Calpine £10bn in debt as it files for Chapter 11

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The struggling US electricity giant Calpine has become one of America's largest corporate collapses, filing for Chapter 11 bankruptcy protection yesterday saying it was more than $18bn (£10bn) in debt.

Last month Calpine's board fired its two most senior executives - the founder and chief executive Peter Cartwright and its chief financial officer Robert Kelly - after the two lost a three-month legal fight with bondholders to use $313m raised from asset sales to buy fuel to keep Calpine operating.

In a ruling which led Wall Street to think bankruptcy was almost inevitable, a Delaware court said the money had been spent inappropriately and ordered Calpine to hand the funds back to bondholders by 22 January. The company said it could not meet the deadline. Its share price has lost 90 per cent of its value and trading in its shares has been suspended. On 12 December, Robert May, a turnaround specialist, was appointed as chief executive.

Mr Cartwright founded the company, based in California, in the 1980s as a consultant to the energy industry. In the 1990s he turned it into one of the US's largest independent power companies at a time when America's energy market was deregulating and rival power companies were competing for electricity sales with former local monopolies.

The company's fortunes have been rocky. To build up its network of about 90 power plants around the US, Calpine spent billions of dollars, loading itself with debt. It was hampered by the fact that many independent power generators flooded the market in the 1990s, depressing electricity prices. The collapse of the energy trading giant Enron in December 2001 was also a major blow as it led to a decline in energy trading and to stricter credit demands from lenders.

Calpine said that filing for bankruptcy protection would give it time to reorganise its finances and stabilise its business.