Enron Ascending

Chapter 9Expanding Gas Marketing: 1992–1993

Under financial-side Jeff Skilling and physical-side John Esslinger, Enron Gas Services (EGS) vaulted into rarified air in the two years under review. Building on its momentum of 1990–91, and utilizing the gas-futures market of the New York Mercantile Exchange (NYMEX), Skilling’s enterprise would highlight the innovative side of Enron’s history.

In 1992, EGS became Enron’s second-largest earnings unit after the interstate pipelines, doubling income from the year before. “The significant growth in earnings can be attributed to a strategy that recognizes that the market is increasingly segmented and in search of customized products that fit individual needs,” Enron stated. Profits of $147 million in 1992 would increase to $169 million in 1993. But unlike realized earnings elsewhere at Enron, mark-to-market accounting made some of this only paper profits on what was guessed to come. The resulting cash-flow problem required EGS to minimize liabilities on the balance sheet and self-finance projects.

With internal growth, external acquisitions, and asset reallocations within Enron, EGS ended 1993 as a large company within a company, boasting revenues of $6.1 billion, assets of $5.4 billion, and 1,100 employees. A huge hiring influx was under way, with talent coming to Enron from banks, smaller independent gas marketers, and gas utilities. Training programs were launched for college graduates (analysts) and those with graduate degrees and ...