Private companies profiles
Houston power company Calpine had a strong year, heading back to profitability after suffering deep loses in 2017.
Calpine, the nation’s biggest generator of electricity from natural gas and a retail electric provider that sells under the brand name Champion Energy, earned $10 million last year, reflecting higher power prices and reversing a $339 million loss it reported the previous year, according to financial records Calpine reported to securities regulators.
Normally, private companies don’t report earnings to regulators but Calpine only became a private company last year when Calpine was acquired by New Jersey private equity firm Energy Capital Partners in a deal valued at nearly $17 billion, including the assumption of Calpine’s debt. With the deal, Calpine is now the biggest private company in Houston, reporting $9.5 billion in revenues in 2018, an 8.7 percent increase from the previous year. The company has 2,300 employees, including 900 in Houston.
Calpine opted to become private after struggling with sagging stock prices, lackluster earnings and the shifting economy of power markets that rewards low-cost renewables such as wind and solar power. Public investors didn’t value the stock like they should have, according to company officials, who found themselves making shortterm
decisions to appease Wall Street analysts rather than making investment decisions in the best longterm interests of the company.
“We thought we were worth more,” said Thad Hill, president and chief executive officer of Calpine.
Calpine investors ended up getting a 50 percent premium on their money when Energy Capital Partners bought Calpine, a deal that made many investors happy including Calpine employees. Each year Calpine gave a stock grant to eligible employees, which included the majority of front line workers such as production employees and office staff. Employees who hadn’t previously sold their shares received about $5,000 for every year of service.
Last year was good in other ways for the Houston-based company, which benefited from higher spreads between the price of power and the cost to produce it. The company, whose offices are on the edge of the Theater District in downtown Houston, has been building new generation capacity, including a new 830-megawatt combined cycle natural gas power plant in Pennsylvania that began operating in March. Calpine recently began construction in Louisiana of a 330-megawatt peaker plant, designed to run when power prices spike, in an arrangement with New Orleansbased power generator and retailer Entergy.
Calpine is also selling two plants, including a 325-megawatt combined cycle plant in Delaware and a 503-megawatt peaker plant in Wisconsin to Connecticut-based private investment firm Starwood Energy Group Global, according to Starwood’s announcement in April.
Currently, Calpine has 80 power plants that generate about 26,000 megawatts of power, enough to power about 20 million homes. Its retail operations serve customers in 24 states, including Texas, Canada and Mexico.
Calpine is hoping to expand that retail business by signing up Astros third baseman Alex Bregman as its new spokesman for Champion in a campaign that starts this month. It’s a natural fit, said Hill, because Champion is the official electricity supplier for the Astros. And the team has done well, he said.
Champion sells between 2 and 5 percent of electricity in Texas, a small player behind the behemoths in the industry such as NRG Energy, Vistra Energy and Direct Energy, which combined control around 70 percent of the Texas electricity market. Calpine, which has adopted the slogan “no fine print,” is betting electricity shoppers in Texas will be drawn to a company that doesn’t sell confusing multitier electricity plans, doesn’t go door-to-door to sell power plans and doesn’t use multilevel, commissionbased marketing channels to sell power. And it runs its call centers out of Houston instead of in foreign countries.
“We want to grow it the right way,” said Hill.