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. Last Updated: 07/27/2016

Utility Defaults on $17Bln Debt

SAN FRANCISCO / NEW YORK -- Embattled U.S. power producer Calpine filed for bankruptcy late on Tuesday, weighed down by $17 billion in debt and court battles with creditors over how to use its cash.

Calpine, squeezed by a credit crunch and a weak merchant power market that resulted from the collapse of Enron and the California energy crisis in 2000-01, said it filed petitions to restructure under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the Southern District of New York in Manhattan.

Calpine, which listed assets of $26.6 billion, said many of its subsidiaries also filed for bankruptcy.

Of the creditors holding the 80 largest unsecured claims, Wilmington Trust is trustee for the six largest positions -- notes worth more than $4.5 billion.

Analysts said a bankruptcy filing had been likely after a Delaware court ordered Calpine to repay $312 million to creditors who challenged the company's use of proceeds from assets sales to buy natural gas to fuel its power plants. Calpine had said it was able to pay the money by a Jan. 22 deadline.

Calpine said it received commitments for up to $2 billion of secured debtor-in-possession financing from Deutsche Bank and Credit Suisse First Boston.

California energy market experts have suggested Calpine's bankruptcy would look in many ways like an airline insolvency -- its 3,300 workers would keep working, power plants would keep running, and operations would not be disrupted.

"Our plan calls for power plants to remain available for operation to provide reliable supplies of electricity," chief executive Robert May said in a statement. May, who helped steer recoveries at HealthSouth. and Charter Communications, took over the reins at Calpine on Dec. 12.

Calpine, based in San Jose, California, is a major supplier to the state's electricity grid, providing 5,250 megawatts of the grid's capacity.

On Monday, California Attorney General Bill Lockyer filed an emergency petition with the Federal Energy Regulatory Commission seeking to force Calpine to continue supplying electricity under long-term contracts with the state if Calpine goes bankrupt.

Calpine said it would continue to evaluate all opportunities to strengthen its balance sheet and improve its cash flow, including asset sales and reductions in operating and overhead costs.

Calpine went on a credit-fueled power plant building spree in the late 1990s, putting together one of the largest independent power systems in the U.S. But when electricity markets collapsed after the California power crisis and the Enron scandal, merchant generators like Calpine were hit with rising credit costs and declining prices for their electricity.