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Calpine Sees Power Market Upswing; Bullish About LNG, Coal Gas Prospects, CEO Says

While it continues to face challenges and criticism from the financial community for its continuing losses and relatively heavy debt load, San Jose, CA-based Calpine Corp. sees the wholesale power market turning around in key areas and is determined to play a role in importing liquefied natural gas (LNG) along the West Coast of North America, according to the CEO Peter Cartwright.

"One of the attractions of gas-fired power plants [in which Calpine specializes] is that a variety of fuels can be burned in them," Cartwright said. "We need more gas in North America than we can get from the [production] fields now in operation, and the way we are going to get more gas is through LNG. There are many LNG terminals in development."

Cartwright said that Calpine is actively involved in the development of two West Coast LNG facilities: one in the mouth of the Columbia River in Oregon, and another offshore California. He described the Oregon project as being in the "fairly early stages of development, and as we get that further along we will bring in a large gas company as a partner to develop that.

"We're also looking at gasifying solid fuels, such as petroleum coke, a waste product at refineries and a very attractive fuel source that can be gasified and burned in a gas turbine."

Calpine's power plants in Texas that are adjacent to refineries would be good targets for this sort of fuel use, said Cartwright, noting that ultimately the company will get involved in gasifying coal and burning the fuel in power plant turbines.

On the financial front, a Calpine spokesperson confirmed that the company has received a letter from The Bank of New York, a collateral trustee to some of Calpine's secured debt-holdings, questioning the company's reinvestment of the proceeds from sales of oil and gas assets last July. While noting she was limited in what she could say publicly, the Calpine spokesperson said the bank's letter refers Calpine to a law firm that "claims to represent a majority of holders of our first lien notes."

As already reported in a 10-Q to the Securities and Exchange Commission, Calpine contends it is permitted to use the proceeds from the sale of its oil/gas assets to acquire new natural gas and/or geothermal energy assets. A portion of the proceeds in question has been used to reinvest in new natural gas assets, the company spokesperson said.

While the company remains focused on "selling assets, reducing operating costs and cutting corporate debt," Cartwright told analysts at the Bank of America Securities' investment conference in San Francisco Tuesday that power market growth Texas and the Southeast has been robust (5% and 3%, respectively) and the company's plants in those regions should benefit.

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