Calpine Corporation

CALPI NE CORPORATI ON:THE HE EVOLUTI ON FROM PROJECT FI NANC NCE TO COR ORPOR ORATE FI NANC NCE Gr oup–1:Sect i on–1

Ni khi lAnand 111 Pr ac hiChandgo t hi a 116 Sar baniChoudhur i 118  At ulDugar 120 Raj atGupt a 122 Rohi tJai n 125 Shr addhaKama mat 128

 AGENDA 

Ove r vi e w oft heCase

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USPo werI ndus t r yandi t svar i ousphase s

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Ne w Fi nanc i ngSt r at egy

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Cur r entSt at uso fCal pi ne

 ABOUTTHECOMPANY 

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Foundedi n1984,whol l yo wneds ubs i di ar yof El e c t r o wat t . I nvol vedmai nl yi nPo werGener at i onBus i nes s . Pr es entSi t uat i on-22Oper at i onalPl ant s& 12 underde ve l opment . Co ns o l i dat e dAs s e t so f$1712mi l l i o n,Re v e nue s $556mi l l i onandNe tI nc ome$46mi l l i on (8. 27% ofRe ve nue& 2. 70% ofAs s e t s ) Fundi ngSt r at egy:   

Upt o1994:Pr oj ec tFi nanc e 19941999:Cor por at eFi nanc e Po s t1999:? ? ? ? ? ?

TARGETS  

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I nc r eas eCapac i t yt o15000MW f r om 2729MW. Fundsr equi r ement$6bi l l i on@aver ageof$0. 5 mi l l i on/MW. Expe c t edROEandROCof1822% & 1012% r es pec t i vel y .

USPOWERI NDUSTRYFACTS Thi r d Lar ges tI ndus t r y af t er Aut omobi l es and Heal t hc ar e  Re venueso f$296andAs s et so f$686bi l l i on  T o t alI ndus t r yc apac i t y7 , 33, 000MW  I nves t orOwnedUt i l i t i esOwn72% ofc apac i t y  L ong Ter m Gr o wt h Rat e es t i mat ed at 2%whi c h i mpl i ed a c os tof$ 7 bi l l i on t oadd 15000 MW of c apac i t yannual l y .   A gi ngPl ant s …. 90% t ober epl ac edby2015.  Re duc i ngRes er veMar gi nf r om 35% t o12%  Hu gePr ofitOppor t uni t yduet oc hangei nt ec hnol ogy andr e gul at i o n 

U. S.POWERI NDUSTRY Regul at ed Phase •

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Mul t i St at e Oper at i ons Pr o hi bi t e d Pr i c e s Regul at ed Toc at e r Specific Mar ket sonl y

I PPsPhas e • •

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Der egul at i on El i mi nat ed Monopol y Ri ght s We akened Enc our age d c r e at i ono f s mal lpo wer pl ant sus i ng nont r adi t i onal f uel s

Mer c hant Cont r ac t sPhase •

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NEPAal l o we d I PPst os el lat whol esal e c o mpe t i t i v e p r i c e s Cogener at i on r equi r ement r emo ved al l owi ngI PPs t obui l dl ar g er p l a n t s

CALPI NE’ SNEW FI NANCI NG STRATEGY   

Pr o j e c tFi nanc e Cor por at eFi nanc e/Bal anc eShee tFi nanc i ng Re vol vi ngCr e di tf ac i l i t y

1)PROJECTFI NANCI NG  Advant ages •

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Nonr ec our s edebt r epaymentf r om pr o j e c tc as hflo w Se c ur i t yo v er pr o j ec tas s e t s Lenderpl ac es emphas i son s t andal one p r o j e c t

Di s advant ages • • •

Re l at i vehi ghf e es & Mar gi ns LongPr oc es s i ng Ti me Ex c e s sc apac i t y f r om onepl antt o anot herpl ant c anno tbe d i v e r t e d

CORPORATEFI NANCE

REVOLVI NG CREDI TFACI LI TY

BENEFI TSOFUSI NG PROJECTFI NANCE FOR FI NANCI NG POWERPLANTSWI TH LONG TERM PPAS 

Eas eo fg e t t i ngpr o j e c tfinanc eduet o: 

St eadys t r eam ofCas hflo wsens ur edbyLTPPAswi t hc r e di t i cUt i l i t y wo r t hyPubl

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Co nt r ac t ualBundl e: l e s spo s s i bi l i t yo fc o s to v er r un

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Ri ngf enc i ngf r om Ot herr i sksass oc i at edwi t hpar ent c ompany .

Hi ghe rt axs hi e l dsf o rt hepr o j e c tduet ohi ghl e v er age  Us edebtatl owc os t  Nol ar gepenal t yi nf undi ngc os tsi nc et hepowerpl ant i sr el at i vel ys af e 

DI D CALPI NE’ SSTRATEGYOFUSI NG PROJECT FI NANCEMAKESENSEPRI ORTO 1998? 

Fi nanc i albur denr educ edont hePar entc ompany ( no nr e c o ur s ede bt )

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Cal pi nede bt c api t al i z at i o nr at i ov ar i e dbe t we e n95% -80% dur i ng199498.

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Cal pi ne’ sbondr at i ngwasl ow atB1/ B,t her eby maki ngco s toffinanc i nghi gher( 9. 12%)

WHATARETHEMOSTSI GNI FI CANT RI SKS? ?

WHATARETHEMOSTSI GNI FI CANT RI SKS( CONTD. . )

WHATARETHEMOSTSI GNI FI CANT RI SKS( CONTD. . )

HOW BI G ARE THE POTENTI AL RETURNS?

nancial Calculati

 ASTHECEO,WOULD YOU EMBARK ON THEHI GH GROWTH STRATEGY. 

HugeSuppl yDemandgap.Thust her ei so ppo r t uni t y t opo werAmer i c a.

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90% o ft hei ns t al l e dc apac i t yt ober e pl ac e dby2015.

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Cal pi nehast het e c hno l o gi c ale ffic i e nc y( he atr at eo f 7500asagai ns ti ndus t r yaver age11000) .

  A vai l abi l i t yofaRe vol vi ngCr edi ti nwhi c h 

Us eo ft hel o anf o rc o ns t r uc t i o no fmul t i pl epl ant s

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Lo we rf e es t r uc t ur e

WHATHAPPENEDNEXT… 

Pos t Hybri dSt rat egy •

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Syndi c at i o no f20banksf o r$ 1bnr e v o l vi ngl o an Ov e r c apac i t y>Ope r at eatl o we rc apac i t yf ac t o r s+ Cos tofgasi nc r ease d>Affec tc ashflo ws DebtSer vi c eRequi r ement s+Oper at i onal Co ns t r ai nt sc aus i ngDe c l i ni ngLi qui di t yPo s i t i o nand Chapt er11Bankr upt c yfil i ng( Reor gani zat i on)

WHATHAPPENEDNEXT… 

2008Onwards( Pos t Bankrupt cy) •

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Emer ge df r om bankr upt c yi n2008 St r o ngbal anc es he e tduet os a l eo fas s e t sa nd r e duc t i o ni no pe r at i ngc o s t s .

 Addi t i onalfinanc i alfle xi bi l i t yduet ot he r e s t r uc t ur i ng( f o rs t r e aml i neo pe r at i o nsand s e r vi c i ngde bto bl i gat i o ns )

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Cur r entCapac i t y–appr o x22kmw

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