May 2, 2002 — Calpine Corp. announced Thursday its financial and operating results for the quarter ended March 31, 2002.
Calpine’s net income was $33 million in the first quarter of 2002, down from $123 million for the same quarter last year – a 73 percent decrease.
The diluted earnings per share was 10 cents compared with 37 cents in the same quarter last year.
“Calpine continues to make significant progress toward strengthening liquidity and improving creditworthiness, while enhancing its revenue-generating capacity. Since late December, we have raised nearly $4 billion of capital, retired approximately $953 million of debt, restructured our turbine program — which will reduce 2002 and 2003 capital spending by more than $3 billion — and successfully renegotiated our long-term power contracts with the California Department of Water Resources,” stated Calpine Chairman, CEO and President Peter Cartwright.
“In addition to strengthening our liquidity, Calpine completed construction and brought on line more than 1,400 megawatts of highly efficient generation capacity in strategic power markets. Our revised construction program remains on schedule and within budget. By year-end 2002, we expect to have 79 plants, totaling 20,100 megawatts, on-line and generating strong cash flow in key power markets throughout North America.”
“While we expect 2002 will continue to be a challenging year for the entire power sector, we are encouraged by signs in several major markets of rising demand and stronger prices as the economy begins to recover,” added Cartwright. “We remain committed to prudent and disciplined long-term growth strategies that will generate attractive, sustainable returns for our investors, while meeting the power needs of the markets we serve.”
2002 First Quarter Financial Results
Financial results for the three months ended March 31, 2002 reflect a significant decrease in electricity prices, gas prices and spark spreads as compared to the first quarter of 2001, primarily as a result of unusually mild weather and weak market fundamentals. Total electrical generating production increased by 103%, as we brought additional facilities into operation.
Total revenues also benefited from the company’s hedging and optimization program. The combination of lower spark spreads and higher operating expenses due to the additional production resulted in a 35% decrease in gross profit when compared to the first quarter of last year. Despite the soft first quarter margin, we believe our long-term program of constructing highly efficient power facilities should continue to provide Calpine with a low cost basis and a competitive advantage in the marketplace.
During the quarter, the company recorded a pre-tax, primarily non-cash, charge to earnings for equipment cancellation cost of $168.5 million. The cancelled equipment consisted of 34 gas turbine generators, one steam turbine generator and other equipment. Also during the quarter, we sold our 11.4% interest in the Lockport Power Plant for a pre-tax other income gain of $9.7 million. We also recorded an after-tax extraordinary gain of $2.1 million from purchasing Zero-Coupon Convertible Debentures at a discount, less the related write-off of financing costs. After equipment cancellation cost and extraordinary gain, the GAAP fully diluted earnings (loss) per share for the quarter ending March 31, 2002 was $(0.24) compared to $0.36 for the first quarter of 2001 (after cumulative effect of a change in accounting principle).
Market- Power Generation Program
Calpine is a leader in highly efficient natural gas-fired and geothermal power generation. Calpine expects to more than double its generating base by the end of 2003. Once the company completes its revised power plant construction program, it will have one of the largest, most modern and environmentally friendly fleets of power plants in North America. Recent highlights include:
* Completed construction of three new energy centers and two combined-cycle expansions, adding more than 1,400 megawatts of capacity; these new facilities are providing clean, reliable electricity for California, Missouri and Texas customers;
* Renegotiated its power contracts with the California Department of Water Resources, increasing earnings and cash flow in the early years; resolves concerns surrounding the contracts, preserving almost $9 billion of revenues for power committed to California; and
* Secured a 10-year power sales agreement with Wisconsin Public Service Corporation for up to 235 megawatts of capacity and energy from Calpine’s proposed Sherry Energy Center; this arrangement enhances Calpine’s liquidity, while ensuring that capacity will be available to serve Wisconsin consumers.
To ensure Calpine is well positioned to manage its transition from a development company to one of the nation’s largest independent power providers, the company also in the first quarter announced several organizational enhancements. The company created the Office of the Chairman with Peter Cartwright remaining Chairman, CEO and President, and Ann Curtis, formerly CFO, becoming Vice Chairman and continuing in her role as Executive Vice President. Robert Kelly, formerly Senior Vice President of Calpine, becomes CFO and assumes the title of Executive Vice President while remaining President of Calpine Finance Company. James Macias was promoted to the new role of Chief Operating Officer and Executive Vice President, from Senior Vice President-Power and Industrial Marketing. Kelly and Macias report to the Office of the Chairman.
Recent Financings and Asset Sales Strengthen 2002 Liquidity
Calpine continues to take steps to strengthen its balance sheet and ensure sufficient liquidity for the company’s revised business plans. Since late December, Calpine has completed or entered into nearly $4 billion of financing transactions and cut $2 billion of capital spending, giving the company projected cash resources of more than $2 billion for 2002.
Recent milestones include:
* Closing of $2 billion secured credit facility;
* Sale of 66 million shares of common stock priced at $11.50 per share, raising $734.3 million; over-allotment option granted for up to 9.9 million shares of common stock; proceeds expected to be used to repay debt and for general corporate purposes;
* Completion of sale of additional 4% Convertible Senior Notes Due 2006, totaling $1.2 billion, with proceeds used to purchase and retire Zero-Coupon Convertible Debentures Due April 30, 2021 and for general corporate purposes;
* Purchase and retirement of remaining Zero-Coupon Convertible Debentures, totaling approximately $878 million;
* Entered agreement with ING Bank on debt portion of proposed California peaker sale/leaseback; total sale/leaseback represents a $500 million financing;
* Restructured turbine program, resulting in reductions of more than $3 billion of capital spending in 2002-2003; deferred delivery and payment for 81 turbines and cancelled orders for 34 GE gas turbine generators, one steam turbine generator and other equipment;
* Announced sale of 180-megawatt De Pere Energy Center to Wisconsin Public Service for $120 million; transaction expected to close in the third quarter of 2002; and
* Sale of Calpine’s 11.4% interest in the 200-megawatt Lockport Power Plant, located in Lockport, N.Y., for approximately $27 million; Calpine’s interest was sold to Fortistar, the project’s managing general partner.
2002 Liquidity Update
The quarter’s liquidity-enhancing transactions enabled Calpine to substantially increase its cash resources for 2002. The following table summarizes the company’s currently anticipated sources and uses of funds. These estimates are subject to further change as Calpine continues to pursue additional alternatives and as it monitors the scope and pace of its construction program based on market conditions. The company intends to update this information periodically.
Based in San Jose, Calif., Calpine Corporation is an independent power company that is dedicated to providing customers with clean, efficient, natural gas-fired power generation. It generates and markets power, through plants it develops, owns and operates, in 21 states in the United States, three provinces in Canada and in the United Kingdom. Calpine also is the world’s largest producer of renewable geothermal energy, and it owns 1.3 trillion 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 its website at www.calpine.com.