Calpine may get hot, but it also knows how to blow off some steam. In 2014 the independent power producer and marketer controlled 27,000 MW of generating capacity (and 309 MW under construction) through interests in 88 primarily natural gas-fired power plants in 18 US states and Canada. This fleet also includes 15 geothermal power plants in California. Calpine, the leading geothermal power producer in North America, owns 725 MW of capacity at the largest geothermal facility in the US (the Geysers in northern California), and which accounts for 40% of the country's geothermal energy. The company has major presence in the wholesale power markets in California, the Mid-Atlantic, and Texas.
Serving customers in 18 US states and Canada, Calpine's operating segments are West (including geothermal), Texas, and East (including Canada). The company has regional office in Dublin (California), Wilmington (Delaware), Pasadena (Texas), Washington DC, Sacramento, and Austin (Texas).
California, Texas and the Northeast region are the largest wholesale power markets in the US.
The company's segments are West (including geothermal), Texas and East (including Canada). Texas accounted for 40% of Calpine's revenues in 2014; East, 31%; and West, 29%.
Other Calpine operations include construction, consulting, and management services; turbine component manufacturing; and critical power provision for high-tech companies.
Its indirect subsidiaries include Calpine Construction Finance Company L.P., (and its units Hermiston Power LLC and Brazos Valley Energy LLC) and Calpine Development Holdings, Inc.
Sales and Marketing
The company sells wholesale power, steam, capacity, renewable energy credits and ancillary services to their customers, which include utilities, independent electric system operators, industrial and agricultural companies, retail power providers, municipalities, power marketers and others.
Calpine's utility electricity is distributed via its distribution network, underground lines, and transmission system.
Calpine sells electricity to wholesalers, and end-users, primarily through long-term contracts; the firm also trades power on the wholesale market. In 2014 grid operator PJM accounted for more than 10% of Calpine's total revenues.
The company has recorded strong revenue growth over the last five years. In 2014 its net revenues increased by 27%.
The West segment reported an increase due to the positive impact from Russell City and Los Esteros power plants reporting an increase in MW in operation, partially offset by the expiration of a tolling contract associated with Calpine's Delta Energy Center.
Texas saw a 38% increase in revenues due to the acquisition of the Guadalupe Energy Center and expansions of its Deer Park and Channel Energy Centers. An increase in average total MW in operation and in generation, and a higher commodity margin, also contributed to the strong growth.
East segment revenues rose as the result of the sale of six power plants. The increase in commodity margin was due to colder than normal weather resulting in higher margins, lower natural gas price. This rise was partially offset by lower contribution from hedges, lower regulatory capacity revenues from PJM and the expiration of a power purchase agreement (PPA) associated with the Osprey Energy Center partially offset by a new PPA associated with Osprey Energy Center.
In 2014 Calpine's net income increased by almost 6,600% due to higher sales and the gain from the sale of six power plants in the East segment.
Cash from operating activities increased by 56% in 2014.
The company’s goal is to continue to grow its generation presence in core markets with an emphasis on acquisitions, expansions or modernizations of existing power plants. Calpine is also actively seeking divestiture opportunities of non-core assets in order to pay down debt.
Calpine also plans to focus on competitive wholesale power markets and advocate for market-driven solutions that result in nondiscriminatory forward price signals for investors.
The company has disposed of most of its natural gas reserves and gathering and transportation assets in order to focus on power generation. It is seeking to grow organically and through negotiating supply contracts and by making selected acquisitions supported by asset sales to ensure financial stability.
To raise cash to pay down debt, in 2014 Calpine sold six of its power plants (with 3,500 MW) to privately-held LS Power Equity Advisors for $1.6 billion.
In 2014 Calpine had two power plants under construction.
That year the company agreed to supply electric generation capacity and power to American Electric Power Service Corporation, as agent for Public Service Company of Oklahoma, from Calpine’s Oneta Energy Center (a natural gas fired power plant).
In 2013, to raise cash, Calpine sold its Riverside Energy Center (a 600 MW natural gas plant in Beloit, Wisconsin, to Wisconsin Power and Light for $400 million.
Mergers and Acquisitions
Growing its generating capacity in Texas, in 2014 Calpine bought a power plant owned by MinnTex Power Holdings, LLC with a nameplate capacity of 1,050 MW for $625 million. It also purchased a 1,050 MW, combined-cycle power plant from a unit of Wayzata Investment Partners for $625 million. The natural gas-fired plant is 30 miles northeast of San Antonio.
That year the company also bought a 809 MW combined-cycle power plant from Exelon for $530 million. The natural gas-fired plant in North Weymouth, Massachusetts, expands Calpine’s footprint in the New England competitive wholesale power market.
In 2012 the company acquired an 800-MW natural gas-fired, combined-cycle power plant in Central Texas from Bosque Power Co., for $432 million. That year it sold the Broad River Energy Center to Broad River Power LLC, an affiliate of Energy Capital Partners LLC, for $427 million.
In 2010 Calpine purchased 4,490 MW of power plants from Pepco Holdings for about $1.7 billion. The acquisition added Conectiv Energy's power plants (18 operating and one under construction) to Calpine's fleet, helping to strengthen its market position in the Eastern US.