Calpine Stock Drops Sharply

Calpine Corp. shares plunged 11% on Wednesday after the power-plant developer warned that it would post a first-quarter loss and sell stock to raise cash.

The stock fell $1.53 to $11.80 on Wednesday on the New York Stock Exchange. The shares had gained 12% on Tuesday as California dropped complaints against Calpine after renegotiating multiyear power contracts. The stock has fallen 79% in the last year.

Calpine will post a loss of about 25 cents a share after incurring costs related to canceling orders for turbines, the company said after the close of trading Tuesday. It also plans to sell as many as 69 million new shares, which would be worth $814 million at Wednesday’s closing price.

“I think it’s a knee-jerk reaction to the dilution” in shareholder equity, said David P. Brady, who manages $1 billion, including the Stein Roe Young Investor Fund, which owns 620,000 Calpine shares. San Jose-based Calpine last month canceled $3 billion in turbine purchases as it scaled back expansion plans. Energy companies have delayed projects or sold assets to bolster their balance sheets after the collapse of Enron Corp. eroded investor confidence in the industry.

Calpine plans to sell 60 million new shares to pay debt and may offer 9 million more, depending on demand, hoping to raise “a little over $800 million,” Chief Financial Officer Robert Kelly said.

Calpine said Tuesday it would have had a first-quarter profit of about 10 cents a share, excluding equipment-cancellation costs and other items. On that basis it was expected to earn 13 cents a share, the average estimate in a poll by Thomson Financial/First Call.

Full results are scheduled to be released May 2.