CALPINE l Founder looks back
Calpine.
‘‘ If everybody thinks you’re going into bankruptcy, it makes it harder to do anything — whether you’re going into bankruptcy or not,’’ he said. ‘‘ Right now, everybody thinks it is.’’
Calpine issued a statement Thursday saying there was ‘‘ substantial risk’’ it would be unable to refund the $313 million bondholders had sought in a Delaware court battle, even if the amount was reduced by $100 million and the company was given 90 more days to pay it back. Prior to this week, Calpine had said the money would not affect its day- to- day operations.
Calpine officials declined to comment Thursday. Kelly did not return multiple calls.
‘ Tremendous assets’
Derr told the Mercury News on Tuesday that bankruptcy was a possibility but not inevitable. The company has more than $27 billion in assets, which could be sold off to reduce debt.
‘‘ We should keep front and center that Calpine has a tremendous number of assets,’’ Derr said.
Even though Cartwright believed Calpine could overcome its debt, the company became entangled in legal battles with creditors. And while electricity markets have continued on an upward curve this year, they’ve never fully recovered after the 2001 collapse of Enron.
Cartwright founded Calpine in 1984 as an energy consulting business, providing management advice and assistance to power generators. In the 1990s, when regulators around the country began opening up electricity markets traditionally dominated by utility companies, Cartwright saw an opportunity.
Calpine went public in 1996, and launched an ambitious plan to be the nation’s largest independent energy producer. Instead of buying older power plants once owned by utilities, a strategy chosen by rivals, Calpine built new plants, convinced that newer technologies would allow them to outperform competitors.
The only problem was the money. A 600-megawatt power plant, such as the Metcalf Energy Center in South San Jose, cost roughly $500 million.
To finance such deals, Cartwright turned to Kelly, who Cartwright said ‘‘ had an amazing record of working with the top investment bankers on Wall Street and working with a variety of different products.’’
By May of this year, Calpine had 93 power plants. But it also had layer upon layer of creditors who had shelled out billions. Some investors had a stake in the company’s failure. Short sellers — who profit if the company’s stock falls — had sold short 42 percent of the company’s shares in September, according to the New York Stock Exchange.
‘‘ It grew very rapidly,’’ Derr said. ‘‘ The debt load overwhelmed its ability to generate enough revenue.’’
Cartwright said the combination of short sellers and hedge funds yearning for Calpine’s fall posed a formidable obstacle.
‘‘ Everybody I talked to feels that there was a concerted effort on the part of short sellers and hedge funds to push the stock price down,’’ he said.
‘ Not going away’
Still, Cartwright never relinquished the dream. He so believed in his vision, Calpine is the only company he has shares in.
‘‘ I don’t own any other stock,’’ he said, noting that he does own houses and other property.
He may also have a lot of cash. Despite Calpine’s current stock price, Cartwright made out well. His total compensation from 2001 through 2004 has been more than $50 million. As part of his severance package, he will get $ 5.6 million.
Cartwright, 75, acknowledged that being ousted from the company he founded was painful. But he said he’s not done working in the energy sector, though he declined to elaborate.
‘‘ It’s a disappointment,’’ he said. But ‘‘ I’m not sitting around sucking my thumb worried about it. There’s a lot of things I’m doing. . . . We’re not going away from the power industry.’’ Contact Matthai Chakko Kuruvila at mkuruvila@mercurynews.com or ( 408) 920- 2722.