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Calpine Files Reorganization Plan

After 18 months in bankruptcy and billions of dollars in losses, power producer Calpine thinks its business is still worth $21.7 billion. But that doesn't necessarily mean there will be anything of value left for the company's current stockholders.

In documents filed late Wednesday in New York bankruptcy court, San Jose-based Calpine laid out a reorganization plan that could leave current stockholders penniless or give them as much as $3.53 per share.

The amount will hinge on much new stock Calpine will have to repay its unsecured creditors. Calpine estimates the amount due will range from $8 billion to $8.9 billion.

If the payments fall on the low end, shareholders will get $3.53 per share -- above the stock's recent trading price. But it's not unusual for the stocks of bankrupt companies to become worthless, and Calpine shareholders would get nothing if the unsecured claims approved by the court hit $8.9 billion.

While the filing represents a pivotal step in Calpine's efforts to get its finances back in order, the case is far from over. The reorganization plan will likely face resistance from lawyers representing Calpine creditors and stockholders who believe the company is either overestimating or underestimating its assets and debts.

Calpine hopes to persuade Bankruptcy Judge Burton Lifland to approve the plan before the end of the year. As part of its reorganization, Calpine has lined up $8 billion in financing from a group that includes Goldman Sachs Group Inc. and Morgan Stanley.

"While we still have much to do in order to complete this process, this proposed plan of reorganization provides a clear path for Calpine to emerge as a stronger, more financially stable company with an improved competitive position in the energy industry," said Robert May, Calpine's chief executive.

Overambitious Expansion

Calpine, one of the nation's largest electricity producers, descended into bankruptcy after a debt-laden expansion backfired. It has reported losses totaling $12.4 billion since 2003.

Despite the financial mess, Calpine has continued to intrigue investors, largely because it operates a fleet of environmentally friendly power plants that have become more attractive amid growing environmental concerns including global warming.

Calpine shares , which trade on the over-the-counter Pink Sheets, fell 14 cents to $2.93 Wednesday. At the time of Calpine's December 2005 bankruptcy filing, the stock stood at just 23 cents per share -- down from a peak of nearly $60 in 2001, when soaring electricity prices in the western United States turned the company into a hot commodity.

Besides betting that Calpine will still be worth something after it emerges from bankruptcy, investors also may be reacting to recent speculation that the company could be bought out by a private equity firm looking to capitalize on the growing demand for clean-burning electricity.

In a conference call with reporters late Wednesday, Calpine management confirmed it had discussed a possible sale with some unidentified parties before filing its reorganization plan.

Calpine expects to emerge from bankruptcy with 72 power plants, down from 92 at the time of the bankruptcy filing. The remaining plants, most of which rely on natural gas, have a total capacity of 22,500 megawatts.

During its bankruptcy, Calpine jettisoned about 1,100 workers in a move that saved about $180 million annually. The company still employs about 2,200 workers, according to court documents.

The reorganization plan pegs Calpine's value at $21.7 billion, including $1.4 billion in cash.

Calpine hopes to pay the unsecured claims in full, although under the plan, some creditors could receive only 91% of what they're owed.

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