Publish date:

Report Card: Jonathan Raleigh


Graduate of

Villanova University

. Prior to joining

Goldman Sachs

last year, Raleigh headed the power and utility research group at

CIBC World Markets


Industry Outlook and Style

A power crisis in California has sent rolling blackouts through the state and has put its two largest utilities,

Pacific Gas & Electric

, a


(PCG) - Get PG&E Corporation Report

subsidiary, and

Southern California Edison

, a unit of

Edison International

(EIX) - Get Edison International Report

, on the verge of bankruptcy .

Gov. Gray Davis

and the state legislature have been scrambling to address the situation to ensure that the lights don't go out.('s

Christopher Edmonds

has been following all the twists and turns of this


The state's power woes have hurt the utilities group as a whole this year. Nevertheless, assuming those problems are resolved, Goldman Sachs analyst Jonathan Raleigh says that the fundamentals for most companies in the sector look "phenomenal." In a recent research report, he highlighted several positives that he argues are not being discounted in current valuations: continued strength in oil and gas prices, new opportunity in the convergence of electricity and natural gas, the continuance of a stronger reinvestment cycle, opportunity created by deregulation and more creative managements, and further restructuring in the energy and utility industries.

In particular, he expects all the independent power producers -- IPPs are the outfits that generate power and sell it to utilities like PG&E -- to do well this year. As his top pick for the sector, the Goldman Sachs analyst names


TheStreet Recommends


, which has been one of the group's best-performing stocks for two years running, he says.

Other names in the IPP group include


(AES) - Get AES Corporation Report





NRG Energy

(NRG) - Get NRG Energy, Inc. Report


Southern Energy



The California crisis "has definitely dampened enthusiasm for the sector, and it was having a huge impact on companies like Calpine, Dynegy, Southern Energy and any of the guys that supply power," says Raleigh. But on Jan. 19, Davis and the state's lawmakers cobbled together a short-term Band-Aid for the situation, passing legislation appropriating $400 million, which the state's

Water Resources Department

has been using to buy power from the generators that are owed money by the two utilities.

This solution, while only a short-term measure, clarified the situation a bit for the analyst. "This showed the market that the pressure that's been placed on the generation stocks is probably incorrect because the generators are going to get paid under any scenario, whether the utilities go bankrupt or not," he contends. (Goldman Sachs has had investment banking relationships with all of the companies mentioned here except Dynegy.)

Stock Pick

Favorite stock for next 12 months:



"The stock was up 400% in '99, something like 180% last year, and I think it will be up over 100% this year. It's just the fastest growing company in our sector, and relative to what's out there for estimates, I think they're going to materially exceed expectations for a while. Their business model has been a pretty straightforward and simple one of adding brand-new baseload gas-fired generation all over the place where it's necessary. And they've been the most proactive project developer in the U.S."

Rate Their Stock Picks:

Which stock do you like best?

Fleishman: Exelon

Raleigh: Calpine

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