Acquisitions and Divestitures

Acquisition of Calpine Solutions, formerly Noble Solutions

On December 1, 2016, through our indirect, wholly-owned subsidiaries Calpine Energy Services Holdco II, LLC and Calpine Energy Financial Holdings, LLC, we completed the purchase of Calpine Solutions, formerly Noble Solutions, along with a swap contract from Noble Americas Gas & Power Corp. and Noble Group Limited for approximately $800 million plus approximately $350 million of net working capital. We recovered approximately $250 million in cash subsequent to closing and expect to recover an additional approximately $200 million through collateral synergies and the runoff of acquired legacy hedges, substantially within the first year. Calpine Solutions is a commercial and industrial retail electricity provider with customers in 19 states in the U.S., including presence in 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. We funded the acquisition with a combination of cash on hand and debt financing. The results of Calpine Solutions are reflected in the segment which corresponds with the geographic area in which the retail sales occur.

The following table summarizes the consideration paid for Calpine Solutions as well as the preliminary determination of the identifiable assets acquired and liabilities assumed at the December 1, 2016 acquisition date (in millions):



Consideration	$	1,150

Identifiable assets acquired and liabilities assumed:
Assets:
Current assets	141
Margin deposits and other prepaid expense	518
Derivative assets, current⁽¹⁾	365
Property, plant and equipment, net	7
Intangible assets⁽²⁾	360
Goodwill	162
Long-term derivative assets⁽¹⁾	359
Total assets acquired	1,912
Liabilities:
Current liabilities	276
Derivative liabilities, current⁽¹⁾	270
Long-term derivative liabilities⁽¹⁾	216
Total liabilities assumed	762
Net assets acquired	$	1,150

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(1)	Consists of acquired customer and wholesale contracts which will be substantially amortized over the next 5 years.


(2)	Consists primarily of customer relationships that are being amortized over 14 years. See Note 2 for a further description of our intangible assets.

We recorded goodwill of $162 million, all of which is deductible for tax purposes, in connection with the acquisition of Calpine Solutions which represent the excess of the purchase price over the fair values of Calpine Solution’s assets and liabilities. For the goodwill acquired, we allocated $68 million to our West segment, $15 million to our Texas segment and $79 million to our East segment.

The revenue and earnings of Calpine Solutions since its acquisition on December 1, 2016 are not material to our Consolidated Statement of Operations for the year ended December 31, 2016.

The following table summarizes the unaudited pro forma operating revenues and net income attributable to Calpine for the periods presented as if Calpine Solutions was acquired on January 1, 2015. The unaudited pro forma information has been prepared by adding the preliminary, unaudited historical results of Calpine Solutions, as adjusted for amortization of intangible assets and acquired contracts (using the preliminary values assigned to the net assets acquired from Calpine Solutions disclosed above) and interest expense from our 2017 First Lien Term Loan which funded a portion of the purchase price, to our results for the periods indicated below (in millions, except per share amounts).



	2016		2015
	(Unaudited)
Operating revenues	$	8,324	$	8,308
Net income attributable to Calpine	$	105	$	132
Net income per share attributable to Calpine - basic	$	0.30	$	0.36
Net income per share attributable to Calpine - diluted	$	0.29	$	0.36

Acquisition of North American Power

On January 17, 2017, we, through an indirect, wholly-owned subsidiary, completed the purchase of 100% of the outstanding limited liability company membership interests in North American Power for approximately $105 million, excluding working capital and other adjustments. North American Power is a growing retail energy supplier for homes and small businesses and is primarily concentrated in the Northeast U.S. where Calpine has a substantial power generation presence and where Champion Energy has a substantial retail sales footprint that will be enhanced by the addition of North American Power, which will be integrated into our Champion Energy retail platform. We funded the acquisition with cash on hand and the purchase price will be primarily allocated to goodwill and intangible assets. The pro forma incremental effect of North American Power on our results of operations for each of the years ended December 31, 2016 and 2015 is not material.

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 years ended December 31, 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. The pro forma incremental effect of Champion Energy on our results of operations for each of the years ended December 31, 2015 and 2014 is not material.

Acquisition of Fore River Energy Center

On November 7, 2014, we, through our indirect, wholly-owned subsidiary Calpine Fore River Energy Center, LLC, completed the purchase of Fore River Energy Center, a power plant with a capacity of 731 MW, and related plant inventory from a subsidiary of Exelon Corporation, for approximately $530 million, excluding working capital 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. Built in 2003, Fore River Energy Center is located in North Weymouth, Massachusetts and features two combustion turbines, two heat recovery steam generators and one steam turbine. Both turbines feature dual-fuel capability that will enable them to run on either natural gas or fuel oil, depending on market conditions. The purchase price was funded with cash on hand and primarily allocated to property, plant and equipment. The purchase price allocation was finalized during the third quarter of 2015 which did not result in any material adjustments or the recognition of goodwill. The pro forma incremental effect of Fore River Energy Center on our results of operations for the year ended December 31, 2014 is not material.

Acquisition of Guadalupe Energy Center

On February 26, 2014, we, through our indirect, wholly-owned subsidiary Calpine Guadalupe GP, LLC, completed the purchase of a power plant owned by MinnTex Power Holdings, LLC with a capacity of 1,000 MW, for approximately $625 million, excluding working capital adjustments. The addition of this modern, natural gas-fired, combined-cycle power plant increased capacity in our Texas segment, which is one of our core markets. The 110-acre site, located in Guadalupe County, Texas, which is northeast of San Antonio, Texas, includes two 525 MW generation blocks, each consisting of two GE 7FA combustion turbines, two heat recovery steam generators and one GE steam turbine. We also paid $15 million to acquire rights to an advanced development opportunity for an approximately 400 MW quick-start, natural gas-fired peaker. We funded the acquisition with $425 million in incremental CCFC Term Loans and cash on hand. See Note 6 for a further description of the incremental CCFC Term Loans. The purchase price was primarily allocated to property, plant and equipment and was finalized during the third quarter of 2014 which did not result in any material adjustments to the preliminary purchase price allocation nor the recognition of any goodwill. The pro forma incremental effect of Guadalupe Energy Center on our results of operations for the year ended December 31, 2014 is not material.

Sale of Osprey Energy Center

On January 3, 2017, we completed the sale of our Osprey Energy Center to Duke Energy Florida, Inc. for approximately $166 million, excluding working capital and other adjustments. This transaction supports our effort to divest non-core assets outside our strategic concentration.

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 used the proceeds from the sale to partially fund the Calpine Solutions, formerly Noble Solutions, acquisition and for other corporate purposes. We recorded a gain on sale of assets, net of approximately $157 million during the fourth quarter of 2016, and our federal and state NOLs 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. 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. In December 2016, the Nevada Public Utility Commission issued an order rejecting the asset sale agreement. In January 2017, Nevada Power Company filed a motion for reconsideration of this order. In February 2017, the FERC approved Nevada Power Company’s acquisition of the South Point Energy Center. However, on February 8, 2017, the Nevada Public Utility Commission denied Nevada Power Company’s purchase of the South Point Energy Center. Nevada Power Company has the right to appeal this decision. We are also currently assessing our options; however, we do not anticipate that the denial of the sale by the Nevada Public Utility Commission will have a material effect on our financial condition, results of operations or cash flows.

Sale of Six Power Plants

On July 3, 2014, we completed the sale of six of our power plants in our East segment to NatGen Southeast Power LLC, a wholly-owned subsidiary of LS Power Equity Partners III. The purchase and sale agreement, dated April 17, 2014, stipulates the sale of 100% of the limited liability company interests in (i) Mobile Energy LLC, (ii) Santa Rosa Energy Center, LLC, (iii) Carville Energy, LLC, (iv) Decatur Energy Center, LLC, (v) Columbia Energy LLC and (vi) Calpine Oneta Power, LLC and thereby sell assets comprising 3,498 MW of combined-cycle generation capacity in Oklahoma, Louisiana, Alabama, Florida and South Carolina for a sale price of approximately $1.57 billion in cash, plus approximately $2 million for working capital and other adjustments at closing. The divestiture of these power plants has better aligned our asset base with our strategic focus on competitive wholesale markets.

We recorded a gain on sale of assets, net of approximately $753 million during the third quarter of 2014 and used existing federal and state NOLs to almost entirely offset the projected taxable gains from the sale. The sale of the six power plants did not meet the criteria for treatment as discontinued operations.

The six power plants included in the transaction are as follows:



Plant Name	Plant Capacity		Location
Oneta Energy Center	1,134	MW	Coweta, OK
Carville Energy Center⁽¹⁾	501	MW	St. Gabriel, LA
Decatur Energy Center	795	MW	Decatur, AL
Hog Bayou Energy Center	237	MW	Mobile, AL
Santa Rosa Energy Center	225	MW	Pace, FL
Columbia Energy Center⁽¹⁾	606	MW	Calhoun County, SC
Total	3,498	MW

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(1)	Indicates combined-cycle cogeneration power plant.

Assets Held for Sale

The assets of Osprey Energy Center and South Point Energy Center, which are part of our East and West segments, respectively, are reported as current assets held for sale on our Consolidated Balance Sheet at December 31, 2016 and primarily consist of property, plant and equipment, net. The assets of Osprey Energy Center are reported as long-term assets held for sale on our Consolidated Balance Sheet at December 31, 2015.