Energy Giants Targeting Telecommunications

Communications projects are high on the list of announcements and pronouncements at a Houston energy conference this week, with company executives telling analysts that the Internet, bandwidth and telecommunications may surpass traditional energy earnings in the next decade.

Enron Corp.'s CEO Ken Lay said the Houston-based energy giant will sell some European and North American assets to become less "asset intensive," and free up cash for an expanded broadband fiber-optic network. The extra cash, totaling between $600 million and $650 million, would be dropped into Enron's growing broadband business, Lay told analysts at the Dain Rauscher Wessels conference.

Since it was formed in November 1999, Lay said its e-commerce site, Enron Online, which has exceeded all analysts' expectations and is driving the move toward bandwidth, has had gross transactions of $150 billion. The system now is handling about 2,000 transactions a day, and 60% of all the company's business takes place through the online system.

Williams Co. already has announced its move to split its energy and communications units into separate businesses (see Daily GPI, July 25), and that plan is proceeding ahead of schedule, said Bill Hobbs, president of energy and marketing. He predicted the split would occur before the end of the second quarter 2001.

"The network is one year ahead of schedule, and by the end of the year, we will have moved into 50 local markets," Hobbs said. He also announced that Williams has invested in E-speed, which will be in conjunction with the company's earlier investment in Houstonstreet.com (see Daily GPI, March 8) as the company's web-based power trading exchanges.

For the company's expansion into bandwidth, Hobbs said there are a "lot of opportunities now residing in the telecommunications market," especially from a trading aspect. Saying he wouldn't classify Williams as a "trading shop," Hobbs nonetheless said that the company has more access to markets at a significantly lower cost because of its e-business.

"We're very excited about the investment in the Internet businesses," Hobbs said. That is where our long-term stability is. The best is yet to come in the marketing and trading areas."

And telecommunications is high on the list at the largest natural gas pipeline company, El Paso Energy Corp., which announced yesterday it will invest up to $2 billion in the next few years to build a substantial telecommunications business.

Greg Jenkins, who heads up El Paso's global networks unit, said most of the investments will be made in acquisitions of some regional network operators that need to reduce their debt to survive.

©Copyright 2000 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.