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Strategies & Market Trends : VOLTAIRE'S PORCH-MODERATED -- Ignore unavailable to you. Want to Upgrade?

To: gooch_the_farmer who wrote (21996)	12/5/2000 11:04:52 AM
From: edamo	Read Replies (1) \| Respond to of 65232

gooch....the utility industry is settling into two camps....the producers and the marketers.....the producers are aggressive companies who are buying the generation facilities from those who want to be pure marketers or resellers. some producers specialize in the purchase of nuclear generation such as amergen....others prefer fossil fuel plants as southern company or duke.... the problem exists even with the stratification of producers and marketers in the fact that new fossil fuel or nuclear facilities haven't been built since the seventies....there is a great deal of co generation that is springing up, particularly in the trash to steam areas or gas turbine facilities. with the aging of the production side physical plant, along with variable energy costs, the pure marketer is victim to the supply or production side. recently connectiv (delmarva and atlantic electric consortium) pulled out of many resale markets as they couldn't buy kwh as cheaply as the local producer/reseller exelon (peco and comed consortium) could generate.... too many variables which would preclude high growth....consolidation of companies creates a pseudo growth as each gets a larger piece of the pie....but the pie grows at a slow rate, which precludes constant growth. at some point in time new generation is required, but the cost of generation equates to capital expenditure in the billions, along with a several year construction schedule....return on investment is suspect at this time, as lessons learned and stranded costs still weigh heavy from the last round of nuclear plant construction... utilities when all is sorted out will still be a widow and orphan holding....but if they are bought at these levels, the potential capital loss more then offsets the dividend.... look at historic cyclical patterns of the large utilities, it will give you a fairly clear indication...most will show a late ninety eight spike, a collapse in ninety nine and a recovery in late two thousand....a mimic of the perception of the economy.... do your research, buy fundamentals, clarify your goals, remain cautious..... good luck ed a