That the contracts will be renegotiated.
You don't seem to care what you say.
The contracts -- or at least the ones anyone worries about -- have already been renegotiated. California got shorter terms, and CPN got (1) a little more money earlier in the shorter contract periods, and (2) something close to immunity from further claims by California:
biz.yahoo.com
Monday April 22, 6:23 pm Eastern Time
Press Release
SOURCE: Calpine Corporation
Calpine Completes Restructuring of California Power Contracts
New Contracts to Provide Long-Term Benefit for California and Calpine
SAN JOSE, Calif., April 22 /PRNewswire-FirstCall/ -- Calpine Corporation (NYSE: CPN - news) today announced that it has successfully restructured its long-term power contracts with the California Department of Water Resources (CDWR). The Office of the Governor, the California Public Utilities Commission (CPUC), the Electricity Oversight Board (EOB) and the California Attorney General (AG) endorse these contracts and agree to drop all challenges, including withdrawing the Section 206 complaint recently filed by the CPUC and EOB at FERC.
``Calpine is very pleased with this outcome. Both sides worked hard to create solutions that benefit all parties -- California energy consumers, the state of California and Calpine,'' said Jim Macias, Calpine's executive vice president, chief operating officer and lead negotiator for the CDWR contracts. ``These restructured agreements resolve questions and uncertainty surrounding our contracts. The state is assured electricity will be available under more flexible terms when supplies will be critically needed. Calpine continues to benefit from solid, long-term power contracts and increased revenue and cash flow in the early years.''
To help the CDWR reduce their long-term purchase obligations, Calpine has agreed to shorten the duration of the two ten-year, baseload energy contracts by two years, and the 20-year peaker contract by ten years. ``Calpine remains bullish on the long-term California power market,'' continued Macias. ``Calpine believes the growing need for new power in California is significant -- particularly as the economy recovers, weather normalizes and older, less efficient generating assets need to be replaced. We are confident that we will be able to sell this capacity in the future.''
Calpine also agreed to reduce the energy price on one ten-year baseload contract from $61.00 to $59.60 per megawatt-hour, and convert the energy portion of its peaker contract to gas index pricing from fixed energy pricing. The company also agreed to deliver up to 12.2 million megawatt-hours of additional energy in 2002 and 2003. ``This will help fix CDWR's cost of electricity in the near-term, while providing the state with the needed flexibility to meet uncertain energy demands,'' added Macias.
Overview
-- Restructured contracts are endorsed by The Office of the Governor, the CPUC, AG, EOB and CDWR
-- The CPUC and EOB will withdraw their Federal Energy Regulatory Commission (FERC) 206 complaints; EOB and CPUC agree to no longer seek refunds from Calpine through FERC refund proceedings
-- The Office of the Governor, the CPUC, AG, EOB and CDWR agree that they will not challenge the validity or the justness and reasonableness of the restructured contracts
-- Calpine agreed to pay $6 million over three years to the AG to resolve any and all claims against Calpine; $1.5 million of this amount will be used to fund solar or other alternative energy retrofits of schools, hospitals and public buildings in California
-- Calpine to provide additional, flexible energy sales to CDWR in 2002 and 2003
-- Calpine adjusted its gas hedges to reflect new terms and conditions of restructured contracts
Contract 1
-- Baseload power deliveries remain unchanged at 350 megawatts for 2002, 600 megawatts for 2003, and 1,000 megawatts for 2004 and beyond
-- Fixed energy price remains at $58.60 per megawatt-hour
-- Calpine to provide up to 2.7 million and 4.8 million megawatt hours of additional, flexible energy in 2002 and 2003, respectively; energy pricing indexed to gas; two-year fixed capacity revenue of approximately $127.5 million
-- Term of contract reduced to eight years from ten years
-- Approximately $3.7 billion of total revenue is expected to be earned from baseload and peaking capacity between 2002 and 2009
Contract 2
-- Baseload power deliveries remain unchanged at 200 megawatts for the first half of 2002 and 1,000 megawatts from July 1, 2002 forward
-- Fixed energy price reduced to $59.60 per megawatt-hour from $61.00
-- Calpine to provide up to 1.7 million and 3.0 million megawatt-hours of additional, flexible energy in 2002 and 2003, respectively; energy pricing indexed to gas; two-year fixed capacity revenue of approximately $88.8 million
-- Term of contract reduced to eight years from ten years
-- CDWR has the right to complete four Calpine projects planned for California if Calpine does not build these four new energy centers; contract prices, terms and conditions are not impacted; CDWR reimburses Calpine for all construction costs and certain other costs incurred to date
-- Approximately $4.1 billion of total revenue is expected to be earned from baseload and peaking capacity between 2002 and 2009
Contract 3
-- Calpine continues to provide CDWR with an option of 2,000 hours for 495 megawatts of peak power
-- Fixed annual capacity payments remain at $90 million for years one through five and $80 million per year thereafter; energy pricing now indexed to gas, versus fixed at $73.00 per megawatt-hour
-- Term of the contract reduced to ten years from 20 years
-- Approximately $800 million of revenue expected to be earned from peaking capacity between 2002 and 2011
Contract 4
-- Calpine to provide up to 225 megawatts of new peaking capacity
-- Three-year term, beginning with commercial operation
-- Fixed annual average capacity payments remain at $46.8 million per year; energy pricing remains indexed to gas
-- Approximately $140 million of revenue expected to be earned from capacity between 2003 and 2005
Commitment to California Market
Calpine has long recognized the need for new sources of clean generation in California. In 1996, the company launched the largest power development program in California. In 2001, Calpine brought on line 1,100 megawatts and expects to add another 1,375 megawatts in 2002 -- representing approximately 2,500 megawatts of clean, reliable electricity for California consumers.
The demand for electricity is expected to continue to grow in California. A recent FERC study has warned that the state could still face a shortfall of energy supply and that more electric generating facilities will be needed. Recent slowdowns and cancellations of power projects in California by other power generators have added to this potential shortfall.
Calpine will remain a vital part of the solution to California's current and future energy needs. As the state's leading independent power producer, the company elected to work cooperatively with the state to reach a mutually beneficial and timely resolution. These agreements also will help improve market stability and regulatory certainty -- a fundamental requisite for Calpine's commitment to the state's power market. The company will continue to generate and deliver clean, reliable electricity to help stem potential energy shortfalls.[snip] |
