-----Original Message-----
From: Stein, Neil [mailto:neil.stein@csfb.com]
Sent: Monday, August 06, 2001 7:14 AM
To: undisclosed-recipients
Subject: CSFB Independent Power Weekly-Issue #38; Response to
BarronsArti cle Included


Good Morning,

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

 <<IPW080601.pdf>> 
Also note that 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.

1. IPPs Rise 0.4%   Last week our IPP composite rose 0.4%, slightly
underperforming both the NASDAQ (+1.8%) and the S&P 500 (+0.7%).  Mirant,
which was up 6.1%, was the strongest performer in the group.  Shaw Group was
the weakest performer, falling 5.9%.

2. Barrons Predicts "Power Glut"   Over the weekend an article in Barrons
suggested that the industry was facing a generation capacity glut, which
would have negative investment implications for some of the Independent
Power Producers.  In support of this thesis, the article cited the large
number of announced capacity additions as well as recent power price trends.
We dispute this article's conclusions for 3 reasons.  1. Announced capacity
additions cannot be taken at face value; 2. The article's thesis does not
consider the potential for retirement of existing capacity, and 3. The
regional characteristics of the power generation market resist such broad
sweeping generalizations.

3. Credit Spreads Continue to Improve   Importantly, while our IPP equity
composite has traded off more than 10% over the last few weeks, IPP credit
spreads continue to tighten.  For example, while Calpine shares have traded
off 11% since July 6, the spreads on CPN's 10 year 8.5% notes due 2011 have
actually tightened by more than 50 basis points.  Last week alone, CPN
spreads tightened by 12 basis points, while the stock traded off 3%.  To
cite another example, while Mirant shares have traded off 8% over the same
period, the spreads on MIR's 7.9% notes due 2009 have tightened by 55 basis
points.  

4. Q2 Earnings Review   Last week second quarter earnings results were
reported by Black Hills, Cleco, DPL, Entergy, Mirant and Orion Power.
Upside surprises were reported by DPL, ETR, MIR and ORN.  Versus
expectations, Mirant's results were the strongest, coming in 21% above our
estimate.  Cleco was the only company that posted an earnings
disappointment, reporting Q2 results that were 22% below our estimate.  

5. Power Market Update   Last week power prices were up considerably as
evidenced by the 27% increase in the Mirant National Power Index.  With the
exception of the Western market, power prices got a boost from hot
temperatures that blanketed most of the country.  The Texas market
experienced unusual volatility owing to recent wholesale market design
changes and the initiation of a retail competition pilot program.

Regards,

Neil Stein   212/325-4217


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