Calpine Corp., the San Jose, CA-based merchant power plantdeveloper/operator, continued its aggressive growth strategy lastweek, announcing separate acquisition and strategic alliances inthe central midsection of the U.S., along with startup anddevelopment of new projects in Texas and California, respectively.This latest growth spurt eventually could make Calpine by 2005 thenation’s largest merchant power plant operator with the youngest,most natural gas-intensive electricity generating network.

In total, the 16-year-old, multi-billion-dollar company, whichwent public four years ago, began the week by paying $576 millionand agreeing to take on more than $100 million in additional debtto corral 43 plants or proposed plants in various stages ofdevelopment and the rights to an additional 58 General Electric gasturbines capable of producing up to 14,000 MW of power. The assetsbeing acquired are all privately held.

Later, Calpine announced the startup of the 500-MW HidalgoEnergy Center in Edinburg, TX, a plant in which it holds majorityownership (78.5%) with the Brownsville (TX) Public Utilities Board.Subsequently, on Thursday the company announced plans to build, ownand operate a fifth merchant generating plant in California on anAmerican Indian reservation in Southern California.

Calpine said it has acquired the rights to pursue a 600 MWgas-fired generation facility near the town of Thermal in RiversideCounty, CA, through a development deal with Adair International Oiland Gas and a long-term lease agreement with the Torres MartinezDesert Cahuilla Indians.

The $275 million facility, to be called the Teayawa EnergyCenter, will be sited on the Cahuilla Indians’ land in theCoachella Valley, with construction to begin in mid-2001 andcommercial operation to get under way in late 2003.

In Texas, Calpine on June 14 began operating the energy center,which is located within one mile of its Magic Valley GeneratingStation, a 730 MW gas-fired facility currently under construction.The Magic Valley facility is expected to be on line in the summerof 2001. The Hidalgo plant will sell power into the Texas wholesalemarket and potentially into the growing energy markets of northernMexico.

However, among the series of announcements last week it was themajor acquisition and alliances that promise an unprecedentedgrowth spurt for Calpine as it bought potential expansion into fournew states — Wisconsin, Indiana, South Carolina and Georgia —increasing the company’s potential portfolio of almost-exclusivelygas-fired power plants to 89 in 25 states, totaling 26,750 MW by2005.

For $450 million, and agreement to assume its outstanding debt,Calpine bought SkyGen Energy LLC, Northbrook, IL, from MichaelPolsky, its founder, and Wisvest Corp., a Wisconsin Energy Corp.subsidiary. Polsky will continue to run SkyGen as a wholly ownedsubsidiary of Calpine and will assume a seat on Calpine’s board.For another $126 million, Calpine bought into a strategic alliancewith Dallas-based Panda Energy International, Inc., obtaining therights to develop, construct, own and operate a 1,000 MW Pandapower plant proposed for Oklahoma and the potential to do the samewith seven other Panda projects in various earlier stages ofdevelopment.

The Panda deal eventually could involve the largest currentmerchant power plant under development in the U.S., the 2,720 MW ElDorado plant in Arkansas for which Panda just last week announced acontract with Trans-Union Interstate Pipeline to build a 42-mile,30-inch-diameter natural gas supply pipeline to fuel generatingplant with up to 430,000 MMBtu/d. The pipeline will connect theplant with Gulf States Pipeline, Sharon, LA, allowing access to gasbasins in three states (Texas, Louisiana and Oklahoma).

In total, Calpine obtains immediate development, ownership andoperating rights to Panda’s 1,000-MW natural gas-fired Onetaproject in Oklahoma, scheduled to begin construction next quarterand becoming Calpine’s fourth plant hooked to the Southwest PowerPool; in addition it obtains the rights to do similar acquisitionsof seven other Panda projects, including El Dorado. In each case,Calpine will pay Panda a development fee and allow it to share inthe plant’s eventual cash flow, according to a San Jose-basedCalpine spokesperson. Calpine also acquires from Panda the rightsto 24 GE gas turbines and 12 steam turbines, representing 9,600 MWof gas-fired generation.

“Panda like Calpine is concentrated on the gas-fired generationmarket,” said Calpine’s spokesperson. “What Panda will bring to usis an opportunity to develop a total of eight projects totaling10,650 MW of generation. It is structured so the seven projectsunder development-two in advanced stages-once they are financed andready for construction, Calpine has the exclusive right to buy.”

The SkyGen deal, involving mostly cogeneration facilitiesoffering both electricity and steam to large industrial customers,provides Calpine with a diverse portfolio of 45 projects in variousstages of development-three now operating (780 MW total); threebeing built (812 MW); 13 projects in the “late-stage development”(5,258 MW); and another 16 (6,615 MW) classified as “developmentopportunities.”

Richard Nemec, Los Angeles

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