London-based Enron energy traders are to receive total bonuses of £24 million sterling (€39 million) to persuade them to keep doing their jobs, it was revealed yesterday.
The payments have been agreed between PwC, the administrators of the bankrupt energy group's European operations, and about 100 "key" staff.
These traders are working through about 250,000 trading positions to try to raise up to £125 million cash. The traders will get an average of £240,000 each as an incentive to maximise returns for creditors.
PwC has already paid bonuses of £6.2 million to 14 senior executives of Enron Direct, the UK electricity and gas supplier, for helping to sell the business for £96.4 million to Centrica, the UK multi-utility.
The payments to traders and executives are likely to cause concern among creditors, particularly former employees who have not just lost their jobs but in many instances have also seen their pensions disappear.
One company that owed money said yesterday: "If the creditors committee had been in place earlier, that sort of bonus would not have been voted through." Mr Tony Lomas, one of four PwC administrators working on the Enron businesses, said it was not abnormal to pay incentives to retain key staff to realise better value for creditors.
PwC itself is set to receive fees that could run into "tens of millions of pounds". The total liabilities of the European businesses controlled by PwC are thought to be several billions of dollars, and PwC hopes to raise $750 million (€859 million) to $1 billion from disposals and realisation of profitable contracts leaving a large shortfall.
Mr Lomas told creditors yesterday that the complexity of Enron's structure with more than 400 companies in Europe alone and the scale of inter-company debts made it impossible to be precise about total liabilities. There are more than 1,000 Enron companies worldwide. He said that when PwC was appointed at the end of November, Enron Europe was in a parlous state, with just £10 million in the bank and an annual wage bill of £150 million.
It had been the practice of the company's US parent daily to "sweep up" all of the cash of its European subsidiary, returning sufficient to cover immediate costs. When the US stopped sending the cash, the business was unable to continue.
Mr Lomas also revealed the lavish spending by Enron's executives in London. The company paid $30 million to fit out its European headquarters, Enron House, near Buckingham Palace. It cost $74 million to build. The administrators were trying to recover some of the fixed fittings from the building, owned by the Duke of Westminster. The remaining Enron staff expect to leave the offices next month to move to cheaper accommodation, saving an annual rent thought to be more than £8 million.
Mr Tim Dumbreck, fund manager at Grosvenor, the Duke of Westminster's property group, said: "We are taking the necessary advice and trying to have constructive dialogue with Enron to come to an agreement over the lease."
-(Financial Times Service)
