Every region of the United States this year “will likely beshort generating capacity,” which will drive margins and fuelprofits higher for generators, according to a report by DeutscheBanc Alex. Brown energy analyst Jay Dobson.

In the report, “Electricity Supply and Demand in the U.S.: TheMarch to a Commodity Drum,” Dobson offers his reasoning behind thestrength of the U.S. generation sector. He studied the supply anddemand dynamics of the U.S. electricity sector for his report,analyzing the outlook for each region through 2005.

“The summer of 2001, and thus, the second and third quarters of2001, still look very promising form an earnings growthperspective,” said Dobson. His favorite investment ideas in the”strong buy” category include AES Corp., Calpine Corp., ReliantEnergy and Exelon Corp.

He said, however, that profit margins in the generation segmentwould peak in 2002 with the supply and demand environment becomingequal by 2004. By 2005, he sees the market moving to excesscapacity. Dobson noted that in fact, the large amounts of capacityare expected to actually come on line in 2002 and 2003, leading tomore moderate power prices, which in turn will lead to moremoderate profit margins.

“The rising profit margins in 2001 continue to support ourgeneration-focused investment thesis in the electric powerindustry,” said Dobson. “However, we continue to emphasize that thegeneration opportunity is a finite one.”

For more information on the report, visit www.deutsche-bank.com.

©Copyright 2001 Intelligence Press Inc. All rights reserved. Thepreceding news report may not be republished or redistributed, inwhole or in part, in any form, without prior written consent ofIntelligence Press, Inc.