Enron Fallout Hits Energy Firms, Stocks

ByABC News
February 4, 2002, 7:18 PM

Feb. 5 -- The taint of scandal surrounding Enron's collapse has made the public's trust in the economy even worse.

Among those caught up in the ever-widening ripples of the Enron effect other powercompanies, which are desperately trying to convince investors that they don't do businessthe way Enron did.

"We were outraged by the linkage with us with Enron. You couldn't have more dramatic differences," said Jim Macias, the senior vice president of Calpine, which is amongthose companies whose bond rating has been lowered to junk bond status, in partbecause of a drop in energy profits, but also because of financial jitters related to the Enron scandal.

To reduce their debt and improve their rating, many companies are now halting construction of energy plants.

"We had a bunch of construction workers, and now they're leaving," said Mark Sigfrinious, the mayor of Goldendale, Wash. "It's going to hurt."

Just a year ago, Western states were calling for more plants to help end their energy crisis. Now, Calpine alone has deferred construction of 34 new plants.

"What we can look for in a few years, again, is electricity shortages," said Peter Navarro, a business professor at the University of California. "This is a critical matter, not just for California and the West, but for parts of New England and other parts of this country which depend on electricity and aren't getting it."

Investors Not Certain What to Trust

Accounting firms are also feeling the Enron effect. They are trying to convince customers that they don't do business like Arthur Andersen, the firm that failed to blow the whistle on Enron's troubles.

But the credibility damage may already be done. Many investors are shying away from the stock market because they don't know what to believe.

"The investor is scared," explained Carol Coates of Prudential Securities. "They're not trusting the accounting information they're getting in the audited statements. They're not sure to trust what management is telling them. This has cast a huge doubt on management credibility."