A consortium of investors led by private equity firm Energy Capital Partners (ECP), along with billionaire Len Blavatnik’s Access Industries, and Canada Pension Plan Investment Board (CPPIB), agreed to acquire Houston-based Calpine Corp (NYSE: CPN), America’s largest generator of electricity from natural gas and geothermal resources, for $5.6 billion, Calpine said.
Calpine, which emerged from bankruptcy in 2008, has $11.31 billion in debt, bringing the estimated enterprise value of the deal to roughly $17 billion.
The proposed purchase price of $15.25 per share in cash, represents a 51% premium to Calpine’s undisturbed share price of $10.07 in early May.
Calpine’s fleet of 80 power plants in operation or under construction represents approximately 26,000 megawatts of generation capacity. Through wholesale power operations and its retail businesses Calpine Energy Solutions and Champion Energy, the group serves customers in 25 states, Canada and Mexico.
“We are very pleased to announce this proposed transaction and are confident it is in the best interests of our shareholders and stakeholders,” said Frank Cassidy, Chairman of Calpine’s Board of Directors. The deal was unanimously approved by Calpine’s Board of Directors.
“We look forward to joining forces with Calpine’s talented team as they continue executing their strategy,” said Tyler Reeder, a partner at Energy Capital Partners. “We see significant value in Calpine’s operational excellence and strong and stable cash flows and have been impressed by the company’s exceptional leadership and talented employees. We do not expect to make any changes to the way Calpine operates its business and intend to remain focused on providing the high level of service to which Calpine’s wholesale and retail customers have become accustomed. Finally, we do not intend to make any changes to the company’s financial policy or previously announced $2.7 billion deleveraging plan.”
“We are excited to partner with Energy Capital, a leading private equity investment firm focused on North American energy infrastructure and power assets,” said Thad Hill, President and Chief Executive Officer of Calpine. “With ECP, Calpine will be able to operate as it always has – executing on our strategic objectives of providing safe and reliable power and serving our retail and wholesale customers with differentiated products and services. We will also continue to strengthen our wholesale power generation footprint, while benefiting from ECP’s support, industry expertise and long-term investment horizon. In short, Calpine will continue to be the nation’s premier competitive power company.”
Calpine will maintain its corporate headquarters in Houston, Texas with the current management team expected to remain in place.
Energy Capital Partners is a private equity and credit investment firm with over $13 billion in capital commitments. With offices in Short Hills, New Jersey, Houston, Texas and San Diego, California, the firm focuses on investing in the traditional and renewable power generation, midstream oil and gas, electric transmission, environmental infrastructure and related energy services sectors of North America’s energy infrastructure. The firm was founded in 2005 by Doug Kimmelman, its senior partner.
Access Industries is a privately held, U.S.-based industrial group with global strategic investments. Founded in 1986 by entrepreneur and philanthropist Len Blavatnik, the group is headquartered in New York, with offices in London and Moscow. Its industrial focus spans four key sectors: natural resources and chemicals; media and telecommunications; real estate and hospitality; and venture capital.
CPPIB is a professional investment management organization that invests the assets of the Canada Pension Plan (CPP). The firm invests in public equities, private equities, real estate, infrastructure and fixed income instruments. Headquartered in Toronto, with offices in Hong Kong, London, Luxembourg, Mumbai, New York City, São Paulo and Sydney, CPPIB is governed and managed independently of CPP. At June 30, 2017, the CPP Fund totaled C$326.5 billion.
Lazard is serving as financial advisor and White & Case LLP as legal advisor to Calpine. Barclays Capital Inc. is serving as financial advisor and Latham & Watkins LLP as legal advisor to Energy Capital Partners.
The deal includes a 45-day “go-shop” period, and is subject to approval by a majority of Calpine’s hareholders, regulatory filings and waiting periods, and other customary closing conditions. The deal is expected to close in the first quarter of 2018.