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To: Dale Baker who wrote (33297)	4/22/2003 9:25:48 AM
From: Dale Baker	Read Replies (2) \| Respond to of 118717

S&P on CPN: Calpine's ability to increase the proportion of its generation under profitable contract in 2003 will be crucial to proving it has a sustainable business model, in our view. If CPN can avoid financial distress from a heavy debt load and current weak power margins, longer term returns should be exceptional as growing electric demand from a recovering economy soaks up surplus generating capacity over the next couple of years. Given high natural gas prices and below average hydroelectric stream flow conditions, we believe CPN has the potential for a very strong summer quarter. Other potential drivers for share appreciation include consummation of CPN's anticipated liquidity drivers, refinancings of debt obligations and signing of new power sales contracts. Calpine's earnings quality (as measured by Standard & Poor's Core EPS calculation) is superior to peers, as it has no defined benefit plan and is expensing stock options in 2003. CPN trades below a number of energy merchants based on our estimated 2004 P/E and current P/B ratios. We recommend aggressive investors accumulate the shares.