Calpine Reports Second Quarter 2020 Results

Calpine Corporation:

Summary of Second Quarter 2020 Financial Results (in millions):

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

2020

 

2019

 

% Change

 

2020

 

2019

 

% Change

 

 

 

 

 

 

 

 

 

 

 

 

Operating Revenues

$

1,744

 

 

$

2,599

 

 

(32.9

)%

 

$

4,036

 

 

$

5,198

 

 

(22.4

)%

Income from operations

$

312

 

 

$

444

 

 

(29.7

)%

 

$

661

 

 

$

802

 

 

(17.6

)%

Cash provided by operating activities

$

221

 

 

$

278

 

 

(20.5

)%

 

$

434

 

 

$

519

 

 

(16.4

)%

Net Income1

$

163

 

 

$

266

 

 

(38.7

)%

 

$

291

 

 

$

441

 

 

(34.0

)%

Commodity Margin2

$

723

 

 

$

752

 

 

(3.9

)%

 

$

1,311

 

 

$

1,531

 

 

(14.4

)%

Adjusted Unlevered Free Cash Flow2

$

319

 

 

$

360

 

 

(11.4

)%

 

$

545

 

 

$

779

 

 

(30.0

)%

Adjusted Free Cash Flow2

$

182

 

 

$

203

 

 

(10.3

)%

 

$

262

 

 

$

467

 

 

(43.9

)%

1 Reported as Net Income attributable to Calpine on our Consolidated Condensed Statements of Operations.

2 Non-GAAP financial measure, see “Regulation G Reconciliations” for further details.

Calpine Corporation today reported Net Income of $163 million for the second quarter of 2020 compared to $266 million in the prior year period. The period-over-period decrease in Net Income was primarily due to a decrease in Commodity Margin2 driven in large part by a reduction in capacity revenue received in the ISO-NE and PJM markets and a decrease in non-cash, mark-to-market earnings on our commodity hedge positions for the three months ended June 30, 2020, compared to the same period in 2019. The decrease was partially offset by a favorable period-over-period change in our income taxes resulting from the partial release of our valuation allowance associated with our NOLs during the second quarter of 2020. Cash provided by operating activities for the second quarter of 2020 was $221 million compared to $278 million in the prior year period. The decrease in Cash provided by operating activities, after adjusting for non-cash items, was primarily due to the decrease in Commodity Margin,2 as previously discussed, and an increase in working capital employed primarily resulting from a period-over-period change in energy margin posting requirements due to the return of cash collateral to a counterparty in exchange for a letter of credit during the second quarter of 2020.

Net Income for the first half of 2020 was $291 million compared to Net Income of $441 million in the prior year period. The period-over-period decrease in Net Income was primarily due to a decrease in Commodity Margin2 driven in large part by a reduction in capacity revenue received in the ISO-NE and PJM markets as well as a reduction in contribution from hedges as a result of milder weather in the first quarter of 2020. Cash provided by operating activities for the first half of 2020 was $434 million compared to $519 million in the prior year period. The period-over-period decrease in cash provided by operating activities was primarily due to the decrease in Commodity Margin,2 as previously discussed, partially offset by a decrease in working capital employed primarily resulting from a period-over-period net decrease in energy margin posting requirements and lower inventory purchases.

REGIONAL SEGMENT REVIEW OF RESULTS

Table 1: Commodity Margin by Segment (in millions)

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

2020

 

2019

 

Variance

 

2020

 

2019

 

Variance

West

 

$

269

 

 

$

251

 

 

$

18

 

 

$

503

 

 

$

515

 

 

$

(12

)

Texas

 

172

 

 

173

 

 

(1

)

 

285

 

 

335

 

 

(50

)

East

 

193

 

 

235

 

 

(42

)

 

343

 

 

500

 

 

(157

)

Retail

 

89

 

 

93

 

 

(4

)

 

180

 

 

181

 

 

(1

)

Total

 

$

723

 

 

$

752

 

 

$

(29

)

 

$

1,311

 

 

$

1,531

 

 

$

(220

)

West Region

Second Quarter: Commodity Margin in our West segment increased by $18 million in the second quarter of 2020 compared to the prior year period. Primary drivers were:

+ higher resource adequacy revenue,

+ increased contribution from higher generation driven in part by the restart of our South Point Energy Center during the second half of 2019, and

+ the acquisition on January 28, 2020 of the 25% noncontrolling interest of Russell City Energy Company, LLC which was previously owned by a third party.

Year-to-Date: Commodity Margin in our West segment decreased by $12 million in the first half of 2020 compared to the prior year period. Primary drivers were:

– lower market spark spreads in January and February 2020 resulting largely from lower natural gas prices in Southern California, and

– lower contribution from hedging activity, partially offset by

+ higher resource adequacy revenue, and

+ increased contribution from higher generation driven in part by the restart of our South Point Energy Center during the second half of 2019.

Texas Region

Second Quarter: Commodity Margin in our Texas segment decreased by $1 million in the second quarter of 2020 compared to the prior year period. Primary drivers were:

– lower contribution from hedging activity largely offset by

+ modestly higher market spark spreads.

Year-to-Date: Commodity Margin in our Texas segment decreased by $50 million in the first half of 2020 compared to the prior year period, primarily due to lower contribution from hedging activity.

East Region

Second Quarter: Commodity Margin in our East segment decreased by $42 million in the second quarter of 2020 compared to the prior year period. Primary drivers were:

– lower regulatory capacity revenue in ISO-NE and PJM and

– the sale of our Garrison and RockGen Energy Centers in July 2019.

Year-to-Date: Commodity Margin in our East segment decreased by $157 million in the first half of 2020 compared to the prior year period. Primary drivers were:

– lower regulatory capacity revenue in ISO-NE and PJM,

– the sale of our Garrison and RockGen Energy Centers in July 2019, and

– lower contribution from hedging activity resulting from milder weather during the first quarter of 2020, partially offset by

+ the commencement of commercial operations at our 828 MW York 2 Energy Center in March 2019.

Retail

Second Quarter: Commodity Margin in our Retail segment remained largely unchanged in the second quarter of 2020 compared to the prior year period.

Year-to-Date: Commodity Margin in our Retail segment remained largely unchanged in the first half of 2020 compared to the prior year period.

LIQUIDITY, CASH FLOW AND CAPITAL RESOURCES

Table 2: Liquidity (in millions)

 

June 30, 2020

 

December 31, 2019

Cash and cash equivalents, corporate(1)

$

574

 

 

$

1,072

 

Cash and cash equivalents, non-corporate

103

 

 

59

 

Total cash and cash equivalents

677

 

 

1,131

 

Restricted cash

241

 

 

345

 

Corporate Revolving Facility availability(2)

1,534

 

 

1,392

 

CDHI revolving facility availability(3)

1

 

 

1

 

Other facilities availability(4)

37

 

 

3

 

Total current liquidity availability(5)

$

2,490

 

 

$

2,872

 

(1) Our ability to use corporate cash and cash equivalents is unrestricted. On January 21, 2020, we used the remaining cash on hand from the issuance of our 2028 First Lien Notes and 2028 Senior Unsecured Notes to redeem approximately $1,052 million aggregate principal amount of our 2022 and 2024 First Lien Notes and 2023 Senior Unsecured Notes.

(2) Our ability to use availability under our Corporate Revolving Facility is unrestricted. At June 30, 2020, the approximately $2.0 billion in total capacity under our Corporate Revolving Facility is comprised of $462 million in letters of credit outstanding, no borrowings outstanding and $1,534 million in remaining available capacity.

(3) Our CDHI revolving facility is restricted to support certain obligations under PPAs and power transmission and natural gas transportation agreements as well as fund the construction of our Washington Parish Energy Center.

(4) On April 9, 2020, we amended one of our unsecured letter of credit facilities to partially extend the maturity of $100 million in commitments from June 20, 2020 to June 20, 2022. On June 9, 2020, we entered into the GPC Term Loan which provides for $200 million in letter of credit facilities.

(5) Includes $23 million and $127 million of margin deposits posted with us by our counterparties at June 30, 2020 and December 31, 2019, respectively.

Liquidity was approximately $2.5 billion as of June 30, 2020. Cash, cash equivalents and restricted cash decreased by $558 million during the first half of 2020, largely due to the redemption of the remaining $1.1 billion aggregate principal amount of our 2022 and 2024 First Lien Notes and our 2023 Senior Unsecured Notes on January 21, 2020, as further discussed below, partially offset by cash provided by operating activities.

Table 3: Cash Flow Activities (in millions)

 

Six Months Ended June 30,

 

2020

 

2019

Beginning cash, cash equivalents and restricted cash

$

1,476

 

 

$

406

 

Net cash provided by (used in):

 

 

 

Operating activities

434

 

 

519

 

Investing activities

(304

)

 

(315

)

Financing activities

(688

)

 

(51

)

Net increase (decrease) in cash, cash equivalents and restricted cash

(558

)

 

153

 

Ending cash, cash equivalents and restricted cash

$

918

 

 

$

559

 

Cash provided by operating activities for six months ended June 30, 2020 was $434 million compared to $519 million in the prior year period. The period-over-period decrease in cash provided by operating activities is primarily driven by the reduction in Commodity Margin for the six months ended June 30, 2020, when compared to the same period in 2019. This reduction is partially offset by a reduction in cash employed for working capital driven by a reduction in energy margin posting requirements and lower inventory purchases.

Cash used in investing activities was $304 million for six months ended June 30, 2020 compared to $315 million in the prior year period. The period-over period decrease in cash used is primarily attributable to a decrease in capital expenditures associated with the completion of construction of our York 2 Energy Center in March 2019 as well as timing differences in normal, recurring maintenance projects.

Cash used in financing activities was $688 million during the six months ended June 30, 2020 compared to $51 million in the prior period. The cash used during the first half of 2020 is primarily attributable to the redemption of the outstanding aggregate principal amount of $623 million of our 2023 Senior Unsecured Notes, $245 million of our 2022 First Lien Notes and $184 million of our 2024 First Lien Notes with the proceeds from our 2028 Senior Unsecured Notes and 2028 First Lien Notes issued in December of 2019. In addition, we issued our $900 million Geysers Power Company, LLC (GPC) Term Loan in June 2020 and used a portion of the proceeds to repay approximately $348 million in aggregate principal amount of project debt. We also acquired the 25% noncontrolling interest in Russell City Energy Center, LLC for $35 million plus working capital adjustments of approximately $14 million for a total purchase price of approximately $49 million in January 2020.

COVID-19 Pandemic Update

In March 2020, the World Health Organization categorized the novel coronavirus disease 2019 (COVID-19) as a pandemic, and the President declared the COVID-19 outbreak a national emergency. COVID-19 continues to spread throughout the United States and other countries across the world negatively affecting the global economy, disrupting global supply chains and workforce participation and resulting in significant volatility and disruption of financial markets. While we have noted recovery in certain key geographic areas where we own generation facilities, we continue to closely monitor the impact of the COVID-19 outbreak on all aspects of our business, including how it has affected and continues to affect our employees, customers, suppliers and the communities in which we operate.

Our first priority with regard to the COVID-19 outbreak is to ensure the health and safety of our employees and contractors. As one of the largest independent power producers in the U.S., we are designated as an “essential business” and have an obligation to operate our fleet of power plants to sustain the bulk electric system and manage retail customer power delivery obligations. To ensure the continued reliable operations of our generation fleet and delivery of power to our retail customers, we continue to abide by a set of safety and health measures as a means to ensure we are able to provide reliable energy to the markets we serve. These measures include restricting access at our power plants to only mission-critical individuals and adherence to social distancing protocols wherever possible. Additionally, our commercial and retail operations, including all support staff such as legal, accounting, finance, information technology and human resources, continue to work remotely.

To date, the COVID-19 outbreak has not had a material adverse effect on our operations, financial condition or cash flows. While the ultimate determination depends on the length and severity of the crisis, at this time, we anticipate our cash flows from operations and our available sources of liquidity will be sufficient to meet our current cash requirements during this period. As the impact of the COVID-19 outbreak on the economy and our operations evolves, we will continue to assess and manage our liquidity needs.

The ultimate extent to which the COVID-19 pandemic may impact our business, operating results, financial condition or liquidity will depend on future developments, including the duration of the outbreak, continued business and workforce disruptions, the effectiveness of actions taken to contain and treat the disease and the lasting effect on the economy, especially in the geographic areas where we own and operate power generating facilities and serve retail customers. Given the uncertainty concerning the overall impact of the COVID-19 outbreak, while we do not anticipate the effect of the outbreak to have a material adverse effect on our financial condition, results of operations or cash flows for the year ended December 31, 2020, we are unable to predict the ultimate impact of the outbreak on our future results. For further discussion, see “Item 1A. Risk Factors” in Part II of our Form 10-Q for the quarterly period ended June 30, 2020.

Portfolio Management

On January 28, 2020, we completed the acquisition of the 25% noncontrolling interest of Russell City Energy Company, LLC for $35 million plus working capital adjustments of approximately $14 million for a total purchase price of approximately $49 million. Prior to the acquisition, we accounted for the third party ownership interest as a noncontrolling interest.

Balance Sheet Management

On January 21, 2020, we redeemed the outstanding aggregate principal amount of $245 million of our 2022 First Lien Notes, $184 million of our 2024 First Lien Notes and $623 million of our 2023 Senior Unsecured Notes, which were included in debt, current portion on our Consolidated Condensed Balance Sheet at December 31, 2019, with the proceeds from the 2028 First Lien Notes and 2028 Senior Unsecured Notes that we issued in December 2019, which were included in cash and cash equivalents on our Consolidated Condensed Balance Sheet at December 31, 2019.

On June 9, 2020, GPC and the guarantors party thereto entered into a seven-year $900 million first lien senior secured term loan facility and three senior secured revolving letter of credit facilities totaling $200 million. The GPC Term Loan is certified under the Climate Bonds Standard. Any letters of credit issued under the GPC Term Loan letter of credit facilities must be at the request of and for the account of GPC. The GPC Term Loan bears interest, at GPC’s option, at either (i) the Base Rate, equal to the highest of (a) the Federal Funds Rate plus 0.50% per annum, (b) the prime rate published in the Wall Street Journal, or (c) 1.0% plus an applicable margin of 1.0%, increasing by 0.125% every three years, or (ii) LIBOR plus an applicable margin of 2.0% per annum, increasing by 0.125% every three years. The GPC Term Loan matures on June 9, 2027, but may be prepaid at any time upon irrevocable notice to the Administrative Agent. We used a portion of the proceeds from the GPC Term Loan to repay approximately $348 million of project debt.

The GPC Term Loan is secured by certain real and personal property of GPC consisting primarily of the Geysers Assets. The GPC Term Loan is not guaranteed by Calpine Corporation and is without recourse to Calpine Corporation or any of our non-GPC subsidiaries or assets; however, GPC generates a portion of its cash flows from an intercompany tolling agreement with Calpine Energy Services, L.P. and has various service agreements in place with other subsidiaries of Calpine Corporation.

On August 10, 2020, we issued $650 million in aggregate principal amount of 4.625% senior unsecured notes due 2029 and $850 million in aggregate principal amount of 5.000% senior unsecured notes due 2031 in private placements. The 2029 Senior Unsecured Notes bear interest at 4.625% per annum and the 2031 Senior Unsecured Notes bear interest at 5.000% per annum with interest payable on both series of notes semi-annually on February 1 and August 1 of each year, beginning on February 1, 2021. The 2029 Senior Unsecured Notes and 2031 Senior Unsecured Notes mature on February 1, 2029 and February 1, 2031, respectively.

On August 10, 2020, we utilized proceeds from our 2029 Senior Unsecured Notes and 2031 Senior Unsecured Notes, together with cash on hand, to purchase approximately $255 million and $1,045 million in aggregate principal amount of our 2024 Senior Unsecured Notes and 2025 Senior Unsecured Notes, respectively. On August 12, 2020, we redeemed the remaining amounts outstanding under our 2024 Senior Unsecured Notes and 2025 Senior Unsecured Notes.

PG&E Bankruptcy

On July 1, 2020, PG&E and PG&E Corporation emerged from bankruptcy. Under PG&E's plan of reorganization, our PPAs were assumed and any restrictions on our projects arising from the bankruptcy were cured.

We currently have several power plants that provide energy and energy-related products to PG&E under PPAs, many of which have PG&E collateral posting requirements. Subsequent to the bankruptcy filing, we received all material payments under the PPAs, either directly or through the application of collateral. We also currently have numerous other agreements with PG&E related to the operation of our power plants in Northern California, under which PG&E continued to provide service subsequent to its bankruptcy filing.

ABOUT CALPINE

Calpine Corporation is America’s largest generator of electricity from natural gas and geothermal resources with operations in competitive power markets. Our fleet of 78 power plants in operation or under construction represents over 26,000 megawatts of generation capacity. Through wholesale power operations and our retail businesses Calpine Energy Solutions and Champion Energy, we serve customers in 23 states, Canada and Mexico. Our clean, efficient, modern and flexible fleet uses advanced technologies to generate power in a low-carbon and environmentally responsible manner. We are uniquely positioned to benefit from the secular trends affecting our industry, including the abundant and affordable supply of clean natural gas, environmental regulation, aging power generation infrastructure and the increasing need for dispatchable power plants to successfully integrate intermittent renewables into the grid. Please visit www.calpine.com to learn more about how Calpine is creating power for a sustainable future.

Calpine’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2020, will be filed with the Securities and Exchange Commission (SEC) and will be available 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 the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act, and Section 21E of the Exchange Act. Forward-looking statements may appear throughout this release. 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. We believe that the forward-looking statements are based upon reasonable assumptions and expectations. However, 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:

  • Public health threats or outbreaks of communicable diseases, such as the ongoing COVID-19 pandemic and its impact on our business, suppliers, customers, employees and supply chains;
  • Financial results that may be volatile and may not reflect historical trends due to, among other things, seasonality of demand, fluctuations in prices for commodities such as natural gas and power, changes in U.S. macroeconomic conditions, fluctuations in liquidity and volatility in the energy commodities markets and our ability and the extent to which we hedge risks;
  • Laws, regulations and market rules in the wholesale and retail markets in which we participate and our ability to effectively respond to changes in laws, regulations or market rules or the interpretation thereof including those related to the environment, derivative transactions and market design in the regions in which we operate;
  • Our ability to manage our liquidity needs, access the capital markets when necessary and comply with covenants under our Senior Unsecured Notes, First Lien Term Loans, First Lien Notes, Corporate Revolving Facility, CCFC Term Loan and other existing financing obligations;
  • Risks associated with the operation, construction and development of power plants, including unscheduled outages or delays and plant efficiencies;
  • 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 water 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;
  • Extensive competition in our wholesale and retail business, including from renewable sources of power, interference by states in competitive power markets through subsidies or similar support for new or existing power plants, lower prices and other incentives offered by retail competitors, and other risks associated with marketing and selling power in the evolving energy markets;
  • Structural changes in the supply and demand of power resulting from the development of new fuels or technologies and demand-side management tools (such as distributed generation, power storage and other technologies);
  • The expiration or early termination of our PPAs and the related results on revenues;
  • Future capacity revenue may not occur at expected levels;
  • Natural disasters, such as hurricanes, earthquakes, droughts and floods, acts of terrorism, cyber attacks or wildfires that may affect our power plants or the markets our power plants or retail operations serve and our corporate offices;
  • Disruptions in or limitations on the transportation of natural gas or fuel oil and the transmission of power;
  • Our ability to manage our counterparty and customer exposure and credit risk, including our commodity positions or if a significant customer were to seek bankruptcy protection under Chapter 11;
  • Our ability to attract, motivate and retain key employees;
  • Present and possible future claims, litigation and enforcement actions that may arise from noncompliance with market rules promulgated by the SEC, CFTC, FERC and other regulatory bodies; and
  • Other risks identified in this press release, in our Annual Report on Form 10-K for the year ended December 31, 2019, and in other reports filed by us with the SEC.

Given the risks and uncertainties surrounding forward-looking statements, you should not place undue reliance on these statements. Many of these factors are beyond our ability to control or predict. Our forward-looking statements speak only as of the date of this release. Other than as required by law, we undertake no obligation to update or revise forward-looking statements, whether as a result of new information, future events, or otherwise.

CALPINE CORPORATION AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

2020

 

2019

 

2020

 

2019

 

(millions)

Operating revenues:

 

 

 

 

 

 

 

Commodity revenue

$

1,852

 

 

$

2,128

 

 

$

3,795

 

 

$

4,666

 

Mark-to-market gain (loss)

(113

)

 

467

 

 

232

 

 

523

 

Other revenue

5

 

 

4

 

 

9

 

 

9

 

Operating revenues

1,744

 

 

2,599

 

 

4,036

 

 

5,198

 

Operating expenses:

 

 

 

 

 

 

 

Fuel and purchased energy expense:

 

 

 

 

 

 

 

Commodity expense

1,110

 

 

1,367

 

 

2,457

 

 

3,125

 

Mark-to-market (gain) loss

(148

)

 

280

 

 

(4

)

 

290

 

Fuel and purchased energy expense

962

 

 

1,647

 

 

2,453

 

 

3,415

 

Operating and maintenance expense

266

 

 

245

 

 

506

 

 

484

 

Depreciation and amortization expense

163

 

 

175

 

 

327

 

 

349

 

General and other administrative expense

31

 

 

34

 

 

62

 

 

66

 

Other operating expenses

14

 

 

19

 

 

31

 

 

38

 

Total operating expenses

1,436

 

 

2,120

 

 

3,379

 

 

4,352

 

Impairment losses

 

 

40

 

 

 

 

55

 

(Income) from unconsolidated subsidiaries

(4

)

 

(5

)

 

(4

)

 

(11

)

Income from operations

312

 

 

444

 

 

661

 

 

802

 

Interest expense

167

 

 

157

 

 

336

 

 

306

 

(Gain) loss on extinguishment of debt

8

 

 

3

 

 

8

 

 

(1

)

Other (income) expense, net

5

 

 

5

 

 

9

 

 

28

 

Income before income taxes

132

 

 

279

 

 

308

 

 

469

 

Income tax expense (benefit)

(31

)

 

9

 

 

15

 

 

19

 

Net income

163

 

 

270

 

 

293

 

 

450

 

Net income attributable to the noncontrolling interest

 

 

(4

)

 

(2

)

 

(9

)

Net income attributable to Calpine

$

163

 

 

$

266

 

 

$

291

 

 

$

441

 

CALPINE CORPORATION AND SUBSIDIARIES

CONSOLIDATED CONDENSED BALANCE SHEETS

(Unaudited)

 

 

 

June 30,

 

December 31,

 

 

2020

 

2019

 

 

(in millions, except share and per share amounts)

ASSETS

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

677

 

 

$

1,131

 

Accounts receivable, net of allowance of $9 and $9

 

683

 

 

757

 

Inventories

 

517

 

 

543

 

Margin deposits and other prepaid expense

 

346

 

 

367

 

Restricted cash, current

 

225

 

 

299

 

Derivative assets, current

 

199

 

 

156

 

Other current assets

 

42

 

 

49

 

Total current assets

 

2,689

 

 

3,302

 

Property, plant and equipment, net

 

11,937

 

 

11,963

 

Restricted cash, net of current portion

 

16

 

 

46

 

Investments in unconsolidated subsidiaries

 

67

 

 

70

 

Long-term derivative assets

 

250

 

 

246

 

Goodwill

 

242

 

 

242

 

Intangible assets, net

 

316

 

 

340

 

Other assets

 

438

 

 

440

 

Total assets

 

$

15,955

 

 

$

16,649

 

LIABILITIES & STOCKHOLDER’S EQUITY

 

 

 

 

Current liabilities:

 

 

 

 

Accounts payable

 

$

569

 

 

$

714

 

Accrued interest payable

 

108

 

 

61

 

Debt, current portion

 

231

 

 

1,268

 

Derivative liabilities, current

 

168

 

 

225

 

Other current liabilities

 

531

 

 

657

 

Total current liabilities

 

1,607

 

 

2,925

 

Debt, net of current portion

 

10,874

 

 

10,438

 

Long-term derivative liabilities

 

196

 

 

63

 

Other long-term liabilities

 

479

 

 

565

 

Total liabilities

 

13,156

 

 

13,991

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

Stockholder’s equity:

 

 

 

 

Common stock, $0.001 par value per share; authorized 5,000 shares, 105.2 shares issued and outstanding

 

 

 

 

Additional paid-in capital

 

9,651

 

 

9,584

 

Accumulated deficit

 

(6,632

)

 

(6,923

)

Accumulated other comprehensive loss

 

(220

)

 

(114

)

Total Calpine stockholder’s equity

 

2,799

 

 

2,547

 

Noncontrolling interest

 

 

 

111

 

Total stockholder’s equity

 

2,799

 

 

2,658

 

Total liabilities and stockholder’s equity

 

$

15,955

 

 

$

16,649

 

CALPINE CORPORATION AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

 

Six Months Ended June 30,

 

 

2020

 

2019

 

 

(in millions)

Cash flows from operating activities:

 

 

 

 

Net cash provided by operating activities

 

$

434

 

 

$

519

 

Cash flows from investing activities:

 

 

 

 

Purchases of property, plant and equipment

 

(320

)

 

(304

)

Other

 

16

 

 

(11

)

Net cash used in investing activities

 

(304

)

 

(315

)

Cash flows from financing activities:

 

 

 

 

Borrowings under First Lien Term Loans

 

 

 

941

 

Repayment of CCFC Term Loan and First Lien Term Loans

 

(22

)

 

(942

)

Repayments of First Lien Notes

 

(429

)

 

 

Repayments of Senior Unsecured Notes

 

(623

)

 

(44

)

Borrowings under revolving facilities

 

450

 

 

220

 

Repayments of revolving facilities

 

(450

)

 

(175

)

Borrowings from project financing, notes payable and other

 

900

 

 

34

 

Repayments of project financing, notes payable and other

 

(412

)

 

(77

)

Financing costs

 

(46

)

 

(8

)

Acquisition of noncontrolling interest(1)

 

(49

)

 

 

Other

 

(7

)

 

 

Net cash used in financing activities

 

(688

)

 

(51

)

Net increase (decrease) in cash, cash equivalents and restricted cash

 

(558

)

 

153

 

Cash, cash equivalents and restricted cash, beginning of period

 

1,476

 

 

406

 

Cash, cash equivalents and restricted cash, end of period(2)

 

$

918

 

 

$

559

 

 

Cash paid during the period for:

 

 

 

 

Interest, net of amounts capitalized

 

$

221

 

 

$

283

 

Income taxes

 

$

2

 

 

$

8

 

 

 

 

 

 

Supplemental disclosure of non-cash investing and financing activities:

 

 

 

 

Change in capital expenditures included in accounts payable and other current liabilities

 

$

(27

)

 

$

19

 

Plant tax settlement offset in prepaid assets

 

$

 

 

$

(4

)

Asset retirement obligation adjustment offset in operating activities

 

$

 

 

$

(10

)

Garrison Energy Center and RockGen Energy Center property, plant and equipment, net, classified as current assets held for sale

 

$

 

 

$

(335

)

Garrison Energy Center capital lease liability classified as current liabilities held for sale

 

$

 

 

$

22

 

(1) On January 28, 2020, we completed the acquisition of the 25% noncontrolling interest of Russell City Energy Company, LLC for $35 million plus working capital adjustments of approximately $14 million for a total purchase price of approximately $49 million.

(2) Our cash and cash equivalents, restricted cash, current, and restricted cash, net of current portion, are stated as separate line items on our Consolidated Condensed Balance Sheets.

REGULATION G RECONCILIATIONS

In addition to disclosing financial results in accordance with U.S. GAAP, the accompanying second quarter 2020 earnings release contains non-GAAP financial measures. Commodity Margin, Adjusted Free Cash Flow and Adjusted Unlevered Free Cash Flow are non-GAAP financial measures that we use as measures of our performance and liquidity. These non-GAAP measures should be viewed as a supplement to and not a substitute for our U.S. GAAP measures of performance and liquidity, and the financial results calculated in accordance with U.S. GAAP and reconciliations from these results should be carefully evaluated.

Commodity Margin includes revenues recognized on our wholesale and retail power sales activity, electric capacity sales, renewable energy credit sales, steam sales, realized settlements associated with our marketing, hedging, optimization and trading activity less costs from our fuel and purchased energy expenses, commodity transmission and transportation expenses, environmental compliance expenses and ancillary retail expense. We believe that Commodity Margin is a useful tool for assessing the performance of our core operations and is a key operational measure of profit reviewed by our chief operating decision maker. Commodity Margin is not a measure calculated in accordance with U.S. GAAP and should be viewed as a supplement to and not a substitute for our results of operations presented in accordance with U.S. GAAP. Commodity Margin does not intend to represent income (loss) from operations, the most comparable U.S. GAAP measure, as an indicator of operating performance and is not necessarily comparable to similarly titled measures reported by other companies.

Adjusted Free Cash Flow represents cash flows from operating activities including the effects of capitalized maintenance expenditures, adjustments to reflect the Adjusted Free Cash Flow from unconsolidated investments and to exclude the noncontrolling interest and other miscellaneous adjustments such as the effect of changes in working capital. Adjusted Unlevered Free Cash Flow is calculated on the same basis as Adjusted Free Cash Flow but excludes the effect of cash interest, net, and operating lease payments, thus capturing the performance of our business independent of its capital structure. Adjusted Free Cash Flow and Adjusted Unlevered Free Cash Flow are presented because we believe they are useful measures of liquidity to assist in comparing financial results from period to period on a consistent basis and to readily view operating trends, as measures for planning and forecasting overall expectations and for evaluating actual results against such expectations and in communications with our board of directors, owners, creditors, analysts and investors concerning our financial results. Adjusted Free Cash Flow and Adjusted Unlevered Free Cash Flow are liquidity measures and are not intended to represent cash flows from operations, the most directly comparable U.S. GAAP measure, and are not necessarily comparable to similarly titled measures reported by other companies.

Adjusted Unlevered Free Cash Flow Reconciliation

In the following table, we have reconciled our cash flows from operating activities to our Adjusted Free Cash Flow and Adjusted Unlevered Free Cash Flow for the three and six months ended June 30, 2020 and 2019 (in millions).

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

2020

 

2019

 

2020

 

2019

Net cash provided by operating activities

 

$

221

 

 

$

278

 

 

$

434

 

 

$

519

 

Add:

 

 

 

 

 

 

 

 

Capital maintenance expenditures(1)

 

(120

)

 

(107

)

 

(214

)

 

(204

)

Tax differences

 

4

 

 

(7

)

 

6

 

 

(4

)

Adjustments to reflect Adjusted Free Cash Flow from unconsolidated investments and exclude the non-controlling interest

 

3

 

 

1

 

 

5

 

 

(6

)

Capitalized corporate interest

 

(3

)

 

(1

)

 

(5

)

 

(8

)

Changes in working capital

 

71

 

 

46

 

 

43

 

 

166

 

Amortization of acquired derivative contracts

 

5

 

 

2

 

 

8

 

 

8

 

Other(2)

 

1

 

 

(9

)

 

(15

)

 

(4

)

Adjusted Free Cash Flow

 

$

182

 

 

$

203

 

 

$

262

 

 

$

467

 

Add:

 

 

 

 

 

 

 

 

Cash interest, net(3)

 

137

 

 

151

 

 

281

 

 

300

 

Operating lease payments

 

 

 

6

 

 

2

 

 

12

 

Adjusted Unlevered Free Cash Flow

 

$

319

 

 

$

360

 

 

$

545

 

 

$

779

 

 

 

 

 

 

 

 

 

 

Net cash used in investing activities

 

$

(178

)

 

$

(163

)

 

$

(304

)

 

$

(315

)

Net cash provided by (used in) financing activities

 

$

38

 

 

$

(74

)

 

$

(688

)

 

$

(51

)

 

 

 

 

 

 

 

 

 

Supplemental disclosure of cash activities:

 

 

 

 

 

 

 

 

Major maintenance expense and capital maintenance expenditures(4)

 

$

167

 

 

$

143

 

 

$

286

 

 

$

268

 

Cash taxes

 

$

 

 

$

7

 

 

$

 

 

$

7

 

Other

 

$

 

 

$

1

 

 

$

 

 

$

1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) Capital maintenance expenditures exclude major construction and development projects.

(2) Other primarily represents miscellaneous items excluded from Adjusted Free Cash Flow that are included in cash flow from operations.

(3) Includes commitment, letter of credit and other bank fees from both consolidated and unconsolidated investments, net of interest income.

(4) Includes $47 million and $36 million in major maintenance expense for the three months ended June 30, 2020 and 2019, respectively, and $120 million and $107 million in capital maintenance expenditures for the three months ended June 30, 2020 and 2019, respectively. Includes $72 million and $64 million in major maintenance expense for the six months ended June 30, 2020 and 2019, respectively, and $214 million and $204 million in capital maintenance expenditures for the six months ended June 30, 2020 and 2019, respectively.

Commodity Margin Reconciliation

The following tables reconcile income (loss) from operations to Commodity Margin for the three and six months ended June 30, 2020 and 2019 (in millions):

 

 

Three Months Ended June 30, 2020

 

 

 

 

 

 

 

 

 

 

Consolidation

 

 

 

 

Wholesale

 

 

 

and

 

 

 

 

West

 

Texas

 

East

 

Retail

 

Elimination

 

Total

Income from operations

 

$

171

 

 

$

18

 

 

$

29

 

 

$

94

 

 

$

 

 

$

312

 

Add:

 

 

 

 

 

 

 

 

 

 

 

 

Operating and maintenance expense

 

96

 

 

73

 

 

71

 

 

35

 

 

(9

)

 

266

 

Depreciation and amortization expense

 

56

 

 

50

 

 

45

 

 

12

 

 

 

 

163

 

General and other administrative expense

 

6

 

 

13

 

 

8

 

 

4

 

 

 

 

31

 

Other operating expenses

 

7

 

 

1

 

 

6

 

 

 

 

 

 

14

 

(Income) from unconsolidated subsidiaries

 

 

 

 

 

(4

)

 

 

 

 

 

(4

)

Less: Mark-to-market commodity activity, net and other(1)

 

67

 

 

(17

)

 

(38

)

 

56

 

 

(9

)

 

59

 

Commodity Margin

 

$

269

 

 

$

172

 

 

$

193

 

 

$

89

 

 

$

 

 

$

723

 

 

 

 

Three Months Ended June 30, 2019

 

 

 

 

 

 

 

 

 

 

Consolidation

 

 

 

 

Wholesale

 

 

 

and

 

 

 

 

West

 

Texas

 

East

 

Retail

 

Elimination

 

Total

Income (loss) from operations

 

$

153

 

 

$

277

 

 

$

154

 

 

$

(140

)

 

$

 

 

$

444

 

Add:

 

 

 

 

 

 

 

 

 

 

 

 

Operating and maintenance expense

 

84

 

 

66

 

 

72

 

 

33

 

 

(10

)

 

245

 

Depreciation and amortization expense

 

60

 

 

54

 

 

48

 

 

13

 

 

 

 

175

 

General and other administrative expense

 

5

 

 

15

 

 

10

 

 

4

 

 

 

 

34

 

Other operating expenses

 

7

 

 

1

 

 

11

 

 

 

 

 

 

19

 

Impairment losses

 

 

 

 

 

40

 

 

 

 

 

 

40

 

(Income) from unconsolidated subsidiaries

 

 

 

 

 

(6

)

 

1

 

 

 

 

(5

)

Less: Mark-to-market commodity activity, net and other(1)

 

58

 

 

240

 

 

94

 

 

(182

)

 

(10

)

 

200

 

Commodity Margin

 

$

251

 

 

$

173

 

 

$

235

 

 

$

93

 

 

$

 

 

$

752

 

 

 

 

Six Months Ended June 30, 2020

 

 

 

 

 

 

 

 

 

 

Consolidation

 

 

 

 

Wholesale

 

 

 

and

 

 

 

 

West

 

Texas

 

East

 

Retail

 

Elimination

 

Total

Income from operations

 

$

301

 

 

$

103

 

 

$

137

 

 

$

120

 

 

$

 

 

$

661

 

Add:

 

 

 

 

 

 

 

 

 

 

 

 

Operating and maintenance expense

 

182

 

 

139

 

 

134

 

 

68

 

 

(17

)

 

506

 

Depreciation and amortization expense

 

112

 

 

100

 

 

91

 

 

24

 

 

 

 

327

 

General and other administrative expense

 

14

 

 

24

 

 

16

 

 

8

 

 

 

 

62

 

Other operating expenses

 

15

 

 

3

 

 

13

 

 

 

 

 

 

31

 

(Income) from unconsolidated subsidiaries

 

 

 

 

 

(4

)

 

 

 

 

 

(4

)

Less: Mark-to-market commodity activity, net and other(2)

 

121

 

 

84

 

 

44

 

 

40

 

 

(17

)

 

272

 

Commodity Margin

 

$

503

 

 

$

285

 

 

$

343

 

 

$

180

 

 

$

 

 

$

1,311

 

 

 

 

Six Months Ended June 30, 2019

 

 

 

 

 

 

 

 

 

 

Consolidation

 

 

 

 

Wholesale

 

 

 

and

 

 

 

 

West

 

Texas

 

East

 

Retail

 

Elimination

 

Total

Income (loss) from operations

 

$

303

 

 

$

359

 

 

$

296

 

 

$

(156

)

 

$

 

 

$

802

 

Add:

 

 

 

 

 

 

 

 

 

 

 

 

Operating and maintenance expense

 

165

 

 

131

 

 

139

 

 

67

 

 

(18

)

 

484

 

Depreciation and amortization expense

 

133

 

 

99

 

 

91

 

 

26

 

 

 

 

349

 

General and other administrative expense

 

12

 

 

27

 

 

19

 

 

8

 

 

 

 

66

 

Other operating expenses

 

16

 

 

3

 

 

19

 

 

 

 

 

 

38

 

Impairment losses

 

 

 

 

 

55

 

 

 

 

 

 

55

 

(Income) from unconsolidated subsidiaries

 

 

 

 

 

(12

)

 

1

 

 

 

 

(11

)

Less: Mark-to-market commodity activity, net and other(2)

 

114

 

 

284

 

 

107

 

 

(235

)

 

(18

)

 

252

 

Commodity Margin

 

$

515

 

 

$

335

 

 

$

500

 

 

$

181

 

 

$

 

 

$

1,531

 

(1) Includes $(22) million and $(19) million of lease levelization and $9 million and $18 million of amortization expense for the three months ended June 30, 2020 and 2019, respectively.

(2) Includes $(40) million and $(35) million of lease levelization and $25 million and $39 million of amortization expense for the six months ended June 30, 2020 and 2019, respectively.

OPERATING PERFORMANCE METRICS

The table below shows the operating performance metrics for the periods presented:

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

2020

 

2019

 

2020

 

2019

Total MWh generated (in thousands)(1)(2)

 

22,493

 

 

21,156

 

 

47,405

 

 

43,257

 

West

 

5,515

 

 

4,015

 

 

12,505

 

 

10,784

 

Texas

 

11,377

 

 

10,497

 

 

22,295

 

 

20,713

 

East

 

5,601

 

 

6,644

 

 

12,605

 

 

11,760

 

 

 

 

 

 

 

 

 

 

Average availability(2)

 

81.5

%

 

81.5

%

 

84.0

%

 

84.2

%

West

 

84.4

%

 

79.7

%

 

86.7

%

 

83.3

%

Texas

 

80.9

%

 

80.9

%

 

80.8

%

 

81.8

%

East

 

79.6

%

 

83.5

%

 

85.0

%

 

87.3

%

 

 

 

 

 

 

 

 

 

Average capacity factor, excluding peakers

 

44.6

%

 

41.6

%

 

47.1

%

 

43.9

%

West

 

35.4

%

 

26.6

%

 

40.4

%

 

35.9

%

Texas

 

58.4

%

 

54.3

%

 

57.4

%

 

53.9

%

East

 

36.0

%

 

41.8

%

 

40.6

%

 

39.1

%

 

 

 

 

 

 

 

 

 

Steam adjusted heat rate (Btu/kWh)(2)

 

7,329

 

 

7,338

 

 

7,311

 

 

7,305

 

West

 

7,552

 

 

7,526

 

 

7,457

 

 

7,391

 

Texas

 

7,088

 

 

7,149

 

 

7,080

 

 

7,110

 

East

 

7,665

 

 

7,571

 

 

7,613

 

 

7,596

 

(1) Excludes generation from unconsolidated power plants and power plants owned but not operated by us.

(2) Generation, average availability and steam adjusted heat rate exclude power plants and units that are inactive.