Energy Choice
                            

Matters

Alert: Noble Announces Buyer, Price For Noble Americas Energy Solutions Retail Biz

October 9, 2016

Email This Story
Copyright 2010-16 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

Noble Group Limited ("Noble") announced the sale of its Noble Americas Energy Solutions subsidiary ("NAES") to Calpine Corporation ("Calpine") for $1.05 billion in consideration.

The consideration for the divestiture consists of USD $800 million plus the repayment to Noble of NAES working capital at closing (which as of the latest set of audited accounts (31/12/15) was USD $248 million).

In addition, operating cash flows from NAES will continue to accrue to Noble up until closing of the transaction, at which point there will be a final adjustment for any changes in working capital. Furthermore, the divestiture releases approximately USD $275 million in Letters of Credit and Surety Bonds representing additional working capital which will become available to Noble.

"The sale of NAES substantially completes the USD 2 billion capital raising initiative that we announced in June", said Noble’s Co-CEOs, Jeff Frase and Will Randall. "With this divestiture, Noble will continue to reduce debt while also funding growth opportunities in our high return businesses" added Mr. Frase and Mr. Randall.

Closing of the divestiture is subject to approval by Noble shareholders, expiration of the Hart Scott-Rodino waiting period and approval of the U.S. Federal Energy Regulatory Commission under Section 203 of the Federal Power Act.

It is expected that the transaction will close in December 2016.

Calpine, which for the longest time was focused on wholesale only, apart from limited wholesale-like retail transactions, acquired Champion Energy a year ago, and recently said that it is "doubling down" on its new retail strategy

Calpine said NAES is the nation’s largest independent supplier of power to commercial and industrial retail customers. Calpine described the purchase price as $800 million plus an estimated $100 million of net working capital at closing.

Calpine expects to recover approximately $200 million through collateral synergies and the runoff of acquired legacy hedges, substantially within the first year, resulting in expected net cash deployed of approximately $700 million (including working capital), or approximately five times NAES’ recent and expected run-rate Adjusted EBITDA.

"In addition to expanding our retail customer sales channels and product offerings, we will more than double the volume of retail load we are capable of serving across the country from our complementary wholesale power generation fleet," said Thad Hill, Calpine’s President and Chief Executive Officer

"Financially, this transaction is highly cash flow and credit accretive, given a rapidly amortizing bridge loan, the achievement of collateral synergies and the ongoing generation of stable and substantial cash flows," concluded Hill. "In addition to delivering strong annual cash flow, the strong sales effort by the NAES team has continued to build the mark-to-market value of their book over the last several years, which will help ensure future success of the business. We look forward to welcoming the entire NAES team to the Calpine family."

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.

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 approximately $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.

ADVERTISEMENT
NEW Jobs on RetailEnergyJobs.com:
• NEW! -- Vice President Sales & Marketing -- Retail Supplier -- Houston
• NEW! -- Executive Director -- Retail Supplier
• NEW! -- Director of Billing Operations
• NEW! -- Director/Manager Channel Sales -- Retail Supplier -- Houston
• NEW! -- Analyst, Supply & Settlements -- Retail Supplier -- Houston
• NEW! -- Manager of Supply -- Retail Provider -- Dallas
• NEW! -- Pricing Analyst -- Retail Supplier
• NEW! -- Channel Partner Manager, Northeast -- Retail Provider