Calpine Benefits from Low Natural Gas Prices in First-Quarter 2012, Readies $550 Million in Investments through 2015

---

Researched by Industrial Information Resources (Sugar Land, Texas)--Calpine Corporation (NYSE:CPN) (Houston, Texas), the largest independent power producer in the U.S. reported overall improvement and a flurry of new projects in the first quarter of 2012, as lower natural gas prices led to increased power generation, despite unusually mild winter weather. The quarter saw a net loss of $9 million, compared with a net loss of $297 million in first-quarter 2011.

Calpine executives emphasized earnings results were more representative of the quarter when using the "adjusted EBITDA" method, which in this case is defined as earnings before income tax benefits; interest expenses; major maintenance expenses; operating lease expenses; debt extinguishment costs; gains and losses on commodity derivative and mark-to-market activities; losses on interest rate derivatives; depreciation; amortization; and other, smaller adjustments and expenses. Using this measurement, income stood at $325 million, a 7.26% increase from first-quarter 2011.

Total operating revenues in first-quarter 2012 were reported to be $1.24 billion, a 17.55% decrease from the same period last year. Although warmer-than-expected temperatures during the winter season reduced the overall market demand for power, Calpine generated 29 megawatt-hours of electricity during the quarter, a record for a first quarter. In particular, the company's natural gas units saw substantially higher demand as a result of coal-to-gas switching in the Mid-Atlantic, Southeast and Texas segments. However, results in the West segment were hampered by a lack of activity at the Sutter Energy Center in Yuba City, California.

Industrial Info is tracking $3.11 billion in active Calpine projects, including the $844 million construction of the Russell City Energy Center in Hayward, California. The project involves constructing a natural gas-fired, combined-cycle power plant utilizing two Siemens SGT6-5000F 501F combustion turbine generator sets; a duct-fired heat-recovery steam generator; and a GE-D11 triple-pressure, reheat condensing steam turbine generator. If completed, the plant will supply 600 megawatts (MW) to the grid.

Calpine also recently announced that it has executed contracts with California's three investor-owned utilities--Pacific Gas and Electric Company (San Francisco, California), a unit of PG&E Corporation (NYSE:PCG) (San Francisco); San Diego Gas and Electric Company, a subsidiary of Sempra Energy (NYSE:SRE) (San Diego); and Southern California Edison Company (Rosemead, California), the utility unit of Edison International (NYSE:EIX) (Rosemead)--to purchase "resource adequacy," or enough energy to meet the total demand from customers, from the Sutter Energy Center. The contracts, which cover July 1 through the end of 2012, were submitted for approval to the California Public Utilities Commission, which allowed the three utilities to negotiate with Calpine to keep the plant online throughout the year.

Sutter Energy Center is a combined-cycle facility that can produce up to 578 MW. Unit 1 at the plant is undergoing an outage for major inspections and repairs to a 185-MW Siemens SGT6-5000F W501F gas turbine; two Vogt heat-recovery steam generators; and a 200-MW Siemens steam turbine.

"The current low natural gas price environment is driving opportunities for Calpine that have not existed in the history of the company," said Jack Fusco, the president and chief executive officer of Calpine, in a conference call.

All four of Calpine's regional segments reported higher incomes from operations when compared with the same period last year:

• The West region reported $94 million in income from operations, a 9.3% increase from first-quarter 2011.
• The Texas region reported $27 million in income from operations, compared with a $113 million loss in the same period last year.
• The North region reported $72 million in income from operations, a 26.32% increase from first-quarter 2011.
• The Southeast region reported $1 million in income from operations, compared with a $12 million loss in the same period last year.

Calpine executives expect adjusted EBITDA of between $1.67 billion and $1.8 billion in full-year 2012, an increase from the previous estimate of between $1.6 billion and $1.73 billion. The company expects about $100 million in growth capital expenditures in 2012, such as the planned expansion of the Deer Park Energy Center in Deer Park, Texas, which involves installing a natural gas-fired Siemens 501FD combustion turbine generator set and a heat-recovery steam generator to boost capacity sent to the grid and steam capacity for the host. Calpine also is planning to expand the Channel Energy Center in Houston, Texas, and to continue with development projects at the Garrison Energy Center in Dover, Delaware.

"The power markets in general are shaping up favorably for efficient natural gas-fired generation," Fusco said in the conference call. "Heat rates for this summer in both Texas and the Mid-Atlantic are robust, and California has noticeably improved year-over-year, as hydro levels have been closer to normal. In the Southeast, we remain encouraged by the increased interest of utilities and municipalities in our power plants."

In the longer term, Calpine is advancing more than 800 MW of growth projects that will require about $550 million of investment during the coming three years. The company recently entered into 20-year power purchase agreements for between 160 and 280 MW of power from the Oneta Energy Center in Broken Arrow, Oklahoma.

For more information, visit Industrial Info's North American Power Project Database.

View Plant Profile - 1032188 1054662 1040501 1053849 1044539 3049188
View Project Report - 6003476 1010050 300053089

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, and eight offices outside of North America, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.