Calpine Cites Debt Uncertainty Due to PG&E Bankruptcy

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Researched by Industrial Info Resources (Sugar Land, Texas)--Calpine Corporation (Houston, Texas) said on Friday it has continued to receive power purchase agreement (PPA) payments from PG&E Corporation (NYSE:PCG) since the California power company filed for bankruptcy protection in January. However, Calpine added that it could "incur an event of default" on debt stemming from two completed California power plant projects if PG&E discontinues the PPAs.

Industrial Info is tracking more than $1.9 billion in active Calpine projects.

Calpine, which went private upon its acquisition by an affiliate of Energy Capital Partners and a consortium of other investors last year, reported $10 million in net income for 2018, a substantial swing from a $339 million net loss in 2017. The company reported $9.5 billion in operating revenues for 2018, compared with $8.7 billion in 2017. The company has a fleet of 79 power plants in operation or under construction, representing about 26 gigawatts of generation capacity.

In its earnings release, Calpine noted PG&E's bankruptcy filing.

"We currently have several power plants that provide energy and energy-related products to PG&E under PPAs, many of which have PG&E collateral posting requirements," Calpine said. Since PG&E's bankruptcy filing, Calpine said it has received all material payments under the PPAs, either directly or through the application of collateral.

"We also currently have numerous other agreements with PG&E related to the operation of our power plants in Northern California, under which PG&E has continued to provide service since its bankruptcy filing, Calpine said, adding it can't predict the ultimate outcome of the bankruptcy proceedings.

Calpine also noted that its Russell City Energy Center and Los Esteros Critical Energy Center, both of which began commercial operations in 2013, sell energy to PG&E through PPAs.

As a result of PG&E's bankruptcy, "we are currently unable to make distributions from our Russell City and Los Esteros projects in accordance with the terms of the project debt agreements associated with each related project," Calpine said. "If PG&E does not seek to assume our PPAs through their bankruptcy proceedings, unless otherwise modified, we will incur an event of default under the Russell City and Los Esteros project debt agreements 180 days after the date of PG&E's bankruptcy filing. We continue to monitor the bankruptcy proceedings and are assessing our options."

PG&E sought bankruptcy protection in the wake of massive wildfires that have swept through California, creating the potential of more than $30 billion in liability costs for the power company. California's state fire agency determined last year that PG&E equipment was the cause of several wildfires across northern California in 2017.

Among the active Calpine projects being tracked by Industrial Info is a 760-megawatt (MW) combined-cycle addition at its York Energy Center in Delta, Pennsylvania. The addition includes a 2-on-1 dual-fuel natural gas/diesel fired combined cycle power block consisting of two 227-MW General Electric natural gas-fired combustion turbines with Vogt duct-fired heat recovery steam generators and a 212-MW General Electric steam turbine generator. McDermott is providing engineering, procurement and construction for the project, which is planned for completion early this year. For more information, see Industrial Info's project report.

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