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Debt | 12 Months Ended
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Dec. 31, 2012
Debt Disclosure [Abstract] |
Debt |
| Debt
Our debt at December 31, 2012 and 2011, was as follows (in millions):
| 2012 |  | 2011
First Lien Notes(1) | $ | 5,303 |  |  | $ | 5,892 |
First Lien Term Loans(1) | 2,463 |  |  | 1,646 |
Project financing, notes payable and other(1) | 1,789 |  |  | 1,691 |
CCFC Notes | 978 |  |  | 972 |
Capital lease obligations | 217 |  |  | 224 |
Total debt | 10,750 |  |  | 10,425 |
Less: Current maturities | 115 |  |  | 104 |
Debt, net of current portion | $ | 10,635 |  |  | $ | 10,321 |
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(1) | During the fourth quarter of 2012, we redeemed 10% of the aggregate principal amount of our First Lien Notes and repaid project debt with proceeds received from the issuance of our 2019 First Lien Term Loan.
Annual Debt Maturities Contractual annual principal repayments or maturities of debt instruments as of December 31, 2012, are as follows (in millions):
2013 | $ | 115 |
2014 | 188 |
2015 | 153 |
2016 | 1,162 |
2017 | 1,597 |
Thereafter | 7,580 |
Total debt | 10,795 |
Less: Discount | 45 |
Total | $ | 10,750 |
First Lien Notes 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)
| 2012 |  | 2011 |  | 2012 |  | 2011
2017 First Lien Notes | $ | 1,080 |  |  | $ | 1,200 |  |  | 7.5 | % |  | 7.5 | %
2019 First Lien Notes | 360 |  |  | 400 |  |  | 8.2 |  |  | 8.2 |
2020 First Lien Notes | 983 |  |  | 1,092 |  |  | 8.1 |  |  | 8.1 |
2021 First Lien Notes | 1,800 |  |  | 2,000 |  |  | 7.7 |  |  | 7.7 |
2023 First Lien Notes | 1,080 |  |  | 1,200 |  |  | 8.0 |  |  | 8.0 |
Total First Lien Notes | $ | 5,303 |  |  | $ | 5,892 |  |  |  |  |
____________
(1) | Our weighted average interest rate calculation includes the amortization of deferred financing costs and debt discount.
Our First Lien Notes are secured equally and ratably with indebtedness incurred under our First Lien Term Loans and Corporate Revolving Facility, 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. 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.
On October 9, 2012, we issued notice to the holders of our First Lien Notes of our intent to redeem 10% of the aggregate principal amount of each series of our existing First Lien Notes. On November 7, 2012, we completed the redemption at a redemption price of 103% of the principal amount redeemed, plus accrued and unpaid interest. This redemption was funded using a portion of the proceeds received from the issuance of the 2019 First Lien Term Loan discussed further below. First Lien Term Loans Our First Lien Term Loans provide for senior secured term loan facilities and bear 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 First Lien Term Loans credit agreements), 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 First Lien Term Loans will be payable at the end of each quarter with the remaining balance payable on the maturity date. The First Lien Term Loans are subject to certain qualifications and exceptions, similar to our First Lien Notes. The 2018 First Lien Term Loans have a maturity date of April 1, 2018. On October 9, 2012, we entered into and borrowed $835 million under our 2019 First Lien Term Loan, which bears interest at the same rate as our First Lien Term Loans (discussed above). We used the net proceeds received to redeem 10% of the aggregate principal amount of each series of our existing First Lien Notes at a redemption price of 103% of the principal amount redeemed and to repay project debt totaling $218 million, plus accrued and unpaid interest for each. The 2019 First Lien Term Loan allows us to reduce our overall cost of debt by replacing a portion of our First Lien Notes with fixed interest rates ranging from 7.25% to 8.0% with a corporate level term loan carrying a lower variable interest rate currently at 4.5% and to repay variable rate project debt. The 2019 First Lien Term Loan carries substantially the same terms as the 2018 First Lien Term Loans and matures on October 9, 2019. The 2019 First Lien Term Loan also contains substantially similar covenants, qualifications, exceptions and limitations as the 2018 First Lien Term Loans and First Lien Notes. We recorded debt extinguishment costs of approximately $18 million associated with the redemption premium, the write-off of unamortized deferred financing costs and debt premium and discount during the fourth quarter of 2012.
| Outstanding at December 31, |  | Weighted Average Effective Interest Rates(1)
| 2012 |  | 2011 |  | 2012 |  | 2011
2018 First Lien Term Loans | $ | 1,630 |  |  | $ | 1,646 |  |  | 4.7 | % |  | 4.7 | %
2019 First Lien Term Loan | 833 |  |  | — |  |  | 4.7 |  |  | — |
Total First Lien Term Loans | $ | 2,463 |  |  | $ | 1,646 |  |  |  |  |
____________
(1) | Our weighted average interest rate calculation includes the amortization of deferred financing costs and debt discount.
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)
| 2012 |  | 2011 |  | 2012 |  | 2011
Russell City Project Debt due 2023 | $ | 507 |  |  | $ | 244 |  |  | 3.6 | % |  | 4.1 | %
Steamboat due 2017 | 428 |  |  | 437 |  |  | 6.8 |  |  | 6.6 |
OMEC due 2019 | 345 |  |  | 355 |  |  | 6.8 |  |  | 6.8 |
Los Esteros Project Debt due 2023 | 209 |  |  | 83 |  |  | 3.5 |  |  | 3.8 |
Pasadena(2) | 160 |  |  | 185 |  |  | 8.9 |  |  | 8.8 |
Bethpage Energy Center 3 due 2020-2025(3) | 93 |  |  | 98 |  |  | 7.0 |  |  | 7.0 |
Gilroy note payable due 2014 | 33 |  |  | 49 |  |  | 10.8 |  |  | 10.6 |
Calpine BRSP due 2014(4) | — |  |  | 232 |  |  | — |  |  | 5.7 |
Other | 14 |  |  | 8 |  |  | — |  |  | — |
Total | $ | 1,789 |  |  | $ | 1,691 |  |  |  |  |
_____________
(1) | Our weighted average interest rate calculation includes the amortization of deferred financing costs and debt discount or premium.
(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) | During the fourth quarter of 2012, we repaid the Calpine BRSP project debt with proceeds received from the issuance of our 2019 First Lien Term Loan.
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. 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 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 2012 and 2011. 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, 2012 (in millions):
| Sale-Leaseback Transactions(1) |  | Capital Lease |  | Total
2013 | $ | 37 |  |  | $ | 42 |  |  | $ | 79 |
2014 | 25 |  |  | 43 |  |  | 68 |
2015 | 25 |  |  | 38 |  |  | 63 |
2016 | 25 |  |  | 41 |  |  | 66 |
2017 | 17 |  |  | 38 |  |  | 55 |
Thereafter | 127 |  |  | 161 |  |  | 288 |
Total minimum lease payments | 256 |  |  | 363 |  |  | 619 |
Less: Amount representing interest | 96 |  |  | 146 |  |  | 242 |
Present value of net minimum lease payments | $ | 160 |  |  | $ | 217 |  |  | $ | 377 |
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(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 36 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 December 31, 2012 and 2011, the asset balances for the leased assets totaled approximately $880 million and $879 million with accumulated amortization of $312 million and $318 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 at December 31, 2012 and 2011 (in millions):
| 2012 |  | 2011
Corporate Revolving Facility | $ | 243 |  |  | $ | 440 |
CDHI | 253 |  |  | 193 |
Various project financing facilities | 130 |  |  | 130 |
Total | $ | 626 |  |  | $ | 763 |
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 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 on 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. On January 10, 2012, we increased the CDHI letter of credit facility to $300 million and extended the maturity date to January 2, 2016. As a result of the completion of the sale of Riverside Energy Center, LLC, a wholly-owned subsidiary of CDHI, on December 31, 2012, we are required to cash collateralize letters of credit issued in excess of $225 million until replacement collateral is contributed to the CDHI collateral package which we are in the process of arranging. At December 31, 2012, we had $28 million of cash collateral posted in support of outstanding letters of credit under our CDHI letter of credit facility. We do not believe that this change will have a material impact on our liquidity. 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. The following table details the fair values and carrying values of our debt instruments at December 31, 2012 and 2011 (in millions):
| 2012 |  | 2011
| Fair Value |  | Carrying Value |  | Fair Value |  | Carrying Value
First Lien Notes | $ | 5,863 |  |  | $ | 5,303 |  |  | $ | 6,219 |  |  | $ | 5,892 |
First Lien Term Loans | 2,489 |  |  | 2,463 |  |  | 1,615 |  |  | 1,646 |
Project financing, notes payable and other(1) | 1,599 |  |  | 1,629 |  |  | 1,467 |  |  | 1,504 |
CCFC Notes | 1,075 |  |  | 978 |  |  | 1,070 |  |  | 972 |
Total | $ | 11,026 |  |  | $ | 10,373 |  |  | $ | 10,371 |  |  | $ | 10,014 |
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(1) | Excludes a lease that is accounted for as a failed sale-leaseback transaction under U.S. GAAP.
On January 1, 2012, we adopted Accounting Standards Update 2011-04 “Fair Value Measurement” which requires the categorization by level of the fair value hierarchy for items not measured at fair value on our Consolidated Balance Sheets but for which fair value is required to be disclosed. We measure the fair value of our First Lien Notes, First Lien Term Loans and CCFC Notes using market information, including quoted market prices or dealer quotes for the identical liability when traded as an asset (categorized as level 2). We measure the fair value of our project financing, notes payable and other debt instruments using discounted cash flow analyses based on our current borrowing rates for similar types of borrowing arrangements (categorized as level 3). We do not have any debt instruments with fair value measurements categorized as level 1 within the fair value hierarchy.

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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 Accounting Standards Codification -Topic 505 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6928386&loc=d3e21475-112644 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 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. + Details
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