1. The Birth of JEDI, an SPE
or….
Enron’s End run

2. Must Enron include SPEs on its balance sheet?
Not if…….
not in control of SPE and
outsiders invest & have at risk at least 3% of total capital………
Why does Enron not want to consolidate?

3. 1993
CALPERS
ENRON
$250 Mil
JEDI
Enron
Stock

4. CALPERS wants to cash out of JEDI.
1997
CALPERS wants to cash out of JEDI.
Enron must figure out a way to redeem the CALPERS investment. They create Chewco to buy out CALPERS.

5. ENRON
CALPERS
$383 Mil
CHEWCO
JEDI
This is the plan….

6. Needs $383 million to give CALPERS …… It gets…..
CHEWCO
Needs $383 million to give CALPERS ……
It gets…..
$240 mil loan from Barclay’s bank Guaranteed by Enron
$132 mil credit from JEDI (only asset is Enron stock)
Must get 3% from outside sources to avoid consolidation.

7. CHEWCO Capital Structure Outside 3%
$115,000 from M.Kopper (worked at time for Enron)
$11.4 mil loans from Big and Little River (two new LLCs formed for this purpose who get a loan from Barclay’s Bank)

8. CHEWCO Capital Structure Outside 3%
$.115 m
Big River
$11.4
mil.
Kopper
Little River

9. In the following slide…
a solid line is actual cash
transfer. All dollars are in
millions. A dashed line is a
loan.

10. CALPERS ENRON Chewco JEDI Big River Barclay’s Bank Kopper 383 .115
Enron now
sole partner
.115
132
240 Enron guar.
11.4
Barclay’s Bank
11.4
Big River
Little River

11. What causes trouble for Enron?
Barclay’s Bank begins to doubt the strength of the new LLCs – Big River and Little River- and requires a CASH reserve to be deposited (as security) for the $11.4 million dollar loans. This Cash Reserve is paid by JEDI, which by this time consists solely of Enron stock, putting Enron in the at risk position for this amount.
(See red arrow on the next slide.)

12. CALPERS Chewco JEDI ENRON Big River Barclay’s Bank Kopper 6.6 383
Enron now
sole partner
.115
132
240 Enron guar.
11.4
6.6
Barclay’s Bank
11.4
Big River
Little River

13. Revenue Recognition?
I.e. Profit to Enron?
$10 mil in guarantee fee + fee based on loan balance to JEDI. A total of $25.7 mil revenues from this source.

14. Other Profit to Enron?
The increase in the price of Enron stock held by JEDI. Enron recognized $126 million in the first quarter of 2000 from this.