fw : ipp update : analysis of power market conditions indicatesselling was overdone ; focus on cpn and mir
- - - - - original message - - - - -
from : stein , neil [ mailto : neil . stein @ csfb . com ]
sent : wednesday , july 25 , 2001 8 : 09 am
to : undisclosed - recipients
subject : ipp update : analysis of power market conditions
indicatesselling was overdone ; focus on cpn and mir
good morning ,
attached , please find our latest update on the ipp sector , which includes an
analysis of recent power market conditions
>
1 . focus on cpn and mir on july 24 , 2001 , our ipp composite traded off 8 % ,
owing to heightened market concerns surrounding " soft " spot and forward
power prices . we believe the weakness presents a buying opportunity across
the whole section and recommend that investors focus on our top 2 picks :
calpine ( cpn , strong buy ) and mirant ( mir , buy ) .
2 . power market analysis in this note we include an analysis of recent
power market conditions . we conclude that power market conditions have been
more stable than is generally believed . further , if conditions had
worsened , the earnings impact would not be severe . on that basis we believe
the sell - off across the sector was overdone .
3 . beware of national power indices ! in order to properly analyze recent
power price fluctuations , it is key to analyze the california market
separately . outside of california , spark spreads have actually increased by
2 . 7 % on average since may in a number of key markets . within california ,
there have been large declines in pricing and margins . however , potential
returns on capital in that market remain well above anywhere else in the
country .
4 . ipps are not call options on power prices ! the bulk of the group has
contracted substantial portions of their output . in particular , calpine has
sold forward 90 % of its output in 2001 and 80 % in 2002
5 . current valuations reflect the investor uncertainties 2001 and 2002 p / e
multiples have compressed by more than 40 % year to date
6 . buy on weakness to the extent earnings prospects remain intact , we view
the recent weakness as irrational .
regards ,
neil stein 212 / 325 - 4217
bryan sifert 212 / 325 - 3906
this message is for the named person ' s use only . it may contain
confidential , proprietary or legally privileged information . no
confidentiality or privilege is waived or lost by any mistransmission .
if you receive this message in error , please immediately delete it and all
copies of it from your system , destroy any hard copies of it and notify the
sender . you must not , directly or indirectly , use , disclose , distribute ,
print , or copy any part of this message if you are not the intended
recipient . credit suisse group and each of its subsidiaries each reserve
the right to monitor all e - mail communications through its networks . any
views expressed in this message are those of the individual sender , except
where the message states otherwise and the sender is authorised to state
them to be the views of any such entity .
unless otherwise stated , any pricing information given in this message is
indicative only , is subject to change and does not constitute an offer to
deal at any price quoted .
any reference to the terms of executed transactions should be treated as
preliminary only and subject to our formal written confirmation .
fw : ipp update : analysis of power market conditions
indicatesselling was overdone ; focus on cpn and mir
- - - - - original message - - - - -
from : stein , neil [ mailto : neil . stein @ csfb . com ]
sent : wednesday , july 25 , 2001 8 : 09 am
to : undisclosed - recipients
subject : ipp update : analysis of power market conditions
indicatesselling was overdone ; focus on cpn and mir
good morning ,
attached , please find our latest update on the ipp sector , which includes an
analysis of recent power market conditions
>
1 . focus on cpn and mir on july 24 , 2001 , our ipp composite traded off 8 % ,
owing to heightened market concerns surrounding " soft " spot and forward
power prices . we believe the weakness presents a buying opportunity across
the whole section and recommend that investors focus on our top 2 picks :
calpine ( cpn , strong buy ) and mirant ( mir , buy ) .
2 . power market analysis in this note we include an analysis of recent
power market conditions . we conclude that power market conditions have been
more stable than is generally believed . further , if conditions had
worsened , the earnings impact would not be severe . on that basis we believe
the sell - off across the sector was overdone .
3 . beware of national power indices ! in order to properly analyze recent
power price fluctuations , it is key to analyze the california market
separately . outside of california , spark spreads have actually increased by
2 . 7 % on average since may in a number of key markets . within california ,
there have been large declines in pricing and margins . however , potential
returns on capital in that market remain well above anywhere else in the
country .
4 . ipps are not call options on power prices ! the bulk of the group has
contracted substantial portions of their output . in particular , calpine has
sold forward 90 % of its output in 2001 and 80 % in 2002
5 . current valuations reflect the investor uncertainties 2001 and 2002 p / e
multiples have compressed by more than 40 % year to date
6 . buy on weakness to the extent earnings prospects remain intact , we view
the recent weakness as irrational .
regards ,
neil stein 212 / 325 - 4217
bryan sifert 212 / 325 - 3906
this message is for the named person ' s use only . it may contain
confidential , proprietary or legally privileged information . no
confidentiality or privilege is waived or lost by any mistransmission .
if you receive this message in error , please immediately delete it and all
copies of it from your system , destroy any hard copies of it and notify the
sender . you must not , directly or indirectly , use , disclose , distribute ,
print , or copy any part of this message if you are not the intended
recipient . credit suisse group and each of its subsidiaries each reserve
the right to monitor all e - mail communications through its networks . any
views expressed in this message are those of the individual sender , except
where the message states otherwise and the sender is authorised to state
them to be the views of any such entity .
unless otherwise stated , any pricing information given in this message is
indicative only , is subject to change and does not constitute an offer to
deal at any price quoted .
any reference to the terms of executed transactions should be treated as
preliminary only and subject to our formal written confirmation .