Calpine to get full payment of QF receivables from Pacific Gas & Electric

Calpine Corp. will receive full payment of $267 million in past due bills from Pacific Gas & Electric Co., under an agreement scheduled for approval July 12 by a US bankruptcy judge. Investors reacted enthusiastically to the announcement, pushing the stock price up 12.82% or $4.79/share to $42.15 in mid-morning trading.


By the OGJ Online Staff

HOUSTON, July 6 -- Calpine Corp. will receive full payment of $267 million in past due bills from Pacific Gas & Electric Co., under an agreement scheduled for approval July 12 by a US bankruptcy judge.

Investors reacted enthusiastically to the announcement, pushing the stock price up 12.82% or $4.79/share to $42.15 in mid-morning trading.

The agreement covers past due amounts owed for qualified facility capacity and energy as well as QF sales going forward. It was filed Friday with the US Bankruptcy Court for the Northern district of California.

Calpine, San Jose, Calif., will receive $267 million plus interest effective July 13 in a lump sum payment when Pacific Gas & Electric's bankruptcy reorganization plan is approved by the court. The San Francisco utility filed for reorganization April 6, after failing to win a rate increase from the California Public Utilities Commission. The electricity utility was paying more for wholesale electricity than it could recover from retail customers under a rate freeze imposed when the industry was deregulated.

"The exposure to California is now over," Jim Macias, Calpine senior vice-president said during a conference call. "We wanted and got an early decision on the QF contracts."

Besides past due amounts, negotiators hammered out a stipulation to be approved by the court for sale of Calpine's QF energy and capacity going forward for 5 years. Energy will be sold to Pacific Gas & Electric for 5.73¢/kw-hr consistent with a recent California Public Utilities Commission decision on QF contracts.

"There is no more uncertainty. The 600 Mw of QF capacity will be there," Macias said. He added the gas supply to cover the 5-year contract was locked in before today's announcement.

Calpine officials said the "spreads" were "attractive" and suggested that the gas-fired energy would cost about 3.67¢/kw-hr to produce, assuming $4/Mcf for gas and a heat rate of 9,000 btu/kw-hr.

The agreement already approved by other creditors places Calpine in line to be paid ahead of all other unsecured creditors, said Macias. After the utility files its reorganization plan in the next few months, it will take from 4 to 6 months for the court to approve it, he said. At that time, Calpine will be paid the past due bills, plus interest.

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