After a couple of years of forgoing blaming California's business climate for their misfortunes, some of the merchant generators' second-quarter earnings this year were bleak—Calpine's. Dynegy, Reliant, and Williams posted gains over this time last year, while others slumped. \t NRG Energy, in league with Dynegy for their West Coast Power venture, cited the loss of state contracts. Heavily leveraged Calpine appears sanguine that the state's growing power demand could help turn it around, but it still has billions of dollars in debt to pay off even if it does so. <b>AES:<\/b> The giant worldwide energy company is rescheduling its previously planned August 9 earnings call to a later date "due to the company's planned restatement of its financial results," according to a statement. <b>Calpine:<\/b> While suffering from increased losses on its bet of merchant power, Calpine reported a second-quarter loss of $298.5 million, compared with a loss this time last year of $28 million. Despite the losses, Paul Posoli, Calpine executive vice-president, told analysts that the demand for energy this summer bodes well for the company. The company invested heavily in building new power plants, including several in California, among them the Metcalf and Otay Mesa plants. But the borrowing took its toll, and Calpine has been refinancing its debt load—now standing at $17.4 billion, down from more than $18 billion. "Calpine continues to make significant progress in advancing our strategic initiative to de-lever our balance sheet and reduce interest expense," stated chief executive officer Peter Cartwright. Calpine has been selling off its assets, but not in California. Instead, it announced that it would be working with GE Energy to build a new plant-Inland Empire in Southern California. It also recently ramped up the Pastoria Energy Center to 750 MW. <b>Constellation:<\/b> Constellation posted $121.7 million in quarterly profits, compared to $128 million this quarter last year. The company owns the 830 MW High Desert power plant in California. It also has a business, Constellation NewEnergy, that provides commercial and industrial customers direct access. <b>Duke:<\/b> Duke Energy posted $309 million in income this past quarter, compared to $432 million in the second quarter last year. The unit that holds California power plants, Duke Energy North America, however, reported a loss of $58 million in the second quarter, worse than a year ago, when it lost $38 million. The company blamed that on decreased sales due to milder weather in the West. This summer's hot weather could keep losses in check, predicts the company. <b>Dynegy:<\/b> Dynegy announced net income for the second quarter of $32 million, well up from $2 million this quarter last year. Dynegy's partnership with NRG Energy in California, West Coast Power, accounted for $1 million this past quarter, compared with $47 million in the same quarter last year. West Coast lost its long-term contract with the Department of Water Resources at the end of 2004. \t Although it no longer has a state agreement, West Coast is "actively working on repowering" its El Segundo plant, according to chief executive officer Bruce Williamson. \t After the quarter closed, Dynegy announced that it would sell its Midstream natural gas business to Targa Resources, a Houston, Texas-based company. Dynegy expects to receive $2.475 billion in cash, of which $2.35 billion will be paid at closing. The sale is expected to close in the fourth quarter of 2005. The proceeds from the Midstream transaction will be used to reduce outstanding debt. \t As of March 31, 2005, the Houston-based energy company had $5.326 billion of debt outstanding. As a result, on August 3, Standard & Poor's gave Dynegy a B\/B-2 credit rating. "The rating action reflects the uncertainty regarding the use of the proceeds from the Midstream sale as well as the sustainability of Dynegy's remaining business lines," stated S&P analyst John Kennedy. While proceeds could be used to significantly lower debt levels, Dynegy, according to the ratings agency, has stated that some proceeds could be used to fund strategic growth opportunities. <b>FPL:<\/b> FPL Group reported a second-quarter net income of $203 million, down from $257 million in the same quarter of 2004. Subsidiary FPL Energy, which owns California wind farms, among other assets, posted a $20 million net income, compared to $69 million in the same quarter last year. The downturn was based on hedging, but FPL called the movement "positive." The company noted that "the positions that have been hedged remain essentially unchanged in value, while those that have not been hedged have increased in value." \t <b>NRG Energy:<\/b> Net income for NRG in the second quarter was $23.9 million, down from $83 million in the same quarter last year. The company reported lower income from West Coast Power, co-owned with Dynegy (see above), but it was partially offset by reduced interest rates and lower taxes. For instance, the company's Western plants contributed $5.9 million for the quarter, compared to $23.2 million the same time last year. West Coast Power's contract with the Department of Water Resources expired at the end of last year. "We continue to be bullish on California's capacity market reform," said one senior official. Executives said that California's resource-adequacy developments provide "substantial incentives for load-serving entities to hedge price risks through long-term contracts." That could mean that NRG's power plants could find buyers for their energy and would not have to risk selling power on the merchant market. <b>Reliant:<\/b> Reliant posted a gain in the second quarter of $70 million, compared with a loss the same time last year of $64 million. \t "The California regulatory landscape still holds some uncertainty," but it is going in the right direction, according to company officials. Output from Reliant's California power plants was slightly down in the second quarter this year compared to the same time last year - 1.17 million MWh in the past quarter, compared with 1.42 million MWh the same time last year. In related news, on July 29, Reliant settled for $68 million a shareholder class-action lawsuit related to trading activities from 1999 to 2001. <b>Williams:<\/b> Williams announced a second-quarter income of $41.3 million, compared with a loss at this time last year of $18.2 million. The company attributed much of the improvement to its natural gas business.