Calpine Taps Turnaround Veteran
HealthSouth Ex-Chairman
Will Assume Role of CEO
After Ouster of Top Officers
By REBECCA SMITH
Staff Reporter of THE WALL STREET JOURNAL
December 13, 2005; Page A5
Calpine Corp. named former HealthSouth Corp. chairman Bob May as chief executive officer, two weeks after the board unexpectedly ousted the power-generation company's two top officers.
Mr. May, 56 years old, helped lead HealthSouth through the aftermath of an accounting scandal, taking over as interim CEO of the health-care company after Richard Scrushy stepped down, and served as chairman until last October.
At Calpine, Mr. May takes command of a company on the edge of bankruptcy, weighed down by almost $18 billion in debt and disappointing cash flow and beset by restive bondholders who repeatedly have gone to court to prevent the San Jose, Calif., company from disposing of assets that back Calpine debt securities.
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• Trouble at Calpine: Track the performance of the company's share price.
In an interview yesterday, Mr. May said his immediate goal is to immerse himself in Calpine's finances. He said he has made no judgment about whether the company will have to seek bankruptcy protection.
"This is not a short-term engagement," said Mr. May, who began work yesterday. "I will stay with the company until it regains its fiscal health."
Calpine directors began to woo Mr. May before they ousted company founder Peter Cartwright as chief executive two weeks ago, according to one person close to the situation. Kenneth Derr, the former Chevron Corp. chairman who was Calpine's acting CEO, met with Mr. May several times during the past month. Calpine offered Mr. May a cash-focused pay package that includes the promise of new equity if the company enters and emerges from bankruptcy protection, this person added.
Mr. May should be helped by his experience at HealthSouth and by his tenure at Charter Communications Inc., a cable-television company that also had financial difficulties. Mr. May, Charter's interim chief executive from January through August of this year, said he helped the company push out debt maturities by an average of five years to "give it additional runway" to improve cash flow.
His only experience with a company in bankruptcy court was as chief executive of PNV Inc., a Florida telecommunications provider, from 1999 until 2001. Before that, he spent 21 years at FedEx Corp.
What happens next at Calpine is of keen interest to energy officials in many states because Calpine owns and operates plants with the potential to produce almost 30,000 megawatts of power, making it one of the five biggest owners of generating capacity in the U.S.
Calpine's primary problem is that it embarked on an ambitious power-plant construction program in the late 1990s, financed almost entirely by debt, and was unable to replace that debt with money from stock sales after energy markets tanked in 2002. Its stock also plunged.
The company kept racking up debt, convinced that recovering markets would supply it with the money to pay it off. But that recovery has been slow to occur, leaving Calpine with underutilized power plants in the 21 states in which it operates.
Mr. May's primary task will be to complete an internal analysis of Calpine's options. The board is trying to decide whether the company, which has many debt obligations coming due after Jan. 22, should reorganize under federal bankruptcy law or take another path. |
