Calpine built too many power plants on borrowed money — $22.5B in assets gone

Calpine was founded in 1984 by Peter Cartwright in San Jose, California, as an independent power producer building and operating natural gas and geothermal plants. It grew explosively during the energy deregulation of the late 1990s and early 2000s, becoming the largest US generator built on natural gas and one of the largest overall, with 80 power plants and nearly 26,000 megawatts of capacity.

The growth was debt-fuelled. Calpine borrowed billions to construct new gas-fired plants, convinced that deregulation and rising demand meant power prices would keep climbing. The California electricity crisis of 2000–01 initially boosted revenues, but when prices collapsed after Enron and the merchant energy sector cratered, Calpine was left with too many plants and too much debt.

By 2004, Lehman Brothers analyst Christine Daley had lost confidence in Calpine and began shorting the stock — a bet that ultimately earned Lehman roughly $100 million. In November 2005, founder and CEO Peter Cartwright and CFO Bob Kelly resigned as the company faced severe financial problems. The company could not service its enormous debt load on collapsing power revenues.

Calpine filed for Chapter 11 bankruptcy on 20 December 2005 — at the time the largest US merchant energy bankruptcy. It held roughly $22.5 billion in assets against $18 billion in debt. Calpine emerged from bankruptcy on 31 January 2008, with its old stock cancelled and new shares issued. Cartwright's company, which he had built from $1 million in seed capital to one of America's largest power generators, was gone in two years.