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Debt | 12 Months Ended
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Dec. 31, 2011
Debt [Abstract] |
Debt | Debt Our debt at December 31, 2011 and 2010, was as follows (in millions):
| 2011 |  | 2010
First Lien Notes(1) | $ | 5,892 |  |  | $ | 4,691 |
Project financing, notes payable and other(2)(3) | 1,691 |  |  | 1,922 |
Term Loan and New Term Loan(2)(4) | 1,646 |  |  | — |
CCFC Notes | 972 |  |  | 965 |
Capital lease obligations | 224 |  |  | 236 |
NDH Project Debt(4) | — |  |  | 1,258 |
First Lien Credit Facility(1) | — |  |  | 1,184 |
Total debt | 10,425 |  |  | 10,256 |
Less: Current maturities | 104 |  |  | 152 |
Debt, net of current portion | $ | 10,321 |  |  | $ | 10,104 |
_____________
(1) | On January 14, 2011, we repaid and terminated the First Lien Credit Facility with the issuance of the 2023 First Lien Notes as discussed below.
(2) | On June 17, 2011, we repaid approximately $340 million of project debt with the proceeds received from $360 million in borrowings under the New Term Loan as further described below.
(3) | On June 24, 2011, we closed on the approximately $845 million Russell City Project Debt to fund the construction of Russell City and on August 23, 2011, we closed on the $373 million Los Esteros Project Debt to fund the upgrade of our Los Esteros Critical Energy Facility, both further described below.
(4) | On March 9, 2011, we borrowed $1.3 billion under the Term Loan and repaid and terminated the NDH Project Debt as discussed below.
Annual Debt Maturities Contractual annual principal repayments or maturities of debt instruments as of December 31, 2011, are as follows (in millions):
2012 | $ | 104 |
2013 | 135 |
2014 | 392 |
2015 | 164 |
2016 | 1,177 |
Thereafter | 8,496 |
Total debt | 10,468 |
Less: Discount | 43 |
Total | $ | 10,425 |
Our First Lien Notes and Termination of the First Lien Credit Facility Our First Lien Notes are summarized in the table below (in millions, except for interest rates):
| Outstanding at December 31, |  | Weighted Average Effective Interest Rates(1)
| 2011 |  | 2010 |  | 2011 |  | 2010
2017 First Lien Notes | $ | 1,200 |  |  | $ | 1,200 |  |  | 7.5 | % |  | 7.5 | %
2019 First Lien Notes | 400 |  |  | 400 |  |  | 8.2 |  |  | 8.2 |
2020 First Lien Notes | 1,092 |  |  | 1,091 |  |  | 8.1 |  |  | 8.1 |
2021 First Lien Notes | 2,000 |  |  | 2,000 |  |  | 7.7 |  |  | 7.7 |
2023 First Lien Notes(2) | 1,200 |  |  | — |  |  | 8.0 |  |  | — |
Total First Lien Notes | $ | 5,892 |  |  | $ | 4,691 |  |  |  |  |
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(1) | Our weighted average interest rate calculation includes the amortization of deferred financing costs and debt discount.
(2) | On January 14, 2011, we issued $1.2 billion in aggregate principal amount of 7.875% senior secured notes due 2023 in a private placement. Interest on the 2023 First Lien Notes is payable semi-annually on January 15 and July 15 of each year, beginning on July 15, 2011. The 2023 First Lien Notes will mature on January 15, 2023.
Following our emergence from Chapter 11, our First Lien Credit Facility served as our primary debt facility. Beginning in late 2009, we began to repay or exchange our First Lien Credit Facility term loans through proceeds received from the issuances of the First Lien Notes, together with operating cash. On January 14, 2011, we repaid the remaining approximately $1.2 billion from the proceeds from the issuance of the 2023 First Lien Notes, together with operating cash, thereby terminating the First Lien Credit Facility in accordance with its terms. Our First Lien Notes are secured equally and ratably with indebtedness incurred under our Corporate Revolving Facility, Term Loan and New Term Loan (described below), subject to certain exceptions and permitted liens, on substantially all of our and certain of the guarantors' existing and future assets. Additionally, our First Lien Notes rank equally in right of payment with all of our and the guarantors' other existing and future senior indebtedness, and will be effectively subordinated in right of payment to all existing and future liabilities of our subsidiaries that do not guarantee our First Lien Notes. Repayment of the NDH Project Debt also eliminated the restrictions against our NDH subsidiaries being guarantors to our First Lien Notes and Corporate Revolving Facility. On March 9, 2011, we executed assumption agreements to the amended and restated guarantee and collateral agreement, to add our NDH subsidiaries as guarantors to our Corporate Revolving Facility and Term Loan. On April 26, 2011, we executed supplemental indentures for the First Lien Notes to add the NDH subsidiaries as guarantors. On June 17, 2011, we executed assumption agreements to the amended and restated guarantee and collateral agreement, to add Deer Park Holdings, LLC, Metcalf Holdings, LLC, Deer Park Energy Center LLC and Metcalf Energy Center, LLC as guarantors of our Corporate Revolving Facility, Term Loan and New Term Loan. On July 22, 2011, we executed supplemental indentures for the First Lien Notes to add Deer Park Holdings, LLC, Metcalf Holdings, LLC, Deer Park Energy Center LLC and Metcalf Energy Center, LLC as guarantors. Subject to certain qualifications and exceptions, our First Lien Notes will, among other things, limit our ability and the ability of the guarantors to:
• | incur or guarantee additional first lien indebtedness;
• | enter into certain types of commodity hedge agreements that can be secured by first lien collateral;
• | enter into sale and leaseback transactions;
• | create or incur liens; and
• | consolidate, merge or transfer all or substantially all of our assets and the assets of our restricted subsidiaries on a combined basis.
In connection with the issuance of the 2023 First Lien Notes, we recorded approximately $22 million of deferred financing costs on our Consolidated Balance Sheet during 2011, and we recorded approximately $19 million in debt extinguishment costs during the year ended December 31, 2011, related to the repayment and termination of the First Lien Credit Facility. The Term Loan and the New Term Loan and Repayment of the NDH Project Debt and Other Project Debt On March 9, 2011, we entered into and borrowed $1.3 billion under the Term Loan. We used the net proceeds received, together with operating cash on hand to fully retire the approximately $1.3 billion NDH Project Debt in accordance with its repayment terms. The NDH Project Debt was originally established to partially fund the Conectiv Acquisition. The Term Loan provides for a senior secured term loan facility in an aggregate principal amount of $1.3 billion and bears interest, at our option, at either (i) the base rate, equal to the higher of the Federal Funds effective rate plus 0.5% per annum or the Prime Rate (as such terms are defined in the Term Loan credit agreement), plus an applicable margin of 2.25%, or (ii) LIBOR plus 3.25% per annum subject to a LIBOR floor of 1.25%. An aggregate amount equal to 0.25% of the aggregate principal amount of the Term Loan will be payable at the end of each quarter commencing on June 30, 2011, with the remaining balance payable on the maturity date (April 1, 2018). We may elect from time to time to convert all or a portion of the Term Loan from initial LIBOR rate loans to base rate loans or vice versa. In addition, we may at any time, and from time to time, prepay the Term Loan, in whole or in part, without premium or penalty, upon irrevocable notice to the administrative agent. We may also reprice the interest rate on the Term Loan, subject to approval from the Lenders and subject to a 1% premium if a repricing transaction occurs prior to the first anniversary of the closing date. We may elect to extend the maturity of any term loans under the Term Loan, in whole or in part subject to approval from those lenders holding such term loans. The Term Loan is subject to certain qualifications and exceptions, similar to our First Lien Notes. If a change of control triggering event occurs, the Company shall notify the administrative agent in writing and shall make an offer to prepay the entire principal amount of the Term Loan outstanding within thirty (30) days after the date of such change of control triggering event. In connection with the Term Loan, the Company and its subsidiaries (subject to certain exceptions) have made certain representations and warranties and are required to comply with various affirmative and negative covenants. The Term Loan is subject to customary events of default included in financing transactions, including, among others, failure to make payments when due, certain defaults under other material indebtedness, breach of certain covenants, breach of certain representations and warranties, involuntary or voluntary bankruptcy, and material judgments. If an event of default arises from certain events of bankruptcy or insolvency, all amounts outstanding under the Term Loan will become due and payable immediately without further action or notice. If other events of default arise (as defined in the Credit Agreement) and are continuing, the lenders holding more than 50% of the outstanding Term Loan amounts (as defined in the Credit Agreement) may declare all the Term Loan amounts outstanding to be due and payable immediately. In connection with the Term Loan, we recorded deferred financing costs of approximately $14 million on our Consolidated Balance Sheet during 2011, and we recorded approximately $74 million in debt extinguishment costs during the year ended December 31, 2011, which includes approximately $36 million from the write-off of unamortized deferred financing costs, the write-off of approximately $25 million of debt discount and approximately $13 million in prepayment premiums related to the NDH Project Debt. On June 17, 2011, we repaid approximately $340 million of project debt with the proceeds received from $360 million in borrowings under the New Term Loan. The New Term Loan carries substantially the same terms as the Term Loan and matures on April 1, 2018. The New Term Loan also contains very similar covenants, qualifications, exceptions and limitations as the Term Loan and First Lien Notes. In connection with the New Term Loan, we recorded deferred financing costs of approximately $5 million on our Consolidated Balance Sheet during 2011, and we recorded approximately $5 million in debt extinguishment costs during the year ended December 31, 2011. Project Financing, Notes Payable and Other The components of our project financing, notes payable and other are (in millions, except for interest rates):
| Outstanding at December 31, |  | Weighted Average Effective Interest Rates(1) |
| 2011 |  | 2010 |  | 2011 |  | 2010 |
Steamboat due 2017 | $ | 437 |  |  | $ | 445 |  |  | 6.6 | % |  | 6.6 | % |
OMEC due 2019 | 355 |  |  | 364 |  |  | 6.8 |  |  | 6.8 |  |
Russell City | 244 |  |  | — |  |  | 4.1 |  |  | — |  |
Calpine BRSP due 2014 | 232 |  |  | 297 |  |  | 5.7 |  |  | 5.7 |  |
Pasadena(2) | 185 |  |  | 208 |  |  | 8.8 |  |  | 8.6 |  |
Bethpage Energy Center 3, LLC due 2020-2025(3) | 98 |  |  | 103 |  |  | 7.0 |  |  | 7.0 |  |
Los Esteros | 83 |  |  | — |  |  | 3.8 |  |  | — |  |
Gilroy note payable due 2014 | 49 |  |  | 64 |  |  | 10.6 |  |  | 10.6 |  |
Metcalf(4) | — |  |  | 251 |  |  | — |  |  | 6.9 |  |
Deer Park(4) | — |  |  | 99 |  |  | — |  |  | 7.7 |  |
Gilroy Energy Center, LLC | — |  |  | 38 |  |  | — |  |  | 7.3 |  |
Whitby Holdings(5) | — |  |  | 26 |  |  | — |  |  | 9.1 |  |
GEC Holdings, LLC preferred interest | — |  |  | 14 |  |  | — |  |  | 16.6 |  |
Other | 8 |  |  | 13 |  |  | — |  |  | — |  |
Total | $ | 1,691 |  |  | $ | 1,922 |  |  |  |  |  |
_____________
(1) | Our weighted average interest rate calculation includes the amortization of deferred financing costs and debt discount.
(2) | Represents a sale-leaseback transaction that is accounted for as financing transaction under U.S. GAAP.
(3) | Represents a weighted average of first and second lien loans for the weighted average effective interest rates.
(4) | On June 17, 2011, we repaid Metcalf and Deer Park project debt with the proceeds received from $360 million in borrowings under the New Term Loan as further described above.
(5) | The Whitby Holdings debt was purchased from a third party in 2011.
Our project financings are collateralized solely by the capital stock or partnership interests, physical assets, contracts and/or cash flows attributable to the entities that own the power plants. The lenders' recourse under these project financings is limited to such collateral. Russell City — On June 24, 2011, we, through our indirect, partially owned subsidiary Russell City Energy Company, LLC, closed on our approximately $845 million Russell City Project Debt to finance construction of Russell City, a 619 MW natural gas-fired, combined-cycle power plant under construction located in Hayward, California, which is comprised of a $700 million construction loan facility, an approximately $77 million project letter of credit facility and a $68 million debt service reserve letter of credit facility. The construction loan converts to a ten year term loan when commercial operations commence. Borrowings bear interest initially at LIBOR plus 2.25%. At December 31, 2011, approximately $244 million had been drawn under the construction loan and approximately $61 million of letters of credit were issued under the letter of credit facilities. Calpine's pro rata share would be 75% and the pro rata share related to the noncontrolling interest would be 25%. In connection with the closing of the Russell City Project Debt, we recorded deferred financing costs of approximately $27 million on our Consolidated Balance Sheet during 2011. Los Esteros — On August 23, 2011, we, through our indirect, wholly owned subsidiary Los Esteros Critical Energy Facility, LLC, closed on our $373 million Los Esteros Project Debt to finance the upgrade of our Los Esteros Critical Energy Facility from a 188 MW simple-cycle power plant to a 308 MW combined-cycle generation power plant. The upgrade will also increase the efficiency and environmental performance of the power plant by lowering the Heat Rate. The Los Esteros Project Debt is comprised of a $305 million construction loan facility, an approximately $38 million project letter of credit facility and an approximately $30 million debt service reserve letter of credit facility. The construction loan converts to a ten year term loan when commercial operations commence. Borrowings bear interest initially at LIBOR plus 2.25%. At December 31, 2011, approximately $83 million had been drawn under the construction loan and approximately $30 million of letters of credit were issued under the letter of credit facilities. In connection with the closing of the Los Esteros Project Debt, we recorded deferred financing costs of approximately $12 million on our Consolidated Balance Sheet during the year ended December 31, 2011. CCFC Notes On May 19, 2009, our wholly owned subsidiaries, CCFC and CCFC Finance, issued approximately $1.0 billion aggregate principal amount of 8.0% CCFC Notes in a private placement. The net proceeds received, together with CCFC cash on hand, were used to repay the CCFC Term Loans and CCFC Old Notes with the remaining cash distributed to CCFC's indirect parent, CCFCP, which was used by CCFCP to redeem its CCFCP Preferred Shares. In connection with the CCFC Refinancing, we recorded deferred financing costs of approximately $21 million on our Consolidated Balance Sheet during the year ended December 31, 2009, and we recorded $49 million in debt extinguishment costs during the year ended December 31, 2009. The CCFC Notes and the related guarantees are secured, subject to certain exceptions and permitted liens, by all real and personal property of CCFC and CCFC’s material subsidiaries (including the CCFC Guarantors), consisting primarily of six natural gas power plants as well as the equity interests in CCFC and the CCFC Guarantors. The CCFC Notes are not guaranteed by Calpine Corporation and are without recourse to Calpine Corporation or any of our other non-CCFC or CCFC Finance subsidiaries or assets; however, CCFC generates the majority of its cash flows from an intercompany tolling agreement with CES and has various service agreements in place with other subsidiaries of Calpine Corporation. The CCFC Notes mature on June 1, 2016 and the weighted average interest rates, which includes the amortization of deferred financing costs and debt discount, was 8.9% for both 2011 and 2010. Capital Lease Obligations The following is a schedule by year of future minimum lease payments under capital leases and failed sale-leaseback transactions together with the present value of the net minimum lease payments as of December 31, 2011 (in millions):
| Sale-Leaseback Transactions(1) |  | Capital Lease |  | Total
2012 | $ | 41 |  |  | $ | 40 |  |  | $ | 81 |
2013 | 38 |  |  | 38 |  |  | 76 |
2014 | 26 |  |  | 39 |  |  | 65 |
2015 | 25 |  |  | 37 |  |  | 62 |
2016 | 25 |  |  | 40 |  |  | 65 |
Thereafter | 143 |  |  | 200 |  |  | 343 |
Total minimum lease payments | 298 |  |  | 394 |  |  | 692 |
Less: Amount representing interest | 110 |  |  | 170 |  |  | 280 |
Present value of net minimum lease payments | $ | 188 |  |  | $ | 224 |  |  | $ | 412 |
____________
(1) | Amounts are accounted for as financing transactions under U.S. GAAP and are included in our project financing, notes payable and other amounts above.
The primary types of property leased by us are power plants and related equipment. The leases generally provide for the lessee to pay taxes, maintenance, insurance, and certain other operating costs of the leased property. The remaining lease terms range up to 37 years (including lease renewal options). Some of the lease agreements contain customary restrictions on dividends up to Calpine Corporation, additional debt and further encumbrances similar to those typically found in project financing agreements. At both December 31, 2011 and 2010, the asset balances for the leased assets totaled approximately $1.0 billion with accumulated amortization of $340 million and $312 million, respectively. See Note 15 for discussion of capital leases guaranteed by Calpine Corporation. Corporate Revolving Facility and Other Letters of Credit Facilities The table below represents amounts issued under our letter of credit facilities as of December 31, 2011 and 2010 (in millions):
| 2011 |  | 2010
Corporate Revolving Facility(1) | $ | 440 |  |  | $ | 443 |
CDHI(2) | 193 |  |  | 165 |
NDH Project Debt credit facility(3) | — |  |  | 34 |
Various project financing facilities | 130 |  |  | 69 |
Total | $ | 763 |  |  | $ | 711 |
__________
(1) | When we entered into our $1.0 billion Corporate Revolving Facility on December 10, 2010, the letters of credit issued under our First Lien Credit Facility were either replaced with letters of credit issued under our Corporate Revolving Facility or back-stopped by an irrevocable standby letter of credit issued by a third party. Our letters of credit under our Corporate Revolving Facility at December 31, 2010 include those that were back-stopped of approximately $83 million. The back-stopped letters of credit were returned and extinguished during 2011.
(2) | On January 10, 2012, we increased the CDHI letter of credit facility to $300 million and extended the maturity date to January 2, 2016.
(3) | We repaid and terminated the NDH Project Debt on March 9, 2011.
The Corporate Revolving Facility represents our primary revolving facility. Borrowings under the Corporate Revolving Facility bear interest, at our option, at either a base rate or LIBOR rate. Base rate borrowings shall be at the base rate, plus an applicable margin ranging from 2.00% to 2.25% as provided in the Corporate Revolving Facility credit agreement. Base rate is defined as the higher of (i) the Federal Funds Effective Rate, as published by the Federal Reserve Bank of New York, plus 0.50% and (ii) the rate the administrative agent announces from time to time as its prime per annum rate. LIBOR rate borrowings shall be at the British Bankers' Association Interest Settlement Rates for the interest period as selected by us as a one, two, three, six or, if agreed by all relevant lenders, nine or twelve month interest period, plus an applicable margin ranging from 3.00% to 3.25%. Interest payments are due on the last business day of each calendar quarter for base rate loans and the earlier of (i) the last day of the interest period selected or (ii) each day that is three months (or a whole multiple thereof) after the first day for the interest period selected for LIBOR rate loans. Letter of credit fees for issuances of letters of credit include fronting fees equal to that percentage per annum as may be separately agreed upon between us and the issuing lenders and a participation fee for the lenders equal to the applicable interest margin for LIBOR rate borrowings. Drawings under letters of credit shall be repaid within two business days or be converted into borrowings as provided in the Corporate Revolving Facility credit agreement. We will incur an unused commitment fee ranging from 0.50% to 0.75% on the unused amount of commitments under the Corporate Revolving Facility. The Corporate Revolving Facility does not contain any requirements for mandatory prepayments, except in the case of certain designated asset sales in excess of $3 billion in the aggregate. However, we may voluntarily repay, in whole or in part, the Corporate Revolving Facility, together with any accrued but unpaid interest, with prior notice and without premium or penalty. Amounts repaid may be reborrowed, and we may also voluntarily reduce the commitments under the Corporate Revolving Facility without premium or penalty. The Corporate Revolving Facility matures December 10, 2015. The Corporate Revolving Facility is guaranteed and secured by each of our current domestic subsidiaries that was a guarantor under the First Lien Credit Facility and will also be additionally guaranteed by our future domestic subsidiaries that are required to provide such a guarantee in accordance with the terms of the Corporate Revolving Facility. The Corporate Revolving Facility ranks equally in right of payment with all of our and the guarantors' other existing and future senior indebtedness and will be effectively subordinated in right of payment to all existing and future liabilities of our subsidiaries that do not guarantee the Corporate Revolving Facility. The Corporate Revolving Facility also requires compliance with financial covenants that include a minimum cash interest coverage ratio and a maximum net leverage ratio. CDHI We also have a letter of credit facility related to CDHI which matures on December 11, 2012, under which up to $200 million is available for letters of credit. On January 10, 2012, we amended the CDHI letter of credit facility to increase the facility to $300 million and extend the maturity date to January 2, 2016. Fair Value of Debt We record our debt instruments based on contractual terms, net of any applicable premium or discount. We did not elect to apply the alternative U.S. GAAP provisions of the fair value option for recording financial assets and financial liabilities. We measured the fair value of our debt instruments as of December 31, 2011 and 2010, using market information including credit default swap rates and historical default information, quoted market prices or dealer quotes for the identical liability when traded as an asset and discounted cash flow analyses based on our current borrowing rates for similar types of borrowing arrangements. The following table details the fair values and carrying values of our debt instruments as of December 31, 2011 and 2010 (in millions):
| 2011 |  | 2010
| Fair Value |  | Carrying Value |  | Fair Value |  | Carrying Value
First Lien Notes | $ | 6,219 |  |  | $ | 5,892 |  |  | $ | 4,695 |  |  | $ | 4,691 |
Project financing, notes payable and other(1) | 1,467 |  |  | 1,504 |  |  | 1,673 |  |  | 1,708 |
Term Loan and New Term Loan | 1,615 |  |  | 1,646 |  |  | — |  |  | — |
CCFC Notes | 1,070 |  |  | 972 |  |  | 1,067 |  |  | 965 |
NDH Project Debt | — |  |  | — |  |  | 1,303 |  |  | 1,258 |
First Lien Credit Facility | — |  |  | — |  |  | 1,182 |  |  | 1,184 |
Total | $ | 10,371 |  |  | $ | 10,014 |  |  | $ | 9,920 |  |  | $ | 9,806 |
____________
(1) | Excludes leases that are accounted for as failed sale-leaseback transactions under U.S. GAAP and included in our project financing, notes payable and other balance.

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- Definition The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 210 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.5-02.19,20,22) -URI http://asc.fasb.org/extlink&oid=6877327&loc=d3e13212-122682 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 129 -Paragraph 2, 4 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 02 -Paragraph 19, 20, 22 -Article 5 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6928386&loc=d3e21475-112644 + Details
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