Calpine Reports Record First Quarter Results, Reaffirms 2014 Guidance Despite Impact of Previously Announced Divestiture

  Calpine Reports Record First Quarter Results, Reaffirms 2014 Guidance
  Despite Impact of Previously Announced Divestiture

Business Wire

HOUSTON -- May 1, 2014

Calpine Corporation (NYSE: CPN)

Summary of First Quarter 2014 Financial Results (in millions, except per share
amounts):

                                 
                                   Three Months Ended March 31,
                                   2014       2013       % Change
                                                                 
Operating Revenues                 $ 1,965     $ 1,241     58.3  %
Commodity Margin                   $ 645       $ 461       39.9  %
Adjusted EBITDA                    $ 446       $ 286       55.9  %
Adjusted Free Cash Flow            $ 130       $ (43   )
Per Share (diluted)                $ 0.31      $ (0.10 )
Net Loss^1                         $ (17   )   $ (125  )
Per Share (diluted)                $ (0.04 )   $ (0.28 )
Net Income (Loss), As Adjusted^2   $ 55        $ (70   )
                                                                 

Reaffirming 2014 Full Year Guidance^3 (in millions, except per share amounts):

                             
                             2014
                             
Adjusted EBITDA              $1,900 - 2,000
Adjusted Free Cash Flow      $785 - 885
Per Share Estimate (diluted) $1.85 - 2.10
                             

Recent Achievements:

  *Operations:
    — Generated approximately 24 million MWh^4 of electricity in first quarter
    of 2014
    — Leveraged dual-fuel capabilities in Mid-Atlantic and Northeast U.S. to
    reliably provide power during extreme winter weather
    — Despite extreme weather conditions, delivered low fleetwide forced
    outage factor of 2.5%

  *Capital Management:
    — Announced value-enhancing agreement to divest approximately 3.5 GW of
    non-core assets from our Southeast portfolio for $1.57 billion^5
    — Completed acquisition of Guadalupe Energy Center in Texas and closed
    related $425 million term loan
    — Reached final stages of construction for expansions of Deer Park and
    Channel Energy Centers in Texas, which are expected to commence commercial
    operations during the second quarter of 2014
    — Advanced construction on Garrison Energy Center in Delaware, which is
    expected to commence commercial operations during the second quarter of
    2015

Calpine Corporation (NYSE: CPN) today reported first quarter 2014 Adjusted
EBITDA of $446 million, compared to $286 million in the prior year period, and
Adjusted Free Cash Flow of $130 million, or $0.31 per diluted share, compared
to $(43) million, or $(0.10) per diluted share, in the prior year period. Net
Loss^1 for the first quarter of 2014 was $17 million, or $0.04 per diluted
share, compared to $125 million, or $0.28 per diluted share, in the prior year
period. Net Income, As Adjusted^2, for the first quarter of 2014 was $55
million compared to a Net Loss, As Adjusted^2, of $70 million in the prior
year period. The increases in Adjusted EBITDA, Adjusted Free Cash Flow and Net
Income, As Adjusted^2, were driven primarily by higher Commodity Margin
resulting from stronger market conditions driven by colder than normal
weather, our ability to capture the value of our dual-fuel-capable plants in
the North during extreme commodity pricing conditions, portfolio changes and
higher regulatory capacity revenue.

“Calpine’s power generation fleet and commercial operations produced
record-breaking financial results in the first quarter of 2014,” said Jack
Fusco, Calpine’s Chief Executive Officer. “Our versatile combined-cycle and
dual-fueled fleet performed exceptionally well this winter, providing
essential power to the grid during times of scarcity and price volatility.
Despite the extreme weather conditions, our workforce preparedness and
preventive maintenance enabled us to deliver a low forced outage factor of
2.5%. Our strong results confirm that Calpine has the right fleet, in the
right place, at the right time.

“We continue to strategically reposition the company with the recently
announced sale of six power plants in our Southeast region for $1.57 billion,”
said Fusco. “This transaction unlocks shareholder value from these non-core,
historically underappreciated assets, and we intend to redeploy the capital in
a balanced and opportunistic manner that is accretive to Adjusted Free Cash
Flow Per Share.

“As I reflect on my six years as CEO, I am proud of the strategic, operational
and financial accomplishments of the Calpine team. I am confident that Calpine
is very well positioned for further success and that Thad Hill is the right
leader to capitalize upon those efforts as we navigate the ongoing secular
shift in the U.S. power generation sector. As Executive Chairman, I expect to
dedicate more time to focusing on corporate strategy including our capital
allocation efforts, in order to maximize shareholder returns while also
increasing my efforts to advocate for competitive markets and responsible
environmental regulation.”

__________

^1 Reported as Net Loss attributable to Calpine on our Consolidated Condensed
Statements of Operations.

^2 Refer to Table 1 for further detail of Net Income (Loss), As Adjusted.

^3 2014 guidance assumes closing of previously announced Southeast asset
divestiture as of June 1, 2014.

^4 Includes generation from power plants owned but not operated by Calpine and
our share of generation from unconsolidated power plants.

^5 Subject to working capital and other adjustments.

SUMMARY OF FINANCIAL PERFORMANCE

First Quarter Results

Adjusted EBITDA for the first quarter of 2014 was $446 million compared to
$286 million in the prior year period. The year-over-year increase in Adjusted
EBITDA was primarily related to a $184 million increase in Commodity Margin,
which was primarily due to:

      +  stronger market conditions driven by colder than normal
                weather, resulting in higher realized market spark spreads
                running some of our dual-fuel power plants in our North region
            +   on fuel oil rather than natural gas when fuel oil prices were
                lower than natural gas prices
                our Russell City and Los Esteros power plants commencing
            +   commercial operations during the third quarter of 2013 and the
                acquisition of Guadalupe Energy Center in February 2014 and
            +   higher regulatory capacity revenue in the North, partially
                offset by
            –   lower contribution from hedges.

Net Loss^1 was $17 million for the first quarter of 2014, compared to $125
million in the prior year period. As detailed in Table 1, Net Income, As
Adjusted^2, was $55 million in the first quarter of 2014 compared to a Net
Loss, As Adjusted^2, of $70 million in the prior year period. The
year-over-year improvement was driven largely by:

      +  higher Commodity Margin, as previously discussed, partially
                offset by
                higher plant operating expense driven primarily by our plant
                outage schedule that resulted in increased major maintenance
                expense compared to the prior year period, while normal
            –   recurring plant operating expenses were roughly comparable
                after accounting for portfolio changes and the reversal of
                previously recognized regulatory fees that benefited the first
                quarter of 2013 and did not recur in the first quarter of
                2014, and
                lower income tax benefit resulting from an increase in various
            –   state and foreign jurisdiction income taxes associated with a
                decrease in our pre-tax loss.

Adjusted Free Cash Flow was $130 million in the first quarter of 2014 compared
to $(43) million in the prior year period. Adjusted Free Cash Flow increased
during the period primarily due to the increase in Adjusted EBITDA, as
previously discussed.

                                                
Table 1: Net Income (Loss), As Adjusted
                                                  
                                                  Three Months Ended March 31,
                                                  2014            2013
                                                  (in millions)
Net loss attributable to Calpine                  $   (17   )      $  (125  )
Unrealized MtM (gain)/loss on                     72              55       
derivatives^(1)(2)
Net Income (Loss), As Adjusted^(3)                $   55          $  (70   )

__________

^(1) Shown net of tax, assuming a 0% effective tax rate for these items.

^(2) In addition to changes in market value on derivatives not designated as
hedges, changes in unrealized (gain) loss also includes de-designation of
interest rate swap cash flow hedges and related reclassification from AOCI
into earnings, hedge ineffectiveness and adjustments to reflect changes in
credit default risk exposure.

^(3) See “Regulation G Reconciliations” for further discussion of Net Income
(Loss), As Adjusted.


REGIONAL SEGMENT REVIEW OF RESULTS

Table 2: Commodity Margin by Segment (in millions)
           
              Three Months Ended March 31,
              2014        2013        Variance
West          $  202       $  202       $   —
Texas         121           76            45
North         267           142           125
Southeast     55           41           14
Total         $  645       $  461       $   184
                                              

West Region

First Quarter: Commodity Margin in our West segment was unchanged in the first
quarter of 2014 compared to the prior year period. Primary drivers were:

                the commencement of commercial operations at our contracted
      +  Russell City and Los Esteros power plants during the third
                quarter of 2013 and
                higher spark spreads due to stronger market conditions
            +   resulting from lower hydroelectric generation and warmer
                weather, partially offset by
            –   the expiration of a contract associated with our Delta Energy
                Center and
            –   lower contribution from hedges.

Texas Region

First Quarter: Commodity Margin in our Texas segment increased by $45 million
in the first quarter of 2014 compared to the prior year period. Primary
drivers were:

      +  higher spark spreads resulting from stronger market conditions
                due to colder than normal weather and
            +   the acquisition of Guadalupe Energy Center in February 2014,
                partially offset by
            –   lower contribution from hedges.

North Region

First Quarter: Commodity Margin in our North segment increased by $125 million
in the first quarter of 2014 compared to the prior year period. Primary
drivers were:

      +  higher spark spreads resulting from stronger market conditions
                due to colder than normal weather
                higher commodity margin contribution from our
            +   dual-fuel-capable plants during times when fuel oil prices
                were lower than natural gas prices and
            +   higher regulatory capacity revenues, partially offset by
            –   lower contribution from hedges.

Southeast Region

First Quarter: Commodity Margin in our Southeast segment increased by $14
million in the first quarter of 2014 compared to the prior year period.
Primary drivers were:

      +  higher spark spreads resulting from stronger market conditions
                due to colder than normal weather, partially offset by
            –   lower contribution from hedges.


LIQUIDITY, CASH FLOW AND CAPITAL RESOURCES

Table 3: Liquidity
                                                     
                                            March 31,   December 31,
                                            2014        2013
                                            (in millions)
Cash and cash equivalents, corporate^(1)    $ 417       $    649
Cash and cash equivalents, non-corporate    98         292
Total cash and cash equivalents             515         941
Restricted cash                             266         272
Corporate Revolving Facility availability   761         758
CDHI letter of credit availability          35         7
Total current liquidity availability        $ 1,577    $    1,978

__________

^(1) Includes $18 million and $5 million of margin deposits posted with us by
our counterparties at March 31, 2014, and December 31, 2013, respectively.

Liquidity was approximately $1.6 billion as of March 31, 2014. Cash and cash
equivalents decreased during the first quarter of 2014 primarily resulting
from the use of $244 million in cash on hand to fund the purchase of Guadalupe
Energy Center, $140 million in share repurchases, $37 million in payments to
fund the construction of Garrison Energy Center and the expansions of our
Channel and Deer Park Energy Centers as well as other seasonal variations in
working capital, which cause fluctuations in our cash and cash equivalents.

                                                     
Table 4: Cash Flow Activities
                                                        
                                            March 31,   March 31,
                                            2014        2013
                                            (in millions)
Beginning cash and cash equivalents         $  941     $ 1,284 
Net cash provided by (used in):
Operating activities                        123         (157    )
Investing activities                        (769    )   (122    )
Financing activities                        220        (43     )
Net decrease in cash and cash equivalents   (426    )   (322    )
Ending cash and cash equivalents            $  515     $ 962   
                                                                

Cash flows from operating activities in the first quarter of 2014 resulted in
net inflows of $123 million compared to net outflows of $157 million in the
first quarter of 2013. The increase in cash provided by operating activities
was primarily due to an increase in income from operations (adjusted for
non-cash items). Also contributing to the increase was a decrease in working
capital employed, largely due to a decrease in net accounts
receivable/accounts payable balances resulting from timing of cash
receipts/disbursements, along with reduced margin requirements. These
increases were partially offset by higher cash paid for interest due to timing
of interest payments.

Cash flows used in investing activities were $769 million in the first quarter
of 2014 compared to $122 million in the first quarter of 2013. The increase in
outflows was primarily due to the $656 million purchase of our Guadalupe
Energy Center in 2014 with no corresponding acquisition activity in the first
quarter of 2013.

Cash flows provided by financing activities were $220 million and were
primarily related to proceeds received from the issuance of CCFC Term Loans
used to fund a portion of the purchase price of our Guadalupe Energy Center,
partially offset by payments associated with execution of our share repurchase
program.

CAPITAL ALLOCATION

Sale of Six Southeast Power Plants

On April 17, 2014, we entered into a purchase and sale agreement to sell six
of our power plants in the Southeast segment for a purchase price of
approximately $1.57 billion in cash, subject to working capital and other
adjustments. The divestiture of these power plants will better align our asset
base with our strategic focus on competitive wholesale markets.

Share Repurchase Program

In November 2013, our Board of Directors authorized a new $1.0 billion
multi-year share repurchase program, under which we have repurchased a total
of 12,759,919 shares of our common stock for approximately $245 million at an
average price of $19.18 per share as of the date of this release. In February
2014, we temporarily suspended our share repurchase program during our
negotiations regarding the aforementioned transaction.

PLANT DEVELOPMENT

Texas:

Channel and Deer Park Expansions: In the fourth quarter of 2012, we began
construction to expand the baseload capacity of our Deer Park and Channel
Energy Centers by approximately 260 MW^6 each. Each power plant features an
oversized steam turbine that, along with existing plant infrastructure, allows
us to add capacity and improve the power plant’s overall efficiency at a
meaningful discount to the market cost of building new capacity. We expect
commercial operations on the expansions of our Channel and Deer Park Energy
Centers to commence during the second quarter of 2014.

Guadalupe Energy Center: On February 26, 2014, we, through our indirect,
wholly owned subsidiary Calpine Guadalupe GP, LLC, completed the purchase of a
power plant owned by MinnTex Power Holdings, LLC with a nameplate capacity of
1,050 MW for approximately $625 million, excluding working capital
adjustments. The addition of this modern, natural gas-fired, combined-cycle
power plant increased capacity in our Texas segment, which is one of our core
markets. We also paid $15 million to acquire the rights to an advanced
development opportunity for an approximately 400 MW quick-start, natural
gas-fired peaker. We funded the acquisition with $425 million in incremental
CCFC Term Loans and cash on hand.

North:

Garrison Energy Center: Garrison Energy Center is a 309 MW combined-cycle
project located in Delaware on a site secured by a long-term lease with the
City of Dover. Construction commenced in April 2013, and we expect commercial
operations to commence during the second quarter of 2015. The project’s
capacity cleared PJM’s 2015/2016 and 2016/2017 base residual auctions. We are
in the early stages of development of a second phase (309 MW) of this project.
PJM has completed the feasibility and system impact studies for this phase,
and the facilities study is currently underway.

Mankato Power Plant Expansion: We are proposing a 345 MW expansion of the
Mankato Power Plant in response to a competitive resource acquisition process
established by the Minnesota Public Utilities Commission (“MPUC”) to acquire
up to approximately 500 MW of new capacity. The initial stage of the
proceeding was managed via a contested case hearing. On March 27, 2014, the
MPUC agreed in part and disagreed in part with the recommendation of the
Administrative Law Judge and directed Xcel Energy (Northern States Power) to
negotiate in parallel PPAs with Calpine and certain other entities, subject to
final review and approval by the MPUC. A decision is expected in late 2014 or
early 2015.

PJM Development Opportunities: We are currently evaluating opportunities to
develop more than 1,000 MW in the PJM market area that feature cost advantages
such as existing infrastructure and favorable transmission queue positions.
These projects are continuing to advance entitlements (permits, zoning,
transmission, etc.) for their potential development at a future date.

All Segments:

Turbine Modernization: We continue to move forward with our turbine
modernization program. Through March 31, 2014, we have completed the upgrade
of twelve Siemens and eight GE turbines totaling approximately 200 MW and have
committed to upgrade approximately four additional turbines. Similarly, we
have the opportunity at several of our power plants in Texas to implement
further turbine modernizations to add as much as 500 MW of incremental
capacity across the region at attractive prices. In addition, we have begun a
program to update our dual-fueled turbines at certain of our power plants in
our North segment. Our decision to invest in these modernizations depends
upon, among other things, further clarity on market design reforms currently
being considered.

___________

^6 Represents incremental baseload capacity at annual average conditions.
Incremental summer peaking capacity is approximately 200 MW per unit,
supplemented by incremental efficiencies across the balance of plant.

OPERATIONS UPDATE

First Quarter 2014 Power Operations Achievements

  *Safety Performance:
    — Maintained top quartile^7 safety metrics: 0.80 Total Recordable Incident
    Rate

  *Availability Performance:
    — Despite extreme weather conditions, achieved a low fleetwide forced
    outage factor of 2.5% and impressive fleetwide starting reliability of
    97.4%

  *Geothermal Generation:
    — Provided approximately 1.4 million MWh of renewable baseload generation

  *Natural Gas-fired Generation:
    — Provided approximately 350,000 MWh of reliable oil-fired generation from
    dual-fuel PJM fleet during extreme weather conditions
    — Pastoria Energy Center: 0% forced outage factor, 100% starting
    reliability

___________

^7 According to EEI Safety Survey (2012).


2014 FINANCIAL OUTLOOK

(in millions, except per share amounts)
                                                             Full Year 2014
Adjusted EBITDA                                               $ 1,900 - 2,000
Less:
Operating lease payments                                        35
Major maintenance expense and maintenance capital               380
expenditures^(1)
Cash interest, net^(2)                                          675
Cash taxes                                                      20
Other                                                          5        
Adjusted Free Cash Flow                                       $ 785 - 885
Per Share Estimate (diluted)                                  $ 1.85 - 2.10
                                                                         
Debt amortization                                             $ (200     )
Growth capital expenditures (net of debt funding)             $ (200     )
Guadalupe Energy Center acquisition (net of debt funding)     $ (244     )

________

^(1) Includes projected major maintenance expense of $220 million and
maintenance capital expenditures of $160 million. Capital expenditures exclude
major construction and development projects.

^(2) Includes commitment, letter of credit and other bank fees from both
consolidated and unconsolidated investments, net of capitalized interest and
interest income.

As detailed above, today we are reaffirming our 2014 guidance, even after
accounting for the impact of our announced Southeast asset divestiture. We
project Adjusted EBITDA of $1,900 million to $2,000 million, Adjusted Free
Cash Flow of $785 million to $885 million and Adjusted Free Cash Flow Per
Share guidance of $1.85 to $2.10. We expect to invest $200 million (net of
debt funding) in our ongoing growth-related projects during the year,
including the expected completion of our Deer Park and Channel Energy Center
expansions and ongoing construction of our Garrison Energy Center.

INVESTOR CONFERENCE CALL AND WEBCAST

We will host a conference call to discuss our financial and operating results
for the first quarter of 2014 on Thursday, May 1,2014, at 10 a.m. Eastern
time / 9 a.m. Central time. A listen-only webcast of the call may be accessed
through our website at www.calpine.com, or by dialing (800) 447-0521 in the
U.S. or (847) 413-3238 outside the U.S. The confirmation code is 36846002. An
archived recording of the call will be made available for a limited time on
our website or by dialing (888) 843-7419 in the U.S. or (630) 652-3042 outside
the U.S. and providing confirmation code 36846002. Presentation materials to
accompany the conference call will be available on our website on May 1,2014.

ABOUT CALPINE

Calpine Corporation generates more electricity than any other independent
power producer in America, with a fleet of 94 power plants in operation or
under construction, representing more than 29,000 megawatts of generation
capacity. Serving customers in 20 states and Canada, we specialize in
developing, constructing, owning and operating natural gas-fired and renewable
geothermal power plants that use advanced technologies to generate power in a
low-carbon and environmentally responsible manner. Our clean, efficient,
modern and flexible fleet is uniquely positioned to benefit from the secular
trends affecting our industry, including the abundant and affordable supply of
clean natural gas, stricter environmental regulation, aging power generation
infrastructure and the increasing need for dispatchable power plants to
successfully integrate intermittent renewables into the grid. We focus on
competitive wholesale power markets and advocate for market-driven solutions
that result in nondiscriminatory forward price signals for investors. Please
visit www.calpine.com to learn more about why Calpine is a generation ahead -
today.

Calpine’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2014,
has been filed with the Securities and Exchange Commission (SEC) and may be
found on the SEC’s website at www.sec.gov.

FORWARD-LOOKING INFORMATION

In addition to historical information, this release contains “forward-looking
statements” within the meaning of the Private Securities Litigation Reform Act
of 1995, Section27A of the Securities Act, and Section21E of the Exchange
Act. Forward-looking statements may appear throughout this release. We use
words such as “believe,” “intend,” “expect,” “anticipate,” “plan,” “may,”
“will,” “should,” “estimate,” “potential,” “project” and similar expressions
to identify forward-looking statements. Such statements include, among others,
those concerning our expected financial performance and strategic and
operational plans, as well as all 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:

  *Financial results that may be volatile and may not reflect historical
    trends due to, among other things, seasonality of demand, fluctuations in
    prices for commodities such as natural gas and power, changes in U.S.
    macroeconomic conditions, fluctuations in liquidity and volatility in the
    energy commodities markets and our ability to hedge risks;
  *Laws, regulation and market rules in the markets in which we participate
    and our ability to effectively respond to changes in laws, regulations or
    market rules or the interpretation thereof including those related to the
    environment, derivative transactions and market design in the regions in
    which we operate;
  *Our ability to manage our liquidity needs and to comply with covenants
    under our First Lien Notes, Corporate Revolving Facility, First Lien Term
    Loans, CCFC Term Loans and other existing financing obligations;
  *Risks associated with the operation, construction and development of power
    plants including unscheduled outages or delays and plant efficiencies;
  *Risks related to our geothermal resources, including the adequacy of our
    steam reserves, unusual or unexpected steam field well and pipeline
    maintenance requirements, variables associated with the injection of water
    to the steam reservoir and potential regulations or other requirements
    related to seismicity concerns that may delay or increase the cost of
    developing or operating geothermal resources;
  *The unknown future impact on our business from the Dodd-Frank Act and the
    rules to be promulgated thereunder;
  *Competition, including risks associated with marketing and selling power
    in the evolving energy markets;
  *Structural changes in the supply and demand of power, resulting from the
    development of new fuels or technologies and demand-side management tools;
  *The expiration or early termination of our PPAs and the related results on
    revenues;
  *Future capacity revenues may not occur at expected levels;
  *Natural disasters, such as hurricanes, earthquakes and floods, acts of
    terrorism or cyber attacks that may impact our power plants or the markets
    our power plants serve and our corporate headquarters;
  *Disruptions in or limitations on the transportation of natural gas, fuel
    oil and transmission of power;
  *Our ability to manage our customer and counterparty exposure and credit
    risk, including our commodity positions;
  *Our ability to attract, motivate and retain key employees;
  *Present and possible future claims, litigation and enforcement actions;
    and
  *Other risks identified in this press release and in our 2013 Form 10-K.

Given the risks and uncertainties surrounding forward-looking statements, you
should not place undue reliance on these statements. Many of these factors are
beyond our ability to control or predict. Our forward-looking statements speak
only as of the date of this release. Other than as required by law, we
undertake no obligation to update or revise forward-looking statements,
whether as a result of new information, future events, or otherwise.


CALPINE CORPORATION AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

                                                     
                             Three Months Ended March 31,
                             2014                          2013
                             (in millions, except share and per share amounts)
Operating revenues:
Commodity revenue            $      2,048                  $    1,308
Unrealized mark-to-market    (86                )          (71            )
(loss)
Other revenue                3                            4              
Operating revenues           1,965                        1,241          
Operating expenses:
Fuel and purchased energy
expense:
Commodity expense            1,370                         835
Unrealized mark-to-market    (13                )          (14            )
(gain)
Fuel and purchased energy    1,357                        821            
expense
Plant operating expense      265                           227
Depreciation and             153                           146
amortization expense
Sales, general and other     33                            33
administrative expense
Other operating expenses     22                           18             
Total operating expenses     1,830                        1,245          
(Income) from
unconsolidated investments   (9                 )          (8             )
in power plants
Income from operations       144                           4
Interest expense             166                           176
Interest (income)            (1                 )          (2             )
Other (income) expense,      11                           5              
net
Loss before income taxes     (32                )          (175           )
Income tax benefit           (19                )          (50            )
Net loss                     (13                )          (125           )
Net income attributable to
the noncontrolling           (4                 )          —              
interest
Net loss attributable to     $      (17         )          $    (125      )
Calpine
                                                                          
Basic and diluted loss per
common share attributable
to Calpine:
Weighted average shares of
common stock outstanding           420,105                   451,706   
(in thousands)
Net loss per common share
attributable to Calpine —    $      (0.04       )          $    (0.28     )
basic and diluted
                                                                          


CALPINE CORPORATION AND SUBSIDIARIES

CONSOLIDATED CONDENSED BALANCE SHEETS

(Unaudited)
                                                         
                                      March 31,               December 31,
                                      2014                    2013
                                      (in millions, except share and per share
                                      amounts)
ASSETS
Current assets:
Cash and cash equivalents             $    515                $   941
Accounts receivable, net of           627                     552
allowance of $5 and $5
Margin deposits and other prepaid     293                     309
expense
Restricted cash, current              195                     203
Derivative assets, current            655                     445
Inventory and other current assets    417                    406          
Total current assets                  2,702                   2,856
Property, plant and equipment, net    13,598                  12,995
Restricted cash, net of current       71                      69
portion
Investments in power plants           85                      93
Long-term derivative assets           174                     105
Other assets                          437                    441          
Total assets                          $    17,067            $   16,559   
LIABILITIES & STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable                      $    607                $   462
Accrued interest payable              93                      162
Debt, current portion                 189                     204
Derivative liabilities, current       728                     451
Other current liabilities             256                    252          
Total current liabilities             1,873                   1,531
Debt, net of current portion          11,286                  10,908
Long-term derivative liabilities      230                     243
Other long-term liabilities           266                    309          
Total liabilities                     13,655                  12,991
                                                                           
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.001 par value
per share; authorized 100,000,000     —                       —
shares, none issued and outstanding
Common stock, $0.001 par value per
share; authorized 1,400,000,000
shares, 499,765,622 and 497,841,056   1                       1
shares issued, respectively, and
423,242,107 and 429,038,988 shares
outstanding, respectively
Treasury stock, at cost, 76,523,515   (1,378         )        (1,230       )
and 68,802,068 shares, respectively
Additional paid-in capital            12,400                  12,389
Accumulated deficit                   (7,503         )        (7,486       )
Accumulated other comprehensive       (166           )        (160         )
loss
Total Calpine stockholders’ equity    3,354                   3,514
Noncontrolling interest               58                     54           
Total stockholders’ equity            3,412                  3,568        
Total liabilities and stockholders’   $    17,067            $   16,559   
equity
                                                                           


CALPINE CORPORATION AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)
                                                
                                                  Three Months Ended March 31,
                                                  2014            2013
                                                  (in millions)
Cash flows from operating activities:
Net loss                                          $   (13    )     $  (125  )
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization expense^(1)         164              158
Deferred income taxes                             (13        )     (7       )
Unrealized mark-to-market activity, net           72               55
(Income) from unconsolidated investments in       (9         )     (8       )
power plants
Return on unconsolidated investments in power     13               —
plants
Stock-based compensation expense                  10               8
Other                                             (2         )     —
Change in operating assets and liabilities:
Accounts receivable                               (75        )     (45      )
Derivative instruments, net                       (87        )     (36      )
Other assets                                      29               (73      )
Accounts payable and accrued expenses             106              (91      )
Other liabilities                                 (72        )     7        
Net cash provided by (used in) operating          123             (157     )
activities
Cash flows from investing activities:
Purchases of property, plant and equipment        (119       )     (176     )
Purchase of Guadalupe Energy Center, net of       (656       )     —
cash
Decrease in restricted cash                       6               54       
Net cash used in investing activities             $   (769   )     $  (122  )
Cash flows from financing activities:
Borrowings under CCFC Term Loans                  $   420          $  —
Repayment of CCFC Term Loans and First Lien       (11        )     (6       )
Term Loans
Borrowings from project financing, notes          1                73
payable and other
Repayments of project financing, notes payable    (43        )     (36      )
and other
Financing costs                                   (10        )     (9       )
Stock repurchases                                 (140       )     (75      )
Proceeds from exercises of stock options          3                9
Other                                             —               1        
Net cash provided by (used in) financing          220             (43      )
activities
Net decrease in cash and cash equivalents         (426       )     (322     )
Cash and cash equivalents, beginning of period    941             1,284    
Cash and cash equivalents, end of period          $   515         $  962   
                                                                            
Cash paid during the period for:
Interest, net of amounts capitalized              $   225          $  213
Income taxes                                      $   8            $  5
                                                                            
Supplemental disclosure of non-cash investing
activities:
Change in capital expenditures included in        $   (9     )     $  17
accounts payable

__________

^(1) Includes depreciation and amortization included in fuel and purchased
energy expense and interest expense on our Consolidated Condensed Statements
of Operations.

REGULATION G RECONCILIATIONS

Net Income (Loss), As Adjusted, Commodity Margin, Adjusted EBITDA and Adjusted
Free Cash Flow are non-GAAP financial measures that we use as measures of our
performance. These measures should be viewed as a supplement to and not a
substitute for our U.S. GAAP measures of performance.

Net Income (Loss), As Adjusted, represents net income (loss) attributable to
Calpine, adjusted for certain non-cash and non-recurring items as previously
detailed in Table 1, including unrealized mark-to-market (gain) loss on
derivatives, and other adjustments. Net Income (Loss), As Adjusted, is
presented because we believe it is a useful tool for assessing the operating
performance of our company in the current period. Net Income (Loss), As
Adjusted, is not intended to represent net income (loss), the most comparable
U.S. GAAP measure, as an indicator of operating performance and is not
necessarily comparable to similarly titled measures reported by other
companies.

Commodity Margin includes our power and steam revenues, sales of purchased
power and physical natural gas, capacity revenue, revenue from renewable
energy credits, sales of surplus emission allowances, transmission revenue and
expenses, fuel and purchased energy expense, fuel transportation expense,
environmental compliance expense, and realized settlements from our marketing,
hedging, optimization and trading activities including natural gas
transactions hedging future power sales, but excludes the unrealized portion
of our mark-to-market activity and other revenues. We believe that Commodity
Margin is a useful tool for assessing the performance of our core operations,
and it is a key operational measure reviewed by our chief operating decision
maker. Commodity Margin does not intend to represent income (loss) from
operations, the most comparable U.S. GAAP measure, as an indicator of
operating performance and is not necessarily comparable to similarly titled
measures reported by other companies.

Adjusted EBITDA represents net income (loss) attributable to Calpine before
net (income) loss attributable to the noncontrolling interest, interest,
taxes, depreciation and amortization, adjusted for certain non-cash and
non-recurring items as detailed in the following reconciliation. Adjusted
EBITDA is not intended to represent cash flows from operations or net income
(loss) as defined by U.S. GAAP as an indicator of operating performance and is
not necessarily comparable to similarly titled measures reported by other
companies.

We believe Adjusted EBITDA is useful to investors and other users of our
financial statements in evaluating our operating performance because it
provides them with an additional tool to compare business performance across
companies and across periods. We believe that EBITDA is widely used by
investors to measure a company’s operating performance without regard to items
such as interest expense, taxes, depreciation and amortization, which can vary
substantially from company to company depending upon accounting methods and
book value of assets, capital structure and the method by which assets were
acquired.

Additionally, we believe that investors commonly adjust EBITDA information to
eliminate the effect of restructuring and other expenses, which vary widely
from company to company and impair comparability. As we define it, Adjusted
EBITDA represents EBITDA adjusted for the effects of impairment losses, gains
or losses on sales, dispositions or retirements of assets, any unrealized
gains or losses from accounting for derivatives, adjustments to exclude the
Adjusted EBITDA related to the noncontrolling interest, stock-based
compensation expense, operating lease expense, non-cash gains and losses from
foreign currency translations, major maintenance expense, non-cash
GAAP-related adjustments to levelize revenues from tolling contracts, gains or
losses on the repurchase or extinguishment of debt and any extraordinary,
unusual or non-recurring items plus adjustments to reflect the Adjusted EBITDA
from our unconsolidated investments. We adjust for these items in our Adjusted
EBITDA as our management believes that these items would distort their ability
to efficiently view and assess our core operating trends.

In summary, our management uses Adjusted EBITDA as a measure of operating
performance to assist in comparing performance from period to period on a
consistent basis and to readily view operating trends, as a measure for
planning and forecasting overall expectations and for evaluating actual
results against such expectations, and in communications with our Board of
Directors, shareholders, creditors, analysts and investors concerning our
financial performance.

During the fourth quarter of 2013, we changed the methodology previously used
during 2013 for allocating corporate expenses to our segments. This change had
no impact to our Consolidated Condensed Statements of Operations for any
period in 2013; however, segment amounts previously reported for the first
three quarterly periods in 2013 were adjusted by immaterial amounts.

Adjusted Free Cash Flow represents net income before interest, taxes,
depreciation and amortization, as adjusted, less operating lease payments,
major maintenance expense and maintenance capital expenditures, net cash
interest, cash taxes and other adjustments, including non-recurring items.
Adjusted Free Cash Flow is presented because we believe it is a useful tool
for assessing the financial performance of our company in the current period.
Adjusted Free Cash Flow is a performance measure and is not intended to
represent net income (loss), the most directly comparable U.S. GAAP measure,
or liquidity and is not necessarily comparable to similarly titled measures
reported by other companies.

Commodity Margin Reconciliation

The following table reconciles our Commodity Margin to its U.S. GAAP results
for the three months ended March 31, 2014 and 2013 (in millions):

               
                 Three Months Ended March 31, 2014
                                                       Consolidation 
                                                           And
                 West      Texas     North     Southeast   Elimination     Total
Commodity        $ 202     $ 121     $ 267     $  55       $    —          $ 645
Margin
Add:
Unrealized
mark-to-market   29        (46   )   (17   )   6           (9        )     (37   )
commodity
activity, net
and other^(1)
Less:
Plant
operating        105       90        52        27          (9        )     265
expense
Depreciation
and              60        42        33        18          —               153
amortization
expense
Sales, general
and other        10        12        6         6           (1        )     33
administrative
expense
Other
operating        12        2         6         1           1               22
expenses
(Income) from
unconsolidated   —        —        (9    )   —          —              (9    )
investments in
power plants
Income (loss)
from             $ 44     $ (71 )   $ 162    $  9       $    —         $ 144 
operations
                                                                                 

               
                 Three Months Ended March 31, 2013
                                                       Consolidation 
                                                           And
                 West      Texas     North     Southeast   Elimination     Total
Commodity        $ 202     $ 76      $ 142     $  41       $    —          $ 461
Margin
Add:
Unrealized
mark-to-market   (37   )   (11   )   7         7           (7        )     (41   )
commodity
activity, net
and other^(1)
Less:
Plant
operating        95        65        43        31          (7        )     227
expense
Depreciation
and              53        42        33        19          (1        )     146
amortization
expense
Sales, general
and other        7         14        6         6           —               33
administrative
expense
Other
operating        9         1         7         1           —               18
expenses
(Income) from
unconsolidated   —        —        (8    )   —          —              (8    )
investments in
power plants
Income (loss)
from             $ 1      $ (57 )   $ 68     $  (9  )    $    1         $ 4   
operations

_________

^(1) Includes $(29) million and $(16) million of lease levelization and $4
million and $4 million of amortization expense for the three months ended
March31, 2014 and 2013, respectively.

Consolidated Adjusted EBITDA Reconciliation

In the following table, we have reconciled our Adjusted EBITDA and Adjusted
Free Cash Flow to our net loss attributable to Calpine for the three months
ended March 31, 2014 and 2013, as reported under U.S. GAAP.

                                                
                                                  Three Months Ended March 31,
                                                  2014           2013
                                                  (in millions)
Net loss attributable to Calpine                  $   (17   )     $  (125   )
Net income attributable to the noncontrolling     4               —
interest
Income tax benefit                                (19       )     (50       )
Other (income) expense, net                       11              5
Interest expense, net of interest income          165            174       
Income from operations                            $   144         $  4
Add:
Adjustments to reconcile income from operations
to Adjusted EBITDA:
Depreciation and amortization expense,            151             146
excluding deferred financing costs^(1)
Major maintenance expense                         81              66
Operating lease expense                           9               9
Unrealized loss on commodity derivative           73              57
mark-to-market activity
Adjustments to reflect Adjusted EBITDA from
unconsolidated investments and exclude the        3               6
noncontrolling interest^(2)
Stock-based compensation expense                  10              8
Loss on dispositions of assets                    —               2
Acquired contract amortization                    4               4
Other                                             (29       )     (16       )
Total Adjusted EBITDA                             $   446        $  286    
Less:
Operating lease payments                          9               9
Major maintenance expense and capital             133             136
expenditures^(3)
Cash interest, net^(4)                            168             180
Cash taxes                                        6               3
Other                                             —              1         
Adjusted Free Cash Flow^(5)                       $   130        $  (43    )
                                                                            
Weighted average shares of common stock           420,105        451,706   
outstanding (diluted, in thousands)
Adjusted Free Cash Flow Per Share (diluted)       $   0.31       $  (0.10  )

_________

^(1) Depreciation and amortization expense in the income from operations
calculation on our Consolidated Condensed Statements of Operations excludes
amortization of other assets.

^(2) Adjustments to reflect Adjusted EBITDA from unconsolidated investments
include unrealized (gain) loss on mark-to-market activity of nil for each of
the three months ended March 31, 2014 and 2013.

^(3) Includes $83 million and $66 million in major maintenance expense for the
three months ended March 31, 2014 and 2013, respectively, and $50 million and
$70 million in maintenance capital expenditures for the three months ended
March 31, 2014 and 2013, respectively.

^(4) Includes commitment, letter of credit and other bank fees from both
consolidated and unconsolidated investments, net of capitalized interest and
interest income.

^(5) Excludes an increase in working capital of $6 million and $94 million for
the three months ended March 31, 2014 and 2013, respectively. Adjusted Free
Cash Flow, as reported, excludes changes in working capital, such that it is
calculated on the same basis as our guidance.

In the following table, we have reconciled our Adjusted EBITDA to our
Commodity Margin, both of which are non-GAAP measures, for the three months
ended March 31, 2014 and 2013. Reconciliations for both Adjusted EBITDA and
Commodity Margin to comparable U.S. GAAP measures are provided above.

                                                
                                                  Three Months Ended March 31,
                                                  2014             2013
                                                  (in millions)
Commodity Margin                                  $   645           $  461
Other revenue                                     3                 3
Plant operating expense^(1)                       (177      )       (154    )
Sales, general and administrative expense^(2)     (29       )       (29     )
Other operating expenses^(3)                      (12       )       (10     )
Adjusted EBITDA from unconsolidated investments   16               15      
in power plants^(4)
Adjusted EBITDA                                   $   446          $  286  

_________

^(1) Shown net of major maintenance expense, stock-based compensation expense,
non-cash loss on dispositions of assets and other costs.

^(2) Shown net of stock-based compensation expense and other costs.

^(3) Shown net of operating lease expense, amortization and other costs.

^(4) Amount is composed of income from unconsolidated investments in power
plants, as well as adjustments to reflect Adjusted EBITDA from unconsolidated
investments.

                                                                         
Adjusted EBITDA and Adjusted Free Cash Flow Reconciliation for Guidance
                                                                         
Full Year 2014 Range^(1):                                     Low        High
                                                              (in millions)
GAAP Net Income ^(2)                                       $  270      $ 370
Plus:
Interest expense, net of interest income                      675        675
Depreciation and amortization expense                         610        610
Major maintenance expense                                     215        215
Operating lease expense                                       35         35
Other^(3)                                                     95        95
Adjusted EBITDA                                            $  1,900    $ 2,000
Less:
Operating lease payments                                      35         35
Major maintenance expense and maintenance capital             380        380
expenditures^(4)
Cash interest, net^(5)                                        675        675
Cash taxes                                                    20         20
Other                                                         5         5
Adjusted Free Cash Flow                                    $  785      $ 885

_________

^(1) 2014 guidance assumes closing of previously announced Southeast asset
divestiture as of June 1, 2014.

^(2) For purposes of Net Income guidance reconciliation, unrealized
mark-to-market adjustments are assumed to be nil.

^(3) Other includes stock-based compensation expense, adjustments to reflect
Adjusted EBITDA from unconsolidated investments, income tax expense and other
items.

^(4) Includes projected major maintenance expense of $220 million and
maintenance capital expenditures of $160 million. Capital expenditures exclude
major construction and development projects.

^(5) Includes commitment, letter of credit and other bank fees from both
consolidated and unconsolidated investments, net of capitalized interest and
interest income.


OPERATING PERFORMANCE METRICS

The table below shows the operating performance metrics for continuing
operations:
                                         
                                             Three Months Ended March 31,
                                             2014              2013      
Total MWh generated (in thousands)^(1)       22,977              23,998
West                                         8,831               8,337
Texas                                        6,877               8,030
North                                        3,645               3,909
Southeast                                    3,624               3,722
                                                                           
Average availability                         88.4      %         90.1      %
West                                         89.0      %         88.5      %
Texas                                        82.7      %         87.2      %
North                                        88.1      %         92.3      %
Southeast                                    97.6      %         94.1      %
                                                                           
Average capacity factor, excluding           43.2      %         47.6      %
peakers
West                                         58.2      %         61.6      %
Texas                                        39.0      %         47.8      %
North                                        38.4      %         43.2      %
Southeast                                    32.8      %         33.7      %
                                                                           
Steam adjusted heat rate (Btu/kWh)           7,353               7,345
West                                         7,248               7,287
Texas                                        7,151               7,162
North                                        7,971               7,911
Southeast                                    7,377               7,269

________

^(1) Excludes generation from unconsolidated power plants and power plants
owned but not operated by us.

Contact:

Calpine Corporation
Media Relations:
Brett Kerr, 713-830-8809
brett.kerr@calpine.com
or
Investor Relations:
Bryan Kimzey, 713-830-8777
bryan.kimzey@calpine.com
 
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