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To: Dale Baker who wrote (36110)	1/2/2004 12:31:55 PM
From: Dale Baker	Read Replies (1) \| Respond to of 118717

RRI close to new highs today. Lots of other new highs though: VSL, LFL, TLK, TRGL, STHLY, TLD, GCH, LAQ, ACGL, AMPH. S&P says RRI is $10 stock by: investor999us 01/01/04 08:09 pm Msg: 68304 of 68323 Valuation 15-DEC-03 We believe RRI is capable of generating significant free cash flow (FCF) after maintenance capital spending. In light of a number of one-time charges in 2003, significant cost reductions planned for 2004, and the absence of planned construction expenditures for 2005, we believe the company has the capacity to post strong FCF growth through 2005. As a result of RRI's recent debt refinancings, the company does not have any material debt maturities prior to 2007. We believe regulatory risks are beginning to dissipate; RRI settled three separate FERC and SEC investigations between January and September. Based on other industry settlements, we expect a favorable conclusion to FERC's threatened suspension of the company's wholesale trading privileges. We also look for RRI to realize net positive cash flow from the ultimate resolution of refunds and overdue receivables associated with the California energy crisis. Based on discounted cash flow analysis, we arrive at a 12-month target price of $10. Although we regard the shares as high risk, we recommend purchase.