|
|
Enron Mail |
Today's IssueAlert Sponsors:=20 <http://www.energyventurefair.com/<; We are seeking 75 of the most promising energy-based technology and service= companies to present at Energy Venture Fair II, January 29 & 30, 2002, Hou= ston, TX-the follow-up to the explosively successful Energy Venture Fair I = held in Boston in June. If you are a Senior Executive from one of these com= panies, and are interested in having a platform to present your vision and = business plans before a national audience of investors, please contact Nann= ette Mooney at (818) 888-4445, Ext. 11, for more information, or via email = at nannettem@energyventurefair.com <mailto:nannettem@energyventurefair.com<= . APPLY TODAY - SPACE IS LIMITED.=20 <http://www.energyventurefair.com<;=20 <http://www.nuclear-gen.com< Infocast's Building New Nuclear Power Plants Conference brings together the= leading operators, equipment manufacturers, regulators, financial analysts= , and builders of nuclear power plants to one place to discuss the road for= ward for building new nuclear power. Contact Infocast at (818) 888-4444 for= more information or go to www.nuclear-gen.com <http://www.nuclear-gen.com<= =20 <http://secure.scientech.com/rci/wsimages/scientech_logo_small.jpg< <http://secure.scientech.com/rci/wsimages/IssueAlert_Logo_188.jpg< October 2, 2001=20 Spain's Endesa Moves In for a U.S. Acquisition=20 By Will McNamara Director, Electric Industry Analysis=20 <http://secure.scientech.com/rci/wsimages/will100border_copy.jpg< [News report from Power Finance & Risk] Endesa, Spain's largest utility, is= setting up a business development unit in New York and will shortly transf= er three executives from its Madrid headquarters to seek out investment opp= ortunities in the United States. Virginia Sanz de Madrid, a Spanish utility= analyst at Deutsche Bank in Madrid, says Endesa is probably looking to acq= uire existing generation or distribution companies rather than develop new = assets from scratch. She adds that Endesa is looking to spend some $2 to $3= billion to enter the U.S. energy market.=20 Analysis: A common response to reports that Endesa is attempting to expand = in the United States may be: Why has the company waited so long? Along with= affording new opportunities for domestic companies, deregulation of the U.= S. electric market has also enticed several large European power firms to e= xpand their scales through a stateside acquisition. Thus, some financial an= alysts may wonder if Endesa is jumping on the U.S.-expansion bandwagon too = late. The timing may still be right for Endesa, however, considering that f= alling wholesale electricity prices across the United States and the decrea= sed value of generation assets over the last few months could actually make= a U.S. generation purchase more lucrative today than in recent years. Cons= equently, Endesa's rumored expansion efforts in the United States, and cont= inuing acquisitions across continental Europe, are part of the company's ag= gressive growth strategy.=20 Under the monopoly system in Spain, Endesa was clearly the country's larges= t power firm, owning about 22,576 MW of generating capacity and controlling= 67 percent of Spain's electricity market. However, due to its own move tow= ard privatization, the Spanish government has placed restrictions on the do= mestic growth of the country's largest electric companies, requiring Endesa= to look abroad for growth opportunities. Thus, for some time there has bee= n little question that Endesa would like to develop interests across contin= ental Europe, and is not going to let any dust settle before it continues t= o expand. The fact that Endesa also plans to expand in the United States re= presents a new, but not necessarily surprising, direction for the company.= =20 The impetus for Endesa moving into the United States, beyond the opportunit= ies for growth that exist in this country, may be rooted in some setbacks t= hat Endesa has experienced in Spain and minimal acquisition opportunities a= cross continental Europe. In late 2000, Endesa made its first significant m= ove outside of Spain when it purchased a 30-percent interest in the French = electricity generator Societe Nationale d'Electricite et de Thermique (SNET= ). While a comparatively small company by American standards, SNET is the s= econd-largest electricity company in France in terms of installed capacity,= and third largest in terms of electricity generation. SNET owns five coal = plants totaling 2,600 megawatts, which generate about 6,838 GWh annually. T= his is a very low output, and in fact SNET accounts for only 2.5 percent of= the market share in France. However, given the fact that France's largest = energy company, EDF, still has a hold on about 90 percent of the market in = the country, the acquisition of the next-largest company was a major coup. = The acquisition of SNET was also attractive to Endesa because of the compan= y's experience in coal-based electricity-which still is the power source fo= r roughly half of the electricity produced across the Continent-and its pro= gressiveness in terms of technology.=20 Upon the acquisition of SNET, Endesa began friendly merger proceedings with= Iberdrola, the second-largest power firm in Spain. Under the now-terminate= d deal, Endesa would have purchased Iberdrola for about $12.6 billion and c= reated a new entity well prepared to expand across Europe and Latin America= . Reportedly, the merger would have created the world's third-biggest elect= ricity company, after Tokyo Electric Power and Enron, and without question = would have marked Spain's largest industrial merger to date. For further pe= rspective, the new company created by the merger between Endesa and Iberdro= la would have had a combined market capitalization of approximately 36 bill= ion euros (or $32 billion in U.S. terms). This would have surpassed Duke En= ergy's market capitalization of $30.3 billion and been roughly the size of = American Electric Power, TXU, and Reliant put together (resulting in a $33.= 8 million market capitalization). Had it materialized, the merger also woul= d have given a considerable jolt to Spain's fast-growing power market, and = altered the current playing field among Europe's largest power companies.= =20 However, in a major setback for Endesa's growth, Spanish authorities requir= ed that the merged company sell off some generating capacity, arguing that = Spain needed new players to increase competition. The government also ruled= that the new entity would have to lower its market share of distribution, = and authorities cut the amount of stranded costs that the new company would= be able to recoup. Although analysts had expected the merger to proceed de= spite the government conditions, Endesa and Iberdrola said the imposed gove= rnmental conditions outweighed the benefits of the merger, which would crea= te fewer synergies than initially proposed. Ironically, much of the funding= for Endesa's purchases have come from the sales of its own non-strategic a= ssets that took place in preparation for the Iberdrola acquisition.=20 Moreover, the inability to grow its scale through the purchase of Iberdrola= has apparently prompted Endesa to concentrate on finding new acquisition o= pportunities. In addition to expansion into the United States, last month E= ndesa led a consortium that will acquire the generation assets of Enel, Ita= ly's largest generating company, for 2.63 billion euros. The generating ass= ets, which are housed under a subsidiary company known as Elettrogen, inclu= de an installed capacity of 5,700 MW that is ranked as the second-largest g= enerating firm in Italy. Elettrogen is one of three companies in which Enel= grouped its generation assets in order to comply with Italian regulatory m= andates regarding divestiture. The purchase of Elettrogen marks the first s= ignificant expansion of Endesa beyond its home territory in Spain. In the p= urchase agreement, Endesa will have 45-percent ownership of Elettrogen, par= tnering with Banco Santander Central Hispano (40 percent), a Spanish bank, = and Italian ASM Brescia (15 percent), a municipal utility that serves 400,0= 00 customers in Italy.=20 The acquisition of Elettrogen is an important component of Endesa's expansi= on strategy across Europe and may be an indication of how the company inten= ds to progress in the United States. Endesa has established a goal of accum= ulating 8,000 MW of generating capacity beyond its existing assets in Spain= by 2005. Through the purchase of Elettrogen and the previous purchase of S= NET, Endesa has already reached that goal four years ahead of schedule.=20 If Endesa does make a purchase of a U.S. company, it will most likely be an= acquisition that involves substantial generating assets, as power generati= on has become Endesa's primary focus. To date, there have been a handful of= instances in which an international power firm has bought a U.S. energy co= mpany since deregulation began four years ago. ScottishPower purchased Paci= fiCorp, National Grid purchased New England Electric System (NEES) and East= ern Utilities Associates (EUA), and Powergen bought LG&E. Note that all of = these buying companies are based in the United Kingdom. Pending internation= al deals include National Grid's purchase of Niagara Mohawk and the German = company RWE's purchase of American Water Works, and EDF has made it clear t= hat it also wants to expand in the United States. Generally speaking, inter= national power firms have used the purchase of either vertically integrated= utilities or unbundled businesses as a "testing ground" to learn the ins a= nd outs of the U.S. energy market and plan subsequent specialization in a p= articular market niche. Further, although international companies such as N= ational Grid are focused on the transmission side of the U.S. energy indust= ry, the generation sector clearly offers solid opportunities for growth. In= the spring of 2001, President Bush released an energy plan that calls for = significant new energy production efforts, which opened up new windows of o= pportunity for international companies to further expand in the United Stat= es.=20 An archive list of previous IssueAlerts is available at www.scientech.com <http://secure.scientech.com/issuealert/<;=20 We encourage our readers to contact us with their comments. We look forward= to hearing from you. Nancy Spring <mailto:nspring@scientech.com< Reach thousands of utility analysts and decision makers every day. Your com= pany can schedule a sponsorship of IssueAlert by contacting Jane Pelz <mai= lto:jpelz@scientech.com<. Advertising opportunities are also available on o= ur Website.=20 SCIENTECH is pleased to provide you with your free, daily IssueAlert. Let u= s know if we can help you with in-depth analyses or any other SCIENTECH inf= ormation products. If you would like to refer a colleague to receive our fr= ee, daily IssueAlerts, please reply to this e-mail and include their full n= ame and e-mail address or register directly on our site.=20 If you no longer wish to receive this daily e-mail, and you are currently a= registered subscriber to IssueAlert via SCIENTECH's website, please visit = <http://secure.scientech.com/account/<; to unsubscribe. Otherwise, please se= nd an e-mail to to IssueAlert <mailto:IssueAlert@scientech.com<, with "Dele= te IA Subscription" in the subject line.=20 SCIENTECH's IssueAlerts(SM) are compiled based on the independent analysis = of SCIENTECH consultants. The opinions expressed in SCIENTECH's IssueAlerts= are not intended to predict financial performance of companies discussed, = or to be the basis for investment decisions of any kind. SCIENTECH's sole p= urpose in publishing its IssueAlerts is to offer an independent perspective= regarding the key events occurring in the energy industry, based on its lo= ng-standing reputation as an expert on energy issues.=20 Copyright 2001. SCIENTECH, Inc. All rights reserved. <http://infostore.consultrci.com/spacerdot.gif?IssueAlert=3D10/2/2001<;
|
