-----Original Message-----
From: *SSSB Utilities Team [mailto:sssbutilteam@imceu.sbi.com]
Sent: Tuesday, January 15, 2002 9:16 AM
Subject: US Utility Market - Weekly Update


SCHRODER SALOMON SMITH BARNEY

Our weekly US e-mail product is designed to provide clients with a useful
overview of news, valuations, and key energy price data from the US market.
This week:

*	Initiation of coverage on Reliant Resources.
*	Chart in Section 2. shows US forward spark spreads remain weak.

1. Valuation Multiples
Open this pdf to see a comprehensive schedule of valuation multiples for US
utility, power trader, merchant generator, and power technology companies.

 <<USUtils1.pdf>>  <<IPR Valuations Table Output.xls>>

We provide a summary of US consensus P/E ratios by electric utility strategy
below:

			2001E P/E	2002E P/E
Distribution		12.7x		11.4x
Integrated Utilities	13.0x		11.5x
Electric Generators	10.6x		8.7x
Energy Merchants	13.1x		11.6x
Source: I/B/E/S, Schroder Salomon Smith Barney estimates


2. Prices
Open this attachment to see current and forward price and spark spreads in
the key US power regions where European companies are active. Covered in the
charts is the Western US region (COB, Palo Verde, Mid Columbia), the North
East (Neepool), and Texas (ERCOT B).

 <<US Power Prices 14 Jan 02.pdf>>


3. News Highlights


*	PJM Study Says Single Northeast RTO Too Costly - Tuesday, 15 January
	The PJM Interconnection has released a preliminary cost/benefit
analysis suggesting the costs of joining a single Northeast RTO would
outweigh the benefits. In particular, PJM believes it would lose over $690m
of generator revenues, production costs and load payments a year. The
reports suggests the ISO New England would lose $324m per annum, while ISO
New York could save up to $2bn. PJM is expetced to pursue an agreement it
has reached with the Midwest ISO to create a single market. As a result, the
New England and New York ISOs are expected to pursue an RTO of their own.
Source: Platts.

*	UBS Wins Enron Trading - Friday, 11 January
	UBS has emerged as the winning bidder for control of Enron's
electronic commodity and derivatives trading operations, beating Citigroup
and BP. The sale was limited to a 51% stake in a new company called Netco
holding the hardward, software and employment conracts. The $13-billion
contract book was not included. There is no cash invloved, instead the offer
will give Enron one-thirs of any profits from a revived trading operation
over the next five years. EnronOnline is expected to be up and running again
within weeks. Source: Platts.

*	Vermont Yankee Sale Under Threat - Friday, 11 January
	The sale of the 540MW Vermont Yankee plant to Entergy ran into new
problems as teh Vermont Department of Public Service recommended new
conditions for the sale. In particular, the DPS would want the nuclear plant
to continue to sell power to local utilities at negotiated prices after 2012
if its operating license is renewed. Under the existing sales terms Entergy
would be free to sell on a merchant basis from 2012. A final decision is
expected mid-2002. Source: Platts.

	Vermont Yankee is part-owned (22.5%) by National Grid USA, the US
business of National Grid (NGG.L, 1M, 459p). Until the plant is sold,
National Grid USA will continue to share 80% of the revenues and costs with
customers through CTCs. The remaining 20% accounts for under 1% of National
Grid's total operating profit.

*	Retail Choice Popular in Texas - Friday, 11 January
	ERCOT has stated that it has received requests to switch over 34,000
retail electricity customers to new suppliers since it started accepting
requests on 17 December 2001, ahead of full retail competition on 1 January
2002.
	Source: Platts

	Centrica (CNA.L, 2M, 233p) filed an application in September 2001
with the Public Utility Commission of Texas to be licensed as a retail
electric provider (REP) in the state. It sought authority to begin marketing
electric service to residential and small commercial customers, and it plans
to provide service under the brand names of Republic Power and Energy
America. Centrica has held preliminary discussions with potential wholesale
power suppliers. Its primary focus will be on key metropolitan areas such as
Dallas-Fort Worth, Houston and Corpus Christi.

*	California AG Sues PG&E - Friday, 11 January
	California Attorney General has filed a lawsuit seeking $600m-$4bn
damages from PG&E Corp. for allegedly violating legal agreements designed to
protect utility ratepayers. Source: Platts

*	New York State Sues Niagara Mohawk/NRG - Thursday, 10 January
	New York State has filed a lawsuit accusing Niagara Mohawk (NiMo)
and NRG of violating the Clean Air Act. The lawsuit refers to two coal-fired
plants that NiMo sold to NRG in 1998, Huntley and Dunkirk. It alleges that
improvements were made to the plant  without upgrading air pollution
controls. NRG and NiMo themselves are fighting over who has responsibility
for the pollution controls, which could cost $350m. NiMo is suing NRG,
saying the responsibility for the controls lies with NRG and was specified
in the sales contract. NRG dispute this claim. Both lawsuits are pending.
Source: Dow Jones

	National Grid (NGG.L, 1M, 459p) are currently in the process of
acquiring NiMo in a deal expected to close early this year. NiMo has exited
from generation over the last few years and is a wires-focused business.

*	Mirant Triples Cash Reserves - Thursday, 10 January
	A recent credit rating downgrade to "junk" status by Moody's has
forced Mirant to triple the amount of cash it uses to support its trading
operations to upto $1bn. Mirant also said that its ability to do long-term
structured deals has been affected. However, the company believes it is well
positioned to benefit from the demise of Enron. Source: Platts

*	Peoples to Build 1,200MW Oregon Plant - Tuesday, 8 January
	Peoples Energy plans to file applications in Oregon to build a
1,200MW merchant CCGT plant. Source: Platts


4. US Research
We summarise below relevant research from SSB's US Utilities Team. The full
reports can be found on SSSB's GEO (Global Equity Online) service.

RELIANT RESOURCES (3H, Current: $15.59, Target: $17.00) - We initiate
coverage on Reliant Resources (RRI)  with a 3H (Neutral, High Risk) rating
and a $17 price target. Reliant Resources is a diversified deregulated
energy provider, with businesses including power generation, wholesale
trading & marketing, and retail energy. In May of 2001, 20% of Reliant
Resources was offered to the public by parent REI-- a full spin is expected
during 1Q 2002. Our Neutral rating reflects (1) Reliant Resources'
inconsistent track record in their Merchant business & (2) their significant
leverage to commodity prices though their fast-growing generation portfolio.
Our analysis continues to show depressed forward power prices & spark
spreads across the U.S. in 2002/3. We used sum-of-the-parts and adjusted
present value analyses to derive our $17 price target for RRI.

 <<RRI.pdf>>

Peter Bisztyga
Associate
European Utilities Equity Research
Schroder Salomon Smith Barney
Tel: +44 20 7986 3932
Fax: +44 20 7986 4342
E-mail: peter.bisztyga@ssmb.com

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 - USUtils1.pdf 
 - IPR Valuations Table Output.xls 
 - US Power Prices 14 Jan 02.pdf 
 - RRI.pdf