In a deal in which natural gas-fired generation promises to expand in the future, Calpine Corp. said Thursday is has completed its $1.63 billion acquisition of Conectiv Energy’s power plant fleet from Pepco Holdings Inc.

Calpine instantly gets a major presence in five Mid-Atlantic states and PJM grid operations with 19 generation facilities (one under construction) totaling 4,490 MW.

For Calpine with a strong presence in California and Texas, Conectiv’s fleet offers access to PJM East markets, including a robust capacity market and what Calpine called “a strong likelihood that increasingly stringent environmental regulation will result in the retirement of aging, inefficient coal units” that would create added opportunities for Calpine’s predominantly natural gas-powered plants.

While the existing 18-plant Conectiv fleet should help reduce Calpine’s sensitivity to wholesale gas price swings, the fully contracted 565 MW combined-cycle gas-fired plant now under construction will provide other growth opportunities. That plant is scheduled to start operation in mid-2011. In addition, there are other expansion opportunities within the Conectiv fleet, Calpine said.

Calpine CEO Jack Fusco said the acquisition gives Calpine a “critical foothold in PJM,” which he characterized as one of the nation’s “most robustly competitive power markets.” Longer term there are also what Fusco called “growth opportunities” in PJM and the Conectiv fleet, in addition to the immediate capacity and energy revenue benefits to Calpine, which a little more than two years ago emerged from Chapter 11 bankruptcy.

Calpine said the transaction includes existing forward capacity and energy sales commitments, along with a six-year tolling agreement with Constellation Power for the natural gas-fired plant under construction. It also includes Conectiv’s trading book, load-serving auction obligations, off-site environmental liabilities and preclose pension liabilities.

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