Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Gold/Mining/Energy : Mirant Corporation (MIR) -- Ignore unavailable to you. Want to Upgrade?

To: KyrosL who wrote (246)	2/23/2002 12:57:57 AM
From: Softechie	Respond to of 903

Crisis of confidence swamps U.S. power companies By Paul Thomasch NEW YORK, Feb 22 (Reuters) - The hole just seems to keep getting deeper for some major U.S. power companies. It's no longer the case of having investor confidence sunk by the Enron scandal. Now questions about opaque accounting and weak balance sheets are piling up. ADVERTISEMENT On Friday, for example, AES Corp.'s (NYSE:AES - news) stock slipped to 10-year lows, while Calpine Corp.'s (NYSE:CPN - news) fell to levels last seen in June 1999 on concerns they have not fully come clean. Simply put, it has become a matter of trust for investors, said John Nichol, a portfolio manager with the $900 million Federated Utility Fund. Power companies have not been ``forthright about how they manage their business model and how they fix their books,'' he said. These days, when companies promise to clean up their books, said Nichol, they face a skeptical audience. ``People are saying, 'Wait a minute you didn't tell us the whole truth a year ago? Why should we believe that you are now able to restructure your balance sheet?''' In the case of AES, disclosures that it backed $650 million worth of loans with unregistered stock added to a host of problems faced by the Arlington, Virginia-based company. The company has been rocked this week by its exposure to Latin America and concerns a recent restructuring plan will fall short of what is needed to right its balance sheet. Long criticized for its complex financing, AES's so-called secured equity-linked loans could result in a massive dilution of its stock if the unregistered shares were needed to cover the loans. Shares of AES fell to lows not seen since August 1992, before recovering to close higher, after Standard & Poor's said use of the company's unregistered stock as collateral for the loans was unlikely to be ``the cause of a credit crisis.'' Shares gained 0.5 percent to $4.13 on Friday, but were off 41 percent for the week. CALPINE'S CREDIT NEEDS For San Jose-based Calpine, skepticism about its finances after its debt was downgraded to ``junk'' status by two ratings agencies has battered the independent power producer. Calpine's stock on Friday fell 2.8 percent to $7.11 as investors awaited news on whether it had gained a new credit line needled to finish 26 power plants under construction. The company has already has canceled $2 billion from its capital spending program and postponed plans to build 34 new power plants. ``The market is looking at this as critically important to Calpine. If it doesn't come through, there will be a lot of very tough decisions to make,'' said Gordon Howald, an analyst with Credit Lyonnais. Calpine and AES are hardly alone. El Paso (NYSE:EP - news), Williams (NYSE:WMB - news), Mirant Corp. (NYSE:MIR - news) and others have unveiled drastic measure to try to win back the faith of Wall Street, including plans to sell a combined $7.5 billion or more worth or power plants and pipelines. ``They are attempting to restructure their balance sheets and if they can't get it restructured they have a problem,'' said Nichol, adding that many of the power producers ``are walking a tightrope right now.'' And it shows in many of their stock prices. A year ago, AES was trading at almost $57 a share, while Calpine hovered at about $43 a share. Nichol said even though the stock of one of the power companies ``could go up 100 percent in the next year,'' one of them ``could also probably go bankrupt.'' ``I don't think I need to take that risk right now.'' (-- Additional reporting by Janet McGurty and Nichola Groom)