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Enron Mail |
Good Morning,
Attached, please find the latest issue of our Independent Power Weekly. <<IPW061101.pdf<< Summary: 1. IPPs Fall 6.9% Last week we saw continued lackluster performance from the Independent Power Producers. Our composite fell 6.9%, underperforming both the NASDAQ (+3.1%) and the S&P 500 (+0.3). Mirant, which was down 1.6%, was the strongest performer in the group. Shaw Group was the weakest performer, declining by 12.0%. 2. Politics and Price Caps Dominate Investor Attention In our view, last week's continued poor stock price performance reflected 2 major issues: 1. Lingering political uncertainties with increased media attention; and, 2. Soft spot power market conditions across much of the US. 3. Power Markets Recover on Friday Importantly, on Friday (6/8), most regions across the US experienced a significant upturn in power pricing with forecasts calling for hotter weather. Trades for Monday delivery, which took place on Friday, saw price increases of 10-25% on average in the Eastern and Central regions. In the Western region, prices spiked up 40-50%. Should these price increases prove to be sustainable, we would expect to see a meaningful improvement in investor sentiment. 4. EIX Bankruptcy? Implications for the IPPs Recently there has been increasing speculation that a Chapter 11 bankruptcy filing by Southern California Edison, the utility subsidiary of Edison International, could be imminent. We thought it would be timely to analyze the implications of an SCE bankruptcy for the IPPs. Our overall conclusion is that an SCE bankruptcy would be neutral for the sector. Such an event would have no impact on the earnings estimates or forecasted growth rates for any of the companies under our coverage. In addition, none of the companies have any direct receivables exposure to SCE. Finally, we believe reserves taken against accounts receivable balances from the CalISO and PX across the sector adequately mitigate exposure to potential bad debt writedowns. 5. Looking Ahead: ORN Analyst Meeting On Tuesday (6/12), Orion Power will host its first major analyst meeting since its November 2000 IPO. Beyond giving a detailed review of the business, we expect management to discuss the prospect of future acquisitions. Recently, management has indicated that it is evaluating a number of potential transactions located primarily in the Southeast. We also expect the company to provide a detailed regulatory update on its key markets-PJM and NY. Finally, we expect management to reaffirm prior guidance for 2001 of $1.15 per share. While we believe ORN's exposure to the New York City market offers meaningful upside potential, we believe the company will continue with its conservative stance for the year. Our 2001 and 2002 EPS estimates for ORN remain $1.20 and 1.60. Our target price is $38. 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. - IPW061101.pdf
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