UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
FORM 10-Q
[ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarter ended March 31, 1996
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from
______________________ to ______________________
Commission File Number: 033-73160
CALPINE CORPORATION
(A California Corporation)
I.R.S. Employer Identification No. 77-0031605
50 West San Fernando Street
San Jose, California 95113
Telephone: (408) 995-5115
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [ X ] No [ ]
Indicate the number of shares outstanding of each of the Registrant's classes of
common stock:
Class A: None Class B: 2,000,000
This report on Form 10-Q, including all exhibits, contains 39 pages.
The exhibit index is located on page 25 of this report.
-1-
<PAGE>
CALPINE CORPORATION AND SUBSIDIARIES
Report on Form 10-Q
For the Quarter Ended March 31, 1996
INDEX
PART I. FINANCIAL INFORMATION Page No.
ITEM 1. Financial Statements
Condensed Consolidated Balance Sheets
March 31, 1996 and December 31, 1995.....................................3
Condensed Consolidated Statements of Operations
Three Months Ended March 31, 1996 and 1995...............................4
Condensed Consolidated Statements of Cash Flows
Three Months Ended March 31, 1996 and 1995...............................5
Notes to Condensed Consolidated Financial Statements.....................6
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.....................................12
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings...............................................17
ITEM 2. Change in Securities............................................17
ITEM 3. Defaults Upon Senior Securities.................................17
ITEM 4. Submission of Matters to a Vote of Security Holders.............17
ITEM 5. Other Information...............................................17
ITEM 6. Exhibits and Reports on Form 8-K................................17
SIGNATURES...................................................................24
Exhibit Index................................................................25
-2-
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
CALPINE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
<CAPTION>
March 31, December 31,
1996 1995
-------- --------
(unaudited)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents ............................... $ 68,647 $ 21,810
Accounts receivable ..................................... 17,522 20,124
Acquisition project receivables ......................... 8,114 8,805
Other current assets .................................... 4,900 5,491
-------- --------
Total current assets ............................... 99,183 56,230
Property, plant and equipment, net ........................... 448,261 447,751
Investments in power projects ................................ 12,206 8,218
Notes receivable from related parties ........................ 20,006 19,391
Notes receivable from Coperlasa .............................. 11,264 6,094
Restricted cash .............................................. 8,526 9,627
Deferred charges and other assets ............................ 5,903 7,220
-------- --------
Total assets ....................................... $605,349 $554,531
======== ========
Liabilities and Shareholder's Equity
Current liabilities:
Current non-recourse long-term project financing ........ $ 83,846 $ 84,708
Notes payable to bank and short-term borrowings ......... 969 1,177
Accounts payable ........................................ 6,877 6,876
Accrued payroll and related expenses .................... 1,892 2,789
Accrued interest payable ................................ 4,328 7,050
Other accrued expenses .................................. 2,282 2,657
-------- --------
Total current liabilities .......................... 100,194 105,257
Long-term line of credit ..................................... 32,151 19,851
Non-recourse long-term project financing, less current portion 185,798 190,642
Notes payable ................................................ 6,473 6,348
Senior Notes Due 2004 ........................................ 105,000 105,000
Deferred income taxes, net ................................... 97,164 97,621
Other liabilities ............................................ 3,636 4,585
-------- --------
Total liabilities .................................. 530,416 529,304
-------- --------
Shareholder's equity
Preferred stock ......................................... 50,000 --
Common stock ............................................ 6,224 6,224
Retained earnings ....................................... 18,709 19,003
-------- --------
Total shareholder's equity ......................... 74,933 25,227
-------- --------
Total liabilities and shareholder's equity ......... $605,349 $554,531
======== ========
The accompanying notes are an integral part of these condensed
consolidated financial statements.
</TABLE>
-3-
<PAGE>
<TABLE>
CALPINE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
<CAPTION>
Three Months Ended
March 31,
--------------------
1996 1995
-------- --------
<S> <C> <C>
Revenue:
Electricity and steam sales ................................... $ 25,775 $ 21,103
Service contract revenue from related parties ................. 2,012 1,523
Service revenue from others ................................... 574 --
Income (loss) from unconsolidated investments in power projects 1,415 (616)
Interest income on loans to power projects .................... 1,897 --
-------- --------
Total revenue ........................................ 31,673 22,010
-------- --------
Cost of revenue:
Plant operating expenses, depreciation, operating lease expense
and production royalties ................................... 19,472 12,281
Service contract expenses and other ........................... 1,857 1,111
-------- --------
Total cost of revenue ................................ 21,329 13,392
-------- --------
Gross profit ....................................................... 10,344 8,618
Project development expenses ....................................... 516 501
General and administrative expenses ................................ 2,640 1,545
-------- --------
Income from operations ............................... 7,188 6,572
Other (income) expense:
Interest expense .............................................. 8,219 6,931
Other income, net ............................................. (533) (459)
-------- --------
Income before provision for income taxes ............. (498) 100
Provision for (benefit from) income taxes .......................... (204) 41
-------- --------
Net income ........................................... $ (294) $ 59
======== ========
Weighted average shares outstanding ................................ 2,000 2,190
======== ========
Earnings per share ................................................. $ (0.15) $ 0.03
======== ========
The accompanying notes are an integral part of these condensed
consolidated financial statements.
</TABLE>
-4-
<PAGE>
<TABLE>
CALPINE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
<CAPTION>
Three Months Ended March 31,
1996 1995
-------- --------
<S> <C> <C>
Net cash provided by (used for) operating activities ......... $ (2,216) $ 4,443
-------- --------
Cash flows from investing activities:
Acquisition of property, plant and equipment ............ (7,261) (8,071)
Deposit for King City transaction ....................... (1,000) --
Investments in power projects and capitalized costs ..... (459) (502)
Increase in notes receivable from related party ......... -- (250)
Decrease in restricted cash ............................. 1,101 2,902
Other, net .............................................. (20) 5
-------- --------
Net cash used in investing activities .............. (7,639) (5,916)
-------- --------
Cash flows from financing activities:
Borrowings from line of credit .......................... 12,300 --
Repayment of line of credit ............................. (208) --
Repayment of non-recourse project financing ............. (5,400) (9,900)
Proceeds from issuance of preferred stock ............... 50,000 --
Repayment of working capital loan ....................... -- (4,000)
Financing costs ......................................... -- (82)
-------- --------
Net cash provided by (used for) financing activities 56,692 (13,982)
-------- --------
Net increase (decrease) in cash and cash equivalents ......... 46,837 (15,455)
Cash and cash equivalents, beginning of period ............... 21,810 22,527
-------- --------
Cash and cash equivalents, end of period ..................... $ 68,647 $ 7,072
======== ========
Supplementary information:
Cash paid during the period for:
Interest ........................................... $ 10,951 $ 10,812
Income taxes ....................................... $ -- $ 125
The accompanying notes are an integral part of these condensed
consolidated financial statements.
</TABLE>
-5-
<PAGE>
CALPINE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1996
1. Organization and Operation of the Company
Calpine Corporation (Calpine), a California corporation, and
subsidiaries (collectively, the Company) are engaged in the
development, acquisition, ownership and operation of power generation
facilities in the United States. The Company has ownership interests in
and operates geothermal steam fields, geothermal power generation
facilities, and natural gas-fired cogeneration facilities in Northern
California and Washington. Each of the generation facilities produces
electricity for sale to utilities. Thermal energy produced by the
gas-fired cogeneration facilities is sold to governmental and
industrial users, and steam produced by the geothermal steam fields is
sold to utility-owned power plants. Founded in 1984, the Company is
wholly owned by Electrowatt Services, Inc., which is wholly owned by
Electrowatt Ltd (Electrowatt), a Swiss company. The Company has
expertise in the areas of engineering, finance, construction and plant
operations and maintenance.
2. Summary of Significant Accounting Policies
Basis of Interim Presentation
The accompanying interim condensed consolidated financial statements of
the Company have been prepared by the Company, without audit by
independent public accountants, pursuant to the rules and regulations
of the Securities and Exchange Commission. In the opinion of
management, the condensed consolidated financial statements include all
and only normal recurring adjustments necessary to present fairly the
information required to be set forth therein. Certain information and
note disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted from these statements pursuant to such rules and
regulations and, accordingly, should be read in conjunction with the
audited consolidated financial statements of the Company included in
the Company's annual report on Form 10-K for the year ended December
31, 1995. The results for interim periods are not necessarily
indicative of the results for the entire year.
Earnings Per Share
Earnings per share are calculated using the weighted average number of
shares outstanding during each period and, unless antidilutive, the net
additional number of shares which would be issuable upon the exercise
of outstanding stock options, assuming that the Company used the
proceeds received to purchase additional shares at the estimated fair
market value, as determined by the Board of Directors, based in part on
an independent appraisal.
Impact of Recent Accounting Pronouncements
In March 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards (SFAS) No. 121, Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of. This pronouncement requires that long-lived assets and
certain identifiable intangible assets be reviewed for impairment
whenever events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. An impairment loss is to be
recognized when the sum of undiscounted cash flows is less than the
carrying amount of the asset. Measurement of the loss for assets that
the entity expects to hold and use are to be based on the fair market
value of the asset. SFAS No. 121 must be adopted for fiscal years
beginning in 1996. The Company adopted SFAS No.
-6-
<PAGE>
CALPINE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
121 effective January 1, 1996, and determined that adoption of this
pronouncement had no material impact on the results of operations or
financial condition as of January 1, 1996.
3. Accounts Receivable
The Company has both billed and unbilled receivables. The components of
accounts receivable as of March 31, 1996 and December 31, 1995 are as
follows (in thousands):
March 31, December 31,
1996 1995
------- -------
(unaudited)
Projects:
Billed ...... $15,806 $18,341
Unbilled..... 549 525
Other ....... 1,167 1,258
------- -------
$17,522 $20,124
======= =======
Other accounts receivable consist primarily of disputed amounts related
to the Greenleaf facilities purchase price. In April 1996, the Company
reclassified such accounts receivable to property, plant and equipment
as an adjustment to the purchase price of the Greenleaf facilities (see
Note 6).
Accounts receivable from related parties as of March 31, 1996 and
December 31, 1995 are comprised of the following (in thousands):
March 31, December 31,
1996 1995
------ ------
(unaudited)
O.L.S. Energy-Agnews, Inc. ....... $ 379 $ 806
Geothermal Energy Partners, Ltd... 1,512 462
Sumas Cogeneration Company, L.P... 1,088 908
Electrowatt and subsidiaries ..... 1 1
------ ------
$2,980 $2,177
====== ======
4. Investments in Power Projects
The Company has unconsolidated investments in power projects which are
accounted for under the equity method. Unaudited financial information
for the three months ended March 31, 1996 and 1995 related to these
investments is as follows (in thousands):
-7-
<PAGE>
CALPINE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
<TABLE>
<CAPTION>
1996 1995
------------------------------------------ -------------------------------------------
Sumas O.L.S. Geothermal Sumas O.L.S. Geothermal
Cogeneration Energy- Energy Cogeneration Energy- Energy
Company, Agnews, Partners, Company, Agnews, Partners,
L.P. Inc. Ltd. L.P. Inc. Ltd.
<S> <C> <C> <C> <C> <C> <C>
Revenue $ 12,047 $ 1,699 $ 4,118 $ 8,653 $ 1,552 $ 4,969
Operating expenses 6,336 2,191 3,536 7,067 1,739 2,507
-------------- ---------- ------------ -------------- ------------ -------------
Income (loss) from
operations 5,711 (492) 582 1,586 (187) 2,462
Other expenses, net 2,599 275 1,246 2,637 650 1,438
-------------- ---------- ------------- -------------- ------------ -------------
Net income (loss) $ 3,112 $ (767) $ (664) $ (1,051) $ (837) $ 1,024
============== ========== ============= ============== ============ =============
Company's share of net
income (loss) $ 1,556 $ (153) $ 12 $ (526) $ (154) $ 64
============== ========== ============= ============== ============ =============
</TABLE>
5. Calpine Thermal Power, Inc.
In March 1996, Calpine Thermal Power, Inc. (Calpine Thermal) and Unocal
Corporation entered into an alternative pricing agreement with Pacific
Gas and Electric Company (PG&E) for any steam produced in excess of 40%
of average field capacity. An alternative pricing strategy would be
effective through December 31, 2000, with pricing strategies for 1996
and 1997 to be established during 1996. Under the agreement, PG&E would
purchase a portion of the steam that PG&E would have curtailed under
Calpine Thermal's existing steam sales agreement. The price of steam
would be at competitive market prices, subject to a specified minimum
price.
6. Calpine Greenleaf Corporation
In April 1995, the Company purchased the capital stock of the companies
which owned 100% of the assets of two 49.5 megawatt natural gas-fired
cogeneration facilities (collectively, the Greenleaf facilities)
located in Yuba City in Northern California. The purchase price
included a cash payment of $20.3 million and the assumption of project
debt totalling $60.2 million. In April 1996, the Company finalized the
purchase price in accordance with the Share Purchase Agreement dated
March 30, 1995.
The acquisition was accounted for as a purchase and the purchase price
has been allocated to the acquired assets and liabilities based on the
estimated fair values of the acquired assets and liabilities as shown
below. The adjusted allocation of the purchase price is as follows (in
thousands):
Current assets .............. $ 6,572
Property, plant and equipment 122,545
---------
Total assets ....... 129,117
---------
Current liabilities ......... (1,079)
Deferred income taxes, net .. (46,580)
---------
Total liabilities .. (47,659)
---------
Net purchase price .......... $ 81,458
=========
-8-
<PAGE>
CALPINE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
7. King City Transaction
In April 1996, the Company entered into a long-term operating lease
with BAF Energy A California Limited Partnership (BAF), for a 120
megawatt natural gas-fired combined cycle facility located in King
City, California. The facility generates electricity for sale to PG&E
pursuant to a long-term power sales agreement through 2019. Natural gas
for the facility is supplied by Chevron USA Inc. pursuant to a contract
which expires June 30, 1997.
Under the terms of the operating lease, the Company makes semi-annual
lease payments to BAF, a portion of which is supported by a $100.7
million collateral fund, owned by the Company. The collateral consists
of a portfolio of investment grade and U.S. Treasury Securities that
will mature serially in amounts equal to a portion of the lease
payments.
The Company financed the collateral fund and other transaction costs
with $50.0 million of proceeds from the issuance of preferred stock to
Electrowatt by Calpine (see Note 10) and other short-term borrowings,
which included $13.3 million of borrowings under the Credit Suisse
Credit Facility discussed in Note 8 below and a $45.0 million loan from
The Bank of Nova Scotia which bears interest at 7.5% and matures upon
the earlier of the issuance of the Senior Notes Due 2006 (see Note 9)
or August 23, 1996. The Company expects to repay the short-term
borrowings from a portion of the net proceeds of the Senior Notes Due
2006 to be issued in May 1996.
8. Lines of Credit
At March 31, 1996, the Company had $32.2 million of borrowings under
its $50.0 million Credit Facility with Credit Suisse (whose parent
company owns 44.9% of Electrowatt). The outstanding balance bears
interest at the London Interbank Offered Rate (LIBOR) plus a mutually
agreed margin, for a total interest rate of approximately 6.05% as of
March 31, 1996. Interest is paid on the last day of each interest
period for such loan, but not less often than quarterly, based on the
principal amount outstanding during the period. No stated principal
amortization exists for this indebtedness.
On April 29, 1996, the Credit Facility was increased to $58.0 million.
From April 1, 1996 through May 14, 1996, the Company issued a letter of
credit for $25,000 and borrowed an additional $21.5 million for working
capital purposes, to fund loans in connection with the Cerro Prieto
project, and to fund the King City transaction as discussed in Note 7.
A portion of the proceeds from the Senior Notes Due 2006 to be issued
in May 1996 will be used to repay the outstanding balance of the Credit
Facility.
9. Senior Notes Due 2006
On May 13, 1996, the Company agreed to issue $180.0 million aggregate
principal amount of 10 1/2% Senior Notes Due 2006. The net proceeds
will be used to refinance existing indebtedness and for general
corporate purposes. The Company has no sinking fund or mandatory
redemption obligations with respect to the Senior Notes Due 2006.
Interest is payable semi-annually on May 15 and November 15 of each
year while the Senior Notes Due 2006 are outstanding, commencing on
November 15, 1996.
-9-
<PAGE>
CALPINE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
10. Preferred Stock
The Company has 5,000,000 authorized shares of Series A Preferred
Stock, all of which were issued on March 21, 1996 and outstanding as of
March 31, 1996. All of the shares of Series A Preferred Stock are held
by Electrowatt. The shares of Series A Preferred Stock are not publicly
traded. Currently, no dividends are payable on the Series A Preferred
Stock. The Company intends to amend its Second Amended and Restated
Articles of Incorporation to provide that dividends may be paid on the
Series A Preferred Stock, when and if declared by the Board of
Directors. The Series A Preferred Stock contains provisions regarding
liquidation and conversion rights.
11. Contingencies
The Company, together with over 100 other parties, was named as a
defendant in the second amended complaint in an action brought in
August 1993 by the bankruptcy trustee for Bonneville Pacific
Corporation (Bonneville), captioned Roger G. Segal, as the Chapter 11
Trustee for Bonneville Pacific Corporation v. Portland General
Corporation, et al., in the United States District Court for the
District of Utah. This complaint alleges that, in conjunction with top
executives of Bonneville and with the alleged assistance of the other
100 defendants, the Company engaged in a broad conspiracy and fraud.
The complaint has been amended a number of times. The Company has
answered each version of the complaint by denying all claims and is in
the process of conducting discovery. In August 1994, the Company
successfully moved for an order severing the trustee's claim against
the Company from the claims against the other defendants. Although the
case involves over 25 separate financial transactions entered into by
Bonneville, the severed case concerns the Company in respect of only
one of these transactions. In 1988, the Company invested $2.0 million
in a partnership formed with Bonneville to develop four hydroelectric
projects in the State of Hawaii. The projects were not successfully
developed by the partnership, and, subsequent to Bonneville's Chapter
11 filing, the Company filed a claim as a creditor against Bonneville's
bankruptcy estate. The trustee alleges that the equity investment was
actually a "sham" loan designed to inflate Bonneville's earnings. The
trustee further alleges that Calpine is one of many defendants in this
case responsible for Bonneville's insolvency and the amount of damages
attributable to the Company based on the $2.0 million partnership
investment is alleged to be $577.2 million. The trustee is seeking to
hold each of the other defendants liable for a portion, all or, in
certain cases, more than this amount. The Company expects the matter
will be set for trial in 1996. The Company believes the claims against
it are without merit and will continue to defend the action vigorously.
The Company further believes that the resolution of this matter will
not have a material adverse effect on its financial position or results
of operations.
ENCO, the wholly owned subsidiary of Sumas Cogeneration Company, L.P.,
in which the Company is a limited partner, terminated protracted
contract negotiations with two Canadian natural gas suppliers in
January 1995. One of the suppliers notified ENCO it considered a draft
contract to be effective although it had not been executed by ENCO. The
supplier indicated it may pursue legal action if ENCO would not execute
the contract. As of May 14, 1996, no legal action has been served on
ENCO. Management believes if legal action is commenced, ENCO has
significant defenses and believes such action will not result in any
material adverse impact to the Company's financial condition or results
of operations.
-10-
<PAGE>
CALPINE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The Company is involved in various other claims and legal actions
arising out of the normal course of business. Management does not
expect that the outcome of these cases will have a material adverse
effect on the Company's financial position or results of operations.
-11-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
- --------
During the twelve months ended March 31, 1996, the Company completed two
acquisitions. On April 21, 1995, the Company acquired the stock of certain
companies that own 100% of two 49.5 megawatt natural gas-fired cogeneration
facilities (Greenleaf 1 and 2). On June 29, 1995, the Company acquired the
operating lease for a 28.5 megawatt natural gas-fired cogeneration facility
located in Watsonville, California.
The majority of the Company's consolidated revenues are derived from electricity
and steam sales by the West Ford Flat facility, the Bear Canyon facility, the
Greenleaf 1 and 2 facilities, the Watsonville facility, the PG&E Unit 13 and
Unit 16 Steam Fields, the SMUDGEO#1 Steam Fields, and the Calpine Thermal Steam
Fields. Such revenues reflect electricity and steam sales by the Greenleaf
facilities and by the Watsonville facility only since their acquisition by the
Company on April 21, 1995 and June 29, 1995, respectively.
Each of the power generation facilities produces electricity for sale to a
utility. Thermal energy produced by the gas-fired cogeneration facilities is
sold to governmental and industrial users, and steam produced by the geothermal
steam fields is sold to utility-owned power plants. The electricity, thermal
energy and steam generated by these facilities are typically sold under
long-term take-and-pay power or steam sales agreements generally having original
terms of 20 or 30 years.
Each of the Company's power and steam sales agreements contains curtailment
provisions under which the purchasers of energy or steam are entitled to reduce
the number of hours of energy or amount of steam purchased thereunder. During
1995, certain of the Company's power generation facilities experienced maximum
curtailment primarily as a result of low gas prices and a high degree of
precipitation, which resulted in high levels of energy generation by
hydroelectric power facilities that supply electricity. The Company expects the
maximum curtailment during 1996 under its power and steam sales agreements for
certain of its facilities.
SELECTED OPERATING DATA
- -----------------------
Set forth below is certain selected operating information for the power
generation facilities and steam fields, for which results are consolidated in
the Company's statement of operations. The information set forth under power
plants consists of the results for the West Ford Flat and Bear Canyon
facilities, and the Greenleaf 1 and 2 facilities and the Watsonville facility
since their acquisition on April 21, 1995 and June 29, 1995, respectively. The
information set forth under steam fields consists of the results for the PG&E
Unit 13 and Unit 16 Steam Fields, the SMUDGEO#1 Steam Fields and the Calpine
Thermal Steam Fields (dollar amounts in thousands, except per kilowatt hour
amounts).
-12-
<PAGE>
Three Months Ended March 31,
1996 1995
-------- --------
Power Plants
Electricity revenues
Energy ....................... $ 15,339 $ 11,140
Capacity ..................... $ 1,566 $ 380
Megawatt hours produced ........ 330,675 96,406
Average energy rate per kilowatt
hour produced ................ $ 0.0464 $ 0.115
Steam Fields
Steam revenues ................. $ 8,870 $ 9,583
Megawatt hours produced ........ 556,039 468,526
Average energy rate per kilowatt
hour produced ................ $ 0.0160 $ 0.0205
RESULTS OF OPERATIONS
- ---------------------
Three Months Ended March 31, 1996 Compared to Three Months Ended March 31, 1995
Revenue. The Company's total revenue was $31.7 million for the three months
ended March 31, 1996 compared to $22.0 million for the comparable period in
1995:
Electricity and steam sales revenue increased 22% to $25.8 million for
the three months ended March 31, 1996, compared to $21.1 million for
the comparable period in 1995. The increase was primarily attributable
to $4.5 million of revenue from the Greenleaf facilities and $1.2
million from the Watsonville facility which were included in the
Company's operations after March 31, 1995. The SMUDGEO#1 Steam Fields
also contributed $465,000 to the revenue increase, primarily due to an
increase in production and in the steam sales price. Offsetting the
favorable increases was a $709,000 decrease in revenue from the PG&E
Unit 13 and Unit 16 Steam Fields due to a price decrease in accordance
with the steam sales agreements and higher curtailment by PG&E during
the three months ended March 31, 1996 due to hydro-spill conditions.
Revenue from the West Ford Flat and Bear Canyon facilities also
decreased $310,000 for the three months ended March 31, 1996 compared
to the same period in 1995. The decrease was due to less production,
offset by a price increase.
Service contract revenue from related parties increased 33% to $2.0
million for the three months ended March 31, 1996 compared to $1.5
million for the same period in 1995. Approximately $342,000 of the
increase was related to billings for an overhaul at the Aidlin
facility.
Service revenue from others for the three months ended March 31, 1996
consisted of a $255,000 advisory fee for financing of a power
generation facility; $191,000 of technical services and management fees
related to the Cerro Prieto project; and $128,000 of power marketing
sales.
Income from unconsolidated investments in power projects increased to
$1.4 million for the three months ended March 31, 1996 compared to a
$616,000 loss for the comparable period in 1995. The increase is
primarily attributable to $1.6 million of equity income from the
Company's investment in Sumas Cogeneration Company, L.P. (Sumas) (see
Note 4) in which the Company is a limited partner. Sumas is the owner
and operator of a natural gas-fired combined cycle electrical
generation facility with production capacity of approximately 125
megawatts located in Sumas, Washington. The increase in Sumas'
profitability during 1996 is primarily attributable to an increase in
the sale price in accordance with the power sales agreement with Puget
Sound Power & Light Company.
-13-
<PAGE>
Interest income on loans to power projects contributed $1.9 million to
the revenue increase for the three months ended March 31, 1996. In 1993
and 1994, the Company loaned a total of $11.5 million to the sole
shareholder of Sumas Energy, Inc. (SEI), the general partner of Sumas.
The loans bear interest at 16.25% to 20%, and are generally secured by
a pledge to Calpine of SEI's interest in Sumas. The Company will
receive payments of 75% of SEI's cash distributions from Sumas. Prior
to 1996, the Company deferred recognition of interest income from these
notes until Sumas generated net income. During the three months ended
March 31, 1996, the Company recognized interest income of $1.6 million
based on SEI's proportionate share of net income. In addition, the
Company recognized $342,000 of interest income on loans to Coperlasa
related to the Cerro Prieto project.
Cost of revenue increased 59% to $21.3 million for the three months ended March
31, 1996 compared to $13.4 million for the comparable period in 1995. The
increase was primarily due to plant operating, depreciation, operating lease and
production royalty expenses attributable to the operations of the Greenleaf and
Watsonville facilities acquired on April 21, 1995 and June 29, 1995,
respectively. The increases were partially offset by lower operating and
depreciation expenses at Calpine Geysers Company, L.P.
General and administrative expenses increased 73% to $2.6 million for the three
months ended March 31, 1996 compared to $1.5 million for the same period in
1995. The three months ended March 31, 1995 was reflective of a $324,000
decrease in expenses due to an adjustment of the bonus accrual for 1994. The
three months ended March 31, 1996 also included $408,000 of costs related to the
Company's power marketing activities. The remaining increases in 1996 were due
to additional personnel and related expenses necessary to support the Company's
expanded operations.
Interest expense increased to $8.2 million for the three months ended March 31,
1996 compared to $6.9 million for the comparable period in 1995. The 19%
increase was attributable to $1.5 million of interest expense incurred on the
debt related to the Greenleaf facilities acquired in April 1995.
Other income, net increased 16% to $533,000 for the three months ended March 31,
1996 compared to $459,000 for the same period in 1995. The increase was
primarily due to $80,000 of interest income earned on the $50.0 million of
proceeds from the issuance of the Series A Preferred Stock.
Provision for income taxes. The effective rate for the income tax provision
(benefit) was approximately 41% for the three months ended March 31, 1996 and
1995. The effective rate was based on statutory tax rates.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
To date, the Company has obtained cash from its operations, borrowings under the
Credit Suisse Credit Facility and other working capital lines, equity
contributions from Electrowatt, and proceeds from non-recourse project
financings and other long-term debt. The Company utilized this cash to fund its
operations, service debt obligations, fund the acquisition, development and
construction of power generation facilities, finance capital expenditures and
meet its other cash and liquidity needs.
-14-
<PAGE>
The following table summarizes the Company cash flow activities for the periods
indicated (in thousands):
Three Months Ended March 31,
1996 1995
-------- --------
Cash flows from:
Operating activities... $ (2,216) $ 4,443
Investing activities... (7,639) (5,916)
Financing activities... 56,692 (13,982)
-------- --------
Total .............. $ 46,837 $(15,455)
-------- --------
Operating activities for the three months ended March 31, 1996 consisted of
approximately $294,000 of net loss from operations, $1.4 million of income from
unconsolidated investments in power projects and $6.7 million net increase in
operating assets and liabilities, offset by $6.7 million of depreciation and
amortization.
Investing activities used $7.6 million during the three months ended March 31,
1996, primarily due to $7.3 million of capital expenditures and a $1.0 million
deposit in connection with the King City transaction, offset by a $1.1 million
decrease in restricted cash requirements.
Financing activities provided $56.7 million of cash during the three months
ended March 31, 1996. The Company issued $50.0 million of preferred stock to
Electrowatt and borrowed an additional $12.3 million from the Credit Suisse
Credit Facility. In addition, the Company repaid $5.4 million of non-recourse
project financing.
As of March 31, 1996, cash and cash equivalents were $68.6 million and working
capital was a negative $1.0 million. For the three months ended March 31, 1996,
working capital increased $48.0 million and cash and cash equivalents increased
$46.8 million as compared to the twelve months ended December 31, 1995. The
increase in working capital was primarily due to the proceeds from the issuance
of preferred stock which were invested until May 1, 1996 for the King City
transaction. Working capital includes a $57.0 million non-recourse project
financing maturing September 1996. On May 13, 1996, the Company agreed to issue
$180.0 million of Senior Notes Due 2006, of which a portion of net proceeds will
be used to refinance current indebtedness and to repay the $57.0 million loan
from The Bank of Nova Scotia.
As a developer, owner and operator of power generation projects, the Company may
be required to make long-term commitments and investments of substantial capital
for its projects. The Company historically has financed these capital
requirements with borrowings under its credit facility with Credit Suisse, other
lines of credit, non-recourse project financing, or long-term debt.
The Company currently has outstanding $105.0 million of its 9 1/4% Senior Notes
Due 2004 which mature on February 1, 2004 and bear interest payable
semi-annually on February 1 and August 1 of each year. Under the provisions of
the indenture, the Company may, under certain circumstances, be limited in its
ability to make restricted payments, as defined, which include dividends and
certain purchases and investments, incur additional indebtedness and engage in
certain transactions.
At March 31, 1996, the Company had $269.6 million of non-recourse project
financing associated with power generating facilities and steam fields at the
West Ford Flat facility, the Bear Canyon facility, the PG&E Unit 13 and Unit 16
Steam Fields, the SMUDGEO#1 Steam Fields, the Calpine Thermal Steam Fields and
the Greenleaf facilities. As of March 31, 1996, the annual maturities for all
non-recourse project debt were $79.3 million for the remainder of 1996, $24.8
million for 1997, $26.0 million for 1998, $18.7 million for 1999, $18.0 million
for 2000 and $100.2 million thereafter. On April 1, 1996, the Company repaid
$4.2 million of this non-recourse project financing.
The Company currently has the Credit Suisse Credit Facility, which was arranged
by Electrowatt and provides for total borrowings of $58.0 million, with interest
at either LIBOR or at the Credit Suisse base rate plus a
-15-
<PAGE>
mutually agreed margin. As of March 31, 1996, the Company had outstanding $32.2
million of borrowings at LIBOR plus a mutually agreed margin. From April 1
through May 14, 1996, the Company borrowed an additional $21.5 million to fund
loans in connection with the Cerro Prieto project, working capital requirements
and to fund a portion of the King City transaction. Outstanding borrowings of
$53.7 million will be repaid with a portion of the net proceeds from the Senior
Notes Due 2006 to be issued in May 1996 (see Note 9).
The Company has a $1.2 million working capital line with a commercial lender
that may be used to fund short-term working capital commitments and letters of
credit. At March 31, 1996, the Company had no borrowings under this working
capital line and $900,000 of letters of credit outstanding. Borrowings are at
prime plus 1%.
During April 1996, the Company entered into a $45.0 million financing agreement
with The Bank of Nova Scotia as financing, in part, for the King City
transaction. The $45.0 million borrowing will be repaid with a portion of the
net proceeds from the sale of the Senior Notes Due 2006 during May 1996.
The Company also had outstanding a non-interest bearing promissory note to
Natomas Energy Company in the amount of $6.5 million representing a portion of
the September 1994 purchase price of Thermal Power Company. This note has been
discounted to yield 8% per annum and is due September 9, 1997.
The Company intends to continue to seek the use of non-recourse project
financing for new projects, where appropriate. The debt agreements of the
Company's subsidiaries and other affiliates governing the non-recourse project
financing generally restrict their ability to pay dividends, make distributions
or otherwise transfer funds to the Company. The dividend restrictions in such
agreements generally require that, prior to the payment of dividends,
distributions or other transfers, the subsidiary or other affiliate must provide
for the payment of other obligations, including operating expenses, debt service
and reserves. However, the Company does not believe that such restrictions will
adversely affect its ability to meet its debt obligations.
At March 31, 1996, the Company had commitments for capital expenditures in 1996
totaling $1.6 million related to various projects at its geothermal facilities.
The Company intends to fund capital expenditures for the ongoing operation and
development of the Company's power generation facilities primarily through the
operating cash flow of such facilities. For the three months ended March 31,
1996, capital expenditures included $4.0 million for the purchase of geothermal
leases for the Glass Mountain project and $900,000 for the new rotor at the PG&E
Unit 13 facility.
The Company continues to pursue the acquisition and development of geothermal
resources and new power generation projects. The Company expects to commit
significant capital during 1996 and in future years for the acquisition and
development of these projects. The Company's actual capital expenditures may
vary significantly during any year.
In April 1996, the Company entered into a transaction involving a lease of the
King City facility. The company financed this transaction with the $45.0 million
loan from The Bank of Nova Scotia, $13.3 million of borrowings under the Credit
Suisse Credit Facility (both of which will be repaid with a portion of the net
proceeds from the sale of the Senior Notes Due 2006 to be issued in May 1996)
and $50.0 million of proceeds from the issuance of preferred stock to
Electrowatt.
The Company believes that it will have sufficient liquidity from cash flow from
operations and borrowings available under the lines of credit and working
capital lines and the net proceeds from the sale of the Senior Notes Due 2006 to
satisfy all obligations under outstanding indebtedness, including Senior Notes,
to finance anticipated capital expenditures and to fund working capital
requirements through December 31, 1996.
-16-
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGE IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit
Number Description
- ------ -----------
3.1 Amended and Restated Articles of Incorporation, dated as of April
22, 1996, of Calpine Corporation, a California corporation. (k)
4.1 Indenture dated as of February 17, 1994 between the Company and
Shawmut Bank of Connecticut, National Association, as Trustee,
including Form of Senior Notes. (a)
10.1 Financing Agreements
10.1.1 Term and Working Capital Loan Agreement, dated as of June 1,1990,
between Calpine Geysers Company, L.P. (formerly Santa Rosa
Geothermal Company, L.P.), and Deutsche Bank AG, New York Branch.
(a)
10.1.2 First Amendment to Term and Working Capital Loan Agreement, dated
as of June 29, 1990, between Calpine Geysers Company, L.P.
(formerly Santa Rosa Geothermal Company, L.P.), and Deutsche Bank
AG, New York Branch. (a)
10.1.3 Second Amendment to Term and Working Capital Loan Agreement, dated
as of December 1, 1990, between Calpine Geysers Company,L.P.
(formerly Santa Rosa Geothermal Company, L.P.), and Deutsche Bank
AG, New York Branch. (a)
-17-
<PAGE>
10.1.4 Third Amendment to Term and Working Capital Loan Agreement, dated
as of June 26, 1992, between Calpine Geysers Company, L.P.
(formerly Santa Rosa Geothermal Company, L.P.), Deutsche Bank AG,
New York Branch, National Westminster Bank PLC, Union Bank of
Switzerland, New York Branch, and The Prudential Insurance Company
of America. (a)
10.1.5 Fourth Amendment to Term and Working Capital Loan Agreement, dated
as of April l, 1993, between Calpine Geysers Company, L.P.
(formerly Santa Rosa Geothermal Company, L.P.), Deutsche Bank AG,
New York Branch, National Westminster Bank PLC, Union Bank of
Switzerland, New York Branch, and The Prudential Insurance Company
of America. (a)
10.1.6 Construction and Term Loan Agreement, dated as of January 30,1992,
between Sumas Cogeneration Company, L.P., The Prudential Insurance
Company of America, and Credit Suisse, New York Branch. (a)
10.1.7 Amendment No. 1 to Construction and Term Loan Agreement, dated as
of May 24, 1993, between Sumas Cogeneration Company, L.P., The
Prudential Insurance Company of America, and Credit Suisse, New
York Branch. (a)
10.1.8 Credit Agreement-Construction Loan and Term Loan Facility, dated
as of January 10, 1990, between Credit Suisse and O.L.S.
Energy-Agnews. (a)
10.1.9 Amendment No. 1 to Credit Agreement-Construction Loan and Term
Loan Facility, dated as of December 5, 1990, between Credit Suisse
and O.L.S. Energy-Agnews. (a)
10.1.10 Participation Agreement, dated as of December 1, 1990, between
O.L.S. Energy-Agnews, Nynex Credit Company, Credit Suisse,
Meridian Trust Company of California, and GATX Capital
Corporation. (a)
10.1.11 Facility Lease Agreement, dated as of December 1, 1990, between
Meridian Trust Company of California and O.L.S. Energy-Agnews. (a)
10.1.12 Project Revenues Agreement, dated as of December 1, 1990, between
O.L.S. Energy-Agnews, Meridian Trust Company of California and
Credit Suisse. (a)
10.1.13 Credit Agreement, dated as of September 9, 1994, between Calpine
Thermal Power, Inc., Thermal Power Company and The Bank of Nova
Scotia. (b)
10.1.14 Project Credit Agreement, dated as of June 30, 1995, between
Calpine Greenleaf Corporation, Greenleaf Unit One Associates,
Greenleaf Unit Two Associates, Inc. and The Sumitomo Bank,
Limited. (g)
10.1.15 Lease dated as of April 24, 1996 between BAF Energy A California
Limited Partnership, Lessor, and Calpine King City Cogen, LLC,
Lessee. (j)
10.2 Purchase Agreements
10.2.1 Purchase Agreement, dated as of April 1, 1993, between Sonoma
Geothermal Partners, L.P., Healdsburg Energy Company, L.P., and
Freeport-McMoRan Resource Partners, Limited Partnership. (a)
-18-
<PAGE>
10.2.2 Stock Purchase Agreement, dated as of June 27, 1994, between Maxus
International Energy Company, Natomas Energy Company, Calpine
Corporation and Calpine Thermal Power, Inc. and amendment thereto
dated July 28, 1994. (b)
10.2.3 Share Purchase Agreement dated March 30, 1995 between Calpine
Corporation, Calpine Greenleaf Corporation, Radnor Power Corp. and
LFC Financial Corp. (e)
10.3 Power Sales Agreements
10.3.1 Long-Term Energy and Capacity Power Purchase Agreement relating to
the Bear Canyon Facility, dated November 30, 1984, between Pacific
Gas & Electric and Calpine Geysers Company, L.P. (formerly Santa
Rosa Geothermal Company, L.P.), Amendment dated October 17, 1985,
Second Amendment dated October 19, 1988, and related documents.
(a)
10.3.2 Long-Term Energy and Capacity Power Purchase Agreement relating to
the Bear Canyon Facility, dated November 29, 1984, between Pacific
Gas & Electric and Calpine Geysers Company, L.P. (formerly Santa
Rosa Geothermal Company, L.P.), and Modification dated November
29, 1984, Amendment dated October 17, 1985, Second Amendment dated
October 19, 1988, and related documents. (a)
10.3.3 Long-Term Energy and Capacity Power Purchase Agreement relating to
the West Ford Flat Facility, dated November 13, 1984, between
Pacific Gas & Electric and Calpine Geysers Company, L.P. (formerly
Santa Rosa Geothermal Company, L.P.), and amendments dated May 18,
1987, June 22, 1987, July 3, 1987 and January 21, 1988, and
related documents. (a)
10.3.4 Agreement for Firm Power Purchase, dated as of February 24, 1989,
between Puget Sound Power & Light Company and Sumas Energy, Inc.
and amendment thereto dated September 30, 1991. (a)
10.3.5 Long-Term Energy and Capacity Power Purchase Agreement, dated
April 16, 1985, between O.L.S. Energy-Agnews and Pacific Gas &
Electric Company and amendment thereto dated February 24, 1989.
(a)
10.3.6 Long-Term Energy and Capacity Power Purchase Agreement, dated
November 15, 1984, between Geothermal Energy Partners, Ltd., and
Pacific Gas & Electric Company and related documents. (a)
10.3.7 Long-Term Energy and Capacity Power Purchase Agreement, dated
November 15, 1984, between Geothermal Energy Partners, Ltd., and
Pacific Gas & Electric Company (see Exhibit 10.3.6 for related
documents). (a)
10.3.8 Long-Term Energy and Capacity Power Purchase Agreement, dated
December 12, 1984, between Greenleaf Unit One Associates, Inc. and
Pacific Gas and Electric Company. (f)
10.3.9 Long-Term Energy and Capacity Power Purchase Agreement, dated
December 12, 1984, between Greenleaf Unit Two Associates, Inc. and
Pacific Gas and Electric Company. (f)
10.4 Steam Sales Agreements
10.4.1 Geothermal Steam Sales Agreement, dated July 19, 1979, between
Calpine Geysers Company, L.P. (formerly Santa Rosa Geothermal
Company, L.P.), and Sacramento Municipal Utility District and
related documents. (a)
-19-
<PAGE>
10.4.2 Agreement for the Sale and Purchase of Geothermal Steam, dated
March 23, 1973, between Calpine Geysers Company, L.P. (formerly
Santa Rosa Geothermal Company, L.P.), and Pacific Gas & Electric
Company and related letter dated May 18, 1987. (a)
10.4.3 Thermal Energy and Kiln Lease Agreement, dated as of January 16,
1992, between Sumas Cogeneration Company, L.P., and Socco, Inc.
and amendment thereto dated May 24, 1993. (a)
10.4.4 Amended and Restated Energy Service Agreement, dated as of
December l, 1990, between the State of California and O.L.S.
Energy-Agnews. (a)
10.4.5 Agreement for the Sale of Geothermal Steam, dated as of July 28,
1992, between Thermal Power Company and Pacific Gas & Electric
Company. (c)
10.4.6 Amendment to the Agreement for the Sale of Geothermal Steam, dated
as of August 9, 1995, between Union Oil Company of California, NEC
Acquisition Company, Thermal Power Company, and Pacific Gas and
Electric Company. (h)
10.5 Service Agreements
10.5.1 Operation and Maintenance Agreement, dated as of April 5, 1990,
between Calpine Operating Plant Services, Inc. (formerly
Calpine-Geysers Plant Services, Inc.), and Calpine Geysers
Company, L.P. (formerly Santa Rosa Geothermal Company, L.P.). (a)
10.5.2 Amended and Restated Operating and Maintenance Agreement, dated as
of January 24, 1992, between Calpine Operating Plant Services,
Inc. and Sumas Cogeneration Company, L.P. (a)
10.5.3 Amended and Restated Operation and Maintenance Agreement, dated as
of December 31, 1990, between O.L.S. Energy-Agnews and Calpine
Operating Plant Services, Inc. (formerly Calpine Cogen-Agnews,
Inc.). (a)
10.5.4 Operating and Maintenance Agreement, dated as of January 1, 1995,
between Calpine Corporation and Geothermal Energy Partners, Ltd.
(h)
10.6 Gas Supply Agreements
10.6.1 Gas Sale and Purchase Agreement, dated as of December 23, 1991,
between ENCO Gas, Ltd, and Sumas Cogeneration Company, L.P. (a)
10.6.2 Gas Management Agreement, dated as of December 23, 1991, between
Canadian Hydrocarbons Marketing Inc., ENCO Gas, Ltd. and Sumas
Cogeneration Company, L.P. (a)
10.6.4 Natural Gas Sales Agreement, dated as of November 1, 1993, between
O.L.S. Energy-Agnews, Inc. and Amoco Energy Trading Corporation.
(a)
10.6.5 Natural Gas Service Agreement, dated November 1, 1993, between
Pacific Gas & Electric Company and O.L.S. Energy-Agnews, Inc. (a)
10.7 Agreements Regarding Real Property
10.7.1 Office Lease, dated March 15, 1991, between 50 West San Fernando
Associates, L.P., and Calpine Corporation. (a)
-20-
<PAGE>
10.7.2 First Amendment to Office Lease, dated April 30, 1992, between 50
West San Fernando Associates, L.P. and Calpine Corporation. (a)
10.7.3 Geothermal Resources Lease CA 1862, dated July 25, 1974, between
the United States Bureau of Land Management and Calpine Geysers
Company, L.P. (formerly Santa Rosa Geothermal Company, L.P.). (a)
10.7.4 Geothermal Resources Lease PRC 5206.2, dated December 14, 1976,
between the State of California and Calpine Geysers Company, L.P.
(formerly Santa Rosa Geothermal Company, L.P.). (a)
10.7.5 First Amendment to Geothermal Resources Lease PRC 5206.2, dated
April 20,1994, between the State of California and Calpine Geysers
Company, L.P. (formerly Santa Rosa Geothermal Company, L.P.). (a)
10.7.6 Industrial Park Lease Agreement, dated December 18, 1990, between
Port of Bellingham and Sumas Energy, Inc. (a)
10.7.7 First Amendment to Industrial Park Lease Agreement, dated as of
July 16, 1991, between Port of Bellingham, Sumas Energy, Inc., and
Sumas Cogeneration Company, L.P. (a)
10.7.8 Second Amendment to Industrial Park Lease Agreement, dated as of
December 17, 1991 between Port of Bellingham and Sumas
Cogeneration Company, L.P. (a)
10.7.9 Amended and Restated Cogeneration Lease, dated as of December 1,
1990, between the State of California and O.L.S. Energy-Agnews.
(a)
10.8 General
10.8.1 Limited Partnership Agreement of Sumas Cogeneration Company, L.P.,
dated as of August 28, 1991, between Sumas Energy, Inc. and
Whatcom Cogeneration Partners, L.P. (a)
10.8.2 First Amendment to Limited Partnership Agreement of Sumas
Cogeneration Company, L.P., dated as of January 30, 1992, between
Whatcom Cogeneration Partners, L.P., and Sumas Energy, Inc. (a)
10.8.3 Second Amendment to Limited Partnership Agreement of Sumas
Cogeneration Company, L.P., dated as of May 24, 1993, between
Whatcom Cogeneration Partners, L.P., and Sumas Energy, Inc. (a)
10.8.4 Second Amended and Restated Shareholders' Agreement, dated as of
October 22, 1993, among GATX Capital Corporation, Calpine Agnews,
Inc., JGS-Agnews, Inc., and GATX/Calpine-Agnews, Inc. (a)
10.8.5 Amended and Restated Reimbursement Agreement, dated October 22,
1993, between GATX Capital Corporation, Calpine Agnews, Inc.,
JGS-Agnews, Inc., GATX/Calpine-Agnews, Inc., and O.L.S.
Energy-Agnews, Inc. (a)
10.8.6 Amended and Restated Limited Partnership Agreement of Geothermal
Energy Partners Ltd., L.P., dated as of May 19, 1989, between
Western Geothermal Company, L.P., Sonoma Geothermal Company, L.P.,
and Cloverdale Geothermal Partners, L.P. (a)
-21-
<PAGE>
10.8.7 Assignment and Security Agreement, dated as of January 10, 1990,
between O.L.S. Energy-Agnews
and Credit Suisse. (a)
10.8.8 Pledge Agreement, dated as of January 10, 1990, between
GATX/Calpine-Agnews, Inc., and Credit Suisse. (a)
10.8.9 Equity Support Agreement, dated as of January 10, 1990, between
Calpine Corporation and Credit Suisse. (a)
10.8.10 Assignment and Security Agreement, dated as of December 1, 1990,
between O.L.S. Energy- Agnews and Meridian Trust Company of
California. (a)
10.8.11 Calpine Subordination Agreement, dated as of April 1, 1993,
between Freeport-McMoRan Resource Partners, L.P., Calpine
Corporation, Sonoma Geothermal Partners, L.P., Calpine Sonoma,
Inc., Healdsburg Energy Company, L.P., and Calpine Geysers
Company, L.P. (formerly Santa Rosa Energy Company, L.P.). (a)
10.8.12 First Amended and Restated Limited Partner Pledge and Security
Agreement, dated as of April 1, 1993, between Sonoma Geothermal
Partners, L.P., Healdsburg Energy Company, L.P., Calpine Geysers
Company, L.P. (formerly Santa Rosa Geothermal Company, L.P.),
Freeport-McMoRan Resource Partners, L.P., and Meridian Trust
Company of California. (a)
10.8.13 Management Services Agreement, dated January 1, 1995, between
Calpine Corporation and Electrowatt Ltd. (k)
10.8.14 Revolving Credit Facility Letter Agreements, dated April 21, 1995,
between Calpine Corporation and Credit Suisse, and between Calpine
Greenleaf Corporation and Credit Suisse. (g)
10.8.15 Letter regarding Credit Facility, dated April 7, 1993, from
Electrowatt Ltd to Credit Suisse. (a)
10.8.16 Promissory Grid Note, dated April 29, 1996, between Calpine
Corporation and Credit Suisse. (k)
10.8.17 Guarantee Fee Agreement, dated January 1, 1995, between Calpine
Corporation and Electrowatt Ltd. (g)
10.8.18 Amended and Restated Operating Agreement for the Geysers, dated as
of December 1, 1993, by and between Magma-Thermal Power Project, a
joint venture composed of NEC Acquisition Company and Thermal
Power Company, and Union Oil Company of California. (c)
10.9 Calpine Corporation Stock Option Program and forms of agreements
thereunder. (a)
10.10 Employment Agreement, effective as of January 1, 1995, between
Calpine Corporation and Mr. Peter Cartwright. (d)
10.11 Form of Indemnification Agreement for directors. (a)
10.12 Form of Indemnification Agreement for executive officers. (a)
- -----------------------------
(a) Incorporated by reference to Registrant's Registration Statement
on Form S-1 (Registration Statement No. 33-73160).
-22-
<PAGE>
(b) Incorporated by reference to Registrant's Current Report on Form
8-K dated September 9, 1994 and filed on September 26, 1994.
(c) Incorporated by reference to Registrant's Quarterly Report on Form
10-Q dated September 30, 1994 and filed on November 14, 1994.
(d) Incorporated by reference to Registrant's Annual Report on Form
10-K dated December 31, 1994 and filed on March 29, 1995.
(e) Incorporated by reference to Registrant's Current Report on Form
8-K dated April 21, 1995 and filed on May 5, 1995.
(f) Incorporated by reference to Registrant's Quarterly Report on Form
10-Q dated March 31, 1995 and filed on May 12, 1995.
(g) Incorporated by reference to Registrant's Quarterly Report on Form
10-Q dated June 30, 1995 and filed on August 14, 1995.
(h) Incorporated by reference to Registrant's Quarterly Report on Form
10-Q dated September 30, 1995 and filed on November 14, 1995.
(i) Incorporated by reference to Registrant's Annual Report on Form
10-K dated December 31, 1994 and filed on March 29, 1996.
(j) Incorporated by reference to Registrant's Current Report on Form
8-K dated May 1, 1996 and filed on May 14, 1996.
(k) Filed herewith.
(b) Reports on Form 8-K
No reports were filed on Form 8-K during the three months ended March 31, 1996.
A report on Form 8-K was filed on May 14, 1996.
-23-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CALPINE CORPORATION
By: \s\ Ann B. Curtis Date: May 15, 1996
-----------------------------------
Ann B. Curtis
Senior Vice President
(Chief Financial Officer)
By: \s\ Gloria S. Gee Date: May 15, 1996
-----------------------------------
Gloria S. Gee
Corporate Controller
(Chief Accounting Officer)
-24-
<PAGE>
EXHIBIT INDEX
Exhibit Page
Number Description Number
3.1 Amended and Restated Articles of Incorporation,
dated as of April 22, 1996, of Calpine
Corporation, a California corporation. 26
10.8.13 Management Services Agreement, dated January 1,
1995, between Calpine Corporation and
Electrowatt Ltd. 35
10.8.16 Promissory Grid Note, dated April 29, 1996,
between Calpine Corporation and Credit Suisse. 38
-25-
<PAGE>
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
CALPINE CORPORATION,
a California corporation
The undersigned, Peter Cartwright and Ann B. Curtis, hereby certify
that:
ONE: They are The duly elected and acting president and secretary,
respectively, of calpine Corporation, a California corporation.
TWO: The Amended and Restated Articles of Incorporation of this
corporation are amended and restated to read in full as follows:
ARTICLE I.
The name of this corporation is Calpine Corporation.
ARTICLE II.
The purpose of this corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of California other than the banking business, the trust company business or
the practice of a profession permitted to be incorporated by the California
Corporations Code.
ARTICLE III.
The total number of shares of all classes of stock which this
corporation shall have authority to issue is Eleven Million Five Hundred
Thousand (11,500,000) shares, consisting of Five Million (5,000,000) shares of
Series A Preferred Stock, with a par value of one cent ($0.01) per share (the
"Series A Preferred Stock"), Three Million Five Hundred Thousand (3,500,000) of
Class A Common Stock, with a par value of one cent ($0.01) per share ("the Class
A Common Stock"), and Three Million (3,000,000) shares of Class B Common Stock,
with a par value of one cent ($0.01) per share (the "Class B Common Stock"). The
Class A Common Stock and the Class B Common Stock are collectively referred to
as the "Common Stock."
The Board of Directors of the Corporation may issue shares of any
class of the Corporation's stock for such consideration, including cash,
property, or services, as the Board may deem appropriate, subject to the
requirement that the value of such consideration be no less than the par value
of the shares issued.
-26-
<PAGE>
The following is a statement of the distinguishing characteristics of
each class of stock of the Corporation, including designations, and the powers,
preferences, and rights, and the qualifications, limitations, or restrictions
thereof.
A. Series A Preferred Stock. The rights, preferences, privileges
and restrictions granted to and imposed on the Series A Preferred Stock are as
set forth below:
1. Dividends. The holders of shares of Series A Preferred
Stock shall not be entitled to receive dividends.
2. Liquidation Preference.
(a) In the event of any liquidation, dissolution or
winding up of this corporation, either voluntary or involuntary, the holders of
Series A Preferred Stock shall be entitled to receive, prior and in preference
to any distribution of any of the assets or surplus funds of this corporation to
the holders of Common Stock by reason of their ownership thereof, an amount per
share equal to the sum of $10.00 for each outstanding share of Series A
Preferred Stock (the "Original Series A Issue Price"). If, upon the occurrence
of such an event, the assets and funds thus distributed among the holders of
Series A Preferred Stock shall be insufficient to permit the payment to such
holders of the full preferential amount for such series, then the entire assets
and funds of the corporation legally available for distribution shall be
distributed ratably among the holders of the Series A Preferred Stock.
(b) After payment has been made to the holders of
Series A Preferred Stock of the full amounts to which they shall be entitled as
aforesaid, the remaining assets and funds of this corporation legally available
for distribution shall be distributed ratably among the holders of Common Stock.
3. Conversion. The holders of Series A Preferred Stock shall
have conversion rights as follows (the "Conversion Rights"):
(a) Right to Convert. Each share of Series A Preferred
Stock shall be convertible, at the option of the holder thereof, at any time
during the thirty (30) day period following the sale, transfer or other
disposition by the corporation's shareholder or shareholders in one transaction
or a series of related transactions of fifty percent (50%) or more of the
corporation's outstanding shares of Common Stock (the "Transferred Shares"),
into such number of fully paid and non-assessable shares of Class A Common Stock
as is determined by dividing (x) the Original Series A Issue Price by (y) the
price at which the Transferred Shares are sold.
(b) Automatic Conversion. Immediately upon the
consummation of the corporation's sale of its Class A Common Stock in a bona
fide, firm commitment under writing pursuant to a registration statement under
the Securities Act of 1933, as amended (the "Securities Act"), which results in
aggregate gross cash proceeds to this corporation in excess of $10,000,000, each
share of Series A Preferred Stock shall automatically be converted into such
-27-
<PAGE>
number of fully-paid and non-assessable shares of Class A Common Stock as is
determined by dividing (x) the Original Series A Issue Price multiplied by 0.85
by (y) an amount equal to the price at which the shares of Class A Common Stock
are sold in such underwriting.
(c) Mechanics of Conversion. Before any holder of
Series A Preferred Stock shall be entitled to convert the same into shares of
Class A Common Stock, such holder shall surrender the certificate or
certificates therefor, duly endorsed, at the office of this corporation or of
any transfer agent for the Series A Preferred Stock, and shall give written
notice by mail, postage prepaid, to this corporation at its principal corporate
office, of the election to convert the same and shall state therein the name or
names in which the certificate or certificates for shares of Class A Common
Stock are to be issued. This corporation shall, as soon as practicable
thereafter, issue and deliver at such office to such holder of Series A
Preferred Stock, or to the nominee or nominees of such holder, a certificate or
certificates for the number of shares of Class A Common Stock to which such
holder shall be entitled as aforesaid. Such conversion shall be deemed to have
been made immediately prior to the close of business on the date of such
surrender of the shares of Series A Preferred Stock to be converted in the case
of a conversion pursuant to Section 3(a), and on the date of the closing of the
underwriting in the case of a conversion pursuant to Section 3(b), and the
person or persons entitled to receive the shares of Class A Common Stock
issuable upon such conversion shall be treated for all purposes as the record
holder or holders of such shares of Class A Common Stock as of the applicable
date. If the conversion is in connection with an underwritten offer of
securities registered pursuant to the Securities Act, the conversion will be
conditioned upon the closing with the underwriter of the sale of securities
pursuant to such offering.
(d) No Impairment. This corporation will not, by
amendment of its articles of incorporation or through any reorganization,
recapitalization, transfer of assets, consolidation, merger, dissolution, issue
or sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by this corporation, but will at all times in good faith assist in the
carrying out of all the provisions of this Section 3 and in the taking of all
such action as may be necessary or appropriate in order to protect the
Conversion Rights of the holders of Series A Preferred Stock against impairment.
(e) No Fractional Shares. No fractional shares shall be
issued upon conversion of the Series A Preferred Stock, and the number of shares
of Class A Common Stock to be issued shall be rounded to the nearest whole
share.
(f) Reservation of Stock Issuable Upon Conversion. This
corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Class A Common Stock solely for the purpose of effecting
the conversion of the shares of the Series A Preferred Stock such number of its
shares of Class A Common Stock as shall from time to time be sufficient to
effect the conversion of all outstanding shares of the Series A Preferred Stock,
and if at any time the number of authorized but unissued shares of Class A
Common Stock shall not be sufficient to effect the conversion of all then
outstanding shares of the Series A Preferred Stock, in addition to such other
remedies as shall be available to the holder of such
-28-
<PAGE>
Series A Preferred Stock, this Corporation will take such corporate action as
may, in the opinion of its counsel, be necessary to increase its authorized but
unissued shares of Class A Common Stock to such number of shares as shall be
sufficient for such purposes.
(g) Notices. Any notice required by the provisions of
this Section 3 to be given to the holders of shares of Series A Preferred Stock
shall be deemed given if deposited in the United States mail, postage prepaid,
and addressed to each holder of record at his address appearing on the books of
this Corporation.
4. Voting Rights. The holder of each share of Series A
Preferred Stock shall have no voting rights other than those rights specifically
provided by applicable law.
5. Status of Converted or Redeemed Stock. In the event any
shares of Series A Preferred Stock shall be converted pursuant to Section 3
hereof, the shares so converted shall be canceled and shall not be issuable by
the corporation, and the articles of incorporation of this corporation shall be
appropriately amended to effect the corresponding reduction in the corporation's
authorized capital stock.
6. Repurchase of Shares. In connection with repurchases by
this corporation of its Common Stock pursuant to its agreements with certain of
the holders thereof providing for such repurchases in the event of the
termination of the status of such holder as an employee, director or consultant
to the Company, each holder of Series A Preferred Stock shall be deemed to have
consented, for purposes of Sections 502, 503 and 506 of the California General
Corporation Law, to distributions made by the corporation with respect to such
repurchases.
B. Class A Common Stock
1. Voting
(a) On all matters other than matters for which each
class of stock is required by applicable law to vote or act separately, each
holder of the Class A Common Stock shall be entitled to one (1) vote for each
share held on all matters submitted to stockholders of the Corporation, whether
by vote at a meeting or for action by written consent, and holders of Class A
Common Stock shall vote together as a single class with the holders of the Class
B Common Stock.
2. Dividends and Other Distributions
(a) The holders of the Class A Common Stock shall be
entitled to receive, when, if and as declared by the Board of Directors of the
Corporation, such dividends of cash, stock, or property as the Board of
Directors shall from time to time declare subject to the following rights and
restrictions:
-29-
<PAGE>
(i) All cash dividends declared and paid on the
Class A Common Stock shall, on a calendar year basis per share, be equal to all
cash dividends declared and paid, on the Class B Common Stock, on a calendar
year basis per share.
(ii) No dividends of stock or property (other than
cash) shall be declared and paid, per share, on the Class B Common Stock unless
a dividend of an equal amount and equal value of stock or property (other than
cash) has been concurrently declared and paid, per share, on the Class A Common
Stock; provided, however, that a stock dividend shall only be declared and paid
in conformance with the following: (A) a dividend of shares of Class A Common
Stock may be declared and paid both to the holders of Class A Common Stock and
Class B Common Stock, (B) shares of Class A Common Stock may be declared and
paid to holders of Class A Common Stock, and a dividend of shares of Class B
Common Stock may be declared and paid to holders of Class B Common Stock, and
(C) in the event of any stock dividend under (A) or (B) above, the number of
shares distributed per share of Class A Common Stock and Class B Common Stock
shall be the same.
(b) Upon any liquidation, dissolution, or winding up of
the Corporation, whether voluntary or involuntary, after payment or provision
for payment of the debts and other liabilities of the Corporation, and after
payment of the liquidation preference of the Series A Preferred Stock, the
holders of the Class A Common Stock and the Class B Common Stock shall be
entitled (together as a single class) to share ratably (i.e., an equal amount of
assets for each share of either Class A Common Stock or Class B Common Stock) in
the remaining assets of the Corporation.
3. Other Matters
The shares of Class A Common Stock may not be subdivided by
a stock split or otherwise or be combined by reclassification, reorganization,
reverse stock split or otherwise, without the shares of Class B Common Stock
being similarly subdivided by a stock split or otherwise or combined by
reclassification, reorganization, reverse stock split, or otherwise. Upon
subdivision by a stock split or otherwise, or combination by reclassification,
reorganization, reverse stock split, or otherwise, the Corporation shall not be
obligated to issue any fractional shares of Class A Common Stock, and in lieu
thereof, the Corporation shall pay to the holder of Class A Common Stock cash
compensation with respect to any such fractional interest in accordance with the
laws of the State of California and otherwise in the discretion of the
Corporation.
4. Adjustments
The dividends and other distribution rights of the Class A
Common Stock shall be proportionately adjusted for any increase or decrease in
the number of issued shares of Class A Common Stock and/or Class B Common Stock
resulting from a stock split, stock dividend, or other subdivision, or
reclassification, reorganization, reverse stock split, or other combination
affecting the outstanding Common Stock of the Corporation.
-30-
<PAGE>
C. Class B Common Stock
1. Voting
(a) On all matters other than matters for which each
class of stock is required by applicable law to vote or act separately, each
holder of the Class B Common Stock shall be entitled to ten (10) votes for each
shares held on all matters submitted to stock holders of the Corporation,
whether by vote at a meeting or for action by written consent, and holders of
Class B Common Stock shall vote together as a single class with the holders of
the Class A Common Stock.
2. Dividends and Other Distributions
(a) The holders of record of the Class B Common Stock
shall be entitled to receive, when, if and as declared by the Board of Directors
of the Corporation, such dividends of cash, stock, or property as the Board of
Directors shall from time to time declare, subject to the following rights and
restrictions:
(i) No cash dividends shall be declared and paid
on the Class B Common Stock, on a calendar year basis per share, unless there
shall have been declared and paid an equal amount of cash dividends on the Class
A Common Stock, on a calendar year basis per share.
(ii) No dividends of stock or property (other than
cash) shall be declared and paid, per share, on the Class B Common Stock unless
a dividend of an equal amount and equal value of stock or property (other than
cash) has been concurrently declared and paid, per share, on the Class A Common
Stock; provided, however, that a stock dividend shall only be declared and paid
in conformance with the following: (A) a dividend of shares of Class A Common
Stock may be declared and paid both to the holders of Class A Common Stock and
Class B Common Stock, (B) shares of Class A Common Stock may be declared and
paid to holders of Class A Common Stock, and a dividend of shares of Class B
Common Stock may be declared and paid to holders of Class B Common Stock, and
(C) in the event of any stock dividend under (A) or (B) above, the number of
shares distributed per share of Class A Common Stock and Class B Common Stock
shall be the same.
(b) Upon any liquidation, dissolution, or winding up of
the Corporation, whether voluntary or involuntary, after payment or provision
for payment of the debts and other liabilities of the Corporation, and after
payment of the liquidation preference of the Series A Preferred Stock, the
holders of the Class A Common Stock and the Class B Common Stock shall be
entitled (together as a single class) to share ratably (i.e., an equal amount of
assets for each share of either Class A Common stock or Class B Common Stock) in
the remaining assets of the Corporation.
-31-
<PAGE>
3. Other Matters
The shares of Class B Common Stock may not be
subdivided by a stock split or otherwise or be combined by reclassification,
reorganization, reverse stock split, or otherwise, without the shares of Class A
Common Stock being similarly subdivided by a stock split or otherwise or
combined by reclassification, reorganization, reverse stock split or otherwise.
Upon subdivision by a stock split or otherwise, or combination by
reclassification, reorganization, reverse stock split, or otherwise, the
Corporation shall not be obligated to issue any fractional shares of Class B
Common Stock, and in lieu thereof, the Corporation shall pay to the holder of
Class B Common Stock cash compensation with respect to any such fractional
interest in accordance with the laws of the State of California and otherwise in
the discretion of the Corporation.
4. Conversion
Outstanding shares of Class B Common Stock shall be
convertible into shares of Class A Common Stock, on a share-for-share basis, at
the option of the holder thereof, on and subject to the following terms and
conditions:
(a) The Corporation shall effect any such conversion as
soon as practicable after receipt from any such holder of shares of Class B
Common Stock of (i) written notice to the Corporation of the request for
conversion of shares of Class B Common Stock into shares of Class A Common
Stock, which notice shall be addressed to the principal office of the
Corporation or to the Corporation's designated transfer agent, shall state the
number of shares of Class B Common Stock to be converted into shares of Class A
Common Stock, the certificate number or numbers of the certificates representing
the shares of Class B Common Stock to be so converted, and the name or names in
which such holder desires the certificate or certificates for such Class A
Common Stock to be issued; and (ii) a certificate or certificates representing
the number of shares of Class B Common Stock to be converted into shares of
Class A Common Stock, duly endorsed for transfer with signature(s) guaranteed by
a firm which is a member of a registered national securities exchange or a
member of the National Association of Securities Dealers, Inc., or by a
commercial bank or trust company having an office or correspondent in the United
States.
(b) In the event the certificate or certificates for
shares of Class B Common Stock delivered to the Corporation for conversion into
shares of Class A Common Stock represent a number of shares greater than the
number of shares of Class B Common Stock to be converted, the Corporation at the
time of issuance of a certificate or Certificates for shares of Class A Common
Stock pursuant to the conversion request, shall issue and deliver to the holder
requesting conversion, or to such other person as such holder may designate, a
certificate for shares of Class B Common Stock not being converted into shares
of Class A Common Stock issued in the name of such holder, or such holder's
designee if so requested by such holder.
(c) The Corporation shall not be obligated to issue any
fractional shares of Class A Common Stock or Class B Common Stock upon
conversion of shares of Class B
-32-
<PAGE>
Common Stock into Class A Common Stock; and in lieu thereof, the Corporation
shall pay to the holder requesting conversion cash compensation with respect to
any such fractional interest, in accordance with the laws of the State of
California and otherwise in the discretion of the Corporation.
(d) Upon conversion of Class B Common Stock into Class
A Common Stock, the shares of Class B Common Stock so converted shall be retired
and shall not be restored to the status of authorized but unissued shares of
Class B Common Stock of the Corporation.
(e) Any such conversion shall be deemed to have been
made at the close of business on the date of receipt by the Corporation or its
transfer agent of the document required by Section C(4)(a) above.
5. Adjustments
The dividend and other distribution rights and
conversion rights of the Class B Common Stock shall be proportionately adjusted
for any increase or decrease in the number of issued shares of Class A Common
Stock and/or Class B Common Stock resulting from a stock split, stock dividend,
or other subdivision, or reclassification, reorganization, reverse stock split
or other combination affecting the outstanding Common Stock of the Corporation.
ARTICLE IV.
Limitation of Directors' Liability. The liability of the
directors of the corporation for monetary damages shall be eliminated to the
fullest extent permissible under California law.
ARTICLE V.
Indemnification of Corporate Agents. This corporation is
authorized to indemnify the directors and officers of the corporation to the
fullest extent permissible under California law.
Repeal or Modification. Any repeal or modification of the
foregoing provisions of Article IV and Article V by the shareholders of the
corporation shall not adversely affect any right or protection of a director of
the corporation existing at the time of such repeal or modification.
* * *
THREE: The foregoing amendment and restatement of articles of
incorporation has been duly approved by the Board of Directors of this
corporation.
-33-
<PAGE>
FOUR: The foregoing amendment and restatement of articles of
incorporation has been duly approved by the required vote of shareholders in
accordance with Sections 902 and 903 of the Corporations Code. There are no
shares of Class A Common Stock outstanding and there are 2,000,000 shares of
Class B Common Stock outstanding. The number of shares voting in favor of the
amendment and restatement equaled or exceed the vote required. The percentage
vote required was more than 50%.
We further declare under penalty of perjury under the laws of the
State of California that the matters set forth in this certificate are true and
correct of our own knowledge.
DATE: April 22, 1996
\s\ Peter Cartwright
---------------------
Peter Cartwright, President
\s\ Ann B. Curtis
---------------------
Ann B. Curtis, Secretary
-34-
<PAGE>
MANAGEMENT SERVICES AGREEMENT
THIS MANAGEMENT SERVICES AGREEMENT ("Agreement") is made and entered
into effective as of the 1st day of January, 1995, between Calpine Corporation,
a California corporation, of 50 West San Fernando Street, San Jose, California
95113 ("CALPINE") and Electrowatt Ltd of Zurich, Switzerland ("ELECTROWATT").
Recitals
A. CALPINE is engaged in the development, ownership and operation of generating
plants using geothermal, cogeneration or hydroelectric power to provide energy;
B. ELECTROWATT is an international corporation engaged in the ownership and
engineering of power projects, with expertise in the areas of engineering,
finance, construction and plant operations;
C. CALPINE desires to retain the services of ELECTROWATT to provide management,
advisory and support services to assist CALPINE in business development; and
D. ELECTROWATT has agreed to perform such services in accordance with the terms
and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants, undertakings
and conditions set forth below, the parties hereby agree as follows:
1. Appointment and Responsibilities. On the terms and conditions set forth
in this Agreement, CALPINE hereby appoints and retains ELECTROWATT to
provide, throughout the Term, management, advisory and support services,
as hereinafter set forth (the "Advisory Services"). ELECTROWATT hereby
accepts such appointment and agrees to perform the Advisory Services in
accordance with the terms and conditions of this Agreement.
ELECTROWATT's principal areas of responsibility shall be in rendering
financial and technical advice and the development of new business
opportunities. ELECTROWATT shall have such power and authority as shall
reasonably be required to enable it to perform its duties hereunder in
an efficient manner, provided, that in exercising such power and
authority and performing such duties, ELECTROWATT shall at all times be
subject to the authority and control of the Board of Directors of
Calpine Corporation.
-35-
<PAGE>
2. Advisory Services. ELECTROWATT shall provide the following services:
2.1 Construction Advisory Services: ELECTROWATT shall advise CALPINE
as to the performance of the technical, engineering, operational,
management and administrative tasks which are required or
advisable to be performed by CALPINE under various construction
contracts.
2.2 Finance: ELECTROWATT shall assist CALPINE with respect to
CALPINE's obligations and covenants under financing agreements by
providing such technical information and assistance as may be
necessary or appropriate to effect such compliance.
2.3 Acquisition and Development: ELECTROWATT will assist CALPINE in
the identification and acquisition of existing power facilities
and advise CALPINE in the development of new power facilities.
2.4 Other: ELECTROWATT shall provide such other advice and assistance
reasonably required by CALPINE in connection with the operation
of the corporation.
3. Term. This Agreement shall be for a term lasting three years from the
date first specified above, unless earlier terminated pursuant to this
Agreement or extended by mutual agreement of the parties.
4. Compensation. CALPINE shall pay ELECTROWATT, and ELECTROWATT hereby
agrees to accept as compensation for all services rendered hereunder, at
the annual rate of $200,000, payable in approximately equal quarterly
installments.
5. Reimbursement. In addition to the compensation provided in Section 4,
above, CALPINE shall pay or reimburse ELECTROWATT for all reasonable
travel and other travel expenses incurred by ELECTROWATT in connection
with the performance of its services under this Agreement, including
travel expenses incurred by ELECTROWATT in the attendance of meetings of
the Board of Directors, upon presentation of expense statements,
vouchers and other supporting documentation in such form and containing
such information as CALPINE may from time to time reasonably request;
provided, however, that the amounts available for such travel and other
expenses may be fixed in advance by the Board of Directors.
6. Entirety and Amendments. This Agreement supersedes any prior oral or
written understandings and constitutes the full agreement between the
parties and cannot be
-36-
<PAGE>
supplemented, augmented, amended or in any manner changed or altered
except by written instrument duly executed by the parties.
7. Construction and Jurisdiction. This Agreement shall be governed by, and
construed in accordance with, the laws and jurisprudence of the State of
California, and the parties agree to submit to the jurisdiction of the
courts of that State for the settlement of disputes arising hereunder.
IN WITNESS WHEREOF, this Agreement is executed effective as of the day
and year first above written.
CALPINE:
Calpine Corporation
By: \s\ Peter Cartwright
----------------------
Title: President
ELECTROWATT:
Electrowatt Ltd
By: \s\ R. A. Boesch
----------------------
Title:
-37-
<PAGE>
PROMISSORY GRID NOTE
US$ 58,000,000.00 April 29, 1996
San Jose, CA
FOR VALUE RECEIVED, Calpine Corporation, a California Corporation
(herein referred to as the "COMPANY"), hereby promises to pay to CREDIT SUISSE,
New York Branch (the "Bank"), or order, at the office of the Bank at 12 East
49th Street, New York, NY 10017 the principal sum of fifty eight million dollars
or such lesser amount as shall equal the aggregated unpaid amount of the loans
made by the Bank to the Company in lawful money of the United States of America
and in immediately available funds 1) for loans based on the Credit Suisse Base
Rate on demand, and to pay interest on the unpaid principal amount of each such
loan, at such office, in like money and funds, for the period commencing on the
date of such loan until such loan shall be paid in full, quarterly on the last
business day of each quarter hereafter beginning June 30, 1996 at a rate per
annum equal to the Credit Suisse Base Rate as announced by the Bank at its
office in New York City from time to time ("Base Rate" means the higher of (a)
the base commercial lending rate announced from time to time by Credit Suisse
(New York Branch), or (b) the rate quoted by Credit Suisse (New York Branch) at
approximately 11:00 a.m., New York City time, to dealers in the New York Federal
Funds market for the overnight offering of dollars by Credit Suisse (New York
Branch) for deposit, plus one-quarter of one percent; any change in interest
resulting from the change in such Base Rate to be effective at the beginning of
the business day on which each such change in the Base Rate is announced); 2)
for loans based on LIBOR on the last day of an interest period unless such loan
is rolled over (at the Bank's option), and to pay interest on the unpaid
principal amount of each such loan, at such office, in like money and funds, for
the period commencing on the date of such loan until such loan shall be paid in
full, on the last day of each interest period (each period commencing on the
date such loan is made and ending on such loan's maturity date) at a rate per
annum as mutually agreed between the Company and the Bank.
The bank is hereby authorized by the Company to endorse on the schedule
attached to this Note (or any continuation thereof) the amount of each loan made
by the Bank to the Company, the date such loan is made, and the amount of each
payment or prepayment of principal of such loan received by the Bank, provided
that any failure by the Bank to make any such endorsement shall not affect the
obligations of the Company hereunder in respect of such loans. The aggregate
unpaid amount of loan advances is reflected on the schedule attached to this
Note and shall be presumptive evidence of the entire outstanding loan amount.
This note shall remain valid and in force despite the fact that there
may be times when no indebtedness is owing hereunder.
-38-
<PAGE>
If the Company shall (1) default in payment of any liabilities to the
holder hereof when due; (2) make or have made any misrepresentation as to its
business or financial condition to CREDIT SUISSE; (3) become insolvent (however
such insolvency may be evidenced), or make a general assignment for the benefit
of creditors; (4) suspend the transaction of its usual business; (5) have
proceedings supplementary to or in enforcement of judgment commenced against it,
or with respect to any of its property; (6) have a proceeding or a petition in
bankruptcy or for relief under any law relating to relief of debtors,
readjustment of indebtedness, reorganization, composition or extension filed or
commenced by or against it; (7) have its property or control over its affairs or
operations taken by or on behalf of governmental authority (de jure or de
facto); (8) have a receiver appointed of, or a writ or order of attachment of
garnishment issued or made against any of its property or assets; (9) have any
indebtedness for borrowed money become due and payable by acceleration of
maturity thereof; (10) cease to be directly or indirectly 80% owned by
Electrowatt, Ltd., Switzerland, as per a certain letter from Electrowatt, Ltd.
to Credit Suisse; or (11) be dissolved or be a party to any merger or
consolidation without the written consent of the holder hereof; then in any such
case this note and all other present and future claims of any kind of the Bank
against the Company, whether created directly or acquired by assignment, whether
absolute or contingent, shall, unless the Bank shall otherwise elect, forthwith
be due and payable. The Company hereby waives presentment, demand of payment,
protest and notice of non-payment and of protest.
The Bank may assign and pledge all or any portion of the loans owing to
it under this Promissory Grid Note to any Federal reserve Bank or the United
States Treasury as collateral security pursuant to Regulation A of the Board of
Governors of the Federal Reserve System and any Operating Circular issued by
such Federal Reserve Bank, provided that any payment in respect of such assigned
loans made by the Company to the assigning and/or the Company's obligations
hereunder in respect of such assigned loan to the extent of such payment. No
such assignment shall release the assigning Bank from its obligations hereunder.
The Company may at its option prepay all or any part of the principal
of the Credit Suisse Base Rate Loans without premium or penalty.
The Note shall be governed by and construed in accordance with the laws
of the State of New York.
CALPINE CORPORATION
\s\ Peter Cartwright
- ---------------------------
By: Peter Cartwright
Title: President and CEO
-39-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM CALPINE CORPORATION'S CONDENSED CONSOLIDATED BALANCE
SHEET AS OF MARCH 31, 1996 AND FROM THE CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000916457
<NAME> Calpine Corporation
<MULTIPLIER> 1,000
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<EXCHANGE-RATE> 1
<CASH> 68,647
<SECURITIES> 0
<RECEIVABLES> 25,836
<ALLOWANCES> 0
<INVENTORY> 1,367
<CURRENT-ASSETS> 99,183
<PP&E> 515,601
<DEPRECIATION> 67,341
<TOTAL-ASSETS> 605,349
<CURRENT-LIABILITIES> 100,194
<BONDS> 329,422
0
50,000
<COMMON> 20
<OTHER-SE> 24,913
<TOTAL-LIABILITY-AND-EQUITY> 605,349
<SALES> 25,903
<TOTAL-REVENUES> 31,673
<CGS> 19,595
<TOTAL-COSTS> 21,329
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,219
<INCOME-PRETAX> (498)
<INCOME-TAX> (204)
<INCOME-CONTINUING> (294)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (294)
<EPS-PRIMARY> (0.15)
<EPS-DILUTED> (0.15)
</TABLE>