The Birth and Formation of Enron

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The Birth and Formation of Enron
The Enron Corporation was born in the recession following the oil and energy crises of the 1970’s. Houston Natural Gas Company’s (HNG) CEO Kenneth Lay engineered a merger with Internorth Incorporated (Internorth) (Free, Macintosh, Stein, 2007, page 2), the CEO of Internorth, Samuel Segner, resigning six months following passing the title and responsibilities of CEO to Kenneth Lay. Enteron was born shortly afterwards as the HNG/Internorth merger rebranded first to Enteron then quickly shortening this to Enron in 1986. This newly formed company owned the second largest gas pipeline network in the US employing 15000 workers with $12.1 billion of assets; however alongside this came large amounts of debt with first year loss of $14million.During the initial years the newly formed company struggled as a traditional natural gas supplier within the regulated energy markets. The American governments change in policy regarding energy markets, with market deregulation being driven forward by new policy, opened up new possibilities for the struggling firm and paved the way to its rise to power.
During the 1980’s US government policies such as the Federal Energy Regulatory Commission (FERC) Order 436 and 636 alongside the Natural Gas Wellhead Decontrol Act of 1989 (NBGWDA) deregulated the markets in which Enron operated, eliminating constraints imposed upon the markets by regulation to prevent a repeat of the economic issues of the previous decades energy crisis (The History of Regulation, 2004).As prices for natural gas fell by more than 50% following the deregulation due to increased supplies, Enron began to charge other companies for utilising its massive pipeline network (Culp and Hanke, 2003, page 8).

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