bailouts for institutions. Goes back to the point that energy markets have natural self correcting mechanisms + Enron’s fall had more to do with accounting/financing than the corruption of the markets they engaged with and created.
– Separate fact from myth. Why so many today owe their livelihood to the risks that Enron took to be successful.
– Ultimate first mover advantage. An aggressive appetite for risk.
– NGPA – removal of federal price controls at well head and FERC Order 363 unbundling gas supply from gas delivery. Without that no choice in electricity providers that we enjoy today.
– Ken Lay’s role in lobbying for deregulation and his connection to the Bush family.
– They did not fail from being successful traders but from financial leverage.
– Enron online and the financialization of core markets of energy trading.
– The conflict of being a “super local” in the physical markets for gas and power. How they would push their market position and view of market positions.
– Valuing optionality of assets, securitizing them – meant that you did not have to own the asset to operate in the energy markets.