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Enron Mail |
Power Curve 5: Forward Power Continues Softening; Implications
* The Power Curve has softened since our last analysis (Power Curve 4, May 2). Forward expectations are down 11%, 15% and 9% for 2001, 2002 and 2003, respectively. The Spark Spread, an important measure of profit potential, has declined further: down 18%, 32% and 84%, respectively. * Shape of curve remains "backwardated" - decreasing from a peak this summer. * Softening trend has continued since January. This period every region was affected with California and the West showing the largest declines. * Power Producers: most favorable commodity pricing environment this summer--continue to expect positive earnings surprises 2Q and perhaps 3Q. * Recommendation to investors: Expect near-term strength in Producers keyed off of strong 2Q expectations. Recommend shifting portfolio toward Energy Merchants as we move into the summer. Maintain positive ratings on both groups of stocks given strong near-term earnings visibility. <<Power Curve 5 5-24-01.doc<< <<Power Curve 5 5-24-01.pdf<< Raymond C. Niles Power/Natural Gas Research Salomon Smith Barney (212) 816-2807 ray.niles@ssmb.com s - Power Curve 5 5-24-01.doc - Power Curve 5 5-24-01.pdf
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