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Deal to put Calpine in retail power world

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Calpine CEO Thad Hill says the deal is part of a plan "to be closer to our end-use customers."
Calpine CEO Thad Hill says the deal is part of a plan "to be closer to our end-use customers."Gary Fountain/Freelance

Calpine Corp. is entering the retail residential electricity market for the first time, purchasing Champion Energy Services from a group that includes Astros owner Jim Crane.

Houston-based Calpine will pay $240 million in cash for Champion from Crane and his Crane Holding Cos. The deal comes as more power generation companies like Calpine are acquiring retail business arms. It's part of a deliberate growth plan "to be closer to our end-use customers" in Texas and the Northeast, Calpine president and CEO Thad Hill said in a statement Monday.

Crane Capital owns 75 percent of Champion, and the rest is held by EDF Trading, a subsidiary of the giant France-based EDF electric utility company. The deal is expected to close by the fourth quarter.

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Crane on Monday called the sale a "very positive deal for everybody" largely because Calpine will retain all of Champion's 180 employees, most of whom are in Houston, and maintain the Champion brand name.

"They needed a retail piece," Crane said of Calpine, "and, as the industry consolidates, we'd been out there on our own."

Crane said he had considered acquiring power plants but determined it made more sense to sell.

The deal also was logical for Calpine as one of the few top power generators without a residential retail arm, said Andrew Bischof, analyst at Morningstar.

"It's not too surprising," Bischof said. "It's a good hedge."

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Similarly, NRG Energy has Reliant Energy to handle its residential retail. Exelon Corp. owns Constellation Energy, and Houston-based Dynegy has Homefield Energy and Dynegy Energy Services.

Calpine, which mostly owns and operates natural gas-fired power plants, has a market capitalization value of more than $6.3 billion. The deal also includes the acquisition of Champion's Cavallo Energy.

Calpine stock closed at $16.97 per share on Monday, down 33 cents.

Champion has 2.5 million residential equivalent customers, many of whom are in Texas, and commercial and industrial customers.

Champion president David Tudor, who will keep the same job in the transition, expressed confidence that Champion will continue to increase its customer base.

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Calpine already had a relationship with Crane as one of the top "Community Leaders" sponsors of the Astros.

While Crane said it helped that he knows the Calpine leadership well, he emphasized that the business friendship had little to do with getting the deal done.

Champion was founded in 2002 in Houston at the time when Texas deregulated the electricity market. It also has customers in Illinois, Pennsylvania, Ohio, New Jersey, Maryland, Massachusetts and New York.

Calpine, which left bankruptcy in 2008, moved from California to Houston in 2009. The company has about 2,000 employees, including about 800 in the region.

Jose de Jesus Ortiz contributed.

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