Calpine Expands Retail Footprint With Noble Energy Unit Deal

Calpine Corp.’s decision to buy the U.S. energy unit of commodity trader Noble Group Ltd. for about $800 million marks its latest attempt to seek a hedge against low power prices by selling directly to customers.

The deal, which includes an additional $100 million in working capital, is expected to close by the end of the year, the independent power producer based in Houston said late Sunday in a statement. Calpine shares jumped as much as 3.7 percent in New York trading on Monday, the biggest one-day gain in a month.

Cheap natural gas, competition from renewable energy and weak demand have pushed down power prices, spurring Calpine and rival generators NRG Energy Inc. and Dynegy Inc. to seek to add direct sales to customers to boost earnings. Calpine snapped up electricity retailer Champion Energy Marketing LLC for $240 million last year to increase sales from its plants in Texas.

“Retail marketing provides a natural hedge against weak power prices given that retail margins may benefit from lower wholesale prices,” said Stacy Nemeroff, an analyst at Bloomberg Intelligence. Since retail contracts are often sold at fixed prices, margins on those sales rise when wholesale prices fall, she said.

San Diego-based Noble Americas Energy Solutions offers supply and risk-management services to commercial and industrial customers, buying energy wholesale for sale as retail products, according to Noble’s annual report. The unit has an aggregate book value of $662 million, Noble said in a separate statement.

“This transaction is highly cash flow and credit accretive,” Calpine Chief Executive Officer Thad Hill said. “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.”

Calpine was up 1.8 percent at $12.77 at 9:44 a.m. in New York. The shares have slid 12 percent this year.

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