Calpine Corp., the San Jose, CA-based merchant power plantdeveloper/operator, continued its aggressive growth strategyMonday, announcing separate acquisition and strategic alliances inthe central midsection of the U.S. that eventually could make it by2005 the nation’s largest merchant power plant operator with theyoungest, most natural gas-intensive electricity generatingnetwork.

In total, the 16-year-old, multi-billion-dollar company thatwent public four years ago shelled out $576 million and agreed totake on more than $100 million in additional debt to corral 43plants or proposed plants in various stages of development and therights to an additional 58 General Electric gas turbines capable ofproducing up to 14,000 MW of power. The assets being acquired areall privately held.

As part of the move, Calpine buys potential expansion into fournew states-Wisconsin, Indiana, South Carolina and Georgia-expandingthe company’s potential portfolio of almost-exclusively gas-firedpower plants to 89 in 25 states, totaling 26,750 MW by 2005.

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.”

“We’re looking at a great mix of mainly gas-fired combined cycleprojects with a few peaking facilities,” said Calpine’sspokesperson. “SkyGen is a great fit for Calpine; their strategyparallels ours, They have a nice mix in terms of long-term,standing sales agreements for various cogeneration facilities. Theyare strong in cogeneration and have a long-term track record with alot of industrial customers. A lot of the projects are notgreenfield projects, but on-site inside-the-fence cogeneration.”

SkyGen becomes a subsidiary at Calpine, with its 70 employees,mostly based in Northbrook, IL, and two of its operatingfacilities, joining the San Jose company but remaining at theircurrent office locations in the Midwest.

In reference to both deals, Calpine’s founder and CEO PeterCartwright reiterated that the entrepreneur founder-heads of SkyGenand Panda mirror his own outlook on the future of the U. S.electricity business.

Cartwright, who has past ties to Panda’s CEO Bob Carter, calledthe Panda projects “a great portfolio” with “tremendous upsidepotential” for both companies. And he called Polsky and the SkyGenfirm “one of the premier power plant developers in the country,”noting that “Michael’s vision for the U.S. power industry closelyparallels my own.”

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