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Content-Type: text/plain; charset=ANSI_X3.4-1968 Content-Transfer-Encoding: quoted-printable X-From: IssueAlert@SCIENTECH.COM X-To: ISSUEALERTHTML@LISTSERV.SCIENTECH.COM X-cc: X-bcc: X-Folder: \JQUENET (Non-Privileged)\Deleted Items X-Origin: Quenet-J X-FileName: JQUENET (Non-Privileged).pst SCIENTECH's IssueAlert Today's IssueAlert Sponsors: =09 [IMAGE] SCIENTECH is currently interviewing 1,500 utilities on CIS/CRM and = customer care in the United States and Canada to determine: The leadin= g software providers Drivers of utility technology decisions Analysis of = license sales versus ASP sales New market opportunities Growing/shrinking= software markets Download a sample prospectus for an introduction to th= is new survey at: http://secure.scientech.com/specialpages/Multi_Client.asp= and contact Jon Brock at 505-244-7607 for more details.=09 [IMAGE] [IMAGE] October 18, 2001=20 Caminus and Altra Energy Partner to Create Full-Service Trading Software Provider=20 By Will McNamara Director, Electric Industry Analysis=20 [IMAGE] [News item from Reuters] Software company Caminus Corp. (Nasdaq: CAMZ) anno= unced it would buy the software operations of privately held Altra Energy C= orp. Caminus said it would swap 1.975 shares of its stock and pay $30 milli= on cash for Altra's software business. That values the deal at about $62 mi= llion, based on Caminus' closing price of $16.05 on Oct. 12. =20 Analysis: The announcement that Caminus and Altra Energy are joining forces= represents major news for the energy industry, particularly impacting thos= e companies that are involved in the trading sector. On their own, both com= panies have ascended in the trading space by focusing on a particular niche= . Now that Caminus is acquiring Altra's software suite, which is primarily = focused on the natural-gas trading sector, the synergy between the two comp= anies creates a fuller package of offerings for companies that are involved= in energy trading. Essentially, Altra has two core businesses-an energy tr= ading exchange and a software business. Caminus has entered into an agreeme= nt process to purchase only the software side of Altra. Altra has a highly = regarded portfolio of software systems and consultant services primarily fo= cused on the automation of gas transaction management and pipeline operatio= ns. Together, the synergy of the two companies is intended to enable greate= r participation for traders in existing online energy trading exchanges. = =20 Let's first establish the business models of these two companies so that we= can fully appreciate the synergies that the new partnership will create. U= p to the point of this partnership, Caminus and Altra were not considered d= irect-line competitors, as Caminus' business model focused on risk manageme= nt while Altra focused on the actual energy transactions. However, there we= re components of the companies' businesses that certainly overlapped. Camin= us Corp. has created a software suite that helps utilities and gas producer= s trade energy commodities in exchanges such as EnronOnline, TradeSpark, Ho= ustonStreet, etc. Altra's software, which is used in the same energy tradin= g portals, focuses on natural-gas transactions. =20 Headquartered in New York, Caminus, which went public a year ago, is a prov= ider of software solutions (and consulting services) that help a wide range= of participants in the energy market to manage their risk factors associat= ed with energy trading. Toward that end, the company offers two software pa= ckages: Zai*Net software solutions, which "enables energy organizations to effectiv= ely trade and manage energy transactions." Zai*Net has been designed to add= ress a wide range of energy commodities, traded instruments and associated = risks and was designed to interface with both proprietary and third-party s= ystems. Nucleus software systems, which were designed specifically to meet the trad= ing, risk management, scheduling, and accounting needs of utilities, genera= ting companies, power pools, gas and oil producers, processors, pipelines, = and other energy market participants. In other words, the Caminus Nucleus s= ystem provides a tool for energy traders to organize, track and manage thei= r various energy transactions from generation to end-user delivery. One of = the advantages to the Nucleus software is that users can evaluate assets an= d market positions in real-time and consequently determine acceptable risk = levels.=20 Recently, Caminus added the Storefront product, which is a Web-based tradin= g application that helps customers to increase trading volume and reduce tr= ansaction costs by publishing bids and offers on the Internet. Also, just t= his week at the Power Mart conference in Houston, Caminus unveiled a new so= ftware product known as FrontOffice?, which gives traders of energy physica= ls and traded instruments the ability to see how a potential deal will affe= ct a portfolio before committing to the transaction. According to company r= eports, approximately 80 percent of Caminus' revenue comes from software li= cense sales. In addition, Caminus also has a consulting service that focuse= s on risk management services for energy clients. =20 One reason that Caminus has gotten a good share of industry attention latel= y is its efforts, along with other software companies, to establish a commo= n standard for moving transaction data from energy trading platforms to tra= nsaction / risk management systems. A few months ago, Caminus established t= he Energy Trading Standards Group with HoustonStreet, and has since generat= ed interest in some 30 companies to participate and help create universal s= tandards for energy trading. One of the key objectives of the Standards Gro= up is to help determine which technology should be used as the standard pro= tocol for energy trading platforms. The technology committee is reportedly = working on a beta version of XML standard for physical power transactions.= =20 In September, Caminus formed a strategic partnership with Lodestar Corp., w= hich primarily provides billing software and load forecasting solutions. Un= der the partnership, Caminus and Lodestar will work to integrate and jointl= y market their respective wholesale and retail energy billing, transaction,= trading, and risk management systems to create what they are calling a "St= raight-Through Processing (STP)" environment for vertically integrated ener= gy companies. =20 By comparison, Altra Energy is a private company located in Houston that pr= ovides software systems primarily focused on managing the transactions and = physical movement of the gas and pipeline segment of the industry. Altra re= portedly has the largest base of systems in the gas segment of the market. = Some of the specific features of the Altra software include scheduling of d= irect access load, generation dispatch, regional transmission organization = (RTO) connectivity, integrated OASIS reservations, and North American Elect= ric Reliability Council (NERC) checkout and billing. Altra boasts a custome= r list of about 100 clients, mostly in the gas sector but also including po= wer and multi-fuel companies. Altra's software product suite includes trans= action management tools known as Altra Gas, Altra Power, Altra Pipeline and= Altra Web, which all facilitate the exchange of a particular commodity.=20 According to Caminus, the value of acquiring Altra's software suite is to c= reate an offering of integrated applications that can be applied to both ga= s and power traders. Further, the exchange of customers should benefit both= companies. Caminus will have the opportunity to sell its risk management s= ervices to Altra's customer base, and in turn gain the opportunity to sell = Altra's new generation of systems to Caminus customers. =20 The European market is arguably the top focus of Caminus Corp. In fact, Cam= inus believes that the global market for energy trading is presently "explo= ding." According to Caminus CEO David Stoner, the global market for wholesa= le energy trading, which consists of the European market, is six to eight t= imes the size of retail markets. Consequently, a typical therm gets traded = a number of times in Europe before it actually gets sold to an end user. In= terestingly, about 30 to 40 percent of the companies to which Caminus has p= rovided risk management consulting services are U.S. companies attempting t= o expand in the European wholesale trading market. Caminus consultants help= ed write the New Electricity Trading Arrangements (NETA) for the British go= vernment, due to be implemented by the end of 2001 or early 2002. Although = smaller than the U.S. market, Britain has been experiencing privatization a= nd various levels of deregulation since 1983, providing valuable experience= and depth. Besides the U.K., Caminus has been active throughout Europe in = Italy, Spain, Holland, Belgium, Germany, and the Nordic countries through N= ORDPOOL.=20 Earnings for Caminus have been fairly strong up until recently, when fallou= t from the events of Sept. 11 began to impact the company's business. For 2= Q 2001, Caminus reported that its total revenues increased 58 percent to $1= 7.7 million, compared to $11.2 million for 2Q 2000. Specifically, revenues = from the company's software license fees increased 61 percent to $7.5 milli= on during the same quarter. However, for 3Q 2001, Caminus lost $369,000, or= 2 cents a share, on revenue of $14.7 million, due primarily to the fact so= me license sales that were expected to close did not. Specifically, Caminus= says that much of the revenue from its license sales is booked during the = last month of each quarter. Given the impact that the events of Sept. 11 ha= d on many companies, a large part of this anticipated revenue was not booke= d as scheduled.=20 Moving forward, Caminus says that the addition of Altra's software should r= esult in an increase of its 2002 revenue guidance by about 40 percent. Cami= nus also expects the partnership with Altra to increase its 4Q earnings to = 27 cents a share, compared with a previous estimate of 23 cents a share, al= though analysts are still projecting 19 cents a share for the fourth quarte= r. =20 Deregulation has opened up many new opportunities for generation companies = to trade and market power in new regions. However, with these opportunities= come considerable risks. Hence, creating this balance between risk and opp= ortunity in the energy trading space is the market niche in which Caminus a= nd Altra operate. However, the software market in the energy trading space = is becoming increasingly competitive. Every month, new competitors in this = space emerge, so it is difficult to offer a comprehensive list. However, so= me competitors that also seek market share in the niche now occupied by Cam= inus / Altra are Allegro Development, KWI and SolArc (to name just a few). = =20 Moreover, competition in wholesale trading should continue to gain momentum= , regardless of the status of deregulation in a particular state. The whole= sale market is without question far more attractive to traders than the ret= ail market, and as I mentioned power is often traded many times on the whol= esale market before it reaches the end user. Thus, consolidation within the= energy-trading software space should continue, and I would expect Caminus = to proceed with further acquisitions once it integrates the Altra software = into its service offerings. =20 Clarification Statement to 10/16/01 IssueAlert on Dynegy: In its 3Q 2001 ea= rnings statement, Dynegy reported that net income of its transmission and d= istribution company Illinois Power was $26 million, versus $27 million in 3= Q 2000. In the 10/16 column, we incorrectly stated that Illinois Power had = taken a loss of $15 million. The loss of $15 million was reported by Dynegy= 's telecommunications segment, which was duly noted in the article. We apol= ogize for any confusion this error might have caused.=20 An archive list of previous IssueAlerts is available atwww.scientech.com=20 We encourage our readers to contact us with their comments. We look forwar= d to hearing from you. Nancy Spring Reach thousands of utility analysts = and decision makers every day. Your company can schedule a sponsorship of I= ssueAlert by contacting Jane Pelz . Advertising opportunities are also ava= ilable on our Website. =09 Our staff is comprised of leading energy experts with diverse background= s in utility generation, transmission & distribution, retail markets, new = technologies, I/T, renewable energy, regulatory affairs, community relatio= ns and international issues. Contact consulting@scientech.com or call Nan= cy Spring at 1-505-244-7613. =09 SCIENTECH is pleased to provide you with your free, daily IssueAlert. Let = us know if we can help you with in-depth analyses or any other SCIENTECH i= nformation products. If you would like to refer a colleague to receive our= free, daily IssueAlerts, please reply to this e-mail and include their f= ull name and e-mail address or register directly on our site. If you no = longer wish to receive this daily e-mail, and you are currently a registere= d subscriber to IssueAlert via SCIENTECH's website, please visit http://s= ecure.scientech.com/account/ to unsubscribe. Otherwise, please send an e-= mail to to IssueAlert , with "Delete IA Subscription" in the subject line.= =09 SCIENTECH's IssueAlerts(SM) are compiled based on the independent analysis= of SCIENTECH consultants. The opinions expressed in SCIENTECH's IssueAler= ts are not intended to predict financial performance of companies discusse= d, or to be the basis for investment decisions of any kind. SCIENTECH's so= le purpose in publishing its IssueAlerts is to offer an independent perspe= ctive regarding the key events occurring in the energy industry, based on = its long-standing reputation as an expert on energy issues. Copyright = 2001. SCIENTECH, Inc. All rights reserved.=09
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