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Enron Mail |
Good Morning,
Attached, please find the latest issue of our Independent Power Weekly. <<IPW051401.pdf<< Summary: 1. IPPs Fall 0.5% Last week our IPP composite traded off 0.5%, outperforming both the NASDAQ (-3.8%) and the S&P 500 (-1.7%). Mirant was the strongest performer, rising 7.8%. AES was the weakest, falling 8.7%. 2. Investors Focus on Calif. Windfall Profits Tax Proposal On Monday evening (5/7), the California State Senate passed windfall profits tax bill, calling for a 100% tax on power sales over $80 per Mwh. We believe the proposal should be seen as a negotiating tactic to force generators to lower prices. Should the bill get passed in its current form, we believe CPN, MIR and NRG's exposure is limited by their power sales contracts. Regardless, the bill presents interesting federal/state jurisdictional issues, which could form the basis for a legal challenge. 3. AES: Time for Investors to Take "Another Look" On Friday, AES hosted a conference call to address investor concerns regarding Latin America. On the call, management reaffirmed its prior guidance for 2001 of $1.75 - $1.90. While we acknowledge the risks presented by the Brazilian situation and the potential for additional negative catalysts, in our view, given current price levels, now is an ideal time for investors to take "another look" at AES. The stock is trading close to its 52 week valuation trough. Indeed, we believe it is safe to assume that the market has already priced-in an earnings disappointment. AES's 52 week median 2001 P/E is 27.8x. If we regard this level as AES's normalized valuation, the market is implying that it will earn about $1.59 in 2001-16% below our base case estimate and 6% below the bottom-end of management's range of guidance. See our FC note issued today for more details. 4. Looking Ahead: Mirant Hosting Analyst Meeting on 5/14 and 5/15 MIR will host its first major analyst seminar on May 14 and 15 in Atlanta. We believe the meeting will be an important catalyst for the stock. MIR is currently trading at 22.2 times our 2001 EPS estimate, representing a 17% discount to the group average. Since the beginning of the year, earnings expectations for Mirant have increased by 73%. We believe MIR's relative valuation discount reflects investor confusion surrounding the drivers of the recent upside as well as skepticism surrounding the sustainability of earnings growth over the next few years. We believe management will address these issues at the analyst meeting, which should help close some of the valuation gap between MIR and its peers. 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. - IPW051401.pdf
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