J.P. Morgan: Tech Boom = Gas Company Boom

In the new economy, while energy-intensive industrial business lags, the growing information technology (IT) and telecom sectors "should account for an increasingly large piece of the total energy pie," according to an industry analysis report released by J.P. Morgan. And some will profit more than others, the financial giant said, in naming seven natural gas-based companies the winners in the new market.

Power demand increasingly is hyped by the new world of electronics, J.P. Morgan said, estimating that the average web-hosting center uses the electricity equivalency of eight 40-story office buildings. And behind that power is natural gas.

Anadarko Petroleum, Devon Energy, Duke Energy, El Paso Energy, Enron, Entergy and Williams Co. are the companies J.P. Morgan believes will lead the charge, with "top management, the right portfolio of physical assets and skill sets, and a proven track record."

As the energy industry has seen this summer, demand for power far outweighs supplier capacity, and the power generating industry is busy at work playing catch-up. Almost all of what is being built to meet this demand is efficient natural gas-fired capacity, which bodes well for natural gas E&P companies and pipelines," analysts Anatol Feygin, Kyle Rudden and Waqar Syed said in the report. "We believe that a handful of E&P, pipeline and electricity generation companies are positioned well to profit from this dynamic."

J.P. Morgan estimates that an average of 20-30 GW a year will be constructed over the next few years "with the peak occurring in 2001 and 2002. Over 95% of the proposed plants will be gas-fired to ease environmental impact. Adding to natural gas dependency, analysts estimate that 40 GW of nuclear plant generation will be retired between 1998 and 2020. Natural gas has enjoyed a 1.8% annual growth rate during the 1990s. If electric generation grows to 20-30 GW a year, the annual gas growth rate through 2010 should be 3.1%. J.P Morgan rated the seven energy companies a buy.

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