Ann de Rouffignac
OGJ Online
Opportunities centered on electricity are Williams's best bet for growth, Bill Hobbs, president Energy Marketing & Trading at Williams, told delegates to the Dain Rauscher Wessels Energy Conference 2000 in Houston Tuesday.
Since the company made most of its fortune first in natural gas pipelines and then in telecommunications, that may come as a surprise. But Hobbs laid out a strategy that is clearly directed toward electricity.
�The more the utilities got in trouble providing power for their customers the more our telephone rang,� said Hobbs.
Williams signed long-term structured deals to provide risk management services and electricity to Avista Corp., Spokane, Wash., and Hoosier Energy, an Indiana cooperative, after both encountered problems related to buying on the spot market.
Williams's strategy is to go after more of these big structured deals centered around electric assets. The company prefers large block sales over longer term transactions in order to hedge the risk. Williams actually inked a deal to provide 1,000 Mw over 18 years, Hobbs mentioned.
�Those kinds of deals don�t happen every day,� he said. � But we have several 200-250 Mw sales in the hopper that range 5-20 years.�
Given recent volatility in the power markets, he said longer term electricity deals are becoming more common as utilities try to lock up a secure supply of power at a stable price.
Hobbs pointed out that Williams Energy Marketing & Trading recently rose in ranks to number five in terms of volume of electricity trading. But he said volumes or speculative positions are not the company�s goal. Profits are what counts, he said.
In power, the company reported operating profits in excess of $400 million since June 1998.
But Williams has barely scratched the surface of opportunity in electricity, he said. The company will pursue control of additional power plants in its current regions of operation and also seek opportunities along the pipelines it owns. The company has set a goal of having access to hard assets of 25,000 Mw by 2003 and 40,000 Mw by 2005. Currently, the company has secured 8,900 Mw in five regions.
�Acquisitions are very controversial in our shop,� said Hobbs. �We believe over building will occur and when it does we will look to acquire some more plants.�
Williams is interested in building, acquiring, or making tolling arrangements around hard assets. Under a tolling agreement, a fuel owner pays the owner of a power plant to convert the fuel to electricity for a set fee and then sells the power into the market.
