|
|
Enron Mail |
http://www.consultrci.com
************************************************************************ Read SCIENTECH's free SourceBook Weekly article: "Power Traders: The Winner= s and Losers" at: http://www.consultrci.com/web/rciweb.nsf/Web+Pages/SBEntrance.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 IssueAlert, October 17, 2000 Dynegy Launches B2B Portal and Trading Site 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 Dynegy, Inc. announced the launch of Dynegydirect, an Internet-based,=20 commission-free B2B portal and trading site for energy and communications commodities. Dynegydirect will be introduced to Dynegy customers in a phased-in rollout that started on Oct. 16, with online trading commencing over the next sever= al weeks. Through the portal, Dynegy customers will have self-service access to Dynegy's bid and offer prices across U.S. power, natural gas and=20 natural-gas liquids products. U.K power and natural gas, as well as coal, emission allowances, weather derivatives, international natural-gas liquids, and bandwidth will be offered in the coming months. ANALYSIS: This is a major undertaking for Dynegy, but perhaps not very surprising as the company is following many of its competitors into the big-league online trading market. Dynegy is following a trail blazed by the likes of EnronOnline, Entergy, AEP, etc., in establishing a portal to "enhance liquidity, improve customer control and create greater trading efficiency." Of the various online trading sites that have been announced, Dynegydirect appears most similar to EnronOnline=01*clearly the leader in the field=01*because it is principal-based. In other words, Dynegy will be a participant in all of the transactions, either as a buyer or a seller. Unlike EnronOnline, which is completely online, Dynegydirect will allow customers to conduct their transactions with Dynegy over the telephone during and following the launch of the site. Over the last year, Dynegy has identified its strategy as wanting to become a leader in the converging energy and communications business. In addition, according to Dynegy's CEO Chuck Watson, the company's goal is to gain a 10-percent share (or 70,000 MW) of the U.S. electric market over the next five years by acquiring plants, building them or negotiating the right to sell power produced by others. Along with a strident strategy of buildin= g merchant plants in areas where demand is growing significantly, Dynegy presumably plans to now use its trading portal to market the power it has either generated itself or bought on the wholesale market. I spoke late yesterday afternoon with Blake Young, Dynegy's chief informati= on officer and president of Dynegy Global Technologies, about the new site and how it will compete against such stiff competition. First, Young said that Dynegydirect is a "component of a broader strategy" to support Dynegy'= s comprehensive electronic business efforts. What this means is that=20 Dynegydirect ultimately will be much larger than just a trading portal, including such other electronic businesses as e-procurement and energy supply chain=20 management. The portal will be particularly customer-driven, in that it should provide many windows of opportunity for Dynegy customers to maximize their manageme= nt capabilities. Dynegy has been planning a trading operation for some time; its growth as a power generator and marketer has been an indication that Dynegy=20 recognized new trends in the energy industry. You may recall that a few months back Dynegy teamed with Williams in investing $25 million each for minority equity stakes in eSpeed, Inc. As noted in SCIENTECH's IssueAlert from Sept. 25, eSpeed is investing $2 million in TradeSpark, which plans to create electronic marketplaces for natural gas, electricity, coal, weather=20 derivatives, nitrogen oxide, and sulfur dioxide emission credits. TradeSpark is using the infrastructure and capabilities of eSpeed. In other words, eSpeed is TradeSpark's "enabler." As an investor in eSpeed, Dynegy stands to profit from TradeSpark's pre-launch market valuation of $40 million. At this point= , it is not clear if Dynegy intends for Dynegydirect to be a competitor to TradeSpark as Dynegy stands to profit from both trading operations. How does this all relate to Dynegydirect? According to Young, Dynegy is pursuing commodity trading along two venues. The first is a proprietary, one-to-many format in which Dynegy will participate in all transactions as either a buyer or a seller. This operation will be conducted on the Dynegydirect portal. The second venue is an anonymous, many-to-many format in which Dynegy will participate along with multiple buyers and sellers. This operation will take place on TradeSpark, which became operational in early October. Dynegy is a participating member in TradeSpark along with Coral Energy, Dominion, Koch Energy Trading, TXU Energy Trading, Willi= ams Energy Marketing and Trading, and Cantor Fitzgerald. Entergy also plans to come on board as a member and investor once its venture with Koch closes later this year. Other key attributes to Dynegydirect, as identified in the announcement of the site, are that its "highly configurable floors will enable customers to group products in a customized fashion for convenient access." In additi= on, customers can trade on multiple floors simultaneously, and the site's=20 real-time price updates will allow them to see prices on all of their floors, enablin= g them to make immediate decisions on prices and volumes. Young said that Dynegy is extremely confident that the portal's technology will be "well accepted" as it is JAVA-based (meaning, among other things, that it is flexible enough to operate between MACs and IBMs) and=20 object-oriented. While these are important from an IT perspective, as would be important to CIO Young, perhaps more importantly is that the site offers an opportuni= ty for Dynegy to support the growth of its businesses and offers a=20 cost-efficiency tool for customers. In August, Dynegy announced that it is acquiring Extant, a privately held, Colorado-based communications solutions and e-commerce company. Extant's primary line of business is in providing connectivity solutions and broadba= nd capacity to communications businesses and information providers, enabling them to exchange information and provide voice, data and video services to their customers. The acquisition will mark Dynegy's first significant penetration into the telecommunications sector. While not directly related to this new portal, the acquisition of Extant is relevant because Dynegy intends to eventually trade broadband capacity on the site. Extant's broadb= and capacity will help to support Dynegy's trading of this commodity. While the move to online trading is a smart, and almost inevitable, decisio= n for Dynegy and other energy companies wanting to remain competitive, the competition and risk associated with this venture are formidable. Clearly, Dynegy has found a market edge with its eSpeed /TradeSpark affiliation. TradeSpark is already up and running, as compared to many announced trading sites that have launch dates next year. In addition, TradeSpark is creating a large liquidity pool by bringing together several mediums, including the Internet, voice brokering and eSpeed's 300 millisecond private global network. The many-to-many format which Dynegy is pursuing through TradeSpar= k is an obvious route for the company to follow, and one with considerably less risks associated with it. On the other hand, building its own=20 Dynegydirect, in which Dynegy is the principal player, sounds like a Herculean task. For perspective, Enron was the first company that came out of the gate with an online energy trading portal. EnronOnline has a 12-month lead=01*al= ong with transactions in excess of $100 billion=01*ahead of Dynegy, or any comp= any that is just now developing a trading portal. It appears that Dynegy plans to build Dynegydirect from the ground up, unlike its involvement in=20 TradeSpark, which is already up and running. This could become a lengthy and costly endeavor. As I finished writing this analysis, Dynegy reported third-quarter earnings of $.55 per share. In particular, Dynegy reported that recurring net income from Dynegy Marketing and Trading increased to $141.0 million, representing 80 percent of Dynegy's consolidated net income (compared to $26.8 million in the third quarter of 1999). Obviously, Dynegy's commodities marketing and trading operation is on a very significant growth mode. The launch of Dynegydirect=01*along with ongoing participation in TradeSpark=01*is a k= ey element of this growth. =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=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 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 =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=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 in the body of the email type "remove."
|