Calpine Corporation (CPN) to Acquire NAES in ~$900M Deal
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Calpine Corporation (NYSE: CPN) announced that it has entered into an agreement to purchase Noble Americas Energy Solutions, LLC (NAES), the nation’s largest independent supplier of power to commercial and industrial retail customers, for a purchase price of $800 million plus an estimated $100 million of net working capital at closing. Calpine expects to recover approximately $200 million through collateral synergies and the runoff of acquired legacy hedges, substantially within the first year, resulting in expected net cash deployed of approximately $700 million (including working capital), or approximately five times NAES’ recent and expected run-rate Adjusted EBITDA.
“We are excited to be acquiring the best commercial and industrial direct energy sales platform in the U.S. The acquisition of this well-regarded organization known for providing sophisticated customers with highly customized products is a natural fit with Calpine’s customer-centric culture and will allow us to build upon the success we have experienced since our entry into retail last year through the Champion Energy platform,” said Thad Hill, Calpine’s President and Chief Executive Officer. “In addition to expanding our retail customer sales channels and product offerings, we will more than double the volume of retail load we are capable of serving across the country from our complementary wholesale power generation fleet.
“Financially, this transaction is highly cash flow and credit accretive, given a rapidly amortizing bridge loan, the achievement of collateral synergies and the ongoing generation of stable and substantial cash flows,” concluded Hill. “In addition to delivering strong annual cash flow, the strong sales effort by the NAES team has continued to build the mark-to-market value of their book over the last several years, which will help ensure future success of the business. We look forward to welcoming the entire NAES team to the Calpine family.”
NAES currently serves commercial and industrial customers in 18 states nationwide, including California, Texas, the Mid-Atlantic and Northeastern United States, where Calpine’s wholesale power generation fleet is primarily concentrated. The organization will remain headquartered in San Diego and will continue to operate under the leadership of Jim Wood, President of NAES.
“We are thrilled to be joining the Calpine team,” said Wood. “Our customers should know that we will continue to provide the same high level of services and product offerings during the ownership transition and, when under the Calpine banner, we expect to provide even greater value-added products and services.”
Funding and Credit Support
Calpine expects to fund the acquisition with a combination of cash on hand and temporary bridge loan financing of up to $550 million. The company intends to repay the bridge facility during 2017 with proceeds from announced asset sales as well as cash from operations, including that generated from the anticipated collateral synergies.
Under Calpine ownership, anticipated collateral needs are expected to be met with approximately $240 million in letters of credit and $20 million of surety bonds, leaving almost $1.2 billion of Calpine Corporate Revolver capacity remaining at closing.
Approvals and Time to Close
Calpine will acquire the business from Noble Americas Gas & Power Corp., a subsidiary of Noble Group Ltd. The transaction is expected to close by year end 2016, subject to customary closing conditions, approval by shareholders of Noble Group Ltd., approval from the Federal Energy Regulatory Commission and antitrust review under the Hart-Scott-Rodino Act.
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