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Calpine Notes Earnings 'Challenge'

June 21, 2002|From Bloomberg News

Calpine Corp., a power producer with plants in 29 states, faces "a challenge" to meet its 2002 profit forecast because of lower margins, Chief Operating Officer James Macias said Thursday.

"We would need to see movements on the spark spreads," a measure of profit from producing power from natural gas, for the company to meet projections of $1.50 to $1.60 a share this year, Macias said at an industry conference.

The news sent Calpine shares down $1.02, or $12%, to $7.78 on the New York Stock Exchange. Shares of the San Jose-based company have declined 80% in the last year as the weak economy reduced demand for electricity. Energy stocks also have fallen after the collapse of Enron Corp.

Calpine has slashed capital spending for 2002 and 2003 by $3 billion, sold shares and paid off $953 million in debt since December to fortify its balance sheet.

The stock decline is "an overreaction," said Shelly Meyers, who manages about $50 million at Meyers Capital Management, including Calpine shares. "I think they'll only make $1.20 a share, but they will be making real money. The market is reacting more to passion and emotion than reason."

Macias said Calpine might provide another forecast on 2002 profit in its second-quarter earnings announcement, due about Aug. 1. The company was expected to earn $1.49 a share this year, according to Thomson First Call.

Earnings "are difficult to assess now," said Chris Budzynski, analyst at Legg Mason Wood Walker Inc. "It's dependent on a number of variables, the two biggest being the weather and the economy. If you get hot weather and economic improvements, you could run into problems with supply in some parts of the country and have higher prices."

Budzynski rates Calpine's stock a "buy" and doesn't own its shares.

Calpine has been seeking a partner to back energy transactions after Moody's Investors Service cut the company's credit rating to "junk" status in December.

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