Power plant asset values ... pricing points from additional Calpine plant sales

Calpine (CPN) revealed on June 14th the 4 power plants (out of 8 announced a few weeks ago) it has tentatively reached agreement to sell.  Calpine also announced the expected proceeds and sales price of these 4 power plants.

In late May, 2005, Calpine Corp )CPN) announced a substantial restructuring plan that centered on accelerating debt payment by reducing debt by $3 billion in 2005 (a year ahead of its prior schedule).  There were a variety of pieces to that plan, including the sale of 8 merchant power plants (see our article: CPN's Restructuring Plan).

While we may have comment later in the week on how this sale helps CPN reach its goal (since the announcement in late May CPN has announced the sale of its UK plant, which was expected, and these 4 plants, for total proceeds of just under $1.3 billion), the topic of this piece is the value of the plants, and the pricing point established.

CPN reported its news on the afternoon of June 14th (see this article: Yahoo Article on the CPN Asset Sale Announcement).

In short, CPN announced the tentative agreement (with full details still to be worked out) to sell 3 power plants with 782 MW of capacity in Pennsylvania to Tenasko for $275 million, and 1 power plant with 156 MW of capacity in Illinois to Diamond Generating Corp (which looks to be a subsidiary of Mitsubishi Corp, but also appears to be mainly an owner of power plants in which Tenaska is the controlling partner) for $75 million.

The sale to Tenaska of the Pennsylvania plants is for $351/KW, and the sale of the Illinois plant is for $481/KW.    We do not know the contracting status of these plants (do they have short or long term contracts with cutomers, or do they mainly sell power and capacity on the spot market).  Therefore I do not yet know whether these are good or bad prices or values for the plants.

We will try to track down some of this information over the next few days and weeks, and at some point will summarize all the sales of power plant assets since we started to track them.  Look for that in the future.

Some general comments introducing this theme on this site include:

1. Bull and Bear Cases for Power Plant Values
2. PEG Plant Sale
3. WEC Power Plant Sale