Calpine predicts profits will skyrocket past expectations

Guided by Calpine management's projections, analysts surveyed by First Call/Thomson Financial had predicted first-quarter earnings of 13 cents per share.

Calpine's upside won't stop with the first quarter, either. The company also raised its earnings target for all of 2001 to $1.80 per share, 18 percent higher than the previous goal of $1.52 per share. The projected earnings translate into a $645 million profit, which would nearly double Calpine's 2000 net income of $325 million.

Investors rewarded Calpine by driving up its stock $3.04 to $55.92. Since California deregulated its electricity market in March 1998, Calpine's stock has gone up by 25-fold, creating $15 billion in shareholder wealth.

Calpine delivered the good news to its shareholders at a time when California is wringing its hands over how to pay for an astronomical electricity bill that seems to keep rising.

After shelling out $27 billion for electricity last year, California is on pace to run up a $70 billion bill this year, according to a report earlier this month issued by the state's power grid manager.

To help pay for the higher costs, California regulators this week approved average electricity rate increases ranging between 42 percent and 46 percent for the state's two largest utilities, the nearly bankrupt Pacific Gas and Electric and Southern California Edison.

And state Controller Kathleen Connell warned that California will exhaust its budget surplus by Oct. 1 unless more extreme action is taken.

Calpine is not the only power generator making huge profits. Mirant Corp., based in Atlanta, announced earlier this month that its first-quarter profits will triple Wall Street's expectations.

Calpine portrays itself as an ally of the state. The company sells most of its power in California at prices set in long-term contracts and rates established by state regulators.