Power Curve 5: Forward Power Continues Softening; Implications

*	The Power Curve has softened since our last analysis (Power Curve 4,
May 2).  Forward expectations are down 11%, 15% and 9% for 2001, 2002 and
2003, respectively.  The Spark Spread, an important measure of profit
potential, has declined further: down 18%, 32% and 84%, respectively.
*	Shape of curve remains "backwardated" - decreasing from a peak this
summer.
*	Softening trend has continued since January.  This period every
region was affected with California and the West showing the largest
declines.
*	Power Producers: most favorable commodity pricing environment this
summer--continue to expect positive earnings surprises 2Q and perhaps 3Q.
*	Recommendation to investors:  Expect near-term strength in Producers
keyed off of strong 2Q expectations.  Recommend shifting portfolio toward
Energy Merchants as we move into the summer.  Maintain positive ratings on
both groups of stocks given strong near-term earnings visibility.

 <<Power Curve 5 5-24-01.doc>>  <<Power Curve 5 5-24-01.pdf>>


Raymond C. Niles
Power/Natural Gas Research
Salomon Smith Barney
(212) 816-2807
ray.niles@ssmb.com

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 - Power Curve 5 5-24-01.doc 
 - Power Curve 5 5-24-01.pdf