power curve 5 : forward power continues softening ; implications power curve 5 : forward power continues softening ; implications
* the power curve has softened since our last analysis ( power curve 4 ,
may 2 ) . forward expectations are down 11 % , 15 % and 9 % for 2001 , 2002 and
2003 , respectively . the spark spread , an important measure of profit
potential , has declined further : down 18 % , 32 % and 84 % , respectively .
* shape of curve remains " backwardated " - decreasing from a peak this
summer .
* softening trend has continued since january . this period every
region was affected with california and the west showing the largest
declines .
* power producers : most favorable commodity pricing environment this
summer - - continue to expect positive earnings surprises 2 q and perhaps 3 q .
* recommendation to investors : expect near - term strength in producers
keyed off of strong 2 q expectations . recommend shifting portfolio toward
energy merchants as we move into the summer . maintain positive ratings on
both groups of stocks given strong near - term earnings visibility .
> >
raymond c . niles
power / natural gas research
salomon smith barney
( 212 ) 816 - 2807
ray . niles @ ssmb . com
s
- power curve 5 5 - 24 - 01 . doc
- power curve 5 5 - 24 - 01 . pdf
power curve 5 : forward power continues softening ; implications
power curve 5 : forward power continues softening ; implications
* the power curve has softened since our last analysis ( power curve 4 ,
may 2 ) . forward expectations are down 11 % , 15 % and 9 % for 2001 , 2002 and
2003 , respectively . the spark spread , an important measure of profit
potential , has declined further : down 18 % , 32 % and 84 % , respectively .
* shape of curve remains " backwardated " - decreasing from a peak this
summer .
* softening trend has continued since january . this period every
region was affected with california and the west showing the largest
declines .
* power producers : most favorable commodity pricing environment this
summer - - continue to expect positive earnings surprises 2 q and perhaps 3 q .
* recommendation to investors : expect near - term strength in producers
keyed off of strong 2 q expectations . recommend shifting portfolio toward
energy merchants as we move into the summer . maintain positive ratings on
both groups of stocks given strong near - term earnings visibility .
> >
raymond c . niles
power / natural gas research
salomon smith barney
( 212 ) 816 - 2807
ray . niles @ ssmb . com
s
- power curve 5 5 - 24 - 01 . doc
- power curve 5 5 - 24 - 01 . pdf