Posted on 02/11/2003 8:01:53 PM PST by MeneMeneTekelUpharsin
SAN JOSE, Calif., Feb 11 (Reuters) - Power producer Calpine Corp. (NYSE:CPN - News) said on Tuesday that it had reached deals with its turbine suppliers giving it the option to cancel future orders of $3.4 billion if demand in the depressed industry does not pick up. The San Jose, California-based company said it would record a pretax charge of about $207 million against earnings in the fourth quarter of 2002 for costs associated with the potential cancellation of 87 gas turbines and 44 steam turbines.
Calpine has been working to shed assets as it scales back plans for future expansion and analysts and investors reacted positively to the restructured turbine deal. The company's shares rose on the news, climbing 51 cents or 18 percent to $3.33 on the New York Stock Exchange on Tuesday. "This is a much better situation than the Street had been led to believe. It is a great deal for Calpine," said analyst Lasan Johong of Blaylock & Partners L.P.
Calpine said its remaining capital commitment for turbines was now about $594 million, down from about $4 billion. Turbine manufacturers included in the agreements were GE Power Systems (NYSE:GE - News), Siemens Westinghouse (XETRA:SIEGn.DE - News) and Toshiba International Corp (Tokyo:6502.T - News). Calpine said it had canceled 11 gas turbines and two steam turbines. The company can elect to go forward with the other turbines, in which case it will negotiate a purchase price and receive credit for payments previously made.
"They will end up ordering some of those turbines and getting some money (credit)," Johong said. Calpine was in the process of rapidly building a huge fleet of gas-fired plant power plants when prices for electricity suddenly collapsed in 2001. It responded by putting many future power plant projects on hold or shelving them altogether, leaving it with orders for turbines which it no longer needed. "This latest phase of Calpine's restructured turbine program reflects our continued focus on further reducing future capital expenditures," Chairman and Chief Executive Peter Cartwright said in a statement.
Calpine said it had agreed to pay about $109 million for the restructuring of the agreements and the cancellation of certain equipment. To date, it has paid about $91 million of that total with remaining payments of $9 million due this year, $6 million in 2004 and $3 million in 2005.
Have a good night all.
Here's a link showing what happened when the above news hit the wires around 2:22 p.m. Notice the volume and the chart about that time.
Calpowercrisis:
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Sorry, but that was out of line. Many of us have been baffled by Calpine's charmed relationship with the state govt. in California, but I'm sure that's the extent Ernest's involvement.
Aside: FoxNews was pumping DUK about a month ago when it was above 20. It's now in the 15 area. I found that suspicious...sounds like the old "pump-and-dump" to me.
Look back and see what kind of stories Ernest has posted about Calpine. As for the relationship between Calpine and Gray Davis, no, I don't like Gray Davis, but if you're in business and have hard assets in a given location, you HAVE to work out some kind of arrangement to get along with those in positions of authority. If you don't, survival is not in the cards.
This is another example of power companies cutting investment in new plants and equipment to generate power. California's demand for power will continue to grow. That's not even debateable.
Where are they going to get it?
Very good question. Perhaps they'll "nationalize" the power companies and take them over AFTER they've been built. Are we headed in that direction?
Uh...came by internet. Found them interesting. It's down today in spite of the news, but still interesting.
Where are they going to get it?
Be very worried if Grayout Doofus calls up the 40th Mech Infantry Division for an unspecified "emergency." He might decide to invade Arizona and Nevada.
Sometimes I wonder if Gray Davis is another Herostratus.
cancellation of 87 gas turbines and 44 steam turbines.
Where are they going to get it(electric power)?
The cancellation of that many gas and steam turbines means that Calpine has canceled on the order 14,000 MW to 22,000 MW of new power plants in the US. For round numbers let's assume 20,000 MW. Combine this with other companies canceling the construction of new power plants and one has to to wonder, "where are they going to get the power the US requires in the future?
Now going up to the 30,000 foot level, the Energy Information Agency estimates that in 2001 the entire US electric generation summer capacity (all sources) was about 855 Million kW. If we assume that each power plant has an average life of 30 year, then we need to replace 28.5 Million kW of generation a year. That is Calpine is canceling the construction of about 20 million kW of capacity, or 2 percent of total US generation capacity. Now considering that Calpine isn't the only company canceling power plants, the question for California and the entire US is how many percent have been canceled over the past year? Considering the size of Calpine, I would not be surprised to find out that cancelations would be on the order of 10 percent of US capacity.
This is a serious problem for the US electric power industry and all of its customers. Assuming no load growth, who is replacing the old power plants that are wearing out? If we assume the economy recovers, who will be building power plants for use by our children and the businesses that employe them? Inquiring minds want to know?
California should be especially worried, since they get much of their power from AZ and NM (maybe 20%?). The EPA will surely succeed in shutting down Mohave, Navajo, and Four Corners coal-fired plants within the next five years (polluting the viewscape in the Grand Canyon). Those plants produce lots of cheap power for Kali. They will be impossible to replace.
I guess everyone in the US will have to move to Texas if they want electricity.
Snopercod said: Uh...you must have just parachuted in here to these calpowercrisis threads. Ernest and I have been posting articles about Calpine for 2 1/2 years now. Not selected articles, but everything that we can find.
And that is about the extent of my interest, of course Calpine was particularly interesting because, snoper, dog gone, randita, and others of us , could not figure out why Davis was atacking every other one of the power producers except Calpine.
It did turnout that some of Davis people were buying their stock, and Calpine was making some contributions, etc! But it took awhile for those facts to come out.
Any way we were just seriously interested in turning up any and all facts on all aspects of the power crisis!
I think the group was pretty successful in building an understnading of and explaining much of what was going on!
It was all a lot of fun as well!
The factor that you and the rest of our rational FReeper commentators are ignoring is... The Liberal/Labor/Lawyer/Luddite/Consumerist/EnvironMentalist/NIMBY/Demo-Socialist GUILT-RIDDEN, NO GROWTH MINDSET!!!
Power/Job generation supports Capitalist Economic Progress and ATTRACTS GROWTH of productive people which they FEEL is in OVERSUPPLY! They are desperately determined to "Bring it all down, maaaaaaan!"
Davis & Brown, Jr. were permanently humiliated by daddy Pat Brown's build-up of CA to levels of success unseen by mankind in it's history by descendants of WHITE EUROPEAN MALES WITH CONQUERING (productive) ATTITUDES!
They will never stop till they've turned this all around as it helped make America an unstopable force in the world. It is their mission in life to equalize all nations and America must be reduced to the lowest common denominator.
That cannot happen till they break CA of it's productive habits with illegal immigration, restoration of the environment, (which includes returning it's economy to the savages that originally lived by grinding their nuts on the rocks) and bankrupting the capitalism that had become it's biggest government "program!"
This is their "big picture!" You can see these forces at work with CalPine and a host of other events/scenarios taking place right now, if one steps back and takes their long view.
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