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Calpine Corporation

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Corporation Background
Calpine Corporation, founded in 1984, was a wholly-owned subsidiary of a Swiss industial corporation, Electrowatt, affiliated with Credit Suisse Banking Group. By pursued the construction and operation of QF power plants on the IPP model, from 1984 to 1999, Calpine had created 22 plants with a combined capacity of 2,729 MW operating in seven states, and other 12 plants in various stages of development. What’s more, on 1998, the fixed assets had grown to $1712 million while $421 million on 1994. On September 1996, Calpine also took action to raise public equity. The IPO of Calpine bought $317 million at a price of $16 per share to the company.
From 1984 to 1994, Calpine preferred to use method of project finance to do the construction of new plants. After 1994, the corporation changed its policy to retiring subsidiary project debt with parent-level, corporate debt issues. On 1999, after raised 5 corporation debt, the rate of Calpine was improved from B1/B to Ba2/BB.
Industry Background
The U.S. Electric power industry, with annual revenues of $296 billion and assets of $686 billion, was the country’s third largest industry while the first and second industries are automobiles and health care in 20 century. This industry consist of investor-owned utility controlled plants, the federal government controlled plants, municipal and cooperative electric companies controlled plants and other kinds of producers controlled plants, whiled 170 investor-owned utilities controlled the most part of this industry, approximately 72% with the generating capacity of 733,000MW.
However because of the long-term growth rate, 2% annual, additional 15000MW of new capacity annually is required. What’s worse, according to Ron Walter, a Calpine senior vice president, 45% of U.S. generating capacity was over 25 years old which needed to be replaced, but the

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