Calpine feels the impact of higher natural gas prices

Calpine (NYSE:CPN), with its fleet of gas-fired power plants, suffered during the first quarter of 2013 with the rise in natural gas prices.

“Our first quarter results were in line with our expectations, driven by a meaningful increase in the price of natural gas that put gas-fired plants back on the margin in Texas and the Southeast,” said Calpine CEO Jack Fusco.

But things should get better later in 2013, Fusco said in a May 2 earnings release.

“Late last year, we sold two non-core contracted plants and bought a merchant plant in Texas; this summer, we will place in service two new contracted plants in California,” Fusco said. “As a result of these portfolio changes, when combined with a more summer-weighted hedge profile and expected increases in regulatory capacity payments later this year, we expect that a higher proportion of our Adjusted EBITDA will be realized in the second half of 2013.”

During 1Q13, Calpine started construction on the first phases of the Garrison combined-cycle gas power plant in Delaware during April. The first 309 MW phase of the plant should be completed in 2Q 2015.

“We are currently evaluating our Deepwater facility [in New Jersey] since the existing 158 MW fossil fuel steam-based power plant will be decommissioned by May 1, 2015. The Deepwater development opportunity would add approximately 350 MW of new combined-cycle capacity and leverage existing infrastructure. Several outstanding early development issues must be resolved before the project will be advanced,” Calpine said.

The non-utility generator expects to complete the 464-MW Russell City energy center in California during the third quarter. Upon completion, Russell City is contracted to deliver its full output to Pacific Gas & Electric (PG&E) under a 10-year power purchase agreement.

Likewise, the Los Esteros project should be finished in the third quarter. It is being converted from a 188 MW simple-cycle generation power plant to a 309 MW combined-cycle generation power plant. Calpine and PG&E negotiated a new contract to replace the existing California Department of Water Resources contract.

In addition, Calpine is continuing its turbine modernization program. “Through March 31, 2013, we have completed the upgrade of eleven Siemens and eight GE turbines totaling approximately 200 MW and have committed to upgrade approximately five additional turbines. Similarly, we have the opportunity at several of our power plants in Texas to implement further modernizations to add as much as 300 MW of incremental capacity across the region at attractive prices,” Calpine said.

Calpine reported first quarter 2013 adjusted EBITDA of $286m, compared to $325m in the prior year period, and adjusted free cash flow of $(43)m, or $(0.10) per diluted share, compared to $(27)m, or $(0.06) per diluted share, 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.