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, 1998
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from
______________________ to ______________________
Commission File Number: 033-73160
CALPINE CORPORATION
(A Delaware Corporation)
I.R.S. Employer Identification No. 77-0212977
50 West San Fernando Street
San Jose, California 95113
Telephone: (408) 995-5115
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [ X ] No [ ]
Indicate the number of shares outstanding of each of the Registrant's classes of
common stock, as of the latest practicable date:
$0.001 par value Common Stock 20,105,390 shares outstanding on
May 12, 1998
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<PAGE>
CALPINE CORPORATION AND SUBSIDIARIES
Report on Form 10-Q
For the Quarter Ended March 31, 1998
INDEX
PART I. FINANCIAL INFORMATION Page No.
ITEM 1. Financial Statements
Condensed Consolidated Balance Sheets
March 31, 1998 and December 31, 1997..................................3
Condensed Consolidated Statements of Operations
Three Months Ended March 31, 1998 and 1997............................4
Condensed Consolidated Statements of Cash Flows
Three Months Ended March 31, 1998 and 1997............................5
Notes to Condensed Consolidated Financial Statements..................6
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations..................................13
PART II..OTHER INFORMATION
ITEM 1. Legal Proceedings...........................................20
ITEM 2. Change in Securities........................................20
ITEM 3. Defaults Upon Senior Securities.............................20
ITEM 4. Submission of Matters to a Vote of Security Holders.........20
ITEM 5. Other Information...........................................20
ITEM 6. Exhibits and Reports on Form 8-K............................21
Signatures....................................................................25
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<PAGE>
ITEM 1. FINANCIAL STATEMENTS
CALPINE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, 1998 and December 31, 1997
(in thousands)
March 31, December 31,
1998 1997
---------- ----------
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents ......................... $ 96,960 $ 48,513
Accounts receivable from related parties ......... 3,605 7,672
Accounts receivable from others .................. 69,866 35,133
Collateral securities, current portion ........... 3,387 6,036
Loans receivable from related parties, current
portion ........................................ -- 30,507
Prepaid operating lease .......................... 13,652 13,652
Inventories ...................................... 9,114 6,015
Other current assets ............................. 19,920 19,050
---------- ----------
Total current assets .......................... 216,504 166,578
Property, plant and equipment, net ................... 1,140,783 719,721
Investments in power projects ........................ 156,194 239,160
Project development costs ............................ 7,490 4,614
Collateral securities, net of current portion ........ 86,155 87,134
Loans receivable from related parties, net of current
portion............................................. -- 101,304
Notes receivable from related parties ................ 13,575 16,053
Restricted cash ...................................... 15,659 15,584
Deferred financing costs ............................. 24,021 20,493
Other assets ......................................... 17,716 10,315
---------- ----------
Total assets ................................. $1,678,097 $1,380,956
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of non-recourse project financing . $ 9,670 $ 112,966
Accounts payable .................................. 38,415 30,441
Accrued payroll and related expenses .............. 3,151 4,950
Accrued interest payable .......................... 14,286 18,025
Deferred lease incentive .......................... 3,569 3,569
Other current liabilities ......................... 30,672 8,635
---------- ----------
Total current liabilities ..................... 99,763 178,586
Non-recourse project financing, net of current portion 227,081 182,893
Senior Notes ......................................... 859,629 560,041
Deferred income taxes, net ........................... 163,024 142,050
Deferred lease incentive ............................. 70,491 71,383
Other liabilities .................................... 20,621 6,047
---------- ----------
Total liabilities ............................ 1,440,609 1,141,000
---------- ----------
Stockholders' equity:
Common stock ...................................... 20 20
Additional paid-in capital ........................ 168,132 167,542
Retained earnings ................................. 69,336 72,394
---------- ----------
Total stockholders' equity .................... 237,488 239,956
---------- ----------
Total liabilities and stockholders' equity .... $1,678,097 $1,380,956
========== ==========
The accompanying notes are an integral part of these
consolidated financial statements.
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<PAGE>
CALPINE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended March 31, 1998 and 1997 (in
thousands, except per share amounts)
(unaudited)
Three Months Ended
March 31,
--------------------
1998 1997
-------- --------
Revenue:
Electricity and steam sales ......................... $ 43,390 $ 33,687
Service contract revenue ............................ 5,481 1,814
Income from unconsolidated investments in power
projects .......................................... 3,754 2,033
Interest income on loans to power projects ......... 2,520 1,697
-------- --------
Total revenue ................................... 55,145 39,231
-------- --------
Cost of revenue:
Plant operating expenses, depreciation,
operating lease expense and production royalties ... 34,473 29,205
Service contract expenses ........................... 4,896 1,384
-------- --------
Total cost of revenue ........................... 39,369 30,589
-------- --------
Gross profit ........................................... 15,776 8,642
Project development expenses ........................... 1,681 2,161
General and administrative expenses .................... 5,236 4,211
-------- --------
Income from operations .......................... 8,859 2,270
Interest expense ....................................... 18,523 12,977
Interest income ........................................ (2,363) (3,401)
Other (income) expense ................................. (401) (200)
-------- --------
Loss before provision for income taxes .......... (6,900) (7,106)
Provision for income taxes ............................. (3,843) (3,066)
-------- --------
Net loss ........................................ $ (3,057) $ (4,040)
======== ========
Basic earnings per common share:
Weighted average shares of common stock .............. 20,087 19,852
Basic earnings per share ............................. $ (0.15) $ (0.20)
Diluted earnings per share:
Weighted average shares of common stock .............. 20,087 19,852
Diluted earnings per share ........................... $ (0.15) $ (0.20)
The accompanying notes are an integral part of these
consolidated financial statements.
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<PAGE>
CALPlNE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS For the
Three Months Ended March 31, 1998 and 1997
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------
1998 1997
--------- ---------
<S> <C> <C>
Net cash provided by operating activities ............. $ 3,545 $ 9,194
--------- ---------
Cash flows from investing activities:
Acquisition of property, plant and equipment ........ (12,873) (27,887)
Acquisitions ........................................ (157,108) (7,462)
Decrease in notes receivable ........................ 13,814 --
Maturities of collateral securities ................. 4,480 5,350
Project development costs ........................... (2,912) (1,277)
Decrease(increase) in restricted cash ............... (76) 12,302
Other ............................................... 419 (34)
--------- ---------
Net cash used in investing activities ......... (154,256) (19,008)
--------- ---------
Cash flows from financing activities:
Borrowings of non-recourse project financing ........ 44,450 1,650
Repayments of non-recourse project financing ........ (140,935) (139)
Proceeds from Senior Notes .......................... 300,000 --
Proceeds from issuance of common stock .............. 421 419
Financing costs ..................................... (4,778) (3)
--------- ---------
Net cash provided by financing activities .... 199,158 1,927
--------- ---------
Net increase (decrease) in cash and cash equivalents... 48,447 (7,887)
Cash and cash equivalents, beginning of period ........ 48,513 100,010
--------- ---------
Cash and cash equivalents, end of period .............. $ 96,960 $ 92,123
========= =========
Cash paid during the period for:
Interest ............................................ $ 23,034 $ 9,079
Income taxes ........................................ $ -- $ 435
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
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<PAGE>
CALPINE CORPORATION AND SUBSIDIAIRIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1998
1. Organization and Operation of the Company
Calpine Corporation ("Calpine"), a Delaware corporation, and subsidiaries
(collectively, the "Company") 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 and operates natural gas-fired power plants,
geothermal power plants and geothermal steam fields.
2. Summary of Significant Accounting Policies
Basis of Interim Presentation -- The accompanying interim condensed consolidated
financial statements of the Company have been prepared by the Company, without
audit by independent public accountants, pursuant to the rules and regulations
of the Securities and Exchange Commission. In the opinion of management, the
condensed consolidated financial statements include the adjustments necessary to
present fairly the information required to be set forth therein. Certain
information and note disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted from these statements pursuant to such rules and
regulations and, accordingly, should be read in conjunction with the audited
consolidated financial statements of the Company included in the Company's
annual report on Form 10-K for the year ended December 31, 1997. The results for
interim periods are not necessarily indicative of the results for the entire
year.
Capitalized interest -- The Company capitalizes interest on projects during the
construction period. For the three months ended March 31, 1998 and 1997, the
Company capitalized $2.0 million and $563,000 of interest in connection with the
construction of power plants.
Derivative financial instruments - The Company engages in activities to manage
risks associated with changes in interest rates. The Company has entered into
swap agreements to reduce exposure to interest rate fluctuations in connection
with certain debt commitments. The instruments' cash flows mirror those of the
underlying exposure. Unrealized gains and losses relating to the instruments are
being deferred over the lives of the contracts. The premiums paid on the
instruments, as measured at inception, are being amortized over their respective
lives as components of interest expense. Any gains or losses realized upon the
early termination of these instruments are deferred and recognized in income
over the remaining life of the existing swap.
Reclassifications -- Prior period amounts in the consolidated condensed
financial statements have been reclassified where necessary to conform to the
1998 presentation.
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<PAGE>
CALPINE CORPORATION AND SUBSIDIAIRIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
March 31, 1998
3. Accounts Receivable
At March 31, 1998, accounts receivable totaled $73.5 million, which included
$3.6 million receivable from related parties. Accounts receivable from related
parties at March 31, 1998 and December 31, 1997 include the following (in
thousands):
March 31, December 31,
1998 1997
------ ------
Nisseqougue Cogen Partners ........................... $2,982 $4,140
TBG Cogen Partners ................................... 34 1,490
Texas Cogeneration Company ........................... -- 903
Sumas Cogeneration Company, L.P ...................... 107 527
Geothermal Energy Partners, Ltd. ..................... 130 275
O.L.S. Energy-Agnews, Inc. ........................... 247 269
KIAC Partners ........................................ 105 68
------ ------
Accounts receivable from related parties ........... $3,605 $7,672
====== ======
4. Results of Unconsolidated Investments in Power Projects
The Company has unconsolidated investments in power projects which are accounted
for under the equity method. Investments in less-than-majority-owned affiliates
and the nature and extent of these investments change over time. The combined
results of operations and financial position of the Company's equity-basis
affiliates are summarized below (in thousands):
Three Months Ended
------------------------
March 31, March 31,
1998 1997
----------- -----------
Condensed Statement of Operations
Revenue............................................. $ 190,815 $ 18,009
Net income.......................................... $ 13,236 $ 5,724
Company's share of net income......................... $ 3,754 $ 2,033
As Of As Of
March 31, December 31,
1998 1997
----------- -----------
Condensed Balance Sheet
Assets.............................................. $ 1,252,719 $ 1,693,454
Liabilities......................................... $ 994,886 $ 1,276,922
Company's investment in subsidiaries.................. $ 151,422 $ 237,241
Project development costs............................. 732 1,919
----------- -----------
Total investments....................... ........... $ 152,154 $ 239,160
=========== ===========
The following details the Company's income from investments in unconsolidated
power projects and the service contract revenue recorded by the Company related
to those power projects (in thousands):
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<PAGE>
CALPINE CORPORATION AND SUBSIDIAIRIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
March 31, 1998
<TABLE>
<CAPTION>
Investments in Service
Power Projects Contract Revenue
------------------- -----------------
For the three months ended March 31,
Ownership --------------------------------------
Percentage 1998 1997 1998 1997
-------------- -------- -------- -------- ------
<S> <C> <C> <C> <C> <C>
Sumas Cogeneration Company, L.P (1) $ 979 $ 2,066 $ 373 $ 518
O.L.S. Energy-Agnews, Inc 20 (88) (124) 437 459
Geothermal Energy Partners, Ltd 5 111 91 802 780
Auburndale Power Partners, L.P. 50 (163) - - -
Gordonsville Energy, L.P 50 1,367 - - -
KIAC Partners 50 (2,192) - - -
Nissequogue Cogen Partners 50 (119) - - -
Lockport Energy Associates,L.P 11 938 - - -
Texas Cogeneration Company (2) 2,922 - 1,613 -
</TABLE>
(1) On September 30, 1997, the partnership agreement governing Sumas
Cogeneration Company, L.P. ("Sumas") was amended changing the
distribution percentages to the partners. As provided for in the
amendment, the Company's percentage share of the project's cash flow
increased from 50% to approximately 70% through June 30, 2001, based on
certain specified payments. Thereafter, the Company will receive 50% of
the project's cash flow until a 24.5% pre-tax rate of return on its
original investment is achieved, at which time the Company's equity
interest in the partnership will be reduced to 0.1%. As a result of the
amendment of the partnership agreement and the receipt of certain
distributions during 1997, the Company's investment in Sumas was reduced
to zero. Because the investment has been reduced to zero and there are
no continuing obligations of the Company related to Sumas, the Company
expects that income recorded in future periods will approximate the
amount of cash received from partnership distributions.
(2) On March 31, 1998, the Company acquired the remaining 50%
interest in Texas Cogeneration Company.
5. Repayment of Non-Recourse Financing
On March 31, 1998, the Company repaid $89.6 million to The Bank of Nova Scotia
which represented the outstanding balance on the original $125.0 million of
non-recourse project financing utilized to fund a portion of the purchase of the
original 50% interest in Texas Cogeneration Company, and the purchase of $155.6
million of notes receivable from the related projects. The Company refinanced
the non-recourse debt with a portion of the net proceeds from the $300.0 million
offering of 7-7/8% Senior Notes Due 2008 (see Note 9).
6. Texas City and Clear Lake Transaction
On March 31, 1998, the Company acquired the remaining 50% interest in the Texas
City Power Plant and the Clear Lake Power Plant for a purchase price of $52.8
million in cash, subject to final adjustments. The Company has certain
contingent purchase payments that could approximate 2.2% of project revenue
beginning in the year 2000, increasing to 2.9% in 2002. The Company acquired the
remaining interests in these plants by purchasing the capital stock of Texas
Cogeneration Company ("TCC") from Dominion Cogen, Inc. ("DCI"). As part of this
transaction, the Company now owns a 7.5% interest in a 165 megawatt natural gas-
-8-
<PAGE>
CALPINE CORPORATION AND SUBSIDIAIRIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
March 31, 1998
fired power plant located in Bayonne, NJ. A wholly owned subsidiary
of Calpine now purchases a portion of its natural gas for the Texas power plants
from Enron Capital & Trade Resources Corp. In a related transaction, the Company
paid approximately $105.3 million to restructure certain gas contracts with
Enron Capital & Trade Resources Corp
The purchase of the capital stock from DCI and the restructuring of certain gas
contracts were funded with a portion of the net proceeds from the issuance of
the 7-7/8% Senior Notes Due 2008.
The acquisition is being accounted for as a purchase. The effective date of the
transaction was March 31, 1998.
On June 23, 1997, the Company had acquired an initial 50% interest in the Texas
City and Clear Lake Power Plants through the acquisition of 50% of the capital
stock of Enron/Dominion Cogen Corp. ("EDCC") from a subsidiary of Enron Corp.
EDCC was subsequently renamed TCC. In addition to the purchase of the capital
stock of TCC in June 1997, the Company purchased from the project lenders $155.6
million of outstanding debt on the Texas City and Clear Lake Power Plants
(approximately $53.0 and $102.6 million, respectively).
The following represents unaudited pro forma results of operations for the year
ended December 31, 1997 assuming the acquisition occurred as of January 1, 1997
(in thousands, except per share data):
1997
---------
Revenue $ 603,760
Net income $ 61,464
Basic earnings per share $ 3.08
Diluted earnings per share $ 2.92
7. Bethpage Transaction
On February 9, 1998, the Company acquired the remaining 55% interest in TBG
Cogen Partners Joint Venture ("TBG Cogen"). The partnership owns the Bethpage
Power Plant, a 57 megawatt gas-fired cogeneration facility located on Long
Island. The total purchase price of $5.0 million consisted of: (i) a $4.6
million cash payment, and (ii) a $375,000 option applied toward the purchase,
subject to final adjustments. The Company was also assigned all of General
Electric's interest as operator of the Bethpage Power Plant.
Upon the acquisition of the remaining 55% interest, the Company assumed the
outstanding debt of TBG Cogen. On March 31, 1998, the Company made a payment to
Toronto Dominion, Inc. of approximately $38.2 million to pay off the existing
project debt, accrued interest, and a related interest rate swap with a portion
of the net proceeds from the 7-7/8% Senior Notes Due 2008. The acquisition is
being accounted for as a purchase.
8. Financial Instruments
On March 31, 1998, the Company completed its Rule 144A offering of $300.0
million 7-7/8% Senior Notes Due 2008 ("Senior Notes Due 2008"). After deducting
discounts to initial purchasers and expenses of the offering, the net proceeds
from the
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<PAGE>
CALPINE CORPORATION AND SUBSIDIAIRIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
March 31, 1998
sale of the Senior Notes Due 2008 were approximately $293.5 million. Proceeds
from the Senior Notes Due 2008 were used as follows: (i) $52.8 million to pay
for the purchase of the remaining 50% interest in TCC (see Note 7), (ii) $105.3
million to pay for the restructuring of certain gas contracts associated with
the TCC acquisition, (iii) $89.6 million to repay the outstanding principal on
the non-recourse debt provided by The Bank of Nova Scotia, and (iv) $38.2
million to repay outstanding debt on the Bethpage Power Plant. Transaction costs
incurred in connection with the debt offering were recorded as a deferred charge
and are amortized over the ten year life of the Senior Notes Due 2008 using the
effective interest rate method.
In anticipation of the Senior Notes Due 2008 offering, the Company entered into
a forward treasury bond during February 1998. The Company closed its position
prior to the pricing date of the debt resulting in a gain of $2.3 million, which
was applied against transaction costs associated with the financing.
9. Revolving Credit Facility and Line of Credit
At March 31, 1998, 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, 1998, the
Company had no borrowings and $15.4 million of letters of credit outstanding
under the credit facility. Borrowings bear interest at The Bank of Nova Scotia's
base rate plus an applicable margin or at the London Interbank Offered Rate
("LIBOR") plus an applicable margin. Interest is paid on the last day of each
interest period for such loans, but not less often than quarterly. The credit
facility expires in September 1999.
On May 15, 1998, the Company replaced the $50.0 million credit facility with a
$100.0 million credit facility which has a three year term.
10. Earnings per Share
The Company adopted Statement of Financial Accounting Standards No. 128,
"Earnings per Share," which replaces the presentation of primary earnings per
share and fully diluted earnings per share with a presentation of basic earnings
per share and diluted earnings per share. As the Company incurred a loss during
the three months ended March 31, 1998, both basic and diluted earnings per share
are the same.
<TABLE>
<CAPTION>
Net Loss Shares
(Numerator) (Denominator) Per Share
(in thousands) (in thousands) Amount
-------------------- -------------------- -----------------
<S> <C> <C> <C>
For the three months ended March 31, 1997
Basic and diluted earnings per share
Income available to common stockholders $ (4,040) 19,852 $ (0.20)
For the three months ended March 31, 1997
Basic and diluted earnings per share
Income available to common stockholders $ (3,057) 20,087 $ (0.15)
</TABLE>
Unexercised employee stock options to purchase 2.1 million and 2.4 million
shares of the Company's common stock during the three months ended March 31,
1998 and
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<PAGE>
CALPINE CORPORATION AND SUBSIDIAIRIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
March 31, 1998
1997, respectively, were not included in the computation of diluted shares
outstanding because such inclusion would be anti-dilutive.
11. Contingencies
On September 30, 1997, a lawsuit was filed by Indeck North American Power Fund
("Indeck") in the Circuit Court of Cook County, Illinois against Norweb plc. and
certain other parties, including the Company. Some of Indeck's claims relate to
Calpine Gordonsville, Inc.'s acquisition of a 50% interest in Gordonsville
Energy L.P. from Northern Hydro Limited and Calpine Auburndale, Inc.'s
acquisition of a 50% interest in Auburndale Power Plant Partners Limited
Partnership from Norweb Power Services (No. 1) Limited. Indeck is claiming that
Calpine Gordonsville, Inc., Calpine Auburndale, Inc. and the Company tortiously
interfered with Indeck's contractual rights to purchase such interests and
conspired with other parties to do so. Indeck is seeking $25.0 million in
compensatory damages, $25.0 million in punitive damages, and the recovery of
attorneys' fees and costs. All the defendants filed motions to dismiss such
claims, which are currently pending. The Company believes that the claims of
Indeck are without merit and that the resolution of this matter will not have a
material adverse effect on the Company's financial position or results of
operations.
There is currently a dispute between Texas-New Mexico Power Company ("TNP") and
Clear Lake Cogeneration Limited Partnership ("CLC"), which owns the Clear Lake
Power Plant, regarding certain costs and other amounts that TNP has withheld
from payments due under the power sales agreement. As of December 31, 1997, TNP
has withheld approximately $5.4 million related to transmission charges and has
continued to withhold approximately $450,000 per month thereafter. CLC filed a
petition for declaratory order with the Texas Public Utilities Commission
("Texas PUC") on October 2, 1997 requesting that the Texas PUC declare that
TNP's withholding is in error. This matter is pending before the Texas PUC. In
addition, as of March 31, 1998, TNP has withheld approximately $5.2 million of
standby power charges and has continued to withhold approximately $270,000 per
month thereafter. CLC has filed a lawsuit in Texas against TNP claiming that TNP
is in breach of certain provisions of the power sales agreement, including the
provisions involved in the disputes described above, and is seeking in excess of
$15.0 million in damages. A trial has been rescheduled to commence from the
previously reported date of June 1998 to October of 1998. The Company is unable
to predict the outcome of either of these proceedings.
An action was filed against Lockport Energy Associates, L.P. ("LEA") on August
7, 1997 by New York State Electricity and Gas Company ("NYSEG") in the Federal
District Court for the Northern District of New York. NYSEG has requested the
Court to direct the Federal Energy Regulatory Commission (the "FERC") and the
New York Public Service Commission ("NYPSC"), to modify contract rates to be
paid to the Lockport Power Plant. On October 14, 1997, NYPSC, a named defendant
in the NYSEG action, filed a cross-claim alleging that the FERC violated PURPA
and the Federal Power Act by failing to reform the NYSEG contract which was
previously approved by the NYPSC. LEA continues to vigorously defend this
action, although it is unable to predict the outcome of this case. Calpine
retains the right to require The Brooklyn Union Gas Company ("BUG") to purchase
Calpine's interest in the Lockport Power Plant for $18.9 million, less equity
distributions received by Calpine, at any time before December 19, 2001. In the
event the NYSEG's action is successful, Calpine may choose to exercise its right
to require BUG to
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<PAGE>
CALPINE CORPORATION AND SUBSIDIAIRIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
March 31, 1998
purchase its interest in the Lockport Power Plant.
On February 17, 1998, the Company filed an action in the Superior Court of
California, Sonoma County, seeking injunctive and declaratory relief to prevent
Pacific Gas & Electric Company ("PG&E") from unilaterally assigning the
Company's steam sales contract to the prospective winning bidder in PG&E's
recently announced auction of its power plants in The Geysers. On January 14,
1998, PG&E filed an application with the CPUC pursuant to Public Utilities Code
Section 851 ("851 Filing"), in which it seeks authorization to sell five
electric generating plants and related assets. Included in this proposed sale
are The Geysers Geothermal Power Plants (including Units 13 and 16) and certain
of PG&E's fossil fueled steam-electric generating plants. In PG&E's 851 Filing,
PG&E announced its intention to assign its rights and to delegate its duties
under the Company's steam contract to the successful third party purchaser of
the Unit 13 and Unit 16 Power Plants. The Company had been informed by PG&E that
it will attempt to make such assignment and delegation without first seeking and
obtaining the approval and consent of the Company. In April 1998, PG&E and the
Company entered into an agreement to resolve their differences relating to the
assignability of the steam sales contract. Under the terms of the agreement,
Calpine has dismissed the Sonoma County Superior Court lawsuit and PG&E has
withdrawn its motion to modify the Assigned Commissioners Ruling in the CPUC 851
divestiture proceeding as it relates to Calpine. As part of the agreement, PG&E
and Calpine have agreed to amend the steam sales agreement to modify the steam
pricing formula and to grant Calpine a right of first refusal to purchase the
Units 13 and 16 power plants for the same price and terms as PG&E is willing to
sell to a third party buyer in the 851 auction.
The Company is involved in various other claims and legal actions arising out of
the normal course of business. The Company does not expect that the outcome of
these proceedings will have a material adverse effect on the Company's financial
position or results of operations, although no assurance can be given in this
regard.
12. Subsequent Event
On April 9, 1998 the Company terminated an existing interest rate swap related
to the debt for the Clear Lake Power Plant. Approximately $3.7 million was paid
by the Company to the Bank of Nova Scotia in terminating the existing swap.
-12-
<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 annual report may be considered forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended and subject to
the safe harbor created by the Securities Litigation Reform Act of 1995. Such
statements include declarations regarding the intent, belief or current
expectations of the Company and its management. Prospective investors are
cautioned that any such forward-looking statements are not guarantees of future
performance and involve a number of risks and uncertainties; actual results
could differ materially from those indicated by such forward-looking statements.
Among the important factors that could cause actual results to differ materially
from those indicated by such forward-looking statements are: (i) that the
information is of a preliminary nature and may be subject to further adjustment,
(ii) the possible unavailability of financing, (iii) risks related to the
development, acquisition and operation of power plants, (iv) the impact of
avoided cost pricing, energy price fluctuations and gas price increases, (v) the
impact of curtailment, (vi) the seasonal nature of the Company's business, (vii)
start-up risks, (viii) general operating risks, (ix) the dependence on third
parties, (x) risks associated with international investments, (xi) risks
associated with the power marketing business, (xii) changes in government
regulation, (xiii) the availability of natural gas, (xiv) the effects of
competition, (xv) the dependence on senior management, (xvi) volatility in the
Company's stock price, (xvii) fluctuations in quarterly results and seasonality,
and (xviii) other risks identified from time to time in the Company's reports
and registration statements filed with the Securities and Exchange Commission.
OVERVIEW
- --------
Calpine Corporation ("Calpine") a Delaware corporation, and subsidiaries
(collectively, the "Company") is engaged in the acquisition, development,
ownership and operation of power generation facilities and the sale of
electricity and steam principally in the United States. At March 31, 1998, the
Company had interests in 24 power plants and steam fields in six states and
Mexico, having an aggregate capacity of 2,778 megawatts.
Reflecting the seasonality of several of its long-term power sales agreements,
the Company reported a net loss of $3.1 million, or ($0.15) per basic common
share, for the three months ended March 31, 1998. This compared to a net loss of
$4.0 million, or ($.20) per basic common share, for the same period in 1997.
On February 5, 1998, the Company acquired the remaining 55% interest in, and
assumed operations and maintenance of, the Bethpage Power Plant. The Company
purchased the remaining interests for approximately $5.0 million. Additionally,
on March 31, 1998 the Company repaid all outstanding project debt of $38.2
million.
On February 18, 1998, the Company announced that it had entered into exclusive
negotiations to acquire a 70 megawatt gas-fired cogeneration power plant and
natural gas pipeline system from The Dow Chemical Company located in Pittsburg,
California. There can be no assurance that the Company will successfully
complete this acquisition.
On March 31, 1998, the Company completed the acquisition of the remaining 50%
interest in the Texas Cogeneration Company ("TCC"), which is the owner of the
Texas City and Clear Lake Power Plants. The Company paid $52.8 million in cash
and must make certain contingent purchase payments that could approximate 2.2%
of project revenue beginning in the year 2000, increasing to 2.9% in 2002. As
part of this acquisition, the Company now is the owner of a 7.5% interest in the
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Bayonne Power Plant, a 165 megawatt natural gas-fired cogeneration power plant
located in Bayonne, New Jersey. In addition, the Company paid $105.3 million to
restructure certain gas contracts related to this transaction.
Included in the results of operations for the three months ended March 31, 1998
are the King City and Gilroy Power Plants which each have a generating capacity
of 120 megawatts. In accordance with their power sales agreements, the King City
and Gilroy Power Plants did not generate electricity during this period. As
scheduled, both power plants resumed operation on May 1, 1998 and 1997.
SELECTED OPERATING INFORMATION
- ------------------------------
Set forth below is certain selected operating information for the power plants
and steam fields, for which results are consolidated in the Company's Condensed
Consolidated Statements of Operations. Information set forth under the power
plants consists of the results for the West Ford Flat, Bear Canyon, Greenleaf 1
& 2, Watsonville, King City and Gilroy Power Plants. Also included is the
Bethpage Power Plant which the Company acquired February 5, 1998. Information
set forth under steam fields consists of the results for the PG&E Units 13 & 16,
the SMUDGEO #1 Steam Fields and the Calpine Thermal Steam Fields, (dollar
amounts in thousands, except per kilowatt hour amounts).
Three Months Ended
March 31,
------------------------------------
Power Plants: 1998 1997
------------------ -----------------
Electricity revenue:
Energy $ 23,314 $ 18,977
Capacity $ 9,462 $ 5,181
Megawatt hours produced 334,052 268,610
Average energy price per
kilowatt hour $ 0.0698 $ 0.0706
Steam Fields:
Steam revenue $ 10,614 $ 9,529
Megawatt hours produced 641,833 606,838
Average price per kilowatt
hour $ 0.0165 $ 0.0157
Megawatt hours produced at the power plants increased 24% for the three months
ended March 31, 1998 as compared with the same period in 1997, primarily due to
72,000 megawatt hours of production at the Bethpage Power Plant.
OTHER FINANCIAL DATA 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,
---------------------
1998 1997
------- -------
Depreciation and amortization ...................... $12,582 $11,333
Interest expense per indenture ..................... $19,724 $14,168
EBITDA ............................................. $25,681 $19,479
EBITDA to interest expense per indenture ........... 1.30x 1.37x
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
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accordance with generally accepted accounting principles) or (ii) to cash flows
from operating activities (determined in accordance with generally accepted
accounting principles).
Interest expense per indenture is defined as total interest expense plus
one-third of all operating lease obligations, dividends paid in respect to
preferred stock and cash contributions to any employee stock ownership plan used
to pay interest on loans to purchase capital stock of the company.
RESULTS OF OPERATIONS
- ---------------------
Three Months Ended March 31, 1998 Compared to Three Months Ended March 31, 1997
REVENUE -- Total revenue increased 41% to $55.1 million for the three months
ended March 31, 1998 compared to $39.2 million in 1997.
Electricity and steam sales revenue increased 29% to $43.4 million in
1998 compared to $33.7 million in 1997. The Bethpage Power Plant provided $4.9
million of revenue since February 5, 1998 when the Company acquired 100%
ownership. The increase in electricity and steam sales was partially due to $2.9
million of increased capacity revenue from the Gilroy and King City Power
Plants, and a $1.9 million increase from geothermal operations.
Service contract revenue increased to $5.5 million in 1998 compared to
$1.8 million in 1997. The 206% increase was primarily attributable to a $1.9
million increase from fuel management fees, as well as an increase of $1.6
million in operations and maintenance revenue from the Texas City and Clear Lake
Power Plants, which the Company acquired a 50% interest in June 1997.
Income from unconsolidated investments in power projects increased 90% to $3.8
million in 1998 compared to $2.0 million during 1997. The increase is primarily
attributable to $2.9 million of equity income from the Company's investment in
the Texas City and Clear Lake Power Plants which were acquired in June 1997, and
$1.4 million of equity income from the Company's investment in the Gordonsville
Power Plant. The above increases were offset by a $1.1 million decrease in
equity income from the Sumas power project and a $1.4 million loss due to
seasonality at the Kennedy International Airport, Lockport and Stony Brook Power
Plants.
Interest income on loans to power projects increased 47% to $2.5
million in 1998 compared to $1.7 million in 1997. The increase is primarily
related to loans made by the Company to the Texas City and Clear Lake Power
Plants.
COST OF REVENUE -- Cost of revenue increased 29% to $39.4 million in 1998
compared to $30.6 million in 1997. The increase of $8.8 million was primarily
attributable to a $2.8 million increase in plant operating expenses at the
Company's geothermal operations due to increased production, and due to
operations at the Bethpage Power Plant since the Company's acquisition of the
remaining interest in the facility on February 5, 1998. Additionally, there was
a $3.5 million increase in service contract expenses, of which $1.3 million is
related to the Texas City and Clear Lake Power Plants' operating and maintenance
contracts, $1.3 million with the fuel management contracts and $764,300 increase
due to the Calpine Gas Company.
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<PAGE>
PROJECT DEVELOPMENT EXPENSES -- Project development expenses decreased 23% to
$1.7 million in 1998 compared to $2.2 million in 1997, due primarily to charges
incurred in the first three months of 1997 related to project development
activities.
GENERAL AND ADMINISTRATIVE EXPENSES -- General and administrative expenses
increased 24% to $5.2 million for the three months in 1998 compared to $4.2
million in 1997. The increase was attributable to continued growth in personnel
and associated overhead costs necessary to support the overall growth in the
Company's operations.
INTEREST EXPENSE -- Interest expense increased 42% to $18.5 million for the
three months in 1998 from $13.0 million for the same period in 1997. The
increase was attributable to (i) $6.0 million related to the 8-3/4% Senior Notes
Due 2007 issued in July and September 1997 and (ii) $2.1 million of interest
expense on debt related to the acquisition of the Texas City and Clear Lake
Power Plants. These increases were partially offset by $2.0 million of interest
capitalized on equity investments for the development and construction of power
plants.
INTEREST INCOME -- Interest income decreased 29% to $2.4 million for the three
months in 1998 from $3.4 million for the same period in 1997. The decrease is
the result of lower cash and cash equivalent balances.
OTHER INCOME, NET -- Other income, net, increased to $401,000 for the three
months in 1998 compared to $200,000 for the same period in 1997. The increase
was attributable to higher royalty income.
PROVISION FOR INCOME TAXES -- The effective income tax rate was approximately
56% for the three months ended March 31, 1998. The reductions from the statutory
tax rate were primarily due to depletion in excess of tax basis benefits at the
Company's geothermal facilities and a decrease in the California taxes paid due
to the Company's expansion into states other than California.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
To date, the Company has obtained cash from its operations, borrowings under its
credit facilities and other working capital lines, sale of debt and equity, and
proceeds from non-recourse project financing. 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's cash flow activities for the
periods indicated (dollars in thousands):
March 31,
-------------------------------------
1998 1997
---------------- ----------------
Cash flows from:
Operating activities $ 3,545 $ 9,195
Investing activities (154,256) (19,008)
Financing activities 199,158 1,927
---------------- ----------------
Total $ 48,447 $ (7,886)
================ ================
Operating activities for the three months ended March 31, 1998 provided $3.5
million, consisting of approximately $12.6 million of depreciation and
amortization, $14.7 million net decrease in operating assets, $2.2 million of
distributions from unconsolidated investments in power projects, offset by $3.1
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million of net loss from operations, $3.8 million of deferred income taxes and
$19.1 million net increase in operating liabilities.
Investing activities for the three months ended March 31, 1998 used $154.3
million, primarily due to $158.1 million for the acquisition of the remaining
50% interest in the Texas City and Clear Lake Power Plants, $4.6 million for the
acquisition of the remaining 55% interest in the Bethpage Power Plant, $7.2
million of capital expenditures related to the construction of the Pasadena
Power Plant, $5.8 million of other capital expenditures, $2.9 million of
capitalized project development costs, offset by the receipt of $13.8 million of
loan payments from Texas City and Clear Lake Power Plants and $4.5 million of
maturities of collateral securities in connection with the King City Power
Plant.
Financing activities for the three months ended March 31, 1998 provided $199.2
million of cash consisting of $43.0 million of borrowings for the construction
of the Pasadena Power Plant, $1.5 million of borrowings for contingent
consideration in connection with the acquisition of the Gilroy Power Plant, and
$293.5 million of net proceeds from the issuance of the Senior Notes Due 2008,
partially offset by $140.9 million in repayment of non-recourse project
financing and $4.8 million of costs associated with financing activities.
At March 31, 1998, cash and cash equivalents were $97.0 million and working
capital was $116.7 million. For the three months ended March 31, 1998, cash and
cash equivalents increased by $48.4 million and working capital increased by
$128.7 million as compared to December 31, 1997.
As a developer, owner and operator of power generation facilities, 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 cash from operations, borrowings under its credit facilities,
other lines of credit, non-recourse project financing or long-term debt, and the
sale of equity.
Management continues to evaluate current and forecasted cash flow as a basis for
financing operating requirements and capital expenditures. The Company believes
that it will have sufficient liquidity from cash flow from operations,
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 for the next twelve
months. The Company expects to commit significant capital in future years for
the acquisition and development of these power plants. The Company's actual
capital expenditures may vary significantly during any year.
During the three months ended March 31, 1998, the credit ratings on the
Company's senior unsecured debt were upgraded by Moody's Investors Service to
"Ba2" from "Ba3" and by Standard & Poor's to "BB-" from "B+",. In addition, Duff
& Phelps Credit Rating Co. assigned an initial credit rating of "BB" on the
Company's senior unsecured debt.
At March 31, 1998, the Company had a $50.0 million revolving credit facility
available with a consortium of commercial lending institutions. At March 31,
1998, the Company had no borrowings and $15.4 million of letters of credit
outstanding under the credit facility. (See Note 9 of Condensed Consolidated
Financial Statements). On May 15, 1998, the Company replaced the $50.0 million
credit facility with a $100.0 million credit facility with a three-year term.
The credit facility contains certain restrictions that limit or prohibit, among
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<PAGE>
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, 1998, the Company had no borrowings under this working
capital line and $74,000 of letters of credit outstanding. Borrowings are at
prime plus 1%.
At March 31, 1998, the Company had $105.0 million of outstanding 9-1/4% Senior
Notes Due 2004, which mature on February 1, 2004 and bear interest payable
semi-annually on February 1 and August 1 of each year. In addition, the Company
had $180.0 million of outstanding 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. During 1997, the Company issued $275.0 million of 8-3/4% Senior
Notes Due 2007, which mature on July 15, 2007 and bear interest payable
semi-annually on January 15 and July 15 of each year.
On March 31, 1998 the Company completed the Rule 144A offering of its $300.0
million 7-7/8% Senior Notes Due 2008. After deducting discounts to initial
purchasers and expenses of the offering, the net proceeds from the sale of the
Senior Notes Due 2008 were approximately $293.5 million (See Note 8 to the
Condensed Consolidated Financial Statements for use of proceeds and further
information). 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 includes dividends and certain purchases and
investments, incur additional indebtedness and engage in certain transactions.
OUTLOOK
- -------
The Company receives from PG&E a fixed price of 13.83 cents for each unit of
electrical energy according to schedules set forth in the long-term power sales
agreements for Bear Canyon and West Ford Flat Power Plants. The fixed price
periods under these power sales agreements expire in September and December
1998, respectively. 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 will adjust from the interim short-run
avoided cost ("SRAC") or the energy clearing-price of the independent power
exchange which commenced operations on March 31, 1998 and is deemed to be
functioning smoothly. The average prices per kilowatt for SRAC for the year 1997
and for the first three months of 1998 were 2.94 cents and 2.90 cents,
respectively. Due to seasonality, such average energy prices may not be
indicative of future energy prices. During the first three months of 1998, the
Bear Canyon and West Ford Flat Power Plants generated approximately 100,226,000
kilowatt hours of electrical energy for sale. The Company expects decreased
royalty expenses can potentially mitigate the forecasted decline in energy
revenues and planned operating cost reductions at these facilities, although
there can be no assurances in this regard. The Company expects to continue its
strategy of replacing decreased revenues through its acquisition and development
program.
Deregulation within the Power Generation Industry. Many states are implementing
or considering regulatory initiatives designed to increase competition in the
domestic power generation industry. In December 1995, the California Public
Utilities Commission ("CPUC") issued an electric industry restructuring
decision,
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<PAGE>
which envisioned commencement of deregulation and implementation of customer
choice of electricity supplier by January 1, 1998. Legislation implementing this
decision was adopted in September 1996. The CPUC subsequently extended the
implementation date to April 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 all of 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.
Impact of Recent Accounting Pronouncements. In February 1998, the Financial
Accounting Standards Board issued Statement of Financial Accounting Standards
No. 132, "Employers' Disclosures about Pensions and Other Postretirement
Benefits." This statement revises standards for disclosures about pension and
other postretirement benefit plans and is effective for fiscal years beginning
after December 15, 1997. This standard expands or modifies disclosure and,
accordingly will have no impact on the company's reported financial position,
results of operations and cash flows.
Year 2000 Compliance. To ensure that the Company's computer systems are Year
2000 compliant, the Company continues to prepare for the Year 2000 issue. The
Company has been reviewing each of its financial and operating systems to
identify those that contain two-digit year codes. The Company is assessing the
amount of programming required to upgrade or replace each of the affected
programs with the goal of completing all relevant internal software remediation
and testing by 1998, with continuing Year 2000 compliance efforts through 1999.
In addition, the Company is actively working with all of its partnerships to
assess their compliance efforts and the Company's exposure resulting from Year
2000 issues.
Based upon current information, the Company does not anticipate costs associated
with the Year 2000 issue to have a material financial impact. However, there can
be no assurances that there will not be interruptions or other limitations of
financial and operating systems functionality or that the Company will not incur
significant costs to avoid such interruptions or limitations. The Company's
expectations about future costs associated with the Year 2000 issue are subject
to uncertainties that could cause actual results to have a greater financial
impact than currently anticipated. Factors that could influence the amount and
timing of future costs include the success of the Company in identifying systems
and programs that contain two-digit year codes, the nature and amount of
programming required to upgrade or replace each of the affected programs, the
rate and magnitude of related labor and consulting costs, and the success of the
Company's partnerships in addressing the Year 2000 issue.
The forward-looking statements discussed in this outlook section involve a
number of risks and uncertainties. Other risks and uncertainties include, but
are not limited to, the general economy, regulatory conditions, the changing
environment of the power generation industry, pricing, the effects of legal and
administrative cases and proceedings, and such other risks and uncertainties as
may be detailed from time to time in the Company's SEC reports and filings.
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<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On February 17, 1998, the Company filed an action in the Superior Court of
California, Sonoma County, seeking injunctive and declaratory relief to prevent
Pacific Gas & Electric Company ("PG&E") from unilaterally assigning the
Company's steam sales contract to the prospective winning bidder in PG&E's
recently announced auction of its power plants in The Geysers. On January 14,
1998, PG&E filed an application with the CPUC pursuant to Public Utilities Code
Section 851 ("851 Filing"), in which it seeks authorization to sell five
electric generating plants and related assets. Included in this proposed sale
are The Geysers Geothermal Power Plants (including Units 13 and 16) and certain
of PG&E's fossil fueled steam-electric generating plants. In PG&E's 851 Filing,
PG&E announced its intention to assign its rights and to delegate its duties
under the Company's steam contract to the successful third party purchaser of
the Unit 13 and Unit 16 Power Plants. The Company had been informed by PG&E that
it will attempt to make such assignment and delegation without first seeking and
obtaining the approval and consent of the Company. In April 1998, PG&E and the
Company entered into an agreement to resolve their differences relating to the
assignability of the steam sales contract. Under the terms of the agreement,
Calpine has dismissed the Sonoma County Superior Court lawsuit and PG&E has
withdrawn its motion to modify the Assigned Commissioners Ruling in the CPUC 851
divestiture proceeding as it relates to Calpine. As part of the agreement, PG&E
and Calpine have agreed to amend the steam sales agreement to modify the steam
pricing formula and to grant Calpine a right of first refusal to purchase the
Units 13 and 16 power plants for the same price and terms as PG&E is willing to
sell to a third party buyer in the 851 auction.
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) Reports on Form 8-K
Current report dated March 16, 1998 and filed on April 1, 1998
Item 5. Other Events - Proposed Rule 144A offering of $200
million principal amount of Senior
Notes Due 2008
Current report dated March 26, 1998 and filed on April 3, 1998
Item 5. Other Events - Proposed Rule 144A offering of $300
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million principal amount of 7-7/8%
Senior Notes Due 2008
Current report dated March 31, 1998 and filed on April 14, 1998
Item 2. Acquisitions and Dispositions of Assets
- TCC Acquisition
Item 7. Financial Statements and Exhibits
Current report dated March 31, 1998 and filed on May 15, 1998
Item 7. Financial Statements and Exhibits - Amended Form 8-K/A
(b) Exhibits
The following exhibits are filed herewith unless otherwise indicated:
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 -- 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)
10.1.2 -- 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)
10.1.3 -- Lease dated as of April 24, 1996 between BAF Energy A
California Limited Partnership, Lessor, and Calpine King
City Cogen, LLC, Lessee.(j)
10.1.4 -- Credit Agreement, dated as of August 28, 1996, among
Calpine Gilroy Cogen, L.P. and Banque Nationale de
Paris.(l)
10.1.5 -- Credit Agreement, dated as of September 25, 1996, among
Calpine Corporation and The Bank of Nova Scotia.(m)
10.1.6 -- 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 -- Asset Purchase Agreement, dated as of August 28, 1996,
among Gilroy Energy Company, McCormick & Company,
Incorporated and Calpine Gilroy Cogen, L.P.(m)
10.2.2 -- Noncompetition/Earnings Contingency Agreement, dated as
of August 28, 1996, among Gilroy Energy Company, McCormick
& Company, Incorporated and Calpine Gilroy Cogen, L.P.(m)
10.2.3 -- Purchase and sale Agreement dated March 27, 1997 for
the purchase and sale of shares of Enron/Dominion
Cogen Corp. Common Stock among Enron Power Corporation and
Calpine Corporation. (p)
10.2.4 -- Stock Purchase and redemption Agreement dated March
31, 1998, among Dominion Cogen, Inc. Dominion Energy,
Inc. and Calpine Finance (q)
10.3 -- Power Sales Agreements
10.3.1 -- Long-Term Energy and Capacity Power Purchase Agreement
relating
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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 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)
10.3.6 -- Amended and Restated Energy Sales Agreement, dated
December 16, 1996, between Phillips Petroleum Company and
Pasadena Cogeneration, L.P.(n)
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)
10.8 -- 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 -- 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)
10.9.1 -- 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)
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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 -- First Amended and Restated Consulting Contract between
Calpine Corporation and Mr. George J. Stathakis.(o)
10.11 -- Form of Indemnification Agreement for directors and
officers. (l)
21.1 -- Subsidiaries of the Company.(m)
27.0 -- Financial Data Schedule.*
- ------------
(a) Incorporated by reference to Registrant's Registration Statement on Form
S-1 (Registration Statement No. 33-73160).
(b) Intentionally ommitted.
(c) Intentionally ommitted.
(d) Intentionally ommitted.
(e) Intentionally ommitted.
(f) Intentionally ommitted.
(g) Intentionally ommitted.
(h) Intentionally ommitted.
(i) Intentionally ommitted.
(j) Intentionally ommitted.
(k) Intentionally ommitted.
(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, filed on March 27, 1996.
-23-
<PAGE>
(o) Incorporated by reference to Registrant's Quarterly Report on Form 10-Q
dated March 31, 1997 and filed on May 12, 1997
(p) Incorporated by reference to Registrant's Quarterly Report on Form 10-Q
dated June 30, 1997 and filed on August 14, 1997.
(q) Incorporated by reference to Registrant's Current Report on Form 8-K dated
March 31, 1998 and filed on April 14, 1998.
* Filed herewith.
Exhibit 27 Financial Data Schedule
-24-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CALPINE CORPORATION
By: /s/ Ann B. Curtis Date: May 15, 1997
--------------------------------------------
Ann B. Curtis
Senior Vice President
(Chief Financial Officer)
By: /s/ Gloria S. Gee Date: May 15, 1997
--------------------------------------------
Gloria S. Gee
Corporate Controller
(Chief Accounting Officer)
-25-
<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, 1998 AND FROM THE CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1998 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-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<EXCHANGE-RATE> 1
<CASH> 96,960
<SECURITIES> 3,387
<RECEIVABLES> 73,471
<ALLOWANCES> 0
<INVENTORY> 9,114
<CURRENT-ASSETS> 216,504
<PP&E> 1,140,783
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,678,097
<CURRENT-LIABILITIES> 99,763
<BONDS> 859,629
0
0
<COMMON> 20
<OTHER-SE> 237,468
<TOTAL-LIABILITY-AND-EQUITY> 1,678,097
<SALES> 43,390
<TOTAL-REVENUES> 55,145
<CGS> 34,473
<TOTAL-COSTS> 39,369
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 18,523
<INCOME-PRETAX> (6,900)
<INCOME-TAX> (3,843)
<INCOME-CONTINUING> (3,057)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,057)
<EPS-PRIMARY> (0.15)
<EPS-DILUTED> (0.15)
</TABLE>
