Calpine works on power plant buy, new generating capacity

Calpine Corp. (NYSE: CPN) in its third quarter earnings report, released Oct. 30, said it saw a number of recent developments in terms of power plant construction and acquisition.

In October, it entered into an agreement to purchase the 745-MW (nameplate) Granite Ridge Energy Center for approximately $500 million, excluding working capital adjustments. The addition of this natural gas combined-cycle plant in Londonderry, New Hampshire, meaningfully increases Calpine’s capacity in the tightening New England market. The power plant features two combustion turbines, two heat recovery steam generators and one steam turbine. Calpine expects the transaction to close in the first quarter of 2016. It expects to fund the purchase with a combination of cash on hand and financing.

Power plant developments in the various regions include:

Texas

  • Guadalupe Peaking Energy Center: In April, Calpine executed an agreement with Guadalupe Valley Electric Cooperative (GVEC) that will facilitate the construction of a 418-MW natural gas-fired peaking plant to be co-located with Calpine’s Guadalupe Energy Center. Construction of the Guadalupe Peaking Energy Center (GPEC) may commence at Calpine’s discretion, so long as the power plant reaches commercial operation between June 1, 2017, and June 1, 2019. When it begins commercial operation, GVEC will purchase a 50% ownership interest in GPEC. Once built, GPEC will feature two fast-ramping combustion turbines. This project meets a customer desire to have direct access to peaking generation resources, leverages the benefits of an existing plant site and development rights, plus affording Calpine the flexibility of timing the plant’s construction in response to market pricing signals.

East

  • Garrison Energy Center: Garrison Energy Center in Delaware commenced commercial operations in June 2015, bringing online about 309 MW of combined-cycle, natural gas-fired capacity. The plant features one combustion turbine, one heat recovery steam generator and one steam turbine and is expected to be dual-fuel capable by this winter. Calpine noted that it is in the early stages of development of a second phase of the Garrison Energy Center.
  • York 2 Energy Center: This is a 760-MW dual-fuel combined-cycle project that will be co-located with Calpine’s York Energy Center in Peach Bottom Township, Pennsylvania. Once complete, the plant will feature two combustion turbines, two heat recovery steam generators and one steam turbine. The project’s capacity cleared PJM Interconnection’s 2017/2018 and 2018/2019 base residual auctions. The project is now under construction, with commercial operations expected to commence during the second quarter of 2017. PJM has completed the interconnection study process for an additional 70 MW of planned capacity at the York 2 Energy Center. This incremental 70 MW cleared the 2018/2019 base residual auction.
  • Mankato Power Plant Expansion: On Feb. 5, the Minnesota Public Utilities Commission concluded a competitive resource acquisition proceeding and selected a 345-MW expansion of Calpine’s Mankato Power Plant, authorizing execution of a 20-year power purchase agreement (PPA) between Calpine and Xcel Energy. The PPA was executed in April 2015 and remains subject to approval by the North Dakota Public Service Commission. Commercial operation of the expanded capacity may commence as early as 2019, subject to requisite regulatory approvals and applicable contract conditions.
  • PJM and ISO-NE Development Opportunities: Calpine is currently evaluating opportunities to develop additional projects in the PJM and ISO New England market areas that feature cost advantages such as existing infrastructure and favorable transmission queue positions. These unspecified projects are continuing to advance entitlements (such as permits, zoning and transmission) for their potential future development when economical.
  • Osprey Energy Center: During the first quarter of 2014, Calpine executed an asset sale agreement for the sale of its gas-fired Osprey Energy Center to Duke Energy Florida for approximately $166 million, excluding working capital and other adjustments. The sale will be consummated in January 2017 upon the conclusion of a 27-month PPA. In July 2015, the transaction was approved by the Federal Energy Regulatory Commission and the Florida Public Service Commission. This sale represents a strategic disposition of a power plant in a wholesale power market dominated by regulated utilities, Calpine said.

All Segments

  • Turbine Modernization: Calpine continues to move forward with a turbine modernization program. Through Sept. 30, it completed the upgrade of thirteen Siemens and eight General Electric turbines totaling approximately 210 MW and has committed to upgrade three additional turbines. In addition, it has begun a program to update its dual-fueled turbines at certain power plants in the East region.

In September 2015, a wildfire spread to Calpine’s Geysers geothermal assets in Lake and Sonoma counties, California, affecting five of 14 power plants in the region which sustained damage to ancillary structures such as cooling towers and communication/electric deliverability infrastructure. The wildfire has since been contained, and the Geysers assets are generating renewable power at approximately three-quarters of the normal operating capacity, Calpine reported. The company expects its insurance program to cover the repair and replacement costs as well as net revenue losses after deductibles are met. As a result, it does not anticipate that the wildfire will have a material impact on its financial condition, results of operations or cash flows.

Calpine is America’s largest generator of electricity from natural gas and geothermal resources. Its fleet of 83 power plants in operation or under construction represents nearly 27,000 MW of generation capacity. Through wholesale power operations and its retail business, Champion Energy, it serves customers in 19 states and Canada.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.