Enron Corp., the world’s largest energy trader, and DynegyCorp., which plans to try harder to be the second or third largesttrader in the next few years, reported over-the-top earnings forthe third quarter yesterday, reaping the benefits of skyrocketingenergy prices and a continued focus on asset expansion.
Enron’s recurring net income, up 31%, rose to $292 million, or34 cents a share, compared with 1999 third quarter earnings of $223million, or 27 cents a share. First Call/Thomson analysts hadpredicted earnings of 32 cents a share for Enron. Dynegy reportedrecurring net income of $176.5 million, or 55 cents a share,compared with Dynegy/Illinova pro forma recurring net income of$96.5 million, or 32 cents per diluted share for the same periodlast year. Enron and Dynegy, both based in Houston, offered notonly positive returns for the quarter, but also a forecast for thecoming year that predicts growth will go even higher.
Sales in Enron’s four business units — wholesale energyoperations and services, retail energy services, transportation anddistribution and broadband services — grew nearly $30 billion inthe third quarter on the strength of its market edge in nearlyevery unit.
“Our wholesale and retail energy businesses have achievedrecord-setting levels of physical deliveries, contract originationsand profitability,” said Enron CEO Key Lay. “We are very optimisticabout the continued strong growth for our company.”
Enron said it took advantage of the higher energy prices bylocking up sources of power and natural gas and then selling andgiving customers easy access to its commodities throughEnronOnline. Since its debut last November, EnronOnline has handledmore than $183 billion in transactions.
Only Enron’s broadband services group, which is in the processof building a U.S. fiber optics network, reported a $20 millionloss in earnings. And that loss, said officials, came in buildingthe infrastructure to get it up and going. Connections in 40-citiesalready have been completed, with 20 more expected by next year.
Enron had a lot of things going in its favor for the thirdquarter, with North American natural gas revenues increasing 82% inthe quarter, mostly attributed to high gas prices in the past fewmonths. Enron also got the upper hand in electricity sales, whichwere up 46% in North America, with a lot of that amount inpower-starved California.
Enron’s wholesale energy operations and services unit, whichincludes natural gas sales, electricity trading and power plantdevelopment, also rose in revenue to more than double — $28.1billion from $11.1 billion for the same period of 1999. Income fromits retail energy services business, which contracts electricityand gas management for businesses, posted revenue nearly triplefrom a year ago, standing at $1.48 billion from $542 million.
Transportation and distribution earnings at Enron also were up15% from a year ago, a unit that includes a 32,000 network ofnatural gas pipelines and the Oregon utility Portland GeneralElectric. Portland General is set to be sold to Sierra PacificResources in the first quarter of 2001.
Dynegy CEO Chuck Watson said he was “absolutely thrilled” withthird quarter results, and said the key to the company’sperformance was its geographic diversity. The marketing and tradeunit, which Watson called the “growth engine” reported net incomeincreased to $141.9 million — 80% of the company’s consolidatednet income. The unit reported earnings of $26.8 million in thethird quarter 1999.
Dynegy’s midstream services earnings were down for the quarter,decreasing to $7.8 million, compared to $23.9 million in third quarter1999. Income was impacted by the company’s sale of nearly one thirdof its upstream natural gas processing assets, and a “flat commoditypricing environment” in the quarter. Illinois Power, Dynegy’stransmission and distribution subsidiary added in 1999 (see Daily GPI,June 15), saw net income of $26.8million.
Watson also predicted that the company’s newest venture,Dynegydirect, launched on Monday (see Daily GPI, Oct. 17), would onlybe a small part of the company’s continued asset expansion.
“We’re a marketing and trading company first and foremost,” saidWatson. “But the lines between gas and power have blurred.”
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