Calpine declares bankruptcy, cites natural gas prices

December 22, 2005

Electrical power generator declared  on Tuesday. The San Jose, California based company filed for bankruptcy protection in U.S. Federal Court, to facilitate debt restructuring and to allow for normal operations to continue. Calpine has obtained secured debtor-in-possession financing from and  totaling $2 billion. The company announced that some of its subsidiaries would also file for creditor protection under the. Calpine and its subsidiaries operate natural gas and geothermal electricity generating plants in 21 U.S. states and 3 Canadian provinces.

The recent rise in natural gas prices due to Hurricanes Rita and Katrina has pushed Calpine's cost significantly above the locked in selling price for its long-term contracts. Calpine has asked the court to void eight long term contracts, including a 20-year contract entered into with the State of California's Department of Water Resources and Pacific Gas and Electric Company in 2001.

The company received permission on December 21 from the Federal Bankruptcy Court for the Southern District of New York to use $500 million of its financing to continue operating and to keep paying its employees' salaries and benefits.