UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 28, 2005
CALPINE CORPORATION
(Exact name of registrant as specified in its charter)
Delaware
(State of Other Jurisdiction of Incorporation)
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
(Address of principal executive offices and telephone number)
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:
[ ] Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
ITEM 1.01 -- ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT
On May 28, 2005, Calpine Corporation ("Calpine") and its indirect, wholly
owned subsidiaries Calpine UK Holdings Limited (the "Seller"), and Quintana
Canada Holdings, LLC (the "Seller Guarantor", and, collectively with the Seller
and Calpine, the "Seller Parties"), entered into a share sale and purchase
agreement (the "Agreement") with International Power PLC ("IPR"), Mitsui & Co.,
Ltd. ("Mitsui") and Normantrail (UK CO 3) Limited (the "Purchaser"), a
partnership formed by IPR and Mitsui. Pursuant to the terms of the Agreement,
the Purchaser will acquire from the Seller (the "Acquisition") the entire issued
share capital of Saltend Cogeneration Company Limited ("SCCL") and Calpine UK
Operations Limited ("UK OpCo", together with SCCL, the "Sale Group"). SCCL is
the owner of, and UK OpCo is the operator of, the Saltend Energy Centre, a 1200
MW (nominal) natural gas-fired cogeneration facility located in Hull, England.
Calpine and the Seller have provided certain customary warranties, and the
Seller Guarantor has guaranteed the payment by the Seller of liabilities in
respect of all claims under the Agreement other than claims for breach of a
warranty. The obligations of the Purchaser are guaranteed as to 70% by IPR and
30% by Mitsui.
The total amount payable by the Purchaser under the Agreement is
(pound)489,969,886, comprising an amount payable for the Sale Group shares and
an amount to repay intercompany loans made to SCCL by certain of its affiliates.
The purchase price is subject to a net working capital adjustment at closing.
(pound)20,000,000 of the purchase price will be retained in escrow for one year
following closing of the Acquisition. The Seller will be entitled to receive
(pound)5,000,000 from the escrow every three months, subject to the Purchaser
making any claims under the Agreement in such period, which claims may be
satisfied from amounts in escrow.
The Acquisition is subject to certain conditions, including (a) receipt of
(i) the approval of the European Commission, (ii) certain waivers and consents
of BP International Limited ("BPI") under contracts relating to SCCL, including
the waiver by BPI or the expiration without exercise by PBI of a right of first
refusal and BPI's agreement regarding certain financing arrangements that SCCL
will enter into at closing, and (iii) audited financial statements for SCCL and
UK OpCo for the year ended December 31, 2004, and (b) conditions requiring that
certain procedures be followed at closing, including the receipt of confirmation
from SCCL's auditors relating to a report that is to be delivered to SCCL's
directors at closing, to permit SCCL to provide financial assistance for the
acquisition of its shares in compliance with UK Companies Law.
The Agreement may be terminated (i) by the Seller or the Purchaser if the
conditions precedent are not satisfied or waived by August 7, 2005, (ii) by the
Purchaser, if there is a material adverse effect relating to the business,
assets, financial or trading condition of the Sale Group taken as a whole
("MAE"), or if there is a breach of warranty at signing or closing that would
give rise to a MAE, or (iii) by the Seller if there would be breach of warranty
at closing that the Purchaser estimates would result in a claim against the
Seller or Calpine in excess of (pound)125,000 and such claim is not waived by
the Purchaser. The Agreement will automatically terminate if closing does not
occur by August 30, 2005.
The Agreement contains certain indemnities given by the Seller including
with respect to certain environmental and tax matters. The maximum aggregate
liability of the Seller Parties for certain warranties (relating, for example,
to title to the shares, and capacity and authority to enter into and perform
their obligations under the Agreement) is equal to the purchase price. The
maximum aggregate liability of the Seller Parties for all other claims under the
Agreement including under the environmental and tax indemnities is
(pound)100,000,000. Included within this liability cap is a liability sub-cap of
(pound)35,000,000 applicable to claims under the environmental indemnity.
Net proceeds from the sale will be used to redeem the outstanding $360
million of 2-Year Redeemable Preferred Shares and $260 million of Redeemable
Preferred Shares due July 30, 2005, and as permitted by Calpine's existing bond
indentures.
ITEM 2.05 -- COSTS ASSOCIATED WITH EXIT OR DISPOSAL ACTIVITIES
We incorporate by reference in this Item 2.05 our response to Item 1.01
above. In connection with the Acquisition we estimate that we will incur
approximately $9 million of various transaction fees including investment
banking, legal and tax consulting costs. In addition, as a result of the
Acquisition, we expect to record non-cash losses of approximately $74 million
due to the close-outs of a net investment hedge and a series of commodity cash
flow hedges.
We estimate that we will incur charges of approximately $24 million related
to the redemption of the two existing series of Redeemable Preferred Shares
consisting of a pre-payment penalty and write-off of unamortized deferred
financing costs. Of this amount approximately $13 million will be a non-cash
charge.
The expected closing date of the Acquisition is July 26, 2005, subject to
satisfaction of the conditions as described in Item 1.01 above.
ITEM 9.01 -- FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Businesses Acquired.
Not Applicable
(b) Pro Forma Financial Information.
Not Applicable
(c) Exhibits.
99.1 Press Release dated May 31, 2005.
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, Controller and
Chief Accounting Officer
Date: June 3, 2005
EXHIBIT INDEX
Exhibit Number Exhibit
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99.1 Press Release dated May 31, 2005.
EXHIBIT 99.1
NEWS RELEASE CONTACTS: (408) 995-5115
Media Relations: Katherine Potter, Ext. 1168
Investor Relations: Karen Bunton, Ext. 1121
Calpine to Sell Saltend Energy Centre Generating
Proceeds of Approximately $925 Million
(SAN JOSE, Calif.) /PR Newswire - First Call/ May 31, 2005 - A subsidiary
of Calpine Corporation [NYSE:CPN], has agreed to sell its 1,200-megawatt Saltend
Energy Centre for a total purchase price of (pound)490 million, or approximately
$US906 million, plus adjustments for working capital expected to be
approximately $US19 million - generating total expected gross proceeds to
Calpine of approximately $US925 million. Saltend is a natural gas-fired,
cogeneration power plant located in Hull, England.
Calpine is selling the Saltend power plant to a partnership between
International Power plc and Mitsui & Co., Ltd. Calpine currently anticipates the
sale to close on or about July 26, 2005, pending regulatory approval and other
conditions of closing.
Calpine Chief Financial Officer Bob Kelly stated, "Calpine continues to
focus on optimizing the value of our core North American power plant assets and
strengthening our balance sheet. We acquired the Saltend power plant in August
2001 for $810 million. This transaction is an excellent opportunity for Calpine
to capture significant value for our Saltend investment."
Net proceeds from the sale of the Saltend Energy Centre will be used to
redeem two existing series of Redeemable Preferred Shares for approximately $620
million, and as permitted by Calpine's existing bond indentures.
Credit Suisse First Boston acted as Calpine's advisor for the sale. Credit
Suisse First Boston, which is regulated in the United Kingdom by the Financial
Services Authority, is acting only for Calpine and no one else in connection
with this matter and will not regard any other person as its client or be
responsible to anyone other than to Calpine for providing the protections
afforded to clients of Credit Suisse First Boston, nor for giving advice in
relation to this or any other matter referred to in this announcement.
Calpine Corporation is a North American power company dedicated to
providing electric power to customers from clean, efficient, natural gas-fired
and geothermal power plants. The company generates power at plants it owns or
leases in 21 states in the United States, three provinces in Canada and in the
United Kingdom. The company is included in the S&P 500. Calpine was founded in
1984 and is publicly traded on the New York Stock Exchange under the symbol CPN.
For more information, visit .
This news release discusses certain matters that may be considered
"forward-looking" statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended, including statements regarding the intent, belief or current
expectations of Calpine Corporation ("the Company") and its management.
Prospective investors are cautioned that any such forward-looking statements are
not guarantees of future performance and involve a number of risks and
uncertainties that could materially affect actual results such as, but not
limited to, (i) the timing and extent of deregulation of energy markets and the
rules and regulations adopted on a transitional basis with respect thereto; (ii)
the timing and extent of changes in commodity prices for energy, particularly
natural gas and electricity; (iii) unscheduled outages of operating plants; (iv)
a competitor's development of lower cost generating gas-fired power plants; (v)
risks associated with marketing and selling power from power plants in the
newly-competitive energy market; (vi) other risks identified from time-to-time
in the Company's reports and registration statements filed with the SEC,
including the risk factors identified in its Annual Report on Form 10-K for the
year ended December 31, 2004 and in its Quarterly Report on Form 10-Q for the
quarter ended March 31, 2005, which can also be found on the Company's website
at www.calpine.com. All information set forth in this news release is as of
today's date, and the Company undertakes no duty to update this information.