Calpine Puts in Blockbuster Week

In a week that saw it sign a 10-year supply deal with the state of California, double its gas reserves with a billion-dollar Canadian acquisition and dip into the financial markets for more than a billion, it seemed only fitting that San Jose, CA-based Calpine Corp. should announce bullish earning results for 2000.

It attributed all the success to the company's continued successful implementation of its aggressive growth strategy, announcing Feb. 6 triple-digit percentage increases in revenues, net income and earnings-per-share. Net income, before an extraordinary charge, were $324.7 million in 2000, compared to $96.2 million in 1999, a 238% increase; revenues were $2.3 billion, compared to $847.7 million in 1999, a 171% increase; and earnings-per-share were $1.11, compared to 43 cents/share in 1999, a 158% increase.

"Today Calpine has the largest construction and development effort ever undertaken in the electricity industry," said Peter Cartwright, Calpine CEO. Last week, the company increased its goal for the end of 2005 to 70,000 MW total among the power plant portfolio it plans to have in operation. In 2000, the company more than doubled its assets, growing to $9.7 billion compared to $4 billion at the end of 1999.

For the fourth quarter, net income jumped to $107.7 million, compared to $30.7 million for the comparable period in 1999; revenues were $1 billion, compared to $247.4 million in the fourth quarter of 1999; earnings-per-share were 38 cents vs. 13 cents.

Calpine said it expected to sign a 10-year contract with the state of California Tuesday at attractive rates, and it expects to be able to get paid by the two near-insolvent California investor-owned utilities by the early spring this year. Calpine has 400 MW of qualifying facility (QF) generation that is at risk until the utility financial problems are resolved.

"Market fundamentals continue to be very strong in California," said Calpine vice president Jim Macias who oversees the firm's operations in the state. "We're very confident that we are going to get full payment for all accounts due, which are principally tied to Pacific Gas and Electric Co."

Projecting the highest growth rate of any merchant power plant developer in the nation, Calpine in 2000 made acquisitions of some existing power plants and the power plant developer, SkyGen Energy, but also added to its natural gas portfolio with the purchase of TriGas Exploration, Calgary, adding 30 MMcf/d of strategic gas reserves.

"We've set a target to have equity gas of about 25% of what we consume," Cartwright said. "We're doing this as a means of increasing our net income. We have been very successful in producing gas at substantially below market indexes. We will continue to look to expand our ownership in the whole value chain in gas."

Cartwright said that Calpine now has the "financial resources to acquire larger positions" in natural gas, but he said that the company will continue to look for gas properties in which it can reduce the production costs to the advantage of their power plants with lower-than-market-based energy supplies.

Calpine's has 24 plants now under construction totaling 13,400 MW, and another 24 plants announced totaling another 14,200 MW in 2000. Five plants totaling 1,500 MW started operating in 2000 in New England, Texas and the Midwest.

Richard Nemec, Los Angeles

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