UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
FORM 10-Q
[ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarter ended MARCH 31, 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 19,903,733 shares outstanding on May 9, 1997
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<PAGE>
CALPINE CORPORATION AND SUBSIDIARIES
REPORT ON FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 1997
INDEX
PART I. FINANCIAL INFORMATION PAGE NO.
ITEM 1. Financial Statements
Condensed Consolidated Balance Sheets
March 31, 1997 and December 31, 1996.........................3
Condensed Consolidated Statements of Operations
Three Months Ended March 31, 1997 and 1996...................4
Condensed Consolidated Statements of Cash Flows
Three Months Ended March 31, 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..........................9
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings..................................15
ITEM 2. Change in Securities...............................15
ITEM 3. Defaults Upon Senior Securities....................15
ITEM 4. Submission of Matters to a
Vote of Security Holders...........................15
ITEM 5. Other Information..................................15
ITEM 6. Exhibits and Reports on Form 8-K...................15
Signatures....................................................................22
Exhibit Index.................................................................23
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<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CALPINE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
MARCH 31, 1997 AND DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1997 1996
---------- ----------
ASSETS (unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents ......................... $ 96,164 $ 100,010
Accounts receivable from related parties .......... 1,383 2,826
Accounts receivable from others ................... 20,815 39,962
Acquisition project receivables ................... 791 791
Collateral securities, current portion ............ 4,501 5,470
Prepaid operating lease ........................... 13,652 12,668
Other current assets .............................. 8,776 9,460
---------- ----------
Total current assets .......................... 146,082 171,187
Property, plant and equipment, net ................... 675,414 650,053
Investments in power projects ........................ 12,443 13,937
Collateral securities, net of current portion ........ 86,196 89,806
Notes receivable from related parties ................ 18,891 18,182
Notes receivable from Coperlasa ...................... 16,367 17,961
Restricted cash ...................................... 38,876 55,219
Other assets ......................................... 20,497 13,870
---------- ----------
Total assets .................................. $1,014,766 $1,030,215
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of non-recourse project financing . $ 41,238 $ 30,627
Notes payable and short-term borrowings ........... 6,999 6,865
Accounts payable .................................. 9,949 18,363
Accrued payroll and related expenses .............. 2,336 3,912
Accrued interest payable .......................... 11,554 7,332
Other accrued expenses ............................ 5,406 7,870
---------- ----------
Total current liabilities ..................... 77,482 74,969
Non-recourse project financing, net of current portion 269,303 278,640
Senior Notes ......................................... 285,000 285,000
Deferred income taxes, net ........................... 96,789 100,385
Deferred lease incentive ............................. 77,629 78,521
Other liabilities .................................... 9,060 9,573
---------- ----------
Total liabilities ............................. 815,263 827,088
---------- ----------
Stockholders' equity
Common stock ...................................... 20 20
Additional paid-in capital ........................ 165,828 165,412
Retained earnings ................................. 33,655 37,695
---------- ----------
Total stockholders' equity .................... 199,503 203,127
---------- ----------
Total liabilities and stockholders' equity .... $1,014,766 $1,030,215
========== ==========
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
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CALPINE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------
1997 1996
-------- --------
<S> <C> <C>
Revenue:
Electricity and steam sales ............................ $ 33,687 $ 25,775
Service contract revenue ............................... 1,814 2,586
Income from unconsolidated investments in power projects 2,033 1,415
Interest income on loans to power projects ............. 1,697 1,897
-------- --------
Total revenue ...................................... 39,231 31,673
-------- --------
Cost of revenue:
Plant operating expenses, depreciation, operating
lease expense and production royalties ............... 28,739 19,472
Service contract expenses .............................. 1,850 1,857
-------- --------
Total cost of revenue .............................. 30,589 21,329
-------- --------
Gross profit .............................................. 8,642 10,344
Project development expenses .............................. 2,161 516
General and administrative expenses ....................... 4,211 2,640
-------- --------
Income from operations ............................. 2,270 7,188
Other (income) expense:
Interest expense ....................................... 12,977 8,219
Other income, net ...................................... (3,601) (533)
-------- --------
Loss before provision for income taxes ............. (7,106) (498)
Provision for income taxes ................................ (3,066) (204)
-------- --------
Net loss ........................................... $ (4,040) $ (294)
======== ========
Earnings per share:
Weighted average shares outstanding .................... 19,852 10,651
======== ========
Earnings per share ..................................... $ (0.20) $ (0.03)
======== ========
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
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CALPLNE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------
1997 1996
--------- ---------
<S> <C> <C>
Net cash provided by operating activities ................... $ 10,284 $ 1,214
--------- ---------
Cash flows from investing activities:
Acquisition of property, plant and equipment ............. (29,977) (7,261)
Deposit for King City Transaction ........................ -- (1,000)
Montis Niger Transaction ................................. (7,461) --
Investments in power projects and capitalized costs ...... (50) (459)
Loans to Coperlasa ....................................... -- (3,430)
Maturities of collateral securities ...................... 5,350 --
Decrease in restricted cash .............................. 16,342 1,101
Other, net ............................................... (261) (20)
--------- ---------
Net cash used in investing activities .............. (16,057) (11,069)
--------- ---------
Cash flows from financing activities:
Borrowings from line of credit ........................... -- 12,300
Repayments of line of credit ............................. -- (208)
Borrowings from non-recourse project financing ........... 1,650 --
Repayments of non-recourse project financing ............. (139) (5,400)
Proceeds from issuance of preferred stock ................ -- 50,000
Proceeds from issuance of common stock ................... 351 --
Other, net ............................................... 65 --
--------- ---------
Net cash provided by financing activities .......... 1,927 56,692
--------- ---------
Net increase (decrease) in cash and cash equivalents ........ (3,846) 46,837
Cash and cash equivalents, beginning of period .............. 100,010 21,810
--------- ---------
Cash and cash equivalents, end of period .................... $ 96,164 $ 68,647
========= =========
Supplementary information -- cash paid during the period for:
Interest ................................................. $ 9,079 $ 10,951
Income taxes ............................................. $ 435 --
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
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CALPINE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 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 in the United States and
selected international markets. The Company has ownership interests in and
operates natural gas-fired cogeneration facilities, geothermal steam fields and
geothermal power generation facilities in the United States and selected
international markets. Each of the generation facilities produces electricity
for sale to utilities. Thermal energy produced by the gas- fired cogeneration
facilities is sold to governmental and industrial users, and steam produced by
the geothermal steam fields is sold to utility-owned power plants.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Interim Presentation -- The accompanying interim condensed consolidated
financial statements of the Company have been prepared by the Company, without
audit by independent public accountants, pursuant to the rules and regulations
of the Securities and Exchange Commission. In the opinion of management, the
condensed consolidated financial statements include all and only normal
recurring adjustments necessary to present fairly the information required to be
set forth therein. Certain information and note disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted from these statements pursuant to such
rules and regulations and, accordingly, should be read in conjunction with the
audited consolidated financial statements of the Company included in the
Company's annual report on Form 10-K for the year ended December 31, 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 months ended March 31, 1997, basic and diluted earnings per share
would be equivalent to 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 months ended March 31, 1997, the Company
capitalized $563,000 of interest in connection with the construction of the
Pasadena Power Plant. No interest was capitalized in 1996.
Reclassifications -- Prior year amounts in the consolidated condensed financial
statements have been reclassified where necessary to conform to the 1997
presentation.
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CALPINE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1997
3. ACCOUNTS RECEIVABLE
Accounts receivable from related parties as of March 31, 1997 and December 31,
1996 are comprised of the following (in thousands):
March 31, December 31,
1997 1996
------ ------
(unaudited)
O.L.S. Energy-Agnews, Inc. ........ $ 732 $ 687
Geothermal Energy Partners, Ltd. .. 180 350
Sumas Cogeneration Company, L.P. .. 153 590
Electrowatt Ltd. and subsidiaries . 318 1,199
------ ------
$1,383 $2,826
====== ======
4. INVESTMENTS IN POWER PROJECTS
The Company has unconsolidated investments in power projects which are
accounted for under the equity method. Unaudited financial information for the
three months ended March 31, 1997 and 1996 related to these investments is as
follows (in thousands):
<TABLE>
<CAPTION>
1997 1996
---------------------------------------- ----------------------------------------
Sumas O.L.S. Geothermal Sumas O.L.S. Geothermal
Cogeneration Energy- Energy Cogeneration Energy- Energy
Company, Agnews, Partners, Company, Agnews, Partners,
L.P. Inc. Ltd. L.P. Inc. Ltd.
------------ ------- ----------- ------------ --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Revenue $ 9,884 $ 2,522 $ 5,603 $ 12,047 $ 1,699 $ 4,118
Operating expenses 3,114 3,135 2,277 6,336 2,191 3,536
------------ ------- ----------- ------------ --------- -----------
Income (loss) from
operations 6,770 (613) 3,326 5,711 (492) 582
Other expenses, net 2,435 216 1,108 2,599 275 1,246
------------ -------- ----------- ------------ ---------- -----------
Net income (loss) $ 4,335 $ (829) $ 2,218 $ 3,112 $ (767) $ (664)
============= ========= ============ ============= =========== ============
Company's share of
net income (loss) $ 2,066 $ (124) $ 91 $ 1,556 $ (153) $ 12
============= ========= ============ ============= =========== ============
</TABLE>
5. LINES OF CREDIT
At March 31, 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 March 31, 1997, the
Company had no borrowings and $2.7 million of letters of credit outstanding
related to operating expenses at the Company's Watsonville Power Plant.
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. No stated principal amortization exists for this indebtedness.
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CALPINE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1997
6. MONTIS NIGER TRANSACTION
On January 31, 1997, the Company acquired the outstanding capital stock of
Montis Niger, Inc. ("MNI"), a natural gas production company, and certain gas
reserves from Radnor Power, a wholly-owned subsidiary of LFC Financial Corp.,
for $7.1 million plus $962,000 for certain working capital items, subject to
final adjustments. MNI 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 $7.5 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.
7. 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 results in widespread impact on the
market structure and requires participation and oversight of the Federal Energy
Regulatory Commission ("FERC"), the CPUC has sought to build a California
consensus involving the legislature, the Governor, public and municipal
utilities and customers. The consensus has resulted in filings with the FERC
which should permit both the CPUC and FERC to collectively proceed with
implementation of the new competitive market structure. On September 23, 1996,
state legislation was passed, AB 1890 (the "Bill"), which codified much of the
CPUC decision and directed the CPUC to proceed with implementation of
restructure 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. The proposed restructuring provides for
phased-in customer choice (direct access), development of a non-discriminatory
market structure, full recovery of utility stranded costs, 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. In May 1997, the CPUC ruled that all utility customers will be able to
choose their electricity supplier beginning January 1, 1998. 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 operations. 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.
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.
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<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) 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 and energy price fluctuations,
(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 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 15 power
generation facilities and steam fields having an aggregate capacity of 1,047
megawatts. Calpine's net interest in these facilities is 973 megawatts, of which
515 megawatts or 53% are natural gas-fired facilities and 458 megawatts or 47%
are geothermal facilities.
On January 31, 1997, the Company acquired Montis Niger, Inc. ("MNI"), a natural
gas production company, and certain gas reserves. MNI owns 10 billion cubic feet
of proven gas reserves and an 80-mile pipeline system which provides gas to the
Company's Greenleaf power plants. In February 1997, the Company announced the
development of northern California's first merchant power plant. The 480
megawatt Sutter Power Plant will provide electricity to the deregulated
California power market in the year 2000. The Company is currently pursuing
regulatory agency permits for this project. In March 1997, the Company entered
into a purchase agreement with a subsidiary of Enron Corp. to acquire a 50%
interest in 827 megawatts of operating gas-fired plants in Texas. The
acquisition is expected to close during the second quarter of 1997, contingent
upon third-party approvals. In March 1997, the Company commenced construction of
the 240 megawatt Pasadena Power Plant located in Pasadena, Texas. The Pasadena
plant is the first merchant plant to be financed with non-recourse project debt
and is scheduled to be operational in 1998. The successful development or
acquisition of the projects described above are subject to various risks,
including (a) obtaining sufficient equity and debt financing, (b) obtaining all
governmental permits and third party approvals and other rights, (c) obtaining
power or steam sales agreements, fuel supply and transportation agreements,
electrical transmission agreements, site agreements and construction agreements,
as appropriate, and (d) possible construction or other delays or cost overruns.
As a result, there can be no assurance that the Company will successfully
complete any of these development projects or acquisitions or that they will be
completed on a timely basis and within the planned budget.
Included in the results of operations for the three months ended March 31, 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. As scheduled by Pacific Gas and Electric Company ("PG&E") and in
accordance with their respective power sales agreements, the King City and
Gilroy Power Plants did not generate electricity during the three months ended
March 31, 1997. As scheduled, both power plants resumed operation on May 1,
1997.
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<PAGE>
Each of the Company's power plants produces electricity for sale to a utility.
Thermal energy produced by the gas-fired cogeneration facilities is sold to
governmental and industrial users, and steam produced by the geothermal steam
fields is sold to utility-owned power plants. The electricity, thermal energy
and steam generated by these facilities are typically sold pursuant to
long-term, take-and-pay power or steam sales agreements generally having
original terms of 20 or 30 years. Nine of these agreements with PG&E provide for
both capacity payments and energy payments for the term of the agreements.
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. The fixed price periods under these power sales agreements
expire at various times in 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 by the California Public
Utilities Commission ("CPUC"). The currently prevailing avoided cost of energy
is substantially lower than the fixed energy prices under these power sales
agreements and is generally expected to remain so. While avoided cost does not
affect capacity payments under the power sales agreements, in the event that the
avoided cost of energy 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 avoided cost energy 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.
Each 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 months ended March 31, 1997, the West Ford Flat and
Bear Canyon Power Plants each experienced 263 hours of curtailment, compared to
448 hours of curtailment for the same period in 1996. Due to an amendment to the
power sales contracts executed in April 1997, the Company currently does not
expect maximum curtailment during 1997 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, 1998. 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 operations. 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).
- 10 -
<PAGE>
Three Months Ended
March 31,
-------------------
1997 1996
-------- --------
Power Plants
Electricity revenues
Energy ..................................... $ 18,977 $ 15,339
Capacity ................................... $ 5,181 $ 1,566
Megawatt hours produced ...................... 268,610 330,675
Average energy rate per kilowatt hour produced $ 0.0706 $ 0.0464
Steam Fields
Steam revenues ............................... $ 9,529 $ 8,870
Megawatt hours produced ...................... 606,838 556,039
Average energy rate per kilowatt hour produced $ 0.0157 $ 0.0160
Megawatt hours produced declined for the three months ended March 31, 1997
compared to the same period in 1996, primarily due to a 57,886 megawatt hour
decline in 1997 production by the Greenleaf 1 Power Plant. The Greenleaf 1 Power
Plant 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 months ended
March 31, 1997 compared to the same period in 1996 due to increases in the
average energy price per kilowatt hour produced at both the geothermal and
gas-fired power plants, and reflects the decreased kilowatt hour production at
the lower priced gas-fired power plants.
OTHER FINANCIAL DATA AND RATIOS
Set forth below are certain other financial data and ratios for the periods
indicated (in thousands, except ratio data):
Three Months Ended
March 31,
-------------------
1997 1996
-------- --------
Depreciation and amortization $ 11,333 $ 6,875
Interest expense per indenture $ 14,168 $ 8,553
EBITDA $ 19,479 $ 13,353
EBITDA to interest expense per indenture 1.37x 1.56x
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 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, capitalized interest, 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 MONTHS ENDED MARCH 31, 1997 COMPARED TO THREE MONTHS ENDED MARCH 31, 1996
Revenue. Total revenue was $39.2 million for the three months ended March 31,
1997 compared to $31.7 million for the comparable period in 1996. Electricity
and steam sales revenue increased 31% to $33.7 million for the three months
ended March 31, 1997 compared to $25.8 million for the comparable period in
1996. The increase was partially due to $1.2 million and $2.5 million of
capacity revenue from 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. As scheduled, the King City
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<PAGE>
and Gilroy Power Plants did not generate electrical energy and did not earn
energy revenue during the three months ended March 31, 1997. Revenue from the
West Ford Flat and Bear Canyon Power Plants increased by $1.8 million for the
three months ended March 31, 1997 compared to the same period in 1996, primarily
due to increased kilowatt hour generation and increased energy prices in 1997.
The West Ford Flat and Bear Canyon Power Plants were curtailed under their power
sales agreements for approximately $1.6 million of revenue during the three
months in 1997, compared to approximately $2.6 million of revenue during the
same period in 1996. Thermal Power Company also contributed $912,000 more
revenue for the three months in 1997 than the same period in 1996 due to
increased steam sales under the competitive alternative pricing agreement
entered into with PG&E in March 1996. Revenue from the Greenleaf and Watsonville
Power Plants for the three months in 1997 increased by a total of $1.8 million
compared to the same period in 1996, due to an increase in the energy price per
kilowatt hour. Service contract revenue decreased 31% to $1.8 million for the
three months ended March 31, 1997 compared to $2.6 million for the same period
in 1996, which reflected $342,000 of billings for an overhaul at the Aidlin
power plant and a $255,000 advisory fee for financing of a power plant during
1996. Income from unconsolidated investments in power projects increased 43% to
$2.0 million for the three months ended March 31, 1997 compared to $1.4 million
for the same period in 1996. The increase is primarily attributable to $2.1
million of equity income from the Company's investment in Sumas Cogeneration
Company, L.P. ("Sumas") during the three months ended March 31, 1997 compared to
$1.6 million for the same period in 1996. The increase in Sumas income was
primarily due to a higher price for energy sold and certain other payments
received from Puget Sound Power and Light Company under the power sales
agreement. Interest income on loans to power projects decreased 11% to $1.7
million for the three months ended March 31, 1997 compared to $1.9 million for
the comparable period in 1996, primarily related to interest income on the loans
to Coperlasa for the Cerro Prieto project.
Cost of revenue. Cost of revenue increased 44% to $30.6 million for the three
months ended March 31, 1997 compared to $21.3 million for the comparable period
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 $2.2 million for the three months
ended March 31, 1997 compared to $516,000 for the same period in 1996. The
increase was due primarily to expanded business acquisition and development
activities.
General and administrative expenses. General and administrative expenses
increased 62% to $4.2 million for the three months ended March 31, 1997 compared
to $2.6 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 $13.0 million for the three
months ended March 31, 1997 compared to $8.2 million for the comparable period
in 1996. The 59% increase was attributable to $4.7 million of interest expense
related to the Senior Notes Due 2006 issued in May 1996, and $2.3 million of
interest on debt related to the Gilroy Power Plant acquired in August 1996,
offset by $563,000 of interest capitalized for the construction of the Pasadena
Power Plant and a $1.8 million decrease in interest expense primarily as a
result of repayments of principal on certain non-recourse project financings and
other short-term borrowings.
Other income, net. Other income, net increased to $3.6 million for the three
months ended March 31, 1997 compared to $533,000 for the same period in 1996.
The increase was primarily due to $1.6 million of interest income earned on the
collateral securities for the King City Power Plant. The remaining increase is
mainly attributable to interest earned on higher cash and cash equivalent
balances during the three months ended March 31, 1997 primarily as a result of
the Company's initial public offering in September 1996.
Provision for income taxes. The effective rate for the income tax benefit was
approximately 43% for the three months ended March 31, 1997. The effective tax
rate differs from the statutory rates due to depletion in excess of tax basis
benefits at the Company's geothermal facilities for the three months ended March
31, 1997. The effective rate for the three months ended March 31, 1996 was 41%
based on statutory tax rates.
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<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
To date, the Company has obtained cash from its operations, borrowings under
the working capital lines, equity offerings, contributions from the Company's
former owner, and proceeds from non-recourse project financings, senior notes
and other long-term debt. The Company utilized this cash to fund its operations,
service debt obligations, fund the acquisition, development and construction of
power generation facilities, finance capital expenditures and meet its other
cash and liquidity needs.
The following table summarizes the Company cash flow activities for the periods
indicated (in thousands):
Three Months Ended
March 31,
-----------------------------
1997 1996
---------- ----------
Cash flows from:
Operating activities $ 10,284 $ 1,214
Investing activities (16,057) (11,069)
Financing activities 1,927 56,692
---------- ----------
Total $ (3,846) $ 46,837
========== ==========
Operating activities provided $10.3 million for the three months ended March 31,
1997 consisting of approximately $4.0 million of net loss from operations and
$3.8 million in deferred income taxes; offset by $10.4 million of depreciation
and amortization, $6.2 million net decrease in operating assets and liabilities,
and $1.5 million of net distributed income from unconsolidated investments in
power projects.
Investing activities used $16.1 million during the three months ended March 31,
1997, primarily due to $20.5 million of capital expenditures related to the
construction of the Pasadena Power Plant, $9.5 million of other capital
expenditures, $7.5 million for the acquisition of Montis Niger, Inc., offset by
$5.4 million of collateral security maturities in connection with the King City
Power Plant and a $16.3 million decrease in restricted cash, primarily related
to the Pasadena Power Plant.
Financing activities provided $1.9 million of cash during the three months ended
March 31, 1997 primarily due to $1.7 million of borrowings for contingent
consideration in connection with the acquisition of the Gilroy Power Plant.
As of March 31, 1997, cash and cash equivalents were $96.2 million and working
capital was $68.6 million. For the three months ended March 31, 1997, cash and
cash equivalents decreased by $3.8 million and working capital decreased by
$27.6 million as compared to the period ended December 31, 1996. The decrease in
working capital is primarily due to a $20.6 million decrease in accounts
receivable during the three months ended March 31, 1997, as the King City and
Gilroy Power Plants were scheduled by PG&E to not generate electricity during
the period.
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.
The Company currently has 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 has $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.
At March 31, 1997, the Company had $310.5 million of non-recourse project
financing associated with power generating facilities and steam fields at the
West Ford Flat Power Plant, the Bear Canyon Power Plant, the PG&E Unit 13 and
Unit 16 Steam Fields, the SMUDGEO #1 Steam Fields, the Greenleaf 1 and 2 Power
Plants and the Gilroy Power Plant. As of March 31, 1997, the annual maturities
for all non-recourse project financing were $36.5 million for the remainder of
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<PAGE>
1997, $38.7 million for 1998, $24.2 million for 1999, $24.8 million for 2000,
$16.6 million for 2001 and $168.1 million thereafter.
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 March 31, 1997, the Company had no
borrowings outstanding and $2.7 million of letters of credit outstanding under
the revolving credit facility (see Note 5 of Notes to 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 March 31, 1997, the Company had no borrowings under this working
capital line and $900,000 of letters of credit outstanding. Borrowings bear
interest at prime plus 1%.
The Company also has outstanding a non-interest bearing promissory note to
Natomas Energy Company in the amount of $6.5 million representing a portion of
the September 1994 purchase price of Thermal Power Company. This note has been
discounted to yield 8% per annum and is due September 9, 1997.
The Company intends to continue to seek the use of non-recourse project
financing for new projects, where appropriate. The debt agreements of the
Company's subsidiaries and other affiliates governing the non-recourse project
financing generally restrict their ability to pay dividends, make distributions
or otherwise transfer funds to the Company. The dividend restrictions in such
agreements generally require that, prior to the payment of dividends,
distributions or other transfers, the subsidiary or other affiliate must provide
for the payment of other obligations, including operating expenses, debt service
and reserves. However, the Company does not believe that such restrictions will
adversely affect its ability to meet its debt obligations.
At March 31, 1996, the Company had commitments for capital expenditures in 1997
totaling $2.8 million related to various projects at its geothermal facilities.
The Company intends to fund capital expenditures for the ongoing operation and
development of the Company's power generation facilities primarily through the
operating cash flow of such facilities. Capital expenditures for the three
months ended March 31, 1997 of $30.0 million included $20.5 million for the
construction of the Pasadena Power Plant, $4.4 million related to the geothermal
facilities and the remaining $5.1 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.
The Company believes that it will have sufficient liquidity from cash flow from
operations and borrowings available under the lines of credit and working
capital to satisfy all obligations under outstanding indebtedness, to finance
anticipated capital expenditures and to fund working capital requirements
through December 31, 1997.
IMPACT OF RECENT ACCOUNTING PRONOUNCEMENT
In February 1997, the FASB issued SFAS No. 128, Earnings Per Share, which
simplifies the standards for computing earnings per share previously found in
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 months ended March 31, 1997, basic and
diluted earnings per share would be equivalent to the earnings per share
presented in the accompanying condensed consolidated statement of operations.
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<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGE IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
The following exhibits are filed herewith unless otherwise indicated:
Exhibit 11 Computation of Earnings Per Share
Exhibit 27 Financial Data Schedule
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)
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)
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<PAGE>
10.1.3 Second Amendment to Term and Working Capital Loan Agreement, dated
as of December 1, 1990, between Calpine Geysers Company, L.P.
(formerly Santa Rosa Geothermal Company, L.P.) and Deutsche Bank AG,
New York Branch. (a)
10.1.4 Third Amendment to Term and Working Capital Loan Agreement, dated as
of June 26, 1992, between Calpine Geysers Company, L.P. (formerly
Santa Rosa Geothermal Company, L.P.), Deutsche Bank AG, New York
Branch, National Westminster Bank PLC, Union Bank of Switzerland,
New York Branch, and The Prudential Insurance Company of America.
(a)
10.1.5 Fourth Amendment to Term and Working Capital Loan Agreement, dated
as of April l, 1993, between Calpine Geysers Company, L.P. (formerly
Santa Rosa Geothermal Company, L.P.), Deutsche Bank AG, New York
Branch, National Westminster Bank PLC, Union Bank of Switzerland,
New York Branch, and The Prudential Insurance Company of America.
(a)
10.1.6 Construction and Term Loan Agreement, dated as of January 30, 1992,
between Sumas Cogeneration Company, L.P., The Prudential Insurance
Company of America and Credit Suisse, New York Branch. (a)
10.1.7 Amendment No. 1 to Construction and Term Loan Agreement, dated as of
May 24, 1993, between Sumas Cogeneration Company, L.P., The
Prudential Insurance Company of America and Credit Suisse, New York
Branch. (a)
10.1.8 Credit Agreement-Construction Loan and Term Loan Facility, dated as
of January 10, 1990, between Credit Suisse and O.L.S. Energy-Agnews.
(a)
10.1.9 Amendment No. 1 to Credit Agreement-Construction Loan and Term Loan
Facility, dated as of December 5, 1990, between Credit Suisse and
O.L.S. Energy-Agnews. (a)
10.1.10 Participation Agreement, dated as of December 1, 1990, between
O.L.S. Energy-Agnews, Nynex Credit Company, Credit Suisse, Meridian
Trust Company of California and GATX Capital Corporation. (a)
10.1.11 Facility Lease Agreement, dated as of December 1, 1990, between
Meridian Trust Company of California and O.L.S. Energy-Agnews. (a)
10.1.12 Project Revenues Agreement, dated as of December 1, 1990, between
O.L.S. Energy-Agnews, Meridian Trust Company of California and
Credit Suisse. (a)
10.1.13 Project Credit Agreement, dated as of June 30, 1995, between Calpine
Greenleaf Corporation, Greenleaf Unit One Associates, Greenleaf Unit
Two Associates, Inc. and The Sumitomo Bank, Limited. (g)
10.1.14 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)
10.2 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)
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<PAGE>
10.2.2 Stock Purchase Agreement, dated as of June 27, 1994, between Maxus
International Energy Company, Natomas Energy Company, Calpine
Corporation and Calpine Thermal Power, Inc., and amendment thereto
dated July 28, 1994. (b)
10.2.3 Share Purchase Agreement dated March 30, 1995 between Calpine
Corporation, Calpine Greenleaf Corporation, Radnor Power Corp. and
LFC Financial Corp. (e)
10.2.4 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)
10.3 Power Sales Agreements
10.3.1 Long-Term Energy and Capacity Power Purchase Agreement relating to
the Bear Canyon Facility, dated November 30, 1984, between Pacific
Gas & Electric and Calpine Geysers Company, L.P. (formerly Santa
Rosa Geothermal Company, L.P.), Amendment dated October 17, 1985,
Second Amendment dated October 19, 1988, and related documents. (a)
10.3.2 Long-Term Energy and Capacity Power Purchase Agreement relating to
the Bear Canyon Facility, dated November 29, 1984, between Pacific
Gas & Electric and Calpine Geysers Company, L.P. (formerly Santa
Rosa Geothermal Company, L.P.), and Modification dated November 29,
1984, Amendment dated October 17, 1985, Second Amendment dated
October 19, 1988, and related documents. (a)
10.3.3 Long-Term Energy and Capacity Power Purchase Agreement relating to
the West Ford Flat Facility, dated November 13, 1984, between
Pacific Gas & Electric and Calpine Geysers Company, L.P. (formerly
Santa Rosa Geothermal Company, L.P.), and Amendments dated May 18,
1987, June 22, 1987, July 3, 1987 and January 21, 1988, and related
documents. (a)
10.3.4 Agreement for Firm Power Purchase, dated as of February 24, 1989,
between Puget Sound Power & Light Company and Sumas Energy, Inc. and
Amendment thereto dated September 30, 1991. (a)
10.3.5 Long-Term Energy and Capacity Power Purchase Agreement, dated April
16, 1985, between O.L.S. Energy- Agnews and Pacific Gas & Electric
Company and amendment thereto dated February 24, 1989. (a)
10.3.6 Long-Term Energy and Capacity Power Purchase Agreement, dated
November 15, 1984, between Geothermal Energy Partners, Ltd. and
Pacific Gas & Electric Company, and related documents. (a)
10.3.7 Long-Term Energy and Capacity Power Purchase Agreement, dated
November 15, 1984, between Geothermal Energy Partners, Ltd. and
Pacific Gas & Electric Company (see Exhibit 10.3.6 for related
documents). (a)
10.3.8 Long-Term Energy and Capacity Power Purchase Agreement, dated
December 12, 1984, between Greenleaf Unit One Associates, Inc. and
Pacific Gas and Electric Company. (f)
10.3.9 Long-Term Energy and Capacity Power Purchase Agreement, dated
December 12, 1984, between Greenleaf Unit Two Associates, Inc. and
Pacific Gas and Electric Company. (f)
10.3.10 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)
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<PAGE>
10.4 Steam Sales Agreements
10.4.1 Geothermal Steam Sales Agreement, dated July 19, 1979, between
Calpine Geysers Company, L.P. (formerly Santa Rosa Geothermal
Company, L.P.), and Sacramento Municipal Utility District, and
related documents. (a)
10.4.2 Agreement for the Sale and Purchase of Geothermal Steam, dated March
23, 1973, between Calpine Geysers Company, L.P. (formerly Santa Rosa
Geothermal Company, L.P.) and Pacific Gas & Electric Company, and
related letter dated May 18, 1987. (a)
10.4.3 Thermal Energy and Kiln Lease Agreement, dated as of January 16,
1992, between Sumas Cogeneration Company, L.P. and Socco, Inc., and
Amendment thereto dated May 24, 1993. (a)
10.4.4 Amended and Restated Energy Service Agreement, dated as of December
l, 1990, between the State of California and O.L.S. Energy-Agnews.
(a)
10.4.5 Agreement for the Sale of Geothermal Steam, dated as of July 28,
1992, between Thermal Power Company and Pacific Gas & Electric
Company. (c)
10.4.6 Amendment to the Agreement for the Sale of Geothermal Steam, dated
as of August 9, 1995, between Union Oil Company of California, NEC
Acquisition Company, Thermal Power Company, and Pacific Gas and
Electric Company. (h)
10.5 Service Agreements
10.5.1 Operation and Maintenance Agreement, dated as of April 5, 1990,
between Calpine Operating Plant Services, Inc. (formerly
Calpine-Geysers Plant Services, Inc.) and Calpine Geysers Company,
L.P. (formerly Santa Rosa Geothermal Company, L.P.). (a)
10.5.2 Amended and Restated Operating and Maintenance Agreement, dated as
of January 24, 1992, between Calpine Operating Plant Services, Inc.
and Sumas Cogeneration Company, L.P. (a)
10.5.3 Amended and Restated Operation and Maintenance Agreement, dated as
of December 31, 1990, between O.L.S. Energy-Agnews and Calpine
Operating Plant Services, Inc. (formerly Calpine Cogen-Agnews,
Inc.). (a)
10.5.4 Operating and Maintenance Agreement, dated as of January 1, 1995,
between Calpine Corporation and Geothermal Energy Partners, Ltd. (h)
10.5.5 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)
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<PAGE>
10.7 Agreements Regarding Real Property
10.7.1 Office Lease, dated March 15, 1991, between 50 West San Fernando
Associates, L.P. and Calpine Corporation. (a)
10.7.2 First Amendment to Office Lease, dated April 30, 1992, between 50
West San Fernando Associates, L.P. and Calpine Corporation. (a)
10.7.3 Geothermal Resources Lease CA 1862, dated July 25, 1974, between the
United States Bureau of Land Management and Calpine Geysers Company,
L.P. (formerly Santa Rosa Geothermal Company, L.P.). (a)
10.7.4 Geothermal Resources Lease PRC 5206.2, dated December 14, 1976,
between the State of California and Calpine Geysers Company, L.P.
(formerly Santa Rosa Geothermal Company, L.P.). (a)
10.7.5 First Amendment to Geothermal Resources Lease PRC 5206.2, dated
April 20,1994, between the State of California and Calpine Geysers
Company, L.P. (formerly Santa Rosa Geothermal Company, L.P.). (a)
10.7.6 Industrial Park Lease Agreement, dated December 18, 1990, between
Port of Bellingham and Sumas Energy, Inc. (a)
10.7.7 First Amendment to Industrial Park Lease Agreement, dated as of July
16, 1991, between Port of Bellingham, Sumas Energy, Inc., and Sumas
Cogeneration Company, L.P. (a)
10.7.8 Second Amendment to Industrial Park Lease Agreement, dated as of
December 17, 1991, between Port of Bellingham and Sumas Cogeneration
Company, L.P. (a)
10.7.9 Amended and Restated Cogeneration Lease, dated as of December 1,
1990, between the State of California and O.L.S. Energy-Agnews. (a)
10.8 General
10.8.1 Limited Partnership Agreement of Sumas Cogeneration Company, L.P.,
dated as of August 28, 1991, between Sumas Energy, Inc. and Whatcom
Cogeneration Partners, L.P. (a)
10.8.2 First Amendment to Limited Partnership Agreement of Sumas
Cogeneration Company, L.P., dated as of January 30, 1992, between
Whatcom Cogeneration Partners, L.P. and Sumas Energy, Inc. (a)
10.8.3 Second Amendment to Limited Partnership Agreement of Sumas
Cogeneration Company, L.P., dated as of May 24, 1993, between
Whatcom Cogeneration Partners, L.P. and Sumas Energy, Inc. (a)
10.8.4 Second Amended and Restated Shareholders' Agreement, dated as of
October 22, 1993, among GATX Capital Corporation, Calpine Agnews,
Inc., JGS-Agnews, Inc., and GATX/Calpine-Agnews, Inc. (a)
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)
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<PAGE>
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)
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. *
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 March 31, 1995 and filed on May 12, 1995.
(g) Incorporated by reference to Registrant's Quarterly Report on Form
10-Q dated June 30, 1995 and filed on August 14, 1995.
- 20 -
<PAGE>
(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 March 31, 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).
(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 March 31, 1997.
* Filed herewith.
(B) REPORTS ON FORM 8-K
No reports were filed on Form 8-K during the three months ended March 31, 1997.
- 21 -
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CALPINE CORPORATION
By: /s/ Ann B. Curtis Date: May 12, 1997
--------------------------------------------
Ann B. Curtis
Senior Vice President
(Chief Financial Officer)
By: /s/ Gloria S. Gee Date: May 12, 1997
--------------------------------------------
Gloria S. Gee
Corporate Controller
(Chief Accounting Officer)
- 22 -
<PAGE>
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
11 Computation of Earnings Per Share
10.10.6 Amended Consulting Contract between Calpine Corporation
and Mr. George J. Stathakis
27 Financial Data Schedule
- 23 -
EXHIBIT 11
CALPINE CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31,
--------------------
1997 1996
-------- --------
Net loss ..................................... $ (4,040) $ (294)
======== ========
Primary earnings per share
Average number of common shares outstanding 19,852 10,388
Conversion of preferred stock ............. -- 263
-------- --------
19,852 10,651
-------- --------
Primary earnings per share ............ $ (0.20) $ (0.03)
======== ========
Fully diluted earnings per share
Average number of common shares outstanding 19,852 10,388
Conversion of preferred stock ............. -- 263
-------- --------
19,852 10,651
-------- --------
Fully diluted earnings per share ...... $ (0.20) $ (0.03)
======== ========
CONSULTING CONTRACT
THIS CONSULTING CONTRACT ("Contract") is made and entered into
effective as of the 1st day of January, 1997, between Calpine Corporation, a
Delaware corporation, of 50 West San Fernando Street, San Jose, California 95113
("CALPINE") and GEORGE J. STATHAKIS, 120 Montgomery Street, 13th Floor, San
Francisco, California 94104 ("CONSULTANT"), with reference to the following:
In consideration of the mutual agreements herein contained, the parties
wish to amend and restate the Contract in its entirety as follows:
1. SCOPE OF SERVICES
1.1 CONSULTANT agrees to perform the following services:
(a) Provide advice and guidance on various management
issues to the President and members of his senior
staff.
(b) Provide advice and guidance to CALPINE's Business
Development staff with regard to domestic and
international business, with a more in-depth emphasis
on international business.
(c) In addition, but outside of the Retainer, Consultant
will identify project investment opportunities for
the Corporation and develop projects through to
financing.
2. TERM
2.1 This Contract shall be for a term lasting one year from the
date first specified above, unless earlier terminated pursuant
to this Contract or extended by mutual agreement of the
parties.
2.2 Notwithstanding the above, either party may terminate this
Contract at any time by giving thirty (30) days written notice
to the other party, provided, however, that any payments due
and payable upon termination shall be paid.
3. COMPENSATION
Compensation to CONSULTANT for services rendered shall be as follows:
(a) CALPINE will pay CONSULTANT a monthly retainer (the
"Retainer") of Five Thousand Dollars ($5,000.00), commencing
January 1, 1997, which amount will be payable at the beginning
of each month under the Term hereof.
(b) In addition to the cash compensation stated in (a) above,
CALPINE will grant to CONSULTANT ten thousand (10,000) stock
options under the Calpine Corporation 1996 Stock Incentive
Plan. The grant will be effective April 1, 1997; the option
price for this grant will be the fair market value of Calpine
Corporation stock at the close of business on the effective
date. The options will be 25% vested on the effective date,
and the balance will vest 25% on July 1, 1997; October 1,
1997; and January 1, 1998.
(c) A fee will be negotiated between the parties for those project
investment opportunities identified and completed through
closure by CONSULTANT.
- 1 -
<PAGE>
(d) In addition to the above, CALPINE agrees to reimburse
CONSULTANT for all travel and other actual out-of-pocket
expenses incurred in support of this Contract. Such expenses
will not be incurred by CONSULTANT without prior approval of
CALPINE. CONSULTANT shall furnish copies of all receipts with
invoices for expenses incurred in support of this Contract.
4. WARRANTY
CONSULTANT assumes professional and technical responsibility for
performance of Services to be provided hereunder in accordance with
recognized professional standards. If within one year following
completion of the Services, the Services fail to meet the aforesaid
standards, and CALPINE promptly advises CONSULTANT in writing,
CONSULTANT agrees to reperform deficient Services without charge to
CALPINE up to a maximum amount equivalent to the compensation received
for the deficient Services rendered.
5. INDEPENDENT CONTRACTOR
5.1 CONSULTANT acknowledges and agrees that it enters into this
Contract as an independent contractor. Under no circumstances
shall CONSULTANT look to CALPINE as its employer, nor as a
partner, agent or principal. CONSULTANT shall not be entitled
to any benefits accorded to CALPINE's employees including,
without limitation, workers compensation, disability
insurance, and vacation or sick pay. CONSULTANT shall be
responsible for providing, at its expense and in its name,
disability, workers' compensation or other insurance as well
as licenses and permits usual or necessary for conducting the
Services hereunder.
5.2 CONSULTANT shall pay, when and as due, any and all taxes
incurred as a result of CONSULTANT's compensation hereunder,
including estimated taxes. CONSULTANT hereby indemnifies
CALPINE for any claims, losses costs, fees, liabilities,
damages or injuries suffered by CALPINE arising out of
CONSULTANT's breach of this section.
5.3 CONSULTANT represents that he or she has the qualifications
and ability to perform the Services in a professional manner,
without the advice, control or supervision of CALPINE.
CONSULTANT shall be solely responsible for the professional
performance of the Services, and shall receive no assistance,
direction or control from CALPINE. CONSULTANT shall have sole
discretion and control of its work and the manner in which it
is performed.
6. INSURANCE
6.1 CONSULTANT shall maintain in full force and effect during the
term of this Contract, the insurance described below, as well
as such other insurance as deemed reasonably necessary by
CALPINE to insure the services performed hereunder.
6.1.1 Automobile liability insurance covering owned,
non-owned and hired automobiles for a combined single
limit of $100,000/$300,000 for bodily injury and
property damage.
6.2 CONSULTANT shall, upon request, furnish certificates showing
that the above insurance will be in effect during the term of
this Contract and shall specify that CALPINE must be given, in
writing, thirty (30) days notice of cancellation, termination,
or alternation of the policies evidenced by certificates. It
is acknowledged, understood and agreed that no payment shall
be due from CALPINE under this Contract at any time when
CONSULTANT is not in full compliance with this provision
dealing with insurance.
- 2 -
<PAGE>
7. INDEMNITY
7.1 CALPINE agrees to indemnify CONSULTANT and hold him harmless
against any claim by any person that CONSULTANT's performance
arising from or in connection with CONSULTANT's relationship
with CALPINE renders CONSULTANT liable to such person, and
against any losses or damages suffered by CALPINE and its
affiliates as a result of any such claim (including legal fees
and expenses); provided, however, that such indemnity will not
extend to any action taken or omitted by CONSULTANT as a
result of gross negligence or wilful misconduct.
7.2 CONSULTANT shall not be liable for any consequential or
indirect damages occurring as a result of any recommendation,
opinion or advice given by CONSULTANT, or from any
implementation of CONSULTANT's recommendations by CALPINE, or
from any other services performed hereunder by CONSULTANT for
CALPINE.
8. ASSIGNMENT AND SUBCONTRACTING
CONSULTANT shall not have the right to assign this Contract or
subcontract any of the work without the prior written consent of
CALPINE. CONSULTANT shall supervise all work subcontracted by
CONSULTANT in performing the Services and shall be responsible for all
work performed by a subcontractor as if CONSULTANT itself had performed
such work. The assignment or subcontracting of any work to
subcontractors shall not relieve CONSULTANT from any of its obligations
under this Contract with respect to the Services.
9. CONFIDENTIALITY
All data, information, work papers, technology and reports furnished or
disclosed by CALPINE to CONSULTANT or its personnel in the course of
performing the Services ("Information") are and shall remain the sole
property of CALPINE and shall be kept confidential by CONSULTANT, and
shall be delivered over to CALPINE at CALPINE's request. CONSULTANT
agrees not to divulge all or any part of the Information to third
parties, without the prior written consent of CALPINE, unless:
(a) The Information is known to CONSULTANT prior to obtaining the
same from CALPINE;
(b) The Information is, at the time of disclosure by CONSULTANT,
then in the public domain; or
(c) The Information is obtained by CONSULTANT from a third party
who did not receive same, directly or indirectly, from CALPINE
and who has no obligation of secrecy with respect thereto.
CONSULTANT further agrees that it will not, without the prior written
consent of CALPINE, disclose to any third party any of such Information
developed or obtained by CONSULTANT in the performance of this
Contract. If so requested by CALPINE, CONSULTANT further agrees to
require its employees to execute a nondisclosure agreement prior to
performing Services under this Contract.
10. JURISDICTION
This Contract shall be governed by and be construed in accordance with
the laws of the State of California.
11. PUBLICATION
CONSULTANT shall not use CALPINE's name or trademarks, photographs or
otherwise claim any affiliation with CALPINE in any publication or
public forum without obtaining prior written approval from CALPINE.
- 3 -
<PAGE>
12. SURVIVAL
The rights and obligations of the parties, which, by their nature, are
normally intended to survive the termination or completion of this
Contract shall remain in full force and effect following termination of
this Contract for any reason.
13. ENTIRE CONTRACT AND AMENDMENTS
This Contract, together with Exhibits and Schedules, if any, attached
hereto, all of which are incorporated herein as part of this Contract
by this reference, and together with all purchase orders, contain the
entire agreement between the parties hereto with respect to the subject
matter hereof. No amendment to this Contract or to any purchase order
shall be binding upon either party hereto, unless it is in writing and
executed on behalf of each party hereto by a duly authorized
representative and expressly specified as such.
14. BINDING EFFECT
This First Amended and Restated Contract shall be binding upon and
inure to the benefit of the parties hereto, and to their successors and
permitted assigns.
IN WITNESS WHEREOF, this Contract is executed effective as of the day
and year first above written.
CALPINE: CONSULTANT:
CALPINE CORPORATION GEORGE J. STATHAKIS
By: By:
Title: President Title:
Date: April 3, 1997 Date:
- 4 -
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CALPINE
CORPORATION'S CONDENSED CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 1997 AND
FROM THE CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE THREE
MONTHS ENDED MARCH 31, 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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<EXCHANGE-RATE> 1
<CASH> 96,164
<SECURITIES> 4,501
<RECEIVABLES> 22,198
<ALLOWANCES> 0
<INVENTORY> 2,674
<CURRENT-ASSETS> 146,082
<PP&E> 786,737
<DEPRECIATION> 111,323
<TOTAL-ASSETS> 1,014,766
<CURRENT-LIABILITIES> 77,482
<BONDS> 554,303
0
0
<COMMON> 20
<OTHER-SE> 199,483
<TOTAL-LIABILITY-AND-EQUITY> 1,014,766
<SALES> 33,687
<TOTAL-REVENUES> 39,231
<CGS> 28,739
<TOTAL-COSTS> 30,589
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,977
<INCOME-PRETAX> (7,106)
<INCOME-TAX> (3,066)
<INCOME-CONTINUING> (4,040)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,040)
<EPS-PRIMARY> (0.20)
<EPS-DILUTED> (0.20)
</TABLE>
