CPN: NYSE 15.09
-0.03 -0.2% Volume: 2,927,314 January 22, 2018
America’s Premier Power Generation Company
... Creating Power for a Sustainable Future

Calpine Corp. Reports Exceptional 2008 Third Quarter and Year to Date Results; Provides 2008 Adjusted EBITDA Guidance

11/07/2008

Third Quarter 2008 Highlights vs. same period 2007:

  • $3.2 billion of Operating Revenues, a 37% increase
  • $842 million of Commodity Margin, a 15% increase
  • $593 million of Adjusted EBITDA, a 17% increase
  • $941 million of Net Cash Provided by Operating Activities, a 268% increase
  • $1.6 billion of Total Liquidity, an increase of 135% from June 30, 2008

Nine Months 2008 Highlights vs. same period 2007:

  • $8.0 billion of Operating Revenues, a 32% increase
  • $2.1 billion of Commodity Margin, a 25% increase
  • $1.4 billion of Adjusted EBITDA, a 26% increase
  • $355 million of Net Cash Provided by Operating Activities, a 393% increase

Third Quarter 2008 Operational Highlights:

  • 25.9 million MWh of electric generation
  • 96.6% availability, an increase of 3% over the same period in 2007
  • Record low forced outage factor of 0.01% at The Geysers geothermal facilities
  • Refined hedging program and risk management in light of financial markets turmoil

Providing 2008 Adjusted EBITDA Guidance:

  • 2008 Adjusted EBITDA guidance of $1.650  1.675 billion

HOUSTON & SAN JOSE, Calif.--(BUSINESS WIRE)--Nov. 7, 2008--Calpine Corporation (NYSE:CPN) today reported operating revenues of $3.2 billion for third quarter 2008, an increase of 37% over operating revenues in the third quarter 2007. Net income, excluding reorganization items, rose to $134 million for the quarter ended September 30, 2008. This result includes a pre-tax net mark-to-market (MtM) non-cash gain of $38 million, as shown in Table 1 below. Third quarter net income also includes a one-time impairment loss of $179 million related to our interest in Auburndale and a $13 million one-time loss related to the settlement of certain disputes.

Commodity Margin for the third quarter was $842 million, an increase of $110 million over the third quarter 2007, as seen in Table 3 below, primarily due to the Company's performance in the Texas region where Commodity Margin increased by $104 million, or 62% over the same period last year. Higher market spark spreads and plant availability, together with prudent risk management following Hurricane Ike, drove the year-over-year improvements.

Adjusted EBITDA was $593 million for the quarter, up 17%, or $88 million from $505 million reported for the third quarter 2007, as seen in Table 2 below. This increase is mainly attributed to the increase in Commodity Margin, as discussed above, decreased plant operating expenses not related to scheduled major maintenance activity of $10 million and an increase in other revenue of $6 million, partially offset by a $32 million decrease in pre-tax realized MtM (cash portion) revenue and a $12 million increase in sales, general and other administrative expenses (without depreciation and non-cash employee stock-based compensation) primarily related to increased legal and consulting expenses associated with Calpine's emergence from bankruptcy in January of this year.

Net cash provided by operating activities for the third quarter 2008 increased $685 million, or 268%, to $941 million over the same period in 2007. This increase is mainly attributed to a $324 million return of net cash collateral deposits, a $24 million reduction in gas and power prepayments and a $66 million change in additional working capital.

"Calpine has delivered record financial results for the third quarter despite cooler weather and major hurricanes in our primary markets, as well as a slowdown in the economy," said Jack Fusco, Calpine's President and Chief Executive Officer. "Importantly, despite considerable turbulence in the financial markets, we have been able to substantially improve liquidity which will enable us to continue to execute on our business plan. Other achievements included completion of the jointly owned Greenfield Energy Centre, which commenced commercial operations in October, and power plant operating availability of 97%. These exceptional results are due to our careful focus on operating our business, our hedging program, utilizing a first-lien structure to preserve liquidity, managing counterparty risk, fiscal discipline and excellence in plant operations."

For the first nine months of 2008, operating revenues increased by 32% from the same period last year to $8.0 billion. Net income (loss), excluding reorganization items, was improved by $387 million to ($144) million, when compared against the same period in 2007. Commodity Margin for the first nine months of 2008 was $2.1 billion compared to Commodity Margin of $1.7 billion in the first nine months of 2007. Adjusted EBITDA for the first nine months of 2008 was $1.4 billion versus $1.1 billion for the same period in 2007. This increase is largely attributed to the $424 million increase in Commodity Margin due to strong performance of our Texas region where Commodity Margin increased by $268 million, or 68%, over the same period last year, favorable market conditions during the off-peak period in the West during the second quarter and higher natural gas prices in the second quarter and the first half of the third quarter of 2008 which benefited our plants as they operated more efficiently than market heat rates.

Net cash provided by operating activities for the nine-month period ending September 30, 2008, increased $283 million, or 393%, to $355 million over the same period in 2007. This increase is mainly attributed to a $61 million return of net cash collateral deposits.

SUMMARY OF FINANCIAL PERFORMANCE

Table 1: Summarized Consolidated Statements of Operations

                                 Three Months Ended Nine Months Ended
                                   September 30,      September 30,
                                 ------------------ ------------------
                                   2008      2007     2008      2007
                                 --------- -------- --------- --------
                                            (in millions)
Operating revenues               $  3,190  $ 2,324  $  7,969  $ 6,046
Cost of revenue                    (2,656)  (1,897)   (6,988)  (5,309)
                                 --------  -------  --------  -------
Gross profit                          534      427       981      737
SG&A, impairment charges, other
 operating expenses                  (262)     (45)     (358)    (136)
                                 --------  -------  --------  -------
Income from operations                272      382       623      601
Net interest expense, minority
 interest and other expense          (218)    (477)     (827)    (999)
                                 --------  -------  --------  -------
Income (loss) before
 reorganization items and income
 taxes                                 54      (95)     (204)    (398)
Reorganization items                   (2)  (3,940)     (263)  (3,366)
Provision (benefit) for income
 taxes                                (80)      51       (60)     133
                                 --------  -------  --------  -------
  Total                               136    3,794       119    2,835
                                 --------  -------  --------  -------
Reorganization items                   (2)  (3,940)     (263)  (3,366)
                                 --------  -------  --------  -------
  Total, Net of reorganization
   items                              134     (146)     (144)    (531)
                                 --------  -------  --------  -------
MtM gain on derivatives (non-
 cash portion)(1)                     (38)     (20)      (10)     (22)
                                 --------  -------  --------  -------
  Total, Net of reorganization
   items and MtM impacts         $     96  $  (166) $   (154) $  (553)
                                 ========  =======  ========  =======

--------------------------------
(1) Represents the non-cash portion of net MtM gains (losses) on
 economic hedges that do not qualify for hedge accounting treatment.

Table 2: Adjusted EBITDA

                                 Three Months Ended Nine Months Ended
                                   September 30,      September 30,
                                 ------------------ ------------------
                                   2008      2007     2008      2007
                                 --------- -------- --------- --------
                                            (in millions)
GAAP net income                  $    136  $ 3,794  $    119  $ 2,835
Add:
Adjustments to reconcile
 Adjusted EBITDA to net income:
  Interest expense, net of
   interest income                    201      603       799    1,133
  Depreciation and amortization
   expense, excluding deferred
   financing costs(1)                 117      125       357      383
  Provision (benefit) for income
   taxes                              (80)      51       (60)     133
  Impairment charges                  179       --       179       --
  Loss on sale of assets,
   excluding reorganization
   items                               --       22         6       24
  Reorganization items                 (2)  (3,940)     (263)  (3,366)
  Major maintenance expense            22        4       118       78
  Losses on repurchase or
   extinguishment of debt              --       --        13       --
  Operating lease expense              12       15        35       39
  Gains on derivatives (non-cash
   portion)                           (38)     (20)      (10)     (22)
  Claim settlement income              --     (129)       --     (129)
  Stock-based compensation
   expense (income)                    17       --        36       (1)
  Other                                29      (20)       32      (26)
                                 --------  -------  --------  -------
Adjusted EBITDA                  $    593  $   505  $  1,361  $ 1,081
                                 ========  =======  ========  =======

--------------------------------
(1) Depreciation and amortization in the GAAP net income calculation
 on the Consolidated Condensed Statements of Operations excludes
 amortization of other assets and amounts classified as sales, general
 and other administrative expenses.

REGIONAL SEGMENT REVIEW OF RESULTS

Table 3: Commodity Margin by Segment

                                 Three Months Ended Nine Months Ended
                                   September 30,      September 30,
                                 ------------------ ------------------
            Segment                2008      2007     2008      2007
-------------------------------- --------- -------- --------- --------
                                            (in millions)
West                             $    345  $   385  $    954   $  880
Texas                                 272      168       660      392
Southeast                             106      112       234      214
North                                  96       79       230      217
Other                                  23      (12)       35      (14)
                                 --------  -------  --------  -------
  Total                          $    842  $   732  $  2,113   $1,689
                                 ========  =======  ========  =======

West: Commodity Margin in our West segment decreased by $40 million, or 10%, for the three months ended September 30, 2008, compared to the same period in the prior year resulting from lower realized margins on hedged positions as well as the negative impact on our natural gas held in storage resulting from the decrease in market natural gas prices in September 2008. Partially offsetting the decrease were the favorable impacts of new and renegotiated power contracts and, to a lesser extent, a 3% increase in generation during the three months ended September 30, 2008, compared to 2007. The increase in generation was attributed to a 2% increase in our average capacity factor, excluding peakers, driven by a 2% increase in our average availability for the three months ended September 30, 2008, compared to the three months ended September 30, 2007.

West segment Commodity Margin for the nine-month period ending September 30, 2008, increased $74 million or 8% over the same period in 2007. This increase primarily resulted from higher off-peak spark spreads in April 2008 due to lower hydroelectric generation and the favorable impact of new power contracts and a 5% increase in generation during the nine months ended September 30, 2008, compared to 2007.

Texas: Commodity Margin in our Texas segment increased by $104 million, or 62%, due primarily to higher market spark spreads in July and August of 2008 compared to the same period in 2007. Market spark spreads decreased in September 2008 compared to the same period in 2007 due to the impact of Hurricane Ike; however, we were able to purchase replacement power at prices below our generation cost and hedged prices during the same period, which had a favorable impact in September 2008. Generation increased in July and August 2008 as a result of the favorable market conditions and higher average availability, but the negative impact of Hurricane Ike in September 2008 left generation relatively unchanged for the third quarter of 2008 compared to 2007. We experienced a 3% increase in our steam adjusted heat rate for the three months ended September 30, 2008, compared to 2007 resulting from the loss of steam load due to the impact of Hurricane Ike and lower steam demand from two of our customers.

For the nine-month period ending September 30, 2008, Commodity Margin in our Texas segment increased by $268 million, or 68%, due primarily to higher market spark spreads from higher natural gas prices and transmission congestion in the South and Houston zones in the second quarter and the first half of the third quarter of 2008.

Southeast: Commodity Margin in our Southeast segment decreased $6 million, or 5%, during the three months ended September 30, 2008, compared to 2007 resulting from lower market spark spreads on open positions. However, the decrease was substantially offset by higher hedged levels on existing generation and the favorable impact of new power contracts which effectively negated a 15%, or 1,122 MW, decrease in our average total MW in operation and lower market spark spreads in the third quarter of 2008 compared to 2007. Generation decreased 28% during the three months ended September 30, 2008, compared to 2007 due primarily to a 15% or 1,122 MW decrease in our average total MW in operation following the sale of our interest in Acadia Power Partners in 2007 and the deconsolidation of Auburndale during the third quarter of 2008. Also contributing to the decrease in generation was a 13% decrease in our average capacity factor, excluding peakers, which resulted from lower market heat rates as well as an unplanned outage at our Carville Energy Center due to Hurricane Gustav during the third quarter of 2008.

For the nine-month period ending September 30, 2008, Commodity Margin in our Southeast segment increased by $20 million, or 9%, compared to 2007 resulting from the impact of higher hedged levels on existing generation, the favorable impact of new power contracts and $21 million of Commodity Margin recognized during the second quarter of 2008 related to a transmission capacity contract for which we received approval from the Federal Energy Regulatory Commission during the second quarter of 2008.

North: Commodity Margin in our North segment increased by $17 million, or 22%, resulting from higher realized spark spreads as well as an increase in our hedged position during the three months ended September 30, 2008, compared to 2007. The increase was partially offset by a decrease in generation of 15% during the third quarter of 2008, compared to the same period in 2007 due primarily to lower generation at power plants whose generation is contracted and controlled by third parties. Steam adjusted heat rate increased by 3% due to lower steam demand at two of our power plants.

For the nine-month period ending September 30, 2008, Commodity Margin in our North segment increased by $13 million, or 6%, resulting from higher realized spark spreads and an increase in our hedged position compared to 2007. This was partially offset by outages at our Westbrook Energy Center during the second quarter of 2008.

Other: Commodity Margin in our Other segment increased by $35 million during the third quarter and by $49 million for the nine-month period ending September 30, 2008, primarily resulting from the roll-off from OCI into earnings of the realized portion of non-region specific natural gas hedges and elimination of inter-segment transactions.

LIQUIDITY AND CAPITAL RESOURCES

Table 4: Corporate Liquidity

                                         September 30,     June 30,
                                              2008           2008
                                         -------------- --------------
                                                 (in millions)
Cash and cash equivalents, corporate     $          549 $          157
Cash and cash equivalents, non-corporate            302            213
                                         -------------- --------------
  Total cash and cash equivalents(1)                851            370
Letter of credit availability(2)                     12             85
Revolver availability(3)                            727            221
                                         -------------- --------------
  Total current liquidity(4)             $        1,590 $          676
                                         ============== ==============

----------------------------------------
(1) Excludes $436 million and $525 million of restricted cash for
 September 30, 2008, and June 30, 2008, respectively.
(2) Includes available balances for Calpine Development Holdings Inc.
 and Knock-in Facilities.
(3) Subsequent to period ending September 30, 2008, Calpine elected to
 draw $725 million under its Exit Credit Facility.
(4) Excludes contingent amounts of $150 million under the Knock-in
 Facility and $200 million under the Commodity Collateral Revolver.

Despite the turmoil in the financial markets during the third quarter, Calpine's liquidity position increased by $914 million to $1.6 billion due to a $481 million increase in cash balances and a $506 million increase in Exit Credit Facility revolver availability. The increase in cash and revolver availability was primarily driven by $324 million in return of cash collateral, $43 million in reductions in gas and power prepayments and $89 million in reclassification of restricted cash to unrestricted cash.

Subsequent to the end of the third quarter, Calpine elected to draw $725 million under its Exit Credit Facility revolver as a proactive financial decision to reduce the risk of non-performance from the institutions that hold a revolving commitment in its corporate first-lien facility, thereby enhancing the quality of the Company's liquidity during a period of great uncertainty in the capital markets.

PLANT DEVELOPMENT AND CONSTRUCTION

Greenfield Energy Centre: This 1,005 MW combined-cycle, natural gas-fired plant in Ontario, Canada, 50% owned through a joint venture with Mitsui & Co., achieved commercial operation on October 17, 2008. Greenfield has a 20-year clean power supply contract with the Ontario Power Authority for the full output with guaranteed revenue equivalent to a fixed monthly payment, plus payment for variable operating and maintenance costs based on actual power generation.

Otay Mesa Energy Center: The 596 MW combined-cycle, natural gas-fired Otay Mesa plant near San Diego is under construction and scheduled to begin commercial operations in September 2009. Calpine has sold 596 MW of production under a ten-year power purchase agreement (PPA) with San Diego Gas & Electric.

Russell City Energy Center: This is a joint development project in which Calpine holds a 65% interest, in partnership with GE Energy Financial Services, for a 600 MW combined-cycle, natural gas-fired plant to be constructed in the San Francisco Bay area. In the third quarter, the 2006 PPA between Pacific Gas & Electric Company (PG&E) and Russell City Energy Company, LLC, under which PG&E would take 100% of the generation for ten years, was amended to provide for continued development with an expected commercial operation date in June 2012. Completion of the Russell City development project is dependent upon obtaining the necessary permits and regulatory approvals.

OPERATIONS UPDATE

Plant Operations Achievements: Our plants had an exceptional quarter with achievements in several important categories:

  • Safety: We had top quartile safety performance with a lost-time rate of 0.17. In addition, our Magic Valley Generating Station earned OSHA's VPP Recognition for outstanding efforts by an employer and its employees to achieve a level of excellence in occupational safety and health at their worksites. 
  • Geothermal: The Geysers geothermal facilities had a forced outage factor of only 0.01%. In addition, our facilities were recognized by the State of California with a seventh consecutive Outstanding Lease Maintenance Award for environmental stewardship, safety, infrastructure maintenance and resource conservation. 
  • Fossil Generation: Fleetwide, our natural gas-fired units had a forced outage factor of 2.8% before adjustments for storms and less than 2% after adjustment for forced outages due to Hurricane Ike and Hurricane Gustav.

Commercial Operations Achievements: Our commercial operations group has continued to reduce natural gas and power price exposure and lock in commodity margin, despite a difficult commercial environment in a more collateral efficient manner.

  • Filled out a substantial portion of the unhedged balance of 2008 price risk enabling us to provide the full year 2008 guidance discussed below. 
  • Substantially increased our hedges for 2009 at target prices to lock in commodity margin. This places Calpine in a strong position to perform -- notwithstanding the current economic slowdown. 
  • Executed a new 500 MW PPA with TVA in the Southeast Region. 
  • Increased usage of the First-Lien or so-called "right-way-risk" program by almost 140% since September 1, 2008. 
  • The Texas team delivered strong September results despite the impacts of Hurricane Ike.

OUTLOOK FOR 2008

Table 5: Adjusted EBITDA and Major Cash Items Guidance for 2008 ($ in
 millions)

                                           Full Year 2008   Recurring
                                           --------------- -----------
Adjusted EBITDA                            $ 1,650-1,675

Major cash items:
  Recurring Cash Interest(1)               $     800       $   750
  Cash Major Maintenance(2)                $     165       $ 150-160
  Capital Expenditures(3)                  $     170       $ 110-130

------------------------------------------
(1) Recurring Cash Interest in 2008 excludes interest on Second
 Priority Senior Notes of approximately $250 million.
(2) 2008 and 2009 higher than recurring amounts shown above
(3) Purchases of Property Plant and Equipment exclude major
 construction and development projects funded with debt

Delivering on management's commitment to increase the level of transparency to assist the investment community in evaluating the Company, Calpine is providing 2008 Adjusted EBITDA guidance for the first time since emerging from bankruptcy. Our Adjusted EBITDA guidance for 2008 is $1.650 - $1.675 billion. The Company's 2008 guidance reflects the substantial hedging progress that our commercial operations team has been able to achieve this year, with 92% hedged on expected energy deliveries at an average spark spread price of $26 per MWh.

INVESTOR CONFERENCE CALL AND WEBCAST

Calpine will host a conference call to discuss its financial and operating results for the three and nine months ended September 30, 2008, on Friday, November 7, 2008, at 10:00 a.m. ET/9:00 a.m. CT. A listen-only webcast of the call may be accessed through the Company's web site at www.calpine.com, or by dialing 877-591-4954 (or 719-325-4900 for international listeners) at least ten minutes prior to the beginning of the call. An archived recording of the call will be made available on the web site and can also be accessed by dialing 888-203-1112 or 719-457-0820 (International) and providing Confirmation Code 4259943. In addition, the accompanying presentation will be available on the Company web site on November 7, 2008.

ABOUT CALPINE

Calpine Corporation is helping meet the needs of an economy that demands more and cleaner sources of electricity. Founded in 1984, Calpine is a major U.S. power company, currently capable of delivering over 24,000 MWs of clean, cost-effective, reliable and fuel-efficient electricity to customers and communities in 16 states in the United States and in Canada. The Company operates low-carbon emissions, natural gas-fired power plants and renewable geothermal power plants. Using advanced technologies, Calpine generates electricity in a reliable and environmentally responsible manner for the customers and communities it serves. Please visit www.calpine.com for more information.

Calpine's Quarterly Report on form 10-Q, including its unaudited financial statements, for the quarter ended September 30, 2008, has been filed with the Securities and Exchange Commission (SEC) and may be found on the SEC's web site at www.sec.gov.

FORWARD LOOKING INFORMATION

In addition to historical information, this release contains forward-looking statements within the meaning of Section 27A of the U.S. Securities Act of 1933, as amended, and Section 21E of the U.S. Securities Exchange Act of 1934, as amended. Words such as "believe," "intend," "expect," "anticipate," "plan," "may," "will" and similar expressions identify forward-looking statements. Such statements include, among others, those concerning expected financial performance and strategic and operational plans, as well as assumptions, expectations, predictions, intentions or beliefs about future events. You are cautioned that any such forward-looking statements are not guarantees of future performance and that a number of risks and uncertainties could cause actual results to differ materially from those anticipated in the forward-looking statements. Such risks and uncertainties include, but are not limited to:

  • the Company's ability to implement its business plan; 
  • financial results that may be volatile and may not reflect historical trends; 
  • seasonal fluctuations of our results and exposure to variations in weather patterns; 
  • potential volatility in earnings associated with fluctuations in prices for commodities such as natural gas and power; 
  • the Company's ability to manage liquidity needs and comply with covenants related to its Exit Credit Facility and other existing financing obligations; 
  • general financial and economic conditions including the cost and availability of capital and credit; 
  • the impact of the current financial crisis and the economic downturn on liquidity in the energy markets on which the Company relies to hedge risk and on the ability of suppliers and service providers to perform under their contracts with us; 
  • the Company's ability to complete the implementation of its Plan of Reorganization; 
  • disruptions in or limitations on the transportation of natural gas and transmission of electricity; 
  • the expiration or termination of PPAs and the related results on revenues; 
  • risks associated with the operation of power plants including unscheduled outages; 
  • factors that impact the output of the Company's geothermal resources and generation facilities, including unusual or unexpected steam field well and pipeline maintenance and variables associated with the wastewater injection projects that supply added water to the steam reservoir; 
  • natural disasters such as hurricanes, earthquakes and floods that may impact the Company's plants or the markets such plants serve; 
  • risks associated with power project development and construction activities as well as upgrades and expansions of existing plants; 
  • the ability to attract, retain and motivate key employees including filling certain significant positions within our management team; 
  • the ability to attract and retain customers and counterparties; 
  • the ability to manage our customer and counterparty exposure and credit risk; 
  • competition and regulation in the markets in which the Company participates; 
  • risks associated with marketing and selling power from plants in the evolving energy markets, including changing market rules; 
  • present and possible future claims, litigation and enforcement actions; 
  • effects of the application of laws or regulations, including changes in laws or regulations or the interpretation thereof; and 
  • other risks identified in this release or in Calpine's reports and registration statements filed with the SEC, including, without limitation, the risk factors identified in its Annual Report on Form 10-K for the year ended December 31, 2007.

Actual results or developments may differ materially from the expectations expressed or implied in the forward-looking statements, and Calpine undertakes no obligation to update any such statements. Unless specified otherwise, all information set forth in this release is as of today's date, and Calpine undertakes no duty to update this information. For additional information about Calpine's Chapter 11 reorganization or general business operations, please refer to Calpine's Annual Report on Form 10-K for the fiscal year ended December 31, 2007, and any other recent Calpine report to the Securities and Exchange Commission. These filings are available by visiting the Securities and Exchange Commission's web site at www.sec.gov or Calpine's web site at www.calpine.com.

                 CALPINE CORPORATION AND SUBSIDIARIES

                CONSOLIDATED CONDENSED BALANCE SHEETS
                             (Unaudited)

                                            September 30, December 31,
                                                2008          2007
                                            ------------- ------------
                                              (in millions, except
                                              share and per share
                                                     amounts)
                  ASSETS
Current assets:
  Cash and cash equivalents                 $        851  $     1,915
  Accounts receivable, net of allowance of
   $28 and $54                                     1,067          878
  Accounts receivable, related party                   4          226
  Materials and supplies                             147          114
  Margin deposits and other prepaid expense          533          452
  Restricted cash, current                           264          422
  Current derivative assets                        2,350          731
  Current assets held for sale                        --          195
  Other current assets                               108           98
                                            ------------  -----------
    Total current assets                           5,324        5,031

  Property, plant and equipment, net              11,923       12,292
  Restricted cash, net of current portion            172          159
  Investments                                        373          260
  Long-term derivative assets                        469          290
  Other assets                                       728        1,018
                                            ------------  -----------
    Total assets                            $     18,989  $    19,050
                                            ============  ===========
    LIABILITIES & STOCKHOLDERS' EQUITY
                 (DEFICIT)
Current liabilities:
  Accounts payable                          $        760  $       642
  Accrued interest payable                            71          324
  Debt, current portion                              662        1,710
  Current derivative liabilities                   2,433          806
  Income taxes payable                                39           51
  Other current liabilities                          450          571
                                            ------------  -----------
    Total current liabilities                      4,415        4,104

  Debt, net of current portion                     9,133        9,946
  Deferred income taxes, net of current
   portion                                           144           38
  Long-term derivative liabilities                   478          578
  Other long-term liabilities                        228          245
                                            ------------  -----------
Total liabilities not subject to compromise       14,398       14,911
Liabilities subject to compromise                     --        8,788
Commitments and contingencies
Minority interest                                      3            3
Stockholders' equity (deficit):
  Preferred stock, $.001 par value per
   share; authorized 100,000,000 shares,
   none issued and outstanding in 2008;
   authorized 10,000,000 shares, none
   issued and outstanding in 2007                     --           --
  Common stock, $.001 par value per share;
   authorized 1,400,000,000 shares,
   422,955,002 shares issued and
   422,889,970 shares outstanding in 2008;
   authorized 2,000,000,000 shares,
   568,314,685 issued and 479,314,685
   outstanding in 2007                                 1            1
  Treasury stock, at cost, 65,032 shares at
   September 30, 2008, and none at December
   31, 2007                                           (1)          --
  Additional paid-in capital                      12,203        3,263
  Accumulated deficit                             (7,588)      (7,685)
  Accumulated other comprehensive income
   (loss)                                           (27)         (231)
                                            ------------  -----------
    Total stockholders' equity (deficit)           4,588       (4,652)
                                            ------------  -----------
      Total liabilities and stockholders'
       equity (deficit)                     $     18,989  $    19,050
                                            ============  ===========

                 CALPINE CORPORATION AND SUBSIDIARIES

           CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
                             (Unaudited)

                               Three Months Ended  Nine Months Ended
                                  September 30,       September 30,
                               ------------------- -------------------
                                 2008      2007      2008      2007
                               --------- --------- --------- ---------
                                (in millions, except share and per
                                           share amounts)
Operating revenues             $  3,190  $  2,324  $  7,969  $  6,046

Cost of revenue:
  Fuel and purchased energy
   expense                        2,322     1,570     5,935     4,297
  Plant operating expense           198       182       636       561
  Depreciation and
   amortization expense             110       114       329       350
  Other cost of revenue              26        31        88       101
                               --------   -------  --------  --------
    Total cost of revenue         2,656     1,897     6,988     5,309
                               --------  --------  --------  --------
      Gross profit                  534       427       981       737
Sales, general and other
 administrative expense              58        33       154       112
Impairment charges                  179        --       179        --
Other operating expense              25        12        25        24
                               --------  --------  --------  --------
  Income from operations            272       382       623       601
Interest expense                    212       617       837     1,181
Interest (income)                   (11)      (14)      (38)      (48)
Minority interest (income)
 expense                             (1)        1        (1)       --
Other (income) expense, net          18      (127)       29      (134)
                               --------  --------  --------  --------
  Income (loss) before
   reorganization items and
   income taxes                      54       (95)     (204)     (398)
Reorganization items                 (2)   (3,940)     (263)   (3,366)
                               --------  --------  --------  --------
  Income before income taxes         56     3,845        59     2,968
(Benefit) provision for income
 taxes                              (80)       51      (60)       133
                               --------  --------  --------  --------
      Net income               $    136  $  3,794  $    119  $  2,835
                               ========  ========  ========  ========
Basic earnings per common
 share:
  Weighted average shares of
   common stock outstanding
   (in thousands)               485,073   479,312   485,027   479,208
                               --------  --------  --------  --------
      Net income per share -
       basic(1)                $   0.28  $   7.92  $   0.25  $   5.92
                               ========  ========  ========  ========
Diluted earnings per common
 share:
  Weighted average shares of
   common stock outstanding
   (in thousands)               485,741   479,617   485,588   479,543
                               --------  --------  --------  --------
      Net income per share -
       diluted(1)              $   0.28  $   7.91  $   0.25  $   5.91
                               ========  ========  ========  ========

------------------------------
(1) All shares of the Company's common stock outstanding prior to
 January 31, 2008, were canceled pursuant to the Plan of
 Reorganization, and new shares of reorganized Calpine Corporation
 common stock were issued. Although gain per share information for the
 three and nine months ended September 30, 2007, is presented, it is
 not comparable to the information for the three and nine months ended
 September 30, 2008, due to the changes in the Company's capital
 structure on January 31, 2008, which also included termination of all
 outstanding convertible securities.

                 CALPINE CORPORATION AND SUBSIDIARIES

           CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
                             (Unaudited)

                                       Nine Months Ended September 30,
                                       -------------------------------
                                            2008            2007
                                       --------------- ---------------
                                                (in millions)
Cash flows from operating activities:
  Net income                           $          119  $        2,835
  Adjustments to reconcile net income
   to net cash provided by operating
   activities:
    Depreciation and amortization
     expense(1)                                   418             420
    Deferred income taxes                         (60)            133
    Panda settlement                               13              --
    Impairment charges                            179              --
    Loss on sale of assets, excluding
     reorganization items                           6              24
    Foreign currency transaction gain              (2)             (2)
    Change in the fair value of
     derivative assets and liabilities             40             (24)
    Derivative contracts classified as
     financing activities                         (70)             --
    Loss from unconsolidated
     investments in power projects                 10               9
    Stock-based compensation expense
     (income)                                      36              (1)
    Reorganization items                         (331)         (3,459)
    Other                                           9              (2)
  Change in operating assets and
   liabilities:
    Accounts receivable                           126            (316)
    Other assets                                   96              19
    Accounts payable, LSTC and accrued
     expenses                                     (76)            383
    Other liabilities                            (158)             53
                                       --------------  --------------
      Net cash provided by operating
       activities                                 355              72
                                       --------------  --------------
Cash flows from investing activities:
  Purchases of property, plant and
   equipment                                     (108)           (173)
  Disposals of property, plant and
   equipment                                       16              32
  Proceeds from sale of investments,
   turbines and power plants                      398             507
  Cash acquired due to reconsolidation
   of Canadian Debtors and other
   foreign entities                                64              --
  Contributions to unconsolidated
   investments                                    (14)            (73)
  Return of investment in Canadian
   Debtors                                         --              75
  Return of investment from
   unconsolidated investments                      26             104
  Decrease in restricted cash                     145              57
  Cash effect of deconsolidation of
   variable interest entities                       2             (29)
  Other                                             5               4
                                       --------------  --------------
      Net cash provided by investing
       activities                                 534             504
                                       --------------  --------------

Cash flows from financing activities:
  Repayments of notes payable and
   lines of credit                     $          (98) $         (135)
  Borrowings under project financing              356              16
  Repayments of project financing                (297)           (108)
  Repayments of CalGen Secured Debt                --            (224)
  Borrowings under DIP Facility                    --             614
  Repayments of DIP Facility                      (98)            (28)
  Borrowings under Exit Facilities              3,523              --
  Repayments of Exit Facilities                (1,460)             --
  Borrowings under Commodity
   Collateral Revolver                            100              --
  Repayments of Second Priority Debt           (3,672)             --
  Redemptions of preferred interests             (166)             (9)
  Financing costs                                (207)            (81)
  Derivative contracts                             70              --
  Other                                            (4)              5
                                       --------------  --------------
      Net cash (used in) provided by
       financing activities                    (1,953)             50
                                       --------------  --------------
Net (decrease) increase in cash and
 cash equivalents                              (1,064)            626
Cash and cash equivalents, beginning
 of period                                      1,915           1,077
                                       --------------  --------------
Cash and cash equivalents, end of
 period                                $          851  $        1,703
                                       ==============  ==============
Cash paid (received) during the period
 for:
  Interest, net of amounts capitalized $          873  $          926
  Income taxes                         $           16  $            1
  Reorganization items included in
   operating activities, net           $          124  $           88
  Reorganization items included in
   investing activities, net           $         (414) $         (582)
  Reorganization items included in
   financing activities, net           $           --  $           74
Supplemental disclosure of non-cash
 investing and financing activities:
  Settlement of LSTC through issuance
   of reorganized Calpine Corporation
   common stock                        $        5,200  $           --
  DIP Facility borrowings converted
   into exit financing under Exit
   Facilities                          $        3,872  $           --
  Settlement of Convertible Senior
   Notes and Unsecured Senior Notes
   with reorganized Calpine
   Corporation common stock            $        3,703  $           --
  DIP Facility borrowings used to
   extinguish the Original DIP
   Facility principal ($989), CalGen
   Secured Debt principal ($2,309) and
   operating liabilities ($88)         $           --  $        3,386
  Project financing ($159) and
   operating liabilities ($33)
   extinguished with sale of Aries
   Power Plant                         $           --  $          192
  Fair value of loaned common stock
   returned                            $           --  $          138
  Letter of credit draws under CalGen
   Secured Debt used for operating
   activities                          $           --  $           16
  Fair value of Metcalf cooperation
   agreement, with offsets to notes
   payable ($6) and operating
   liabilities ($6)                    $           --  $           12

--------------------------------------
(1) Includes depreciation and amortization that is also recorded in
 sales, general and other administrative expense and interest expense.

Adjusted EBITDA Reconciliation

The table below provides a reconciliation of Adjusted EBITDA to the Company's net cash provided by operating activities and GAAP net income (loss) (in millions):

                                  Three Months Ended Nine Months Ended
                                    September 30,      September 30,
                                  ------------------ -----------------
                                    2008      2007     2008     2007
                                  --------- -------- -------- --------
Cash provided by operating
 activities                       $    941  $   256  $   355  $    72
Less:
  Changes in operating assets and
   liabilities                         420      217      (12)     139
  Additional adjustments to
   reconcile GAAP net income to
   net cash provided by (used in)
   operating activities:
   Depreciation and amortization
    expense(1)                         138      136      418      420
   Deferred income taxes              (145)      51      (60)     133
   Panda settlement                     13       --       13       --
   Change in the fair value of
    derivative assets and
    liabilities and derivative
    contracts classified as
    financing activities               162      (14)     (30)     (24)
   Reorganization items                 (9)  (3,956)    (331)  (3,459)
   Impairment charges                  179       --      179       --
   Loss on sale of assets,
    excluding reorganization
    items                               --       22        6       24
   Other                                47        6       53        4
                                  --------  -------  -------  -------
GAAP net income                        136    3,794      119    2,835
Add:
  Adjustments to reconcile GAAP
   net income to Adjusted EBITDA:
    Interest expense, net of
     interest income                   201      603      799    1,133
    Depreciation and amortization
     expense, excluding deferred
     financing costs(1)                117      125      357      383
    (Benefit) provision for
     income taxes                      (80)      51      (60)     133
    Impairment charges                 179       --      179       --
    Loss on sale of assets,
     excluding reorganization
     items                              --       22        6       24
    Reorganization items                (2)  (3,940)    (263)  (3,366)
    Major maintenance expense           22        4      118       78
    Losses on repurchase or
     extinguishment of debt             --       --       13       --
    Operating lease expense             12       15       35       39
    Gains on derivatives (non-
     cash portion)                     (38)     (20)     (10)     (22)
    Claim settlement income             --     (129)      --     (129)
    Stock-based compensation
     expense (income)                   17       --       36       (1)
    Other                               29      (20)      32      (26)
                                  --------  -------  -------  -------
      Adjusted EBITDA             $    593  $   505  $ 1,361  $ 1,081
                                  ========  =======  =======  =======

---------------------------------
(1) Depreciation and amortization in the GAAP net income (loss)
 calculation on the Company's Consolidated Condensed Statements of
 Operations excludes amortization of other assets and amounts
 classified as sales, general and other administrative expenses.

Adjusted EBITDA Reconciliation for Guidance

Full Year 2008 Range:                               Low        High
                                                 ---------- ----------
                                                     (in millions)
Adjusted EBITDA                                  $    1,650 $    1,675
Less:
  Interest Expense, net of Interest Income(1)         1,018      1,018
  Depreciation and Amortization                         442        442
  Major Maintenance Expense                             175        175
  Operating Lease Expense                                45         45
  Other(2)                                            (155)      (155)
                                                 ---------- ----------
    Net income (loss)                            $      125 $      150
                                                 ========== ==========

------------------------------------------------
(1) Includes interest paid on Second Priority Liens
(2) Other includes Stock Compensation, Minority Interest Expense,
 Impairments and other adjustments.

Consolidated Commodity Margin

The following table reconciles the Company's Commodity Margin to its GAAP results for the three and nine months ended September 30, 2008, and 2007 (in millions):

                                  Three Months Ended Nine Months Ended
                                     September 30,     September 30,
                                  ------------------ -----------------
                                    2008      2007     2008     2007
                                  --------- -------- -------- --------

Operating revenues                $  3,190  $ 2,324  $ 7,969  $ 6,046
(Less): Other revenue                  (12)      (6)    (35)      (50)
(Less): Fuel and purchased energy
 expense                            (2,322)  (1,570)  (5,935)  (4,297)
Adjustment to remove:
  Mark-to-market commodity
   activity, net(1)                    (14)     (16)     114      (10)
                                   -------   ------   ------   ------
    Consolidated commodity margin $    842  $   732  $ 2,113  $ 1,689
                                   =======   ======   ======   ======

---------------------------------
(1) Included in operating revenues and fuel and purchased energy
 expense.

Cash Flow Activities

The following table summarizes the Company's cash flow activities for the nine months ended September 30, 2008, and 2007 (in millions):

                                                         2008    2007
                                                       -------- ------
Beginning cash and cash equivalents                    $ 1,915  $1,077
                                                       -------  ------
Net cash provided by (used in):
  Operating activities                                     355      72
  Investing activities                                     534     504
  Financing activities                                  (1,953)     50
                                                       -------  ------
    Net (decrease) increase in cash and cash
     equivalents                                        (1,064)    626
                                                       -------  ------
      Ending cash and cash equivalents                 $   851  $1,703
                                                       =======  ======

Operating Performance Metrics

The table below shows the operating performance metrics for continuing operations:

                                 Three Months Ended Nine Months Ended
                                    September 30,      September 30,
                                 ------------------ ------------------
                                  2008(1)  2007(1)   2008(1)  2007(1)
                                 --------- -------- --------- --------
                                          (MWh in thousands)
Total MWh generated                25,868  27,127     67,995   69,005
  West                             10,563  10,218     27,702   26,461
  Texas                             9,830   9,907     27,048   25,640
  Southeast                         3,806   5,089      9,111   11,930
  North                             1,669   1,913      4,134    4,974

Average availability                 96.6%   93.9%      90.8%    91.5%
  West                               95.8%   94.2%      89.6%    90.0%
  Texas                              96.9%   96.2%      90.1%    91.8%
  Southeast                          97.4%   91.5%      92.6%    93.6%
  North                              96.7%   92.5%      92.0%    89.8%

Average total MW in operation      23,064  24,854     23,097   25,098
  West                              7,246   7,246      7,246    7,293
  Texas                             7,251   7,266      7,251    7,271
  Southeast                         6,205   7,327      6,238    7,518
  North                             2,362   3,015      2,362    3,016

Average capacity factor,
 excluding peakers                   55.2%   54.6%      49.0%    46.5%
  West                               73.9%   72.1%      65.9%    62.4%
  Texas                              61.4%   61.8%      56.7%    53.8%
  Southeast                          29.8%   34.1%      24.5%    26.2%
  North                              39.1%   39.0%      33.8%    36.3%

Steam adjusted Heat Rate            7,274   7,211      7,237    7,172
  West                              7,314   7,313      7,287    7,330
  Texas                             7,147   6,967      7,090    6,823
  Southeast                         7,335   7,441      7,409    7,470
  North                             7,722   7,492      7,596    7,659

--------------------------------
(1) Excludes plants sold or mothballed since 3Q07 (adjusted for sale
 of Acadia and mothball of Pryor). Not adjusted for deconsolidation of
 Auburndale and RockGen.

CONTACT: Calpine Corporation
Media Relations:
Mel Scott, 713-570-4553
scottm@calpine.com
Investor Relations:
Andre K. Walker, 713-830-8775
andrew@calpine.com

SOURCE: Calpine Corporation