Acquisitive Calpine Corp. stuck to its strategy last Friday,saying it agreed to buy 80% of the Minneapolis, MN-basedCogeneration Corp. of America (CGCA) for $145 million. The proposedacquisition will increase Calpine’s gas-fired energy production to2,476 net MW of capacity, representing a 20% jump in production.Calpine expects to complete the deal in January.
“We’ve said all along we want to be the leading independentpower producer in the United States,” said Bill Highlander, Calpinespokesman. “We saw an opportunity to substantially add to ourcapacity and acted on it.”
CGCA owns interests in six gas-fired facilities in the UnitedStates totaling about 580 MW of capacity. Calpine’s net ownershipinterest (after deducting minority interests) is 400 MW. The plantsare located in Pennsylvania, New Jersey, Illinois and Oklahoma.Calpine will assume operation of four of the facilities uponcompletion of the acquisition and also refinance about $80 millionof CGCA corporate level debt.
“This acquisition significantly strengthens Calpine’s naturalgas-fired power plant portfolio and provides us with access to keyenergy markets,” said Calpine Vice President John King. “We lookforward to expanding our presence in the central and easternstates, both through future strategic acquisitions and thedevelopment of modern energy facilities.”
Calpine has been the most active player in the M&A gamerecently. Last week the San Jose, CA-based company bought Houston,TX-based Sheridan Energy for $41 million (see Daily GPI, Aug. 26).Also earlier this month, Calpine bought 18 combustion turbines fromSiemens Westinghouse.
“The addition of [CGCA] should be a good fit given the company’sU.S. market focus, emphasis on gas-fired generation and use oflong-term contracts for its output – which is all part of Calpine’sstrategy,” said Ron Barone, a PaineWebber analyst. “..This will notonly increase Calpine’s gas-fired production 20%, but it will alsoprovide access to the Midwest energy market, namely Illinois andOklahoma.”
The deal also bolsters Calpine’s extensive power presence on theEast Coast. Even before this acquisition, the company had threepower plants, totaling 130 MW, operating in New York, and had fourother plants in construction in parts of Massachusetts, Maine andRhode Island.
As a result of the merger, NRG Energy Inc., a subsidiary ofNorthern States Power, would have its 45% interest in CGCA reducedto 20%. Under the terms of the agreement, Calpine would pay NRG$37.5 million for 1.5 million shares. All operating, management andservices agreements between NRG and CGCA will be terminated uponcompletion of the acquisition and will be replaced by agreementsbetween Calpine and CGCA. NRG said its recent U.S. acquisitionshave focused on larger generating stations, making the CGCA assetsa better overall fit with Calpine’s strategic focus oncombined-cycle, gas-fired and geothermal power generation. EachCGCA shareholder will get $25/share assuming shareholders approvethe deal.
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