FW: Third Quarter EPS Increase 38%; Maintaining 2001E and 2002E EPS

-----Original Message-----
From: "Russo, Brian" <Brian.Russo@ubsw.com<@ENRON On Behalf Of "Abramson, Barry" <Barry.Abramson@ubsw.com<
Sent: Thursday, October 25, 2001 4:50 PM
To: undisclosed-recipients:;@ENRON
Subject: CIN: Third Quarter EPS Increase 38%; Maintaining 2001E and 2002E EPS

KEY POINTS
* CIN reported third quarter 2001 operating earnings of $0.80 per share, compared with $0.58 per share earned in
the third quarter of 2000. The 38% increase in earnings per share is primarily due to strength in wholesale trading and
marketing and solid growth at the regulated utility operations.
* Cinergy reaffirmed its 2001 earnings guidance of $2.75 per share. Although no comments regarding 2002 estimated
earnings were provided by the company, we currently feel comfortable with our 2002E EPS of $2.95. We expect Cinergy to
grow earnings at a conservative rate of 7%-8% per annum, with regulated operations growing at 5%-6% and energy merchant
operations growing at 10%-12%. However, if the economy weakens further and wholesale power prices remain at current
levels we may revisit on 2002 estimated earnings per share at a later date.
* Energy Merchant segment earnings were $0.37 per share, more than double the $0.15 per share earned in last
year's third quarter. Origination, marketing and trading gross margins rose $43 million, or $0.07 per share, to $217.1
million from $174.1 million last year. Electricity trading volumes totaled 86,398,499 mWh, up 150% from last year's
levels. Physical and financial gas trading volumes totaled 48.1 bcf per day, up 160% over the same period last year.
Cinergy Solutions, the segment's cogeneration business, added $0.03 per share in the quarter. Also, CIN added roughly
1,100 MW of new gas-fired peaking capacity since the third quarter last year.
* Regulated Operations earned $0.48 per share in the latest quarter, compared with $0.46 per share in the third
quarter 2000. Gross margins improved due to increased customer demand from service territory growth and warmer weather.
This was offset slightly by increased operations and maintenance and interest expenses. Total electric retail sales
volumes were 13,898,726 mWh, up 3.6% over last year's level. Gas retail and transportation sales volumes declined 10.8%
to 10,248,332 mcf. The decrease was primarily related to weather as well as softening industrial demand. As of
September 2001, total electric customers were 1,500,790, up from 1,481,411 a year ago and total gas customers were
489,667, up from 482,328 a year ago.
* Results from the Power Technology and Infrastructure Services segment lost $0.05 per share, down from a loss of
$0.03 in the prior year. Through Cinergy Ventures Group, this division pursues technology equity investments and runs
technology pilots. CIN owns several start-up energy infrastructure companies that incurred additional costs as well as
roughly $100 million of direct and indirect investments in power technology-related companies that decreased in value
during the third quarter.
* We continue to rate shares of CIN Strong Buy. Our 12-month price target of $37 per share is based upon a P/E
multiple of 12.5 times our 2002 EPS estimate of $2.95. In our opinion, the premium valuation is warranted. CIN is a low
cost producer of electricity (primarily coal) that is strategically located in the Midwest, and is actively adding to
its merchant generation portfolio. In total, Cinergy Corp. owns 13,000 MW of generation capacity. Of that total, 6,000
MW is regulated and 7,000 MW is unregulated. Because of Cinergy Corp.'s strategic location and its large fleet of
low-cost power plants, we think the company would be attractive to potential acquirers.

<<CIN01Q3.doc<<

- CIN01Q3.doc

Visit our website at http://www.ubswarburg.com

This message contains confidential information and is intended only
for the individual named. If you are not the named addressee you
should not disseminate, distribute or copy this e-mail. Please
notify the sender immediately by e-mail if you have received this
e-mail by mistake and delete this e-mail from your system.

E-mail transmission cannot be guaranteed to be secure or error-free
as information could be intercepted, corrupted, lost, destroyed,
arrive late or incomplete, or contain viruses. The sender therefore
does not accept liability for any errors or omissions in the contents
of this message which arise as a result of e-mail transmission. If
verification is required please request a hard-copy version. This
message is provided for informational purposes and should not be
construed as a solicitation or offer to buy or sell any securities or
related financial instruments.