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As I watch the continued unraveling of Calpine, I wonder what happened to the cretin who came to this board a couple of months ago and lambasted me in every imaginable way for speaking the truth about this stock.

Today's news says it all. From Reuters, courtesy of Yahoo:

Shares of Calpine Corp... fell more than 9 percent after a report that the struggling independent power producer has hired a high-profile restructuring team to advise its board.

The New York Post reported on Tuesday that Calpine has retained restructuring experts from the law firm of Kirkland & Ellis, citing attorneys representing parties that are suing the company.

...The Post said its sources acknowledged [that this] did not necessarily mean the cash-strapped company was considering a bankruptcy filing. More likely, the Post reported, they are advising the company on its alternatives if it loses a crucial legal battle against bondholders...

"Advising the company on its alternatives?" What a bunch of doublespeak. The issue is that the bondholders disagree with how Calpine spent $370 million. Calpine is suing them. Unless the issue is resolved in Calpine's favor, the company will need to come up with that much money from other sources. Out of thin air, basically.

And given the timing, it looks like it will have to do all this *after* having reported the Q3 earnings, which I expect will be yet another disappointment. As noted in earlier messages, the company had several power plants shut down by hurricanes, and demand for electricity in the South was reduced by massive outages even when the power plants were available. Add to that the occasional outage in other plants that had nothing to do with storms.

The best luck of all for Calpine was that July and September were both warmer than normal -- the kind of quarter they've been waiting for. But a massive hurricane kind of disrupted things just a tad. There goes that little edge they needed. As I've said before, it's never a good thing when management is relying on good luck, rather than the execution of a sound plan.

And, oh yeah -- just as they did in the second quarter, the company sold another power plant at a loss, and will take a writedown of over $100 million against the third quarter books just for THAT transaction. Last quarter, that helped create a negative earnings surprise. It's hard to imagine that a few bucks from "Calbear" will overcome that.

The earnings report is due in a couple of weeks. If the stock hasn't bounced back from today's action (down about 12% as I write this), one could reasonably assume that it will start to get seriously cheap after that, if the report is as gloomy as I expect. Even if the company meets its guidance, the guidance was nothing to write home about. And at that point, they may really need help from the restucturing experts.

As for the guy who thought he was such an expert, and slammed me for a couple of weeks as I fought his blatant efforts to pump this silly stock -- Dude, you should be ashamed. Anybody who might have taken you seriously is now out a bunch of money, and if the company does file for bankruptcy (AKA "restructuring"), the holders of common stock will almost certainly get $0.0 for every share they hold.

Caveat: These are my personal opinions. I don't claim to have a crystal ball, and there's always the possibility that I could be wrong about CPN. Investors should do their own research and make their own decisions regarding this or any stock. In any case, I do not have any financial interest in this stock, either positive or negative. I am only trying to help other investors understand it, based on things I've learned about it over the years.
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