updated 5/25/2005 11:13:40 AM ET 2005-05-25T15:13:40

Energy producer Calpine Corp. on Wednesday said it plans to trim about $200 million in annual costs and cut more than $3 billion in debt by the end of the year as it pares operations in an effort to boost profits.

The company, which has struggled as electricity prices have plunged from lofty levels reached four years ago, unveiled a plan under which it may sell as many as eight power plants and temporarily shut down money-losing facilities until market demand strengthens.

Calpine’s share price jumped on the news.

Calpine is already reviewing bids for its 1,200-megawatt plant in Britain, and has said it will use the proceeds to redeem $620 million of preferred equity related to the project. Last week, Calpine said it is also considering alternatives for its domestic oil and gas assets.

On Wednesday, Calpine said it is accelerating its debt-reduction plan by a year, but noted that more cuts are planned for 2006 and beyond. Lowering the debt level should decrease yearly interest expense by about $275 million, Calpine said.

Initiatives to alleviate operating costs include terminating long-term maintenance agreements and limiting off-peak operating losses, the company said.

Calpine added that it will continue implementing technology aimed at boosting fuel efficiency at its power plants, and is targeting a 4 percent reduction in fuel costs through incremental improvements in heat rates.

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