|
|
Enron Mail |
Cc: mark.schroeder@enron.com
Mime-Version: 1.0 Content-Type: text/plain; charset=ANSI_X3.4-1968 Content-Transfer-Encoding: quoted-printable Bcc: mark.schroeder@enron.com X-From: Steven J Kean X-To: Paula Rieker X-cc: Mark Schroeder X-bcc: X-Folder: \Steven_Kean_June2001_4\Notes Folders\Discussion threads X-Origin: KEAN-S X-FileName: skean.nsf Do you guys follow these reports? Do we need to correct them? ----- Forwarded by Steven J Kean/NA/Enron on 10/09/2000 08:50 AM ----- =09Mark Schroeder@ECT =0910/09/2000 04:05 AM =09=09=20 =09=09 To: Steven J Kean/NA/Enron@Enron, Mark Palmer/Corp/Enron@ENRON =09=09 cc:=20 =09=09 Subject: Calling All Investors: The New Power Company's IPO Priced a= t $21=20 Per Share Was Enron actually banned from the California residential market, as per=20 below? mcs ---------------------- Forwarded by Mark Schroeder/LON/ECT on 09/10/2000=20 10:08 --------------------------- =20 =09Enron Capital & Trade Resources Corp. =09 =09From: "IssueAlert" <IssueAlert@scientech.com< = =20 06/10/2000 12:13 =09 To:=20 cc: =20 Subject: Calling All Investors: The New Power Company's IPO Priced at $21 P= er=20 Share http://www.consultrci.com ************************************************************************ SCIENTECH's timely and newest InfoGrid, The Telecommunications InfoGrid, will help you keep up with the latest moves of energy companies into the fast-growing telecom market. Learn more about SCIENTECH'S InfoGrids at: http://www.consultrci.com/web/infostore.nsf/Products/InfoGrid ************************************************************************ =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, October 6, 2000 Calling All Investors: The New Power Company's IPO Priced at $21 Per Share 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 TNPC, Inc., parent of The New Power Company, announced yesterday that its initial public offering (IPO) of 24 million common shares was priced at $21 per share. The stock closed yesterday at $27 per share. The Company expects to receive net proceeds from the offering of its shares at=20 approximately $473 million, exclusive of the underwriters' option to purchase an addition= al 3,600,000 common shares to cover over allotments. TNPC, Inc.=01*a partnersh= ip between Enron, America Online (AOL) and IBM=01*was formed in late 1999 to provide electricity and natural gas directly to households and small=20 businesses in the deregulated energy marketplace. TNPC's shares will be listed on the NYSE under the symbol NPW. Closing of the offering is expected to occur Oct. 11. ANALYSIS: I am sure that many eyebrows were raised when TNPC issued the IPO of its stock at $21, a figure that seemed surprisingly high for a start= -up company that has been in operation only since early summer. It is rather mind-boggling that a company with no significant track record could open its stock at such a price, but it is not unheard of. In fact, TNPC is=20 following a trend of new Internet companies initiating IPOs that are supported by grand concepts rather than tangible success. However, the TNPC "dream team" alliance between Enron, AOL and IBM has been met with great expectations (and a lot of skepticism as well) throughout the industry. I read through the S-1/A filing that TNPC submitted to the SEC, so hopefull= y I can cut through the hype regarding this deal to get to its nucleus. First= , TNPC acknowledges repeatedly throughout its filing that it is entering into an extremely high-risk venture, and in fact will "incur substantial operating and net losses, and cannot assure that we will attain=20 profitability." Further, TNPC admits that it expects to incur these losses for a=20 "significant," but undetermined, period of time. Why, then, would Wall Street be greeting this IPO with such a positive welcome? One could easily argue that the sheer market presence of Enron, AOL and IBM has by association driven up the value of TNPC, but I think a deeper answer lies within several factors. First, TNPC has been bankrolled by some hefty investments. In two separate, private placements, investors such as Enron, GE Capital Equity Investments and DLJMB Partners (among others) put up about $214 million in start-up capital in exchange for shares in the company. Enron is the majority owner of TNPC, with 57-percent control. This money has allowed TNPC to make=20 important acquisitions. For instance, TNPC bought the residential and small commercia= l retail energy business of Columbia Energy Group, which includes approximate= ly 285,000 natural-gas customers and 20,000 electricity customers in eight states. This is a valuable card in TNPC's deck as it locks in customers during this time when deregulation is developing slowly in retail markets. I wouldn't be surprised if TNPC makes a similar acquisition of another customer base in the near future, such as in Texas, where customers have been spun off to energy service companies rather than being held by the T&D operations of utilities. In other words, in Texas TNPC could easily buy customers without having to buy wires or infrastructure, assuming there is a willing seller. Second, and perhaps more importantly, earlier this year Enron transferred its residential and small commercial retail operations in California and Ohio to TNPC. This deal included the operations of Enron Energy Services but did not include PG&E Energy Services, which Enron acquired earlier this year. Together with the Columbia Energy Group acquisition, TNPC has come out of the gate running with a significant beginning customer base of over 325,000 customers. Why would Enron have turned over its residential customers to TNPC? Don't forget that Enron struggled in and retreated from the California residential market, stating that it couldn't make any money in the retail market. TNPC's S1/A filing confirms rumors that Enron Energy Services actually retreated from California due to a lawsuit claimin= g the company had violated laws relating to advertising directed to residenti= al consumers in 1997 and 1998. Enron was in fact banned from selling power to the residential market in California. Under this customer transfer, Enron is able to put its money into a completely separate business=01*essen= tially moving this high-risk business venture, and worst performing part of its retail service, off its own books. Yet if TNPC succeeds, Enron still benefi= ts as it is the majority owner. I think these two factors answer why Wall Street has looked so favorably on a self-described "new company with a limited operating history." Looking ahead, can TNPC maintain this comparatively high value of its stock? Well, there's both good news and bad news for TNPC. First, let's look on the bright side. TNPC has put into place a great management team, starting with H. Eugene Lockhart, formerly of AT&T, as president and CEO. Other key players bring retail market expertise from work at MasterCard, Exxon and PespiCo. In addition, within the energy industry, TNPC arguably could not have a better backer than Enron. What other company's touch has been golden in nearly every venture it has pursued? In addition to being the majority owner, Enron probably is also providing TNPC access to commodities at preferential prices, which will certainly enhance its sales approach in the retail market. Plus, TNPC has access to the 24 million customers that AOL represents, which I've always thought was the company's secret weapon. But then there are the risks, and they are substantial. First, competition is not materializing rapidly on the retail side. In a state like Pennsylvan= ia, which perhaps represents the strongest deregulated market in the United States, only about 16 percent of customers in PECO's territory have opted to switch their provider. So, TNPC has an uphill climb, to say the least, in making any inroads at capturing a lock=01*and making money=01*in the ret= ail market. Second, the only way that I can see TNPC making it at all is if they continue to buy customers like they did from Columbia Energy Group. There are big questions surrounding whether the company will be able to do this or not, and much of its success hinges on this uncertainty. Third, and perhaps most serious of all, is TNPC's vulnerability on the technology side of its operation. TNPC has entered into a 10-year revenue management and customer care agreement with IBM Global Services, under which IBM will manage the company's online commerce and billing application= s. IBM's track record in developing customer care systems is less than stellar= . In fact, PG&E initiated a lawsuit against IBM a few years ago when the utility had to pull the plug on a massive $100 million customer information system (CIS), employed by IBM, which it claimed was ineffective. IBM has partnered with SCT to provide the infrastructure to be used by TNPC. Under an agreement between IBM Global Services and SCT, the SCT Banner CIS will be integrated into a number of back-office IT solutions under development by IBM for TNPC. Experts in the CIS industry have questioned whether SCT's Banner CIS can handle over one million customers. If it cannot, this will surely limit TNPC's growth potential. Moreover, although TNPC's IPO signals a strong future, there are many=20 uncertainties surrounding this nascent operation. As one of the few major players in the energy retail market, TNPC has very few competitors, with the possible exceptions of NewEnergy or GreenMountain. Another competitor is also emergi= ng in Britain's Centrica, which plans to expand in North America after its recent acquisition of Canadian retail gas supplier Direct Energy.=20 Consequently, the coming year could either make or break TNPC and the challenges that the company faces in wanting to conquer the retail market are extremely steep. =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 Learn more about SCIENTECH's Issues and Analysis products and services at: http://www.consultrci.com/web/rciweb.nsf/web/Depts-IA.html =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 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 including e-commerce and telecom in the electric utili= ty industry. 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 in the body of the email type "remove."
|