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30 March 2006 - Calpine Corporation has agreed to sell its 45 per cent interest in the 525 MW Valladolid III Power Plant, currently under construction on the Yucatan Peninsula in Mexico. Calpine is selling its equity interest to the two remaining partners in the project, Mitsui & Co., Ltd. and Chubu Electric Power Co., Inc. approximately $43m.
Under terms of the agreement, Calpine will receive a cash payment of approximately $43m, less a 10 per cent holdback, at closing. The Buyers will return the 10 per cent holdback after a period of one-year following closing of the transaction.
At closing, Calpine will also eliminate its 45 per cent share of the non-recourse unconsolidated project debt. In addition, at closing $9.1m of Calpine funds held in escrow for credit support for the project will be released to Calpine. The company expects to record a non-cash impairment charge of approximately $41m on its investment in the project and expects to complete the transaction in the next 30 days.
"The sale of the Valladolid project will provide Calpine with additional liquidity and is consistent with our strategy of focusing on our core business, power generation in key power markets in the United States," said Robert P. May, Calpine's Chief Executive Officer. "As part of our restructuring program, Calpine will continue to assess opportunities to sell non-strategic assets, with the goal of emerging from Chapter 11 as a sustainable, competitive and profitable power company."
Valladolid III is a natural gas-fired, combined-cycle power plant that will provide up to 525 MW of energy through a 25-year power purchase agreement with the Comision Federal de Electricidad. Calpine had supplied two General Electric F-class combustion gas turbines in exchange for its 45 per cent interest in the project. Calpine also provided engineering, construction and commissioning services for the construction subcontractor. Construction of the project is scheduled for completion in June 2006.
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