7.11.2003: Meldung: Calpine Reports Third Quarter 2003 Results
For the nine months ended September 30, 2003, the company reported earnings per share of $0.41, or $162.4 million of net income, compared with earnings per share of $0.40, or $143.8 million of net income, for the nine months ended September 30, 2002. Results for the first nine months of 2003 include a $0.25 per share gain recorded on the purchases of outstanding debt and preferred securities, offset by a loss of $0.11 for other charges, including a $0.03 per share non-cash charge for equipment and development cost write-downs, a $0.04 per share non-cash charge for foreign exchange translation losses, a $0.03 per share charge for discontinued operations to reflect the sale of the company"s specialty engineering unit, and a $0.01 per share loss for non-routine equipment repair costs.
2003 2002 % Chg
Generated (millions) 25.9 23.4 11%
Megawatts in Operation 22,244 17,947 24%
Revenue (millions) $2,687.1 $2,474.7 9%
Net Income (millions) $237.8 $151.1 57%
Earnings Per Share (millions) $0.51 $0.34 50%
Operating Cash Flow (millions) $58.2 $366.8 (84)%
EBITDA, as adjusted
(millions) (a) $663.1 $488.9 36%
EBITDA, as adjusted, before
charges (millions) (b) $480.7 $510.1 (6)%
Total Assets (billions) $26 $23 13%
(a) Earnings Before Interest, Tax, Depreciation and Amortization, as
adjusted; see attached Supplemental Data for reconciliation from net
(b) See attached Supplemental Data for reconciliation from EBITDA, as adjusted.
Peter Cartwright, Calpine chairman, CEO and president, stated, "The quarter was highlighted by the very successful advancement of our refinancing and liquidity-enhancing programs -- both of which, I"m pleased to report, exceeded our expectations. Following these liquidity and refinancing transactions, we expect to end the year with liquidity of approximately $2 billion. More important, we"ve accomplished this while continuing to execute our proven business plan, maintaining our financial strength and enhancing the long-term value of Calpine.
"On the liquidity front, Calpine has completed approximately $2.1 billion of liquidity-enhancing transactions in 2003, and we expect to complete approximately $300 million of additional transactions by year-end. We also completed several successful financing transactions, totaling $4.6 billion, which allowed Calpine to extend debt maturities and selectively repurchase certain debt securities at a discount. Our efficient fleet of energy centers increased production by 11%; however, operating earnings for the quarter were lower than expected due to low spark spreads brought about by excess capacity in some markets, generally mild weather, high gas prices and a weak economy.
"Although we anticipated stronger spark spreads during the quarter, we remained profitable due to the strength of our contractual portfolio. Looking forward, the power industry remains a strong, long-term investment, with tremendous opportunity for growth. Today, we generate over 22,000 megawatts of electricity, and when our construction program is complete, we will produce nearly 30,000 megawatts. As energy prices and industrial demand normalize, Calpine will have an unparalleled opportunity to leverage our fleet of highly efficient, integrated systems of power plants."
2003 Third Quarter Results
The company"s growing portfolio of operating power generation facilities contributed to an 11% and 17% increase in electric generation production for the three and nine months ended September 30, 2003, respectively, compared to the same periods in 2002. Electric generation and marketing revenue increased 3% and 23% for the three and nine months ended September 30, 2003, respectively, as electricity and steam revenue increased by $496.9 million or 53% and $1,361.8 million or 60%, respectively, as a result of the higher production and higher electricity prices. This was partially offset by a decline in sales of purchased power for hedging and optimization. Overall, the company achieved approximately $2.7 billion of revenue for the third quarter of 2003, compared to approximately $2.5 billion for the third quarter of 2002. Operating results for the three and nine months ended September 30, 2003, reflect a decrease in average spark spreads per megawatt-hour compared with the same periods in 2002. While the company experienced an increase in realized electricity prices in 2003, this was more than offset by higher fuel expense. At the same time, higher realized oil and gas pricing resulted in an increase in oil and gas production margins compared to the prior periods. During the quarter, the company recorded other revenue of $69.4 million in connection with its settlement with Enron, primarily related to the termination of commodity contracts following the Enron bankruptcy. This partially offsets the amounts being amortized to fuel expense related to the terminated Enron hedges.
Plant operating expense, interest expense and depreciation were higher due to the additional plants in operation. Gross profit for the three and nine months ended September 30, 2003, increased approximately 2% and decreased approximately 8%, respectively, compared to the same periods in 2002. For the three and nine months ended September 30, 2003, overall financial results significantly benefited from $192.2 million and $199.0 million, respectively, of net pre-tax gains recorded in connection with the repurchase of various issuances of debt and preferred securities at a discount.
Also, effective July 1, 2003, the company adopted SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity" ("SFAS No. 150"), which required the company to prospectively classify as debt $244 million of certain preferred equity interests, some of which were previously classified as minority interests. However, we continue to classify $310 million of Calpine Power Income Fund preferred equity interests as minority interests, rather than debt, in anticipation that the Financial Accounting Standards Board will defer the applicability of SFAS No. 150 to limited life partnerships prior to our Form 10-Q filing for the quarter ended September 30, 2003.
2003 Liquidity Program Update
Calpine is nearing the successful completion of its $2.3 billion liquidity program for 2003. To date, the company has closed approximately $2.1 billion of liquidity-enhancing transactions. Over the past several months, Calpine has:
-- Completed its offering of approximately $301.7 million of Gilroy Energy
Center, LLC (GEC) 4% Senior Secured Notes Due 2011. In connection with
this offering, Calpine has also received funding on a third party
preferred equity investment in GEC Holdings, LLC, totaling $74 million.
GEC is a wholly owned, stand-alone subsidiary of the Calpine subsidiary
GEC Holdings, LLC;
-- Completed a $230 million, non-recourse project financing for its
600-megawatt Riverside Energy Center, currently under construction in
Beloit, Wisc. The project will deliver 450 megawatts of electricity to
Wisconsin Power and Light and provide 75 megawatts of capacity to
Madison Gas & Electric under two, nine-year agreements;
-- Closed the initial public offering of Calpine Natural Gas Trust
(CNG Trust). CNG Trust acquired select Canadian natural gas and crude
oil properties from Calpine, generating net proceeds of approximately
-- Sold a 70% interest in its 150-megawatt Auburndale, Fla. power plant
for $86 million. Calpine will hold the remaining 30% interest and
continue to operate and maintain the plant; and
-- Received approximately Cdn$19.2 million from the exercise of Warranted
Units issued as part of the Calpine Power Income Fund secondary
offering. To date, Calpine has received approximately Cdn$61.7 million
(approximately US$46.3 million) from the exercise of the Warranted
Units. The balance of approximately Cdn$15.0 million (approximately
US$11.3 million), is expected to be received by year-end.
The last significant transaction included in the 2003 liquidity program is the non-recourse project financing to fund the construction of the 600-megawatt Rocky Mountain Energy Center in Colorado. This financing is expected to close by December 31, 2003.
On September 30, 2003, liquidity for the company totaled approximately $1.8 billion. This included cash and cash equivalents on hand of approximately $1.0 billion, the current portion of restricted cash of $0.4 billion and approximately $0.4 billion of borrowing capacity under the company"s various credit facilities.
In what has been a challenging year in the U.S. capital markets, Calpine has completed $4.6 billion of capital market transactions. Proceeds from these financings have been used to refinance and repurchase existing debt. Most recently, Calpine has:
-- Closed the $750 million financing at its wholly owned subsidiary,
Calpine Construction Finance Company, L.P. (CCFC I); and
-- Issued $50 million of secured notes through CCFC I, which was an add-on
to the $750 million CCFC I offering.
Net proceeds from these offerings were used to refinance a portion of CCFC I"s existing debt. The remaining balance was repaid from proceeds from the $3.3 billion term loan and second-priority senior secured notes offering.
As of November 1, 2003, the company has repurchased approximately $1.4 billion in principal amount of its outstanding debt and preferred securities in exchange for approximately $1.0 billion in cash and 30.0 million shares of common stock valued at approximately $160.6 million. As a result of these transactions, the company has realized a net pre-tax gain on the repurchase of securities of $202.4 million, while reducing indebtedness by $393 million.
Calpine has built and manages the largest, cleanest and most efficient fleet of natural gas-fired and geothermal power plants in the industry, representing more than 22,000 megawatts of electricity. To help fuel its assets and hedge its long-term natural gas costs, Calpine also owns nearly 900 billion cubic feet equivalent of natural gas reserves. During the quarter, Calpine:
-- Operated at a 60% baseload capacity factor, producing 25.9 million
megawatt-hours, an 11% increase compared to third quarter production
levels in 2002;
-- Achieved an average baseload heat rate of approximately 7,160 British
thermal units per kilowatt-hour for the quarter, significantly below
the industry average;
-- Increased the total average availability factor of its North American
generating facilities to 98.3%, compared to 95.2% a year ago;
-- Advanced construction of 13 projects in ten states, representing an
additional 7,600 megawatts of new capacity; and
-- Produced approximately 257 million cubic feet equivalent per day of
natural gas -- representing about 15% of Calpine"s total fuel
New Market Opportunities
Calpine is uniquely positioned to offer wholesale and industrial customers access to its integrated systems of highly efficient power plants, natural gas assets and energy products and services.
Calpine continues to execute its strategy of selling the majority of its power under long-term contracts. In 2003 alone, Calpine has executed power sales contracts for nearly 5,400 megawatts of generation. These contracts have an average on-peak spark spread of approximately $18 per megawatt hour and have an average life of approximately two years.
During the quarter, the company announced a number of new power contracts with major load-serving customers in key power markets, including:
-- A two-year agreement to supply electricity to Reliant Energy Electric
Solutions, LLC, Houston, Texas. Calpine will supply 150 megawatts
beginning January 1, 2004, increasing to 250 megawatts on
January 1, 2005;
-- A term sheet for a ten-year power sales agreement with San Diego
Gas & Electric for the full output of Calpine"s 570-megawatt Otay Mesa
Energy Center currently under construction near San Diego; and
-- A partnership between Calpine and Mitsui & Co. that was selected by
Comision Federal de Electricidad (CFE) to build, own and operate a
525-megawatt baseload, natural gas-fired, combined-cycle energy center
for CFE in the Yucatan Peninsula. The proposed facility will deliver
electricity to CFE under a 25-year power sales agreement. Calpine will
supply two combustion gas turbines to the project, which will give the
company a 45-percent interest in the facility. Mitsui will own the remaining interest.
Included in the attached Supplemental Data to this news release is an updated report summarizing Calpine"s total generation capacity and capacity currently under contract through 2008. A full detailed report is available on the company"s website at www.calpine.com.
Updated 2003 Earnings Guidance
The company is updating its GAAP fully diluted earnings per share guidance for the year ending December 31, 2003, to a range of approximately $0.85 to $1.00 per share. Core operating earnings for the year have been revised from $0.25 to $0.35 per share to $0.18 to $0.22 per share based on lower spark spreads expected during the fourth quarter. Included in this guidance are other expenses, which include equipment and development cost write-downs and foreign exchange translation losses; other income, which includes gains on sale of assets; gains to be recorded on the open-market purchases of existing indebtedness; mark-to-market gains recorded in the fourth quarter on certain power and gas contracts due to a change in accounting principles; and losses from discontinued operations.
The following is a breakdown of the current 2003 earnings guidance:
-- Core operating earnings $0.18 to $0.22
-- Net other expense ($0.13) to ($0.16)
-- Net other income $0.10 to $0.12
-- Gains on the purchase of existing debt $0.30 to $0.40
-- Mark-to-market earnings $0.42 to $0.45
-- Loss from discontinued operations ($0.02) to ($0.03)
Total $0.85 to $1.00
EBITDA, as adjusted, before non-cash and other charges, is anticipated to be approximately $1.4 billion.
Conference Call Information
Calpine will host a conference call to discuss its third quarter 2003 financial and operating results along with an update on liquidity and refinancing activities. The conference call will occur Wednesday, November 5, 2003, at 8:30 a.m. PST. To participate via the teleconference (in listen-only mode), dial 1-888-603-6685 at least five minutes before the start of the call. In addition, Calpine will simulcast the conference call live via the Internet. The web cast can be accessed and will be available for 30 days on Calpine"s investor relations page at www.calpine.com.
Calpine Corporation is a leading North American power company dedicated to providing electric power to wholesale and industrial customers from clean, efficient, natural gas-fired and geothermal power facilities. The company generates power at plants it owns or leases in 22 states in the United States, three provinces in Canada and in the United Kingdom. Calpine is also the world"s largest producer of renewable geothermal energy, and it owns approximately 900 billion cubic feet equivalent of proved natural gas reserves in Canada and the United States. The company was founded in 1984 and is publicly traded on the New York Stock Exchange under the symbol CPN. For more information about Calpine, visit www.calpine.com.
This news release discusses certain matters that may be considered "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, including statements regarding the intent, belief or current expectations of Calpine Corporation ("the Company") and its management. Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve a number of risks and uncertainties that could materially affect actual results such as, but not limited to, (i) the timing and extent of deregulation of energy markets and the rules and regulations adopted on a transitional basis with respect thereto; (ii) the timing and extent of changes in commodity prices for energy, particularly natural gas and electricity; (iii) commercial operations of new plants that may be delayed or prevented because of various development and construction risks, such as a failure to obtain the necessary permits to operate, failure of third-party contractors to perform their contractual obligations or failure to obtain financing on acceptable terms; (iv) unscheduled outages of operating plants; (v) a competitor"s development of lower cost generating gas-fired power plants; (vi) risks associated with marketing and selling power from power plants in the newly-competitive energy market; (vii) the successful exploitation of an oil or gas resource that ultimately depends upon the geology of the resource, the total amount and costs to develop recoverable reserves and operations factors relating to the extraction of natural gas; (viii) the effects on the Company"s business resulting from reduced liquidity in the trading and power industry; (ix) the Company"s ability to access the capital markets or obtain bank financing on attractive terms; (x) the direct or indirect effects on the Company"s business of a lowering of its credit rating (or actions it may take in response to changing credit rating criteria), including, increased collateral requirements, refusal by the Company"s current or potential counterparties to enter into transactions with it and its inability to obtain credit or capital in desired amounts or on favorable terms; and (xi) other risks identified from time-to-time in the Company"s reports and registration statements filed with the SEC, including the risk factors identified in its Annual Report on Form 10-K for the year ended December 31, 2002, its Form 8-K filed on October 23, 2003, and its Quarterly Report on Form 10-Q for the quarter ended June 30, 2003, which can be found on the Company"s website at www.calpine.com. All information set forth in this news release is as of today"s date, and the Company undertakes no duty to update this information.
Calpine Corp. Headquarters
50 West San Fernando Street
San Jose, CA 95113