Sounding more like a visionary guru than a hard-charging CEO,Dynegy’s Chuck Watson offered up his forecast yesterday forsuccessful energy companies of the future, telling participants atEnergy Economy 2000 in Houston that businesses will need to own thetechnology they use, recruit and keep technical talent and mostimportantly, transform their companies from the traditionalasset-driven formula to a knowledge-driven strategy by embracingthe Internet.

Energy convergence is key to Dynegy’s success, Watson said, withnatural gas, power, communications and technology forming thecornerstones of the company’s business. Already a wildly successfulmarketer since he first went into business 15 years ago, Watsonsaid that business opportunities and the natural gas business hasnever been more exciting. His company has backed up that visionwith a common stock price that has quadrupled since the first ofthe year.

“There are a lot of similarities in communications and naturalgas and power,” said Watson. “The data business is a huge businesstoday and will be for the next 15 years at least. If we’re evenremotely as successful in our data communications business as wehave been in the gas and power business, there are more earningspotential in communications than in anything else.”

Watson said the communications opportunities are “huge andgrowing,” and he wants to make sure that Houston-based Dynegy is ina position to own the technology rather than just trade it, as itdoes in its natural gas marketing.

As part of its long-term plan to compete in the communicationsbusiness, Dynegy announced in August that it would buy Extant Inc., aColorado-based communications solutions and network company (see DailyGPI, Aug. 3). That deal is set to closeby the end of September.

“Technology convergence gives us the ability to compete in wayswe never dreamed of. We have dramatically expanded our reach in thepast 18 months.” Because of the transformation of the marketplace,Watson said that Dynegy would continually be changing to meet theneeds of its customers. “We are reinventing ourselves every year.”

Based on what Dynegy has seen in recent months, he predictedthat in the future, successful companies would be those that managetheir emerging assets more than just managing the assets theyalready have. “Today, 80% of our business is traditional, and 20%of it is B2B, e-business. In two years, I predict that 80% of ourbusiness will be B2B and 20% of it will be traditional. There’sgoing to be a huge shift.”

The economy of the future will be based on “ideas rather thanphysical” assets. “Knowledge assets drive Wall Street already, andif you leverage your intellectual capital, you will do well.”Dynegy, he said, will be balanced in its attack and continue to bea leading energy marketer, but insisted it will be aknowledge-based company “for years to come.”

Asked about the outlook for natural gas and Dynegy’s place inthe market, Watson said, “natural gas is not done” in NorthAmerica, but more opportunities exist globally, especially inWestern Europe in the short term. To continue to meet the energydemands of the future, especially in natural gas, oil and power,Watson said that the United States needs a domestic energy policy.

“This country is dangerously short of peaking capacity,” hesaid. “There’s been virtually no capacity added in the last 10years.” By 2001, he predicted that the United States would be45,000 MW short of capacity overall. Some areas of the country,like the Northeast, are in good shape, while the Northwest isextremely short. “Meanwhile, the demand growth continues. This isnot a window that will close in six or seven years.”

Although he said that the global opportunities ahead areenticing, Watson said Dynegy would remain strong in North America.”North America is still exciting for us. We’ve stuck to ourknitting, and now we have a strong company and can look towardother global opportunities.”

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