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Gold/Mining/Energy : Keystone Energy Services - KESE on BB Nasdaq -- Ignore unavailable to you. Want to Upgrade?

To: MARIO PASQUA who wrote (65)	11/18/1997 12:48:00 AM
From: emichael	Respond to of 307

Discount Power Broker Keystone Energizes Investors The Motley Fool - November 17, 1997 12:31 KESE FERC V%MFOOL P%TMF November 17, 1997/FOOLWIRE/ -- Sidestepping the deservedly controversial nature of OTC issues, today's Lunchtime News column takes a look at Keystone Energy Services (OTC: KESE), up $2 1/8 to $9 1/2 this morning, as a harbinger of the changes occurring in the U.S. electric utilities industry. Keystone is the first "public" company to emerge as a discount power broker in the nation's nascent retail electricity market. The company reported last Friday that it had signed "over 30 million kwh" in contracts, which represents electricity usage of more than $5 million per year at current prices. Keystone's stock promptly gained 15% on the day. Electric utility stocks have dramatically underperformed the overall market over the last two years, largely as a result of the uncertainty surrounding deregulation of the industry. The latest change on the legislative front to significantly alter the competitive landscape came in April of 1996 when the Federal Energy Regulatory Commission (FERC) ordered electric utilities nationwide to open up their utility transmission systems and allow the free flow of electrons to competitors. This was the first step in the process of allowing companies in areas where electricity is less costly to transmit their "juice" to areas where it is more costly, which is the entire point of deregulation. The stakes are high for an industry that is twice the size of the long-distance telephone business. Analysts predict that the nation's $212 billion a year electric bill will drop 20-30% over the next five to ten years. The state furthest along in the process is California, which has long labored under the burden of astronomical power costs (30% to 50% higher than the national average). Starting on January 1, 1998, residential, commercial and industrial customers in California will be able to purchase their electricity from either their current utility or any other "licensed electricity supplier." Some have touted Keystone as the next MCI or Sprint, making analogies with companies that benefited handsomely when deregulation hit the long-distance arena in the mid 1980s. The more apt analogy would be with the ubiquitous long-distance "resellers" of the period (acknowledging that both MCI and Sprint at times resold long-distance service on AT&T lines). Keystone's business model is simple -- it calls up potential customers and offers them a 10% to 25% discount on their electricity service, with no change in the provision of service or billing. When the bill is received by the "old" utility, new legislation mandates that the electricity portion of the bill be credited to Keystone. At present the company is ahead of the game in terms of sales staff and marketing, as well as the experience of its management team. The company claims that it can penetrate 1% of the $22.5 billion California market by the end of 1998. However, in a business where the only barrier to entry is a license, prepare for a wave of such "resellers" to inundate the market, all competing on the basis of price. It may not happen immediately, it may not happen in six months, but it will happen. Unfortunately, Keystone has chosen to list on the OTC Bulletin Board (which in essence acts as a pure quotation service) as a result of "time to market" issues surrounding listing requirements. Companies that are quoted on the "BB" are under no requirement to report quarterly financial information to the SEC or investors. However, this week the company is submitting audited financial statements in order to become a "fully reporting" OTC issue, and Keystone has stated that it plans to eventually list on one of the major exchanges (this week's submission is the first step). Tracking the fortunes of Keystone will provide some insight into a process that will be replicated in some way, shape, or form across the entire country in coming years. -- By Alex Schay

To: MARIO PASQUA who wrote (65)	11/18/1997 6:04:00 AM
From: unregmarket	Respond to of 307

MP - It may be 5 - 10 years to iron out the SYSTEM's problems, but KESE is able to come into the game as a distribution company, not as a generation company. They are, simply stated, power brokers who can buy low and sell at a market discount to their customers. Marketing is their expertise, not buying coal and gas. California is ripe for the picking, and KESE has a good strategy to jump in the mix as of 1/1/98. Calif. residents will take risks of assured supply, knowing that if a new provider screws up, the state will bail the residents out because this is so new. Are they going to start a new system in front of the whole country and say "Whoops, we did not have our act together"? KESE is a good play right now, futuresuperstock article or not. The pump and dump scenario holds no water here because you are talking bandwagon mentality here - the neighbors hear of each other's cheaper electrcity coming through the same line and they will want it, too. Rick M.

To: MARIO PASQUA who wrote (65)	11/18/1997 6:49:00 AM
From: keith warren	Read Replies (2) \| Respond to of 307

mp The deregulation is the same as when the phone co deregulated. You do not have MCI, ATT, etc. coming in and adding new lines nor are they servicing the lines of a customers (per say). You sign up for long distance with SPRINT while GTE may be your local service provider. You pay for long distance to SPRINT but you are stil using GTE equipment until it reaches the nearest pop office where it is then "handed over" to SPRINT. If there is a (say you cant call certain area codes) you will report it to SPRINT where they will check out their equipment and if all is well, they will refer it to GTE to check down to your equipment. The same concept will be used in the power business. Hope this helps a little. Keith