CPPIB buys stake in U.S. power producer

The Canada Pension Plan Investment Board is part of a group of investors buying U.S. power producer Calpine Corp. for US$5.6 billion.

The board said the all cash transaction, for which it’s putting up US$750 million, helps add power and renewable assets to its expanding natural resources portfolio.

The deal, advised by Energy Capital Partners, will give CPPIB a stake in Houston-based Calpine, which has 80 power plants in operation or under construction and enough natural gas and renewable capacity to power about 20 million homes.

Calpine has operations in 18 states, including 13 geothermal geyser assets in northern California, as well as a partial interest in two generation stations in southwestern Ontario.

“Calpine is the premier power generator,” Timothy Winter, a St. Louis-based analyst for Gabelli & Co. who rates Calpine at buy, said Friday. “The market doesn’t appreciate the story. It doesn’t appreciate the whole independent power producer business. It seems like private equity does.”

Calpine will “continue to strengthen our wholesale power generation footprint, while benefiting from ECP’s support, industry expertise and long-term investment horizon,” Thad Hill, the company’s chief executive officer, said in the statement.

Tyler Reeder, a partner at Energy Capital, said the firm doesn’t expect to make any changes to the way Calpine operates or to the company’s financial policy and previously announced US$2.7 billion debt reduction plan.