CALPINE CORP
10-Q, 1997-05-12
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 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




                                      - 1 -
<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


                                      - 2 -
<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.


                                      - 3 -
<PAGE>

                      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.


                                      - 4 -
<PAGE>

                      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.


                                      - 5 -
<PAGE>

                      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.


                                      - 6 -
<PAGE>

                      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.


                                      - 7 -
<PAGE>

                      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.


                                      - 8 -
<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.

                                      - 9 -
<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


                                     - 11 -
<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.


                                     - 12 -
<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


                                     - 13 -
<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.


                                     - 14 -
<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)


                                     - 15 -
<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)


                                     - 16 -
<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)


                                     - 17 -
<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)


                                     - 18 -
<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)


                                     - 19 -
<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>


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