FYI - Fitch Puts Calpine On Watch-Negative
Fitch-NY-December 14, 2001: Fitch places its `BBB-` rating of the senior unsecured debt of Calpine Corporation (CPN) on Ratings Watch Negative. Calpine has some $11 billion of debt securities and lease-supported obligations outstanding. The action relates to an ongoing review of CPN's liquidity and business prospects in the light of turbulent market conditions that have impacted the company's access to the capital markets.
While the company's operating fundamentals are sound, the financial profile is aggressive, and is not consistent with the current market environment. Based on the company's strong asset portfolio and long-term contracts for a substantial portion of its current and future output, Fitch believes that if the rating is changed, the most likely outcome would be `BB+' or `BB'.
Questions have arisen regarding CPN's ability to refinance $878 million of maturing zero coupon notes and to fund future capital requirements. While CPN has a number of alternatives to address the short term financing requirements, Fitch will focus on the company's long-term plan for adjusting its capital structure to the new market environment. The company's financial leverage is relatively high. However, high financial leverage is somewhat mitigated by the relatively low cost and high efficiency of the company's generation fleet, ownership of gas and oil reserves valued on the balance sheet at less than their current value, and a meaningful level of contractual cover for future sales with credit-worthy counterparties. Also, the anticipated completion of the current phase of the company's capacity construction will result in reduced capital expenditures and increasing free cash flow over the next five years, providing an opportunity for management to reduce debt. From a credit viewpoint, management's recent statements that it may curtail the aggressive development of power projects not currently under construction is a favorable sign.
Calpine is a large independent North American power developer and power producer with related businesses engaged in gas production and power marketing. The company currently has 11,100 megawatts (mw) of installed generating capacity, up from had 5,849 mw at year-end 2000, and 17,100 mw under construction.
(END) DOW JONES NEWS 12-14-01
02:00 PM- - 02 00 PM EST 12-14-01
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Incidentally, if anyone cares, my position on Calpine has not changed. The storm will die down and Calpine will emerge strong and with the best fleet of energy generating plants (and locations) in the US. |
