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Gold/Mining/Energy : CPN: Calpine Corporation -- Ignore unavailable to you. Want to Upgrade?

To: Howard R. Hansen who wrote (250)	1/21/2002 6:16:33 PM
From: Bob Rudd	Respond to of 555

Returns are highly variable depending on opportunities to lock in future spark spread. Over the past 2 years they have been excellent, but have recently deteriorated. Projections made at the top [bottom] of the market will prove to be too optomistic [pessimistic]. The pullback in plant construction is actually going to be favorable because it insures there will be times ahead when they will be able to once again lock in very attractive forward revenues. The current pricing lull is not due to excess capacity so much as a combination of unfavorable weather [If you sell power] and the economic slowdown. Neither is permanent. Shortfalls and pricing power can come quickly when the economy reaccelerates and the weather turns favorable to power sellers. Also, modest return on assets translates into much higher return on equity due to leverage that is typical of most utilities. Concerns about excessive leverage have been pretty much addressed with recent financings.