Electric utilities: When will the storm end?

NEW YORK, March 14, 2003 — It may be a while before electric utilities light up Wall Street.

“The electric industry has been plagued by a laundry list of issues including a sharp slowdown in demand, excess supply, liquidity concerns and financial scrutiny by investors and analysts following the Enron bankruptcy,” said David Fore electric utilities analyst. “As a result, almost all electric utility companies have suffered to some extent. While the need for electricity is not going away, the negatives outweigh the positives right now.”

According to the report, So Much for Being Defensive, investors who turned to electric utilities in tough markets have been caught in a virtual electrical storm.

The S&P Utility Index plunged 33% last year versus a 23.4% drop in the S&P 500.

The Dow Jones Utility Index fell 26.8% compared to a 16.8% slide in the Dow Jones Industrial Average. On a broader scale, the Dow has outperformed the Dow Jones Utility Index in all but eight years in the period from 1972 to 2002.

Utilities are also be in the middle of the largest credit crunch since the Great Depression as an estimated $60 billion to $75 billion in debt comes due for refinancing by 2005.

Utilities faced with potential downgrades by credit rating agencies have been forced to rein in costs through asset sales, lower capital spending and even cuts in the dividend.

“Many utilities have had to put their dividends under the knife as they look for ways to conserve cash and slash debt in an attempt to avoid downgrades,” said Fore.

Fore recently launched coverage of Dominion Resources (D) and Southern Company (SO) with a Peer Perform and Duke Energy (DUK) at an Underperform.

Dominion Resources is a diversified energy company serving electric and gas customers in Virginia, Ohio, Pennsylvania and West Virginia, Southern Company is one of the largest electric utility holding companies in the country while Duke Energy is an integrated electric utility serving North and South Carolina. Duke also has sizable wholesale electric generation and gas transmission businesses.

For a copy of the report, members of the press may contact Monica Orbe at (212) 272-9294 or morbe@bear.com.

Founded in 1923, Bear, Stearns & Co. Inc. is a worldwide investment banking and securities trading and brokerage firm, and the major subsidiary of The Bear Stearns Companies Inc. (NYSE:BSC – News). With approximately $30.6 billion in total capital, Bear Stearns serves governments, corporations, institutions and individuals worldwide.

The company’s business includes corporate finance and mergers and acquisitions, institutional equities and fixed income sales, trading and research, private client services, derivatives, foreign exchange and futures sales and trading, asset management and custody services.

Through Bear, Stearns Securities Corp., it offers prime broker and broker dealer services, including securities lending. Headquartered in New York City, the company has approximately 10,500 employees worldwide. For additional information about Bear Stearns, please visit the firm’s Web site at http://www.bearstearns.com.

For important information regarding the companies in this report, please contact your registered representative at 1-800-371-0978, or write to Uzi Rosha, Equity Research Compliance, Bear Stearns & Co. Inc., 383 Madison Avenue, New York, NY 10179

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