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*************************************************************************** SCIENTECH IssueAlert Sponsor: Energy Exchanges Online - Scottsdale - December 4-6: the only place to meet your future clients, suppliers and partners. SCIENTECH has secured a $300 discount for all IssueAlert subscribers to participate to this event= . To join Altra, HoustonStreet, Petrocosm, APX, Enron, Conoco, Duke plus a legion of other online energy experts visit www.eyeforenergy.com/xonline. This is the only event to take you from yesterday to tomorrow TODAY! *************************************************************************** Reach thousands of utility analysts and decision makers every day. Your company can schedule a sponsorship of IssueAlert by contacting Nancy Spring at nspring@scientech.com or (505)244-7613. Advertising opportunities are also available on our website. *************************************************************************** =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D SCIENTECH IssueAlert, November 22, 2000 Endesa Receives Green Light to Move into France By: Will McNamara, Director, Electric Industry Analysis =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D Endesa (NYSE: ELE), Spain's largest power utility, has signed an agreement with Charbonnages de France (CDF) to acquire a 30-percent interest in the French electricity generator Societe Nationale d'Electricite et de Thermiqu= e (SNET). The transaction has been authorized by the French Government. The agreement includes Endesa's right to increase its interest in SNET in the medium term in order to strengthen the cooperation between both companies and allow Endesa to carry out its industrial development plan in France and Europe. ANALYSIS: The approval for Endesa to acquire 30-percent interest in SNET cements the company's move into France, which is a major component in the aggressive expansion efforts Endesa has been implementing this year. SNET, while a comparatively small company by American standards, is still the second 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. This 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 larges= t energy company, EDF, still has a hold on about 90 percent of the market in the country, any acquisition of the next-largest company is a major coup. The acquisition of SNET was also attractive to Endesa because of the company's experience in coal-based electricity=01*which still is the po= wer source for roughly half of the electricity produced across the Continent=01= *and its progressiveness in terms of technology. Presently, SNET sells the bulk of its electricity output to EDF under a long-term contract between the two companies. The rest of its generation is sold to eligible customers. In addition to its current assets, SNET is also planning a new 350-MW gas-fired station in eastern France and is the front runner to build a new clean-coal plant in the heavily industriali= zed Rhone Valley. Thus, as France slowly opens its market to competition, SNET could emerge as one of the major providers. Endesa was able to beat out other bidders for SNET, including France's Suez Lyonnaise des Eaux and Germany's RWE, due to the positive valuation of Endesa's industrial and commercial projects and the economic value of its offer. Endesa already entered the French market last month with a three-year=20 exclusive agreement to serve the energy needs of SEB, a small appliance company. The company's move outside of Spain resulted from several factors. First, the Spanish government has placed restrictions on the domestic growth of its largest electric companies, essentially land-locking the domestic growt= h of companies like Endesa and forcing them to look outward for growth=20 opportunities. In addition, growth in countries like France and Germany is probably appeal= ing to Endesa because their central location offers additional expansion=20 opportunities into Italy and Eastern Europe. Just within the last year, privatization has come to the major European countries=01*either all at once, as in the case of Germany, or in forced increments, as occurred in France. There has been little question that Endesa would like to develop generation=20 interests across the Continent, and has taken advantage of competitive opportunities as they have emerged. In fact, Endesa disclosed that it plans to become a leading European power player through the swap of assets with other=20 electricity customers and through acquisitions. Rumor has it that Endesa is also lookin= g to acquire the generation assets of Enel=01*Italy's state-owned power and the biggest European rival to EDF. However, as Endesa expands abroad it continues to face significant problems in Spain, due mostly to its proposed merger with the second largest=20 electricity provider in the country, Iberdrola. Just last month, Endesa announced that it had entered into a "friendly merger" with Iberdrola. Together, the two companies will gain a hold over 80 percent of Spain's power market with a combined market capitalization of the equivalent to $32 billion. Reported= ly, the merger will create the world's third-biggest electricity company, after Tokyo Electric Power and Enron. However, Spanish oil company Repsol, which lost out on the bid for Iberdrola to Endesa, continues to contemplate renew= ing a hostile takeover of the company. Repsol claims that it in fact offered 1.2 more euros per share than what Endesa has promised to pay for Iberdrola in their $13 billion merger, but that Iberdrola did not even consider the bid. Both Endesa and Repsol are partially owned by the Spanish government (only 33 percent of Endesa is publicly traded), so presently negotiations are being held to see if a compromise can be reached. Reportedly, the merge= r between Endesa and Iberdrola can occur only if some of the companies belong= ing to the merged company are sold, as per the Spanish antimonopoly legislation= . Ironically, this could benefit Repsol as the company plans to invest in any companies that are divested due to the merger. France has been criticized by other European nations for delaying energy liberalization across the Continent. In fact, France has only opened its power and gas markets by the minimum amount imposed by the European Union. While other European countries have opened 100 percent of their markets to competition, France has opted for a phased-in approach, opening a third each of its power and gas markets by February 2003 and August 2008,=20 respectively. Thus, although Endesa is certainly pushing through barriers to obtain entry into France, it is questionable when true competition will emerge in the country. A report from the Paris-based International Energy Agency, issued just last week, contends that France's power liberalization law restricts power trading and allows EDF to keep its market advantages. However, even though Endesa may face expansion limitations in France, it is important to remember how large the company is in its home country. Endesa produces about half of Spain's electricity (22,500 MW), relying mainly on nuclear and coal-fired plants. Looking to diversify, Endesa also owns interests in gas, water, and telecommunications companies. It is the largest shareholder in Auna, a jointly owned company (with partners Telecom Italia and Uni?n Fenosa) that controls Retevisi?n, Spain's second-largest phone company, behind Telef?nica. In addition, Endesa is also investing heavily in energy firms in Latin America. Thus, although France is very important for Endesa's European expansion efforts, the company is still a contender in other key markets. =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D A new SCIENTECH PowerHitter interview with Peter Weigand, Chairman and CEO of Skipping Stone, is now available. Find out more at: http://www.consultrci.com =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D 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 information products. If you would like to refer a colleague to receive our free, daily IssueAlerts, please reply to this email and include their full name and email address or register directly at: http://www.consultrci.com/web/infostore.nsf/Products/IssueAlert Sincerely, Will McNamara Director, Electric Industry Analysis wmcnamara@scientech.com =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D Feedback regarding SCIENTECH's IssueAlert should be sent to=20 wmcnamara@scientech.com =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D SCIENTECH's IssueAlerts are compiled based on independent analysis by=20 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 purpos= e in publishing its IssueAlerts is to offer an independent perspective regard= ing the key events occurring in the energy industry, based on its long-standing reputation as an expert on energy and telecommunications issues. Copyright 2000. SCIENTECH, Inc. If you do not wish to receive any further IssueAlerts from SCIENTECH, pleas= e reply to this message and type "remove" in the subject line.
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