Calpine, PG&E; Reach Agreement on Contracts

Calpine Corp. reached an agreement to collect $265.7 million owed by PG&E; Corp.’s Pacific Gas & Electric and said it will continue to supply electricity to the cash-strapped California utility.

The agreement was filed in Bankruptcy Court in San Francisco, where Pacific Gas sought Chapter 11 protection from creditors in April, and is expected to be approved by Judge Dennis Montali. Calpine’s stock rose 15% as concern eased that the San Jose-based company would take a charge against earnings for the PG&E; debt.

Under the agreement, Pacific Gas will assume contracts covering 11 of Calpine’s “qualifying facilities,” plants that generate electricity using renewable energy sources. Calpine operates geothermal plants, which use the Earth’s heat to produce power. The generators can produce 600 megawatts, enough power to light about 450,000 California homes.

Calpine will continue to receive payments it’s guaranteed under contract, plus 5.4 cents per kilowatt-hour for five years. Calpine wouldn’t comment on how much it would receive under the agreement.

Calpine shares rose $5.26 to close at $42.62, and shares of San Francisco-based PG&E; rose 13 cents to $13.45, both on the New York Stock Exchange.