ENE: Reiterate Buy; Believe Leadership Still Intact

* ENE has underperformed its peer group of Energy Merchants.  Stock
price down 39% from 52-week high ($90 on August 23) vs. peer group, up 1.9%.
* We reiterate our Buy rating on the stock, and believe the weakness
is largely due to concern over ENE's group-high P/E multiple and PEG ratio
of 27x and 1.3x, respectively (group average 19x and 1.0x), coupled with a
series of concerns over various parts of Enron's business: bandwidth, India,
etc.
* Our sense is that the bandwidth unit is performing on target, and is
likely to beat the strong numbers posted last quarter.  India, while a
significant issue, remains a small part of Enron's asset base (about 4%).
It is a legacy business, in our view, and does not materially affect our
overall view of the company.
* We see ENE's business fundamentals intact, and in fact, improving.
Growth rate expansion to 25% from 20%; growing returns on capital; bandwidth
trading all good reasons to own stock -- justify premium valuation.

 <<ENE 5-18-01 Reiterate Buy.doc>>  <<ENE 5-18-01 Reiterate Buy.pdf>>

Raymond C. Niles
Power/Natural Gas Research
Salomon Smith Barney
(212) 816-2807
ray.niles@ssmb.com

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 - ENE 5-18-01 Reiterate Buy.doc
 - ENE 5-18-01 Reiterate Buy.pdf