Calpine Corporation: Q1 Results
Calpine Corporation (CPN) reported first quarter 2013 Adjusted EBITDA of $286 million, compared to $325 million in the prior year period, and Adjusted Free Cash Flow of $(43) million, or $(0.10) per diluted share, compared to $(27) million, or $(0.06) per diluted share, in the prior year period. Net Loss1 for the first quarter was $125 million, or $0.28 per diluted share, compared to a Net Loss1 of $9 million, or $0.02 per diluted share, in the prior year period. Net Loss, As Adjusted2, for the first quarter of 2013 was $70 million compared to $65 million in the prior year period. The declines in first quarter Adjusted EBITDA, Adjusted Free Cash Flow and Net Loss, As Adjusted2 in the first quarter of 2013 compared to 2012 were consistent with previous disclosures and were driven primarily by lower Commodity Margin, largely as a result of changes in our portfolio, a move towards seasonal hedging in 2013 compared to annual hedging in 2012 and lower generation due to the reversal of coal-to-gas switching that occurred during the first quarter of 2012.
“Our first quarter results were in line with our expectations, driven by a meaningful increase in the price of natural gas that put gas-fired plants back on the margin in Texas and the Southeast,” said Jack Fusco, Calpine’s Chief Executive Officer. “It is worth noting that the quarterly distribution of our 2013 Adjusted EBITDA performance will be different than in past years due to previously announced portfolio changes. Late last year, we sold two non-core contracted plants and bought a merchant plant in Texas; this summer, we will place in service two new contracted plants in California. As a result of these portfolio changes, when combined with a more summer-weighted hedge profile and expected increases in regulatory capacity payments later this year, we expect that a higher proportion of our Adjusted EBITDA will be realized in the second half of 2013. Therefore, we reaffirm our 2013 full-year guidance ranges for Adjusted EBITDA and Adjusted Free Cash Flow of $1,800 million to $1,960 million and $615 million to $775 million, respectively, and our Adjusted Free Cash Flow Per Share estimate of $1.50.”
SUMMARY OF FINANCIAL PERFORMANCE
First Quarter Results
Adjusted EBITDA for the first quarter of 2013 was $286 million, compared to $325 million in the prior year period. The year-over-year decrease in Adjusted EBITDA was primarily due to a $56 million decrease in Commodity Margin, partially offset by a $16 million decrease in plant operating expense4. The decrease in Commodity Margin was primarily due to:
– the sale of Broad River and Riverside Energy Centers, partially offset by the acquisition of Bosque Energy Center in the fourth quarter of 2012
– lower spark spreads and generation output resulting from a reversal of coal-to-gas switching primarily in our Texas, North and Southeast segments and
– lower contribution from hedges due to a shift from the use of annual hedges in 2012 to more seasonal hedges in 2013, primarily in our Texas segment, partially offset by
+ higher revenue from tolling contracts in our West and Southeast segments.
The decrease in plant operating expense4 was primarily due to the reversal of retroactive regulatory fees for which we determined the likelihood of payment was not probable based on the actions of regulatory officials.
Net Loss1 was $125 million for the first quarter of 2013, compared to a Net Loss1 of $9 million in the prior year period. As detailed in Table 1, Net Loss, As Adjusted2, was $70 million in the first quarter of 2013 compared to $65 million in the prior year period. The year-over-year decline was driven largely by:
– lower Commodity Margin, as previously discussed, partially offset by
+ higher income tax benefit primarily related to a decrease in various state and foreign jurisdiction income taxes.
1 Reported as net loss attributable to Calpine on our Consolidated Condensed Statements of Operations.
2 Refer to Table 1 for further detail of Net Loss, As Adjusted.
3 Includes generation from power plants owned but not operated by Calpine and our share of generation from unconsolidated power plants.
4 Decrease in plant operating expense excludes changes in major maintenance expense, stock-based compensation expense, non-cash loss on disposition of assets and other costs. See the table titled “Consolidated Adjusted EBITDA Reconciliation” for the actual amounts of these items for the three months ended March 31, 2013 and 2012.
Share Repurchase Program
In February 2013, our Board of Directors authorized the repurchase of an additional $400 million in shares of our common stock, bringing the cumulative authorization total to $1 billion. As of the date of this release, we have repurchased a total of approximately 3 million shares of our outstanding common stock under the additional $400 million authorization for approximately $58 million at an average price paid of $18.97 per share.
First Quarter 2013 Power Operations Achievements:
— Maintained top quartile6 safety metrics, recording a 0.9 Total Recordable Incident Rate
— Delivered remarkable fleetwide forced outage factor: 1.5%
— Maintained impressive fleetwide starting reliability: 98%
— Provided more than 1.5 million MWh of renewable baseload generation with a remarkable 0.22% forced outage factor
Natural Gas-fired Generation:
— Hermiston Power Project: Produced a fleet-best 91% capacity factor, 100% availability factor
— Commenced construction on the first phase of Garrison Energy Center in April 2013
Calpine Corporation generates more electricity than any other independent power producer in America, with a fleet of 93 power plants in operation or under construction, representing more than 27,000 megawatts of generation capacity in operation. Serving customers in 20 states and Canada, we specialize in developing, constructing, owning and operating natural gas-fired and renewable geothermal power plants that use advanced technologies to generate power in a low-carbon and environmentally responsible manner. Our clean, efficient, modern and flexible fleet is uniquely positioned to benefit from the secular trends affecting our industry, including the abundant and affordable supply of clean natural gas, stricter environmental regulation, aging power generation infrastructure and the increasing need for dispatchable power plants to successfully integrate intermittent renewables into the grid. We focus on competitive wholesale power markets and advocate for market-driven solutions that result in nondiscriminatory forward price signals for investors. Please visit www.calpine.com to learn more about why Calpine is a generation ahead - today.
Bryan Kimzey, 713-830-8777