---------------------- Forwarded by Carla Hoffman/PDX/ECT on 12/21/2000 09:30 
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	Enron Capital & Trade Resources Corp.
	
	From:  "Pergher, Gunther" <Gunther.Pergher@dowjones.com>                      
     12/21/2000 07:40 AM
	

To: undisclosed-recipients:;
cc:  
Subject: DJ Selling Power May Be Attractive To Pulp, Paper Mills



15:09 GMT 21 December 2000 =DJ Selling Power May Be Attractive To Pulp,
Paper Mills
By Zahida Hafeez
Of DOW JONES NEWSWIRES
CHICAGO (Dow Jones)--As power prices skyrocket in the Pacific northwest, and
forest products markets soften, some pulp and paper producers could consider
turning into power vendors, taking downtime and instead reselling energy
into the open market.
At least in theory, many analysts believe that switching to selling power
can be a more profitable enterprise for pulp and paper mills, as it has been
for some aluminum mills.
Nationwide, pulp and paper makers generate roughly 55% of their energy,
while 45% is purchased from outside sources, in some cases through fixed
pricing arrangements.
And some even generate power enough to compete with public utilities for
rank. The world's largest newsprint maker, Abitibi-Consolidated Inc. (ABY),
which ranks as the third-largest generator of power in the Canadian
northwest region, self-generates 35% of its energy needs.
Of course, not all companies could switch. Firstly, not all co-generate a
significant amount of their energy needs, and those that do need to keep
running their operations side-by-side. Secondly, the fixed-rate contracts
with public utilities bar customers from reselling power. And lastly, energy
sale is strictly regulated in many parts of the U.S. and Canada, and hence
not very profitable.
Mills which could profit from selling energy are those with fixed pricing
arrangements for natural gas and electricity. They could take downtime while
reselling their energy at a higher price. Alternatively, they could adjust
operations to run machines during non-peak hours, while selling electricity
during the peak hours.
Meanwhile, mills that have onsite hydroelectric power generators, such as
Abitibi and Pacifica Papers Inc. (T.PPP), can easily sell surplus energy or
even close down operations and sell energy instead.
With wholesale power prices for day-ahead delivery hovering in the mid-$400s
a megawatt hour in the Pacific northwest region, and hitting $3000 a
megawatt hour just two weeks ago on speculation that extremely cold weather
would boost demand to where it would exhaust supply, it might not be a bad
plan to consider shutting down.
Newsprint Makers Could Double Profits
Rob Duncan, analyst with Research Capital Corp. in Toronto, estimates that
those paper companies, which are now making a profit of $150 to $200 per ton
of newsprint, for instance, could double their profits. They could be making
a profit of $300 a ton of newsprint capacity closed if they were to sell
electricity even at a rate of $250 a megawatt hour.
Nevertheless, Duncan added, "My feeling is that companies haven't thought
this through yet."
Indeed, most companies are in the process of evaluating whether or not
energy selling would suit their long-term goals and allow them to meet
customer needs, including Abitibi, Bowater Inc. (BOW), Weyerhaeuser Co. (WY)
and Domtar Inc. (DTC).
Most producers interviewed by the Dow Jones Newswires declined to say how
much power they generated.
"We're examining all of our alternatives at this point, and first and
foremost, whether it makes sense to make paper at current energy rates or
more sense to shut down," said Abitibi's spokesman John Chimienti, adding,
"but at this point there (aren't) imminent (closures)."
The alternatives the company is considering now extend to deals with the
respective public utilities to participate in some kind of load-shedding
plan, or shutting down in the winter months for better rates in the future,
Chimienti said.
Abitibi has resold some of its purchased energy in the past, but never its
hydroelectric power, with most of its mills which are self-sufficient being
located in regulated power markets, officials said.
During this summer's energy price spike, Abitibi closed for a day or two a
mill in Augusta, Georgia, and resold its contracted power, according to
Michael Innes, vice president of energy and environment at Abitibi.
Reselling power seemed like a more profitable prospect at the mill, which
has the capability to produce 440,000 tons of newsprint annually, Innes
said.
As to whether the company could do it again, Innes said, "We've never done
it in the winter, but that doesn't mean we can't ever do it."
Paul Ehinger, an independent analyst based in Medford, Ore., said several
plywood plants in the Northwest region, which purchase natural gas at
previously fixed lower rates have closed down and are reselling natural gas
at a higher price than they paid.
U.S. natural gas prices on the benchmark New York Mercantile Exchange have
soared steadily since mid-February from around $3.00 per million British
thermal units to an all-time high near $10 this month - four times 1999
levels.
"The markets are poor, and if you can make more money by shutting down
operations and reselling natural gas bought at a firm price, you should do
it," Ehinger said.
However, the practice remains largely restricted.
"We haven't seriously considered this concept...but it would depend on
whether the cost of power keeps rising," said Bob Boschee, mill manager for
Smurfit-Stone Container Corp.'s (SSCC) mill in Missoula, Mont., which is
currently running at only 50% operating rate on electricity bought at fixed
rates from Enron Corp. (ENE). "Everything becomes a consideration if power
sells for $3000 (a megawatt hour) as it did a week or two ago. I'm sure
everybody thought of shutting down then," he said.
-By Zahida Hafeez, Dow Jones Newswires;
312-750-4132; zahida.hafeez@dowjones.com
(END) Dow Jones Newswires 21-12-00
1509GMT Copyright (c) 2000, Dow Jones & Company Inc


G_nther A. Pergher
Senior Analyst
Dow Jones & Company Inc.
Tel.  609.520.7067
Fax. 609.452.3531

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