UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
FORM 8-K
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): September 2, 2004
CALPINE CORPORATION
(A Delaware Corporation)
Commission File Number: 001-12079
I.R.S. Employer Identification No. 77-0212977
50 West San Fernando Street
San Jose, California 95113
Telephone: (408) 995-5115
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |||
| o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |||
| o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |||
| o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | |||
SECTION 1 — REGISTRANT’S BUSINESS AND OPERATIONS
ITEM 1.01. ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT
Calpine Corporation (the “Registrant”) entered into three material definitive agreements in the aggregate; to dispose of a significant portion of its oil and gas assets not made in the ordinary course of business of the Registrant. These agreements are outlined below:
Agreement no. 1:
Calpine Natural Gas L.P. (“CNG”) and the Registrant (collectively the “Seller”), entered into an agreement with Pogo Producing Company (“Pogo”), the buyer, effective July 1, 2004 (the “Effective Date”), to sell all of Seller’s right, title and interest in its oil and gas properties and associated assets in New Mexico, including all of Seller’s leases, minerals, overrides, easements, wells, contracts, and personal property (“New Mexico Properties”). The cash consideration was $83.1 million, which included a $3 million performance deposit. Although no purchase price adjustments were made prior to the closing on September 1, 2004, the Purchase and Sale Agreement with Pogo does provide for a post-closing settlement for: (1) certain title defects claimed by Pogo before Closing, provided that such defects cannot be resolved to the satisfaction of both parties, (2) adjustments if Seller is unable to obtain consents to assign certain New Mexico Properties, and (3) revenues and costs before and after the Effective Date.
The New Mexico Properties were sold subject to certain warranties and representations that are customary in transactions of this type in the United States. As noted above, the Seller retains responsibility for curing (or making a purchase price adjustment for) certain title defects claimed by Pogo. In addition, the Seller has agreed to indemnify Pogo for up to one-half of the purchase price for claims: (1) related to pre-Effective Date liabilities (other than certain environmental and title defects) and (2) made on or before December 31, 2005. Pogo agrees to indemnify the Seller for all post-Effective Date liabilities.
This agreement has been attached under Item 9.01(c) as Exhibit 99.1.
Agreement no. 2:
CNG and the Registrant (collectively with CNG the “Seller”), entered into an agreement with Bill Barrett Corporation, the buyer, effective July 1, 2004 (the “Effective Date”), to sell all of the Seller’s right, title and interest in its oil and gas properties and associated assets in Colorado (except for CNG’s Kitzmiller property in the north-west part of the state which were retained by the seller), including leases, minerals, overrides, easements, wells, contracts, and personal property (“Colorado Properties”). The purchase price was $139.7 million, which included a $7.0 million performance deposit. Although no purchase price adjustments were made prior to the closing on September 1, 2004, the Purchase and Sale Agreement with Bill Barrett Corporation does provide for a post-closing settlement for: (1) certain environmental and title defects claimed by Bill Barrett Corporation before closing, provided that such defects cannot be resolved to the satisfaction of both parties, (2) adjustments if Seller is unable to obtain consents to assign for certain Colorado Properties and (3) revenues and costs before and after the Effective Date.
The Colorado Properties were sold subject to certain warranties and representations that are customary in transactions of this type in the United States. As noted above, the Seller retains responsibility for curing (or making a purchase price adjustment for) certain title defects claimed by Barrett. In addition, the Seller has agreed to indemnify Bill Barrett Corporation for up to one-half of the purchase price for claims: (1) related to pre-Effective Date liabilities (other than certain environmental and title defects) and (2) made on or before one year following the closing. Barrett agrees to indemnify Seller for all post-Effective Date liabilities.
This agreement has been attached under Item 9.01(c) as Exhibit 99.2.
Agreement no. 3:
Calpine Canada Natural Gas Partnership (“CCNGP”) and Calpine Energy Holdings Limited (“CEHL”), entered into an agreement with PrimeWest Gas Corp. and PrimeWest Energy Trust, the Buyer, to sell, effective July 1, 2004, all of CCNGP’s interest in oil and gas properties located in Canada and all of CEHL’s ownership interest in 6.8 million units of Calpine Natural Gas Trust (“CNGT”), for cash consideration of CND$825.0 million, or approximately US$625.0 million, less adjustments of CND$15.6 million, to reflect a September 2, 2004, closing date. The agreement contained standard terms and conditions relating to the sale of oil and gas properties in Alberta. The transaction closed on September 2, 2004.
As a result of the sale of the trust units of CNGT, the Registrant’s obligations under various agreements with CNGT have been terminated. This included the Registrant’s obligations under the energy management agreement, the participation agreement (wherein the Registrant had agreed to offer 50% of any future acquisition of properties to the CNGT) and the call on production agreement (wherein the Registrant had the right to purchase all of the CNGT’s production at index pricing, secured by the trust units owned by the Registrant).
This agreement has been attached under Item 9.01(c) as Exhibit 99.3.
SECTION 2 — FINANCIAL INFORMATION
ITEM 2.01. COMPLETION OF ACQUISITION OR DISPOSITION OF ASSETS
Calpine Corporation (the “Registrant”) completed the disposition of a significant amount of its oil and gas assets outside the ordinary course of business. A description of the transactions that represent the disposition of a significant amount of assets is listed below.
Calpine Natural Gas L.P. (“CNG”) and the Registrant, (collectively the “Seller”), entered into an agreement with Pogo Producing Company (“Pogo”), the buyer, effective July 1, 2004 (the “Effective Date”), to sell all of Seller’s right, title and interest in its oil and gas properties and associated assets in New Mexico, including all of Seller’s leases, minerals, overrides, easements, wells, contracts, and personal property (“New Mexico Properties”). The cash consideration was $83.1 million, which included a $3 million performance deposit. Although no purchase price adjustments were made prior to the closing on September 1, 2004, the Purchase and Sale Agreement with Pogo does provide for a post-closing settlement for: (1) certain title defects claimed by Pogo before the closing, provided that such defects cannot be resolved to the satisfaction of both parties, (2) adjustments if Seller is unable to obtain consents to assign certain New Mexico Properties, and (3) revenues and costs before and after the Effective Date. The New Mexico Properties were sold subject to certain warranties and representations that are customary in transactions of this type in the United States.
CNG and the Registrant (collectively with CNG the “Seller”), entered into an agreement with Bill Barrett Corporation, the buyer, effective July 1, 2004 (the “Effective Date”), to sell all of the Seller’s right, title and interest in its oil and gas properties and associated assets in Colorado (except for CNG’s Kitzmiller property in the north-west part of the state which were retained by the Seller), including leases, minerals, overrides, easements, wells, contracts, and Colorado Properties. The purchase price was $139.7 million, which included a $7.0 million performance deposit. Although no purchase price adjustments were made prior to the closing on September 1, 2004, the Purchase and Sale Agreement with Bill Barrett Corporation does provide for a post-closing settlement for: (1) certain environmental and title defects claimed by Bill Barrett Corporation before closing, provided that such defects cannot be resolved to the satisfaction of both parties, (2) adjustments if Seller is unable to obtain consents to assign for certain Colorado Properties and (3) revenues and costs before and after the Effective Date. The Colorado Properties were sold subject to certain warranties and representations that are customary in transactions of this type in the United States.
Calpine Canada Natural Gas Partnership (“CCNGP”) and Calpine Energy Holdings Limited (“CEHL”), entered into an agreement with PrimeWest Gas Corp. and PrimeWest Energy Trust, the Buyer, to sell, effective July 1, 2004, all of CCNGP’s interest in oil and gas properties located in Canada and all of CEHL’s ownership interest in 6.8 million units of Calpine Natural Gas Trust (“CNGT”), for cash consideration of CND$825.0 million, or approximately US$625.0 million, less adjustments of CND $15.6 million, to reflect a September 2, 2004, closing date. The agreement contained standard terms and conditions relating to the sale of oil and gas properties in Alberta. The transaction closed on September 2, 2004.
ITEM 2.05. COSTS ASSOCIATED WITH EXIT OR DISPOSAL ACTIVITIES
On September 1, 2004, as further described in Items 1.01 and 2.01 of the Form 8-K, the Registrant along with CNG completed the sale of its Rocky Mountain gas reserves that are primarily concentrated in two geographic areas: the Colorado Piceance Basin and the New Mexico San Juan Basin. Together, these assets represent approximately 120 billion cubic feet equivalent (“Bcfe”) of proved gas reserves, producing approximately 16.3 million net cubic feet equivalent (“MMcfed”) per day of gas. On September 2, 2004, the Registrant completed the sale of its Canadian natural gas reserves and petroleum assets. These Canadian assets represent approximately 221 Bcfe of proved reserves, producing approximately 61 MMcfed. Included in this sale was the Registrant’s 25 percent interest in approximately 80 Bcfe of proved reserves (net of royalties) and 32 MMcfed of production owned by the Calpine Natural Gas Trust (“CNGT”). In connection with the Registrant’s sale of its Canadian and Rocky Mountain gas reserves, the Registrant will incur one-time future cash expenditures associated with the sale, consisting of employee severance and other related one-time termination benefits of approximately $4.9 million pre-tax, various other exit costs of approximately $0.6 million pre-tax and closing fees of approximately $4.6 million pre-tax, for total pre-tax exit activity costs of approximately $10.1 million ($6.1 million net of tax).
SECTION 8 — OTHER EVENTS
ITEM 8.01. OTHER EVENTS
On September 2, 2004, the Registrant issued a press release attached hereto as exhibit 99.4 announcing the sale of its Rocky Mountain gas reserves. Also, on September 2, 2004, the Registrant issued a press release attached hereto as exhibit 99.5 announcing the completion of the sale of its Canadian gas reserves.
SECTION 9 — FINANCIAL STATEMENTS AND EXHIBITS
ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Businesses Acquired
Not Applicable
(b) Pro Forma Financial Information
Calpine Natural Gas L.P. (“CNG”) and the Registrant, (collectively the “Seller”), entered into an agreement with Pogo Producing Company (“Pogo”), the buyer, effective July 1, 2004 (the “Effective Date”), to sell all of Seller’s right, title and interest in its oil and gas properties and associated assets in New Mexico, including all of Seller’s leases, minerals, overrides, easements, wells, contracts, and personal property (“Properties”). The cash consideration was $83.1 million, which included a $3 million performance deposit. Although no purchase price adjustments were made for operations prior to the closing on September 1, 2004, the Purchase and Sale Agreement (“PSA”) does provide for a post-closing settlement for: (1) certain environment and title defects claimed by Pogo before Closing, provided that such defects cannot be resolved to the satisfaction of both parties, (2) adjustments if Seller is unable to obtain consents to assign for certain Properties, and (3) revenues and costs before and after the Effective Date. The Properties were sold subject to certain warranties and representations that are customary in transactions of this type in the United States.
CNG and the Registrant (collectively the “Seller”), entered into an agreement with Bill Barrett Corp. (“Barrett”), the buyer, effective July 1, 2004 (the “Effective Date”), to sell all of the Seller’s Effective Date right, title and interest in its oil and gas properties and associated assets in Colorado (except for CNG’s Kitzmiller property that was retained in the north-west part of the state), including leases, minerals, overrides, easements, wells, contracts, and Properties. The purchase price was $139.7 million, which included a $7.0 million performance deposit. Although no purchase price adjustments were made for operations prior to September 1, 2004, the closing date, the PSA does provide for a post-closing settlement for: (1) certain environment and title defects claimed by the Barrett before Closing, provided that such defects cannot be resolved to the satisfaction of both parties, (2) adjustments if Seller is unable to obtain consents to assign for certain Properties and (3) revenues and costs before and after the Effective Date. The Properties were sold subject to certain warranties and representations that are customary in transactions of this type in the United States.
Calpine Canada Natural Gas Partnership (“CCNGP”) and Calpine Energy Holdings Limited (“CEHL”), entered into an agreement with PrimeWest Gas Corp. and PrimeWest Energy Trust, the Buyer, to sell, effective July 1, 2004, all of CCNGP’s interest in oil and gas properties located in Canada and all of CEHL’s ownership interest in 6.8 million units of Calpine Natural Gas Trust (“CNGT”), for cash consideration of CND$825.0 million, or approximately US$625.0 million, less adjustments of CND$15.6 million, to reflect a September 2, 2004, closing date. The agreement contained standard terms and conditions relating to the sale of oil and gas properties in Alberta. The transaction closed on September 2, 2004 Effective Date.
In connection with the Registrant’s sale of its Canadian gas reserves, the Registrant will incur one-time future cash expenditures associated with the sale, consisting of employee severance and other related one-time termination benefits of approximately $4.9 million pre-tax, various other exit costs of approximately $0.6 million pre-tax and closing fees of approximately $4.6 million pre-tax, for total pre-tax exit activity costs of approximately $10.1 million ($6.1 million net of tax). These charges, which will be made in the third quarter of 2004, were not considered in the historical Pro-Forma Consolidated Condensed Statements of Operations presented below.
The unaudited Pro-forma Consolidated Condensed Statements of Operations are presented for the six months ended June 30, 2004 and the year ended December 31, 2003 and present the Registrant’s operations as if the transactions described above had occurred at January 1 of each of the periods presented. An unaudited Pro-Forma Consolidated Condensed Balance Sheet as of June 30, 2004, is also presented. The unaudited Pro-Forma Consolidated Condensed Balance Sheet presents the property sales described above, as if they had occurred at January 1, 2004.
The unaudited Pro-Forma Consolidated Condensed Financial Statements should be read in conjunction with the Registrant’s Financial Statements and related Notes included in the Registrant’s Report on Form 10-Q for the quarter ended June 30, 2004 and the Report on Form 10-K for the year ended December 31, 2003 filed with the Securities and Exchange Commission.
CALPINE CORPORATION AND SUBSIDIARIES
PRO-FORMA CONSOLIDATED CONDENSED BALANCE SHEET
June 30, 2004
(In thousands, except share and per share amounts)
(Unaudited)
| Canadian | Rocky Mountain | New Mexico | ||||||||||||||||||
| Actual | Gas Assets(1) | Gas Assets(1) | Gas Assets(1) | Pro-Forma | ||||||||||||||||
| (Unaudited) | ||||||||||||||||||||
ASSETS | ||||||||||||||||||||
| Current assets: | ||||||||||||||||||||
| Cash and cash equivalents | $ | 844,031 | $ | — | $ | — | $ | — | $ | 844,031 | ||||||||||
| Accounts receivable, net | 1,170,130 | — | — | — | 1,170,130 | |||||||||||||||
| Margin deposits and other prepaid expense | 406,741 | — | — | — | 406,741 | |||||||||||||||
| Inventories | 144,913 | (1,838 | ) | — | — | 143,075 | ||||||||||||||
| Restricted cash | 317,833 | — | — | — | 317,833 | |||||||||||||||
| Current derivative assets | 338,805 | — | — | — | 338,805 | |||||||||||||||
| Current assets held for sale | — | 1,838 | — | — | 1,838 | |||||||||||||||
| Other current assets | 72,117 | — | — | — | 72,117 | |||||||||||||||
| Total current assets | 3,294,570 | — | — | — | 3,294,570 | |||||||||||||||
| Restricted cash, net of current portion | 191,695 | — | — | — | 191,695 | |||||||||||||||
| Notes receivable, net of current portion | 225,396 | — | — | — | 225,396 | |||||||||||||||
| Project development costs | 151,084 | — | — | — | 151,084 | |||||||||||||||
| Investments in power projects and oil and gas properties | 417,303 | (24,558 | ) | — | — | 392,745 | ||||||||||||||
| Deferred financing costs | 423,499 | — | — | — | 423,499 | |||||||||||||||
| Prepaid lease, net of current portion | 383,940 | — | — | — | 383,940 | |||||||||||||||
| Property, plant and equipment, net | 21,031,174 | (456,668 | ) | (65,654 | ) | (47,286 | ) | 20,461,566 | ||||||||||||
| Goodwill, net | 45,160 | — | — | — | 45,160 | |||||||||||||||
| Other intangible assets, net | 89,411 | — | — | — | 89,411 | |||||||||||||||
| Long-term derivative assets | 561,328 | — | — | — | 561,328 | |||||||||||||||
| Long-term assets held for sale | — | 481,226 | 65,654 | 47,286 | 594,166 | |||||||||||||||
| Other assets | 627,202 | — | — | — | 627,202 | |||||||||||||||
| Total assets | $ | 27,441,762 | $ | — | $ | — | $ | — | $ | 27,441,762 | ||||||||||
LIABILITIES & STOCKHOLDERS’ EQUITY | ||||||||||||||||||||
| Current liabilities: | ||||||||||||||||||||
| Accounts payable | $ | 1,160,600 | — | — | — | $ | 1,160,600 | |||||||||||||
| Accrued payroll and related expense | 72,644 | — | — | — | 72,644 | |||||||||||||||
| Accrued interest payable | 362,497 | — | — | — | 362,497 | |||||||||||||||
| Income taxes payable | 5,680 | — | — | — | 5,680 | |||||||||||||||
| Notes payable and borrowings under lines of credit, current portion | 239,289 | — | — | — | 239,289 | |||||||||||||||
| Preferred interests, current portion | 8,758 | — | — | — | 8,758 | |||||||||||||||
| Capital lease obligation, current portion | 8,466 | — | — | — | 8,466 | |||||||||||||||
| CCFC I financing, current portion | 3,208 | — | — | — | 3,208 | |||||||||||||||
| Construction/project financing, current portion | 57,256 | — | — | — | 57,256 | |||||||||||||||
| Senior notes and term loans, current portion | 14,500 | (2,000 | ) | — | — | 12,500 | ||||||||||||||
| Current derivative liabilities | 383,097 | — | — | — | 383,097 | |||||||||||||||
| Current liabilities held for sale | — | 4,330 | — | — | 4,330 | |||||||||||||||
| Other current liabilities | 271,589 | (2,330 | ) | — | — | 269,259 | ||||||||||||||
| Total current liabilities | 2,587,584 | — | — | — | 2,587,584 | |||||||||||||||
| Notes payable and borrowings under lines of credit, net of current portion | 861,424 | — | — | — | 861,424 | |||||||||||||||
| Notes payable to Calpine Capital Trusts | 1,153,500 | — | — | — | 1,153,500 | |||||||||||||||
| Preferred interests, net of current portion | 142,064 | — | — | — | 142,064 | |||||||||||||||
| Capital lease obligation, net of current portion | 283,005 | — | — | — | 283,005 | |||||||||||||||
| CCFC I financing, net of current portion | 784,661 | — | — | — | 784,661 | |||||||||||||||
| CalGen/CCFC II financing | 2,448,907 | — | — | — | 2,448,907 | |||||||||||||||
| Construction/project financing, net of current portion | 1,723,040 | — | — | — | 1,723,040 | |||||||||||||||
| Convertible Senior Notes Due 2006 | 72,126 | — | — | — | 72,126 | |||||||||||||||
CALPINE CORPORATION AND SUBSIDIARIES
PRO-FORMA CONSOLIDATED CONDENSED BALANCE SHEET — (Continued)
June 30, 2004
(In thousands, except share and per share amounts)
(Unaudited)
| Canadian | Rocky Mountain | New Mexico | ||||||||||||||||||
| Actual | Gas Assets(1) | Gas Assets(1) | Gas Assets(1) | Pro-Forma | ||||||||||||||||
| (Unaudited) | ||||||||||||||||||||
| Convertible Senior Notes Due 2023 | 900,000 | — | — | — | 900,000 | |||||||||||||||
| Senior notes and term loans, net of current portion | 9,370,936 | (218,529 | ) | (48,949 | ) | (29,022 | ) | 9,074,436 | ||||||||||||
| Deferred income taxes, net | 1,185,712 | — | — | — | 1,185,712 | |||||||||||||||
| Deferred revenue | 110,087 | — | — | — | 110,087 | |||||||||||||||
| Long-term derivative liabilities | 599,495 | — | — | — | 599,495 | |||||||||||||||
| Long-term liabilities held for sale | — | 234,014 | 49,091 | 29,193 | 312,298 | |||||||||||||||
| Other liabilities | 267,769 | (15,485 | ) | (142 | ) | (171 | ) | 251,971 | ||||||||||||
| Total liabilities | 22,490,310 | — | — | — | 22,490,310 | |||||||||||||||
| Minority interests | 350,561 | — | — | — | 350,561 | |||||||||||||||
| Stockholders’ equity: | ||||||||||||||||||||
| Preferred stock, $.001 par value per share; authorized 10,000,000 shares; none issued and outstanding in 2004 and 2003 | — | — | — | — | — | |||||||||||||||
| Common stock, $.001 par value per share; authorized 1,000,000,000 shares at December 31, 2003, and 2,000,000,000 shares at June 30, 2004; issued and outstanding 439,326,249 shares in 2004 and 415,010,125 shares in 2003 | 439 | — | — | — | 439 | |||||||||||||||
| Additional paid-in capital | 3,109,778 | — | — | — | 3,109,778 | |||||||||||||||
| Retained earnings | 1,468,619 | — | — | — | 1,468,619 | |||||||||||||||
| Accumulated other comprehensive income | 22,055 | — | — | — | 22,055 | |||||||||||||||
| Total stockholders’ equity | 4,600,891 | — | — | — | 4,600,891 | |||||||||||||||
| Total liabilities and stockholders’ equity | $ | 27,441,762 | $ | — | $ | — | $ | — | $ | 27,441,762 | ||||||||||
| (1) | Assumes sale by Calpine Corporation on June 30, 2004. |
CALPINE CORPORATION AND SUBSIDIARIES
PRO-FORMA CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS(1)(2)
Six Months Ended June 30, 2004
(In thousands, except per share amounts)
(Unaudited)
| Canadian | Rocky Mountain | New Mexico | |||||||||||||||||||
| Actual | Gas Assets | Gas Assets | Gas Assets | Pro-Forma | |||||||||||||||||
| (Unaudited) | |||||||||||||||||||||
| Revenue: | |||||||||||||||||||||
| Electric generation and marketing revenue | |||||||||||||||||||||
| Electricity and steam revenue | $ | 2,558,678 | $ | — | $ | — | $ | — | $ | 2,558,678 | |||||||||||
| Sales of purchased power for hedging and optimization | 876,680 | — | — | — | 876,680 | ||||||||||||||||
| Total electric generation and marketing revenue | 3,435,358 | — | — | — | 3,435,358 | ||||||||||||||||
| Oil and gas production and marketing revenue | |||||||||||||||||||||
| Oil and gas sales | 50,651 | (19,108 | ) | (374 | ) | (1,384 | ) | 29,785 | |||||||||||||
| Sales of purchased gas for hedging and optimization | 834,708 | — | — | — | 834,708 | ||||||||||||||||
| Total oil and gas production and marketing revenue | 885,359 | (19,108 | ) | (374 | ) | (1,384 | ) | 864,493 | |||||||||||||
| Mark-to-market activities, net | (10,086 | ) | — | — | — | (10,086 | ) | ||||||||||||||
| Other revenue | 46,741 | — | — | — | 46,741 | ||||||||||||||||
| Total revenue | 4,357,372 | (19,108 | ) | (374 | ) | (1,384 | ) | 4,336,506 | |||||||||||||
| �� | |||||||||||||||||||||
| Cost of revenue: | |||||||||||||||||||||
| Electric generation and marketing expense | |||||||||||||||||||||
| Plant operating expense | 399,498 | — | — | — | 399,498 | ||||||||||||||||
| Transmission purchase expense | 31,078 | — | — | — | 31,078 | ||||||||||||||||
| Royalty expense | 12,833 | — | — | — | 12,833 | ||||||||||||||||
| Purchased power expense for hedging and optimization | 820,108 | — | — | — | 820,108 | ||||||||||||||||
| Total electric generation and marketing expense | 1,263,517 | — | — | — | 1,263,517 | ||||||||||||||||
| Oil and gas operating and marketing expense | |||||||||||||||||||||
| Oil and gas operating expense | 45,770 | (13,687 | ) | (1,290 | ) | (2,647 | ) | 28,146 | |||||||||||||
| Purchased gas expense for hedging and optimization | 814,409 | — | — | — | 814,409 | ||||||||||||||||
| Total oil and gas operating and marketing expense | 860,179 | (13,687 | ) | (1,290 | ) | (2,647 | ) | 842,555 | |||||||||||||
| Fuel expense | 1,630,490 | 39,188 | 9,486 | 6,756 | 1,685,920 | ||||||||||||||||
| Depreciation, depletion and amortization expense | 311,203 | (34,495 | ) | (3,099 | ) | (1,847 | ) | 271,762 | |||||||||||||
| Operating lease expense | 54,762 | — | — | — | 54,762 | ||||||||||||||||
| Other cost of revenue | 48,988 | — | — | — | 48,988 | ||||||||||||||||
| Total cost of revenue | 4,169,139 | (8,994 | ) | 5,097 | 2,262 | 4,167,504 | |||||||||||||||
| Gross profit | 188,233 | (10,114 | ) | (5,471 | ) | (3,646 | ) | 169,002 | |||||||||||||
| Loss (income) from unconsolidated investments in power projects and oil and gas properties | (1,788 | ) | 2,586 | — | — | 798 | |||||||||||||||
| Equipment cancellation and impairment cost | 2,367 | — | — | — | 2,367 | ||||||||||||||||
| Project development expense | 11,748 | — | — | — | 11,748 | ||||||||||||||||
| Research and development expense | 8,939 | — | — | — | 8,939 | ||||||||||||||||
| Sales, general and administrative expense | 118,225 | (5,612 | ) | — | — | 112,613 | |||||||||||||||
| Income from operations | 48,742 | (7,088 | ) | (5,471 | ) | (3,646 | ) | 32,537 | |||||||||||||
| Interest expense | 534,452 | (9,920 | ) | (1,694 | ) | (1,120 | ) | 521,718 | |||||||||||||
| Interest (income) | (21,981 | ) | — | — | — | (21,981 | ) | ||||||||||||||
| Minority interest expense | 13,159 | — | — | — | 13,159 | ||||||||||||||||
| (Income) from repurchase of various issuances of debt | (3,394 | ) | — | — | — | (3,394 | ) | ||||||||||||||
| Other (income) | (203,996 | ) | — | — | — | (203,996 | ) | ||||||||||||||
| Loss before (benefit) for income taxes | (269,498 | ) | 2,832 | (3,777 | ) | (2,526 | ) | (272,969 | ) | ||||||||||||
| (Benefit) for income taxes | (146,553 | ) | 1,109 | (1,440 | ) | (1,003 | ) | (147,887 | ) | ||||||||||||
| Loss from continuing operations(3) | $ | (122,945 | ) | $ | 1,723 | $ | (2,337 | ) | $ | (1,523 | ) | $ | (125,082 | ) | |||||||
CALPINE CORPORATION AND SUBSIDIARIES
PRO-FORMA CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS(1)(2) — (Continued)
Six Months Ended June 30, 2004
(In thousands, except per share amounts)
(Unaudited)
| Canadian | Rocky Mountain | New Mexico | ||||||||||||||||||
| Actual | Gas Assets | Gas Assets | Gas Assets | Pro-Forma | ||||||||||||||||
| (Unaudited) | ||||||||||||||||||||
| Basic and diluted loss per common share: | ||||||||||||||||||||
| Weighted average shares of common stock outstanding | 416,332 | 416,332 | ||||||||||||||||||
| Loss from continuing operations (3) | $ | (0.30 | ) | $ | (0.30 | ) | ||||||||||||||
| (1) | The Pro-Forma Consolidated Condensed Statement of Operations assumes that the gas asset sales described above were sold by Calpine Corporation on January 1, 2003. | |
| (2) | Operating results for the gas assets described above are their actual operating results from January 1 to their respective dates of sale. | |
| (3) | Represents loss before discontinued operations and cumulative effect of a change in accounting principle. |
CALPINE CORPORATION AND SUBSIDIARIES
PRO-FORMA CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS(1)(2)
Year Ended December 31, 2003
(In thousands, except per share amounts)
(Unaudited)
| Canadian | Rocky Mountain | New Mexico | Other | Pro- | ||||||||||||||||||||||||
| Actual | Gas Assets | Gas Assets | Gas Assets | Reclassifications(3) | Forma | |||||||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||||||||||
| Revenue: | ||||||||||||||||||||||||||||
| Electric generation and marketing revenue | ||||||||||||||||||||||||||||
| Electricity and steam revenue | $ | 4,695,744 | $ | — | $ | — | $ | — | $ | (15,347) | $ | 4,680,397 | ||||||||||||||||
| Sales of purchased power for hedging and optimization | 2,714,187 | — | — | — | — | 2,714,187 | ||||||||||||||||||||||
| Total electric generation and marketing revenue | 7,409,931 | — | — | — | (15,347) | 7,394,584 | ||||||||||||||||||||||
| Oil and gas production and marketing revenue | ||||||||||||||||||||||||||||
| Oil and gas sales | 107,662 | (46,920 | ) | (275 | ) | (1,311 | ) | — | 59,156 | |||||||||||||||||||
| Sales of purchased gas for hedging and optimization | 1,320,902 | — | — | — | — | 1,320,902 | ||||||||||||||||||||||
| Total oil and gas production and marketing revenue | 1,428,564 | (46,920 | ) | (275 | ) | (1,311 | ) | — | 1,380,058 | |||||||||||||||||||
| Mark-to-market activities, net | (26,439 | ) | — | — | — | (26,439 | ) | |||||||||||||||||||||
| Other revenue | 107,483 | — | — | — | 15,347 | 122,830 | ||||||||||||||||||||||
| Total revenue | 8,919,539 | (46,920 | ) | (275 | ) | (1,311 | ) | — | 8,871,033 | |||||||||||||||||||
| Cost of revenue: | ||||||||||||||||||||||||||||
| Electric generation and marketing expense | ||||||||||||||||||||||||||||
| Plant operating expense | 679,031 | — | — | — | (4,221 | ) | 674,810 | |||||||||||||||||||||
| Transmission purchase expense | — | — | — | — | 34,690 | 34,690 | ||||||||||||||||||||||
| Royalty expense | 24,932 | — | — | — | — | 24,932 | ||||||||||||||||||||||
| Purchased power expense for hedging and optimization | 2,690,069 | — | — | — | — | 2,690,069 | ||||||||||||||||||||||
| Total electric generation and marketing expense | 3,394,032 | — | — | — | 30,469 | 3,424,501 | ||||||||||||||||||||||
| Oil and gas operating and marketing expense | ||||||||||||||||||||||||||||
| Oil and gas operating expense | 106,244 | (24,011 | ) | (2,569 | ) | (4,211 | ) | — | 75,453 | |||||||||||||||||||
| Purchased gas expense for hedging and optimization | 1,279,568 | — | — | — | — | 1,279,568 | ||||||||||||||||||||||
| Total oil and gas operating and marketing expense | 1,385,812 | (24,011 | ) | (2,569 | ) | (4,211 | ) | — | 1,355,021 | |||||||||||||||||||
| Fuel expense | 2,564,742 | 76,778 | 14,590 | 9,508 | — | 2,665,618 | ||||||||||||||||||||||
| Depreciation, depletion and amortization expense | 583,912 | (69,056 | ) | (4,817 | ) | (2,724 | ) | — | 507,315 | |||||||||||||||||||
| Operating lease expense | 112,070 | — | — | — | — | 112,070 | ||||||||||||||||||||||
| Other cost of revenue | 42,270 | — | — | — | — | 42,270 | ||||||||||||||||||||||
| Total cost of revenue | 8,082,838 | (16,289 | ) | 7,204 | 2,573 | 30,469 | 8,106,795 | |||||||||||||||||||||
| Gross profit | 836,701 | (30,631 | ) | (7,479 | ) | (3,884 | ) | (30,469 | ) | 764,238 | ||||||||||||||||||
| (Income) from unconsolidated investments in power projects and oil and gas properties | (76,703 | ) | 898 | — | — | — | (75,805 | ) | ||||||||||||||||||||
| Equipment cancellation and impairment cost | 64,384 | — | — | — | — | 64,384 | ||||||||||||||||||||||
| Long-term service agreement cancellation charge | 16,355 | — | — | — | — | 16,355 | ||||||||||||||||||||||
| Project development expense | 21,804 | — | — | — | — | 21,804 | ||||||||||||||||||||||
| Research and development expense | — | — | — | — | 10,630 | 10,630 | ||||||||||||||||||||||
| Sales, general and administrative expense | 265,653 | (8,083 | ) | — | — | (41,099 | ) | 216,471 | ||||||||||||||||||||
| Merger expense | — | — | — | — | — | — | ||||||||||||||||||||||
PRO-FORMA CONSOLIDATED STATEMENT OF OPERATIONS — (Continued)
Year Ended December 31, 2003
(In thousands, except per share amounts)
(Unaudited)
| Canadian | Rocky Mountain | New Mexico | Other | Pro- | ||||||||||||||||||||||
| Actual | Gas Assets | Gas Assets | Gas Assets | Reclassifications(3) | Forma | |||||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||||||||
| Income from operations | 545,208 | (23,446 | ) | (7,479 | ) | (3,884 | ) | — | 510,399 | |||||||||||||||||
| Interest expense | 726,103 | (15,892 | ) | (2,271 | ) | (1,634 | ) | — | 706,306 | |||||||||||||||||
| Distributions on trust preferred securities | 46,610 | — | — | — | — | 46,610 | ||||||||||||||||||||
| Interest (income) | (39,716 | ) | — | — | — | — | (39,716 | ) | ||||||||||||||||||
| Minority interest expense | 27,330 | — | — | — | — | 27,330 | ||||||||||||||||||||
| (Income) from repurchase of various issuances of debt | (278,612 | ) | — | — | — | — | (278,612 | ) | ||||||||||||||||||
| Other (income) | (46,126 | ) | — | — | — | — | (46,126 | ) | ||||||||||||||||||
| Income before provision (benefit) for income taxes | 109,619 | (7,554 | ) | (5,208 | ) | (2,250 | ) | — | 94,607 | |||||||||||||||||
| (Benefit) for income taxes | (134 | ) | (2,960 | ) | (1,980 | ) | (899 | ) | — | (5,973 | ) | |||||||||||||||
| Income from continuing operations (4) | $109,753 | $(4,594 | ) | $(3,228 | ) | $(1,351 | ) | $— | $100,580 | |||||||||||||||||
| Basic earnings per common share: | ||||||||||||||||||||||||||
| Weighted average shares of common stock outstanding | 390,772 | 390,772 | ||||||||||||||||||||||||
| Income from continuing operations (4) | $ | 0.28 | $ | 0.26 | ||||||||||||||||||||||
| Diluted earnings per common share: | ||||||||||||||||||||||||||
| Weighted average shares of common stock outstanding before dilutive effect of certain convertible securities | 396,219 | 396,219 | ||||||||||||||||||||||||
| Income from continuing operations (4) | $ | 0.28 | $ | 0.25 | ||||||||||||||||||||||
| (1) | The Pro-Forma Consolidated Statement of Operations assumes that the gas asset sales described above were sold on January 1, 2003. | |
| (2) | Operating results for the gas assets described above are their actual operating results from January 1 to their respective dates of sales. | |
| (3) | Certain amounts in the Pro-Forma Consolidated Statement of Operations have been reclassified to conform to the 2004 presentation. Note that these reclassifications did not occur as a result of the disposition of the gas assets described above. These reclassifications include: (1) $15,347 from Electricity and Steam revenue to Other revenue representing Transmission revenue; (2) $34,690 from Plant operating expense to Transmission purchase expense; (3) $25,075 from Sales, general and administrative expense to Plant operating expense for information systems costs for the Company’s power plants; (4) $10,630 from Sales, general and administrative expense to Research and development expense; and (5) $5,394 from Sales, general and administrative expense to Plant operating expense for the Company’s stock option compensation expense. | |
| (4) | Represents income before discontinued operations and cumulative effect of a change in accounting principle. |
(c) Exhibits
| 99.1 | — | Purchase and Sale Agreement among Calpine Corporation, Calpine Natural Gas L.P. and Pogo Producing Company dated July 1, 2004. | ||
| 99.2 | — | Purchase and Sale Agreement among Calpine Corporation, Calpine Natural Gas L.P. and Bill Barrett Corporation dated July 1, 2004 | ||
| 99.3 | — | Asset and Trust Unit Purchase and Sale Agreement among Calpine Canada Natural Gas Partnership and Calpine Energy Holdings Limited and Calpine Corporation and PrimeWest Gas Corp. and PrimeWest Energy Trust dated July 1, 2004. | ||
| 99.4 | — | Press release dated September 2, 2004, indicating the Registrant’s sale of its Rocky Mountain gas reserves. | ||
| 99.5 | — | Press release dated September 2, 2004, indicating the Registrant’s sale of its Canadian gas reserves. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
CALPINE CORPORATION
| By: | /s/ Charles B. Clark, Jr. | |||
| Charles B. Clark, Jr. | ||||
| Senior Vice President and Corporate Controller, Chief Accounting Officer | ||||
Date: September 8, 2004
EXHIBIT INDEX
| Exhibit | ||
| No. | Description | |
| 99.1 | Purchase and Sale Agreement among Calpine Corporation, Calpine Natural Gas L.P. and Pogo Producing Company dated July 1, 2004. | |
| 99.2 | Purchase and Sale Agreement among Calpine Corporation, Calpine Natural Gas L.P. and Bill Barrett Corporation dated July 1, 2004. | |
| 99.3 | Asset and Trust Unit Purchase and Sale Agreement among Calpine Canada Natural Gas Partnership and Calpine Energy Holdings Limited and Calpine Corporation and PrimeWest Gas Corp. and PrimeWest Energy Trust dated July 1, 2004. | |
| 99.4 | Press release dated September 2, 2004, indicating the Registrant’s sale of its Rocky Mountain gas reserves. | |
| 99.5 | Press release dated September 2, 2004, indicating the Registrant’s sale of its Canadian gas reserves. |
