FBR sees supply and demand balance in electricity market

ARLINGTON, Va., Aug. 14, 2001 – Friedman, Billings, Ramsey & Co., Inc., a subsidiary of Friedman, Billings, Ramsey Group, Inc., today said that the future demand for new power plant capacity is grossly underestimated, while the forecasts for new supply are exaggerated.

In an 8-page report, entitled “The Overbuild Scenario Debunked: Supply and Demand Balance More Likely,” Senior Analyst Maurice May said that technological displacement of inefficient power plants, the critical need to rebuild reserve capacity, and the growing demand for electricity are demand drivers that have not been widely recognized. FBR’s study of 439 gas-fired plants in operation finds 112,000 megawatts of inefficient capacity, which is a target for displacement.

“On the supply side, it is unreasonable to presume that all announced generation will be built,” May said. “Based on regional and state analysis, we estimate that no more than 60 percent of all announced generation for the next five years will be built, which amounts to about 175,000 megawatts. Compared to our demand projections, excess capacity is absent, and supply and demand are more or less in balance.”

May concludes that neither investment capital nor stock prices of independent power companies are going to wait until 2005 to determine whether an excess supply of electricity exists. As information is disseminated on issues he outlined in his report, stock prices should respond, he said. Economic forces in play will favor big power producers with efficient, and low-cost generation, sophisticated energy marketing and trading operations, and scale and critical mass in targeted markets, such as Mirant Corporation (MIR) and Allegheny Energy, Inc. (AYE), May said.

Friedman, Billings, Ramsey Group, Inc. (NYSE: FBR – news), the parent company of Friedman, Billings, Ramsey & Co., Inc., is a financial holding company for business that provide investment banking, institutional brokerage, specialized asset management, and banking products and services. FBR provides capital and financial expertise throughout a company’s lifecycle and affords investors access to a range of proprietary financial products and services. Headquartered in the Washington metropolitan area, FBR has offices in Arlington and Reston, Va., Atlanta, Bethesda, Md., Boston, Charlotte, Chicago, Cleveland, Dallas, Irvine, Ca., New York City, Portland, Seattle, London, and Vienna. Bank products and services are offered by FBR National Bank & Trust, member FDIC and an Equal Housing Lender. For more information, see http://www.fbr.com .

Additional information on the securities mentioned in this report is available upon request. This report is based on data obtained from sources we believe to be reliable, but is not guaranteed as to accuracy and does not purport to be complete. Because of individual client objectives, this report should not be construed as advice designed to meet the particular investment needs of any investor. Any opinions expressed herein are subject to change.

This report is not to be construed as an offer or the solicitation of an offer to buy or sell the securities herein mentioned. From time to time, this firm, its affiliated entities and/or their respective directors, officers, employees or members of their immediate families may have a long or short position in the securities mentioned in this report.

These securities may be sold to or purchased from customers or otherwise by this firm, its affiliated entities, and/or its directors, officers, employees or members of their immediate families, as principal or agent. This publication has been issued and approved by FBR Group under a compliance routine approved by Friedman, Billings, Ramsey International Limited, its UK SFA Regulated subsidiary, for distribution to UK and European non-private clients.


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