Liquidity-strained Calpine Corp. announced Thursday it is “evaluating” the sale of its 230 Bcfe Alberta proved natural gas reserves and a 25% interest in a related Calpine Natural Gas Trust amounting to about 80 Bcfe of proved reserves.

In addition, the power plant developer said it is also evaluating the sale of “certain unidentified” U.S. natural gas reserves. Combined, the reserves in play represent about 30% of Calpine’s total reserves.

Apparently, the move could allow Calpine to pay off some of its high-cost debt and allow it to take on more lower-cost debt, depending on the market at the time, according to a Calpine spokesperson. It is another in a continuing series of refinancings by Calpine over the past two years in order to avoid a cash squeeze from its excess capacity in a dampened wholesale power market with narrow spark spreads.

As a result of the potential gas reserve sale, Calpine said it is working on “restructuring” some of its power contracts from a fixed-price arrangement to a capacity-and-variable-energy agreement, and the company has retained Waterous & Co. to act as the advisor for the sale of the Canadian reserves.

In the past, Calpine senior management has said it wanted to keep enough gas reserves to provide up to 25% of the firm’s natural gas requirements — which are some of the largest loads in the nation — to run its fleet of gas-fired, combined-cycle generation plants that are located in more than half of the lower 48 states and three Canadian provinces.

Calpine said the net proceeds from any sale of the gas reserves would be used to repay its existing $500 million first-lien indebtedness with remaining proceeds to be used in accordance with the asset sale provisions of Calpine’s existing bond indentures. After repaying the existing debt, Calpine said it would hope to issue up to $700 million of new first-lien debt, the proceeds of which would be use for “general corporate purposes” or to pay off other debt.

At the shareholders meeting last month, Calpine CEO/founder Peter Cartwright summarized the company total debt as being around $17 billion as it pushes to have a power plant fleet that will approach 30,000 MW collectively by 2006.

Bob Kelly, Calpine’s CFO, said the combination of selling gas reserves and restructuring certain fixed-price contracts will “enhance” the company’s liquidity position, and also “preserve the margin of our power contracts. Our equity gas reserves have provided us with an attractive hedge to our fixed-price contract portfolio.”

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