Calpine gets court OK for Fremont plant sale, Utility Choice settlement; eyes emergence

By Rebecca Melvin

New York, Jan. 30 - Calpine Corp. received court approval Wednesday for two recent deals including the $253.6 million sale of its partially built Fremont, Ohio, power plant and a settlement agreement with Utility Choice Electric, expunging $123 million of claims against Calpine.

In a third action, a small claim related to the Westmont power plant in California, judge Burton R. Lifland of the U.S. Bankruptcy Court for the Southern District of New York denied SIA Trust's motion to modify the stay so the matter could be litigated in California.

The judge also ordered the parties to mediate a settlement of the claim, which amounts only to $245,000.

Meanwhile, Calpine attorney David Seligman of Kirkland & Ellis LLP, speaking with reporters after the hearing, reiterated that the company still plans to emerge from bankruptcy on Jan. 31. But Calpine spokesman Mel Scott told Prospect News Wednesday that emergence will be "on or before Feb. 6."

Scott said $7.4 billion in exit financing is in place, but "additional administrative work needs to take place" before emergence.

Objecting shareholders file at district court

Scott declined to comment on a shareholders' lawsuit pending before judge Laura T. Swain at the U.S. District Court for the Southern District of New York.

Calpine objecting shareholders Compania Internacional Financiera SA, Coudree Global Equities Fund, Standard Bank, Leonardo Capital Fund SPC and Elias A. Felluss filed with the district court after judge Lifland resolutely denied their motions this month to reconsider or appeal Calpine's confirmed reorganization plan.

Other shareholders including David Flair, Avram Ninyo and Merle Root also appealed the confirmation of the company's plan in a filing at the bankruptcy court on Monday, and they are also filing with the district court, according to an attorney.

The attorney said a hearing at the district court case hasn't yet been scheduled.

Relating to Wednesday's approvals, the Fremont plant sale price of $253.6 million was more than double the stalking horse bid of $124 million. FirstEnergy Generation Corp. prevailed as the purchaser among four bidders in a five-hour auction Monday, according to an attorney.

A $3.1 million breakup fee that will have to be paid to stalking horse bidder American Municipal Power - Ohio Inc.

Objecting shareholders' counsel Matthew Stein of Sonnenschein Nath & Rosenthal asked, "How much of the final sale price was included in the debtors' valuation?"

To which Calpine responded that the targeted stalking horse bid of $124 million was probably what was included.

The objecting shareholders argue that the enterprise valuation of the company set in the reorganization plan is artificially low.

Calpine's dispute with Utility Choice involved two power supply transmission contracts. Utility Choice filed three proofs of claim alleging $123 million in damages. Calpine objected to those claims and sought recovery of about $20 million in unpaid invoices.

Separately, judge Lifland denied SIA Trust's motion to lift a stay to make it more convenient and faster to litigate its claim.

"We'd like to go back to California," counsel for SIA Trust William Healy of Campeau Goodsell Smith told the judge.

Lifland said the issue shouldn't be dealt with outside of the New York bankruptcy court because quantification of claims such as SIA's is integral to reorganization, and part of the point of rolling all of the liabilities of the company into one proceeding.

Calpine, a San Jose, Calif., power company, filed for bankruptcy on Dec. 20, 2005 in the U.S. Bankruptcy Court for the Southern District of New York. Its Chapter 11 case number is 05-60200.

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