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): September 7, 2005
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:
[ ] 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 September 7, 2005, Calpine Corporation ("Calpine") and its indirect,
wholly owned subsidiary Calpine Energy Services, L.P. ("CES"), entered into a
Master Transaction Agreement (the "Agreement") with The Bear Stearns Companies
Inc. ("Bear Stearns"). At the closing of the transactions contemplated by the
Agreement (the "Closing"), Calpine Merchant Services Company, Inc., an indirect
wholly owned subsidiary of Calpine ("CMSC") and CalBear Energy LP, an indirect
wholly owned subsidiary of Bear Stearns ("CalBear") will also become parties to
the Agreement. Pursuant to the terms of the Agreement, Calpine and its
Affiliates, on the one hand, and Bear Stearns and its Affiliates, on the other
hand, will each refer certain trades and third party service transactions to
CalBear. This referral obligation does not include any transaction that could be
serviced by, used by, hedge cash flow from or otherwise optimize the results or
flexibility of the assets of the referring entity. In addition, none of the
parties will enter into a venture that substantially replicates the transactions
contemplated by the Agreement during the term of the Agreement and for a period
of up to two years after the termination of the Agreement, depending upon the
reason for the termination.
Calpine has guaranteed the payment in full when due of all amounts owed by
and due from CES or CMSC to Bear Stearns or CalBear pursuant to the terms of the
Agreement or any of the agreements (described below) to be entered into under
the Agreement. Bear Stearns has guaranteed the payment in full when due of all
amounts owed by and due from CalBear to Calpine, CES or CMSC pursuant to the
terms of the Agreement or any of the agreements to be entered into under the
Agreement. In addition, Bear Stearns has agreed to provide CalBear with all
funds and collateral necessary for CalBear to perform its obligations under
certain agreements and to provide certain other financial support to CalBear.
The Closing is subject to certain conditions, including the receipt of
regulatory approval from the FERC and the execution and delivery of certain
agreements, including an Agency and Services Agreement by and among CMSC and
CalBear, pursuant to which CMSC will act as CalBear's exclusive agent for gas
and power trading; a Trading Master Agreement by and among CES, CMSC and
CalBear, pursuant to which CalBear will execute credit enhancement trades on
behalf of CES; and an ISDA Master Agreement, Schedule, and applicable annexes
between CES and CalBear to effectuate the credit enhancement trades. Pursuant to
the Agency and Services Agreement, CSMC will earn service fees (a portion of
which will be held in reserve during the term of the Agency and Services
Agreement) equal to 50% of CalBear's profits, which fees (including the reserve)
are subject to a requirement to return based on losses at CalBear, up to 50% of
such losses.
The Agreement and the agreements entered into under the Agreement will
terminate on November 30, 2006 unless both Calpine and Bear Stearns affirm the
continuation of the Agreement upon 90 days' advance notice to the other, and
will terminate at the end of each calendar quarter thereafter unless extended by
both parties. In addition, both Calpine and Bear Stearns may terminate the
Agreement voluntarily upon 90 days' advance written notice and for specified
causes.
Calpine, CES and CMSC, on one hand, and Bear Stearns and CalBear, on the
other hand, each indemnify the others against any damages resulting from
inaccuracy of representations, breach of covenant or agreement, willful
misconduct, brokerage fees, and violation of laws, subject to certain carve-outs
and limitations.
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 September 8, 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/ Robert D. Kelly
------------------------------------
Robert D. Kelly
Executive Vice President and
Chief Financial Officer
Date: September 13, 2005
EXHIBIT INDEX
Exhibit Description
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99.1 Press release dated September 8, 2005
================================================================================
EXHIBIT 99.1
For Immediate Release
BEAR STEARNS AND CALPINE FORM ENERGY MARKETING AND TRADING VENTURE:
CALBEAR ENERGY
(NEW YORK, NY) /BusinessWire - First Call / September 8, 2005 -- The Bear
Stearns Companies Inc. [NYSE: BSC] and Calpine Corporation [NYSE: CPN] announced
today that they have agreed to form a new energy marketing and trading venture
to develop a significant customer business focused on physical natural gas and
power trading and related structured transactions. CalBear Energy LP (CalBear),
a wholly owned Bear Stearns subsidiary, will benefit from the financial
resources, risk management expertise and client reach of Bear Stearns,
complimented by the market knowledge, technology, trading ability, deal flow and
customers of Calpine. These strengths will provide a solid foundation to
establish the new venture's market position in the growing merchant energy
trading business. It is anticipated that CalBear trading operations will begin
in the fourth quarter of 2005, following the requisite regulatory approvals. A
conference call will take place today at 10:30 a.m. eastern daylight savings
time to discuss this new venture.
Commenting on the transaction, Warren Spector, President and Co-Chief
Operating Officer of Bear Stearns, said, "We are very excited about the
formation of CalBear and working with Calpine in this venture. This transaction
provides us with a unique opportunity to quickly become a leading provider of
liquidity, execution and clearing services in the physical energy market without
compromising our disciplined approach to risk and capital allocation. Many of
our hedge fund, institutional investor, public finance and private equity
clients are active users of energy price risk management services. Acquiring the
expertise necessary to properly serve their needs has been a strategic priority
for the firm. Calpine was our choice in this venture because of their
professionalism and commitment to providing the best service to their clients."
Peter Cartwright, Calpine Chairman, President and Chief Executive Officer,
said, "We are very pleased about the creation of CalBear and teaming up with
Bear Stearns as we will build upon the strengths of both of our organizations.
This energy trading venture will enable us to create more value for our
shareholders and to provide additional opportunities for our customers and
employees. As we looked to set up the ideal energy trading organization, we felt
strongly that venturing with the right financial institution was essential for
us to maximize returns from Calpine's investments. Bear Stearns is the right
institution."
In connection with this transaction, Calpine has formed a wholly owned
subsidiary, Calpine Merchant Services Company, Inc. (CMSC), that will include
the employees and information infrastructure of the highly regarded Calpine
subsidiary, Calpine Energy Services, L.P. (CES). CalBear has entered into an
agreement with CMSC that provides for CMSC to be its exclusive agent to execute
power and natural gas trades with CalBear clients that have entered into master
trading agreements guaranteed by Bear Stearns. CMSC will also provide scheduling
and back office services to CalBear from its offices in Houston. CMSC will be
compensated for its services through a service fee equal to 50 percent of the
profits of CalBear.
The transaction also includes a $350 million credit intermediation
agreement between CalBear and CES. Under the terms of this arrangement, CalBear
will enter into approved transactions to sell power and acquire natural gas up
to 61 days in advance with clients that have entered into master trading
agreements guaranteed by Bear Stearns. The economics of these transactions will
be passed on to CES through offsetting trades. CalBear's counterparty exposure
to CES will be mitigated through the use of margin requirements and a master
netting agreement covering all CES transactions with CalBear. It is anticipated
that this credit intermediation agreement will provide CES with additional
flexibility and the opportunity to expand the operating margins of Calpine's
generating assets. In addition, the agreement is expected to increase Calpine's
working capital position through the return of cash currently posted as
collateral.
In addition, CMSC, acting as agent for CES, will provide all of the asset
management services required by Calpine's power generation fleet. Calpine will
retain all of the economics of these assets.
Conference Call Information
Bear Stearns and Calpine will host a conference call this morning to
discuss this energy marketing and trading venture. The call is scheduled to
begin at 10:30 a.m. eastern daylight savings time today, Thursday, September 8,
2005. To participate via the teleconference (in listen-only mode), please dial
1-888-603-6685 (1-706-634-1265 for international callers) at least five minutes
before the start of the call. In addition, Calpine will simulcast the conference
call and presentation live via the Internet. The webcast and presentation will
be available for 30 days on Calpine's investor relations' page at
www.calpine.com.
About Bear Stearns
Founded in 1923, Bear, Stearns & Co. Inc. is a leading investment banking
and securities trading and U.S. registered brokerage firm, and the major
subsidiary of The Bear Stearns Companies Inc. [NYSE:BSC]. With approximately
$49.4 billion in total capital, Bear Stearns serves governments, corporations,
institutions and individuals worldwide. The company's business includes
corporate finance and mergers and acquisitions, institutional equities and fixed
income sales and trading, securities research, private client services,
derivatives, foreign exchange and futures sales and trading, asset management
and custody services. Through Bear, Stearns Securities Corp. (BSSC), Bear
Stearns offers financing, securities lending, clearing and technology solutions
to hedge funds, broker-dealers and investment advisors. BSSC is a member of the
NYSE, NASD and SIPC. Headquartered in New York City, the company has
approximately 11,000 employees worldwide. For additional information about Bear
Stearns, please visit the firm's website at http://www.bearstearns.com.
About Calpine Corporation
A major power company, Calpine Corporation supplies customers and
communities with electricity from clean, efficient, natural gas-fired and
geothermal power plants. Calpine owns, leases and operates integrated systems of
plants in 21 U.S. states and three Canadian provinces. Its customized products
and services include wholesale and retail electricity, natural gas, gas turbine
components and services, energy management, and a wide range of power plant
engineering, construction and operations services. Calpine was founded in 1984.
It is included in the S&P 500 Index and is publicly traded on the New York Stock
Exchange under the symbol CPN. For more information about Calpine, please visit
the company's website at www.calpine.com.
Media Contact: Russell Sherman Katherine Potter
Bear, Stearns & Co. Inc. Calpine Corporation
(212) 272-5219 (408) 995-5115, Ext. 1168
Meg Laidlaw
Calpine Corporation
(713) 830-8655
Investor Contact: Elizabeth Ventura Rick Barraza
Bear, Stearns & Co. Inc. Calpine Corporation
(212) 272-9251 (408) 995-5115, Ext. 1125
Karen Bunton
Calpine Corporation
(408) 995-5115, Ext. 1121