Legacy of Enron mess haunts energy traders
By Sheila McNulty, FT Syndication Service
HOUSTON: US energy traders continued to struggle in the third quarter, with Calpine, the debtladen US utility, tumbling to a loss and Williams suffering a 96 per cent drop in profits.
The companies, which reported recently, continued a trend of poor sector results that began with the bankruptcy of Enron in 2001.
Calpine pulled in $3.3bn in revenue, 36 per cent more than last time, due to rising power prices and additional generation. Yet financial burdens created by its $18bn in debt left Calpine recording a loss of $216.7m, or 45 cents per share, from earnings of $141.1m, or 32 cents.
Williams reported net income of $4.4m, or one cent per share, down sharply from $98.6m, or 19 cents, previously. Although it benefited from increased natural gas production in the high commodity price environment, Williams' results underlined that it still is paying for the excesses of the pre-Enron era, with unrealised mark-to-market losses experienced in its power segment.
Many energy companies are unravelling their mark-to-market accounting, which involved accounting now for future profits from planned projects or deals.
Interest in Calpine has centred on its legal battle to access the funds creditors have withheld as it works all angles to shore up its financial position.
Calpine is in talks to lease the Geysers, its 19 geothermal power plants in northern California, say people familiar with the discussions, to avoid restrictions on its use of the proceeds if it sold the plants.
No deal is expected until after November 11, when Calpine must convince courts it is unfairly being denied access to the money. The Bank of New York, trustee for some Calpine debt, refused to give the company access to the funds from the sale of natural gas assets in July.
Calpine sued, demanding the funds. If it loses the hearing, Calpine is likely to be forced to return the $315m it already has taken from the account and be denied access to the $395m remaining.
Calpine said the Geysers has continued to increase in value and "the phones would burn up" if the company decided to market the asset.