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For Calpine, going private means no more pesky stock analysts

L.M. SixelFebruary 15, 2019

Houston power company Calpine gave up its its stock symbol on the New York Stock Exchange for a new life as a private company about one year ago.

Calpine struggled with lackluster earnings, slumping stock prices and the changing economics of electricity markets. So in came a group of investors led by the New Jersey private equity firm Energy Capital Partners. They acquired the company in March in a deal valued at nearly $17 billion, including the assumption of Calpine’s debt.

A key rationale behind the deal was to free Calpine from the pressures of Wall Street and allow it to make the long-term investments and pursue strategies to help it compete in markets in which renewables, such as wind and solar, are playing a growing and increasingly important role.

Calpine is the nation’s largest generator of electricity from natural gas, a flexible source of power that can react quickly to changes in demand and fill in the gaps when winds don’t blow and the sun doesn’t shine. But like other merchant power companies, it has battled low electricity prices and increasing competition from renewable energy. Not long before Calpine found its buyer, NRG Energy of Houston and Princeton, N.J., launched an effort to sell off some $4 billion in assets. Another Houston power company, Dynegy, was acquired last year by Vistra Energy of Irving.

Calpine CEO Thad Hill, who has led the company since 2014, recently spoke to Texas Inc. about how his life has changed since Calpine went private.

Q: Why did you go private in the first place?

A: We felt the public markets was not fairly evaluating the company. We felt good about our business and how we were operating, but there were reports of a struggling industry. The share price was a lot less than it should have been. We found a group of investors who valued it much higher and paid a premium for the public shares.

Q: How is it different to be a private company?

A: Having been on both sides, it’s pretty interesting. Some things I anticipated, other things I didn’t.

First and foremost, it’s great there’s not the quarterly pressure anymore. I think we always made the right long-term decisions. But we were criticized how they would be interpreted by investment companies and analysts. Now we have a bit of freedom to take the long view rather than worrying what the 16 or 17 analysts would say about you.

Secondly, you spend a lot of time on being public, whether it’s getting ready for earnings calls, traveling to investor conventions and talking to investors. Now, that time has came back to add value to the business.

Third, the board can make decisions and then execute them. In the old days you would have to explain it to the shareholders and sell-side analysts and investors who might not agree.

Q: How long did it take to prepare for all the meetings with investors and analysts?

A: It takes several days a month. I don’t want to characterize this as good versus bad. It’s just different.

Q: What are you doing with all that free time?

A: The joke is that I get to help my team do their jobs a lot more. I get to focus on our business more.

Q: With less public scrutiny, are you concerned Calpine will fade from view?

A: No. We haven’t diminished our role in the community. Participating in the Houston Marathon and the MS 150 for multiple sclerosis is important to who we are. It has nothing to do with our brand strategy.

We’re not trading on the New York Stock Exchange anymore. I’m not sure whether our customers or the public cares whether we’re private or public.

Q: Are you less reserved in what you say publicly about Calpine now that you’re a private company?

A: Being a private company, you really don’t have to say anything. We get to go about our business.

lynn.sixel@chron.com

twitter.com/lmsixel

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