Dec. 20 (Bloomberg) -- Calpine Corp., the U.S. power plant owner saddled with more than $17 billion in debt, filed for bankruptcy protection after soaring natural gas prices left it unable to make loan and bond payments.

The filing in U.S. Bankruptcy Court in New York followed the ouster of top executives after they lost a fight with bondholders over using asset sale proceeds for plant fuel.

``I would expect bondholders to receive about par following an abbreviated bankruptcy,'' Jon Kyle Cartwright, director of research for BOSC Inc. in Clearwater, Florida, said in an interview today before the filing. ``I would expect them to be in and out of bankruptcy within two years.''

Calpine is the fourth major U.S. electricity producer to seek bankruptcy protection since the December 2001 collapse of Enron Corp., once the dominant electricity trader. Mirant Corp., NRG Energy Inc. and National Energy & Gas Transmission Inc. all sought protection from creditors as an excess of plant construction pushed down U.S. electricity prices.

Calpine spokeswoman Katherine Potter didn't immediately return a call to her office after business hours.

``Our plan calls for power plants to remain available for operation to provide reliable supplies of electricity,'' Chief Executive Officer Robert P. May said in the statement. ``We intend to move through this restructuring process as quickly as possible to regain our financial health and to take the necessary steps to become a stronger and more competitive energy provider.''

Management Changes

Delaware's Supreme Court on Dec. 16 upheld a lower-court ruling that Calpine must return $313 million to a bond collateral fund by Jan. 22. The money represents the amount, plus interest, spent from sale of the company's gas-production business to buy plant fuel.

Calpine's board removed founder Peter Cartwright as CEO and Chief Financial Officer Robert Kelly on Nov. 29, after they sued Bank of New York to lift a freeze on asset-sale proceeds demanded by bondholders, and lost. The company hired May, a turnaround expert and former chairman of HealthSouth Corp., as chief executive officer on Dec. 12.

California petitioned federal energy regulators Dec. 19 to compel Calpine to continue power deliveries to the state. In bankruptcy, the company may try to void a contract to supply as much as 1,000 megawatts of power to the state at below-market prices, Attorney General Bill Lockyer said in the filing. That's enough power for 800,000 average U.S. homes.

Mirant, NRG

Atlanta-based power-producer Mirant Corp. filed for bankruptcy protection in July 2003 after failing to persuade creditors to refinance $4.9 billion in debt. Mirant is expected to exit bankruptcy in January under a court-approved reorganization plan. Unsecured creditors will get 96.25 percent of Mirant's new common stock, and pre-bankruptcy shareholders will get 3.75 percent, under the plan.

NRG, refinanced as it exited bankruptcy in December 2003, got $9.9 billion in bank financing in October to buy Texas Genco Holdings LLC, an owner of power plants in the Houston area. NRG will pay $5.8 billion in cash and stock and assume $2.5 billion in debt. The company's stock has more than doubled since its bankruptcy ended.

Calpine, the biggest issuer of high-yield debt last year, raised $48 billion over the past 10 years to build the nation's biggest network of natural-gas fueled plants. Rising debt and credit concerns surrounding Enron's collapse prompted Moody's Investors Service in 2001 to cut the company's credit rating to junk from the lowest investment grade.

Demand Tumbled

Demand for Calpine's power tumbled, as prices for the natural gas its plants burn more than doubled this year, making production more expensive than electricity from plants using coal or nuclear energy. The company reported net losses in eight of the past 11 quarters.

The firing of Cartwright, 75, and Kelly, 48, was a prelude to the bankruptcy filing, as soaring gas prices forced the Calpine board to abandon Kelly's strategy of extending maturities on its $17 billion of debt, said Dorothea Matthews, a debt analyst for CreditSights Inc. in New York.

New York Stock Exchange trading in Calpine stock ended Dec. 6, after the shares tumbled to 22 cents. They reached a peak of $58.04 on March 30, 2001, as an electricity shortage gripped California, sending power prices as high as $1,000 a megawatt- hour. The shares slid as construction of new power plants produced a power glut in much of the U.S., slashing wholesale electricity prices below Calpine's costs.

``They've been burning cash at an incredible rate,'' said Mathews, who doesn't own Calpine shares or stock.

Delaware Ruling

The company on Nov. 22 lost a court battle with bondholders over its use of asset-sale proceeds to buy power-plant fuel. The decision by Delaware Chancery Court Judge Leo Strine Jr. blocked the company from $400 million in proceeds, and Strine indicated he would order Calpine to restore $313 million already spent to back secured debt.

The Delaware Supreme Court upheld Strine's ruling this month.

Last month Calpine reported a third-quarter loss of $216.7 million, or 45 cents a share, as fuel and interest costs rose.

Calpine's 8.5 percent bond maturing in May 2008 rose 0.25 cent on the dollar to 28 cents on the dollar in New York, according to Trace, the bond price reporting system of the NASD. The bond yields 82 percent, Trace data show.

Calpine's plants can produce enough power for 22.1 million average homes. Enron's collapse triggered tighter credit requirements for generators as a power glut from new plants cut prices for their output.

Cartwright expanded Calpine in the late 1990s after federal regulators passed rules forcing utilities to allow competition in their service areas. Debt jumped eightfold as the company borrowed money to pay for the new generators, building the largest network of gas-fired plants in the U.S.

To contact the reporter on this story: Tom Becker in U.S. Bankruptcy Court in New York at tbecker5@bloomberg.net; Jim Polson in New York at jpolson@bloomberg.net;

Last Updated: December 20, 2005 23:34 EST