Calpine Corporation is America’s largest generator of electricity from natural gas and geothermal resources with operations in key competitive power markets. Founded in 1984, the company has 79 power plants in operation or under construction and represents 26,000 megawatts of generation capacity. The company has 64 natural gas-fired combustion turbine-based plants, one natural gas and fuel oil-fired steam-based plant, 13 geothermal steam turbine-based plants and one photovoltaic solar plant.
Calpine serves customers in 24 U.S. states, Canada and Mexico. Calpine sells power, steam, capacity, renewable energy and related services to wholesale customers who include commercial and industrial end-users, state and regional wholesale market operators, and retail customers.
The company operates primarily natural gas-fired and geothermal power plants in North America and has 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. The power generation technologies comprise two types: efficient combined-cycle power plants, which use natural gas-fired combustion turbines, and renewable geothermal conventional steam turbines. Calpine is one of the largest owners and operators of industrial gas turbines.
The Company has 3 geographical reportable segments for wholesale business which are the West (including geothermal), Texas and the East (including Canada), and a separate reportable segment of the Retail business.
According to the Annual Financial Report, Calpine Corporation reported a net income of $10 million in 2018 compared to a net loss of $339 million the previous year. The year-over-year increase in net income was primarily due to an increase in commodity margin in wholesale regional segments and a decrease in operating and maintenance expense.
Operating revenues of the Company recorded an increase of $760 million or by 8.7%, from $8,752 million in 2017 to $9,512 million in 2018.
Cash provided by operating activities for 2018 was $1,101 million compared to $949 million the previous year. The increase of 16% in cash provided by operating activities in 2018 was primarily due to an increase in income from operations.
At the end of 2018 liquidity was approximately $1.4 billion compared to $1.6 billion in 2017. Cash and cash equivalents decreased in 2018, primarily due to repayments of debt.
Income from operation increased by $384 million or by 101% in 2018, from $378 million in 2017 to $762 million in 2018, primarily due to a decrease in major maintenance expense of $60 million in 2018.
Other operating expenses increased by $13 million for the year ending December 31, 2018 compared to the year ending December 31, 2017, primarily due to merger-related costs. In 2017 Calpine entered into a merger agreement with Volt Parent, LP and Volt Merger Sub, Inc., and in March 2018 the Company completed the merger procedure.
During 2018, Calpine recorded impairment losses of approximately $10 million associated with existing equipment at the site of the Washington Parish Energy Center, which will not be used in the construction of the new power plant. Compared to 2017, the company recorded impairment losses of approximately $41 million related to the South Point Energy Center to adjust the value of turbine equipment to fair value.
The spread between commodity revenue and commodity expense represents commodity Margin, which is a very important financial performance indicator of the company. The following commodity margins have been achieved by the company´s segments in 2018.
Commodity margin in the West segment increased by $90 million or by 9%, from $970 million in 2017 to $1,060 million in 2018, primarily driven by new contracts at Metcalf and Sutter Energy Centers and higher power generation, which segmentally increased by 15% compared to the previous year.
Commodity margin in the Texas segment increased by $94 million or by 23%, from $522 million in 2017 to $646 million in 2018, primarily driven by higher market spark spreads, which also drove a 4% year-over-year increase in generation, as well as by higher revenue associated with the sale of environmental credits in the first quarter of 2018, with no similar activity in 2017.
Commodity margin in the East segment increased by $180 million or by 23%, from $790 million in 2017 to $970 million in 2018. Primary drivers were higher regulatory capacity revenue and a gain recorded during the first quarter of 2018 associated with the cancellation of a contract.
Commodity margin in the Retail segment decreased by $39 million or by 10%, from $396 million in 2017 to $357 million in 2018, primarily due to higher purchased energy and capacity supply costs in Texas and the Northeast.
Total commodity margin of all segments increased by $325 million or by 12% from $2,708 million in 2017 to $3,033 million in 2018. Capital expenditures for 2018 were $415 million, an increase of $110 million compared to expenditures of $305 million for 2017. The increase was primarily due to additional capitalization of seasonal maintenance costs during 2018 when compared to 2017.
Equipped for the future and committed to operational excellence, Calpine is economically fulfilling America’s power needs as low fuel prices and environmental regulations shift generation to natural-gas-fired capacity.