Calpine Plans to Sell More Plants
Calpine Corp., which has been struggling under a heavy debt load ever since the collapse of energy giant Enron Corp., accelerated its $3-billion debt reduction plan Wednesday and said it planned to sell as many as eight more power plants in a bid to strengthen its balance sheet.
The San Jose company, which recently found itself denying rumors that it faced bankruptcy protection because of the debt, said it would mothball underperforming plants, cancel costly maintenance agreements, try to cut losses at plants during off-peak hours and explore U.S. liquefied natural gas projects.
The announcement came hours before the company’s annual shareholder meeting.
Calpine, which through the first quarter had more than $18 billion in total debt, aims to reduce operating costs by $200 million annually and achieve $275 million in annual interest savings. It also hopes to slash debt by more than $3 billion by the end of the year, moving up its timetable from the end of 2006, with continued reductions planned for next year and in 2007.
The company said that previously announced potential asset sales, as well as power plant sales, would help finance the reduction.
Calpine is one of several merchant power companies trying to dig out from an industrywide credit crunch after the collapse of Enron and a glut in generating capacity.
The company has sold off assets and slashed debt to keep going until power markets strengthen and “spark spreads” -- profit margins on electricity sales -- improve.
Last week, Calpine said it was evaluating strategic alternatives for its U.S. oil and gas assets, including the possible sale of all or some of these operations.
It also is finalizing a review of bids for its 1,200-megawatt Saltend Energy Center plant in Britain, the company’s only plant in Europe.
Chief Executive Peter Cartwright told shareholders at Calpine’s annual meeting Wednesday that Calpine was “very pleased” with the bid prices for Saltend.
He also said Calpine was negotiating the sale of the eight other plants “we expect to close this year.”
Cartwright, who co-founded the company 21 years ago, said the steps announced Wednesday “will substantially strengthen our company.”
The asset sales and the temporary plant shutdowns should refocus the company’s business to take advantage of opportunities in several key power regions, he said.
Calpine owns 92 power plants in more than 20 states and Canada. Cartwright declined to identify which of the company’s power plants were on the sales block but said none of them were in California, Texas or the Southeast.
Calpine shares rose 66 cents to $2.64.
Associated Press and Reuters were used in compiling this report.
