Calpine slashes earnings estimates and capital spending for 2002

By the OGJ Online Staff

HOUSTON, Jan. 16 -- Independent power producer Calpine Corp. Wednesday slashed earnings projections for 2002 by 30% and put on hold the construction of 34 power plants, cutting $2 billion from expected capital spending in 2002.

Calpine, San Jose, said 2002 earnings before interest, taxes, and depreciation are expected to be $2 billion or $1.70/share, compared to an earlier estimate in late September of $2.45 to $2.60/share. First Call/Thompson consensus estimates on Jan. 15 were $2.20/share for 2002.

Calpine had clung to its ambitious building program plans throughout most of 2001 even though forward electricity prices plummeted and the economy entered a recession. Given market conditions, CEO Peter Cartwright said capital spending for 15,100 Mw of new capacity must go "on hold" pending further review.

Calpine said it will, however, continue to develop the projects until they are ready for construction. Projects under construction now will be completed, he said.

"Calpine believes the depressed prices in the domestic energy markets are temporary, and that demand for power will grow as the weather normalizes and the national economy recovers," Cartwright said in a statement.

One reason cited for cuting $2 billion of capital expenditures is the difficulty of obtaining attractive financing for the projects. "The company must have access to the capital required to build each project under attractive terms," he said.

Cartwright reaffirmed that the company has been able to tap the capital markets for about $5 billion in the last 3 months, despite the uncertainty created by the bankruptcy protection filing by Enron Corp., the depressed economy, and poor electricity pricing outlook. The company said it has sufficient capital and liquidity to retire $878 million of convertible debentures due in April and to complete all 27 power projects currently under construction.

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