Enron was hubris incorporated. It christened itself "the world's leading company" and it stomped through the capital cities of the world, extolling the virtues of liberalised energy markets.
It financed politicians and parties: Enron's founder bankrolled Dubbya; the company sponsored the 1998 Labour Party conference and it put the former Tory energy minister Lord Wakeham on its payroll. When Enron banged on the door of 10 Downing Street, it routinely got an audience.
Like all companies with overweening self-belief, it appeared to think that the normal rules of behaviour were for others. Thus it overstated its profits by $586m over the past four years. There were also dubious transactions between the company and a vehicle created by its former chief financial officer, which appear to have been profitable for this Enron executive and rather less so for the company.
So I was not terribly saddened by its collapse. Enron was smelly, and the British ministers who tugged their forelocks at it should have known better. I remember how anxious Downing Street was when the company put the boot into ministers' plans to rescue the coal industry four years ago. And just in case you think I exaggerate the government's respect for the company, I point you to the 2000 New Year's honours list, which included a CBE for Ralph Hodge, chairman of Enron Europe, for "services to the power generation and gas industries".
On the other hand, ministers were only following the lead of bankers and fund managers, who financed Enron's astonishing expansion (no surprise here - analysing business independently is not a trait shown by any British government). When it went down, Enron owed somewhere between $30bn and $60bn to banks, insurers and competing energy companies, among others.
Enron's operations were so vast, opaque and complex that getting a more precise fix on its liabilities is impossible at present. All one can say is that the world's biggest and most influential banks, Citicorp and JP Morgan Chase, provided it with vital credit and credibility.
The funny thing about Enron's collapse is that no bank or insurer or energy company claims to have been hurt terribly by it. It is quite difficult to believe this, because its debts are so huge. If a similar business had gone bust a decade ago, it would have been a racing certainty that other big institutions would have been laid low. But on this occasion, lots and lots of companies (including Barclays, Royal Bank of Scotland, Abbey National and Centrica in the UK) all claim to be facing tolerable losses on their exposure.
I should not be churlish. If the lending to Enron is as widely spread as it seems to be, then the world is a much safer place than I thought it was. It means that big banks and financial companies are really quite adept at spreading risk, at dividing loans between many different institutions so that none has too much. But in my gut, I feel that the world's bankers are simply not astute enough for there to be no seriously unpleasant repercussions from the collapse of the seventh-biggest company in the US.
Even if the banks are OK, there are millions of little victims whose pension funds and long-term savings plans invested in Enron shares and bonds. The corporation's demise is yet another blow to the wealth of ordinary savers, notably those in the US. I feel particularly sorry for relatively junior Enron employees, who were so caught up in the gung-ho culture that they put rather too much of their money in their company's own shares.
It is also pretty astonishing that no UK energy firm has been hammered by Enron's demise. The energy companies have been operating in deregulated markets for just a few years. And as the energy regulator, Ofgem, has frequently warned, they are only gradually acquiring the appropriate financial skills for buying and selling in the complex derivatives markets that Enron more or less invented, and dominated. It would be little short of a miracle if none of them has ended up with imprudent exposure to Enron through a lack of the sophistication necessary for safe trading in complex contracts that involve promises to buy and sell power on assorted dates and at variable prices.
But now for the counter-intuitive punchline, which is that Enron's demise is good for those of us who believe in competition.
The point of liberalising the energy markets is that it brings down prices for consumers. This has happened in the UK. But lower prices would be less attractive if competition also brought a much-increased risk of disruption to supply. (I should point out here that the recent troubles in the Californian energy market were not a failure of competition, but a failure to liberalise in a rational way.)
If a firm as huge as Enron can go down with no noticeable harm to consumers, then it seems to me that the system is pretty robust. There are questions about how Enron was allowed to grow in the way it did, about why various watchdogs failed to notice that it was inflating its profits and its asset base. But those are questions about the effectiveness of regulation and governance of companies in general, not about energy companies in particular.
So the announcement by Ofgem that it wants to end all price regulation of UK gas and electricity companies is not an example of chronic bad timing. One sign of a healthy market is that poor companies go to the wall and new businesses spring up. Or, to put it another way, Enron's fall is a good reason to uncork the fizz.
Robert Peston is editorial director of Quest(TM); www.csquest.com; e-mail rpeston@csquest.com
