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To: E.J. Neitz Jr who wrote (47455)	4/1/2003 11:52:17 PM
From: aniela	Read Replies (1) \| Respond to of 53068

Here is what S&P had to say about RRI today. Overview - 01-APR-03 Key Stock Statistics Prior to the 2002 third quarter, energy trading and marketing revenues included costs of energy tradeding revenues without affecting the absolute level of gross margin). On a net basis, we see 2003 revenues up over 3%, as higher energy prices and full-year con- tributions from the Orion Energy acquisition and re- cently constructed power projects are likely to outweigh reduced energy marketing activity and the impact of asset sales. Margins should narrow, on lower net trading Fiscal 2002 2001 2000 1999 1998 1997 pect about a 50% increase in net interest expense. Estimates exclude about $41.7 million in accrual expense ($128.3 million in 2002) for a 2004 cash payment due 1Q CenterPoint Energy (RRI’s former parent) for retail sup- ply customers. We see 2003 Standard & Poor’s Core Earnings per share of $0.77. Valuation - 01-APR-03 At the end of March, RRI successfully refinanced its short-term bank debt, alleviating short-term liquidity con cerns. We believe it now has the resources to finish construction of its power plants, and possibly even toexercise a right to acquire majority ownership in Texas Genco (a publicly traded power company that is 80% owned by RRI’s former parent). Despite a significan reduction in risk, the stock is trading at about 20% of book value, near the bottom of the energy merchant peer group, and at a P/E discount, based on our 2003 EPS estimate. We believe the stock remains depressed due to overblown concerns about the FERC’s decision regarding the California energy crisis. We doubt that RRI will lose market-based electric trading privileges, but 2003 EPS probably would not suffer if it did, in the company’s view. However, reflecting volatility and regu- Dividend Data latory uncertainty, we recommend that RRI be accumulated only by aggressive investors.