NRG acknowledged Wednesday that it made the initial $22.98 a share offer on May 14. NRG said the deal assumes Calpine had 500 million fully diluted shares outstanding as of May 13. That calculation would value all of Calpine at $11.35 billion.

NRG offered to pay 0.534 shares for each share of Calpine, the company said in a statement. Based on NRG’s Wednesday closing price of $42.51, the deal values each Calpine share at $22.70, a 6.7% premium to Calpine’s closing price of $21.20.

“This is quite simply, the right deal, at the right point in time, between the right partners,” David Crane, NRG’s chief executive officer said in a statement.

After over-expanding during a period of high electricity prices, the company was unable to carry its heavy debt load as prices began to drop in 2002 and was forced into bankruptcy in 2005.

Calpine laid off more than 1,000 employees – a third of its workforce at the time – and restructured more than $20 billion in debt. Analysts anticipate a buyout will result in more job cuts as NRG aims to lower annual expenses by eliminating overlapping positions.

NRG spent seven months operating under Chapter 11 bankruptcy itself in 2003. NRG said that it is “becoming a full taxpayer four years out” of its own troubles, and the combined company will be able to make the best use of Calpine’s $5.1 billion of net-operating-loss carry-forwards, Dow Jones reported. While Calpine is still putting together its post-Chapter 11 team, NRG says it has strong management immediately available.

“We believe Calpine’s lack of a management team, plus NRG’s established (and in, our view, well-regarded) management team, will likely weigh heavily on Calpine’s board as it deliberates negotiations,” NRG said.

Right now, Calpine has 60 power plants capable of producing 23,000 megawatts of electricity, while NRG maintains 49 plants with a total capacity of 24,120 megawatts.

The takeover would double NRG’s capacity in the United States to about 45,000 megawatts, enough to power 36 million homes.

NRG would also benefit from Calpine’s focus on cleaner natural gas fuel, as lawmakers seek to reduce carbon-dioxide emissions. Calpine is the largest U.S. producer of electricity from gas-fired plants, Bloomberg News reported.

The Lieberman-Warner climate security act, a bill proposed by senators Joseph Lieberman and John Warner aims to reduce emissions by 66% from 2005 levels by 2050. The Senate is scheduled to begin debate on the measure next month.

Source: NRG Looks to Electrify its Business with $11.3 Billion Calpine Takover

At least, since it started monitoring customer mood with its own survey four short years ago. Says their chief economist Fionnuala Earley:

“Food and fuel prices remain high and with house prices no longer rising it is unlikely that consumer confidence will pick up very quickly.”

The Daily Mail agrees under a headline “Broke Britain”. Families have less to spend as household income is eaten up by “unavoidable outgoings”. Discretionary spending – what’s left over after the “unavoidables” – is at its lowest level since 1991.

Economic forecasters Capital Economics expect food prices to continue to rise for some time yet at an annualised 6% and electricity prices will rise up to 10% in the second half. The average Council Tax bill is up 4% and the average water bill up 5.8%.
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—FLEET STREET LETTER ALERT—

3 “Gloom-Loving Stocks” for the Coming Recession

Dark clouds are gathering over the UK economy.

But for contrarian-minded investors, this spells opportunity.

The Fleet Street Letter has just been given permission to share three such money moves with you today.

You can read the full briefing here

Forecasts are not a reliable indicator of future results. Your capital is at risk when you invest in shares, never risk more than you can afford to
lose. Please seek independent financial advice if necessary. Fleet Street Publications Ltd. Customer Services: 0207 633 3600.

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And then there’s the inexorable rise of the oil price. It notched up another record hitting $122 yesterday. For the car driver presently, that translates into 110p for an average litre of unleaded petrol. A level that means it has now crossed the £5/gallon threshold and filling the tank sets you back a wallet-denting £75. An average litre of diesel costs even more at 120p, or £82 a tankful.

But hey, don’t worry CPI inflation is only 2.5% when you factor in all those DVDs, flat screen TVs etc. etc. it all pans out…doesn’t it? Add in too the darkening cloud hanging over the housing market… But the frontline casualties to date look like house builders and, as we suspected, estate agents.

Estate agents are going to the wall in numbers. As we know the credit crunch begat the mortgage famine which in turn begat a recession in housing transactions. That last part is a potential stake to the heart of those whose business is to broker the deals for a fee. No deals, no fees. No fees, no business. A slump in home sales has seen 1,000 estate agents close to date and 4,000 lose their jobs.

It’s a strange situation Peter Bolton King, chief executive of the National Association of Estate Agents, tells the Mail:

‘The irony is that there is no shortage of people who want to move house, but without mortgages they just can’t do so. Estate agents are having to close because there just isn’t enough movement in the housing market.’

I know, our hearts bleed for the poor unfortunates. Given their infestation in many high streets, some trimming may be no bad thing but the death of the market helps no one in the end. In Argentina they have a saying: La plata que no se meuva, se meura. Money that doesn’t move, dies. Putting aside the phrase probably arose during their ruinous experience of hyperinflation the central thought is one of the nature of markets – a market that doesn’t move, dies. And in the case of the UK housing market presently, it’s showing a weak pulse.

(Hispanic speakers are welcome to correct my rusty linguistics!)

*** There’s still plenty of money around judging by an art market that continues to make the headlines. Monet’s ‘A Railway Bridge at Argenteuil’, “considered a prime example of high Impressionism” says the International Herald Tribune fetched a record $37m yesterday.

The previous owners paid $12.6m in 1988. A prize possession no doubt but aesthetic pleasure aside in investment terms that’s a modest return – a little over 5.5%pa. For that you can keep your Monet your editor will stick with his more humble investment trust savings scheme.

Or perhaps a permanent interest bearing share (PIBs) is worth a look these days. One of these unfashionable and little known fixed interest investments – the Britannia 5.555% – is yielding over 8% Collins Stewart advises in a note this morning. No doubt a good deal more than you’d get in even Britannia’s most generous savings account.

More adventurous investors might like to consider what is perhaps the last of the emerging markets: Africa. The pros have been turning their sights on it. The FT reports today ICAP plc, the interdealer broker, is setting up a hedge fund investing in Africa and the Middle East. The region has not escaped the attention of our own emerging markets expert Manraaj Dheensay. He’s found a great opportunity to invest in the region and interested readers should look out to hear more about it from Manraaj, coming through this Saturday.

Regards,

Rob Mackrill
The Daily Reckoning

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You’ve heard the stories about truckers striking on highways and national “Don’t gas up” days, and now you are starting to hear about farmers unable to fuel their tractors. That’s a major concern as the price of diesel — which is used in over 95% of tractors and other farm equipment — reaches $4.25 per gallon.

Even if you read Kerr’s blurb, you may not be aware of the impacts that fuel and electricity prices have on water supply. We’re talking the powering of irrigation equipment…

Today, dear reader, we have the solution…and one micro-cap with the technology to solve this problem…

**********Time Is Running Out **********

“If the Millionaire’s Market Makes You So Much Money, Why Don’t You Just Keep It to Yourself? Why Release This Information?”

Answer: I DO use my guest pass to make money each and every day. But with 1,633,894 transactions per day, there’s more than enough for you, too.

I don’t want to ever be accused of front-running a recommendation. So here’s my promise to you in plain English — I’ll never personally play the recommendations I give you.

So if you think about it, it’s a win-win. I get to continue doing what I love…while still giving you the guest pass and specific instructions on how you could make money for yourself!

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The story of 2007 was solar power. We’ve talked about it a hundred times. Everyone that was interested in the next big alternative energy last year bought every company even remotely connected to solar power. Take for instance First Solar…

As you can see, investors bid the price of this stock up to $267 per share from $28.50 in just a few months. Well, the same is true for this next company I recently stumbled upon. However, this one should outperform the rest this year.

Worldwater & Solar Technologies, Inc. (WWAT: OTC) is a solar technology development company that focuses on farmers’ needs. The company’s lead product, AquaMax, is the simplest answer to the highly complex irrigation problem.

You see, powering the massive irrigation systems of our beloved Great Plains is a huge problem. Sure everyone is focusing on how to bring new energy onto the grids, but no one — that is until now — has thought outside the box (or grids in this case).

AquaMax is a very simple, yet innovative, development. It works like this…

A series of solar panels are set up on the farm, which tie into the power grid already in place. This gives the farmer his own secondary source of power, which juices up the underground water pumps used in the irrigation system:

This does a number of things, which the company’s website does a great job of explaining in this chart:

In consequence of price caps on electricity rates, soaring coal prices have forced many power plants to run at a loss. Among 4,773 large-capacity power plants in China, almost 42% recorded losses in the first two months of 2008. This is 6.35% more than a year earlier. The losses totaled 13.79 billion yuan ($1.97 billion), or more than triple the year-earlier figure.

Zou Yiqiao, director of the price and financial supervision department of the State Electricity Regulatory Commission (SERC), has advised major power companies to merge with or acquire coal producers and transporters to help stabilize costs and supplies. Zou reportedly stated that utilities should slow the expansion of their thermal-power capacity and instead invest in coal transport firms and mines.

According to a SERC spokesman, the Chinese government will “allow power costs to reflect coal prices” some time in the future. In addition to thermal coal plants, China has a major program to build out renewable energy sources and boost electricity output.

Until we meet again,

Byron King

Note: Byron King is a frequent contributor to the free e-letter Whiskey & Gunpowder. To receive daily insights into energy, oil, commodities and other natural resources sign up here!