THE WINNERS IN CALIFORNIA

---------------------- Forwarded by Mary Hain/HOU/ECT on 10/02/2000 08:43 AM
---------------------------

Enron Capital & Trade Resources Corp.

From: "Ronald Carroll" <rcarroll@bracepatt.com<
10/02/2000 06:48 AM

To: <jhartso@enron.com<, <mary.hain@enron.com<, <smara@enron.com<,
<snovose@enron.com<
cc:
Subject: THE WINNERS IN CALIFORNIA

DJ POWER POINTS: Winners In $4 Billion Calif Sweepstakes
< By Mark Golden
< A Dow Jones Newswires Column
<
< NEW YORK (Dow Jones)--Now that PG&E Corp (PCG), Edison International
< (EIX)
< and
< Sempra Energy (SRE) have announced that about $4 billion in power costs
< flew
< out
< their windows this summer, Wall Street might be curious to know on which
< corporate doorsteps the windfall landed.
< A few of the beneficiaries have indicated publicly how well they did
< this
< summer. We've supplemented those announcements with data on market share,
< conversations with western U.S. electricity traders, second quarter
< earnings
< reports and publicly available information from the California Independent
< System Operator - operator of the state's high-voltage transmission grid
< and
< real-time power market - to create this Top 10 list of winners in the
< Summer
< of
< Luck.
<
< No. 10: Duke Energy Corp (DUK), Calpine Corp (CPN) and AES Corp (AES).
< These
< companies, with significant merchant power plants in California, didn't
< make
< as
< much money as they could have because they sold their power before prices
< started rising.
< AES, for starters, has sold the vast majority of the capacity of its
< California natural-gas fired generators under a long-term, fixed-price
< contract
< to make power for another company - a company much higher on this list -
< which
< supplies the natural gas and owns the electricity.
< Duke, with 2,680 megawatts of generators in California, lost out on
< significant potential income, because it sold most of its power months
< before
< prices started to rise.
<
< No. 9: Electricity trading companies. These companies, like Utilicorp
< United's
< (UCU) Aquila, Citizens Power (now owned by Edison International) and
< Belgian
< company Tractebel's (B.TRB) U.S. unit, mostly traded in and out of
< positions
< -
< and they made good profits doing so. This group also includes the
< unregulated
< trading units of Sempra and PG&E.
<
< No. 8: Western utilities with power to spare, namely Arizona Public
< Service
< Co., the Public Service Co. of New Mexico (PNM) and IdaCorp Inc.'s (IDA)
< Idaho
< Power.
< PNM said on Sept. 14 that it made $193 million in wholesale marketing
< during
< July and August, a 90% increase over the same two months last year.
< Arizona
< Public Service, which is a subsidiary of Pinnacle West Capital Corp (PNW),
< had
< considerably more power to sell than PNM, market sources said.
<
< No. 7: TransAlta (T.TA) and PPL Global (PPL). Western electricity prices
< have
< been high outside California as well. TransAlta and PPL reached deals to
< buy
< two
< major coal-fired power plants in the Northwest last year and took
< ownership
< before this summer. Unlike gas, coal is still cheap.
<
< No. 6: Enron Corp (ENE), El Paso Energy (EPG) and the energy trading
< unit
< of
< Morgan Stanley-Dean Witter (MWD). Unlike the in-and-out traders, these
< companies
< bet on rising prices and came into the summer holding large supplies in
< the
< West, electricity traders said.
< "Enron just bought and bought and bought before the summer, and never
< seemed
< to sell," said one trader.
< El Paso also owns 896 MW of generation in California.
<
< No. 5: The U.S. Federal Government and the State of Arizona. Federal
< utility
< Bonneville Power Administration and Arizona public utility Salt River
< Project
< rode to California's rescue on the hottest days this summer, providing
< hundreds
< of megawatts of supply at top dollar.
<
< No. 4: California's independent generators. The merchant power companies
< in
< California that did the best this summer are Reliant Energy Inc. (REI),
< with
< about 4,063 MW of California capacity; Southern Co. (SO), with about 3,000
< MW;
< NRG Energy (NRG), with 1,500 MW; and Dynegy Inc. (DYN), with 1,250 MW.
< Unlike Duke, AES and Calpine, these companies held on to most of their
< power
< and sold it in the day-ahead and real-time markets, where prices turned
< out
< to
< be best.
< Reliant has already indicated that third quarter earnings available for
< equity
< will top last year's figure by about $110 million.
< All of these companies, however, saw their windfall trimmed by
< diversification. Each owns gas-fired and some oil-fired merchant power
< plants in
< the eastern U.S., where high fuel prices and low electricity prices have
< damped
< profits.
< "We've had a good summer, but we have a pretty balanced portfolio across
< the
< country," Stephen Bergstrom, president and chief executive of Dynegy, said
< in an
< interview. "As good as the summer has been in the West, it's been as bad
< in
< the
< eastern half of the country."
<
< No. 3: Los Angeles Dept. of Water & Power (and its bondholders). LADWP
< has
< about 7,000 MW of generation, or about 2,000 MW more than it needs for its
< customers. As LADWP general manager S. David Freeman said a few weeks ago,
< "A
< blind pig could make money with that setup."
<
< No. 2: The heavily taxed citizens of British Columbia, Canada. Their
< provincially owned utility, BC Hydro, has been very busy this summer
< turning
< (free!) water into electricity worth hundreds of millions of dollars more
< than
< expected and flooding the province's general funds. With hydroelectric dam
< reservoirs the size of New England and transmission lines that can carry
< 3,000
< MW of southbound power, BC Hydro has single-handedly kept socialism
< solvent
< for
< another year in British Columbia.
<
< And the Grand Prize winner in the California Utilities Sweepstakes:
< Williams
< Companies (WMB), the company AES's generators are working for. Williams
< controls
< almost 4,000 MW of gas-fired generation in the San Diego area, a little
< more
< than 10% of what California's utilities need on average during daylight
< hours in
< the summer.
< What's more, those plants are under contract as "resource must run" with
< the
< ISO. Their power can't be sold in the forward market. Williams had to take
< daily
< and real-time market prices by default, which is exactly what you would
< have
< done to maximize profits.
< And Williams isn't hurt by the factors that have diluted other
< companies'
< California gains. It isn't very exposed in the East; and as a big producer
< of
< natural gas, it's benefiting from high gas prices nationwide.
< Just to give an idea of how well the company likely has done this
< summer,
< consider that Williams' second quarter profit from its energy services
< segment
< rose to $412 million this year from $106 million in the second quarter of
< 1999.
< That in a quarter with one and a half months of soaring prices. In the
< third
< quarter, there were three.
< -By Mark Golden, Dow Jones Newswires; 201-938-4604;
< mark.golden@dowjones.com
<
< (END) Dow Jones Newswires 29-09-00
< 1800GMT(AP-DJ-09-29-00 1800GMT)
<