Calpine Corp. agreed to purchase Noble Americas Energy Solutions, an independent supplier of power to commercial and industrial retail customers, for a purchase price of $800 million plus an estimated $100 million of net working capital at closing.
Calpine expects to recover about $200 million through collateral synergies and the runoff of acquired legacy hedges, substantially within the first year, resulting in expected net cash deployed of about $700 million (including working capital), or about five times NAES’ recent and expected run-rate adjusted EBITDA.
NAES currently serves commercial and industrial customers in 18 states nationwide, including California, Texas, the Mid-Atlantic and Northeastern United States, where Calpine’s wholesale power generation fleet is primarily concentrated. The organization will remain headquartered in San Diego and will continue to operate under the leadership of Jim Wood, President of NAES.
“We are thrilled to be joining the Calpine team,” said Wood. “Our customers should know that we will continue to provide the same high level of services and product offerings during the ownership transition and, when under the Calpine banner, we expect to provide even greater value-added products and services.”
Calpine expects to fund the acquisition with a combination of cash on hand and temporary bridge loan financing of up to $550 million. The company intends to repay the bridge facility during 2017 with proceeds from announced asset sales as well as cash from operations, including that generated from the anticipated collateral synergies.
Under Calpine ownership, anticipated collateral needs are expected to be met with about $240 million in letters of credit and $20 million of surety bonds, leaving almost $1.2 billion of Calpine Corporate Revolver capacity remaining at closing.
Calpine will acquire the business from Noble Americas Gas & Power Corp., a subsidiary of Noble Group Ltd. The transaction is expected to close by year end 2016, subject to customary closing conditions, approval by shareholders of Noble Group Ltd., approval from the Federal Energy Regulatory Commission and antitrust review under the Hart-Scott-Rodino Act.