CPN: Calpine Corporation Message Board

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Gold/Mining/Energy : CPN: Calpine Corporation

FRO 23.66

-0.3%

Nov 7 9:30 AM EST

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To: Clement who wrote (166)	12/9/2001 4:10:38 PM
From: Clement	Read Replies (1) of 555

An equally interesting article from Calpine: www0.mercurycenter.com Here are my thoughts - First it depends what the concern is with respect to Calpine - is it (a) solvency? or (b) future earnings potential and growth. If (a) you can bet that there would be a lot more concern re: bonds, and bond ratings agencies post enron. And in fact we did see that when the price of calpine's public bonds dropped -- but they subsequently recovered. Calpine has raised an additional $2.6 billion in debt since October. Granted, this is pre-enron, but if I recall, concerns about enron first popped up in October anyway. Bank debt and bank facilities are often considered good signals to the public markets because bankers have access to more information than the public markets do. If (b) - I think there is legitimacy with respect to concern about their trading activities. But marginally, the returns are pretty small net-net (10%). And Calpine doesn't extend their risk levels beyond what they produce to any substantial degree (I believe 10% was the margin quoted). So the bottom line is -- do you think Calpine will continue to be able to execute well. Bearing in mind that they are a low cost producer. Also bear in mind their focus on long term contracts. Thoughts? Clement

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