Good info.   Thanks.

 -----Original Message-----
From: 	Herndon, Rogers  
Sent:	Thursday, July 05, 2001 7:47 AM
To:	Presto, Kevin M.
Cc:	Misra, Narsimha
Subject:	FW: Eastern Power Outlook


FYI
 -----Original Message-----
From: 	"Allan Stewart" <astewart@pira.com>@ENRON [mailto:IMCEANOTES-+22Allan+20Stewart+22+20+3Castewart+40pira+2Ecom+3E+40ENRON@ENRON.com] 
Sent:	Thursday, July 05, 2001 7:37 AM
To:	Herndon, Rogers
Subject:	Eastern Power Outlook

I am shaking off the rust from my vacation, and so are my banking friends.
It will probably take until next week to get a decent cross-section from the
financial/development segments, but you have put your fingers on the key.
Who will start construction with 02 and 03 in the mid-$30's? Probably more
than a few is my guess.

The July 2001 Edition of "Smart" Money had a section on energy. The cover
read: "Power Up Your Portfolio .. 10 Great Energy Stocks And Funds To Buy
Now".
STOCKS
1. Apache
2. Dominion
3. Dynegy (your favorite)
4. Mirant
5. Noble Drilling
6. Quanta Services
FUNDS
7. Strong American Utilities
8. Vanguard Utilities Income
9. Invesco Energy
10.Strong Energy

On one page, there was this message overlayed on top of two transmission
towers:
"With fundamentals as strong as they are, there will never be a "last time"
to buy these stocks."

"You've Got To Love Dynegy." "You can snap up the Houston-based Dynegy for
just 21 times earnings - not bad for a leading energy marketer that's also
one of the fastest-growing independent power producers in the U.S., with
17,775 megawatts operating in high-growth, high-demand regions such as the
midwest, northeast, southeast, and California". They were comparing Dynegy
to Calpine (in terms of PEs) but were saying tha Dynegy had the trading too
so they were a better bet (UGH)!

The wild card is dumb investors and lenders. Still too much money chasing
too few quality cash generators.

I have given some further thought to the gas story, and I agree that the
odds are low of any sort of meaningful bounce in price from today's levels.
We are really quite certain that gas inventory will get mighty fat, and that
the fronts will have to give way to create storage room for gas. This is the
same ugly story I was putting forth when I saw you a few months back. While
in theory coal could lose market to gas and heavy industry could restart
(both being positive demand surprises), I agree that the odds of these are
low ... but I will keep watching and testing notwithstanding. While are not
expecting it this early, the combination of the above and a sharp
contraction in gas oriented drilling could provide some support for prices.
Again, for the time being it certainly looks like it is pleasant to be a
bear. Give some thought to buying some of that mid-$30 energy for your
end-users (2002/3) or don't they make deals that far out?

It is hard to see much upside risk to power without some odd weather
wildcards or something funky on coal. Stock levels have remained low, but
are building. We also have yet to see a really hot day this month. Before we
bury this beast, I want to check its pulse one more time. Ontario set a new
summer peak this past month. I gather the dash for gas stopped.

BEWARE OF HILLARY & SCHUMER: Spoke with FERC late on Tuesday. One more pop
in NY and there may be a California style mitigation scheme put in place in
New York according to my contact there.

I hope your 4th was enjoyable.

Thanks for the call the other day.