Uncertainty over how the Californian power fiasco eventually will
play out is causing spreads to widen on those deals that are going
to the project market for financing. Lenders are now looking with
concern at some companies, such as Edison Mission and Pacific Gas
& Electric, which were perceived as blue chip. Credit analysts
at some banks are getting rattled at the energy sector in general
while deal-makers are being forced to sweeten the take to lure in
?There is no doubt that the California energy crisis has had a
chilling effect on the perception of how robust the US energy
market is, but activity is not grinding to a halt,? says Ken
Malloy, chief executive of the Centre for the Advancement of Energy
Markets and a former Federal Energy Regulatory Commission official.
?California is unique from a number of perspectives. While every
state has at least one stupid energy policy, California has a
combination of stupid policies ? not least of which is that no
other state requires sell-off at fixed retail prices. Couple that
with a confluence of events ? dry season, nuclear plants down, gas
prices up and increased demand ? and you have the genesis of the
crisis. If only two of those events had occurred, there wouldn't
have been a crisis.?
Business as usual for some
However, for companies with committed lines of credit, the West
Coast meltdown has had little effect. Calpine, for example, has
launched the largest power generating initiative in California.
With an existing 2,400 megawatt (MW) of in-state generation,
Calpine has 2,030 MW of energy centres under construction and...
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