Calpine Corporation (NYSE: CPN) today reported 2009 Adjusted
EBITDA of $1,782 million, up $83 million, or 5%, over the prior
year despite recessionary influences. Although 2009 commodity
prices were lower than in 2008 and annual U.S. power demand was
down nearly 4% year-over-year, our Commodity Margin of $2,562
million was relatively unchanged from 2008. The company also
reported strong 2009 Adjusted Free Cash Flow of $609 million, an
increase of 23% over 2008 results. Additionally, corporate
liquidity increased by more than $200 million in 2009 to $2,379
million. Net income1 during the year was $149 million, or $0.31 per
diluted share, compared to net income of $10 million, or $0.02 per
diluted share, in 2008.
“Our exceptional 2009 operating and commercial performance
translated into a strong financial performance, particularly given
the depressed general market and economic environment. We have made
significant progress toward our goal of being ‘best in class’,”
said Jack Fusco, Calpine’s President and Chief Executive Officer.
“We improved on several key operating metrics, including our forced
outage and availability factors, demonstrating our commitment to
delivering clean, efficient and reliable energy and services to our
customers. Our strong financial results reflect the effectiveness
of our hedging program as well as the success of our efficiency
initiatives in 2009. During the year, we also accomplished several
noteworthy achievements, including the successful commissioning of
our Otay Mesa Energy Center, the opportunistic refinancing of
approximately $3.0 billion of debt and the origination of several
important contracts with key customers throughout the country.
“Looking ahead to 2010, today we are reaffirming our Adjusted
EBITDA guidance of $1.5 to $1.6 billion and our Adjusted Free Cash
Flow guidance of $400 to $500 million. I am pleased that our
proactive hedging efforts have substantially mitigated our exposure
to natural gas price risk in 2010, allowing us to continue to focus
on excellence in operations, customer-focused origination and
disciplined strategic growth,” Fusco said.
“Our growth projects include our turbine upgrade program,
expansion at The Geysers, and construction of the Russell City
Energy Center as well as the expansion of our Los Esteros Critical
Energy Facility, both located in California. These projects
reaffirm Calpine’s position as a long-term leader in environmental
stewardship through operation of and investment in clean
technologies.”
SUMMARY OF FINANCIAL
PERFORMANCE
Full Year Results
Adjusted EBITDA for the year ended December 31, 2009, was $1,782
million, compared to $1,699 million in the prior year period. The
$83 million improvement year-over-year was primarily due to three
factors. First, Commodity Margin increased by $38 million during
the 2009 period. This improvement was due to higher average hedge
margins in 2009 compared to 2008 and strong performance by our
Southeast segment, which experienced a 35% increase in generation
in 2009 largely due to higher natural gas generation displacement
of coal generation in certain sub-markets of that segment, caused
by lower natural gas prices resulting in higher market heat
rates.
Secondly, in the 2009 period, we reduced aggregate plant
operating expense2, sales, general and administrative expense2, and
components of other cost of revenue by $61 million, after excluding
a $29 million decrease in reimbursements for insurance claims from
prior periods that reduced plant operating expense in the 2008
period and, to a much lesser extent, the 2009 period. These cost
improvements were due, in large part, to efficiency efforts that we
implemented over the course of 2009. Finally, Adjusted EBITDA from
unconsolidated investments increased by $41 million in 2009
compared to the corresponding 2008 period, primarily as a result of
Greenfield Energy Centre achieving commercial operations in the
fourth quarter of 2008 and Otay Mesa Energy Center achieving
commercial operations in the fourth quarter of 2009.
These increases were offset, in part by a $36 million decrease
in other revenue associated with declines in revenues from
operations and maintenance and construction management projects and
royalty income on oil and gas producing properties.
Net income1 increased to $149 million for the year ended
December 31, 2009, from $10 million in the prior year period. As
detailed in Table 1, net income, excluding reorganization items,
discontinued operations, other items and unrealized mark-to-market
gains or losses, increased from $62 million in 2008 to $141 million
in 2009. The improvement is primarily attributable to income from
unconsolidated investments in power plants, which increased by $99
million, excluding an impairment loss of $180 million in 2008. In
addition, the increase was due to the $38 million improvement in
Commodity Margin previously noted. Offsetting these improvements,
income tax expense increased by $62 million in 2009 compared to
2008, primarily due to non-cash changes in our intraperiod tax
allocations.
Cash flows provided by operating activities for the twelve
months ended December 31, 2009, improved to $761 million compared
to $494 million for the 2008 period. Cash paid for interest
decreased by $299 million in 2009, primarily due to the repayment
of the Second Priority Debt, and, to a lesser extent, lower
interest rates for the comparable period in 2009. In addition, cash
payments for reorganization items decreased by $115 million.
Meanwhile, working capital employed, after adjusting for
debt-related balances and derivative activities, which did not
impact cash provided by operating activities, increased by
approximately $152 million for the 2009 period compared to 2008.
The increase was primarily due to a reduction in assets held for
sale during 2008 for which there was not a corresponding change in
2009, offset by a net reduction in working capital employed in 2009
for margins and net accounts receivable and payable. Finally, cash
payments for debt extinguishment costs in 2009 were $39 million
related to the CCFC Refinancing, compared to cash payments of $6
million related to the refinancing of Blue Spruce and Metcalf in
2008.
Fourth Quarter Results
Adjusted EBITDA for the fourth quarter of 2009 was $408 million,
up $83 million from the prior year period. The year-over-year
improvement was primarily due to a $79 million increase in
Commodity Margin to $615 million in 2009 from $536 million in 2008.
The Commodity Margin improvement was primarily attributable to our
West region, which benefited from strong hedges, despite a weaker
commodity price environment. In addition, our Southeast segment
also benefited from hedge positions.
Adjusted EBITDA was also favorably impacted by a $22 million
increase in Adjusted EBITDA from unconsolidated investments,
primarily associated with our Otay Mesa plant, which achieved
commercial operation in the fourth quarter of 2009.
These improvements were offset, in part, by a $17 million
decline in other revenue from the fourth quarter of 2008 to the
fourth quarter of 2009, primarily the result of lower royalty
income on oil and gas producing properties.
Net loss1 decreased from $109 million in the fourth quarter of
2008 to $43 million in the fourth quarter of 2009. As detailed in
Table 1, net loss, excluding reorganization items, other items and
unrealized mark-to-market gains or losses, decreased from $177
million in the fourth quarter of 2008 to $12 million in the fourth
quarter of 2009. This improvement was primarily associated with the
$79 million year-over-year increase in Commodity Margin, as
previously noted. In addition, income from unconsolidated
investments in power plants increased by $62 million, excluding a
$1 million impairment loss in 2008. Plant operating expense and
sales, general and administrative expense, as reported, decreased
by $39 million and $9 million, respectively, due, in part, to the
efficiency efforts previously mentioned. These benefits were
offset, in part, by the $17 million decline in other revenue noted
above.
1 Reported as net income (loss) attributable to Calpine on our
Consolidated Statements of Operations.
2 Plant operating expense and sales, general and administrative
expense exclude, in the aggregate, decreases in major maintenance
expense of $16 million, decreases in stock-based compensation
expense of $12 million, decreases in non-cash loss on dispositions
of assets of $2 million, and decreases in depreciation and
amortization of $2 million. See the table titled "Consolidated
Adjusted EBITDA Reconciliation" for the actual amounts of these
items in 2008 and 2009.
Table 1: Summarized Consolidated Condensed Statements of
Operations
(Unaudited) Three Months Ended December
31, Year Ended December 31, 2009
2008 2009 2008 (in millions)
Operating revenues $ 1,569 $ 1,968 $ 6,564 $ 9,937 Cost of revenue
1,335 1,791 5,349 8,779 Gross profit
234 177 1,215 1,158
SG&A, (income) loss from
unconsolidated investments in power plants and other operating
expense
33 112 151 470 Income from operations
201 65 1,064 688
Net interest expense, debt
extinguishment costs and other (income) expense
246 223 905 1,051
Income (loss) before
reorganization items, income taxes and discontinued operations
(45 ) (158 ) 159 (363 )
Reorganization items
1 (39 ) (1 ) (302 )
Income (loss) before income taxes
and discontinued operations
(46 ) (119 ) 160 (61 )
Income tax expense (benefit)
(2 ) 13 15 (47 )
Income (loss) before discontinued
operations
(44 ) (132 ) 145 (14 )
Discontinued operations, net of
tax provision of $14 in 2008
— 23 — 23
Net income (loss)
$ (44 ) $ (109 ) $ 145 $ 9
Net loss attributable to the
noncontrolling interest
1 — 4 1
Net income (loss) attributable to
Calpine
$ (43 ) $ (109 ) $ 149 $ 10
Reorganization items(1)
1 (39 ) (1 ) (302 ) Discontinued operations, net — (23 ) — (23 )
Other items(1)(2)
52 34 82 401
Net income (loss), net of
reorganization items, discontinued operations and other items
10 (137 ) 230 86
Unrealized MtM (gains) losses on
derivatives(1)(3)
(22 ) (40 ) (89 ) (24 )
Net income (loss), net of
reorganization items, discontinued operations, other items
and unrealized MtM impacts
$ (12 ) $ (177 ) $ 141 $ 62
(1) Shown net of tax, assuming a
0% effective tax rate for these items (other than those referenced
in note 2 below).
(2) Other items in the fourth
quarter of 2008 include an impairment charge of approximately $33
million related to the Auburndale peaker power plant and a $1
million impairment loss associated with our interest in the
Auburndale power plant, which was sold during 2008. Other items in
the full year 2008 include the $33 million impairment charge
related to the Auburndale peaker power plant, a cumulative
impairment loss of $180 million associated with our interest in the
Auburndale power plant, $13 million in settlement costs, $13
million in debt extinguishment costs, as well as $135 million in
post-petition interest expense and $27 million in settlement
obligations related to the Canadian debtors and other
deconsolidated foreign entities recorded prior to their
reconsolidation in February 2008, both of which were associated
with our emergence from bankruptcy. Other items in the fourth
quarter 2009 include $25 million in additional depreciation expense
associated with a change in the estimated useful lives and salvage
values of our power plants and related equipment and changing our
Geysers Assets depreciation method, as well as $27 million in debt
extinguishment costs. Other items in the full year 2009 period also
include debt extinguishment costs of $49 million associated with
the refinancing of CCFC, shown net of tax assuming a 38.4%
effective tax rate.
(3) Represents unrealized
mark-to-market (MtM) (gains) losses on contracts that did not
qualify as hedges under the hedge accounting guidelines or
qualified under the hedge accounting guidelines and the hedge
accounting designation had not been elected.
REGIONAL SEGMENT REVIEW OF RESULTS
Table 2: Commodity Margin by Segment (in millions)
Year Ended December 31, 2009
2008 West $ 1,346 $ 1,255 Texas 644 726 Southeast 304
264 North 268 279 Total $ 2,562 $ 2,524
West: Commodity Margin in our West segment increased by
$91 million for the year ended December 31, 2009 compared to the
year ended December 31, 2008. The increase was primarily a result
of higher hedge levels and prices, sales of surplus emission
allowances in the first quarter of 2009 and higher resource
adequacy and renewable energy credit revenues in 2009 compared to
2008. Market heat rates remained relatively unchanged across
periods, and lower natural gas prices resulted in lower market
spark spreads for the year ended December 31, 2009 compared to
2008. In addition, the current period benefited from the
non-recurrence in 2009 of an unfavorable natural gas storage
inventory price adjustment in September 2008.
Texas: Commodity Margin in our Texas segment decreased by
$82 million for the year ended December 31, 2009 compared to 2008.
This decrease is primarily attributable to weaker natural gas
prices that were 56% lower in 2009 compared to 2008. Overall,
market heat rates were relatively unchanged in 2009 compared to
2008; however, market heat rates were higher in the third quarter
of 2009 compared to the same period in 2008 due to warmer than
average weather and lower in the second quarter of 2009 compared to
the same period in 2008 due to the congestion-driven pricing
environment of the second quarter of 2008. Also contributing to the
overall decrease in Commodity Margin was lower steam sales
resulting from weaker industrial demand in 2009 compared to
2008.
Southeast: Commodity Margin in our Southeast segment
increased by $40 million for the year ended December 31, 2009
compared to 2008. The increase was driven by a 35% increase in
generation, which resulted from higher natural gas generation
displacement of coal generation in certain sub-markets in our
Southeast segment primarily caused by lower natural gas prices
resulting in higher market heat rates in 2009 compared to 2008.
Commodity Margin in the Southeast was also positively affected in
2009 compared to 2008, by the favorable impact of an off-take
agreement at one of our power plants and incremental natural gas
hedges. The benefit from these positive performance factors was
partially offset by the negative impact from the settlement of a
disputed steam contract, which adversely impacted operating
revenues in 2009. In addition, a gain of $21 million related to the
temporary assignment of a transmission capacity contract in the
second quarter of 2008 led to a reduction in relative
year-over-year performance.
North: Commodity Margin in our North segment decreased by
$11 million for the year ended December 31, 2009 compared to 2008.
Although market spark spreads were lower in 2009 compared to 2008,
the impact was largely mitigated by our hedge position as well as
the favorable impact of the reconsolidation of RockGen in December
2008.
LIQUIDITY AND CAPITAL
RESOURCES
Table 3: Corporate Liquidity
December 31, December
31, 2009 2008 (in millions) Cash and cash
equivalents, corporate(1) $ 725 $ 1,361 Cash and cash equivalents,
non-corporate 264 296 Total cash and cash equivalents
989 1,657 Restricted cash 562 503 Letter of credit availability(2)
34 2 Revolver availability(3) 794 16 Total current
liquidity(4) $ 2,379 $ 2,178
(1) Includes $9 million and $169
million of margin deposits held by us posted by our counterparties
as of December 31, 2009 and 2008, respectively.
(2) Additional available
balances for Calpine Development Holdings, Inc. As of December 31,
2009, we have the option to increase our availability by an
additional $50 million under this letter of credit by satisfying
certain conditions.
(3) We repaid $725 million
previously drawn on our First Lien Credit Facility revolver on
September 28, 2009.
(4) Excludes contingent
amounts of $150 million under the Knock-in Facility and $200
million under the Commodity Collateral Revolver as of December 31,
2008.
Liquidity improved by more than $200 million during 2009, from
$2.2 billion at December 31, 2008 to $2.4 billion at December 31,
2009. Consistent with our efforts to maintain strong liquidity,
during the fourth quarter of 2009, we extended the letter of credit
facility at our subsidiary, Calpine Development Holdings, Inc.,
which was previously scheduled to mature in 2010 but will now
mature in 2012.
During 2009, we generated $609 million of Adjusted Free Cash
Flow, representing an improvement of $114 million over 2008 results
and exceeding our guidance for the year. The year-over-year
improvement in Adjusted Free Cash Flow was primarily the result of
the $83 million increase in Adjusted EBITDA, as previously
discussed, as well as a $48 million decrease in cash tax payments
from 2008 to 2009. Operating activities resulted in net cash
proceeds of $761 million during the 2009 period, compared to $494
million in 2008. In addition, cash flows used in investing
activities resulted in a net outflow of $250 million in 2009,
driven largely by $179 million in capital expenditures, which were
primarily related to maintenance across the fleet, growth
investments in our turbine upgrade program and improvements to
company systems.
During the fourth quarter of 2009, we continued our efforts
toward managing near-term debt maturities by amending and extending
our approximately $499 million Steamboat credit facility. The
credit facility, originally scheduled to mature in 2011, is now due
in 2017 and was refinanced on favorable terms. Including the
Steamboat refinancing in the fourth quarter, we successfully
refinanced approximately $3 billion of capital during 2009. “We
entered 2009 with a goal of de-risking the balance sheet by
opportunistically addressing near-term maturities while maintaining
a strong liquidity balance,” said Zamir Rauf, Calpine’s Chief
Financial Officer. “I am pleased to report that we achieved this
goal. First, we refinanced approximately $3 billion of debt at very
attractive rates while simplifying the balance sheet in the
process. In addition, we improved our liquidity by $200 million. I
would like to commend our team for the progress made on this front,
particularly considering the uncertain nature of the economy and
capital markets just a year ago.”
PLANT DEVELOPMENT
Russell City Energy Center: On February 4, 2010, we received the
Prevention of Significant Deterioration air permit, the final
permit necessary, to begin construction of our Russell City Energy
Center (RCEC), a proposed 600 MW, natural gas-fired power plant to
be located in Hayward, California in which we own a 65% share.
Under the terms of the permit, RCEC is intended to become the first
power plant in the United States with a federal limit on greenhouse
gas emissions, and will be designed to operate in a way that
produces 25% fewer greenhouse gas emissions than the California
Public Utilities Commission standard. The power plant will use 100%
reclaimed water from the City of Hayward’s Water Pollution Control
Facility for cooling and boiler makeup, which will prevent nearly
four million gallons of wastewater per day from being discharged
into the San Francisco Bay. We hope to complete financing and break
ground for this new state-of-the-art power plant during 2010 with
commercial operations scheduled to begin in 2013.
OPERATIONS UPDATE
2009 Power Operations Achievements:
- Safety Performance: Achieved
seventh consecutive year of top-quartile safety performance with
2009 lost-time incident rate of 0.24
- Availability Performance:
- Improved fleet-wide average
availability factor to 92.1% in 2009, compared to 90.5% in
2008
- Achieved fleet-wide forced
outage factor of 2.03% in 2009, compared to 3.29% in 2008
- Delivered full-year natural
gas-fired fleet starting reliability of 97% in 2009
- Geothermal Generation: Provided
approximately 6.0 million MWh of renewable baseload generation with
94% capacity factor and 0.26% forced outage factor
- Natural Gas-fired Generation:
- Increased production from
gas-fired plants by nearly 3.0 million MWh, or 4%, despite reduced
nationwide electric consumption
- Successfully commissioned Otay
Mesa Energy Center in California
- Six Calpine facilities
recognized during fourth quarter by the Texas Commission on
Environmental Quality with Bronze Level membership in the Clean
Texas Program
- Sustainable Cost Reductions:
Reduced plant operating expense2, sales, general and administrative
expense2 and components of other cost of revenue, largely through
efficiency efforts and disciplined cost controls
2009 Commercial Operations Achievements:
- Customer-oriented growth:
- Signed or began serving term
contracts covering over 5,300 MW of capacity across our portfolio,
leveraging the flexible nature of our fleet to provide value for
our customers
- Developed innovative solution
for Los Angeles Department of Water and Power to offer wind
integration services, helping our customer meet renewables targets
while providing a reliable energy product
- Effective hedging: Maintained
stable year-over-year Commodity Margin, despite declining commodity
prices
FINANCIAL OUTLOOK
Table 4: Adjusted EBITDA and Adjusted Free Cash Flow
Guidance
Full Year 2010 (in millions) Adjusted
EBITDA $ 1,500 – 1,600 Less: Operating lease payments 50 Major
maintenance expense and capital expenditures(1) 290 Cash interest,
net 750 Cash taxes 10 Adjusted Free Cash Flow $ 400 - 500
(1) Includes projected Major
Maintenance Expense of $178 million and maintenance Capital
Expenditures of $112 million. Capital expenditures exclude major
construction and development projects.
(2) Excludes changes in cash
collateral for commodity procurement and risk management
activities.
Today we are reaffirming our 2010 guidance, which includes
Adjusted EBITDA of $1.5 billion to $1.6 billion, and Adjusted Free
Cash Flow of $400 million to $500 million. We are also updating
estimates of our growth capital for 2010. We expect to invest $135
million in growth-related projects during the year, including our
ongoing turbine upgrade program, the addition of incremental steam
wells at The Geysers, and the anticipated commencement of
construction on the 120 MW upgrade of our Los Esteros plant and on
our proposed 600 MW Russell City Energy Center.
INVESTOR CONFERENCE CALL AND
WEBCAST
We will host a conference call to discuss our financial and
operating results for the fourth quarter and full year 2009, on
Thursday, February 25, 2010, at 9:00 a.m. ET / 8:00 a.m. CT. A
listen-only webcast of the call may be accessed through our website
at www.calpine.com, or by dialing 888-695-0608 (or 719-325-2236 for
international listeners) at least 10 minutes prior to the beginning
of the call. An archived recording of the call will be made
available for a limited time on our website. The recording also can
be accessed by dialing 888-203-1112 (or 719-457-0820 for
international listeners) and providing Confirmation Code 1737034.
Presentation materials to accompany the conference call will be
made available on our website on February 25, 2010.
ANNUAL MEETING DATE
Calpine’s Annual Meeting of Shareholders will be held on
Wednesday, May 19, 2010, at 10:00 a.m. CT in Houston, Texas, at a
location to be announced.
ABOUT CALPINE
Founded in 1984, Calpine Corporation is a major U.S. power
company, currently capable of delivering nearly 25,000 megawatts of
clean, cost-effective, reliable and fuel-efficient power to
customers and communities in 16 states in the United States and
Canada. Calpine Corporation is committed to helping meet the needs
of an economy that demands more and cleaner sources of electricity.
Calpine owns, leases and operates low-carbon, natural gas-fired and
renewable geothermal power plants. Using advanced technologies,
Calpine generates power in a reliable and environmentally
responsible manner for the customers and communities it serves.
Please visit our website at www.calpine.com for more
information.
Calpine’s Annual Report on Form 10-K for the year ended December
31, 2009, has been filed with the Securities and Exchange
Commission (SEC) and may be found on the SEC’s website at
www.sec.gov.
FORWARD-LOOKING
INFORMATION
In addition to historical information, this release contains
forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended and Section 21E of the
Securities Exchange Act of 1934, as amended. We use words such as
“believe,” “intend,” “expect,” “anticipate,” “plan,” “may,” “will,”
“should,” “estimate,” “potential,” “project” and similar
expressions to identify forward-looking statements. Such statements
include, among others, those concerning our expected financial
performance and strategic and operational plans, as well as all
assumptions, expectations, predictions, intentions or beliefs about
future events. You are cautioned that any such forward-looking
statements are not guarantees of future performance and that a
number of risks and uncertainties could cause actual results to
differ materially from those anticipated in the forward-looking
statements. Such risks and uncertainties include, but are not
limited to:
- The uncertain length and
severity of the current general financial and economic downturn,
the timing and strength of an economic recovery, if any, and their
impacts on our business including demand for our power and steam
products, the ability of customers, suppliers, service providers
and other contractual counterparties to perform under their
contracts with us and the cost and availability of capital and
credit;
- Financial results that may be
volatile and may not reflect historical trends due to, among other
things, fluctuations in prices for commodities such as natural gas
and power, fluctuations in liquidity and volatility in the energy
commodities markets and our ability to hedge risks;
- Our ability to manage our
customer and counterparty exposure and credit risk, including our
commodity positions;
- Our ability to manage our
significant liquidity needs and to comply with covenants under our
First Lien Credit Facility, our First Lien Notes and other existing
financing obligations;
- Competition, including risks
associated with marketing and selling power in the evolving energy
markets;
- Regulation in the markets in
which we participate and our ability to effectively respond to
changes in laws and regulations or the interpretation thereof
including changing market rules and evolving federal, state and
regional laws and regulations including those related to greenhouse
gas emissions and derivative transactions;
- Natural disasters such as
hurricanes, earthquakes and floods, or acts of terrorism that may
impact our power plants or the markets our power plants serve;
- Seasonal fluctuations of our
results and exposure to variations in weather patterns;
- Disruptions in or limitations on
the transportation of natural gas and transmission of power;
- Our ability to attract, retain
and motivate key employees;
- Our ability to implement our
business plan and strategy;
- Risks related to our geothermal
resources, including the adequacy of our steam reserves, unusual or
unexpected steam field well and pipeline maintenance requirements,
variables associated with the injection of wastewater to the steam
reservoir and potential regulations or other requirements related
to seismicity concerns that may delay or increase the cost of
developing or operating geothermal resources;
- Risks associated with the
operation, construction and development of power plants including
unscheduled outages or delays and plant efficiencies;
- Present and possible future
claims, litigation and enforcement actions;
- The expiration or termination of
our power purchase agreements and the related results on revenues;
and
- Other risks identified in this
release or in our reports and registration statements filed with
the Securities and Exchange Commission (SEC), including, without
limitation, the risk factors identified in our Annual Report on
Form 10-K for the year ended December 31, 2009.
Actual results or developments may differ materially from the
expectations expressed or implied in the forward-looking statement.
Unless specified otherwise, all information set forth in this
release is as of today’s date, and we undertake no obligation to
update any forward-looking statements, whether as a result of new
information, future developments or otherwise. For additional
information about our general business operations, please refer to
our Annual Report on Form 10-K for the year ended December 31,
2009, and any other recent report we have filed with the SEC. These
filings are available by visiting the SEC’s web site at www.sec.gov
or our web site at www.calpine.com.
CALPINE CORPORATION AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
OPERATIONS
(Unaudited) Three Months Ended
December 31, Year Ended December 31, 2009
2008 2009 2008 (in millions, except share
and per share amounts) Operating revenues $ 1,569 $ 1,968 $
6,564 $ 9,937 Cost of revenue: Fuel and purchased energy
expense 930 1,346 3,897 7,281 Plant operating expense 243 282 897
918
Depreciation and amortization
expense
137 104 467 433 Operating asset impairments 4 33 4 33
Other cost of revenue
21 26 84 114 Total cost of revenue
1,335 1,791 5,349 8,779 Gross profit
234 177 1,215 1,158
Sales, general and other
administrative expense
52 61 183 215
(Income) loss from unconsolidated
investments in power plants
(23 ) 40 (50 ) 229 Other operating expense 4 11
18 26 Income from operations 201 65 1,064 688
Interest expense 214 234 829 1,071 Interest (income) (3 ) (9 ) (16
) (47 ) Debt extinguishment costs 27 — 76 13 Other (income)
expense, net 8 (2 ) 16 14
Income (loss) before
reorganization items, income taxes and discontinued operations
(45 ) (158 ) 159 (363 ) Reorganization items 1 (39 )
(1 ) (302 )
Income(loss) before income taxes
and discontinued operations
(46 ) (119 ) 160 (61 ) Income tax expense (benefit) (2 )
13 15 (47 )
Income (loss) before discontinued
operations
(44 ) (132 ) 145 (14 )
Discontinued operations, net of
tax expense of $14 in 2008
— 23 — 23 Net income $ (44 ) $ (109 ) $
145 $ 9 Net loss attributable to the noncontrolling interest
1 — 4 1
Net income attributable to
Calpine
$ (43 ) $ (109 ) $ 149 $ 10
Basic earnings (loss) per common
share:
Weighted average shares of common
stock outstanding (in thousands)
485,776 485,135 485,659 485,054
Income (loss) before discontinued
operations attributable to Calpine
(0.09 ) (0.27 ) 0.31 (0.03 )
Discontinued operations, net of
tax, attributable to Calpine
— 0.05 — 0.05
Net income (loss) per common share
attributable to Calpine – basic
$ (0.09 ) $ (0.22 ) $ 0.31 $ 0.02 Diluted earnings (loss)
per common share:
Weighted average shares of common
stock outstanding (in thousands)
485,776 485,135 486,319 485,546
Income (loss) before discontinued
operations attributable to Calpine
(0.09 ) (0.27 ) 0.31 (0.03 )
Discontinued operations, net of
tax, attributable to Calpine
— 0.05 — 0.05
Net income (loss) per common share
attributable to Calpine – diluted
$ (0.09 ) $ (0.22 ) $ 0.31 $ 0.02
CALPINE CORPORATION AND
SUBSIDIARIES
CONSOLIDATED BALANCE
SHEETS
December 31, 2009 and
2008
2009 2008
(in millions,
exceptshare and per share amounts)
ASSETS Current assets: Cash and cash equivalents $ 989 $
1,657 Accounts receivable, net of allowance of $14 and $42 747 846
Accounts receivable, related party 3 4 Inventory 209 163 Margin
deposits and other prepaid expense 490 776 Restricted cash, current
508 337 Derivative assets, current 1,119 3,653 Other current assets
34 64 Total current assets 4,099 7,500
Property, plant and equipment, net 11,583 11,908 Restricted cash,
net of current portion 54 166 Investments 214 144 Long-term
derivative assets 127 404 Other assets 573 616 Total
assets $ 16,650 $ 20,738
LIABILITIES & STOCKHOLDERS’
EQUITY Current liabilities: Accounts payable $ 578 $ 574
Accrued interest payable 54 85 Debt, current portion 463 716
Derivative liabilities, current 1,360 3,799 Income taxes payable 7
5 Other current liabilities 287 437 Total current
liabilities 2,749 5,616 Debt, net of current portion 8,996
9,756 Deferred income taxes, net of current portion 54 93 Long-term
derivative liabilities 197 698 Other long-term liabilities
208 203 Total liabilities 12,204 16,366 Stockholders’
equity:
Preferred stock, $.001 par value
per share; authorized 100,000,000 shares, none issued and
outstanding at December 31, 2009 and 2008
— —
Common stock, $.001 par value per
share; authorized 1,400,000,000 shares, 443,325,827 shares issued
and 442,998,255 shares outstanding at December 31, 2009 and
429,025,057 shares issued and 428,960,025 shares outstanding at
December 31, 2008
1 1
Treasury stock, at cost, 327,572
shares and 65,032 shares at December 31, 2009 and December 31,
2008, respectively
(3 ) (1 ) Additional paid-in capital 12,256 12,217 Accumulated
deficit (7,540 ) (7,689 ) Accumulated other comprehensive loss
(266 ) (158 ) Total Calpine stockholders’ equity
4,448 4,370 Noncontrolling interest (2 ) 2 Total
stockholders’ equity 4,446 4,372 Total liabilities
and stockholders’ equity $ 16,650 $ 20,738
CALPINE CORPORATION AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH
FLOWS
For the Years Ended December
31, 2009 and 2008
2009
2008 (in millions) Cash flows from operating
activities: Net income $ 145 $ 9
Adjustments to reconcile net
income to net cash provided by operating activities:
Depreciation and amortization expense(1) 556 544
(Income) loss from unconsolidated
investments in power plants
(50 ) 229 Debt extinguishment costs 37 7 Deferred income taxes 16
27 Impairment loss 4 46 Gain on sale of discontinued operations —
(37 ) Loss on disposal of assets, excluding reorganization items 37
36 Unrealized mark-to-market activity, net (89 ) (24 ) Return on
investment in unconsolidated subsidiaries 11 — Stock-based
compensation expense 38 50 Reorganization items (6 ) (359 ) Other 6
16
Change in operating assets and
liabilities, net of effects of acquisitions:
Accounts receivable 108 375 Derivative instruments (118 ) 234 Other
assets 235 (101 )
Accounts payable, liabilities
subject to compromise and accrued expenses
(19 ) (215 ) Other liabilities (150 ) (343 ) Net cash
provided by operating activities 761 494 Cash flows
from investing activities: Purchases of property, plant and
equipment (179 ) (143 ) Proceeds from sale of power plants,
turbines and investments — 413 Proceeds from sale of discontinued
operations — 79
Cash acquired due to
reconsolidation of the Canadian Debtors and
other deconsolidated foreign entities
— 64 Contributions to unconsolidated investments (19 ) (17 ) Return
of investment from unconsolidated investments 9 27 (Increase)
decrease in restricted cash (59 ) 78 Cash effect of deconsolidation
of VIEs — (2 ) Other (2 ) 17
Net cash provided by (used in)
investing activities
(250 ) 516 Cash flows from financing activities:
Repayments of notes payable
(106 )
(99 ) Borrowings from CCFC New Notes 955 — Repayments of CCFC Old
Notes (781 ) (4 ) Borrowings from project financing 79 357
Repayments of project financing (121 ) (275 ) Repayments of DIP
Facility — (98 ) Borrowings under First Lien Facilities — 4,248
Repayments on First Lien Facilities (785 ) (1,475 ) Borrowings
under Commodity Collateral Revolver — 100 Repayments of Second
Priority Debt — (3,672 ) Repayments on capital leases (43 ) (42 )
Redemptions of preferred interests (310 ) (166 ) Financing costs
(65 ) (207 ) Derivative contracts classified as financing
activities — 64 Other (2 ) 1 Net cash used in
financing activities (1,179 ) (1,268 ) Net decrease
in cash and cash equivalents (668 ) (258 ) Cash and cash
equivalents, beginning of period 1,657 1,915 Cash and
cash equivalents, end of period $ 989 $ 1,657 Cash paid
(received) during the period for: Interest, net of amounts
capitalized $ 761 $ 1,060 Income taxes $ 7 $ 74 Reorganization
items included in operating activities, net $ 5 $ 120
Reorganization items included in investing activities, net $ — $
(418 )
Supplemental disclosure of
non-cash investing and financing activities:
Settlement of commodity contract with project financing $ 79 $ —
Change in capital expenditures included in accounts payable $ 6 $
13
Issuance of First Lien Notes in
exchange for First Lien Credit Facility term loans
$ 1,200 $ — Amended Steamboat project debt $ 448 $ —
Settlement of liabilities subject
to compromise through issuance of reorganized Calpine
Corporation common stock
$ — $ 5,200
DIP Facility borrowings converted
into exit financing under our First Lien Facilities
$ — $ 3,872
Settlement of Convertible Senior
Notes and Unsecured Senior Notes with reorganized Calpine
Corporation common stock
$ — $ 3,703
(1) Includes depreciation and
amortization that is recorded in sales, general and other
administrative expense and interest expense on our Consolidated
Statements of Operations.
REGULATION G RECONCILIATIONS
Commodity Margin, Adjusted EBITDA and Adjusted Free Cash Flow
are non-GAAP financial measures that we use as measures of our
performance. These measures should be viewed as a supplement to and
not a substitute for our GAAP measures of performance.
Commodity Margin includes our power and steam revenues, sales of
purchased power and natural gas, capacity revenue, revenue from
renewable energy credits, sales of surplus emission allowances,
transmission revenue and expenses, fuel and purchased energy
expense, RGGI compliance costs and cash settlements from our
marketing, hedging and optimization activities that are included in
mark-to-market activity, but excludes the unrealized portion of our
mark-to-market activity and other revenues. Commodity Margin is
presented because we believe it is a useful tool for assessing the
performance of our core operations, and it is a key operational
measure reviewed by our chief operating decision maker. Commodity
Margin does not intend to represent gross profit (loss), the most
comparable GAAP measure, as an indicator of operating performance
and is not necessarily comparable to similarly-titled measures
reported by other companies.
Adjusted EBITDA represents net income (loss) before interest,
taxes, depreciation and amortization, adjusted for certain non-cash
and non-recurring items as detailed in the following
reconciliation. Adjusted EBITDA is presented because our management
uses Adjusted EBITDA (i) as a measure of operating performance to
assist in comparing performance from period to period on a
consistent basis and to readily view operating trends; (ii) as a
measure for planning and forecasting overall expectations and for
evaluating actual results against such expectations; and (iii) in
communications with our Board of Directors, shareholders,
creditors, analysts and investors concerning our financial
performance. We believe Adjusted EBITDA is also used by and is
useful to investors and other users of our financial statements in
evaluating our operating performance because it provides them with
an additional tool to compare business performance across companies
and across periods. We believe that EBITDA is widely used by
investors to measure a company’s operating performance without
regard to items such as interest expense, taxes, depreciation and
amortization, which can vary substantially from company to company
depending upon accounting methods and book value of assets, capital
structure and the method by which assets were acquired. Adjusted
EBITDA is not a measure calculated in accordance with GAAP, and
should be viewed as a supplement to and not a substitute for our
results of operations presented in accordance with GAAP. Adjusted
EBITDA is not intended to represent cash flows from operations or
net income (loss) as defined by GAAP as an indicator of operating
performance. Furthermore, Adjusted EBITDA is not necessarily
comparable to similarly-titled measures reported by other
companies.
Adjusted Free Cash Flow represents net income before interest,
taxes, depreciation and amortization, as adjusted, less operating
lease payments, major maintenance expense and maintenance capital
expenditures, net cash interest, cash taxes, working capital and
other adjustments. Adjusted Free Cash Flow is presented because our
management uses this measure, among others, to make decisions about
capital allocation. Adjusted Free Cash Flow is not intended to
represent cash flows from operations as defined by GAAP as an
indicator of operating performance and is not necessarily
comparable to similarly-titled measures reported by other
companies.
Commodity Margin Reconciliation
The following table reconciles our Commodity Margin to its GAAP
results for the three months ended December 31, 2009 and 2008:
Three Months Ended December 31,
2009(in millions)
Consolidation And West Texas
Southeast North Elimination Total
Commodity Margin $ 352 $ 139 $ 71 $ 53 $ — $ 615
Add: Mark-to-market commodity
activity, net and other revenue(1)
23 8 (7 ) 9 (9 ) 24 Less: Plant operating expense 111 69 40 30 (7 )
243 Depreciation and amortization expense 55 37 29 19 (3 ) 137
Other cost of revenue(2) 17 2 3 7
(4 ) 25 Gross profit (loss) $ 192 $ 39 $ (8 ) $ 6 $ 5
$ 234
Three Months Ended December 31,
2008(in millions)
Consolidation And West Texas
Southeast North Elimination Total
Commodity Margin $ 290 $ 139 $ 56 $ 51 $ — $ 536
Add: Mark-to-market commodity
activity, net and other revenue(1)
(1 ) 81 30 (16 ) (8 ) 86 Less: Plant operating expense 125 89 44 35
(11 ) 282
Depreciation and amortization
expense
47 30 15 16 (4 ) 104 Other cost of revenue(2) 17 3
36 5 (2 ) 59 Gross profit (loss) $ 100
$ 98 $ (9 ) $ (21 ) $ 9 $ 177
(1) Mark-to-market commodity
activity represents the unrealized portion of our mark-to-market
activity, net, as well as a non-cash gain from amortization of
prepaid power sales agreements included in operating revenues and
fuel and purchased energy expense on our Consolidated Statements of
Operations.
(2) Includes operating asset
impairments of $4 million and $33 million for the three months
ended December 31, 2009 and 2008, respectively.
The following table reconciles our Commodity Margin to its GAAP
results for the years ended December 31, 2009 and 2008:
Year Ended December 31,
2009(in millions)
Consolidation And West Texas
Southeast North Elimination Total
Commodity Margin $ 1,346 $ 644 $ 304 $ 268 $ — $ 2,562
Add: Mark-to-market commodity
activity, net and other revenue(1)
143 (40 ) (5 ) 46 (44 ) 100 Less: Plant operating expense 437 232
134 91 3 897
Depreciation and amortization
expense
205 125 79 66 (8 ) 467
Other cost of revenue(2)
62 13 10 30 (32 ) 83
Gross profit $ 785 $ 234 $ 76 $ 127 $ (7 ) $ 1,215
Year Ended December 31,
2008(in millions)
Consolidation And West Texas
Southeast North Elimination Total
Commodity Margin $ 1,255 $ 726 $ 264 $ 279 $ — $ 2,524
Add: Mark-to-market commodity
activity, net and other revenue(1)
(31 ) 195 36 (40 ) (28 ) 132 Less: Plant operating expense 434 267
128 108 (19 ) 918 Depreciation and amortization expense 190 124 69
56 (6 ) 433 Other cost of revenue(2) 71 12 59
26 (21 ) 147 Gross profit $ 529 $ 518 $ 44 $
49 $ 18 $ 1,158
(1) Mark-to-market commodity
activity represents the unrealized portion of our mark-to-market
activity, net, as well as a non-cash gain from amortization of
prepaid power sales agreements included in operating revenues and
fuel and purchased energy expense on our Consolidated Statements of
Operations for the years ended December 31, 2009 and 2008.
(2) Excludes $5 million and nil of
RGGI compliance costs for the years ended December 31, 2009 and
2008, respectively, which were included as a component of Commodity
Margin and includes operating asset impairments of $4 million and
$33 million for the years ended December 31, 2009 and 2008,
respectively.
Consolidated Adjusted EBITDA Reconciliation
In the following table, we have reconciled our Adjusted EBITDA
and Adjusted Free Cash Flow to our Net Income for the three and
twelve months ended December 31, 2009 and 2008, as reported under
GAAP.
Three Months Ended December 31, Year Ended
December 31, 2009 2008 2009 2008
(in millions) Net income attributable to Calpine $ (43 ) $
(109 ) $ 149 $ 10
Net loss attributable to
noncontrolling interest
(1 ) — (4 ) (1 ) Discontinued operations, net of tax expense — (23
) — (23 ) Income tax expense (benefit) (2 ) 13 15 (47 )
Reorganization items 1 (39 ) (1 ) (302 )
Other (income) expense and debt
extinguishment costs, net
35 (2 ) 92 27 Interest expense, net 211 225
813 1,024 Income from operations $ 201 $ 65 $ 1,064 $ 688
Add: Adjustments to reconcile income from operations to Adjusted
EBITDA:
Depreciation and amortization
expense, excluding deferred financing costs(1)
141 110 480 467 Impairment loss 4 41 4 226 Major maintenance
expense 50 72 174 190 Operating lease expense 12 11 47 46 Non-cash
realized gains on derivatives — (7 ) — (40 )
Unrealized (gains) losses on
commodity derivative mark-to-market activity
(19 ) (57 ) (79 ) (35 )
Adjustments to reflect Adjusted
EBITDA from unconsolidated investments(2),(3)
6 47 17 76 Stock-based compensation expense 8 14 38 50 Non-cash
loss on dispositions of assets 3 25 32 34 Other(4) 2
4 5 (3 ) Adjusted EBITDA $ 408 $ 325 $ 1,782 $ 1,699
Less: Lease payments 12 47 46
Major maintenance expense and
capital expenditures(5)
77 351 321 Cash interest(6) 206 773 794 Cash taxes — (5 ) 43 Other
— 7 — Adjusted Free Cash Flow(7)(8) $ 113 $
609 $ 495
(1) Depreciation and amortization
expense in the income from operations calculation on our
Consolidated Condensed Statements of Operations excludes
amortization of other assets and amounts classified as sales,
general and other administrative expenses.
(2) Included in our Consolidated
Statements of Operations in (income) loss from unconsolidated
investments in power plants.
(3) Adjustments to reflect
Adjusted EBITDA from unconsolidated investments include $(13)
million and $61 million in unrealized (gains) losses on
mark-to-market activity for the three months ended December 31,
2009 and 2008, respectively, and $(47) million and $55 million in
unrealized (gains) losses on mark-to-market activity for the years
ended December 31, 2009 and 2008, respectively.
(4) Includes fees for letters of
credit.
(5) Includes $52 million and $183
million in major maintenance expense for the three and twelve
months ended December 31, 2009, respectively, and $25 million and
$168 million in maintenance capital expenditures for the three and
twelve months ended December 31, 2009, respectively. Includes $191
million in major maintenance expense and $130 million in
maintenance capital expenditures for the twelve months ended
December 31, 2008.
(6) Includes commitment, letter of
credit and other bank fees from both consolidated and
unconsolidated investments, net of capitalized interest and
interest income.
(7) Excludes decrease (increase)
in working capital of $71 million and $70 million for the three and
twelve months ended December 31, 2009 and $(44) million for the
twelve months ended December 31, 2008.
(8) Adjusted Free Cash Flow, as
reported, excludes changes in working capital, such that it is
calculated on the same basis as our guidance. Results for the year
ended December 31, 2008 have been recast to conform to this
method.
In the following table, we have reconciled our Adjusted EBITDA
to our Commodity Margin, both of which are non-GAAP measures, for
the three and twelve months ended December 31, 2009 and 2008.
Reconciliations for both Adjusted EBITDA and Commodity Margin to
comparable GAAP measures are provided above.
Three Months Ended December 31, Year Ended
December 31, 2009 2008 2009 2008
(in millions) Commodity Margin $ 615 $ 536 $ 2,562 $ 2,524
Other revenue 5 22 21 57 Plant operating expense(1) (186 ) (180 )
(675 ) (670 ) Other cost of revenue(2) (7 ) (12 ) (28 ) (46 )
Sales, general and administrative expense(3) (46 ) (49 ) (152 )
(178 ) Adjusted EBITDA from unconsolidated investments in power
plants(4) 29 7 67 26 Other operating expense(5) (4 ) (3 ) (18 ) (11
) Other 2 4 5 (3 ) Adjusted EBITDA $
408 $ 325 $ 1,782 $ 1,699
(1) Shown net of major maintenance
expense, stock-based compensation expense, and non-cash loss on
dispositions of assets.
(2) Shown net of operating lease
expense and depreciation and amortization. Excludes $5 million and
nil of RGGI compliance costs for the years ended December 31, 2009
and 2008, respectively, which were included as a component of
Commodity Margin.
(3) Shown net of depreciation and
amortization and stock-based compensation expense.
(4) Shown net of impairments in
2008. Amount is comprised of income from unconsolidated investments
in power plants, as well as adjustments to reflect Adjusted EBTIDA
from unconsolidated investments.
(5) Shown net of impairments in
2008.
Adjusted EBITDA and Adjusted Free Cash Flow Reconciliation
for Guidance
Full Year 2010 Range:
Low
High (in millions) GAAP Net Income $ (30 ) $
70 Plus: Interest expense, net of interest income 750 750
Depreciation and amortization expense 465 465 Major maintenance
expense 180 180 Operating lease expense 50 50 Other(1) 85
85 Adjusted EBITDA $ 1,500 $ 1,600 Less: Operating lease
payments 50 50 Major maintenance expense and maintenance capital
expenditures(2) 290 290 Cash interest, net(3) 750 750 Cash taxes
10 10
Adjusted Free Cash Flow
$ 400 $ 500
(1) Other includes stock-based
compensation expense, adjustments to reflect Adjusted EBITDA from
unconsolidated investments, and other items.
(2) Includes projected Major
Maintenance Expense of $178 million and maintenance Capital
Expenditures of $112 million. Capital expenditures exclude major
construction and development projects.
(3) Includes fees for letters of
credit, net of interest income.
CASH FLOW ACTIVITIES
The following table summarizes our cash flow activities for the
years ended December 31, 2009 and 2008:
Year
Ended December 31, 2009 2008 (in
millions) Beginning cash and cash equivalents $ 1,657 $ 1,915
Net cash provided by (used in): Operating activities
761
494 Investing activities
(250
) 516 Financing activities (1,179 ) (1,268 ) Net
decrease in cash and cash equivalents (668 ) (258 )
Ending cash and cash equivalents $ 989 $ 1,657
OPERATING PERFORMANCE METRICS
The table below shows the operating performance metrics for
continuing operations:
Three Months Ended December 31, Year Ended
December 31, 2009 2008 2009 2008
Total MWh generated (1) (in thousands) 21,622 19,872
88,339 87,762 West 9,925 9,435 36,033 37,137 Texas
6,629 5,360 29,687 32,408 Southeast 3,528 3,762 17,370 12,820 North
1,540 1,315 5,249 5,397 Average availability 89.9 % 89.7 %
92.1 % 90.5 % West 92.3 % 87.6 % 92.3 % 89.1 % Texas 83.9 % 84.8 %
90.0 % 88.8 % Southeast 92.9 % 96.5 % 93.2 % 93.6 % North 92.5 %
94.2 % 94.7 % 92.6 % Average capacity factor, excluding
peakers 47.5 % 43.5 % 48.7 % 47.9 % West 70.4 % 66.4 % 64.1 % 65.9
% Texas 41.9 % 34.0 % 47.4 % 51.6 % Southeast 31.0 % 32.6 % 37.9 %
26.6 % North 36.3 % 32.4 % 31.1 % 32.8 % Steam adjusted Heat
Rate (mmbtu/kWh) 7,263 7,183 7,263 7,231 West 7,318 7,208 7,304
7,267 Texas 7,118 7,040 7,142 7,082 Southeast 7,331 7,210 7,299
7,388 North 7,441 7,545 7,614 7,584
(1) MWh generated is shown here as
our net operating interest for plants that we both consolidate and
operate. Excludes generation at RockGen from January 1 to September
30, 2008, as the plant was deconsolidated during this period.
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