December 8, 2005

Fork in the road

No word on Calpine’s direction following ouster of CEO and CFO

By Carol Rosen
Staff Writer

Various rumors have swirled around the financially stressed Calpine Corporation during the first week in December, since its board of directors ousted the former CEO and CFO and its stock was delisted from the New York Stock Exchange.

An aerial view of the local Calpine Metcalf power plant

The company is looking at a number of different scenarios to get out of its current debt situation, according to spokesperson Lisa Poelle, but as of the morning of Dec. 7 had not come up with a plan. Calpine employs 20 people at the power plant and about 200 at its headquarters in downtown San Jose.

However, company and city officials expressed little concern about the Metcalf Power Plant. The 600 megawatts of power generated from the plant are sold to the ISO (Independent Systems Operator) grid, which apportions the power to companies like PG&E.

The city of San Jose as of yet is not overly concerned about the situation, according to Tom Manheim from the Department of Public Works.

“San Jose gets its power from PG&E, which contracts with the Independent Systems Operator (ISO). We’ve been receiving power long before Metcalf came on line,” said Lindsey Wolf, public affairs manager for the city’s Environmental Services Department.

The ISO controls where the power goes and where it is needed. The Metcalf plant provides local power and also sells into the grid, said ISO spokesperson Stephanie McCorkle. McCorkle was unsure how much power is used “locally” and how much is fed into the statewide grid. But the San Jose metropolitan area has traditionally been a
large importer of electricity, she said.

McCorkle added that the plant “is significant to California and a wonderful addition to California’s grid.”

“The [Metcalf] power plant is operating efficiently and safely,” said Poelle. It is one of 30 plants owned by the independent power company. “The financial analysts are reviewing the situation and the board of directors will make a decision soon,” she said. “I know they are working on it. I don’t expect it to take very long, but there hasn’t been any time line set.”

Calpine is a 20-year-old company, which has built independent power plants around the country, but mostly clustered in California and Texas. Peter Cartwright, the founder, former board chairman, CEO and president was ousted on Nov. 29 along with CFO Robert D. Kelly. The board allegedly ousted the two because they would not agree to declare bankruptcy.

News reports called Cartwright the “driving force behind the company.” He later expressed regret for amassing the huge debt in order to build independent power plants throughout the United States. However, his severance pay was $5.6 million, according to the San Jose Mercury News.

Calpine is $17 billion in debt. That includes $313 million the company spent on gas to fire its power plants earlier this year. The latter figure came from a sale that has been questioned as to its legality. Late last week after news of the ouster, the company’s stock, which once had sold for more than $56 per share, fell 32 percent to 85 cents per share.

The New York Stock Exchange delisted the stock on Dec. 5. The stock on Tuesday was at 22 cents listed on the Over the Counter Bulletin Board with the symbol CPNL. You can follow the stock on the Pink Sheet at www.pinksheet.com.

Katherine Potter, a financial spokesperson for the company, said she wasn’t sure whether the stock will eventually be relisted. Calpine went public in 1996. Its symbol was CPN.

Kenneth T. Derr has been named interim CEO and chairman of the board. Derr retired in 1999 as CEO at Chevron. He’s been a member of the Calpine board since 2001. In earlier news reports, Derr and the board indicated they plan to take the company in a new direction.