Message-ID: <24019649.1075845450283.JavaMail.evans@thyme> Date: Mon, 21 May 2001 01:27:00 -0700 (PDT) From: benjamin.morton@ssmb.com Subject: ILA: Initiating Coverage of a Pure-Play Energy Merchant Mime-Version: 1.0 Content-Type: text/plain; charset=us-ascii Content-Transfer-Encoding: 7bit X-From: "Morton, Benjamin [EQRE]" X-To: X-cc: X-bcc: X-Folder: \Greg_Whalley_Oct2001\Notes Folders\Connect deletes X-Origin: WHALLEY-G X-FileName: gwhalley.nsf ILA: Initiating Coverage of a Pure-Play Energy Merchant * We initiate coverage of Aquila, Inc. with a 1H (Buy, High Risk) rating and a 12-month price target of $44. * Aquila is a pure-play Energy Merchant, leveraging their strong trading and risk management skills in the rapidly growing energy commodity markets. Aquila was an early mover into these deregulating markets, and has shown strong traction over recent years, which we believe is sustainable long-term. * We project a 20-25% growth rate for ILA driven by our robust outlook for wholesale energy and the potential for successful expansion into new commodities and geographies. * At a 2002 0.7x P/E-to-growth (PEG) ratio, ILA is trading at a significant discount to their Energy Merchant peer average of 1.0x. Based on its strong track record and potential for industry-leading earnings growth, we place a PEG value on ILA of 1.0x 2002 earnings, leading to our $44 price target. <> <> Raymond C. Niles Power/Natural Gas Research Salomon Smith Barney (212) 816-2807 ray.niles@ssmb.com s - ILA launch note5-18-01.pdf - ILA launch note5-18-01.doc