Message-ID: <266545.1075851642985.JavaMail.evans@thyme> Date: Mon, 17 Sep 2001 04:46:52 -0700 (PDT) From: neil.stein@csfb.com To: undisclosed-recipients@enron.com Subject: CSFB Independent Power Weekly--Issue #43 Mime-Version: 1.0 Content-Type: text/plain; charset=us-ascii Content-Transfer-Encoding: 7bit X-From: Stein, Neil X-To: undisclosed-recipients X-cc: X-bcc: X-Folder: \Dasovich, Jeff (Non-Privileged)\Dasovich, Jeff\Inbox X-Origin: DASOVICH-J X-FileName: Dasovich, Jeff (Non-Privileged).pst <> Good Morning, Our deepest sorrow and sympathy goes out to all those who have lost loved ones and have suffered because of last Tuesday's national tragedy. For those investors that are interested in understanding how last week's tragedy might impact the sector we attached the latest issue of our Independent Power Weekly and offer the following thoughts: 1. Framework for Analysis From a broader equity market perspective, the analytical challenge for investors is understanding how the prospect of slower economic growth will impact the outlook for corporate earnings. Another area for analysis is understanding how the negative impact of a slowing economy will be offset by falling interest rates. 2. Sector is Well Positioned Relative to the Market On both fronts, we believe the power generation sector is well positioned relative to the broader market. Compared to the rest of the market, the growth prospects for the industry are clearly less sensitive to economic conditions. Providing support for this view, in 1991, when real GDP declined 0.5%, electricity demand increased 2.0%, which compares with a 2.2% annual growth rate from 1990-2000. In addition, we believe the sector will benefit disproportionately from falling interest rates. 3. Current Valuations Offer Downside Protection Current valuations for the sector offer downside protection relative to the market. On average, the pure play US IPPs are trading at 14.4 and 11.0 times our 2001 and 2002 EPS estimates. This valuation represents a 33% and 42% discount to the S&P 500, despite an average growth rate of 28% for the IPPs versus 6% for the S&P 500. 4. Impact on the NY Power Market How these tragedies will impact the fundamentals of the New York power market has been the subject of considerable speculation. Our analysis indicates that even under the most extreme demand reduction scenario, supply shortages will persist in the region through mid-2006. However, the magnitude of the potential shortfall (measured in MW) is likely to decline by 12 - 30%. 5. Impact on Recent Power Market Activity The World Trade Center tragedy had a number of consequences for the power markets. Most immediately, the impact was felt in New York where significantly reduced demand from lower Manhattan pushed down local power prices. Throughout the country, the situation resulted in well below normal trading volumes. Finally, the overall uncertainty served to push up forward prices in several parts of the country. Regards, Neil Stein 212/325-4217 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.