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Calpine shrugs off downgrade
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December 17, 2001: 10:21 a.m. ET
Power producer says downgrade of debt to "junk" status won't harm business.
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NEW YORK (CNN/Money) - Beleaguered independent power producer Calpine Corp. said Monday its operations won't be affected by Moody's downgrade of its debt to "junk" status, its latest humiliation in the wake of the collapse of competitor Enron Corp.
Calpine shares fell nearly 20 percent Friday after Moody's Investors Service cut its rating of Calpine's debt to Ba1, the highest "junk" rating from Baa3, the lowest investment grade.
Calpine (CPN: down $0.31 to $12.89, Research, Estimates) shares were steady in early trading Monday.
Moody's said the company, which develops and operates power plants and sells electricity, had accumulated significant debt and needed to improve on its "modest" operating profits. The bond-rating agency also cited Calpine's stock price, which has plunged from last March's high of $58.04.
The stock was especially battered last week, as Wall Street firms from Lehman Brothers to Raymond James downgraded it, some comparing Calpine's business model to that of Enron, the Houston-based trader that recently declared bankruptcy amid one of the most spectacular collapses in corporate history.
San Jose, Cal.-based Calpine said Moody's downgrade will not trigger any defaults under its credit agreements and will have "no material impact" on credit requirements in its power sales agreements. Calpine said it was still doing business with "its usual creditworthy counterparties."
Click here for more on the Enron collapse
"Calpine is committed to restoring its investment grade rating, which it first received from Moody's two months ago," Calpine Finance Co. President Bob Kelly said in a statement.
Moody's had upgraded Calpine's debt to investment grade on Oct. 2.
On Friday, Moody's also downgraded the debt of Dynegy Inc. (DYN: down $1.94 to $23.00, Research, Estimates), which had planned for months to merge with Enron before it canceled the deal in late November. The two companies are now suing each other. 
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