Citi Revises Outlook on Calpine Corporation

Citi has published a report on Calpine Corporation CPN brightening the view of the energy company's future. In the report, Citi wrote, "We are raising our utilization assumptions for Calpine's North and Southeast combined cycle gas turbine fleet to 44% for 2013, up from 41%. EPA's recently disclosed CSAPR SO2 rule, if implemented, should raise the coal to gas switching breakeven point from ~$6/mmbtu to 7.50/mmbtu. This in turn should drive utilization rates higher by roughly 5-10% above 2011 levels for the North and Southeast fleet in our view. We estimate, using current forward spark spreads, that this should add ~$70 million in EBITDA by 2013 versus current year levels. Consensus EBITDA estimates for Calpine have not risen since the CSAPR rule was publicly released, suggesting the Street has not yet fully accounted for CSAPR's effect in our view." Citi rated Calpine a BUY with a price target of $20.00. Calpine closed Monday at $16.12.