Energy Capital is said to plan US$5.5b Calpine takeover

[SAN FRANCISCO] Private equity firm Energy Capital Partners has reached an agreement to buy US power generator Calpine for US$5.5 billion in cash, people familiar with the matter said.

Energy Capital may announce the takeover as early as Friday, the people said, asking not to be identified because the information isn't public.

Calpine investors would get US$15.25 a share as part of the deal, which is valued at more than US$17 billion including debt, they said.

Calpine is one of the few publicly listed US power generators still selling supplies directly into wholesale power markets.

These companies have seen their margins squeezed by cheap natural gas, a surge in renewable energy resources and subsidies that some states have created for nuclear power.

The rout has touched off a wave of consolidation with companies including FirstEnergy and American Electric Power looking to get out of the business altogether.

Calpine declined to comment. An Energy Capital spokesman couldn't immediately be reached for comment.

Energy Capital has secured co-investors and limited partners for the Calpine deal, according to one of the people familiar with the matter.

Calpine was up 9.2 per cent at US$14.74 in after-markets trading at 7.59pm New York time Thursday. The shares closed at US$13.50, giving the Houston-based generator a market value of US$4.87 billion.

Energy Capital has become one of the most active private equity investors in the US power sector. It formed a joint venture last year with Dynegy to buy Engie SA's US power portfolio for US$3.3 billion and agreed to sell its stake in that joint venture to Dynegy before the deal closed.

The investor was Dynegy's largest stakeholder as of June, based on data compiled by Bloomberg.

Energy Capital also bought a natural gas plant from Calpine in South Carolina in 2012 for more than US$400 million. Calpine owns 80 power plants and has about 6.5 million retail customers in California, Texas and the US North-east.

BLOOMBERG