Posted on 02/14/2002 6:55:30 PM PST by Ernest_at_the_Beach
Edited on 07/19/2004 2:09:37 PM PDT by Jim Robinson. [history]
New York, Feb. 14 (Bloomberg) -- Calpine Corp. is seeking a partner with investment-grade credit to back energy trades after the U.S. electricity producer had its debt rating cut to junk and its shares plunged more than 80 percent.
Calpine is negotiating with three companies to combine its trading arm, Calpine Energy Services, with a single partner, Chief Executive Officer Peter Cartwright said at an industry conference in New York. He declined to name the companies.
(Excerpt) Read more at quote.bloomberg.com ...
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I see it as a little chlorine in the gene pool of the energy industry. My pick for winners are those old, conservative utility companies that everyone wrote off a few years ago. The highflying Wall Street types who figured they were smarter than those stogy old guys who have been in the business for 100 years, are now crashing and burning.
Looks like a Tortoise and Hare story.
I see Calpine as three companies; an energy trading company, a powerplant developer, and a powerplant O&M service company. The last two appear to be well run and basically profitable.
Unfortunately "energy companies" have a bad name at the moment. What should have a bad name at the moment is energy speculation and commodity broker companies.
Calpine's trading arm, read that commodity broker-like operations are the one that they need to shore up. Enron was first a natural gas pipeline company that became an energy commodity broker and then broker of bandwidth and everthing else including weather.
The commodity or options market is very risky, more people loose money than make money in that market. Enron, and Calpine trading are learning a hard lesson that we all know; commodity trading may be risky. What the Enron's and Calpine trading's of the world did not realize was that natural gas that traded in a fairly predictable $2 to $6 per 1000 scf range spiked up to $25 to $40 in the height of the calpowercrisis while electricity that was in the 1.5 to 5.5 cents/kWh range jumped to a 20 cents/kWh to 100 cents/kWh range. When a commodity market has a price change of one to two orders of magnatude, even the smart option brokers can loose their shirt.
What the rating agencies are saying is that if you want to play in the options market, you better have one hell of a lot of capital to be in a market that can change costs by over a factor of ten in the matter of a couple months. Calpine, Enron and others didn't have the level of capital require to play in such a volital market.
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