An Alternate View of Calpine's Coming Year - Or, which planet are we on?
thestreet.com
Cash Getting Crunchier at Calpine
By Peter Eavis Senior Columnist 01/31/2002 05:20 PM EST
Calpine's (CPN:NYSE - news - commentary - research - analysis) cash crisis
continues.
The company reported fourth-quarter earnings Thursday and offered its 2002
outlook, but said little that would alleviate concerns that the power producer faces
the mother of all cash crunches this year. Calpine has said it would consider
returning to the capital markets, but that's a fate debt-heavy Calpine would do
better to avoid given the weakness in its shares; the company didn't immediately
return calls seeking comment Thursday. Calpine stock, which is more than 75% off
its 52-week high, added 14 cents to close at $11.20.
On a conference call Thursday and in its fourth-quarter earnings press release, the
company offered additional details on uses and sources of cash, allowing us to
update the calculations we made on Jan. 18 (see the table below).
As the table shows, Calpine's expected cash sources, totaling $4.38 billion, barely
cover its needs, of $4.36 billion. And that's taking the company's numbers at face
value.
So what might not pan out in Calpine's own numbers? One big risk is that the cash
flow number of $1.2 billion might be hard to achieve. That figure is based on an
EBITDA (earnings before interest, taxes, depreciation and amortization) projection
of $2 billion.
But, despite being asked, the company wouldn't offer a power-sales margin on the
call; that data would've allowed investors to test that forecast. And with gas and
power prices slumping, that $2 billion looks aggressive -- meaning the $1.2 billion
in operating cash flows also looks tough to achieve.
There are other potential cash uses that Calpine didn't factor into its calculation.
The company has said that it'll have to make a net payment of $160 million to
Enron to cancel a gas contract, but it declined to say how much of that cash it
thought it might have to pay out in 2002. The company didn't give details on any
payments it may have to make to cancel equipment purchases.
Updated Calpine Cash Analysis
Company projections for 2002, in millions of dollars
Sources Uses
Cash on Hand $1,800 Capital Spending $2,500
Credit Lines 875 Lease Payments 330
Operating Cash Flow 1,200 Payment of Debtlike 60
Securities
Sales Leaseback 250 Maintenance 250
Working Capital 400
Repay Bonds 819
TOTAL $4,375 TOTAL $4,359
There's also a chance that Calpine, with its credit rating under pressure, may find it
hard to find partners to raise the $500 million from the sale-leaseback deal. And
cash taxes will probably be higher than the forecast $100 million in 2002.
Let's redo the numbers. If we say EBITDA comes down to $1.7 billion and cash
taxes are $50 million higher, that takes operating cash flows down to $850 million.
Let's then assume Calpine makes only $250 million through the sale-leaseback. In
total, then, sources of cash would be $600 million lower at $3.78 billion. We could
increase the cash uses by $80 million to cover half of what Calpine owes Enron,
and add $10 million for plant cancellations. This would take the total use number
up to $4.45 billion, or $670 million higher than sources.
Now, Calpine says it can raise some $500 million from other sources if it has to. It
will have to.
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Mr. Market, it would seem, is finding Mr. Eavis assessment much more believable.
-Ray |
