CSC could lose $1.1bn Enron deal

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CSC could lose $1.1bn Enron deal

Nick Huber
IT supplier Computer Sciences Corporation (CSC) could lose a $£1.1bn (£770m) contract after the spectacular collapse of energy giant Enron.

In 1999 CSC signed an 11-year outsourcing contract worth $1.1bn with Enron subsidiary Enron Energy Services. The business process outsourcing deal saw CSC take over responsibility for billing and collection for retail gas and electricity customers - the heart of Enron's business.

As part of the deal, about 300 IT staff transferred to CSC from the Texan energy supplier. But their future is now uncertain after Enron was declared bankrupt - one of the largest bankruptcies in corporate history.

CSC continues to provide the outsourced service to Enron and receive payment. However, it has no guarantee that the contract will continue and is at the mercy of US bankruptcy laws.

"It is unclear at present how this will play out but we are providing services and they are paying for us," said a CSC spokesman.

Worryingly for CSC, bankruptcy law usually trumps any clauses written into contracts between a company and a supplier. CSC will have to wait in line with other Enron creditors.

If Enron is taken over, it is possible that the buyer will decide to retain the outsourcing deal with CSC, as the billing function run by CSC will remain a crucial part of the business.

But outsourcing experts said that any buyer would be in a strong position to negotiate a favourable deal with CSC, which may not compensate the supplier for its investment to date.

As well as back-office functions, the CSC deal includes applying e-business technology to Enron's retail electricity and gas markets.

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