Calpine initiated with "overweight"
newratings.com
Wednesday, January 02, 2008 12:02:07 PM ET
Lehman Brothers
NEW YORK, January 2 (newratings.com) - Analyst Gregg Orrill of Lehman Brothers initiates coverage of Calpine Corp (CPN.NYS) with an "overweight" rating. The target price is set to $25.
In a research note published this morning, the analyst mentions that Calpine is well positioned to gain from the CO2 mandates, while the market's preference for "green" stocks could lend upside to the company's share price. Calpine’s cash flow generation is likely to accelerate rapidly to $1.4 billion in 2012, the analyst says. Calpine’s capacity in the Southeast is underutilized, which provides the company with potential to exceed expectations going forward, Lehman Brothers adds.
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Commentary by David Wilson
bloomberg.com
Excerpt:
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Calpine Corp. may be as much as five weeks away from handing out new shares to creditors as part of its emergence from bankruptcy. Lehman Brothers Holdings Inc. didn't want to wait that long to recommend buying the power producer's stock.
Gregg Orrill, a New York-based analyst at Lehman, began coverage yesterday with an ``overweight'' rating. The San Jose, California-based company will benefit from its geothermal plants as investors favor renewable energy, he wrote in a report.
Calpine may reach $25 in the next 12 months, the report said. The estimate isn't comparable to the current share price, 34.5 cents as of yesterday's close. Under Calpine's reorganization plan, all of the shares outstanding will be canceled and holders will get warrants for a 10 percent stake. Some investors asked a federal judge yesterday to reconsider his approval of the terms.
Lehman's relationship with the company goes beyond analyst coverage. The firm managed two debt sales last year on behalf of Calpine's Canadian units, which divested a total of $504 million in notes from Calpine Canada Energy Finance ULC that they held.
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