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June 30, 2007

NEW ASSET MANAGER COMES LOADED FOR BEARComments (0)

Filed under: business — admin @ 10:12 pm

June 30, 2007 — Moving rapidly to stabilize its reeling asset management unit, Bear Stearns replaced the group’s chief with a well-respected money management veteran charged with cleaning up the mess created by the collapse of two hedge funds.

Jeffrey Lane, the former head of asset management firm Neuberger Berman and a vice chairman at Lehman Brothers, agreed to take the helm at Bear Stearns Asset Management. Former chief Richard Marin will become a consultant.

There will be no graceful exit for Marin - Lane is assuming his duties at BSAM immediately.

Lane is credited with growing Neuberger Berman to $135 billion in assets from $40 billion over five years prior to Lehman acquiring the firm in 2003 for $3.2 billion.

In speaking about his new role, Lane tried to emphasize the future in a discussion with Bloomberg News.

“I didn’t come here to unwind an asset-management company, I came here to grow one,” he said.

But Lane certainly will have to unwind a pair of hedge funds first.

Over the past two weeks, two connected Bear funds, with about $1.1 billion in capital between them, have teetered on the edge of collapse, requiring the firm to commit $1.6 billion in credit to guarantee what had been a debt load of over $10 billion.

At the same time, Lane is almost immediately likely to have to turn his attention to managing an expanding Securities and Exchange Commission inquiry into the funds’ collapse.

As reported in The Post last week, the SEC has begun issuing document requests, specifically looking into events in May, when the fund told investors that a previously announced 6.5 percent loss was actually almost 19 percent.

To appease worried creditors, the head of Bear’s high-profile mortgage department, Tom Marano, is helping direct the fund’s remaining asset sales.

“It was designed to do two things: Send a message to [BSAM] investors that we are very serious about managing money safely, and to begin the process of shaking up management,” a senior Bear executive said of the management move.

Investors continue to pound Bear’s stock, sending it down $4 yesterday, to close at $140 - its lowest price since last September.

roddy.boyd@nypost.com

Naked truth wins £10,000 literary prize for stripper turned novelistComments (0)

Filed under: Uncategorized — admin @ 10:11 pm

A FORMER stripper has won a top literary prize for a novel that draws heavily on her years at one of London’s best-known strip clubs.

Fiona Dunscombe, 44, drew on her work at Raymond’s Revuebar in the 1980s for her first novel, The Triple Point of Water. The heroine is a striptease artist looking for her lost father.

The book yesterday won the Dundee International Book Prize for an unpublished novel, with a 10,000 award and a publication deal with Polygon.

Radio 4’s Today show host, James Naughtie, one of the judges, called it “gritty, dark and full of life”.

From about 200 entries and a shortlist of ten, it was the one that stood out as the work of a real writer, he said. “Obviously it had rough edges, but it was a story with insight and touch. It is very personal to her, very intimate.”

The book’s central character, Arabella Cordon, is a rural English girl who finds work in London’s Soho as a stripper.

Arabella is looking for her real father, who left her mother long ago. Other women in the book are also seeking father figures, a strong theme of the novel.

It closely reflects Ms Dunscombe’s experience. Her biological father left her mother before she was born. She tracked him down three years ago through an internet search, e-mailing him at his home in Sweden. Colin Scott Wheatley was at the ceremony yesterday, along with one of the two half-sisters Ms Dunscombe never knew she had.

“The book is very much about the way identity can be determined by all the father figures around you,” said Sarah Ream, the book’s editor at Polygon.

Ms Dunscombe now lives in France, with her seven-year-old son and accountant husband. She is the first international winner of the Dundee prize, which she heard about from a French academic who specialises in Scottish literature.

Born in Derbyshire, she moved to London after school and answered an advert for Paul Raymond’s club. A version of her audition appears in the book.

She worked there three years. The book reflects the days of Thatcher’s Britain, she said, with homelessness on the streets of London and a culture of blame and a “lack of compassion”.

Ms Dunscombe said she never suffered from the sex industry’s association with drugs, prostitution or pornography. But she struggled with self-esteem in a business that placed all its value on physical looks.

“There’s nothing bad about taking your clothes off, or about being nude per se, but when you do that for a living, you suffer from other people’s perceptions of what you do,” she said.

“It’s absolutely central to the book, looking very much at Soho as well as the strip club. I wouldn’t have been able to write that without having the experience to draw on. I don’t want to forget it.”

Ms Dunscombe has begun her second book - exploring the idea of being very connected to a father she never knew.

What the Verizon Verdict Means for VonageComments (0)

Filed under: business — admin @ 10:10 pm

Web-calling outfit Vonage suffered a major setback on Mar. 8 when an eight-person jury found it guilty of infringing on three patents owned by rival telco Verizon.

After a weeklong hearing in the U.S. District Court for the Eastern District of Virginia, a jury ruled that Vonage Holdings («www.businessweek.com») must pay Verizon Communications («www.businessweek.com») $58 million in damages and a 5.5% licensing fee per subscriber per month. The damages and fee fell short of what Verizon asked for, and the jury said Vonage didn’t infringe on two of the patents at the heart of the case. It also found Vonage was not willful in its infringement, helping Vonage avoid stiffer penalties. Injunction Likely

Though Vonage avoided a worst-case scenario, the verdict is hardly something to cheer about. The company’s stock fell 3.86%, to $4.85, an all-time low, the day the verdict was announced. The decision and expected injunction barring Vonage from using Verizon technology without paying the royalty fee are likely to take a big financial toll and push back profitability targets. They could also undermine customer confidence and make Vonage and other Web-calling providers vulnerable to other lawsuits.

While the damages will likely be subject to an appeal that could take as long as two years (most analysts think a settlement between the two companies in the meantime is unlikely), the injunction and the license fees are likely to kick in this year. An injunction hearing has been set for Mar. 23 and analysts expect an injunction to take effect in April. Vonage said in a statement that if the court imposes the injunction, it will seek a stay from the Federal Court of Appeals.

With an injunction in place, Vonage either will have to pay Verizon royalties or rebuild its network so that it doesn’t using the technology in question—or face a service shutdown. Both options are fraught with risks. Verizon’s patents cover a range of features, from call-waiting to how Web calls are connected to traditional phone lines. So coming up with a so-called workaround won’t be easy, say Stifel, Nicolaus («www.businessweek.com») analysts. Vonage does have some patents of its own. In July, it acquired three patents from Digital Packet Licensing, saying the purchase would help it fend off litigation from Verizon and other companies such as Sprint Nextel («www.businessweek.com»). The Mar. 8 verdict shows the patents weren’t as potent as Vonage had hoped. Perils of a Workaround

Even if a workaround is found, putting it in place could be disruptive. Witness Research In Motion («www.businessweek.com»), whose customers temporarily lost service after a network upgrade originally designed to combat patent-infringement claims. In a statement, Vonage didn’t address the prospect of technology alternatives but said, “Vonage’s customers should see no change to any aspect of their phone service.”

Analysts aren’t so sanguine. Some of Vonage’s 2.2 million customers may jump ship amid the potential for tech glitches and other turmoil wrought by the decision, says Jon Arnold, a principal at consultancy J Arnold & Associates. “Subscribers will get nervous,” Arnold says. The company’s subscriber growth is already shaky. In the fourth quarter, Vonage lured 36,000 fewer subscribers than in the preceding period. “Their quarterly growth rate is [already] dropping, they are moving at a pace that’s below the industry average,” says Stephan Beckert, director of research at consultancy TeleGeography. If growth were to stall further, Vonage may take longer than previously expected to reach operating profitability. Before the verdict, Vonage expected to reach that milestone as soon as early 2008.

Weekly Outlook: Dollar & Yen Weakness to Continue, BoE to Spark VolatilityComments (0)

Filed under: fx — admin @ 10:10 pm

Action Insight | Written by ActionForex.com | Jun 30 07 16:24 GMT |
Forex Weekly Review and Outlook Dollar & Yen Weakness to Continue, BoE to Spark Volatility

Dollar extended weakness across the board last week. Even though Fed didn’t tone down the concern on inflation in the post FOMC meeting statement, dollar was sold off after May core PCE deflator showed further moderation in core inflation. Fed was another step closer to softening the tightening bias. Meanwhile, the Japanese yen had a volatility week, first rebounding strongly on risk aversion but then sold off sharply as carry trade came back,. European majors as well as commodity currencies were both supported by strength against dollar and yen and surged higher. Technically speaking, both dollar’s and yen’s short term outlook remains bearish in general. A number of important economic data from US and Japan will be featured this week and will likely trigger much volatility. However, the current trend will likely continue even in case of occasional upside surprise from economic data. One the other hand, Sterling will likely remain strong on build up to BoE rate decision.
Prev Week’s High Prev Week’s Low Prev Week’s Close Last Week’s High Last Week’s Low Last Week’s Close Change (pips) Change (%)
EURUSD 1.3470 1.3371 1.3469 1.3541 1.3414 1.3541 72 0.53%
GBPUSD 1.9994 1.9751 1.9992 2.0084 1.9927 2.0084 92 0.46%
USDCHF 1.2425 1.2285 1.2292 1.2341 1.2206 1.2212 -80 -0.65%
USDJPY 124.13 123.09 123.88 123.93 122.23 123.16 -72 -0.58%
USDCAD 1.0756 1.0613 1.0683 1.0733 1.0470 1.0651 -32 -0.30%
AUDUSD 0.8492 0.8396 0.8470 0.8521 0.8355 0.8492 22 0.26%
NZDUSD 0.7681 0.7500 0.7639 0.7739 0.7571 0.7725 86 1.13%
EURJPY 166.92 165.15 166.85 166.91 164.23 166.79 -6 -0.04%
EURGBP 0.6774 0.6712 0.6737 0.6750 0.6707 0.6740 3 0.04%
EURCHF 1.6671 1.6540 1.6556 1.6574 1.6487 1.6539 -17 -0.10%
GBPJPY 247.91 243.87 247.65 247.79 243.95 247.39 -26 -0.10%
GBPCHF 2.4751 2.4522 2.4575 2.4689 2.4486 2.4534 -41 -0.17%
AUDJPY 105.33 103.65 104.91 105.22 102.17 104.59 -32 -0.31%

FOMC was the main event from US last week but it delivered little new to the market. Rate was kept unchanged at 5.25% as widely expected. The post meeting statement was a bit more hawkish that expected. The major change in the accompanying statement was the part regarding inflation. Fed acknowledged that “readings on core inflation have improved modestly in recent months”. But FOMC members don’t see that as convincing indication of sustained moderation in inflation pressure yet and is still concerned about the upside risks due to high level of resource utilization. The Fed also maintained its tightening bias by saying that “predominant policy concern remains the risk that inflation will fail to moderate as expected.”

The major dollar mover was indeed Friday’s Personal consumption and expenditure data. In particular, core PCE deflator, the Fed’s preferred gauge of inflation, moderated further from 2.0% to 1.9% yoy in May, which is now with Fed’s implicit target range. This reinforced speculation that Fed will eventually drop its tightening bias in the coming months. Also, both personal income and spending missed expectation by rising 0.4% and 0.5% respectively, comparing to expectation of 0.6% and 0.7%. . Though, overall inflation, as measured by the PCE deflator, rose 0.5%, fastest in 13 months.

Housing data were still weak with existing home sales dropping another -0.3% to 5.99m annualized rate, new home sales dropping another -1.6% to 0.915m annualized rate in May. Though, strong rise of 0.9% in construction spending raised some hope that housing market is nearing a bottom. Other data include durable goods orders which dropped sharply by -2.8% in May. Chicago PMI dropped less than expected to 60.2 in Jun. Q1 GDP final print was revised less than expected to 0.7%.

Euro was generally supported during the week except some extra volatility in yen crosses. Eurozone M43 money supply growth reaccelerated from 10.4% to 10.7% in May. Germany unemployment unexpectedly dropped by -37k, pushing unemployment rate further lower to 9.1%. Though, Eurozone Apr current account turned to -4.0b deficit. Jun HICP stayed at 1.9% yoy. Retail sales in Germany dropped unexpectedly by -1.8% mom in May.

The Japanese yen staged a strong broad based rebound last week, believed to be fueled by concern on risk of carry trades Comments from the Bank for International Settlements in its annual report that there was “clearly something anomalous” in the low-yielding yen’s recent decline is giving some to the yen. Japan’s Finance Minister Koji Omi warned that markets should be aware of the risks of one-way bets and “disorderly moves of foreign exchange rates are undesirable.” Also, former Japanese Cabinet member Takenaka said BoJ may raise interest rates by as much as 50bps if the ruling LDP party maintains control of parliament in next month’s elections. However, the strength in yen was temporary as risk aversion faded and carry trade came back into play. EUR/JPY recovered most of its losses and just missed record high of 166.94 by a pip. NZD/JPY, the ultimate carry trade, also rose to new 22 year high of 95.51.

Japanese industrial production was worse than expected with a 0.4% fall in May and raised some concern over the highly anticipated Tankan Survey this week. Japanese consumer prices was flat yoy in May and didn’t provide any support for the BoJ to act quicker. Though retail sales beat expectation by rising 0.5% mom, 0.1% yoy in May, which was the first positive annual growth rate record in 8 months which suggest that there is a good chance that the pick-up will extend to 2H of 07.

Sterling continued to be supported by speculation that BoE could raise rate again this week. Several members of BoE MPC testified to the Treasury Committee of the House of Commons where different opinions from the members were voiced. Governor King emphasized the “upside” risks to inflation, while Deputy Governor Rachel Lomax wanted to see some data before deciding to hike again. Besley, believed that by moving immediately, the Bank would be better able to cope with the inflation created by the expansion of demand. Gieve reiterated that rates were not rising fast enough to contain credit growth. Sterling was also additionally supported by stronger than expected house price growth which saw Nationwide house price index rose 1.1% mom, 11.1% yoy, beating expectation of 0.4% mom, 10.3% yoy, up from prior 0.5% mom, 10.3% yoy. The mom rate is the fastest since Dec’s 1.2% while the annual rate is a 29 month high.The rising house prices was undaunted by prior rate hike and is adding another bullet for the hawks to push for another rate hike in July.

Speculation of a 50bps hike from SNB faded last week but nevertheless, the swissy remained firm and ended up higher against most majors. The KOF leading index rose to 1.98 in June from a revised 1.94 in May. Though it’s below expectation of 2.0, it still continued to suggest firm growth in the economy throughout 2007.

Commodity currencies were still the main beneficiary of carry trade and dollar weakness. With AUD/USD made new 18 year high while AUD/USD hit fresh 25 years high. Canadian dollar finished the multi week consolidation and surged to new 30 year against dollar. However, the Loonie was then pressured just after disappointment from Canadian GDP which was flat in Apr comparing to expectation of 0.2% growth.

Suggested Readings:

After initial consolidation, EUR/USD finally resumed rebound from 1.3262 on Friday by surging to as high as 1.3541. The corrective fall from 1.3681 should have already completed with three waves down to 1.3262, just meeting 100% projection of 1.3681 to 1.3391 from 1.3553 at 1.3263. Break of 1.3553 resistance will confirm this case and bring retest of 1.3681 high. On the downside, in case of pull back, downside should be contained above 1.3421 support and bring another rally.

In the bigger picture, whole up trend from 1.1639 is likely still in progress with medium term rising channel remains intact. Break of 1.3553 near term resistance will confirm that the fall from 1.3681 is in corrective nature. In other words, the rise from 1.3262 should represent resumption of the up trend and target 61.8% projection of 1.2865 to 1.1.3681 from 1.3262 at 1.3766.

However, we maintain that risk of medium term reversal remains high. Upside momentum continues to diminish with bearish divergence condition in daily MACD and RSI. As discussed before, whole medium term up trend from 1.1639 is interpreted as having first move completed with three waves up to 1.2978, subsequent sideway consolidation completed at 1.2483. Rise from 1.2483, which is treated as resumption of up trend from 1.1639. Such up trend is now is expected to terminate between 61.8% projection of 1.2865 to 1.1.3681 from 1.3262 at 1.3766 and 100% projection of 1.1639 to 1.2978 from 1.2483 at 1.3822.

But still, even though a break below 1.3421 support will turn short term outlook bearish again, sustained trading below medium term rising channel support (now at 1.3129) is needed to confirm whole up trend from 1.1639 has completed. Otherwise, another high could still be seen before EUR/USD finally make an important top.

In the longer term picture, it’s still early to conclude whether medium term rally from 1.1639 represents resumption of multi-year up trend from 0.8223 or just part of a large scale consolidation that started at 1.3668. But, the three wave corrective nature of the rise from 1.1639 to 1.2978 suggest that this whole rally from 1.1639 will be corrective too, thus, favoring the latter case. Sustained break of of the medium term channel support and 55 weeks EMA will confirm this case and could probably extend medium term weakness to 1.1639 to complete the consolidation pattern. But sustained break of 1.3822 fibo resistance will dampen this view and path the way towards 95 high of 1.4523.

GBP/USD

After several attempts, cable finally took out 2.0000 psychological resistance last week and surged to as high as 2.0086. As discussed before, corrective fall from 2.0132 has completed with three waves down to 1.9621, after drawing support from the medium term rising channel. The current rally from 1.9621 is expected to extend to retest 2.0132 high and then 61.8% projection of 1.9183 to 2.0132 from 1.9621 at 2.0207 first. Below 2.0002 minor support will indicate a short term top is formed and bring pull back to 1.9928 support or below. But downside should be contained well above 1.9783 resistance turned support and bring rally resumption.

In the bigger picture, the completion of the fall from 2.0132 in a corrective 3 wave manner and the holding of the medium term rising channel indicates that rise from 1.8090 is still in progress, so is the whole up trend from 1.7047. There are various interpretation of the rally from 1.7047 but none is really convincing yet. Also, medium term upside momentum remains unconvincing with bearish divergence conditions staying in weekly MACD and RSI as well as daily MACD and RSI.

Focus should now be on 2.0207 projection target. Sustained break of this level, which will also have 2.0106 cluster resistance (100% projection of 1.7047 to 1.9024 from 1.8090 at 2.0067) taken out too, will indicate that underlying bullishness in cable is much stronger than we originally thought. Also, this will add much credence to the case that whole up trend from 1.7047 is resumption of multi-year up trend from 1.3680. In such case, further rally should then be seen to 61.8% projection of 1.3680 (01 low) to 1.9554 (05 high) from 1.7047 (05 low) at 2.0677 first. On the other hand, failure of taking out this projection target and sustained trading below medium term rising channel (now at 1.9702) will argue that whole rise from 1.7047 has completed and put 1.9183 support into focus.

USD/CHF

USD/CHF’s fall from 1.2467 extends further to as low as 1.2208 last week. The weekly close below short term rising trend line (now at 1.2224) argues that the rise from 1.1993 has already completed. From a short term angle, further decline is still expected to be seen as long as 1.2339 resistance holds. Break of 1.2146 will confirm that rise from 1.1993 has completed and bring further fall towards medium term rising trend line (now at 1.2045) first).

In the bigger picture, the previously discussed head and shoulder bottom formation (ls: 1.1919, h: 1.1878, rs: 1.1993) scenario didn’t play out as rally from 1.1993 lost steam well below mentioned 1.2571 resistance. Sharp decline from 1.2467 and break of the short term rising trend line is reviving the case that price actions from 1.1919 is likely developing into a medium term triangle formation. Nevertheless, medium term outlook will remain mixed with USD/CHF still staying inside established range of 1.1993 and 1.2467.

On the downside, break of 1.1993 low will indicate that above mentioned triangle consolidation has completed. Medium term outlook will confirm to be bearish and bring deeper decline to 1.1878 low first and then towards 1.1288 (04 low). On the upside, break of 1.2467 will indicate that rise from 1.1993 low has resumed for 1.2571 resistance. And same as before, break will confirm the head and shoulder bottom and have medium term outlook turned bullish for 1.2768 resistance and then 1.3283 high.

In the longer term picture, USD/CHF is still staying in the middle area of the long term range of 1.1288 and 1.3283. Outlook will very much depends on which of the reversal or consolidation scenario plays out.

USD/JPY

USD/JPY’s correction from 124.13 was contained at 122.22 last week, above mentioned 122.13 support as expected and staged a strong rebound to as high as 123.55 on broad based yen weakness towards the end of the week. Short term outlook is a bit mixed. Firstly, considering that 123.53 resistance still holds, correction from 124.13 is not confirmed to be completed yet. Secondly both USD and JPY are weak in general, thus giving no additional indication on the comparative strength and weakness.

Nevertheless, further rally is still in favor as long as 122.80 support holds. Break of 123.53 will encourage retest of 124.13 high and break will confirm recent rally has resumed for 61.8% projection of 120.76 to 124.13 from 122.22 at 124.30 first. However, below 122.80 will indicate that consolidation from 124.13 is still in progress and should bring another test of 122.22 low before completion.

In the bigger picture rise from 115.13 is still in progress with 122.01/05 cluster support (61.8% retracement of 120.76 to 124.13 at 122.05 and 23.6% retracement of 115.13 to 124.13 at 122.01) remains intact. Such rally is treated as resumption of the rise from 108.99, which in turn, is the resumption of whole up trend from 101.66 after interim correction has completed with three waves down from 121.38 to 108.99. Further rally is expected to be seen to next medium term target of resistance zone of 100% projection of 101.65 to 121.38 from 108.99 at 128.72 and 100% projection of 108.99 to 122.17 from 115.13 at 128.31. Break of 122.01/05 cluster support will indicate rise from 115.13 has completed and bring deeper correction. But still, rise from 108.99 is still in force as long as pull back is contained well above 115.13 low.

Also, note that USD/JPY is staying comfortably above the long term falling trend line (147.68 to 135.20). Multi-year consolidation pattern that started from 147.60 should have already completed. But, whether current rise from 101.65 represents the resumption of whole up trend from 79.75 remains to be seen. Note that above mentioned medium term projection target of 100% projection of 108.99 to 122.17 from 115.13 at 128.31 and 100% projection of 101.65 to 121.38 from 108.99 at 128.72 are in proximity to 78.6% of 135.20 to 101.65 at 127.95. This cluster resistance zone will be important to determine the long term trend.

EUR/JPY

EUR/JPY’s correction 166.94 extended to as low as 164.23 initially, but was supported by 50% retracement of 161.49 to 166.94 at 164.22. Subsequent rebound has pushed EUR/JPY to as high as 166.93, just missing prior record high. From a short term angle, rally from 164.23 should be resumption of the rise from 161.49. Hence, break of 166.94 will encourage further rally to 61.8% projection of 161.49 to 166.94 from 164.23 at 167.60 first. However, below 165.39 will suggest that consolidation from 166.94 is probably still in progress with another fall to 164.23 before completion. Still, downside is expected to be contained above 61.8% retracement of 161.49 to 166.94 at 163.57 and bring another rally.

In the bigger picture, whole medium term rally from 130.60 is still in progress and the interpretation remains unchanged. . First wave up ended at 143.60, subsequent correction ended at 137.167. The third wave up ended at 159.63 while fourth wave correction has ended at 150.75. Rise from there represents the final advance in this structure. With 61.8% projection of 137.16 to 159.63 from 150.75 at 164.64 taken out decisively, next upside target will be 100% projection of 137.16 to 159.63 from 150.75 at 173.22. On the downside, it will take a break of 161.49 support to indicate rise from 150.75 has completed. Otherwise, further rally is still in favor even in case of pull back. In the longer term picture, regardless of the internal structure, rally from 88.97 has now taken out key resistance level of 162.42 and 38.2% retracement of 285.56 (79 high) to 88.97 (00 low) at 164.07. Next important long term resistance will be at 188.22 (90 high) and 50% retracement of 285.56 to 88.97 at 187.27.

Giving the Semis the Benefit of the DoubtComments (0)

Filed under: Uncategorized — admin @ 10:10 pm

This column was originally published on RealMoney on Feb. 26 at 12:00 p.m. EST. It’s being republished as a bonus for TheStreet.com readers. For more information about subscribing to RealMoney, please click here.

As TXU (TXU) heads to the world of private companies, the utility space will likely be re-energized by talk of more deals, either in private-equity buyouts or public-company mergers.

Such chatter will inevitably occur today, and given the industry’s stable nature, the “what-if” exercise is worth considering. However, the complexities of the electric power business make big deals challenging, if not downright difficult.

Regulation

Utilities have a great profile for private-equity firms: stable cash flow, predictable demand and a captive customer base, to name just three. But they also entail a significant amount of regulatory risk.

Although deregulation of the power business has helped lessen some onerous regulation, most electric-power companies’ core businesses remain highly regulated, primarily by state public utilities commissions and, at least to some extent, by the Federal Energy Regulatory Commission.

If you wonder what that means, just ask Constellation Energy (CEG) and FPL Group (FPL) . In October, the two companies walked away from a merger that had been in the works for nearly two years because of regulatory hassles. In addition, Exelon (EXC) and Public Service Enterprise Group (PEG) canceled their proposed merger for similar reasons. Of course, some deals have been completed — such as Duke Energy (DUK) and Cinergy — but plenty of uncertainty exists when it comes to public utility mergers.

However, private equity’s entrance into the mix may present new opportunities. It is too early to determine what type of hurdles the TXU deal will face from regulators, but objections are already being assuaged. The new TXU said this morning that it will lower consumer power rates and significantly reduce its plan to build new coal-fired generation plants.

In addition, the private version of TXU is courting heavy hitters for its board, including former Secretary of State James Baker, former EPA Commissioner William Reilly and former Commerce Secretary Donald Evans. Furthermore, the press release announcing the deal talks up the new company’s commitment to the environment and sustainable energy.

The deal will still require various regulatory approvals, and there’s sure to be plenty of opposition and positioning from TXU customers looking for concessions.

TXU is a unique utility in that it has strong portfolios of both regulated and unregulated assets. While the regulated utility provides a solid, stable base of business, the unregulated generation business offers an opportunity for growth, a fact that hasn’t likely gone unnoticed by the private-equity group, led by Kohlberg Kravis Roberts and Texas Pacific Group.

Public to Private

For good reason, TXU will be the talk of the town today. Yet, for investors, the more relevant question is what could come next.

Recently, Mirant (MIR) sold assets to LS Power for nearly $1.4 billion, and in April 2006, NorthWestern Energy (NWEC) agreed to sell to Babcock and Brown Infrastructure for $2.2 billion. Although those deals aren’t nearly as large as the TXU buyout, they do suggest a keen interest in power assets among private-equity investors.

Other private companies such as Tenaska are also on the prowl for new development opportunities as well as established power generation assets. And, while not private, Warren Buffett’s Berkshire Hathaway (BRKA) , through its MidAmerican Energy Holdings, has said it is willing to spend billions in the power market if the right opportunities are found.

Independent power producers like Mirant and AES (AES) have to be discussing the pros and cons of going private with the backing of firms like KKR, Blackstone, Carlyle and others. Although there’s no indication that any of these firms are eyeing specific assets, private-equity firms tend to focus on similar sectors.

Consolidation

In addition to private equity’s influence on the sector, KKR’s move will probably raise the possibility of additional consolidation among the smaller, regional utilities. Although regulatory hurdles remain, the continued growth of large utilities may spark a stronger urge for smaller utilities to get bigger.

In previous columns, I have discussed the potential for regional consolidation. In the Midwest, smaller utilities like Westar Energy (WR) , Great Plains Energy (GXP) , OGE Energy (OGE) , Empire District (EDE) and Cleco (CNL) are always considering options and opportunities.

In addition, Atlanta’s Southern (SO) is looking for growth opportunities. With names like Scana (SCG) and Teco (TE) right next door, opportunities exist if the price and regulatory climate look right.

All that said, remember that talk is cheap and power deals are often discussed but much less often executed. While the KKR-TXU deal is a blockbuster, utility mergers rarely happen in pairs.

Still, this morning’s deal is likely to give rise to plenty of powerful opportunities.

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