Calpine sells Power Systems Manufacturing for $242M

Calpine Corporation announced March 9 that it has received approval from the U.S. Bankruptcy Court, Southern District of New York, for the sale of substantially all of the assets of Power Systems Manufacturing LLC, a subsidiary of Calpine, to Alstom Power Inc. for a cash purchase price of $242 million. The asset sale will advance Calpine's restructuring program to further focus the company's resources on those core business activities involving the production and sale of power in key markets in which Calpine can best compete. The company expects to close the transaction, pending certain regulatory approvals, in the next 30 days.

Calpine chief executive officer Robert P. May stated, "The sale of PSM represents another successful step toward emerging from Chapter 11 as a stronger, more competitive power company. We continue to identify and execute on opportunities that generate near-term results and enhance the long-term value of Calpine for all of our stakeholders. The sale of PSM represents a new beginning for PSM to grow and strengthen its business. For Calpine, the sale will eliminate the capital commitment associated with the research, development and manufacturing of turbine components, while maintaining our ability to enhance our operations with the purchase of innovative PSM turbine products and services."

Calpine is PSM's largest customer, and both Calpine and PSM desire to continue their business relationship after the sale. Calpine will purchase, on a preferential basis from PSM, turbine parts to be used in certain of Calpine's combustion gas turbines throughout the company's fleet of clean, reliable and fuel-efficient natural gas-fired power generation facilities.

Formed in 1998 and located in Jupiter, Florida, PSM designs, manufactures and sells highly engineered turbine and combustion aftermarket components for industrial, heavy-duty gas turbines. Under the leadership of Tom Churbuck and due to the strength of its highly skilled and experienced team of professionals, PSM has quickly grown to become recognized as a quality source of alternative technology for the industrial gas turbine market. With its staff of more than 100 employees, whom are expected to be retained by Alstom, PSM also provides turbine services, which include system modernizations and conversions, maintenance and fuel system repairs, to independent power producers, industrial self-generators and electric utilities.

In January, the company initially obtained a $200 million bid from Marubeni Corporation and in February, Calpine received approval from the Bankruptcy Court of the bidding procedures to sell substantially all of the assets of PSM. In accordance with bidding procedures approved by the Bankruptcy Court, Calpine held an auction on March 5 to allow other potential buyers to bid on the assets of PSM. At the conclusion of this auction, Alstom Power was selected as the winning bidder. Proceeds from the sale will be used to reduce debt and enhance liquidity.