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Calpine Files Chapter 11

TSC Staff

The San Jose, Calif., company said it had $2 billion of financing commitments in hand from Credit Suisse First Boston and Deutsche Bank and expected to continue normal operations.

"Our plan calls for power plants to remain available for operation to provide reliable supplies of electricity," said CEO Robert P. May, who was hired earlier this month to take the reins from founder Peter Cartwright. "We intend to move through this restructuring process as quickly as possible to regain our financial health and to take the necessary steps to become a stronger and more competitive energy provider. With our new financing we will have additional financial flexibility and sufficient liquidity to meet our obligations going forward."

During the restructuring process, Calpine will continue to evaluate all opportunities to strengthen its balance sheet and enhance operating cash flow, including asset sales and reductions in operating and overhead costs. In addition, Calpine has petitioned the court to reject certain of its contracts, including power sales agreements in which the price paid to Calpine for electricity is significantly below its cost or market prices. The company expects its power plants will continue to be available to meet the needs of electricity consumers in all of its service areas.

The move concludes a long and public struggle on the part of Calpine, whose shares traded in the mid $50s several years ago before starting a long, steep plunge as debt came due and cash grew scarce. Calpine got into a tussle with creditors earlier this year that ended badly for the company last month, when a judge ruled it had misspent $312 million in asset-sale proceeds. The judge later ruled that Calpine would have to repay the trustee accounts by next month, setting off a mad dash to the exit among investors and causing the company to admit for the first time it was considering a Chapter 11 filing.

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