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Banks could end up controlling U.S. power plants saddled with tens of billion of dollars of debt as the original owners walk out on generation assets crippled by project level loans far exceeding the plants' value, warns John Veech, managing director at Lehman Brothers.

Industry consultants that have taken flak for their overly optimistic power price forecasts over the past few years hit back at criticism that their forward curve projections fuelled the boom-bust cycle that's gripping the IPP industry.

The steep interest rate hikes associated with many of the high-profile corporate loan restructurings of recent months left panelists questioning whether filing for bankruptcy protection might not prove a better longer-term option for embattled power companies unable to repay debt.

Michael Polsky, the IPP entrepreneur who sold his Wisvest-backed SkyGen Energy operation to Calpine for $450 million three years back, tore into the oft-floated argument that the sectors' woes can be traced to a confluence of extraordinary problems. "It was not a 'perfect storm.' It was a failure of the business," he told attendees.

Lead underwriter Credit Suisse First Boston has been offering some of its exposure to NorthWestern Corp.'s $390 million B term loan in the secondary market. Market officials say the strategy by CSFB was planned from the outset (PFR, 12/23), noting it didn't fully syndicate the facility because of flux at the utility holding company. The amount of paper offered could not be determined, nor could the offer price. Calls to CSFB were not returned.

Carlson Capital, a Dallas hedge fund with $3.1 billion under management, has hired Don Kendall, a founder of Credit Suisse First Boston's project finance business, to search out investment opportunities in the depressed power market. One financier says the fund is bankrolling the effort to the tune of $1 billion and Kendall may use the funds to acquire distressed assets. Another power official, who was unaware of the hire, says landing Kendall is a signal of serious intent. "Don has always been thought of as one of the smartest people in the business, " he notes. Kendall did not return calls by press time and a spokeswoman at Carlson says the fund hasn't commented on its operations since its inception 10 years ago.

El Paso Corp. was forced last week to offer a rich 10% yield to refinance an $825 million facility in the B loan market, but on the flip side bagged the option to call the deal early; an innovation for the power sector B loan market.

Hawaiian Electric Industries will look to the bond market to refinance $136 million of long-term debt that comes due in April. Suzy Hollinger, manager, investor relations, said the company is planning to issue $100 million in medium-term notes out of a prior $300 million shelf registration. The remaining $36 million will be bankrolled through internal funds.

Williams Co.s has continued to cut into the headcount of its Energy Marketing & Trading operation in Tulsa, Okla., with a recent round of layoffs believed to total around 70, including Greg Hickl, head of power trading. Separately, Steve Culliton, EM&T's head of forward and financial power trading who left the firm several months ago, recently joined Citadel Investment Group, a hedge fund in Chicago. Hickl and Culliton declined comment.

Stuart Jackson, recently appointed ceo of Killingholme Power, has resigned, a month after taking the helm at the bank-owned U.K. power plant. Jackson, formerly head of NRG Energy's European power business, began working for Killingholme's creditors last month after NRG walked out on the 680 MW gas-fired power plant (PFR,2 10). A City creditor involved in the financing says the banks have yet to appoint a new ceo.