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Calpine's 1Q Loss Widens

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Calpine Corporation posted adjusted loss of 16 cents per share as against the year-ago loss of 14 cents and the Zacks Consensus Estimate of 15 cents a share.

The weak numbers were largely responsible for lower Commodity Margin, mainly due to the changes in the company’s portfolio, a move towards seasonal hedging in 2013 compared to annual hedging in 2012. The results were also affected due to lower generation due to the reversal of coal-to-gas switching that occurred during the first quarter of 2012.

Operational Performance

Quarterly revenues at Calpine were $1,241.0 million, higher than the Zacks Consensus Estimate of $1,083.0 million. The figure also increased from the year-ago figure of $1,236.0 million.

In the quarter, fuel and purchased energy expense jumped 29.3% to $821.0 million from the year-earlier figure of $635.0 million. Total operating expenses were $1,245.0 million, up 18.6% year over year.

In the reported quarter, commodity margin was $461.0 million, down 10.8% year over year. Adjusted earnings before interest tax, depreciation and amortization (EBITDA) decreased 12.0% to $286.0 million from $325.0 million in the year-ago quarter.

Quarterly Segment Performance

Commodity margin in the West Region was $202.0 million, down 2.9% year over year due to lower contribution from hedges.

Commodity margin in the Texas Region was $76.0 million, down 30.3% year over year due to lower contribution from hedges, lower spark spreads and lower generation output resulting from a reversal of coal-to-gas switching.

Commodity margin in the North Region was $142.0 million, down 1.4% year over year driven by lower spark spreads and lower generation output due to a reversal of coal-to-gas switching. The sale of Riverside Energy Center in Dec 2012 also contributed to the lower figure.

Commodity margin in the Southeast Region was $41.0 million, down from $56.0 million in the same period last year. The decrease was due to the sale of Broad River Energy Center in Dec 2012.

Financial Update

Cash and cash equivalents at the end of Mar 31, 2013 were $962.0 million versus $1,284.0 million at the end of Dec 31, 2012. Debt was $10,633.0 million, down marginally from $10,635.0 million at the end of Dec 2012.

Till date, Calpine repurchased a total of approximately 3 million of outstanding common stocks under the additional $400 million authorization for approximately $58 million at an average price paid of $18.97 per share.


For full-year 2013, the company expects adjusted EBITDA of $1,800.0 million to $1,960 million. It expects growth capital expenditures to be $250 million.

Zacks Rank

The company presently retains a Zacks Rank #3 (Hold). There are other companies which are worth buying now. These are Empresa Nacional de Electricidad S.A. with a Zacks Rank #1 (Strong Buy), while The AES Corporation (AES - Free Report) and CMS Energy Corp. (CMS - Free Report) hold a Zacks Rank #2 (Buy).

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