The rating on Calpine Corp. (B/Negative/--), a San Jose, Calif.-based company that develops, acquires, owns, and operates power generation facilities, reflects the following risks: Calpine's credit statistics are weak. For example, the company's 2004 adjusted funds from operations (FFO) interest coverage was low at 0.7x. In addition, Standard&Poor's does not expect adjusted FFO interest coverage ratios to substantially exceed 1.0x in the near term. Overall business risks have increased. Calpine's monetization of contractual revenue and sales of its gas assets and assets with contractual revenues will increase cash flow volatility because merchant power revenues and higher gas expenses will make up a larger portion of available cash. Calpine has limited opportunities to reduce its debt burden and has
