Acquisitions and Divestitures

Acquisition of NAES

On October 9, 2016, we announced that we entered into an agreement, through our indirect, wholly-owned subsidiaries Calpine Energy Services Holdco II, LLC and Calpine Energy Financial Holdings, LLC, to purchase NAES and a swap contract from Noble Americas Gas & Power Corp. and Noble Group Limited for approximately $800 million plus approximately $100 million of net working capital estimated at closing. We expect to recover approximately $200 million through collateral synergies and the runoff of acquired legacy hedges, substantially within the first year. NAES is a commercial and industrial retail electricity provider with customers in 18 states in the U.S. including California, Texas, the Mid-Atlantic and Northeast, where our wholesale power generation fleet is primarily concentrated. The acquisition of this large direct energy sales platform is consistent with our stated goal of getting closer to our end-use customers and expands our retail customer base, complementing our existing retail business while providing us a valuable sales channel for reaching a much greater portion of the load we seek to serve. The transaction is expected to close in the fourth quarter of 2016, subject to federal regulatory approval and approval of the shareholders of Noble Group Limited, and will be funded with a combination of cash on hand and debt financing.

Acquisition of Granite Ridge Energy Center

On February 5, 2016, we, through our indirect, wholly-owned subsidiary Calpine Granite Holdings, LLC, completed the purchase of Granite Ridge Energy Center, a power plant with a nameplate capacity of 745 MW (summer peaking capacity of 695 MW), from Granite Ridge Holdings, LLC, for approximately $500 million, excluding working capital and other adjustments. The addition of this modern, efficient, natural gas-fired, combined-cycle power plant increased capacity in our East segment, specifically the constrained New England market. Beginning operations in 2003, Granite Ridge Energy Center is located in Londonderry, New Hampshire and features two combustion turbines, two heat recovery steam generators and one steam turbine. We funded the acquisition with a combination of cash on hand and our 2023 First Lien Term Loan obtained in the fourth quarter of 2015, and the purchase price was primarily allocated to property, plant and equipment. The pro forma incremental effect of Granite Ridge Energy Center on our results of operations for each of the three and nine months ended September 30, 2016 and 2015 is not material.

Acquisition of Champion Energy

On October 1, 2015, we, through our indirect, wholly-owned subsidiary Calpine Energy Services Holdco, LLC, completed the purchase of Champion Energy Marketing, LLC from a subsidiary of Crane Champion Holdco, LLC, which owned a 75% interest, and EDF Trading North America, LLC, which owned a 25% interest, for approximately $240 million, excluding working capital adjustments. The addition of this well-established retail sales organization is consistent with our stated goal of getting closer to our end-use customers and provides us a valuable sales channel for directly reaching a much greater portion of the load we seek to serve. The purchase price was funded with cash on hand and any excess of the purchase price over the fair values of Champion Energy’s assets and liabilities was recorded as goodwill; however, the goodwill we recorded as a result of this acquisition was immaterial. The purchase price allocation was finalized during the third quarter of 2016 which did not result in any material adjustments.

Sale of Mankato Power Plant

On October 26, 2016, we, through our indirect, wholly-owned subsidiaries, New Steamboat Holdings, LLC and Mankato Holdings, LLC, completed the sale of our Mankato Power Plant, a 375 MW natural gas-fired, combined-cycle power plant and 345 MW expansion project under advanced development located in Minnesota, to Southern Power Company, a subsidiary of Southern Company, for $396 million, excluding working capital and other adjustments. This transaction supports our effort to divest non-core assets outside our strategic concentration. We expect to use the proceeds from the sale to fund pending acquisitions and for other corporate purposes. We expect to record a gain on sale of assets, net of approximately $160 million during the fourth quarter of 2016, and our federal and state NOLs will almost entirely offset the projected taxable gain from the sale.

Sale of South Point Energy Center

On April 1, 2016, we entered into an asset sale agreement for the sale of substantially all of the assets comprising our South Point Energy Center to Nevada Power Company d/b/a NV Energy for approximately $76 million plus the assumption by the purchaser of existing transmission capacity contracts with a future net present value payment obligation of approximately $112 million, approximately $9 million in remaining tribal lease costs and approximately $21 million in near-term repairs, maintenance and capital improvements to restore the power plant to full capacity. The sale is subject to certain conditions precedent, as well as federal and state regulatory approvals, and is expected to close no later than the first quarter of 2017. The natural gas-fired, combined-cycle plant is located on the Fort Mojave Indian Reservation in Mohave Valley, Arizona, and features a summer peaking capacity of 504 MW. This transaction supports our effort to divest non-core assets outside our strategic concentration.

Sale of Osprey Energy Center

We executed an asset sale agreement in the fourth quarter of 2014 for the sale of our Osprey Energy Center to Duke Energy Florida, Inc. for approximately $166 million, excluding working capital and other adjustments, which will be consummated in January 2017 upon the conclusion of a PPA with a term of 27 months. The sale has received FERC and state regulatory approvals and represents a strategic disposition of a power plant in a wholesale power market dominated by regulated utilities.

Assets Held for Sale

The assets of South Point Energy Center, which is part of our West segment, and the assets of Osprey Energy Center and Mankato Power Plant, including the expansion project at our Mankato Power Plant, which are part of our East segment, are reported as current assets held for sale on our Consolidated Condensed Balance Sheet at September 30, 2016.

The table below presents the components of our current assets held for sale at September 30, 2016 (in millions):



	September 30, 2016
Assets:
Current assets	$	12
Property, plant and equipment, net	401
Other long-term assets	39
Total current assets held for sale	$	452