<<IPW091701.pdf>> 
Good Morning,

Our deepest sorrow and sympathy goes out to all those who have lost loved
ones and have suffered because of last Tuesday's national tragedy. 

For those investors that are interested in understanding how last week's
tragedy might impact the sector we attached the latest issue of our
Independent Power Weekly and offer the following thoughts:

1. Framework for Analysis   From a broader equity market perspective, the
analytical challenge for investors is understanding how the prospect of
slower economic growth will impact the outlook for corporate earnings.
Another area for analysis is understanding how the negative impact of a
slowing economy will be offset by falling interest rates.

2. Sector is Well Positioned Relative to the Market   On both fronts, we
believe the power generation sector is well positioned relative to the
broader market.  Compared to the rest of the market, the growth prospects
for the industry are clearly less sensitive to economic conditions.
Providing support for this view, in 1991, when real GDP declined 0.5%,
electricity demand increased 2.0%, which compares with a 2.2% annual growth
rate from 1990-2000.  In addition, we believe the sector will benefit
disproportionately from falling interest rates.    

3. Current Valuations Offer Downside Protection   Current valuations for the
sector offer downside protection relative to the market.  On average, the
pure play US IPPs are trading at 14.4 and 11.0 times our 2001 and 2002 EPS
estimates.  This valuation represents a 33% and 42% discount to the S&P 500,
despite an average growth rate of 28% for the IPPs versus 6% for the S&P
500.

4. Impact on the NY Power Market   How these tragedies will impact the
fundamentals of the New York power market has been the subject of
considerable speculation.  Our analysis indicates that even under the most
extreme demand reduction scenario, supply shortages will persist in the
region through mid-2006.  However, the magnitude of the potential shortfall
(measured in MW) is likely to decline by 12 - 30%.  

5. Impact on Recent Power Market Activity   The World Trade Center tragedy
had a number of consequences for the power markets.  Most immediately, the
impact was felt in New York where significantly reduced demand from lower
Manhattan pushed down local power prices.  Throughout the country, the
situation resulted in well below normal trading volumes.  Finally, the
overall uncertainty served to push up forward prices in several parts of the
country.

Regards,

Neil Stein   212/325-4217

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