Calpine Corp. (NYSE: CPN) said in its July 29 earnings report that it advanced several power projects in the second quarter, and that it is readying for the sale of gas-fired power plants in Florida and Nevada.
Those projects by region are
- 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. The plant will feature two combustion turbines, two heat recovery steam generators and one steam turbine. The project’s capacity cleared PJM Interconnection’s last three base residual auctions. The project is now under construction, with commercial operation targeted in the third quarter of 2017. PJM has completed the interconnection study process for an additional 68 MW of planned capacity at York 2 Energy Center. This incremental 68 MW cleared the last two base residual auctions, with a final air permit expected in the third quarter of 2016.
- Mankato Power Plant Expansion – In February 2015, 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 PPA between Calpine and Northern States Power d/b/a Xcel Energy. The PPA was executed in April 2015 and satisfied final regulatory approval requirements in March 2016. Commercial operation of the expanded capacity is expected by June 1, 2019.
- PJM and ISO-NE Development Opportunities – Calpine continues to evaluate development projects in the PJM and ISO New England market areas that feature cost-advantages, such as existing infrastructure and favorable transmission queue positions. These projects continue to advance entitlements (such as permits, zoning and transmission) for potential future development when/if economic as compared to purchasing existing power plants in the region.
- Osprey Energy Center – Calpine executed an asset sale agreement in the fourth quarter of 2014 for the sale of the gas-fired Osprey Energy Center to Duke Energy Florida for approximately $166 million, excluding working capital and other adjustments, which will be consummated in January 2017 upon the conclusion of a PPA with a term of 27 months. The sale has received FERC and state regulatory approvals and represents a strategic disposition of a power plant in a wholesale power market dominated by regulated utilities.
- Clear Lake Power Plant – Calpine plans to file with ERCOT to retire the 400-MW Clear Lake Power Plant. Built in 1985, Clear Lake is an older technology. Reasons to retire include growing maintenance costs and lack of adequate compensation. Calpine is working with the facility’s bilateral counterparties to mutually agree on a date to cease commercial operations, which will take place no later than the summer of 2018.
- Guadalupe Peaking Energy Center – In April 2015, 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. Under the agreement, construction of the Guadalupe Peaking Energy Center (GPEC) may commence at Calpine’s discretion, so long as the power plant reaches commercial operation by June 1, 2019. When the plant begins commercial operation, GVEC will purchase a 50% ownership interest in GPEC. GPEC will feature two fast-ramping combustion turbines capable of responding to peaks in power demand. This project leverages the benefits of an existing site and development rights, as well as the customer’s ability to fund its investment at attractive rates.
- South Point Energy Center – On April 1, 2016, Calpine entered into an asset sale agreement for substantially all of the assets comprising its South Point Energy Center to Nevada Power d/b/a NV Energy for approximately $76 million plus the assumption by the purchaser of existing transmission capacity contracts with a future net present value payment obligation of approximately $112 million, approximately $9 million in remaining tribal lease costs and approximately $21 million in near-term repairs, maintenance and capital improvements to restore the power plant to full capacity. The sale is subject to certain conditions, as well as federal and state regulatory approvals, and is expected to close no later than the first quarter of 2017. The natural gas-fired, combined-cycle plant is located on the Fort Mojave Indian Reservation in Mohave Valley, Arizona, and features a summer peak capacity of 504 MW. This transaction supports a Calpine effort to divest non-core assets outside its strategic concentration.
In September 2015, a wildfire spread to Calpine’s Geysers geothermal assets in Lake and Sonoma counties, California. The wildfire affected five of its 14 power plants in the region, which sustained damage to ancillary structures such as cooling towers and communication/electric deliverability infrastructure. The Geysers assets are currently generating renewable power at approximately 95% of the normal operating capacity and should be restored to pre-fire levels by the end of 2016.
Calpine noted: “We believe the repair and replacement costs, as well as our net revenue losses relating to the wildfire, will be limited to our insurance deductibles of approximately $36 million, all of which was recognized in 2015. Any losses incurred in 2016 related to the wildfire will be primarily offset by insurance proceeds, when such proceeds are realizable. We record insurance proceeds in the same financial statement line as the related loss is incurred and recorded approximately $8 million in business interruption proceeds as operating revenues during the three and six months ended June 30, 2016. We do not anticipate the wildfire or timing of insurance proceeds recovery to have a material impact on our financial condition, results of operations or cash flows.”
Calpine is America’s largest generator of electricity from natural gas and geothermal resources. It fleet of 84 power plants in operation or under construction represents more than 27,000 MW.