Calpine to Sell Plant in England
Struggling energy wholesaler Calpine Corp. said Tuesday that it would sell a power plant in England for $925 million, raising money for the company’s plan to reduce its debt by more than 20% by the end of the year.
The San Jose-based company had been mulling over several offers for its 1,200-megawatt plant in Hull, England, before choosing a partnership between International Power and Mitsui & Co. as the winning bid. The deal is expected to close in late July.
The sale price represents a premium from the $810 million that Calpine paid when it bought the plant in 2001. The plant provides enough electricity for about 900,000 homes.
“They got a good number for selling the plant,” said Barry Abramson, who helps manage about $28 billion, including 120,000 Calpine shares, at Gabelli Asset Management in Rye, N.Y.
Calpine’s shares gained 28 cents, or 10.4%, to close at $2.98. Last month, the stock dropped to a record low of $1.32, and Calpine’s bonds slid to below 50 cents on the dollar amid concern that creditors might force the company into bankruptcy.
Once a Wall Street darling, Calpine has fallen on hard times in recent years as electricity prices have plunged from their heights of 2001, forcing the company to jettison assets as its tries to slow its losses and whittle debts that totaled $18.1 billion through March.
Hoping to allay fears about the company’s mounting financial troubles, Calpine last week pledged to repay $3 billion of its debt during the next seven months. As part of that plan, Calpine is trying to sell its remaining natural gas supplies in the United States. The company also expects to sell eight other power plants and reduce its annual expenses by $200 million.
Calpine’s 93 plants have combined capacity of 26,659 megawatts, the most in the U.S. for a company that doesn’t own utilities.
London-based International Power, which owns power plants in 17 countries, would get a 70% stake in the plant, called Saltend. Tokyo-based Mitsui, Japan’s second-largest trading company, would get 30% of the plant’s electricity.
Bloomberg News and Associated Press were used in compiling this report.
