Under deals reported Monday, independent power producer Calpine Corp. is fashioning itself into a major player in the deregulated US power markets.
The San Jose-based firm said it is buying competing independent power producer SkyGen Energy LLC, Northbrook, Ill., for $450 million plus certain obligations, and it reported an agreement under which it will play a major role in eight power plants totaling 10,000 Mw under development by Panda Energy International, Dallas.
Together, the deals announced Monday , in addition to several reported previously, would bring Calpine's 2004 operating portfolio to more than 50,000 Mw.
Skygen, owned by founder Michael Polsky and Wisvest Corp., a Wisconsin Energy Corp. affiliate, will become a Calpine subsidiary. Upon closing of the transaction, expected during the third quarter of 2000, Calpine will increase its power portfolio by up to 13,500 net Mw of natural gas-fired generation in the US.
Calpine will add three operating facilities totaling 780 net Mw, three projects under construction totaling 812 net Mw, 13 late-stage development facilities totaling 5,258 net Mw, and 16 project development opportunities totaling 6,615 net Mw. It will also acquire 34 General Electric 7 FA gas turbines as part of the deal.
As part of the SkyGen Energy acquisition, Polsky will receive about 1.1 million shares of Calpine common stock. He will serve as Skygen president and as a member of Calpine's board of directors.
$1 billion credit
To fund the SkyGen Energy and other recently announced acquisitions, Calpine said it has obtained a $1 billion short-term credit facility with the Bank of Nova Scotia, Credit Suisse First Boston Corp., and CIBC World Markets. The company expects to refinance this facility in the capital markets.
Under the Calpine and Panda agreement, Panda will develop and carry each of the projects to the construction phase. Calpine will have exclusive rights to construct, own, and operate the plants. Panda will participate in 50% of the cash flow, above Calpine's priority return, in all the projects within the alliance. Included in the pact is the acquisition by Calpine of 24 General Electric 7FA combustion gas turbines and 12 steam turbines scheduled for delivery in 2001 and 2002.
Robert W. (Bob) Carter, Panda chairman, said the first project to be developed under the alliance will be Oneta Power Partners LP, a 1,000-Mw natural gas-fueled power plant under construction near Coweta, Okla. Calpine will pay Panda about $126 million, including reimbursement of development costs and payments for the gas and steam turbines and the Oneta facility. The Oneta transaction is expected to close in July. The plant is scheduled to go into service in 2002.
Calpine Pres. and CEO Peter Cartwright said the Oklahoma facility is significant because it will complement Calpine's Southwest Power Pool portfolio of high-efficiency energy centers and strengthen the company's position as a low-cost power provider.
In addition to the Oneta facility, Panda has locations under development in Gila Bend, Ariz.; El Dorado, Ark.; Tallmadge, Mich.; New Florence, Mo.; Allentown, Pa.; Culloden, W.Va., and Port St. Lucie and Leesburg, Fla. Construction is under way on 1,000-Mw plants near Paris, Marion, and Odessa, Tex.