Enron is both old and new economy --- an article

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---------------------- Forwarded by Mark Palmer/Corp/Enron on 04/24/2000
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From: Claudia Johnson@ENRON COMMUNICATIONS on 04/21/2000 02:39 PM PDT
To: Joe Hirko/Enron Communications@Enron Communications, Kevin Hannon/Enron
Communications@Enron Communications, Ken Rice/Enron Communications@Enron
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Subject: Enron is both old and new economy --- an article

Enron is both Old and New Economy Saw opportunity that Canadian firms missed,
Mathew Ingram says
MATHEW INGRAM

04/18/2000
The Globe and Mail

Calgary -- Old Economy, New Economy: In the past few weeks, one goes down
while
the other goes up, and then the next day they change places. For the nervous,
there are a few companies that have a foot in both of these camps -- including
one whose feet come with size large construction boots on them. That company
is
Houston-based Enron Corp., and it is everything that Canadian energy and
pipeline companies could have been but aren't.

Enron is one of the world's largest energy companies, with a market value of
about $45-billion (U.S.) and interests in electric power generation, natural
gas
production, pipelines and related industries. But it is also a major player
in a
new kind of pipeline business -- the fibre-optic information pipeline
business.
Not only does it own a massive fibre network, but it is also a leader in the
emerging market of bandwidth trading.

Not that long ago, Enron was a sleepy old energy utility -- much like
TransCanada PipeLines, for example. Then the company realized it could play a
role in the market for new commodities such as fibre-optic bandwidth . Enron
president Jeff Skilling said recently that in five or six years, he expects
the
bandwidth market "will be as large as the combined natural gas and electricity
markets," or about $300-billion.

It didn't take a genius to see that pipeline companies had an advantage when
it
came to building fibre networks: that is, ready-made routes. Railway and oil
industry magnate Philip Anschutz was one of the early entrants in the market,
having hit on the idea of laying fibre-optic cables along his railway
rights-of-way -- an idea that became a $30-billion company called Qwest
Communications (which is merging with US West).

Williams Cos. had the same idea of laying fibre alongside its pipelines, and
later sold that business to MCI WorldCom in 1995 for $2.5-billion. The company
is now completing a new network through subsidiary Williams Communications. In
Canada, Alberta-based construction company Ledcor started laying fibre as it
was
repairing tracks for CN Rail, and sold access to phone and Internet companies.
That business became 360Networks, a separate unit that is expected to go
public
this week.

So where were pipeline and energy companies like TransCanada and Nova and
Enbridge (formerly IPL) and Westcoast while all this was going on? Well, Nova
was busy trying to be a chemical and a pipeline company, and then it and
TransCanada were busy fighting the Alliance pipeline project, and then they
decided to merge, in one of the world's all-time worst merger deals. Now
TransCanada has its hands full trying to replace the billions in market value
it
has managed to lose over the past year.

Westcoast and Enbridge have focused on pipelines and related interests, and
they
have both done a good job of it -- but they remain tied to fundamentally
low-margin businesses. Enron has swung for the fences, and that's why its
stock
has climbed from the $45 range last fall to about $65. Given its exposure to
technology, Enron has suffered a little bit lately.

Enron isn't the only one building the pipes for the information industry, mind
you. Established companies such as Qwest and WorldCom own extensive networks,
while newer entrants such as Global Crossing and 360Networks are building or
buying them. Enron even has competition from energy firms such as BP Amoco and
PG&E, who recently bought a stake in a company called Aerie Networks that is
building a network using their pipeline rights-of-way. Six other U.S. energy
companies have a similar joint venture.

With all this building, some industry watchers have raised the spectre of a
bandwidth glut, and it is conceivable there will be some kind of
consolidation.
But Enron is in a good position to be one of the consolidators -- and
meanwhile,
the company is taking advantage of the increase in demand for fibre capacity
by
setting up a bandwidth -trading market.

This is another area where energy companies like Enron have an advantage. They
are already accustomed to sophisticated trading and hedging of commodities
such
as pipeline capacity and natural gas. Enron , for example, is a leader in
energy
trading and risk management. What's so different about selling space on a
fibre-optic pipeline? Not much.

Can a single company explore, produce and ship natural gas, produce and sell
electric power, and become a leader in Internet infrastructure all at the same
time? That remains to be seen, but Enron appears determined to try -- and
that's
why brokerage firms such as Merrill Lynch say it has a chance to become "the
General Electric of the New Economy."