Good Morning,

Attached, please find the latest issue of our Independent Power Weekly.

<<IPW072301.pdf>>
Summary:
1. IPPs Fall 9.4%   In terms of stock price performance, last week was
lackluster for the Independent Power Producers.  Our composite was down
9.4%, underperforming both the NASDAQ (-2.7%) and the S&P 500 (-0.4%).
International Power was the strongest performer in the group, rising 4.9%.
The Shaw Group was the weakest, falling 15.6%.

2. Mild Weather Exposes Companies with Portfolio Risk   We attribute last
week's poor performance to indications that some companies (e.g. CEG and
KSE) are experiencing earnings pressure due to mild weather and its impact
on power market conditions.  While investors interpreted these events as a
sign of deteriorating industry fundamentals, we view them as more the result
of company specific portfolio risk, i.e., lack of geographic diversity.  We
remain comfortable with our earnings forecasts for the bulk of the major
IPPs.  In particular, we highlight our top 2 picks --Calpine and Mirant-- as
having the least portfolio risk owing to a combination of geographical
diversity, stringent hedging policies and a strong risk management skillset.


3. Looking Ahead: Earnings Reports from AES, CPN and NRG   This week we
await earnings reports from AES, Calpine and NRG Energy.  We believe an
upside surprise is most likely from Calpine, which will report earnings on
Thursday (7/26).  Our estimate is $0.30 versus the $0.19 earned last year.
While we expect AES to meet our $0.29 estimate, we believe weakness at its
Brazilian operations has the potential to negatively impact 2001 EPS by
$0.25-$0.30 (see our FC note dated July 16).  Following AES's conference
call on Thursday, we will adjust our $1.89 2001 estimate accordingly, unless
management continues to indicate sufficient upside in other parts of its
portfolio.

4. FASB Goodwill Update   On Friday (7/20), the FASB published two
standards, Statement 141, Business Combinations, and Statement 142, Goodwill
and Other Intangible Assets.  The most immediate impact of the new standards
will be the elimination of the requirement that goodwill be amortized.  In
this report we outline the EPS impact that results from the cessation of
goodwill amortization for the companies in the power generation sector.  In
the near future, we intend to issue separate report where we formally adjust
our 2002 earnings estimates.

5. CSFB Power Generation Supply Chain Conference   On September 10 and 11,
CSFB will host a Power Generation Supply Chain Conference at the Plaza Hotel
in New York City.  This event is designed to provide investors with a
wholistic perspective on all aspects of the sector-from coal and natural gas
companies, to equipment and construction service providers, to the power
producers themselves.  Please contact us if you would like additional
information.

Regards,

Neil Stein   212/325-4217
Bryan Sifert   212/325-3906


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 - IPW072301.pdf