Calpine may get hot, but it also knows how to blow off some steam. In 2013 the independent power producer and marketer controlled more than 28,100 MW of generating capacity (and 699 MW under construction) through interests in 93 primarily natural gas-fired power plants in 20 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 20 US states and Canada, the company's reportable segments are West (including geothermal), Texas, North (including Canada), and Southeast.
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
Calpine sells electricity to utilities, wholesalers, and end-users, primarily through long-term contracts; the firm also trades power on the wholesale market. In 2013 grid operator PJM and utility PG&E accounted for more than 10% of Calpine's total revenues.
After experiencing a revenue dip in 2012 due to a 20% drop in commodity sales (the result of a higher contribution from hedges in Texas and lower regulatory capacity revenues as the result of the expiration of contracts), in 2013 Calpine's revenues increased by 15%. The rise was due to an 18% increase in commodity revenues thanks to the Russell City and Los Esteros power plants commencing commercial operations and the acquisition of Bosque Energy Center (partially offset by the sale of Broad River and Riverside Energy Center); higher regulatory capacity revenue in the North; and higher revenues from new contracts in the West and Southeast segments.
In 2013 Calpine’s net income decreased by 93% primarily due to higher depreciation and amortization expenses resulting from the acquisition of the Bosque Energy Center in 2012; a $12 million increase related to Russell City and Los Esteros power plants coming online in 2013; and a $9 million increase due to the timing of assets placed into service net of assets fully depreciated during 2013.
The company’s operating cash inflow decreased to $549 million (compared to $653 million in 2012) due to an increase in working capital as a result of a $125 million increase in net accounts receivable/accounts payable balances resulting from higher revenues. Cash paid for income taxes, net of refunds received, was $19 million in 2013 (compared to $1 million in 2012).
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 announced plans to sell six of its power plants (with 3,500 MW) to privately-held LS Power Equity Advisors for $1.6 billion.
In 2013 Calpine had four 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 2014 the company agreed to buy 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 2013 Calpine agreed to purchase 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.
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.
SPO Advisory Corp owns about 13% of Calpine; Luminus Management LLC 12%.