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Division PPL would set in city is new crown jewel

05/04/01

By GREGORY KARP
Of The Morning Call

PPL Corp. isn't the same company longtime Lehigh Valley residents have known for generations.

It's quickly transformed from a staid electric utility into one of the most aggressive producers and wholesalers of power in the country. Nowadays, delivering electricity to eastern and central Pennsylvania homes is a small portion of the company's business.

Instead, the company has found a gold mine in selling electricity to other power companies.

PPL's power plants and the division that brokers wholesale power, PPL EnergyPlus, accounted for 77 percent of PPL's record-breaking profits in 2000.

And it's that darling of a division, EnergyPlus, that would be located at Ninth and Hamilton streets in Allentown, depending on the outcome of a court fight over the property between the city and the Allentown Arena Corp. PPL has proposed buying the former Hess's site for about $2 million and constructing a three-story office building, with EnergyPlus on top and retail shops and restaurants on the ground floor.

The development would also include building a bridge from the existing company headquarters across Ninth Street to the new building and a 1,000-car parking deck.

EnergyPlus may do as much to determine PPL's destiny as PPL's 24-story skyscraper does to define the Allentown skyline, according to David M. Schanzer, an industry analyst with Janney Montgomery Scott in Philadelphia.

"That's the future of the company," Schanzer said. "That's where the action is."

That action involves the constant buying and selling of electricity, now that the power-supply business is deregulated. Prices can rise and fall moment to moment, and deals are made on the fly.

It's similar to the frenzied action of a traditional commodities exchange, but instead of buying, selling and betting on future prices of pork bellies and soybeans, the market is about electricity.

At EnergyPlus the trading floor is a high-tech room that uses the latest in computer and communications equipment to monitor electricity markets, weather conditions and PPL's power plants.

The future EnergyPlus headquarters, whether it's in downtown Allentown or elsewhere, will house an expanded trading floor for the company's eastern North America trading operations, the company has said. EnergyPlus also has a rapidly growing West Coast trading floor in Montana, where PPL owns power plants.

PPL Chief Executive Officer William Hecht said EnergyPlus plans to increase trading and marketing employment by at least 20 percent.

EnergyPlus, which buys and sells energy in 42 states and Canada, has been particularly successful at the free-market wheeling and dealing. Its energy marketing and trading operations are estimated to have added $60 million to PPL profits last year. And that's a conservative estimate, the company said.

PPL's stock price has tripled since March 2000.

"Almost all of the company's earnings will come from the unregulated business in the coming years," analyst Barry Abramson of USB Warburg wrote in a note to investors last week.

Besides electricity trading, EnergyPlus also deals in natural gas and petroleum products and sells electricity and gas directly to industrial businesses.
Schanzer, the analyst, said the idea of locating the EnergyPlus headquarters in Allentown is consistent with the company's efforts to be a good corporate citizen.

"The whole company is EnergyPlus when you think about it," he said.

"And it means PPL has continued the tradition of being part of the Allentown community."

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