Calpine Corp., San Jose, Calif., on Thursday said it's acquiring the Freestone Energy Center in north Texas from Entergy Corp., New Orleans, for $61 million cash and assumption of $147 million in liabilities.
In a related statement, the Shaw Group Inc., Baton Rouge, La., confirmed the Freestone power plant was the project Shaw reported in March with an undisclosed power developer. As a result of Freestone's sale to Calpine, Shaw will no longer be participating in the project.
Freestone is a 1,000-Mw natural gas-fired power generating facility under development in Freestone County, 80 miles southeast of Dallas. Construction is scheduled to begin during the third quarter 2000, with a two-phased commercial start-up beginning in June 2002.
Calpine will manage the project's development, including engineering and design, construction, fuel supply, and power marketing. The project will consist of four combined-cycle General Electric Co. 7FA combustion engines with two steam turbines.
Calpine says the deal expands its position as the largest independent power producer in Texas. The company currently has 10 gas-fired energy projects in operation, under construction, or development in the state, representing 5,400 Mw of generation. The purchase price and liabilities represent payment for the land and development rights, turbine payments, plus related equipment and expenditures.
The center will serve the Electric Reliability Council of Texas (ERCOT), which is power short during peak summer demand, says Diana Naylor, Calpine senior vice-president.
ERCOT has a limited ability to import electricity, because it is relatively isolated from the national grid, Calpine says. But it is also considered one of the nation's fastest growing energy markets. With an annual growth rate of 3% to 5%, the 60,000-Mw ERCOT market represents about 7% of the US market.
Entergy Wholesale Operations Pres. Geoff Roberts said Entergy was originally looking for a 50% partner for the project, but Calpine was only interested in buying the entire facility.
"They made us an offer that was economically attractive and exceeded both the full value of Entergy's investment and our expected net present value in the project," says Roberts. "Anytime we are able to earn above our cost of capital and realize a return in excess of 30%, as we did on this project, that is a good business decision."
