PF Archive

Resurrection?

01 10 2001

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 recalcitrant lenders. ?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...