The following is a report on the Energy and Natural gas sectors from Credit Suisse First Boston. Please call us at 713-853-2407 if you have any questions.

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CREDIT SUISSE FIRST BOSTON CORPORATION
Equity Research
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Energy
Curt Launer         212/538-4269     curt.launer@csfb.com
Philip Salles       212/538-4221     philip.salles@csfb.com
Andy DeVries        212/325-2518     andy.devries@csfb.com

Natural Gas & Power
Catalysts In Place, EPG Up 8%, ENE Poised to Recover, Group Positioning Solid

Summary

Group led by El Paso (EPG, 51.02, Strong Buy), up 8% on positive meetings,
discussion of regulatory risks and increase in "hedged" production. Storage
revision moves Sept natural gas price down 20% and E&P shares 7% lower. IPP's
rise 4% in recovery from recent weakness.

Natural Gas & Power "majors" up nearly 3% vs 2% rise in S&P 500. EPG gain plus
3% upside moves in Dynegy (DYN, 42.25, Buy) and Williams (WMB, 32.81, Buy).
Kinder Morgan (KMI, 55.71, Strong Buy) up 2% for week and 7% y-t-d as best
performer in group. Duke (DUK, 38.75, Strong Buy) up 2%.

Enron (ENE, 36.35, Strong Buy) off 1% for week. At 20x '01 eps est of $1.80 and
16.2x '02 est of $2.25, ENE is trading at average p/e of group and 15%-20% less
than overall market. Premium growth rate above 20%, dissipation of recent
concerns, positive group and company fundamentals point to recovery.

"Cheap growth" aspect of sector valuations identified in 20% discount to S&P p/e
despite premium growth rate. Catalysts in 3Q'01 eps up 20% despite lower
yr-over-yr commodity prices, stable to higher sequential commodity prices and
some improvement in regulatory environment.

Viewpoint

Despite a significant drop of nearly 20% in the September '01 natural gas
futures related to a storage reporting "snafu" that moved exploration and
production shares 7% lower, the natural gas and power group, led by a nearly 8%
gain in EPG rose about 2%, in line with the S&P 500. Stronger performance,
reversing declines by Independent Power Producers (up 4% last week) helped DYN
and WMB rise about 3% each. In terms of natural gas prices, our focus remains on
longer term supply and demand fundamentals that point to a sustainable range of
$3-$4 per mcf. We consider this range as beneficial for the merchant, pipeline
and producing sectors of the industry.

We have previously commented on the "cheap growth" attraction of the Natural Gas
& Power group compared to the overall market. An earnings growth rate in excess
of 15% and a price/earnings multiple about 20% below the S&P 500 currently are
the valuation criteria that summarize this opportunity currently.

In our opinion, the shares that best fit this investment model currently are EPG
at 13.4x '02 eps (discussed below) and WMB, at 12.2x '02 eps. We also emphasize
ENE at 16.2x '02 because its premium p/e is gone, but its premium growth rate
remains. DYN, at 17.2x '02 eps and KMI at 23.2x '02 are very attractive
currently as well.

We look for 3Q'01 eps growth above 20% despite lower year-over-year commodity
prices; stable to higher sequential natural gas and power prices; and
improvement in the regulatory environment as catalysts for recovery and upside
for the group..

EPG Analyst Meeting Details Growth; Regulatory Issues

EPG held analyst meetings last week that focused on earnings growth, especially
in its Merchant Energy unit, additional hedging of natural gas production and
the regulatory and legal issues in the FERC "market power" and "marketing
affiliate abuse" cases pending against the company.

In the two cases pending against EPG, new information will be available soon.
Legal briefs were due Fri, Aug 24 and "reply briefs" are due on Sept 7. Rulings
by the FERC Administrative Law Judge (ALJ) are expected "on or before" Oct 9.

Initial comments from the EPG legal briefs substantiate the position that the
company did nothing wrong, has already been exonerated by the FERC in a March
'01 ruling on the affiliate matter and did not have, or exercise, market power.

We anticipate that the legal comments filed by the California Public Utilities
Commission (CPUC) will attempt to sensationalize EPG internal documents that
discuss use of pipeline capacity to manipulate the market. However, this is only
if these documents are taken out of context and without any recognition of the
economic, operational and regulatory realities of the situation.

In our opinion, obvious and prejudicial comments by the ALJ indicate a
probability of the "affiliate case" being ruled against EPG. We regard the
"market power" allegations as clearly unproved.

From a financial point of view, the significance of this outcome is that the
affiliate case carries no financial penalties and does not open EPG to civil
liability in California. In this event, we would ascribe a possibility to
settlement discussions emanating from the CPUC because they are seeking a
financial windfall, not a technical victory in their case against EPG.

From a business perspective, EPGs Merchant, Pipeline, Production and Field
Services units producing sustainable and visible eps growth in the 15%-20%
range. Our modeling concurs with these projections.

Our Merchant Energy estimate shows 25% ebit growth, mostly related to non-
commodity based fee and margin business. In Production, EPG has 75% of '01
production hedged at $3.85 per mcf, 60% of '02 hedged at $4.19 per mcf and 35%
of '03 at $4.19 per mcf. Our model shows EPGs leverage to natural gas prices of
about $0.02 per share per $0.10 per mcf change.  At or above a $3.20 realized
gas prices indicates some conservatism in our '02 estimates.

Our estimates remain $3.30 in '01 & $3.80 in '02. We rate EPG Strong Buy and it
is on the CSFB Focus List. We recognize the regulatory issues with an interim
target of 15x our '02 estimate or $57 as the October 9, 2001 ALJ decision
approaches. Our longer-term target, recognizing its premium growth rate is 20x
'02 eps or $76 per share.

ATG Responds to Full Rate Review by PSC

AGL Resources (ATG, 22.81, Hold) plans to ask the Georgia Public Service
Commission (PSC) to reconsider its decision for a full rate review at its gas
utility. The PSC staff said that ATG is earning 4%-7% more than its allowed ROE
of 11%. Approximately $30-52 million pretax, or $0.35- $0.60 per share after-tax
is at stake in this matter. ATG has responded that a rate reduction is unjust
based on its calculation of a 9.9% return.

A PSC ruling is expected in March '02. We are maintaining our current estimates,
albeit with a higher level of uncertainty with the outcome of the rate case. Our
eps estimates are $1.55 in '01 and $1.60 in '02. Our valuation thesis for ATG
points to its dividend yield of 4.7% and a p/e target of 15x '02 eps. Currently
this derives a target price of $24 and a Hold rating. Please see report dated
July 26, 2001 for additional information.

AGA Revises Natural Gas Storage Number Upward

September natural gas prices fell 18% last week after the American Gas
Association (AGA) revised its 3 billion cubic feet injection report to 50 bcf
for the week ended August 10, 2001. While reporting an injection of 86 billion
cubic feet for the week ending August 17th, the AGA restated the storage
injection for the week ending August 10th from 3 bcf to 50 bcf injection. Many
market participants expressed concern with the initial 3 bcf storage number
which the AGA had previously stated would not be revised. Please see page 13 for
more details and historical natural gas storage information.

UGI Closes Propane Acquisition from NI

UGI Corp's (UGI, 29.09, Buy) 52% owned propane subsidiary Amerigas propane (APU,
23.50, Buy) announced the completion of its acquisition of Columbia Propane from
NiSource (NI, 26.22, Buy) for $202 million last week. The transaction includes
the issuance of 2.3 million APG units to NI.  Our analysis shows an addition of
$0.10 per share in earnings in '02 for UGI (and a plus in a completed assety
sale for NI). We are maintaining our '01 eps estimate of $2.05 in '01 and
raising our '02 eps estimate from $2.25 to $2.35 in '02 for UGI.

Industry Fundamentals

Pricing

Our index of natural gas prices for 2001 closed August 24 at $4.85 per mcf, down
$0.18 for the week and $1.01 above the same week in 2000. The near-month
September contract closed at $2.71 per mcf, down $0.60 from the week before. Our
index for 2002 closed at $3.26, down $0.40 from the previous week.

The "12-month strip" closed the week at $3.21 per mcf, off $0.46 for the week
and $0.43 lower than the comparable week a year ago.

The near-month (October) futures contract for West Texas Intermediate (WTI)
closed at $26.93 per barrel, up $0.30 for the week. This compares with $32.03 a
year ago. The September futures contract expires August 21 at $27.91.

Nuclear plant outages stand at 6% of total nuclear generating capacity versus 7%
a year ago.

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years, served as a manager or co-manager of a public offering of securities for
or makes a primary market in issues of any or all of the companies mentioned.

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Curt Launer         212/538-4269     curt.launer@csfb.com

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2001. All rights reserved.

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