Enron Corp. - University of California | Office of The President

including in Argentina. Its business plan was to acquire and operate or manage public water and
wastewater facilities that are being privatized worldwide. However, Enron created this purported
worldwide water business without adequate feasibility studied and without a detailed business plan.
The Company stumbled and was never able to compete effectively in bidding wars against such huge
multinational rivals as Vivendi and Suez Lyonnaise des Eaux. Wessex Water had been expected to
be the main revenue source for Azurix but results were disappointing after regulators forced the
company to cut prices by 12%, leaving Azurix without its main source of cash. In 99, one-third of
Azurix was sold in a public offering underwritten by Deutsche Bank and Bank America. After
initially increasing, the shares plummeted.
591. It was clear by 00 that Azurix had overpaid for a $489 million franchise to supply
water services in Buenos Aires, Argentina. The Argentina investment was troubled from the
beginning as promised new infrastructure was not provided by the government. In 11/00, Azurix
had been fined in Argentina for negligence which left customers without water for five days. In 00,
Mark-Jusbasche left the Company in part due to disappointing financial results at Azurix. In the
4thQ 00, Enron had to record an after-tax charge of $326 million to reflect Enron's portion of
impairments recorded by Azurix. In late 00, Enron had announced plans to take Azurix private –
which it did in 3/01 for $327.5 million. This amount was booked as an asset, but due to the
problems with Azurix's business, defendants knew it was impaired from the time of acquisition, if
not before. Yet Enron failed to record a charge.
592. The situation did not improve during 01. Enron was planning extensive layoffs at
Azurix, as the business was not at all successful. However, in order to overstate earnings, in early
01, Enron failed to take any charges for the impairment until the 3rdQ 01, when it recorded a charge
of $287 million.
- 387 -