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 June 30, 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, which has no exhibits, contains 24 pages.
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<PAGE>
CALPINE CORPORATION AND SUBSIDIARIES
Report on Form 10-Q
For the Quarter Ended June 30, 1996
INDEX
PART I. FINANCIAL INFORMATION Page No.
ITEM 1. Financial Statements
Condensed Consolidated Balance Sheets
June 30, 1996 and December 31, 1995...................................3
Condensed Consolidated Statements of Operations
Three and Six Months Ended June 30, 1996 and 1995.....................4
Condensed Consolidated Statements of Cash Flows
Six Months Ended June 30, 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
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<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
CALPINE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
<CAPTION>
June 30, December 31,
1996 1995
--------- ----------
Assets (unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents ............................................ $ 38,403 $ 21,810
Accounts receivable .................................................. 38,691 20,124
Acquisition project receivables ...................................... 4,536 8,805
Collateral securities, current portion ............................... 9,745 --
Prepaid expenses ..................................................... 6,978 3,447
Inventory ............................................................ 3,444 1,377
Other current assets ................................................. 2,947 667
-------- --------
Total current assets ............................................ 104,744 56,230
Property, plant and equipment, net ........................................ 530,203 447,751
Investments in power projects and capitalized costs ....................... 12,693 8,218
Collateral securities, net of current portion ............................. 88,669 --
Notes receivable from related parties ..................................... 20,894 19,391
Notes receivable from Coperlasa ........................................... 16,492 6,094
Restricted cash ........................................................... 8,477 9,627
Deferred charges and other assets ......................................... 10,640 7,220
-------- --------
Total assets .................................................... $792,812 $554,531
======== ========
Liabilities and Shareholder's Equity
Current liabilities:
Current non-recourse project financing ............................... $ 27,178 $ 84,708
Notes payable to bank and short-term borrowings ...................... -- 1,177
Accounts payable ..................................................... 9,530 6,876
Accrued payroll and related expenses ................................. 2,336 2,789
Accrued interest payable ............................................. 8,693 7,050
Other accrued expenses ............................................... 5,121 2,657
-------- --------
Total current liabilities ....................................... 52,858 105,257
Long-term line of credit .................................................. -- 19,851
Non-recourse project financing, less current portion ...................... 180,974 190,642
Notes payable ............................................................. 6,598 6,348
Senior Notes .............................................................. 285,000 105,000
Deferred income taxes, net ................................................ 100,068 97,621
Deferred lease incentive .................................................. 81,495 --
Other liabilities ......................................................... 6,163 4,585
-------- --------
Total liabilities ............................................... 713,156 529,304
-------- --------
Shareholder's equity:
Preferred stock ...................................................... 50,000 --
Common stock ......................................................... 6,224 6,224
Retained earnings .................................................... 23,432 19,003
-------- --------
Total shareholder's equity ...................................... 79,656 25,227
-------- --------
Total liabilities and shareholder's equity ...................... $792,812 $554,531
======== ========
The accompanying notes are an integral part of these
condensed consolidated financial statements.
</TABLE>
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<PAGE>
<TABLE>
CALPINE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------------------- --------------------
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenue:
Electricity and steam sales ................. $ 46,255 $ 27,911 $ 72,030 $ 49,014
Service contract revenue from related
parties ................................ 2,604 1,606 4,616 3,129
Service revenue from others ................. 244 -- 818 --
Income (loss) from unconsolidated
investments in power projects .......... 298 (1,175) 1,713 (1,791)
Interest income on loans to power projects .. 920 -- 2,817 --
-------- -------- -------- --------
Total revenue ...................... 50,321 28,342 81,994 50,352
-------- -------- -------- --------
Cost of revenue:
Plant operating expenses, depreciation,
operating lease and production royalties 27,363 16,004 46,835 28,344
Service contract expenses and other ......... 2,627 1,222 4,484 2,274
-------- -------- -------- --------
Total cost of revenue .............. 29,990 17,226 51,319 30,618
-------- -------- -------- --------
Gross profit ..................................... 20,331 11,116 30,675 19,734
Project development expenses ..................... 894 807 1,410 1,308
General and administrative expenses .............. 3,234 2,114 5,874 3,659
-------- -------- -------- --------
Income from operations ............. 16,203 8,195 23,391 14,767
Other (income) expense:
Interest expense ............................ 10,446 8,185 18,665 15,116
Interest income and other, net .............. (2,244) (396) (2,777) (855)
-------- -------- -------- --------
Income before provision for income
taxes ......................... 8,001 406 7,503 506
Provision for income taxes ....................... 3,284 167 3,080 208
-------- -------- -------- --------
Net income ......................... $ 4,717 $ 239 $ 4,423 $ 298
======== ======== ======== ========
Weighted average shares outstanding .............. 2,260 2,190 2,260 2,190
======== ======== ======== ========
Earnings per share ............................... $ 2.09 $ 0.11 $ 1.96 $ 0.14
======== ======== ======== ========
The accompanying notes are an integral part of these
condensed consolidated financial statements.
</TABLE>
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<PAGE>
<TABLE>
CALPINE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
<CAPTION>
Six Months Ended June 30,
-------------------------
1996 1995
--------- ---------
<S> <C> <C>
Net cash provided by operating activities .............. $ 5,035 $ 5,126
--------- ---------
Cash flows from investing activities:
Acquisition of property, plant and equipment ...... (8,061) (9,324)
Investment in Greenleaf, net of cash on hand ...... -- (16,958)
Investment in Watsonville, net of cash on hand .... -- 494
Investment in King City, net of cash on hand ...... (4,877) --
Investment in King City collateral securities ..... (98,414) --
Investments in power projects and capitalized costs (2,983) (579)
Investments in Coperlasa .......................... (12,104) --
Increase in notes receivable from related party ... (250) (250)
Decrease in restricted cash ....................... 1,150 2,766
Other, net ........................................ (512) (23)
--------- ---------
Net cash used in investing activities ........ (126,051) (23,874)
--------- ---------
Cash flows from financing activities:
Proceeds from issuance of Senior Notes Due 2006 ... 180,000 --
Proceeds from issuance of preferred stock ......... 50,000 --
Borrowings from line of credit .................... 33,800 20,851
Repayment of line of credit ....................... (53,651) (15,000)
Borrowing from bank ............................... 45,000 --
Repayments to bank ................................ (46,177) --
Borrowings of non-recourse project financing ...... -- 77,925
Repayment of non-recourse project financing ....... (66,600) (73,988)
Repayment of working capital loan ................. -- (4,500)
Financing costs ................................... (4,763) (1,546)
--------- ---------
Net cash provided by financing activities .... 137,609 3,742
--------- ---------
Net increase (decrease) in cash and cash equivalents ... 16,593 (15,006)
Cash and cash equivalents, beginning of period ......... 21,810 22,527
--------- ---------
Cash and cash equivalents, end of period ............... $ 38,403 $ 7,521
========= =========
Supplementary information:
Cash paid during the period for:
Interest ..................................... $ 16,517 $ 17,530
Income taxes ................................. $ 955 $ 125
The accompanying notes are an integral part of these
condensed consolidated financial statements.
</TABLE>
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<PAGE>
CALPINE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 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, Washington and Mexico. 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.
In July 1996, the Company filed a registration statement with the
United States Securities and Exchange Commission relating to the
initial public offering of shares of the Company's common stock. In the
offering, the Company will sell newly issued shares of common stock and
Electrowatt will sell shares of common stock representing its entire
ownership interest in Calpine. If the offering is consummated,
Electrowatt will no longer own any interest in the Company. The Company
currently anticipates the initial public offering to close in September
1996.
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.
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<PAGE>
CALPINE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
June 30, 1996
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. 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.
In October 1995, the Financial Accounting Standards Board issued SFAS
No. 123, Accounting for Stock Based Compensation. The disclosure
requirements of SFAS No. 123 are effective for the Company's 1996
fiscal year. The new pronouncement did not have an impact on its
results of operations since the intrinsic value-based method prescribed
by Accounting Principles Board Opinion No. 25 and also allowed by SFAS
No. 123 will continue to be used by the Company to account for its
stock-based compensation plans.
3. Accounts Receivable
The Company has both billed and unbilled receivables. The components of
accounts receivable as of June 30, 1996 and December 31, 1995 are as
follows (in thousands):
June 30, December 31,
1996 1995
--------- -----------
(unaudited)
Projects:
Billed ........... $37,622 $18,341
Unbilled ......... 845 525
Other ............ 224 1,258
------- -------
$38,691 $20,124
======= =======
Other accounts receivable as of December 31, 1995 consisted primarily
of disputed amounts related to the Greenleaf facilities purchase price.
In May 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).
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<PAGE>
CALPINE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
June 30, 1996
Accounts receivable from related parties as of June 30, 1996 and
December 31, 1995 are comprised of the following (in thousands):
June 30, December 31,
1996 1995
---------- ------------
(unaudited)
O.L.S. Energy-Agnews, Inc. ..... $ 589 $ 806
Geothermal Energy Partners, Ltd. 979 462
Sumas Cogeneration Company, L.P. 1,206 908
Electrowatt and subsidiaries ... 2 1
------ ------
$2,776 $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 six months ended June 30, 1996 and 1995 related to these
investments is as follows (in thousands):
<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 ............... $ 21,561 $ 4,604 $ 9,576 $ 15,265 $4,612 $ 9,847
Operating expenses .... 12,752 4,349 6,219 13,530 4,300 5,064
--------- ------- ------- --------- ----- ---------
Income from
operations ......... 8,809 255 3,357 1,735 312 4,783
Other expenses, net ... 5,098 1,040 2,444 5,283 1,034 2,865
--------- ------- ------- --------- ----- ---------
Net income (loss) $ 3,711 $ (785) $ 913 $ (3,548) $(722) $ 1,918
--------- ------- ------- --------- ----- ---------
Company's share of net
income (loss) ...... $ 1,855 $ (179) $ 37 $ (1,774) $(130) $ 113
========= ======= ======= ======== ===== ========
</TABLE>
5. Thermal Power Company
In March 1996, Thermal Power Company (TPC), a wholly owned subsidiary
of the Company, 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 as defined in
the steam sales agreement. The alternative pricing strategy is
effective through December 31, 2000. Under the agreement, PG&E would
purchase a portion of the steam that PG&E would likely curtail under
TPC's existing steam sales agreement. The price for this portion of
steam will be set by TPC and Unocal with the intent that it be at
competitive market prices. TPC and Unocal will solely determine the
price and duration of these alternative price offers.
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<PAGE>
CALPINE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
June 30, 1996
6. Greenleaf Transaction
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 California. The purchase price included a cash
payment of $20.3 million and the assumption of project debt totaling
$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
their estimated fair values. 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
=========
Pro forma consolidated results for the Company as if the acquisition
had been consummated on January 1, 1995 are as follows (in thousands
except per share amounts):
Six Months Ended
June 30, 1995
----------------
Revenue ................. $ 55,666
Net income (loss) ....... $ (2,211)
Earnings per share ...... $ (1.01)
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 on each February 15 and August 15, a portion of
which is supported by a $98.4 million collateral fund owned by the
Company. The collateral fund 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 collateral fund
securities are accounted for as held-to-maturity investments under SFAS
No. 115, Accounting for Certain Investments in Debt and Equity
Securities. As of June 30, 1996, future rent payments are $11.5 million
for the remainder of 1996, $24.4 million for 1997, $23.8 million for
1998, $19.4 million for 1999, $20.1 million for 2000 and $204.1 million
thereafter.
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<PAGE>
CALPINE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
June 30, 1996
The Company has recorded the value of the above-market pricing provided
in the power sales agreement (PSA) as an asset which is included in
property, plant and equipment, since the Company has, in substance,
acquired the PSA. The Company has also recorded a deferred lease
incentive equal to the value of the above-market payments to be
received. The asset and liability are being amortized over the life of
the power sales agreement and lease, respectively.
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 (see Note 8) and a $45.0 million loan from The Bank of
Nova Scotia. The Company repaid the short-term borrowings from a
portion of the net proceeds of the Senior Notes Due 2006 issued in May
1996 (see Note 9).
8. Lines of Credit
At June 30, 1996, the Company had no borrowings under its $50.0 million
Credit Facility with Credit Suisse (whose parent company owns 44.9% of
Electrowatt) and had letters of credit outstanding for $3,025,000.
Borrowings under the Credit Facility bear interest at the London
Interbank Offered Rate (LIBOR) plus 0.5%. 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. Upon
completion of the Company's proposed initial public offering, the
Credit Facility will terminate and is expected to be replaced by a
comparable facility. On July 20, 1996, the Company entered into a
commitment letter with The Bank of Nova Scotia which will provide a
$50.0 million three-year revolving credit facility. Such revolving
credit facility will become effective upon the completion of the
Company's proposed initial public offering.
9. Senior Notes Due 2006
On May 16, 1996, the Company issued $180.0 million aggregate principal
amount of 10-1/2% Senior Notes Due 2006. The net proceeds of $175.2
million were used to repay $53.7 million of borrowings under the Credit
Suisse Credit Facility, $57.0 million of non-recourse project financing
and $45.0 million of borrowings from The Bank of Nova Scotia. The
remaining $19.5 million was available for general corporate purposes.
Transaction costs of $4.8 million incurred in connection with the
public debt offering were recorded as a deferred charge and are
amortized over the ten-year life of the Senior Notes using the
straight-line method.
The Senior Notes Due 2006 will mature on May 15, 2006. 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.
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
June 30, 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. No dividends are
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<PAGE>
CALPINE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
June 30, 1996
payable on the Series A Preferred Stock. The Series A Preferred Stock
contains provisions regarding liquidation and conversion rights. Upon
consummation of the Company's proposed initial public offering, the
Series A Preferred Stock will be converted into common stock and sold
to the public in the offering.
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 initially alleged that Calpine was one of many defendants in
this case responsible for Bonneville's deepening insolvency and the
amount of damages attributable to the Company based on the $2.0 million
partnership investment was alleged to be $577.2 million. Based upon
statements made by the Court and the trustee in August 1996, the
Company believes that the maximum compensatory damages which the
trustee may seek will not exceed $5.0 million. There can be no
assurance, however, of the actual amount of damages to be sought by the
trustee. 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 operation.
In connection with the Company's unsuccessful attempt to acquire
O'Brien Environmental Energy, Inc. (O'Brien) in 1995 through the U.S.
Bankruptcy Court proceedings, the Company has recorded approximately
$3.7 million of third-party expenses, all of which have been
capitalized by the Company. Pursuant to the terms of a contract with
O'Brien, the Company is seeking the reimbursement of such expenses and
a $2.0 million break-up fee, each of which is subject to the approval
of the Bankruptcy Court. On June 6, 1996, the Bankruptcy Court ruled
that the Company had the right to seek reimbursement of its fees and
expenses and scheduled an evidentiary hearing to begin on August 28,
1996 to determine the amount to be awarded. Although the Company
believes it will be awarded all or a substantial part of the fees and
expenses which it is seeking, there can be no assurance as to the
ultimate resolution of this claim.
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
========
The Company completed two acquisitions during 1995 and entered into one lease
transaction during 1996. 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. One May 2, 1996, the Company
entered into an operating lease transaction for a 120 megawatt natural gas-fired
cogeneration facility located in King City, California. In addition, during
November 1995 the Company entered into a series of agreements to invest up to
$20.0 million in the Cerro Prieto Steam Fields.
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 King City facility,
the PG&E Unit 13 and Unit 16 Steam Fields, the SMUDGEO#1 Steam Fields, and the
Thermal Power Company Steam Fields. Such revenues reflect electricity and steam
sales by the Greenleaf, Watsonville and King City facilities only since their
transaction dates of April 21, 1995, June 29, 1995 and May 2, 1996,
respectively, as discussed above.
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 and Watsonville facilities since their acquisition
on April 21, 1995 and June 29, 1995, respectively, and the King City facility
since May 2, 1996. 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 Thermal Power Company Steam Fields (dollar amounts in thousands,
except per kilowatt hour amounts).
-12-
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
---------------------------- ---------------------------
June 30, 1996 June 30,1995 June 30,1996 June 30,1995
------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Power Plants
Electricity revenues (in $000)
Energy ........................... $ 19,022 $ 11,183 $ 34,362 $ 22,323
Capacity ......................... $ 18,208 $ 8,672 $ 19,774 $ 9,051
Megawatt hours produced ............. 406,064 227,653 736,739 324,059
Average energy rate per kilowatt
hour produced .................... $ 0.04684 $ 0.04912 $ 0.04664 $ 0.06889
Steam Fields
Steam revenues (in $000) ............ $ 7,025 $ 8,056 $ 15,866 $ 17,639
Kilowatt hours produced ............. 484,232 454,722 1,040,271 1,027,317
Average energy rate per kilowatt
hour produced .................... $ 0.01451 $ 0.01772 $ 0.01525 $ 0.01717
</TABLE>
RESULTS OF OPERATIONS
=====================
Three and Six Months Ended June 30, 1996 Compared to Three and Six Months Ended
June 30, 1995
Revenue. The Company's total revenues were $50.3 million and $82.0 million for
the three and six months ended June 30, 1996 compared to $28.3 million and $50.4
million for the comparable periods in 1995.
Electricity and steam sales revenue increased 66% and 47% to $46.3
million and $72.0 million for the three and six months ended June 30,
1996, compared to $27.9 million and $49.0 million for the comparable
periods in 1995. The increase for the three months ended June 30, 1996
compared to the same period for 1995 was primarily due to $11.0 million
from the King City facility, $2.7 million of higher revenue from the
Watsonville facility and $1.5 million of higher revenue from the
Greenleaf facilities which were included in Company operations since
their respective transaction dates. The increase for the six months
ended June 30, 1996 compared to the same period in 1995 was primarily
due to $11.0 million from the King City Facility, $3.9 million of
higher revenue from the Watsonville facility and $6.0 million of higher
revenue from the Greenleaf facilities. The remaining increases for the
three and six month periods were primarily due to higher generation and
higher prices at other Company power generation facilities and steam
fields.
Service contract revenue from related parties increased 62% and 48% to
$2.6 million and $4.6 million for the three months and six months ended
June 30, 1996 compared to $1.6 million and $3.1 million for the same
periods in 1995. For the three and six months ended June 30, 1996,
approximately $676,000 and $832,000 were related to billings for an
overhaul at the Aidlin facility; and approximately $263,000 and
$318,000 were related to billings for an overhaul at the Agnews
facility.
Service revenue from others for the three months and six months ended
June 30, 1996 consisted primarily of $237,000 and $428,000 of technical
services and management fees related to the Cerro Prieto Steam Fields
for the three and six months ended June 30, 1996; and a $255,000
advisory fee for financing of a power generation facility for the six
months ended June 30, 1996.
Income from unconsolidated investments in power projects increased to
$298,000 and $1.7 million for the three and six months ended June 30,
1996 compared to losses of $1.2 million and $1.8 million for the
comparable periods in 1995. The increases are primarily attributable to
$300,000 and $1.9 million of equity income for the three and six months
ended June 30, 1996 from the Company's investment in Sumas Cogeneration
Company, L.P. (Sumas) (see Note 4). Sumas is the owner and
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<PAGE>
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 a contractual increase in the
energy price in accordance with the power sales agreement with Puget
Sound Power & Light Company.
Interest income on loans to power projects contributed $920,000 and
$2.8 million to the revenue increase for the three and six months ended
June 30, 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, of which $1.5 million bears interest at 20%
and the remaining $10.0 million bears interest at 16.25%. The loans are
secured by a pledge to Calpine of SEI's interest in Sumas. The Company
will receive 100% of the payments of SEI's cash distributions from
Sumas until payment in full of the $1.5 million loan, and 50% of such
cash distributions until payment in full of the $10.0 million loan.
Prior to 1996, the Company deferred recognition of interest income from
these notes until Sumas generated net income. During the three and six
months ended June 30, 1996, the Company recognized interest income of
$300,000 and $1.9 million based on SEI's proportionate share of net
income. In addition, the Company recognized $620,000 and $962,000 of
interest income on loans to Coperlasa related to the Cerro Prieto Steam
Fields for the three and six months ended June 30, 1996.
Cost of revenue increased 74% and 68% to $30.0 million and $51.3 million for the
three and six months ended June 30, 1996 compared to $17.2 million and $30.6
million for the same periods in 1995. The increase was primarily due to plant
operating, depreciation, operating lease and production royalty expenses
attributable to (i) full three and six month periods of operations at the
Greenleaf facilities which were purchased on April 21, 1995, (ii) operations of
the Watsonville facility subsequent to June 29, 1995 and (iii) operations of the
King City facility subsequent to May 2, 1996. The increases in cost of revenue
were also due to the increase in service contract expenses as a result of
expenses related to the Aidlin and Agnews overhauls, and due to expenses related
to the Cerro Prieto Steam Fields, partially offset by lower operating and
depreciation expenses at the Company's other existing power generation
facilities and steam fields.
General and administrative expenses increased 53% and 61% to $3.2 million and
$5.9 million for the three and six months ended June 30, 1996 compared to $2.1
million and $3.7 million for the same periods in 1995. The increases in 1996
were primarily due to additional personnel and related expenses necessary to
support the Company's expanding operations.
Interest expense increased 28% and 23% to $10.4 million and $18.7 million for
the three and six months ended June 30, 1996 compared to $8.2 million and $15.1
million for the same periods in 1995. The 28% increase for the three months
ended June 30, 1996 compared to the same period in 1995 was primarily due to
$2.4 million of interest on the Company's 10-1/2% Senior Notes issued in May
1996. The 23% increase for the six months ended June 30, 1996 compared to the
same period in 1995 was primarily attributable to the $2.4 million of interest
on the 10-1/2% Senior Notes, $1.7 million of interest expense related to the
Greenleaf 1 and 2 facilities acquired in April 21, 1995, offset by a $1.5
million decrease in interest expense primarily as a result of repayments of
principal on certain indebtedness.
Other income, net increased to $2.2 million and $2.8 million for the three and
six months ended June 30, 1996 compared to $396,000 and $855,000 the comparable
periods in 1995. The increases were primarily due to $1.5 million of interest
income on the King City collateral securities purchased in connection with the
King City Transaction and to an increase in interest income from the investment
of the proceeds of the Preferred Stock proceeds and a portion of the proceeds
from the sale of the 10-1/2% Senior Notes.
Provision for income taxes. The effective rate for the income tax provision was
approximately 41% for the three and six months ended June 30, 1996 and 1995. The
effective rate was based on statutory tax rates.
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<PAGE>
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.
Operating activities for the six months ended June 30, 1996 consisted of
approximately $4.4 million of net income from operations, $15.0 million of
depreciation and amortization, $1.7 million in deferred income taxes, offset by
$1.7 million of income from unconsolidated investments in power projects and
$14.4 million net increase in operating assets and liabilities.
Investing activities used $126.1 million during the six months ended June 30,
1996, primarily due to $11.0 million of capital expenditures and capitalized
project costs, $98.4 million for the purchase of collateral securities, a $12.1
million investment in Coperlasa and $4.9 million for deferred transaction costs
in connection with King City, offset by a $1.1 million decrease in restricted
cash requirements.
Financing activities provided $137.6 million of cash during the six months ended
June 30, 1996. The Company issued $50.0 million of preferred stock to
Electrowatt, borrowed $45.0 million of bank debt and an additional $33.8 million
under the Credit Suisse Credit Facility, and received net proceeds of $175.2
million from the Senior Notes Due 2006. The Company subsequently repaid $46.2
million of bank debt, all borrowings outstanding under the Credit Suisse Credit
Facility of $53.7 million, and $66.6 million of non-recourse project financing.
As of June 30, 1996, cash and cash equivalents were $38.4 million and working
capital was $51.9 million. For the six months ended June 30, 1996, working
capital increased $100.9 million and cash and cash equivalents increased $16.6
million as compared to the twelve months ended December 31, 1995. The increase
in working capital primarily reflects the inclusion of $57.0 million of
non-recourse project financing in current liabilities as of December 31, 1995. A
portion of the funds from the issuance of the Senior Notes Due 2006 was used to
refinance current bank debt and borrowings under the Credit Suisse Credit
Facility, and to repay the $57.0 million indebtedness. Working capital at June
30, 1996 also includes the net remaining proceeds from the issuance of the
Senior Notes Due 2006. In July 1996, the Company repaid $6.5 million of
principal and interest related to non-recourse project financing.
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. In addition, the Company
has $180.0 million of its 10-1/2% Senior Notes Due 2006 which mature on May 15,
2006 and bear interest semi-annually on May 15 and November 15 of each year.
Under the provisions of the applicable indentures, 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 June 30, 1996, the Company had $208.2 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 and the Greenleaf facilities. As of
June 30, 1996, the annual maturities for all non-recourse project financing were
$18.1 million for the remainder of 1996, $24.8
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<PAGE>
million for 1997, $26.0 million for 1998, $18.7 million for 1999, $18.0 million
for 2000 and $100.2 million thereafter.
The Company currently has the Credit Suisse Credit Facility, which was arranged
by Electrowatt and provides for total borrowings of $50.0 million, with
borrowings bearing interest at either LIBOR or at the Credit Suisse base rate
plus a mutually agreed margin. At June 30, 1996, the Company had no borrowings
outstanding under the Credit Suisse Credit Facility. Upon consummation of the
Company's initial public offering, the Credit Suisse Credit Facility will
terminate and is expected to be replaced by a comparable facility. On July 20,
1996, the Company entered into a Commitment Letter with The Bank of Nova Scotia
which will provide a $50.0 million three-year revolving credit facility. Such
revolving credit facility will become effective upon completion of the initial
public offering.
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 June 30, 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%.
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 June 30, 1996, the Company had planned commitments for remaining capital
expenditures in 1996 totaling $6.5 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 six months
ended June 30, 1996, capital expenditures included $4.0 million for the purchase
of geothermal leases for the Glass Mountain project and $2.7 million 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.
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 to satisfy all obligations under outstanding indebtedness, to finance
anticipated capital expenditures and to fund working capital requirements
through December 31, 1996.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In connection with the Company's unsuccessful attempt to acquire O'Brien
Environmental Energy, Inc. (O'Brien) in 1995 through the U.S. Bankruptcy Court
proceedings, the Company incurred approximately $3.7 million of third-party
expenses, all of which have been capitalized by the Company. Pursuant to the
terms of a contract with O'Brien, the Company is seeking the reimbursement of
such expenses and a $2.0 million break-up fee, each of which is subject to the
approval of the Bankruptcy Court. On June 6, 1996, the Bankruptcy Court ruled
that the Company had the right to seek reimbursement of its fees and expenses
and scheduled an evidentiary hearing to begin on August 28, 1996 to determine
the amount to be awarded. Although the Company believes it will be awarded all
or a substantial part of the fees and expenses which it is seeking, there can be
no assurance as to the ultimate resolution of this claim.
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
2.1. Lease dated as of April 24, 1996, between BAF Energy A California
Limited Partnership, Lessor, and Calpine King City Cogen, LLC, Lessee.
(l)
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 Notes. (a)
4.2 Indenture dated as of May 16, 1996 between the Company and Fleet
National Bank, as Trustee, including form of Notes. (m)
10.1 Financing Agreements
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<PAGE>
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)
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)
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<PAGE>
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)
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)
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<PAGE>
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)
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)
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<PAGE>
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)
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)
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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)
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)
-22-
<PAGE>
10.11 Form of Indemnification Agreement for directors. (a)
10.12 Form of Indemnification Agreement for executive officers. (a)
21.1 Subsidiaries of the Company. (m)
------------------------------------
(a) Incorporated by reference to Registrant's Registration Statement on
Form S-1 (Registration Statement No. 33-73160).
(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) Incorporated by reference to Registrant's Quarterly Report on Form 10-Q
dated March 31, 1996 and filed on May 15, 1996.
(l) Incorporated by reference to Registrant's Current Report on Form 8-K
(Amendment No. 1) dated June 3, 1996 and filed on June 4, 1996.
(m) Incorporated by reference to Registrant's Registration Statement on
Form S-4 (Registration Statement No. 33-723160) filed on July 3, 1996.
(b) Reports on Form 8-K
A report on Form 8-K was filed on May 14, 1996. A report on Form 8-K/A was filed
on June 4, 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: August 14, 1996
-------------------------
Ann B. Curtis
Senior Vice President
(Chief Financial Officer)
By: \s\ Gloria S. Gee Date: August 14, 1996
-------------------------
Gloria S. Gee
Corporate Controller
(Chief Accounting Officer)
-24-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM CALPINE CORPORATION'S CONDENSED CONSOLIDATED BALANCE
SHEET AS OF JUNE 30, 1996 AND FROM THE CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1
<CASH> 38,403
<SECURITIES> 9,745
<RECEIVABLES> 43,227
<ALLOWANCES> 0
<INVENTORY> 3,444
<CURRENT-ASSETS> 104,744
<PP&E> 530,203
<DEPRECIATION> 0
<TOTAL-ASSETS> 792,812
<CURRENT-LIABILITIES> 52,858
<BONDS> 472,572
0
50,000
<COMMON> 6,224
<OTHER-SE> 23,432
<TOTAL-LIABILITY-AND-EQUITY> 792,812
<SALES> 72,030
<TOTAL-REVENUES> 81,994
<CGS> 46,835
<TOTAL-COSTS> 51,319
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 18,665
<INCOME-PRETAX> 7,503
<INCOME-TAX> 3,080
<INCOME-CONTINUING> 4,423
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,423
<EPS-PRIMARY> 1.96
<EPS-DILUTED> 1.96
</TABLE>
