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4-Traders Homepage  >  Equities  >  Nyse  >  Calpine Corporation    CPN

CALPINE CORPORATION (CPN)
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Calpine : FERC Issues Order Involving Calpine and Access Industries

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02/17/2018 | 02:22pm CET

WASHINGTON, Feb. 16 -- The U.S. Department of Energy's Federal Energy Regulatory Commission issued the following delegated order (Docket No. EC18-39-000) involving Calpine and Access Industries:

ORDER AUTHORIZING ACQUISITION AND DISPOSITION OF JURISDICTIONAL FACILITIES

On December 21, 2017, Calpine Corporation (Calpine) and Access Industries, Inc. (Access) (together, Applicants) filed an application pursuant to sections 203(a)(1)(A) and (a)(2)of the Federal Power Act (FPA) (1) requesting authorization for a transaction in connection with Access's election to expand its existing governance rights in Volt Parent, LP (Volt Parent) (Proposed Transaction).The jurisdictional facilities involved in the Proposed Transaction consist of market-based rate tariffs or rate schedules and associated contracts, books, records and accounts; reactive rate schedules; and the Millbury Rate Schedule.

According to Applicants, through various subsidiaries, Calpine owns, leases, and operates power plants in the United States and Canada with an aggregate generating capacity of approximately 26,000 megawatts (MW).

Applicants also represent that Access is a corporation and a privately held industrial group. It is under the exclusive control of a single, natural person, who holds and manages the interests in it. As is relevant to the Proposed Transaction, Access' subsidiaries own or control 31.1 MW of generation facilities located in MISO.

Applicants explain that Volt Parent has entered into an agreement to acquire Calpine, currently under review by the Commission (ECP/Calpine Transaction). Applicants state that, as of the closing of the ECP/Calpine Transaction, Volt Parent's interests in energy assets will consist solely of Calpine and its subsidiaries.

According to Applicants, Volt Parentis a wholly controlled subsidiary of ECP Control Co, LLC (ECP). Applicants state that ECP is a limited liability company owned by six individual people, the ECP Managers. ECP is focused on electric generation and inputs to electric generation in North America and does not own or control any traditional franchised utilities with captive customers. Neither ECP nor its affiliates own or control any transmission facilities or any inputs to power production in the United States. None of the ECP Managers hold any officer or director position with any energy-related entity other than through ECP and its affiliates. ECP's affiliates own or control 686 MW of generation in the Midcontinent Independent System Operator, Inc. (MISO) market

Pursuant to the Letter Agreement, dated August 17, 2017, by and among Volt Parent and Access, Access intends to exercise an option to expand its governance rights in Volt Parent. As a result, Access will become an upstream owner of Calpine and its public utility subsidiaries. Applicants state that the Proposed Transaction will not be consummated until after consummation of the ECP/Calpine Transaction.

Applicants state that the Proposed Transaction will not have an adverse impact on horizontal competition. According to Applicants, the only Commission-jurisdictional market in which there is overlap between generation owned or controlled by Calpine and its affiliates and Access and its relevant affiliates is MISO. Applicants state that the Proposed Transaction will not have an adverse impact on horizontal competition in MISO, because Applicants and their affiliates will own or control 717.1 MW out of 174,724 MW total, which equals 0.41 percent, a de minimis amount.

Applicants state that the Proposed Transaction will not have an adverse impact on vertical competition. Neither Applicants nor any of their affiliates own or control any electric transmission facilities in the United States. Applicants submit that the Proposed Transaction raises no issues with respect to Applicants and their affiliates who own or control inputs to electric power production. Further, Applicants do not own inputs to electricity products and generation facilities in the in the same geographic market. Finally, Applicants maintain that neither they nor any of the iraffiliates own or control any inputs to electric power production that could be used to erect barriers to entry in any relevant market.

Applicants maintain that the Proposed Transaction will not have an adverse impact on rates. Applicants represent that all wholesale sales of electric energy, capacity and ancillary services by Applicants and their affiliates will continue to be made pursuant to their market-based rate or negotiated rate tariffs or cost-based rate schedules on file with the Commission following the closing of the Proposed Transaction. According to Applicants, certain of the iraffiliates have reactive rate schedules on file with the Commission establishing cost-based revenue requirements for reactive power and voltage support, and certain of them receive cost-based compensation for black start service provided. Further, one of ECP's affiliates makes wholesale sales pursuant to a cost-based rate schedule on file with the Commission. Nonetheless, Applicants assert that none of these would allow for the pass-through of costs associated with the Proposed Transaction without Commission authorization under Section 205 of the FPA. Thus, Applicants submit that the Proposed Transaction has no adverse impact on rates.

Applicants verify that, based on facts and circumstances known to them or that are reasonably foreseeable, the Proposed Transaction will not result in, at the time of the Proposed Transaction or in the future, any cross-subsidization of a non-utility associate company or pledge or encumbrance of utility assets for the benefit of an associate company, including: (1) any transfer of facilities between a traditional public utility associate company that has captive customers or that owns or provides transmission service over jurisdictional transmission facilities, and an associate company; (2) any new issuance of securities by a traditional public utility associate company that has captive customers or that owns or provides transmission service over jurisdictional transmission facilities, for the benefit of an associate company; (3) any new pledge or encumbrance of assets of a traditional public utility associate company that has captive customers or that owns or provides transmission service over jurisdictional transmission facilities, for the benefit of an associate company; or (4) any new affiliate contract between a non-utility associate company and a traditional public utility associate company that has captive customers or that owns or provides transmission service over jurisdictional transmission facilities, other than non-power goods and service agreements subject to review under sections 205 and 206 of the FPA.

The filing was noticed on December 21, 2017, with comments, protests, or interventions due on or before January 11, 2018.PUBLIC CITIZEN, INC and PJM submitted filed timely motions to intervene. Notices of intervention and unopposed timely filed motions to intervene are granted pursuant to the operation of Rule 214 of the Commission's Rules of Practice and Procedure (18 C.F.R. Section 385.214) (2017).

Information and/or systems connected to the bulk system involved in these transactions may be subject to reliability and cybersecurity standards approved by the Commission pursuant to FPA section 215. Compliance with these standards is mandatory and enforceable regardless of the physical location of the affiliates or investors, information database, and operating systems. If affiliates, personnel or investors are not authorized for access to such information and/or systems connected to the bulk power system, a public utility is obligated to take the appropriate measures to deny access to this information and/or the equipment/software connected to the bulk power system. The mechanisms that deny access to information, procedures, software, equipment, etc., must comply with all applicable reliability and cybersecurity standards. The Commission, North American Electric Reliability Corporation or the relevant regional entity may audit compliance with reliability and cybersecurity standards.

When a controlling interest in a public utility is acquired by another company, whether a domestic company or a foreign company, the Commission's ability to adequately protect public utility customers against inappropriate cross-subsidization may be impaired absent access to the parent company's books and records. Section 301(c) of the FPA gives the Commission authority to examine the books and records of any person who controls, directly or indirectly, a jurisdictional public utility insofar as the books and records relate to transactions with or the business of such public utility. The approval of the Proposed Transaction is based on such examination ability.

Order No. 652 requires that sellers with market-based rate authority timely report to the Commission any change in status that would reflect a departure from the characteristics the Commission relied upon in granting market-based rate authority. To the extent that a transaction authorized under FPA section 203 results in a change in status, sellers that have market-based rates are advised that they must comply with the requirements of Order No. 652.

After consideration, it is concluded that the Proposed Transaction is consistent with the public interest and is authorized, subject to the following conditions:

(1) The Proposed Transaction is authorized upon the terms and conditions and for the purposes set forth in the application;

(2) Applicants must inform the Commission of any material change in circumstances that departs from the facts or representations that the Commission relied upon in authorizing the Proposed Transaction within 30 days from the date of the material change in circumstances;

(3) The foregoing authorization is without prejudice to the authority of the Commission or any other regulatory body with respect to rates, service, accounts, valuation, estimates or determinations of costs, or any other matter whatsoever now pending or which may come before the Commission;

(4) Nothing in this order shall be construed to imply acquiescence in any estimate or determination of cost or any valuation of property claimed or asserted;

(5) If the Proposed Transaction results in changes in the status or upstream ownership of Applicant's affiliated qualifying facilities, an appropriate filing for recertification pursuant to 18 C.F.R. Section 292.207 (2017) shall be made;

(6) The Commission retains authority under sections 203(b) and 309 of the FPA to issue supplemental orders as appropriate;

(7) Applicants shall make any appropriate filings under section 205 of the FPA, as necessary, to implement the Proposed Transaction; and

(8) Applicants shall notify the Commission within 10 days of the date that the disposition of jurisdictional facilities has been consummated;

This action is taken pursuant to the authority delegated to the Director, Division of Electric Power Regulation - West, under 18 C.F.R. Section 375.307 (2017). This order constitutes final agency action. Requests for rehearing by the Commission may be filed within 30 days of the date of issuance of this order, pursuant to 18 C.F.R. Section 385.713 (2017).

Steve P. Rodgers, Director, Division of Electric Power Regulation West

Footnotes:

1. 16 U.S.C. Section 824b (2012).

2. Reporting Requirement for Changes in Status for Public Utilities with Market-Based Rate Authority, Order No. 652, FERC Stats. & Regs. 31,175, order on reh'g, 111 FERC 61,413 (2005).

© 2018 Targeted News Service, source News Service

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Sales 2018 5 586 M
EBIT 2018 1 084 M
Net income 2018 374 M
Debt 2018 9 863 M
Yield 2018 -
P/E ratio 2018 13,77
P/E ratio 2019 16,56
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Average target price 14,5 $
Spread / Average Target -4,3%
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