ICI facing £480m Enron bill

DEBT-LADEN chemicals giant ICI faces the threat of a £480 million hit as a result of the collapse of energy trader Enron, Financial Mail has established.

The news follows revelations only a week ago that ICI has a £453 million pensions liability under new accounting rules - just as the company tries to raise cash from shareholders in an emergency rights issue.

Details of the potential black hole are disclosed in the small print of documents sent to investors as part of the fund-raising exercise.

ICI and Enron became partners in a vast Teesside power plant project in the early Nineties. Together, they signed 20-year contracts to buy gas supplies to fuel the station.

The chemicals giant sold its share of the project to Enron in two deals in 1996 and 1998. But the collapse of Enron means that ICI could become liable for almost £500 million of payments for future gas supplies.

ICI has kept the gas supply deals off its balance sheet. Instead, they are described as 'contingent liabilities' because the part of Enron that signed the deals is still trading.

But with Enron Corporation in Houston and Enron Europe in London in receivership, experts are now warning that the companies involved with the Teesside deal could also be put into receivership. ICI could then be forced to pay the gas contracts.

ICI believes it will be liable for only a fraction of the total sums involved because of agreements signed at the time of the gas deals. On one set of contracts worth £348 million, ICI believes it could be held liable for only £174 million. On another set worth more than £1 billion, the group said it would be liable for only 30%, or £308 million.

But City experts say that if the contract has not been tightly drafted, ICI could find itself being pursued for the whole sum.

Tim Stocks at City law firm Taylor Joynson Garrett said: 'The key question is whether the deal that split liability was signed between Enron and ICI or between the two companies and the seller of the gas. If it does not include the seller, then ICI could find itself being chased for the whole £1 billion.'

ICI defended the inclusion of the liabilities as a contingency. A company spokesman said: 'These accounts were approved by Goldman Sachs, SG Warburg, Merrill Lynch and KPMG. The underwriters and accountants would never let anything slip past in these circumstances.

'The figures in the prospectus are the absolute maximum we could pay and the largest sum would be spread over the years to 2008. And we would actually have the gas to sell. We are sure that we could not be held liable for the whole sum.'