With or without deregulation, the impact of rising energy costswill increase the demand for Enron’s growing product base,especially in its services area, offering even more leverage forNorth America’s largest wholesale marketer. Lou Pai, CEO of EnronEnergy Services LLC, provided an overview of his division at theannual investor’s conference last Thursday in Houston, calling theopportunities for growth are tremendous.
“When you look at what’s happening in the marketplace, we areseeing more and more utilities looking to get out of the merchantfunction,” Pai said. “Enron’s value then is extended to morecustomers, and our energy outsourcing products for the middlemarket offer us a great opportunity for growth.”
Specifically targeted now and into the near-term are residentialenergy markets and what he called “power quality,” which refers tothe new technology emerging to enhance distributed generation,demand-side management and software. Enron also plans to grow itsenergy services in the insurance and equipment leasing fields.
Enron’s commitment to the residential energy market took on newmeaning when it partnered up with GE Capital, IBM and America Onlinelast year to form a retail energy company, The New Power Company (seeDaily GPI, May 17, 2000). Enron, whichholds 60% of the company, is the supplier, IBM provides back officesupport and AOL (pre the Time Warner merger) provides the key link tothe small customer market.
Pai said the future for TNPC is “huge,” with an estimated marketopportunity of more than $150 billion. Already, he said, TNCP hasraised more than $750 million in private and public funding, has a$600 million fully funded business plan, has hired a “strong”management team and most important, has a customer base of morethan 300,000.
“The current commodity price environment is very favorable forthis market,” he said. “At this point, we’re going to be in a greatposition because it would be very difficult for a competitor toraise this kind of capital and get started. We’ll have a swing atthis market for the next year or year and a half.”
Pai called “power quality” the hottest new opportunity forEnron. Driven by scale and energy use, “businesses can’t toleratethe risk of missing out on the power grid.” Referring to thecurrent available solutions, Pai said that integration risk,technology risk and commodity price volatility were a fear forcustomers — and a market that Enron is perfectly suited to enter.
“Customers are concerned about power quality.no surges in thelines.power reliability.no interruptions.commodity availability andprice. We think the distribution system we’ve developed fits thatapproach,” Pai said.
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