Investor Meetings May 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
Calpine Generating Power Strategically positioned within U.S. power industry value chain Fuel Supply Retail Transportation Transmission & Distribution Calpine (NYSE: Calpine (NYSE: CPN) CPN) • ~2,400 employees • ~2,400 employees • Approx. 26,000 MW • Approx. 26,000 MW generation capacity generation capacity • 80 power plants 1 • 80 power plants 1 Power Generation 1 Includes one plant under construction. Calpine Corporation 2
National Portfolio of Approximately 26,000 MW Geographic Diversity Dispatch Technology As of 4/28/2017 • Geographically diversified portfolio: Scale in America’s most competitive power markets • Featuring one of smallest environmental footprints in America’s power generation sector • Largest operator of combined heat and power (cogeneration) technology in America • Largest geothermal power producer in America Calpine Corporation 3
Nation’s Largest Baseload Renewable, Natural Gas and Cogeneration Power Provider Clean Modern Efficient Our 2016 steam-adjusted heat rate was 7,386 Source: Calpine, Energy Velocity (2016). CPN steam-adjusted heat rate excludes peakers. Calpine Corporation 4
Calpine Investment Thesis • Experienced leadership bench Premier • Best-in-class operations and unparalleled asset quality competitive power • Geographic diversity across competitive wholesale power markets company • Wholesale business complemented by expanded retail customer base • Abundant, affordable natural gas Secular trends • Implementation of stringent environmental regulations favor natural gas- • Focus on grid reliability: pay-for-performance initiatives fired generation • Need for flexible capacity to integrate intermittent renewables • Reducing leverage through accelerated debt paydown Cash-based • Strong liquidity and minimal near-term debt maturities capital allocation • Monetizing assets through sale or contracts philosophy • Committed to returning capital to stakeholders Calpine represents an attractive opportunity to gain exposure to the combined-cycle gas turbine recovery at a substantial discount to replacement cost Calpine Corporation 5
VALUE PROPOSITION Calpine Corporation 6
2017 Objectives Maintain excellent safety performance Achieve FOF <2.5% DELIVER SOLID, DELIVER SOLID, DELIVER SOLID, Complete York 2 by early 2018 STABLE STABLE STABLE Pay off ~$850M 1 of debt CASH FLOWS CASH FLOWS CASH FLOWS Complete annual portfolio review Deliver on Adj. EBITDA guidance 2 of $1,800 - $1,950 M NE Residential TX Residential Broker C&I TX GLO (NAP) SUCCESSFULLY SUCCESSFULLY SUCCESSFULLY Direct C&I Wholesale INTEGRATE INTEGRATE INTEGRATE Origination EXPANDED EXPANDED EXPANDED Solutions Champion Management Management RETAIL PLATFORM RETAIL PLATFORM RETAIL PLATFORM Enterprise + Hedging Systems Wholesale Fleet • Commitment to delever • Accelerate debt paydown: $2.7B committed or planned over next EXECUTE ON three years DELEVERING PLAN • Reduce leverage by ~1.5x by FYE 2019 3 • Philosophy: Delevering creates equity value 1 Includes repayment of Solutions bridge loan, scheduled amortization, repurchase of lessor interest in Pasadena lease and call of remaining 2023 notes (funded by ~$53 million in cash on hand and a $400 million term loan due 2019). Amount excludes call premium of ~$18 million. 2 Guidance range as of 4/28/2017. 3 At midpoint of 2017 Adjusted EBITDA guidance range. Calpine Corporation 7
Enduring Business Model: Best-in-Class Fleet + Steady Cash Flows Durable Fleet Steady Financial Performance Modern, flexible & efficient Adj. EBITDA 1 ($ 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 • $2.7B planned debt paydown (2017 – 2019) Ability to maintain steady results while shrinking balance sheet 1 A non-GAAP financial measure. Reconciliations of Adj. EBITDA to Net Income (Loss), the most comparable U.S. GAAP measure, are included in the appendix and on our website. 2017E as of 4/28/17. 2 Based upon midpoint of 2017 Adjusted FCF and Adjusted EBITDA guidance. Calpine Corporation 8
Long-Term Value Proposition Near-term catalysts Relentless Portfolio Management represent upside opportunity… What We’ve What’s New / • Fundamental reform in PJM / ISO-NE with strong FERC leadership Done Recently To Come • Discontinued operations at • Managing CA peaker portfolio • PJM capacity auction: uneconomic plants ‒ Negotiating RMR for Potential for EMAAC to separate ‒ Sutter Yuba City, Feather River ‒ Clear Lake ‒ King City, Wolfskill status • Retirement announcements in Texas ‒ South Point pending • Divested non-core assets • Complete York 2 by early 2018 …while we continue to manage the ‒ Osprey • Washington Parish construction and ‒ Mankato sale 1 to Entergy Louisiana by 2021 business for long-term value • Guadalupe Peaker canceled; PPA with Guadalupe Valley Prudent Balance Sheet / Evolution into Integrated Platform Cost Management Planned Debt Paydown ($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 / ~$850 over next processes across retail $750 three years organization: $600 $15M run-rate synergies $550 captured in 2017 ~75% $400 • Leveraging wholesale fleet $280 current market $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 9
REGIONAL OBSERVATIONS Calpine Corporation 10
As Markets Continue to Evolve, So Does Calpine Historically, Calpine evolution has been …with recent expansion into complementary geographically focused… retail businesses 2010: Today*: North 3,417 MW West 14% East North 6,317 MW West 9,145 MW 25% 7,910 MW 78 plants 36% 32% Southeast 77 plants 25.6 GW 6,083 MW + 24.8 GW 24% Retail Texas Southeast 1,139 MW 9,027 MW Texas 4% 35% 7,392 MW 30% Geographic diversity and market scale objectives Strategically Expanded Retail Customer Base have been successfully achieved National Calpine Rank Market (MW Gas-Fired Capacity) Geographic Texas #1 S olut ions Scope Champion Nort h American California #2 Power Mid-Atlantic #3 Champion New England #3 Local Small C&I Direct C&I Residential C&I Broker Consultative Businesses Low High * Shown proforma for mothball of Sutter and South Point (West), and inclusive of York 2 expansion. Product Customization Calpine Corporation 11
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