Message-ID: <9458586.1075863432672.JavaMail.evans@thyme> Date: Wed, 25 Jul 2001 09:21:08 -0700 (PDT) From: j.kaminski@enron.com To: eric.scott@enron.com Subject: RE: Power & Natural Gas : Power Curve 6: Crossing the Mountaintop; Lower Outlook, Ratings Mime-Version: 1.0 Content-Type: text/plain; charset=us-ascii Content-Transfer-Encoding: 7bit X-From: Kaminski, Vince J X-To: Scott, Eric X-cc: X-bcc: X-Folder: \VKAMINS (Non-Privileged)\Kaminski, Vince J\Sent Items X-Origin: Kaminski-V X-FileName: VKAMINS (Non-Privileged).pst Eric, Thanks. Vince -----Original Message----- From: Scott, Eric Sent: Wednesday, July 25, 2001 10:48 AM To: Kaminski, Vince J Subject: FW: Power & Natural Gas : Power Curve 6: Crossing the Mountaintop; Lower Outlook, Ratings Attached is the report I mentioned to you as one of the reasons for the ENE decline. Eric -----Original Message----- From: SSMB-GEO-Alert@geo2.sbi.com@ENRON [mailto:IMCEANOTES-SSMB-GEO-Alert+40geo2+2Esbi+2Ecom+40ENRON@ENRON.com] Sent: Tuesday, July 24, 2001 10:37 AM To: undisclosed-recipients:;@ENRON Subject: Power & Natural Gas : Power Curve 6: Crossing the Mountaintop; Lower Outlook, Ratings SSMB Global Equities Online(GEO) Profile Alert The following generated an alert in your portfolio: Power & Natural Gas : Eric ENE : Eric Power Curve 6: Crossing the Mountaintop; Lower Outlook, Ratings Salomon Smith Barney Analyst Raymond Niles Date 07/24/2001 Industry Power & Natural Gas Company The AES Corporation Allegheny Energy Constellation Energy Group CINERGY Corporation Calpine Corporation DTE Energy Company DYNEGY Inc. Enron Corporation El Paso Energy Corporation Exelon Corporation FPL Group Inc. Mirant NRG Energy, Inc. PG&E Corporation Public Service Enterprise Group Inc. Progress Energy PPL Corporation Reliant Energy Inc. TECO Energy Inc. _________________________________________________________________ Power Curve 6: Crossing the Mountaintop; Lower Outlook, Ratings SUMMARY VALUATION AND RECOMMENDATION DATA * We reduce earnings estimates, ratings and price targets for a number of our companies who are "long" power. In all, we are lowering ratings on seven companies, price targets on thirteen, and earnings estimates on sixteen. * This follows our call (Power Curve 4, published May 2) where we established a more cautious outlook for Power Producers versus Energy Merchants. * Since our last Power Curve analysis on May 31, we have seen the continued deterioration of both forward power prices and spark spreads. * June was the first period in which we have seen year/year declines in power prices and spark spreads. We had expected to see these signs first in 1Q:02. * We maintain a bullish outlook on those companies that are not leveraged to power prices, whether through strong risk management skills or through a lack of generation. Our top two picks are ENE and DYN. Earnings Per Share Company (Ticker) Price FYE Rating Target LTGR Current Yr Next Yr The AES Corporation- $35.72 Dec Curr 2H $43.00 25% $1.80E $2.20E (AES#) Prev 1H $75.00 30% $1.90E $2.30E Allegheny Energy- $44.76 Dec Curr 2H $50.00 8% $3.80E $4.20E (AYE#) Prev 1H $60.00 10% $3.90E $4.30E Constellation Energy- $32.40 Dec Curr 2H $40.00 8% $2.65E $3.10E Group (CEG#) Prev 2H $40.00 10% $2.65E $3.10E CINERGY Corporation- $32.10 Dec Curr 2M $38.00 8% $2.80E $2.95E (CIN) Prev 2M $38.00 8% $2.80E $3.00E Calpine Corporation- $39.66 Dec Curr 2H $48.00 30% $1.95E $2.30E (CPN#) Prev 1H $70.00 35% $2.00E $2.60E DTE Energy Company- $43.50 Dec Curr 1M $54.00 8% $3.50E $4.20E (DTE#) Prev 1M $54.00 8% $3.50E $4.24E DYNEGY Inc. (DYN#) $45.61 Dec Curr 1H $70.00 23% $2.00E $2.55E Prev 1H $70.00 20% $2.00E $2.55E Enron Corporation- $48.16 Dec Curr 1H $75.00 23% $1.80E $2.15E (ENE#) Prev 1H $75.00 20% $1.80E $2.15E El Paso Energy Corpo- $52.43 Dec Curr 1H $65.00 15% $3.35E $3.70E ration (EPG#) Prev 1H $85.00 15% $3.35E $3.80E Exelon Corporation- $60.55 Dec Curr 1M $70.00 9% $4.50E $4.95E (EXC#) Prev 1M $80.00 10% $4.60E $5.05E FPL Group Inc. (FPL) $57.01 Dec Curr 3M $60.00 7% $4.70E $4.95E Prev 3M $65.00 7% $4.70E $5.10E Mirant (MIR) $33.30 Dec Curr 1H $42.00 23% $1.90E $2.20E Prev 1H $42.00 25% $1.90E $2.20E NRG Energy, Inc.- $22.90 Dec Curr 2H $27.00 22% $1.37E $1.65E (NRG#) Prev 1H $40.00 25% $1.37E $1.70E PG&E Corporation- $15.00 Dec Curr 3S $17.00 8% NA $1.90E (PCG) Prev 3M $29.00 8% $2.70E NA Public Service Enter- $46.18 Dec Curr 2M $52.00 7% $3.75E $4.00E prise Group I (PEG#) Prev 1M $60.00 8% $3.75E $4.05E Progress Energy- $41.65 Dec Curr 2M $47.00 7% $3.40E $3.60E (PGN#) Prev 2M $47.00 8% $3.40E $3.60E PPL Corporation (PPL) $49.25 Dec Curr 2H $60.00 12% $4.00E $4.40E Prev 2H $65.00 15% $4.10E $4.50E Reliant Energy Inc.- $29.40 Dec Curr 2H $42.00 9% $3.20E $2.90E (REI#) Prev 2H $42.00 11% $3.20E $2.90E TECO Energy Inc.- $29.80 Dec Curr 3M $33.00 8% $2.30E $2.50E (TE#) Prev 3M $33.00 10% $2.30E $2.50E POWER PRICES HAVE PEAKED; WE ARE CROSSING THE MOUNTAINTOP AND NOW EXPECT A DECLINING PRICE ENVIRONMENT June is the first month that we have seen negative year-on-year comparisons in the commodity drivers that underlie earnings. Based on work in our last Power Curve report (Power Curve 5, 5/31/01), we had not expected the commodity drivers of earnings to turn negative until 1Q:02. Instead, we see commodity comparisons turning negative in June, and on a full quarterly basis, 3Q:01. June 2001 June 2000 % Change Power Prices ($/MWh) $50.21 $83.25 (40%) Spark Spread ($/MWh) $23.77 $56.93 (58%) In our view, the most important measure for earnings, particularly for Power Producers, is the Spark Spread, which shows the gross margin potential for power generation in the spot market. Hedging, trading, and the sale of other services such as capacity availability and spinning reserves offsets the impact of a decline in this number. Most companies with generating capacity are at least 85% hedged for 2001, 60% hedged for 2002, and 40% hedged for 2003. NEGATIVE QUARTERLY COMMODITY DRIVERS BEGINNING 3Q:01, TWO QUARTERS AHEAD OF EARLIER EXPECTATIONS Forward power and gas markets suggest that 3Q:01 will be the first full quarter of negative commodity comparisons. Earlier, in PC5, we had expected this would not occur until 1Q:02. What has surprised us is the swiftness and breadth of the decline in the power pricing environment. Unlike 2Q:01, which had two good months -- April and May -- to buoy earnings, forward markets suggest year/year declines in power prices and the spark spread for all of 3Q:01 and continuing into 4Q:01. June is an important "swing" month in what is normally a relatively volatile earnings quarter. So far, because of lower realized prices and a declining power price outlook, a number of companies have either pre- announced or guided to reduced earnings expectations, including: PPL, PNW, PNM, NRG, KSE and CEG. Quarterly Comparisons, Power Prices and Spark Spreads DOWNGRADING STOCKS; DECLINING POWER PRICES ARE NOT GOOD FOR EARNINGS In a declining power pricing environment, investors should take a more cautious stance on companies who are "long" the commodity -- i.e., companies who, because of their business model, are making a long bet on commodity prices. Within this constraint, we look for signs that mitigate this exposure. Furthermore, we are positive on the long-run case for aggressive companies who are building newer, more efficient power plants and replacing the aging plant that has built up under 70 years of regulation. As long-run bets, companies such as Calpine (CPN, downgraded to 2H from 1H) offer an excellent play on deregulation, although we temper our outlook due to declining power prices. Certain other Power Producers are better positioned than others, and when we add the valuation component to this discussion (the stock prices of many Producers peaked in late April/early May), we think a number still offer attractive value. However, our broad thrust is to recommend companies who are not long power (or have small exposure), whether because of strong trading and risk management skills or a lack of generating capacity. In Power Curve 4 (5/1/01), when we first wrote about the declining price curve, we suggested a more cautious stance towards Power Producers versus Energy Merchants. We stand by that advice. We are downgrading the rating on only 1 Merchant vs. 4 Producers and Integrated Utilities who are exposed to power prices. In terms of estimates, only 2 Merchants are being reduced, while we are reducing 14 Power Producers and Integrated Utilities. Our top 3 growth-oriented picks for investors who want to avoid the impact of declining power prices are Energy Merchants ENE, DYN and ILA. For dividend or total-return investors, we recommend Integrated Utilities EXC, ETR, and AEP. MACRO VIEW: WHY ARE POWER PRICES DECLINING? Figure 1. The Forward Power Curve ($/MWh) --U.S. 1998 1999 2000 2001F 2002F 2003F $/MWh $36.22 $40.53 $67.61 $73.44 $41.72 $36.81 The forward curve for power shows a rapid decline from peak levels achieved in 2000 and 2001E. Rapid growth in construction of new generating capacity is the primary cause of the decline in forward price expectations (with the slowing economy an additional factor in the near-term). See Figure 2. Additionally, we cite two reasons why plant builds tend to over-shoot (either on the upside or the downside) changes in the demand for power. These are because electricity is capital intensive and a commodity, each of which creates cycles of over- and under-development. (1) Incremental Capacity Exceeds Incremental Demand. The cause of the current decline in prices is the rapid addition of new generating capacity, in all regions of the country. Additions to capacity are exceeding increases in demand for power, by a wide margin, in most regions. This has caused the supply and demand balance to shift from a shortage to a growing surplus. Additional factors have hastened the decline in prices. A slowing economy has reduced demand, as has the absence of last year's hotter-than-normal weather. So far this summer, weather has been approximately normal. (2) Capacity additions exceeded incremental demand in 2000. We think 2000 was the first year when incremental capacity exceeded incremental demand. We still have an underlying power shortage, which has lasted well into 2001. However, the market is adding capacity in a manner which should relentlessly lessen its severity and even potentially create over-capacity within the next several years. In 2000, 27,000 megawatts (MW) of capacity was added, up from 11,000 in 1999, and less than 10,000 MW during most of the 1990's. We expect approximately 45,000 MW of capacity will be added in 2001, and a similar number in 2002. Since this amount exceeds the amount required to meet growth in demand, we project a rising "reserve margin." The reserve margin is the best fundamental indicator of the balance between supply and demand, with a high reserve margin indicating over-capacity (falling power prices), and a low reserve margin indicating under-capacity (rising power prices). We tentatively project a bottoming of the electricity commodity price cycle in 2003, if enough developers scale back their plans to build new plants. Figure 2. U.S. Capacity Additions and Reserve Margin 1996 1997 1998 1999 2000P 2001E 2002E 2003E MW Additions 8,900 4,400 1,000 11,000 27,000 47,000 43,000 35,000 Reserve Margin 15% 13% 12% 10% 13% 16% 18% 18% TWO REASONS FOR BOOM AND BUST CYCLES IN POWER (1) Electricity is a cyclical commodity industry. We have reached the peak of the "first-ever" cycle in the history of the industry. We put "first" in quotes because we think the cycles were always there, except they were hidden by regulation. With deregulation of the wholesale power market in 1996, market-clearing prices reveal the balance between supply and demand. From 1996 until mid 2001, we were climbing the mountaintop of the electricity cycle. Now we are on the downside. (2) Electricity production is capital-intensive. We think the cycles will last a number of years, 4-6 years in the current cycle (we put the first year as 1998, when enough liquidity existed in the newly deregulated market; we see the bottom as 2003), driven by the capital-intensive nature of the industry. Power plants take a long time to build. Planning decisions must be made between 1 and 5 years in advance of the actual day when power will be produced. This is a much slower process than the market, and pricing expectations at the time of planning will have no doubt changed by the time plants are up-and-running. We think it is difficult for individual company executives to fully anticipate the development plans of their competitors and, in the quest for market share, the tendency is to build in a manner which is often too aggressive when viewed on an industry-wide basis years later. GUIDE TO INVESTORS: INDUSTRY-LEVEL TRACK THE SPARK SPREAD. A primary metric for investors to track is the "spark spread". The spark spread measures the difference between power prices (revenues) and natural gas prices (cost). This is the critical metric for tracking earnings power of generating companies. The gross margin of Power Producers in the spot market will be determined by the spark spread, and when these companies hedge, they will have to hedge using the forward spark spread available at that time. Thus, a declining spark spread affects the earnings power of all companies, even those who are well hedged. Only if they could hedge 100% would their earnings be unaffected by declining prices. No company we are aware of has been able to hedge 100% of their output. The forward spark spread actually suggests a worse commodity price environment in the 2002/3 period than existed in 1998/9, prior to the run-up in prices in 2000/1. Figure 3. The Forward Spark Spread -- U.S. 1998 1999 2000 2001F 2002F 2003F $/MWh $21.36 $23.04 $41.28 $40.65 $14.15 $9.28 GUIDE TO INVESTORS: COMPANY-LEVEL STOCKS THAT CAN WEATHER THE STORM The following factors will help companies weather the storm, from most to least importance: Trading and risk management skills. A strong trading desk acts as the "eyes and ears" to the market, often providing advance warning of changes in the commodity price outlook. Companies with generating plant portfolios can use a strong trading desk to lock in power and gas prices earlier than their competitors. The pure play Energy Merchants derive the bulk of their profits from trading and risk management activities, own little if any generating capacity, and are characterized by a commodity price-neutral earnings model. All of our Energy Merchants have trading and risk management skills that help their overall activity. Our top pick and a pure play Energy Merchant is Enron (ENE-1H). We do not see their earnings being affected by a declining price environment. Other companies with strong trading/risk management operations include Dynegy (DYN-1H) and Aquila (ILA-1H). Duke Energy (DUK-1H) and Mirant (MIR-1H) also have strong operations. In terms of vulnerability to power prices, we think ENE and ILA have the strongest positions, owing to the lack or near-lack of generating capacity owned. Contracting/hedging activity. The more aggressive a company's moves were to lock in power prices earlier this year, the better positioned they are. Nevertheless, the unhedged portion of capacity can have a significant affect on earnings, particularly in the long-run. We note that Calpine (CPN-2H), which we have downgraded to 2H from 1H, has aggressively stepped up its hedging activity in recent weeks, signing a 3,000 MW deal with Shell, a 1,000 MW deal with Reliant Resources (RRI-NR). This activity appears to coincide with the rapid declines in the forward curve we have seen over the past two months. Offsetting "short" positions. This is a characteristic typical of electric utilities, who in many cases offset their long positions in generation with the short obligation to sell power to their customers. Utilities that are well- positioned in this regard include: EXC and AEP. Utilities that are most vulnerable are those who have aggressively developed generating capacity in an effort to capture some of the earnings and growth visibility of the pure play Power Producers. These include: AYE, CEG, and PPL. We are particularly concerned about companies that have invested in peaking capacity, or, separately, relatively inefficient plants that require a lot of capital dollars to upgrade. These plants are often the "marginal" unit, providing earnings in tight pricing environments, but having significantly less value as prices decline. Backlog of plant development. We also think that companies with significant plant development backlogs can "muscle" their way through a weakened commodity price environment. In particular, we note CPN, whose plants in operation grow as follows: Figure 4. Calpine Earnings Metrics, 2000-2003E 2000 2001 2002 2003 CAGR Y/E MW in operation 5,883 11,705 21,266 30,463 73% % of portfolio hedged 85% 71% 61% EPS $1.11 $1.95 $2.30 $3.00 39% They have hedged aggressively their output from their plants, so even though future plants have lower margins, overall EPS growth can still be impressive. Nevertheless, we have also lowered our EPS estimates for CPN, reflecting the impact of lower spark spreads on the unhedged portion of output. Our revised "Outperform" rating for CPN reflects the likely strong visibility of EPS growth over the 2000-2003 period. SUMMARY OF RATINGS/ESTIMATES/PRICE TARGET CHANGES REVISED VALUATION TABLE RISKS TO OUR MORE CAUTIOUS STANCE We see four principal risks to our more cautious stance. Some horses are already out of the barn. Power Producers and selected Energy Merchants (those with exposure to power prices) are down 26% since peaking on May 1. Some of the risk of declining forward power prices is now reflected in the stocks. However, we do not think all of the horses are out of the barn, and advise cautiously shutting the barn door on selected stocks at this time. The next leg that could drive stocks downward is declining EPS estimates. We think this is likely, particularly for 2002 and 2003, if power prices continue their decline. We think when this happens, stocks are likely to go down further. Hotter Weather. So far in 2001, weather across the country has been near- normal vs. hotter-than-normal weather last year. The year-on-year moderation has affected the forward curve. Should August become hotter relative to last year, the forward curve could temporarily strengthen, boosting power price and earnings expectations near-term. Ultimately, we think the principal cause of the decline in power prices is the dramatic build in power plants. Even if the curve temporarily strengthens due to weather, we still expect it will be downward sloping for the next several years. A Rebound in the Economy. A weak economy has certainly affected power demand, which, in turn, has affected the forward curve. When the economy eventually rebounds, which some are predicting by 4Q:01 or early 2002, the forward curve should strengthen. We will watch for these signs and adjust our outlook accordingly. Cancellations of plant development plans. This factor is a wildcard for the group in our opinion. We expect to see a number of weaker developers begin to cancel plant development plans. So far, sources such as turbine manufacturer GE has not given any indication turbine orders are being canceled. If/when they occur, the cancellation of development plans will have two effects. First, it will confirm the increasingly difficult industry environment, and would likely be perceived as negative. Then, following the cancellation of enough development plans, it will sow the seeds for the recovery of power prices in the future. This is why we think power prices will bottom in 2003. The mechanism for rebuilding the forward curve will, in part, be driven by cancellation of plant development plans and the restoration of a tighter supply-demand balance. SUMMARY: BECOMING MORE CAUTIOUS ON GROUP. We are lowering ratings, price targets and/or estimates on 11 companies with exposure to the declining trend in power prices. We advise investors to be more cautious on the group. However, we continue to advise a shift toward Energy Merchants, who have little or no commodity price exposure, and away from Power Producers, who are long power, as well as those Integrated Utilities who are long power. Additionally, we see several factors that also merit a cautious outlook, apart from the declining trend in power prices and its adverse effect on earnings: (1) Utilities as a defensive play may become less valuable if the broad market begins to recover and/or tech stocks begin to outperform. (2) Growth Energy stocks have benefited from strong earnings visibility at a time when many other S&P 500 sectors have "rolled over." The resumption of earnings growth in any of these other sectors could draw growth capital away from our Growth Energy names, particularly if their earnings is now under challenge. QUARTERLY ESTIMATES PER SHARE DATA Current Year* Next Year Next Year + 1 Ticker Period Current Previous Current Previous Current Previous AES# 1Q $0.42A $0.42A NA NA NA NA 2Q $0.30E $0.30E NA NA NA NA 3Q $0.51E $0.55E NA NA NA NA 4Q $0.60E $0.66E NA NA NA NA Year $1.80E $1.90E $2.20E $2.30E NA NA AYE# 1Q $0.90E $0.90E NA NA NA NA 2Q $0.75E $0.75E NA NA NA NA 3Q $1.30E $1.35E NA NA NA NA 4Q $0.85E $0.90E NA NA NA NA Year $3.80E $3.90E $4.20E $4.30E NA $4.75E CEG# 1Q $0.68A $0.68A NA NA NA NA 2Q $0.46A $0.46A NA NA NA NA 3Q $0.95E $0.95E NA NA NA NA 4Q $0.56E $0.56E NA NA NA NA Year $2.65E $2.65E $3.10E $3.10E $3.35E $3.35E CIN 1Q $0.75A $0.75A NA NA NA NA 2Q $0.50E $0.50E NA NA NA NA 3Q NA NA NA NA NA NA 4Q NA NA NA NA NA NA Year $2.80E $2.80E $2.95E $3.00E NA NA CPN# 1Q $0.30A $0.30A NA NA NA NA 2Q $0.35E $0.35E NA NA NA NA 3Q $0.90E $0.90E NA NA NA NA 4Q $0.45E $0.50E NA NA NA NA Year $1.95E $2.00E $2.30E $2.60E $3.00E $3.10E DTE# 1Q $0.97A $0.97A NA NA NA NA 2Q $0.40E $0.40E NA NA NA NA 3Q $0.93E $0.93E NA NA NA NA 4Q $1.20E $1.20E NA NA NA NA Year $3.50E $3.50E $4.20E $4.24E NA $4.41E DYN# 1Q $0.41A $0.41A NA NA NA NA 2Q $0.40E $0.40E NA NA NA NA 3Q $0.80E $0.80E NA NA NA NA 4Q $0.40E $0.40E NA NA NA NA Year $2.00E $2.00E $2.55E $2.55E NA NA ENE# 1Q $0.47A $0.47A NA NA NA NA 2Q $0.45A $0.45A NA NA NA NA 3Q NA NA NA NA NA NA 4Q NA NA NA NA NA NA Year $1.80E $1.80E $2.15E $2.15E NA NA EPG# 1Q $0.96A $0.96A NA NA NA NA 2Q $0.78E $0.78E NA NA NA NA 3Q $0.76E $0.76E NA NA NA NA 4Q $0.85E $0.85E NA NA NA NA Year $3.35E $3.35E $3.70E $3.80E NA NA EXC# 1Q $1.19A $1.19A NA NA NA NA 2Q $0.90E $0.90E NA NA NA NA 3Q $1.56E $1.61E NA NA NA NA 4Q $0.85E $0.90E NA NA NA NA Year $4.50E $4.60E $4.95E $5.05E NA NA FPL 1Q $0.76A $0.76A NA NA NA NA 2Q $1.30E $1.30E NA NA NA NA 3Q $1.98E $1.98E NA NA NA NA 4Q $0.66E $0.66E NA NA NA NA Year $4.70E $4.70E $4.95E $5.10E NA NA MIR 1Q $0.51A $0.51A NA NA NA NA 2Q $0.45E $0.45E NA NA NA NA 3Q $0.54E $0.54E NA NA NA NA 4Q $0.40E $0.40E NA NA NA NA Year $1.90E $1.90E $2.20E $2.20E NA NA NRG# 1Q $0.19A $0.19A NA NA NA NA 2Q $0.22E $0.22E NA NA NA NA 3Q $0.69E $0.69E NA NA NA NA 4Q $0.27E $0.27E NA NA NA NA Year $1.37E $1.37E $1.65E $1.70E NA NA PCG 1Q $0.67E $0.67E NA NA NA NA 2Q $0.75E $0.75E NA NA NA NA 3Q NA NA NA NA NA NA 4Q NA NA NA NA NA NA Year NA $2.70E $1.90E NA NA NA PEG# 1Q $1.25A $1.25A NA NA NA NA 2Q $0.74E $0.74E NA NA NA NA 3Q $0.75E $0.75E NA NA NA NA 4Q $1.01E $1.01E NA NA NA NA Year $3.75E $3.75E $4.00E $4.05E NA $4.30E PGN# 1Q $0.77E $0.77E NA NA NA NA 2Q $0.75E $0.75E NA NA NA NA 3Q $1.18E $1.18E NA NA NA NA 4Q $0.70E $0.70E NA NA NA NA Year $3.40E $3.40E $3.60E $3.60E NA NA PPL 1Q $1.52A $1.52A NA NA NA NA 2Q $0.71E $0.71E NA NA NA NA 3Q $0.92E $1.02E NA NA NA NA 4Q $0.85E $0.85E NA NA NA NA Year $4.00E $4.10E $4.40E $4.50E NA $4.40E REI# 1Q $0.94A $0.94A $0.80E $0.80E NA NA 2Q $0.75E $0.75E $0.70E $0.70E NA NA 3Q $1.28E $1.28E $1.20E $1.20E NA NA 4Q $0.23E $0.23E $0.20E $0.20E NA NA Year $3.20E $3.20E $2.90E $2.90E NA NA TE# 1Q $0.54A $0.54A NA NA NA NA 2Q $0.52E $0.52E NA NA NA NA 3Q $0.74E $0.74E NA NA NA NA 4Q $0.50E $0.50E NA NA NA NA Year $2.30E $2.30E $2.50E $2.50E NA $2.75E _________________________________________________________________ # Within the past three years, Salomon Smith Barney, including its parent, subsidiaries and/or affiliates, has acted as manager or co-manager of a public offering of the securities of this company.Salomon Smith Barney ("SSB"), including its parent, subsidiaries and/or affiliates ("the Firm"), usually makes a market in the U.S.-traded over the counter securities recommended in this report and may sell to or buy from customers, as principal, securities recommended in this report. 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