Calpine Corporation (



Q3 2011 Earnings Call

October 28, 2011 10:00 am ET


Bryan Kimzey - VP, IR

Jack Fusco - President and CEO

Thad Hill - COO

Zamir Rauf - CFO

Thad Miller - CLO


Brian Chin - Citigroup

John Cowen - ISI Group

Angie Storozynski – Macquarie

Ameet Thakkar - Bank of America

Julien Dumoulin-Smith - UBS

Michael Worms - BMO Capital



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Welcome to the Calpine Corporation Third Quarter Earnings Release Conference Call. My name is Mitchell and I will be your operator for today’s call. (Operator Instructions) Please not that this conference is being recorded. I will now turn the call over to Vice President of Investor Relations Bryan Kimzey. Mr. Kimzey you may begin.

Bryan Kimzey

Thank you, operator, and good morning, everyone. I’d like to welcome you to Calpine’s investor update conference call covering our third quarter 2011 results. Today’s call is being broadcast live over the phone and via webcast, which can be found on our website at You will find the access to the webcast and a copy of the accompanying presentation materials in the Investor Relations section of our website.

Joining me for this morning’s call are Jack Fusco, our President and Chief Executive Officer; Thad Hill, our Chief Operating Officer; and Zamir Rauf, our Chief Financial Officer. Thad Miller or Chief Legal Officer is also with us to address any questions you may have on regulatory issues.

Before we begin the presentation, I encourage all listeners to review the Safe Harbor statement included on slide two of the presentation. As a reminder, certain statements made during the call and within the accompanying presentation materials may be deemed forward-looking statements within the meaning of applicable securities laws. These statements involve certain risks and uncertainties detailed in our most recent filings with the SEC. Should one or more of these risks or uncertainties materialize or should underlying assumptions prove incorrect, actual results may vary materially from those indicated.

Additionally, we would like to advice you that statements made during this call are made as of this date and listeners to any replay should understand that the passage of time by itself will diminish the quality of these statements.

Lastly, today’s call and the accompanying presentation materials may reference certain non-GAAP financial measures. Reconciliations of these non-GAAP measures to the most directly comparable GAAP measures are available within the appendix of our presentation material.

I’ll now turn it over to Jack to lead our presentation.

Jack Fusco

Thank you, Bryan, and good morning to everyone. I first want to start by welcoming Bryan to the Calpine team. As most of you know, Bryan comes to Calpine with a wealth of experience in investment banking, finance, and investor relations, and I am pleased that he has joined us.

On a regrettable more somber note on October 20th, we had a tragic accident at our Geysers power plant. A longtime Geysers employee, Mr. Corky Bracisco suffered a fatal automobile accident. I would like to reassure his family, friends, and our Geysers employees that my thoughts and prayers are with them.

Turning back to our results. We delivered another solid quarter. I challenged our operations team to prove that they can deliver and they kept for lost ground. And I am pleased to report that Calpine’s operating performance during the third quarter was record breaking.

Our overall fleet delivered an impressive 1.9% forced outage factor. Even more impressive was the performance of our Texas fleet 0.9% forced outage factor during one of the hottest and driest summers on record. Our Geysers power plant had 0.3% forced outage factor.

Women in operations and maintenance, thank you. Your efforts resulted in the production of 29 billion kilowatt hours of reliable affordable power for customers. Thad will further discuss our commercial and plant operations result later on this call.

From a financial perspective, we are on target to deliver our 2011 guidance. Adjusted EBITDA increased by 2% through the first nine months of year. The quarter saw slight decrease compared to the third quarter 2010 primarily driven by the sell of our Colorado plant, and sell of minority interest of our Freestone power plant, both of which occurred during December 2010. Zamir will discuss the detailed drivers of our financial results later in the call.

Meanwhile, we continue to make significant progress towards enhancing shareholder value through financially disciplined effective capital allocation, between our growth projects and share repurchase program.

I will cover the status of our growth projects momentarily. As of yesterday though, we have repurchased over 2 million shares. We will continue to execute this program on an opportunistic and financially disciplined basis, considering all available alternatives in our capital allocation decision-making.

Now turning our attention to 2012. We are initiating full year guidance for adjusted EBITDA and adjusted recurring free cash flow at $1.55 billion to $1.75 billion and $375 million to $575 million respectively. This is a wider range than we have typically provided due to the fact that we do not believe the four electricity markets are correctly pricing in the unprecedented regulatory and market outcomes. Therefore, at this moment, we are carrying a substantially larger open or unhedged position for 2012 than we did going into 2011 and prior years.

Zamir will cover the details of the 2012 guidance. But suffice to say, we have a high degree of visibility into incremental upside from 2012 to 2013, with a completion of both the Russell City and Los Esteros projects, as well as increased PJM capacity revenues and the implementation of carbon regulation in California. In longer-term, we believe that we will be able to deliver steadily growing returns to our shareholders, as the economy recovers, environmental regulations take effect, power markets tighten and electricity demand grows.

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