While going through a retrenchment in what has been the nation’s most aggressive merchant power plant expansion nationally in the U.S., San Jose, CA-based Calpine Corp. is looking to beef up its natural gas assets on a net basis, and expects to be making some acquisition announcements in the very near future, its senior executive for planning/development indicated Friday during a 30-minute interview. The company expects to be both a buyer and a seller of gas assets.

“We’re presently looking at some opportunities to add to our gas portfolio,” said Ron Walter, one of five founding executives of Calpine in 1984. “We really haven’t changed any of objectives, but at the same time it is very obvious that we have less money available to spend than we might have thought we would have a year ago. Nevertheless, we are still looking at some opportunities, and we will probably be announcing some small ones in the not-too-distant future.

“We’re focused on assets we think are good bargains. The price of gas is low right now, so there ought to be some good buys out there. We also are mindful of how much liquidity and cash we have in the drawer.”

Calpine’s Walter and a spokesperson, Katherine Potter, also reiterated an earlier announcement that the company is ready to shop “nonstrategic assets” on both the gas and power sides this year. “We’re no different from any other oil and gas company, we’ll streamline our portfolio as we move along,” said Walter, adding that some of the “noncore” gas assets that the company acquired with acquisitions in the last two years may be sold in the same near-term time frame that other assets are acquired.

“At a time when we’re marshaling our resources, we have a particular focus on the urgency of getting some of those noncore assets out of our portfolio and turning them into cash we can use for the rest of the business,” Walter said.

The company has said several times this year that it views 2002 as a short-term tightening period in terms of the capital market tightness, softening of energy prices and recession. Longer term, however, the aggressive power plant developer “still sees opportunity” in the natural gas market.

“As painful as this current period is for companies, and our company in particular, I think this is going to vastly increase our competitiveness going forward, because while everyone is canceling power plants out there and having second thoughts about adding to the infrastructure, power is still needed,” Walter said. “We’re not going to back off the historical growth level we have seen over the last 30 years.” He sees the pendulum swinging in the other direction, particularly in natural gas where drilling currently is way down.

Longer term, Calpine may partner with, or acquire, some exploration companies and larger projects such as proposals to bring down natural gas from Alaska. However, Walter said the company’s natural gas “actions” this year will probably be confined to basins in which it is already involved.

In response to a specific question about partnering with, or acquiring, some California independent gas E&P companies, he said. Calpine has “had those discussions and to us it makes a lot of good sense,” Walter said. “We’re more focused on natural gas as a fuel for our power plants as opposed to looking at it as a commodity, so sometimes we can sit down with a gas company that is more focused on exploration, and we’re more focused on the production. We’ve done some of these kinds of deals on a small basis and we’re very open to those types of transactions.”

(Separately, a senior official with a Bakersfield, CA-based independent, Tri-Valley Oil and Gas Corp., said his company has had discussions with Calpine concerning funding natural gas drilling projects in California, but were turned down.)

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