Things continue to look grim for Calpine, the independent power producer struggling to emerge from bankruptcy protection. Squeezed between declining margins (real terms, not necessarily GAAP terms with special charges coming off the books etc.) demanding creditors, one has to wonder if Calpine will emerge from the proceedings now.

Earlier this week the company announced a reduction of their credit facility by $400M (the entire facility was $8B) and a revaluation of the company when it emerges from bankruptcy of $18.95B. Creditors believe the valuation should be north of $24B leaving a significant gap. The bankruptcy court has approved the revised plan and the company should emerge in January. But, this was true in June too and didn’t happen.

Why do we care? Calpine’s portfolio is dominated by natural gas-fired power plants. But, a small and profitable segment of the company is comprised of the 19 plants located in The Geysers region of California producing about 750MW of clean power. We’re very interested in seeing those valuable assets protected and not have them sink with the Calpine ship.

Note: The issue is gaining today, but the market cap is still sub-$200M down from ~$2B in June.

Disclosure: The author holds no position in Calpine (though he did consider it as a speculative investment at one time.)