Tuesday, August 12, 2008

Taking the Good With the Bad

Two companies, two different directions. Calpine is giving every indication that the formerly bankrupt power producer is back and getting stronger. Pacific Ethanol, the erstwhile media darling, isn't having such an easy go of it.

The Los Angeles Times contrasts the two companies' fortunes in separate bulletins:

Calpine Corp., the U.S. power producer that exited bankruptcy protection in January, reported a profit in the second quarter after a year-earlier loss from reorganization costs. Net income was $197 million, or 41 cents a share, compared with a loss of $500 million, or $1.04, San Jose-based Calpine said Monday. Revenue rose 37% to $2.83 billion.

The company also named Jack Fusco chief executive.Calpine said Fusco's appointment was effective Sunday. He replaces Robert May, who had been CEO since December 2005 and had said he would retire once a successor was in place. Fusco previously was CEO of Texas Genco Inc.Calpine is the largest U.S. producer of electricity fueled by natural gas.

The company was driven into bankruptcy in December 2005 after natural gas costs surged and a power glut held down electricity prices. Since then, Calpine has doubled forward sales that lock in profit margins.Shares of Calpine rose 61 cents, or 3.8%, to $16.60 after the earnings news."


"Corn costs hurt Pacific EthanolPacific Ethanol Inc., the alternative fuel producer partly owned by Microsoft Corp. co-founder Bill Gates, reported a second-quarter loss of $8.33 million on higher corn costs. The loss was 23 cents a share, compared with net income of $2.16 million, or 3 cents, a year earlier, Sacramento-based Pacific Ethanol said. Sales rose 74% to $198 million.

Higher prices for ethanol couldn't match the rise in corn costs during the quarter. Corn futures on the Chicago Board of Trade rose to a record $7.99 a bushel on June 27 amid speculation that Midwest flooding would damage crops. A bushel of corn produces about 2.7 gallons of ethanol.

"Ethanol prices did not rise enough to offset the rise in corn prices," said Ron Oster, an analyst at Broadpoint Capital Inc. in Albany, N.Y.Shares of Pacific Ethanol fell 32 cents to $2.05 after the earnings news."