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Strategies & Market Trends : IPPs and Merchant Energy Co.s -- Ignore unavailable to you. Want to Upgrade?

To: DELT1970 who wrote (3042)	1/12/2004 6:36:27 PM
From: Larry S.	Respond to of 3358

Morgan Stanley seeks Duke Energy's trading book Monday January 12, 6:14 pm ET By Matt Daily HOUSTON, Jan 12 (Reuters) - Morgan Stanley (NYSE:MWD - News) is wants to acquire Duke Energy's (NYSE:DUK - News) electricity trading book, a move that would bolster Wall Street's grip on the market once dominated by merchant energy companies. ADVERTISEMENT Duke Energy Trading and Marketing filed a request last month with the Federal Energy Regulatory Commission for approval to sell 241 electricity trades to Morgan Stanley Capital Group. The deal did not represent all of Duke's trading portfolio, "but this probably a pretty big part of it," a Duke spokeswoman said. She declined to assign a market value of the portfolio, although traders said it is likely worth millions of dollars. Wall Street firms, including Morgan Stanley, Bank of America (NYSE:BAC - News) and Swiss UBS (UBSZn.VX) have stepped aggressively into electricity and natural gas derivatives trading, filling the void left by the collapse of energy giant Enron Corp. (Other OTC:ENRNQ.PK - News) and the withdrawal of many conventional energy players. "They see the opportunity. The traditional merchant energy companies have taken it on the chin and they have no plans get back into trading anytime soon," said Mark Gurley, principal with Kansas Energy Partners. Neither Duke nor Morgan Stanley would comment on the financial details of the proposed trading portfolio transaction, although Duke said in its filing it included 241 individual deals. The companies are seeking to finalize the transaction by Feb. 1. "DETM plans to transfer to MSCG part of DETM's portfolio of wholesale power sales and power purchase agreements that it has entered into with third parties," it said in the filing. Duke Energy has said it would unwind Duke Energy Trading and Marketing, a 60-40 joint venture with Exxon Mobil Corp. (NYSE:XOM - News) as part of its drive to reduce trim back its merchant energy operations. FILLING THE VOID Companies such as Williams Cos. Inc.(NYSE:WMB - News), Dynegy Inc. (NYSE:DYN - News), Aquila Inc.(NYSE:ILA - News), Reliant Resources Inc. (NYSE:RRI - News) and El Paso Corp. (NYSE:EP - News) all abandoned speculative trading in the power and gas markets as their credit ratings dropped to "junk," or non-investment grade, status and amid accounting and trading scandals. Their withdrawal from trading, except to hedge their power and gas needs, has pushed the costs of trading sharply higher, draining liquidity from the markets. That has drawn the attention of the major financial institutions, which have solid trading experience and ample money to play in the volatile markets. To help run their the energy trading operations, many of the financial players have been recruiting trading talent formerly based in Houston for Enron, El Paso, Dynegy, Reliant and others to their offices based in New York and the New England states, industry sources said. While much of the financial institutions' activity has been on the derivatives side of the business, which involves contracts based on underlying commodity deals, the companies must also have some exposure to the physical markets. "The jobs that are going to be there are going to be on the financial side," said Richard Duszynski, president of Houston- based advisory group Mergent Energy. "They'll also have to have a physical market book and a physical pressence," he added. biz.yahoo.com