Textile Dyers Seek Relief From Enron

Textile dyers, printers and finishers, who have been battered by exorbitant energy prices, are hoping that the current debacle involving energy giant Enron Corp. will bring some much-needed relief.

Beleaguered Enron, which supplies natural gas to 60 to 70 percent of apparel industry dyers, filed for Chapter 11 bankruptcy following a broken merger deal between it and energy trader Dynegy Inc. The Houston-based companies are now at odds with each other, as Enron moved quickly to file a $10 billion lawsuit over the quashed merger that Dynegy pulled out of, citing Enron’s weakening cash position.

Many of California’s textile dyers are still paying steep prices for natural gas because they locked into long-term contracts during last summer’s energy crisis, which saw prices skyrocket to unprecedented levels and forced several companies out of business. The impact is still being felt, as two more firms, Heng Sang and Paradise Dyers, shut down last month, according to Scott Edwards, president of the Association of Textile Dyers, Printers and Finishers, the industry’s trade representative.

“A lot of these companies locked into two-, three- and five-year contracts when gas was trading at $30 [per therm] and they [negotiated] prices of about $8,” Edwards explained. “Now, it’s something like $3.50. All of us are paying well above market price.”

Pradip Shah of Los Angeles-based Washington Garment Dyeing and Finishing was one of those dyers. He locked in at $7.50 for three years.

“We’re hoping we can get out of it. The gas company has told us that Enron is open to cancel contracts [via default], but we haven’t found out if this is for sure yet,” Shah said.

Edwards speculated that Enron may opt to sell its accounts to competitors with terms intact but added that the company is working daily with creditors on managing its assets. As part of that plan, the company this week terminated more than half of its staff of approximately 7,500 workers.

Meanwhile, California power officials said they are prepared to cover up to 1,200 megawatts of energy should Enron cut off its power supplies.

“There’s been quite a shakeout here with dyers and if anything, that’s made it easier to hold prices with converters,” said Edwards.