Calpine adding more than 800 MW of new gas generation

Calpine (NYSE: CPN) officials said during an April 27 earnings call that the company hopes to add more than 800 MW of new generating capacity in Texas and the Mid-Atlantic by mid-2015.

These projects include expansion of the Deer Park and Channel plants in Texas as well as development of the 310-MW Garrison gas plant in Delaware.

Calpine CEO Jack Fusco said the company is “conservatively adding capacity at roughly five to six times EBITDA (earnings before interest, taxes, depreciation and amortization).”

At all three plants, Calpine will be using “legacy” combustion turbines from its existing inventory. The expansions at Deer Park and Channel should cost less than $550/kW whereas the new Garrison plant should cost less than $800/kW, the company said.

Calpine’s website lists Deer Park at 1,000 MW and Channel at roughly 600 MW, once peaking ability is considered at the two plants.

Deer Park and Channel should each bring an additional 260 MW of new generation into operation in June 2014, whereas the Garrison plant is seen entering commercial operation in June 2015. Air permits, and most other government approvals, for the new projects should be attained by the end of this year, Calpine officials said.

Calpine is doing a system impact study for a potential second, 310-MW phase at the Garrison project in the Dover area. The first phase’s capacity will be bid into PJM’s 2015/2016 base residual auction.

“We are advancing more than 800 MW of disciplined growth projects, requiring almost $550 million in investments over the next three years,” Fusco said. “In addition, our Riverside facility sale remains on target and we continue to seek opportunities to monetize the value of our Southeast fleet through long-term contracts or asset divestitures.”

Calpine noted that Alliant Energy (NYSE: LNT) has until May 31 to exercise its option to buy the 600-MW Riverside gas plant in Wisconsin.

Also, Calpine and the major electric utilities in California are scheduled to report back to the California Public Utilities Commission on April 30 on utility negotiations for a power contract for Calpine’s Sutter combined-cycle gas project.

Calpine officials said the independent power producer continues to benefit from increased coal-to-gas switching. Calpine’s gas plants are now even competitive with power plants burning cheap Power River Basin coal, company officials said.

“Calpine’s power generation fleet achieved record-breaking performance in the first quarter of 2012, producing 29 million MWh of power – 52% more than the prior year,” Fusco said. The CEO said that in the face of increased demand, Calpine’s employees were able to achieve 98% starting reliability with only a 1% forced outage factor and no lost time incidents while holding plant operating expenses flat.

The Russell City plant in California is under construction and commercial operation is expected in 2013. It will deliver power to PG&E under a 10-year contract. “Upon completion, this project will bring online approximately 429 MW of net interest baseload capacity (464 MW with peaking capacity) representing our 75% share,” Calpine said.

The Los Esteros project is being upgraded from a 188-MW simple-cycle facility to a 309 MW combined-cycle generation power plant. The existing 188 MW simple-cycle facility was shut down at the end of 2011 to allow for major maintenance on the combustion turbines and installation of the new heat recovery steam generators and a steam turbine generator in connection with the new power contract. Construction is ongoing and operation is expected in the third quarter of 2013. During 2009, Calpine and PG&E negotiated a new PPA to replace the existing California Department of Water Resources contract and facilitate the upgrade.

Calpine reported first quarter 2012 Adjusted EBITDA of $325m, compared to $303m in the prior year period, and Adjusted Recurring Free Cash Flow of $(27)m, compared to $(21)m in the prior year period.  

About Wayne Barber 4201 Articles
Wayne Barber, Chief Analyst for the GenerationHub, has been covering power generation, energy and natural resources issues at national publications for more than 20 years. Prior to joining PennWell he was editor of Generation Markets Week at SNL Financial for nine years. He has also worked as a business journalist at both McGraw-Hill and Financial Times Energy. Wayne also worked as a newspaper reporter for several years. During his career has visited nuclear reactors and coal mines as well as coal and natural gas power plants. Wayne can be reached at wayneb@pennwell.com.