Dive Brief:

• Calpine has agreed to buy the 1,050-MW natural gas-fired Guadalupe power plant near San Antonio, Texas, for $625 million.
• The deal, expected to close early next year, includes the rights to a roughly 470-MW peaking power plant to be built next to the Guadalupe plant, owned by a Wayzata Investment Partners company. Calpine will build the new plant “if market conditions warrant.”

Dive Insight:

The transaction will increase Calpine's capacity in the Electric Reliability Council of Texas (ERCOT) footprint by 13% to about 9,075 MW. Calpine is also adding 550 MW to two plants it owns in Houston.

Electric demand in Texas has been growing in the last few years, but generators contend that the market does not support building new power plants. Regulators and lawmakers are considering changes to the ERCOT market to spur power plant development.

“We strongly believe in the potential of the Texas market as electric demand increases and reserve margins tighten,” Jack Fusco, Calpine CEO, said. “Acquiring this modern, flexible and efficient plant in ERCOT’s south zone at a discount to replacement cost furthers our strategic objectives in this key market.”