James Donnell

James Donnell is the President of Duke Energy North America (DENA). A Mississippi native and a graduate of Texas A&M in mechanical engineering, Donnell previously held positions with Natural Gas Clearinghouse and PanEnergy Corp., the latter of which merged into Duke Energy during 1997.

"Duke Energy North America," Donnell said, "supplies energy, integrated logistics and asset optimization services as well as risk management products to wholesale energy producers and users across North America...to better serve its customers and support its market positions, DENA develops, owns and manages a portfolio of efficient, competitively priced merchant generation facilities. It is capitalized at about $2.5 billion, about the same as Duke Energy International."

As to growth, Donnell points out that company executives have told Wall Street analysts that Duke Energy as a whole will grow at eight to ten percent a year. But because the regulated portion is likely to grow at no more than about 2 percent a year, the Energy Services Group is going to have to grow at 40 to 50 percent a year. It has more than kept that promise lately.

DENA's philosophy is one of getting into underserved markets, building or buying at good prices and when the time is right, sell portions of the assets.

Donnell believes that DENA's future is bright for a number of reasons, one being risk management skills. "Very few companies have the kind of talent in this department that we have," he says. "It's a key to our success. We get excellent objective reports from our internal analysts who study a market. We are market-makers ourselves and have people in most markets so we can get a very good pulse of what is going on."

He cites as an example a DENA assessment that prices for power are going to be good in the southeast next summer. DENA will be opening plants there. "We size up the markets and get the jump on them," Donnell disclosed.

Another advantage: allied engineering. DENA can and does call on the two engineering divisions within its group. They build and can operate plants for DENA. "When things get tough, you can count on them to do their best job," Donnell said, implying that companies without engineering arms could not count on the same comfort. As to the risk of overpaying on account of the close relationship and the lack of the discipline of competition working to keep the price down, Donnell said that the money might be shifted but it stays in the Energy Services Group nonetheless.

Another advantage for DENA, according to Donnell: recent shrewd purchases. DENA forward-bought turbines from General Electric. "Now prices for these are up and you can't get one until 2004," Donnell said. "Having ours lined up is go-ing to give us plants at a very good price."

"The plants we have under development now we plan to sell portions of," he added. "We always want to have enough deal flow to bring in enough capacity and yet sell some off. We see a number of advantages in this. For one, it allows us to measure value, to see as it were, a commodity price for the plants we own, to see what the market thinks is the value we are adding. Selling a plant also diminishes our price and technology risks."

Donnell views DENA basically as a buyer and trader. "Assets themselves are commodities," he said. "Plants are really the right to make conversions from gas to power. If we were to find out that the gas we had bought to convert to power was more valuable than the power itself, we could sell the gas instead." Donnell believes DENA does not have any direct competitors. Enron and Dynergy compete in the trading fields but they do not develop, engineer and construct. "Across the skill sets of a broad portfolio, no one has everything we have."