Kyoto Spurned Is Mixed Bag for U.S. Firms --- Subsidiaries Abroad Will Have 
to Abide by New Emissions Rules
The Wall Street Journal, 07/25/01
THE NATION FERC Scrutinizes Charges of Bias in Grid Controller Energy: 
Davis-appointed panel that heads Cal-ISO violates U.S. law, critics say. 
Remedies could include scrapping it.
Los Angeles Times, 07/25/01
Markets / Your Money Dreary Outlook Batters Stocks Markets: Disheartening 
forecasts from AT&T, Amazon rattle Wall Street. Dow, Nasdaq post losses for 
third session.
Los Angeles Times, 07/25/01
INDIA PRESS:Enron/MSEB Dispute Clouding Invest - Official
Dow Jones International News, 07/25/01

Rocca seeks Centre's intervention in Enron dispute
The Hindu, 07/25/01

Houston Energy Firm's Quarterly Income Is Up 60 Percent
KRTBN Knight-Ridder Tribune Business News: Houston Chronicle - Texas, 07/25/01
Dynegy's Telecommunications Unit Reports $20 Million Loss
Dow Jones Energy Service, 07/24/01
BANDWIDTH BEAT: Bandwidth Trading Isn't Dead Yet
Dow Jones Energy Service, 07/24/01


Economy
Kyoto Spurned Is Mixed Bag for U.S. Firms --- Subsidiaries Abroad Will Have 
to Abide by New Emissions Rules
A Wall Street Journal News Roundup

07/25/2001
The Wall Street Journal
A2
(Copyright (c) 2001, Dow Jones & Company, Inc.)

The U.S. rejection of the Kyoto Protocol appears to give U.S. companies an 
advantage over their foreign rivals, which would be forced to invest to 
reduce greenhouse-gas emissions. But longer term, some U.S. companies could 
find themselves less energy efficient in their domestic operations than their 
overseas competitors. 
U.S. multinationals seem resigned to the fact that their operations abroad 
will need to conform to the Kyoto rules. Few sectors would be as affected by 
curbs on carbon-dioxide emissions as the auto industry, whose cars and trucks 
are one of the world's biggest sources of the gas. In Europe, the auto 
industry, including units of the Big Three auto makers, already has signed a 
voluntary agreement to cut 25% from 1995 levels of the amount of carbon 
dioxide that the European industry's new vehicles belch out by 2008.
But in the U.S., most major auto makers continue to oppose calls by 
environmentalists and rising numbers of politicians to force a similar result 
by toughening the nation's automotive fuel-economy rule. 
The Kyoto agreement, approved this week by 178 countries, but not by the 
U.S., at a United Nations convention in Bonn, calls for industrial nations to 
reduce their emissions to 5.2% below 1990 levels during an accounting period 
that runs from 2008 to 2012. The accord must still be approved by 
legislatures of at least 55 countries, representing more than 55% of 
emissions from the industrialized world. 
Foreign companies are hollering that they will have to abide by stiffer 
environmental regulations than their U.S. rivals. "We could be placed at a 
disadvantage to oil and gas companies operating in the U.S.," said Chris 
Dawson, a spokesman for Petro-Canada, a Calgary, Alberta, integrated oil 
company. "The markets must be open, and everyone must be operating on the 
same playing field." 
The Bush administration, which faults Kyoto for being too costly for U.S. 
businesses, has promised to develop its own framework to reduce global 
warming. Indeed, this week's approval of the Kyoto agreement raises the 
possibility that a compromise regulatory regime can be worked out. Democrats 
in Congress say that they will now mount a strong campaign to set up a U.S. 
regime to regulate carbon dioxide, which could give the U.S. standing to 
enter the Kyoto accord later. Secretary of State Colin Powell yesterday said: 
"We are committed to working with all nations of the world to find a 
consensus in the near future." 
Although the European Union looks certain to ratify Kyoto, questions remain 
over the commitment of some other key countries, especially Japan, whose 
heavy industry could be hurt by Kyoto, especially compared with the U.S. 
Japan was only dragged into the deal in Bonn after receiving concessions, 
which reduced the cuts it will have to make in its emissions. 
A big appeal that led to the original accord was that the parties to it can 
engage in several types of international emissions trading, a concept 
promoted for years by the U.S. before it abandoned Kyoto. The U.S. had been 
expected to be the major buyer of such credits, especially from Russia. 
Jonathan Pershing, who heads the International Energy Agency's environmental 
division, estimated that the world trading market in emissions credits would 
have been roughly $42 billion a year, including the U.S. Computer models, he 
said, show the withdrawal of the U.S. would shrink the market and also drop 
the demand price for Russian credits sharply, leaving annual trade among 
nations at about $3 billion. Mr. Pershing believes U.S. companies may not be 
able to use the market, at least initially. Later they may, he said, but 
"maybe at a higher cost" of entry. 
Some U.S. companies want the U.S. to rethink its position on Kyoto and gain 
entry for its companies in the emerging market. "It would give us an 
opportunity to get more mileage out of the capital we have to meet this 
[climate change] challenge," said Thomas R. Jacob, a senior international 
adviser for DuPont Co., which operates in 70 countries. DuPont is one of 36 
multinational companies that have formed an alliance with the Pew Charitable 
Trusts to support efforts to curb climate change and to express interest in 
emissions-trading possibilities. 
Enron Corp. -- which has a big trading operation, as well as utilities -- 
expects that Kyoto would offer it business opportunities. Those include, for 
example, helping companies switch from coal to cleaner-burning natural gas, 
and helping companies finance pollution-control equipment, said Jeff Keller, 
Enron's director of environmental strategies. He believes the U.S., 
eventually, will join the group of signers. 
Many European companies are already well on their way to meeting Kyoto's 
targets. "We're way ahead of Kyoto," boasts Pasquale Pistorio, chief 
executive of French chip maker STMicroelectronics NV. Increased energy 
efficiency saved the company $40 million last year, he said, and STM has 
targeted zero carbon dioxide emissions by 2010. STM takes advantage of a 
Kyoto provision allowing it to plant trees, which reduce carbon dioxide in 
the atmosphere, in order to offset the company's emissions. 
In the United Kingdom, big oil companies BP PLC and Royal Dutch/Shell Group 
were early supporters of Kyoto, and both companies subsequently declared they 
would hew to the standards of the protocol even before it was passed. To 
assist in achieving these reductions, the companies separately have set up 
internal emissions-trading floors, where various company units can trade 
credits.

Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. 

National Desk
THE NATION FERC Scrutinizes Charges of Bias in Grid Controller Energy: 
Davis-appointed panel that heads Cal-ISO violates U.S. law, critics say. 
Remedies could include scrapping it.
RICARDO ALONSO-ZALDIVAR
TIMES STAFF WRITER

07/25/2001
Los Angeles Times
Home Edition
A-17
Copyright 2001 / The Times Mirror Company

WASHINGTON -- The Federal Energy Regulatory Commission appears headed for a 
showdown with Gov. Gray Davis, perhaps as early as today, over political 
control of the powerful nonprofit corporation that runs California's 
electricity transmission grid. 
Responding to an industry complaint that the grid operator lacks required 
independence, FERC could immediately disband its governing board, which was 
appointed by Davis. But several observers said Tuesday that such a 
politically provocative step seems unlikely in the heat of summer. They 
predicted the commission will find some other way, such as negotiations with 
Davis, to address its concerns.
Most consumers know the California Independent System Operator, or Cal-ISO, 
as the agency that declares power emergencies and schedules rolling 
blackouts. 
But the Folsom-based ISO is more than that: It functions as California's 
electricity traffic controller, scheduling delivery of power to match 
shifting demand throughout a service area that covers three-quarters of the 
state. It is the fifth-largest entity of its kind in the world. 
Under emergency legislation passed in Sacramento earlier this year, Cal-ISO 
is now governed by a five-member board appointed by Davis, and there lies the 
controversy. 
Power companies have formally complained to FERC that Cal-ISO can no longer 
be considered an unbiased player in the market, as federal rules require it 
to be. They point out that the state, through the Department of Water 
Resources, is now a major power buyer. 
The industry fears that Davis might one day use his leverage over Cal-ISO to 
deny access to the California market to sellers that fall from political 
grace or don't deal with the water department on favorable terms. 
Senior FERC officials agree that a conflict of interest exists. Previously, 
Cal-ISO was governed by a board that represented a cross-section of interest 
groups from industry to consumers. But that arrangement was widely considered 
ineffective. 
The issue is scheduled for consideration today at FERC's last meeting of the 
summer. Agency sources said FERC's five commissioners are considering a wide 
range of options, from ordering the current ISO board disbanded to postponing 
a decision altogether. 
New Board Could Be One Compromise 
One middle-of-the-road proposal calls for negotiations and arbitration with 
Davis and other interested parties, with the goal of creating a new Cal-ISO 
governing board not directly answerable to the governor. 
"The ISO is not independent," said a senior FERC official who asked not to be 
identified. "There is ample evidence of that. The governor should not be 
appointing the board. 
"We believe the law is on our side," the official added. "But having the law 
on your side may mean sending federal marshals. To some extent, this has the 
flavor of a government takeover. Do you kick the doors in and install a new 
board?" 
Michael Kahn, a San Francisco lawyer appointed by Davis to head the Cal-ISO 
board, indicated the state would be willing to negotiate. 
"Precipitous intervention is not warranted," Kahn said. "We should try to 
initiate some sort of dialogue to see if this can be resolved otherwise." 
Added Kahn: "The generators and the marketers don't like the ISO because it 
is independent of their interests." 
In a legal brief submitted to FERC in May, the industry declared that it has 
no confidence in the current setup and warned that doubts about Cal-ISO could 
crimp needed investment in new power plants. 
"The establishment of an independent [Cal-ISO] is vital to the long-term 
resolution of California's energy problems and the stability of the entire 
Western region," wrote Julie Simon, vice president for policy at the Electric 
Power Supply Assn. "The continued influx of capital for new or expanded 
in-state generation, the willingness . . . of out-of-state suppliers to sell 
into the California market and the ability to seamlessly integrate 
California's grid with other Western regional transmission organizations will 
require that [Cal-ISO] function as an 'honest broker.' " 
But Cal-ISO, she added, "has been transformed from an independent operator of 
interstate transmission resources to a partisan advocate for the state of 
California. . . . If the governor is dissatisfied with the [Cal-ISO] board, 
he can appoint a new board." 
Consumer advocates say that presents a problem for power marketers such as 
Mirant Corp., Duke Energy Corp., Dynegy Corp. and Enron Corp., but not for 
the public. 
Differing Views on Panel's Role 
"The ISO is finally operating in the public interest, and it drives these 
companies nuts," said Mark Cooper of the Consumer Federation of America. 
"FERC has continually complained that California is supposed to fix its own 
problem. There is an ISO that appears to be working. So why would anybody 
want to go and stir this up?" 
However, Rep. Doug Ose (R-Sacramento) said the close link between the grid 
operator and Davis has hurt California's credibility in the energy policy 
debate. 
"The purpose of that board is to run the transmission grid," Ose said. "You 
can have a consumer representative, but you've got to have people who have 
significantly greater experience running electric transmission." 
Kahn, the Cal-ISO chairman, said the board has not tried to put itself in the 
place of the professional staff running the grid. "ISO management has been 
allowed to do what they want. There has been very, very limited interference 
by the board. If FERC now wants to come in and micromanage the ISO, that 
would be extraordinary." 
A veteran Washington energy lawyer said he doubts that FERC will take such a 
drastic step as dismissing the board appointed by Davis. Although the agency 
appears to have the legal authority to do so, since federal law supersedes 
state law, such a move would likely trigger a rhetorical backlash from Davis 
and a lawsuit by the state. 
"It is a red-hot issue, and this is the summer peak," said the lawyer, who 
asked not to be identified. "You can make a pretty good argument that the 
commission ought to take a crack at negotiating a way out of this." 
Tension between FERC and Davis is likely to continue for months and spill 
into other areas. For example, FERC wants the California grid to eventually 
form part of a regional transmission network governed by a board that 
represents the entire West. The governor wants the California grid to remain 
under state control. 
RELATED STORY 
Edison rescue: Current rates give utility a little breathing room. C1

Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. 

Business; Financial Desk
Markets / Your Money Dreary Outlook Batters Stocks Markets: Disheartening 
forecasts from AT&T, Amazon rattle Wall Street. Dow, Nasdaq post losses for 
third session.
From Reuters

07/25/2001
Los Angeles Times
Home Edition
C-4
Copyright 2001 / The Times Mirror Company

Stocks tumbled to 14-week lows Tuesday as dour forecasts from industry leader 
AT&T and new mass layoffs at Lucent Technologies suggested the slump in 
corporate profits is far from over. 
Amazon.com also rattled Wall Street when the online retail giant said sales 
could slow further amid feeble economic growth. The news ignited fears that 
consumer spending is dropping and could undercut an economic rebound, money 
managers said.
"It's a horrible market," said Rich Levy, head of block trading at CIBC World 
Markets Inc. "No one's buying into this thing. People are tired of losing 
money." 
The Dow Jones industrial average tumbled for the third session in a row, 
dropping 183.30 points, or 1.8%, to 10,241.12. The broader Standard & Poor's 
500 index fell 19.38 points, or 1.6%, to 1,171.65. 
The technology-laden Nasdaq composite index also dropped for a third straight 
session, losing 29.32 points, or 1.5%, to 1,959.24, widening Monday's loss of 
2%. Tuesday's swoon marked the lowest close for Nasdaq and the S&P 500 since 
mid-April. 
Stocks fell broadly across sectors. Only eight industry groups out of 107 
tracked by S&P finished the day in positive territory, led by gold--a 
traditional investment haven in troubled times. 
More than two stocks fell for every one that rose on Nasdaq and the New York 
Stock Exchange. Trading was active. 
Amid the busiest week of the earnings reporting season, companies are unable 
to predict when profits will turn up again. 
Troubled telecom giant Lucent posted a loss and said it will cut its work 
force by an additional 15,000 to 20,000 jobs. Lucent, the most heavily traded 
stock on the NYSE, fell $1.47 to $6.43--a drop of more than 18%. 
"When Lucent announces a layoff on top of previous layoffs, it shows there 
are more recession-type strategies being used for survival purposes," said 
Ned Riley, chief investment strategist for State Street Global Advisors. 
Long-distance telephone and cable television giant AT&T said stiff 
competition and weak prices in the long-distance phone market hurt profit, 
and warned third-quarter revenue may fall. Its shares fell 59 cents to 
$19.46. 
Amazon.com helped lead Nasdaq lower after the online retail giant said sales 
could slow further. The company posted a narrower-than-expected loss, but its 
revenue disappointed. Amazon fell more than 24%, or $3.97, to $12.06. 
Matters weren't helped any by Federal Reserve Chairman Alan Greenspan, who 
told the Senate Banking Committee that the U.S. economy may not be out of the 
woods yet. The warning echoed comments he made to the House Financial 
Services Committee on July 18 during the first part of his twice-yearly 
testimony on monetary policy. 
The central banker hinted the Fed was open to the idea of more interest rate 
reductions to shore up the economy on top of the six rate cuts the Fed has 
engineered this year. 
As senators grilled him on economic issues, Greenspan said changes in 
monetary policy are still able to lift the economy. He also said inflation 
remains tame. 
Contrary to money managers' impressions, Greenspan said consumers were still 
confident about the economy. He noted fallingenergy prices were boosting 
corporate profits and putting more money into consumers' pockets. 
Among Tuesday's highlights: 
* Oil stocks slumped after reporting quarterly results as investors bet this 
could be their last show of increased profits for some time as energy prices 
decline. Exxon Mobil, the No. 1 U.S. oil company and a component of the Dow 
industrials, posted higher earnings, thanks to lofty crude oil and natural 
gas prices and robust profit from refining. Exxon dropped $1.53 to $40.97. 
No. 2 oil company Chevron also slid, despite posting better earnings. Its 
shares fell $2.46 to $85.18. 
* Utility stocks fell sharply on expectations of lower power prices and 
falling profit margins. The Dow Jones utilities average lost 3.5% and is down 
nearly 10% during the last five trading sessions. Among the losers: Enron, 
down $3.42 to $43.24; Dynegy, off $2.75 to $43; Calpine, off $4.25 to $33.90; 
and Duke Energy, down $2.06 to $36.88. 
* Fast food giant McDonald's, another Dow component, gained 62 cents to 
$28.39 after reporting profit in line with Wall Street's forecasts, even as a 
strong U.S. dollar and lingering concernsover "mad-cow" disease hurt 
earnings. 
* Gold stocks rose on a flurry of interest from disenchanted stock investors. 
The S&P gold index rose almost 4% as Newmont Mining climbed 94 cents to 
$20.64 andBarrick Gold gained 33 cents to $15.66. 
Market Roundup, C6-C7

GRAPHIC-CHART: Daily Diary, Tuesday, July 24, 2001; 
Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. 


INDIA PRESS:Enron/MSEB Dispute Clouding Invest - Official

07/25/2001
Dow Jones International News
(Copyright (c) 2001, Dow Jones & Company, Inc.)

NEW DELHI -(Dow Jones)- The dispute around Enron Corp.'s (ENE) Dabhol Power 
Co. power project is impeding further foreign investments to India, reports 
the Financial Express quoting U.S. Assistant Secretary of State for South 
Asian Affairs Christina B. Rocca. 
"This ongoing dispute casts a dark cloud over India's entire investment 
climate," said Rocca. She hopes India's federal government would step in to 
resolve the dispute between Dabhol and its sole electricity buyer, the 
Maharashtra State Electricity Board.
Enron holds 65% of the 740 megawatt Dabhol project located in the western 
Indian state of Maharashtra. Since May 29, Dabhol has halted operations 
because MSEB stopped drawing electricity from its power plant saying the cost 
of power was "unaffordable". Construction on the 1,444 megawatt Dabhol phase 
II was stopped mid-June after MSEB refused to honor several of its bills. 
Website: http//www.financialexpress.com 

-By Himendra Kumar; Dow Jones Newswires; 91-11-461-9426; 
himendra.kumar@dowjones.com

Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. 

Rocca seeks Centre's intervention in Enron dispute
Our Special Correspondent

07/25/2001
The Hindu
Copyright (C) 2001 Kasturi & Sons Ltd (KSL); Source: World Reporter (TM) - 
Asia Intelligence Wire

NEW DELHI, JULY 24. The United States today sought the Central Government's 
intervention in the Enron imbroglio in view of its impact on the bilateral 
investment climate. 
The visiting U.S. Assistant Secretary of State, Ms. Christina Rocca said "the 
ongoing dispute between the Dabhol Power Company and the Maharashtra 
Government casts a dark cloud over India's entire investment climate."
While declining to offer a specific proposal for resolving the dispute 
immediately, she maintained that it would be difficult for international 
investors to view India favourably until the issue was resolved in a 
"reasonable" manner. Ms. Rocca met the Union Power Minister, Mr. Suresh 
Prabhu, on Monday apparently to discuss the issue. 
Addressing a meeting organised by the Confederation of Indian Industry (CII), 
she sought to highlight the three economic areas of special interest to 
businessmen in both countries. These include the global trade regime, the 
bilateral investment climate and intellectual property rights. 
On the investment climate, she said the level of foreign direct investment 
flows were much lower than they should be by any reasonable international 
standards. She ascribed much of the problem to Enron from the point of view 
of U.S. investors. 
On the multilateral trade regime, Ms. Rocca described the World Trade 
Organisation ministerial conference to be held in Doha in November as a 
"terrific opportunity" to launch a new round of trade talks. It would help 
India move towards an even more export-oriented innovative economy. Beyond 
dealing with the "built-in" agenda on agriculture and services, Doha offered 
the prospect of agreement that standard, sound trade rules would apply to 
electronic commerce. 
The U.S. official also focussed on the concern over the need for better 
intellectual property rights in this country which would support India's 
search for investment in the cutting edge knowledge-based sectors. The new 
U.S. Trade Representative, Mr. Robert Zoelleck, is expected to discuss most 
of these issues during his visit here early next month. 
Ms. Rocca, who welcomed the Indo-U.S. dialogue in the private sector on IPR 
in the IT, biotech and pharmaceutical sectors, felt problems still remained. 
She urged India to adopt and enforce a patent law that met all WTO standards 
on trade- related intellectual property or TRIPs as soon as possible. She 
insisted that India did not provide product patent protection for medicines 
and was a significant source of pirated items. It was for this reason that 
India was on the U.S.T.R.'s Special 301 Priority Watch List. 
She said there was need for progress in telecom liberalisation and on an open 
sky civil aviation agreement to give an impetus to the already burgeoning 
commercial cooperation.

Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. 


Houston Energy Firm's Quarterly Income Is Up 60 Percent
Laura Goldberg

07/25/2001
KRTBN Knight-Ridder Tribune Business News: Houston Chronicle - Texas
Copyright (C) 2001 KRTBN Knight Ridder Tribune Business News; Source: World 
Reporter (TM)

Dynegy reported a 60 percent jump in net second-quarter income Tuesday, 
fueled by strong power and natural gas sales. 
Investors, however, reacted by lumping Dynegy in with energy stocks that took 
a pounding in the day's trading.
Dynegy's quarterly net income rose to $146 million, up from $91 million a 
year ago, while diluted earnings per share came in at 43 cents, up from 19 
cents. 
The year-ago earnings per share rose to 29 cents after excluding a special 
dividend payment. 
"I couldn't be happier with the way the core business is operating today," 
Chuck Watson, Dynegy's chief executive and chairman, said during a conference 
call with analysts. 
Dynegy beat analyst expectations. Those surveyed by Thomson Financial/First 
Call projected Dynegy would make an average of 40 cents a diluted share. 
But investors drove Dynegy's stock down. It closed at $43, off $2.75. 
Other Houston energy companies got hit, including fellow trader Enron Corp., 
which closed down $3.42 at $43.24; natural-gas company El Paso Corp., which 
closed down $4.26 at $47.64; and Reliant Energy's Reliant Resources unit, 
which closed down $2.25 at $18.35. 
Parent Reliant Energy only got nicked, closing at $28, down 37 cents. 
The overall stock market had a down day, with the Dow closing off more than 
180 points amid negative news from other corporate sectors. 
Analysts offered several reasons for the energy sell-off, including concerns 
over how California's energy conflicts will play out. 
Energy companies and California failed to settle the state's claims that it 
is owed billions for alleged power overcharges. The matter rests with the 
Federal Regulatory Energy Commission, which may take up the issue today. 
Also, Salomon Smith Barney analyst Raymond Niles on Tuesday downgraded a 
number of energy stocks, although he remained positive on Enron and Dynegy. 
Companies mostly or solely focused on electricity generation face more risks 
when power prices decline, as has been the case recently. Dynegy and Enron 
don't fit that profile. 
Jeff Dietert, an analyst with Simmons & Company International in Houston, 
described Dynegy's quarter as a solid one that "proves that they can make 
money even when gas and power prices are falling." He added: "From my 
perspective, Dynegy is in great shape for the second half of this year." 
The market failed to distinguish between power producers and so-called energy 
merchants such as Dynegy, said Carol Coale, an analyst with Prudential 
Securities in Houston. 
"I guess the big signal is that strong earnings performance doesn't seem to 
matter in this market here," she said. "The whole message is that strong 
earnings have very little impact on the sector right now." 
The sell-off in the face of good earnings left officials at Dynegy 
frustrated, said Chief Financial Officer Rob Doty, who was expecting the 
market to be excited by the company's second-quarter performance. 
Net income for Dynegy's marketing and trading unit rose 111 percent to $150 
million in the second quarter, up from $71 million a year ago. Volumes of 
natural gas and electricity sales in North America increased significantly. 
Dynegy's online trading operation, Dynegydirect, helped boost those volumes 
by handling transactions worth more than $11 billion for the quarter. 
Since its launch in November 2000, Dynegydirect has handled almost $25 
billion worth of transactions. 
Dynegy's newly created global communications segment had a $20 million loss, 
or 6 cents a share, in the quarter because of development costs and decreased 
customer demand. 
Dynegy estimates an annual loss of 13 to 16 cents for the segment, which is 
focused on broadband marketing and trading. 
The company hopes that the segment will make money by the second half of next 
year.

Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. 

Dynegy's Telecommunications Unit Reports $20 Million Loss
By Erwin Seba
Of DOW JONES NEWSWIRES

07/24/2001
Dow Jones Energy Service
(Copyright (c) 2001, Dow Jones & Company, Inc.)

HOUSTON -(Dow Jones)- Dynegy Inc.'s (DYN) telecommunications unit reported a 
$20 million loss in the second quarter of this year, executives said Tuesday. 
During the first six months of the year, Dynegy Global Communications lost a 
total of $31 million. 
In a conference call, Dynegy Chairman and Chief Executive Chuck Watson said 
losses in the second half of the year aren't expected to exceed those of the 
first half. For the year, telecom losses are expected to bring down corporate 
earnings per share by 13 cents to 16 cents.
"There's been an obvious turndown since Dynegy entered in the market last 
summer," Watson said. "We can't make a profit until our network is 
completed." 
Company officials attributed the loss to the cost of building Dynegy's global 
telecommunications network. 
But Watson said the company was in a better position than some of its energy 
merchant competitors. 
"We didn't beef up our personnel and assets, so we don't find ourselves in 
the same position as others," he said. 
The company has taken some steps to reduce its costs, however. 
The global communications office in Vienna has been closed and its personnel 
and operations have been moved to the unit's London office. 
"We're keeping our head count flat," Watson said of the unit as a whole. 
Company executives were patting themselves on the back throughout the 
conference call for the strategy they followed, which is playing well in the 
depressed telecommunications market. 
Pat Marburger, president of Dynegy Broadband Trading and Origination, told 
Dow Jones Newswires that the strategy was intended to reduce the company's 
capital investment. 
"We knew getting into it we wanted to invest very little capital, which 
should give us a cost advantage right out of the chute," Marburger said. 
As in energy, the company has emphasized alliances with other companies 
instead of going it alone. 
For example, earlier this year, Dynegy announced an agreement with Telseon 
Inc. to use that company's points of presence in 18 of the largest U.S. 
cities. "We could have done the same thing with $15 million over 18 months 
time," he said. 
He also said a $70 million investment in indefeasible rights of use for unlit 
optical fiber from Level 3 was a good investment, even though the cost of 
dark fiber has dropped along with bandwidth prices. 
Although Dynegy has kept its broadband marketing and trading staff small, 
both Watson and Marburger promised they'll have the people needed to handle 
the bandwidth market. 
About 30 people market bandwidth from the Denver office. And another group of 
less than 10 people trades bandwidth, Marburger said. Most of those trades 
are for infrastructure, he added. 
Marburger expects the marketing group to grow to 50-60 people by the middle 
or end of next year. He also expects the bandwidth market to recover within 
two years. 
The entire telecom unit employs about 300 people. 
The company doesn't expect to reassign employees once the network is complete 
at the end of this year, Marburger said. Enron Broadband Services (ENE) 
reassigned employees and Williams Communications (WCG) laid off employees 
after their networks were completed. 
"Most of the network is being outsourced," he said. 
A telecommunications industry analyst said the energy merchants were about 
the only companies left that can invest in telecommunications. 
"I think these upfront costs are going to result in some losses," said Rod 
Woodward of Frost & Sullivan in San Antonio, Texas. "They're able to support 
those losses with the way they are doing with their energy groups." 
Overall, Dynegy Inc. reported net income of $142 million on operating revenue 
of $10.8 billion for the second quarter of 2001, or recurring earnings of 43 
cents per share. 
In the second quarter of last year, the company reported net income of $91 
million on operating revenue of $5.7 billion, or recurring earnings of 19 
cents per diluted share. 

-By Erwin Seba, Dow Jones Newswires; 713-547-9214; erwin.seba@dowjones.com

Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. 

BANDWIDTH BEAT: Bandwidth Trading Isn't Dead Yet
By Michael Rieke
Of DOW JONES NEWSWIRES

07/24/2001
Dow Jones Energy Service
(Copyright (c) 2001, Dow Jones & Company, Inc.)

HOUSTON -(Dow Jones)- An official with one of the largest telecommunications 
carriers laughed last week, saying Enron Corp. (ENE) had been chased out of 
the broadband business by a $102 million loss for the second quarter. 
His laughter was probably premature. Enron is cutting expenses in its 
broadband operation, but so is just about every other company involved in 
that business, including the official's own employer.
At the same time, there are signs that energy companies haven't given up on 
bandwidth trading. 
For one, Dynegy Inc. (DYN), Aquila Energy Services (ILA), Koch Industries, El 
Paso Corp. (EPG), Reliant Energy Inc. (REI), Goldman Sachs Group Inc. (GS), 
Cable & Wireless PLC (CWP) and Global Crossing Ltd. (GX) have quietly formed 
a consortium to work at improving connectivity needed for bandwidth trading. 
Sources at those companies wouldn't confirm they were members of a 
consortium. They've agreed to keep their work quiet. But other sources said 
the group has had at least one meeting. 
Companies like Sphera Optical Networks Inc., FiberNet Telecom Group (FTGX), 
Universal Access Inc. (UAXS), LighTrade and Nortel Networks Corp. (NT) were 
invited to the meeting to talk about what they could do to help firm 
deliveries of bandwidth. 
Tier-1 carriers - the largest carriers - were excluded, as consortium members 
want to make it easier to trade in their markets, a broker said. 
Creating Commodities 

There's another sign that bandwidth trading isn't dead. 
Steve Kamman, an equity analyst for CIBC World Markets, said in a research 
note last week that carriers have started reselling backup circuits to third 
parties, who buy them as unprotected circuits at big discounts. 
"We've bought lines like that," said Sushil Nelson, general manager of Aquila 
Broadband Services, the telecom unit of Aquila Energy Services (ILA). "We do 
it with the carriers all the time." 
Fully protected circuits - called Sonet rings - consist of two circuits 
running between two cities. One circuit carries data, while the other serves 
as a backup. Since the backup isn't used, it can be resold - as long as the 
new buyer will accept the risk of getting bumped. 
Many buyers don't need the full protection of a Sonet ring. Internet service 
providers and many data users aren't providing critical services, so they can 
put up with some outages, especially if it means lower prices. 
Unprotected circuits became a standard offering on international subsea 
routes this spring, when four large carriers began to offer them in response 
to demand from customers. An official for one of those carriers said his 
company started breaking up Sonet rings and selling unprotected circuits on 
transatlantic routes early last year. 
Selling the other half of a Sonet ring is a step toward commoditization of 
capacity, Nelson said. 
Buyers can build their own lower-priced Sonet rings, Kamman said. For 
example, if a buyer wanted a protected circuit from New York to Los Angeles, 
he could buy one unprotected circuit between the two cities, running through 
Chicago. Because it's unprotected, the buyer gets it at less than half the 
price of a protected circuit. 
Then he buys another unprotected circuit between New York and Los Angeles, 
running though Dallas. Again, he gets a discount. The two unprotected 
circuits give him almost the same protection of a Sonet ring, but at a lower 
cost. If he gets bumped off one, he can switch to the other. 
Alternatively, the buyer can pick up some added revenue by reselling the 
unprotected circuit he isn't using. 
Taking Advantage Of Options 

Such deals take advantage of options embedded in a network, Kamman said. 
Buyers are taking the risk that they'll get bumped in exchange for a lower 
price. 
Such sales are good for the carriers. They've already paid the cost of laying 
and lighting Sonet ring circuits. If they sell only Sonet rings, half their 
circuits go unused. Now they can earn new revenue by selling the unused half. 
Bandwidth trading opens eyes to new ways of doing business in telecom, Kamman 
said. 
"It's incredibly cool," he said. "Squeezing (the optionality) out of the 
networks and turning it into a traded security is going to take some real 
work. But there's no question at all that (it's) something very real." 
-By Michael Rieke, Dow Jones Newswires; 713-547-9207; michael.rieke@wsj.com

Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved.