Calpine is an independent power producer. Most of their generating assets are gas turbines. Until today, Calpine was considered a near pure play on gas-to-electricity.

Champion is an energy service provider. Their services are limited to providing retail electricity.

Both companies operate in the deregulated energy markets. Calpine is focused in federally regulated wholesale markets. Champion is focused in state-regulated retail markets.

On the surface, Calpine's acquisition makes little sense. Digging a little deeper, it makes a lot of sense.

By owning 2.5 million retail customers, Calpine is able to hedge their generating fleet against a retail portfolio. They are also able to hedge their retail customer base against their generating fleet. After this acquisition is complete, Calpine can go long on natural gas and lock in a margin.

As an aside, 2.5 million retail customers is considered a stable base. On its own, Champion should be profitable.

Here is the announcement.


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