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Enron Mail |
Good Morning,
Attached, please find the latest issue of our Independent Power Weekly. <<IPW072301.pdf<< Summary: 1. IPPs Fall 9.4% In terms of stock price performance, last week was lackluster for the Independent Power Producers. Our composite was down 9.4%, underperforming both the NASDAQ (-2.7%) and the S&P 500 (-0.4%). International Power was the strongest performer in the group, rising 4.9%. The Shaw Group was the weakest, falling 15.6%. 2. Mild Weather Exposes Companies with Portfolio Risk We attribute last week's poor performance to indications that some companies (e.g. CEG and KSE) are experiencing earnings pressure due to mild weather and its impact on power market conditions. While investors interpreted these events as a sign of deteriorating industry fundamentals, we view them as more the result of company specific portfolio risk, i.e., lack of geographic diversity. We remain comfortable with our earnings forecasts for the bulk of the major IPPs. In particular, we highlight our top 2 picks --Calpine and Mirant-- as having the least portfolio risk owing to a combination of geographical diversity, stringent hedging policies and a strong risk management skillset. 3. Looking Ahead: Earnings Reports from AES, CPN and NRG This week we await earnings reports from AES, Calpine and NRG Energy. We believe an upside surprise is most likely from Calpine, which will report earnings on Thursday (7/26). Our estimate is $0.30 versus the $0.19 earned last year. While we expect AES to meet our $0.29 estimate, we believe weakness at its Brazilian operations has the potential to negatively impact 2001 EPS by $0.25-$0.30 (see our FC note dated July 16). Following AES's conference call on Thursday, we will adjust our $1.89 2001 estimate accordingly, unless management continues to indicate sufficient upside in other parts of its portfolio. 4. FASB Goodwill Update On Friday (7/20), the FASB published two standards, Statement 141, Business Combinations, and Statement 142, Goodwill and Other Intangible Assets. The most immediate impact of the new standards will be the elimination of the requirement that goodwill be amortized. In this report we outline the EPS impact that results from the cessation of goodwill amortization for the companies in the power generation sector. In the near future, we intend to issue separate report where we formally adjust our 2002 earnings estimates. 5. CSFB Power Generation Supply Chain Conference On September 10 and 11, CSFB will host a Power Generation Supply Chain Conference at the Plaza Hotel in New York City. This event is designed to provide investors with a wholistic perspective on all aspects of the sector-from coal and natural gas companies, to equipment and construction service providers, to the power producers themselves. Please contact us if you would like additional information. Regards, Neil Stein 212/325-4217 Bryan Sifert 212/325-3906 This message is for the named person's use only. It may contain confidential, proprietary or legally privileged information. No confidentiality or privilege is waived or lost by any mistransmission. If you receive this message in error, please immediately delete it and all copies of it from your system, destroy any hard copies of it and notify the sender. You must not, directly or indirectly, use, disclose, distribute, print, or copy any part of this message if you are not the intended recipient. CREDIT SUISSE GROUP and each of its subsidiaries each reserve the right to monitor all e-mail communications through its networks. Any views expressed in this message are those of the individual sender, except where the message states otherwise and the sender is authorised to state them to be the views of any such entity. Unless otherwise stated, any pricing information given in this message is indicative only, is subject to change and does not constitute an offer to deal at any price quoted. Any reference to the terms of executed transactions should be treated as preliminary only and subject to our formal written confirmation. - IPW072301.pdf
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