1. Wall Street Trends, Speculation and Myths Dave Parker Senior Utility Analyst

2. What Drives Wall Street? Information World/National Events Economic Data Company/Sector Specific News The Rumor Mill – Chat Rooms, etc.

3. Efficient Market? Yes, short term Information overload can create knee jerk reactions CNBC effect The Sky Theory Trees rarely grow to the sky The sky rarely falls

5. Information Filter

6. Switching from Bear to Bull Credibility Accountability Predictability Irrational Pessimism Long-term investing dead?

7. Buy and Hold/ Market Timing Buy S&P 500 bottom/sell top - 400% actual 140%

8. Sleeping Easier

9. Investors’ Perspective Sky is going to fall. Why? Uncertain Terrorism, War, US/World political Uncertainty, Inflation, Deflation, Rising Interest Rates…. Directionless market a plus for utility stocks

10. Utilities Outperform

11. Big Change From Bull Market

12. Sector Positives Significant investment needed to improve reliability and keep up with demand growth Regulators are lowering risk by pre- approving projects Improving financial fundamentals reflecting Back-to-Basics strategy Sector again focused on what they do well

13. Rewarding Back to Basics Strategy

14. Rewarding Back to Basics

15. Boring Utility Returns

16. Near-Term Challenges Stock prices at upper end of expected trading range Mild weather most likely will pressure 3Q04 EPS Kerry not a fan of lower taxes on dividends Short interest is at record highs

17. Appendix

18. Why Own A Utility Stock? Income Safety Predictable returns Widow’s and Orphan’s Stocks

19. Distribution Highly regulated provides slower but steady EPS growth Higher yields Lower risk Returns in line with historical utility returns

20. Diversified Services EPS growth above utility average, EPS can have peaks and valleys More price volatility but tracks ups and downs of utility sector Appeals to investors looking for some yield but understand total return = yield + price appreciation

21. Commodity Big swings in EPS performance with changes in electricity commodity prices Limited yield due to EPS volatility Trading like cyclical stocks, tracking economy’s ups and downs

22. What Fuels Investors’ Optimism Substantial investment returns Long term – quarter or two Key issues typically overlooked Risk for potential reward What goes up won’t always go up What goes up will come down What goes down, can go up

23. Deregulation Changes Landscape Limited regulation so significant upside potential as demand outpaced supply

24. Deregulation Changes Landscape Limited regulation so significant downside potential supply outpaced demand

25. “Boring” Is Good In a Bear market investors want certainty No news, better than average chance of meeting EPS estimates Yield – Yes please

26. Risk/Reward for Differing Strategies

27. Outlook for Energy Investors’ expectations realistic again Evolution of business strategies from rate of return is value added Challenges: Overcoming irrational pessimism Rebuilding confidence