Calpine rejects comparison with Enron

Calpine Corp. executives said the company is not facing the same problems that affected Enron Corp. and any close comparison is unfounded.

Pete Cartwright, CEO, hosted a conference call with investors to quell any concerns generated by a recent published report that implied the two companies had similar structures, strategies, and accounting practices.

“Calpine is not another Enron,” said Pete Cartwright, CEO of Calpine, San Jose. “We never worked to emulate the Enron business model. The comparison is ridiculous.”

Cartwright stressed that Calpine’s model is to build and operate the fleet of new and efficient power plants and sell the power on long term contracts to load serving entities.

“We don’t have speculative trading positions,” he said. “Enron was a commodities trader.”

Calpine’s strategy to build and operate a huge fleet of power plants in the face of falling electricity commodity prices is not a problem either, he said.

“We always said that the goal of deregulation is to lower electricity prices to consumers. We fully expect prices to go down in deregulated markets,” said Cartwright.

Almost two-thirds of Calpine’s power sold from power plants is locked into long-term contracts.

Even though power prices are falling, Calpine officials said there is still sufficient cash flow generated from those contracts off of existing plants to service the debt.

The existing $13 billion in contracts can cover the entire debt of the company, Cartwright said.

The published report said that Calpine had $10 billion of debt on the balance sheet.

“What the report didn’t say was we have $20 billion of assets,” said Cartwright.

Analysts agree that it is a stretch to say the situations are similar. Enron followed an “asset light” strategy, and Calpine is clearly asset based. Also, Calpine has no off balance sheet financing transactions that link back to the parent’s equity.

The one similarity is Calpine’s high growth rate depended on high valuations to get inexpensive access to capital and equity to fund the construction program, said Andre Meade, analyst with Commerzbank Securities, New York.

“But if there is a problem, it’s easy to fix at Calpine,” said Meade. “Just build less plants.”

Meade is not worried about liquidity for Calpine or problems with going to the capital markets. It could just stretch out the building program over more years, he said.

Meade said his concern about Calpine is its strategy of building one type of power plant, with one fuel, in relatively few regions. He said that strategy can be risky.

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