Calpine Plans New Debt Sale as Ratings Rise

Independent power company Calpine Corp. plans to raise about $2 billion from debt sales, analysts said Tuesday, after Moody’s Investors Service upgraded nearly all its debt to investment grade. Shares rose more than 14%.

The San Jose-based company, which has already raised $3.5 billion from debt sales this year, said it is selling about $1.35 billion of senior notes in four currencies--U.S. and Canadian dollars, euros and British pounds.

It said it will use proceeds to refinance bridge loans it obtained for recent purchases, as well as for working capital and general corporate purposes. Analysts said it is privately selling an additional $655 million of “pass-through” certificates. The sales could take place by next week, market sources said.

Moody’s on Tuesday upgraded the senior unsecured debt of Calpine and its affiliates to “Baa3,” its lowest investment grade, from “Ba1,” its highest junk grade. Upgrades can lower borrowing costs, and companies upgraded to investment-grade from junk are known as “rising stars.”

The rating agency, whose actions affect $9 billion of debt and preferred securities, said Calpine enjoys “very strong, broad and deep management,” a “focused” growth strategy, “disciplined power marketing and financial and risk management” and significant contracted power sales and gas hedges for the next five years.

The other leading rating agencies on Tuesday also affirmed their ratings for Calpine’s unsecured debt--Standard & Poor’s, at “BB-plus,” its highest junk grade, and Fitch at “BBB-minus,” its lowest investment grade.

Calpine shares rose $3.05 to $24.75 on the New York Stock Exchange.

Calpine has made several purchases this year. In July, it agreed to buy from Entergy Corp. the Saltend Energy Centre in north England for about $800 million.

Analysts said the company performs well within what S&P; called the “highly politicized” California power market.