CALPINE CORP
10-Q, 1997-11-14
COGENERATION SERVICES & SMALL POWER PRODUCERS
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                                  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 September 30, 1997


[   ]    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 Delaware Corporation)

                  I.R.S. Employer Identification No. 77-0212977



                           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, as of the latest practicable date:

    $0.001 par value Common Stock
    20,035,705 shares outstanding on November 10, 1997



                                      - 1 -

<PAGE>



                      CALPINE CORPORATION AND SUBSIDIARIES
                               Report on Form 10-Q
                    For the Quarter Ended September 30, 1997

                                      INDEX

PART I.           FINANCIAL INFORMATION                                 Page No.

                  ITEM 1.  Financial Statements

                  Condensed Consolidated Balance Sheets
                  September 30, 1997 and December 31, 1996.....................3

                  Condensed Consolidated Statements of Operations
                  Three and Nine Months Ended September 30, 1997 and 1996......4

                  Condensed Consolidated Statements of Cash Flows
                  Nine Months Ended September 30, 1997 and 1996................5

                  Notes to Condensed Consolidated Financial Statements.........6

                  ITEM 2.  Management's Discussion and Analysis of Financial
                  Condition and Results of Operations.........................14

PART II.          OTHER INFORMATION

                  ITEM 1.  Legal Proceedings..................................21

                  ITEM 2.  Change in Securities...............................21

                  ITEM 3.  Defaults Upon Senior Securities....................21

                  ITEM 4.  Submission of Matters to a Vote of 
                           Security Holders...................................21

                  ITEM 5.  Other Information..................................21

                  ITEM 6.  Exhibits and Reports on Form 8-K...................21


Signatures....................................................................29

Exhibit Index.................................................................30




                                      - 2 -

<PAGE>



                          PART I. FINANCIAL INFORMATION

ITEM 1.    FINANCIAL STATEMENTS

                      CALPINE CORPORATION AND SUBSIDIARIES

                      CONDENSED CONSOLIDATED BALANCE SHEETS
                    September 30, 1997 and December 31, 1996
                                 (in thousands)

<TABLE>
<CAPTION>
                                                             September 30,  December 31,
                                                                    1997         1996
                                                                ----------   ----------
<S>                                                            <C>           <C>    
                       ASSETS                                   (unaudited)
Current assets:
   Cash and cash equivalents ................................   $  198,550   $  100,010
   Accounts receivable from related parties .................        1,931        2,826
   Accounts receivable from others ..........................       50,236       39,962
   Notes receivable from related parties, current portion ...       15,564         --
   Collateral securities, current portion ...................        6,046        5,470
   Prepaid operating lease ..................................       13,652       12,668
   Other current assets .....................................        7,684       10,251
                                                                ----------   ----------
       Total current assets .................................      293,663      171,187
Property, plant and equipment, net ..........................      710,599      650,053
Investments in power projects ...............................       74,224       13,937
Collateral securities, net of current portion ...............       86,283       89,806
Notes receivable from related parties, net of current portion      134,189       18,182
Notes receivable from Coperlasa .............................       16,353       17,961
Restricted cash .............................................       18,195       55,219
Other assets ................................................       34,461       13,870
                                                                ----------   ----------
       Total assets .........................................   $1,367,967   $1,030,215
                                                                ==========   ==========

            LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
   Current portion of non-recourse project financing ........   $  123,095   $   30,627
   Notes payable and short-term borrowings ..................         --          6,865
   Accounts payable .........................................       19,104       18,363
   Accrued payroll and related expenses .....................        4,178        3,912
   Accrued interest payable .................................       16,254        7,332
   Other accrued expenses ...................................        8,295        7,870
                                                                ----------   ----------
       Total current liabilities ............................      170,926       74,969
Non-recourse project financing, net of current portion ......      186,403      278,640
Senior Notes ................................................      560,043      285,000
Deferred income taxes, net ..................................      139,651      100,385
Deferred lease incentive ....................................       75,844       78,521
Other liabilities ...........................................        5,549        9,573
                                                                ----------   ----------
       Total liabilities ....................................    1,138,416      827,088
                                                                ----------   ----------

Stockholders' equity
   Common stock .............................................           20           20
   Additional paid-in capital ...............................      167,329      165,412
   Retained earnings ........................................       62,202       37,695
                                                                ----------   ----------
       Total stockholders' equity ...........................      229,551      203,127
                                                                ----------   ----------
       Total liabilities and stockholders' equity ...........   $1,367,967   $1,030,215
                                                                ==========   ==========

         The accompanying notes are an integral part of these condensed
                       consolidated financial statements.
</TABLE>


                                      - 3 -

<PAGE>



                      CALPINE CORPORATION AND SUBSIDIARIES

                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
         For the Three and Nine Months Ended September 30, 1997 and 1996
                    (in thousands, except per share amounts)
                                   (unaudited)
<TABLE>
<CAPTION>

                                                         Three Months Ended        Nine Months Ended
                                                            September 30,             September 30,
                                                       ---------    ---------   ---------    ---------
                                                         1997         1996        1997          1996
                                                       ---------    ---------   ---------    ---------
<S>                                                    <C>          <C>         <C>          <C>   
Revenue:
   Electricity and steam sales .....................   $  79,441    $  68,281   $ 175,767    $ 140,311
   Service contract revenue ........................       3,342          172       6,871        5,606
   Income from unconsolidated investments in power
     projects ......................................       3,313        1,158       7,477        2,871
   Interest income on loans to power projects ......       6,809        1,286       9,765        4,103
                                                       ---------    ---------   ---------    ---------
       Total revenue ...............................      92,905       70,897     199,880      152,891
                                                       ---------    ---------   ---------    ---------
Cost of revenue:
   Plant operating expenses, depreciation, operating
     lease expense and production royalties ........      40,435       34,384     104,711       81,219
   Service contract expenses .......................       2,704        1,469       6,223        5,953
                                                       ---------    ---------   ---------    ---------
       Total cost of revenue .......................      43,139       35,853     110,934       87,172
                                                       ---------    ---------   ---------    ---------

Gross profit .......................................      49,766       35,044      88,946       65,719

Project development expenses .......................       1,764        1,044       5,711        2,454
General and administrative expenses ................       4,618        4,903      13,202       10,777
                                                       ---------    ---------   ---------    ---------
       Income from operations ......................      43,384       29,097      70,033       52,488

Other expense (income):
   Interest expense ................................      17,219       12,434      43,364       31,099
   Other income, net ...............................      (3,896)       1,149     (11,789)      (1,628)
                                                       ---------    ---------   ---------    ---------
       Income before provision for income taxes ....      30,061       15,514      38,458       23,017
Provision for income taxes .........................      10,914        4,782      13,951        7,862
                                                       ---------    ---------   ---------    ---------
       Net income ..................................   $  19,147    $  10,732   $  24,507    $  15,155
                                                       =========    =========   =========    =========

Primary earnings per share:
   Weighted average shares outstanding .............      21,056       14,070      20,635       12,695
                                                       =========    =========   =========    =========

   Primary earnings per share ......................   $    0.91    $    0.76   $    1.19    $    1.19
                                                       =========    =========   =========    =========



Fully diluted earnings per share:
   Weighted average shares outstanding .............      21,086       14,303      21,023       13,227
                                                       =========    =========   =========    =========

   Fully diluted earnings per share ................   $    0.91    $    0.75   $    1.17    $    1.15
                                                       =========    =========   =========    =========


         The accompanying notes are an integral part of these condensed
                       consolidated financial statements.

</TABLE>

                                      - 4 -

<PAGE>



                      CALPlNE CORPORATION AND SUBSIDIARIES

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
              For the Nine Months Ended September 30, 1997 and 1996
                                 (in thousands)
                                   (unaudited)

<TABLE>
<CAPTION>
                                                                   Nine Months Ended
                                                                     September 30,
                                                                ----------------------
                                                                   1997        1996
                                                                ---------    ---------

<S>                                                             <C>          <C>      
Net cash provided by operating activities ...................   $  66,429    $  25,694
                                                                ---------    ---------

Cash flows from investing activities:
   Acquisition of property, plant and equipment .............     (89,281)     (13,189)
   Acquisition of Texas Cogeneration Company, net of cash ...    (192,348)        --
   Repayment of notes receivable ............................      21,137         --
   Investment in King City, net of cash on hand .............        --         (5,408)
   Investment in King City collateral securities, net .......        --        (97,901)
   Investment in Gilroy, net of cash on hand ................        --       (138,073)
   Advances to Coperlasa ....................................        --        (14,238)
   Acquisition of Calpine Gas Company .......................      (7,621)        --
   Investments in power projects and capitalized costs ......      (3,172)      (3,504)
   Maturities of collateral securities ......................       5,350        2,900
   Decrease in restricted cash ..............................      37,024          245
   Other, net ...............................................          67         (152)
                                                                ---------    ---------
         Net cash used in investing activities ..............    (228,844)    (269,320)
                                                                ---------    ---------

Cash flows from financing activities:
   Proceeds from issuance of Senior Notes Due 2006 ..........        --        180,000
   Proceeds from issuance of Senior Notes Due 2007 ..........     275,000         --
   Borrowings from line of credit ...........................      14,300       59,922
   Repayments of line of credit .............................     (14,300)     (79,773)
   Borrowings from bank .....................................     125,000       45,000
   Repayments to bank .......................................     (11,031)     (46,177)
   Repayments of notes payable ..............................      (7,131)        --
   Borrowings of non-recourse project financing .............       4,950      116,000
   Repayments of non-recourse project financing .............    (118,209)     (77,754)
   Proceeds from issuance of preferred stock ................        --         50,000
   Proceeds from issuance of common stock ...................       1,111       82,141
   Financing costs ..........................................      (9,542)      (8,066)
   Other, net ...............................................         807         --
                                                                ---------    ---------
         Net cash provided by financing activities ..........     260,955      321,293
                                                                ---------    ---------

Net increase in cash and cash equivalents ...................      98,540       77,667
Cash and cash equivalents, beginning of period ..............     100,010       21,810
                                                                ---------    ---------
Cash and cash equivalents, end of period ....................   $ 198,550    $  99,477
                                                                =========    =========

Supplementary information -- cash paid during the period for:
   Interest .................................................   $  36,314    $  28,170
   Income taxes .............................................   $   1,185    $     955

         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
                               September 30, 1997


1.       Organization and Operation of the Company

Calpine  Corporation  ("Calpine"),  a  Delaware  corporation,  and  subsidiaries
(collectively,  the  "Company")  are  engaged in the  development,  acquisition,
ownership  and  operation  of  power  generation  facilities  and  the  sale  of
electricity and steam in the United States and selected  international  markets.
The  Company has  interests  in and  operates  natural  gas-fired  cogeneration
facilities, geothermal steam fields and geothermal power generation facilities.

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 the 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, 1996. The results for
interim  periods are not  necessarily  indicative  of the results for the entire
year.

Earnings  Per Share --  Earnings  per  share is  calculated  using the  weighted
average  number  of  common  shares  and  common   equivalent   shares,   unless
antidilutive, using the treasury stock method for outstanding stock options. For
1996,  net income per share also gives effect to common  equivalent  shares from
convertible   preferred   shares  from  the  original   date  of  issuance  that
automatically  converted  to common  shares  upon  completion  of the  Company's
initial public offering in September 1996 (using the if-converted method).

In February  1997, the Financial  Accounting  Standards  Board  ("FASB")  issued
Statement  of Financial  Accounting  Standards  ("SFAS")  No. 128,  Earnings Per
Share,   which  simplifies  the  standards  for  computing  earnings  per  share
previously  found in Accounting  Principles  Board Opinion ("APBO") No. 15. SFAS
No.  128  replaces  the  presentation  of  primary  earnings  per  share  with a
presentation of basic earnings per share, which excludes dilution.  SFAS No. 128
also requires dual  presentation of basic and diluted  earnings per share on the
face of the income  statement for all entities with complex  capital  structures
and requires a reconciliation.  Diluted earnings per share is computed similarly
to fully diluted  earnings per share  pursuant to APBO No. 15. SFAS No. 128 must
be adopted for financial statements issued for periods ending after December 15,
1997, including interim periods; earlier application is not permitted.  SFAS No.
128 requires restatement of all prior-period  earnings per share data presented.
For the three and nine  months  ended  September  30,  1997,  basic and  diluted
earnings per share would not be materially different than the earnings per share
presented in the accompanying condensed consolidated statement of operations.

Capitalized  interest -- The Company capitalizes interest on projects during the
construction period. For the three and nine months ended September 30, 1997, the
Company capitalized $1.3 million and $2.6 million,  respectively, of interest in
connection with the construction of power plants. No interest was capitalized in
1996.

Derivative Financial  Instruments -- The Company engages in activities to manage
risks  associated with changes in interest  rates.  The Company has entered into
swaps to reduce  exposure to  interest  rate  fluctuations  in  connection  with
certain  debt  commitments.  The  instruments'  cash flows  mirror  those of the
underlying  exposures.  Unrealized  gains and losses relating to the instruments
are being  deferred  over the lives of the  contracts.  The premiums paid on the
instruments, as measured at inception, are being amortized over their respective
lives as components of interest  expense.  Any gains or losses realized upon the
early  termination  of these  instruments  are deferred and recognized in income
over the remaining life of the underlying  exposure.  At September 30, 1997, the
Company  had $137.2  million of  interest  rate  swaps on  non-recourse  project
financing.

                                      - 6 -

<PAGE>


                      CALPINE CORPORATION AND SUBSIDIARIES

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                               September 30, 1997


The Company,  through its wholly owned subsidiary Calpine Power Services Company
("CPSC"), markets power and energy services to utilities,  wholesalers,  and end
users.  CPSC provides  these  services by entering into contracts to purchase or
supply  electricity at specified  delivery points and specified future dates. In
some cases,  CPSC  utilizes  option  agreements to manage its exposure to market
fluctuations.  At September 30, 1997 CPSC held option contracts for the purchase
and sale of up to 50 megawatts for the period from June 1, 1998 to September 30,
1998.

Reclassifications  --  Prior  period  amounts  in  the  consolidated   condensed
financial  statements have been  reclassified  where necessary to conform to the
1997 presentation.

3.       Accounts Receivable and Notes Receivable

Accounts  receivable  from related parties as of September 30, 1997 and December
31, 1996 are comprised of the following (in thousands):

                                     September 30,   December 31,
                                           1997         1996
                                          ------       ------
                                      (unaudited)

     O.L.S. Energy-Agnews, Inc. .......   $  408       $  687
     Geothermal Energy Partners, Ltd. .      312          350
     Sumas Cogeneration Company, L.P. .      444          590
     Texas Cogeneration Company ("TCC")      767           --
     Electrowatt Ltd. and subsidiaries        --        1,199
                                          ------       ------
                                          $1,931       $2,826
                                          ======       ======

 Notes receivable from related parties as of September 30, 1997 and December 31,
1996 are comprised of the following (in thousands):

                                       September 30,   December 31,
                                              1997        1996
                                           --------    --------
                                         (unaudited)

      Darrel Jones .....................   $ 10,004    $ 18,182
      Cogenron, Inc. (subsidiary of TCC)     42,378          --
      Clear Lake Cogeneration, L.P......
        (subsidiary of TCC) ............     97,371          --
                                           --------    --------
                                           $149,753    $ 18,182
                                           ========    ========

 Darrel Jones is the sole  shareholder  of Sumas  Energy,  Inc.,  the  Company's
partner  in Sumas  Cogeneration  Company,  L.P.  (see  Note  4).  See Note 5 for
information regarding TCC.

                                      - 7 -

<PAGE>


                      CALPINE CORPORATION AND SUBSIDIARIES

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                               September 30, 1997


 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
nine  months  ended  September  30,  1997 and 1996  (except  Texas  Cogeneration
Company, L.P., which was acquired on June 23, 1997) related to these investments
is as follows (in thousands):
<TABLE>
<CAPTION>
                                                 1997                                                  1996
                      ----------------------------------------------------------    ------------------------------------------
                           Sumas         O.L.S.      Geothermal        Texas             Sumas         O.L.S.      Geothermal
                       Cogeneration     Energy-        Energy      Cogeneration      Cogeneration      Energy-       Energy
                         Company,       Agnews,      Partners,       Company,          Company,        Agnews,     Partners,
                           L.P.          Inc.           Ltd.            L.P.             L.P.           Inc.          Ltd.
                      --------------   ---------   -------------   -------------    --------------   ----------  -------------
<S>                         <C>         <C>          <C>            <C>                <C>              <C>         <C>    
 Revenue                    $28,839     $10,203      $18,290        $78,789           $31,740          $8,182      $16,312
 Operating expenses          13,002       7,925        9,425         66,962            19,404           5,942        8,787
                            -------     -------      -------        -------           -------          ------       ------
 Income from operations      15,837       2,278        8,865         11,827            12,336           2,240        7,525

 Other expenses, net          7,329       2,505        2,826          3,123             7,635           2,284        3,582
                            -------     -------       ------        -------           -------          ------       ------
 
     Net income (loss)      $ 8,508     $  (227)     $ 6,039        $ 8,704           $ 4,701          $  (44)     $ 3,943
                            =======     =======      =======        =======           =======          ======      =======

 Company's share of net                                                                                   
   income (loss)            $ 5,423     $   (45)     $   272        $ 1,827           $ 2,687          $  (13)     $   197
                            =======     =======      =======        =======           =======          ======      =======
</TABLE>
          
On September 30, 1997, the partnership  agreement  governing Sumas  Cogeneration
Company, L.P. was amended changing the distribution percentages to the partners.
As provided by the terms of the amendment,  the Company increased its percentage
share of the project's cash flow from 50% to approximately  70% through June 30,
2001. Thereafter,  the Company will receive 50% of the project's cash flow until
a 24.5% pre-tax rate of return on its original investment is achieved,  at which
time the Company's equity interest in the partnership  would be reduced to 0.1%.
In  connection  with the  amended  agreement,  the  Company's  partner  in Sumas
Cogeneration  Company,  L.P.  paid off a portion  of its notes  payable  and all
outstanding interest on its notes payable to the Company. The Company recognized
$3.5 million of interest income which had previously been deferred.  The Company
also  committed  to provide the  partner a $12.5  million  line of credit  which
expires December 31, 2003.

 5.      Texas Cogeneration Company Transaction

 On June 23, 1997, Calpine completed the acquisition of a 50% equity interest in
the Texas City  cogeneration  facility  (the "Texas  City Power  Plant") and the
Clear Lake  cogeneration  facility  (the "Clear  Lake Power  Plant") for a total
purchase  price of $35.4  million,  subject to final  adjustments.  The  Company
acquired its 50% interest in these plants through the  acquisition of 50% of the
capital stock of Enron Dominion  Cogen Corp.  ("EDCC") from Enron Power Corp., a
wholly owned subsidiary of Enron Corp. ("Enron").  EDCC was subsequently renamed
Texas Cogeneration Company ("TCC"). The other 50% shareholder interest in TCC is
owned by Dominion Cogen, Inc. In addition to the purchase of 50% of the stock of
TCC,  Calpine,  through its wholly owned  subsidiary,  Calpine  Finance  Company
("CFC"),  purchased from the existing  lenders the $155.6 million of outstanding
non-recourse  project  debt of the Texas City Power Plant  (approximately  $53.0
million)  and the Clear Lake Power Plant  (approximately  $102.6  million).  The
acquisition of the capital stock of TCC and the purchase of the outstanding debt
from the existing  lenders were financed with  approximately  $125.0  million of
non-recourse  debt  provided  by The  Bank  of Nova  Scotia,  $14.3  million  of
borrowings  from the  revolving  credit  facility,  and $55.8  million of equity
provided by the Company (see Notes 10 and 11 for more information  regarding the
revolving line of credit and the $125.0 million of non-recourse debt).

 The Company  accounts for its  investment in TCC under the equity  method.  The
Texas City and Clear  Lake Power  Plants are  operated  by the  Company  under a
one-year contract with automatic renewal provisions.

 Texas City Power Plant -- The Texas City Power Plant is a 450 megawatt  natural
gas-fired combined-cycle cogeneration facility located in Texas City, Texas. The
plant commenced commercial operation in June 1987.

                                      - 8 -

<PAGE>


                      CALPINE CORPORATION AND SUBSIDIARIES

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                               September 30, 1997


Electricity  generated  by the Texas City Power Plant is sold under two separate
long-term agreements to (i) Texas Utilities Generating Company ("TUEC") under an
original  12-year power sales agreement  terminating in June 1999 and (ii) Union
Carbide  Company  ("UCC")  under  an  original  12-year  power  sales  agreement
terminating in June 1999.  Each power sales  agreement  contains  provisions for
capacity and energy payments. The TUEC power sales agreement provides for a firm
capacity payment for 410 megawatts. The UCC power sales agreement provides for a
firm capacity payment for 20 megawatts.

 Clear Lake Power Plant -- The Clear Lake Power Plant is a 377 megawatt  natural
gas/hydrogen-fired  combined-cycle  cogeneration  facility  located in Pasadena,
Texas. The plant commenced commercial operation in December 1984.

 Electricity  generated  by the  Clear  Lake  Power  Plant is sold  under  three
separate  long-term  agreements  to (i) Texas New Mexico Power  Company  ("TNP")
under an  original  20-year  power sales  agreement  terminating  in 2004,  (ii)
Houston Light & Power  Company  ("HL&P")  under an original  10-year power sales
agreement terminating in 2005, and (ii) Hoescht Celanese Chemical Group ("HCCG")
under an original 10-year power sales agreement terminating in 2004.
Each power sales agreement contains provisions for capacity and energy payments.

 6.       Auburndale and Gordonsville Transaction

 On October 9, 1997, Calpine completed the acquisition of a 50% interest in both
the  Auburndale  cogeneration  facility (the  "Auburndale  Power Plant") and the
Gordonsville  cogeneration facility (the "Gordonsville Power Plant") for a total
purchase  price of $40.2  million.  The Company  acquired  its interest in these
plants from Norweb Power  Services  (No. 1) Limited and Northern  Hydro Limited,
both wholly owned companies of Norweb plc. The Company  financed the acquisition
of the 50% interest in the two power plants utilizing existing cash resources.

 The Auburndale Power Plant is a 150 megawatt natural  gas-fired  combined-cycle
cogeneration facility located outside of Orlando,  Florida. The Auburndale Power
Plant  commenced  commercial  operation in July 1994 and sells 131  megawatts of
capacity and energy to Florida Power Corporation under three 20-year  agreements
terminating in December 2013.

 The Gordonsville Power Plant is a 240 megawatt natural gas-fired combined-cycle
cogeneration  facility  located near  Gordonsville,  Virginia.  The Gordonsville
Power Plant commenced commercial  operations in June 1994 and sells capacity and
energy to  Virginia  Power  Company  under two 30-year  power  sales  agreements
terminating in 2024. In addition, the power sales agreements with Virginia Power
Company provide for fixed capacity payments.

 The  Gordonsville  and  Auburndale  Power Plants are operated by Edison Mission
Operations & Maintenance Inc.  ("EMOM"),  an affiliate of Edison Mission Energy.
The operating  agreements between EMOM and the two facilities expire in December
2013. EMOM is paid on a cost-plus basis for all direct labor plus  reimbursement
of certain costs, an operating fee and an incentive based upon performance.

 The Company  accounts  for its  investment  in the  Auburndale  Power Plant and
Gordonsville Power Plant under the equity method because control of these plants
is deemed to be shared with wholly owned subsidiaries of Edison Mission Energy.

 7.      Dighton and Tiverton Transaction

 On October 10, 1997, Calpine executed  agreements with Energy Management,  Inc.
("EMI"),  a New England-based  power developer,  to invest in two merchant power
plants which will sell 434 megawatts of  electricity  into the  deregulated  New
England  Power Pool and to wholesale  and retail  customers.  The plants,  to be
located in Dighton,  Massachusetts and Tiverton, Rhode Island, will be developed
by EMI and are slated for start-up in early 1999 and early 2000.


                                      - 9 -

<PAGE>


                      CALPINE CORPORATION AND SUBSIDIARIES

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                               September 30, 1997


 The  Company   invested   $16.0   million  in  the  169   megawatt   gas-fired,
combined-cycle  Dighton  power  plant  and will  have the  right  to  receive  a
preferred payment stream at a rate of approximately 12% on its investment.  This
will be accounted for as an equity  investment.  Construction  will begin in the
fourth  quarter of 1997 and EMI will operate the plant when it begins  operation
in 1999.

 The Company has also been granted an exclusive  option to purchase an ownership
interest  in and to  partner  with EMI on the 265  megawatt  gas-fired  Tiverton
project.  EMI and the Company will be co-general  partners for the project.  EMI
will  operate the  facility and provide  management  services;  the Company will
provide power marketing and fuel management services for the facility.  Over the
life of the project, the Company and EMI will each receive  approximately 50% of
project cash flows. The Company will initially receive 70% of project cash flows
until  it  has  received  cash  equal  to  its  initial  equity   investment  of
approximately $40.0 million.

 8.      Calpine Gas Company Transaction

 On January 31, 1997,  the Company  acquired the  outstanding  capital  stock of
Montis Niger, Inc., a natural gas production  company,  and certain gas reserves
from Radnor Power, a wholly-owned  subsidiary of LFC Financial  Corp.,  for $7.1
million.  In addition,  the Company paid  $824,000 for certain  working  capital
items.  The  Company's  allocation  of the  purchase  price is  subject to final
adjustments.  Montis Niger,  subsequently  renamed to Calpine Gas Company,  owns
proven natural gas reserves and an 80-mile pipeline system which provides gas to
the Company's Greenleaf 1 and 2 Power Plants in northern California. The Company
paid  $7.6  million  in cash for a portion  of the  purchase  price and  working
capital  items,  and  recorded a $600,000  liability  for the  remainder  of the
purchase price due upon completion of certain drilling obligations.

 9.      Gas Energy Inc. Transaction

 On August 25, 1997,  Calpine  entered into an agreement with The Brooklyn Union
Gas  Company  ("BU") to acquire  100% of the  capital  stock of Gas Energy  Inc.
("GEI") and Gas Energy  Cogeneration  Inc.  ("GECI") for an  aggregate  purchase
price of $102.5 million,  subject to certain adjustments  (collectively referred
to as the "GEI Transaction"). GEI and GECI are both wholly owned subsidiaries of
BU and have (i) a 50% interest in the Kennedy International Airport Power Plant,
(ii) a 50% interest in the Nissequogue Power Plant,  (iii) a 45% interest in the
Grumman Power Plant, (iv) an 11.36% interest in the Lockport Power Plant and (v)
a 100% interest in three fuel management companies.

 The  Kennedy  International  Airport  Power Plant is a 107  megawatt  gas-fired
combined-cycle  cogeneration  facility  located in Queens,  New York.  Steam and
electricity  generated by the Kennedy International Airport Power Plant are sold
to  John  F.  Kennedy  International  Airport  under  a  twenty  year  agreement
terminating in 2015.

 The Nissequogue Power Plant is a 40 megawatt  gas-fired  cogeneration  facility
located at the State  University  of New York at Stony  Brook  ("SUNY")  on Long
Island, New York. Steam and electricity generated by the Nissequogue Power Plant
are sold to SUNY under a twenty year  agreement  terminating in 2015, and excess
electricity is sold to Long Island Lighting Company ("LILCo").

 The Grumman Power Plant is a 57 megawatt  gas-fired combined cycle cogeneration
facility located in Bethpage,  New York. Steam and electricity  generated by the
Grumman Power Plant are sold to the Northrop Grumman Corporation under a fifteen
year agreement expiring in 2004, and excess electricity is sold to LILCo.

 The  Lockport  Power  Plant  is  a  184  megawatt   gas-fired   combined  cycle
cogeneration  facility  located in  Lockport,  New York.  Steam and  electricity
generated by the Lockport Power Plant are sold to a General Motors Plant under a
fifteen year agreement  terminating  in 2007, and excess  electricity is sold to
New York State Electric and Gas.


                                     - 10 -

<PAGE>


                      CALPINE CORPORATION AND SUBSIDIARIES

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                               September 30, 1997


 The Company currently expects to complete these acquisitions  during the fourth
quarter of 1997, upon fulfillment of all required conditions. However, there can
be no assurance that this  acquisition will be completed in the anticipated time
frame.

 10.     Revolving Credit Facility

 At  September  30,  1997,  the  Company  had a $50.0  million  credit  facility
available with a consortium of commercial lending institutions which include The
Bank  of  Nova  Scotia,  International  Nederlanden  U.S.  Capital  Corporation,
Sumitomo Bank of California and Canadian Imperial Bank of Commerce. At September
30, 1997,  the Company had no  borrowings  and $7.6 million of letters of credit
outstanding  under the credit facility.  Borrowings bear interest at The Bank of
Nova  Scotia's base rate plus an  applicable  margin or at the London  Interbank
Offered Rate ("LIBOR") plus an applicable  margin.  Interest is paid on the last
day of each interest period for such loans, but not less often than quarterly.
The credit agreement expires in September 1999.

 11.     Non-Recourse Project Financing

 Note  Payable to Bank -- On June 23,  1997,  the Company  entered into a $125.0
million  non-recourse  financing  with The Bank of Nova Scotia,  the proceeds of
which were  utilized  for the  acquisition  of the 50%  interest  in TCC and the
purchase from the lenders of $155.6 million of outstanding  non-recourse project
debt (see Note 5). The $125.0 million non-recourse financing matures on June 22,
1998. On September 30, 1997, $114.0 million of borrowings were outstanding which
bear interest at The Bank of Nova  Scotia's base rate plus an applicable  margin
or at LIBOR plus an  applicable  margin  (approximately  7.0% at  September  30,
1997). The Company utilized existing swap arrangements to minimize the impact of
potential changes in interest rates on the project debt. The effective  interest
rate  including the effect of the existing swap  arrangement  was  approximately
8.3% at September 30, 1997.

 12.     Senior Notes Due 2007

 On July 8, 1997, the Company issued $200.0 million  aggregate  principal amount
of 8 3/4% Senior Notes Due 2007. The net proceeds of $195.0 million were used as
follows:  (i) $102.7 million to repay non-recourse  project financing related to
Calpine  Geysers  Company,  (ii) $6.4 million to repay a note payable to Natomas
Energy  Company  related to the purchase of Thermal Power  Company,  (iii) $14.3
million  to repay  borrowings  under The Bank of Nova  Scotia  Revolving  Credit
Facility,  (iv)  $728,000 to repay a note payable to Santa Fe  Geothermal,  Inc.
which would have matured in December 1997, and (v)  approximately  $70.9 million
for general  corporate  purposes.  Transaction costs incurred in connection with
the debt offering were recorded as a deferred  charge and are amortized over the
ten-year life of the 8 3/4% Senior Notes Due 2007.

 On September 10, 1997, the Company issued an additional $75.0 million aggregate
principal  amount of 8 3/4%  Senior  Notes Due 2007.  The net  proceeds of $75.8
million were used to finance acquisitions and for general corporate purposes.

 In May  and  June  1997,  the  Company  executed  five  interest  rate  hedging
transactions  related to debt with a notional  value of $182.0  million  and was
designed to eliminate interest rate risk for the period from May 1997 to July 8,
1997 when $200.0 million of the 8 3/4% Senior Notes Due 2007 were priced.  These
interest rate hedging transactions were designated as a hedge of the anticipated
bond offering,  and the resulting $3.0 million cost resulting from the hedges is
being amortized over the life of the bonds.  The effective  interest rate on the
$275.0 million aggregate principal amount after the hedging transactions and the
amortization of deferred costs is 8.9%.

 The 8 3/4% Senior Notes Due 2007 will mature on July 15, 2007.  The Company has
no sinking fund or mandatory  redemption  obligations with respect to the 8 3/4%
Senior Notes Due 2007. Interest is payable  semi-annually on January 15 and July
15 of each  year  while  the 8 3/4%  Senior  Notes  Due  2007  are  outstanding,
commencing on January 15, 1998.

                                     - 11 -

<PAGE>
                      CALPINE CORPORATION AND SUBSIDIARIES

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                               September 30, 1997


 13.     Preferred Share Purchase Rights

 On June 5, 1997, the Board of Directors  adopted a  Stockholders  Right Plan to
strengthen the Board's  ability to protect  Calpine's  stockholders.  The Rights
Plan is designed to protect  against abusive or coercive  takeover  tactics that
are not in the best interests of Calpine and its stockholders.  To implement the
Rights Plan, the Board of Directors  declared a dividend of one preferred  share
purchase right (a "Right") for each outstanding share of Common Stock, par value
$0.001 per share,  held on record as of June 18, 1997.  On  September  30, 1997,
there were 19,905,233  Rights  outstanding.  Each Right  initially  represents a
contingent right to purchase, under certain circumstances, one one-thousandth of
a share (a "Unit") of Series A Junior  Participating  Preferred Stock, par value
$0.001 per share (the  "Preferred  Stock"),  of the Company at a price of $80.00
per Unit,  subject  to  adjustment.  The  Rights  become  exercisable  and trade
independently  from Calpine's  Common Stock upon the public  announcement of the
acquisition  by a person or group of 15% or more of the Company's  Common Stock,
or ten days after  commencement  of a tender or exchange offer that would result
in the  acquisition of 15% or more of the Company's  Common Stock.  Each Unit of
Preferred  Stock  purchased  upon  exercise  of the Rights will be entitled to a
dividend equal to any dividend  declared per share of Common Stock and will have
one vote,  voting  together with the Common Stock.  In the event of liquidation,
each unit of  Preferred  Stock will be entitled to any payment made per share of
Common Stock.

 If Calpine is acquired in a merger or other  business  combination  transaction
after a person or group has acquired 15% or more of the Company's  Common Stock,
each Right will entitle its holder to purchase, at the Right's exercise price, a
number of the acquiring  company's  common shares having a market value of twice
such exercise price.  In addition,  if a person or group acquires 15% or more of
Calpine's  Common  Stock,  each Right will  entitle  its holder  (other than the
acquiring person or group) to purchase,  at the Right's exercise price, a number
of  fractional  shares of  Calpine's  Preferred  Stock or shares of Common Stock
having a market value of twice such exercise price.

 The Rights expire June 18, 2007 unless  redeemed  earlier by Calpine's Board of
Directors. The rights can be redeemed by the Board at a price of $0.01 per Right
at any time before the Rights become exercisable, and thereafter only in limited
circumstances.

 14.     Contingencies

 CPUC  Restructuring  -- Electricity  and steam sales  agreements  with PG&E are
regulated by the California Public Utilities  Commission  ("CPUC").  In December
1995,  the CPUC proposed the transition of the electric  generation  market to a
competitive  market beginning January 1, 1998, with all consumers  participating
by 2003. Since the proposed restructure would result in widespread impact on the
market structure and require  participation  and oversight of the Federal Energy
Regulatory Commission ("FERC"),  the CPUC sought to build a California consensus
involving  the  legislature,  the Governor,  public and municipal  utilities and
customers. The consensus resulted in filings with the FERC which permit both the
CPUC and FERC to collectively proceed with implementation of the new competitive
market structure.

 The  proposed  restructure  provided  for  phased-in  customer  choice  (direct
access),  development of a non-discriminatory market structure, full recovery of
utility stranded costs over a five-year transition period,  sanctity of existing
contracts,  and continuation of existing public policy programs  including funds
for enhancement of in-state renewable energy  technologies during the transition
period.  On  September  23, 1996,  state  legislation  was passed,  AB 1890 (the
"Bill"),  which codified much of the CPUC restructure  decision and directed the
CPUC to proceed  with  implementation  no later than  January 1, 1998.  The Bill
accelerated the transition period to a fully competitive  market from five years
to four  years  with all  consumers  participating  by the year  2002.  The Bill
provided  for an  electricity  rate  freeze  for the  period of  transition  and
mandated through issuance of rate reduction bonds a 10% rate reduction for small
commercial and residential customers effective January 1, 1998. In May 1997, the
CPUC ruled customer phase-in was not required and all utility customers would be
able to choose their electricity  supplier beginning January 1, 1998. In October
1997, the FERC conditionally  approved the CPUC and investor-owned utility (IOU)
filings  for  going  forward  on  January  1, 1998  with  implementation  of the
Independent  Systems  Operator  (ISO) for operation of the  IOU-owned  statewide
transmission  

                                     - 12 -

<PAGE>


                      CALPINE CORPORATION AND SUBSIDIARIES

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                               September 30, 1997

grid  system and the Power  Exchange  (PX) to provide an energy  price  auction.
Existing   investor-owned   utilities   will   continue  as  regulated   utility
distribution companies and provide electricity  distribution services for energy
service  providers.  The  Company  believes  that  restructuring  will  not have
material  effect  on its  existing  power  sales  agreements  and,  accordingly,
believes  that its  existing  business  and  results of  operations  will not be
materially  adversely  affected,  although  there  can be no  assurance  in this
regard.

 Litigation  -- The  Company is  involved  in various  claims and legal  actions
arising out of the normal  course of business.  Management  believes  that these
matters will not have a material impact on the financial  position or results of
operations of the Company, although there can be no assurance in this regard.

                                     - 13 -

<PAGE>



 ITEM 2.          MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                  AND RESULTS OF OPERATIONS


 Except for  historical  financial  information  contained  herein,  the matters
discussed   in  this   quarterly   report  on  Form   10-Q  may  be   considered
"forward-looking" statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended and subject to the safe harbor created by the  Securities  Litigation
Reform Act of 1995. Such statements include  declarations  regarding the intent,
belief or current  expectations of the Company and its  management.  Prospective
investors  are  cautioned  that any such  forward-looking  statements  are not
guarantees   of  future   performance   and   involve  a  number  of  risks  and
uncertainties;  actual results could differ  materially  from those indicated by
such  forward-looking  statements.  Among the important factors that could cause
actual results to differ materially from those indicated by such forward-looking
statements are: (i) that the  information is of a preliminary  nature and may be
subject to further  adjustment,  (ii) the possible  unavailability of financing,
(iii) risks  related to the  development,  acquisition  and  operation  of power
plants,  (iv) the impact of avoided cost pricing,  energy price fluctuations and
gas price increases, (v) the impact of curtailment,  (vi) the seasonal nature of
the Company's  business,  (vii) start-up risks,  (viii) general operating risks,
(ix) the dependence on third parties,  (x) risks  associated with  international
investments,  (xi) risks  associated  with the power marketing  business,  (xii)
changes in government regulation,  (xiii) the availability of natural gas, (xiv)
the effects of  competition,  (xv) the  dependence on senior  management,  (xvi)
volatility  in the  Company's  stock  price,  (xvii)  fluctuations  in quarterly
results and seasonality, and (xviii) other risks identified from time to time in
the Company's reports and registration  statements filed with the Securities and
Exchange Commission.


 OVERVIEW

 Calpine is engaged in the acquisition,  development, ownership and operation of
power generation  facilities and the sale of electricity and steam in the United
States and selected  international  markets.  At September 30, 1997, the Company
had  interests in 16 power  generation  facilities  and steam  fields  having an
aggregate capacity of 1793.5 megawatts. On October 9, 1997, the Company acquired
50%  interests in two  gas-fired  facilities  with an aggregate  capacity of 390
megawatts  in Virginia  and  Florida.  In  addition,  Calpine has a 240 megawatt
gas-fired power generation  facility under  construction in Pasadena,  Texas and
pending acquisitions,  subject to the fulfillment of all required conditions, of
interests  in four  gas-fired  facilities  with  an  aggregate  capacity  of 388
megawatts in New York.

 On January 31, 1997, the Company  acquired the Calpine Gas Fields (formerly the
Montis  Niger Gas Fields) for a total price of  approximately  $7.1 million plus
$824,000  for certain  working  capital  items.  The Calpine Gas Fields have 9.7
billion  cubic feet of estimated  proven gas  reserves  and an 80-mile  pipeline
system which provide gas to the Company's Greenleaf 1 and 2 Power Plants.

 In  February  1997,  the  Company  commenced  construction  of a  240  megawatt
gas-fired  cogeneration project at the Phillips Houston Chemical Complex ("HCC")
located in Pasadena,  Texas (the "Pasadena Cogeneration  Project").  The Company
has entered  into an agreement to supply HCC with  approximately  90  megawatts,
with  the  remainder  of  available  electricity  output  to be  sold  into  the
competitive  market.  The Pasadena  Cogeneration  Project is the first  merchant
power plant to be financed with non-recourse project debt and is scheduled to be
operational in 1998. In February 1997, the Company  announced the development of
a 480 megawatt  gas-fired  cogeneration  project in Sutter  County,  in northern
California (the "Sutter Cogeneration Project").  The Sutter Cogeneration Project
would  be  northern   California's   first  merchant  power  plant.  The  Sutter
Cogeneration  project is  expected  to provide  electricity  to the  deregulated
California  power market  commencing in the year 2000.  The Company is currently
pursuing regulatory agency permits for this project.

 On May 16, 1997, the Company  entered into  agreements to acquire 50% interests
in the 240 megawatt Gordonsville Power Plant located west of Richmond,  Virginia
and the 150 megawatt Auburndale Power Plant located outside of Orlando, Florida.
The Company  completed the  acquisition  on October 9, 1997 for a total purchase
price of $40.2 million.


                                     - 14 -

<PAGE>



 On June 23, 1997,  the Company  completed  the  acquisition  of an indirect 50%
equity  interest in the 450 megawatt Texas City Power Plant and the 377 megawatt
Clear Lake Power Plant for an aggregate  purchase price of $35.4  million.  As a
part of that acquisition, the Company entered into a $125.0 million non-recourse
financing  agreement  with The Bank of Nova  Scotia,  the proceeds of which were
utilized for the  acquisition of the 50% equity interest of TCC and the purchase
of $155.6 million of outstanding  non-recourse  project debt associated with the
Texas City and Clear Lake Power Plants.  The Company  accounts for its 50% share
of  earnings  from the Texas City and Clear Lake Power  Plants  under the equity
method  of   accounting   and  such   earnings  are  included  in  "income  from
unconsolidated investments in power projects".

 Included  in the  results of  operations  for the three and nine  months  ended
September  30, 1997 are the King City and Gilroy  Power Plants which each have a
generating  capacity  of 120  megawatts.  The King  City  Power  Plant  has been
included in the Company's  consolidated  results of operations  since the May 2,
1996 effective date of the operating lease, and the Gilroy Power Plant since its
acquisition on August 29, 1996.

 Each of the Company's  consolidated power plants produces  electricity for sale
to a utility or, in certain  instances,  other third-party  purchasers.  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  pursuant  to  long-term,
take-and-pay power or steam sales agreements  generally having original terms of
20 or 30 years. The Company has a net interest of 421 megawatts of the aggregate
capacity generated by nine power plants that deliver  electricity to Pacific Gas
and Electric Company ("PG&E") under separate  long-term power sales  agreements.
Each of these agreements provides for both capacity payments and energy payments
for the term of the  agreement.  During the initial  ten-year  period of certain
agreements, PG&E pays a fixed price for each unit of electrical energy according
to schedules set forth in such agreements (which represent 17%, or 73 megawatts,
of such  net  interest).  The  fixed  price  periods  under  these  power  sales
agreements expire at various times from 1998 through 2000. After the fixed price
periods  expire,  while the basis for the capacity and capacity  bonus  payments
under these power sales agreements  remains the same, the energy payments adjust
to PG&E's then avoided cost of energy,  which is determined  and published  each
month by the utility.  The term "avoided cost" refers to the  incremental  costs
that an electric  utility  would incur to produce or purchase an amount of power
equivalent to that  purchased from QFs. On December 9, 1996, the CPUC approved a
new methodology for the  calculation of short-run  avoided cost ("SRAC"),  which
was  effective  retroactive  to  October  1,  1996 and will  continue  until the
independent power exchange has commenced operations and is functioning properly.
The independent power exchange is scheduled to commence operations on January 1,
1998.  Thereafter,  the  SRAC  will  become  the  energy  clearing  price of the
independent power exchange. The currently prevailing SRAC is substantially lower
than the fixed energy prices under these power sales agreements and is generally
expected to remain so. While SRAC does not affect  capacity  payments  under the
power  sales  agreements,   in  the  event  that  the  SRAC  does  not  increase
significantly,  the Company's energy revenues under these power sales agreements
would be materially  reduced at the  expiration of the fixed price period.  Such
reduction  may have a  material  adverse  effect  on the  Company's  results  of
operations.  The Company  cannot  predict the likely level of SRAC prices at the
expiration of the fixed price periods. The majority of the capacity revenues are
paid  during  the  months  of May  through  October.  Prices  paid for the steam
delivered by the  Company's  steam fields are based on a formula that  partially
reflects  the price  levels of  nuclear  and  fossil  fuels,  and  therefore,  a
reduction in the price levels of such fuels may reduce  revenue  under the steam
sales agreements for the steam fields.

 Certain of the Company's power and steam sales agreements  contain  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.  For the
year  ended  December  31,  1996,  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  during the period which  resulted in
high levels of energy  generation by hydroelectric  power facilities that supply
electricity.  For the three and nine  months  ended  September  30,  1997,  such
facilities  experienced  a reduced  amount of  curtailment  compared to the same
periods in 1996. Due to an amendment to certain power sales agreements which was
executed in May 1997, the Company currently does not expect  curtailment  during
the remainder of the term of the power sales agreements for these power plants.

 Many states are implementing or considering  regulatory initiatives designed to
increase  competition in the domestic  power  generation  industry.  In December
1995,  the  CPUC  issued  an  electric  industry  restructuring  decision  which
envisions  commencement of deregulation and implementation of customer choice of
electricity supplier by January 1,

                                     - 15 -

<PAGE>



1998.  Legislation  implementing this decision was adopted in September 1996. As
part of its policy  decision,  the CPUC indicated that power sales agreements of
existing qualifying  facilities would be honored. The Company cannot predict the
final form or timing of the proposed  restructuring and the impact, if any, that
such  restructuring  would have on the Company's existing business or results of
operation.  The Company  believes that any such  restructuring  would not have a
material effect on its power sales  agreements and,  accordingly,  believes that
its  existing  business  and  results  of  operations  would  not be  materially
adversely affected, although there can be no assurance in this regard.

 SELECTED OPERATING DATA

 Set forth below is certain selected operating  information for the power plants
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 Power Plants, the Greenleaf 1 and
2 Power Plants, the Watsonville Power Plant, the King City Power Plant since May
2, 1996, and the Gilroy Power Plant since August 29, 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 Calpine  Thermal  Steam
Fields (dollar amounts in thousands, except per kilowatt hour amounts).

<TABLE>
<CAPTION>
                                      Three Months Ended             Nine Months Ended
                                         September 30,                 September 30,
                                   ------------------------      ------------------------
                                      1997           1996           1997           1996
                                   ---------      ---------      ---------      ---------
<S>                                <C>            <C>            <C>           <C>    
Power Plants
  Electricity revenues
    Energy                         $  33,180      $  26,199      $  77,451      $  60,561
    Capacity                       $  35,105      $  30,321      $  67,048      $  50,095
  Megawatt hours produced            730,412        593,172      1,551,078      1,332,594
  Average energy rate per
    kilowatt hour produced         $ 0.04543      $ 0.04417      $ 0.04993      $ 0.04545

Steam Fields
  Steam revenues                   $  11,155      $  11,761      $  31,268      $  29,655
  Megawatt hours produced            693,367        770,021      1,972,439      1,811,449
  Average energy rate per
    kilowatt hour produced         $ 0.01609      $ 0.01527      $ 0.01585      $ 0.01637
</TABLE>

Electric  energy and capacity  revenue  increased  for the three and nine months
ended September 30, 1997 compared to the same periods in 1996,  primarily due to
increases  in revenue at the Gilroy,  King City,  West Ford Flat and Bear Canyon
Power Plants.  Electricity  revenues at the Gilroy Power Plant increased for the
three and nine  months  ended  September  30,  1997 by $10.0  million  and $23.4
million, respectively, as compared to the same periods in 1996. The increase was
principally  due to the timing of the Company's  acquisition of the power plant,
which occurred in August 1996. Higher energy prices at the King City Power Plant
contributed  to an increase in energy  revenue of $394,000  and $3.0 million for
the three and nine month periods  ended  September  30, 1997,  respectively,  as
compared to the same periods in 1996. Less curtailment at the West Ford Flat and
Bear  Canyon  Power  Plants  in 1997 as  compared  to the same  periods  in 1996
contributed to an increase in electric revenues of $1.0 million and $4.7 million
for the three and nine month period ended September 30, 1997,  respectively.  In
May 1997,  the West Ford Flat and Bear Canyon Power  Plants  signed an agreement
with  PG&E  whereby  energy  deliveries  were  no  longer  curtailed  at the two
facilities  and PG&E paid a lower price for  electrical  energy  during  certain
periods.  The increase in electric  production  more than offset the decrease in
the selling price of energy at the two facilities.

 Megawatt hours produced by power plants  increased in 1997 compared to the same
period in 1996, primarily due to 119,000 and 240,000 megawatt hours of increased
production  by the  Gilroy  Power  Plant  for the three  and nine  months  ended
September  30,  1997,  respectively.  The Gilroy Power Plant was acquired by the
Company in August  1996.  During  the nine  months  ended  September  30,  1997,
Greenleaf 1 Power Plant  production  declined by 44,000 megawatt hours as it did
not operate for the period from  January 1 to February  26, 1997 due to flooding
in the vicinity of the power plant.  The average  energy rate per kilowatt  hour
produced  for all power  plants  increased  for the three and nine months  ended
September  30,  1997  compared  to the same  period  in 1996,  primarily  due to
increases in the average energy prices per kilowatt hour produced during 1997 at
certain gas-fired power plants.

                                     - 16 -

<PAGE>



 Steam field  megawatt  hours  produced  decreased  for the three  months  ended
September 30, 1997 compared to the same periods in 1996,  primarily due to lower
steam  production.  Increased  steam usage by other  facilities that share steam
fields  with  SMUDGEO#1  caused a decrease  in the amount of steam  supplied  to
SMUDGEO#1  for the three  months  ended  September  30,  1997.  Megawattt  hours
produced by steam fields  increased for the nine months ended September 30, 1997
compared to the same period in 1996. The increase reflects the shut-down of PG&E
Unit 13 from March 23 to May 25 for  installation  of a new  turbine  rotor.  In
addition, reduced output at numerous hydroelectric facilities during 1997 caused
an increase in the demand for geothermal production at the Calpine Thermal Steam
Fields.  The average energy rate per kilowatt hour produced for the three months
ended September 30, 1997 was higher than the price for the comparable  period in
1996,  primarily due to less price discounting at Calpine Thermal Power Company.
Lower prices in accordance with power sales agreements caused the average energy
rate per kilowatt hour produced for the nine months ended  September 30, 1997 to
be less than the price for the comparable period in 1996.


 OTHER FINANCIAL DATA AND RATIOS

 Set forth below are  certain  other  financial  data and ratios for the periods
indicated (in thousands, except ratio data):
<TABLE>
<CAPTION>
                                                  Three Months Ended            Nine Months Ended
                                                    September 30,                September 30,
                                              -------------------------     ---------------------------
                                                 1997           1996          1997           1996
                                              -----------     ---------     ---------     ----------
<S>                                            <C>             <C>           <C>           <C>      
 Depreciation and amortization                 $   13,370      $ 12,348      $ 36,919      $  27,699
 Interest expense per indenture                $   18,583      $ 13,852      $ 47,204      $  33,933
 EBITDA                                        $   64,702      $ 45,908      $127,398      $  86,441
 EBITDA to interest expense per indenture            3.48          3.31          2.70           2.55
</TABLE>

 EBITDA is defined as income  from  operations  plus  depreciation,  capitalized
interest,  other income,  non-cash charges and cash received from investments in
power projects,  reduced by the non-cash income from unconsolidated  investments
in power  projects.  EBITDA is presented not as a measure of operating  results,
but rather as a measure of the Company's  ability to service debt. EBITDA should
not be  construed  as an  alternative  either  (i)  to  income  from  operations
(determined in accordance with generally accepted accounting principles) or (ii)
to cash flows from operating activities (determined in accordance with generally
accepted accounting principles).

 Interest  expense  per  indenture  is defined as total  interest  expense  plus
one-third  of all  operating  lease  obligations,  dividends  paid in respect to
preferred stock and cash contributions to any employee stock ownership plan used
to pay interest on loans to purchase capital stock of the Company.


 RESULTS OF OPERATIONS

 Three and Nine Months Ended September 30, 1997 Compared to Three and Nine 
Months Ended September 30, 1996

 Revenue.  Total revenue was $92.9 million and $199.9  million for the three and
nine  months  ended  September  30, 1997  compared  to $70.9  million and $152.9
million for the comparable periods in 1996.  Electricity and steam sales revenue
increased 16% and 25% to $79.4 million and $175.8 million for the three and nine
months ended September 30, 1997 compared to $68.3 million and $140.3 million for
the  comparable  periods  in 1996.  The  increase  for the  three  months  ended
September 30, 1997 was primarily due to $10.0 million of higher revenue from the
Gilroy  Power Plant  acquired in August  1996.  The increase for the nine months
ended  September 30, 1997 was  primarily due to $23.4 million of higher  revenue
from the Gilroy Power Plant,  $3.0 million of higher  revenue from the King City
Power Plant, $6.3 million of higher revenue from the Company's  geothermal power
plants,  and $2.8 million due to increased prices or production at other Company
gas-fired power plants. As scheduled,  the King City and Gilroy Power Plants did
not generate  electrical  energy and did not earn energy revenue during the four
months ended April 30, 1997. Included in geothermal revenue are revenue from the
West Ford Flat and Bear Canyon Power Plants which  increased by $1.0 million and
$4.7 million for the three and nine months ended  September 30, 1997 compared to
the same periods in 1996,  primarily due to increased  kilowatt hour  generation
and increased energy prices. Thermal Power Company also contributed $263,000

                                     - 17 -

<PAGE>



and $2.0 million more revenue for the three and nine months ended  September 30,
1997 than the same  periods in 1996.  The  increase  in the three  months  ended
September 30, 1997 was attributed to higher energy prices,  and the increase for
the nine months ended  September 30, 1997 was  primarily due to increased  steam
sales under the alternative  pricing  agreement  entered into with PG&E in March
1996.  Service  contract revenue was $3.3 million and $6.9 million for the three
and nine months ended  September  30, 1997 compared to $172,000 and $5.6 million
for the comparable periods in 1996. Included within service contract revenue are
revenue from Calpine Power  Services  Company which  recorded  trading losses of
$1.9 million and $1.7 million for the three and nine months ended  September 30,
1996. Income from unconsolidated investments in power projects increased to $3.3
million and $7.5 million for the three and nine months ended  September 30, 1997
compared to $1.2  million and $2.9  million  for the same  periods in 1996.  The
increase for three and nine month period ended  September  30, 1997 is primarily
attributable  to an increase  in equity  income of  $685,000  and $2.7  million,
respectively,  from the Company's investment in Sumas Cogeneration Company, L.P.
("Sumas"), and to equity income of $1.7 million and $1.8 million,  respectively,
from the Company's June 1997 investment in Texas Cogeneration  Company (see Note
5 to the Condensed  Consolidated  Financial  Statements).  In accordance  with a
power sales  agreement with Puget Sound Power and Light Company,  Sumas operated
the plant at a minimum  capacity from February to September  1997 and received a
higher  price for energy sold and certain  other  payments.  Interest  income on
loans to power projects increased to $6.8 million and $9.8 million for the three
and nine  months  ended  September  30, 1997  compared to $1.3  million and $4.1
million for the comparable periods in 1996. The increase is primarily related to
interest income on the loans to the sole shareholder of Sumas Energy,  Inc., the
Company's  partner in the Sumas  project,  and interest  income on loans made by
Calpine  Finance Company to the Texas City and Clear Lake Power Plants (see Note
5 to the Condensed Consolidated Financial Statements).

 Cost of revenue.  Cost of revenue  increased  20% and 27% to $43.1  million and
$110.9  million for the three and nine months ended  September 30, 1997 compared
to $35.9  million and $87.2  million  for the  comparable  periods in 1996.  The
increase was primarily due to plant operating,  depreciation and operating lease
expenses attributable to the operations of the King City and Gilroy Power Plants
which  have been  included  in the  Company's  operations  since May 2, 1996 and
August 29, 1996, respectively.

 Project development expenses increased to $1.8 million and $5.7 million for the
three and nine months ended September 30, 1997 compared to $1.0 million and $2.5
million for the same periods in 1996. The increase was due primarily to expanded
business acquisition and development activities.

 General  and  administrative  expenses.  General  and  administrative  expenses
decreased  6% to $4.6  million for the three  months  ended  September  30, 1997
compared to $4.9 million for the same period in 1996. The decrease was primarily
due to a $1.4  million  employee  bonus  expense  related  to the  common  stock
offering in September,  1996,  partially  offset by an increase in personnel and
related expenses in 1997. General and  administrative  expenses increased 22% to
$13.2  million for the nine months ended  September  30, 1997  compared to $10.8
million for the same period in 1996.  The increase in 1997 was due to additional
personnel  and related  expenses  necessary  to support the  Company's  expanded
operations.

 Interest expense. Interest expense increased to $17.2 million and $43.4 million
for the three and nine months ended September 30, 1997 compared to $12.4 million
and $31.1 million for the  comparable  periods in 1996. The 39% increase for the
three months ended  September  30, 1996  compared to the same period in 1996 was
attributable to $1.6 million of increased interest on debt related to the Gilroy
Power Plant acquired in August 1996, $4.6 million of increased interest on the 8
3/4% Senior  Notes Due 2007 issued in July 1997,  and $2.6  million  increase in
interest expense at Calpine Finance Company,  offset by $1.3 million of interest
capitalized for the  construction of the Pasadena Power Plant and a $2.0 million
decrease in interest  expense for Calpine Geysers due to repayment of the junior
and senior term loans.  The 40% increase for the nine months ended September 30,
1997  compared to the same period in 1996 was  attributable  to $4.6  million of
increased interest expense related to the 8 3/4% Senior Notes Due 2007 issued in
July 1997,  $7.3 million of increased  interest  expense  related to the 10 1/2%
Senior  Notes Due 2006  issued in May,  1996,  $6.3  million of interest on debt
related to the Gilroy  Power Plant  acquired  in August 1996 and a $2.8  million
increase of interest expense at Calpine Finance Company,  offset by $2.6 million
of interest capitalized for the construction of the Pasadena Power Plant, a $2.9
million  decrease in interest  expense at Calpine  Geysers,  and a $1.8  million
decrease in interest expense at Thermal Power Company.

 Other  income,  net.  Other  income,  net  increased  to $3.9 million and $11.8
million for the three and nine months  ended  September  30, 1997  compared to a
loss of $1.1 million and income of $1.6 million for the same periods in 1996 due
to

                                     - 18 -

<PAGE>



interest earned on higher cash and cash equivalent  balances and interest income
earned on the collateral securities for the King City Power Plant.

 Provision for income taxes. The effective income tax rate was approximately 36%
for the three and nine months ended  September 30, 1997.  Depletion in excess of
tax basis  benefits at the  Company's  geothermal  facilities  and a revision of
prior  years' tax  estimates  of $1.3  million and $1.7  million,  respectively,
reduced the Company's  effective tax rate for 1997. The effective  rates for the
three and nine months ended  September 30, 1996 were 31% and 34%,  respectively.
In 1996, the Company  decreased its deferred income tax liability by $769,000 to
reflect  the  change in  California's  state  income tax rate from 9.3% to 8.84%
effective  January  1,  1997.  In  addition,  depletion  in  excess of tax basis
benefits at the Company's geothermal  facilities reduced the Company's effective
tax rate for 1996.


 LIQUIDITY AND CAPITAL RESOURCES

 The following table summarizes the Company cash flow activities for the periods
indicated (in thousands):
                                                   Nine Months Ended
                                                     September 30,
                                             -----------------------------
                                               1997               1996
                                             ----------         ----------
 Cash flows from:
     Operating activities                     $  66,429         $   25,694
     Investing activities                      (228,844)          (269,320)
     Financing activities                       260,955            321,293
                                             ----------         ----------
         Total                               $   98,540         $   77,667
                                             ==========         ==========

Operating  activities provided $66.4 million for the nine months ended September
30,  1997  consisting  of  approximately   $24.5  million  of  net  income  from
operations,   $11.5  million  in  deferred   income  taxes,   $34.6  million  of
depreciation and  amortization,  $9.6 million of partnership  distributions  and
income from  unconsolidated  investments  in power  projects  and a $1.6 million
distribution  from Coperlasa,  offset by $15.4 million net increase in operating
assets and liabilities.

Investing  activities used $228.8 million during the nine months ended September
30,  1997,  primarily  due to  $192.3  million  for  the  acquisition  of  Texas
Cogeneration Company and the related notes receivable,  $66.4 million of capital
expenditures  related to the  construction  of the Pasadena  Power Plant,  $22.9
million of other  capital  expenditures,  $7.6  million for the  acquisition  of
Calpine Gas Company, offset by a $21.1 million of loan payments, $5.4 million of
collateral  security maturities in connection with the King City Power Plant and
a $37.0 million decrease in restricted cash,  primarily  related to the Pasadena
Power Plant and Calpine Geysers Company, L.P.

Financing  activities  provided  $261.0  million of cash  during the nine months
ended  September  30, 1997  consisting of $139.3  million of borrowings  for the
acquisition of Texas Cogeneration Company and the related notes receivable, $5.0
million of  borrowings  for  contingent  consideration  in  connection  with the
acquisition  of the Gilroy Power Plant and $275.0  million of proceeds  from the
issuance of the 8 3/4% Senior Notes Due 2007, offset by $118.2 million repayment
of non-recourse  project debt, $25.3 million repayment of borrowings  related to
the acquisition  Texas  Cogeneration  Company,  $7.1 million  repayment of notes
payable and $9.5 million payment of costs associated with refinancing.

As of September  30, 1997,  cash and cash  equivalents  were $198.6  million and
working  capital was a $122.7  million.  For the nine months ended September 30,
1997, cash and cash  equivalents  increased by $98.5 million and working capital
increased by $26.5  million as compared to the period  ended  December 31, 1996.
The  increase  in working  capital is  primarily  due to the  issuance of $275.0
million of 8 3/4% Senior Notes Due 2007, offset by the use of available cash and
proceeds from a non-recourse  project financing due June 1998 in the acquisition
of Texas  Cogeneration  Company and in the purchase of the non-recourse  project
financing of the Texas City and Clear Lake Power Plants.

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 facilities, other lines of credit,
non-recourse project financing or long-term debt.


                                     - 19 -

<PAGE>


At September  30, 1997,  the Company had  outstanding  $105.0  million of 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
had $180.0 million of 10 1/2% Senior Notes Due 2006 which mature on May 15, 2006
and bear interest payable  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. On July 8, 1997, the
Company  issued  $200.0  million of 8 3/4% Senior Notes Due 2007 which mature on
July 15, 2007 and bear interest payable  semi-annually of January 15 and July 15
of each year,  beginning  January 1, 1998. Of the $195.0 million of net proceeds
from the sale of the Senior  Notes,  the  Company  repaid  approximately  $124.1
million of  existing  indebtedness  (see Note 12 to the  Condensed  Consolidated
Financial Statements for use of proceeds and further  information).  The Company
anticipates that a portion of the remaining net proceeds will be used to finance
potential  future  acquisitions.  On September 10, 1997,  the Company  issued an
additional  $75.0  million of 8 3/4% Senior Notes Due 2007.  The net proceeds of
$75.8  million  were used to  finance  acquisitions  and for  general  corporate
purposes.

At September 30, 1997,  the Company had $195.5 million of  non-recourse  project
financing  associated  with the  Greenleaf  1 and 2 Power  Plants and the Gilroy
Power Plant. The annual  maturities for all non-recourse  project financing were
$4.7 million for the remainder of 1997,  $9.7 million for 1998, $8.7 million for
1999,  $10.4  million  for  2000,  $10.6  million  for 2001 and  $151.5  million
thereafter.

At September 30, 1997, the Company had $114.0 million of non-recourse borrowings
from The Bank of Nova Scotia in  connection  with the  acquisition  of the notes
receivable from the Texas City and Clear Lake Power Plants. Such debt matures on
June 22, 1998.

The Company  currently has a $50.0 million  revolving  credit  agreement  with a
consortium of commercial  lending  institutions  led by The Bank of Nova Scotia,
with borrowings  bearing  interest at either LIBOR or at The Bank of Nova Scotia
base rate plus a mutually agreed margin.  At September 30, 1997, the Company had
no  borrowings  outstanding  and $7.6  million of letters of credit  outstanding
under the revolving  credit facility (see Note 10 to the Condensed  Consolidated
Financial Statements).  The Bank of Nova Scotia credit facility contains certain
restrictions  that  significantly  limit or prohibit,  among other  things,  the
ability of the Company or its subsidiaries to incur indebtedness,  make payments
of certain indebtedness, pay dividends, make investments, engage in transactions
with  affiliates,   create  liens,   sell  assets  and  engage  in  mergers  and
consolidations.

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 September 30, 1997, the Company had no borrowings under this working
capital  line and  $74,000  of letters of credit  outstanding.  Borrowings  bear
interest at prime plus 1%.

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 September 30, 1997, the Company had commitments  for capital  expenditures in
1997 totaling $36.8 million related to various  projects at its power generation
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. Capital expenditures for the
nine months ended September 30, 1997 of $91.2 million included $66.4 million for
the  construction  of the  Pasadena  Power Plant,  $9.3  million  related to the
geothermal  facilities,  $1.4 million  related to merchant  power plants and the
remaining $14.1 million at the gas-fired power plants.

The Company  continues to pursue the  acquisition  and  development of new power
generation projects. The Company expects to commit significant capital in future
years for the  acquisition  and  development  of these  projects.  The Company's
actual capital expenditures may vary significantly during any year.


                                     - 20 -

<PAGE>


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 September 30, 1998.


Impact of Recent Accounting Pronouncements

In June 1997, the FASB issued SFAS No.130, Reporting Comprehensive Income, which
establishes  standards for reporting and display of comprehensive income and its
components   (revenues,   expenses,   gains  and   losses)  in  non-   condensed
general-purpose  financial  statements.  SFAS No.130 requires  classification of
other  comprehensive  income by their nature in a financial  statement,  and the
display of the accumulated balance of other comprehensive income separately from
retained  earnings and  additional  paid-in  capital in the equity  section of a
statement  of  financial  position.  SFAS No.130 is  effective  for fiscal years
beginning after December 15, 1997. The Company believes this  pronouncement will
not have a material effect on its financial statements.

In June 1997, the FASB also issued SFAS No.131, Disclosures about Segments of an
Enterprise  and Related  Information,  which  established  standards for the way
public business  enterprises  report  information  about  operating  segments in
annual financial  statements and requires that those enterprises report selected
information   about  operating   segments  in  interim   financial   reports  to
shareholders.  SFAS No.131 also  establishes  standards for related  disclosures
about products and services,  geographic areas and major customers.  SFAS No.131
is  effective  for fiscal years  beginning  after  December  15, 1997,  although
earlier application is encouraged.  The Company believes this pronouncement will
not have a material effect on its financial statements.



                           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

The following exhibits are filed herewith unless otherwise indicated:

Exhibit 11        Computation of Earnings Per Share

Exhibit 27        Financial Data Schedule


                                     - 21 -

<PAGE>


Exhibit
Number                Description
- ------                -----------

3.1           Amended  and  Restated  Certificate  of  Incorporation  of Calpine
              Corporation, a Delaware corporation. (l)

3.2           Amended and  Restated  Bylaws of Calpine  Corporation,  a Delaware
              corporation. (l)

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)

4.3           Indenture dated as of July 8, 1997,  between  Calpine  Corporation
              and The Bank of New York, as Trustee, including form of Notes. (p)

4.4           Registration  Rights  Agreement  dated  as of July 1,  1997 by and
              between  Calpine   Corporation  and  Credit  Suisse  First  Boston
              Corporation,  Morgan Stanley & Co. Incorporated,  Salomon Brothers
              Inc., Scotia Capital Markets (USA) Inc.,  BancAmerica  Securities,
              Inc. and CIBC Wood Gundy Securities Corp. (p)

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)

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)

                                     - 22 -

<PAGE>

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       Project Credit Agreement,  dated as of September 30, 1995, between
              Calpine  Greenleaf  Corporation,  Greenleaf  Unit One  Associates,
              Greenleaf  Unit  Two  Associates,  Inc.  and  The  Sumitomo  Bank,
              Limited. (g)

10.1.14       Lease dated as of April 24, 1996  between BAF Energy A  California
              Limited  Partnership,  Lessor,  and Calpine King City Cogen,  LLC,
              Lessee. (j)

10.1.15       Credit  Agreement,  dated as of August  28,  1996,  among  Calpine
              Gilroy Cogen, L.P. and Banque Nationale de Paris. (l)

10.1.16       Credit  Agreement,  dated as of September 25, 1996,  among Calpine
              Corporation and The Bank of Nova Scotia. (m)

10.1.17       Credit   Agreement,   dated  December  20,  1996,  among  Pasadena
              Cogeneration L.P. and ING (U.S.) Capital  Corporation and The Bank
              Parties Hereto. (n)

10.1.18       Credit Agreement, dated as of June 23, 1997, among Calpine Finance
              Company and Certain Commercial Lending Institutions,  and The Bank
              of Nova Scotia as the Agent for the Lenders. (p)

10.1.19       Purchase  agreement  dated  as of  July  1,  1997,  among  Calpine
              Corporation and The Bank of New York as the Trustee. (p)

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)

10.2.4        Asset  Purchase  Agreement,  dated as of August  28,  1996,  among
              Gilroy  Energy  Company,  McCormick  & Company,  Incorporated  and
              Calpine Gilroy Cogen, L.P. (m)

10.2.5        Noncompetition  /  Earnings  Contingency  Agreement,  dated  as of
              August 28, 1996, among Gilroy Energy Company, McCormick & Company,
              Incorporated and Calpine Gilroy Cogen, L.P. (m)

10.2.6        Purchase  and Sale  Agreement  dated as of March 27, 1997  between
              Enron Power Corp. and Calpine Finance Company. (p)

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

                                     - 23 -

<PAGE>
              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)

10.3.10       Long-Term  Energy and Capacity  Power  Purchase  Agreement,  dated
              December 5, 1985,  between Calpine Gilroy Cogen,  L.P. and Pacific
              Gas and Electric  Company,  and Amendments  thereto dated December
              19, 1993, July 18, 1985, June 9, 1986, August 18, 1988 and June 9,
              1991. (l)

10.3.11       Amended and Restated  Energy Sales  Agreement,  dated December 16,
              1996,    between   Phillips   Petroleum   Company   and   Pasadena
              Cogeneration, L.P. (n)

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)


                                     - 24 -

<PAGE>
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)

10.5.5        Amended and Restated Operating Agreement for the Geysers, dated as
              of December 31, 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)

10.6          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)

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)

                                     - 25 -

<PAGE>
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)

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       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)

10.9.1        Calpine  Corporation  Stock Option Program and forms of agreements
              thereunder. (a)

                                     - 26 -

<PAGE>
10.9.2        Calpine  Corporation  1996  Stock  Incentive  Plan  and  forms  of
              agreements thereunder. (l)

10.9.3        Calpine  Corporation  Employee  Stock  Purchase  Plan and forms of
              agreements thereunder. (l)

10.10.1       Amended  and  Restated   Employment   Agreement   between  Calpine
              Corporation and Mr. Peter Cartwright. (l)

10.10.2       Senior  Vice  President   Employment   Agreement  between  Calpine
              Corporation  and  Ms.  Ann B.  Curtis.  (l)  

10.10.3       Senior  Vice  President   Employment   Agreement  between  Calpine
              Corporation and Mr. Lynn A. Kerby. (l)

10.10.4       Vice President  Employment  Agreement between Calpine  Corporation
              and Mr. Ron A. Walter. (l)

10.10.5       Vice President  Employment  Agreement between Calpine  Corporation
              and Mr. Robert D. Kelly. (l)

10.10.6       Amended  Consulting  Contract between Calpine  Corporation and Mr.
              George J. Stathakis. (o)

10.11         Form of Indemnification Agreement for directors and officers. (l)


                      ------------------------------------


(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 September 30, 1995 and filed on May 12, 1995.

(g)           Incorporated by reference to Registrant's Quarterly Report on Form
              10-Q dated September 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, 1995 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 September 30, 1996 and filed on May 15, 1996.

(l)           Incorporated by reference to Registrant's  Registration  Statement
              on Form S-1 (Registration Statement No. 333-07497).

                                     - 27 -

<PAGE>
(m)           Incorporated by reference to  Registrant's  Current Report on Form
              8-K dated August 29, 1996 and filed on September 13, 1996.

(n)           Incorporated  by reference to  Registrant's  Annual Report on Form
              10-K dated December 31, 1996 and filed on September 30, 1997.

(o)           Incorporated by reference to Registrant's Quarterly Report on Form
              10-Q dated March 31, 1997 and filed on May 12, 1997.

(p)           Incorporated by reference to Registrant's Quarterly Report on Form
              10-Q dated June 30, 1997 and filed on August 14, 1997.


(b)           REPORTS ON FORM 8-K

              Current report dated June 24, 1997 and filed on July 1, 1997
               Item 5.  Other Events -- Proposed Rule 144A offering of $200.0
                              million principal amount of Senior Notes Due 2007

              Current report dated July 2, 1997 and filed on July 7, 1997
               Item 5.  Other Events -- Pricing of Rule 144A offering of $200.0
                              million principal amount of 8-3/4% Senior Notes
                              Due 2007 


                                     - 28 -

<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:   November 14, 1997
              ---------------------------
              Ann B. Curtis
              Senior Vice President
              (Chief Financial Officer)


                  /s/ Gloria S. Gee                    Date:   November 14, 1997
              ---------------------------
              Gloria S. Gee
              Corporate Controller
              (Chief Accounting Officer)





                                     - 29 -

<PAGE>





                                  EXHIBIT INDEX


Exhibit
Number                            Description
- -------                           -----------

11                   Computation of Earnings Per Share

27                   Financial Data Schedule








                                     - 30 -



                                   EXHIBIT 11

                      CALPINE CORPORATION AND SUBSIDIARIES

                        COMPUTATION OF EARNINGS PER SHARE
                    (in thousands, except per share amounts)
                                   (unaudited)

<TABLE>
<CAPTION>
                                               Three Months Ended              Nine Months Ended
                                                  September 30,                  September 30,
                                            -------------------------       -----------------------
                                              1997            1996           1997           1996
                                            ---------       ---------       --------       --------
                                                                           
<S>                                         <C>             <C>             <C>            <C>     
Net income                                  $  19,147       $  10,732       $ 24,507       $ 15,155
                                            =========       =========       ========       ========

Primary earnings per share
   Weighted average number of
     common  shares outstanding                19,976          11,044         19,913         10,606
   Conversion of preferred stock                   --           2,179             --          1,541
   Common shares issuable upon
     exercise of stock options using
     the treasury method                        1,080             847            722            548
                                            ---------       ---------       --------       --------
                                            $  21,056       $  14,070       $ 20,635       $ 12,695
                                            ---------       ---------       --------       --------

       Primary earnings per share           $    0.91       $    0.76       $   1.19       $   1.19
                                            =========       =========       ========       ========

Fully diluted earnings per share
   Weighted average number of
     common  shares outstanding                19,976          11,044         19,913         10,606
   Conversion of preferred stock                   --           2,179             --          1,541
   Common shares issuable upon
     exercise of stock options using
     the treasury method                        1,110           1,080          1,110          1,080
                                            ---------       ---------       --------       --------
                                               21,086          14,303       $ 21,023         13,227
                                            ---------       ---------       --------       --------

       Fully diluted earnings per share     $    0.91       $    0.75       $   1.17       $   1.15
                                            =========       =========       ========       ========

</TABLE>

<TABLE> <S> <C>

<ARTICLE>                     5
<LEGEND>
     THE SCHEDULE CONTAINS SUMMARY FINANCIAL  INFORMATION EXTRACTED FROM CALPINE
     CORPORATION'S CONDENSED CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 1997
     AND FROM THE CONDENSED  CONSOLIDATED  STATEMENT OF OPERATIONS  FOR THE NINE
     MONTHS  ENDED  SEPTEMBER  30,  1997 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>                   9-MOS
<FISCAL-YEAR-END>                              DEC-31-1997
<PERIOD-START>                                 JAN-01-1997
<PERIOD-END>                                   SEP-30-1997
<EXCHANGE-RATE>                                1
<CASH>                                          198,550
<SECURITIES>                                      6,046
<RECEIVABLES>                                    52,167
<ALLOWANCES>                                          0
<INVENTORY>                                       2,775
<CURRENT-ASSETS>                                293,663
<PP&E>                                          846,701
<DEPRECIATION>                                  136,102
<TOTAL-ASSETS>                                1,367,967
<CURRENT-LIABILITIES>                           170,926
<BONDS>                                         746,446
                                 0
                                           0
<COMMON>                                             20
<OTHER-SE>                                      229,531
<TOTAL-LIABILITY-AND-EQUITY>                  1,367,967
<SALES>                                         175,767
<TOTAL-REVENUES>                                199,980
<CGS>                                           104,711
<TOTAL-COSTS>                                   110,934
<OTHER-EXPENSES>                                      0
<LOSS-PROVISION>                                      0
<INTEREST-EXPENSE>                               43,364
<INCOME-PRETAX>                                  38,458
<INCOME-TAX>                                     13,951
<INCOME-CONTINUING>                              24,507
<DISCONTINUED>                                        0
<EXTRAORDINARY>                                       0
<CHANGES>                                             0
<NET-INCOME>                                     24,507
<EPS-PRIMARY>                                      1.19
<EPS-DILUTED>                                      1.17
        



</TABLE>


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