Although conceived on a relative shoestring as a small thermal power plant operator in the Pacific Northwest five years ago, ScottishPower’s U.S. operations with PPM Energy expect to continue rapid annual growth in its niche positions in wind energy and natural gas storage, company officials told an analysts forum in London.

ScottishPower CEO Philip Bowman said PPM is a “core part” of ScottishPower’s current strategy and would not suffer the fate of ScottishPower’s other U.S. subsidiary, PacifiCorp., which was sold earlier this year.

“We see a strong case for further development and investment in PPM Energy,” Bowman told UK-based analysts in kicking off the “roundtable” at a UBS financial conference. Bowman described PPM as establishing “leadership positions in some high-growth and high-value segments of the North American energy market.”

Over the past five years since it was created by PacifiCorp to operate small thermal generation plants in the Northwest, PPM has grown into a national presence, increasing its operating profits an average of 50% annually and investing $1.9 billion, mostly in the wind generation and natural gas storage business segments, with an energy management component covering both. For the next four years, starting this year, PPM intends to more than double its investment, adding $2.8 billion through 2009, according to Portland, OR-based PPM CEO Terry Hudgens.

“PPM has significant growth potential, with high-quality development pipelines and market-leading positions in wind and gas storage,” said Bowman, noting he has a lot of confidence in the opportunities for the business to grow from its level of $150 million in operating profits last year.

There was no consensus expressed during the question-and-answer sessions on the intrinsic value of PPM other than the fact that management and the analysts agreed the European market currently under-values the company. Hudgens drew short of putting a specific dollar amount on its market value, but said it was somewhere between the market’s current very conservation $1.5 billion in asset value to one analyst’s rough guess at the conference of close to $7.5 billion.

Hudgens speculated that even if the current U.S. “production tax credit” (PTC) is not extended after it expires the end of 2007, PPM’s wind business will be in good position to continue to grow because green tags, or “renewable energy credits (RECs),” should help keep the price of the power competitive — around $19 to $20/MWh. In addition, he is confident PPM’;s energy management unit can “connect and bind” the wind power and storage businesses with hedging through storage, transportation and market alliance arrangements.

Both Hudgens and Bowman underscored that they expect PPM to be able to “exploit” the growing liquefied natural gas (LNG) import business in the United States and UK with its growing storage operations.

In gas storage, PPM is slated to increase its total capacity to 75 Bcf, from its current 50 Bcf, with the completion of two new projects (Waha in west Texas and the so-called “Houston Hub”), Hudgens said. “We have a target to get to 125 Bcf total storage capacity through our own development efforts and potential for smaller acquisitions.”

In response to questions about the wind power sector, Hudgens said PPM was in a strong position in its advanced turbine ordering, giving it all that it needs through the end of 2007, and in regard to adopting the latest technology advances in tower height, rotor circumference and other components that increase the efficiency greatly of each 1 MW-sized turbine.

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