Energy Capital Partners, Investors to Purchase Calpine

By Editors of Power Engineering

Calpine Corporation, the largest natural gas and geothermal electricity generating company in the United States, announced it has entered into an agreement with Energy Capital Partners and a consortium of investors led by Access Industries and Canada Pension Plan Investment Board to be purchase for $5.6 billion.

“We are very pleased to announce this proposed transaction and are confident it is in the best interests of our shareholders and stakeholders,” said Frank Cassidy, Chairman of Calpine’s Board of Directors. “This transaction is the result of an exhaustive review of strategic alternatives undertaken by our Board, with the assistance of outside advisors, to maximize shareholder value and unlock the company’s intrinsic value, while eliminating execution risk. We are confident that this is the best outcome of that review and look forward to shareholder approval.”

The purchase price includes a 45-day period during which Calpine can solicit, evaluate and negotiate alternative proposals, though Calpine would have to pay a termination fee of $142 million. The sale is also subject to stockholder and regulatory approval.

Calpine was reportedly looking for buyers as of May. At 80 generating plants, the company has an enterprise value above $16 billion.

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.

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.