Q2 2017 Earnings Briefs
Calpine Confirms Acquisition Talks
Calpine, PG&E and Southern California Edison released their second-quarter earnings results last week.

Calpine CEO Thad Hill confirmed Friday that the Houston-based merchant generation company is looking to be acquired. Citing anonymous sources, Bloomberg reported on Wednesday that Energy Capital Partners is in advanced talks to purchase Calpine and could announce a deal as soon as this week.

During a call to discuss second-quarter results, Hill said that “the public equity markets have undervalued our business and underappreciated our strong track record of executing on our financial commitments and our stable cash flows.”

The company’s board of directors decided to explore “strategic alternatives” in early spring, Hill said. Executives do not plan to provide updates on sale discussions unless required by law and do not know if they will result in any sale.

Calpine’s adjusted second-quarter profit was $419 million, compared with $452 million during the same period last year, an 8% drop. Profit for the first half of the year was $745 million, compared with $826 million in 2016.

The company saw higher peak-time prices for its Texas plants in the constrained Houston zone, and PJM’s most recent capacity auction yielded good results for the company’s plants there.

Calpine, PG&E and Southern California Edison earnings
Hermiston Power Plant | Calpine

“The larger storyline in the east is the integrity of their market structures given the potential for nuclear bailouts in some states and the pursuit of renewables in others,” Hill said.

CAISO is exploring reliability-must-run agreements with Calpine to keep its 47-MW Yuba City and Feather River peaking units operational. (See CAISO Seeks Reliability Designations for Calpine Peakers.)

Calpine lists as current assets its 80 power plants in operation or under construction in 18 states, totaling about 26 GW of capacity. Company executives elected not to take questions from analysts regarding the second-quarter results.

PG&E Files $74M Transmission Charge

Pacific Gas and Electric parent company PG&E Corp. reported that its profits rose by 97% to $406 million on a non-adjusted basis compared with the same period a year ago. The increases resulted from resolution of its 2017 electric and transmission and storage rate cases, the company said.

During a July 27 earnings call, CEO Geisha Williams said the company had filed with FERC for a $74 million transmission revenue increase beginning next year for reliability work and modernizing substations.

“It is through these types of investments and these continued investments in our grid that we can help ensure our system is stable and that we can continue providing the high-quality service that our customers have come to expect,” Williams said.

The company’s 2,240-MW Diablo Canyon nuclear plant was in planned refueling when a scorching heat wave hit California, and nearly 2% of customers lost power on a peak day. At times during the heat wave, renewable portfolio standard-qualified resources made up more than half of energy supply, Williams said.

PG&E received 98% of its rate base request in its general rate case, representing an 1% increase in authorized revenue for 2017. It expects a decision later this year on a settlement filed with the California Public Utilities Commission on its proposal to retire Diablo Canyon. The company in January reached a settlement with environmental groups and others over the retirement of the plant, due to shut down in 2025.

SCE Profits Down

Southern California Edison’s (SCE) profit fell by $11 million to $307 million in the second quarter “due to a reduction in [PUC] revenue related to prior overcollections,” the company said. Year-to-date revenue was $656 million, compared with $612 million in the first six months of 2016, with some influence from rate case and operations and maintenance numbers.

Edison International CEO Pedro Pizarro said July 27 that the company has hired an adviser to study selling its SoCore Energy solar business. “We just wanted to explore whether there are other options, including the potential for a sale,” he explained.

SCE’s capital expenditures are trending downward from the originally forecast $4.2 billion and are currently expected to be about $3.8 billion because of delays in transmission spending, lower customer growth and lack of approval of grid modernization.

SCE is in the midst of a rate case, and in June it lowered its capital funding request by about $420 million, $300 million of which is devoted to grid modernization. The company has run into opposition to its grid modernization plan from environmental groups, which want more focus on distributed energy resources and renewables.

Xcel Beats Expectations

Xcel Energy on Thursday reported second-quarter earnings of $227 million ($0.45/share), up from $197 million ($0.39/shar) a year ago. That beat analyst expectations gathered by Thomson Reuters of 42 cents/share.

Xcel’s revenue came in at $2.65 billion, ahead of $2.6 billion expectations.

The Minneapolis-based company said rate increases in Minnesota, New Mexico, Texas and Wisconsin led to higher margins. Xcel also benefited from higher natural gas profit margins, lower operations and maintenance expenses, and a lower tax rate.

— Jason Fordney and Tom Kleckner

CAISO/WEIMOther Coverage

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