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Content-Type: text/plain; charset=us-ascii Content-Transfer-Encoding: 7bit X-From: "IssueAlert" <IssueAlert@scientech.com< X-To: X-cc: X-bcc: X-Folder: \Drew_Fossum_Dec2000_June2001_1\Notes Folders\All documents X-Origin: FOSSUM-D X-FileName: dfossum.nsf http://www.consultrci.com ********************************************************************* Read SCIENTECH's free SourceBook Weekly article: "Bright Lights - A Conversation With Kevin Jordan, President of Excel Energy Technologies, Ltd.," at: http://www.consultrci.com/web/rciweb.nsf/Web+Pages/SBEntrance.html ********************************************************************* =============================================================== SCIENTECH IssueAlert, November 14, 2000 SmartEnergy Rounds Up $15 million in Financing; Is an IPO in the Works? By: Will McNamara, Director, Electric Industry Analysis =============================================================== SmartEnergy announced that it had completed its Series A round of financing, having received funding from an investor group including strategic utilities, venture capital and global banks. SmartEnergy, a privately held Internet-based energy service provider active in New York, plans to use the funding as working capital to "rapidly ramp up to meet an aggressive deployment schedule." ANALYSIS: You may recall that I discussed SmartEnergy about a month ago (IssueAlert, Oct. 11), when I drew attention to the fact that the online start-up was taking customers away from ConEdison. In existence only since April 1999, SmartEnergy offers electricity and natural gas to residential and small business customers. Under a promotion currently under way in New York, SmartEnergy has guaranteed savings of up to 40 percent on energy through the winter months for natural-gas customers in the boroughs of New York City and Westchester County. Capitalizing on ongoing threats about low supplies of oil and natural gas, SmartEnergy is using the so-called "energy crisis" to lure customers away from the traditional utility by locking in current natural-gas rates over the course of the next 12 months under its "Smart Fixed Rate" plan. As a policy, SmartEnergy hedges the products that its sell to customers, so that neither the company nor its customers is exposed to energy market price risks. In addition, SmartEnergy has offered 500 United Airlines Mileage Plus Reward Miles as an enticement to secure customers. As I discussed last month, an advantage that online energy providers such as SmartEnergy have over traditional utilities is their agility. As utilities try to disengage themselves from regulatory-bound rate structures, online companies have the freedom and flexibility to offer attractive products and billing options to customers. In addition, operating online allows SmartEnergy to easily operate in geographically disparate markets. Up until now, SmartEnergy's marketing efforts have been concentrated in New York state. However, the company claims that it will be serving six states, including New Jersey and Pennsylvania, by the end of this year. SmartEnergy expects to be serving all 25 deregulated states by the end of 2001, and the financing that it has received from investors undoubtedly will support this anticipated growth. Venture capitalists apparently agree that a company like SmartEnergy offers a unique business model that could potentially lead to financial returns as the energy industry continues to become deregulated. Investors that are bankrolling SmartEnergy include Alliant Energy, WPS Resources Corporation, Avian Securities and several other unidentified private investors. In addition, there is a European contingent that is part of the Series A round, including Dexia Ventures, the private equity arm of Dexia Bank, a USD $211 billion asset bank based in Belgium; KBC Bank; and venture capitalist groups Trust Capital, Proseed Capital Holdings and Technoledge Ventures. The inclusion of both American and European investors is important. Coupled with SmartEnergy's intention to operate in all 25 U.S. states that are deregulating, the fact that the company also has European investors suggests that SmartEnergy plans to be an energy provider on both sides of the Atlantic. The fact that SmartEnergy operates completely online lends itself to a platform of worldwide service. In fact, Alliant Energy identified "the strong growth of the Internet and technology in the energy segment" as a key reason why it is financially supporting the growth of SmartEnergy. In fact, the alliance between SmartEnergy and Madison, Wis.-based Alliant has been in existence for several months. The utility's non-regulated subsidiary Alliant Energy Resources formed a strategic partnership with SmartEnergy to expand a decidedly e-focused business. The partnership with SmartEnergy represents Alliant's new drive to forge strategic alliances with companies offering state-of-the-art technology and new products and services for customers. In fact, Alliant has referred to SmartEnergy as "the energy company of today and tomorrow" and believes that it has a platform that can be replicated for fast growth in markets around the world. Of course, my question is whether or not we are seeing the wheels turn toward an imminent IPO from SmartEnergy. It would certainly be an obvious move for the private company to head in this direction, especially now as technology stocks are being received favorably by Wall Street. I've written pretty extensively over the last few weeks about companies like Evergreen Solar, Active Power and Capstone Turbine all issuing very solid IPOs as a result of, in my opinion, their business models in new technologies and / or alternative fuels. There is arguably a general perception within the financial community that energy companies incorporating new technologies into their business models will gain an increasingly strong lock on the energy market in the next two years. With few exceptions, energy companies exploring new technologies that have issued IPOs over the last several months have performed comparatively well. As commercial and industrial customers want various service options that reduce their dependence on traditional utilities and the transmission grid, start-up companies like SmartEnergy might find a very profitable niche. Perhaps the greatest marketing edge that SmartEnergy has is its customer service, again resulting from its online presence. Customer interaction can be conducted via the telephone or over the Internet, enabling 24/7 account access and the ability for customers to check their accounts at any time. The downside, of course, is customer reluctance to sign up with a start-up company that they may not know. In addition, SmartEnergy faces tough competition from other online energy providers that also are gaining momentum in deregulated markets, including Utility.com and Essential.com. None of these companies has yet gone public, and are instead focusing on building critical mass and establishing their brand identities. Yet, of the three, SmartEnergy may be the most aggressive in terms of expansion, and could be on the fast track to an IPO in the near term. =============================================================== SCIENTECH can help you find the answers you need. From simple questions to complex problems, our experts and consultants will get results. Learn more about our six service areas at: http://www.consultrci.com/web/rciweb.nsf/Web+Pages/About_RCI.html ============================================================== 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 =============================================================== Feedback regarding SCIENTECH's IssueAlert should be sent to wmcnamara@scientech.com =============================================================== SCIENTECH's IssueAlerts are compiled based on independent analysis by 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 purpose in publishing its IssueAlerts is to offer an independent perspective regarding 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, please reply to this message and in the body of the email type "remove."
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