Gas

Calpine Explores Possibility of Sale

By Editors of Power Engineering

Calpine Corp. is working with investment bankers at Lazard to potentially find buyers for the company, the Wall Street Journal reported.

According to unnamed sources, Calpine has found interest from a number of private equity firms, though the process is still in its early stages.

Calpine currently owns 80 power plant, the largest fleet in the nation, and has an enterprise value above $16 billion.

Though the company has yet to officially comment on the matter, CEO Thad Hill suggested the company was open to a sale during an earnings call last month, the Houston Chronicle reported.

“Look, we’re going to continue to answer this exactly the same way, which is — as I have before and it remains true — if there is somebody out there, whoever it is, a strategic anybody else that values the company a lot more than our shareholders do, we’ll do the right thing,” he said. “But until and unless that ever occurs, our job is to operate, produce the cash, and do what’s right for the shareholders.”

Calpine has struggled over the last two years due to low natural gas prices and unusual weather that lowered demand for electricity. Additionally, heavy rain in the west lowered demand from Calpine due to above-average hydro production.

Profits at Calpine fell from $235 million in 2015 to $92 million in 2016. Moody’s Investors Service noted that in Texas and California, prices are low enough to make independent companies operate with minimal or negative cash flows.

New plant construction in the PJM market is expected to lower average wholesale prices 10 percent by 2021.

Calpine reported a loss of $56 million for the first quarter of 2017, though that was better than the loss of $198 million logged in the first quarter of 2016.

The company was founded in 1984 and filed for Chapter 11 bankruptcy protection due to heavy borrowing and high natural gas prices that made its power plants more expensive to operate. The company emerged from bankruptcy in 2008.

In recent months, the company has been cutting costs and selling assets, the Wall Street Journal reported.