First Quarter 2017 Investor Update Conference Call April 28, 2017 Calpine Corporation
Safe Harbor Statement Forward-Looking Statements The information contained in this presentation includes certain estimates, projections and other forward-looking information that reflect Calpine’s current views with respect to future events and financial performance. These estimates, projections and other forward-looking information are based on assumptions that Calpine believes, as of the date hereof, are reasonable. Inevitably, there will be differences between such estimates and actual results, and those differences may be material. There can be no assurance that any estimates, projections or forward-looking information will be realized. All such estimates, projections and forward-looking information speak only as of the date hereof. Calpine undertakes no duty to update or revise the information contained herein other than as required by law. You are cautioned not to place undue reliance on the estimates, projections and other forward-looking information in this presentation as they are based on current expectations and general assumptions and are subject to various risks, uncertainties and other factors, including those set forth in Calpine’s Quarterly Report on Form 10-Q for the three months ended March 31, 2017, its Annual Report on Form 10-K for the year ended December 31, 2016 and in other documents that Calpine files with the SEC. Many of these risks, uncertainties and other factors are beyond Calpine’s control and may cause actual results to differ materially from the views, beliefs and estimates expressed herein. Calpine’s reports and other information filed with the SEC, including the risk factors identified in its Annual Report on Form 10-K for the year ended December 31, 2016, can be found on the SEC’s website at www.sec.gov and on Calpine’s website at www.calpine.com. Reconciliation to U.S. GAAP Financial Information The following presentation includes certain “non-GAAP financial measures” as defined in Regulation G under the Securities Exchange Act of 1934, as amended. Schedules are included herein that reconcile the non-GAAP financial measures included in the following presentation to the most directly comparable financial measures calculated and presented in accordance with U.S. GAAP. Calpine Corporation 1
Agenda Welcome and Safe Harbor Bryan Kimzey Vice President, Investor Relations CEO Review Thad Hill President, Chief Executive Officer Financial Review Zamir Rauf EVP, Chief Financial Officer Q&A Calpine Corporation 2
Reaffirming Full Year Guidance Recent Highlights On Track for Full Year Guidance Adj. EBITDA 3 ($ millions) Delivering on financial commitments 2018E: ~$100M above • Challenging 1Q driven by mild winter 2017E midpoint – Lower volume, consistent with prior guidance: ~90M MWh in 2017 • Full year results driven by 2H17 • Reaffirming 2017 guidance Delevering 1Q15 1Q16 1Q17 FY16 FY17E • Executing on $2.7 billion debt paydown plan – Paid down $233 million 1 of debt in 1Q17 out of $850 million planned in 2017 Key BalYr Drivers (YoY): Relentless portfolio management Retail: +$100M – Closed on sale of Osprey Energy Center Capacity payments (Jun-Dec): +$50M – Retired Clear Lake Energy Center Asset sales/closures: - $35M – Guadalupe: Canceled construction project; Gas transport credit (2Q): - $40M signed 10-year PPA • Markets/hedges/costs ? – Washington Parish: Contract to monetize value of legacy site via construction/sale 2 1 Includes $150 million paydown of Solutions bridge loan, $53 million net paydown via refinancing of 2023 Notes and $55 million of scheduled amortization, offset by $25 million draw on revolver. 2 Subject to regulatory approval and other conditions. 3 A non-GAAP financial measure. Reconciliations of Adj. EBITDA to Net Income (Loss), the most comparable U.S. GAAP measure, are included in the appendix. Calpine Corporation 3
Enduring Business Model: Best-in-Class Fleet + Steady Cash Flows Durable Fleet Steady Financial Performance Modern, flexible & efficient Adj. EBITDA 1 ($ millions) Environmentally responsible Critical for reliability • $1.75B - $2.0B of Adj. EBITDA 1 annually Geographically diverse • 75% Unlevered Free Cash Flow conversion 2 • $6.7B of unrestricted federal NOLs Complementary retail platform • $2.7B planned debt paydown (2017 – 2019) Ability to maintain steady results while shrinking balance sheet 1 A non-GAAP financial measure. Reconciliations of Adj. EBITDA to Net Income (Loss), the most comparable U.S. GAAP measure, are included in the appendix. 2 Based upon midpoint of 2017 Adjusted FCF and Adjusted EBITDA guidance. Calpine Corporation 4
Long-Term Value Proposition Near-term catalysts Relentless Portfolio Management represent upside opportunity… What We’ve What’s New / • Fundamental reform in PJM / ISO-NE with Done Recently To Come strong FERC leadership • Discontinued operations at • Managing CA peaker portfolio • PJM capacity auction: uneconomic plants ‒ Negotiating RMR for Potential for EMAAC to separate ‒ Sutter Yuba City, Feather River ‒ Clear Lake ‒ King City, Wolfskill status • Retirement announcements in Texas ‒ South Point pending • Divested non-core assets • Complete York 2 by early 2018 …while we continue to manage the ‒ Osprey • Washington Parish construction and ‒ Mankato sale 1 to Entergy Louisiana by 2021 business for long-term value • Guadalupe Peaker canceled; PPA with Guadalupe Valley Prudent Balance Sheet / Evolution into Integrated Platform Cost Management Planned Debt Paydown ($M): Rapid and Effective Expansion $1,230 of Retail Platform 1Q: ~27% $2.7B Retail integration underway: Retail Load Served as % of Wholesale Generation complete paydown • Aligning systems / over next ~$850 $750 processes across retail three years organization: $600 $15M run-rate synergies $550 captured in 2017 ~75% $400 current market • Leveraging wholesale fleet $280 $46 cap 2 to create innovative asset- $53 backed retail products $200 $200 $200 2017 2018 2019 Amortization 2023 Notes Pasadena Solutions Bridge 1 Subject to regulatory approval and other conditions. 2 Based upon closing stock price as of 4/27/17. OMEC 2022 Notes 2019 Term Loan Calpine Corporation 5
Advocating for Free Markets States Continue Attempts to Choose Our View Out-of-Market Winners Issue Status Further state intervention not a foregone conclusion ‒ OH, PA, NJ and CT nuclear bailouts will be Attempt to bail out old Efforts defeated coal generation in OH tougher to pass; most plants would continue operating without subsidies Nuclear bailouts in NY and IL Litigation underway ‒ Significantly above market prices expected from Mass. RFP; DPU will consider costs prior to Efforts underway for nuclear State battles with contract approval bailouts in OH, PA, NJ, CT broad opposition Large renewable efforts in Draft ISO-NE capacity ISO-NE and PJM actively pursuing solutions that New England market reform protect integrity of wholesale markets while accommodating state policies ‒ Continued grid reliability and new generation 3 Lines of Defense require committed stable, wholesale markets ‒ In addition, states do not want responsibility of 1 State by state on-the-ground political effort reliability and resource planning ‒ New England effort underway: Litigation using arguments around federal ISO-NE pro-market tariff proposal issued 2 preemption and the Commerce Clause Tariff restructuring to allow coexistence of state New FERC Commissioners expected to be 3 mandates and wholesale markets pro-market and anti-subsidy Calpine Corporation 6
Focused on Best-in-Class Operations Generation in Key Markets (000 MWh) 1 Employee Total Reportable Incident Rate Mild winter Key YoY Near-record hydro Reversal of coal/gas Osprey, Mankato Drivers: Delta switching Forced Outage Factor (FOF, %) Retail Sales (TWh) Strong Retail Platform • ~80% Retention Rate Geysers wildfire • Average contract term: Single plant Two single plant outage ~2 years Geysers Single plant outages wildfire outage • Average customer duration: >5 years 2.5 2.6 1.9 0.1 1.6 1 As compared to our SEC filings, generation shown here includes net interest in generation from our unconsolidated power plants and plants owned but not operated by us. Calpine Corporation 7
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