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  • May 2001 (Revised January 2003)
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Calpine Corporation: The Evolution from Project to Corporate Finance

By: Benjamin C. Esty and Michael Kane
  • Format:Print
  • | Pages:22
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Abstract

In early 1999, Calpine Corp.'s CEO Pete Cartwright adopted an aggressive growth strategy with the goal of increasing the company's aggregate generating capacity from approximately 3,000 to 15,000 megawatts (MW) by 2004. He believed there was a fleeting opportunity to repower America given the inefficiency and age of current generating capacity as well as the recently granted ability to compete in wholesale power markets. To achieve the new goal, Calpine will have to build or acquire as many as 25 power plants at a total cost of $6 billion (approximately $500,000 per 1,000 MW). For a company with assets of $1.7 billion, a subinvestment grade debt rating, a debt-to-capitalization ratio of 79%, and an after-tax cash flow of $143 million in 1998, raising this much money was going to be a formidable challenge.

Keywords

Information Technology; Cost of Capital; Project Finance; Adaptation; Profit; Financial Strategy; Corporate Finance; Energy Industry; United States

Citation

Esty, Benjamin C., and Michael Kane. "Calpine Corporation: The Evolution from Project to Corporate Finance." Harvard Business School Case 201-098, May 2001. (Revised January 2003.)
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About The Author

Benjamin C. Esty

Finance
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