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Enron Mail |
USA: EOTT pays $120 mln for assets from Enron affiliate.
Reuters English News Service, 07/02/01 India: The Dabhol controversy revisited Business Line (The Hindu), 07/02/01 India: Some US cos keen on Dabhol project Business Line (The Hindu), 07/01/01 No change in Maha govt stand on Enron: CM Press Trust of India Limited, 07/01/01 Elbows Fly in Contest for New Power Plants The New York Times, 07/01/01 FOCUS on ENERGY / Deregulation proving a mixed bag elsewhere Houston Chronicle, 07/01/01 A flood of fund-raisers? / Community wonders how to help as arts groups assess damage Houston Chronicle, 07/01/01 Lessons for Asia in California's Energy `Crisis': Patrick Smith Bloomberg, 07/01/01 Enron Chief Lay May Visit India to Discuss Dabhol, Paper Says Bloomberg, 07/01/01 Power Plays: The High-Energy Portfolio SmartMoney, 07/01/01 Global economic spiral to pull India's growth to new lows: analysts by Biman Mukherjee Agence France-Presse, 07/01/01 Enron Chairman to visit India on ninth or 10th July Press Trust of India Limited, 06/30/01 Lenders can run DPC: IDBI chief Business Standard, 06/30/01 Army chief, ex-Enron exec, will still have say Houston Chronicle, 06/30/01 Bush aide joined energy talks while holding industry stocks Houston Chronicle, 06/30/01 No Rove Conflict, White House Says; Bush Aide Sat In on Energy Meetings The Washington Post, 06/30/01 Army chief, a former Enron exec, won't step away from energy issue Associated Press Newswires, 06/29/01 Western Wholesale Power Trades Fri Above FERC Price Limit Dow Jones Energy Service, 06/29/01 USA: EOTT pays $120 mln for assets from Enron affiliate. 07/02/2001 Reuters English News Service (C) Reuters Limited 2001. HOUSTON, July 2 (Reuters) - EOTT Energy Partners L.P. said on Monday that it has paid $120 million for energy assets from affiliates of energy marketer and trader Enron Corp. . Houston-based EOTT has bought a hydrocarbon processing complex in Morgan's Point, Texas and a liquids pipeline grid system, as well as a natural gas liquids storage facility that was previously operated by an Enron affiliate under a lease financing arrangement. At the same time, Eott has entered into a 10-year tolling agreement for production from the hydrocarbon processing complex. It has also arranged a 10-year storage and transportation agreement for use of the pipeline and storage systems. The agreements are with an Enron affiliate. Dana Gibbs, president and chief operating officer of EOTT Energy Corp., a general partner of EOTT Energy Partners, said in a statement that the acquisition will add to earnings and provide for stable cash flows without exposure to the commodity markets or prices. He also noted that the deal will increase the company's EBITDA (earnings before interest, taxes, depreciation and amortization), a measure of positive cash flow, by about $20 million on an annualized basis. Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. India: The Dabhol controversy revisited 07/02/2001 Business Line (The Hindu) Copyright (C) 2001 Kasturi & Sons Ltd (KSL); Source: World Reporter (TM) - Asia Intelligence Wire THE Dabhol Power Project has been a subject of controversy ever since it started. This writer was among those who pointed out the rationality of the negotiations carried out with the Dabhol Power Company, which led to the Maharashtra Government accepting a very high financial liability. In an article entitled "Why do Governments twist and turn?" in Business Line dated January 20, 1997, I had specifically referred to the various changes in the negotiating stance taken by the Government of Maharashtra. This was with particular reference to the judgment of the Bombay High Court on the Enron issue. Referring to the Committee under Mr Gopinath Munde, the former Deputy Chief Minister of Maharashtra, the judges of Bombay High Court had quoted the Committee as saying: "The entire negotiation with Enron is an illustration of how not to negotiate, how not to take a weak position and how not to leave it to initiate to the other side." The Munde Committee had gone hammer and tongs at the lack of competitive bidding by the Pawar Government. It also hinted darkly at "several unseen factors and forces, which seem to have worked to get Enron what it wanted..." Presenting his Deputy's report to the Assembly, the then Chief Minister, Mr Manohar Joshi had observed with a flourish: "The speed with which this agreement (what Mr Pawar had got) must be categorised as 'Enron came, Enron saw and Enron conquered"'. The Maharashtra Government is now all ready for another bout of negotiations with the Dabhol Power Company (DPC). The circumstances are, of course, different now. As a result of an extremely painstaking analysis by the Madhav Godbole Committee, a detailed report has been drawn up which, among other things, recommends a renegotiation to reduce the unconscionably high tariff levied by the DPC and agreed to by the Government of Maharashtra. It is important to learn the lessons of the previous negotiations before any renegotiation is taken up. I am aware that Dr Godbole, with his tremendous experience in matters of this nature, would not leave any stone unturned to ensure that the maximum benefit is obtained for the country and the State of Maharashtra. I am, however, restating some of the conclusions which I have drawn, based on my perusal of the judgment of the Bombay High Court and other relevant papers in regard to the negotiations by the Kirit Parekh Committee. In particular, the Bombay High Court judgment points out that the speed with which the renegotiations were conducted by the Parekh Committee showed amazing alacrity. Let me quote the judgment in extenso: "The speed with which the negotiating group studied the project, made a proposal for renegotiation, which was accepted by Dabhol, and submitted its report is unprecedented. The negotiating group was constituted by the Government of Maharashtra on November 8, 1995. It was asked to submit its report to the State Government by December 7, 1995. The Committee, we are told, examined the project, collected data on various similar other projects as well as internal bids, including data on a similar project executed by Enron in the UK, held considerable negotiations, settled the terms for the project revival, got the consent of Enron and Dabhol to the same on November 15, 1995, just within a week of its constitution, and submitted its exhaustive report along with data and details to the Government of Maharashtra on November 19, 1995, just 11 days after its formation, much before the December 7 1995 deadline by which it was required to submit the same. The speed at which the whole thing was done by the negotiating group is unprecedented. What would stop one to say, as was said by the Chief Minister in the context of the original PPA, Enron revisited, Enron saw and Enron conquered, much more than what it did earlier. I am confident that this story will not be repeated now. Surely, Dr Godbole will ensure that thoroughness will not be sacrificed at the altar of speed this time. It is obvious that the Maharashtra Government stands to lose substantially if the tariffs are not renegotiated downwards. At the same time, we must concede that a negotiated contract is very difficult to go back upon. In its earlier negotiations, the DPC was assisted by a team of competent lawyers. It is to be hoped that the Godbole Committee will call on an equally competent set of lawyers from our side. Negotiations in respect of power projects are very much the domain of corporate lawyers, who have specialised on the subject. The Godbole Committee would do well to utilise the best legal talent available in the country and, if necessary, from abroad if it is to succeed in wresting some gains. It is important to stress that Government and its representatives cannot and should not wash their hands off the DPC case. Their counter-guarantee to the payments of the Maharashtra Government and the MSEB is a perpetual reminder of the fact that, if the Maharashtra Government defaults, it will be ultimately the Union Government that has to carry the can. If the Centre has any reservation on the subject, the right time for raising doubts was at the stage of giving the counter-guarantee and not now. The Government reneging on a guarantee can have serious repercussions on the credit rating of the country itself. It can also affect future FDI flows if it gets to be known that the word of the Government is not to be trusted. It is ultimately a test of economic maturity for a country to stand by its agreements, however mistakenly they may have been entered into - unless they be entered into through misrepresentation of facts. It is difficult at this stage to allege misrepresentation of facts by DPC, when all the presentations by the DPC were fully in the public domain and the Government walked into the guarantee trap with its eyes open. If the DPC terminates its contract, not only the Government but also the financial institutions and banks which have been major lenders to the DPC are liable to grievous losses. The sums involved run into thousands of crores of rupees. The Government has, therefore, to somehow find a way out of the Dabhol dilemma. No cost is too high to sustain the country's reputation as one which stands by its solemn agreement. The Government, through such instrumentalities as the NTPC and Power Trading Corporation, can definitely arrange to buy power, which is surplus to Maharashtra State and wheel it to other States in need. There is admittedly shortage of power, particularly peaking power, in many States. What is lacking is the transmission capability to move power from Mumbai to regions, such as Karnataka, Tamil Nadu and so on. One advantage of Dabhol is that it supplies peaking power, which the country is short of. It should not be beyond the ingenuity of the experts in the Power Ministry and the CEA to work out a mechanism by which the Power Trading Corporation can take power from Maharashtra and supply the same to other States in need of power, particularly peaking power. Once this is done, the plant load factor of Dabhol power can be improved, and the effective tariff charged to MSEB reduced. This involves an act of financial and electrical engineering, which cannot brook any further delay. In my view, it is on the successful resolution to the problem of evacuation of power from Maharashtra to other States and payments, therefore, that the resolution of the Dabhol dilemma will finally rest. New Delhi should not be dismayed by the immediate problems involved in the arrangement for transmission of surplus power from Maharashtra to other States. The alternatives to this solution are too costly to contemplate. Let us hope that out of the Dabhol problem will emerge the unified energy market for India. I am stating this possible solution not to oversimplify the challenge before the Godbole Committee, but rather to point out that the solutions are possible given the political will and tenacity to pursue them. The DPC will, of course, be up to all its usual tricks to force the renegotiators to concede more than they should. But so much of the background of the dispute is in the public domain that the renegotiators will find it difficult to make any further concession to the private investor. The renegotiators must stick to their brief to reduce the tariffs. In this, there is hope in tripartite solution, in which the Centre, the Maharashtra Government and the DPC become participants to buy the surplus power and wheel it to other States. Only such a solution will show a sustainable way out of the current imbroglio. S. Venkitaramanan Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. India: Some US cos keen on Dabhol project 07/01/2001 Business Line (The Hindu) Copyright (C) 2001 Kasturi & Sons Ltd (KSL); Source: World Reporter (TM) - Asia Intelligence Wire MUMBAI, June 30. SOME US companies have shown interest in taking over the Dabhol power project if Enron pulls out, according to the acting Chairman and Managing Director of IDBI, Mr S.K. Chakrabarti. Mr Chakrabarti told newspersons after the seventh AGM of the institution that Dabhol Power Company (DPC) had enough resources to repay its debts till September. In fact, the company had repaid part of the principal of the first phase also. He was confident that the asset would remain a standard one. He said if no buyer was interested in taking over the project and Enron exits, IDBI would take over the project and appoint an operations and maintenance contractor to run it. The institution had pulled up the engineering consultants, Stone and Webster, for delaying their report on the cost implications of different options of completing the project. It had also pulled up Enron for not informing it of the EPC contractors terminating their agreements on time, Mr Chakrabarti said. He said the institution was in direct touch with the EPC contractors to get them back to resume construction work at the project. "We are holding talks with them on the issue and we are optimistic," he said. On the Modi Rubber open offer issue, the IDBI chief said his institution did not have much of a say in it as its stake in the company was very small. "The decision in that issue is being taken by UTI and LIC, which have substantial holdings. We are meeting on Monday in Delhi where we will decide on the future course of action," he said. Our Bureau Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. No change in Maha govt stand on Enron: CM 07/01/2001 Press Trust of India Limited © 2001 PTI Ltd. Mumbai, Jul 1 (PTI) Maharashtra (north India) Chief Minister Vilasrao Deshmukh Sunday said there was no change in the Democratic Front government's stand on the Enron issue. Speaking to reporters after an award function here, Deshmukh said his government continued to adhere to its earlier demand of reduction of power tariff since it was in no position to purchase all the electricity produced by the Enron-promoted Dabhol power project (DPC) at the current rates. He said the seven state governments which have reportedly "agreed" to purchase power from DPC, had "only displayed a willingness to purchase power only at a reduced price." The state government had urged the Godbole committee to decide the issue of reduced tariff among its other points of reference while dealing with US power giant Enron, the chief minister said. (THROUGH ASIA PULSE) 01-07 2001 Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. Long Island Weekly Desk; Section 14LI Elbows Fly in Contest for New Power Plants By JOHN RATHER 07/01/2001 The New York Times Page 3, Column 1 c. 2001 New York Times Company WITH the pressure on to build new power plants on Long Island before rising demand for electricity outstrips available supplies, a major private energy company is butting heads with the Long Island Power Authority over where some of the new power will come from. The energy company, American National Power of Houston, which goes by the name Brookhaven Energy locally, wants to spend more than $300 million to build a 580-megawatt natural gas-fueled power station near Yaphank to supply what it says would be minimally polluting, low-cost electricity to the region. ''Long Island has at least the second highest rates in the country, and it's also being served by very old and very inefficient generators,'' said Robert J. Charlebois, an American National Power vice president. ''We think there's an opportunity to be the least-cost provider of electricity and compete favorably.'' But the Long Island Power Authority is resisting the effort. American National Power says that LIPA, which is supposed to encourage competition among suppliers in accord with New York's deregulated market, is actually trying to prevent outsiders from building plants that it says would deliver electricity more cheaply than the plants operated by LIPA's main power-producing partner, Keyspan Energy. ''They are motivated to keep the competition out,'' said Joseph S. Fitzpatrick, American National Power's senior vice president for development. LIPA denies the accusation, saying American National Power's proposed plant fails practical tests by being too far east and would cost $100 million to $150 million to tie into a transmission system geared toward more heavily populated western Suffolk and Nassau counties. ''There has been no planning on their part for the transmission needs,'' said Bert J. Cunningham, LIPA's spokesman. ''They are leaving us to pick up the tab and make their power deliverable.'' LIPA, meantime, is backing a proposal by Keyspan to build a 250-megawatt gas-powered generator near Spagnoli Road in Melville that would use oil as a backup fuel. The site, in addition to being near an existing Keyspan gas line, is next to an electrical substation, minimizing the cost of a transmission tie-in, Mr. Cunningham said. Mr. Charlebois said his company estimated that the cost of connecting its plant to the grid would be less than $10 million. He added that LIPA had been less than cooperative in supplying information needed for a required transmission study. ''It's been like pulling teeth,'' he said. ''It's been quite frustrating.'' Mr. Cunningham said LIPA cooperated. ''Maybe they felt our response time was longer than they anticipated,'' he said. But another company, Caithness Energy of Manhattan, suggested that it too had difficulty obtaining timely information from LIPA for a transmission study. Caithness had proposed a 750-megawatt power station, nearly the size of the defunct 800-megawatt Shoreham nuclear plant, at a site about a mile from the American National Power site. Last week a Caithness manager of project development, Daniel McBrearty, said the proposal was inactive. In an exception to its resistance to outside entrepreneurs, LIPA is endorsing a project by Florida Power and Light to build a 79-megawatt gas unit next to a Keyspan generating station in Far Rockaway, Queens. The project, which would be Florida Power and Light's debut in LIPA's service area, would substitute for a now-lapsed proposal by Enron for a barge-mounted generator in Far Rockaway. LIPA, a state agency that holds 15-year contracts to purchase power produced by former Long Island Lighting Company power stations now owned by Keyspan, is also seeking proposals for up to 79 megawatts of new generation capable of using gas and oil at the Shoreham site, which is already connected to the power grid. A Keyspan proposal for a 250-megawatt plant at the site is also in the state's regulatory queue. Mr. Cunningham said the authority planned to promote additional plants of up to 79 megawatts and one larger plant at sites yet to be announced. The 79-megawatt limit is one megawatt short of triggering intensive Public Service Commission siting and environmental review, meaning that proposals for these smaller plants can proceed more quickly. Long Island's newest electrical generator came on line last week, just in time to help LIPA squeak through a summer when power supplies may be pushed to the limit. But the generator, a 44-megawatt gas-powered unit hurriedly installed by the New York Power Authority at the former Pilgrim State psychiatric hospital near Brentwood, will be too small to provide more than temporary relief for what energy officials say is an impending Long Island power shortage. ''It's a bridge to get us through until larger plants are built,'' said Joseph Leary, a state power authority spokesman. The generating plans at Shoreham and other Eastern Suffolk sites would be advanced by construction of a gas pipeline from Connecticut under Long Island Sound to the Shoreham site. The pipeline, proposed by Islander East Pipeline Company, a partnership of Keyspan and Duke Energy, would bring natural gas from a major new field near Sable Island off Nova Scotia to Long Island, competing with current supplies piped in from the Gulf Coast and western Canada. The companies expect the pipeline, which would be about 50 miles long, to be in service by 2003. David J. Manning, Keyspan's senior vice president for corporate affairs, said the pipeline would strengthen the company's gas system for residential, commercial and industrial customers on eastern Long Island, where the company is trying to make inroads in a home heating industry still dominated by oil. He said the new gas supplies would also increase gas competition and reduce prices. Two other operators have also expressed interest in building pipelines linking Connecticut and the Shoreham site. But Keyspan and Duke appear to be in the lead and formally applied to the Federal Energy Regulatory Commission last month for permission to proceed. Proposed spurs would bring the pipeline to the Yaphank site where American National Power wants to build and to the former Navy property in Calverton, where another energy company, AES Long Island, is proposing a 510-megawatt gas-powered plant. The Town of Riverhead now owns the property. Harry Davitian, an AES Long Island vice president, said the prospect of new gas supplies and the availability of sites explained the eastern Long Island plant proposals. ''It's very difficult to find sites in the western part of Suffolk, and Nassau is very built up,'' he said. AES Long Island is a subsidiary of AES, which owns 160 power plants in 22 countries. Farther west, a proposal by PPL Global, another major energy company, to build a 300-megawatt gas-powered plant near Kings Park continues to face stiff local opposition. LIPA, meantime, must decide as early as this summer whether to exercise a one-year contractual option that began in May to purchase the aging Keyspan plants. The plants include units in Northport, Port Jefferson, Glenwood Landing, Island Park and Far Rockaway that run on natural gas and oil. The New York Public Interest Research Group has identified the Northport and Port Jefferson power stations as among the greatest air polluters in the state. Mr. Manning of Keyspan disputed the assertion, saying more than $60 million was spent over the last 10 years to reduce sulfur dioxide and nitrous oxide emissions to levels far below state and national averages. Gordian Raacke, the executive director of the Citizens Advisory Panel, a LIPA watchdog, described the plants as ''old clunkers'' that would make a bad investment. But Richard M. Kessel, LIPA's executive director, has said, ''Whoever owns those plants rules the Island.'' As LIPA pondered, American National Power was forging on with its plans for Yaphank despite lacking LIPA's endorsement. The company filed a formal application with the New York Public Service Commission last week to build the 580-megawatt plant on 28 acres south of Exit 66 on the Long Island Expressway near Yaphank. The filing sets in motion a 12-month timetable for public hearings leading to a state ruling on whether the plant will be built. In the long queue of power companies that have expressed at least preliminary interest in building new plants on Long Island, American National, which is a subsidiary of British company with worldwide energy interests, now moves to the front of the line in New York's regulatory scheme. Chart: ''Power Plants in the Pipeline'' Major electrical generating plants proposed for Nassau, Suffolk and LIPA's service area in Queens. 1.AES Long Island 510-megawatt gas-powered plant at site of former Calverton Naval Weapons Industrial Reserve Plant. 2.Long Island Power Authority Seeking proposals for up to 79-megawatt gas and oil dual-cycle plant at site of former Shoreham nuclear plant. 3.American National Power 580-megawatt gas-powered plant. 4.Caithness Energy 750-megawatt gas-powered plant. 5.PPL Global 300-megawatt gas-powered plant. 6.New York Power Authority 44-megawatt gas-powered plant at Pilgrim State property. 7.Keyspan 250-megawatt gas-powered plant. 8.Florida Power and Light Up to 79-megawatt gas-powered unit. Map of Long Island highlighting areas of proposed electrical generating plants. Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. NEWS FOCUS on ENERGY / Deregulation proving a mixed bag elsewhere LAURA GOLDBERG Staff 07/01/2001 Houston Chronicle 4 STAR 1 (Copyright 2001) California continues to draw headlines as a case study for what can go wrong with electricity deregulation. With rolling blackouts, state investigations of power price manipulation and all the fuss surrounding California, few may realize residential consumers in a dozen other states have been living under deregulation schemes, a few for several years, without catastrophic results. As some Texans get electricity from new companies under a pilot program starting Friday and others wait until the full market opens Jan. 1, it is natural to look to other states with questions. Did residents save on electricity costs? Did consumers rush to try out new companies? In short: yes and no. But for reasons that might not seem obvious. Since states have deregulated in distinct ways, are subject to different economic forces and are part of different power transmission grids, strong comparisons can't always be made. But it is worth looking at what's happening elsewhere. In many states, lawmakers who drafted deregulation schemes figured the change would take years to work and sometimes built in years- long transition periods. Those transitions often come with mandated rate caps or cuts for existing, or "incumbent," power providers. Those caps and cuts mean residents save on electric bills but in some cases also made it difficult for new competitors to come in and undercut longtime electricity providers. So residents saved, but competition - what backers of deregulation say spurs lower prices and and better service - didn't thrive. About 40 million residential, commercial and industrial customers in the United States theoretically have an option to choose alternative retail electric providers. Some 1.8 million, representing 4.5 percent, have done so, according to Cambridge Energy Research Associates, a Massachusetts-based consultant. "Many of those 40 million customers have choice in name only, as no one has signed up to offer an alternative to the utility," said Amy Biehl, an associate director at Cambridge who specializes in retail electricity issues. "Because of the way the market is structured, they cannot offer savings or make a margin." On Jan. 1, Texans will join the ranks of those able to buy electricity from competing providers. In Houston, that means consumers can leave Reliant Energy HL&P. Those who don't switch will keep getting Reliant service but not under the HL&P banner. Come January, Texans who don't switch providers will see an immediate rate cut. An average residential customer in Texas should save about $78 next year because of the rate cut, according to a recent report by the Energy Institute at the University of Houston's C.T. Bauer College of Business. The way Texas crafted its reduction allows enough room and flexibility for a competitive market to develop, said Commissioner Brett Perlman of the state Public Utility Commission. "If you don't get the prices right on the default service, then the market doesn't work," he said. Experiences in Pennsylvania and Massachusetts bear him out. It is especially true when considering that rising fuel prices make it more expensive to produce electricity. Pennsylvania, which began consumer choice in early 1999, is widely cited as one of deregulation's success stories. The office of Gov. Tom Ridge boasts that the state's electricity rates are now below the national average. Before, they were 15 percent higher. Consumers and businesses, the office says, have saved $3 billion on electricity. Even though a chunk of the savings is attributable to rate caps, the issue of competition brought them on, said Glen Thomas, chairman of the Pennsylvania Utility Commission. Caps were negotiated with utilities as part of the state's deregulation plan. Pennsylvania has seen more customers try out new providers than in other states. About 550,000 customers, about 10 percent, at any point in time are being served by competitive providers, said Sonny Popowsky, the state's consumer advocate. On top of that, another 250,000 residential customers were assigned to a new provider. Popowsky stressed that Pennsylvania hasn't really deregulated, but restructured: Incumbent providers are selling at capped rates, in some instances for the next decade. Popowsky said he believes electricity restructuring in his state has succeeded "fairly well." "Because of our rate caps, all of our customers are either better or at least no worse off than they were in 1996," Popowsky said. But there have been bumps. As wholesale electricity prices rose, alternative providers found it more difficult to compete against utilities' capped rates, and many have left the market, Popowsky said. One utility had problems with a cap and asked state regulators for an increase. The request was denied and a settlement struck. Another utility said that in some cases it is buying wholesale energy at higher costs than it can sell it back to customers. It won't ask for a rate increase but is finding other ways, such as through new kinds of services, to make up the money. David Kleppinger, a lawyer who represents the Industrial Energy Consumers of Pennsylvania, said savings were available through competitive providers in 1999 and 2000. But this year, industrial users began returning to their old providers as wholesale prices rose. "There's disappointment right now that wholesale prices don't allow competitors to really be active in the market," he said. "Presumably, that will change." A Procter & Gamble plant in Mehoopany, Pa., that makes consumer goods such as Bounty and Charmin, switched providers, saving enough money that it was "worth our while," said Chuck O'Hara, the plant's energy affairs manager. As a residential consumer, O'Hara signed up with new providers in 1999 and 2000. The first year, he saved money. The second, he found an even better offer. But his supplier left the market, and he is back with his original utility after he couldn't find a better deal. Last year, he estimated, he saved about a month's worth of electricity costs by going with a competitive provider. Was it worth it? O'Hara said that since he deals with energy for a living, he thought it was. But if he didn't, he said, he isn't so sure it would have been. Like in Pennsylvania, consumers in Massachusetts saved money from rate caps - more than $535 million in 1999. The state, which started letting consumers shop for electricity in 1998, has had less competition for residential service: As of March, fewer than 1 percent of consumers were getting electricity from competitive providers. Consumers' electricity prices, after dropping steadily for 2 1/2 years, recently increased as the cost of fuels used to make electricity rose. As most utilities signed long-term contracts to buy wholesale power at good rates, most would-be competitorshaven't been able to buy wholesale power cheap enough to compete. But state officials expect wholesale costs to fall as fuel prices stabilize and new power plants come on line. David O'Connor, the state's commissioner of energy resources, also predicted there soon will be more retail competition because fuel prices also drove up incumbents' rates. Massachusetts lets incumbent providers raise electricity prices in the face of rising fuel prices. Texas will do the same. Massachusetts' electricity restructuring is working well in ways that aren't yet apparent to residential customers, O'Connor said. For one, he said, the state is drastically improving the supply of generating plants, which should translate to lower prices for consumers. The state purposely built in a transition period that lasts up to seven years, he said. John Hanger, president of Citizens for Pennsylvania's Future and a former state utility commissioner, said success takes time. "I don't think you can do this in a big-bang way," he said. "It requires, really, leaders who are committed to building competitive markets and understand there is actually a need for an active government role in order to do that." The trick, he said, is knowing when to be hands-off and when to be hands-on. Gene Lockhart, president and chief executive officer of the NewPower Co., which is offering retail service across the United States, is "quite optimistic and bullish" about the pace of energy deregulation. He said he isn't surprised that switching rates are slow to take off, as much time and education are needed. "People just don't wake up and switch overnight," he said, adding that sign-ups with NewPower, a joint venture of Enron Corp., IBM and AOL Time Warner, for Texas' pilot program are ahead of expectations. The outlook on deregulation isn't positive everywhere. "It's really kind of a hot topic here again," said Terrence Mercer, a spokesman for the Rhode Island Division of Public Utilities and Carriers. "Three years into it, what was promised really hasn't come to fruition." The idea was competition and lower rates. Instead, "the bills are slightly higher, and there is no competition to speak of," he said. Mark Cooper, director of research for the Consumer Federation of America, argues the promises of deregulation were "bogus." Electric restructuring was pegged to assumptions about natural gas, used to make electricity, being cheap, he said. As natural-gas prices rose, the so-called benefits, he said, went up in smoke. "It hasn't done the harm that we've seen in California, but it hasn't done a lot of good anyplace," he said. In California's wake, states including Oklahoma and Nevada halted plans to let consumers select electric companies. One big difference from California that officials in Texas - and other states - often cite is power-plant supply. Texas has a surplus of generating capacity, while California doesn't. Reliant hasn't participated in retail electricity markets outside of its home state for two reasons. It wanted to focus on Texas, where it is marketing to consumers outside of Houston. And rules elsewhere don't allow for sufficient profit margins to warrant the investment, said Waters Davis, president of Reliant Energy Retail Services. "The future of retail electricity in the U.S. is based largely on the success of the Texas market," Davis said. "A number of other states in the last six to 12 months have put their deregulation efforts on hold until they can find a successful model to follow. I believe that Texas today has the best chance of any state." ... State of deregulation Schedule for the start of competition for residential customers: Ariz. Early 2001 Ark.* 2003 Calif. Early 1998 Conn. Mid 2000 Del. Late 2000 Ill. Mid 2002 Maine Early 2000 Md. Mid 2000 Mass. Early 1998 Mich. Early 2002 Mont.* Mid 2004 Nev.* On hold N.H. Mid 2001 N.J. Mid 1999 N.M.* Early 2007 N.Y. 1998-2002 Ohio Early 2001 Okla.* On hold Pa. Early 1999 R.I. Early 1998 Texas Early 2002 Va. 2002-2004 W.Va.* On hold *These states delayed their deregulation plans. New beggining dates are listed. Graph: 1. State of deregulation (p. 24, TEXT); Map: 2. Map of the United States (p. 24) Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. LIFESTYLE Shelby Hodge A flood of fund-raisers? / Community wonders how to help as arts groups assess damage SHELBY HODGE Staff 07/01/2001 Houston Chronicle 2 STAR 2 (Copyright 2001) SOON after the city's performing-arts groups began tallying losses suffered in the wake of Tropical Storm Allison, a number of community-minded people began thinking fund-raisers. Would there be black-tie dinners and benefit luncheons to help replace what was lost? Would the bar be raised for gala chairs? Could we expect a flurry of invitations to flood-relief events? Actress Vanessa Redgrave sent a letter to the Alley Theatre offering her services for flood-related fund raising. The Houston Symphony, the Society for the Performing Arts, the Alley, Houston Grand Opera and Houston Ballet each had losses of varying degrees. While exact figures are yet to be determined, development directors and executive directors agree that budgets are sure to be strained. How these groups go about recovering from the financial loss varies. The Society for the Performing Arts and Houston Ballet are both considering holding benefits. "At this moment, we are discussing what additional funding we are going to need and what additional fund-raising events we can do. I would like to say that we will probably do at least one," said Toby Mattox, SPA executive director. SPA, which had adjoining office space with the symphony in the basement of Jones Hall, lost furniture, equipment, computers, current business records and some subscriber records. Even with losses in the hundreds of thousands of dollars anticipated, Mattox said SPA would not ask major foundations for aid. "We are going to need them to help us on a regular basis with our continuing programs of education and outreach and presentation," he explained. Further, SPA does not expect chairs of the annual fall luncheon and spring gala to ratchet up their goals. "I think it might be unfair to ask them to accept greater goals. There are already very challenging goals as it is," Mattox said. Houston Ballet managing director C.C. Conner and development director Patsy Chapman are considering adding a fund-raiser, something apart from the Nutcracker Market in November and the ball next spring. Costumes and wigs from productions of "Giselle, Swan Lake" and "Cleopatra," as well as fabric for the ballet's 2002 production of "Peter Pan," were damaged in the flooding at Wortham Theater Center. Several Houston Ballet Orchestra instruments were lost, as well as "pointe" shoes, handmade ballet boots and makeup. As a result of inquiries, the company has established the Houston Ballet Water Damage Relief Fund. Information is available at www.houston ballet.org. Likewise, the Alley Theatre has posted information for those wishing to make donations on its Web site at www.alleytheatre.org. Unsolicited offers of service and contributions have been flowing in despite the Alley's low-key approach to recovery. "We don't want to actively solicit for flood relief . . . because we have already been working on plans for changes in our theaters and renovations in our theaters. We want to try to find the silver lining in this disaster and continue moving forward on the plans that we already have in place," said Paul Tetreault, Alley managing director. The Alley's scene shop and Arena Theater were totaled by waters that entered through the downtown tunnel system. "It's not the way we were intending to renovate the Arena Theater, but we're moving forward with it," Tetreault said. The Houston Symphony was hardest hit of the performing-arts groups. Its headquarters was under 28 feet of water for four days. In addition to losing offices, floodwaters destroyed valuable music scores and irreplaceable instruments. Part of the staff is temporarily working at Three Allen Center in space donated by Enron, with office supplies provided by PricewaterhouseCoopers. In a written statement, Houston Symphony executive director and CEO Ann Kennedy said, "The Houston Symphony is currently sorting through a myriad of offers from artists around the world who want to help us. Houston will be very excited when we announce our plans." Pianist Andre Watts is one who has offered services. Leslie Bennett, 2002 symphony ball chair, has upped the ante for her event next March, saying, "It would make sense to put forth a superhuman effort for this once-in-a-lifetime tragedy. . . . There is an underlying importance to the ball that was not there before." Houston Grand Opera continues tallying losses from production elements that were stored in the soggy Wortham Theater Center basement and in underground offices. The estimate is $1 million. But the company has no plans to organize additional benefits, according to HGO development director Jon Gossett. He said the time and effort required to stage a fund-raiser make it impractical. "We feel that a more efficient way to deal with our financial losses is to make fairly strategic requests of some people who can help us with the situation," he said. HGO general director David Gockley is optimistic that with insurance, the city's rebuilding plans and FEMA programs, the company should recoup 60 percent to 70 percent of its losses. Photo: Houston Ballet costumes get an airing after Tropical Storm Allison. Several of the city's performing-arts groups suffered losses that will strain their budgets this year. Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. Lessons for Asia in California's Energy `Crisis': Patrick Smith 2001-07-01 17:00 (New York) Lessons for Asia in California's Energy `Crisis': Patrick Smith (Commentary. Patrick Smith is a former correspondent in Asia and the author of `Japan: A Reinterpretation.' The opinions expressed are his own.) Norfolk, Connecticut, July 1 (Bloomberg) -- India struggles on with Enron Corp., Indonesia with P.T. Paiton and two dozen other private-sector power providers. In one way or another, so do Pakistan, the Philippines, and other emerging countries across the globe, from Brazil to Russia. One hopes they're watching California, for there's a lesson in the state's recent energy crisis that is fundamental to all of them. It is hard to decide at this point which is worse: the onset of California's energy problems or the unseemly way they have begun to evaporate now that regulators have intervened with price caps and increased scrutiny. Supplies are suddenly up, prices are coming down, and the prospect of rolling blackouts appears to be fading. Crisis? What crisis? Let's score an espresso before heading back to the beach. It is plain enough by now that California's electricity scare had much to do with manipulative interests in the energy industry -- gas suppliers, pipeline operators, and the power generators themselves. The experiment with deregulation in California got under way with the swift, thoughtless passage of industry-backed legislation in the autumn of 1996. It took less than five years for the experiment to fail. Bottom Line Given California's reputation as the vanguard state, where everything happens first and everyone insists on maximum individual freedom and minimum government interference, the message couldn't be more ironic. While this isn't the death of the deregulation god, California's crack-up has already begun to bring it down from the heavens. Developing nations ought to take note: Deregulation is not a panacea; turning the chronic, apparently intractable problems of economic advancement over to private-sector corporations preaching the marketplace's magic does not assure their solution. Market-based strategies will have their place on the shelf, certainly. But as an economic model, the approach will be one among others from which to choose. This truth is the latest thing to go global, it seems to me. In Europe, even British Prime Minister Tony Blair is stepping off the ideological bus. It doesn't matter whether an enterprise is public or private, he declared repeatedly during his recent election campaign, as long as it gets the job done. It's capitalism's version of Deng Xiaoping's old dictum about black cats, white cats, and the catching of mice. Driven by Fashion Even Enron might be thinking that idea over at this point. In part because of its troubles in India, in part because of the unwinding of the mess in California, where it has been a major player, Enron's stock is down some 44 percent so far this year. One does have to wonder if a limit hasn't been reached. It would be difficult to forget how dramatically the privatization wave swept Asia 15 years ago -- a spinoff of the Thatcher-Reagan revolution in the industrial democracies. You could see even then that as a trend in government policy it was too driven by philosophic fashion, had too little hard thinking behind it -- and made almost no reference to local economic conditions. It's ironic, given Prime Minister Mahathir Mohamad's more recent attacks on the West, but Malaysia was especially keen on turning everything down to its expressways over to private operators. All too fast and too often ill-considered. In Indonesia, the Wahid government is now saddled with agreements made under the Suharto dictatorship that it can't possibly live up to. The worst of them is with P.T. Paiton, a joint-venture generator that was up to its ears in the cesspit of Suharto-era corruption, according to an audit conducted late last year. In a market where the state utility's average charge is 3 cents per kilowatt-hour, Paiton's original contract -- since renegotiated -- gives the company a kilowatt-per-hour tariff of 8.5 cents. Expensive Distinctions Then there is Enron and its $3 billion Dabhol Power Co. plant in Maharashtra state. A disputatious deal from its inception nine years ago, it stands at this point as a metaphor for the trend in policy that produced it: The once-solvent state electricity board is headed toward bankruptcy, nobody else can afford Dabhol's power, compromises are being negotiated, and regulatory jurisdictions are still unclear. The fundamental problems are clear enough, at least, and so are some of the solutions. Like California and many others who hopped on the free-market train in the power sector, India leapt before looking closely. Politically and administratively it simply wasn't ready for Enron -- as the now-evident corruption involved in getting the Dabhol deal signed attests. Neither did India do its homework on the distribution side: Like Indonesia, it never bothered to distinguish between those who genuinely need power subsidies and those who don't but get them anyway. This last can be solved -- and the solution may involve still more private-sector participation. A panel of experts now recommends splitting state power distributors into rural and urban suppliers and selling off the latter, so that subsidies can be maintained where needed and otherwise removed. The date on this report is May 2001 -- roughly a decade late, but let us not dwell upon the timing. White Elephants There are also now calls to investigate the Dabhol deal from its origins onward: Who vetted this thing, who agreed to what, when, and why? But along this long trail the story is more or less universal. Little is likely to come of these demands, as Anindya Mukherjee, my colleague in Bloomberg's New Delhi bureau, advises. ``Too many people wanted this white elephant,'' he tells me. Americans will have a hard time acknowledging the failure of deregulation in California -- they are too wedded to the ideology behind it. But India and other nations should be freer to draw conclusions, and they can use California's crisis-that-wasn't-a- crisis as their textbook. Industries, they should recognize, can't be expected to regulate themselves -- all the less for the extreme emphasis now placed on shareholder value. The notion that this is possible, to say nothing of prudent, is a figment with few hard examples of success, if any, to back it up. Without an adequate level of oversight, California here we come. Equally, if there is to be a public benefit derived from privatization, a competitive environment must be either preserved or created. Whether this is even possible in the power sector, or whether the industry is a natural monopoly, is an outstanding question -- one that is especially important in developing nations, where the need to balance social obligations in choosing policies is most acute. Monuments In the end, projects such as Dabhol may stand as monuments to an era gone by anyway. As the power industry is deregulated around the world, according to a recent report from Stratfor, the Internet forecasting group, the search for maximum profits and minimum risk will leave developing nations in the cold -- or the dark. Long term, India, Indonesia, and numerous nations in the same predicament -- rising demand, scarce capital -- will drop out of the privatization game and revert to re-nationalized power generators. The outline is already in place. AES, the U.S. power provider, pulled out of a $2 billion project in Brazil in May; Enron might eventually drop Dabhol and leave India -- as Cogentrix, Electricite de France, and others already have. Meantime, large, integrated power suppliers are pouring investment into safer, more stable nations such as the U.S. That's the picture, Stratfor says. And it's grim. On the other hand, is it time to look for a new model in any case -- to conclude that what doesn't work in California may not work in less developed economies, either? Enron Chief Lay May Visit India to Discuss Dabhol, Paper Says 2001-07-01 01:09 (New York) Mumbai, July 1 (Bloomberg) -- Enron Corp. Chairman Kenneth Lay may visit India in the second week of July to discuss the future of its Indian unit, which is involved in a dispute with the provincial government of Maharashtra, the Economic Times reported, citing Madhav Godbole, the state-appointed chief negotiator. Dabhol Power Co., 65 percent owned by Enron, and the Maharashtra State Electricity Board, have been locked in a row for the past seven months over unpaid bills. India and the Maharashtra government may have to foot a 170 billion rupee ($3.6 billion) bill because of payment guarantees and loans, if Enron carries through with its notice to cancel the project. The Dabhol project may hold the key to further overseas investment in India's power industry. Four foreign power companies, including Electricite de France, Europe's largest, have pulled out of Indian power projects worth $3 billion, citing long delays and the slow pace of reforms. Power Plays: The High-Energy Portfolio By Jersey Gilbert, Odette Galli and Russell Pearlman 07/01/2001 SmartMoney 79 © 2001 SmartMoney. All rights reserved. There are a hundred reasons why your electric bills are so high. Why the price of gasoline is making it feel like 1977 all over again. Why nuclear power is suddenly no longer just a Homer Simpson joke. You already know most of them: skyrocketing demand. Power plant shortages. Sport-utility vehicles. The grid. But there's one thing you really need to know above all else: How can you profit from the Great Energy Crisis of 2001? In these pages, we'll show you how to both make and save money. You'll discover six great stocks poised to thrive in the new energy landscape. You'll find out about the four best mutual funds that specialize in the energy sector. You'll learn eight surprising ways to keep your own utility bills down this summer. (Hint: There's a big guzzler in your garage -- and we don't mean your SUV.) Finally, you'll witness SmartMoney's makeover of the most outrageously wasteful house we could conjure up. And don't worry. You won't have to build your own compost heap. We promise. The future belongs to companies that are addressing our nation's insatiable appetite for energy. These six do just that. Stop what you're doing for a moment and think about wealth -- extravagant, epic, over-the-top American wealth. Where does that money come from? Sure, plenty of people have made fortunes in real estate, transportation and high technology. But when it comes to producing truly epic American fortunes -- your Rockefellers, your Gettys -- you can't beat energy. Somewhere during the Internet gold rush, investors somehow forgot about this crucial component in every portfolio. Well, guess what? They've rediscovered it: Energy stocks came back strongly in 2000; so far this year, the average one is up 9 percent, far outpacing the S&P 500. But the best news is that this traditionally defensive sector still has lots of room for growth. These stocks may not make you a Getty overnight, but for the next three or four years, they have a great shot at outperforming the market. You've heard all the commotion about brownouts, gas guzzlers and the imminent Californication of the nation's power supply. This is one problem that won't be solved overnight. Utility reserve margins are at their lowest levels in decades, according to the Edison Electric Institute, and even with improved efficiency, the U.S. will need more supply. If current trends continue, the shortfall between the projected domestic electric supply and demand will be 32 percent in 2020, according to the Department of Energy. Electricity demand alone is growing 1.8 percent a year. That means we'll need to generate 410,000 megawatts more per hour by 2020. But as John Hammerschmidt, a portfolio manager and analyst at Turner Investment Partners, points out, "Only 90,000 megawatts of new generation capacity has been approved for construction over the next three years." Translation: Look for a boom in power-plant construction. Virtually all of those new plants will be natural gas-fired, resulting in a 35 percent increase in demand for gas used just to generate electricity. That means that gas will continue to be in great demand, despite the Bush administration's promotion of coal and nuclear power to solve the electricity shortfall. After all, it took 15 years to build the last nuclear power plant. It takes three to five years to build a coal-fired plant. But it takes only two years to get a gas-fired plant up and running. What about oil? "The world will need to find an additional 44 million barrels a day by 2010," says hedge fund manager John Tozzi of Cambridge Investments, assuming a modest 1.5 percent increase in demand and a 6 percent depletion rate in known reservoirs. Both growth in demand and depletion rates have been rising faster than that lately. As the charts on page 85 show, the shortages of natural gas, oil and electricity we experienced last winter resulted from conditions that have been building for some time. It will take more than a few months to reverse those trends. Sure, there are some potential problems for energy stocks on the horizon. Some strategists worry that OPEC will jack up production and that California and other states will lead a backlash against power merchants. Others fret that high energy prices will slow the economy and reduce demand. But you shouldn't confuse short-term volatility for changes in the fundamental outlook. Yes, there will be corrections from time to time -- after all, this is a sector that traditionally has the kind of volatility that would make a tech investor feel at home. But we agree with Philip Kehl, Morgan Stanley's E&P analyst, who says, "With long-term fundamentals as sound as they are, there will never be a 'last time' to buy these stocks." So which companies are best positioned to take advantage of all this? The ones that are solving the shortages. Right now that means exploration-and-production and oil-field-equipment companies, drillers, independent power producers, power merchants and electrical-equipment suppliers. To find our picks, we looked for those companies that had a leading market position in their core business or in their regions, but which were selling at more-reasonable valuations than the best-known names -- Enron, Schlumberger, Halliburton, Baker Hughes, Calpine -- which have already had a strong runup. Finally, we looked for growth rates of at least 15 to 20 percent. Here are the six stocks that we deem most promising right now. All prices are as of May 25, 2001. Apache (APA) $59.49 Exploration and production is a notoriously risky business. But many E&P companies pose much less risk to the investor, especially when you consider that these stocks are among the cheapest in the energy sector. They trade at a current P/E of 15, even though analysts expect them to increase profits 45 percent on average this year. The apparent paradox reflects the prevailing view that gas prices will slip back toward $3.50 next year and oil will dip toward $25 -- and E&P companies are mainly valued by the commodity price of their production. But what if production rates are also increasing? That's the case with the E&P stocks we like best, among them Anadarko Petroleum and Devon Energy ("Where to Invest in 2001," January). Right now Apache is among the cheapest of the mid- to large-cap stocks in this group; it trades at a mere 10 times next year's earnings. Like its peers, the Houston firm, still run by one of its founders, has been buying up older, low-volume reservoirs from the major oil companies and successfully revitalizing them, thanks to its aggressive use of more-intense methods for stimulating mature fields. With purchases in Texas, Egypt, Oklahoma, the Gulf of Mexico and western Canada, Apache increased its energy output more than 140 percent between 1998 and the end of 2000. About 55 percent of the output is natural gas, the fuel source that's in shortest supply. (The firm has no exposure to fields in the Rocky Mountains or Alaska, resources that have become dangerously politicized since George W. Bush took office.) Like our other favorite E&P companies, Apache also has success discovering new fields. Its most recent find is the Ladyfern field in northeast British Columbia, which the company is calling "one of the biggest natural gas discoveries in western Canada in recent years." Apache and its partner Murphy Oil are already producing 250 million cubic feet a day for the market. Apache's track record for risk management is part of the stock's long-run appeal. It made very few acquisitions in 1996 and 1997, when oil and gas prices were high. Thus, it emerged from the 1998 "oil wreck" with a strong balance sheet. Dominion Resources (D) $65.76 This integrated utility is no Duke Energy. And that's a good thing. In contrast to Duke's global scope and huge California exposure, Dominion focuses on just one U.S. region -- "Main to Maine," which extends from the Mid-America Interconnected Network, up the East Coast, all the way to, yes, Maine --and has become the dominant energy producer in the region. Many of Dominion's states have pursued favorable deregulation policies. Take Virginia, which accounts for 81 percent of the company's generating assets. Legislators there allowed Dominion to keep its generating plants in a nonregulated subsidiary of the company. Claud Davis, an analyst at the top-performing MFS Utilities fund, says that means Dominion has more incentive to cut the costs of running its plants because it will be able to retain the savings instead of simply passing along lower rates. Currently, Dominion has 21,000 megawatts of electric-generation capacity, ranking it among the largest producers in the U.S. The company, based in Richmond, Va., plans to add nearly 9,000 megawatts through a combination of new plants and acquisitions by 2004. Dominion's boldest move yet was its acquisition last year of CNG, a large natural gas company. "We've got 3 trillion cubic feet of gas reserves," says Chairman and CEO Tom Capps. "We can decide each day what we want to do with the gas. Are we going to sell it, store it, make electricity with it? It gives us a lot of opportunity." With Dominion, you can get earnings growth of 15 percent per year and a yield close to 4 percent, all for a P/E ratio of just 14. Compared with its other peers -- companies like TXU, TECO Energy and American Electric Power --Dominion has a higher growth rate and a greater percentage of earnings coming from nonregulated businesses. Best of all, says Davis, "they also have the certainty of not having to go through deregulation. They've already done it." Dynegy (DYN) $50.65 You've got to love Dynegy. Not only is it one of the leading independent power producers in the U.S., it's also the second most profitable energy trader and marketer, after Enron, thanks to its combination of physical assets and merchant expertise. An example: Dynegy had a contract to sell power from its Kentucky plant to an Ohio utility. But when power prices suddenly dropped, Dynegy went on the open market and bought cheaper power for the utility. It was then able to resell the gas it would have used in the plant at a better profit as well. You can snap up the Houston-based Dynegy for just 21 times earnings -- not bad for a leading energy marketer that's also one of the fastest-growing independent power producers in the U.S., with 17,775 megawatts operating in high-growth, high-demand regions such as the Midwest, Northeast, Southeast and California. (By comparison, Enron's earnings multiple is 25.) Chairman Chuck Watson says the company plans to bring on another 3,920 megawatts this year through either acquisitions, new plants or expansion of existing facilities. Dynegy's goal: to own or control 10 percent of the U.S. generation market. Dynegy also is one of the nation's biggest marketers of natural gas. As states across the U.S. continue to deregulate, its services will be in increasing demand. Mark Easterbrook, a Wall Street Journal top-ranked energy analyst at Dain Rauscher Wessels, calls Dynegy "the best energy convergence pure play. There's some great value there." And the company is realizing that value through its online trading service, DynegyDirect, introduced late last year. "Since we announced the service," Watson says, "we've done $14 billion worth of business, 40 percent of which is brand new." Besides Enron, Dynegy edges out its other major competitors, such as El Paso and Calpine. El Paso sells at a P/E of just 16 on 2002 earnings but is growing only 15 percent per year. And the company is facing a lawsuit in California charging certain of its affiliates with engaging in energy-price manipulation. Calpine trades at a similar P/E ratio as Dynegy for about the same growth rate, but it lacks a substantial trading and marketing business. Mirant (MIR) $40.95 Is Mirant really one of the "biggest snakes on the planet," as Gov. Gray Davis characterized independent power producers operating in California? If it is, it's a snake you want to have in your portfolio. Although about 10 percent of Mirant's business comes from the Golden State, it ranks only fourth among its peers -- behind AES, Reliant and Duke -- in generating capacity there. And the company, which was spun off last September from Southern Co., has already taken a $295 million provision to cover any lost California revenue. Most of Mirant's 20,000-megawatt generating capacity is in other deregulated regions, such as the Mid-Atlantic and New England. Chief Financial Officer Raymond Hill says the company's plan is to more than double its capacity between now and 2005 by adding new plants, two-thirds of the permitting for which has already been completed. That would represent a compound annual growth rate of 20 percent. Like Dominion, Mirant has a natural gas advantage. Through a contract with Vastar, a former Arco subsidiary, Mirant locked up supplies for eight more years. Since then, the company has contracted for two other major sources of gas, both in Canada. It plans to double its gas production and transportation capacity by 2005. And like Dynegy, Mirant is a big player in energy trading and marketing. Despite a big runup in its share price from $22 to $41, money managers like Leslie Rich, who co-manages the top-performing Evergreen Utility & Telecommunications fund, still think Mirant is a good relative value. "It's selling at a P/E of 18, but they keep raising numbers," she notes. "My favorite right now is Mirant," adds Dan Ford, an Institutional Investor-ranked utilities analyst at Lehman Brothers. "In the long run, you'll see differentiation in pricing of the energy merchants like Mirant and Dynegy over the asset-centric players like Calpine and NRG. Right now Mirant is trading at a discount to both groups." Noble Drilling (NE) $45.07 John Tozzi, the hedge fund manager, likes to say that "the only real answer to energy shortages is the drill bit." As long as we use fossil fuels so liberally to power transportation and electric-generation plants, he's probably right. And as the major energy companies reluctantly increase their capital investment in new production, much of that spending will find its way to the drilling companies. Noble is Wall Street's favorite midcap
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