Calpine Corp. wrapped up the closure of its six power plants to an associate of LS Power for $1.57 billion including adjustments. The non-core asset sale includes 3,498 megawatt (MW) of combined-cycle generation capacity encompassing five states in the Southeastern U.S. The market reacted positively to the news with Calpine’s stock price moving up 0.17% to close at $22.91 on Thursday.
The company expects to clock a net book gain of $750 million in the third quarter of 2014. In addition, taxable gains are anticipated to be wholly offset by federal and state net operating losses resulting in net cash proceeds of roughly $1.53 billion.
Calpine intends to plough back the gains to tap the markets presenting high-returns and also to unlock better value to its shareholders.
Calpine’s assets sold to LS Power include the Oneta Energy Center in Coweta Okla., Carville facility in Gabriel, La., Hog Bayou in Mobile, Ala., Decatur facility in Decatur Ala., Santa Rosa in Pace, Fla. and Columbia in Calhoun County, S.C.
Despite the sale, Calpine will retain some assets in the Southeastern zone with 1.7 gigawatts of capacity covering natural-gas fired plants in the Arkansas, Alabama and Florida regions.
With the asset streamlining, Calpine plans to concentrate on the wholesale and competitive power space. The company will integrate its remaining assets in Southeastern province to its operations at North. Together, the assets will form Calpine’s East operations.
Calpine is realigning its assets in the East to expand its natural gas fired generation capabilities which is a positive move given the current pro-environment stance taken by the U.S. government. Meanwhile, signs of steady economic recovery in the company’s West and Texas regions will bode well for Calpine’s future growth.
Calpine has been reshaping its business structure to focus its investments on its three nucleus operation centers–the West, East and Texas. Along with the divestitures, Calpine has been simultaneously engaged in asset acquisitions in its core markets. The addition of Russell City and Los Esteros energy facilities in California and purchase of Guadalupe gas plant in Texas will likely act as growth catalysts.
Currently, Calpine holds a Zacks Rank #2 (Buy). Other better-placed utility players include Wisconsin Energy Corp. , NRG Energy Inc. and Dynegy Inc. . All these stocks presently sport a Zacks Rank #1 (Strong Buy).