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Acquisitions, Divestitures and Discontinued Operations | 12 Months Ended
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Dec. 31, 2011
Acquisitions, Divestitures and Discontinued Operations [Abstract] |
Acquisitions, Divestitures and Discontinued Operations | Acquisitions, Divestitures and Discontinued Operations Conectiv Acquisition On July 1, 2010, we, through our indirect, wholly owned subsidiary NDH, completed the Conectiv Acquisition. The assets acquired include 18 operating power plants and the York Energy Center that was under construction and achieved COD on March 2, 2011, totaling 4,491 MW of capacity. We did not acquire Conectiv's trading book, load serving auction obligations or collateral requirements. Additionally, we did not assume any of Conectiv's off-site environmental liabilities, environmental remediation liabilities in excess of $10 million related to assets located in New Jersey that are subject to ISRA, or pre-close accumulated pension and retirement welfare liabilities; however, we did assume pension liabilities on future services and compensation increases for past services for approximately 130 grandfathered union employees who joined Calpine as a result of the Conectiv Acquisition. During the second half of 2010, we initiated a voluntary retirement incentive program which reduced the number of employees covered by our pension obligation by 31 employees. The net proceeds of $1.3 billion received from the NDH Project Debt were used, together with available operating cash, to pay the Conectiv Acquisition purchase price of approximately $1.64 billion and also fund a cash contribution from Calpine Corporation to NDH of $110 million to fund completion of the York Energy Center. The Conectiv Acquisition provided us with a significant presence in the Mid-Atlantic market, one of the most robust competitive power markets in the U.S., and positioned us with three scale markets instead of two (California and Texas) giving us greater geographic diversity. We accounted for the Conectiv Acquisition under the acquisition method of accounting in accordance with U.S. GAAP. During the second quarter of 2011, we finalized the valuations of the net assets acquired in the Conectiv Acquisition which is summarized in the following table (in millions). We did not record any material valuation adjustments during the first half of 2011, and we did not recognize any goodwill as a result of this acquisition.
Consideration | $ | 1,640 |
Final values of identifiable assets acquired and liabilities assumed: |
Assets: |
Current assets | $ | 78 |
Property, plant and equipment, net | 1,574 |
Other long-term assets | 85 |
Total assets acquired | 1,737 |
Liabilities: |
Current liabilities | 46 |
Long-term liabilities | 51 |
Total liabilities assumed | 97 |
Net assets acquired | $ | 1,640 |
Acquisition of Broad River and South Point Leases On December 8, 2010, we, through our wholly owned, indirect subsidiary, Calpine BRSP, purchased entities from CIT Capital USA Inc. that held the leases for our Broad River and South Point power plants by assuming debt with a fair value of approximately $297 million and a cash payment of approximately $40 million. Prior to this purchase, our Broad River power plant was operated under a sale-leaseback transaction that was accounted for as a failed sale-leaseback financing transaction and our South Point power plant was accounted for as an operating lease. The purchase of the entities holding the power plant leases only added an incremental $85 million in consolidated debt, as the transaction eliminated approximately $212 million recorded as debt and accrued interest owed to CIT Capital USA Inc. under our Broad River power plant lease. We recorded a total pre-tax loss of approximately $125 million on our Consolidated Statement of Operations for the year ended December 31, 2010 for this transaction, which was recorded as shown below (in millions):
Broad River: debt extinguishment costs | $ | 30 |
South Point: impairment loss | 95 |
Total loss recorded for this transaction | $ | 125 |
Broad River — Prior to the purchase, we operated the Broad River power plant under a lease that was accounted for as a failed sale-leaseback financing transaction under U.S. GAAP. The lease liability was included in project financing, notes payable and other debt balance and the power plant assets were included in our property plant and equipment. As a result of the purchase, we did not adjust the historical value of the assets. We allocated the value of the consideration paid in the transaction based upon the fair value of both plants, and the result was an allocation of assumed debt that was greater than the prior debt obligation resulting in a pre-tax loss of approximately $30 million. Because we primarily exchanged future lease obligations for a debt obligation, the resulting loss is recorded as debt extinguishment costs for accounting purposes. South Point — Prior to the purchase, we accounted for the South Point lease as an operating lease. We allocated the consideration paid in the transaction based upon the fair value of both plants. The result was an allocation of consideration paid for South Point that was in excess of the fair value of assets acquired by approximately $95 million, which was primarily due to the elimination of a lease levelization asset associated with the prior lease, which was no longer proper on a consolidated basis. The resulting loss has been reported as an impairment loss for accounting purposes. While the transaction resulted in a one-time, pre-tax loss, in the longer-term, the acquisition of these entities grants us greater flexibility and more control of the future operation of both plants and simplified a previously complex leasing arrangement. Sale of Blue Spruce and Rocky Mountain On December 6, 2010, we, through our indirect, wholly owned subsidiaries Riverside Energy Center, LLC and CDHI, completed the sale of 100% of our ownership interests in Blue Spruce and Rocky Mountain for approximately $739 million, and we recorded a pre-tax gain of approximately $209 million during the fourth quarter of 2010. The results of operations for Blue Spruce and Rocky Mountain are reported as discontinued operations on our Consolidated Statement of Operations for years ended December 31, 2010 and 2009. Discontinued Operations The table below presents the components of our discontinued operations for the periods presented (in millions):
|  | 2010 |  | 2009
Operating revenues |  | $ | 92 |  |  | $ | 101 |
Gain on disposal of discontinued operations |  | 209 |  |  | — |
Income from discontinued operations before taxes |  | 43 |  |  | 35 |
Less: Income tax expense |  | 59 |  |  | — |
Discontinued operations, net of tax |  | $ | 193 |  |  | $ | 35 |
Other Asset Sales On December 8, 2010, we sold a 25% undivided interest in the assets of our Freestone power plant for approximately $215 million in cash. We recorded a pre-tax gain of approximately $119 million in December 2010, which is included in (gain) on sale of assets, net on our Consolidated Statement of Operations. We continue to operate Freestone after the sale.

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