is about to redraw its financial statements in a less favorable light.

After adopting more conservative accounting, Calpine said Monday that it will report lower earnings -- and higher debt -- for each of the past three years. The accounting change, ordered by Calpine's new independent auditor, reclassifies two power plant transactions and shifts more debt onto the company's balance sheet.

According to Deloitte & Touche, which last year replaced Arthur Andersen as Calpine's outside auditor, the two transactions were improperly treated in the past as operating leases instead of financing transactions. Under the new accounting, Calpine's 2002 earnings will drop to 33 cents a share, from 39 cents. Earnings for 2001 will drop by a similar amount, sliding to $1.80, from $1.87, while earnings for 2000 will dip a penny, to $1.18.

Meanwhile, reported debt will grow by $700 million in both 2002 and 2001, and by $300 million in 2000.

Calpine said Monday that it continues to explore alternatives to the accounting change, which should not hurt future earnings.

"Calpine is currently evaluating amendments that could be made to the power contracts for these two projects, which would allow us to account for these transactions as operating leases going forward," said Calpine CFO Bob Kelly. "Sale-leaseback accounting represents a very complex, technical and highly judgmental area of accounting."

The market shrugged off news of the restatement, focusing instead on Calpine's unchanged 2003 earnings guidance of 40 to 50 cents a share. The stock bounced 3.2% to $2.88 in early Monday trading.

Lasan Johong, an analyst at Blaylock & Partners, declared the restatement a nonevent ahead of the open.

"Some people may say it's bad news and try to push the stock down," said Johong, who rates Calpine a buy but doesn't own the stock himself. "But people who know

the company won't give a damn."

Calpine stressed Monday that the accounting change will not hurt the company's cash flow, liquidity position or compliance with credit agreements. It did, however, warn that it may not be finished correcting its books.

The company has submitted its treatment of two other power contracts for review by the

Securities and Exchange Commission

. An unfavorable ruling by the agency would force Calpine to spread $36 million worth of profits, currently booked in 2001, over a 10-year period.

The company said both its current and former auditors believe the $36 million is reported correctly already.