Calpine emerges from Chapter 11

San Jose, Calif.-based Calpine (Pink Sheets: CPNLQ), the largest producer of geothermal power in the U.S., has emerged from Chapter 11 after spending more than two years under bankruptcy protection.

Calpine operates 19 geothermal plants, totaling 725 megawatts, in the Geysers region of Northern California, as well as 63 natural gas combined-cycle plants across the U.S. producing over 23 gigawatts of electricity.

The company said it plans to return to regular trading on the New York Stock Exchange on Feb. 5 under the symbol "CPN."

Although the public markets are turbulent right now for any company, it could be a good time for a firm with strong green credentials.

"The electric power industry knows that supply is scarce now and getting scarcer, and that there is a big quandary about what to build, given the fact that the coal option has been almost eliminated for a lot of states," Daniele Seitz, an analyst at Dahlman Rose & Co., told the Cleantech Group.

And while that usually means an option of natural gas or nuclear for utilities, Seitz said Calpine's renewable generation could become a more popular choice.

"The value of geothermal has risen tremendously, and with the expectation that California will be 20 percent renewable by 2010, it immediately raises the expectation that eventually there will be renewable credit being traded, because not everybody can build wind farms," she said.

Seitz noted that wind power needs a lot space, and has variable reliability, while solar is still in its infancy in the U.S., and is not available around the clock.

"Requiring renewable resources is a tall order, especially in the near term. So actually having the largest geothermal fleet is seen as an advantage, and being able to expand it is an advantage," she said.

Calpine sold 20 natural gas power plants and cut 775 employees when it was under Chapter 11, but did not shed any of its geothermal plants, announcing plans last year to expand its steam powered projects.

In May, Calpine said it planned to boost power by up to 80 MW under a $200 million program.

The company said it would expand steam production and identify new sources of geothermal power, and also rebuild eight older turbines to make them more energy efficient.

Take a look at one of Calpine's steam drilling rigs here >>

Adding to that program, in August the company said it would expand its Geysers Recharge project, a recycled water-to-electricity system.

The expansion would inject an additional 1.62 million gallons per day of treated wastewater from the city of Santa Rosa into the Geysers, which currently receives 11 million gallons per day.

The company said the recycled water injections have increased geothermal energy production by up to 85 MW, with the extra 1.62 million gallons expected to increase production by up to an additional 11 MW.

Calpine filed for bankruptcy protection in December 2005 in the U.S. Bankruptcy Court for the Southern District of New York, weighed down by over $22 billion in debt.

The company emerged from its reorganization after closing on a $7.3 billion exit financing facility that includes a one-year, $300 million bridge facility, expected to be paid off by the end of the first quarter.

Under its reorganization plan, the power company said it plans to issue a total of 485 million shares of new stock to holders of allowed claims, and reserve another 15 million shares for management incentive programs.

Calpine said it expects general unsecured creditors to ultimately recover 99.9 percent of their allowed claims for principal and pre-petition interest, with holders of senior notes getting back 100 percent, and subordinated notes holders recovering 75 percent.

The company's old common stock will be cancelled, with holders of the old stock receiving warrants to purchase the new stock, according to Calpine.

There haven't been any recent announcements of expansion at the firm, but Seitz said coming out of Chapter 11 has certainly improved Calpine's fundamentals and that "they are obviously more apt to make long term contracts."

"But the company is also very aware that they have to maintain a very conservative balance sheet, at least over the next couple of years," she said. "So if there is an expansion, it's going to be very measured."