Troubled Calpine to Slash Value of Assets $7 Billion

Power producer Calpine Corp. said Monday that it would reduce the value of its assets by more than $7 billion as it restructures under Bankruptcy Court protection.

The San Jose-based company will record about $5.5 billion in noncash impairment charges for 2005 and additional noncash valuation allowances of about $1.6 billion against deferred tax assets, which will be reflected in the tax provision for 2005, Calpine said in a statement.

Calpine filed for Chapter 11 bankruptcy protection in December with $26.6 billion in assets and more than $22.5 billion in liabilities. The filing followed the ouster of top executives after they lost a three-month fight with bondholders over the right to use proceeds from asset sales to buy fuel.

“Calpine can no longer conduct business as usual,” Chief Executive Robert May said in Monday’s statement.

May added that the company was aiming to generate positive cash flow in 2007.

The charges will reduce the value of Calpine’s plants by $2.4 billion and miscellaneous equipment by $2.1 billion, according to a filing with the Securities and Exchange Commission.

This month, Calpine said it would fire 775 employees, or 26% of its workforce, and sell about 20 power plants as part of its plan to exit bankruptcy. After the sales, the electricity wholesaler will operate about 70 U.S. power plants.

Calpine spokeswoman Katherine Potter said the company expected to sell most of the 20 plants on the market by the end of the year.

Shares of Calpine, which peaked at nearly $60 in 2001, were unchanged at the close of trading Monday at 24 cents.