simmons fyi - an excerpt from today ' s simmons note on ene ' s conf . call from friday
that summarizes their view of enron . if you ' d like to listen to the call ,
it can be accessed on the www . enron . com website under " investors " .
jeff dietert , simmmons , will be joining craig albert in the meeting tues . afternoon
i am headed to nyc on tuesday for marketing . joining craig and jeff from enron ir
will be scott vonderheide and david leboe ( david is new to ir from wes colwell ' s structuring
group ) . pls . call if you have anything you ' d like to discuss prior to the meeting .
thanks , paula
summary : ene held a conference call primarily to confirm that its business
units are on - track and to dispel some rumors in the marketplace . ene
reiterated its fyol eps guidance of $ 1 . 70 - $ 1 / 75 , which we consider to be
conservative ( consensus is $ 1 . 74 / sh , sci - $ 1 . 80 / sh ) . ene did not discuss
any change to lqol eps expectations ( guidance $ 0 . 40 - $ 0 . 45 / sh , consensus
$ 0 . 45 , sci $ 0 . 43 / sh ) . many of ene ' s comments concerning the wholesale
energy trading confirm comments we are consistently getting from all the
energy convergence players . the california situation is forcing utilities
across the country to deal with risk exposure to avoid a pg & e / edison
situation . most utilities and other gas / electricity consumers are not
prepared to manage these risk and are now outsourcing energy management
activities to sophisticated marketing companies . in addition , new
generation facilities are offering gas marketing opportunities . ene is
clearly the leader in energy marketing , trading & risk management . there
are a few other sophisticated mt & rm companies ( dyn , epg , wmb , duk , mir ,
aquila ) , but there is a huge drop in sophistication below these top tier
marketers . we believe the vast majority of the opportunity is being
captured by these few strong players . ene is expecting lqol natural gas
volumes to be up 25 % to 30 % and electricity volumes to be up 25 % to 50 %
over lqo 0 .
opinion : it is tough to get excited about buying a 30 x multiple stock is a
market as ugly as the one we are currently experiencing . however , ene is
the leader in energy convergence and should be a part of any growth and / or
energy portfolio . there are few opportunities to build a position in the
stock at reasonable valuations and we believe ene ' s current valuation is
very attractive ( 31 x fyol , 26 x fyo 2 ) . business fundamentals are quite
strong and ene is benefiting from a market where tight energy markets
encourage customers to focus on large , well - established suppliers for their
energy requirements .
clearing up the noise :
ebs layoffs . rumors have circulated that ene was laying off employees
in its broadband segment and even that it was disbanding its broadband
business . we expect ene to continue to build the intermediation and
content services units . ene expects to build its network with a larger
percentage of contracted capacity than previously expected and reduced
its capital expenditure expectations from $ 750 million this year to $ 250
million . the reduced activity in building out the network is
contributing to reduced staffing requirements in the network area .
pge divestiture . ceo jeff skilling placed only a 5 % probability on the
completion of the $ 1 . 7 billion pge sale to sierra pacific . the pge
asset is likely to continue as part of the ene portfolio in the
near - term . we had previously considered pge to be a discontinued
business . pge eps contributions will be marginally positive to fyol eps
expectations .
india generation . ene ' s dabhol , india power project ( 826 mw ) is
experiencing a similar crisis to the one in california . the electricity
purchaser of the power generated by dabhol is backed by the indian
government , but has not been able to pass through the increased cost of
power caused by higher oil prices . ene has been relying on the
guarantee from the indian government for payment for its electricity
sales . ene has continued to receive payment from he government but is
subject to regulatory risks for this project .
california credit exposure . we believe ene is managing its credit risk
appropriately .
simmons
fyi - an excerpt from today ' s simmons note on ene ' s conf . call from friday
that summarizes their view of enron . if you ' d like to listen to the call ,
it can be accessed on the www . enron . com website under " investors " .
jeff dietert , simmmons , will be joining craig albert in the meeting tues . afternoon
i am headed to nyc on tuesday for marketing . joining craig and jeff from enron ir
will be scott vonderheide and david leboe ( david is new to ir from wes colwell ' s structuring
group ) . pls . call if you have anything you ' d like to discuss prior to the meeting .
thanks , paula
summary : ene held a conference call primarily to confirm that its business
units are on - track and to dispel some rumors in the marketplace . ene
reiterated its fyol eps guidance of $ 1 . 70 - $ 1 / 75 , which we consider to be
conservative ( consensus is $ 1 . 74 / sh , sci - $ 1 . 80 / sh ) . ene did not discuss
any change to lqol eps expectations ( guidance $ 0 . 40 - $ 0 . 45 / sh , consensus
$ 0 . 45 , sci $ 0 . 43 / sh ) . many of ene ' s comments concerning the wholesale
energy trading confirm comments we are consistently getting from all the
energy convergence players . the california situation is forcing utilities
across the country to deal with risk exposure to avoid a pg & e / edison
situation . most utilities and other gas / electricity consumers are not
prepared to manage these risk and are now outsourcing energy management
activities to sophisticated marketing companies . in addition , new
generation facilities are offering gas marketing opportunities . ene is
clearly the leader in energy marketing , trading & risk management . there
are a few other sophisticated mt & rm companies ( dyn , epg , wmb , duk , mir ,
aquila ) , but there is a huge drop in sophistication below these top tier
marketers . we believe the vast majority of the opportunity is being
captured by these few strong players . ene is expecting lqol natural gas
volumes to be up 25 % to 30 % and electricity volumes to be up 25 % to 50 %
over lqo 0 .
opinion : it is tough to get excited about buying a 30 x multiple stock is a
market as ugly as the one we are currently experiencing . however , ene is
the leader in energy convergence and should be a part of any growth and / or
energy portfolio . there are few opportunities to build a position in the
stock at reasonable valuations and we believe ene ' s current valuation is
very attractive ( 31 x fyol , 26 x fyo 2 ) . business fundamentals are quite
strong and ene is benefiting from a market where tight energy markets
encourage customers to focus on large , well - established suppliers for their
energy requirements .
clearing up the noise :
ebs layoffs . rumors have circulated that ene was laying off employees
in its broadband segment and even that it was disbanding its broadband
business . we expect ene to continue to build the intermediation and
content services units . ene expects to build its network with a larger
percentage of contracted capacity than previously expected and reduced
its capital expenditure expectations from $ 750 million this year to $ 250
million . the reduced activity in building out the network is
contributing to reduced staffing requirements in the network area .
pge divestiture . ceo jeff skilling placed only a 5 % probability on the
completion of the $ 1 . 7 billion pge sale to sierra pacific . the pge
asset is likely to continue as part of the ene portfolio in the
near - term . we had previously considered pge to be a discontinued
business . pge eps contributions will be marginally positive to fyol eps
expectations .
india generation . ene ' s dabhol , india power project ( 826 mw ) is
experiencing a similar crisis to the one in california . the electricity
purchaser of the power generated by dabhol is backed by the indian
government , but has not been able to pass through the increased cost of
power caused by higher oil prices . ene has been relying on the
guarantee from the indian government for payment for its electricity
sales . ene has continued to receive payment from he government but is
subject to regulatory risks for this project .
california credit exposure . we believe ene is managing its credit risk
appropriately .