Enron Paper

In: Business and Management

Submitted By imswmgrl
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TAB B TOPICS: THE CASE OF ENRON

REQUIRED:

After reading the case and articles in the Tab B readings, answer the questions below. You should download this document and include the question above your answer to make it easier to grade. Your answers should be in complete sentences. Based on the nature of the questions, one or two short paragraphs for each question should be adequate.

You should print out your article write-up and submit it in class on the due date.

1. What was the nature of Enron’s business in 1985? How about in 2000?

In 1985, it was a natural gas pipeline company. By 2000, it built leading businesses in energy trading and international energy-asset construction.

2. How could Enron earn money by trading in gas contracts?

They would buy natural gas at spot prices instead of bundles (which was what was required before the deregulation of gas). This made the price of gas more volatile. Skilling suggested that Enron sell the gas in long-term fixed-price contracts with customers. To prevent the company from losing money due to price fluctuations, Enron would also enter long-term fixed-price contracts with producers by using swaps and forward and future contracts to make sure it met the energy requirements of customers.

3. Enron expanded its trading model to markets other than gas. What other markets did they expand into? Were there any concerns from expanding to these other markets?

They got into electricity, water, broadband, coal, weather, pulp, and paper. They expanded into electric power by buying Portland General Electric in 1997. Soon after, they bought electric distributers in Argentina and Brazil. The major concern for this market was that electricity could not be stored like natural gas and would need to find a new way to meet consumer’s demands. Their investments…...

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