Energy sector experiences calm before the storm

NEW YORK, Aug. 9, 2001 — So whatever happened with those blackouts? That’s the question of the moment in the energy industry.

Six months ago the sector was riding high, anticipating more dealmaking and revenue than ever as well as a favorable political climate in Washington.

Today, in its Special Report on energy, The Daily Deal finds an industry chastened. But not for long.

Assistant Managing Editor Alison Rogers writes, “The Department of Energy predicts energy consumption will grow at a measly 1.3% a year through 2020, tough to believe in the heat of August. You can believe cold, hard facts or you can believe your lyin’ eyes.”

In the month of June, according to analysts from Salomon Smith Barney, the industry saw year/year declines and lowered ratings, price targets and earnings estimates. However, many industry experts expect this lull to end soon.

Longtime energy correspondent Claire Poole, a senior writer for The Daily Deal, takes a look at energy dealmaking of recent months. Poole provides insight and predictions from some two dozen analysts and companies in “Power Plays,” a broad look at the investment activity in the industry. “Many people are talking about energy becoming the next flavor of the month for venture capitalists. That may happen, given worries about a return to the power blackouts and long gas lines of the 1970’s. But now, venture capital investing in energy is still small potatoes,” she notes.

Heidi Nasr further analyzes this trend in “Squeezing Out Sparks.” About a year ago, energy was the new must-have. But that ended abruptly thanks to two developments: The California energy crisis proved less dire than expected and the unprecedented change in control of the United States Senate when Jim Jeffords, I-Vt., announced his decision to leave the Republican party. “After that, it was all downhill. That huge sucking sound you heard in early summer was the energy sector abandoning the IPO market,” she writes.

Rogers completes the editorial content of the Special Report in a Q&A with Deloitte Consulting’s Tom Flaherty. In “After the Party,” Flaherty provides his insight into the utilities M&A outlook. He predicts that smaller companies will need to rush to consolidate or position themselves for auction or acquisition, as the game will increasingly be controlled by the largest corporations. He also anticipates that cross-Atlantic deals may become part of the equation.

The editorial content of the Special Report will be augmented with several pages listing the biggest M&A transactions and advisories in the energy industry.

About The Deal

The Deal is a media company providing original news reporting, financial data and commentary on a full spectrum of global transactions and the personalities and politics of dealmakers behind the deals.

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