Company Quick10K Filing
Calpine
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$0.00 0 $0
10-Q 2019-11-08 Quarter: 2019-09-30
10-Q 2019-08-08 Quarter: 2019-06-30
10-Q 2019-05-10 Quarter: 2019-03-31
10-K 2019-03-28 Annual: 2018-12-31
10-Q 2018-11-08 Quarter: 2018-09-30
10-Q 2018-08-09 Quarter: 2018-06-30
10-Q 2018-05-10 Quarter: 2018-03-31
10-K 2018-02-16 Annual: 2017-12-31
10-Q 2017-11-01 Quarter: 2017-09-30
10-Q 2017-07-28 Quarter: 2017-06-30
10-Q 2017-04-28 Quarter: 2017-03-31
10-K 2017-02-10 Annual: 2016-12-31
10-Q 2016-10-28 Quarter: 2016-09-30
10-Q 2016-07-29 Quarter: 2016-06-30
10-Q 2016-04-29 Quarter: 2016-03-31
10-K 2016-02-12 Annual: 2015-12-31
10-Q 2015-10-30 Quarter: 2015-09-30
10-Q 2015-07-30 Quarter: 2015-06-30
10-Q 2015-05-01 Quarter: 2015-03-31
10-K 2015-02-13 Annual: 2014-12-31
10-Q 2014-11-06 Quarter: 2014-09-30
10-Q 2014-08-01 Quarter: 2014-06-30
10-Q 2014-05-01 Quarter: 2014-03-31
10-K 2014-02-13 Annual: 2013-12-31
10-Q 2013-11-07 Quarter: 2013-09-30
10-Q 2013-07-25 Quarter: 2013-06-30
10-K 2013-02-13 Annual: 2012-12-31
10-Q 2012-11-06 Quarter: 2012-09-30
10-Q 2012-07-27 Quarter: 2012-06-30
10-Q 2012-04-27 Quarter: 2012-03-31
10-K 2012-02-10 Annual: 2011-12-31
10-Q 2011-10-28 Quarter: 2011-09-30
10-Q 2011-07-29 Quarter: 2011-06-30
10-Q 2011-04-29 Quarter: 2011-03-31
10-K 2011-02-18 Annual: 2010-12-31
10-Q 2010-10-29 Quarter: 2010-09-30
10-Q 2010-07-30 Quarter: 2010-06-30
10-Q 2010-05-05 Quarter: 2010-03-31
10-K 2010-02-25 Annual: 2009-12-31
8-K 2019-12-27 Enter Agreement, Off-BS Arrangement, Exhibits
8-K 2019-12-19 Regulation FD, Regulation FD, Exhibits
8-K 2019-12-10 Regulation FD, Regulation FD, Exhibits
8-K 2019-12-10 Regulation FD, Regulation FD, Exhibits
8-K 2019-11-20 Regulation FD, Regulation FD
8-K 2019-11-08 Earnings, Earnings, Exhibits
8-K 2019-08-12 Enter Agreement, Off-BS Arrangement, Exhibits
8-K 2019-07-29 Earnings, Earnings, Exhibits
8-K 2019-07-10 Other Events, Other Events
8-K 2019-05-10 Earnings, Earnings, Exhibits
8-K 2019-04-05 Enter Agreement, Off-BS Arrangement, Exhibits
8-K 2019-03-08 Earnings, Earnings, Exhibits
8-K 2018-08-29 Officers, Exhibits
8-K 2018-07-02 Officers, Exhibits
8-K 2018-05-18 Enter Agreement, Off-BS Arrangement, Exhibits
8-K 2018-04-09 Amend Bylaw, Shareholder Vote, Exhibits
8-K 2018-03-16 Officers
8-K 2018-03-08 Enter Agreement, M&A, Shareholder Rights, Control, Officers, Amend Bylaw, Regulation FD, Exhibits
8-K 2018-02-23 Other Events
CPN 2019-09-30
Part I - Financial Information
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II - Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-31.1 cpn_exhibit311x09302019.htm
EX-31.2 cpn_exhibit312x09302019.htm
EX-32.1 cpn_exhibit321x09302019.htm

Calpine Earnings 2019-09-30

CPN 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

Comparables ($MM TTM)
Ticker M Cap Assets Liab Rev G Profit Net Inc EBITDA EV G Margin EV/EBITDA ROA
CPN 0 16,209 12,756 10,591 3,478 712 2,213 10,118 33% 4.6 4%
USCI 0 361 1 18 0 17 17 -365 0% -21.0 5%
EWD 0 183 41 21 0 -0 9 -25 0% -2.8 -0%
IMN 0 9 19 0 0 16 16 -1 100% -0.1 177%
XTEG
VERY
TRWH
VIR
BLPG 0 2 5 3 1 -4 -4 -0 32% 0.0 -282%
VIE

10-Q 1 cpn_10qx09302019.htm CALPINE 10-Q FOR QUARTERLY PERIOD ENDED SEPTEMBER 30, 2019 Document


 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 
____________________
Form 10-Q
(Mark One)
[X]
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
 
 
OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
 
For the quarterly period ended September 30, 2019
 
 
 
 
Or
 
 
 
[    ]
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
 
 
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File No. 001-12079
______________________
image0a10.jpg
Calpine Corporation
(A Delaware Corporation)
I.R.S. Employer Identification No. 77-0212977
717 Texas Avenue, Suite 1000, Houston, Texas 77002
Telephone: (713) 830-2000


Securities registered pursuant to Section 12(b) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes [ ]    No [X]
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes [X]    No [    ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
[   ]
 
Accelerated filer            
[    ]
Non-accelerated filer
[X]
 
Smaller reporting company 
[    ]
Emerging growth company
[   ]
 
 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes [    ]    No [X]

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date: 105.2 shares of common stock, par value $0.001, were outstanding as of November 8, 2019, none of which were publicly traded.


 





CALPINE CORPORATION AND SUBSIDIARIES
REPORT ON FORM 10-Q
For the Quarter Ended September 30, 2019
INDEX
 
 
 
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

i



DEFINITIONS
As used in this report for the quarter ended September 30, 2019 (this “Report”), the following abbreviations and terms have the meanings as listed below. Additionally, the terms “Calpine,” “we,” “us” and “our” refer to Calpine Corporation and its consolidated subsidiaries, unless the context clearly indicates otherwise. The term “Calpine Corporation” refers only to Calpine Corporation and not to any of its subsidiaries. Unless and as otherwise stated, any references in this Report to any agreement means such agreement and all schedules, exhibits and attachments in each case as amended, restated, supplemented or otherwise modified to the date of filing this Report.
ABBREVIATION
 
DEFINITION
 
 
 
2018 Form 10-K
 
Calpine Corporation’s Annual Report on Form 10-K for the year ended December 31, 2018, filed with the SEC on March 28, 2019
 
 
 
2019 First Lien Term Loan
 
The $400 million first lien senior secured term loan, dated February 3, 2017, among Calpine Corporation, as borrower, the lenders party thereto, Morgan Stanley Senior Funding, Inc., as administrative agent and MUFG Union Bank, N.A., as collateral agent, repaid on April 5, 2019
 
 
 
2022 First Lien Notes
 
The $750 million aggregate principal amount of 6.0% senior secured notes due 2022, issued October 31, 2013
 
 
 
2023 First Lien Term Loans
 
The $550 million first lien senior secured term loan, dated December 15, 2015, among Calpine Corporation, as borrower, the lenders party thereto, Morgan Stanley Senior Funding, Inc., as administrative agent and Goldman Sachs Credit Partners L.P., as collateral agent, repaid on April 5, 2019, and the $562 million first lien senior secured term loan, dated May 31, 2016, among Calpine Corporation, as borrower, the lenders party thereto, Citibank, N.A., as administrative agent and MUFG Union Bank, N.A., as collateral agent, repaid on August 12, 2019
 
 
 
2023 Senior Unsecured Notes
 
The $1.25 billion aggregate principal amount of 5.375% senior unsecured notes due 2023, issued July 22, 2014
 
 
 
2024 First Lien Notes
 
The $490 million aggregate principal amount of 5.875% senior secured notes due 2024, issued October 31, 2013
 
 
 
2024 First Lien Term Loan
 
The $1.6 billion first lien senior secured term loan, dated May 28, 2015 (as amended December 21, 2016), among Calpine Corporation, as borrower, the lenders party thereto, Morgan Stanley Senior Funding, Inc., as administrative agent and Goldman Sachs Credit Partners L.P., as collateral agent
 
 
 
2024 Senior Unsecured Notes
 
The $650 million aggregate principal amount of 5.5% senior unsecured notes due 2024, issued February 3, 2015
 
 
 
2025 Senior Unsecured Notes
 
The $1.55 billion aggregate principal amount of 5.75% senior unsecured notes due 2025, issued July 22, 2014
 
 
 
2026 First Lien Notes
 
Collectively, the $625 million aggregate principal amount of 5.25% senior secured notes due 2026, issued May 31, 2016, and the $560 million aggregate principal amount of 5.25% senior secured notes due 2026, issued on December 15, 2017
 
 
 
2026 First Lien Term Loan
 
The $950 million first lien senior secured term loan, dated April 5, 2019, among Calpine Corporation, as borrower, the lenders party thereto, Morgan Stanley Senior Funding, Inc., as administrative agent and MUFG Union Bank, N.A., as collateral agent
 
 
 
2026 First Lien Term Loans
 
Collectively, the 2026 First Lien Term Loan and the New 2026 First Lien Term Loan
 
 
 
Accounts Receivable Sales Program
 
Receivables purchase agreement between Calpine Solutions and Calpine Receivables and the purchase and sale agreement between Calpine Receivables and an unaffiliated financial institution, both which allows for the revolving sale of up to $250 million in certain trade accounts receivables to third parties
 
 
 
AOCI
 
Accumulated Other Comprehensive Income
 
 
 

ii



ABBREVIATION
 
DEFINITION
Average availability
 
Represents the total hours during the period that our plants were in-service or available for service as a percentage of the total hours in the period
 
 
 
Average capacity factor, excluding peakers
 
A measure of total actual power generation as a percent of total potential power generation. It is calculated by dividing (a) total MWh generated by our power plants, excluding peakers, by (b) the product of multiplying (i) the average total MW in operation, excluding peakers, during the period by (ii) the total hours in the period
 
 
 
Btu
 
British thermal unit(s), a measure of heat content
 
 
 
Calpine Receivables
 
Calpine Receivables, LLC, an indirect, wholly owned subsidiary of Calpine, which was established as a bankruptcy remote, special purpose subsidiary and is responsible for administering the Accounts Receivable Sales Program
 
 
 
Calpine Solutions
 
Calpine Energy Solutions, LLC, an indirect, wholly owned subsidiary of Calpine, which is a supplier of power to commercial and industrial retail customers in the United States with customers in 20 states, including presence in California, Texas, the Mid-Atlantic and the Northeast
 
 
 
CCFC
 
Calpine Construction Finance Company, L.P., an indirect, wholly owned subsidiary of Calpine
 
 
 
CCFC Term Loan
 
The $1.0 billion first lien senior secured term loan entered into on December 15, 2017 among CCFC as borrower, the lenders party thereto, and Credit Suisse AG, Cayman Islands Branch, as administrative agent and collateral agent
 
 
 
CDHI
 
Calpine Development Holdings, Inc., an indirect, wholly owned subsidiary of Calpine
 
 
 
Champion Energy
 
Champion Energy Marketing, LLC, an indirect, wholly owned subsidiary of Calpine, which owns a retail electric provider that serves residential, governmental, commercial and industrial customers in deregulated electricity markets in 14 states and the District of Columbia, including presence in California, Texas, the Mid-Atlantic and Northeast
 
 
 
Cogeneration
 
Using a portion or all of the steam generated in the power generating process to supply a customer with steam for use in the customer’s operations
 
 
 
Commodity expense
 
The sum of our expenses from fuel and purchased energy expense, commodity transmission and transportation expense, environmental compliance expenses, ancillary retail expense and realized settlements from our marketing, hedging and optimization activities including natural gas and fuel oil transactions hedging future power sales
 
 
 
Commodity Margin
 
Measure of profit that includes revenue recognized on our wholesale and retail power sales activity, electric capacity sales, REC sales, steam sales, realized settlements associated with our marketing, hedging, optimization and trading activities, fuel and purchased energy expenses, commodity transmission and transportation expenses, environmental compliance expenses and ancillary retail expense. Commodity Margin is a measure of segment profit or loss under FASB Accounting Standards Codification 280 used by our chief operating decision maker to make decisions about allocating resources to the relevant segments and assessing their performance
 
 
 
Commodity revenue
 
The sum of our revenues recognized on our wholesale and retail power sales activity, electric capacity sales, REC sales, steam sales and realized settlements from our marketing, hedging, optimization and trading activities
 
 
 
Company
 
Calpine Corporation, a Delaware corporation, and its subsidiaries
 
 
 
Corporate Revolving Facility
 
The approximately $2.0 billion aggregate amount revolving credit facility credit agreement, dated as of December 10, 2010, as amended on June 27, 2013, July 30, 2014, February 8, 2016, December 1, 2016, September 15, 2017, October 20, 2017, March 8, 2018, May 18, 2018, April 5, 2019 and August 12, 2019 among Calpine Corporation, the Bank of Tokyo-Mitsubishi UFJ, Ltd., as successor administrative agent, MUFG Union Bank, N.A., as successor collateral agent, the lenders party thereto and the other parties thereto
 
 
 
CPN Management
 
CPN Management, LP, which owns 100% of the common stock of Calpine Corporation

iii



ABBREVIATION
 
DEFINITION
 
 
 
CPUC
 
California Public Utilities Commission
 
 
 
Exchange Act
 
U.S. Securities Exchange Act of 1934, as amended
 
 
 
FASB
 
Financial Accounting Standards Board
 
 
 
FERC
 
U.S. Federal Energy Regulatory Commission
 
 
 
First Lien Notes
 
Collectively, the 2022 First Lien Notes, the 2024 First Lien Notes and the 2026 First Lien Notes
 
 
 
First Lien Term Loans
 
Collectively, the 2019 First Lien Term Loan, the 2023 First Lien Term Loans, the 2024 First Lien Term Loan and the 2026 First Lien Term Loans
 
 
 
Geysers Assets
 
Our geothermal power plant assets, including our steam extraction and gathering assets, located in northern California consisting of 13 operating power plants
 
 
 
Greenfield LP
 
Greenfield Energy Centre LP, a 50% partnership interest between certain of our subsidiaries and a third party which operates the Greenfield Energy Centre, a 1,038 MW natural gas-fired, combined-cycle power plant in Ontario, Canada
 
 
 
Heat Rate(s)
 
A measure of the amount of fuel required to produce a unit of power
 
 
 
IRS
 
U.S. Internal Revenue Service
 
 
 
ISO(s)
 
Independent System Operator, which is an entity that coordinates, controls and monitors the operation of an electric power system
 
 
 
KWh
 
Kilowatt hour(s), a measure of power produced, purchased or sold
 
 
 
LIBOR
 
London Inter-Bank Offered Rate
 
 
 
Lyondell
 
LyondellBasell Industries N.V.
 
 
 
Market Heat Rate(s)
 
The regional power price divided by the corresponding regional natural gas price
 
 
 
Merger
 
Merger of Volt Merger Sub, Inc. with and into Calpine pursuant to the terms of the Merger Agreement, which was consummated on March 8, 2018
 
 
 
Merger Agreement
 
Agreement and Plan of Merger, dated, August 17, 2017, by and among Calpine Corporation, Volt Parent, LP and Volt Merger Sub, Inc.
 
 
 
MMBtu
 
Million Btu
 
 
 
MW
 
Megawatt(s), a measure of plant capacity
 
 
 
MWh
 
Megawatt hour(s), a measure of power produced, purchased or sold
 
 
 
New 2026 First Lien Term Loan
 
The $750 million first lien senior secured term loan, dated August 12, 2019, among Calpine Corporation, as borrower, the lending party thereto, Credit Suisse AG, Cayman Islands Branch, as administrative agent and MUFG Union Bank, N.A., as collateral agent
 
 
 
NOL(s)
 
Net operating loss(es)
 
 
 
OCI
 
Other Comprehensive Income
 
 
 
OMEC
 
Otay Mesa Energy Center, LLC, an indirect, wholly owned subsidiary of Calpine, that owns the Otay Mesa Energy Center, a 608 MW power plant located in San Diego County, California
 
 
 
OTC
 
Over-the-Counter
 
 
 
PG&E
 
Pacific Gas and Electric Company
 
 
 

iv



ABBREVIATION
 
DEFINITION
PJM
 
PJM Interconnection is a RTO that coordinates the movement of wholesale electricity in all or parts of Delaware, Illinois, Indiana, Kentucky, Maryland, Michigan, New Jersey, North Carolina, Ohio, Pennsylvania, Tennessee, Virginia, West Virginia and the District of Columbia
 
 
 
PPA(s)
 
Any term power purchase agreement or other contract for a physically settled sale (as distinguished from a financially settled future, option or other derivative or hedge transaction) of any power product, including power, capacity and/or ancillary services, in the form of a bilateral agreement or a written or oral confirmation of a transaction between two parties to a master agreement, including sales related to a tolling transaction in which the purchaser provides the fuel required by us to generate such power and we receive a variable payment to convert the fuel into power and steam
 
 
 
REC(s)
 
Renewable energy credit(s)
 
 
 
Risk Management Policy
 
Calpine’s policy applicable to all employees, contractors, representatives and agents, which defines the risk management framework and corporate governance structure for commodity risk, interest rate risk, currency risk and other risks
 
 
 
RTO(s)
 
Regional Transmission Organization, which is an entity that coordinates, controls and monitors the operation of an electric power system and administers the transmission grid on a regional basis
 
 
 
SDG&E
 
San Diego Gas & Electric Company
 
 
 
SEC
 
U.S. Securities and Exchange Commission
 
 
 
Securities Act
 
U.S. Securities Act of 1933, as amended
 
 
 
Senior Unsecured Notes
 
Collectively, the 2023 Senior Unsecured Notes, the 2024 Senior Unsecured Notes and the 2025 Senior Unsecured Notes
 
 
 
Spark Spread(s)
 
The difference between the sales price of power per MWh and the cost of natural gas to produce it
 
 
 
Steam Adjusted Heat Rate
 
The adjusted Heat Rate for our natural gas-fired power plants, excluding peakers, calculated by dividing (a) the fuel consumed in Btu reduced by the net equivalent Btu in steam exported to a third party by (b) the KWh generated. Steam Adjusted Heat Rate is a measure of fuel efficiency, so the lower our Steam Adjusted Heat Rate, the lower our cost of generation
 
 
 
U.S. GAAP
 
Generally accepted accounting principles in the U.S.
 
 
 
VAR
 
Value-at-risk
 
 
 
VIE(s)
 
Variable interest entity(ies)
 
 
 
Whitby
 
Whitby Cogeneration Limited Partnership, a 50% partnership interest between certain of our subsidiaries and a third party, which operates Whitby, a 50 MW natural gas-fired, simple-cycle cogeneration power plant located in Ontario, Canada

v



Forward-Looking Statements

This Report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act, and Section 21E of the Exchange Act. Forward-looking statements may appear throughout this Report, including without limitation, the “Management’s Discussion and Analysis” section. We use words such as “believe,” “intend,” “expect,” “anticipate,” “plan,” “may,” “will,” “should,” “estimate,” “potential,” “project” and similar expressions to identify forward-looking statements. Such statements include, among others, those concerning our expected financial performance and strategic and operational plans, as well as all assumptions, expectations, predictions, intentions or beliefs about future events. We believe that the forward-looking statements are based upon reasonable assumptions and expectations. However, you are cautioned that any such forward-looking statements are not guarantees of future performance and that a number of risks and uncertainties could cause actual results to differ materially from those anticipated in the forward-looking statements. Such risks and uncertainties include, but are not limited to:
Financial results that may be volatile and may not reflect historical trends due to, among other things, seasonality of demand, fluctuations in prices for commodities such as natural gas and power, changes in U.S. macroeconomic conditions, fluctuations in liquidity and volatility in the energy commodities markets and our ability and the extent to which we hedge risks;
Laws, regulations and market rules in the wholesale and retail markets in which we participate and our ability to effectively respond to changes in laws, regulations or market rules or the interpretation thereof including those related to the environment, derivative transactions and market design in the regions in which we operate;
Our ability to manage our liquidity needs, access the capital markets when necessary and comply with covenants under our First Lien Term Loans, Senior Unsecured Notes, First Lien Notes, Corporate Revolving Facility, CCFC Term Loan and other existing financing obligations;
Risks associated with the operation, construction and development of power plants, including unscheduled outages or delays and plant efficiencies;
Risks related to our geothermal resources, including the adequacy of our steam reserves, unusual or unexpected steam field well and pipeline maintenance requirements, variables associated with the injection of water to the steam reservoir and potential regulations or other requirements related to seismicity concerns that may delay or increase the cost of developing or operating geothermal resources;
Extensive competition in our wholesale and retail businesses, including from renewable sources of power, interference by states in competitive power markets through subsidies or similar support for new or existing power plants, lower prices and other incentives offered by retail competitors, and other risks associated with marketing and selling power in the evolving energy markets;
Structural changes in the supply and demand of power, resulting from the development of new fuels or technologies and demand-side management tools (such as distributed generation, power storage and other technologies);
The expiration or early termination of our PPAs and the related results on revenues;
Future capacity revenue may not occur at expected levels;
Natural disasters, such as hurricanes, earthquakes, droughts, wildfires and floods, acts of terrorism or cyber attacks that may affect our power plants or the markets our power plants or retail operations serve and our corporate offices;
Disruptions in or limitations on the transportation of natural gas or fuel oil and the transmission of power;
Our ability to manage our counterparty and customer exposure and credit risk, including our commodity positions or if a significant customer were to seek bankruptcy protection under Chapter 11;
Our ability to attract, motivate and retain key employees;
Present and possible future claims, litigation and enforcement actions that may arise from noncompliance with market rules promulgated by the SEC, Commodity Futures Trading Commission, FERC and other regulatory bodies; and
Other risks identified in this Report, in our 2018 Form 10-K and in other reports filed by us with the SEC.

Given the risks and uncertainties surrounding forward-looking statements, you should not place undue reliance on these statements. Many of these factors are beyond our ability to control or predict. Our forward-looking statements speak only as of the date of this Report. Other than as required by law, we undertake no obligation to update or revise forward-looking statements, whether as a result of new information, future events, or otherwise.

vi



Where You Can Find Other Information
Our website is www.calpine.com. Information contained on our website is not part of this Report. Information that we furnish or file with the SEC, including our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to, or exhibits included in, these reports are available for download, free of charge, through our website. Our SEC filings, including exhibits filed therewith, are also available directly on the SEC’s website at www.sec.gov.

vii



PART I — FINANCIAL INFORMATION
Item 1.
Financial Statements

CALPINE CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
 
(in millions)
Operating revenues:
 
 
 
 
 
 
 
Commodity revenue
$
2,710

 
$
2,845

 
$
7,376

 
$
7,362

Mark-to-market gain (loss)
78

 
40

 
601

 
(220
)
Other revenue
4

 
5

 
13

 
16

Operating revenues
2,792

 
2,890


7,990

 
7,158

Operating expenses:
 
 
 
 
 
 
 
Fuel and purchased energy expense:
 
 
 
 
 
 
 
Commodity expense
1,620

 
1,912

 
4,745

 
5,128

Mark-to-market (gain) loss
11

 
(66
)
 
301

 
(143
)
Fuel and purchased energy expense
1,631

 
1,846


5,046

 
4,985

Operating and maintenance expense
255

 
248

 
739

 
765

Depreciation and amortization expense
173

 
179

 
522

 
566

General and other administrative expense
39

 
31

 
105

 
122

Other operating expenses
15

 
23

 
53

 
79

Total operating expenses
2,113

 
2,327


6,465

 
6,517

Impairment losses

 

 
55

 

(Income) from unconsolidated subsidiaries
(3
)
 
(5
)
 
(14
)
 
(16
)
Income from operations
682

 
568


1,484

 
657

Interest expense
153

 
158

 
459

 
466

Loss on extinguishment of debt
12

 
1

 
11

 
1

Other (income) expense, net
5

 
3

 
33

 
72

Income before income taxes
512

 
406


981

 
118

Income tax expense
21

 
128

 
40

 
78

Net income
491

 
278


941

 
40

Net income attributable to the noncontrolling interest
(6
)
 
(6
)
 
(15
)
 
(14
)
Net income attributable to Calpine
$
485

 
$
272


$
926

 
$
26


The accompanying notes are an integral part of these Consolidated Condensed Financial Statements.

1



CALPINE CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)

 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
 
(in millions)
Net income
$
491

 
$
278

 
$
941

 
$
40

Cash flow hedging activities:
 
 
 
 
 
 
 
Gain (loss) on cash flow hedges before reclassification adjustment for cash flow hedges realized in net income
(5
)
 
13

 
(57
)
 
76

Reclassification adjustment for (gain) loss on cash flow hedges realized in net income
3

 

 
(2
)
 
7

Foreign currency translation gain (loss)
(1
)
 
1

 
2

 
(7
)
Income tax benefit (expense)
1

 
1

 
2

 
(3
)
Other comprehensive income (loss)
(2
)
 
15

 
(55
)
 
73

Comprehensive income
489

 
293

 
886

 
113

Comprehensive (income) attributable to the noncontrolling interest
(6
)
 
(7
)
 
(14
)
 
(17
)
Comprehensive income attributable to Calpine
$
483

 
$
286

 
$
872


$
96


The accompanying notes are an integral part of these Consolidated Condensed Financial Statements.


2



CALPINE CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited)
 
 
September 30,
 
December 31,
 
 
2019
 
2018
 
 
(in millions, except share and per share amounts)
ASSETS
 
 
 
 
Current assets:
 
 
 
 
Cash and cash equivalents ($47 and $43 attributable to VIEs)
 
$
792

 
$
205

Accounts receivable, net of allowance of $9 and $9
 
882

 
1,022

Inventories
 
571

 
525

Margin deposits and other prepaid expense
 
301

 
315

Restricted cash, current ($227 and $90 attributable to VIEs)
 
345

 
167

Derivative assets, current
 
144

 
142

Current assets held for sale
 
6

 

Other current assets
 
47

 
43

Total current assets
 
3,088

 
2,419

Property, plant and equipment, net ($3,509 and $3,919 attributable to VIEs)
 
12,002

 
12,442

Restricted cash, net of current portion ($30 and $33 attributable to VIEs)
 
62

 
34

Investments in unconsolidated subsidiaries
 
73

 
76

Long-term derivative assets
 
243

 
160

Goodwill
 
242

 
242

Intangible assets, net
 
359

 
412

Other assets ($60 and $30 attributable to VIEs)
 
449

 
277

Total assets
 
$
16,518

 
$
16,062

LIABILITIES & STOCKHOLDER’S EQUITY
 
 
 
 
Current liabilities:
 
 
 
 
Accounts payable
 
$
748

 
$
958

Accrued interest payable
 
120

 
96

Debt, current portion ($177 and $201 attributable to VIEs)
 
229

 
637

Derivative liabilities, current
 
198

 
303

Other current liabilities ($149 and $36 attributable to VIEs)
 
629

 
489

Total current liabilities
 
1,924

 
2,483

Debt, net of current portion ($1,693 and $1,978 attributable to VIEs)
 
10,413

 
10,148

Long-term derivative liabilities
 
84

 
140

Other long-term liabilities ($55 and $36 attributable to VIEs)
 
556

 
235

Total liabilities
 
12,977

 
13,006

 
 
 
 
 
Commitments and contingencies (see Note 11)
 

 

Stockholder’s equity:
 
 
 
 
Common stock, $0.001 par value per share; authorized 5,000 shares, 105.2 shares issued and outstanding
 

 

Additional paid-in capital
 
9,584

 
9,582

Accumulated deficit
 
(6,017
)
 
(6,542
)
Accumulated other comprehensive loss
 
(131
)
 
(77
)
Total Calpine stockholder’s equity
 
3,436

 
2,963

Noncontrolling interest
 
105

 
93

Total stockholder’s equity
 
3,541

 
3,056

Total liabilities and stockholder’s equity
 
$
16,518

 
$
16,062


The accompanying notes are an integral part of these Consolidated Condensed Financial Statements.

3



CALPINE CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS EQUITY
For the Three and Nine Months Ended September 30, 2019 and 2018
(Unaudited)
(in millions)
 
Common
Stock
 
Treasury
Stock
 
Additional
Paid-In
Capital
 
Accumulated
Deficit
 
Accumulated
Other
Comprehensive
Loss
 
Noncontrolling
Interest
 
Total
Stockholder’s
Equity
Balance, December 31, 2018
$

 
$

 
$
9,582

 
$
(6,542
)
 
$
(77
)
 
$
93

 
$
3,056

Net income

 

 

 
175

 

 
5

 
180

Other comprehensive loss

 

 

 

 
(23
)
 

 
(23
)
Other

 

 
2

 

 

 
(2
)
 

Balance, March 31, 2019
$

 
$

 
$
9,584

 
$
(6,367
)
 
$
(100
)
 
$
96

 
$
3,213

Net income

 

 

 
266

 

 
4

 
270

Other comprehensive loss

 

 

 

 
(29
)
 
(1
)
 
(30
)
Balance, June 30, 2019
$

 
$

 
$
9,584

 
$
(6,101
)
 
$
(129
)
 
$
99

 
$
3,453

Dividends

 

 

 
(401
)
 

 

 
(401
)
Net income

 

 

 
485

 

 
6

 
491

Other comprehensive loss

 

 

 

 
(2
)
 

 
(2
)
Balance, September 30, 2019
$


$


$
9,584


$
(6,017
)

$
(131
)

$
105


$
3,541


 
Common
Stock
 
Treasury
Stock
 
Additional
Paid-In
Capital
 
Accumulated
Deficit
 
Accumulated
Other
Comprehensive
Loss
 
Noncontrolling
Interest
 
Total
Stockholder’s
Equity
Balance, December 31, 2017
$

 
$
(15
)
 
$
9,661

 
$
(6,552
)
 
$
(106
)
 
$
79

 
$
3,067

Treasury stock transactions

 
(7
)
 

 

 

 

 
(7
)
Stock-based compensation expense

 

 
41

 

 

 

 
41

Effects of the Merger

 
22

 
(100
)
 

 

 

 
(78
)
Dividends

 

 
(20
)
 

 

 

 
(20
)
Contribution from the noncontrolling interest

 

 

 

 

 
2

 
2

Distribution to the noncontrolling interest

 

 

 

 

 
(2
)
 
(2
)
Net income (loss)

 

 

 
(598
)
 

 
4

 
(594
)
Other comprehensive income

 

 

 

 
36

 
2

 
38

Balance, March 31, 2018
$

 
$

 
$
9,582

 
$
(7,150
)
 
$
(70
)
 
$
85

 
$
2,447

Distribution to the noncontrolling interest

 

 

 

 

 
(1
)
 
(1
)
Net income

 

 

 
352

 

 
4

 
356

Other comprehensive income

 

 

 

 
20

 

 
20

Balance, June 30, 2018
$

 
$

 
$
9,582

 
$
(6,798
)
 
$
(50
)
 
$
88

 
$
2,822

Distribution to the noncontrolling interest

 

 

 

 

 
(3
)
 
(3
)
Net income

 

 

 
272

 

 
6

 
278

Other comprehensive income

 

 

 

 
14

 
1

 
15

Balance, September 30, 2018
$

 
$

 
$
9,582

 
$
(6,526
)
 
$
(36
)
 
$
92

 
$
3,112


The accompanying notes are an integral part of these Consolidated Condensed Financial Statements.


4



CALPINE CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)

 
 
Nine Months Ended September 30,
 
 
2019
 
2018
 
 
(in millions)
Cash flows from operating activities:
 
 
 
 
Net income
 
$
941

 
$
40

Adjustments to reconcile net income to net cash provided by operating activities:
 

 

Depreciation and amortization(1)
 
585

 
642

Deferred income taxes
 
33

 
69

Impairment losses
 
55

 

Mark-to-market activity, net
 
(297
)
 
73

(Income) from unconsolidated subsidiaries
 
(14
)
 
(16
)
Return on investments from unconsolidated subsidiaries
 
11

 
5

Stock-based compensation expense
 

 
57

Other
 
12

 
17

Change in operating assets and liabilities:
 

 

Accounts receivable
 
138

 
35

Accounts payable
 
(217
)
 
(35
)
Margin deposits and other prepaid expense
 
14

 
(43
)
Other assets and liabilities, net
 
169

 
(32
)
Derivative instruments, net
 
1

 
61

Net cash provided by operating activities
 
1,431

 
873

Cash flows from investing activities:
 
 
 
 
Purchases of property, plant and equipment
 
(435
)
 
(314
)
Proceeds from sale of power plants
 
303

 
10

Other
 
(5
)
 
(9
)
Net cash used in investing activities
 
(137
)
 
(313
)
Cash flows from financing activities:
 
 
 
 
Borrowings under First Lien Term Loans
 
1,687

 

Repayment of CCFC Term Loan and First Lien Term Loans
 
(1,496
)
 
(31
)
Repurchases of Senior Unsecured Notes
 
(44
)
 

Borrowings under revolving facilities
 
280

 
525

Repayments of revolving facilities
 
(250
)
 
(525
)
Repayments of project financing, notes payable and other
 
(311
)
 
(89
)
Distribution to noncontrolling interest holder
 

 
(6
)
Financing costs
 
(20
)
 
(12
)
Stock repurchases
 

 
(79
)
Shares repurchased for tax withholding on stock-based awards
 

 
(7
)
Dividends paid(2)
 
(401
)
 
(20
)
Other
 
54

 
4

Net cash used in financing activities
 
(501
)
 
(240
)
Net increase in cash, cash equivalents and restricted cash
 
793

 
320

Cash, cash equivalents and restricted cash, beginning of period
 
406

 
443

Cash, cash equivalents and restricted cash, end of period(3)
 
$
1,199

 
$
763


The accompanying notes are an integral part of these Consolidated Condensed Financial Statements.

5



CALPINE CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS — (CONTINUED)
(Unaudited)

 
 
Nine Months Ended September 30,
 
 
2019
 
2018
 
 
(in millions)
Cash paid during the period for:
 
 
 
 
Interest, net of amounts capitalized
 
$
402

 
$
401

Income taxes
 
$
8

 
$
10

 
 
 
 
 
Supplemental disclosure of non-cash investing and financing activities:
 
 
 
 
Change in capital expenditures included in accounts payable
 
$
6

 
$
(12
)
Plant tax settlement offset in prepaid assets
 
$
(4
)
 
$

Asset retirement obligation adjustment offset in operating activities
 
$
(10
)
 
$

____________
(1)
Includes amortization recorded in Commodity revenue and Commodity expense associated with intangible assets and amortization recorded in interest expense associated with debt issuance costs and discounts.
(2)
Dividends paid during the nine months ended September 30, 2019 and 2018, includes approximately $1 million and $20 million, respectively, in certain Merger-related costs incurred by CPN Management, our parent.
(3)
Our cash and cash equivalents, restricted cash, current and restricted cash, net of current portion are stated as separate line items on our Consolidated Condensed Balance Sheets.

The accompanying notes are an integral part of these Consolidated Condensed Financial Statements.


6



CALPINE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
September 30, 2019
(Unaudited)
1.
Basis of Presentation and Summary of Significant Accounting Policies
We are a power generation company engaged in the ownership and operation of primarily natural gas-fired and geothermal power plants in North America. We have a significant presence in major competitive wholesale and retail power markets in California, Texas and the Northeast and Mid-Atlantic regions of the U.S. We sell power, steam, capacity, renewable energy credits and ancillary services to our customers, which include utilities, independent electric system operators and industrial companies, retail power providers, municipalities and other governmental entities, power marketers as well as retail commercial, industrial, governmental and residential customers. We continue to focus on providing products and services that are beneficial to our wholesale and retail customers. We purchase primarily natural gas and some fuel oil as fuel for our power plants and engage in related natural gas transportation and storage transactions. We also purchase power and related products for sale to our customers and purchase electric transmission rights to deliver power to our customers. Additionally, consistent with our Risk Management Policy, we enter into natural gas, power, environmental product, fuel oil and other physical and financial commodity contracts to hedge certain business risks and optimize our portfolio of power plants.
Basis of Interim Presentation — The accompanying unaudited, interim Consolidated Condensed Financial Statements of Calpine Corporation, a Delaware corporation, and consolidated subsidiaries have been prepared pursuant to the rules and regulations of the SEC. In the opinion of management, the Consolidated Condensed Financial Statements include the normal, recurring adjustments necessary for a fair statement of the information required to be set forth therein. Certain information and note disclosures, normally included in financial statements prepared in accordance with U.S. GAAP, have been condensed or omitted from these statements pursuant to such rules and regulations and, accordingly, these financial statements should be read in conjunction with our audited Consolidated Financial Statements for the year ended December 31, 2018, included in our 2018 Form 10-K. The results for interim periods are not indicative of the results for the entire year primarily due to acquisitions and disposals of assets, seasonal fluctuations in our revenues and expenses, timing of major maintenance expense, variations resulting from the application of the method to calculate the provision for income tax for interim periods, volatility of commodity prices and mark-to-market gains and losses from commodity and interest rate derivative contracts.
Use of Estimates in Preparation of Financial Statements — The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosures included in our Consolidated Condensed Financial Statements. Actual results could differ from those estimates.
Reclassifications We have reclassified certain prior period amounts for comparative purposes. These reclassifications did not have a material effect on our financial condition, results of operations or cash flows.
Cash and Cash Equivalents — We consider all highly liquid investments with an original maturity of three months or less to be cash equivalents. We have cash and cash equivalents held in non-corporate accounts relating to certain project finance facilities and lease agreements that require us to establish and maintain segregated cash accounts. These accounts have been pledged as security in favor of the lenders under such project finance facilities, and the use of certain cash balances on deposit in such accounts is limited, at least temporarily, to the operations of the respective projects.
Restricted Cash — Certain of our debt agreements, lease agreements or other operating agreements require us to establish and maintain segregated cash accounts, the use of which is restricted, making these cash funds unavailable for general use. These amounts are held by depository banks in order to comply with the contractual provisions requiring reserves for payments such as for debt service, rent and major maintenance or with applicable regulatory requirements. Funds that can be used to satisfy obligations due during the next 12 months are classified as current restricted cash, with the remainder classified as non-current restricted cash. Restricted cash is generally invested in accounts earning market rates; therefore, the carrying value approximates fair value. Such cash is excluded from cash and cash equivalents on our Consolidated Condensed Balance Sheets.

7



The table below represents the components of our restricted cash as of September 30, 2019 and December 31, 2018 (in millions):
 
September 30, 2019
 
December 31, 2018
 
Current
 
Non-Current
 
Total
 
Current
 
Non-Current
 
Total
Debt service
$
84

 
$
7

 
$
91

 
$
13

 
$
8

 
$
21

Construction/major maintenance
12

 
22

 
34

 
23

 
24

 
47

Security/project/insurance
245

 
31

 
276

 
120

 

 
120

Other
4

 
2

 
6

 
11

 
2

 
13

Total
$
345

 
$
62

 
$
407

 
$
167

 
$
34

 
$
201

Business Interruption Proceeds — We record business interruption insurance proceeds in operating revenues when they are realizable. We recorded approximately nil and $14 million of business interruption proceeds for the three and nine months ended September 30, 2018. We have not recorded any business interruption insurance proceeds during the three and nine months ended September 30, 2019.
Property, Plant and Equipment, Net — At September 30, 2019 and December 31, 2018, the components of property, plant and equipment are stated at cost less accumulated depreciation as follows (in millions):
 
September 30, 2019
 
December 31, 2018
 
Depreciable Lives
Buildings, machinery and equipment
$
16,565

 
$
16,400

 
1.5
50
 Years
Geothermal properties
1,510

 
1,501

 
13
58
 Years
Other
272

 
286

 
3
50
 Years
 
18,347

 
18,187

 
 
 
 
 
Less: Accumulated depreciation
6,855

 
6,832

 
 
 
 
 
 
11,492

 
11,355

 
 
 
 
 
Land
128

 
121

 
 
 
 
 
Construction in progress
382

 
966

 
 
 
 
 
Property, plant and equipment, net
$
12,002

 
$
12,442

 
 
 
 
 
Capitalized Interest — The total amount of interest capitalized was $2 million and $7 million during the three months ended September 30, 2019 and 2018, respectively, and $10 million and $21 million during the nine months ended September 30, 2019 and 2018, respectively.
Goodwill — We have not recorded any impairment losses or changes in the carrying amount of our goodwill during the three and nine months ended September 30, 2019 and 2018.
New Accounting Standards and Disclosure Requirements
Leases — On January 1, 2019, we adopted Accounting Standards Update 2016-02, “Leases” (“Topic 842”). The comprehensive new lease standard superseded all existing lease guidance. The standard requires that a lessee should recognize a right-of-use asset and a lease liability for substantially all operating leases based on the present value of the minimum rental payments. For lessors, the accounting for leases under Topic 842 remained substantially unchanged. The standard also requires expanded disclosures surrounding leases. We adopted the standards under Topic 842 using the modified retrospective method and elected a number of the practical expedients in our implementation of Topic 842. The key change that affected us relates to our accounting for operating leases for which we are the lessee that were historically off-balance sheet. The impact of adopting the standards resulted in the recognition of a right-of-use asset and lease obligation liability of $191 million on our Consolidated Condensed Balance Sheet on January 1, 2019, exclusive of previously recognized lease balances. The implementation of Topic 842 did not have a material effect on our Consolidated Condensed Statement of Operations or Consolidated Condensed Statement of Cash Flows for the nine months ended September 30, 2019. See Note 3 for a discussion of the practical expedients we elected and additional disclosures required by Topic 842.
Derivatives and Hedging — In August 2017, the FASB issued Accounting Standards Update 2017-12, “Targeted Improvements to Accounting for Hedging Activities.” The standard better aligns an entity’s hedging activities and financial reporting for hedging relationships through changes to both the designation and measurement guidance for qualifying hedging

8



relationships and the presentation of hedge results in the financial statements. The standard will prospectively make hedge accounting easier to apply to hedging activities and also enhances disclosure requirements for how hedge transactions are reflected in the financial statements when hedge accounting is elected. We adopted Accounting Standards Update 2017-12 in the first quarter of 2019 which did not have a material effect on our financial condition, results of operations or cash flows.
Fair Value Measurements — In August 2018, the FASB issued Accounting Standards Update 2018-13, “Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement.” The standard removes, modifies and adds disclosures about fair value measurements and is effective for fiscal years beginning after December 15, 2019. The changes required by this standard to remove or modify disclosures may be early adopted with adoption of the additional disclosures required by this standard delayed until their effective date. We do not anticipate a material effect on our financial condition, results of operations or cash flows as a result of adopting this standard.
2.
Revenue from Contracts with Customers
Disaggregation of Revenues with Customers

The following tables represent a disaggregation of our revenue for the three and nine months ended September 30, 2019 and 2018 by reportable segment (in millions). See Note 13 for a description of our segments.
 
Three Months Ended September 30, 2019
 
Wholesale
 
 
 
 
 
 
 
West
 
Texas
 
East
 
Retail
 
Elimination
 
Total
Third Party:
 
 
 
 
 
 
 
 
 
 
 
Energy & other products
$
238

 
$
490

 
$
169

 
$
491

 
$

 
$
1,388

Capacity
52

 
31

 
115

 

 

 
198

Revenues relating to physical or executory contracts – third party
$
290

 
$
521

 
$
284

 
$
491

 
$

 
$
1,586

 
 
 
 
 
 
 
 
 
 
 
 
Affiliate(1):
$
11

 
$
14

 
$
21

 
$
2

 
$
(48
)
 
$

 
 
 
 
 
 
 
 
 
 
 
 
Revenues relating to leases and derivative instruments(2)
 
 
 
 
 
 
 
 
 
 
$
1,206

Total operating revenues
 
 
 
 
 
 
 
 
 
 
$
2,792


 
Three Months Ended September 30, 2018
 
Wholesale
 
 
 
 
 
 
 
West
 
Texas
 
East
 
Retail
 
Elimination
 
Total
Third Party:
 
 
 
 
 
 
 
 
 
 
 
Energy & other products
$
369

 
$
470

 
$
221

 
$
543

 
$

 
$
1,603

Capacity
51

 
23

 
190

 

 

 
264

Revenues relating to physical or executory contracts – third party
$
420

 
$
493

 
$
411

 
$
543

 
$

 
$
1,867

 
 
 
 
 
 
 
 
 
 
 
 
Affiliate(1):
$
9

 
$
11

 
$
20

 
$

 
$
(40
)
 
$

 
 
 
 
 
 
 
 
 
 
 
 
Revenues relating to leases and derivative instruments(2)
 
 
 
 
 
 
 
 
 
 
$
1,023

Total operating revenues
 
 
 
 
 
 
 
 
 
 
$
2,890



9



 
Nine Months Ended September 30, 2019
 
Wholesale
 
 
 
 
 
 
 
West
 
Texas
 
East
 
Retail
 
Elimination
 
Total
Third Party:
 
 
 
 
 
 
 
 
 
 
 
Energy & other products
$
675

 
$
1,110

 
$
496

 
$
1,316

 
$

 
$
3,597

Capacity
123

 
96

 
446

 

 

 
665

Revenues relating to physical or executory contracts – third party
$
798

 
$
1,206

 
$
942

 
$
1,316

 
$

 
$
4,262

 
 
 
 
 
 
 
 
 
 
 
 
Affiliate(1):
$
28

 
$
42

 
$
78

 
$
6

 
$
(154
)
 
$

 
 
 
 
 
 
 
 
 
 
 
 
Revenues relating to leases and derivative instruments(2)
 
 
 
 
 
 
 
 
 
 
$
3,728

Total operating revenues
 
 
 
 
 
 
 
 
 
 
$
7,990


 
Nine Months Ended September 30, 2018
 
Wholesale
 
 
 
 
 
 
 
West
 
Texas
 
East
 
Retail
 
Elimination
 
Total
Third Party:
 
 
 
 
 
 
 
 
 
 
 
Energy & other products
$
744

 
$
1,100

 
$
473

 
$
1,437

 
$

 
$
3,754

Capacity
105

 
72

 
479

 

 

 
656

Revenues relating to physical or executory contracts – third party
$
849

 
$
1,172

 
$
952

 
$
1,437

 
$

 
$
4,410

 
 
 
 
 
 
 
 
 
 
 
 
Affiliate(1):
$
22

 
$
24

 
$
62

 
$
2

 
$
(110
)
 
$

 
 
 
 
 
 
 
 
 
 
 
 
Revenues relating to leases and derivative instruments(2)
 
 
 
 
 
 
 
 
 
 
$
2,748

Total operating revenues
 
 
 
 
 
 
 
 
 
 
$
7,158

___________
(1)
Affiliate energy, other and capacity revenues reflect revenues on transactions between wholesale and retail affiliates excluding affiliate activity related to leases and derivative instruments. All such activity supports retail supply needs from the wholesale business and/or allows for collateral margin netting efficiencies at Calpine.
(2)
Revenues relating to contracts accounted for as leases and derivatives include energy and capacity revenues relating to PPAs that we are required to account for as operating leases and physical and financial commodity derivative contracts, primarily relating to power, natural gas and environmental products. Revenue related to derivative instruments includes revenue recorded in Commodity revenue and mark-to-market gain (loss) within our operating revenues on our Consolidated Condensed Statements of Operations.
Performance Obligations and Contract Balances
At September 30, 2019 and December 31, 2018, deferred revenue balances relating to contracts with our customers were included in other current liabilities on our Consolidated Condensed Balance Sheets and primarily relate to sales of environmental products and capacity. We classify deferred revenue as current or long-term based on the timing of when we expect to recognize revenue. The balance outstanding at September 30, 2019 and December 31, 2018 was $10 million and $14 million, respectively. Revenue recognized during the three months ended September 30, 2019 and 2018, relating to the deferred revenue balance at the beginning of each period was $19 million and $18 million, respectively. Revenue recognized during the nine months ended September 30, 2019 and 2018, relating to the deferred revenue balance at the beginning of each period was $14 million and $17 million, respectively. Revenue recognized each period relating to deferred revenue balances resulted from our performance under the customer contracts. The change in the deferred revenue balance during the three and nine months ended September 30, 2019

10



and 2018 was primarily due to the timing difference of when consideration was received and when the related good or service was transferred.
Performance Obligations not yet Satisfied
As of September 30, 2019, we have entered into certain contracts for fixed and determinable amounts with customers under which we have not yet completed our performance obligations which primarily includes agreements for which we are providing capacity from our generating facilities. We have revenues related to the sale of capacity through participation in various ISO capacity auctions estimated based upon cleared volumes and the sale of capacity to our customers of $136 million that will be recognized during the remainder of 2019, and $611 million, $603 million, $371 million and $125 million that will be recognized during the years ending December 31, 2020, 2021, 2022 and 2023, respectively, and $112 million thereafter. Revenues under these contracts will be recognized as we transfer control of the commodities to our customers.
3.
Leases
Accounting for Leases – Lessee
We evaluate contracts for lease accounting at contract inception and assess lease classification at the lease commencement date. For our leases, we recognize a right-of-use asset and corresponding lease obligation liability at the lease commencement date where the lease obligation liability is measured at the present value of the minimum lease payments. For our operating leases, the amortization of the right-of-use asset and the accretion of our lease obligation liability result in a single straight-line expense recognized over the lease term.
We determine the discount rate associated with our operating and finance leases using our incremental borrowing rate at lease commencement. For our operating leases, we use an interest rate commensurate with the interest rate to borrow on a collateralized basis over a similar term with an amount equal to the lease payments. Factors management considers in the calculation of the discount rate include the amount of the borrowing, the lease term including options that are reasonably certain of exercise, the current interest rate environment and the credit rating of the entity. For our finance leases, we use the interest rate commensurate with the interest rate for a project finance borrowing arrangement with a similar collateral package, repayment terms, restrictive covenants and guarantees.
Our operating leases are primarily related to office space for our corporate and regional offices as well as land and operating related leases for our power plants. Additionally, one of our power plants is accounted for as an operating lease. Payments made by Calpine on this lease are recognized on a straight-line basis with capital improvements associated with our leased power plant deemed leasehold improvements that are amortized over the shorter of the term of the lease or the economic life of the capital improvement. Several of our leases contain renewal options held by us to extend the lease term. The inclusion of these renewal periods in the lease term and in the minimum lease payments included in our lease liabilities is dependent on specific facts and circumstances for each lease and whether it is determined to be reasonably certain that we will exercise our option to extend the term. Our office, land and other operating leases do not contain any material restrictive covenants or residual value guarantees.
We have entered into finance leases for certain power plants and related equipment with terms that range up to 30 years (including lease renewal options). The finance leases generally provide for the lessee to pay taxes, maintenance, insurance, and certain other operating costs of the leased property.
In connection with our adoption of Topic 842 on January 1, 2019, we elected certain practical expedients that were available under the new lease standards including:
we elected not to separate lease and nonlease components for our current classes of underlying leased assets as the lessee;
we did not evaluate existing and expired land easements that were not previously accounted for as leases prior to January 1, 2019; and
we did not reassess the classification of leases, the accounting for initial direct costs or whether contractual arrangements contained a lease for all contracts that expired or commenced prior to January 1, 2019.
Further, upon the adoption of Topic 842, we made an accounting policy election to not recognize lease assets and liabilities for leases with a term of 12 months or less. We do not have any material subleases associated with our operating and finance leases.

11



The components of our operating and finance lease expense are as follows for the three and nine months ended September 30, 2019 (in millions):
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2019
 
2019
Operating Leases
 
 
 
Operating lease expense
$
11

 
$
34

 
 
 
 
Finance Leases
 
 
 
Amortization of the right-of-use assets
$
2

 
$
6

Interest expense
2

 
6

Finance lease expense
$
4

 
$
12

 
 
 
 
Variable lease expense
$
3

 
$
8

 
 
 
 
Total lease expense
$
18

 
$
54

The following is a schedule by year of future minimum lease payments associated with our operating and finance leases together with the present value of the net minimum lease payments as of September 30, 2019 (in millions):
 
Operating Leases(1)
 
Finance Leases(2)
2019
$
34

 
$
7

2020
20

 
16

2021
21

 
16

2022
19

 
16

2023
18

 
19

Thereafter
201

 
33

Total minimum lease payments
313

 
107

Less: Amount representing interest
105

 
29

Total lease obligation
208

 
78

Less: current lease obligation
39

 
10

Long-term lease obligation
$
169

 
$
68

____________
(1)
The lease liabilities associated with our operating leases as of September 30, 2019 are included in other current liabilities and other long-term liabilities on our Consolidated Condensed Balance Sheet.
(2)
The lease liabilities associated with our finance leases as of September 30, 2019 are included in debt, current portion and debt, net of current portion on our Consolidated Condensed Balance Sheet.

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Supplemental balance sheet information related to our operating and finance leases is as follows as of September 30, 2019 (in millions, except lease term and discount rate):
 
 
September 30, 2019
Operating leases(1)
 
 
Right-of-use assets associated with operating leases
 
$
175

 
 
 
Finance leases(2)
 
 
Property, plant and equipment, gross
 
$
212

Accumulated amortization
 
(104
)
Property, plant and equipment, net
 
$
108

 
 
 
Weighted average remaining lease term (in years)
 
 
Operating leases
 
15.6

Finance leases
 
7.2

 
 
 
Weighted average discount rate
 
 
Operating leases
 
5.3
%
Finance leases
 
8.0
%
____________
(1)
The right-of-use assets associated with our operating leases as of September 30, 2019 are included in other assets on our Consolidated Condensed Balance Sheet.
(2)
The right-of-use assets associated with our finance leases as of September 30, 2019 are included in property, plant and equipment, net on our Consolidated Condensed Balance Sheet.
Supplemental cash flow information related to our operating and finance leases is as follows for the period presented (in millions):
 
 
Nine Months Ended
 
 
September 30, 2019
Cash paid for amounts included in the measurement of lease liabilities
 
 
Operating cash flows from operating leases
 
$
19

Operating cash flows from finance leases
 
$
5

Financing cash flows from finance leases
 
$
6

 
 
 
Right-of-use assets obtained in exchange for lease obligations:
 
 
Operating leases
 
$
9

Finance leases
 
$

As of September 30, 2019, we have executed agreements that contain a lease with a future lease commencement date and future lease commitments of $5 million primarily related to office leases scheduled to commence in the fourth quarter of 2019.
Accounting for Leases – Lessor
We apply lease accounting to PPAs that meet the definition of a lease and determine lease classification treatment at commencement of the agreement. We currently do not have any contracts which are accounted for as sales-type leases or direct financing leases and all of our leases as the lessor are classified as operating leases. As part of the implementation of Topic 842, we elected the practical expedient to not reassess leases that have commenced prior to January 1, 2019.
Revenue from contracts accounted for as operating leases, such as certain tolling agreements, with minimum lease rentals (capacity payments) which vary over time must be levelized. Generally, we levelize these contract revenues on a straight-line basis over the term of the contract. Our operating leases that have commenced contain terms extending through December 2034. These contracts also generally contain variable payment components based on generation volumes or operating efficiency over a

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period of time. Revenues associated with the variable payments are recognized over time as the goods or services are provided to the lessee. Our operating leases generally do not contain renewal or purchase options or residual value guarantees. We have elected to not separate our lease and non-lease components as the lease components reflect the predominant characteristics of these agreements.
Revenue recognized related to fixed lease payments on our operating leases for the periods presented is as follows (in millions):
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2019
 
2019
Operating Leases(1)
 
 
 
Fixed lease payments
$
130

 
$
269

____________
(1)
Revenues associated with our operating leases are included in Commodity revenue and other revenue on our Consolidated Condensed Statement of Operations.
The total contractual future minimum lease rentals for our contracts that have commenced and are accounted for as operating leases at September 30, 2019, are as follows (in millions):
2019
$
74

2020
286

2021
261

2022
226

2023
144

Thereafter
277

Total
$
1,268

We do not recognize lease receivables associated with our operating leases as the long-lived assets subject to the lease contracts are recorded on our Consolidated Condensed Balance Sheet and are being depreciated over their estimated useful lives. Amounts recorded on our Consolidated Condensed Balance Sheet associated with the long-lived assets subject to our operating leases as of September 30, 2019 are as follows (in millions):
 
September 30, 2019
Assets subject to contracts accounted for as operating leases
 
Property, plant and equipment, gross
$
3,085

Accumulated depreciation
(911
)
Property, plant and equipment, net(1)
$
2,174

____________
(1)
Our assets subject to contracts that are accounted for as operating leases primarily consist of our power plants subject to tolling contracts.
We also record lease levelization assets and liabilities for any difference between the timing of the contractual payments made related to our operating lease contracts and revenue recognized on a straight-line basis. These balances are included in current and long-term assets and liabilities on our Consolidated Condensed Balance Sheet.

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