POWER company Enron, which is one of the largest employers in the North-East, was reported to be on the brink of collapse last night after a rival company pulled out of a proposed rescue bid.

The collapse of the deal with Dynegy, coupled with the decision by American credit rating agencies to reclassify Enron's debt as "junk debt", is expected to trigger the biggest bankruptcy case in American history, with the company said to have debts of almost $20bn.

The Texas-based company employs 900 people in the North-East and operates a power station on Teesside, a gas processing plant at Seal Sands, the former ICI utilities business at Wilton, as well as its engineering design subsidiary Nepco, at Stokesley, in North Yorkshire, a water treatment plant, call centre and headquarters.

Earlier this month, the company announced plans to shed 5,000 jobs across Europe, although it promised jobs in the region were safe.

At the time, a spokeswoman for the company's Teesside operations said: "These job cuts won't affect the workforce on Teesside as most of those businesses are stand-alone operations. Hopefully, most of the cuts being made in Europe can be achieved through voluntary redundancies."

It was not clear whether the expected complete collapse of its parent company will have a more direct effect on Enron's North-East operations this time around.

However, the immediate reaction to the collapse of the deal from the company's head office in Houston sounded ominous for the company's workforce.

Chairman Kenneth Lay said: "Uncertainty during the past few weeks with respect to the merger has dramatically lowered the market's confidence in Enron and its trading operations.

"With Dynegy's termination of the merger, and the ratings agency downgrades, we are evaluating and exploring other options to protect our core energy businesses.

"To do this, we will work to retain the employees necessary to the continuing operations of our trading and other core energy businesses."

The uncertainty follows a bleak year for Enron on Teesside. Three people were killed in an explosion at the company's Wilton site in August.