CALPINE CORP, S-3/A, 1999-10-27

CALPINE CORP
S-3/A, 1999-10-27
COGENERATION SERVICES & SMALL POWER PRODUCERS

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 27, 1999

REGISTRATION NO. 333-87427
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

AMENDMENT NO. 3 TO

FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
CALPINE CORPORATION
CALPINE CAPITAL TRUST
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S> <C> <C>
DELAWARE 4911 77-0212977
DELAWARE (PRIMARY STANDARD INDUSTRIAL CLASSIFICATION (TO BE APPLIED FOR)
(STATE OF INCORPORATION) CODE NUMBER) (I.R.S. EMPLOYER IDENTIFICATION NO.)
</TABLE>

50 WEST SAN FERNANDO STREET
SAN JOSE, CA 95113
(408) 995-5115
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)

PETER CARTWRIGHT
CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER
CALPINE CORPORATION
50 WEST SAN FERNANDO STREET
SAN JOSE, CA 95113
(408) 995-5115
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)

COPIES TO:

<TABLE>
<S> <C>
J. MICHAEL SHEPHERD, ESQ. JOSEPH A. COCO, ESQ.
NORA L. GIBSON, ESQ. VINCENT J. PISANO, ESQ.
BROBECK, PHLEGER & HARRISON LLP SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
ONE MARKET 919 THIRD AVENUE
SPEAR STREET TOWER NEW YORK, NY 10022-3897
SAN FRANCISCO, CA 94105 (212) 735-3000
(415) 442-0900
</TABLE>

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.

If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]

If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [ ]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]

<TABLE>
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS AMOUNT OFFERING PRICE PER AGGREGATE OFFERING
OF SECURITIES TO BE REGISTERED TO BE REGISTERED SECURITY PRICE
- ----------------------------------------------------------------------------------------------------------------------
Common Stock........................................ 6,900,000(1) $45.094(5) $311,148,600(5)
Common Stock........................................ 1,380,000(2) $45.344(6) $62,574,720(6)
% Convertible Preferred Securities, Remarketable
Term Income Deferrable Equity Securities (HIGH
TIDES(SM)).......................................... 4,600,000(3) $50.00(7)(8) $230,000,000
% Convertible Preferred Securities, Remarketable
Term Income Deferrable Equity Securities (HIGH
TIDES(SM)).......................................... 920,000(4) $50.00(7)(8) $46,000,000
% Convertible Subordinated Debentures due 2029 of
Calpine Corporation................................. (10) (10) (10)
Common Stock, par value of $.001 per share of
Calpine Corporation................................. (11) (11) (11)
Preferred Securities Guarantee issued by Calpine
Corporation......................................... (12) (12) (12)
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------

<CAPTION>
<S> <C>
- ---------------------------------------------------------------------------
TITLE OF EACH CLASS AMOUNT OF
OF SECURITIES TO BE REGISTERED REGISTRATION FEE
- ------------------------------------------------------------------------------------------------
Common Stock........................................ $86,499(9)
Common Stock........................................ $17,396
% Convertible Preferred Securities, Remarketable
Term Income Deferrable Equity Securities (HIGH
TIDES(SM)).......................................... $63,940(9)
% Convertible Preferred Securities, Remarketable
Term Income Deferrable Equity Securities (HIGH
TIDES(SM)).......................................... $12,788
% Convertible Subordinated Debentures due 2029 of
Calpine Corporation................................. (10)
Common Stock, par value of $.001 per share of
Calpine Corporation................................. (11)
Preferred Securities Guarantee issued by Calpine
Corporation......................................... (12)
- ---------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>

(1) Includes 900,000 shares of common stock as to which the underwriters have
been granted an option to cover over-allotments, if any.

(2) Includes 180,000 shares of common stock as to which the underwriters have
been granted an option to cover over-allotments, if any.

(3) Includes 600,000 HIGH TIDES which the underwriters have the option to
purchase solely to cover over-allotments, if any.

(4) Includes 120,000 HIGH TIDES which the underwriters have the option to
purchase solely to cover over-allotments, if any.

(5) The proposed maximum offering price per share and the registration fee were
calculated in accordance with Rule 457(c) based on the average of the high
and low prices for the registrant's common stock on September 15, 1999, as
listed on the New York Stock Exchange, and adjusted to reflect the
registrant's 2 for 1 stock split declared on September 20, 1999.

(6) The proposed maximum offering price per share and the registration fee were
calculated in accordance with Rule 457(c) based on the average of the high
and low prices for the registrant's common stock on October 26, 1999, as
listed on the New York Stock Exchange.

(7) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(i) of the Securities Act of 1933, as amended.

(8) Exclusive of accrued interest and distributions, if any.

(9) Previously paid.

(10) Up to $284,536,100 in aggregate principal amount of % Convertible
Subordinated Debentures due 2029 of Calpine Corporation may be issued and
sold to Calpine Capital Trust in connection with the issuance by the trust
of up to 4,600,000 of its HIGH TIDES. The convertible debentures may be
distributed, under certain circumstances, to the holders of HIGH TIDES for
no additional consideration.

(11) The HIGH TIDES are convertible into the convertible debentures, which are
convertible into common stock, par value $.001 per share, of Calpine
Corporation. Each HIGH TIDES is estimated to be initially convertible into
shares of common stock, subject to adjustment under certain
circumstances. The actual number of shares of common stock into which the
HIGH TIDES will be convertible will not be determined until the time of
pricing of the offering. Shares of common stock will be issued upon the
conversion of HIGH TIDES without the payment of additional consideration.

<PAGE> 2

(12) Includes the rights of the holders of the HIGH TIDES under the HIGH TIDES
guarantee. No separate consideration will be received for the HIGH TIDES
guarantee.

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 3

THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH SECURITIES
AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL
THESE SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY
STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.

SUBJECT TO COMPLETION DATED OCTOBER 27, 1999

7,200,000 Shares

LOGO
CALPINE CORPORATION

Common Stock
------------------

Our common stock is listed on The New York Stock Exchange under the symbol
"CPN." On October 26, 1999, the last sale price of the common stock was $44.69.

The underwriters have an option to purchase a maximum of 1,080,000
additional shares to cover over-allotments of shares.

Concurrently with this offering, we are offering $240 million of
convertible preferred securities of a subsidiary trust by means of a separate
prospectus. This offering and the convertible trust preferred securities
offering are not contingent on each other.

INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" ON PAGE 9.

<TABLE>
<CAPTION>
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND CALPINE
PUBLIC COMMISSIONS CORPORATION
-------------- -------------- --------------
<S> <C> <C> <C>
Per Share............................................ $ $ $
Total................................................ $ $ $
</TABLE>

Delivery of the shares of common stock will be made on or about ,
1999.

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.

CREDIT SUISSE FIRST BOSTON
CIBC WORLD MARKETS
DONALDSON, LUFKIN & JENRETTE

GOLDMAN, SACHS & CO.
SALOMON SMITH BARNEY
GERARD KLAUER MATTISON &
CO.

The date of this prospectus is October 27, 1999.

<PAGE> 4

[Depiction of Delta Energy Center.]
"Delta Energy Center, a proposed 880 megawatt gas-fired facility located in
Pittsburg, California."

[Depiction of Pasadena Power Plant.]
"Pasadena Power Plant, a 240 megawatt gas-fired facility located in Pasadena,
Texas."
<PAGE> 5

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
PROSPECTUS SUMMARY.................. 1
RISK FACTORS........................ 9
WHERE YOU CAN FIND MORE
INFORMATION....................... 18
FORWARD-LOOKING STATEMENTS.......... 19
USE OF PROCEEDS..................... 20
PRICE RANGE OF COMMON STOCK......... 21
DIVIDEND POLICY..................... 21
CAPITALIZATION...................... 22
SELECTED CONSOLIDATED FINANCIAL
DATA.............................. 23
PRO FORMA CONSOLIDATED FINANCIAL
DATA.............................. 25
</TABLE>

<TABLE>
<CAPTION>
Page
----
<S> <C>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS..................... 27
BUSINESS............................ 43
MANAGEMENT.......................... 70
PRINCIPAL STOCKHOLDERS.............. 73
DESCRIPTION OF CAPITAL STOCK........ 75
UNDERWRITING........................ 77
NOTICE TO CANADIAN RESIDENTS........ 79
LEGAL MATTERS....................... 80
EXPERTS............................. 80
</TABLE>

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

YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR TO
WHICH WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT. THIS DOCUMENT MAY ONLY BE USED WHERE IT IS LEGAL
TO SELL THESE SECURITIES. THE INFORMATION CONTAINED IN THIS DOCUMENT MAY ONLY BE
ACCURATE ON THE DATE OF THIS DOCUMENT.

i
<PAGE> 6

PROSPECTUS SUMMARY

All information in this prospectus reflects the 2 for 1 stock split
declared by us on September 20, 1999.

THE COMPANY

Calpine is a leading independent power company engaged in the development,
acquisition, ownership and operation of power generation facilities and the sale
of electricity predominantly in the United States. We have experienced
significant growth in all aspects of our business over the last five years.
Currently, we own interests in 38 power plants having an aggregate capacity of
3,694 megawatts and have a transaction pending in which we will acquire 80% of
Cogeneration Corporation of America, which owns interests in 6 power plants with
an aggregate capacity of 579 megawatts. We also have 8 gas-fired projects and
one project expansion under construction having an aggregate capacity of 4,485
megawatts and have announced plans to develop 6 gas-fired power plants with a
total capacity of 3,930 megawatts. Upon completion of pending acquisitions and
projects under construction, we will have interests in 52 power plants located
in 14 states having an aggregate capacity of 8,758 megawatts, of which we will
have a net interest in 7,381 megawatts. This represents significant growth from
the 342 megawatts of capacity we had at the end of 1993. Of this total
generating capacity, 90% will be attributable to gas-fired facilities and 10%
will be attributable to geothermal facilities.

As a result of our expansion program, our revenues, cash flow, earnings and
assets have grown significantly over the last five years, as shown in the table
below.

<TABLE>
<CAPTION>
COMPOUND ANNUAL
1993 1998 GROWTH RATE
-------- ---------- ---------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Total Revenue....................... $ 69.9 $ 555.9 51%
EBITDA.............................. 42.4 255.3 43%
Net Income.......................... 3.8 45.7 64%
Total Assets........................ 302.3 1,728.9 42%
</TABLE>

Since our inception in 1984, we have developed substantial expertise in all
aspects of the development, acquisition and operation of power generation
facilities. We believe that the vertical integration of our extensive
engineering, construction management, operations, fuel management and financing
capabilities provides us with a competitive advantage to successfully implement
our acquisition and development program and has contributed to our significant
growth over the past five years.
1
<PAGE> 7

THE MARKET

The power industry represents the third largest industry in the United
States, with an estimated end-user market of over $250 billion of electricity
sales in 1998 produced by an aggregate base of power generation facilities with
a capacity of approximately 750,000 megawatts. In response to increasing
customer demand for access to low-cost electricity and enhanced services, new
regulatory initiatives have been and are continuing to be adopted at both the
state and federal level to increase competition in the domestic power generation
industry. The power generation industry historically has been largely
characterized by electric utility monopolies producing electricity from old,
inefficient, high-cost generating facilities selling to a captive customer base.
Industry trends and regulatory initiatives have transformed the existing market
into a more competitive market where end users purchase electricity from a
variety of suppliers, including non-utility generators, power marketers, public
utilities and others.

There is a significant need for additional power generating capacity
throughout the United States, both to satisfy increasing demand, as well as to
replace old and inefficient generating facilities. Due to environmental and
economic considerations, we believe this new capacity will be provided
predominantly by gas-fired facilities. We believe that these market trends will
create substantial opportunities for efficient, low-cost power producers that
can produce and sell energy to customers at competitive rates.

In addition, as a result of a variety of factors, including deregulation of
the power generation market, utilities, independent power producers and
industrial companies are disposing of power generation facilities. To date,
numerous utilities have sold or announced their intentions to sell their power
generation facilities and have focused their resources on the transmission and
distribution business segments. Many independent producers operating a limited
number of power plants are also seeking to dispose of their plants in response
to competitive pressures, and industrial companies are selling their power
plants to redeploy capital in their core businesses.

STRATEGY

Our strategy is to continue our rapid growth by capitalizing on the
significant opportunities in the power market, primarily through our active
development and acquisition programs. In pursuing our proven growth strategy, we
utilize our extensive management and technical expertise to implement a fully
integrated approach to the acquisition, development and operation of power
generation facilities. This approach uses our expertise in design, engineering,
procurement, finance, construction management, fuel and resource acquisition,
operations and power marketing, which we believe provides us with a competitive
advantage. The key elements of our strategy are as follows:

RECENT DEVELOPMENTS

Project Development and Construction. In May 1999, we completed a 35
megawatt expansion of our Clear Lake Power Plant to 412 megawatts, and the 169
megawatt Dighton Power Plant commenced commercial operations in August 1999.

We currently have nine projects under construction representing 4,485
additional megawatts. Of these new projects, we are currently expanding our
Pasadena facility by 545 megawatts to 785 megawatts and we have eight new power
plants under construction, including the Tiverton Power Plant in Rhode Island;
the Rumford Power Plant in Maine; the Westbrook Power Plant in Maine; the Sutter
Power Plant in California; the Los Medanos Power Plant in California; the South
Point Power Plant in Arizona; and the Magic Valley Power Plant in Texas; and the
Lost Pines 1 Power Plant in Texas. We have also announced plans to develop six
additional power generation facilities, totaling 3,930 megawatts, in California,
Texas, Arizona and Pennsylvania.

In July 1999, we announced an agreement with Credit Suisse First Boston,
New York branch and The Bank of Nova Scotia, as lead arrangers, for a $1.0
billion revolving construction loan facility. The credit facility will be
utilized to finance the construction of our development program. We expect to
finalize the documentation relating to this facility in the fourth quarter of
1999.

In August 1999, we announced the purchase of 18 F-class combustion turbines
from Siemens Westinghouse Power Corporation that will be capable of producing
4,900 megawatts of electricity in a combined-cycle configuration. Beginning in
2002, Siemens will deliver six turbines per year through 2004. Combined with our
existing turbine orders we have 69 turbines under contract, option, letter of
intent or other commitment capable of producing 17,745 megawatts.

Acquisitions. In March 1999, we completed the acquisition of Unocal
Corporation's Geysers geothermal steam fields in northern California for
approximately $102.1 million. The steam fields fuel our 12 Sonoma County power
plants, totaling 544 megawatts, purchased from Pacific Gas and Electric Company
in May 1999.

In May 1999 we completed the acquisition from Pacific Gas and Electric
Company of 14 geothermal power plants at The Geysers in northern California,
with a combined capacity of approximately 700 megawatts, for $212.8 million.
With the acquisition, we now own interests in and operate 18 geothermal power
plants that generate more than 800 megawatts of electricity, and we are the
nation's largest geothermal and green power producer. The combination of our
existing geothermal steam and power plant assets, the acquisition of the Sonoma
steam fields from Unocal, and the 14 power plants from Pacific Gas and Electric
Company allows us to fully integrate the steam and power plant operations at The
Geysers into one efficient, unified system to maximize the renewable natural
resource, lower overall production costs and extend the life of The Geysers.

In August 1999, we completed the acquisition of an additional 50% of the
Aidlin Power Plant from Edison Mission Energy (5%) and General Electric Capital
Corporation (45%) for a total purchase price of $7.2 million. We now own 55% of
the 20 megawatt Aidlin Geothermal Power Plant.
3
<PAGE> 9

In August 1999, we announced an agreement with Cogeneration Corporation of
America Inc. ("CGCA") to acquire 80% of its common stock for $25.00 per share or
approximately $145.0 million. NRG Energy, Inc., a wholly owned subsidiary of
Northern States Power, will own the remaining 20%. The transaction is subject to
the approval of CGCA shareholders and we expect to consummate the acquisition by
year-end 1999. CGCA currently owns interests in six natural gas-fired power
plants, totaling 579 megawatts. The plants are located in Pennsylvania, New
Jersey, Illinois and Oklahoma.

In October 1999, we completed the acquisition of Sheridan Energy, Inc., a
natural gas exploration and production company, through a $41.0 million cash
tender offer. We purchased the outstanding shares of Sheridan Energy's common
stock for $5.50 per share. In addition, we redeemed $11.5 million of outstanding
preferred stock of Sheridan Energy. Sheridan Energy's oil and gas properties,
including 148 billion cubic feet equivalent of proven reserves, are located in
northern California and the Gulf Coast region, where we are developing low-cost
natural gas supplies and proprietary pipeline systems to support our
strategically-located natural gas-fired power plants.

In October 1999, we completed the acquisition of the Calistoga geothermal
power plant from FPL Energy and Caithness Corporation for approximately $78.0
million. Located in The Geysers region of northern California, Calistoga is a 67
megawatt facility which provides electricity to Pacific Gas and Electric Company
under a long term contract.

Enhancement of Existing Power Plants. In July 1999, we announced a
renegotiation of our Gilroy power sales agreement with Pacific Gas and Electric
Company. The amendment provides for the termination of the remaining 18 years of
the long-term contract in exchange for a fixed long-term payment schedule. The
amended agreement is subject to approval by the California Public Utilities
Commission, whose decision we expect to receive in the fourth quarter of 1999.
We will continue to sell the output from the Gilroy Power Plant through October
2002 to Pacific Gas and Electric Company and thereafter we will market the
output in the California wholesale power market.

Third Quarter 1999 Earnings. On October 22, 1999, we announced earnings
for the three and nine months ended September 30, 1999.

Net income was $42.9 million for the quarter ended September 30, 1999,
representing an 86% increase compared to net income of $23.1 million for the
third quarter in 1998. Diluted earnings per share after accounting for the
recently completed two-for-one stock split rose 37% to $0.74 per share for the
quarter, from $0.54 per share for the same period in 1998. Revenue for the
quarter increased 42% from $186.2 million a year ago to $263.6 million. Earnings
before interest, tax, depreciation and amortization increased 28% to $119.1
million for the quarter compared to $93.4 million a year ago.

For the nine months ended September 30, 1999, net income was $64.3 million,
an increase of 103% compared to $31.6 million for the same period in 1998.
Diluted earnings per share rose 61% to $1.21 per share, compared to $0.75 per
share for the nine months of 1998. Revenue for the nine months was $600.2
million, a 57% increase from $382.9 million a year ago. Earnings before
interest, tax, depreciation and amortization for the nine months rose 43% to
$268.2 million, form $187.0 million in 1998. Total assets as of September 30,
1999, were $2.7 billion, up 59% from $1.7 billion at December 31, 1998.

these facilities, revenue includes amounts received under a Reliability Must Run
contract with the California Independent System Operator, which is awaiting
final Federal Energy Regulatory Commission approval.

OUR PRINCIPAL EXECUTIVE OFFICES

Our principal executive offices are located at 50 West San Fernando Street,
San Jose, California 95113. Our telephone number is (408) 995-5115, and our
internet website address is www.calpine.com. The contents of our website are not
part of this prospectus.
5
<PAGE> 11

THE OFFERING

Common stock offered by
Calpine......................... 7,200,000 shares(1)

Common stock to be outstanding
after the offering............ 61,769,788 shares(1)(2)

Convertible preferred
offering........................ Concurrently with the common stock offering,
our subsidiary trust is offering (by a
separate prospectus) $240.0 million of
convertible preferred securities.

Use of proceeds................. We expect to use a substantial portion of
the net proceeds from the offerings to
finance power projects under development and
construction. In addition, we expect to use
$145.0 million of the net proceeds of this
offering to complete the acquisition of 80%
of CGCA. The remaining net proceeds, if any,
will be used for working capital and general
corporate purposes.

New York Stock Exchange
symbol.......................... CPN

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

(1) Excludes the 1,080,000 shares that may be issued pursuant to the
underwriters' over-allotment option.

(2) Based on 54,569,788 shares outstanding as of October 26, 1999. Does not
include 3,453,458 shares of common stock subject to issuance upon exercise
of options previously granted and outstanding as of August 31, 1999, under
our 1996 Stock Incentive Plan.

6
<PAGE> 12

SUMMARY CONSOLIDATED HISTORICAL FINANCIAL AND OPERATING INFORMATION

The following table sets forth a summary of our consolidated historical
financial and operating information for the periods indicated. Our summary
consolidated historical financial information was derived from our consolidated
financial statements. The information presented below should be read in
conjunction with "Selected Consolidated Financial Data" and our consolidated
financial statements and the related notes, incorporated by reference in this
prospectus.

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------------------------------------ -----------------------
1994 1995 1996 1997 1998 1998 1999
-------- ---------- ---------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total revenue.................. $ 94,762 $ 132,098 $ 214,554 $ 276,321 $ 555,948 $ 196,742 $ 336,590
Cost of revenue................ 52,845 77,388 129,200 153,308 375,327 136,125 238,170
Gross profit................... 41,917 54,710 85,354 123,013 180,621 60,617 98,420
Project development expenses... 1,784 3,087 3,867 7,537 7,165 3,119 4,248
General and administrative
expenses..................... 7,323 8,937 14,696 18,289 26,780 11,043 20,964
Income from operations......... 31,772 42,686 66,791 97,187 146,676 46,455 73,208
Interest expense............... 23,886 32,154 45,294 61,466 86,726 40,790 47,171
Other (income) expense......... (1,988) (1,895) (6,259) (17,438) (13,423) (6,599) (11,068)
Extraordinary charge net of tax
benefit of $--, $--, $--,
$--, $441, $207 and $793..... -- -- -- -- 641 302 1,150
Net income..................... $ 6,021 $ 7,378 $ 18,692 $ 34,699 $ 45,678 $ 8,569 $ 21,410
Diluted earnings per common
share:
Weighted average shares of
common stock outstanding... 21,842 21,913 29,758 42,032 42,328 42,100 50,469
Income before extraordinary
charge..................... $ 0.28 $ 0.34 $ 0.63 $ 0.83 $ 1.10 $ 0.21 $ 0.45
Extraordinary charge......... $ -- $ -- $ -- $ -- $ (0.02) $ (0.01) $ (0.02)
Net income................... $ 0.28 $ 0.34 $ 0.63 $ 0.83 $ 1.08 $ 0.20 $ 0.43

OTHER FINANCIAL DATA AND RATIOS:
Depreciation and
amortization................. $ 21,580 $ 26,896 $ 40,551 $ 48,935 $ 82,913 $ 32,104 $ 45,449
EBITDA(1)...................... $ 53,707 $ 69,515 $ 117,379 $ 172,616 $ 255,306 $ 93,374 $ 151,927
EBITDA to Consolidated Interest
Expense(2)................... 2.23x 2.11x 2.41x 2.60x 2.74x 2.16x 2.92x
Total debt to EBITDA........... 6.23x 5.87x 5.12x 4.96x 4.20x -- --
Ratio of earnings to fixed
charges(3)................... 1.52x 1.46x 1.45x 1.64x 1.68x 1.11x 1.43x

SELECTED OPERATING INFORMATION:
Power plants:
Electricity revenue(4):
Energy..................... $ 45,912 $ 54,886 $ 93,851 $ 110,879 $ 252,178 $ 93,735 $ 177,305
Capacity................... $ 7,967 $ 30,485 $ 65,064 $ 84,296 $ 193,535 $ 67,103 $ 106,155
Megawatt hours produced...... 447,177 1,033,566 1,985,404 2,158,008 9,864,080 2,217,659 5,516,805
Average energy price per
kilowatt hour(5)........... 10.267c 5.310c 4.727c 5.138c 2.557c 4.227c 3.214c
</TABLE>

Footnotes appear on the next page.
7
<PAGE> 13

<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF
------------------------------------------------------------ JUNE 30,
1994 1995 1996 1997 1998 1999
-------- ---------- ---------- ---------- ---------- -----------
(DOLLARS IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash
equivalents........... $ 22,527 $ 21,810 $ 95,970 $ 48,513 $ 96,532 $ 320,287
Total assets............ 421,372 554,531 1,031,397 1,380,915 1,728,946 2,549,750
Short-term debt......... 27,300 85,885 37,492 112,966 5,450 --
Long-term line of
credit................ -- 19,851 -- -- -- --
Long-term non-recourse
debt.................. 196,806 190,642 278,640 182,893 114,190 79,210
Notes payable........... 5,296 6,348 -- -- -- --
Senior notes............ 105,000 105,000 285,000 560,000 951,750 1,551,750
Total debt.............. 334,402 407,726 601,132 855,859 1,071,390 1,630,960
Stockholders' equity.... 18,649 25,227 203,127 239,956 286,966 514,127
</TABLE>

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

(1) 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 our ability to service debt. EBITDA should not be
construed as an alternative either (a) to income from operations (determined
in accordance with generally accepted accounting principles) or (b) to cash
flows from operating activities (determined in accordance with generally
accepted accounting principles).

(2) For purposes of calculating the EBITDA to Consolidated Interest Expense
ratio, Consolidated Interest Expense is defined as total interest expense
plus one-third of all operating lease obligations, dividends paid in respect
of preferred stock and cash contributions to any employee stock ownership
plan used to pay interest on loans incurred to purchase our capital stock.

(3) Earnings are defined as income before provision for taxes, extraordinary
item and cumulative effect of changes in accounting principle plus cash
received from investments in power projects and fixed charges reduced by the
equity in income from investments in power projects and capitalized
interest. Fixed charges consist of interest expense, capitalized interest,
amortization of debt issuance costs and the portion of rental expenses
representative of the interest expense component.

(4) Electricity revenue is comprised of fixed capacity payments, which are not
related to production volume, and variable energy payments, which are
related to production volume.

(5) The average energy price per kilowatt hour represents energy revenue divided
by the megawatt hours produced.
8
<PAGE> 14

RISK FACTORS

You should carefully consider the risks described below before making an
investment decision. The risks and uncertainties described below are not the
only ones facing our company. Additional risks and uncertainties not presently
known to us or that we currently deem immaterial may also impair our business
operations.

Each of the following factors could have a material adverse effect on our
business, financial condition or results of operations, causing the trading
price of our common stock to decline and the loss of all or part of your
investment.

WE HAVE SUBSTANTIAL INDEBTEDNESS THAT WE MAY BE UNABLE TO SERVICE AND THAT
RESTRICTS OUR ACTIVITIES

We have substantial debt that we incurred to finance the acquisition and
development of power generation facilities. As of June 30, 1999, our total
consolidated indebtedness was $1.6 billion, our total consolidated assets were
$2.5 billion and our stockholders' equity was $514.1 million. On June 30, 1999,
on an as adjusted basis after giving effect to the sale of common stock and
convertible preferred securities in the offerings and the application of the
proceeds from the offerings, our total consolidated indebtedness would have been
approximately $1.6 billion, our total consolidated assets would have been
approximately $3.1 billion and our as adjusted cash balances would have been
approximately $859.6 million. Whether we will be able to meet our debt service
obligations and to repay our outstanding indebtedness will be dependent
primarily upon the performance of our power generation facilities.

This high level of indebtedness has important consequences, including:

- limiting our ability to borrow additional amounts for working capital,
capital expenditures, debt service requirements, execution of our growth
strategy, or other purposes,

- limiting our ability to use operating cash flow in other areas of our
business because we must dedicate a substantial portion of these funds to
service the debt,

- increasing our vulnerability to general adverse economic and industry
conditions, and

- limiting our ability to capitalize on business opportunities and to react
to competitive pressures and adverse changes in government regulation.

The operating and financial restrictions and covenants in our existing debt
agreements, including the indentures relating to our $1.5 billion aggregate
principle amount of senior notes and our $100.0 million revolving credit
facility, contain restrictive covenants. Among other things, these restrictions
limit or prohibit our ability to:

- incur indebtedness,

- make prepayments of indebtedness in whole or in part,

- pay dividends,

- make investments,

- engage in transactions with affiliates,

- create liens,

- sell assets, and

- acquire facilities or other businesses.

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<PAGE> 15

Also, if our management or ownership changes, the indentures governing our
senior notes may require us to make an offer to purchase our senior notes. We
cannot assure you that we will have the financial resources necessary to
purchase our senior notes in this event.

We believe that our cash flow from operations, together with other
available sources of funds, including borrowings under our existing borrowing
arrangements, will be adequate to pay principal and interest on our senior notes
and other debt and to enable us to comply with the terms of our indentures and
other debt agreements. If we are unable to comply with the terms of our
indentures and other debt agreements and fail to generate sufficient cash flow
from operations in the future, we may be required to refinance all or a portion
of our senior notes and other debt or to obtain additional financing. However,
we may be unable to refinance or obtain additional financing because of our high
levels of debt and the debt incurrence restrictions under our indentures and
other debt agreements. If cash flow is insufficient and refinancing or
additional financing is unavailable, we may be forced to default on our senior
notes and other debt obligations. In the event of a default under the terms of
any of our indebtedness, the debt holders may accelerate the maturity of our
obligations, which could cause defaults under our other obligations.

OUR ABILITY TO REPAY OUR DEBT DEPENDS UPON THE PERFORMANCE OF OUR SUBSIDIARIES

Almost all of our operations are conducted through our subsidiaries and
other affiliates. As a result, we depend almost entirely upon their earnings and
cash flow to service our indebtedness, including our ability to pay the interest
on and principal of our senior notes. The non-recourse project financing
agreements of certain of our subsidiaries and other affiliates generally
restrict their ability to pay dividends, make distributions or otherwise
transfer funds to us prior to the payment of other obligations, including
operating expenses, debt service and reserves.

Our subsidiaries and other affiliates are separate and distinct legal
entities and have no obligation to pay any amounts due on our senior notes, and
do not guarantee the payment of interest on or principal of these notes. The
right of our senior note holders to receive any assets of any of our
subsidiaries or other affiliates upon our liquidation or reorganization will be
subordinated to the claims of any subsidiaries' or other affiliates' creditors
(including trade creditors and holders of debt issued by our subsidiaries or
affiliates). As of June 30, 1999, our subsidiaries had $79.2 million of
non-recourse project financing. We intend to utilize non-recourse project
financing in the future that will be effectively senior to our senior notes.

While the indentures impose limitations on our ability and the ability of
our subsidiaries to incur additional indebtedness, the indentures do not limit
the amount of non-recourse project financing that our subsidiaries may incur to
finance the acquisition and development of new power generation facilities.

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<PAGE> 16

WE MAY BE UNABLE TO SECURE ADDITIONAL FINANCING IN THE FUTURE

Each power generation facility that we acquire or develop will require
substantial capital investment. Our ability to arrange financing and the cost of
the financing are dependent upon numerous factors. These factors include:

- general economic and capital market conditions,

- conditions in energy markets,

- regulatory developments,

- credit availability from banks or other lenders,

- investor confidence in the industry and in us,

- the continued success of our current power generation facilities, and

- provisions of tax and securities laws that are conducive to raising
capital.

Financing for new facilities may not be available to us on acceptable terms in
the future.

We have financed our existing power generation facilities using a variety
of leveraged financing structures, primarily consisting of non-recourse project
financing and lease obligations. As of June 30, 1999, we had approximately $1.6
billion of total consolidated indebtedness, $79.2 million of which represented
non-recourse project financing. Each non-recourse project financing and lease
obligation is structured to be fully paid out of cash flow provided by the
facility or facilities. In the event of a default under a financing agreement
which we do not cure, the lenders or lessors would generally have rights to the
facility and any related assets. In the event of foreclosure after a default, we
might not retain any interest in the facility. While we intend to utilize
non-recourse or lease financing when appropriate, market conditions and other
factors may prevent similar financing for future facilities. We do not believe
the existence of non-recourse or lease financing will significantly affect our
ability to continue to borrow funds in the future in order to finance new
facilities. However, it is possible that we may be unable to obtain the
financing required to develop our power generation facilities on terms
satisfactory to us.

We have from time to time guaranteed certain obligations of our
subsidiaries and other affiliates. Our lenders or lessors may also require us to
guarantee the indebtedness for future facilities. This would render our general
corporate funds vulnerable in the event of a default by the facility or related
subsidiary. Additionally, our indentures may restrict our ability to guarantee
future debt, which could adversely affect our ability to fund new facilities.
Our indentures do not limit the ability of our subsidiaries to incur
non-recourse or lease financing for investment in new facilities.

REVENUE UNDER SOME OF OUR POWER SALES AGREEMENTS MAY BE REDUCED SIGNIFICANTLY
UPON THEIR EXPIRATION OR TERMINATION

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<PAGE> 17

a fluctuating market price. For example, the price for electricity for two of
our power plants, the Bear Canyon (20 megawatts) and West Ford Flat (27
megawatts) power plants, was approximately 13.83 cents per kilowatt hour under
the fixed price periods that recently expired for these facilities, and is now
set at the energy clearing price, which averaged 2.66 cents per kilowatt hour
during 1998. As a result, our energy revenue under these power sales agreements
has been materially reduced. We expect the decline in energy revenues will be
partially mitigated by decreased royalties and planned operating cost reductions
at these facilities. In addition, we will continue our strategy of offsetting
these reductions through our acquisition and development program.

OUR POWER PROJECT DEVELOPMENT AND ACQUISITION ACTIVITIES MAY NOT BE SUCCESSFUL

The development of power generation facilities is subject to substantial
risks. In connection with the development of a power generation facility, we
must generally obtain:

- necessary power generation equipment,

- governmental permits and approvals,

- fuel supply and transportation agreements,

- sufficient equity capital and debt financing,

- electrical transmission agreements, and

- site agreements and construction contracts.

We may be unsuccessful in accomplishing any of these matters or in doing so on a
timely basis. In addition, project development is subject to various
environmental, engineering and construction risks relating to cost-overruns,
delays and performance. Although we may attempt to minimize the financial risks
in the development of a project by securing a favorable power sales agreement,
obtaining all required governmental permits and approvals and arranging adequate
financing prior to the commencement of construction, the development of a power
project may require us to expend significant sums for preliminary engineering,
permitting and legal and other expenses before we can determine whether a
project is feasible, economically attractive or financeable. If we were unable
to complete the development of a facility, we would generally not be able to
recover our investment in the project. The process for obtaining initial
environmental, siting and other governmental permits and approvals is
complicated and lengthy, often taking more than one year, and is subject to
significant uncertainties. We cannot assure you that we will be successful in
the development of power generation facilities in the future.

We have grown substantially in recent years as a result of acquisitions of
interests in power generation facilities and steam fields. We believe that
although the domestic power industry is undergoing consolidation and that
significant acquisition opportunities are available, we are likely to confront
significant competition for acquisition opportunities. In addition, we may be
unable to continue to identify attractive acquisition opportunities at favorable
prices or, to the extent that any opportunities are identified, we may be unable
to complete the acquisitions.

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<PAGE> 18

OUR PROJECTS UNDER CONSTRUCTION MAY NOT COMMENCE OPERATION AS SCHEDULED

The commencement of operation of a newly constructed power generation
facility involves many risks, including:

- start-up problems,

- the breakdown or failure of equipment or processes, and

- performance below expected levels of output or efficiency.

New plants have no operating history and may employ recently developed and
technologically complex equipment. Insurance is maintained to protect against
certain risks, warranties are generally obtained for limited periods relating to
the construction of each project and its equipment in varying degrees, and
contractors and equipment suppliers are obligated to meet certain performance
levels. The insurance, warranties or performance guarantees, however, may not be
adequate to cover lost revenues or increased expenses. As a result, a project
may be unable to fund principal and interest payments under its financing
obligations and may operate at a loss. A default under such a financing
obligation could result in losing our interest in a power generation facility.

In addition, power sales agreements entered into with a utility early in
the development phase of a project may enable the utility to terminate the
agreement, or to retain security posted as liquidated damages, if a project
fails to achieve commercial operation or certain operating levels by specified
dates or fails to make specified payments. In the event a termination right is
exercised, the default provisions in a financing agreement may be triggered
(rendering such debt immediately due and payable). As a result, the project may
be rendered insolvent and we may lose our interest in the project.

OUR POWER GENERATION FACILITIES MAY NOT OPERATE AS PLANNED

Upon completion of our pending acquisitions and projects currently under
construction, we will operate 42 of the 52 power plants in which we will have an
interest. The continued operation of power generation facilities involves many
risks, including the breakdown or failure of power generation equipment,
transmission lines, pipelines or other equipment or processes and performance
below expected levels of output or efficiency. Although from time to time our
power generation facilities have experienced equipment breakdowns or failures,
these breakdowns or failures have not had a significant effect on the operation
of the facilities or on our results of operations. As of June 30, 1999, our gas-
fired and geothermal power generation facilities have operated at an average
availability of approximately 96% and 99%, respectively. Although our facilities
contain various redundancies and back-up mechanisms, a breakdown or failure may
prevent the affected facility from performing under applicable power sales
agreements. In addition, although insurance is maintained to protect against
operating risks, the proceeds of insurance may not be adequate to cover lost
revenues or increased expenses. As a result, we could be unable to service
principal and interest payments under our financing obligations which could
result in losing our interest in the power generation facility.

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<PAGE> 19

OUR GEOTHERMAL ENERGY RESERVES MAY BE INADEQUATE FOR OUR OPERATIONS

The development and operation of geothermal energy resources are subject to
substantial risks and uncertainties similar to those experienced in the
development of oil and gas resources. The successful exploitation of a
geothermal energy resource ultimately depends upon:

- the heat content of the extractable fluids,

- the geology of the reservoir,

- the total amount of recoverable reserves,

- operating expenses relating to the extraction of fluids,

- price levels relating to the extraction of fluids, and

- capital expenditure requirements relating primarily to the drilling of
new wells.

In connection with each geothermal power plant, we estimate the
productivity of the geothermal resource and the expected decline in
productivity. The productivity of a geothermal resource may decline more than
anticipated, resulting in insufficient reserves being available for sustained
generation of the electrical power capacity desired. An incorrect estimate by us
or an unexpected decline in productivity could lower our results of operations.

Geothermal reservoirs are highly complex. As a result, there exist numerous
uncertainties in determining the extent of the reservoirs and the quantity and
productivity of the steam reserves. Reservoir engineering is an inexact process
of estimating underground accumulations of steam or fluids that cannot be
measured in any precise way, and depends significantly on the quantity and
accuracy of available data. As a result, the estimates of other reservoir
specialists may differ materially from ours. Estimates of reserves are generally
revised over time on the basis of the results of drilling, testing and
production that occur after the original estimate was prepared. While we have
extensive experience in the operation and development of geothermal energy
resources and in preparing such estimates, we cannot assure you that we will be
able to successfully manage the development and operation of our geothermal
reservoirs or that we will accurately estimate the quantity or productivity of
our steam reserves.

WE DEPEND ON OUR ELECTRICITY AND THERMAL ENERGY CUSTOMERS

Each of our power generation facilities currently relies on one or more
power sales agreements with one or more utility or other customers for all or
substantially all of such facility's revenue. In addition, the sales of
electricity to two utility customers during 1998 comprised approximately 64% of
our total revenue during that year. The loss of any one power sales agreement
with any of these customers could have a negative effect on our results of
operations. In addition, any material failure by any customer to fulfill its
obligations under a power sales agreement could have a negative effect on the
cash flow available to us and on our results of operations.

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<PAGE> 20

WE ARE SUBJECT TO COMPLEX GOVERNMENT REGULATION WHICH COULD ADVERSELY AFFECT OUR
OPERATIONS

Our activities are subject to complex and stringent energy, environmental
and other governmental laws and regulations. The construction and operation of
power generation facilities require numerous permits, approvals and certificates
from appropriate federal, state and local governmental agencies, as well as
compliance with environmental protection legislation and other regulations.
While we believe that we have obtained the requisite approvals for our existing
operations and that our business is operated in accordance with applicable laws,
we remain subject to a varied and complex body of laws and regulations that both
public officials and private individuals may seek to enforce. Existing laws and
regulations may be revised or new laws and regulations may become applicable to
us that may have a negative effect on our business and results of operations. We
may be unable to obtain all necessary licenses, permits, approvals and
certificates for proposed projects, and completed facilities may not comply with
all applicable permit conditions, statutes or regulations. In addition,
regulatory compliance for the construction of new facilities is a costly and
time-consuming process. Intricate and changing environmental and other
regulatory requirements may necessitate substantial expenditures to obtain
permits. If a project is unable to function as planned due to changing
requirements or local opposition, it may create expensive delays or significant
loss of value in a project.

Our operations are potentially subject to the provisions of various energy
laws and regulations, including the Public Utility Regulatory Policies Act of
1978, as amended ("PURPA"), the Public Utility Holding Company Act of 1955, as
amended ("PUHCA"), and state and local regulations. PUHCA provides for the
extensive regulation of public utility holding companies and their subsidiaries.
PURPA provides to qualifying facilities ("QFs") (as defined under PURPA) and
owners of QFs certain exemptions from certain federal and state regulations,
including rate and financial regulations.

Under present federal law, we are not subject to regulation as a holding
company under PUHCA, and will not be subject to such regulation as long as the
plants in which we have an interest (1) qualify as QFs, (2) are subject to
another exemption or waiver or (3) qualify as exempt wholesale generators
("EWG") under the Energy Policy Act of 1992. In order to be a QF, a facility
must be not more than 50% owned by an electric utility company or electric
utility holding company. In addition, a QF that is a cogeneration facility, such
as the plants in which we currently have interests, must produce electricity as
well as thermal energy for use in an industrial or commercial process in
specified minimum proportions. The QF also must meet certain minimum energy
efficiency standards. Generally, any geothermal power facility which produces up
to 80 megawatts of electricity and meets PURPA ownership requirements is
considered a QF.

If any of the plants in which we have an interest lose their QF status or
if amendments to PURPA are enacted that substantially reduce the benefits
currently afforded QFs, we could become a public utility holding company, which
could subject us to significant federal, state and local regulation, including
rate regulation. If we become a holding company, which could be deemed to occur
prospectively or retroactively to the date that any of our plants loses its QF
status, all our other power plants could lose QF status because, under FERC
regulations, a QF cannot be owned by an electric utility or electric utility
holding company. In addition, a loss of QF status could, depending on the
particular power purchase agreement, allow the power purchaser to cease taking
and paying for electricity or to seek refunds of past amounts paid and thus
could cause the loss

15
<PAGE> 21

of some or all contract revenues or otherwise impair the value of a project. If
a power purchaser were to cease taking and paying for electricity or seek to
obtain refunds of past amounts paid, there can be no assurance that the costs
incurred in connection with the project could be recovered through sales to
other purchasers. Such events could adversely affect our ability to service our
indebtedness, including our senior notes. See "Business -- Government
Regulation -- Federal Energy Regulation."

Currently, Congress is considering proposed legislation that would amend
PURPA by eliminating the requirement that utilities purchase electricity from
QFs at prices based on avoided costs of energy. We do not know whether this
legislation will be passed or, if passed, what form it may take. We cannot
provide assurance that any legislation passed would not adversely affect our
existing domestic projects.

In addition, many states are implementing or considering regulatory
initiatives designed to increase competition in the domestic power generation
industry and increase access to electric utilities' transmission and
distribution systems for independent power producers and electricity consumers.
In particular, the state of California has restructured its electric industry by
providing for a phased-in competitive power generation industry, with a power
pool and an independent system operator, and for direct access to generation for
all power purchasers outside the power exchange under certain circumstances.
Although existing QF power sales contracts are to be honored under such
restructuring, and all of our California operating projects are QFs, until the
new system is fully implemented, it is impossible to predict what impact, if
any, it may have on the operations of those projects.

WE MAY BE UNABLE TO OBTAIN AN ADEQUATE SUPPLY OF NATURAL GAS IN THE FUTURE

To date, our fuel acquisition strategy has included various combinations of
our own gas reserves, gas prepayment contracts and short-, medium- and long-term
supply contracts. In our gas supply arrangements, we attempt to match the fuel
cost with the fuel component included in the facility's power sales agreements
in order to minimize a project's exposure to fuel price risk. We believe that
there will be adequate supplies of natural gas available at reasonable prices
for each of our facilities when current gas supply agreements expire. However,
gas supplies may not be available for the full term of the facilities' power
sales agreements, and gas prices may increase significantly. If gas is not
available, or if gas prices increase above the fuel component of the facilities'
power sales agreements, there could be a negative impact on our results of
operations.

COMPETITION COULD ADVERSELY AFFECT OUR PERFORMANCE

The power generation industry is characterized by intense competition. We
encounter competition from utilities, industrial companies and other power
producers. In recent years, there has been increasing competition in an effort
to obtain power sales agreements. This competition has contributed to a
reduction in electricity prices. In addition, many states have implemented or
are considering regulatory initiatives designed to increase competition in the
domestic power industry. This competition has put pressure on electric utilities
to lower their costs, including the cost of purchased electricity.

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<PAGE> 22

OUR INTERNATIONAL INVESTMENTS MAY FACE UNCERTAINTIES

We have one investment in geothermal steam fields located in Mexico and may
pursue additional international investments. International investments are
subject to unique risks and uncertainties relating to the political, social and
economic structures of the countries in which we invest. Risks specifically
related to investments in non-United States projects may include:

- risks of fluctuations in currency valuation,

- currency inconvertibility,

- expropriation and confiscatory taxation,

- increased regulation, and

- approval requirements and governmental policies limiting returns to
foreign investors.

WE DEPEND ON OUR SENIOR MANAGEMENT

Our success is largely dependent on the skills, experience and efforts of
our senior management. The loss of the services of one or more members of our
senior management could have a negative effect on our business, financial
results and future growth.

SEISMIC DISTURBANCES COULD DAMAGE OUR PROJECTS

Areas where we operate and are developing many of our geothermal and
gas-fired projects are subject to frequent low-level seismic disturbances. More
significant seismic disturbances are possible. Our existing power generation
facilities are built to withstand relatively significant levels of seismic
disturbances, and we believe we maintain adequate insurance protection. However,
earthquake, property damage or business interruption insurance may be inadequate
to cover all potential losses sustained in the event of serious seismic
disturbances. Additionally, insurance may not continue to be available to us on
commercially reasonable terms.

OUR RESULTS ARE SUBJECT TO QUARTERLY AND SEASONAL FLUCTUATIONS

Our quarterly operating results have fluctuated in the past and may
continue to do so in the future as a result of a number of factors, including:

- the timing and size of acquisitions,

- the completion of development projects, and

- variations in levels of production.

Additionally, because we receive the majority of capacity payments under
some of our power sales agreements during the months of May through October, our
revenues and results of operations are, to some extent, seasonal.

THE PRICE OF OUR COMMON STOCK IS VOLATILE

The market price for our common stock has been volatile in the past, and
several factors could cause the price to fluctuate substantially in the future.
These factors include:

- announcements of developments related to our business,

- fluctuations in our results of operations,

- sales of substantial amounts of our securities into the marketplace,

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<PAGE> 23

- general conditions in our industry or the worldwide economy,

- an outbreak of war or hostilities,

- a shortfall in revenues or earnings compared to securities analysts'
expectations,

- changes in analysts' recommendations or projections, and

- announcements of new acquisitions or development projects by us.

The market price of our common stock may fluctuate significantly in the
future, and these fluctuations may be unrelated to our performance. General
market price declines or market volatility in the future could adversely affect
the price of our common stock, and the current market price may not be
indicative of future market prices.

WE COULD BE ADVERSELY AFFECTED IF OUR COMPUTER SYSTEMS ARE NOT YEAR 2000
COMPLIANT

The "Year 2000 problem" refers to the fact that some computer hardware,
software and embedded systems were designed to read and store dates using only
the last two digits of the year.

We are coordinating our efforts to address the impact of Year 2000 on our
business through an analysis of four separate technology domains:

- corporate applications, which include core business systems,

- non-information technology, which includes all operating and control
systems,

- end-user computing systems (that is, systems that are not considered core
business systems but may contain date calculations), and

- business partner and vendor systems.

We currently expect to complete our Year 2000 efforts with respect to
critical systems by November of 1999. This schedule and our cost estimates may
be affected by, among other things, the availability of Year 2000 personnel, the
readiness of third parties, the timing for testing our embedded systems, the
availability of vendor resources to complete embedded system assessments and
produce required component upgrades and our ability to implement appropriate
contingency plans.

We produce revenues by selling power we produce to customers. We depend on
transmission and distribution facilities that are owned and operated by
investor-owned utilities to deliver power to our customers. If either our
customers or the providers of transmission and distribution facilities
experience significant disruptions as a result of the Year 2000 problem, our
ability to sell and deliver power may be hindered, which could result in a loss
of revenue.

The cost or consequences of a materially incomplete or untimely resolution
of the Year 2000 problem could adversely affect our future operations, financial
results or our financial condition.

WHERE YOU CAN FIND MORE INFORMATION

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<PAGE> 24

reference facilities by calling the SEC at 1-800-SEC-0330. You can also access
copies of such material electronically on the SEC's home page on the World Wide
Web at http://www.sec.gov.

This prospectus is part of a registration statement (Registration No.
333-87427) we filed with the SEC. The SEC permits us to "incorporate by
reference" the information we file with them, which means that we can disclose
important information to you by referring you to those documents. The
information incorporated by reference is considered to be part of this
prospectus, and information that we file with the SEC after the date of this
prospectus will automatically update and supersede this information. We
incorporate by reference our Annual Report on Form 10-K as amended for the year
ended December 31, 1998, our Quarterly Reports on Form 10-Q for the periods
ended March 31, 1999 and June 30, 1999, our Current Report on Form 8-K dated May
7, 1999, our Current Report on Form 8-K dated October 11, 1999, and our Current
Report on Form 8-K dated October 22, 1999, each filed by us with the SEC. We
also incorporate by reference any future filings made with the SEC under
Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as
amended, until we sell all of the shares of common stock and convertible
preferred securities being registered or until this offering is otherwise
terminated.

If you request a copy of any or all of the documents incorporated by
reference, then we will send to you the copies you requested at no charge.
However, we will not send exhibits to such documents, unless such exhibits are
specifically incorporated by reference in such documents. You should direct
requests for such copies to Investor Relations, Calpine Corporation, 50 West San
Fernando Street, San Jose, California 95113. Our telephone number is (408)
995-5115.

FORWARD-LOOKING STATEMENTS

Some of the statements in this prospectus and incorporated by reference are
forward-looking statements. These statements involve known and unknown risks,
uncertainties, and other factors that may cause our or our industry's actual
results, levels of activity, performance, or achievements to be materially
different from any future results, levels of activity, performance, or
achievements expressed or implied by such forward-looking statements. Such
factors include, among other things, those listed under "Risk Factors" and
elsewhere in this prospectus.

In some cases, you can identify forward-looking statements by terminology
such as "may," "will," "should," "expects," "plans," "anticipates," "believes,"
"estimates," "predicts," "potential," or "continue" or the negative of such
terms or other comparable terminology.

Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance, or achievements. Moreover, neither we nor any other
person assumes responsibility for the accuracy and completeness of such
statements. We are under no duty to update any of the forward-looking statements
after the date of this prospectus to conform such statements to actual results.

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<PAGE> 25

USE OF PROCEEDS

The aggregate net proceeds to us from the sale of the 7,200,000 shares of
common stock offered by us in the offering (after deducting underwriting
discounts and commissions and estimated offering expenses) will be approximately
$308.9 million ($355.2 million if the underwriters' over-allotment option in the
common stock offering is exercised in full), assuming an offering price of
$44.69 per share. We expect to use a substantial portion of the net proceeds
from this offering to finance power projects under development and construction.
In addition, we expect to use $145.0 million of the net proceeds to complete the
acquisition of 80% of CGCA. The remaining net proceeds, if any, will be used for
working capital and general corporate purposes. See "Business -- Project
Development and Acquisitions." Pending such uses, we expect to invest the net
proceeds in short-term, interest-bearing securities.

20
<PAGE> 26

PRICE RANGE OF COMMON STOCK

Our common stock is traded on the New York Stock Exchange under the symbol
"CPN." Public trading of the common stock commenced on September 20, 1996. Prior
to that, there was no public market for the common stock. The following table
sets forth, for the periods indicated, the high and low sale price per share of
the common stock on the New York Stock Exchange. The information in the
following table reflects the 2 for 1 stock split declared by us on September 20,
1999.

<TABLE>
<CAPTION>
HIGH LOW
------- -------
<S> <C> <C>
1997
First Quarter.............................................. $11.375 $ 8.563
Second Quarter............................................. 10.438 7.875
Third Quarter.............................................. 11.469 8.250
Fourth Quarter............................................. 10.625 6.188

1998
First Quarter.............................................. $ 9.250 $ 6.375
Second Quarter............................................. 10.625 8.625
Third Quarter.............................................. 10.750 8.563
Fourth Quarter............................................. 13.813 8.906

1999
First Quarter.............................................. $18.688 $12.625
Second Quarter............................................. 29.500 17.563
Third Quarter.............................................. 47.875 27.406
Fourth Quarter (through October 26, 1999).................. 51.500 42.531
</TABLE>

As of October 26, 1999, there were approximately 87 holders of record of
our common stock. On October 26, 1999, the last sale price reported on the New
York Stock Exchange for our common stock was $44.69 per share.

DIVIDEND POLICY

We do not anticipate paying any cash dividends on our common stock in the
foreseeable future because we intend to retain our earnings to finance the
expansion of our business and for general corporate purposes. In addition, our
ability to pay cash dividends is restricted under our indentures and our other
debt agreements. Future cash dividends, if any, will be at the discretion of our
board of directors and will depend upon, among other things, our future
operations and earnings, capital requirements, general financial condition,
contractual restrictions and such other factors as the board of directors may
deem relevant.

21
<PAGE> 27

CAPITALIZATION

The following table sets forth, as of June 30, 1999 (1) the actual
consolidated capitalization of the Company; and (2) the consolidated
capitalization of our Company as adjusted for the sale of the shares of our
common stock and convertible preferred securities in the offerings. This table
should be read in conjunction with the consolidated financial statements and
related notes thereto incorporated by reference in this prospectus.

<TABLE>
<CAPTION>
JUNE 30, 1999
-------------------------
ACTUAL AS ADJUSTED
---------- -----------
UNAUDITED
(DOLLARS IN THOUSANDS,
EXCEPT SHARE AMOUNTS)
<S> <C> <C>
CASH:
Cash and cash equivalents........................... $ 320,287 $ 859,584
========== ==========

LONG-TERM DEBT:
Non-recourse project financing, net of current
portion.......................................... $ 79,210 $ 79,210
Senior notes........................................ 1,551,750 1,551,750
---------- ----------
Total long-term debt........................ 1,630,960 1,630,960
---------- ----------
Company-obligated convertible preferred securities of
a subsidiary trust(1)............................... -- 230,400

STOCKHOLDERS' EQUITY:
Preferred stock, $0.001 par value:
10,000,000 shares authorized; no shares
outstanding, actual and as adjusted.............. -- --
Common stock, $0.001 par value:
100,000,000 shares authorized; 54,348,294 shares
outstanding, actual; and 61,548,294 shares
outstanding, as adjusted(2)(3)(4)................ 54 62
Additional paid-in capital.......................... 374,591 683,480
Retained earnings................................... 139,482 139,482
---------- ----------
Total stockholders' equity.................. 514,127 823,024
---------- ----------
Total capitalization..................... $2,145,087 $2,684,384
========== ==========
</TABLE>

- -------------------------
(1) Proceeds are recorded net of unamortized issuance costs of $8,000.

(2) Excludes the 1,080,000 shares that may be issued upon exercise of the
underwriters' over-allotment option.

(3) Does not include 3,202,649 shares of common stock subject to issuance upon
exercise of options previously granted and outstanding as of June 30, 1999
under our 1996 Stock Incentive Plan.
(4) Reflects 2 for 1 stock split declared by us on September 20, 1999.

22
<PAGE> 28

SELECTED CONSOLIDATED FINANCIAL DATA

The consolidated financial data set forth below for the five years ended
and as of December 31, 1998 have been derived from the audited consolidated
financial statements of our company. The consolidated financial data for the six
months ended and as of June 30, 1998 and June 30, 1999 are unaudited, but have
been prepared on the same basis as the audited consolidated financial statements
and, in the opinion of management, contain all adjustments, consisting only of
normal recurring adjustments, necessary for the fair presentation of the
financial position and results of operations for these periods. Consolidated
operating results for the six months ended June 30, 1999 should not be
considered indicative of the results that may be expected for the entire year.
The following selected consolidated financial data should be read in conjunction
with the consolidated financial statements and the related notes thereto
incorporated by reference in this prospectus.

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
--------------------------------------------------- -------------------
1994 1995 1996 1997 1998 1998 1999
------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue:
Electricity and steam sales........ $90,295 $127,799 $199,464 $237,277 $507,897 $178,798 $304,322
Service contract revenue from
related parties.................. 7,221 7,153 6,455 10,177 20,249 8,529 13,238
Income (loss) from unconsolidated
investments in power projects.... (2,754) (2,854) 6,537 15,819 25,240 6,853 18,321
Interest income on loans to power
projects......................... -- -- 2,098 13,048 2,562 2,562 709
------- -------- -------- -------- -------- -------- --------
Total revenue................ 94,762 132,098 214,554 276,321 555,948 196,742 336,590
Cost of revenue...................... 52,845 77,388 129,200 153,308 375,327 136,125 238,170
------- -------- -------- -------- -------- -------- --------
Gross profit......................... 41,917 54,710 85,354 123,013 180,621 60,617 98,420
Project development expenses......... 1,784 3,087 3,867 7,537 7,165 3,119 4,248
General and administrative
expenses........................... 7,323 8,937 14,696 18,289 26,780 11,043 20,964
Provision for write-off of project
development costs.................. 1,038 -- -- -- -- -- --
------- -------- -------- -------- -------- -------- --------
Income from operations............... 31,772 42,686 66,791 97,187 146,676 46,455 73,208
Interest expense..................... 23,886 32,154 45,294 61,466 86,726 40,790 47,171
Other (income) expense............... (1,988) (1,895) (6,259) (17,438) (13,423) (6,599) (11,068)
------- -------- -------- -------- -------- -------- --------
Income before provision for income
taxes............................ 9,874 12,427 27,756 53,159 73,373 12,264 37,105
Provision for income taxes........... 3,853 5,049 9,064 18,460 27,054 3,393 14,545
------- -------- -------- -------- -------- -------- --------
Income before extraordinary
charge........................... 6,021 7,378 18,692 34,699 46,319 8,871 22,560
Extraordinary charge for retirement
of debt, net of tax benefit of $--,
$--, $--, $--, $441, $207 and
$793............................... -- -- -- -- 641 302 1,150
------- -------- -------- -------- -------- -------- --------
Net income......................... $ 6,021 $ 7,378 $ 18,692 $ 34,699 $ 45,678 $ 8,569 $ 21,410
======= ======== ======== ======== ======== ======== ========
Basic earnings per common share:
Weighted average shares of common
stock outstanding................ 20,776 20,776 25,805 39,892 40,242 40,112 47,518
Income before extraordinary
charge........................... $ 0.29 $ 0.36 $ 0.72 $ 0.87 $ 1.15 $ 0.22 $ 0.47
Extraordinary charge............... $ -- $ -- $ -- $ -- $ (0.02) $ (0.01) $ (0.02)
Net income......................... $ 0.29 $ 0.36 $ 0.72 $ 0.87 $ 1.13 $ 0.21 $ 0.45
Diluted earnings per common share:
Weighted average shares of common
stock outstanding................ 21,842 21,913 29,758 42,032 42,328 42,100 50,469
Income before extraordinary
charge........................... $ 0.28 $ 0.34 $ 0.63 $ 0.83 $ 1.10 $ 0.21 $ 0.45
Extraordinary charge............... $ -- $ -- $ -- $ -- $ (0.02) $ (0.01) $ (0.02)
Net income......................... $ 0.28 $ 0.34 $ 0.63 $ 0.83 $ 1.08 $ 0.20 $ 0.43
</TABLE>

23
<PAGE> 29

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
---------------------------------------------------------- -----------------------
1994 1995 1996 1997 1998 1998 1999
-------- -------- ---------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT RATIOS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
OTHER FINANCIAL DATA AND
RATIOS:
Depreciation and
amortization.............. $ 21,580 $ 26,896 $ 40,551 $ 48,935 $ 82,913 $ 32,104 $ 45,449
EBITDA(1)................... $ 53,707 $ 69,515 $ 117,379 $ 172,616 $ 255,306 $ 93,374 $ 151,927
EBITDA to Consolidated
Interest Expense(2)....... 2.23x 2.11x 2.41x 2.60x 2.74x 2.16x 2.92x
Total debt to EBITDA........ 6.23x 5.87x 5.12x 4.96x 4.20x -- --
Ratio of earnings to fixed
charges(3)................ 1.52x 1.46x 1.45x 1.64x 1.68x 1.11x 1.43x
</TABLE>

<TABLE>
<CAPTION>
AS OF DECEMBER 31,
---------------------------------------------------------- AS OF
1994 1995 1996 1997 1998 JUNE 30, 1999
-------- -------- ---------- ---------- ---------- -------------
(IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............ $ 22,527 $ 21,810 $ 95,970 $ 48,513 $ 96,532 $ 320,287
Property, plant and equipment, net... 335,453 447,751 648,208 736,339 1,094,303 1,568,882
Investments in power projects........ 11,114 8,218 13,936 222,542 221,509 234,584
Notes receivable..................... 16,882 25,785 36,143 117,357 10,899 16,202
Total assets......................... 421,372 554,531 1,031,397 1,380,915 1,728,946 2,549,750
Short-term debt...................... 27,300 85,885 37,492 112,966 5,450 --
Long-term line of credit............. -- 19,851 -- -- -- --
Non-recourse debt.................... 196,806 190,642 278,640 182,893 114,190 79,210
Notes payable........................ 5,296 6,348 -- -- -- --
Senior notes......................... 105,000 105,000 285,000 560,000 951,750 1,551,750
Total debt........................... 334,402 407,726 601,132 855,859 1,071,390 1,630,960
Stockholders' equity................. 18,649 25,227 203,127 239,956 286,966 514,127
</TABLE>

- -------------------------
(1) 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 here not as a measure of operating
results but rather as a measure of our ability to service debt. EBITDA
should not be construed as an alternative either (a) to income from
operations (determined in accordance with generally accepted accounting
principles) or (b) to cash flows from operating activities (determined in
accordance with generally accepted accounting principles).

(3) Earnings are defined as income before provision for taxes, extraordinary
item and cumulative effect of change in accounting principle plus cash
received from investments in power projects and fixed charges reduced by the
equity in income from investments in power projects and capitalized
interest. Fixed charges consist of interest expense, capitalized interest,
amortization of debt issuance costs and the portion of rental expenses
representative of the interest expense component.

24
<PAGE> 30

PRO FORMA CONSOLIDATED FINANCIAL DATA

The following unaudited pro forma consolidated statement of operations for
the year ended December 31, 1998 gives effect to the following transactions as
if such transactions had occurred on January 1, 1998: (1) our acquisition of the
remaining 55% interest in the Bethpage Power Plant on February 5, 1998 (the
"Bethpage Transaction"); (2) our acquisition of the remaining 50% interest in
the Texas City Power Plant and the Clear Lake Power Plant on April 1, 1998 (the
"Texas City/Clear Lake Transaction"); (3) our sale of $300 million of 7 7/8%
Senior Notes Due 2008 on March 31, 1998, and the application of the net proceeds
therefrom; and (4) our sale of $100 million of 7 7/8% Senior Notes Due 2008 on
July 24, 1998 and the application of the net proceeds therefrom (the Bethpage
Transaction, the Texas City/Clear Lake Transaction, the sale of $300 million of
7 7/8% Senior Notes Due 2008 and the sale of $100 million of 7 7/8% Senior Notes
Due 2008 being collectively referred to as the "Transactions").

The pro forma consolidated financial data and Management's Discussion and
Analysis of Financial Condition and Results of Operations should be read in
conjunction with the consolidated financial statements and related notes thereto
incorporated by reference in this prospectus. The pro forma adjustments are
based upon available information and certain assumptions that management
believes are reasonable and are described in the notes accompanying the pro
forma consolidated financial data. The pro forma consolidated financial data are
presented for informational purposes only and do not purport to represent what
our results of operations would actually have been had such transactions in fact
occurred at such dates, or to project our results of operations for any future
period. In the opinion of management, all adjustments necessary to present
fairly such pro forma consolidated financial data have been made.

25
<PAGE> 31

PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998
-------------------------------------------------
ADJUSTMENTS PRO FORMA
FOR THE FOR THE
ACTUAL TRANSACTIONS TRANSACTIONS
--------- ---------------- ------------------
(IN THOUSANDS, EXCEPT RATIOS AND PER SHARE DATA)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue:
Electricity and steam sales..................... $507,897 $ 74,163 $582,060
Service contract revenue from related parties... 20,249 (1,613) 18,636
Income from unconsolidated investments in power
projects...................................... 25,240 (1,765) 23,475
Interest income on loans to power projects...... 2,562 (2,520) 42
-------- --------- --------
Total revenue............................ 555,948 68,265 624,213
-------- --------- --------
Cost of revenue:
Plant operating expenses........................ 256,079 48,764 304,843
Depreciation.................................... 73,988 7,612 81,600
Production royalties............................ 10,714 -- 10,714
Operating lease expenses........................ 17,129 (1,277) 15,852
Service contract expenses....................... 17,417 -- 17,417
-------- --------- --------
Total cost of revenue.................... 375,327 55,099 430,426
-------- --------- --------
Gross profit...................................... 180,621 13,166 193,787
Project development expenses...................... 7,165 -- 7,165
General and administrative expenses............... 26,780 (27) 26,753
-------- --------- --------
Income from operations.......................... 146,676 13,193 159,869
Interest expense.................................. 86,726 8,302 95,028
Interest income................................... (12,348) -- (12,348)
Other (income) expense............................ (1,075) (146) (1,221)
-------- --------- --------
Income before provision for income taxes........ 73,373 5,037 78,410
Provision for income taxes........................ 27,054 1,689 28,743
-------- --------- --------
Income before extraordinary charge................ 46,319 3,348 49,667
Extraordinary charge for retirement of debt, net
of tax benefit of $441, $-- and $441............ 641 -- 641
-------- --------- --------
Net income.................................... $ 45,678 $ 3,348 $ 49,026
======== ========= ========
Basic earnings per common share:
Weighted average shares of common stock
outstanding................................... 40,242 40,242
Income before extraordinary charge.............. $ 1.15 $ 1.24
Extraordinary charge............................ $ (0.02) $ (0.02)
Net income...................................... $ 1.13 $ 1.22
Diluted earnings per common share:
Weighted average shares of common stock
outstanding................................... 42,328 42,328
Income before extraordinary charge.............. $ 1.10 $ 1.18
Extraordinary charge............................ $ (0.02) $ (0.02)
Net income...................................... $ 1.08 $ 1.16
OTHER OPERATING DATA AND RATIOS:
Depreciation and amortization................... $ 82,913 $ 90,525
EBITDA.......................................... $255,306 $278,091
EBITDA to Consolidated Interest Expense......... 2.74x 2.74x
Total debt to EBITDA............................ 4.20x 3.85x
Ratio of earnings to fixed charges.............. 1.68x 1.69x
</TABLE>

26
<PAGE> 32

MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

Calpine is engaged in the development, acquisition, ownership and operation
of power generation facilities and the sale of electricity and steam principally
in the United States. At September 10, 1999, we had interests in 37 power plants
predominantly in the United States, having an aggregate capacity of 3,627
megawatts.

On February 5, 1998, we acquired the remaining 55% interest in, and assumed
operations and maintenance of, the Bethpage Power Plant. We purchased the
remaining interests for approximately $5.0 million. Additionally, on March 31,
1998 we repaid all outstanding project debt of $37.4 million related to the
Bethpage Power Plant.

On March 31, 1998, we 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. We paid $52.8 million in cash and agreed
to 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, we own a 7.5% interest in the Bayonne Power Plant, a 165
megawatt gas-fired cogeneration power plant located in Bayonne, New Jersey. In
addition, we paid $105.3 million to restructure certain gas contracts related to
this acquisition.

On July 13, 1998, we signed a letter of intent to enter into a joint
venture to develop, own and operate approximately 2,000 megawatts of gas-fired
power plants in northern California primarily to serve the San Francisco Bay
Area. The gas-fired plants are to be constructed by Bechtel and operated by us.
We have announced that the first plant to be developed under the joint venture
will be the Delta Energy Center, an 880 megawatt gas-fired plant located at the
Dow Chemical facility in Pittsburg, California.

On July 17, 1998, we completed the purchase of a 60 megawatt geothermal
power plant located in Sonoma County, California, from the Sacramento Municipal
Utility District ("SMUD") for $13.0 million. We are the owner and operator of
the geothermal steam fields that provide steam to this facility. Under the
agreement, we paid SMUD $10.6 million at closing, and agreed to pay an
additional $2.4 million over the next two years. In connection with the
acquisition, SMUD agreed to purchase up to 50 megawatts of electricity from the
plant at current market prices plus a renewable power premium through 2001. In
addition, SMUD has the option to purchase 10 megawatts of off-peak power
production through 2005. We currently market the excess electricity into the
California power market.

On July 21, 1998, we completed the acquisition of a 70 megawatt gas-fired
power plant from The Dow Chemical Company for approximately $13.1 million. The
power plant is located at Dow's Pittsburg, California chemical facility. We will
sell up to 18 megawatts of electricity to Dow under a ten-year power sales
agreement, with the balance sold to Pacific Gas and Electric Company ("PG&E")
under an existing power sales agreement. In addition, we will sell approximately
200,000 lbs./hr of steam to Dow and to USS-POSCO Industries' nearby steel mill.

27
<PAGE> 33

In August 1998, we entered into a sale and leaseback transaction for
certain plant and equipment of our Greenleaf 1 & 2 Power Plants, two 49.5
megawatt gas-fired cogeneration facilities located in Sutter County, California,
for a net book value of $108.6 million. Under the terms of the agreement, we
received approximately $559,000 for the sale of all our rights, title and
interest in the stock of Calpine Greenleaf Corporation, and transferred all
non-recourse project financing of $71.6 million and deferred taxes of $21.4
million. A loss of $15.6 million was recorded on the balance sheet and is being
amortized over the term of the lease through June 2014. Additionally, we have an
early purchase option expiring September 30, 2003.

On September 28, 1998, we entered into a partnership agreement with Energy
Management, Inc. ("EMI") to acquire an ownership interest in a 265 megawatt
gas-fired plant under construction in Tiverton, Rhode Island. EMI and Calpine
will be co-general partners for this project, with EMI acting as the managing
general partner. We invested $40.0 million of equity in the power project, which
is scheduled to commence commercial operation in May 2000. We will receive 62.8%
of all cash and income distributions from the Tiverton project until we receive
a 10.5% pre-tax rate of return. Thereafter, we will receive 50% of all
distributions.

On November 18, 1998, we entered into a partnership agreement with EMI to
acquire an ownership interest in a 265 megawatt gas-fired plant under
construction in Rumford, Maine. EMI and Calpine will be co-general partners for
this project, with EMI acting as the managing general partner. We invested $40.0
million of equity in the power project, which is scheduled to commence
commercial operation in July 2000. We will receive 66 2/3% of all cash and
income distributions from the Rumford project until we receive a 10.5% pre-tax
rate of return. Thereafter, we will receive 50% of all distributions.

On January 4, 1999, we completed the acquisition of a 20% interest in 82
billion cubic feet of proven natural gas reserves located in the Sacramento
basin of Northern California. We paid approximately $14.9 million for $13.0
million in redeemable non-voting preferred stock and 20% of the outstanding
common stock of Sheridan California Energy, Inc. ("SCEI"). Additionally, we
signed a ten year gas contract enabling us to purchase 100% of SCEI's
production.

On February 17, 1999, we announced that the Delta Energy Center met the
California Energy Commission's Data Adequacy requirements. This ruling stated
that our Application for Certification contained adequate information for the
California Energy Commission to begin its analysis of the power plant's
environmental impacts and proposed mitigation. The Delta Energy Center, an 880
megawatt gas-fired power plant located at the Dow Chemical facility in
Pittsburg, California, is the first power plant that will be developed, owned
and operated under a joint venture with Bechtel Enterprises, and will provide
power to the Pittsburg, California and the greater San Francisco Bay Area. The
gas-fired power plant is to be constructed by Bechtel and operated by us.

On February 17, 1999, we announced plans to develop, own and operate a 545
megawatt gas-fired power plant in Westbrook, Maine. We acquired the development
rights for the Westbrook Power Plant from Genesis Power Corporation. This power
plant is scheduled to begin power deliveries in early 2001, and will serve the
New England market.

28
<PAGE> 34

joint venture with Bechtel Enterprises, and will provide electricity to the San
Francisco Bay area. We expect the plant to commence operation in mid 2002.

On March 19, 1999, we completed the acquisition of Unocal Corporation's
Geysers geothermal steam fields in northern California for approximately $102.1
million. The steam fields fuel our 12 Sonoma County power plants, totaling 544
megawatts of capacity. We purchased these plants from PG&E on May 7, 1999.

On April 14, 1999, we received approval from the California Energy
Commission to construct a 545 megawatt gas-fired power plant near Yuba City,
California. This power plant, called the Sutter Power Plant, was the first new
power plant approved in California's deregulated power industry. Electricity
produced by the Sutter Power Plant will be sold into California's energy market.
We expect the plant to commence operation in early 2001.

On April 22, 1999, we entered into a joint venture with GenTex Power
Corporation to develop, own and operate a 545 megawatt gas-fired power plant in
Bastrop County, Texas, called Lost Pines 1. Construction of this power plant is
expected to begin in October 1999. Under the definitive agreements we entered in
September 1999, we will manage all phases of the plant's development process,
with GenTex and ourselves jointly operating the plant. The output from Lost
Pines 1 will be divided equally, with GenTex selling its portion to its customer
base, while we will sell our portion to the wholesale power market in Texas. We
expect the plant to commence operation in mid-2001.

On April 23, 1999, we entered into a joint agreement with Pinnacle West
Capital Corporation to develop, own and operate a 545 megawatt gas-fired power
plant located in Phoenix, Arizona. This plant, called the West Phoenix Power
Plant, will provide power to the Phoenix metropolitan area, and construction
will commence in 2000. We expect the plant to commence operation in 2002.

On May 7, 1999, we completed the acquisitions from PG&E, of 12 Sonoma
County and 2 Lake County power plants for approximately $212.8 million. The
acquisitions were financed with a 24 year operating lease. Our geothermal steam
fields fuel the facilities, which have a combined capacity of approximately 694
megawatts of electricity. All of the generation from the facilities is sold to
the California energy market, with the exception of an agreement entered into on
April 29, 1999, to sell to Commonwealth Energy Corporation 75 megawatts of
geothermal electricity in 1999, 100 megawatts in 2000, and 125 megawatts in 2001
and through June 2002. Historically, we have served as a steam supplier for
these facilities, which had been owned and operated by PG&E. These acquisitions
have enabled us to consolidate our operations in The Geysers into a single
ownership structure and to integrate the power plant and steam field operations,
allowing us to optimize the efficiency and performance of the facilities. We
believe that these acquisitions provide us with significant synergies that
leverage our expertise in geothermal power generation and position us to benefit
from the demand for "green" energy in the competitive market.

On June 21, 1999, we acquired the rights to build, own and operate a 545
megawatt gas-fired power plant located in Ontelaunee Township, Pennsylvania. The
plant, called the Ontelaunee Energy Center, will provide power to residences and
businesses throughout the Pennsylvania-New Jersey-Maryland power pool.
Construction will commence in 2000 and the plant is scheduled to begin
production in 2002.

On July 26, 1999, we announced plans to enter into a $1.0 billion revolving
construction credit facility and expect to enter into definitive agreements in
the fall of 1999. The non-recourse credit facility will serve as a key component
of our development

29
<PAGE> 35

program and will be utilized to finance the construction of our diversified
portfolio of gas-fired power plants currently under development. We currently
intend to refinance the construction facility in the longer-term capital markets
prior to its four-year maturity.

On August 20, 1999, we announced the purchase of 18 F-class combustion
turbines from Siemens Westinghouse Power Corporation that will be capable of
producing 4,900 megawatts of electricity in a combined-cycle configuration.
Beginning in 2002, Siemens will deliver six turbines per year through 2004.
Combined with our existing turbine order we have 69 turbines under contract,
option or letter of intent capable of producing 17,745 megawatts.

On August 27, 1999, we announced an agreement with CGCA to acquire 80% of
its common stock for $25.00 per share or approximately $145.0 million. NRG
Energy, Inc., a wholly owned subsidiary of Northern States Power, will own the
remaining 20%. The transaction is subject to the approval of CGCA shareholders
and we expect to consummate the acquisition by year-end 1999. CCGA currently
owns interests in six natural gas-fired power plants, totaling 579 megawatts.
The plants are located in Pennsylvania, New Jersey, Illinois and Oklahoma.

On August 31, 1999, we completed the acquisition of an additional 50% of
the Aidlin Power Plant from Edison Mission Energy (5%) and General Electric
Capital Corporation (45%) for a total purchase price of $7.2 million. We now own
55% of the 20-megawatt Aidlin Power Plant.

On September 29, 1999 we completed the acquisition of development rights to
build, own and operate the Los Medanos Power Plant from Enron North America. The
Los Medanos Power Plant is a 500 megawatt gas-fired cogeneration plant located
adjacent to USS-POSCO Industries steel mill in Pittsburg, California. Los
Medanos will supply USS-POSCO with 60 megawatts of electricity and 75,000 pounds
per hour of steam, and market the excess electricity into the California power
exchange and under bilateral contracts. Construction commenced in September 1999
and commercial operation is scheduled to occur in 2001.

On September 30, 1999 we announced plans to build, own and operate an 800
megawatt gas-fired cogeneration power plant at Bayer Corporation's chemical
facility in Baytown, Texas. The Baytown Power Plant will supply Bayer with all
of its electric and steam requirements for 20 years and market excess
electricity into the Texas wholesale power market. Construction is estimated to
commence in 2000 and commercial operation in 2001.

On October 1, 1999, we completed the acquisition of Sheridan Energy, Inc.,
a natural gas exploration and production company, through a $41.0 million cash
tender offer. We purchased the outstanding shares of Sheridan Energy's common
stock for $5.50 per share. In addition, we redeemed $11.5 million of outstanding
preferred stock of Sheridan Energy. Sheridan Energy's oil and gas properties,
including 148 billion cubic feet equivalent of proven reserves, are located in
northern California and the Gulf Coast region, where we are developing low-cost
natural gas supplies and proprietary pipeline systems to support our
strategically-located natural gas-fired power plants.

On October 21, 1999, we completed the acquisition of the Calistoga
geothermal power plant from FPL Energy and Caithness Corporation for
approximately $78.0 million. Located in The Geysers region of northern
California, Calistoga is a 67 megawatt facility which provides electricity to
Pacific Gas and Electric Company under a long-term contract.

30
<PAGE> 36

On October 25, 1999, we announced that we had executed a letter of intent
which give us the exclusive right to negotiate with LYONDELL-CITGO Reting LP to
build, own and operate a 560 megawatt gas-fired cogeneration power plant at the
LYONDELL-CITGO refinery in Houston, Texas.

The Channel Energy Center will supply all of the electricity and steam
requirements for 20 years to the refinery. Permitting for the facility is
currently underway, with construction projected to commence in early 2000 and
commercial operation in 2001.

SELECTED OPERATING INFORMATION

Set forth below is certain selected operating information for the power
plants and steam fields for which results are consolidated in our consolidated
statements of operations. The information set forth under power plants consists
of the results for the West Ford Flat Power Plant, Bear Canyon Power Plant,
Greenleaf 1 & 2 Power Plants, Watsonville Power Plant, King City Power Plant,
Gilroy Power Plant, the Bethpage Power Plant since its acquisition on February
5, 1998, the Texas City and Clear Lake Power Plants since their acquisition on
March 31, 1998, the Pasadena Power Plant since it began commercial operation on
July 7, 1998, the Sonoma Power Plant since its acquisition on July 17, 1998 and
the Pittsburg Power Plant since its acquisition on July 21, 1998, and the 12
Sonoma County and 2 Lake County power plants purchased from PG&E on May 7, 1999.
The information set forth under steam fields consists of the results for the
Thermal Power Company Steam Fields prior to the acquisition.

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
-------------------------------------------------------------- -----------------------
1994 1995 1996 1997 1998 1998 1999
---------- ---------- ---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
POWER PLANTS:

Electricity revenue
(1):

Energy................. $ 45,912 $ 54,886 $ 93,851 $ 110,879 $ 252,178 $ 93,735 $ 177,305

Capacity............... $ 7,967 $ 30,485 $ 65,064 $ 84,296 $ 193,535 $ 67,103 $ 106,155

Megawatt hours
produced............. 447,177 1,033,566 1,985,404 2,158,008 9,864,080 2,217,659 5,516,805

Average energy price
per kilowatt hour
(2).................. 10.267c 5.310c 4.727c 5.138c 2.557c 4.227c 3.214c

STEAM FIELDS:

Steam revenue (3):

Calpine................ $ 32,631 $ 39,669 $ 40,549 $ 42,102 $ 36,130 $ 17,960 $ 20,862

Other interest......... $ 2,051 $ -- $ -- $ -- $ -- $ -- $ --

Megawatt hours
produced............. 2,156,492 2,415,059 2,528,874 2,641,422 2,323,623 981,114 1,192,722

Average price per
kilowatt hour........ 1.608c 1.643c 1.603c 1.594c 1.555c 1.831c 1.749c
</TABLE>

- -------------------------
(1) Electricity revenue is composed of fixed capacity payments, which are not
related to production, and variable energy payments, which are related to
production.

(2) Represents variable energy revenue divided by the kilowatt-hours produced.
The significant increase in capacity revenue and the accompanying decline in
average energy price per kilowatt-hour since 1994 primarily reflects the
increase in our megawatt hour production as a result of additional gas-fired
power plants.

(3) The decline in steam revenue between 1998 and 1997 reflects the acquisition
and consolidation of the Sonoma Power Plant and the related steam fields. We
completed several acquisitions of geothermal power plants and steam fields
during 1999. Since the steam fields serve power plants owned by us following
their acquisitions, our steam fields will no longer recognize steam revenue.

31
<PAGE> 37

RESULTS OF OPERATIONS

SIX MONTHS ENDED JUNE 30, 1999 COMPARED TO SIX MONTHS ENDED JUNE 30, 1998

Revenue -- Total revenue increased 71% to $336.6 million for the six months
ended June 30, 1999 compared to $196.7 million for the same period in 1998.

Electricity and steam sales revenue for the six months ended June 30, 1999
increased 70% to $304.3 million as compared to $178.8 million for the same
period a year ago. This increase is primarily due to an increase of $106.3
million for power plants that were acquired during the first half of 1998, and
$32.7 million for our Pasadena plant that became operational in the third
quarter of 1998, partially offset by a decrease of $21.6 million at the Bear
Canyon and West Ford Flat Power Plants relating to the expiration of the fixed
priced period of their power sales agreements.

Service contract revenue increased to $13.2 million for the six months
ended June 30, 1999 compared to $8.5 million for the same period in 1998. The
increase was primarily attributable to third party excess gas sales, as well as
an increase for fuel management fees.

Income from unconsolidated investments in power projects for the six months
ended June 30, 1999 increased 165% to $18.3 million as compared to $6.9 million
for the same period a year ago. This increase is primarily attributable to an
increase of $11.4 million of equity income from our investment in Sumas, an
increase of $1.5 million of equity income from our investment in the Bayonne
Power Plant, and an increase of $1.1 million from our Kennedy International
Airport Power Plant. These increases were partially offset by a reduction of
$2.9 million in equity income from our Texas City and Clear Lake Power Plants,
which were consolidated on March 31, 1998.

Interest income on loans to power projects for the six months ended June
30, 1999 decreased to $709,000 compared to $2.6 million for the same period a
year ago. The decrease is primarily related to the acquisition of the remaining
50% interest in Texas Cogeneration Company on March 31, 1998, offset by dividend
income received from Sheridan California Energy.

Cost of revenue -- Cost of revenue increased to $238.2 million for the six
months ended June 30, 1999 compared to $136.1 million for the same period in
1998. The increase of $102.1 million was primarily attributable to increased
plant operating, fuel and depreciation expenses as a result of the acquisition
of the remaining interests in the Texas City, Clear Lake Power Plants on March
31, 1998, the acquisition of the remaining interest in the Bethpage Power Plant
on February 5, 1998, the acquisition of the Pittsburg Power Plant on July 21,
1998, the consolidation of our Geysers operations on May 7, 1999 and the startup
of the Pasadena Power Plant in July of 1998.

General and administrative expenses -- General and administrative expenses for
the six months ended June 30, 1999 increased to $21.0 million compared to $11.0
million for the same period in 1998. The increase was attributable to continued
growth in personnel and associated overhead costs necessary to support the
overall growth in our operations.

Interest expense -- Interest expense for the six months ended June 30, 1999
increased to $47.2 million from $40.8 million for the same period a year ago.
The increase was primarily attributable to $21.8 million of interest associated
with the issuances of senior

32
<PAGE> 38

notes in 1999 and 1998, partially offset by an increase in capitalized interest
of $10.3 million, and a decrease in interest expense of $4.7 million related to
the retirement of non-recourse project financing for the Greenleaf Power Plant
in 1998 and the Gilroy Power Plant in 1999.

Provision for income taxes -- The effective income tax rate was approximately
39% for the six months ended June 30, 1999. The reductions from the statutory
tax rate was primarily due to depletion in excess of tax basis benefits at our
geothermal facilities, and a decrease in the California taxes paid due to our
expansion into states other than California.

YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997

Revenue -- Total revenue increased 101% to $555.9 million in 1998 compared to
$276.3 million in 1997.

Electricity and steam sales revenue increased 114% to $507.9 million in
1998 compared to $237.3 million in 1997. The increase is primarily attributable
to the acquisition of the remaining interest in the Texas City, Clear Lake and
Bethpage Power Plants and the acquisition of the Pittsburg Power Plant. These
power plants accounted for $245.2 million in additional electricity revenues in
1998. We benefited from the startup of our power plant in Pasadena, Texas, which
became operational in July 1998. This power plant contributed $30.5 million in
revenue during 1998. During 1998, we produced 9,864,080 total electricity
megawatt hours, which was 7,706,072 megawatt hours higher than the same period
in 1997, as a result of the factors described above. We recently announced three
acquisitions, which we expect to complete during 1999, upon government approval.
These acquisitions when completed will eliminate steam revenue for The Geysers,
reflecting the consolidation of the acquired power plants and related steam
fields.

Service contract revenue increased 98% to $20.2 million in 1998 compared to
$10.2 million in 1997. The $10.0 million increase was primarily due to $3.3
million for fuel management fees, and $7.5 million for third party excess gas
sales.

Income from unconsolidated investments in power projects increased 59% to
$25.2 million in 1998 compared to $15.8 million in 1997. The increase of $9.4
million is primarily attributable to our investments in the Lockport, Stony
Brook and Kennedy International Airport Power Plants, which contributed $5.2
million of equity income during 1998, as well as $2.5 million of equity income
from the Bayonne Power Plant. For the year ended December 31, 1998, we also
recorded $11.7 million of equity income from the Sumas Power Plant compared to
$8.5 million for the same period in 1997. These increases in equity income were
partially offset by a $1.1 million decrease from the Auburndale Power Plant.

Interest income on loans to power projects decreased 80% to $2.6 million in
1998 compared to $13.0 million in 1997. This decrease was attributable to the
acquisition of the remaining 50% interest in TCC on March 31, 1998 and the sale
of a note receivable in December 1997.

Cost of revenue -- Cost of revenue increased to $375.3 million in 1998 compared
to $153.3 million in 1997. The increase of $222.0 million in 1998 was primarily
attributable to increased plant operating, fuel and depreciation expenses as a
result of the acquisition of the remaining interest in the Texas City, Clear
Lake and Bethpage Power Plants, the acquisition of the Pittsburg Power Plant and
the startup of the Pasadena Power Plant.

33
<PAGE> 39

Additionally, service contract expenses increased $8.8 million for the year
ended December 31, 1998, of which $6.6 million was related to costs associated
with the sale of third party excess gas and a $1.8 million increase for fuel
management contracts.

General and administrative expenses -- General and administrative expenses
increased 46% to $26.8 million in 1998 compared to $18.3 million in 1997. The
increase was attributable to the continued growth in personnel and overhead
costs necessary to support the overall growth in our operations.

Interest expense -- Interest expense increased 41% to $86.7 million in 1998
compared to $61.5 million in 1997. The increase was primarily attributable to
interest expense of $35.0 million related to the senior notes issued in 1998 and
1997. This increase was partially offset by $3.5 million for the repayment of
non-recourse project financing for our Geysers facilities, $2.9 million for
reduction of the TCC debt, $2.0 million for reduction of the indebtedness of the
Greenleaf 1 & 2 Power Plants and $1.7 million of interest capitalized on the
development and construction of power projects.

Interest income -- Interest income decreased 14% to $12.3 million in 1998
compared to $14.3 million in 1997. The decrease was primarily attributable to
less interest earned on restricted cash in 1998.

Other income, net -- Other income decreased 66% to $1.1 million in 1998 compared
to $3.2 million in 1997. The decrease was primarily attributable to gas refunds
received in 1997.

Provision for income taxes -- The effective income tax rate was approximately
37% in 1998 compared to 35% in 1997. The effective rates were lower than the
statutory rate (federal and state) primarily due to depletion in excess of tax
basis benefits at our geothermal facilities, and a decrease in the California
tax liability due to our expansion into states other than California.

YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED
DECEMBER 31, 1996

Revenue -- Total revenue increased 29% to $276.3 million in 1997 compared to
$214.6 million in 1996.

Electricity and steam sales revenue increased 19% to $237.3 million in 1997
compared to $199.5 million in 1996. Electricity and steam sales revenue for 1997
reflected a full year of operation at the Gilroy and King City Power Plants,
which contributed to increases in electricity and steam sales revenue in 1997
compared to 1996 of $25.4 million, and $4.3 million, respectively. Electricity
and steam sales revenue for 1997 compared to 1996 was also $6.0 million higher
at the Bear Canyon and West Ford Flat Power Plants as a result of increased
production and an increase in fixed energy prices to 13.83c per kilowatt-hour.
During 1996, the Bear Canyon and West Ford Flat Power Plants experienced the
maximum curtailment allowed under their power sales agreements with PG&E. In May
1997, the power sales agreements for the Bear Canyon and West Ford Flat Power
Plants were modified to remove curtailment. Without such curtailment, these
plants generated an additional $4.2 million in revenues in 1997 as compared to
1996. In addition, Thermal Power Company ("TPC") also contributed $2.7 million
more revenue for 1997 than 1996, primarily due to increased steam sales under
the alternative pricing agreement entered into with PG&E in March 1996.

34
<PAGE> 40

Service contract revenue increased to $10.2 million in 1997 compared to
$6.5 million in 1996. Service contract revenue during 1996 reflected a $2.8
million loss from our electricity trading operations. The increase in service
contract revenue for 1997 was also attributable to $2.8 million of revenue from
the Texas City and Clear Lake Power Plants, which were acquired in June 1997.

Income from unconsolidated investments in power projects increased to $15.8
million in 1997 compared to $6.5 million during 1996. The increase in 1997
compared to 1996 was primarily due to equity income of $6.3 million from our
June 1997 investment in the Texas City and Clear Lake Power Plants and an
increase in equity income of $2.2 million from our investment in Sumas
Cogeneration Company ("Sumas"). In accordance with a power sales agreement with
Puget Sound Power and Light Company, operations at Sumas were significantly
displaced from February to July 1997, and, in exchange, the Sumas Power Plant
received a higher price for energy sold and certain other payments. In addition,
the partnership agreement governing Sumas was amended in September 1997 to
increase our percentage of distributions.

Interest income on loans to power projects increased to $13.0 million in
1997 compared to $2.1 million in 1996. The increase was primarily related to
interest income on the loans made by Calpine Finance Company, a wholly-owned
subsidiary of our company, to the Texas City and Clear Lake Power Plants, and to
interest income on the loans to the sole shareholder of Sumas Energy, Inc., our
partner in Sumas.

Cost of revenue -- Cost of revenue increased 19% to $153.3 million in 1997
compared to $129.2 million in 1996. Plant operating, depreciation, and operating
lease expenses at the Gilroy and King City Power Plants for 1997 reflected a
full year of operations, which contributed to increases in cost of revenue in
1997 compared to 1996 of $13.0 million and $8.3 million, respectively.

Project development expenses -- Project development expenses increased 92% to
$7.5 million in 1997 compared to $3.9 million in 1996, due primarily to expanded
acquisition and development activities.

General and administrative expenses -- General and administrative expenses
increased 24% to $18.3 million in 1997 compared to $14.7 million in 1996. The
increases were primarily due to additional personnel and related expenses
necessary to support our expanding operations.

Interest expense -- Interest expense increased 36% to $61.5 million in 1997 from
$45.3 million in 1996. The increase was attributable to: (1) $10.8 million of
interest expense related to the 8 3/4% Senior Notes Due 2007 issued in July and
September 1997, (2) a $7.3 million increase in interest expense related to the
10 1/2% Senior Notes Due 2006 issued May 1996, (3) a $6.4 million increase in
interest expense on debt related to the Gilroy Power Plant acquired in August
1996 and (4) $5.4 million of interest expense on debt related to the acquisition
of the Texas City and Clear Lake Power Plants. These increases were offset by
$6.2 million of interest capitalized for the development and construction of
power plants, and a $7.6 million decrease in interest expense at Calpine Geysers
Company and TPC due to repayment of debt.

35
<PAGE> 41

equivalent balances resulting from the issuance of the 8 3/4% Senior Notes Due
2007 during 1997 resulted in higher interest income for 1997 as compared to
1996.

Other income, net -- Other income, net, increased to $3.2 million for 1997
compared with expense of $2.3 million for 1996. In 1997, we recorded a $1.1
million gain on the sale of a note receivable and received a refund of $961,000
from PG&E. In 1996, we recorded a $3.7 million loss for uncollectible amounts
related to an acquisition project.

Provision for income taxes -- The effective rate for the income tax provision
was approximately 35% in 1997 and 33% in 1996. The effective rates were lower
than the statutory tax rate (federal and state) primarily due to depletion in
excess of tax basis benefits at our geothermal facilities, a decrease in the
California taxes paid due to our expansion into states other than California,
and a revision of prior years' tax estimates.

LIQUIDITY AND CAPITAL RESOURCES

To date, we have obtained cash from our operations, borrowings under our
credit facilities and other working capital lines, sale of debt and equity, and
proceeds from non-recourse project financing. We utilized this cash to fund our
operations, service debt obligations, fund the acquisition, development and
construction of power generation facilities, finance capital expenditures and
meet our other cash and liquidity needs. The following table summarizes our cash
flow activities for the periods indicated:

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
--------------------------------- ---------------------
1996 1997 1998 1998 1999
--------- --------- --------- --------- ---------
(IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from:
Operating activities......... $ 59,944 $ 108,461 $ 171,233 $ 23,073 $ 58,555
Investing activities......... (330,937) (402,158) (406,657) (174,923) (590,328)
Financing activities......... 345,153 246,240 283,443 203,696 755,528
--------- --------- --------- --------- ---------
Total................. $ 74,160 $ (47,457) $ 48,019 $ 51,846 $ 223,755
========= ========= ========= ========= =========
</TABLE>

Operating activities for the six months ended June 30, 1999 provided $58.6
million, consisting of approximately $44.1 million of depreciation and
amortization, $21.4 million of net income, $25.5 million of distributions from
unconsolidated investments in power projects, $13.3 million of deferred income
taxes, and a $7.2 million net increase in operating liabilities. This was offset
by $34.6 million net increase in operating assets and $18.3 million of income
from unconsolidated investments. Operating activities for 1998 provided $171.2
million, consisting of approximately $74.3 million of depreciation and
amortization, $45.7 million of net income, $34.4 million of distributions from
unconsolidated investments in power projects, $13.6 million of deferred income
taxes, $5.2 million net decrease in operating assets, and a $23.4 million net
increase in operating liabilities. This was offset by $25.2 million of income
from unconsolidated investments.

36
<PAGE> 42

projects, $8.4 million of additional loans to principal owners of power plants,
$655,000 for the acquisition of additional investments, offset by $1.9 million
of maturities of collateral securities in connection with the King City Power
Plant, the repayment of $3.1 million of outstanding loans, and $18.4 million
from the sale and leaseback transaction of the Geysers Power Company plants.
Investing activities for 1998 used $406.7 million, primarily due to $158.1
million for the acquisition of the remaining 50% interest in the Texas City and
Clear Lake Power Plants, $42.4 million for the acquisition of the remaining 55%
interest in the Bethpage Power Plant, $24.0 million of capital expenditures
related to the construction of the Pasadena Power Plant, $13.1 million for the
acquisition of the Pittsburg Power Plant, $11.9 million for the acquisition of
the Sonoma Power Plant, $74.2 million of other capital expenditures, $16.2
million of capitalized project development costs, $40.0 million for the
acquisition of an equity interest in the Tiverton Power Plant, $40.0 million for
the acquisition of an equity interest in the Rumford Power Plant, $7.0 million
of interest capitalized on construction projects, offset by $559,000 related to
the sale and leaseback transaction of the Greenleaf 1 & 2 Power Plants, the
receipt of $13.8 million of loan payments, $6.0 million of maturities of
collateral securities in connection with the King City Power Plant, and $1.1
million of restricted cash.

Financing activities for the six months ended June 30, 1999 provided $755.5
million of cash consisting of $79.2 million of borrowings for the construction
of the Pasadena Power Plant, $77.6 million of borrowings related to a bridge
facility, $794.8 million of net proceeds from additional equity and senior debt
financings received in March and April of 1999, and $1.2 million for the
issuance of common stock for our Employee Stock Purchase Plan, partially offset
by $120.6 million in repayment of non-recourse project financing in April 1999,
and $77.6 million of repayments related to a bridge facility. Financing
activities for 1998 provided $283.4 million of cash consisting of $52.1 million
of borrowings for the construction of the Pasadena Power Plant, $5.8 million of
borrowings for contingent consideration in connection with the acquisition of
the Gilroy Power Plant, $394.9 million of net proceeds from additional
financings, and $1.1 million for the issuance of common stock, partially offset
by $162.1 million in repayment of non-recourse project financing, $8.3 million
of repurchase of Senior Notes Due 2006 which includes a premium paid and accrued
interest to the date of repurchase.

At June 30, 1999, cash and cash equivalents were $320.3 million and working
capital was $346.4 million. For 1999, cash and cash equivalents increased by
$223.8 million and working capital increased by $259.5 million as compared to
December 31, 1998. At December 31, 1998, cash and cash equivalents were $96.5
million and working capital was $86.9 million. For 1998, cash and cash
equivalents increased by $48.0 million and working capital increased by $112.6
million as compared to December 31, 1997.

As a developer, owner and operator of power generation facilities, we are
required to make long-term commitments and investments of substantial capital
for our projects. We historically have financed these capital requirements with
cash from operations, borrowings under our credit facilities, other lines of
credit, non-recourse project financing or long-term debt, and the sale of
equity.

We continue to evaluate current and forecasted cash flow as a basis for
financing operating requirements and capital expenditures. We believe that we
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.

37
<PAGE> 43

On January 4, 1999, we entered into a Credit Agreement with ING to provide
up to $265.0 million of non-recourse project financing for the construction of
the Pasadena facility expansion. As of June 30, 1999, $79.2 million was
outstanding as a construction loan under the agreement. The outstanding loan
bears interest at ING's base rate plus an applicable margin or at LIBOR plus an
applicable margin and is payable quarterly. The construction loan will convert
to a term loan once the project has completed construction. The construction
loan will mature on or before July 1, 2000, but is subject to an extension to
October 1, 2000 if there are sufficient construction funds available. The term
loan will be available for a period not to exceed five years from the
construction loan maturity date. In connection with the Credit Agreement, we
entered into a $10.0 million letter of credit facility. At June 30, 1999, there
were no letters of credit outstanding under the facility.

On March 26, 1999, we completed a public offering of 12,000,000 shares of
our common stock at $15.50 per share. The net proceeds from this public offering
were approximately $177.9 million. Additionally, in April 1999, we sold an
additional 1,800,000 shares of common stock at $15.50 per share pursuant to the
exercise of the underwriters' over-allotment option for net proceeds of
approximately $26.7 million.

On March 29, 1999, we completed a public offering of $250.0 million of our
7 5/8% Senior Notes Due 2006 and of our $350.0 million 7 3/4% Senior Notes Due
2009. After deducting underwriting discounts and expenses of the offering, the
aggregate net proceeds from the sale of the Senior Notes were approximately
$588.3 million. The Senior Notes Due 2006 bear interest at 7 5/8% per year,
payable semi-annually on April 15 and October 15 each year and mature on April
15, 2006. The Senior Notes Due 2006 are not redeemable prior to maturity. The
Senior Notes Due 2009 bear interest at 7 3/4% per year, payable semi-annually on
April 15 and October 15 each year and mature on April 15, 2009. The Senior Notes
Due 2009 are not redeemable prior to maturity.

The net proceeds from the sale of the common stock, the Senior Notes Due
2006, and the Senior Notes Due 2009 were used as follows: (1) $120.6 million to
refinance indebtedness relating to the Gilroy Power Plant, (2) $77.6 million to
repay indebtedness under a bridge facility provided by Credit Suisse First
Boston to finance a portion of the purchase price to acquire the steam fields
that service the Sonoma County power plants, (3) $50.0 million to repay
outstanding borrowings under our revolving credit facility, $23.4 million of
which was incurred to finance a portion of the steam fields that service the
Sonoma Power Plants, (4) $25.0 million to complete the expansion of the Clear
Lake Power Plant, (5) approximately $400.0 million to finance a portion of power
generation facilities currently under construction and the projects currently
under development, and (6) the remaining $119.6 million will be used for general
corporate purposes. Transaction costs incurred in connection with the senior
notes offered were recorded as deferred charge and are amortized over the
respective lives of the Senior Notes Due 2006 and the Senior Notes Due 2009
using the effective interest rate method.

At June 30, 1999, we had a $100.0 million revolving credit facility
available with a consortium of commercial lending institutions. We had no
borrowings and $20.9 million of letters of credit outstanding under the credit
facility. The credit facility contains certain restrictions that limit or
prohibit, among other things, the ability of Calpine 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.

38
<PAGE> 44

At June 30, 1999, we also had $105.0 million of outstanding 9 1/4% Senior
Notes Due 2004, which mature on February 1, 2004, with interest payable
semi-annually on February 1 and August 1 of each year. In addition, we had
$171.8 million of outstanding 10 1/2% Senior Notes Due 2006, which mature on May
15, 2006, with interest payable semi-annually on May 15 and November 15 of each
year. During 1997, we issued $275.0 million of 8 3/4% Senior Notes Due 2007,
which mature on July 15, 2007, with interest payable semi-annually on January 15
and July 15 of each year. During 1998, we issued $400.0 million of 7 7/8% Senior
Notes due 2008, which mature on April 1, 2008, with interest payable
semi-annually on April 1 and October 1 of each year.

At June 30, 1999, we had a $12.0 million letter of credit outstanding with
The Bank of Nova Scotia to secure performance of the Clear Lake Power Plant.

We have a $1.1 million working capital line with a commercial lender that
may be used to fund short-term working capital commitments and letters of
credit. At June 30, 1999, we had no borrowings under this working capital line
and $74,000 of letters of credit outstanding. Borrowings accrue interest at
prime plus 1%.

FINANCIAL MARKET RISKS

From time to time, we use interest rate swap agreements to mitigate our
exposure to interest rate fluctuations. We do not use derivative financial
instruments for speculative or trading purposes. The following table summarizes
the fair market value of our existing interest rate swap agreements as of June
30, 1999 (in thousands):

<TABLE>
<CAPTION>
WEIGHTED
NOTIONAL AVERAGE
MATURITY DATE PRINCIPAL AMOUNT INTEREST RATE FAIR MARKET VALUE
- ------------- ---------------- ------------- -----------------
<S> <C> <C> <C>
2000 $ 21,800 9.9% $ (571)
2009 65,000 6.1% 1,156
2013 75,000 7.2% (3,480)
2014 79,970 6.7% (1,423)
---------------- ------------- -----------------
Total $241,770 7.1% $(4,318)
================ ============= =================
</TABLE>

Short-term investments. As of June 30, 1999, we have short-term investments
of $271.3 million. These short-term investments consist of highly liquid
investments with maturities between three and twelve months. These investments
are subject to interest rate risk and will increase in value if market interest
rates increase. We have the ability to hold these investments to maturity, and
as a result, we would not expect the value of these investments to be affected
to any significant degree by the effect of a sudden change in market interest
rates. Declines in interest rates over time will reduce our interest income.

39
<PAGE> 45

Outstanding debt. As of June 30, 1999, we have outstanding long-term debt
of approximately $1.6 billion primarily made up of $1.5 billion of senior notes
and $79.2 million of construction financing. Our construction financing has a
floating interest rate which has averaged 6.8%. Our outstanding long-term senior
notes as of June 30, 1999 are as follows (in thousands):

<TABLE>
<CAPTION>
MATURITY DATE CARRYING AMOUNT INTEREST RATE FAIR MARKET VALUE
- ------------- --------------- ------------- -----------------
<S> <C> <C> <C>
2004 $ 105,000 9 1/4% $ 106,050
2006 171,750 10 1/2% 185,267
2006 250,000 7 5/8% 243,125
2007 275,000 8 3/4% 282,219
2008 400,000 7 7/8% 384,600
2009 350,000 7 3/4% 330,313
--------------- -----------------
Total $1,551,750 $1,513,574
=============== =================
</TABLE>

Gas prices fluctuations. We enter into derivative commodity instruments to
hedge our exposure to the impact of price fluctuations on gas purchases. Such
instruments include regulated natural gas contracts and over-the-counter swaps
and basis hedges with major energy derivative product specialists. All hedge
transactions are subject to our risk management policy which does not permit
speculative positions. These transactions are accounted for under the hedge
method of accounting. Cash flows from derivative instruments are recognized as
incurred through changes in working capital.

IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS

In June 1999, the FASB issued FASB Statement No. 137 entitled "Accounting
for Derivative Instruments and Hedging Activities -- Deferral of the Effective
Date of FASB Statement No. 133." The Statement would amend SFAS No. 133 to defer
its effective date to all fiscal quarters of all fiscal years beginning after
June 15, 2000. We have not yet analyzed the impact of adopting SFAS No. 133 on
the financial statements and have not determined the timing of or method of the
adoption of SFAS No. 133. However, the Statement could increase the volatility
of our earnings.

YEAR 2000 COMPLIANCE

Year 2000 Compliance -- The "Year 2000 problem" refers to the fact that
some computer hardware, software and embedded systems were designed to read and
store dates using only the last two digits of the year.

We are coordinating our efforts to address the impact of Year 2000 on our
business through a Year 2000 Project Team comprised of representatives from each
business unit and our Year 2000 Project Office. The Year 2000 Project Office is
charged with addressing additional Year 2000 related issues including, but not
limited to, business continuation and other contingency planning. The Year 2000
Project Team meets regularly to monitor the efforts of assigned staff and
contractors to identify, remediate and test our technology.

The Year 2000 Project Team is focusing on four separate technology domains:

- corporate applications, which include core business systems,

- non-information technology, which includes all operating and control
systems,

40
<PAGE> 46

- end-user computing systems (that is, systems that are not considered core
business systems but may contain date calculations), and

- business partner and vendor systems.

Corporate Applications -- Corporate applications are those major core
systems, such as customer information, human resources and general ledger, for
which our Management Information Systems department has responsibility. We
utilize PeopleSoft for our major core systems. The PeopleSoft applications we
utilize are in operation and have been determined to be Year 2000 compliant.

Non-Information Technology/Embedded Systems -- Non-information technology
includes such items as power plant operating and control systems,
telecommunications and facilities-based equipment (e.g. telephones and two-way
radios) and other embedded systems. Each business unit is responsible for the
inventory and remediation of its embedded systems. In addition, we are working
with the Electric Power Research Institute, a consortium of power companies,
including investor-owned utilities, to coordinate vendor contacts and product
evaluation. Because many embedded systems are similar across utilities, this
concentrated effort should help to reduce total time expended in this area and
help to ensure that our efforts are consistent with the efforts and practices of
other power companies and utilities.

An Inventory phase for non-information technology/embedded systems was
completed in October 1998. An Initial Assessment phase was completed in December
1998. We plan to complete remediation of non-compliant systems by the fourth
quarter of 1999. To date, all embedded systems that we have identified can be
upgraded or modified within our current schedule. The schedule for addressing
Year 2000 issues with respect to mission critical embedded systems is as
follows:

<TABLE>
<CAPTION>
PERCENTAGE
PHASE COMPLETED STATUS ESTIMATED COMPLETION DATE
- ---------------------- ---------- ----------- --------------------------
<S> <C> <C> <C>
Inventory............. 100% Complete September 1998
Initial Assessment.... 100% Complete November 1998
Detail Assessment..... 100% Complete May 1999
Remediation........... 99% In Progress November 1999
Contingency 5%
Planning............ In Progress November 1999
</TABLE>

Testing of embedded systems is complex because some of the testing must be
completed during power plant scheduled maintenance outages. Much of the testing
will be accomplished in the fall of 1999 during regularly scheduled maintenance
outage periods. At that time, at least one typical unit of each critical type
will be tested by us or in cooperation with other power companies, and the
requirement for further testing will be determined.

End-User Computing Systems -- Some of our business units have developed
systems, databases, spreadsheets, etc. that contain date calculations.
Compliance of individual workstations is also included in this domain. These
systems comprise a relatively small percentage of the required modification in
terms of both number and criticality.

Our end-user computing systems are being inventoried by each business unit
and evaluated and remediated by our MIS staff. We expect to complete this
process by year-end 1999.

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<PAGE> 47

Business Partner and Vendor Systems -- We have contracts with business
partners and vendors who provide products and services to us. We are vigorously
seeking to obtain Year 2000 assurances from these third parties. The Year 2000
Project Team and appropriate business units are jointly undertaking this effort.
We have sent letters and accompanying Year 2000 surveys to about 800 vendors and
suppliers. Over 600 responses have been received as of July 31, 1999. These
responses outline to varying degrees the approaches vendors are undertaking to
resolve Year 2000 issues within their own systems. Follow-up letters will be
sent to those vendors who have not responded or whose responses were inadequate.

Contingency Planning -- Contingency and business continuation planning are
in various stages of development for critical and high-priority systems. Our
existing disaster response plan and other contingency plans are currently being
evaluated and will be adopted for use in case of any Year 2000-related
disruption. We expect to complete our contingency planning by November 1999.

Costs -- The costs of expected modifications are currently estimated to be
approximately $1.7 million which will be charged to expense as incurred. From
January 1, 1999 through June 30, 1999, $321,000 was charged to expense.
Approximately 9% of the estimated total cost was incurred in 1998, 63% will be
incurred in 1999 and the remainder will be incurred in 2000. These costs have
been and will be funded through operating cash flow. These estimates may change
as additional evaluations are completed and remediation and testing progress.

Risks -- We currently expect to complete our Year 2000 efforts with respect
to critical systems by the fall of 1999. This schedule and our cost estimates
may be affected by, among other things, the availability of Year 2000 personnel,
the readiness of third parties, the timing for testing our embedded systems, the
availability of vendor resources to complete embedded system assessments and
produce required component upgrades and our ability to implement appropriate
contingency plans.

The cost or consequences of a materially incomplete or untimely resolution
of the Year 2000 problem could adversely affect our future operations, financial
results or our financial condition.

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<PAGE> 48

BUSINESS

OVERVIEW

Calpine is a leading independent power company engaged in the development,
acquisition, ownership and operation of power generation facilities and the sale
of electricity predominantly in the United States. We have experienced
significant growth in all aspects of our business over the last five years.
Currently, we own interests in 38 power plants having an aggregate capacity of
3,694 megawatts and have an acquisition pending in which we will acquire 80% of
CGCA which owns interests in 6 power plants with an aggregate capacity of 579
megawatts. We also have 8 gas-fired projects and one project expansion under
construction having an aggregate capacity of 4,485 megawatts and have announced
plans to develop 6 gas-fired power plants with a total capacity of 3,930
megawatts. Upon completion of pending acquisitions and projects under
construction, we will have interests in 52 power plants located in 14 states
having an aggregate capacity of 8,758 megawatts, of which we will have a net
interest in 7,381 megawatts. This represents significant growth from the 342
megawatts of capacity we had at the end of 1993. Of this total generating
capacity, 90% will be attributable to gas-fired facilities and 10% will be
attributable to geothermal facilities.

As a result of our expansion program, our revenues, cash flow, earnings and
assets have grown significantly over the last five years, as shown in the table
below.

<TABLE>
<CAPTION>
COMPOUND ANNUAL
1993 1998 GROWTH RATE
-------- ---------- ---------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Total Revenue..................... $ 69.9 $ 555.9 51%
EBITDA............................ 42.4 255.3 43%
Net Income........................ 3.8 45.7 64%
Total Assets...................... 302.3 1,728.9 42%
</TABLE>

THE MARKET

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<PAGE> 49

In addition, as a result of a variety of factors, including deregulation of
the power generation market, utilities, independent power producers and
industrial companies are disposing of power generation facilities. To date,
numerous utilities have sold or announced their intentions to sell their power
generation facilities and have focused their resources on the transmission and
distribution segments. Many independent producers operating a limited number of
power plants are also seeking to dispose of their plants in response to
competitive pressures, and industrial companies are selling their power plants
to redeploy capital in their core businesses.

STRATEGY

- Development and expansion of power plants. We are actively pursuing the
development and expansion of highly efficient, low-cost, gas-fired power
plants to replace old and inefficient generating facilities and meet the
demand for new generation. Our strategy is to develop power plants in
strategic geographic locations that enable us to utilize existing power
generation assets and operate the power plants as integrated electric
generation systems. This allows us to achieve significant operating
synergies and efficiencies in fuel procurement, power marketing and
operations and maintenance.

In May 1999, we completed a 35 megawatt expansion of our Clear Lake Power
Plant to 412 megawatts, and we commenced commercial operations at our 169
megawatt Dighton Power Plant in August 1999.

We currently have nine projects under construction representing an
additional 4,485 megawatts. Of these new projects, we are currently
expanding our Pasadena facility by 545 megawatts to 785 megawatts and we
have eight new power plants under construction, including the Tiverton
Power Plant in Rhode Island; the Rumford Power Plant in Maine; the
Westbrook Power Plant in Maine; the Sutter Power Plant in California; the
Los Medanos Power Plant in California; the South Point Power Plant in
Arizona; the Magic Valley Power Plant in Texas; and the Lost Pines 1
Power Plant in Texas. We have also announced plans to develop six
additional power generation facilities, totaling 3,830 megawatts, in
California, Texas, Arizona and Pennsylvania.

44
<PAGE> 50

construction of our development program. We expect to finalize the
documentation relating to this facility in the fourth quarter of 1999.

On August 20, 1999, we announced the purchase of 18 F-class combustion
turbines from Siemens Westinghouse Power Corporation that will be capable
of producing 4,900 megawatts of electricity. Beginning in 2002, Siemens
will deliver six turbines per year through 2004. Combined with our
existing turbine order we have 69 turbines under contract, option or
letter of intent capable of producing 17,745 megawatts.

- Acquisition of power plants. Our strategy is to acquire power generating
facilities that meet our stringent criteria, provide significant
potential for revenue, cash flow and earnings growth and provide the
opportunity to enhance the operating efficiencies of the plants. We have
significantly expanded and diversified our project portfolio through the
acquisition of power generation facilities through the completion of 32
acquisitions to date.

On March 19, 1999, we completed the acquisition of Unocal Corporation's
Geysers geothermal steam fields in northern California for approximately
$102.1 million. The steam fields fuel our 12 Sonoma County power plants,
totaling 544 megawatts purchased from Pacific Gas and Electric Company.

On May 7, 1999 we completed the acquisition from Pacific Gas and Electric
Company ("PG&E") of 14 geothermal power plants at The Geysers in northern
California, with a combined capacity of approximately 700 megawatts, for
$212.8 million. With the acquisition, we now own interests in and operate
18 geothermal power plants that generate more than 800 megawatts of
electricity, and we are the nation's largest geothermal and green power
producer. The combination of our existing geothermal steam and power
plant assets, the acquisition of the Sonoma steam fields from Unocal, and
the 14 power plants from PG&E allows us to fully integrate the steam and
power plant operations at The Geysers into one efficient, unified system
to maximize the renewable natural resource, lower overall production
costs and extend the life of The Geysers.

On August 27, 1999, we announced an agreement with CGCA to acquire 80% of
its common stock for $25.00 per share or approximately $145.0 million.
NRG Energy, Inc., a wholly owned subsidiary of Northern States Power,
will own the remaining 20%. The transaction is subject to the approval of
CGCA shareholders and we expect to consummate the acquisition by year-end
1999. CCGA currently owns interests in six natural gas-fired power
plants, totaling 579 megawatts. The plants are located in Pennsylvania,
New Jersey, Illinois and Oklahoma.

On August 31, 1999, we completed the acquisition of an additional 50% of
the Aidlin Power Plant from Edison Mission Energy (5%) and General
Electric Capital Corporation (45%) for a total purchase price of $7.2
million. We now own 55% of the 20 megawatt Aidlin Power Plant.

45
<PAGE> 51

northern California and the Gulf Coast region, where we are developing
low-cost natural gas supplies and proprietary pipeline systems to support
our strategically-located natural gas-fired power plants.

- Enhancement of existing power plants. We continually seek to maximize the
power generation and revenue potential of our operating assets and
minimize our operating and maintenance expenses and fuel costs. This will
become even more significant as our portfolio of power generation
facilities expands to an aggregate of 52 power plants with an aggregate
capacity of 8,758 megawatts, after completion of our pending acquisitions
and projects currently under construction. We focus on operating our
plants as an integrated system of power generation, which enables us to
minimize costs and maximize operating efficiencies. As of June 30, 1999,
our gas-fired and geothermal power generation facilities have operated at
an average availability of approximately 96% and 99%, respectively. We
believe that achieving and maintaining a low-cost of production will be
increasingly important to compete effectively in the power generation
market.

On July 8, 1999, we announced a renegotiation of our Gilroy power sales
agreement with PG&E. The amendment provides for the termination of the
remaining 18 years of the long-term contract in exchange for a fixed
long-term payment schedule. The amended agreement is subject to approval
by the California Public Utilities Commission, whose decision we expect
to receive in the fourth quarter of 1999. We will continue to sell the
output from the Gilroy Power Plant through October 2002 to PG&E and
thereafter we will market the output in the California wholesale power
market.

DESCRIPTION OF FACILITIES

We currently have interests in 38 power generation facilities with a
current aggregate capacity of approximately 3,694 megawatts, consisting of 19
gas-fired power plants with a total capacity of 2,806 megawatts and 19
geothermal power generation facilities with a total capacity of 888 megawatts.
We also have an acquisition pending comprising 6 gas-fired facilities with an
aggregate capacity of 579 megawatts, 8 gas-fired projects and one project
expansion currently under construction with an aggregate capacity of 4,485
megawatts, and have announced the development of 6 additional power plants with
an aggregate capacity of 3,930 megawatts. Each of the power generation
facilities currently in operation produces electricity for sale to a utility or
other third-party end user. Thermal energy produced by the gas-fired
cogeneration facilities is sold to governmental and industrial users.

The gas-fired and geothermal power generation projects in which we have an
interest produce electricity and thermal energy that are typically sold pursuant
to long-term power sales agreements. Revenue from a power sales agreement
usually consists of two components: energy payments and capacity payments.
Energy payments are based on a power plant's net electrical output where payment
rates may be determined by a schedule of prices covering a fixed number of years
under the power sales agreement, after which

46
<PAGE> 52

payment rates are usually indexed to the fuel costs of the contracting utility
or to general inflation indices. Capacity payments are based on a power plant's
net electrical output and/or its available capacity. Energy payments are made
for each kilowatt hour of energy delivered, while capacity payments, under
certain circumstances, are made whether or not any electricity is delivered.

Upon completion of the pending acquisitions and projects under
construction, we will provide operating and maintenance services for 42 of the
52 power plants in which we have an interest. Such services include the
operation of power plants, geothermal steam fields, wells and well pumps,
gathering systems and gas pipelines. We also supervise maintenance, materials
purchasing and inventory control, manage cash flow, train staff and prepare
operating and maintenance manuals for each power generation facility that we
operate. As a facility develops an operating history, we analyze its operation
and may modify or upgrade equipment or adjust operating procedures or
maintenance measures to enhance the facility's reliability or profitability.
These services are performed under the terms of an operating and maintenance
agreement pursuant to which we are generally reimbursed for certain costs, paid
an annual operating fee and may also be paid an incentive fee based on the
performance of the facility. The fees payable to us are generally subordinated
to any lease payments or debt service obligations of non-recourse financing for
the project.

In order to provide fuel for the gas-fired power generation facilities in
which we have an interest, natural gas reserves are acquired or natural gas is
purchased from third parties under supply agreements. We attempt to structure a
gas-fired power facility's fuel supply agreement so that gas costs have a direct
relationship to the fuel component of revenue energy payments. We currently hold
interests in geothermal leaseholds in The Geysers that produce steam that is
supplied to the power generation facilities owned by us for use in producing
electricity.

Certain power generation facilities in which we have an interest have been
financed primarily with non-recourse project financing that is structured to be
serviced out of the cash flows derived from the sale of electricity, thermal
energy and/or steam produced by such facilities and provides that the
obligations to pay interest and principal on the loans are secured almost solely
by the capital stock or partnership interests, physical assets, contracts and/or
cash flow attributable to the entities that own the facilities. The lenders
under non-recourse project financing generally have no recourse for repayment
against us or any of our assets or the assets of any other entity other than
foreclosure on pledges of stock or partnership interests and the assets
attributable to the entities that own the facilities.

Substantially all of the power generation facilities in which we have an
interest are located on sites which are leased on a long-term basis. See
"-- Properties."

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<PAGE> 53

Set forth below is a map showing the locations of our power plants in
operation, pending acquisitions, power plants under construction and announced
development projects.

[DEPICTION OF A MAP OF THE UNITED STATES, WITH MARKERS INDICATING THE LOCATION
OF OUR FACILITIES]

<TABLE>
<CAPTION>
MEGAWATTS
-----------------------
# OF PLANT CALPINE NET
PLANTS CAPACITY INTEREST
------ -------- -----------
<S> <C> <C> <C>
In operation.................................... 38 3,694 2,955
Pending acquisitions............................ 6 579 400
Under construction
-- New facilities............................. 8 3,940 3,481
-- Expansion projects......................... -- 545 545
Announced development........................... 6 3,930 2,918
-- ------ -----
58 12,688 10,299
== ====== =====
</TABLE>

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<PAGE> 54

Set forth below is certain information regarding our operating power
plants, plants under construction, pending power plant acquisitions and
development projects.

<TABLE>
<CAPTION>
POWER NAMEPLATE CALPINE CALPINE NET
GENERATION CAPACITY INTEREST INTEREST
POWER PLANT TECHNOLOGY LOCATION (MEGAWATTS)(1) PERCENTAGE (MEGAWATTS)
----------- ---------- ------------- -------------- ---------- -----------
<S> <C> <C> <C> <C> <C>
OPERATING POWER PLANTS
Sonoma County (12 power
plants)(3)............ Geothermal California 544.0 100% 544.0
Texas City.............. Gas-Fired Texas 450.0 100% 450.0
Clear Lake.............. Gas-Fired Texas 412.0 100% 412.0
Pasadena................ Gas-Fired Texas 240.0 100% 240.0
Gordonsville............ Gas-Fired Virginia 240.0 50% 120.0
Lockport................ Gas-Fired New York 184.0 11.4% 20.9
Dighton(6).............. Gas-Fired Massachusetts 169.0 50% 84.5
Bayonne................. Gas-Fired New Jersey 165.0 7.5% 12.4
Auburndale.............. Gas-Fired Florida 150.0 50% 75.0
Lake County (2 power
plants)(3)............ Geothermal California 150.0 100% 150.0
Sumas(2)................ Gas-Fired Washington 125.0 70% 87.5
King City............... Gas-Fired California 120.0 100% 120.0
Gilroy.................. Gas-Fired California 120.0 100% 120.0
Kennedy International
Airport............... Gas-Fired New York 107.0 50% 53.5
Pittsburg............... Gas-Fired California 70.0 100% 70.0
Calistoga............... Geothermal California 67.0 100% 67.0
Sonoma(3)............... Geothermal California 60.0 100% 60.0
Bethpage................ Gas-Fired New York 57.0 100% 57.0
Greenleaf 1............. Gas-Fired California 49.5 100% 49.5
Greenleaf 2............. Gas-Fired California 49.5 100% 49.5
Stony Brook............. Gas-Fired New York 40.0 50% 20.0
Agnews.................. Gas-Fired California 29.0 20% 5.8
Watsonville............. Gas-Fired California 28.5 100% 28.5
West Ford Flat.......... Geothermal California 27.0 100% 27.0
Bear Canyon............. Geothermal California 20.0 100% 20.0
Aidlin.................. Geothermal California 20.0 55% 11.0
PENDING ACQUISITIONS
Grays Ferry............. Gas-Fired Pennsylvania 150.0 40% 60.0
Parlin.................. Gas-Fired New Jersey 122.0 80% 97.6
Morris.................. Gas-Fired Illinois 117.0 80% 93.6
Pryor................... Gas-Fired Oklahoma 110.0 80% 88.0
Newark.................. Gas-Fired New Jersey 58.0 80% 46.4
Philadelphia............ Gas-Fired Pennsylvania 22.0 66.4% 14.6
PROJECTS UNDER
CONSTRUCTION
Magic Valley............ Gas-Fired Texas 730.0 100% 730.0
Los Medanos............. Gas-Fired California 500.0 100% 500.0
Westbrook............... Gas-Fired Maine 545.0 100% 545.0
Pasadena Expansion...... Gas-Fired Texas 545.0 100% 545.0
South Point............. Gas-Fired Arizona 545.0 100% 545.0
Sutter.................. Gas-Fired California 545.0 100% 545.0
Lost Pines 1............ Gas-Fired Texas 545.0 50% 272.5
Tiverton(4)............. Gas-Fired Rhode Island 265.0 62.8% 166.4
Rumford(5).............. Gas-Fired Maine 265.0 66.7% 176.8
</TABLE>

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<PAGE> 55

- -------------------------
(1) Nameplate capacity may not represent the actual output for a facility at any
particular time.

(2) See "-- Operating Power Plants -- Sumas Power Plant" for a description of
our interest in the Sumas Power Plant. Based on our current estimates, the
payments to be received by us represent approximately 70% of distributable
cash.

(3) For these geothermal power plants, nameplate capacity refers to the
approximate capacity of the power plants. The capacity of these plants is
expected to gradually diminish as the production of the related steam fields
declines.

(4) See "Project Development and Acquisitions -- Project Development -- Projects
Under Construction -- Tiverton Power Plant" for a description of our
interest in the Tiverton Power Plant.

(5) See "Project Development and Acquisitions -- Project Development -- Projects
Under Construction -- Rumford Power Plant" for a description of our interest
in the Rumford Power Plant.

(6) See "Project Development and Acquisitions -- Project Development -- Projects
Under Construction -- Dighton Power Plant" for a description of our interest
in the Dighton Power Plant. Based on our current estimates, our interest
represents our right to receive approximately 50% of project cash flow
beginning at the commencement of commercial operation.

OPERATING POWER PLANTS

Sonoma County Power Plants. The Sonoma County power plants consist of 12
geothermal power plants and associated steam fields having combined capacity of
544 megawatts located at The Geysers in northern California. The power plants
were acquired from PG&E on May 7, 1999 and we market the output from these
plants into the California power market.

Texas City Power Plant. The Texas City Power Plant is a 450 megawatt
gas-fired cogeneration facility located in Texas City, Texas. Electricity
generated by the Texas City Power Plant is sold under two separate long-term
agreements to (1) Texas Utilities Electric Company ("TUEC") under a power sales
agreement terminating on September 30, 2002, and (2) Union Carbide Corporation
("UCC") under a steam and electricity services agreement terminating on June 30,
1999. Each agreement contains payment provisions for capacity and electric
energy payments. Under a steam and electricity services agreement expiring
October 19, 2003, the Texas City Power Plant will supply UCC with 300,000 lbs/hr
of steam on a monthly average basis, with the required supply of steam not
exceeding 600,000 lbs/hr at any given time. During 1998, the Texas City Power
Plant generated approximately 2,517,316,000 kilowatt hours of electric energy
for sale to TUEC and UCC and approximately $188.3 million of revenue.

50
<PAGE> 56

Clear Lake Power Plant. The Clear Lake Power Plant is a 412 megawatt gas/
hydrogen-fired cogeneration facility located in Pasadena, Texas. Electricity
generated by the Clear Lake Power Plant is sold under three separate long-term
agreements to (1) Texas-New Mexico Power Company ("TNP") under a power sales
agreement terminating in 2004, (2) Houston Lighting and Power Company ("HL&P")
under a power sales agreement terminating in 2005, and (3) Hoechst Celanese
Chemical Group, Inc. ("HCCG") under a power sales agreement terminating in 2004.
Each power sales agreement contains payment provisions for capacity and energy
payments. Under a steam purchase and sale agreement expiring August 31, 2004,
the Clear Lake Power Plant will supply up to 900,000 lbs/hr of steam to HCCG.
During 1998, the Clear Lake Power Plant generated approximately 2,912,649,000
kilowatt hours of electric energy for sale to TNP, HL&P and HCCG and
approximately $89.3 million of revenue.

Pasadena Power Plant. The Pasadena Power Plant is a 240 megawatt gas-fired
cogeneration facility located in Pasadena, Texas. Electricity generated by the
Pasadena Power Plant is sold under contract and into the open market. We entered
into an energy sales agreement with Phillips Petroleum Company ("Phillips")
terminating in 2018. Under this agreement, we provide 90 megawatts of
electricity and 200,000 lbs/hr of steam to Phillips' Houston Chemical Complex.
West Texas Utilities purchased 50 megawatts of capacity through the end of 1998.
In 1999, LG&E Energy Marketing will purchase up to 150 megawatts of electricity
under a one-year agreement. TUEC is also under contract to purchase up to 150
megawatts of electricity under a two-year agreement beginning December 1, 1999.
The remaining available electricity output is sold into the competitive market
through our power marketing organization. During 1998, the Pasadena Power Plant
generated approximately 812,314,000 kilowatt hours of electric energy with
approximately $30.5 million of revenue.

Gordonsville Power Plant. The Gordonsville Power Plant is a 240 megawatt
gas-fired cogeneration facility located near Gordonsville, Virginia. Electricity
generated by the Gordonsville Power Plant is sold to the Virginia Electric and
Power Company under two power sales agreements terminating on June 1, 2024, each
of which include payment provisions for capacity and energy. The Gordonsville
Power Plant sells steam to Rapidan Service Authority under the terms of a steam
purchase and sales agreement, which expires June 1, 2004. During 1998, the
Gordonsville Power Plant generated approximately 213,382,000 kilowatt hours of
electrical energy and approximately $37.4 million of revenue.

Lockport Power Plant. The Lockport Power Plant is a 184 megawatt gas-fired,
combined-cycle cogeneration facility located in Lockport, New York. The facility
is owned and operated by Lockport Energy Associates, L.P. ("LEA"). We own an
indirect 11.36% limited partnership interest in LEA. Electricity and steam is
sold to General Motors Corporation ("GM") under an energy sales agreement
expiring in December 2007 for use at the GM Harrison plant, which is located on
a site adjacent to the Lockport Power Plant. Electricity is also sold to New
York State Electricity and Gas Company ("NYSEG") under a power purchase
agreement expiring October 2007. NYSEG is required to purchase all of the
electric power produced by the Lockport Power Plant not required by GM. For
1998, the Lockport Power Plant generated approximately 1,284,830,000 kilowatt
hours of electricity and had $118.6 million in revenue.

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<PAGE> 57

from the commercial operation date. The Dighton Power Plant was developed by EMI
and cost approximately $120.0 million. Commercial operation commenced in August
1999. The Dighton Power Plant is operated by EMI and sells its output into the
New England power market and to wholesale and retail customers in the
northeastern United States.

Bayonne Power Plant. The Bayonne Power Plant is a 165 megawatt gas-fired
cogeneration facility located in Bayonne, New Jersey. The facility is primarily
owned by an affiliate of Cogen Technologies, Inc. We own an indirect 7.5%
limited partnership interest in the facility. Electricity generated by the
Bayonne Power Plant is sold under various power sales agreements to Jersey
Central Power & Light Company and Public Service Electric and Gas Company of New
Jersey. The Bayonne Power Plant also sells steam to two industrial entities.
During 1998, the Bayonne Power Plant generated approximately 1,399,860,000
kilowatt hours of electrical energy and approximately $116.6 million in revenue.

Auburndale Power Plant. The Auburndale Power Plant is a 150 megawatt
gas-fired cogeneration facility located near the city of Auburndale, Florida.
Electricity generated by the Auburndale Power Plant is sold under various power
sales agreements to Florida Power Corporation ("FPC"), Enron Power Marketing and
Sonat Power Marketing. Auburndale sells 131.18 megawatts of capacity and energy
to FPC under three power sales agreements, each terminating at the end of 2013.
The Auburndale Power Plant sells steam under two steam purchase and sale
agreements. One agreement is with Cutrale Citrus Juices, USA, an affiliate of
Sucocitro Cutrale LTDA, expiring on July 1, 2014. The second agreement is with
Todhunter International, Inc., doing business as Florida Distillers Company,
expiring on July 1, 2009. During 1998, the Auburndale Power Plant generated
approximately 1,022,146,000 kilowatt hours of electrical energy and
approximately $49.6 million in revenue.

Lake County Power Plants. The Lake County power plants consist of two
geothermal power plants and associated steam fields having a combined capacity
of 150 megawatts located at The Geysers in northern California. We acquired
these power plants from PG&E on May 7, 1999, and we market the output from these
plants into the California power market.

Sumas Power Plant. The Sumas Power Plant is a 125 megawatt gas-fired,
combined cycle cogeneration facility located in Sumas, Washington. We currently
hold an ownership interest in the Sumas Power Plant, which entitles us to
receive certain scheduled distributions during the next two years. Upon receipt
of the scheduled distributions, we will no longer have any ownership interest in
the Sumas Power Plant. Electrical energy generated by the Sumas Power Plant is
sold to Puget Sound Power & Light Company ("Puget") under the terms of a power
sales agreement terminating in 2013. Under the power sales agreement, Puget has
agreed to purchase an annual average of 123 megawatts of electrical energy. In
addition to the sale of electricity to Puget, pursuant to a long-term steam
supply and dry kiln lease agreement, the Sumas Power Plant produces and sells
approximately 23,000 lbs/hr of low pressure steam to an adjacent lumber-drying
facility owned by Sumas, which has been leased to and is operated by Socco, Inc.
During 1998, the Sumas Power Plant generated approximately 915,227,280 kilowatt
hours of electrical energy and approximately $49.6 million of total revenue.

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contains payment provisions for capacity and energy. In addition to the sale of
electricity to PG&E, the King City Power Plant produces and sells thermal energy
to a thermal host, Basic Vegetable Products, Inc., an affiliate of BAF, under a
long-term contract coterminous with the power sales agreement. During 1998, the
King City Power Plant generated approximately 428,825,000 kilowatt hours of
electrical energy and approximately $45.6 million of total revenue.

Gilroy Power Plant. The Gilroy Power Plant is a 120 megawatt gas-fired
cogeneration facility located in Gilroy, California. Electricity generated by
the Gilroy Power Plant is sold to PG&E under a power sales agreement terminating
in 2018. In July 1999 we announced a renegotiation of our Gilroy power sales
agreement with PG&E. The amendment provides for the termination of the remaining
18 years of the long-term contract in exchange for a fixed long-term payment
schedule. The amended agreement is subject to approval by the California Public
Utilities Commission, whose decision we expect to receive in the fourth quarter
of 1999. We will continue to sell the output from the Gilroy Power Plant through
October 2002 to PG&E and thereafter we will market the output in the California
wholesale power market. In addition, the Gilroy Power Plant produces and sells
thermal energy to a thermal host, Gilroy Foods, Inc., under a long-term contract
that is coterminous with the power sales agreement. During 1998, the Gilroy
Power Plant generated approximately 477,628,000 kilowatt hours of electrical
energy for sale to PG&E and approximately $39.3 million in revenue.

Kennedy International Airport Power Plant. The Kennedy International
Airport Power Plant is a 107 megawatt gas-fired cogeneration facility located at
John F. Kennedy International Airport in Queens, New York. The facility is owned
and operated by KIAC Partners. We own an indirect 50% general partnership
interest in KIAC. Electricity and thermal energy generated by the Kennedy
International Airport Power Plant is sold to the Port Authority, and incremental
electric power is sold to Consolidated Edison Company of New York, the New York
Power Authority and other utility customers. Electric power and chilled and hot
water generated by the Kennedy International Airport Power Plant is sold to the
Port Authority under an energy purchase agreement that expires November 2015.
For 1998, the Kennedy International Airport Power Plant generated approximately
533,755,000 kilowatt hours of electrical energy, 266,252 mmbtu of chilled water
and 178,405 mmbtu of hot water for sale to the Port Authority, and generated
approximately $56.1 million in revenue.

Pittsburg Power Plant. The Pittsburg Power Plant is a 70 megawatt gas-fired
cogeneration facility, located at The Dow Chemical Company's ("Dow") Pittsburg,
California chemical facility. We sell up to 18 megawatts of electricity to Dow
under a power sales agreement expiring in 2008. Surplus energy is sold to PG&E
under an existing power sales agreement. In addition, we sell approximately
200,000 lbs/hr of steam to Dow under an energy sales agreement expiring in 2003
and to USS-POSCO Industries' nearby steel mill under a process steam contract
expiring in 2001. From its acquisition, in July 1998, through the end of 1998,
the Pittsburg Power Plant generated approximately 92,358,000 kilowatt hours of
electrical energy to Dow and PG&E and approximately $9.4 million in revenue.

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purchase up to an additional 10 megawatts of peak power production through 2005.
We market the excess electricity into the California power market. From its
acquisition, in June 1998, through the end of 1998, the Sonoma Power Plant
generated approximately 215,433,000 kilowatt hours of electrical energy and
approximately $6.2 million in revenue.

Bethpage Power Plant. The Bethpage Power Plant is a 57 megawatt gas-fired,
combined cycle cogeneration facility located adjacent to a Northrup Grumman
Corporation ("Grumman") facility in Bethpage, New York. Electricity and steam
generated by the Bethpage Power Plant are sold to Grumman under an energy
purchase agreement expiring August 2004. Electric power not sold to Grumman is
sold to Long Island Power Authority ("LIPA") under a generation agreement also
expiring August 2004. Grumman is also obligated to purchase a minimum of 158,000
klbs of steam per year from the Bethpage Power Plant. For 1998, the Bethpage
Power Plant generated approximately 474,991,000 kilowatt hours of electrical
energy for sale to Grumman and LIPA and approximately $32.9 million in revenue.

Greenleaf 1 Power Plant. The Greenleaf 1 Power Plant is a 49.5 megawatt
gas-fired cogeneration facility located near Yuba City, California. We operate
this facility under an operating lease with Union Bank of California,
terminating in 2014 (the "Greenleaf Lease"). Electricity generated by the
Greenleaf 1 Power Plant is sold to PG&E under a power sales agreement
terminating in 2019 which contains payment provisions for capacity and energy.
In addition, the Greenleaf 1 Power Plant sells thermal energy, in the form of
hot exhaust to dry wood waste, to a thermal host which is owned and operated by
us. For 1998, the Greenleaf 1 Power Plant generated approximately 326,543,000
kilowatt hours of electrical energy for sale to PG&E and approximately $17.8
million in revenue.

Greenleaf 2 Power Plant. The Greenleaf 2 Power Plant is a 49.5 megawatt
gas-fired cogeneration facility located near Yuba City, California. This
facility is also operated by us under the Greenleaf Lease. Electricity generated
by the Greenleaf 2 Power Plant is sold to PG&E under a power sales agreement
terminating in 2019 which includes payment provisions for capacity and energy.
In addition to the sale of electricity to PG&E, the Greenleaf 2 Power Plant
sells thermal energy to Sunsweet Growers, Inc. pursuant to a 30-year contract.
For 1998, the Greenleaf 2 Power Plant generated approximately 377,101,000
kilowatt hours of electrical energy for sale to PG&E and approximately $20.3
million in revenue.

Stony Brook Power Plant. The Stony Brook Power Plant is a 40 megawatt
gas-fired cogeneration facility located on the campus of the State University of
New York at Stony Brook, New York ("SUNY"). The facility is owned by Nissequogue
Cogen Partners ("NCP"). We own an indirect 50% general partner interest in NCP.
Steam and electric power is sold to SUNY under an energy supply agreement
expiring in 2023. Under the energy supply agreement, SUNY is required to
purchase, and the Stony Brook Power Plant is required to provide, all of SUNY's
electric power and steam requirements up to 36.125 megawatts of electricity and
280,000 lbs/hr of process steam. The remaining electricity is sold to LIPA under
a long-term agreement. LIPA is obligated to purchase electric power generated by
the facility not required by SUNY. SUNY is required to purchase a minimum of
402,000 klbs per year of steam. For 1998, the Stony Brook Power Plant generated
approximately 326,584,000 kilowatt hours of electrical energy and 1,185,000 klbs
of steam for sale to SUNY and LIPA and approximately $31.1 million in revenue.

Agnews Power Plant. The Agnews Power Plant is a 29 megawatt gas-fired,
combined-cycle cogeneration facility located on the East Campus of the
state-owned

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Agnews Developmental Center in San Jose, California. We hold a 20% ownership
interest in GATX Calpine-Agnews, Inc., which is the sole stockholder of O.L.S.
Energy-Agnews, Inc. ("O.L.S. Energy-Agnews"). O.L.S. Energy-Agnews leases the
Agnews Power Plant under a sale leaseback arrangement. Electricity generated by
the Agnews Power Plant is sold to PG&E under a power sales agreement terminating
in 2021 which contains payment provisions for capacity and energy. In addition,
the Agnews Power Plant produces and sells electricity and approximately 7,000
lbs/hr of steam to the Agnews Developmental Center pursuant to a 30-year energy
service agreement. During 1998, the Agnews Power Plant generated approximately
215,180,000 kilowatt hours of electrical energy and total revenue of $11.7
million.

Watsonville Power Plant. The Watsonville Power Plant is a 28.5 megawatt
gas-fired, combined cycle cogeneration facility located in Watsonville,
California. We operate the Watsonville Power Plant under an operating lease with
the Ford Motor Credit Company, terminating in 2009. Electricity generated by the
Watsonville Power Plant is sold to PG&E under a power sales agreement
terminating in 2009 which contains payment provisions for capacity and energy.
During 1998, the Watsonville Power Plant produced and sold steam to Farmers
Processing, a food processor. In addition, the Watsonville Power Plant sold
process water produced from its water distillation facility to Farmer's Cold
Storage, Farmer's Processing and Cascade Properties. For 1998, the Watsonville
Power Plant generated approximately 206,007,000 kilowatt hours of electrical
energy for sale to PG&E and approximately $11.4 million in revenue.

West Ford Flat Power Plant. The West Ford Flat Power Plant consists of a 27
megawatt geothermal power plant and associated steam fields located in northern
California. Electricity generated by the West Ford Flat Power Plant is sold to
PG&E under a power sales agreement terminating in 2008 which contains payment
provisions for capacity and energy. During 1998, the West Ford Flat Power Plant
generated approximately 235,529,000 kilowatt hours of electrical energy for sale
to PG&E and approximately $34.6 million of revenue.

Bear Canyon Power Plant. The Bear Canyon Power Plant consists of a 20
megawatt geothermal power plant and associated steam fields located in northern
California, two miles south of the West Ford Flat Power Plant. Electricity
generated by the Bear Canyon Power Plant is sold to PG&E under two 10 megawatt
power sales agreements terminating in 2008 which contain payment provisions for
capacity and energy. During 1998, the Bear Canyon Power Plant generated
approximately 176,508,000 kilowatt hours of electrical energy and approximately
$20.4 million of revenue.

Aidlin Power Plant. The Aidlin Power Plant consists of a 20 megawatt
geothermal power plant and associated steam fields located in northern
California. We hold an indirect 55% ownership interest in the Aidlin Power
Plant. Electricity generated by the Aidlin Power Plant is sold to PG&E under two
10 megawatt power sales agreements terminating in 2009 which contain payment
provisions for capacity and energy. During 1998, the Aidlin Power Plant
generated approximately 170,046,000 kilowatt hours of electrical energy and
revenue of $24.4 million.

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During 1998, the Calistoga Power Plant generated approximately 614,073,000
kilowatt hours of electrical energy for sale to PG&E and approximately $27.9
million in revenue.

PROJECT DEVELOPMENT AND ACQUISITIONS

We are actively engaged in the development and acquisition of power
generation projects. We have historically focused principally on the development
and acquisition of interests in gas-fired and geothermal power projects,
although we also consider projects that utilize other power generation
technologies. We have significant expertise in a variety of power generation
technologies and have substantial capabilities in each aspect of the development
and acquisition process, including design, engineering, procurement,
construction management, fuel and resource acquisition and management, financing
and operations.

ACQUISITIONS

We will consider the acquisition of an interest in operating projects as
well as projects under development where we would assume responsibility for
completing the development of the project. In the acquisition of power
generation facilities, we generally seek to acquire an ownership interest in
facilities that offer us attractive opportunities for revenue and earnings
growth, and that permit us to assume sole responsibility for the operation and
maintenance of the facility. In evaluating and selecting a project for
acquisition, we consider a variety of factors, including the type of power
generation technology utilized, the location of the project, the terms of any
existing power or thermal energy sales agreements, gas supply and transportation
agreements and wheeling agreements, the quantity and quality of any geothermal
or other natural resource involved, and the actual condition of the physical
plant. In addition, we assess the past performance of an operating project and
prepare financial projections to determine the profitability of the project. We
generally seek to obtain a significant equity interest in a project and to
obtain the operation and maintenance contract for that project. See
"-- Strategy" and "Risk Factors -- Our power project development and acquisition
activities may not be successful."

We have grown substantially in recent years as a result of acquisitions of
interests in power generation facilities and steam fields. We believe that
although the domestic power industry is undergoing consolidation and that
significant acquisition opportunities are available, we are likely to confront
significant competition for acquisition opportunities. In addition, there can be
no assurance that we will continue to identify attractive acquisition
opportunities at favorable prices or, to the extent that any opportunities are
identified, that we will be able to consummate such acquisitions.

PENDING ACQUISITIONS

COGENERATION CORPORATION OF AMERICA. On August 27, 1999 we announced an
agreement with CGCA to acquire 80% of its common stock for $25.00 per share or
approximately $145.0 million. NRG Energy, Inc., a wholly owned subsidiary of
Northern States Power will own the remaining 20%. The transaction is subject to
shareholder approval and we expect to consummate the acquisition by year-end
1999. CGCA currently owns interests in six natural gas-fired power plants,
totaling 579 megawatts. The plants are located in Pennsylvania, New Jersey,
Illinois and Oklahoma. As of June 30, 1999 CGCA had approximately $296.6 million
of indebtedness, including $216.1 million of non-recourse project debt.

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Grays Ferry Power Plant. The Grays Ferry Power Plant is a 150 megawatt,
natural gas-fired cogeneration project located in Philadelphia,
Pennsylvania. CGCA owns 50% of the project and 50% is owned by Trigen Energy
Corporation. The facility is operated by Trigen. Electricity generated by
the Grays Ferry Power Plant is sold under two long-term power sales
agreements to PECO Energy Company, expiring in 2017. An affiliate of Trigen
purchases the steam produced by the project pursuant to a 25-year contract
expiring in 2022.

Parlin Power Plant. The Parlin Power Plant consists of a 122 megawatt
natural gas-fired cogeneration power plant located in Parlin, New Jersey.
The facility is operated by NRG Energy, Inc. Electricity generated by the
Parlin Power Plant is sold pursuant to a long-term contract expiring in 2011
to Jersey Central Power and Light Company ("JCP&L"), and steam produced is
sold to E.I. Dupont de Nemours and Company under a long-term agreement
expiring in 2021.

Morris Power Plant. The Morris Power Plant consists of a 117 megawatt
natural gas-fired cogeneration facility located in Morris, Illinois. The
facility is operated by NRG Energy, Inc. Electricity and steam produced by
the facility is sold to Equistar Chemicals, L.P. pursuant to a long-term
contract expiring in 2023. Any surplus electricity is marketed to the
Illinois power market.

Pryor Power Plant. The Pryor Power Plant is a 110 megawatt natural gas-fired
cogeneration power plant located in Pryor, Oklahoma. The facility is
operated by NRG Energy, Inc. The Pryor Power Plant sells 100-megawatts of
capacity and varying amounts of electrical energy to Oklahoma Gas and
Electric under a contract expiring in 2007. Steam produced from the Pryor
facility is sold to a number of industrial users under contracts with
various termination dates ranging from 1998 to 2007. Surplus electricity is
also sold to the Public Service of Oklahoma at its avoided cost.

Newark Power Plant. The Newark Power Plant consists of a 58 megawatt natural
gas-fired cogeneration power plant located in Newark, New Jersey. The
facility is operated by NRG Energy, Inc. Electricity produced by the
facility is sold pursuant to a long-term contract expiring in 2015 to JCP&L.
Steam produced is sold to Newark Boxboard under a long-term contract
expiring in 2015.

Philadelphia Water Project. The Philadelphia Water Project consists of two
standby peak shaving facilities located at the Philadelphia Water
Department's Northeast and Southwest wastewater treatment plants. CGCA owns
83% of the project and the project is operated by O'Brien Energy Services
Company. The project sells capacity and energy on demand to the Philadelphia
Municipal Authority pursuant to two long-term contracts expiring in 2013.

SHERIDAN ENERGY, INC. On October 1, 1999 we completed the acquisition of
Sheridan Energy, a natural gas exploration and production company, through a
$41.0 million cash tender offer. We purchased the outstanding shares of Sheridan
Energy's common stock for $5.50 per share. In addition, we redeemed $11.5
million of outstanding preferred stock of Sheridan Energy. Sheridan Energy's oil
and gas properties, including 148 billion cubic feet equivalent of proven
reserves, are located in northern California and the Gulf Coast region, where we
are developing low-cost natural gas supplies and proprietary pipeline systems to
support our strategically-located natural gas-fired power plants. As of June 30,
1999, Sheridan Energy had indebtedness of $71.5 million.

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PROJECT DEVELOPMENT

The development of power generation projects involves numerous elements,
including evaluating and selecting development opportunities, designing and
engineering the project, obtaining power sales agreements, acquiring necessary
land rights, permits and fuel resources, obtaining financing and managing
construction. We intend to focus primarily on development opportunities where we
are able to capitalize on our expertise in implementing an innovative and fully
integrated approach to project development in which we control the entire
development process. Utilizing this approach, we believe that we are able to
enhance the value of our projects throughout each stage of development in an
effort to maximize our return on investment.

We are pursuing the development of highly efficient, low-cost power plants
that seek to take advantage of inefficiencies in the electricity market. We
intend to sell all or a portion of the power generated by such plants into the
competitive market through a portfolio of short-, medium-and long-term power
sales agreements. We expect that these projects will represent a prototype for
our future plant developments. See "-- Strategy" and "Risk Factors -- Our power
project development and acquisition activities may not be successful."

The development of power generation facilities is subject to substantial
risks. In connection with the development of a power generation facility, we
must generally obtain power sales agreements, governmental permits and
approvals, fuel supply and transportation agreements, sufficient equity capital
and debt financing, electrical transmission agreements, site agreements and
construction contracts, and there can be no assurance that we will be successful
in doing so. In addition, project development is subject to certain
environmental, engineering and construction risks relating to cost-overruns,
delays and performance. Although we may attempt to minimize the financial risks
in the development of a project by securing a favorable long-term power sales
agreement, entering into power marketing transactions, and obtaining all
required governmental permits and approvals, the development of a power project
may require us to expend significant sums for preliminary engineering,
permitting and legal and other expenses before it can be determined whether a
project is feasible, economically attractive or financeable. If we were unable
to complete the development of a facility, we would generally not be able to
recover our investment in such a facility. The process for obtaining initial
environmental, siting and other governmental permits and approvals is
complicated and lengthy, often taking more than one year, and is subject to
significant uncertainties. As a result of competition, it may be difficult to
obtain a power sales agreement for a proposed project, and the prices offered in
new power sales agreements for both electric capacity and energy may be less
than the prices in prior agreements. We cannot assure that we will be successful
in the development of power generation facilities in the future.

Projects Under Construction

Magic Valley Power Plant. In May 1998, we announced that we had signed a
20-year power sales agreement to provide electricity to the Magic Valley
Electric Cooperative, Inc. of Mercedes, Texas beginning in 2001. The power will
be supplied by our Magic Valley Generating Station, a 730 megawatt natural
gas-fired power plant under development in Edinburg, Texas. Magic Valley
Electric Cooperative Inc., a 51,000 member non-profit electric cooperative,
initially will purchase from 250 to 400 megawatts of capacity, with an option to
purchase additional capacity. We are marketing additional capacity to other

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wholesale customers, initially targeting south Texas. Construction commenced in
April 1999 with commercial operations scheduled to begin in February 2001.

Los Medanos Power Plant. In September 1999, we finalized an agreement with
Enron North America for the development rights of a 500 megawatt gas-fired plant
in Pittsburg, California. Construction commenced in September 1999 and
commercial operations will begin in 2001. The facility will provide electricity
and industrial steam totaling approximately 55 megawatts to USS-POSCO Industries
under a long-term agreement. The balance of the plant's output will be sold into
the California power market.

Westbrook Power Plant. In February 1999, we acquired from Genesis Power
Corporation ("Genesis"), a New England based power developer, the development
rights to a 545 megawatt gas-fired combined-cycle power plant to be located in
Westbrook, Maine. It is estimated that the development of the Westbrook Power
Plant will cost approximately $300.0 million. Construction commenced in February
1999 and commercial operation is scheduled for early 2001. Upon completion, the
Westbrook Power Plant will be operated by our company. It is anticipated that
the output generated by the Westbrook Power Plant will be sold into the New
England power market and to wholesale and retail customers in the northeastern
United States.

Pasadena Expansion. We are currently expanding the Pasadena Power Plant by
an additional 545 megawatts. Construction began in November 1998 and commercial
operation is expected to begin in June 2000. The electricity output from this
expansion will be sold into the competitive market through our power sales
activities.

South Point Power Plant. In May 1998, we announced that we had entered into
a long-term lease agreement with the Fort Mojave Indian Tribe to develop a 545
megawatt gas-fired power plant on the tribe's reservation in Mojave County,
Arizona. The electricity generated will be sold to the Arizona, Nevada and
California power markets. Construction commenced in August 1999 and we
anticipate that the South Point Power Plant will begin operation in March 2001.

Sutter Power Plant. In February 1997, we announced plans to develop a 545
megawatt gas-fired combined cycle project in Sutter County, in northern
California. The Sutter Power Plant would be northern California's first newly
constructed power plant since deregulation of the California power market in
1998. Construction commenced in August 1999 and the Sutter Power Plant is
expected to provide electricity to the deregulated California power market
commencing in the year 2001. We are currently pursuing regulatory agency permits
for this project. In January 1998, we announced that the Sutter Power Plant has
met the California Energy Commission's Data Adequacy requirements in its
Application for Certification.

Lost Pines 1 Power Plant. In September 1999, we entered into definitive
agreements with Austin, Texas-based GenTex Power Corporation, the power
generation affiliate of the Lower Colorado River Authority, to build a 545
megawatt gas-fired facility in Bastrop County, Texas. Construction of this
facility is scheduled to began in October 1999 and commercial operation in June
2001. Upon commercial operation, GenTex will take half of the electrical output
for sale to its customers and we will market the remaining energy to the Texas
power market.

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("EMI"). It is estimated that the development of the Tiverton Power Plant will
cost approximately $172.5 million. For our investment in the Tiverton Power
Plant, we will earn 62.8% of the Tiverton Power Plant project cash flow until a
specified pre-tax return is reached, whereupon our company and EMI will share
projected cash flows equally through the remaining life of the project.
Construction commenced in late 1998 and commercial operation is currently
scheduled for 2000. Upon completion, the Tiverton Power Plant will be operated
by EMI and will sell its output in the New England power market and to wholesale
and retail customers in the northeastern United States.

Rumford Power Plant. In November 1998, we invested $40.0 million of equity
in the development of a 265 megawatt gas-fired power plant to be located in
Rumford, Maine. The Rumford Power Plant is being developed by EMI. It is
estimated that the development of the Rumford Power Plant will cost
approximately $160.0 million. For our investment in the Rumford Power Plant, we
will earn 66.7% of the Rumford Power Plant project cash flow until a specified
pre-tax return is reached, whereupon our company and EMI will share projected
cash flows equally through the remaining life of the project. Construction
commenced in late 1998 and commercial operation is currently scheduled for 2000.
Upon completion, the Rumford Power Plant will be operated by EMI and will sell
its output in the New England power market and to wholesale and retail customers
in the northeastern United States.

Announced Development Projects

Delta Energy Center. In February 1999, we, together with Bechtel
Enterprises, announced plans to develop an 880 megawatt gas-fired cogeneration
project in Pittsburg, California (the "Delta Energy Center"). The Delta Energy
Center will provide steam and electricity to the nearby Dow Chemical Company
facility and market the excess electricity into the California power market. We
anticipate that construction will commence in early 2000 and that operation of
the facility will commence in 2002. We are currently pursuing regulatory agency
permits for this project. On February 3, 1999, our company and Bechtel announced
that the Delta Energy Center has met the California Energy Commission's Data
Adequacy requirements in its Application for Certification.

Baytown Power Plant. In October 1999 we announced plans to build, own and
operate an 800 megawatt gas-fired cogeneration power plant at Bayer
Corporation's chemical facility in Baytown, Texas. The Baytown Power Plant will
supply Bayer with all of its electric and steam requirements for 20 years and
market excess electricity into the Texas wholesale power market. Construction is
estimated to commence in 2000 and commercial operation in 2001.

Metcalf Energy Center. In February 1999, we, together with Bechtel
Enterprises, announced plans to develop a 600 megawatt gas-fired cogeneration
project in San Jose, California (the "Metcalf Energy Center"). We expect the
California Energy Commission review, licensing and public hearing process will
be completed by mid-2000. We anticipate that construction will commence
following this approval and that commercial operation of the facility will
commence in mid-2002. Electricity generated by the Metcalf Energy Center will be
sold into the California power market.

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begin in mid-2000 with final completion in late 2002. The facility is estimated
to cost $220 million and the electricity will be sold into the Arizona power
market.

Ontelaunee Energy Center. In June 1999, we announced that we had acquired
the rights to develop a 545 megawatt gas-fired power plant in Ontelaunee
Township in eastern Pennsylvania. Permitting for the proposed $255 million
facility is underway and construction is scheduled to begin in early 2000.
Commercial operation is estimated for late 2002. Output from the plant will be
sold into the Pennsylvania/New Jersey/Maryland (PJM) power pool and pursuant to
bilateral contracts.

In October, 1999, we announced that we had executed a letter of intent
which give us the exclusive right to negotiate with LYONDELL-CITGO Reting LP to
build, own and operate a 560 megawatt gas-fired cogeneration power plant at the
LYONDELL-CITGO refinery in Houston, Texas.

GAS FIELDS

Montis Niger. In January 1997, we purchased Montis Niger, Inc., a gas
production and pipeline company operating primarily in the Sacramento Basin in
northern California. On July 25, 1997, Montis Niger, Inc. was renamed Calpine
Gas Company. As of January 1, 1998, Calpine Gas Company had approximately 8.1
billion cubic feet of proven natural gas reserves and approximately 13,837 gross
acres and 13,738 net acres under lease in the Sacramento Basin. In addition,
Calpine Gas Company owns and operates an 80-mile pipeline delivering gas to the
Greenleaf 1 and 2 Power Plants which had been either produced by Calpine Gas
Company or purchased from third parties. Calpine Gas Company currently supplies
approximately 79% of the fuel requirements for the Greenleaf 1 and 2 Power
Plants.

Sheridan. In January 1999, we announced that we had acquired a 20% interest
in 82 billion cubic feet of proven natural gas reserves located in the
Sacramento Basin in northern California. Sheridan Energy owns the remaining 80%
interest in these reserves. In addition, we signed a 10-year agreement with
Sheridan under which we will purchase all of Sheridan's Sacramento Basin
production, which currently approximates 20,000 mmbtu per day.

GOVERNMENT REGULATION

We are subject to complex and stringent energy, environmental and other
governmental laws and regulations at the federal, state and local levels in
connection with the development, ownership and operation of its energy
generation facilities. Federal laws and regulations govern transactions by
electrical and gas utility companies, the types of fuel which may be utilized by
an electric generating plant, the type of energy which may be produced by such a
plant and the ownership of a plant. State utility regulatory commissions must
approve the rates and, in some instances, other terms and conditions under which
public utilities purchase electric power from independent producers and sell
retail electric power. Under certain circumstances where specific exemptions are
otherwise unavailable, state utility regulatory commissions may have broad
jurisdiction over non-utility electric power plants. Energy producing projects
also are subject to federal, state and

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local laws and administrative regulations which govern the emissions and other
substances produced, discharged or disposed of by a plant and the geographical
location, zoning, land use and operation of a plant. Applicable federal
environmental laws typically have both state and local enforcement and
implementation provisions. These environmental laws and regulations generally
require that a wide variety of permits and other approvals be obtained before
the commencement of construction or operation of an energy-producing facility
and that the facility then operate in compliance with such permits and
approvals.

FEDERAL ENERGY REGULATION

PURPA

The enactment of the Public Utility Regulatory Policies Act of 1978, as
amended ("PURPA") and the adoption of regulations thereunder by FERC provided
incentives for the development of cogeneration facilities and small power
production facilities (those utilizing renewable fuels and having a capacity of
less than 80 megawatts).

A domestic electricity generating project must be a QF under FERC
regulations in order to take advantage of certain rate and regulatory incentives
provided by PURPA. PURPA exempts owners of QFs from the Public Utility Holding
Company Act of 1935, as amended ("PUHCA"), and exempts QFs from most provisions
of the Federal Power Act (the "FPA") and, except under certain limited
circumstances, state laws concerning rate or financial regulation. These
exemptions are important to us and our competitors. We believe that each of the
electricity generating projects in which we own an interest and which operates
as a QF power producer currently meets the requirements under PURPA necessary
for QF status.

PURPA provides two primary benefits to QFs. First, QFs generally are
relieved of compliance with extensive federal, state and local regulations that
control the financial structure of an electric generating plant and the prices
and terms on which electricity may be sold by the plant. Second, the FERC's
regulations promulgated under PURPA require that electric utilities purchase
electricity generated by QFs at a price based on the purchasing utility's
"avoided cost," and that the utility sell back-up power to the QF on a
non-discriminatory basis. The term "avoided cost" is defined as the incremental
cost to an electric utility of electric energy or capacity, or both, which, but
for the purchase from QFs, such utility would generate for itself or purchase
from another source. The FERC regulations also permit QFs and utilities to
negotiate agreements for utility purchases of power at rates lower than the
utility's avoided costs. While public utilities are not explicitly required by
PURPA to enter into long-term power sales agreements, PURPA helped to create a
regulatory environment in which it has been common for long-term agreements to
be negotiated.

In order to be a QF, a cogeneration facility must produce not only
electricity, but also useful thermal energy for use in an industrial or
commercial process for heating or cooling applications in certain proportions to
the facility's total energy output and must meet certain energy efficiency
standards. A geothermal facility may qualify as a QF if it produces less than 80
megawatts of electricity. Finally, a QF (including a geothermal or hydroelectric
QF or other qualifying small power producer) must not be controlled or more than
50% owned by an electric utility or by most electric utility holding companies,
or a subsidiary of such a utility or holding company or any combination thereof.

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<PAGE> 68

We endeavor to develop our projects, monitor compliance by the projects
with applicable regulations and choose our customers in a manner which minimizes
the risks of any project losing its QF status. Certain factors necessary to
maintain QF status are, however, subject to the risk of events outside our
control. For example, loss of a thermal energy customer or failure of a thermal
energy customer to take required amounts of thermal energy from a cogeneration
facility that is a QF could cause the facility to fail requirements regarding
the level of useful thermal energy output. Upon the occurrence of such an event,
we would seek to replace the thermal energy customer or find another use for the
thermal energy which meets PURPA's requirements, but no assurance can be given
that this would be possible.

If one of the facilities in which we have an interest should lose its
status as a QF, the project would no longer be entitled to the exemptions from
PUHCA and the FPA. This could also trigger certain rights of termination under
the facility's power sales agreement, could subject the facility to rate
regulation as a public utility under the FPA and state law and could result in
us inadvertently becoming a public utility holding company by owning more than
10% of the voting securities of, or controlling, a facility that would no longer
be exempt from PUHCA. This could cause all of our remaining projects to lose
their qualifying status, because QFs may not be controlled or more than 50%
owned by such public utility holding companies. Loss of QF status may also
trigger defaults under covenants to maintain QF status in the projects' power
sales agreements, steam sales agreements and financing agreements and result in
termination, penalties or acceleration of indebtedness under such agreements
such that loss of status may be on a retroactive or a prospective basis.

Under the Energy Policy Act of 1992, if a facility can be qualified as an
exempt wholesale generator ("EWG"), it will be exempt from PUHCA even if it does
not qualify as a QF. Therefore, another response to the loss or potential loss
of QF status would be to apply to have the project qualified as an EWG. However,
assuming this changed status would be permissible under the terms of the
applicable power sales agreement, rate approval from FERC would be required. In
addition, the facility would be required to cease selling electricity to any
retail customers (such as the thermal energy customer) to retain its EWG status
and could become subject to state regulation of sales of thermal energy. See
"-- Public Utility Holding Company Regulation."

Currently, Congress is considering proposed legislation that would amend
PURPA by eliminating the requirement that utilities purchase electricity from
QFs at avoided costs. We do not know whether such legislation will be passed or
what form it may take. We believe that if any such legislation is passed, it
would apply only to new projects. As a result, although such legislation may
adversely affect our ability to develop new projects, we believe it would not
affect our existing QFs. There can be no assurance, however, that any
legislation passed would not adversely impact our existing projects.

Public Utility Holding Company Regulation

Under PUHCA, any corporation, partnership or other legal entity which owns
or controls 10% or more of the outstanding voting securities of a "public
utility company" or a company which is a "holding company" for a public utility
company is subject to registration with the SEC and regulation under PUHCA,
unless eligible for an exemption. A holding company of a public utility company
that is subject to registration is required by PUHCA to limit its utility
operations to a single integrated utility system and to divest any

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other operations not functionally related to the operation of that utility
system. Approval by the SEC is required for nearly all important financial and
business dealings of a registered holding company. Under PURPA, most QFs are not
public utility companies under PUHCA.

The Energy Policy Act of 1992, among other things, amends PUHCA to allow
EWGs, under certain circumstances, to own and operate non-QF electric generating
facilities without subjecting those producers to registration or regulation
under PUHCA. The effect of such amendments has been to enhance the development
of non-QFs which do not have to meet the fuel, production and ownership
requirements of PURPA. We believe that these amendments benefit us by expanding
our ability to own and operate facilities that do not qualify for QF status.
However, they have also resulted in increased competition by allowing utilities
to develop such facilities which are not subject to the constraints of PUHCA.

Federal Natural Gas Transportation Regulation

We have an ownership interest in 19 gas-fired cogeneration projects. The
cost of natural gas is ordinarily the largest expense of a gas-fired project and
is critical to the project's economics. The risks associated with using natural
gas can include the need to arrange transportation of the gas from great
distances, including obtaining removal, export and import authority if the gas
is transported from Canada; the possibility of interruption of the gas supply or
transportation (depending on the quality of the gas reserves purchased or
dedicated to the project, the financial and operating strength of the gas
supplier, whether firm or non-firm transportation is purchased and the operating
of the gas pipeline); and obligations to take a minimum quantity of gas and pay
for it (i.e., take-and-pay obligations).

Pursuant to the Natural Gas Act, FERC has jurisdiction over the
transportation and storage of natural gas in interstate commerce. With respect
to most transactions that do not involve the construction of pipeline
facilities, regulatory authorization can be obtained on a self-implementing
basis. However, pipeline rates and terms and conditions for such services are
subject to continuing FERC oversight.

STATE REGULATION

State public utility commissions ("PUCs") have historically had broad
authority to regulate both the rates charged by, and the financial activities
of, electric utilities operating in their states and to promulgate regulation
for implementation of PURPA. Since a power sales agreement becomes a part of a
utility's cost structure (generally reflected in its retail rates), power sales
agreements with independent electricity producers, such as EWGs, are potentially
under the regulatory purview of PUCs and in particular the process by which the
utility has entered into the power sales agreements. If a PUC has approved the
process by which a utility secures its power supply, a PUC is generally inclined
to "pass through" the expense associated with power purchase agreement with an
independent power producer to the utility's retail customer. However, a
regulatory commission under certain circumstances may disallow the full
reimbursement to a utility for the cost to purchase power from a QF or an EWG.
In addition, retail sales of electricity or thermal energy by an independent
power producer may be subject to PUC regulation depending on state law.
Independent power producers which are not QFs under PURPA, or EWGs pursuant to
the Energy Policy Act of 1992, are considered to be public utilities in many
states and are

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subject to broad regulation by a PUC, ranging from requirement of certificate of
public convenience and necessity to regulation of organizational, accounting,
financial and other corporate matters. States may assert jurisdiction over the
siting and construction of electric generating facilities including QFs and EWGs
and, with the exception of QFs, over the issuance of securities and the sale or
other transfer of assets by these facilities.

In the State of California, restructuring legislation was enacted in
September 1996 and was implemented in 1998. This legislation established an
Independent Systems Operator ("ISO") responsible for centralized control and
efficient and reliable operation of the state-wide electric transmission grid,
and a Power Exchange responsible for an efficient competitive electric energy
auction open on a non-discriminatory basis to all electric services providers.
Other provisions include the quantification and qualification of utility
stranded costs to be eligible for recovery through competitive transition
charges ("CTC"), market power mitigation through utility divestiture of fossil
generation plants, the unbundling and establishment of rate structure for
historical utility functions, the continuation of public purpose programs and
issues related to issuance of rate reduction bonds.

The California Energy Commission ("CEC") and Legislature have
responsibility for development of a competitive market mechanism for allocation
and distribution of funds made available by the legislation for enhancement of
in-state renewable resource technologies and public interest research and
development programs. Funds are to be available through the four-year transition
period to a fully competitive electric services industry.

In addition to the significant opportunity provided for power producers
such as us through implementation of customer choice (direct access), the
California restructuring legislation both recognizes the sanctity of existing
contracts (including QF power sales contracts), provides for mitigation of
utility horizontal market power through divestiture of fossil generation by
California public utilities and provides funds for continuation of public
services programs including fuel diversity through enhancement for in-state
renewable technologies (includes geothermal) for the four-year transition period
to a fully competitive electric services industry.

Other states in which we conduct operations either have implemented or are
actively considering similar restructuring legislation.

State PUCs also have jurisdiction over the transportation of natural gas by
local distribution companies ("LDCs"). Each state's regulatory laws are somewhat
different; however, all generally require the LDC to obtain approval from the
PUC for the construction of facilities and transportation services if the LDC's
generally applicable tariffs do not cover the proposed transaction. LDC rates
are usually subject to continuing PUC oversight.

REGULATION OF CANADIAN GAS

The Canadian natural gas industry is subject to extensive regulation by
governmental authorities. At the federal level, a party exporting gas from
Canada must obtain an export license from the Canadian National Energy Board
("NEB"). The NEB also regulates Canadian pipeline transportation rates and the
construction of pipeline facilities. Gas producers also must obtain a removal
permit or license from provincial authorities before natural gas may be removed
from the province, and provincial authorities may regulate intra-provincial
pipeline and gathering systems. In addition, a party importing natural gas into
the United States first must obtain an import authorization from the U.S.
Department of Energy.

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ENVIRONMENTAL REGULATIONS

The exploration for and development of geothermal resources and the
construction and operation of power projects are subject to extensive federal,
state and local laws and regulations adopted for the protection of the
environment and to regulate land use. The laws and regulations applicable to us
primarily involve the discharge of emissions into the water and air and the use
of water, but can also include wetlands preservation, endangered species, waste
disposal and noise regulations. These laws and regulations in many cases require
a lengthy and complex process of obtaining licenses, permits and approvals from
federal, state and local agencies.

Noncompliance with environmental laws and regulations can result in the
imposition of civil or criminal fines or penalties. In some instances,
environmental laws also may impose clean-up or other remedial obligations in the
event of a release of pollutants or contaminants into the environment. The
following federal laws are among the more significant environmental laws as they
apply to us. In most cases, analogous state laws also exist that may impose
similar, and in some cases more stringent, requirements on us as those discussed
below.

Clean Air Act

The Federal Clean Air Act of 1970 (the "Clean Air Act") provides for the
regulation, largely through state implementation of federal requirements, of
emissions of air pollutants from certain facilities and operations. As
originally enacted, the Clean Air Act sets guidelines for emissions standards
for major pollutants (i.e., sulfur dioxide and nitrogen oxide) from newly built
sources. In late 1990, Congress passed the Clean Air Act Amendments (the "1990
Amendments"). The 1990 Amendments attempt to reduce emissions from existing
sources, particularly previously exempted older power plants. We believe that
all of our operating plants are in compliance with federal performance standards
mandated for such plants under the Clean Air Act and the 1990 Amendments. With
respect to its Aidlin geothermal plant and one of its steam field pipelines, our
operations have, in certain instances, necessitated variances under applicable
California air pollution control laws. However, we believe that we are in
material compliance with such laws with respect to such facilities.

Clean Water Act

The Federal Clean Water Act (the "Clean Water Act") establishes rules
regulating the discharge of pollutants into waters of the United States. We are
required to obtain a wastewater and storm water discharge permit for wastewater
and runoff, respectively, from certain of our facilities. We believe that, with
respect to our geothermal operations, we are exempt from newly promulgated
federal storm water requirements. We believe that we are in material compliance
with applicable discharge requirements under the Clean Water Act.

Resource Conservation and Recovery Act

The Resource Conservation and Recovery Act ("RCRA") regulates the
generation, treatment, storage, handling, transportation and disposal of solid
and hazardous waste. We believe that we are exempt from solid waste requirements
under RCRA. However, particularly with respect to its solid waste disposal
practices at the power generation facilities and steam fields located at The
Geysers, we are subject to certain solid waste

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requirements under applicable California laws. We believe that our operations
are in material compliance with such laws.

Comprehensive Environmental Response, Compensation, and Liability Act

The Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended ("CERCLA" or "Superfund"), requires cleanup of sites from which
there has been a release or threatened release of hazardous substances and
authorizes the United States Environmental Protection Agency ("EPA") to take any
necessary response action at Superfund sites, including ordering potentially
responsible parties ("PRPs") liable for the release to take or pay for such
actions. PRPs are broadly defined under CERCLA to include past and present
owners and operators of, as well as generators of wastes sent to, a site. As of
the present time, we are not subject to liability for any Superfund matters.
However, we generate certain wastes, including hazardous wastes, and sends
certain of our wastes to third-party waste disposal sites. As a result, there
can be no assurance that we will not incur liability under CERCLA in the future.

COMPETITION

The power generation industry is characterized by intense competition, and
we encounter competition from utilities, industrial companies and other
independent power producers. In recent years, there has been increasing
competition in an effort to obtain power sales agreements, and this competition
has contributed to a reduction in electricity prices. In addition, many states
are implementing or considering regulatory initiatives designed to increase
competition in the domestic power industry. In California, the CPUC issued
decisions which provide for direct access for all customers as of April 1, 1998.
In Texas, recently enacted legislation will phase-in a deregulated power market
commencing January 1, 2001. Regulatory initiatives are also being considered in
other states, including New York and states in New England. See
"Business -- Government Regulation -- State Regulation." This competition has
put pressure on electric utilities to lower their costs, including the cost of
purchased electricity, and increasing competition in the supply of electricity
in the future will increase this pressure.

EMPLOYEES

As of September 30, 1999, we had 698 employees. None of our employees are
covered by collective bargaining agreements, and we have never experienced a
work stoppage, strike or labor dispute. We consider relations with our employees
to be good.

PROPERTIES

Our principal executive office is located in San Jose, California, under a
lease that expires in June 2001.

We have leasehold interests in 105 leases comprising 19,813 acres of
federal, state and private geothermal resource lands in The Geysers area in
northern California. These leases comprise our West Ford Flat Power Plant, Bear
Canyon Power Plant and certain steam fields. In the Glass Mountain and Medicine
Lake areas in northern California, we hold leasehold interests in 20 leases
comprising approximately 23,598 acres of federal geothermal resource lands.

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In general, under the leases, we have the exclusive right to drill for,
produce and sell geothermal resources from these properties and the right to use
the surface for all related purposes. Each lease requires the payment of annual
rent until commercial quantities of geothermal resources are established. After
such time, the leases require the payment of minimum advance royalties or other
payments until production commences, at which time production royalties are
payable. Such royalties and other payments are payable to landowners, state and
federal agencies and others, and vary widely as to the particular lease. The
leases are generally for initial terms varying from 10 to 20 years or for so
long as geothermal resources are produced and sold. Certain of the leases
contain drilling or other exploratory work requirements. In certain cases, if a
requirement is not fulfilled, the lease may be terminated and in other cases
additional payments may be required. We believe that our leases are valid and
that we have complied with all the requirements and conditions material to the
continued effectiveness of the leases. A number of our leases for undeveloped
properties may expire in any given year. Before leases expire, we perform
geological evaluations in an effort to determine the resource potential of the
underlying properties. We cannot assure that we will decide to renew any
expiring leases.

We own 77 acres in Sutter County, California, on which the Greenleaf 1
Power Plant is located.

We own Calpine Gas Company, which leases property covering approximately
13,837 gross acres and 13,738 net acres.

See "-- Description of Facilities" for a description of the other material
leased or owned properties in which we have an interest. We believe that our
properties are adequate for our current operations.

LEGAL PROCEEDINGS

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 us. Some of Indeck's claims relate to
Calpine Gordonsville, Inc.'s acquisition of a 50% interest in Gordonsville
Energy 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 Calpine Corporation 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. In July 1998, the court granted motions to dismiss,
without prejudice, the claims against Calpine Gordonsville, Inc. and Calpine
Auburndale, Inc. In August 1998, Indeck filed an amended complaint and the
defendants filed motions to dismiss. We expect a hearing on the motions to be
held in the near future. We are unable to predict the outcome of these
proceedings but we do not believe that these proceedings will have a materially
adverse effect on our financial results.

An action was filed against Lockport Energy Associates ("LERA") and the New
York Public Service Commission ("NYPSC") in August 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 NYPSC and
the Federal Energy Regulatory Commission (the "FERC") to modify contract rates
to be paid to the Lockport Power Plant. In October 1997, NYPSC filed a
cross-claim alleging that the FERC violated PURPA and the Federal Power Act by
failing to reform the NYSEG contract that was previously approved by the NYPSC.
Although we are unable to predict

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the outcome of this case, in any event, we retain the right to require The
Brooklyn Union Gas Company to purchase our interest in the Lockport Power Plant
for $18.9 million, less equity distributions received by us, at any time before
December 19, 2001.

We and our affiliates are involved in various other claims and legal
actions arising out of the normal course of business. We do not expect that the
outcome of these proceedings will have a material adverse effect on our
financial position or results of operations, although we cannot assure you in
this regard.

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MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth certain information with respect to our
directors and executive officers.

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Peter Cartwright.................... 69 Chairman of the Board, President,
Chief Executive Officer and Director
Ann B. Curtis....................... 48 Executive Vice President, Chief
Financial Officer, Corporate
Secretary and Director
Jeffrey E. Garten................... 52 Director
Susan C. Schwab..................... 44 Director
George J. Stathakis................. 69 Director
John O. Wilson...................... 61 Director
V. Orville Wright................... 79 Director
Thomas R. Mason..................... 55 Executive Vice President
Robert D. Kelly..................... 42 Senior Vice President-Finance
</TABLE>

Set forth below is certain information with respect to each director and
executive officer.

Peter Cartwright founded our company in 1984 and has served as a Director
and as our President and Chief Executive Officer since inception. Mr. Cartwright
became Chairman of our board of directors in September 1996. From 1979 to 1984,
Mr. Cartwright was Vice President and General Manager of the Western Regional
Office of Gibbs & Hill, Inc. ("Gibbs & Hill"), an architect-engineering firm
that specialized in power engineering projects. From 1960 to 1979, Mr.
Cartwright worked for General Electric's Nuclear Energy Division. His
responsibilities included plant construction, project management and new
business development. He served on the board of directors of nuclear fuel
manufacturing companies in Germany, Italy and Japan. Mr. Cartwright was
responsible for General Electric's technology development and licensing programs
in Europe and Japan. Mr. Cartwright obtained a Master of Science Degree in Civil
Engineering from Columbia University in 1953 and a Bachelor of Science Degree in
Geological Engineering from Princeton University in 1952.

Ann B. Curtis has served as Executive Vice President of our company since
August 1998, and before that was our Senior Vice President since September 1992,
and has been employed by us since our inception in 1984. Ms. Curtis became a
Director of our company in September 1996. She is responsible for our financial
and administrative functions, including the functions of general counsel,
corporate and project finance, accounting, human resources, public relations and
investor relations. Ms. Curtis also serves as our Chief Financial Officer and
Corporate Secretary. From our inception in 1984 through 1992, she served as our
Vice President for Management and Financial Services. Prior to joining our
company, Ms. Curtis was Manager of Administration for the Western Regional
Office of Gibbs & Hill.

Jeffrey E. Garten became a Director of our company in January 1997. Mr.
Garten has served as Dean of the Yale School of Management and William S.
Beinecke Professor in the Practice of International Trade and Finance since
November 1995. Mr. Garten served

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as Undersecretary of Commerce of International Trade in the United States
Department of Commerce from November 1993 to October 1995. From October 1990 to
October 1992, Mr. Garten was a managing director of The Blackstone Group, an
investment banking firm. Prior thereto, Mr. Garten founded and managed The Eliot
Group, a small investment bank, from November 1987 to October 1990, and served
as managing director of Lehman Brothers from January 1979 to November 1987.

Susan C. Schwab became a Director of our company in January 1997. Dr.
Schwab has served as Dean of the School of Public Affairs at the University of
Maryland since August 1995. Dr. Schwab served as Director, Corporate Business
Development at Motorola, Inc. from July 1993 to August 1995. She also served as
Assistant Secretary of Commerce for the U.S. and Foreign Commercial Service from
March 1989 to May 1993.

George J. Stathakis became a Director of our company in September 1996 and
has served as a Senior Advisor to us since December 1994. Mr. Stathakis has been
providing financial, business and management advisory services to numerous
corporations since 1985. He also served as Chairman of the Board and Chief
Executive Officer of Ramtron International Corporation, an advanced technology
semiconductor company, from 1990 to 1994. From 1986 to 1989, he served as
Chairman of the Board and Chief Executive Officer of International Capital
Corporation, a subsidiary of American Express. Prior to 1986, Mr. Stathakis
served thirty-two years with General Electric Corporation in various management
and executive positions. During his service with General Electric Corporation,
Mr. Stathakis founded the General Electric Trading Company and was appointed its
first President and Chief Executive.

John O. Wilson became a Director of our company in January 1997. Mr. Wilson
has served as a Senior Research Fellow at the Berkeley Roundtable on the
International Economy and as Executive Vice President and Chief Economist of SDR
Capital Management, Inc. since January 1999. Mr. Wilson served as Executive Vice
President and Chief Economist at Bank of America from August 1984 to January
1999. He joined Bank of America in June 1975 as Director of Economics-Policy
Research. He served as a faculty member at the University of California at
Berkeley from September 1979 to June 1991, at the University of Connecticut from
September 1974 to June 1975, and at Yale University from January 1967 to
September 1970. Mr. Wilson also served as Director of Regulatory Analysis of the
U.S. Atomic Energy Commission from April 1972 to October 1972, as Director of
Welfare Reform of the Department of Health, Education and Welfare from April
1971 to April 1972, and as Assistant Director of the U.S. Office of Economic
Opportunity from August 1969 to April 1971.

V. Orville Wright became a Director of our company in January 1997. Mr.
Wright served in various positions with MCI Communications Corp., including Vice
Chairman and Co-Chief Executive Officer from 1988 to 1991, Vice Chairman and
Chief Executive Officer from 1985 to 1987, and President and Chief Operating
Officer from 1975 to 1985. Prior to 1975, Mr. Wright served in senior positions
at Xerox Corp. from 1973 to 1975, at Amdahl Corporation from 1971 to 1973, at
RCA from 1969 to 1971, and at IBM from 1949 to 1969.

Thomas R. Mason has served as our Executive Vice President since August
1999 and Senior Vice President since March 1999 until August 1999. Mr. Mason is
responsible for managing our power plant construction and operations activities.
Prior to joining us, Mr. Mason was President and Chief Operating Officer of
CalEnergy Operating Services Inc., a wholly owned subsidiary of MidAmerica
Energy Holdings Company from 1995 to

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February 1999. He obtained a Masters of Business Administration Degree from the
University of Chicago in 1970 and a Bachelor of Science Degree in Electrical
Engineering from Purdue University in 1966.

Robert D. Kelly has served as our Senior Vice President-Finance since
January 1998 and Vice President, Finance from April 1994 to January 1998. Mr.
Kelly's responsibilities include all project and corporate finance activities.
From 1992 to 1994, Mr. Kelly served as our Director-Project Finance, and from
1991 to 1992, he served as Project Finance Manager. Prior to joining us, he was
the Marketing Manager of Westinghouse Credit Corporation from 1990 to 1991. From
1989 to 1990, Mr. Kelly was Vice President of Lloyds Bank PLC. From 1982 to
1989, Mr. Kelly was employed in various positions with The Bank of Nova Scotia.
He obtained a Master of Business Administration Degree from Dalhousie
University, Canada in 1980 and a Bachelor of Commerce Degree from Memorial
University, Canada, in 1979.

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PRINCIPAL STOCKHOLDERS

The following table sets forth certain information known to us regarding
beneficial ownership of our common stock as of August 31, 1999 by (1) each
person known by us to be the beneficial owner of more than five percent of the
outstanding shares of our common stock, (2) each of our directors, (3) certain
of our executive officers and (4) all of our officers and directors as a group.
All figures reflect the 2 for 1 stock split declared by us on September 20,
1999.

<TABLE>
<CAPTION>
NAME AND ADDRESS NUMBER OF SHARES PERCENTAGE OF SHARES
OF BENEFICIAL OWNER BENEFICIALLY OWNED(1) BENEFICIALLY OWNED(1)
------------------- --------------------- ---------------------
<S> <C> <C>
Putnam Investments, Inc.................. 5,698,912 10.4%
One Post Office Square
Boston, MA 02109
Fidelity Management & Research Co........ 5,274,960 9.7%
82 Devonshire Street, E34E
Boston, MA 02109
Ohio Public Employee Retirement System... 4,200,000 7.7%
277 East Town Street
Columbus, OH 43215
Wellington Management Company, LLP....... 4,024,600 7.4%
75 State Street
Boston, MA 02109
Peter Cartwright(2)...................... 2,011,604 3.6%
Ann B. Curtis(3)......................... 534,008 *
Thomas R. Mason.......................... 2,000 *
Robert D. Kelly(4)....................... 243,320 *
Jeffrey E. Garten(5)..................... 31,122 *
Susan C. Schwab(5)....................... 29,848 *
George J. Stathakis(6)................... 95,562 *
John O. Wilson(5)........................ 37,348 *
V. Orville Wright(7)..................... 45,960 *
All executive officers and directors as a
group (9 persons)(8)................... 3,030,772 5.3%
</TABLE>

- -------------------------
* Less than one percent

(1) This table is based in part upon information supplied by Schedules 13F
filed by principal stockholders with the Securities and Exchange Commission
(the "Commission"). Beneficial ownership is determined in accordance with
the rules of the Commission and generally includes voting or investment
power with respect to securities. Shares of common stock subject to
options, warrants and convertible notes currently exercisable or
convertible, or exercisable or convertible within 60 days after a specified
date, are deemed outstanding for computing the percentage of the person
holding such options but are not deemed outstanding for computing the
percentage of any other person. Except as indicated by footnote, and
subject to community property laws where applicable, the persons named in
the table have sole voting and investment power with respect to all shares
of common stock shown as beneficially owned by them. The number of shares
of common stock outstanding as of October 22, 1999 was 54,569,788.

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<PAGE> 79

(2) Includes options to purchase 1,999,704 shares of our common stock issuable
upon the exercise of options outstanding as of August 31, 1999 or within 60
days thereafter.

(3) Includes options to purchase 533,382 shares of our common stock issuable
upon the exercise of options outstanding as of August 31, 1999 or within 60
days thereafter.

(4) Includes options to purchase 240,720 shares of our common stock issuable
upon the exercise of options outstanding as of August 31, 1999 or within 60
days thereafter.

(5) Represents shares of our common stock issuable upon exercise of options
that are exercisable as of August 31, 1999 or will become exercisable
within 60 days thereafter.

(6) Includes options to purchase 89,562 shares of our common stock issuable
upon the exercise of options outstanding as of August 31, 1999 or within 60
days thereafter.

(7) Includes options to purchase 35,960 shares of our common stock issuable
upon the exercise of options outstanding as of August 31, 1999 or within 60
days thereafter.

(8) Includes options to purchase 3,184,270 shares of our common stock issuable
upon the exercise of options outstanding as of August 31, 1999 or within 60
days thereafter.

74
<PAGE> 80

DESCRIPTION OF CAPITAL STOCK

Our authorized capital stock consists of 100,000,000 shares of common
stock, $.001 par value, and 10,000,000 shares of preferred stock, $.001 par
value. The following summary is qualified in its entirety by the provisions of
our certificate of incorporation and bylaws, which have been filed as exhibits
to the Registration Statement of which this prospectus constitutes a part. The
information provided below reflects the 2 for 1 stock split declared by us on
September 20, 1999.

COMMON STOCK

There will be 60,569,788 shares of common stock outstanding upon the
completion of this offering, based on the 61,769,788 shares outstanding as of
October 26, 1999. The holders of common stock are entitled to one vote per share
on all matters to be voted upon by the stockholders. Subject to preferences that
may be applicable to any outstanding preferred stock, the holders of common
stock are entitled to receive ratably such dividends, if any, as may be declared
from time to time by the board of directors out of funds legally available
therefor. See "Dividend Policy." In the event of our liquidation, dissolution or
winding up, the holders of common stock are entitled to share ratably in all
assets remaining after payment of liabilities, subject to prior liquidation
rights of preferred stock, if any, then outstanding. The common stock has no
preemptive or conversion rights or other subscription rights. There are no
redemption or sinking fund provisions applicable to the common stock. All
outstanding shares of common stock to be outstanding upon the completion of the
common stock offering will be fully paid and non-assessable.

PREFERRED STOCK

The board of directors has the authority to issue the preferred stock in
one or more series and to fix the rights, preferences, privileges and
restrictions granted to or imposed upon any wholly unissued shares of
undesignated preferred stock and to fix the number of shares constituting any
series and the designations of such series, without any further vote or action
by the stockholders. The board of directors, without stockholder approval, can
issue preferred stock with voting and conversion rights which could adversely
affect the voting power of the holders of common stock. The issuance of
preferred stock may have the effect of delaying, deferring or preventing a
change in control of our company, or could delay or prevent a transaction that
might otherwise give our stockholders an opportunity to realize a premium over
the then prevailing market price of the common stock. There will be no shares of
preferred stock outstanding upon the completion of the common stock offering.

ANTI-TAKEOVER EFFECTS OF PROVISIONS OF THE CERTIFICATE OF INCORPORATION, BYLAWS
AND DELAWARE LAW

CERTIFICATE OF INCORPORATION AND BYLAWS

75
<PAGE> 81

(as therein defined) requires the affirmative vote of the holders of two-thirds
of the shares of our capital stock entitled to vote, voting together as a single
class. The certificate of incorporation also provides that all stockholder
actions must be effected at a duly called meeting and not by a consent in
writing. The bylaws provide that our stockholders may call a special meeting of
stockholders only upon a request of stockholders owning at least 50% of our
capital stock. These provisions of the certificate of incorporation and bylaws
could discourage potential acquisition proposals and could delay or prevent a
change in control of our company. These provisions are intended to enhance the
likelihood of continuity and stability in the composition of the board of
directors and in the policies formulated by the board of directors and to
discourage certain types of transactions that may involve an actual or
threatened change of control of our company. These provisions are designed to
reduce our vulnerability to an unsolicited acquisition proposal. The provisions
also are intended to discourage certain tactics that may be used in proxy
fights. However, such provisions could have the effect of discouraging others
from making tender offers for our shares and, as a consequence, they also may
inhibit fluctuations in the market price of our shares that could result from
actual or rumored takeover attempts. Such provisions also may have the effect of
preventing changes in our management.

DELAWARE ANTI-TAKEOVER STATUTE

We are subject to Section 203 of the Delaware General Corporation Law
("Section 203"), which, subject to certain exceptions, prohibits a Delaware
corporation from engaging in any business combination with any interested
stockholder for a period of three years following the date that such stockholder
became an interested stockholder, unless: (1) prior to such date, the board of
directors of the corporation approved either the business combination or the
transaction that resulted in the stockholder becoming an interested stockholder;
(2) upon consummation of the transaction that resulted in the stockholder
becoming an interested stockholder, the interested stockholder owned at least
85% of the voting stock of the corporation outstanding at the time the
transaction commenced, excluding for purposes of determining the number of
shares outstanding those shares owned (x) by persons who are directors and also
officers and (y) by employee stock plans in which employee participants do not
have the right to determine confidentially whether shares held subject to the
plan will be tendered in a tender or exchange offer; or (3) on or subsequent to
such date, the business combination is approved by the board of directors and
authorized at an annual or special meeting of stockholders, and not by written
consent, by the affirmative vote of at least 66 2/3% of the outstanding voting
stock that is not owned by the interested stockholder.

Section 203 defines business combination to include: (1) any merger or
consolidation involving the corporation and the interested stockholder; (2) any
sale, transfer, pledge or other disposition of 10% or more of the assets of the
corporation involving the interested stockholder; (3) subject to certain
exceptions, any transaction that results in the issuance or transfer by the
corporation of any stock of the corporation to the interested stockholder; (4)
any transaction involving the corporation that has the effect of increasing the
proportionate share of the stock of any class or series of the corporation
beneficially owned by the interested stockholder; or (5) the receipt by the
interested stockholder of the benefit of any loans, advances, guarantees,
pledges or other financial benefits provided by or through the corporation. In
general, Section 203 defines an interested stockholder as any entity or person
beneficially owning 15% or more of the outstanding voting stock of the
corporation and any entity or person affiliated with or controlling or
controlled by such entity or person.

76
<PAGE> 82

UNDERWRITING

Under the terms and subject to the conditions contained in an underwriting
agreement dated , 1999, we have agreed to sell to the underwriters
named below, for whom Credit Suisse First Boston Corporation, CIBC World Markets
Corp., Donaldson, Lufkin & Jenrette Securities Corporation, Goldman, Sachs &
Co., Salomon Smith Barney Inc. and Gerard Klauer Mattison & Co., Inc. are acting
as representatives, the following respective numbers of shares of common stock:

<TABLE>
<CAPTION>
Number
Underwriter of Shares
----------- ---------
<S> <C>
Credit Suisse First Boston Corporation......................
CIBC World Markets Corp.....................................
Donaldson, Lufkin & Jenrette Securities Corporation.........
Goldman, Sachs & Co.........................................
Salomon Smith Barney Inc....................................
Gerard Klauer Mattison & Co., Inc...........................
---------
Total............................................. 7,200,000
=========
</TABLE>

The underwriting agreement provides that the underwriters are obligated to
purchase all the shares of common stock in the offering if any are purchased,
other than those shares covered by the over-allotment option described below.
The underwriting agreement also provides that if an underwriter defaults the
purchase commitments of non-defaulting underwriters may be increased or the
offering of common stock may be terminated.

We have granted to the underwriters a 30-day option to purchase on a pro
rata basis up to 900,000 additional shares at the public offering price less the
underwriting discounts and commissions. The option may be exercised only to
cover any over-allotments of common stock.

The underwriters propose to offer the shares of common stock initially at
the public offering price on the cover page of this prospectus and to selling
group members at that price less a concession of $ per share. The
underwriters and selling group members may allow a discount of $ per share
on sales to other broker/dealers. After the public offering, the public offering
price and concession and discount to broker/dealers may be changed by the
representatives.

The following table summarizes the compensation and estimated expenses we
will pay.

<TABLE>
<CAPTION>
Per Share Total
--------------------------------- ---------------------------------
Without With Without With
Over-Allotment Over-Allotment Over-Allotment Over-Allotment
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Underwriting Discounts and
Commissions paid by us....
Expenses payable by us......
</TABLE>

We and each of our officers and directors have agreed that we will not
offer, sell, contract to sell, pledge or otherwise dispose of, directly or
indirectly, or file with the SEC a registration statement under the Securities
Act of 1933 relating to any additional shares of our common stock or securities
convertible into or exchangeable or exercisable for any of our common stock, or
publicly disclose the intention to make an offer, sale, pledge, disposition or
filing, without the prior written consent of Credit Suisse First Boston
77
<PAGE> 83

Corporation for a period of 90 days after the date of this prospectus, except in
our case issuances pursuant to the exercise of employee stock options
outstanding on the date hereof and the concurrent offering HIGH TIDES.

We have agreed to indemnify the underwriters against liabilities under the
Securities Act, or contribute to payments which the underwriters may be required
to make in that respect.

The representatives may engage in over-allotment, stabilizing transactions,
syndicate covering transactions and penalty bids in accordance with Regulation M
under the Securities Exchange Act of 1934.

- Over-allotment involves syndicate sales in excess of the offering size,
which creates a syndicate short position.

- Stabilizing transactions permit bids to purchase the underlying security
so long as the stabilizing bids do not exceed a specified maximum.

- Syndicate covering transactions involve purchases of the common stock in
the open market after the distribution has been completed in order to
cover syndicate short positions.

- Penalty bids permit the representatives to reclaim a selling concession
from a syndicate member when the common stock originally sold by such
syndicate member is purchased in a syndicate covering transaction to
cover syndicate short positions.

These stabilizing transactions, syndicate covering transactions and penalty bids
may cause the price of the common stock to be higher than it would otherwise be
in the absence of such transactions. These transactions may be effected on The
New York Stock Exchange or otherwise and, if commenced, may be discontinued at
any time.

Credit Suisse First Boston, New York branch expects to be the lead arranger
and a lender for our proposed $1.0 billion revolving construction loan facility
and, in such capacity, expects to receive customary fees for such services. The
decision of Credit Suisse First Boston Corporation to distribute the common
stock offered hereby and the HIGH TIDES being offered concurrently was made
independent of Credit Suisse First Boston, New York branch which lender had no
involvement in determining whether or when to distribute the common stock or the
HIGH TIDES under the offerings or the terms of the offerings. Credit Suisse
First Boston Corporation will not receive any benefit from the offerings other
than its portion of the underwriting fees as paid by us.

From time to time, certain of the underwriters have provided advisory and
investment banking services to us, for which customary compensation has been
received. It is expected that such underwriters will continue to provide such
services to us in the future. In addition, Credit Suisse First Boston
Corporation, CIBC World Markets Corp. and ING Barings LLC are acting as
underwriters in the concurrent offering of HIGH TIDES.

78
<PAGE> 84

NOTICE TO CANADIAN RESIDENTS

RESALE RESTRICTIONS

The distribution of the common stock in Canada is being made only on a
private placement basis exempt from the requirement that we prepare and file a
prospectus with the securities regulatory authorities in each province where
trades of common stock are effected. Accordingly, any resale of the common stock
in Canada must be made in accordance with applicable securities law which will
vary depending on the relevant jurisdiction, and which may require resales to be
made in accordance with available statutory exemptions or pursuant to a
discretionary exemption granted by the applicable Canadian securities regulatory
authority. Purchasers are advised to seek legal advice prior to any resale of
the common stock.

REPRESENTATIONS OF PURCHASERS

Each purchaser of common stock in Canada who receives a purchase
confirmation will be deemed to represent to us and the dealer from whom such
purchase confirmation is received that (1) such purchaser is entitled under
applicable provincial securities laws to purchase such common stock without the
benefit of a prospectus qualified under such securities laws, (2) where required
by law, that such purchaser is purchasing as principal and not as agent, and (3)
such purchaser has reviewed the text above under "Resale Restrictions".

RIGHTS OF ACTION (ONTARIO PURCHASERS)

The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
Ontario securities law. As a result, Ontario purchasers must rely on other
remedies that may be available, including common law rights of action for
damages or rescission or rights of action under the civil liability provisions
of the U.S. federal securities laws.

ENFORCEMENT OF LEGAL RIGHTS

All of the issuer's directors and officers as well as the experts named
herein may be located outside of Canada and, as a result, it may not be possible
for Canadian purchasers to effect service of process within Canada upon the
issuer or such persons. All or a substantial portion of the assets of the issuer
and such persons may be located outside of Canada and, as a result, it may not
be possible to satisfy a judgment against the issuer or such persons in Canada
or to enforce a judgment obtained in Canadian courts against such issuer or
persons outside of Canada.

NOTICE TO BRITISH COLUMBIA RESIDENTS

A purchaser of common stock to whom the Securities Act (British Columbia)
applies is advised that such purchaser is required to file with the British
Columbia Securities Commission a report within ten days of the sale of any
common stock acquired by such purchaser pursuant to this offering. Such report
must be in the form attached to British Columbia Securities Commission Blanket
Order BOR #95/17, a copy of which may be obtained from us. Only one such report
must be filed in respect of common stock acquired on the same date and under the
same prospectus exemption.

79
<PAGE> 85

TAXATION AND ELIGIBILITY FOR INVESTMENT

Canadian purchasers of common stock should consult their own legal and tax
advisors with respect to the tax consequences of an investment in the common
stock in their particular circumstances and with respect to the eligibility of
the common stock for investment by the purchaser under relevant Canadian
legislation.

LEGAL MATTERS

The validity of the securities offered hereby will be passed upon for us by
Brobeck, Phleger & Harrison LLP, San Francisco, California. The underwriters
have been represented by Skadden, Arps, Slate, Meagher & Flom LLP, New York, New
York.

EXPERTS

The consolidated financial statements and schedules as of December 31,
1998, 1997 and 1996 incorporated by reference in this prospectus and elsewhere
in the registration statement have been audited by Arthur Andersen LLP,
independent public accountants, as set forth in their reports. In those reports,
that firm states that with respect to Sumas Cogeneration Company, L.P. its
opinion is based on the reports of other independent public accountants, namely
Moss Adams LLP. The consolidated financial statements and supporting schedules
referred to above have been included herein in reliance upon the authority of
that firm as experts in giving said reports.

The consolidated financial statements of Sumas Cogeneration Company, L.P.
and Subsidiary as of December 31, 1998 and 1997 and for each of the years ended
December 31, 1998, 1997 and 1996 included in our Annual Report on Form 10-K as
amended filed with the Securities and Exchange Commission on February 18, 1999
and incorporated by reference in this prospectus have been audited by Moss Adams
LLP, independent public accountants, as indicated in their reports with respect
thereto, and are included herein in reliance upon authority of said firm as
experts in giving said reports.

80
<PAGE> 86

[CALPINE LOGO]
<PAGE> 87

THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES, IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.

SUBJECT TO COMPLETION, DATED OCTOBER 27, 1999

4,800,000 HIGH TIDES(SM)

CALPINE CAPITAL TRUST

% Convertible Preferred Securities
Remarketable Term Income Deferrable Equity Securities (HIGH TIDES)(SM*)
(liquidation amount $50 per HIGH TIDES)
guaranteed, to the extent described herein by,
and convertible into common stock of,

LOGO CALPINE CORPORATION
------------------

The % Convertible Preferred Securities, Remarketable Term Income
Deferrable Equity Securities (HIGH TIDES)(SM) represent undivided preferred
beneficial ownership interests in the assets of Calpine Capital Trust. Subject
to the deferral provisions described in this prospectus, the trust will pay
distributions on the HIGH TIDES on each , ,
and . The trust will make the first distribution on
, 2000. Calpine Corporation may redeem the HIGH TIDES at any time
after , 2002.

Calpine Corporation will own all the common securities issued by the trust.
The trust exists for the sole purpose of issuing the common securities and the
HIGH TIDES and using the proceeds to purchase % Convertible Subordinated
Debentures due 2029 from Calpine.

Each HIGH TIDES is initially convertible into shares of Calpine's common
stock at the rate of shares of common stock for each of the HIGH
TIDES (equivalent to an initial conversion price of $ per share of common
stock). Your HIGH TIDES may be remarketed no earlier than , 2004
and no later than , 2004. At our option and subject to the results
of remarketing, the HIGH TIDES may become nonconvertible or convertible into a
different number of shares of common stock. The remarketing agent will attempt
to obtain a price of 101% of the liquidation amount of the HIGH TIDES. Calpine's
common stock is traded on The New York Stock Exchange under the symbol "CPN." On
October 26, 1999, the last reported sales price of the common stock was $44.69.

The underwriters have an option to purchase a maximum of 720,000 additional
HIGH TIDES to cover over-allotments.

We do not intend to list the HIGH TIDES on a national securities exchange
or automated interdealer quotation system.

Concurrently with this offering, we are offering 7,200,000 shares of our
common stock by means of a separate prospectus. The underwriters of the common
stock offering have an option to purchase up to 1,080,000 additional shares of
common stock to cover over-allotments of shares. This offering and the common
stock offering are not contingent on each other.

INVESTING IN THE HIGH TIDES INVOLVES RISKS. SEE "RISK FACTORS" ON PAGE 16.

<TABLE>
<CAPTION>
PROCEEDS
PRICE TO UNDERWRITING TO THE
PUBLIC(1) COMMISSIONS TRUST(1)
------------------ ------------ ---------------
<S> <C> <C> <C>
Per HIGH TIDES................................... $50 (2) $50
Total............................................ $240,000,000 (2) $240,000,000
</TABLE>

(1) Plus accrued distributions, if any, from , 1999.

(2) Calpine had agreed to pay a commission to the underwriters of $ per each
of the HIGH TIDES, or $ in the aggregate.

Delivery of the HIGH TIDES will be made on or about , 1999.

* The terms Remarketable Term Income Deferrable Equity Securities (HIGH
TIDES)(SM) or HIGH TIDES(SM) are registered service marks of Credit Suisse
First Boston Corporation.

CREDIT SUISSE FIRST BOSTON
CIBC WORLD MARKETS
ING BARINGS

The date of this prospectus is October 27, 1999.

<PAGE> 88

[Depiction of Delta Energy Center.]
"Delta Energy Center, a proposed 880 megawatt gas-fired facility located in
Pittsburg, California."

[Depiction of Pasadena Power Plant.]
"Pasadena Power Plant, a 240 megawatt gas-fired facility located in Pasadena,
Texas."
<PAGE> 89

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
PROSPECTUS SUMMARY...................... 1
RISK FACTORS............................ 16
WHERE YOU CAN FIND MORE INFORMATION..... 30
FORWARD-LOOKING STATEMENTS.............. 31
USE OF PROCEEDS......................... 32
PRICE RANGE OF COMMON STOCK............. 32
DIVIDEND POLICY......................... 33
ACCOUNTING TREATMENT.................... 33
CAPITALIZATION.......................... 34
SELECTED CONSOLIDATED FINANCIAL DATA.... 35
PRO FORMA CONSOLIDATED FINANCIAL DATA... 37
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS............................ 39
BUSINESS................................ 55
MANAGEMENT.............................. 82
PRINCIPAL STOCKHOLDERS.................. 85
</TABLE>

<TABLE>
<CAPTION>
Page
----
<S> <C>
CALPINE CAPITAL TRUST................... 86
THE REMARKETING......................... 87
THE REMARKETING AGENT................... 93
DESCRIPTION OF HIGH TIDES............... 95
DESCRIPTION OF CONVERTIBLE SUBORDINATED
DEBENTURES............................ 118
DESCRIPTION OF THE GUARANTEE............ 129
RELATIONSHIP AMONG THE HIGH TIDES, THE
CONVERTIBLE SUBORDINATED DEBENTURES
AND THE GUARANTEE..................... 133
CERTAIN UNITED STATES FEDERAL INCOME TAX
CONSEQUENCES.......................... 135
DESCRIPTION OF CAPITAL STOCK............ 144
CERTAIN ERISA CONSIDERATIONS............ 146
UNDERWRITING............................ 149
NOTICE TO CANADIAN RESIDENTS............ 151
LEGAL MATTERS........................... 152
EXPERTS................................. 152
</TABLE>

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

i
<PAGE> 90

PROSPECTUS SUMMARY

This summary highlights information contained elsewhere in this prospectus.
This summary is not complete and does not contain all of the information that
you should consider before investing in the HIGH TIDES. You should carefully
read the entire prospectus, including the risk factors, the financial statements
and the documents incorporated by reference into it. Unless we indicate
otherwise, information in this prospectus assumes the underwriters will not
exercise their over-allotment option. Unless the context requires otherwise,
"Calpine," "our company," "our," "we," "us," or similar terms refer to Calpine
Corporation and its consolidated subsidiaries, excluding Calpine Capital Trust.
However, in the descriptions of the HIGH TIDES, the debentures, the guarantee,
the trust and related matters, these terms refer solely to Calpine Corporation
and not the trust or any of our other consolidated subsidiaries.

All information in this prospectus reflects the 2 for 1 stock split
declared by us on September 20, 1999.

THE COMPANY

As a result of our expansion program, our revenues, cash flow, earnings and
assets have grown significantly over the last five years, as shown in the table
below.

successfully implement our acquisition and development program and has
contributed to our significant growth over the past five years.

THE MARKET

The power industry represents the third largest industry in the United
States, with an estimated end-user market of over $250 billion of electricity
sales in 1998 produced by an aggregate base of power generation facilities with
a capacity of approximately 750,000 megawatts. In response to increasing
customer demand for access to low-cost electricity and enhanced services, new
regulatory initiatives have been and are continuing to be adopted at both the
state and federal level to increase competition in the domestic power generation
industry. The power generation industry historically has been largely
characterized by electric utility monopolies producing electricity from old,
inefficient, high-cost generating facilities selling to a captive customer base.
Industry trends and regulatory initiatives have transformed the existing market
into a more competitive market where end-users purchase electricity from a
variety of suppliers, including non-utility generators, power marketers, public
utilities and others.

STRATEGY

RECENT DEVELOPMENTS

We currently have nine projects under construction representing 4,485
additional megawatts. Of these new projects, we are currently expanding our
Pasadena facility by 545 megawatts to 785 megawatts and we have eight new power
plants under construction, including the Tiverton Power Plant in Rhode Island;
the Rumford Power Plant in Maine; the Westbrook Power Plant in Maine; the Sutter
Power Plant in California; the South Point Power Plant in Arizona; the Lost
Pines 1 Power Plant in Texas; the Los Medanos Power Plant in California; and the
Magic Valley Power Plant in Texas. We have also announced plans to develop six
additional power generation facilities, totaling 3,930 megawatts, in California,
Texas, Arizona and Pennsylvania.

In May 1999, we completed the acquisition from Pacific Gas and Electric
Company of 14 geothermal power plants at The Geysers in northern California,
with a combined capacity of approximately 700 megawatts, for $212.8 million.
With the acquisition, we now own interests in and operate 18 geothermal power
plants that generate more than 800 megawatts of electricity, and we are the
nation's largest geothermal and green power producer. The combination of our
existing geothermal steam and power plant assets, the acquisition of the Sonoma
steam fields from Unocal, and the 14 power plants from Pacific Gas and Electric
Company allows us to fully integrate the steam and power plant operations at The
Geysers into one efficient, unified system to maximize the renewable natural
resource, lower overall production costs and extend the life of The Geysers.
3
<PAGE> 93

In October 1999, we completed the acquisition of Sheridan Energy, Inc., a
natural gas exploration and production company, through a $41.0 million cash
tender offer. We purchased all of the outstanding shares of Sheridan Energy's
common stock for $5.50 per share. In addition, we redeemed $11.5 million of
outstanding preferred stock of Sheridan Energy. Sheridan Energy's oil and gas
properties, including 148 billion cubic feet equivalent of proven reserves, are
located in northern California and the Gulf Coast region, where we are
developing low-cost natural gas supplies and proprietary pipeline systems to
support our strategically-located natural gas-fired power plants.

Third Quarter 1999 Earnings. On October 22, 1999, we announced earnings
for the three and nine months ended September 30, 1999.

rose 43% to $268.2 million, form $187.0 million in 1998. Total assets as of
September 30, 1999, were $2.7 billion, up 59% from $1.7 billion at December 31,
1998.

Financial results for the three and nine months ended September 30, 1999
benefited primarily from the acquisition of 14 geothermal power plants totaling
approximately 700 megawatts from Pacific Gas and Electric Company, completed in
May 1999. For certain of these facilities, revenue includes amounts received
under a Reliability Must Run contract with the California Independent System
Operator, which is awaiting final Federal Energy Regulatory Commission approval.

THE TRUST

Calpine Capital Trust is a recently created Delaware business trust. The
trust will issue HIGH TIDES to the public and common securities to us. The trust
will use the proceeds of those issuances to buy Calpine's % Convertible
Subordinated Debentures due 2029. We will, on a subordinated basis, fully and
unconditionally guarantee all of the trust's obligations under the HIGH TIDES.

For financial reporting purposes, we will treat the trust as one of our
subsidiaries. Accordingly, we will include the accounts of the trust in our
consolidated financial statements. We will present the HIGH TIDES as a separate
line item in our consolidated balance sheet entitled "Company-obligated
mandatorily redeemable convertible preferred securities of a subsidiary trust,"
and we will include appropriate disclosures about the HIGH TIDES in the notes to
our consolidated financial statements. For financial reporting purposes, we will
record distributions payable on the HIGH TIDES as a minority interest in our
consolidated statement of income.

OUR PRINCIPAL EXECUTIVE OFFICES

The trust's place of business and telephone number are the principal
executive offices and telephone number of Calpine.
5
<PAGE> 95

THE OFFERING

Issuer....................... Calpine Capital Trust. Substantially all of the
assets of the trust will consist of Calpine's
% Convertible Subordinated Debentures due
2029. We will own 100% of the outstanding common
securities of the trust.

Securities Offered........... 4,800,000 HIGH TIDES. Additionally, we and the
trust have granted the underwriters an option
for 30 days after the date of this prospectus to
purchase up to an additional 720,000 HIGH TIDES
at the initial offering price plus accrued
distributions.

Distributions................ Distributions will accrue on the HIGH TIDES from
the date of original issuance at the applicable
rate applied to the stated liquidation amount of
$50 per HIGH TIDES. The applicable rate will be
% per annum from the date of original
issuance to, but excluding the reset date. The
reset date is any date (1) not later than
October , 2004, or the final reset date, or,
if the day is not a business day, the next
succeeding business day, and (2) not earlier
than 70 business days prior to October , 2004,
as may be determined by the remarketing agent,
in its sole discretion, for settlement of a
successful remarketing. On or after the reset
date, the applicable rate will be the term rate
established by the remarketing agent based on
the outcome of the remarketing. Subject to the
distribution deferral provisions described
below, the trust will pay those distributions
quarterly in arrears on each , ,
and , commencing , 2000.
Because distributions on the HIGH TIDES
constitute interest for United States federal
income tax purposes, corporate holders of the
HIGH TIDES will not be entitled to a
dividends-received deduction.

Distribution Deferral
Provisions................. The trust's ability to pay distributions on the
HIGH TIDES is solely dependent on its receipt of
interest payments from us on the debentures. We
can, on one or more occasions, defer the
interest payments due on the debentures for up
to 20 consecutive quarters unless an event of
default under the debentures has occurred and is
continuing. However, we cannot defer interest
payments beyond the (1) maturity of the
debentures, and (2) in the case of a deferral
period that begins prior to the reset date, the
reset date. If we defer interest payments on the
debentures, the trust will also defer
distributions on the HIGH TIDES. The trust will
be able to pay distributions on the HIGH TIDES
only if and to the extent it receives interest
payments from us on the debentures. During any
deferral period prior to the reset date,
distributions will
6
<PAGE> 96

continue to accumulate quarterly at an annual
rate of % of the liquidation amount of $50
per HIGH TIDES. Also, the deferred distributions
will themselves accrue additional distributions
at an annual rate of %, to the extent
permitted by law. The trust will send you
written notice of a deferral of distributions on
the HIGH TIDES not later than ten days prior to
the record date for the related HIGH TIDES
distribution. During any period in which we
defer interest payments on the debentures, we
cannot:

- declare or pay any dividend on our capital
stock;

- redeem, purchase, acquire or make a
liquidation payment on any of our capital
stock; or

- make any interest, principal or premium
payment on, or repurchase or redeem, any of
our debt securities that rank equally with or
junior to the debentures.

If an interest payment deferral occurs, you will
continue to recognize interest income for United
States federal income tax purposes in advance of
your receipt of any corresponding cash
distribution.

If you convert your HIGH TIDES during any
interest payment deferral period, you will not
receive any cash payment for any deferred
distributions.

Conversion Into Common
Stock...................... On or prior to the tender notification date, you
may convert each HIGH TIDES into shares of
common stock of Calpine at the initial rate of
shares of common stock for each HIGH
TIDES (equivalent to an initial conversion price
of $ per share of common stock). The last
reported sale price of Calpine's common stock on
the NYSE on October 26, 1999 was $44.69 per
share. On and after the reset date, each HIGH
TIDES may, at the trust's option and subject to
the results of remarketing, become
nonconvertible or convertible into a different
number of shares of common stock. The conversion
price and conversion ratio in effect at any time
shall hereafter be referred to as the applicable
conversion price and the applicable conversion
ratio, respectively, each of which will be
subject to adjustment in certain circumstances.

In connection with any conversion of the HIGH
TIDES, the property trustee of the trust will
exchange those HIGH TIDES for debentures having
a principal amount equal to the stated
liquidation amount of HIGH TIDES exchanged. The
conversion agent will then
7
<PAGE> 97

immediately convert the debentures into
Calpine's common stock.

We will not issue any fractional shares of
common stock as a result of the conversion.
Instead, we will pay the fractional interest in
cash based on the then current market value of
our common stock. Also, we will not issue any
additional shares of our common stock upon
conversion of the HIGH TIDES to pay for any
accrued but unpaid distributions on the HIGH
TIDES at the time of conversion.

Maturity..................... The HIGH TIDES do not have a stated maturity.
However, the trust must redeem the HIGH TIDES
upon the repayment or redemption, in whole or in
part, of the debentures. The debentures will
mature on October , 2029, unless earlier
redeemed. Upon redemption of the debentures on
October , 2029, the trust will redeem the HIGH
TIDES at their liquidation amounts plus accrued
and unpaid distributions.

Remarketing.................. The remarketing agent has agreed to use its
reasonable best efforts to remarket all HIGH
TIDES tendered for remarketing. The remarketing
agent will establish the following, all of which
will be effective as of the reset date:

- the term rate per annum at which distributions
will accrue on the HIGH TIDES,

- the number of shares of common stock, if any,
into which HIGH TIDES may be converted, and

- the price, manner and time, if any, at which
the HIGH TIDES may be redeemed at our option,
prior to the stated maturity date of the
debentures.

The reset date is any date (1) not later than
October , 2004, or the final reset date, or,
if the day is not a business day, the next
succeeding business day, and (2) not earlier
than 70 business days prior to October , 2004,
as may be determined by the remarketing agent,
in its sole discretion, for settlement of a
successful remarketing.

The remarketing agent will use its best efforts
to establish the term rate, term conversion
price and ratio and term call provisions most
favorable to us consistent with the remarketing
of all HIGH TIDES tendered at a reset price
equal to 101% of the liquidation amount of the
HIGH TIDES.

At least 30 business days but not more than 90
business days prior to the final reset date, the
trust will send a
8
<PAGE> 98

remarketing notice to you stating whether it
intends to remarket the HIGH TIDES as securities
that either will be convertible into common
stock or nonconvertible. All HIGH TIDES you own
will be deemed tendered for remarketing unless
you deliver an irrevocable notice to the
contrary to the tender agent prior to the tender
notification date. The tender agent will
promptly remit the irrevocable notice to the
remarketing agent prior to the tender
notification date. The tender notification date
is a date no earlier than 10 business days
following the remarketing notice date, or a
shorter period as shall be agreed to by the
remarketing agent.

If no HIGH TIDES are tendered for remarketing,
the remarketing will not take place, and the
remarketing agent will set the term rate, term
conversion price and ratio and term call
provisions in a manner consistent with the
remarketing notice in the manner that it
believes, in its sole discretion, would result
in a price per HIGH TIDES equal to 101% of the
liquidation amount of the HIGH TIDES were a
remarketing actually to occur.

If any HIGH TIDES are tendered for remarketing,
the remarketing agent will commence a
convertible remarketing or a nonconvertible
remarketing. In either case, an initial
remarketing will proceed according to
instructions set forth in the remarketing
notice. The initial remarketing will fail if:

- despite using its best efforts, the
remarketing agent is unable to establish a
term rate less than or equal to the maximum
rate, which is a rate equal to the treasury
rate plus 6%, during the initial remarketing
period,

- the remarketing agent is excused from its
obligations because of the failure by us or
the trust to satisfy certain conditions or the
occurrence of certain market events specified
in the remarketing agreement, or

- there is no remarketing agent on the first day
of the initial remarketing period.

In the event of an initial failed remarketing,
the remarketing agent will commence a final
remarketing. This final remarketing will be a
convertible remarketing if the initial
remarketing was a nonconvertible remarketing and
vice versa. If the remarketing agent is still
not able to establish a term rate less than or
equal to the maximum rate during the final
remarketing period or upon the failure by us or
the trust to satisfy certain
9
<PAGE> 99

conditions or the occurrence of certain market
events specified in the remarketing agreement,
the final remarketing will fail. In the event of
a failed final remarketing, the HIGH TIDES will
remain outstanding as convertible securities at
a term rate equal to the treasury rate plus 6%
per annum and with a term conversion price equal
to 105% of the average closing price of our
common stock for the five consecutive trading
days after the final failed remarketing
termination date. In the event of a failed final
remarketing, all outstanding HIGH TIDES will be
redeemable by us, in whole or in part, at any
time on or after the third anniversary of the
reset date at a redemption price equal to 100%
of the aggregate liquidation amount thereof,
plus accrued and unpaid distributions thereon.

If the remarketing agent is able to establish a
term rate less than or equal to the maximum rate
during the initial remarketing period or the
final remarketing period, as the case may be,
new holders will deliver the reset price for the
remarketed HIGH TIDES, and the term provisions
will become effective on the reset date.

If for any reason term provisions are
established by the remarketing agent but on the
reset date the remarketing agent is unable to
sell one or more HIGH TIDES tendered for
remarketing, the remarketing agent will be
obligated, subject to some conditions, to
purchase the HIGH TIDES for the reset price on
the reset date.

Remarketing Agent............ Credit Suisse First Boston Corporation has
agreed to act as the initial remarketing agent,
but may resign or be replaced by us prior to the
remarketing in accordance with the remarketing
agreement. The remarketing will be done without
charge to the holders of HIGH TIDES, but we will
pay the remarketing agent a fee equal to %
of the aggregate liquidation amount of the HIGH
TIDES outstanding on the reset date upon
settlement of the transactions contemplated by
the remarketing.

Optional Redemption.......... We may redeem the debentures:

- in whole or in part, at any time on or after
October , 2002 until but excluding the
tender notification date, at a redemption
price equal to % of the principal amount of
the debentures, declining ratably to 100% of
the principal amount of the debentures after
, plus any accrued and unpaid
interest; and
10
<PAGE> 100

- after the reset date, in accordance with the
term call protections established in the
remarketing or upon a failed final
remarketing.

Upon the redemption in whole or in part of the
debentures, the proceeds of the redemption shall
be concurrently applied to redeem, at the
applicable redemption price, the related HIGH
TIDES having an aggregate liquidation amount
equal to the aggregate principal amount of
debentures redeemed.

Tax Event or Investment
Company Event Redemption or
Distribution............... Upon the occurrence of specified tax changes
affecting the trust's taxable status or the
deductibility of interest on the debentures or
changes in the law causing the trust to be
considered an investment company, we will cause
the trustees to dissolve and liquidate the trust
and, after satisfaction of liabilities of
creditors of the trust, distribute the
debentures to you. In limited circumstances, we
may redeem the debentures in whole, but not in
part, at a price equal to the principal amount
of the debentures plus accrued and unpaid
interest, in lieu of distributing the
debentures. Upon the occurrence of certain
changes in the tax laws, we may also cause the
HIGH TIDES to remain outstanding and pay
additional amounts due on the debentures as a
result of the change.

Effect of Redemption......... Each of the terms, "stated maturity price,"
"initial redemption price," "term redemption
price," if applicable, and "tax event redemption
price" are referred to as a redemption price.
Upon the repayment or redemption of the
debentures, the trust will concurrently redeem,
on a pro rata basis, at the applicable
redemption price, the HIGH TIDES and common
securities having a liquidation amount equal to
the principal amount of the repaid or redeemed
debentures. If an event of default exists under
the debentures or the declaration of trust that
governs the trust, the HIGH TIDES will receive a
preference over the trust's common securities.

Guarantee.................... We will irrevocably guarantee, on a subordinated
basis and to the extent set forth in this
prospectus, the payment of the following:

- distributions on the HIGH TIDES to the extent
of available trust funds;

- the amount payable upon redemption of the HIGH
TIDES to the extent of available trust funds;
and
11
<PAGE> 101

- generally, the liquidation amount of the HIGH
TIDES to the extent of trust funds available
for distribution to you.

The guarantee will be unsecured and subordinate
to all of our senior debt. Our guarantee is
effectively junior to the debt and other
liabilities of our subsidiaries, and as a
result, funds may not be available for payment
under the guarantee.

Effectively, we have, through the guarantee, the
debentures, the indenture governing the
debentures and the trust's declaration of trust,
taken together, fully, irrevocably and
unconditionally guaranteed all of the trust's
obligations under the HIGH TIDES. No single
document standing alone or operating in
conjunction with fewer than all of the other
documents constitutes a full guarantee. It is
only the combined operation of these documents
that has the effect of providing a full,
irrevocable and unconditional guarantee of the
trust's obligations under the HIGH TIDES.

Liquidation of the Trust..... We, as holder of the trust's common securities,
have the right at any time to dissolve the
trust, subject to specified conditions. If we
dissolve the trust, after satisfaction of
liabilities to creditors of the trust, we will
distribute to you debentures having a principal
amount equal to the liquidation amount of the
HIGH TIDES you hold or, in limited
circumstances, an amount equal to the
liquidation amount per HIGH TIDES plus
accumulated and unpaid distributions to the date
of payment.

Voting Rights................ Except in limited circumstances or as required
by law, you do not have any voting rights,
unless an event of default with respect to the
debentures occurs and is continuing or we
default under the guarantee with respect to the
HIGH TIDES, in which case, you will be entitled,
by majority vote, to appoint an additional
trustee of the trust or remove the Delaware
trustee or the property trustee.

Ranking...................... Generally, the trust will make payments on the
HIGH TIDES pro rata with its common securities.
The debentures will be unsecured and subordinate
and junior in right of payment to all of our
senior debt. At June 30, 1999, we had $1.5
billion of senior debt on a consolidated basis.
Our subsidiaries are separate legal entities and
have no obligations to pay, or make funds
available for the payment of, any amount due on
the debentures, the HIGH TIDES or the guarantee.
12
<PAGE> 102

Form of HIGH TIDES........... The HIGH TIDES will be represented by a global
certificate registered in the name of Cede & Co., as nominee for The Depository
Trust Company.

Use of Proceeds.............. The trust will use the gross proceeds from this
offering and from the issuance of the trust's
common securities to purchase the debentures. We
expect to use a substantial portion of the net
proceeds from the sale of the debentures to the
trust and our concurrent common stock offering
to finance power projects under development and
construction. The remaining net proceeds, if
any, will be used for working capital and
general corporate purposes.

Absence of Market for the
HIGH TIDES................. The HIGH TIDES will be a new issue of securities
for which there is currently no market. We do
not intend to list the HIGH TIDES on a national
securities exchange or automated interdealer
quotation system. Although the underwriters have
informed the trust and us that they currently
intend to make a market in the HIGH TIDES, the
underwriters are not obligated to do so, and
they may discontinue any such market making at
any time without notice.

Accordingly, we cannot assure you as to the
development or liquidity of any market for the
HIGH TIDES.

Concurrent Common Stock
Offering................... Concurrently with this offering of HIGH TIDES,
we are offering by a separate prospectus,
7,200,000 shares of our common stock. The
underwriters of the common stock offering have
an option to purchase up to 1,080,000 additional
shares of common stock to cover over-allotments.

13
<PAGE> 103

SUMMARY CONSOLIDATED HISTORICAL FINANCIAL AND OPERATING INFORMATION

Footnotes appear on the next page.
14
<PAGE> 104

<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF
------------------------------------------------------------ JUNE 30,
1994 1995 1996 1997 1998 1999
-------- ---------- ---------- ---------- ---------- -----------
(DOLLARS IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............... $ 22,527 $ 21,810 $ 95,970 $ 48,513 $ 96,532 $ 320,287
Total assets............................ 421,372 554,531 1,031,397 1,380,915 1,728,946 2,549,750
Short-term debt......................... 27,300 85,885 37,492 112,966 5,450 --
Long-term line of credit................ -- 19,851 -- -- -- --
Long-term non-recourse debt............. 196,806 190,642 278,640 182,893 114,190 79,210
Notes payable........................... 5,296 6,348 -- -- -- --
Senior notes............................ 105,000 105,000 285,000 560,000 951,750 1,551,750
Total debt.............................. 334,402 407,726 601,132 855,859 1,071,390 1,630,960
Stockholders' equity.................... 18,649 25,227 203,127 239,956 286,966 514,127
</TABLE>

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

(4) Electricity revenue is comprised of fixed capacity payments, which are not
related to production volume, and variable energy payments, which are
related to production volume.

(5) The average energy price per kilowatt hour represents energy revenue divided
by the megawatt hours produced.
15
<PAGE> 105

RISK FACTORS

Investing in the HIGH TIDES involves risk. You should carefully consider
the risk factors described below, in addition to the other information contained
in this prospectus, before making an investment decision. The risks and
uncertainties described below are not the only risks we face. Additional risks
and uncertainties not presently known to us or that we currently deem immaterial
may impair our business operations.

Each of the following factors could have a material adverse effect on our
business, financial condition or results of operations, causing the trading
price of the HIGH TIDES and our common stock to decline and the loss of all or
part of your investment.

RISKS RELATING TO CALPINE

WE HAVE SUBSTANTIAL INDEBTEDNESS THAT WE MAY BE UNABLE TO SERVICE AND THAT
RESTRICTS OUR ACTIVITIES

This high level of indebtedness has important consequences, including:

- limiting our ability to borrow additional amounts for working capital,
capital expenditures, debt service requirements, execution of our growth
strategy, or other purposes,

- limiting our ability to use operating cash flow in other areas of our
business because we must dedicate a substantial portion of these funds to
service the debt,

- increasing our vulnerability to general adverse economic and industry
conditions, and

- limiting our ability to capitalize on business opportunities and to react
to competitive pressures and adverse changes in government regulation.

- incur indebtedness,

- make prepayments of indebtedness in whole or in part,

- pay dividends,

- make investments,

- engage in transactions with affiliates,

16
<PAGE> 106

- create liens,

- sell assets, and

- acquire facilities or other businesses.

OUR ABILITY TO REPAY OUR DEBT DEPENDS UPON THE PERFORMANCE OF OUR SUBSIDIARIES

17
<PAGE> 107

WE MAY BE UNABLE TO SECURE ADDITIONAL FINANCING IN THE FUTURE

- general economic and capital market conditions,

- conditions in energy markets,

- regulatory developments,

- credit availability from banks or other lenders,

- investor confidence in the industry and in us,

- the continued success of our current power generation facilities, and

- provisions of tax and securities laws that are conducive to raising
capital.

Financing for new facilities may not be available to us on acceptable terms in
the future.

REVENUE UNDER SOME OF OUR POWER SALES AGREEMENTS MAY BE REDUCED SIGNIFICANTLY
UPON THEIR EXPIRATION OR TERMINATION

Most of the electricity we generate from our existing portfolio is sold
under long-term power sales agreements that expire at various times. When the
terms of each of these power sales agreements expire, it is possible that the
price paid to us for the generation of electricity may be reduced significantly,
which would substantially reduce our revenue under such agreements. The fixed
price periods in some of our long-term power sales agreements have recently
expired, and the electricity under those agreements is now sold at a fluctuating
market price. For example, the price for electricity for two of our power
plants, the Bear Canyon (20 megawatts) and West Ford Flat (27 megawatts) power
plants, was approximately 13.83 cents per kilowatt hour under the fixed price
periods that

18
<PAGE> 108

recently expired for these facilities, and is now set at the energy clearing
price, which averaged 2.66 cents per kilowatt hour during 1998. As a result, our
energy revenue under these power sales agreements has been materially reduced.
We expect the decline in energy revenues will be partially mitigated by
decreased royalties and planned operating cost reductions at these facilities.
In addition, we will continue our strategy of offsetting these reductions
through our acquisition and development program.

OUR POWER PROJECT DEVELOPMENT AND ACQUISITION ACTIVITIES MAY NOT BE SUCCESSFUL

The development of power generation facilities is subject to substantial
risks. In connection with the development of a power generation facility, we
must generally obtain:

- necessary power generation equipment,

- governmental permits and approvals,

- fuel supply and transportation agreements,

- sufficient equity capital and debt financing,

- electrical transmission agreements, and

- site agreements and construction contracts.

19
<PAGE> 109

OUR PROJECTS UNDER CONSTRUCTION MAY NOT COMMENCE OPERATION AS SCHEDULED

The commencement of operation of a newly constructed power generation
facility involves many risks, including:

- start-up problems,

- the breakdown or failure of equipment or processes, and

- performance below expected levels of output or efficiency.

OUR POWER GENERATION FACILITIES MAY NOT OPERATE AS PLANNED

20
<PAGE> 110

OUR GEOTHERMAL ENERGY RESERVES MAY BE INADEQUATE FOR OUR OPERATIONS

- the heat content of the extractable fluids,

- the geology of the reservoir,

- the total amount of recoverable reserves,

- operating expenses relating to the extraction of fluids,

- price levels relating to the extraction of fluids, and

- capital expenditure requirements relating primarily to the drilling of
new wells.

WE DEPEND ON OUR ELECTRICITY AND THERMAL ENERGY CUSTOMERS

21
<PAGE> 111

WE ARE SUBJECT TO COMPLEX GOVERNMENT REGULATION WHICH COULD ADVERSELY AFFECT OUR
OPERATIONS

22
<PAGE> 112

WE MAY BE UNABLE TO OBTAIN AN ADEQUATE SUPPLY OF NATURAL GAS IN THE FUTURE

COMPETITION COULD ADVERSELY AFFECT OUR PERFORMANCE

23
<PAGE> 113

OUR INTERNATIONAL INVESTMENTS MAY FACE UNCERTAINTIES

- risks of fluctuations in currency valuation,

- currency inconvertibility,

- expropriation and confiscatory taxation,

- increased regulation, and

- approval requirements and governmental policies limiting returns to
foreign investors.

WE DEPEND ON OUR SENIOR MANAGEMENT

SEISMIC DISTURBANCES COULD DAMAGE OUR PROJECTS

OUR RESULTS ARE SUBJECT TO QUARTERLY AND SEASONAL FLUCTUATIONS

Our quarterly operating results have fluctuated in the past and may
continue to do so in the future as a result of a number of factors, including:

- the timing and size of acquisitions,

- the completion of development projects, and

- variations in levels of production.

THE PRICE OF OUR COMMON STOCK IS VOLATILE

The market price for our common stock has been volatile in the past, and
several factors could cause the price to fluctuate substantially in the future.
These factors include:

- announcements of developments related to our business,

- fluctuations in our results of operations,

24
<PAGE> 114

- sales of substantial amounts of our securities into the marketplace,

- general conditions in our industry or the worldwide economy,

- an outbreak of war or hostilities,

- a shortfall in revenues or earnings compared to securities analysts'
expectations,

- changes in analysts' recommendations or projections, and

- announcements of new acquisitions or development projects by us.

WE COULD BE ADVERSELY AFFECTED IF OUR COMPUTER SYSTEMS ARE NOT YEAR 2000
COMPLIANT

The "Year 2000 problem" refers to the fact that some computer hardware,
software and embedded systems were designed to read and store dates using only
the last two digits of the year.

We are coordinating our efforts to address the impact of Year 2000 on our
business through an analysis of four separate technology domains:

- corporate applications, which include core business systems,

- non-information technology, which includes all operating and control
systems,

- end-user computing systems (that is, systems that are not considered core
business systems but may contain date calculations), and

- business partner and vendor systems.

The cost or consequences of a materially incomplete or untimely resolution
of the Year 2000 problem could adversely affect our future operations, financial
results or our financial condition.

25
<PAGE> 115

RISKS RELATING TO THE HIGH TIDES

THE TRUST MAY NOT BE ABLE TO MAKE DISTRIBUTIONS ON THE HIGH TIDES IF WE DEFAULT
ON OUR SENIOR DEBT BECAUSE OUR OBLIGATIONS TO PAY ON THE DEBENTURES AND THE
GUARANTEE ARE SUBORDINATED TO OUR PAYMENT OBLIGATIONS UNDER OUR SENIOR DEBT

Because of the subordinated nature of the guarantee and the debentures, we:

- will not be permitted to make any payments of principal, including
redemption payments, or interest on the debentures if we default on our
senior debt;

- will not be permitted to make payments on the guarantee if we default on
any of our senior debt; and

- must pay all our senior debt before we make payments on the guarantee or
the debentures if we become bankrupt, liquidate or dissolve.

The HIGH TIDES, the guarantee and the debentures do not limit our ability
or the ability of our subsidiaries to incur additional indebtedness, including
indebtedness that ranks senior to the debentures and the guarantee. At June 30,
1999, we had $1.5 billion of senior debt on a consolidated basis. Because the
trust will be able to pay amounts due on the HIGH TIDES only if we make payments
on the debentures, your ability to receive distributions may be affected by our
indebtedness.

THE DEBENTURES WILL BE EFFECTIVELY SUBORDINATED TO OBLIGATIONS OF OUR
SUBSIDIARIES

Our right to participate in any distribution of assets of any of our
subsidiaries upon that subsidiary's dissolution, winding-up, liquidation or
reorganization or otherwise (and thus the ability of the holders of the HIGH
TIDES to benefit indirectly from the distribution) is subject to the prior
claims of the creditors of that subsidiary, except to the extent that we are a
creditor of the subsidiary and our claims are recognized. Therefore, the
debentures will be effectively subordinated to all indebtedness and other
obligations of our subsidiaries. Our subsidiaries are separate legal entities
and have no obligations to pay, or make funds available for the payment of, any
amounts due on the debentures, the HIGH TIDES or the guarantee.

THE DEFERRAL OF INTEREST PAYMENTS MAY HAVE AN ADVERSE EFFECT ON THE TRADING
PRICE OF THE HIGH TIDES

If no event of default under the debentures has occurred and is continuing,
we may defer the payment of interest on the debentures for a period not
exceeding 20 consecutive quarters. If we defer interest payments on the
debentures, the trust will defer quarterly distributions on the HIGH TIDES.
However, distributions will still accumulate quarterly and the deferred
distributions will themselves accrue additional distributions at the annual rate
of %, to the extent permitted by law. There is no limitation on the number
of times that we may elect to defer interest payments. However, no deferral
period may extend beyond (1) the maturity of the debentures whether at the
stated maturity or by declaration of acceleration, call for redemption or
otherwise or (2) in the case of a deferral period beginning prior to the reset
date, the reset date.

26
<PAGE> 116

We have no current intention of deferring interest payments on the
debentures. However, if we exercise our right in the future, you will include
original issue discount on the HIGH TIDES in taxable income for federal income
tax purposes, prior to the receipt of cash. In addition, the HIGH TIDES may
trade at prices that do not fully reflect the value of deferred interest on the
debentures. If you sell your HIGH TIDES during an interest deferral period, you
may not receive the same return on your investment as a holder who continues to
hold HIGH TIDES. In addition, our right to defer interest payments on the
debentures may mean that the market price of the HIGH TIDES may be more volatile
than the market prices of other securities that do not have these rights.

IF YOU DO NOT ELECT TO KEEP YOUR HIGH TIDES UPON A REMARKETING NOTICE, YOUR HIGH
TIDES WILL NO LONGER BE OUTSTANDING AFTER A SUCCESSFUL REMARKETING

If you do not notify the remarketing agent, your HIGH TIDES will no longer
be outstanding after the successful remarketing, and you will have no further
rights thereunder except to receive an amount equal to:

- from the proceeds of the remarketing, 101% of the aggregate liquidation
amount of the HIGH TIDES, plus

- from us, accrued and unpaid distributions on the HIGH TIDES up until, but
excluding, the reset date.

The remarketing agent agrees to use its best efforts to remarket all HIGH
TIDES tendered for remarketing. All HIGH TIDES will be considered tendered
unless the holder of HIGH TIDES gives irrevocable notice to the contrary to the
tender agent, which the tender agent will promptly remit to the remarketing
agent, before the tender notification date.

THE REMARKETING OF THE HIGH TIDES MAY NOT BE SUCCESSFUL AND THE TERMS OF THE
HIGH TIDES AFTER ANY REMARKETING ARE SUBJECT TO CHANGE

The remarketing will have failed if:

- despite using its best efforts, the remarketing agent cannot establish a
term rate less than or equal to the maximum rate,

- the remarketing agent is excused from remarketing the HIGH TIDES because
of (a) the failure by us to satisfy a condition in the remarketing
agreement or (b) the occurrence of certain market events specified in the
remarketing agreement; or

- there is no remarketing agent on the first day of the initial remarketing
period.

If the initial remarketing fails, the remarketing agent will commence a
final remarketing during the final remarketing period. If the final remarketing
fails, then the HIGH TIDES will remain outstanding at a term rate equal to the
treasury rate plus 6% per annum and with a term conversion price equal to 105%
of the average closing price of our common stock for the five consecutive
trading days after the final failed remarketing termination date. In the event
of a failed final remarketing, all outstanding HIGH TIDES will be redeemable by
us, in whole or in part, at any time on or after the third anniversary of the
reset date at a redemption price equal to 100% of the aggregate liquidation
amount thereof, plus accrued and unpaid distributions thereon. If no HIGH TIDES
are tendered for remarketing, the remarketing will not take place, although the
remarketing will not be deemed to have failed. The remarketing agent will set
the term provisions according to the

27
<PAGE> 117

instructions contained in the remarketing notice in the manner that it believes,
in its sole discretion, would result in a price per HIGH TIDES equal to 101% of
the liquidation amount if a remarketing were actually to occur.

AFTER THE RESET DATE, THE HIGH TIDES MAY NO LONGER BE CONVERTIBLE OR MAY BE
CONVERTIBLE INTO A FEWER NUMBER OF SHARES OF OUR COMMON STOCK

Each HIGH TIDES is initially convertible, at the option of the holder, into
shares of common stock, which may be adjusted in certain
circumstances. See "Description of HIGH TIDES -- Conversion Rights" We may
choose to remarket the HIGH TIDES so that after the reset date the HIGH TIDES
will not be convertible into shares of common stock, or, each HIGH TIDES will be
convertible into a different number of shares of common stock. See "The
Remarketing."

THE TRUST MAY REDEEM THE HIGH TIDES WITHOUT YOUR CONSENT IF SPECIFIED TAX
CHANGES OCCUR OR IF THE TRUST WOULD BE REQUIRED TO REGISTER AS AN INVESTMENT
COMPANY

Upon the occurrence of specified tax changes affecting the trust's taxable
status or the deductibility of interest on the debentures or changes in the law
causing the trust to be considered an investment company, we may either dissolve
and liquidate the trust and, after satisfaction of liabilities of creditors of
the trust, distribute the debentures to you and to us, as the holder of the
trust's common securities, on a pro rata basis or we may redeem all of the
debentures. If we redeem the debentures, the trust will use the cash it receives
from that redemption to redeem the HIGH TIDES and the trust's common securities.

WE MAY CAUSE THE HIGH TIDES TO BE REDEEMED ON OR AFTER OCTOBER , 2002 WITHOUT
YOUR CONSENT

We may redeem all or some of the debentures at our option at any time on or
after October , 2002. The redemption price initially includes a premium
declining over time to 100% of the principal amount to be redeemed plus any
accrued and unpaid interest. You should assume that we will exercise our
redemption option if we are able to refinance the debentures at a lower interest
rate or if we conclude it is otherwise in our interest to redeem the debentures.
The trust will use the cash it receives from the redemption of the debentures to
redeem an equivalent amount of HIGH TIDES and its common securities on a pro
rata basis.

DISTRIBUTION OF THE DEBENTURES TO YOU MAY HAVE ADVERSE TAX CONSEQUENCES FOR YOU

We may dissolve and liquidate the trust at any time. If that happens, the
trust will redeem the HIGH TIDES and its common securities by distributing,
after satisfaction of liabilities of creditors of the trust, the debentures to
you and to us, as the holder of the trust's common securities, on a pro rata
basis.

Under current United States federal income tax laws, a distribution of
debentures on the dissolution of the trust would not be a taxable event to you.
However, if there is a change in the law and, for example, the trust is
characterized for United States federal income tax purposes as an association
taxable as a corporation at the time of its dissolution, the distribution of
debentures would likely constitute a taxable event to you.

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Because you may receive debentures, you should make an investment decision
with regard to the debentures in addition to the HIGH TIDES. You should
carefully review all the information regarding the debentures contained in this
prospectus.

THE DISTRIBUTION OF DEBENTURES UPON LIQUIDATION OF THE TRUST MAY HAVE AN ADVERSE
EFFECT ON THE TRADING PRICE OF THE HIGH TIDES

We have the right to dissolve and liquidate the trust. Although we have no
current intention of doing so, we anticipate that we would consider exercising
this right if the expenses associated with maintaining the trust are
substantially greater than we expect or for other business reasons. If we
exercise our right to dissolve and liquidate the trust, the trust will redeem
the HIGH TIDES and its common securities by distributing, after satisfaction of
liabilities of creditors of the trust, the debentures to you and to us on a pro
rata basis, unless an event of default under the debentures has occurred and is
continuing, in which case you will have priority over us.

We cannot predict the market prices for the debentures that the trust may
distribute to you. Accordingly the debentures that you receive on a
distribution, or the HIGH TIDES you hold pending a distribution, may trade at a
discount to the price that you paid to purchase the HIGH TIDES.

WE GUARANTEE PAYMENTS ON THE HIGH TIDES ONLY IF THE TRUST HAS CASH AVAILABLE

If we fail to make payments on the debentures, the trust will not be able
to pay distributions, the redemption price or the liquidation amount of each
HIGH TIDES. In those circumstances, you will not be able to rely upon the
guarantee for payment of these amounts. Instead, if we are in default under the
debentures, you may:

- rely on the property trustee for the trust to enforce the trust's rights
under the debentures; or

- directly sue us or seek other remedies to collect your share of payments
owed.

YOU HAVE LIMITED VOTING RIGHTS

You will have limited voting rights relating generally to:

- the modification of the HIGH TIDES and our guarantee of the HIGH TIDES;
and

- the exercise of the trust's rights as holder of debentures.

You are not entitled to appoint, remove or replace the property trustee of
the trust or the statutory trustee of the trust except upon the occurrence of
certain events. The property trustee, and the holders of all of the trust's
common securities may, subject to certain conditions, amend the declaration of
trust without your consent to:

- cure any ambiguity;

- make provisions of the declaration of trust not inconsistent with other
provisions of the declaration of trust;

- ensure that the trust will not be classified for United States federal
income tax purposes as an association subject to taxation as a
corporation;

- ensure that the trust will be classified as a grantor trust; or

- ensure that the trust will not be required to register as an "investment
company" under the Investment Company Act of 1940.

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THE HIGH TIDES AND THE DEBENTURES DO NOT HAVE AN ESTABLISHED MARKET

Prior to this offering, there has been no public market for the HIGH TIDES.
The underwriters currently plan to make a market in the HIGH TIDES. However, the
underwriters may suspend their market making activities at any time and for any
reason. Accordingly, we cannot assure you that an active trading market for the
HIGH TIDES will develop or be sustained. If a market were to develop, the HIGH
TIDES could trade at prices that may be higher or lower than their offering
price depending upon many factors, including:

- prevailing interest rates;

- Calpine's operating results; and

- the market for similar securities.

WHERE YOU CAN FIND MORE INFORMATION

We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission. You may read and copy
any document we file at the public reference facilities of the SEC located at
450 Fifth Street N.W., Washington D.C. 20549. You may obtain information on the
operation of the SEC's public reference facilities by calling the SEC at
1-800-SEC-0330. You can also access copies of such material electronically on
the SEC's home page on the world wide web at http://www.sec.gov.

This prospectus is part of a registration statement (Registration No.
333-87427) we and the trust filed with the SEC. The SEC permits us to
"incorporate by reference" the information we file with them, which means that
we can disclose important information to you by referring you to those
documents. The information incorporated by reference is considered to be part of
this prospectus, and information that we file with the SEC after the date of
this prospectus will automatically update and supersede this information. We
incorporate by reference our Annual Report on Form 10-K as amended for the year
ended December 31, 1998, our Quarterly Reports on Form 10-Q for the periods
ended March 31, 1999 and June 30, 1999, our Current Report on Form 8-K dated May
7, 1999, our Current Report on Form 8-K dated October 11, 1999, and our Current
Report on Form 8-K dated October 22, 1999, each filed by us with the SEC. We
also incorporate by reference any future filings made with the SEC under
Sections 13(a), 13(c), (14) or 15(d) of the Securities Exchange Act of 1934, as
amended, until we sell all of the shares of HIGH TIDES and common stock being
registered or until this offering is otherwise terminated.

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FORWARD-LOOKING STATEMENTS

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USE OF PROCEEDS

We estimate that the gross proceeds from the sale of the HIGH TIDES will be
$240.0 million. The trust will use these proceeds, together with the proceeds
from the issuance of the trust's common securities, to purchase debentures from
us. After deducting the underwriting commissions which we have agreed to pay on
behalf of the trust, and the other offering expenses we will pay, we estimate
that we will receive net proceeds of $230.4 million from the sale of the
debentures to the trust, or $265.0 million if the underwriters' over-allotment
option is exercised in full. We expect to use a substantial portion of the net
proceeds from this offering and the concurrent common stock offering to finance
power projects under development and construction. The remaining proceeds, if
any, will be used for working capital and general corporate purposes. See
"Business -- Project Development and Acquisitions." Pending such uses, we expect
to invest the net proceeds in short-term, interest-bearing securities.

PRICE RANGE OF COMMON STOCK

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DIVIDEND POLICY

ACCOUNTING TREATMENT

We have not included separate financial statements of the trust because we
do not consider those financial statements material to you because:

- Calpine, a reporting company under the Securities Exchange Act of 1934,
will own, directly or indirectly all of the voting securities of the
trust;

- the trust has no independent operations but exists for the sole purpose
of issuing securities representing undivided beneficial interests in the
trust's assets and investing the proceeds in the debentures; and

- we will fully and unconditionally guarantee the obligations of the trust
under the HIGH TIDES and the common securities to the extent that the
trust has assets available to meet such obligations.

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<PAGE> 123

CAPITALIZATION

- -------------------------
(1) Proceeds are recorded net of unamortized issuance costs of $8,000.

(2) Excludes the 1,080,000 shares that may be issued upon exercise of the
underwriters' over-allotment option.

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SELECTED CONSOLIDATED FINANCIAL DATA

35
<PAGE> 125

36
<PAGE> 126

PRO FORMA CONSOLIDATED FINANCIAL DATA

37
<PAGE> 127

PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS

38
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MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

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Under the terms of the agreement, we received approximately $559,000 for the
sale of all our rights, title and interest in the stock of Calpine Greenleaf
Corporation, and transferred all non-recourse project financing of $71.6 million
and deferred taxes of $21.4 million. A loss of $15.6 million was recorded on the
balance sheet and is being amortized over the term of the lease through June
2014. Additionally, we have an early purchase option expiring September 30,
2003.

On February 24, 1999, we announced plans to develop, own and operate a 600
megawatt gas-fired power plant located in San Jose, California. This power
plant, called the Metcalf Energy Center, is the second power plant to be
developed under the joint venture with Bechtel Enterprises, and will provide
electricity to the San Francisco Bay area. We expect the plant to commence
operation in mid 2002.

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On April 22, 1999, we entered into a joint venture with GenTex Power
Corporation to develop, own and operate a 545 megawatt gas-fired power plant in
Bastrop County, Texas, called Lost Pines I. Construction of this power plant is
expected to begin in October 1999. Under the definitive agreements we entered in
September 1999, we will manage all phases of the plant's development process,
with GenTex and ourselves jointly operating the plant. The output from Lost
Pines I will be divided equally, with GenTex selling its portion to its customer
base, while we will sell our portion to the wholesale power market in Texas. We
expect the plant to commence operation in mid-2001.

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fired power plants currently under development. We currently intend to refinance
the construction facility in the longer-term capital markets prior to its
four-year maturity.

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SELECTED OPERATING INFORMATION

Electricity revenue
(1):

Energy................. $ 45,912 $ 54,886 $ 93,851 $ 110,879 $ 252,178 $ 93,735 $ 177,305

Capacity............... $ 7,967 $ 30,485 $ 65,064 $ 84,296 $ 193,535 $ 67,103 $ 106,155

Megawatt hours
produced............. 447,177 1,033,566 1,985,404 2,158,008 9,864,080 2,217,659 5,516,805

Average energy price
per kilowatt hour
(2).................. 10.267c 5.310c 4.727c 5.138c 2.557c 4.227c 3.214c

STEAM FIELDS:

Steam revenue (3):

Calpine................ $ 32,631 $ 39,669 $ 40,549 $ 42,102 $ 36,130 $ 17,960 $ 20,862

Other interest......... $ 2,051 $ -- $ -- $ -- $ -- $ -- $ --

Megawatt hours
produced............. 2,156,492 2,415,059 2,528,874 2,641,422 2,323,623 981,114 1,192,722

Average price per
kilowatt hour........ 1.608c 1.643c 1.603c 1.594c 1.555c 1.831c 1.749c
</TABLE>

- -------------------------
(1) Electricity revenue is composed of fixed capacity payments, which are not
related to production, and variable energy payments, which are related to
production.

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the steam fields serve power plants owned by us following their
acquisitions, our steam fields will no longer recognize steam revenue.

RESULTS OF OPERATIONS

SIX MONTHS ENDED JUNE 30, 1999 COMPARED TO SIX MONTHS ENDED JUNE 30, 1998

Revenue -- Total revenue increased 71% to $336.6 million for the six months
ended June 30, 1999 compared to $196.7 million for the same period in 1998.

Interest expense -- Interest expense for the six months ended June 30, 1999
increased to $47.2 million from $40.8 million for the same period a year ago.
The increase was

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primarily attributable to $21.8 million of interest associated with the
issuances of senior notes in 1999 and 1998, partially offset by an increase in
capitalized interest of $10.3 million, and a decrease in interest expense of
$4.7 million related to the retirement of non-recourse project financing for the
Greenleaf Power Plant in 1998 and the Gilroy Power Plant in 1999.

YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997

Revenue -- Total revenue increased 101% to $555.9 million in 1998 compared to
$276.3 million in 1997.

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Other income, net -- Other income decreased 66% to $1.1 million in 1998 compared
to $3.2 million in 1997. The decrease was primarily attributable to gas refunds
received in 1997.

YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996

Revenue -- Total revenue increased 29% to $276.3 million in 1997 compared to
$214.6 million in 1996.

Service contract revenue increased to $10.2 million in 1997 compared to
$6.5 million in 1996. Service contract revenue during 1996 reflected a $2.8
million loss from our

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electricity trading operations. The increase in service contract revenue for
1997 was also attributable to $2.8 million of revenue from the Texas City and
Clear Lake Power Plants, which were acquired in June 1997.

Project development expenses -- Project development expenses increased 92% to
$7.5 million in 1997 compared to $3.9 million in 1996, due primarily to expanded
acquisition and development activities.

Interest income -- Interest income increased 66% to $14.3 million for 1997
compared with $8.6 million for 1996. Interest income earned on collateral
securities purchased in April 1996 in connection with the King City Power Plant
contributed to an increase in interest income of $1.2 million in 1997 as
compared to 1996. In addition, higher cash and cash equivalent balances
resulting from the issuance of the 8 3/4% Senior Notes Due 2007 during 1997
resulted in higher interest income for 1997 as compared to 1996.

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LIQUIDITY AND CAPITAL RESOURCES

Investing activities for the six months ended June 30, 1999 used $590.3
million, primarily due to $102.2 million for the acquisition of steam fields
from Unocal, $14.9 million for the acquisition of a 20% interest in SCEI, a
$15.8 million increase in restricted cash, $79.3 million of capital expenditures
related to the construction of the Pasadena Power Plant Expansion, $344.6
million of other capital expenditures principally for turbine purchases and for
the Clear Lake Expansion project, $33.8 million of capitalized project
development costs, $14.0 million of interest capitalized on construction
projects, $8.4 million of additional loans to principal owners of power plants,
$655,000 for the acquisition of additional investments, offset by $1.9 million
of maturities of collateral securities in connection with the King City Power
Plant, the repayment of $3.1 million of

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outstanding loans, and $18.4 million from the sale and leaseback transaction of
the Geysers Power Company plants. Investing activities for 1998 used $406.7
million, primarily due to $158.1 million for the acquisition of the remaining
50% interest in the Texas City and Clear Lake Power Plants, $42.4 million for
the acquisition of the remaining 55% interest in the Bethpage Power Plant, $24.0
million of capital expenditures related to the construction of the Pasadena
Power Plant, $13.1 million for the acquisition of the Pittsburg Power Plant,
$11.9 million for the acquisition of the Sonoma Power Plant, $74.2 million of
other capital expenditures, $16.2 million of capitalized project development
costs, $40.0 million for the acquisition of an equity interest in the Tiverton
Power Plant, $40.0 million for the acquisition of an equity interest in the
Rumford Power Plant, $7.0 million of interest capitalized on construction
projects, offset by $559,000 related to the sale and leaseback transaction of
the Greenleaf 1 & 2 Power Plants, the receipt of $13.8 million of loan payments,
$6.0 million of maturities of collateral securities in connection with the King
City Power Plant, and $1.1 million of restricted cash.

On January 4, 1999, we entered into a Credit Agreement with ING to provide
up to $265.0 million of non-recourse project financing for the construction of
the Pasadena

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facility expansion. As of June 30, 1999, $79.2 million was outstanding as a
construction loan under the agreement. The outstanding loan bears interest at
ING's base rate plus an applicable margin or at LIBOR plus an applicable margin
and is payable quarterly. The construction loan will convert to a term loan once
the project has completed construction. The construction loan will mature on or
before July 1, 2000, but is subject to an extension to October 1, 2000 if there
are sufficient construction funds available. The term loan will be available for
a period not to exceed five years from the construction loan maturity date. In
connection with the Credit Agreement, we entered into a $10.0 million letter of
credit facility. At June 30, 1999, there were no letters of credit outstanding
under the facility.

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Senior Notes Due 2006, which mature on May 15, 2006, with interest payable semi-
annually on May 15 and November 15 of each year. During 1997, we issued $275.0
million of 8 3/4% Senior Notes Due 2007, which mature on July 15, 2007, with
interest payable semi-annually on January 15 and July 15 of each year. During
1998, we issued $400.0 million of 7 7/8% Senior Notes due 2008, which mature on
April 1, 2008, with interest payable semi-annually on April 1 and October 1 of
each year.

At June 30, 1999, we had a $12.0 million letter of credit outstanding with
The Bank of Nova Scotia to secure performance of the Clear Lake Power Plant.

FINANCIAL MARKET RISKS

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IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS

YEAR 2000 COMPLIANCE

The Year 2000 Project Team is focusing on four separate technology domains:

- corporate applications, which include core business systems,

- non-information technology, which includes all operating and control
systems,

- end-user computing systems (that is, systems that are not considered core
business systems but may contain date calculations), and

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- business partner and vendor systems.

Our end-user computing systems are being inventoried by each business unit
and evaluated and remediated by our MIS staff. We expect to complete this
process by year-end 1999.

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appropriate business units are jointly undertaking this effort. We have sent
letters and accompanying Year 2000 surveys to about 800 vendors and suppliers.
Over 600 responses have been received as of July 31, 1999. These responses
outline to varying degrees the approaches vendors are undertaking to resolve
Year 2000 issues within their own systems. Follow-up letters will be sent to
those vendors who have not responded or whose responses were inadequate.

The cost or consequences of a materially incomplete or untimely resolution
of the Year 2000 problem could adversely affect our future operations, financial
results or our financial condition.

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BUSINESS

OVERVIEW

Calpine is a leading independent power company engaged in the development,
acquisition, ownership and operation of power generation facilities and the sale
of electricity predominantly in the United States. We have experienced
significant growth in all aspects of our business over the last five years.
Currently, we own interests in 38 power plants having an aggregate capacity of
3,694 megawatts and have an acquisition pending in which we will acquire 80% of
CGCA which owns interests in 6 power plants with an aggregate capacity of 579
megawatts. We also have 8 gas-fired projects and one project expansion under
construction having an aggregate capacity of 4,485 megawatts and have announced
plans to develop 6 gas-fired power plants with a total capacity of 3,930
megawatts. Upon completion of pending acquisitions and projects under
construction, we will have interests in 52 power plants located in 14 states
having an aggregate capacity of 8,758 megawatts, of which we will have a net
interest in 7,381 megawatts. This represents significant growth from the 342
megawatts of capacity we had at the end of 1993. Of this total generating
capacity, 90% will be attributable to gas-fired facilities and 10% will be
attributable to geothermal facilities.

As a result of our expansion program, our revenues, cash flow, earnings and
assets have grown significantly over the last five years, as shown in the table
below.

THE MARKET

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<PAGE> 145

In addition, as a result of a variety of factors, including deregulation of
the power generation market, utilities, independent power producers and
industrial companies are disposing of power generation facilities. To date,
numerous utilities have sold or announced their intentions to sell their power
generation facilities and have focused their resources on the transmission and
distribution segments. Many independent producers operating a limited number of
power plants are also seeking to dispose of their plants in response to
competitive pressures, and industrial companies are selling their power plants
to redeploy capital in their core businesses.

STRATEGY

In May 1999, we completed a 35 megawatt expansion of our Clear Lake Power
Plant to 412 megawatts, and we commenced commercial operations at our 169
megawatt Dighton Power Plant in August 1999.

We currently have nine projects under construction representing an
additional 4,485 megawatts. Of these new projects, we are currently
expanding our Pasadena facility by 545 megawatts to 785 megawatts and we
have eight new power plants under construction, including the Tiverton
Power Plant in Rhode Island; the Rumford Power Plant in Maine; the
Westbrook Power Plant in Maine; the Sutter Power Plant in California; the
Los Medanos Power Plant in California; the South Point Power Plant in
Arizona; the Magic Valley Power Plant in Texas; and the Lost Pines 1
Power Plant in Texas. We have also announced plans to develop six
additional power generation facilities, totaling 3,930 megawatts, in
California, Texas, Arizona and Pennsylvania.

In July 1999, we announced an agreement with Credit Suisse First Boston,
New York branch and The Bank of Nova Scotia, as lead arrangers, for a
$1.0 billion

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<PAGE> 146

revolving construction loan facility. The credit facility will be
utilized to finance the construction of our development program. We
expect to finalize the documentation relating to this facility in the
fourth quarter of 1999.

On August 20, 1999, we announced the purchase of 18 F-class combustion
turbines from Siemens Westinghouse Power Corporation that will be capable
of producing 4,900 megawatts of electricity. Beginning in 2002, Siemens
will deliver six turbines per year through 2004. Combined with our
existing turbine order we have 69 turbines under contract, option or
letter of intent capable of producing 17,745 megawatts.

On March 19, 1999, we completed the acquisition of Unocal Corporation's
Geysers geothermal steam fields in northern California for approximately
$102.1 million. The steam fields fuel our 12 Sonoma County power plants,
totaling 544 megawatts purchased from Pacific Gas and Electric Company.

On August 27, 1999, we announced an agreement with CGCA to acquire 80% of
its common stock for $25.00 per share or approximately $145.0 million.
NRG Energy, Inc., a wholly owned subsidiary of Northern States Power,
will own the remaining 20%. The transaction is subject to the approval of
CGCA shareholders and we expect to consummate the acquisition by year-end
1999. CCGA currently owns interests in six natural gas-fired power
plants, totaling 579 megawatts. The plants are located in Pennsylvania,
New Jersey, Illinois and Oklahoma.

On August 31, 1999, we completed the acquisition of an additional 50% of
the Aidlin Power Plant from Edison Mission Energy (5%) and General
Electric Capital Corporation (45%) for a total purchase price of $7.2
million. We now own 55% of the 20 megawatt Aidlin Power Plant.

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<PAGE> 147

- Enhancement of existing power plants. We continually seek to maximize the
power generation and revenue potential of our operating assets and
minimize our operating and maintenance expenses and fuel costs. This will
become even more significant as our portfolio of power generation
facilities expands to an aggregate of 52 power plants with an aggregate
capacity of 8,808 megawatts, after completion of our pending acquisitions
and projects currently under construction. We focus on operating our
plants as an integrated system of power generation, which enables us to
minimize costs and maximize operating efficiencies. As of June 30, 1999,
our gas-fired and geothermal power generation facilities have operated at
an average availability of approximately 96% and 99%, respectively. We
believe that achieving and maintaining a low-cost of production will be
increasingly important to compete effectively in the power generation
market.

DESCRIPTION OF FACILITIES

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inflation indices. Capacity payments are based on a power plant's net electrical
output and/or its available capacity. Energy payments are made for each kilowatt
hour of energy delivered, while capacity payments, under certain circumstances,
are made whether or not any electricity is delivered.

Substantially all of the power generation facilities in which we have an
interest are located on sites which are leased on a long-term basis. See
"-- Properties."

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Set forth below is a map showing the locations of our power plants in
operation, pending acquisitions, power plants under construction and announced
development projects.

[DEPICTION OF A MAP OF THE UNITED STATES, WITH MARKERS INDICATING THE LOCATION
OF OUR FACILITIES]

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Set forth below is certain information regarding our operating power
plants, plants under construction, pending power plant acquisitions and
development projects.

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- -------------------------
(1) Nameplate capacity may not represent the actual output for a facility at any
particular time.

(4) See "Project Development and Acquisitions -- Project Development -- Projects
Under Construction -- Tiverton Power Plant" for a description of our
interest in the Tiverton Power Plant.

(5) See "Project Development and Acquisitions -- Project Development -- Projects
Under Construction -- Rumford Power Plant" for a description of our interest
in the Rumford Power Plant.

OPERATING POWER PLANTS

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City Power Plant generated approximately 2,517,316,000 kilowatt hours of
electric energy for sale to TUEC and UCC and approximately $188.3 million of
revenue.

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Dighton Power Plant. In October 1997, we invested $16.0 million in the
development of a 169 megawatt gas-fired combined-cycle power plant to be located
in Dighton, Massachusetts. This investment, which is structured as subordinated
debt, will provide us with a preferred payment stream at a rate of 12.07% per
year for a period of twenty years from the commercial operation date. The
Dighton Power Plant was developed by EMI and cost approximately $120.0 million.
Commercial operation commenced in August 1999. The Dighton Power Plant is
operated by EMI and sells its output into the New England power market and to
wholesale and retail customers in the northeastern United States.

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King City Power Plant. The King City Power Plant is a 120 megawatt
gas-fired, combined-cycle cogeneration facility located in King City,
California. We operate the King City Power Plant under a long-term operating
lease for this facility with BAF Energy ("BAF"), terminating in 2018.
Electricity generated by the King City Power Plant is sold to PG&E under a power
sales agreement terminating in 2019. The power sales agreement contains payment
provisions for capacity and energy. In addition to the sale of electricity to
PG&E, the King City Power Plant produces and sells thermal energy to a thermal
host, Basic Vegetable Products, Inc., an affiliate of BAF, under a long-term
contract coterminous with the power sales agreement. During 1998, the King City
Power Plant generated approximately 428,825,000 kilowatt hours of electrical
energy and approximately $45.6 million of total revenue.

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Sonoma Power Plant. The Sonoma Power Plant consists of a 60 megawatt
geothermal power plant and associated steam fields located in Sonoma County,
California. Electricity generated by the Sonoma Power Plant is sold to the
Sacramento Municipal Utility District ("SMUD") under a power sales agreement for
up to 50 megawatts of off-peak power production, terminating in 2001. In
addition, SMUD has the option to purchase up to an additional 10 megawatts of
peak power production through 2005. We market the excess electricity into the
California power market. From its acquisition, in June 1998, through the end of
1998, the Sonoma Power Plant generated approximately 215,433,000 kilowatt hours
of electrical energy and approximately $6.2 million in revenue.

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<PAGE> 156

approximately 326,584,000 kilowatt hours of electrical energy and 1,185,000 klbs
of steam for sale to SUNY and LIPA and approximately $31.1 million in revenue.

Agnews Power Plant. The Agnews Power Plant is a 29 megawatt gas-fired,
combined-cycle cogeneration facility located on the East Campus of the
state-owned Agnews Developmental Center in San Jose, California. We hold a 20%
ownership interest in GATX Calpine-Agnews, Inc., which is the sole stockholder
of O.L.S. Energy-Agnews, Inc. ("O.L.S. Energy-Agnews"). O.L.S. Energy-Agnews
leases the Agnews Power Plant under a sale leaseback arrangement. Electricity
generated by the Agnews Power Plant is sold to PG&E under a power sales
agreement terminating in 2021 which contains payment provisions for capacity and
energy. In addition, the Agnews Power Plant produces and sells electricity and
approximately 7,000 lbs/hr of steam to the Agnews Developmental Center pursuant
to a 30-year energy service agreement. During 1998, the Agnews Power Plant
generated approximately 215,180,000 kilowatt hours of electrical energy and
total revenue of $11.7 million.

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Calistoga Power Plant. The Calistoga Power Plant consists of a 67 megawatt
geothermal power plant and associated steam fields located in northern
California. Electricity generated by the Calistoga Power Plant is sold to PG&E
under a power sales agreement terminating in 2014 which contains payment
provisions for capacity and energy. During 1998, the Calistoga Power Plant
generated approximately 614,073,000 kilowatt hours of electrical energy for sale
to PG&E and approximately $27.9 million in revenue.

PROJECT DEVELOPMENT AND ACQUISITIONS

ACQUISITIONS

We have grown substantially in recent years as a result of acquisitions of
interests in power generation facilities and steam fields. We believe that
although the domestic power industry is undergoing consolidation and that
significant acquisition opportunities are available, we are likely to confront
significant competition for acquisition opportunities. In addition, there can be
no assurance that we will continue to identify attractive acquisition
opportunities at favorable prices or, to the extent that any opportunities are
identified, that we will be able to consummate such acquisitions.

PENDING ACQUISITIONS

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located in Pennsylvania, New Jersey, Illinois and Oklahoma. As of June 30, 1999
CGCA had approximately $296.6 million of indebtedness, including $216.1 million
of non-recourse project debt.

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where we are developing low-cost natural gas supplies and proprietary pipeline
systems to support our strategically-located natural gas-fired power plants. As
of June 30, 1999, Sheridan Energy had indebtedness of $71.5 million.

PROJECT DEVELOPMENT

Projects Under Construction

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Generating Station, a 730 megawatt natural gas-fired power plant under
development in Edinburg, Texas. Magic Valley Electric Cooperative Inc., a 51,000
member non-profit electric cooperative, initially will purchase from 250 to 400
megawatts of capacity, with an option to purchase additional capacity. We are
marketing additional capacity to other wholesale customers, initially targeting
south Texas. Construction commenced in April 1999 with commercial operations
scheduled to begin in February 2001.

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the electrical output for sale to its customers and we will market the remaining
energy to the Texas power market.

Tiverton Power Plant. In September 1998, we invested $40.0 million of
equity in the development of a 265 megawatt gas-fired power plant to be located
in Tiverton, Rhode Island. The Tiverton Power Plant is being developed by Energy
Management Inc. ("EMI"). It is estimated that the development of the Tiverton
Power Plant will cost approximately $172.5 million. For our investment in the
Tiverton Power Plant, we will earn 62.8% of the Tiverton Power Plant project
cash flow until a specified pre-tax return is reached, whereupon our company and
EMI will share projected cash flows equally through the remaining life of the
project. Construction commenced in late 1998 and commercial operation is
currently scheduled for 2000. Upon completion, the Tiverton Power Plant will be
operated by EMI and will sell its output in the New England power market and to
wholesale and retail customers in the northeastern United States.

Announced Development Projects

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the facility will commence in mid-2002. Electricity generated by the Metcalf
Energy Center will be sold into the California power market.

West Phoenix Power Plant. In April 1999, we announced an agreement with
Pinnacle West Capital Corporation to develop a 545 megawatt gas-fired facility
at Arizona Public Services West Phoenix Power Station in Phoenix, Arizona.
Construction is scheduled to begin in mid-2000 with final completion in late
2002. The facility is estimated to cost $220 million and the electricity will be
sold into the Arizona power market.

In October 1999, we announced that we had executed a letter of intent which
give us the exclusive right to negotiate with LYONDELL-CITGO Reting LP to build,
own and operate a 560 megawatt gas-fired cogeneration power plant at the
LYONDELL-CITGO refinery in Houston, Texas.

GAS FIELDS

GOVERNMENT REGULATION

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produced by such a plant and the ownership of a plant. State utility regulatory
commissions must approve the rates and, in some instances, other terms and
conditions under which public utilities purchase electric power from independent
producers and sell retail electric power. Under certain circumstances where
specific exemptions are otherwise unavailable, state utility regulatory
commissions may have broad jurisdiction over non-utility electric power plants.
Energy producing projects also are subject to federal, state and local laws and
administrative regulations which govern the emissions and other substances
produced, discharged or disposed of by a plant and the geographical location,
zoning, land use and operation of a plant. Applicable federal environmental laws
typically have both state and local enforcement and implementation provisions.
These environmental laws and regulations generally require that a wide variety
of permits and other approvals be obtained before the commencement of
construction or operation of an energy-producing facility and that the facility
then operate in compliance with such permits and approvals.

FEDERAL ENERGY REGULATION

PURPA

hydroelectric QF or other qualifying small power producer) must not be
controlled or more than 50% owned by an electric utility or by most electric
utility holding companies, or a subsidiary of such a utility or holding company
or any combination thereof.

Public Utility Holding Company Regulation

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registration with the SEC and regulation under PUHCA, unless eligible for an
exemption. A holding company of a public utility company that is subject to
registration is required by PUHCA to limit its utility operations to a single
integrated utility system and to divest any other operations not functionally
related to the operation of that utility system. Approval by the SEC is required
for nearly all important financial and business dealings of a registered holding
company. Under PURPA, most QFs are not public utility companies under PUHCA.

Federal Natural Gas Transportation Regulation

STATE REGULATION

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an independent power producer may be subject to PUC regulation depending on
state law. Independent power producers which are not QFs under PURPA, or EWGs
pursuant to the Energy Policy Act of 1992, are considered to be public utilities
in many states and are subject to broad regulation by a PUC, ranging from
requirement of certificate of public convenience and necessity to regulation of
organizational, accounting, financial and other corporate matters. States may
assert jurisdiction over the siting and construction of electric generating
facilities including QFs and EWGs and, with the exception of QFs, over the
issuance of securities and the sale or other transfer of assets by these
facilities.

Other states in which we conduct operations either have implemented or are
actively considering similar restructuring legislation.

REGULATION OF CANADIAN GAS

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intra-provincial pipeline and gathering systems. In addition, a party importing
natural gas into the United States first must obtain an import authorization
from the U.S. Department of Energy.

ENVIRONMENTAL REGULATIONS

Clean Air Act

Clean Water Act

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Resource Conservation and Recovery Act

Comprehensive Environmental Response, Compensation, and Liability Act

COMPETITION

EMPLOYEES

PROPERTIES

Our principal executive office is located in San Jose, California, under a
lease that expires in June 2001.

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We own 77 acres in Sutter County, California, on which the Greenleaf 1
Power Plant is located.

We own Calpine Gas Company, which leases property covering approximately
13,837 gross acres and 13,738 net acres.

LEGAL PROCEEDINGS

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MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth certain information with respect to our
directors and executive officers.

Set forth below is certain information with respect to each director and
executive officer.

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University of Chicago in 1970 and a Bachelor of Science Degree in Electrical
Engineering from Purdue University in 1966.

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PRINCIPAL STOCKHOLDERS

- -------------------------
* Less than one percent

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(2) Includes options to purchase 1,999,704 shares of our common stock issuable
upon the exercise of options outstanding as of August 31, 1999 or within 60
days thereafter.

(3) Includes options to purchase 533,382 shares of our common stock issuable
upon the exercise of options outstanding as of August 31, 1999 or within 60
days thereafter.

(4) Includes options to purchase 240,720 shares of our common stock issuable
upon the exercise of options outstanding as of August 31, 1999 or within 60
days thereafter.

(5) Represents shares of our common stock issuable upon exercise of options
that are exercisable as of August 31, 1999 or will become exercisable
within 60 days thereafter.

(6) Includes options to purchase 89,562 shares of our common stock issuable
upon the exercise of options outstanding as of August 31, 1999 or within 60
days thereafter.

(7) Includes options to purchase 35,960 shares of our common stock issuable
upon the exercise of options outstanding as of August 31, 1999 or within 60
days thereafter.

(8) Includes options to purchase 3,184,270 shares of our common stock issuable
upon the exercise of options outstanding as of August 31, 1999 or within 60
days thereafter.

CALPINE CAPITAL TRUST

Calpine Capital Trust is a statutory business trust created under Delaware
law on October 4, 1999 pursuant to a declaration of trust among the initial
trustees and Calpine and a certificate of trust filed with the Delaware
Secretary of State. The declaration of trust will be amended and restated in its
entirety as of the date the trust initially issues the HIGH TIDES. The
declaration of trust will be qualified as an indenture under the Trust Indenture
Act of 1939, as amended, upon the effectiveness of the registration statement of
which this prospectus is a part. Unless the context requires otherwise,
"Calpine," "we," "us," "our" or similar terms in this section refer solely to
Calpine Corporation and not the trust or any of our other consolidated
subsidiaries.

The trust's assets consist principally of the debentures, and payments
under the debentures are its sole revenue. The trust exists for the exclusive
purposes of:

- issuing the HIGH TIDES and the common securities representing undivided
beneficial ownership interests in the trust's assets;

- investing the gross proceeds of those securities in the debentures; and

- engaging in only those other activities necessary or incidental to those
purposes.

Calpine will directly or indirectly acquire common securities of the trust
in an aggregate liquidation amount equal to at least 3% of the total capital of
the trust. The trust will generally make payments on the common securities pro
rata with the HIGH TIDES. However, if an event of default under the declaration
of trust occurs and is continuing, Calpine's right to payment in respect of
distributions and payments upon liquidation, redemption and otherwise will be
subordinated to your rights.

Pursuant to the declaration of trust, the trust will have five trustees,
which we refer to in this prospectus as declaration trustees:

- three of the trustees, referred to as administrative trustees, will be
officers of Calpine;

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- the fourth trustee will be The Bank of New York, which will act as
property trustee; and

- the fifth trustee will be The Bank of New York (Delaware), which will act
as the Delaware statutory trustee.

In limited circumstances, the holders of a majority of the HIGH TIDES will
be entitled to appoint one additional trustee, referred to as the special
trustee. The special trustee need not be an officer or employee of or otherwise
affiliated with Calpine. The special trustee will have the same rights, powers
and privileges as the administrative trustees. See "Description of HIGH
TIDES -- Voting Rights; Amendment of the Declaration."

The property trustee holds title to the debentures for your benefit and the
benefit of the holders of the trust's common securities. As the holder of the
debentures, the property trustee has the power to exercise all the rights,
powers and privileges granted to the holder of the debentures under the
indenture governing the debentures between Calpine and The Bank of New York, as
debenture trustee. In addition, the property trustee maintains exclusive control
of a segregated non-interest bearing bank account to hold all payments made in
respect of the debentures for your benefit and the benefit of the holders of the
trust's common securities.

Subject to your right to appoint a special trustee, we, as the direct or
indirect holder of all of the trust's common securities, have the right to
appoint, remove or replace any of the trustees and to increase or decrease the
number of trustees; provided, however, that during an event of default under the
indenture, the property trustee and the Delaware trustee may only be removed by
the holders of a majority in liquidation amount of the HIGH TIDES. However, the
number of trustees must always be at least three, a majority of which must be
administrative trustees, and, unless otherwise required by applicable law, there
must always be a Delaware statutory trustee. See "Description of Convertible
Subordinated Debentures."

THE REMARKETING

NOTICE OF REMARKETING: TENDER FOR SALE BY REMARKETING; RETENTION OF HIGH TIDES

At least 30 business days but not more than 90 business days prior to the
final reset date, the trust will send to you a remarketing notice stating
whether it intends to remarket the HIGH TIDES as securities that either will be
convertible into common stock or nonconvertible. So that no holder of HIGH
TIDES, through inadvertence or otherwise, may fail to tender any HIGH TIDES for
sale in the remarketing, each outstanding HIGH TIDES you own will be deemed to
have been tendered for remarketing unless you have given irrevocable notice to
the contrary to the tender agent. The tender agent will promptly remit the
notice to the remarketing agent. The irrevocable notice, which may be telephonic
or written, must be delivered prior to 5:00 p.m., New York City time on the
tender notification date. The tender notification date is a business day no
earlier than 10 business

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days following the remarketing notice date, or a shorter period as shall be
agreed to by the remarketing agent. If you elect to retain HIGH TIDES, your
notice must state:

- the number of HIGH TIDES to be retained (which must be all of the HIGH
TIDES represented by the applicable certificate, unless such certificate
is a global HIGH TIDES certificate),

- the number of the certificate representing the HIGH TIDES not being
tendered (unless such certificate is a global HIGH TIDES certificate),
and

- the number of HIGH TIDES represented by such certificate (unless such
certificate is a global HIGH TIDES certificate).

Any transferee of a HIGH TIDES is bound to the terms of any such notice
which has been given relating to the transferred HIGH TIDES.

Any failure by you to give timely notice of an election to retain all or
any part of your HIGH TIDES will constitute an irrevocable tender for sale in
the remarketing of all the HIGH TIDES you hold. On and after the reset date, the
terms of all HIGH TIDES, whether or not tendered for remarketing, will be
modified by the term provisions, as the same shall be established by the
remarketing agent.

If the HIGH TIDES are not held by DTC or its nominee in the form of one or
more global HIGH TIDES, certificates representing remarketed HIGH TIDES will be
issued to the purchasers thereof, irrespective of whether the certificates
formerly representing such HIGH TIDES have been delivered to the tender agent.
If you do not duly give notice that you will retain your HIGH TIDES, your rights
with respect to the HIGH TIDES will cease upon the successful remarketing of the
HIGH TIDES, except your right to receive an amount equal to:

- from the proceeds of the remarketing, 101% of the aggregate liquidation
amount of the HIGH TIDES, plus

- from us, any accrued and unpaid distributions on the HIGH TIDES to, but
excluding, the reset date (upon surrender of the certificate representing
the HIGH TIDES to the tender agent properly endorsed for transfer, in the
case of a holder other than DTC, which has taken physical delivery of a
HIGH TIDES certificate) but without any additional interest thereon (and
the certificate will cease to represent outstanding HIGH TIDES).

If no HIGH TIDES are tendered for remarketing, the remarketing will not
take place, although the remarketing will not be deemed to have failed. Under
these circumstances, the remarketing agent will set the term provisions in a
manner consistent with the remarketing notice that it believes, in its sole
discretion, would result in a price per HIGH TIDES equal to 101% of the
liquidation amount thereof were a remarketing actually to occur.

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THE REMARKETING PROCESS

The remarketing agent has agreed to use its best efforts to remarket all
HIGH TIDES tendered for remarketing in accordance with the remarketing
agreement. The remarketing agent will establish, effective beginning on the
reset date:

- the term rate per annum at which distributions will accrue on the HIGH
TIDES,

- the term conversion ratio and price, which determine the number of shares
of common stock, if any, into which each HIGH TIDES may be converted, and

- the term call protections, which are the price, manner and time, if any,
at which the HIGH TIDES may be redeemed.

In this prospectus, we refer to the term rate, the term conversion ratio
and price and the term call protections as the term provisions.

The remarketing agent will use its best efforts to establish the term
provisions most favorable to us consistent with the successful remarketing of
all HIGH TIDES tendered at a price equal to 101% of the liquidation amount. The
remarketing agent may purchase HIGH TIDES tendered for remarketing, but it shall
not be obligated to purchase any HIGH TIDES except to the extent expressly
provided under the remarketing agreement.

The remarketing will be done without charge to the holders of the HIGH
TIDES, but we shall be obligated to pay the remarketing agent fees for its
services. Neither we nor any of our affiliates will be permitted to submit
orders for or purchase tendered HIGH TIDES in the remarketing.

In establishing the term provisions during the remarketing, the remarketing
agent will take into account the following remarketing conditions:

- short-term and long-term market interest rates and indices of the
short-term and long-term interest rates,

- market supply and demand for short-term and long-term securities,

- yield curves for short-term and long-term securities comparable to the
HIGH TIDES,

- industry and financial conditions which may affect the HIGH TIDES,

- the number of HIGH TIDES to be remarketed,

- the number of potential purchasers,

- the number of shares of common stock, if any, into which the HIGH TIDES
will be convertible,

- the current ratings by nationally recognized statistical rating
organizations of our long-term subordinated debt and of other outstanding
capital securities of the trust, including the HIGH TIDES and the common
securities, and

- the length and type of call protections, if any.

We currently have no intention of causing the applicable conversion price
on the reset date to be less than 100% of the fair market value of the common
stock on the reset date.

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If any HIGH TIDES are tendered for remarketing, on the business day
following the tender notification date, the remarketing agent will commence a
convertible remarketing or a nonconvertible remarketing, as the case may be, in
accordance with the remarketing agreement and pursuant to the instructions set
forth in the remarketing notice. The remarketing agent will determine, and upon
request make available to interested persons, non-binding indications of the
term provisions based upon then-current remarketing conditions. The remarketing
agent will solicit and receive orders from prospective investors to purchase
tendered HIGH TIDES. The remarketing agent will continue using its best efforts
to remarket the HIGH TIDES as described above, adjusting the non-binding
indications of the term provisions as necessary to establish the term conditions
most favorable to us consistent with remarketing all HIGH TIDES tendered at 101%
of the aggregate liquidation amount until the remarketing is completed or is
deemed to have failed for any of the reasons set forth under "-- Effect of a
Failed Remarketing."

If the remarketing agent determines that the remarketing has not failed,
the remarketing agent will promptly communicate the term provisions to the
tender agent. The initial remarketing termination date is the tenth business day
following the tender notification date, or a shorter period as shall be agreed
to by the remarketing agent. The tender agent will communicate the term
provisions to the declaration trustees, the debenture trustee, the trust, the
paying agent, us and each holder, if any, which timely elected not to tender all
of its HIGH TIDES for remarketing, by written notice or by telephone promptly
confirmed by telecopy or other writing. On the reset date, new holders will
tender the reset price for the tendered HIGH TIDES as set forth below under
"-- Settlement" and the term provisions will become effective.

EFFECT OF FAILED REMARKETING

The initial remarketing will fail if:

- despite using its best efforts the remarketing agent is unable to
establish, prior to the initial remarketing termination date, a term rate
that is less than or equal to the treasury rate plus 6% per annum, which
we refer to in this prospectus as the maximum rate,

- the remarketing agent is excused from remarketing the HIGH TIDES because
of the failure by us or the trust to satisfy a condition in the
remarketing agreement or the occurrence of certain market events
specified in the remarketing agreement, or

- there is no remarketing agent on the first day of the initial remarketing
period.

If the initial remarketing fails because the remarketing agent was not able
to establish a term rate less than or equal to the maximum rate, the remarketing
agent will commence a final remarketing during the period beginning on the
business day following the initial remarketing termination date and ending on
the date which is 10 business days later, or a shorter period as shall be agreed
to by the remarketing agent. The final remarketing will be a convertible
remarketing if the initial remarketing was a nonconvertible remarketing and vice
versa.

If the remarketing agent is able to establish a term rate less than or
equal to the maximum rate during the final remarketing period, it shall promptly
communicate the term provisions to the tender agent, who will communicate the
term provisions to the declaration trustees, the trust, the paying agent, us and
each holder, if any, which timely elected not to tender all of its HIGH TIDES
for remarketing, by written notice or by telephone promptly confirmed by
telecopy or other writing. On the reset date, new holders
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will tender the reset price for the tendered HIGH TIDES as set forth below under
"-- Settlement" and the term provisions will become effective.

If despite using its best efforts, the remarketing agent is still not able
to establish a term rate less than or equal to the maximum rate prior to the
expiration of the final remarketing period the final remarketing will fail. In
the event of a failed final remarketing, the remarketing agent will establish
the terms of the HIGH TIDES. The term rate shall be a rate equal to the treasury
rate plus 6% per annum. The term conversion price will be equal to 105% of the
average closing price of our common stock for the five consecutive trading days
after the final failed remarketing termination date. In the event of a failed
final remarketing, all outstanding HIGH TIDES will be redeemable by us, in whole
or in part, at any time on or after the third anniversary of the reset date at a
redemption price equal to 100% of the aggregate liquidation amount thereof, plus
accrued and unpaid distributions thereon. There can be no assurance that all of
the HIGH TIDES tendered will be remarketed.

The term "treasury rate" means (A) the yield, under the heading which
represents the average for the week immediately prior to the date of
calculation, appearing in the most recently published statistical release
designated H.15(519) or any successor publication which is published weekly by
the Federal Reserve and which establishes yields on actively traded United
States Treasury securities adjusted to constant maturity under the caption
"Treasury Constant Maturities," for the maturity corresponding to the remaining
life (if no maturity is within three months before or after the remaining life,
yields for the two published maturities most closely corresponding to the
remaining life shall be determined and the treasury rate shall be interpolated
or extrapolated from such yields on a straight-line basis, rounding to the
nearest month) or (B) if such release, or any successor release, is not
published during the week preceding the calculation date or does not contain
such yields, the rate per annum equal to the semi-annual equivalent yield to
maturity of the comparable treasury issue, calculated using a price for the
comparable treasury issue (expressed as a percentage of its principal amount)
equal to the comparable treasury price for the reset date. The treasury rate
shall be calculated on the third business day preceding the reset date.

The term "comparable treasury issue" means the United States Treasury
security selected by the quotation agent as having a maturity comparable to the
remaining life that would be utilized, at the time of selection and in
accordance with customary financial practice, in pricing new issues of corporate
debt securities of comparable maturity to the remaining life. If no United
States Treasury security has a maturity which is within a period from three
months before to three months after the reset date, the two most closely
corresponding United States Treasury securities shall be used as the comparable
treasury issue, and the rate being calculated shall be interpolated or
extrapolated on a straight-line basis, rounding to the nearest month using such
securities.

The term "comparable treasury price" means (A) the arithmetic mean of five
reference treasury dealer quotations for the reset date, after excluding the
highest and lowest such reference treasury dealer quotations, or (B) if the
quotation agent obtains fewer than five reference treasury dealer quotations,
the arithmetic mean of all the reference treasury dealer quotations.

The term "quotation agent" means Credit Suisse First Boston Corporation and
its successor provided, however, that if the foregoing shall cease to be a
primary United States

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Government securities dealer in The City of New York we shall substitute
therefor another primary treasury dealer.

The term "reference treasury dealer" means (A) the quotation agent and (B)
any other primary treasury dealer selected by the debenture trustee after
consultation with us.

The term "reference treasury dealer quotations" means, with respect to each
reference treasury dealer and the reset date, the arithmetic mean, as determined
by the debenture trustee, of the bid and asked prices for the comparable
treasury issue (expressed in each case as a percentage of its principal amount)
quoted in writing to the debenture trustee by such reference treasury dealer at
5:00 p.m., New York City time, on the third business day preceding the reset
date.

The term "remaining life" means the period beginning on the reset date and
ending at October , 2029.

SETTLEMENT

Settlement of transactions in connection with the remarketing will take
place on the reset date, or such earlier date as the remarketing agent may, in
its sole discretion, determine. Payments in respect of the tendered HIGH TIDES
in an amount equal to the reset price will be made by the tender agent (but only
to the extent in fact received by the tender agent) on the date in the manner
described under "Description of HIGH TIDES -- Form, Book-Entry Procedures and
Transfer," but, in the case of a holder (other than DTC) which has taken
physical delivery of a certificate representing its HIGH TIDES, the payment
shall be made only upon surrender to the tender agent by 2:30 p.m. New York City
time on the reset date (or any succeeding date) of the certificate representing
the HIGH TIDES, properly endorsed for transfer.

Neither we, the trust, the declaration trustees, the tender agent and
(except to the extent expressly provided under "The Remarketing" and "The
Remarketing Agent") the remarketing agent will be obligated to provide or
advance funds to make payment to the holders of HIGH TIDES tendered in the
remarketing.

PURCHASES BY US AND OUR AFFILIATES

While we, or an affiliate, may from time to time purchase, hold, or sell
HIGH TIDES, neither we nor any of our affiliates may purchase any HIGH TIDES on
the reset date or submit orders in the remarketing, and the remarketing agent
has agreed that it will not knowingly remarket any HIGH TIDES to us or any of
our affiliates.

TENDER AGENT

Tenders of HIGH TIDES in the remarketing will be made to the tender agent,
and the tender agent will pay to the prior holders thereof the reset price,
provided the tender agent receives the amount from the remarketing agent. The
tender agent will be the property trustee or, in the event of the distribution
of debentures to the holders of HIGH TIDES prior to the reset date, the
debenture trustee.

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TERMINATION OF THE TRUST

If the trust is for any reason dissolved and liquidated prior to the reset
date and the debentures are distributed to the holders of HIGH TIDES and common
securities, the remarketing will proceed as described in this prospectus except
that the debentures rather than the HIGH TIDES will be remarketed by the
remarketing agent, the debenture trustee rather than the property trustee will
be the tender agent and the descriptions of the remarketing of the HIGH TIDES in
this prospectus (including under "The Remarketing" and "The Remarketing Agent")
will apply with such changes as are necessary to the remarketing of debentures.
Accordingly, in such an event, without limiting the generality of the foregoing
statements:

- the debentures instead of the HIGH TIDES will be deemed to have been
tendered for remarketing absent timely notice to the contrary, provided
that any notice duly and timely given in respect of the tender for
remarketing of any HIGH TIDES will apply to the debentures distributed in
respect thereof,

- the debentures instead of the HIGH TIDES will be remarketed by the
remarketing agent,

- the remarketing agent will use its best efforts to establish the term
provisions most favorable to us consistent with the successful
remarketing of all debentures tendered therefor at a reset price equal to
101% of the principal amount of the debentures, and

- subject to the proviso in the first bullet point above, a holder of
debentures which has not duly given notice by the tender notification
date that it will retain its debentures will cease to have any further
rights with respect to the debentures upon the successful remarketing of
the debentures, except the right of the holder to receive an amount equal
to (1) from the proceeds of the remarketing, 101% of the principal amount
of the debentures, plus (2) from us, any accrued but unpaid interest on
the debentures to, but excluding, the reset date (upon surrender of the
certificate representing the debentures to the tender agent properly
endorsed for transfer, in the case of a holder other than DTC, which has
taken physical delivery of a debentures certificate) but without any
additional interest thereon (and any such certificate will cease to
represent outstanding debentures).

If the debentures are accelerated, redeemed or otherwise prepaid on or
prior to the reset date, the remarketing will not take place.

THE REMARKETING AGENT

We will use our reasonable best efforts to assure that, at all times prior
to and including the reset date, an investment bank, broker, dealer or other
organization which, in our judgment, is qualified to remarket HIGH TIDES and to
establish the term rate is acting as remarketing agent, provided that if we fail
to appoint a successor upon the resignation or removal of the remarketing agent
reasonably promptly, a successor having such qualifications may be appointed by
the holders of at least 25% in aggregate liquidation amount of the outstanding
HIGH TIDES. Credit Suisse First Boston Corporation has agreed to act as the
initial remarketing agent but may resign or be replaced by us, in accordance
with the terms of the remarketing agreement. The remarketing agent may authorize
any broker-dealer to assist in the remarketing.

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The remarketing agreement among us, the trust, the administrative trustees
and the tender agent provides that the remarketing agent will receive fees from
us for the remarketing equal to 1% of the aggregate liquidation amount of
outstanding HIGH TIDES on the reset date upon settlement of the transactions
contemplated by the remarketing. In addition to these fees we will reimburse the
remarketing agent for all out-of-pocket expenses reasonably incurred in
connection with the performance of its duties. In the event that both the
initial remarketing and the final remarketing fail, we shall not be required to
pay any fees to, or reimburse any out-of-pocket expense of, the remarketing
agent. The remarketing will be done without charge to the holders of the HIGH
TIDES.

We have agreed in the remarketing agreement to indemnify the remarketing
agent against some liabilities arising out of or in connection with its duties,
or to contribute to payments which the remarketing agent may be required to make
in respect thereof.

The remarketing agent may resign and be relieved from its duties under the
remarketing agreement under limited circumstances on a date specified in a
notice in writing delivered to us and to the trust. The remarketing agent's
resignation will not become effective until at least 30 days after delivery of
the notice. The successor remarketing agent must be an investment bank, broker,
dealer or other organization which, in our judgment, is qualified to remarket
the HIGH TIDES and establish the term provisions and which has entered into a
remarketing agreement with us, the trust and the administrative trustees in
which it has agreed to conduct the remarketing in accordance with the terms and
conditions described in this prospectus and provided in the remarketing
agreement. The holders of a majority in aggregate liquidation amount of the
outstanding HIGH TIDES may remove the remarketing agent for cause. The tender
agent will send notice to you of the resignation or removal of the remarketing
agent and the appointment of a successor remarketing agent. If there is no
remarketing agent on the first day of the initial remarketing period, the
remarketing will fail and the HIGH TIDES will remain outstanding on the terms
described in this prospectus under "The Remarketing -- Effect of Failed
Remarketing."

The remarketing agreement provides that the remarketing agent will not be
obligated to remarket HIGH TIDES if:

- there is a material misstatement or omission in any (a) disclosure
document approved by us or the trust in connection with the remarketing
or (b) document publicly disclosed (including in a filing pursuant to the
Securities Exchange Act of 1934) by or on behalf of us or the trust,
unless in each case the remarketing agent is satisfied that such
misstatement or omission has been properly corrected, or

- either we or the trust fails to satisfy conditions customary in an
offering.

Broker-dealers, if any, which obtain purchasers for the HIGH TIDES will be
paid a commission or fee by the remarketing agent based upon the remarketing fee
described above and the number of HIGH TIDES sold. Broker-dealers will enter
into broker-dealer agreements with the remarketing agent, which will provide for
their participation in the remarketing and will require them to follow certain
private placement procedures. The identity of the broker-dealers, if any, which
will participate in the remarketing has not yet been determined. The remarketing
agent will have the right to select broker-dealers at any time prior to the
reset date. No broker-dealer will be obligated to purchase the HIGH TIDES.

If for any reason term provisions are established by the remarketing agent
but on the reset date the remarketing agent is unable to sell one or more HIGH
TIDES tendered for

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remarketing, the remarketing agent will be obligated, except upon the occurrence
of certain market events specified in the remarketing agreement, to purchase the
HIGH TIDES for the reset price on the reset date.

DESCRIPTION OF HIGH TIDES

Under the terms of the declaration of trust, the declaration trustees on
behalf of the trust will issue the HIGH TIDES and the common securities in fully
registered form without interest coupons. The HIGH TIDES will represent
preferred undivided beneficial ownership interests in the assets of the trust,
and the holders of the HIGH TIDES will be entitled to a preference over us, as
the holder of the trust's common securities, in limited circumstances with
respect to distributions and amounts payable on redemption of the HIGH TIDES and
the trust's common securities or dissolution and liquidation of the trust, as
well as other benefits as described in the declaration of trust. See
"-- Subordination of Common Securities." The declaration of trust will be
qualified under and will be subject to and governed by the Trust Indenture Act
of 1939 upon effectiveness of the registration statement of which this
prospectus is a part. This summary of the provisions of the HIGH TIDES, the
trust's common securities and the declaration of trust is subject to, and is
qualified in its entirety by reference to, all the provisions of the declaration
of trust, including the definitions of certain terms. A copy of the declaration
of trust has been filed as an exhibit to the registration statement of which
this prospectus is a part. Unless the context requires otherwise, "Calpine,"
"we," "us," "our" or similar terms in this section refer solely to Calpine
Corporation and not the trust or any of our other consolidated subsidiaries.

GENERAL

The trust will make payments on the HIGH TIDES pro rata with its common
securities except as described under "-- Subordination of Common Securities."
The guarantee executed by us for your benefit will provide for a guarantee on a
subordinated basis with respect to the HIGH TIDES but will not guarantee payment
of distributions or amounts payable on redemption of the HIGH TIDES or on
dissolution and liquidation of the trust when the trust does not have funds on
hand available to make those payments. See "Description of the Guarantee."

Credit Suisse First Boston Corporation has agreed to act as initial
remarketing agent with respect to the HIGH TIDES and is referred to herein as
the remarketing agent. The remarketing agent will be paid fees for its services
and may resign or be replaced by us under certain circumstances. The remarketing
agent may also be removed at any time for cause by the holders of a majority of
the aggregate liquidation amount of HIGH TIDES outstanding. See "The Remarketing
Agent."

DISTRIBUTIONS

Distributions will accrue on the HIGH TIDES from the date of their original
issuance at the applicable rate of the stated liquidation amount of $50 per HIGH
TIDES. Subject to the deferral rights described below, the trust will pay the
distributions quarterly in arrears on each , , and
, each referred to as a distribution date, commencing
, 2000, to the person in whose name each

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HIGH TIDES is registered at the close of business on the day of
the month of the applicable distribution date.

Each registered holder of HIGH TIDES on the fifteenth day prior to the
reset date, including any holder which has tendered or is deemed to have
tendered its HIGH TIDES for remarketing, shall be paid distributions and
additional amounts, if any, accrued to but excluding the reset date. The reset
date is any date (1) not later than October , 2004, or, if the day is not a
business day, the next succeeding business day, and (2) not earlier than 70
business days prior to October , 2004, as may be determined by the remarketing
agent, in its sole discretion, for settlement of a successful remarketing.
Distributions and additional amounts, if any, accrued from and after the reset
date to but excluding , shall be paid on
to the person in whose name each HIGH TIDES is registered on the
preceding , subject to our right to initiate a deferral period.
The applicable rate will be the initial rate of % per annum from the date
of original issuance of the HIGH TIDES but excluding the reset date. From the
reset date, the applicable rate will be the term rate established by the
remarketing agent to be effective on the reset date. On the reset date, the
remarketing agent will notify the declaration trustees, the trust, the debenture
trustee, the paying agent, us and the holders, if any, which elected not to
tender all their HIGH TIDES for remarketing of the term provisions, including
the term rate. The notification must be made by written notice or by telephone
promptly confirmed by telecopy or other writing. See "The Remarketing."

The amount of distributions payable for any period will be computed based
on the number of days elapsed in a 360-day year of twelve 30-day months. If any
distribution date is not a business day, the trust will pay distributions
payable on that date on the next succeeding day that is a business day, and
without any additional distributions or other payments in respect of any such
delay, with the same force and effect as if made on the date the payment was
originally payable. Distributions that the trust does not pay on the applicable
distribution date will accrue additional distributions on the amount of the
accrued distributions, to the extent permitted by law, compounded quarterly from
the relevant distribution date. As used in this prospectus, the term
"distribution" includes quarterly distributions, additional distributions on
quarterly distributions not paid on the applicable distribution date and special
distributions upon certain tax events, as applicable. See "Description of
Convertible Subordinated Debentures -- Additional Amounts." As used in this
prospectus, a "business day" means any day other than a Saturday or a Sunday, or
a day on which banking institutions in The City of New York are authorized or
required by law or executive order to remain closed, or a day on which the
corporate trust office of the property trustee or the debenture trustee is
closed for business.

So long as no event of default under the debentures has occurred and is
continuing, we have the right to defer the payment of interest on the debentures
at any time or from time to time for a period not exceeding 20 consecutive
quarters. However, no deferral period may extend beyond (1) the maturity of the
debentures whether at the stated maturity or by declaration of acceleration,
call for redemption or otherwise and (2) in the case of a deferral period
beginning prior to the reset date, the reset date. We have agreed, among other
things, not to declare or pay any dividend on our capital stock, subject to
certain exceptions, during any deferral period. See "Description of Convertible
Subordinated Debentures -- Option to Extend Interest Payment Date." As a
consequence of any deferral election, the trust will defer quarterly
distributions on the HIGH TIDES during the deferral period. Deferred
distributions to which you are entitled will accumulate additional distributions
at the

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applicable rate, compounded quarterly from the relevant payment date for
distributions during any deferral period, to the extent permitted by applicable
law.

See "Description of Convertible Subordinated Debentures -- Option to Extend
Interest Payment Date" and "Certain United States Federal Income Tax
Consequences -- Interest Income" for a more detailed discussion of the terms and
conditions affecting our right to defer the payment of interest on the
debentures.

We have no current intention of exercising our right to defer payments of
interest on the debentures.

The trust's revenue available for distribution to you will be limited to
payments under the debentures. See "Description of Convertible Subordinated
Debentures -- General." If we do not make interest payments on the debentures,
the property trustee will not have funds available to pay distributions on the
HIGH TIDES. We have guaranteed the payment of distributions, if and to the
extent the trust has funds legally available for the payment of those
distributions and cash sufficient to make those payments, on a limited basis as
set forth under "Description of the Guarantee."

CONVERSION RIGHTS

General. You may convert your HIGH TIDES at any time prior to 5:00 p.m.,
New York City time, on or prior to the tender notification date and, in the
event of a convertible remarketing or a failed final remarketing, from and after
the reset date to and including October , 2029 (except that you may convert
HIGH TIDES called for redemption by us at any time prior to 5:00 p.m., New York
City time, on the relevant redemption date), at your option and in the manner
described below, into shares of our common stock. On or prior to the tender
notification date, you may convert each HIGH TIDES, pursuant to the initial
conversion ratio, into shares of our common stock (equivalent to
an initial conversion price of $ per share of common stock). On and after
the reset date, the trust has the option to make each HIGH TIDES, subject to the
results of the remarketing, become convertible into a different number of shares
of common stock or nonconvertible. See "The Remarketing." The conversion ratio
and the equivalent conversion price in effect at any given time are referred to
in this prospectus as the applicable conversion ratio and the applicable
conversion price, respectively, and will be subject to adjustment as described
under "-- Conversion Price Adjustments" below. The trust will covenant in the
declaration of trust not to convert debentures held by it except pursuant to a
notice of conversion delivered to the property trustee, as conversion agent, by
you.

If you wish to exercise your conversion right, you must deliver an
irrevocable conversion notice, together, if the HIGH TIDES are in certificated
form, with the certificated security, to the conversion agent who will, on your
behalf, exchange the HIGH TIDES for a like amount of debentures and immediately
convert the debentures into shares of our common stock. You may obtain copies of
the required form of the conversion notice from the conversion agent.

If you are the record holder of HIGH TIDES at the close of business on a
distribution record date, you will be entitled to receive the distribution
payable on your HIGH TIDES on the corresponding distribution date even if you
convert your HIGH TIDES after the distribution record date but prior to the
distribution date. Except as provided in the immediately preceding sentence,
neither we nor the trust will make, or be

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required to make, any payment, allowance or adjustment for accrued and unpaid
distributions, whether or not in arrears, on converted HIGH TIDES, even if you
convert your HIGH TIDES during a deferral period. We will make no payment or
allowance for distributions on our shares of common stock issued upon
conversion, except to the extent that those shares of common stock are held of
record on the record date for any distributions. We will deem each conversion to
have been effected immediately prior to the close of business on the day on
which the trust received the related conversion notice.

We will not issue any fractional shares of our common stock as a result of
conversion. Instead, we will pay fractional interest in cash based on the
closing price of our common stock at the time of conversion.

Conversion Price Adjustments -- General. The applicable conversion price of
the HIGH TIDES will be adjusted, without duplication, upon the happening of the
following events:

- the payment of dividends and other distributions payable exclusively in
our common stock on our common stock,

- the issuance to all holders of our common stock of rights or warrants,

- subdivisions and combinations of our common stock,

- the payment of dividends and other distributions to all holders of our
common stock consisting of evidences of our indebtedness, securities or
capital stock, cash or assets, except for those rights or warrants
referred to in the second bullet clause above and dividend and
distributions paid exclusively in cash,

- the payment to holders of our common stock in respect of a tender or
exchange offer, other than an odd-lot offer, by us or any of our
subsidiaries for our common stock at a price in excess of 110% of the
current market price of our common stock as of the trading day next
succeeding the last date tenders or exchanges may be made pursuant to the
tender or exchange offer, and

- the payment of dividends and other distributions on our common stock paid
exclusively in cash, excluding:

-- cash dividends that do not exceed the per share amount of the
smallest of the immediately four preceding quarterly cash dividends,
as adjusted to reflect any of the events described above; and

-- cash dividends the per share amount of which, together with the
aggregate per share amount of any other cash dividends paid within
the 12 months preceding the date of payment of such cash dividends,
does not exceed 12 1/2 % of the current market price of our common
stock as of the trading day immediately preceding the date of
declaration of the dividend.

We may, at our option, make reductions in the applicable conversion price
as our board of directors deems advisable to avoid or diminish any income tax to
our common stockholders resulting from any dividend or distribution of stock, or
rights to acquire stock, or from any event treated similarly for federal income
tax purposes. See "Certain United States Federal Income Tax
Consequences -- Adjustment of Conversion Price."

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The applicable conversion price will not be adjusted:

- upon the issuance of any shares of our common stock pursuant to any
present or future plan providing for the reinvestment of dividends or
interest payable on securities of Calpine and the investment of
additional optional amounts in shares of our common stock under any plan;

- upon the issuance of any shares of our common stock or options or rights
to purchase those shares pursuant to any present or future employee,
director or consultant benefit plan or program of Calpine; or

- upon the issuance of any shares of our common stock pursuant to any
option, warrant, right, or exercisable, exchangeable or convertible
security outstanding as of the date the HIGH TIDES were first issued.

No adjustment in the applicable conversion price will be required unless
the adjustment would require an increase or decrease of at least 1% of the
applicable conversion price. If the adjustment is not made because the
adjustment does not change the applicable conversion price by more than 1%, then
the adjustment that is not made will be carried forward and taken into account
in any future adjustment. Except as specifically described above, the applicable
conversion price will not be subject to adjustment in the case of the issuance
of any of our common stock, or securities convertible into or exchangeable for
our common stock.

Conversion Price Adjustments -- Merger, Consolidation or Sale of Assets of
Calpine. If we are a party to a transaction which results in our common shares
being converted into the right to receive, or being exchanged for, securities,
cash or other property of a third party, the conversion price may be adjusted as
described below. The following are examples of company transactions which may
result in an adjustment to the conversion price:

- merger,

- consolidation,

- sale of all or substantially all of our assets,

- recapitalization or reclassification of our common shares, or

- any compulsory share exchange.

If we are a party to any company transaction, in each case, as a result of
which shares of our common stock will be converted into the right to receive
other securities, cash or other property, we will ensure that lawful provision
is made as part of the terms of the company transaction so that the holder of
each HIGH TIDES then outstanding will have the right thereafter to convert the
HIGH TIDES only into:

- in the case of any company transaction other than a company transaction
involving a Common Stock Fundamental Change, the kind and amount of
securities, cash and other property receivable upon the consummation of
the company transaction by a holder of that number of shares of our
common stock into which a HIGH TIDES was convertible immediately prior to
the company transaction; or

- in the case of a company transaction involving a Common Stock Fundamental
Change, common stock of the kind received by holders of our common stock;

but in each case after giving effect to any adjustment discussed below relating
to a Fundamental Change if the company transaction constitutes a Fundamental
Change.

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The holders of HIGH TIDES will have no voting rights with respect to any
company transaction.

In the case of any company transaction involving a Fundamental Change, the
applicable conversion price will be adjusted immediately before the Fundamental
Change as follows:

- in the case of a Non-Stock Fundamental Change, the applicable conversion
price of the HIGH TIDES will become the lower of:

- the applicable conversion price immediately prior to the Non-Stock
Fundamental Change, but after giving effect to any other prior
adjustments, and

- the result obtained by multiplying the greater of the relevant price or
the then applicable reference market price by the optional redemption
ratio (the product is referred to as the "adjusted relevant price" or
the "adjusted reference market price," as the case may be); and

- in the case of a Common Stock Fundamental Change, the applicable
conversion price of the HIGH TIDES immediately prior to the Common Stock
Fundamental Change, but after giving effect to any other prior
adjustments, will be adjusted by multiplying the applicable conversion
price by a fraction of which the numerator will be the Purchaser Stock
Price and the denominator will be the relevant price.

However, in the event of a Common Stock Fundamental Change in which:

- 100% of the value of the consideration received by a holder of our common
stock is common stock of the successor, acquirer or other third party
(and cash, if any, is paid only with respect to any fractional interests
in the common stock resulting from the Common Stock Fundamental Change);
and

- all our common stock will have been exchanged for, converted into, or
acquired for common stock (and cash with respect to fractional interests)
of the successor, acquirer or other third party;

the applicable conversion price of the HIGH TIDES immediately prior to the
Common Stock Fundamental Change will be adjusted by multiplying the applicable
conversion price by a fraction of which the numerator will be one and the
denominator will be the number of shares of common stock of the successor,
acquirer or other third party received by a holder of one share of our common
stock as a result of the Common Stock Fundamental Change.

In the absence of the adjustments to the applicable conversion price in the
event of a company transaction involving a Fundamental Change, in the case of a
company transaction each HIGH TIDES would become convertible into the
securities, cash, or other property receivable by a holder of the number of
shares of our common stock into which each HIGH TIDES was convertible
immediately prior to the company transaction. Thus, in the absence of the
Fundamental Change provisions, a company transaction could substantially lessen
or eliminate the value of the conversion privilege associated with the HIGH
TIDES. For example, if a company were to acquire Calpine in a cash merger, each
HIGH TIDES would become convertible solely into cash and would no longer be
convertible into securities whose value would vary depending on the future
prospects of Calpine and other factors.

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In Non-Stock Fundamental Change transactions, the foregoing conversion
price adjustments are designed to increase the amount of securities, cash or
other property into which you may convert each HIGH TIDES. In a Non-Stock
Fundamental Change transaction in which the initial value received per share of
our common stock (measured as described in the definition of relevant price) is
lower than the then applicable conversion price of a HIGH TIDES but greater than
or equal to the reference market price, the applicable conversion price will be
adjusted with the effect that you will be able to convert each HIGH TIDES into
securities, cash or other property of the same type received by the holders of
our common stock in the transaction with the applicable conversion price
adjusted as though the initial value had been the adjusted relevant price. In a
Non-Stock Fundamental Change transaction in which the initial value received per
share of our common stock (measured as described in the definition of relevant
price) is lower than both the applicable conversion price of a HIGH TIDES and
the reference market price, the applicable conversion price will be adjusted as
described above but calculated as though the initial value had been the adjusted
reference market price.

In Common Stock Fundamental Change transactions, the foregoing adjustments
are designed to provide in effect that:

- where our common stock is converted partly into common stock and partly
into other securities, cash or property, you will be able to convert each
HIGH TIDES solely into a number of shares of common stock determined so
that the initial value of those shares (measured as described in the
definition of Purchaser Stock Price) equals the value of the shares of
our common stock into which each HIGH TIDES was convertible immediately
before the transaction (measured as aforesaid); and

- where our common stock is converted solely into common stock, you will be
able to convert each HIGH TIDES into the same number of shares of common
stock receivable by a holder of the number of shares of our common stock
into which each HIGH TIDES was convertible immediately before the
transaction.

The term "closing price" of any security on any day means the last reported
sale price of the security on that day, or in case no sale takes place on that
day, the average of the closing bid and asked prices in each case on the
principal national securities exchange on which the securities are listed or
admitted to trading or, if not listed or admitted to trading on any national
securities exchange, on the National Market System of the National Association
of Securities Dealers, Inc. or any successor national automated interdealer
quotation system (the "NNM") or, if the securities are not listed or admitted to
trading on any national securities exchange or quoted on the NNM, the average of
the closing bid and asked prices of the security in the over-the-counter market
as furnished by any New York Stock Exchange member firm selected by Calpine for
that purpose.

The term "Common Stock Fundamental Change" means any Fundamental Change in
which more than 50% of the value, as determined in good faith by our board of
directors, of the consideration received by holders of our common stock consists
of common stock that for each of the ten consecutive trading days immediately
prior to and including the entitlement date has been admitted for listing or
admitted for listing subject to notice of issuance on a national securities
exchange or quoted on the NNM; provided, however, that a Fundamental Change will
not be a Common Stock Fundamental Change unless either:

- we continue to exist after the occurrence of the Fundamental Change and
the outstanding HIGH TIDES continue to exist as outstanding HIGH TIDES;
or

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- not later than the occurrence of the Fundamental Change, the outstanding
debentures are converted into or exchanged for debentures of a
corporation succeeding to our business, which debentures have terms
substantially similar to those of our debentures.

The term "entitlement date" means the record date for determination of the
holders of our common stock entitled to receive securities, cash or other
property in connection with a Non-Stock Fundamental Change or a Common Stock
Fundamental Change or, if there is no record date, the date upon which holders
of our common stock will have the right to receive those securities, cash or
other property.

The term "Fundamental Change" means the occurrence of any transaction or
event in connection with a company transaction pursuant to which all or
substantially all of our common stock will be exchanged for, converted into,
acquired for or constitute solely the right to receive securities, cash or other
property (whether by means of an exchange offer, liquidation, tender offer,
consolidation, merger, combination, reclassification, recapitalization or
otherwise). However, in the case of a company transaction involving more than
one transaction or event, for purposes of adjustment of the applicable
conversion price, the Fundamental Change will be deemed to have occurred when
substantially all of our common stock is exchanged for, converted into, or
acquired for or constitute solely the right to receive securities, cash, or
other property, but the adjustment will be based upon the highest weighted
average per share consideration that a holder of our common stock could have
received in the transactions or events as a result of which more than 50% of all
outstanding shares of our common stock will have been exchanged for, converted
into, or acquired for or constitute solely the right to receive securities, cash
or other property.

The term "Non-Stock Fundamental Change" means any Fundamental Change other
than a Common Stock Fundamental Change.

The term "optional redemption ratio" means a fraction of which the
numerator will be $50 and the denominator will be the then current optional
redemption price or, on or prior to October , 2002 and at any time after the
reset date at which the HIGH TIDES are not redeemable at our option, an amount
per HIGH TIDES determined by us in our sole discretion, after consultation with
a nationally recognized investment banking firm, to be the equivalent of the
hypothetical redemption price that would have been applicable if the HIGH TIDES
had been redeemable during that period.

The term "Purchaser Stock Price" means, with respect to any Common Stock
Fundamental Change, the average of the closing prices for the common stock
received in the Common Stock Fundamental Change for the ten consecutive trading
days prior to and including the entitlement date, as adjusted in good faith by
us to appropriately reflect any of the events referred to in the six bullet
clauses of the first paragraph under "-- Conversion Price Adjustments --
General."

The term "reference market price" will initially mean on the date the trust
originally issues the HIGH TIDES, $ (which is an amount equal to
66 2/3% of the last reported sale price for our common stock on the New York
Stock Exchange Composite Tape on October , 1999). In the event of any
adjustment to the applicable conversion price from such date to, but excluding
the reset date, other than as a result of a Non-Stock Fundamental Change, the
trust will also adjust the reference market price so that the ratio of the
reference market price to the applicable conversion price after giving effect to
any adjustment will be the same as the ratio of $ to the initial
conversion price. If the

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HIGH TIDES are convertible into common stock on and after the reset date, the
reference market price on the reset date will be an amount equal to 66 2/3% of
the closing price of the common stock on the reset date and, in the event of any
adjustment to the applicable conversion price from the reset date and
thereafter, other than as a result of a Non-Stock Fundamental Change, the
reference market price shall also be adjusted so that the ratio of the reference
market price to the applicable conversion price after giving effect to any such
adjustment shall always be the same as the ratio of the closing price of the
common stock on the reset date to the term conversion price.

The term "relevant price" means:

- in the case of a Non-Stock Fundamental Change in which the holder of our
common stock receives only cash, the amount of cash received by the
holder of one share of our common stock; and

- in the event of any other Non-Stock Fundamental Change or any Common
Stock Fundamental Change, the average of the daily closing prices for our
common stock during the ten consecutive trading days prior to and
including the entitlement date, in each case as adjusted in good faith by
us to appropriately reflect any of the events referred to in the six
bullet clauses of the first paragraph under "-- Conversion Price
Adjustments -- General."

MANDATORY REDEMPTION

Upon the repayment in full of the debentures at their stated maturity or a
redemption in whole or in part of the debentures (other than following any
distribution of the debentures to you and the holders of the trust's common
securities), the property trustee will apply the proceeds from the repayment or
redemption to redeem, on a pro rata basis, a like amount of HIGH TIDES and the
trust's common securities, on the redemption date, in an amount per HIGH TIDES
or common security, as applicable, equal to the applicable redemption price. The
redemption price will be equal to:

- the liquidation amount of each HIGH TIDES plus any accrued and unpaid
distributions in the case of (A) the repayment of the debentures at their
stated maturity or (B) the redemption of the debentures in certain
limited circumstances upon the occurrence of a tax event;

- in the case of an optional redemption on or after October , 2002, but
prior to, and excluding, the tender notification date, the initial
redemption price as set forth under "Description of Convertible
Subordinated Debentures -- Redemption -- Optional Redemption"; and

- in the case of an optional redemption after the reset date, in accordance
with the term call protections, if any, established in the remarketing.

REDEMPTION PROCEDURES

The trust will redeem its HIGH TIDES and common securities at the
applicable redemption price with the proceeds from the contemporaneous repayment
or redemption of the debentures. The trust will redeem its HIGH TIDES and common
securities and will pay the applicable redemption price on each redemption date
only to the extent that it has funds on hand available for the payment of the
redemption price. See also "-- Subordination of Common Securities."

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If the trust gives a notice of redemption in respect of the HIGH TIDES,
then, by 10:00 a.m., New York City time, on the redemption date, to the extent
funds are available, with respect to the HIGH TIDES held in global form, the
property trustee will deposit irrevocably with DTC funds sufficient to pay the
applicable redemption price and will give DTC irrevocable instructions and
authority to pay the applicable redemption price to you. See "-- Form,
Book-Entry Procedures and Transfer."

If the HIGH TIDES are no longer in book-entry form, the property trustee,
to the extent funds are available, will irrevocably deposit with the paying
agent for the HIGH TIDES funds sufficient to pay the applicable redemption price
and will give the paying agent irrevocable instructions and authority to pay the
redemption price to the holders of the HIGH TIDES upon surrender of their
certificates evidencing the HIGH TIDES. See "-- Payment and Paying Agency."

Distributions payable on or prior to the redemption date for any HIGH TIDES
called for redemption will be paid to holders of HIGH TIDES as of the relevant
record dates for the related distribution. If the trust has given notice of
redemption and deposited funds as required, then upon the date of the deposit,
all of your rights will cease, except your right to receive the applicable
redemption price, but without interest on the redemption price, and the HIGH
TIDES will cease to be outstanding.

If any redemption date is not a business day, then payment of the
applicable redemption price payable on that date will be made on the next
succeeding day which is a business day, and without any interest or other
payment in respect of any delay. However, if that business day falls in the next
calendar year, the payment will be made on the immediately preceding business
day. In the event that the trust or, pursuant to the guarantee described in
"Description of the Guarantee," we improperly withhold or refuse to make payment
of the applicable redemption price, then distributions on HIGH TIDES will
continue to accrue at the then applicable rate, from the redemption date
originally established by the trust to the date the redemption price is actually
paid. Under these circumstances, the actual payment date will be the date fixed
for redemption for purposes of calculating the redemption price.

Subject to applicable law, we or our subsidiaries may at any time and from
time to time purchase outstanding HIGH TIDES by tender, in the open market or by
private agreement except as provided under "The Remarketing -- Purchases by Us
and Our Affiliates."

If we desire to consummate an optional redemption, we must send a notice to
each holder of HIGH TIDES and the trust's common securities at its registered
address in accordance with the notice procedures set forth under "Description of
Convertible Subordinated Debentures -- Redemption -- Optional Redemption." We
must mail any notice of a tax event redemption at least 30 days but not more
than 60 days before the redemption date to you. We need not provide notice of
repayment at the stated maturity of the debentures.

TAX EVENT OR INVESTMENT COMPANY EVENT REDEMPTION OR DISTRIBUTION

If a tax event occurs and is continuing, we will cause the trustees to
dissolve and liquidate the trust and, after satisfaction of liabilities of
creditors of the trust, cause debentures to be distributed to you and us, as
holder of the common securities, on a pro

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rata basis, in liquidation of the trust within 90 days following the occurrence
of the tax event. However, the liquidation and distribution will be conditioned
on:

- the trustees' receipt of an opinion of a nationally recognized
independent tax counsel, reasonably acceptable to the trustees,
experienced in such matters (a "No Recognition Opinion"), which opinion
may rely on published revenue rulings of the Internal Revenue Service, to
the effect that you will not recognize any income, gain or loss for
United States federal income tax purposes as a result of such liquidation
and distribution of debentures; and

- Calpine being unable to avoid such tax event within such 90-day period by
taking some ministerial action or pursuing some other reasonable measure
that, in our sole judgment, will have no adverse effect on us, the trust
or you and will involve no material cost.

Furthermore, if (1) a nationally recognized independent tax counsel,
reasonably acceptable to the trustees, experienced in such matters provides an
opinion (the "Redemption Tax Opinion") to us that, as a result of a tax event,
there is more than an insubstantial risk that we would be precluded from
deducting the interest on the debentures for United States federal income tax
purposes, even after the debentures were distributed to you upon liquidation of
the trust as described above, or (2) such tax counsel informs the trustees that
it cannot deliver a No Recognition Opinion, we will have the right, upon not
less than 30 nor more than 60 days' notice and within 90 days following the
occurrence and continuation of the tax event, to redeem the debentures, in
whole, but not in part, for cash, for the principal amount plus accrued and
unpaid interest and, following such redemption, the trust will redeem all the
HIGH TIDES at the aggregate liquidation amount of the HIGH TIDES plus accrued
and unpaid distributions. However, if at the time there is available to us or
the trust the opportunity to eliminate, within such 90-day period, the tax event
by taking some ministerial action or pursuing some other reasonable measure
that, in our sole judgment, will have no adverse effect on us, the trust or you
and will involve no material cost, we or the trust will pursue that measure in
lieu of redemption. See "-- Mandatory Redemption." In addition to the foregoing
options, we will also have the option of causing the HIGH TIDES to remain
outstanding and pay additional amounts on the debentures. See "Description of
Convertible Subordinated Debentures -- Additional Amounts."

The term "tax event" means the receipt by the property trustee of an
opinion of a nationally recognized independent tax counsel to us, reasonably
acceptable to the trustees, experienced in such matters (a "Dissolution Tax
Opinion") to the effect that as a result of:

- any amendment to or change (including any announced prospective change
(which will not include a proposed change), provided that a tax event
will not occur more than 90 days before the effective date of any
prospective change) in the laws (or any regulations thereunder) of the
United States or any political subdivision or taxing authority of the
United States or any political subdivision;

- any judicial decision or official administrative pronouncement, ruling,
regulatory procedure, notice or announcement, including any notice or
announcement of intent to adopt such procedures or regulations (an
"Administrative Action"); or

- any amendment to or change in the administrative position or
interpretation of any Administrative Action or judicial decision that
differs from the theretofore generally accepted position, in each case,
by any legislative body, court, governmental agency

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or regulatory body, irrespective of the manner in which such amendment or
change is made known, which amendment or change is effective or such
Administrative Action or decision is announced, in each case, on or after
the date of original issuance of the debentures or the issue date of the
HIGH TIDES;

there is more than an insubstantial risk that one of the following will occur:

- if the debentures are held by the property trustee, (1) the trust is, or
will be within 90 days of the date of such opinion, subject to United
States federal income tax with respect to interest accrued or received on
the debentures or subject to more than a de minimis amount of other
taxes, duties or other governmental charges as determined by counsel, or
(2) any portion of interest payable by us to the trust (or original issue
discount accruing) on the debentures is not, or within 90 days of the
date of such opinion will not be, deductible by us in whole or in part
for United States federal income tax purposes; or

- with respect to debentures which are no longer held by the property
trustee, any portion of interest payable by us (or original issue
discount accruing) on the debentures is not, or within 90 days of the
date of such opinion will not be, deductible by us in whole or in part
for United States federal income tax purposes.

If an investment company event occurs and is continuing, we will cause the
trustees to dissolve and liquidate the trust and, after satisfaction of
liabilities of creditors of the trust, cause a like amount of the debentures to
be distributed to you in liquidation of the trust within 90 days following the
occurrence of the investment company event.

An investment company event occurs if there is a change in law or
regulation or a written change in interpretation or application of law or
regulation by any legislative body, court, governmental agency or regulatory
authority to the effect that the trust is or will be considered an "investment
company" required to be registered under the Investment Company Act of 1940, as
amended. In order to be an investment company event, the change in law must be
effective on or after the date of this prospectus.

The distribution by us of the debentures will effectively result in the
cancellation of the HIGH TIDES.

LIQUIDATION OF THE TRUST AND DISTRIBUTION OF CONVERTIBLE SUBORDINATED DEBENTURES

We, as the holder of the trust's outstanding common securities, will have
the right at any time including, without limitation, upon the occurrence of a
tax event or an investment company event, to dissolve the trust and, after
satisfaction of liabilities of creditors of the trust as provided by applicable
law, cause a like amount of the debentures to be distributed to you and the
holders of the trust's common securities upon liquidation of the trust. However,
we may not dissolve the trust during the period beginning on the business day
following a tender notification date and ending on the reset date (other than
upon the occurrence of a tax event or an investment company event). In addition,
the declaration trustees shall have received a No Recognition Opinion prior to
the dissolution of the trust.

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The trust will automatically dissolve upon the first to occur of:

(A) our bankruptcy, dissolution or liquidation;

(B) the distribution of a like amount of the debentures to the holders of
the HIGH TIDES and the trust's common securities if we, as depositor,
have given our written direction to the property trustee to dissolve
the trust (which direction is optional and, except as described above,
wholly within our discretion, as depositor);

(C) redemption of all the HIGH TIDES and the trust's common securities as
described under "-- Mandatory Redemption" above;

(D) conversion of all outstanding HIGH TIDES and the trust's common
securities as described under "-- Conversion Rights" above;

(E) expiration of the term of the trust; or

(F) entry of an order for the dissolution of the trust by a court of
competent jurisdiction.

If an early dissolution occurs as described in clause (A), (B), (E) or (F)
above, the declaration trustees will liquidate the trust as expeditiously as
they determine to be possible by distributing, after satisfaction of liabilities
to the creditors of the trust as provided by applicable law, to you and the
holders of the trust's common securities a like amount of the debentures, unless
the distribution would not be practical. In that event, you and the holders of
the trust's common securities will be entitled to receive out of the trust's
assets available for distribution to holders, after satisfaction of liabilities
to the trust's creditors as provided by applicable law, an amount equal to, in
the case of holders of HIGH TIDES, the aggregate liquidation amount of the HIGH
TIDES plus accrued and unpaid distributions, to the date of payment (that amount
being the "liquidation distribution"). If the liquidation distribution can be
paid only in part because the trust has insufficient assets available to pay in
full the aggregate liquidation distribution, then the trust will pay the amounts
directly payable by it on the HIGH TIDES on a pro rata basis. We, as the holder
of the trust's common securities, will be entitled to receive distributions upon
any liquidation pro rata with you, except that if an event of default under the
debentures (or an event that, with notice or passage of time, would become an
event of default under the debentures) has occurred and is continuing, the HIGH
TIDES will have a priority over the trust's common securities with respect to
any of those distributions. See "-- Subordination of Common Securities."

If we do not redeem the debentures prior to maturity, the trust is not
dissolved and liquidated and the debentures are not distributed to you and the
holders of the trust's common securities, the HIGH TIDES will remain outstanding
until the repayment of the debentures at their final stated maturity and the
distribution of the liquidation distribution to you.

On and after the liquidation date fixed for any distribution of debentures
to you and the holders of the trust's common securities:

- the trust will no longer deem the HIGH TIDES to be outstanding;

- DTC or its nominee, as the record holder of the HIGH TIDES, will receive
a registered global certificate or certificates representing the
debentures to be

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delivered upon the distribution with respect to HIGH TIDES held by DTC or
its nominee; and

- the trust will deem any certificates representing HIGH TIDES not held by
DTC or its nominee to represent debentures having a principal amount
equal to the liquidation amount of the HIGH TIDES and bearing accrued and
unpaid interest in an amount equal to the accumulated and unpaid
distributions on the HIGH TIDES until those certificates are presented to
the administrative trustees or their agent for cancellation, whereupon we
will issue to the holder, and the debenture trustee will authenticate, a
certificate representing the debentures.

We cannot assure you as to the market prices for the HIGH TIDES or the
debentures that you may receive in exchange for the HIGH TIDES and/or the
trust's common securities if a dissolution and liquidation of the trust were to
occur. Accordingly, the HIGH TIDES that you may purchase, or the debentures that
you may receive on dissolution and liquidation of the trust, may trade at a
discount to the price that you originally paid to purchase the HIGH TIDES.

SUBORDINATION OF COMMON SECURITIES

Payment of distributions on, and the redemption price of, the HIGH TIDES
and the trust's common securities generally shall be made pro rata to the
holders of HIGH TIDES and the trust's common securities. The trust will base
those payments on the liquidation amount of the HIGH TIDES and the trust's
common securities. If on any distribution date or redemption date any event of
default under the debentures has occurred and is continuing or an event of
default under the declaration of trust has occurred and is continuing, then the
trust will not pay any distribution on, or applicable redemption price of, any
of the trust's common securities, and the trust will not make any other payment
on account of the redemption, liquidation or other acquisition of the trust's
common securities, unless:

- all accrued and unpaid distributions on all of the outstanding HIGH TIDES
are paid in cash for all distribution periods ending on or prior to any
payment on the common securities, or

- in the case of payment of the applicable redemption price, the full
amount of the redemption price on all of the outstanding HIGH TIDES then
called for redemption shall have been paid or provided for, and all funds
available to the property trustee will first be applied to the payment in
full in cash of all distributions on, or the applicable redemption price
of, the HIGH TIDES then due and payable.

If an event of default occurs under the declaration of trust resulting from
an event of default under the debentures, the trust will deem us, as holder of
the trust's common securities, to have waived any right to act with respect to
any event of default under the declaration of trust until the effect of all
events of default have been cured, waived or otherwise eliminated. Until all
events of default under the declaration of trust have been so cured, waived or
otherwise eliminated, the property trustee will act solely on your behalf and
not on our behalf as holder of the trust's common securities, and only you will
have the right to direct the property trustee to act on your behalf.

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EVENTS OF DEFAULT; NOTICE

Any one of the following events constitutes an "event of default" under the
declaration of trust (whatever the reason for the event of default and whether
it is voluntary or involuntary or is effected by operation of law or pursuant to
any judgment, decree or order of any court or any order, rule or regulation of
any administrative or governmental body):

- the occurrence of an event of default under the debentures (see
"Description of Convertible Subordinated Debentures -- Debenture Events
of Default");

- the trust's default in the payment of any distribution when it becomes
due and payable, and continuation of the default for a period of 30 days
(subject to the deferral of any due date in the case of a deferral
period);

- the trust's default in the payment of any redemption price of any HIGH
TIDES or common security of the trust when it becomes due and payable;

- default in the performance, or breach, in any material respect, of any
covenant or warranty of the declaration trustees in the declaration of
trust (other than a covenant or warranty, a default in the performance of
which or the breach of which is addressed in the second or third bullet
points above), and continuation of the default or breach for a period of
60 days after the holders of at least 25% in aggregate liquidation amount
of the outstanding HIGH TIDES have given, by registered or certified
mail, to the defaulting trustee or trustees a written notice specifying
the default or breach and requiring it to be remedied and stating that
the notice is a "Notice of Default" under the declaration of trust; or

- the occurrence of a bankruptcy or insolvency with respect to the property
trustee and the failure by us to appoint a successor property trustee
within 60 days of those events.

Within ten business days after the occurrence of any event of default
actually known to the property trustee, the property trustee will transmit
notice of the event of default to you, the administrative trustees and us, as
depositor, unless the event of default has been cured or waived. Calpine, as
depositor, and the administrative trustees are required to file annually with
the property trustee a certificate as to whether or not we and they are in
compliance with all the conditions and covenants applicable to us and them under
the declaration of trust.

If an event of default under the debentures (or an event that with notice
or the passage of time, would become an event of default under the debentures)
or an event of default under the declaration of trust has occurred and is
continuing, the HIGH TIDES will have a preference over the trust's common
securities. See "-- Liquidation of the Trust and Distribution of Convertible
Subordinated Debentures" and "-- Subordination of Common Securities."

REMOVAL OF TRUSTEES

Unless an event of default under the debentures has occurred and is
continuing, we, as the holder of the trust's common securities, may remove any
declaration trustee at any time. If an event of default under the debentures has
occurred and is continuing, the holders of a majority in liquidation amount of
the outstanding HIGH TIDES may remove

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the property trustee and the Delaware statutory trustee. In no event will you
have the right to vote to appoint, remove or replace the administrative
trustees, which voting rights are vested exclusively in us as the holder of the
trust's common securities. No resignation or removal of the Delaware statutory
trustee or the property trustee and no appointment of a successor trustee will
be effective until the acceptance of appointment by the successor trustee in
accordance with the provisions of the declaration of trust.

MERGER OR CONSOLIDATION OF TRUSTEES

Any successor to the property trustee or the Delaware trustee by merger,
conversion or consolidation or which otherwise succeeds to that trustee's
corporate trust business will take the place of that trustee under the
declaration of trust if the successor otherwise is qualified and eligible.

MERGERS, CONSOLIDATIONS, AMALGAMATIONS OR REPLACEMENTS OF THE TRUST

The trust may not merge with or into, consolidate, amalgamate or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any corporation or other person, except as
described below or as otherwise set forth in the declaration of trust. The trust
may, with the consent of the administrative trustees but without your consent
and the consent of the property trustee or the Delaware statutory trustee, merge
with or into, consolidate, amalgamate or be replaced by, or convey, transfer or
lease its properties and assets substantially as an entirety to, a trust
organized as such under the laws of any state if:

- the successor entity either (1) expressly assumes all of the trust's
obligations with respect to the HIGH TIDES or (2) substitutes for the
HIGH TIDES other successor securities having substantially the same terms
as the HIGH TIDES so long as the successor securities rank the same as
the HIGH TIDES rank in priority with respect to distributions and
payments upon liquidation, redemption and otherwise;

- we expressly appoint a trustee of the successor entity possessing the
same powers and duties as the property trustee as the holder of the
debentures;

- the successor securities are listed or traded, or any successor
securities will be listed or traded upon notification of issuance, on any
national securities exchange, national automated quotation system or
other organization on which the HIGH TIDES are then listed or traded, if
any;

- the transaction does not cause the HIGH TIDES, including any successor
securities, to be downgraded by any nationally recognized statistical
rating organization;

- the transaction does not adversely affect the rights, preferences and
privileges of the holders of the HIGH TIDES, including any successor
securities, in any material respect;

- the successor entity has a purpose substantially identical and limited to
the purpose of the trust;

- prior to the transaction, we receive an opinion from independent counsel
to the trust experienced in such matters to the effect that:

-- the transaction does not adversely affect the limited liability of the
holders of the HIGH TIDES and common securities, including any
successor securities;

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-- following the transaction neither the trust nor the successor entity
will be required to register as an investment company under the
Investment Company Act; and

-- following the transaction, the trust or the successor entity will
continue to be treated as a grantor trust for United States federal
income tax purposes.

- we or any permitted successor or assignee owns all of the common
securities of the successor entity and guarantees the obligations of the
successor entity under the successor securities at least to the extent
provided by the guarantee relating to the HIGH TIDES; and

- the transaction is not a taxable event for you.

Notwithstanding the general provisions described above, the trust will not,
except with the consent of holders of 100% in aggregate liquidation amount of
the HIGH TIDES and the trust's common securities, consolidate, amalgamate, merge
with or into, or be replaced by or convey, transfer or lease its properties and
assets substantially as an entirety to any other entity or permit any other
entity to consolidate, amalgamate, merge with or into, or replace it, if the
transaction would cause the trust or the successor entity to be classified as
other than a grantor trust for United States federal income tax purposes.

VOTING RIGHTS; AMENDMENT OF THE DECLARATION

The holders of HIGH TIDES have only the voting rights described below and
under "Description of the Guarantee -- Amendments and Assignment" plus any
voting rights required by law and the declaration of trust.

In addition to your rights with respect to the enforcement of payments by
us to the trust of principal of or interest on the debentures as described under
"Description of Convertible Subordinated Debentures -- Debenture Events of
Default," if either of the following events occurs:

- an event of default under the debentures occurs and is continuing; or

- we default under the guarantee with respect to the HIGH TIDES;

then the holders of the HIGH TIDES, acting as a single class, will be entitled
by a vote of a majority in aggregate stated liquidation amount of the
outstanding HIGH TIDES to appoint a special trustee which shall be called an
appointment event. Any holder of HIGH TIDES, other than Calpine or any of our
affiliates, will be entitled to nominate any person to be appointed as special
trustee. Not later than 30 days after the right to appoint a special trustee
arises, the declaration trustees will convene a meeting of the holders of HIGH
TIDES for the purpose of appointing a special trustee. If the declaration
trustees fail to convene that meeting within the 30-day period, the holders of
not less than 10% of the aggregate stated liquidation amount of the outstanding
HIGH TIDES will be entitled to convene the meeting. The provisions of the
declaration of trust relating to the convening and conduct of the meetings of
the holders will apply with respect to the meeting. Any special trustee so
appointed will cease to be a special trustee if the appointment event pursuant
to which the special trustee was appointed and all other appointment events
cease to be continuing. Notwithstanding the appointment of any special trustee,
we will retain all rights under the indenture, including the right to defer
payments of interest by extending the interest payment period as described under
"Description of Convertible Subordinated Debentures -- Option to Extend Interest
Payment Date." If such an extension occurs, there will be no event of default
under the debentures and, consequently, no event of

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default for failure to make any scheduled interest payment during the deferral
period on the date originally scheduled.

We, along with the property trustee and the administrative trustees, may
amend the declaration of trust from time to time without your consent:

- to cure any ambiguity;

- to correct or supplement any provision in the declaration of trust that
may be inconsistent with any other provision;

- to make any other provisions with respect to ministerial matters or
questions arising under the declaration of trust, which will not be
inconsistent with the other provisions of the declaration of trust; or

- to modify, eliminate or add to any provisions of the declaration of trust
if necessary to ensure that the trust will not be taxable as a
corporation or will be classified for United States federal income tax
purposes as a grantor trust at all times that any HIGH TIDES or the
trust's common securities are outstanding or to ensure that the trust
will not be required to register as an investment company under the
Investment Company Act.

However, no such action may be taken unless the action will not adversely affect
in any material respect the interests of any holder of HIGH TIDES or the trust's
common securities. Any amendments of the declaration of trust will become
effective when notice of the amendment is given to you and the holders of the
trust's common securities.

We, along with the property trustee and the administrative trustees, may
amend the declaration of trust with:

- the consent of holders representing not less than a majority (based upon
liquidation amounts) of the outstanding HIGH TIDES; and

- receipt by the declaration trustees of an opinion of counsel to the
effect that the amendment or the exercise of any power granted to the
trustees in accordance with the amendment will not affect the trust's
status as a grantor trust for United States federal income tax purposes
or the trust's exemption from status as an investment company under the
Investment Company Act.

In addition, without the consent of each holder of HIGH TIDES and the
trust's common securities, no amendment may:

- change the amount or timing of any distribution on the HIGH TIDES or the
trust's common securities or otherwise adversely affect the amount of any
distribution required to be made in respect of the HIGH TIDES or the
trust's common securities as of a specified date; or

- restrict the right of a holder of HIGH TIDES or the trust's common
securities to institute suit for the enforcement of any payment on or
after such date.

So long as any debentures are held by the trust, the declaration trustees
will not:

- direct the time, method and place of conducting any proceeding for any
remedy available to the trustee under the debentures, or execute any
trust or power conferred on the property trustee with respect to the
debentures;

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- waive any past default that is waivable under the indenture governing the
debentures;

- exercise any right to rescind or annul a declaration that the principal
of all the debentures is due and payable; or

- give a required consent to any amendment, modification or termination of
the indenture or the debentures,

unless, in each case, they first obtain the approval of the holders of a
majority in aggregate liquidation amount of all outstanding HIGH TIDES. When the
indenture requires the consent of each holder of debentures, the property
trustee cannot give its consent without the prior consent of each holder of the
HIGH TIDES.

The declaration trustees will not revoke any action previously authorized
or approved by a vote of the holders of the HIGH TIDES except by subsequent vote
of those holders. The property trustee will notify each holder of HIGH TIDES of
any notice of default with respect to the debentures. In addition to obtaining
the foregoing approvals of the holders of the HIGH TIDES, prior to taking any of
the foregoing actions, the property trustee will obtain an opinion of counsel
experienced in those matters to the effect that the action will not affect the
trust's status as a grantor trust for United States federal income tax purposes
on account of the action.

Any required approval of holders of HIGH TIDES may be given either at a
properly convened meeting of those holders or by a written consent without prior
notice. The property trustee must notify holders of HIGH TIDES of any meeting.

Neither your vote nor your consent is required for the trust to redeem and
cancel or remarket the HIGH TIDES in accordance with the declaration of trust.

Notwithstanding that you are entitled to vote or consent under any of the
circumstances described above, any of the HIGH TIDES that are owned by us, the
declaration trustees or any affiliate of Calpine or any declaration trustees,
will, for purposes of such vote or consent, be treated as if they were not
outstanding.

EXPENSES AND TAXES

We will pay all of the costs, expenses or liabilities of the trust, other
than obligations of the trust to pay to the holders of any HIGH TIDES or common
securities the amounts due to the holders under the terms of those securities.
Our foregoing obligations under the indenture governing the debentures are for
the benefit of, and will be enforceable by, any person to whom any such debts,
obligations, costs, expenses and taxes are owed (a "creditor"), whether or not
the creditor has received notice of those obligations. Any creditor may enforce
our obligations directly against us, and we have irrevocably waived any right or
remedy to require that any creditor take any action against the trust or any
other person before proceeding against us.

FORM, BOOK-ENTRY PROCEDURES AND TRANSFER

The HIGH TIDES will be issued in the form of one or more fully registered
global HIGH TIDES certificates except as described below. The global HIGH TIDES
certificate will be deposited upon issuance with the property trustee as
custodian for DTC, in

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New York, New York, and registered in the name of DTC or its nominee, in each
case for credit to an account of a direct or indirect participant in DTC as
described below.

Except as set forth below, the global HIGH TIDES certificate may be
transferred, in whole but not in part, only to another nominee of DTC or to a
successor of DTC or its nominee. Beneficial interests in the global HIGH TIDES
certificate may not be exchanged for HIGH TIDES in certificated form except in
the limited circumstances described below. See "-- Certificated HIGH TIDES." In
addition, a transfer of beneficial interests in the global HIGH TIDES
certificate will be subject to the applicable rules and procedures of DTC and
its direct or indirect participants which may change from time to time.

DEPOSITARY PROCEDURES

DTC has advised us that it is a limited purpose trust company organized
under the laws of the State of New York, a member of the Federal Reserve System,
a "clearing corporation" within the meaning of the Uniform Commercial Code and a
"clearing agency" registered pursuant to the provisions of Section 17A of the
Securities Exchange Act of 1934. DTC was created to hold securities for its
participating organizations and to facilitate the clearance and settlement of
transactions in those securities between its participants through electronic
book-entry changes to accounts of its participants, thereby eliminating the need
for physical movement of certificates. DTC's participants include securities
brokers and dealers, banks, trust companies, clearing corporations and certain
other organizations. Indirect access to DTC's system is also available to other
indirect participants such as banks, brokers, dealers and trust companies that
clear through or maintain a custodial relationship with a participant, either
directly or indirectly. Persons who are not participants may beneficially own
securities held by or on behalf of DTC only through the participants or the
indirect participants. The ownership interest and transfer of ownership interest
of each actual purchaser of each security held by or on behalf of DTC are
recorded on the records of the participants and indirect participants.

DTC has also advised us and the trust that, pursuant to procedures
established by it:

- upon deposit of the global HIGH TIDES certificate, DTC will credit the
accounts of participants designated by Credit Suisse First Boston with
portions of the principal amount of the global HIGH TIDES certificate;
and

- ownership of such interests in the global HIGH TIDES certificate will be
shown on, and the transfer of such ownership interests will be effected
only through, records maintained by DTC, with respect to the
participants, or by the participants and the indirect participants, with
respect to other owners of beneficial interests in the global HIGH TIDES
certificate.

Investors in the global HIGH TIDES certificate may hold their interests in
the global HIGH TIDES certificate directly through DTC, if they are participants
in DTC, or indirectly through organizations which are participants in DTC's
system. All interests in the global HIGH TIDES certificate will be subject to
the procedures and requirements of DTC. The laws of some states require that
certain persons take physical delivery in certificated form of certain
securities, such as the HIGH TIDES, that they own. Consequently, the ability to
transfer beneficial interests in the global HIGH TIDES certificate to those
persons will be limited to that extent. Because DTC can act only on behalf of
participants, which in turn act on behalf of indirect participants and certain
banks, the ability of a person having beneficial interests in a global HIGH
TIDES

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certificate to pledge those interests to persons or entities that do not
participate in the DTC system, or otherwise take actions in respect of those
interests, may be affected by the lack of a physical certificate evidencing
those interests. For certain other restrictions on the transferability of the
HIGH TIDES, see "-- Certificated HIGH TIDES."

EXCEPT AS DESCRIBED BELOW, OWNERS OF BENEFICIAL INTERESTS IN THE GLOBAL
HIGH TIDES CERTIFICATE WILL NOT BE ENTITLED TO HAVE HIGH TIDES REGISTERED IN
THEIR NAMES, AND THEY WILL NOT RECEIVE OR BE ENTITLED TO RECEIVE PHYSICAL
DELIVERY OF HIGH TIDES IN CERTIFICATED FORM AND WILL NOT BE CONSIDERED THE
REGISTERED OWNERS OR HOLDERS THEREOF UNDER THE DECLARATION OF TRUST FOR ANY
PURPOSE.

Payments in respect of the global HIGH TIDES certificate registered in the
name of DTC or its nominee will be payable by the property trustee to DTC or its
nominee as the registered holder under the declaration of trust by wire transfer
in immediately available funds on each distribution date. Under the terms of the
declaration of trust, the property trustee will treat the persons in whose names
the HIGH TIDES, including the global HIGH TIDES certificate, are registered as
the owners of the global HIGH TIDES certificate for the purpose of receiving
payments and for any and all other purposes. Consequently, neither the property
trustee nor any agent of the property trustee has or will have any
responsibility or liability for:

- any aspect of DTC's records or any participant's or indirect
participant's records relating to, or payments made on account of,
beneficial ownership interests in the global HIGH TIDES certificate, or
for maintaining, supervising or reviewing any of DTC's records or any
participant's or indirect participant's records relating to the
beneficial ownership interests in the global HIGH TIDES certificate or

- any other matter relating to the actions and practices of DTC or any of
its participants or indirect participants.

DTC has advised us and the trust that its current practice, upon receipt of
any payment in respect of securities such as the HIGH TIDES, is to credit the
accounts of the relevant participants with the payment on the payment date, in
amounts proportionate to their respective holdings in liquidation amount of
beneficial interests in the global HIGH TIDES certificate, as shown on the
records of DTC, unless DTC has reason to believe it will not receive payment on
the payment date. Payments by the participants and the indirect participants to
the beneficial owners of HIGH TIDES represented by global HIGH TIDES certificate
held through the participants will be governed by standing instructions and
customary practices and will be the responsibility of the participants or the
indirect participants and will not be the responsibility of DTC, the property
trustee or the trust. Neither the trust nor the property trustee will be liable
for any delay by DTC or any of its participants in identifying the beneficial
owners of the HIGH TIDES, and the trust and the property trustee may
conclusively rely on and will be protected in relying on instructions from DTC
or its nominee for all purposes.

Interests in the global HIGH TIDES certificate will trade and settle
according to the rules and procedures of DTC and its participants. Transfers and
settlements between participants in DTC will be effected in accordance with
DTC's procedures.

DTC has advised us and the trust that it will take any action permitted to
be taken by you, including the presentation of HIGH TIDES for exchange as
described below, only at the direction of one or more Participants to whose
account with DTC interests in the global HIGH TIDES certificate are credited and
only in respect of the portion of the

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aggregate liquidation amount of the HIGH TIDES represented by the global HIGH
TIDES certificate as to which the participant or participants has or have given
such direction. However, if there is an event of default under the declaration
of trust, DTC reserves the right to exchange the global HIGH TIDES certificate
for HIGH TIDES in certificated form and to distribute those HIGH TIDES to its
participants.

So long as DTC or its nominee is the registered owner of the global HIGH
TIDES certificate, DTC or the nominee, as the case may be, will be considered
the sole owner or holder of the HIGH TIDES represented by the global HIGH TIDES
certificate for all purposes under the declaration of trust.

Neither DTC nor its nominee will consent or vote with respect to the HIGH
TIDES. Under its usual procedures, DTC would mail an omnibus proxy to the trust
as soon as possible after the record date. The omnibus proxy assigns the
consenting or voting rights of DTC or its nominee to those participants to whose
accounts the HIGH TIDES are credited on the record date (identified in a listing
attached to the omnibus proxy).

The information in this section concerning DTC and its book-entry system
has been obtained from sources that we and the trust believe to be reliable, but
neither we nor the trust takes responsibility for the accuracy of the
information.

Although DTC has agreed to the foregoing procedures to facilitate transfers
of interest in the global HIGH TIDES certificate among participants in DTC, it
is under no obligation to perform or to continue to perform those procedures,
and those procedures may be discontinued at any time. Neither the trust nor the
property trustee will have any responsibility for the performance by DTC or its
participants or indirect participants of their respective obligations under the
rules and procedures governing their operations.

CERTIFICATED HIGH TIDES

The HIGH TIDES represented by the global HIGH TIDES certificate will be
exchangeable for certificated HIGH TIDES in definitive form of like tenor as the
HIGH TIDES in denominations of U.S. $50.00 and integral multiples of $50.00 if:

- DTC notifies us or the trust that it is unwilling or unable to continue
as depositary for the global HIGH TIDES certificate, or if at any time
DTC ceases to be a clearing agency registered under the Securities
Exchange Act of 1934;

- Calpine or the trust in our or its discretion at any time determines not
to have all of the HIGH TIDES evidenced by a global HIGH TIDES
certificate; or

- a default entitling you to accelerate the maturity of the HIGH TIDES has
occurred and is continuing.

Any of the HIGH TIDES that are exchangeable pursuant to the preceding
sentence are exchangeable for certificated HIGH TIDES issuable in authorized
denominations and registered in the names as DTC directs. Subject to the
foregoing, the global HIGH TIDES certificate are not exchangeable, except for a
global HIGH TIDES certificate of the same aggregate denomination to be
registered in the name of DTC or its nominee.

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PAYMENT AND PAYING AGENCY

Payments in respect of the HIGH TIDES held in global form will be made to
DTC. DTC will make payments on the HIGH TIDES by crediting the relevant account
at DTC on the applicable distribution dates. If any HIGH TIDES are not held by
DTC, then the paying agent will mail checks to the registered holders at their
addresses as shown on its register. The paying agent will initially be the
property trustee and any co-paying agent chosen by the property trustee and
acceptable to the administrative trustees and us. The paying agent may resign as
paying agent upon 30 days' written notice to the property trustee, the
administrative trustees and us. If the property trustee resigns as paying agent,
the administrative trustees will appoint a bank or trust company acceptable to
the administrative trustees and us to act as paying agent.

The property trustee has informed the trust that so long as it serves as
paying agent for the HIGH TIDES, it anticipates that information regarding
distributions on the HIGH TIDES, including payment date, record date and
redemption information, will be made available through The Bank of New York.

REGISTRAR, CONVERSION AGENT AND TRANSFER AGENT

The property trustee will act as registrar, conversion agent and transfer
agent for the HIGH TIDES.

The property trustee will act as initial paying agent and transfer agent
for certificated HIGH TIDES and may designate additional or substitute paying
agents and transfer agents at any time. Registration of transfers of
certificated HIGH TIDES will be effected without charge by or on behalf of the
trust, but upon payment (with the giving of such indemnity as the administrative
trustees, the property trustee or we may require) in respect of any tax or other
government charges that may be imposed in connection with any transfer or
exchange. The trust will not be required to register the transfer or exchange of
certificated HIGH TIDES during the period beginning at the opening of business
15 days before any selection of certificated HIGH TIDES to be redeemed and
ending at the close of business on the day of that selection or register the
transfer or exchange of any certificated HIGH TIDES, or portion thereof, called
for redemption.

INFORMATION CONCERNING THE PROPERTY TRUSTEE

The property trustee, other than during the occurrence and continuance of
an event of default, is required to perform only the duties that are
specifically set forth in the declaration of trust. During the existence of an
event of default, the property trustee is required to exercise the same degree
of care and skill as a prudent person would exercise or use in the conduct of
his or her own affairs. Subject to this provision, the property trustee has no
obligation to exercise any of its powers under the declaration of trust at the
request of any holder of HIGH TIDES or the trust's common securities unless it
is offered reasonable indemnity against the costs, expenses and liabilities that
it might incur by doing so. If no event of default has occurred and is
continuing and the property trustee is required to decide between alternative
causes of action, construe ambiguous provisions in the declaration of trust or
is unsure of the application of any provision of the declaration of trust, and
the matter is not one on which holders of the HIGH TIDES or the trust's common
securities are entitled under the declaration of trust to vote, then we will
have the right to tell the property trustee which action to take. If we do not
give any directions, the property trustee will take whatever action it deems
advisable and in the best interests of

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the holders of the HIGH TIDES and the trust's common securities. The property
trustee will have no liability except for its own bad faith, negligence or
willful misconduct.

MISCELLANEOUS

The administrative trustees are authorized and directed to conduct the
affairs of and to operate the trust in such a way that:

- the trust will not be deemed to be an investment company required to be
registered under the Investment Company Act or classified as an
association taxable as a corporation for United States federal income tax
purposes;

- would cause the trust to be classified for United States federal income
tax purposes as a grantor trust; and

- the debentures will be treated as Calpine's indebtedness for United
States federal income tax purposes.

The administrative trustees are authorized to take any lawful action
consistent with the trust's certificate of trust and the declaration of trust,
that the administrative trustees determine in their discretion to be necessary
or desirable for those purposes, as long as their actions do not materially
adversely affect the interests of the holders of the HIGH TIDES or the trust's
common securities.

You and the holders of the trust's common securities have no preemptive or
similar rights.

The trust may not borrow money or issue debt or mortgage or pledge any of
its assets.

GOVERNING LAW

The declaration of trust and the HIGH TIDES will be governed by and
construed in accordance with the laws of the State of Delaware.

DESCRIPTION OF CONVERTIBLE SUBORDINATED DEBENTURES

We will issue the convertible subordinated debentures under an Indenture
between us and The Bank of New York, as debenture trustee. The indenture
governing the debentures will be qualified under and will be subject to and
governed by the Trust Indenture Act upon effectiveness of the registration
statement of which this prospectus is a part. This summary of certain terms and
provisions of the debentures and the indenture is not complete. For a complete
description of the debentures, we encourage you to read the indenture. The form
of indenture has been filed as an exhibit to the registration statement of which
this prospectus is a part. Unless the context requires otherwise, "Calpine,"
"we," "us," "our" or similar terms in this section refer solely to Calpine
Corporation and not the trust or any of our other consolidated subsidiaries.

GENERAL

Concurrently with the issuance of the HIGH TIDES and the trust's common
securities, the trust will invest the proceeds from issuing those securities in
our % Convertible Subordinated Debentures due 2029. Interest will accrue on
the debentures

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from the date of their original issuance, at the applicable rate of the
principal amount thereof, subject to the deferral rights described below. The
trust will make those payments quarterly in arrears on ,
, and , commencing ,
2000 to the person in whose name each debenture is registered, at the close of
business on the of the month in which the applicable interest
payment date falls.

Each registered holder of debentures on the fifteenth day prior to the
reset date, including any holder which has tendered or is deemed to have
tendered its debentures for remarketing, shall be paid a distribution of
interest and additional amounts, if any, accrued to but excluding the reset
date. Interest and additional amounts, if any, accrued from and after the reset
date to but excluding , shall be paid on
to the person in whose name each debenture is registered on the
preceding , subject to our right to initiate a deferral period.
The applicable rate will be % per annum from the date of original issuance
of the HIGH TIDES to, but excluding, the reset date. From the reset date, the
applicable rate will be the term rate established by the remarketing agent to be
effective on the reset date.

We anticipate that, until the dissolution and liquidation of the trust,
each debenture will be registered in the name of the property trustee and held
by the property trustee for the benefit of the holders of the HIGH TIDES and the
trust's common securities. The amount of interest payable for any period will be
computed on the basis of the number of days elapsed in a 360-day year of twelve
30-day months.

If any interest payment date is not a business day, then payment will be
made on the next succeeding business day except if such business day is in the
next succeeding calendar year, such payment will be made on the immediately
preceeding business day. No additional interest or other payment will accrue
because of this change in the payment date. Accrued interest that is not paid on
the applicable interest payment date will bear additional interest on the amount
of interest (to the extent permitted by law), compounded quarterly from the
relevant interest payment date. The term "interest" as used herein will include
quarterly payments, interest on quarterly interest payments not paid on the
applicable interest payment date and additional amounts described in
"-- Additional Amounts."

If the trust distributes the debentures to you, the description of the
remarketing of the HIGH TIDES and your conversion rights in this prospectus will
apply, with such changes as are necessary, to the remarketing or conversion of
the debentures. See "The Remarketing," "The Remarketing Agent" and "Description
of HIGH TIDES -- Conversion Rights."

Unless we previously redeem or repurchase the debentures in accordance with
the indenture, they will mature on October , 2029. See
"-- Redemption -- Repayment at Maturity; Redemption of Convertible Subordinated
Debentures."

The debentures will be unsecured and will rank junior and subordinate in
right of payment to all of our senior debt. Our right to participate in any
distribution of assets of any of our subsidiaries upon the subsidiary's
liquidation or reorganization or otherwise (and thus the ability of holders of
the HIGH TIDES to benefit indirectly from the distribution) is subject to the
prior claims of creditors of the subsidiary, except to the extent that we may
ourselves be recognized as a creditor of the subsidiary. Accordingly, the
debentures will be subordinated to all of our senior debt and effectively
subordinated to all existing and future liabilities of our subsidiaries. Our
subsidiaries are separate legal entities and

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have no obligations to pay, or make funds available for the payment of, any
amounts due on the debentures, the HIGH TIDES or the guarantee of the HIGH
TIDES. Therefore, holders of debentures should look only to our assets for
payments on the debentures. The indenture governing the debentures does not
limit the incurrence or issuance of other secured or unsecured debt of Calpine,
whether under the indenture, our current credit agreement, or any other existing
or other indenture or any other debt instrument or agreement that we may enter
into in the future or otherwise. See "Risk Factors -- Risks Relating to the HIGH
TIDES" and "-- Subordination."

OPTION TO EXTEND INTEREST PAYMENT DATE

If we are not in default under the indenture governing the debentures, we
have the right to defer the payment of interest on the debentures at any time or
from time to time for a period not exceeding 20 consecutive quarters with
respect to each deferral period. We may not, however, defer the payment of
interest beyond (1) the maturity of the debentures whether at the stated
maturity or by declaration of acceleration, call for redemption or otherwise and
(2) in the case of a deferral period beginning prior to the reset date, the
reset date. At the end of a deferral period, we must pay all interest then
accrued and unpaid on the debentures (together with interest thereon accrued at
an annual rate equal to the applicable rate compounded quarterly from the
relevant interest payment date, to the extent permitted by applicable law).
During a deferral period and for so long as the debentures remain outstanding,
interest will continue to accrue and holders of debentures, and holders of the
HIGH TIDES while HIGH TIDES are outstanding, will be required to accrue interest
income in the form of original issue discount for United States federal income
tax purposes. See "Certain United States Federal Income Tax Consequences --
Interest Income."

During any deferral period, we may not:

- declare or pay any dividends or distributions on, or redeem, purchase,
acquire or make a liquidation payment with respect to, any of our capital
stock (which includes common and preferred stock) other than stock
dividends paid by us which consist of stock of the same class as that on
which the dividend is being paid;

- make any payment of principal, interest or premium, if any, on or repay,
repurchase or redeem any of our debt securities that rank pari passu with
or junior in interest to the debentures; or

- make any guarantee payments with respect to any guarantee by Calpine of
the debt securities of any of our subsidiaries if such guarantee
expressly ranks pari passu with or junior in interest to the debentures,
other than:

- dividends or distributions in our common stock;

- any declaration of a dividend in connection with the implementation of
a stockholders' rights plan, or the issuance of stock under plan in
the future, or the redemption or repurchase of any rights pursuant
thereto;

- payments under the guarantee of the HIGH TIDES;

- purchases or acquisitions of shares of our common stock in connection
with the satisfaction by us of our obligations under any employee
benefit plan or any

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other contractual obligation, other than a contractual obligation
ranking expressly by its terms pari passu with or junior to the
debentures;

- the payment of fractional shares resulting from a reclassification of
our capital stock or the exchange or conversion of one class or series
of our capital stock for another class or series of our capital stock;
or

- the purchase of fractional interests in shares of our capital stock
pursuant to the conversion or exchange provisions of the capital stock
or the security being converted or exchanged.

A deferral period will terminate upon the payment by us of all interest
then accrued and unpaid on the debentures, together with interest accrued
thereon at an annual rate equal to the applicable rate, compounded quarterly, to
the extent permitted by applicable law. Prior to the termination of any deferral
period, we may further extend the deferral period. However, the further deferral
cannot cause the deferral period to exceed 20 consecutive quarters or to extend
beyond (1) the maturity of the debentures whether at the stated maturity or by
declaration of acceleration, call for redemption or otherwise and (2) in the
case of a deferral period beginning prior to the reset date, the reset date.
Upon the termination of any deferral period, and subject to the foregoing
limitations, we may elect to begin a new deferral period. We need not pay any
interest during a deferral period, except at the end of the deferral period. We
must give the property trustee and the debenture trustee notice of our election
of any deferral period at least ten days prior to the record date for the
distributions on the HIGH TIDES that would have been payable except for the
election to begin or extend the deferral period. The debenture trustee will give
notice of our election to begin or extend a new deferral period to the holders
of the debentures. There is no limitation on the number of times that we may
elect to begin a deferral period.

We have no current intention of exercising our right to defer payments of
interest on the debentures.

REDEMPTION

Repayment at Maturity; Redemption of Convertible Subordinated Debentures

We must repay the debentures at their stated maturity on
, , unless earlier redeemed. The circumstances in which we
may, or we are required to, redeem the debentures prior to their stated maturity
are described below. Upon the repayment in full at maturity or redemption, in
whole or in part, of the debentures, other than following the distribution of
the debentures to the holders of the HIGH TIDES and the trust's common
securities, the trust will concurrently apply the proceeds from the repayment or
redemption to redeem, at the applicable redemption price, a like amount of HIGH
TIDES and its common securities. See "Description of HIGH TIDES -- Mandatory
Redemption."

Optional Redemption

We will have the right to redeem the debentures (1) in whole or in part, at
any time on or after October , 2002 until, but excluding, the tender
notification date, upon not less than 20 nor more than 60 days' notice, at a
redemption price as set forth below, equal to the following prices per $50
principal amount of debentures plus any accrued but unpaid

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interest on the portion being redeemed, if redeemed during the 12 month period
ending October :

<TABLE>
<CAPTION>
PRICE PER $50
YEAR PRINCIPAL AMOUNT
---- ----------------
<S> <C>
2003........................................ $
2004........................................ $ ;
</TABLE>

(2) after the reset date (except in the event of a failed final remarketing), in
accordance with the term call protections, if any, established in the
remarketing; and (3) in whole or in part, at any time on or after the third
anniversary of the reset date following a failed final remarketing at a
redemption price equal to 100% of the then outstanding aggregate principal
amount of the debentures to be redeemed, plus any accrued and unpaid interest on
the portion being redeemed. The term "term redemption price" means any
redemption price established in the remarketing. The initial redemption price
and the term redemption price are each referred to as an optional redemption
price. The remarketing agent will establish term call protections, if any, in
the remarketing that when taken together with the term rate and the term
conversion ratio, if any, result in a price per HIGH TIDES equal to 101% of the
liquidation amount thereof. However, we may not, at any time, redeem the
debentures for a price less than the aggregate principal amount thereof plus any
accrued and unpaid interest thereon.

In the event of any redemption in part, we will not be required to:

- issue, register the transfer of or exchange any debenture during a period
beginning at the opening of business 15 days before any selection for
redemption of debentures and ending at the close of business on the
earliest date on which the relevant notice of redemption is deemed to
have been given to all holders of debentures to be so redeemed; and

- register the transfer of or exchange any debentures so selected for
redemption, in whole or in part, except the unredeemed portion of any
debenture being redeemed in part.

In no event will we optionally redeem the debentures during a deferral
period. Accordingly, prior to optionally redeeming the debentures, all interest
accrued and unpaid (together, in the case of a deferral period, with interest
thereon, to the extent permitted by law) to the interest payment date
immediately preceding the optional redemption date will be paid in full.

Tax Event Redemption

We may also, under limited circumstances within 90 days of the occurrence
and continuation of a tax event, redeem the debentures in whole, but not in
part, at the aggregate principal amount of the debentures, plus any accrued and
unpaid interest. See "Description of HIGH TIDES -- Tax Event or Investment
Company Event Redemption or Distribution."

If we are permitted to consummate a tax event redemption and we desire to
do so, we must cause a notice to be mailed to each holder of HIGH TIDES and each
holder of debentures at least 30 days but not more than 60 days before the
redemption date. In the event of a tax event redemption, you may convert your
HIGH TIDES, or debentures, if applicable, called for redemption into our common
stock at the applicable conversion ratio prior to 5:00 p.m., New York City time,
on the applicable redemption date.

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ADDITIONAL AMOUNTS

If (A) the property trustee is the sole holder of all the debentures and
(B) the trust is required to pay additional sums equal to any additional taxes,
duties, assessments or other governmental charges as a result of a tax event, we
will pay as additional amounts on the debentures those amounts as required so
that the distributions payable by the trust in respect of the HIGH TIDES and its
common securities will not be reduced as a result of any of those additional
sums.

RESTRICTIONS ON PAYMENTS

If (A) there has occurred an event of default under the debentures, (B) we
are in default with respect to our payment of any obligations under the
guarantee of the HIGH TIDES or (C) we have given notice of our election of a
deferral period as provided in the indenture and have not rescinded that notice,
or the deferral period is continuing, we will not:

- make any payment of principal, interest or premium, if any, on or repay
or repurchase or redeem any of our debt securities that rank pari passu
with or junior in interest to the debentures; or

- make any guarantee payments with respect to any guarantee by us of the
debt of any of our subsidiaries if such guarantee expressly ranks pari
passu with or junior in interest to the debentures in each case, other
than:

- dividends or distributions in our common stock;

- any declaration of a dividend in connection with the implementation of
a stockholders' rights plan, or the issuance of stock under any plan
in the future, or the redemption or repurchase of any rights pursuant
thereto;

- payments under the guarantee of the HIGH TIDES;

- purchases or acquisitions of shares of our common stock in connection
with the satisfaction by us of our obligations under any employee
benefit plan or any other contractual obligation, other than a
contractual obligation ranking expressly by its terms pari passu with
or junior in interest to the debentures;

- the purchase of fractional shares resulting from a reclassification of
our capital stock or the exchange or conversion of one class or series
of our capital stock for another class or series of our capital stock;
or

- the purchase of fractional interests in shares of our capital stock
pursuant to the conversion or exchange provisions of the capital stock
or the security being converted or exchanged.

MODIFICATION OF INDENTURE

We and the debenture trustee may amend the indenture from time to time
without the consent of the holders of debentures for several reasons, including
(1) to cure

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ambiguities, defects or inconsistencies, if such action does not materially
adversely affect the interest of the holders of debentures or the holders of the
HIGH TIDES so long as they remain outstanding; or (2) to qualify or maintain the
qualification of, the indenture under the Trust Indenture Act.

We and the debenture trustee may amend the indenture in other respects with
the consent of the holders representing not less than a majority in principal
amount of debentures. However, without the consent of each holder of the
outstanding debenture as affected, no amendment may:

- change the reset date or any date specified in the indenture on which
interest on, or the principal, together with any accrued and unpaid
interest, of the debentures is due and payable or the stated maturity of
the debentures;

- reduce the principal amount of the debentures;

- reduce the rate or extend the time of payment of interest on the
debentures;

- reduce the percentage of principal amount of outstanding debentures the
consent of whose holders is required to amend, waive or supplement the
indenture; or

- have certain other effects as set forth in the indenture.

DEBENTURE EVENTS OF DEFAULT

Each of the following is an event of default with respect to the
debentures:

- failure for 30 days to pay any interest on the debentures when due,
except in the case of permitted deferrals during a deferral period;

- failure to pay any principal or premium, if any, on the debentures when
due, whether at maturity, upon redemption, by declaration of acceleration
or otherwise;

- our continued failure for 90 days to observe or perform, in any material
respect, certain other covenants contained in the indenture after written
notice to us from the debenture trustee or the holders of at least 25% in
aggregate outstanding principal amount of the debentures;

- failure to issue and deliver shares of our common stock upon an election
by a holder of HIGH TIDES to convert its HIGH TIDES;

- certain events of bankruptcy, insolvency or reorganization of Calpine or
any of its significant subsidiaries; or

- the voluntary or involuntary dissolution, winding-up or termination of
the trust, except in connection with the distribution of the debentures
to the holders of HIGH TIDES and the trust's common securities in
liquidation of the trust, the redemption of all of the HIGH TIDES and the
trust's common securities or certain mergers, consolidations or
amalgamations, each as permitted by the declaration of trust.

The holders of a majority in aggregate outstanding principal amount of the
debentures have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the debenture trustee. The debenture
trustee or the holders of not less than 25% in aggregate outstanding principal
amount of the debentures may declare the principal due and payable immediately
upon an event of default described above. If the

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debenture trustee or the holders of debentures fail to make the declaration, the
holders of at least 25% in aggregate liquidation amount of the HIGH TIDES will
have the right to make the declaration. The holders of a majority in aggregate
outstanding principal amount of the debentures may annul the declaration and
waive the default if the default (other than the non-payment of the principal of
the debentures which has become due solely by the acceleration) has been cured
and a sum sufficient to pay all matured installments of interest and principal
due otherwise than by acceleration has been deposited with the debenture
trustee. If the holders of debentures fail to annul the declaration and waive
the default, the holders of a majority in aggregate liquidation amount of the
HIGH TIDES will have the right to make a declaration and waive the default.

The holders of a majority in aggregate outstanding principal amount of the
debentures affected may, on behalf of the holders of all the debentures, waive
any past default, except:

- a default in the payment of principal of or premium, if any, or interest
on the debentures unless we have cured the default and deposited with the
debenture trustee an amount sufficient to pay all matured installments of
interest and principal due otherwise than by acceleration; or

- a default under a provision under the indenture that cannot be modified
or amended without the consent of the holder of each outstanding
debenture.

If the holders of the debentures fail to annul the declaration and waive
the default, the holders of a majority in aggregate liquidation amount of the
HIGH TIDES will have the right. We are required to file annually with the
debenture trustee a certificate as to whether or not we are in compliance with
all the conditions and covenants applicable to us under the indenture.

If an event of default under the debentures exists and the property trustee
holds the debentures, then the property trustee has the right to declare the
principal of and the interest on the debentures, and any other amounts payable
under the indenture, to be immediately due and payable and to enforce its other
rights as a creditor with respect to the debentures.

ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF HIGH TIDES

If an event of default under the debentures exists and the event is
attributable to our failure to pay interest or principal on the debentures on
the date the interest or principal is due, you may institute a direct action
against us for payment. We may not amend the indenture to remove the foregoing
right to bring a direct action against us unless we have received the prior
written consent of the holders of all of the HIGH TIDES. If the right to bring a
direct action against us is removed, the trust may become subject to the
reporting obligations under the Securities Exchange Act of 1934. Our payment to
a holder of HIGH TIDES in connection with a direct action will not affect our
obligation to pay the principal of and interest on the debentures. We will be
subrogated to the rights of the holder of the HIGH TIDES with respect to
payments on the HIGH TIDES to the extent of any payments made by us to the
holder in any direct action.

You will not be able to exercise directly any remedies, other than those
set forth in the preceding paragraph, available to the holders of the debentures
unless there was an event of default under the declaration of trust. See
"Description of HIGH TIDES -- Events of Default; Notice."

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CONSOLIDATION, MERGER, SALE OF ASSETS AND OTHER TRANSACTIONS

We may not merge, consolidate, transfer or lease our properties and assets
substantially as an entirety to any person other than a wholly owned subsidiary,
and no person may merge, consolidate, or transfer or lease its properties and
assets substantially as an entirety to us, unless:

- in case we consolidate with or merge with or into another person or
convey, transfer or lease our properties and assets substantially as an
entirety to any person other than a wholly owned subsidiary, the
successor person is organized under the laws of the United States or any
state of the United States or the District of Columbia, and the successor
person expressly assumes our obligations on the debentures issued under
the indenture and provides for conversion rights in accordance with the
indenture;

- immediately after giving effect to the transaction, no event of default
under the debentures and no event which, after notice or lapse of time or
both, would become an event of default under the debentures, exists;

- if at the time any HIGH TIDES are outstanding, the transaction is
permitted under the declaration of trust and the guarantee relating to
the HIGH TIDES, and does not give rise to any breach or violation of the
declaration of trust or the guarantee; and

- certain other conditions as prescribed in the indenture are met.

The general provisions of the indenture do not afford holders of the
debentures protection in the event of a highly leveraged or other transaction
involving us that may adversely affect holders of the debentures.

SUBORDINATION

All debentures issued under the indenture will be subordinate and junior in
right of payment to all of our senior debt. Upon any payment or distribution of
our assets to creditors upon any liquidation, dissolution, winding-up,
assignment for the benefit of creditors, marshaling of assets or any bankruptcy,
insolvency or similar proceedings relating to Calpine, the holders of senior
debt will first be entitled to receive payment of the senior debt in full before
the holders of debentures, or the property trustee (or any other person or
entity) on behalf of the holders, will be entitled to receive or retain any
payment or distribution in respect of the debentures.

If the maturity of the debentures is accelerated, the holders of all senior
debt outstanding at the time of the acceleration will first be entitled to
receive payment of the senior debt in full (including any amounts due upon
acceleration) before the holders of the debentures will be entitled to receive
or retain any payment or distribution in respect of the debentures.

In the event that:

- we default in the payment of any principal of, premium, if any, interest
on, or any other amount with respect to, any senior debt when the same
becomes due and payable (a "payment default"), whether at maturity or at
a date fixed for prepayment or by declaration of acceleration or
otherwise; and

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- such payment default continues beyond the period of grace, if any,
specified in the instrument evidencing said senior debt;

then, unless and until the default is cured or waived or ceases to exist or all
senior debt is paid in full, no direct or indirect payment or distribution (in
cash, property, securities, by set-off or otherwise) will be made or agreed to
be made for or in respect of the debentures, or in respect of any redemption,
repayment, retirement, purchase or other acquisition of any of the debentures.

The term "senior debt" means:

(A) indebtedness evidenced by securities, debentures, bonds or other
similar instruments issued by us;

(B) all obligations to make payment pursuant to the terms of financial
instruments, such as (1) securities contracts and foreign currency
exchange contracts, (2) derivative instruments, such as swap
agreements, including interest rate and foreign exchange rate swap
agreements, cap agreements, floor agreements, collar agreements,
interest rate agreements, foreign exchange agreements, options,
commodity futures contracts and commodity options contracts, and (3)
similar financial instruments; except, in the case of (A) and (B)
above, the indebtedness and obligations that are expressly stated to
rank junior in right of payment to, or pari passu in right of payment
with, the debentures;

(C) indebtedness or obligations of others of the kind described in (A) and
(B) above for the payment of which we are responsible or liable as
guarantor or otherwise; and

(D) any deferrals, renewals or extensions of any senior debt.

However, senior debt will not be deemed to include:

- any of our debt which, when incurred and without respect to any election
under Section 1111(b) of the United States Bankruptcy Code of 1978, was
without recourse to us;

- trade accounts payable in the ordinary course of business, which will not
constitute debt for purposes of the HIGH TIDES;

- any of our debt to any of our subsidiaries, except to the extent incurred
for the benefit of third parties;

- debt to any of our employees; or

- debt which expressly provides that it is not senior in right of payment
to the HIGH TIDES.

The term "debt" means:

- the principal of, and premium and interest, if any, on indebtedness for
money borrowed;

- purchase money and similar obligations;

- obligations under capital leases;

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- guarantees, assumptions or purchase commitments relating to, or other
transactions as a result of which we are responsible for the payment of
the indebtedness of others;

- renewals, extensions and refunding of any indebtedness;

- interest or obligations in respect of any indebtedness accruing after the
commencement of any insolvency or bankruptcy proceedings; and

- obligations associated with derivative products such as interest rate and
currency exchange contracts, foreign exchange contracts, commodity
contracts and similar arrangements.

The indenture places no limitation on the amount of senior debt that may be
incurred by us. We expect from time to time to incur additional indebtedness
constituting senior debt. As of June 30, 1999, our aggregate outstanding senior
debt was approximately $1.5 billion. The indenture also places no limitation on
the debt of our subsidiaries, which effectively ranks senior in right of payment
to the debentures. As of June 30, 1999, our subsidiaries had debt and other
liabilities of approximately $79.2 million.

REGISTRATION AND TRANSFER

The debentures will be represented by one or more global certificates
registered in the name of Cede & Co. as the nominee of DTC if, and only if,
distributed to the holders of the HIGH TIDES and the trust's common securities.
Until that time, the debentures will remain registered in the name of and held
by the property trustee. If the debentures are distributed to holders of the
HIGH TIDES and the trust's common securities, beneficial interests in the
debentures will be shown on, and transfers of debentures will be effected only
through, records maintained by participants in DTC. Except as described below,
debentures in certificated form will not be issued in exchange for the global
certificates.

A global security will be exchangeable for debentures in certificated form
registered in the names of persons other than Cede & Co. only if:

- DTC notifies us that it is unwilling or unable to continue as a
depositary for the global security and no successor depositary has been
appointed, or if at any time DTC ceases to be a "clearing agency"
registered under the Securities Exchange Act of 1934, at a time when DTC
is required to be so registered to act as the depositary;

- we, in our sole discretion, determine that the global security will be so
exchangeable; or

- there has occurred and is continuing an event of default under the
debentures.

Any global security that is exchangeable pursuant to the preceding sentence
will be exchangeable for certificates registered in those names as DTC directs.
It is expected that the instructions will be based upon directions received by
DTC from its participants with respect to ownership of beneficial interests in
the global security.

Payments on debentures held in global form will be made to DTC, as the
depositary for the debentures. In the case of debentures issued in certificated
form, principal and interest will be payable, the transfer of the debentures
will be registrable, and debentures will be exchangeable for debentures of other
denominations of a like aggregate principal amount, at

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the corporate office of the debenture trustee in New York, New York, or at the
offices of any paying agent or transfer agent appointed by us, provided that
payment of interest may be made at our option of by check mailed to the address
of the persons entitled thereto or by wire transfer.

For a description of DTC and the terms of the depositary arrangements
relating to payments, transfers, voting rights, redemptions and other notices
and other matters, see "Description of HIGH TIDES -- Form, Book-Entry Procedures
and Transfer." If the debentures are distributed to the holders of the HIGH
TIDES and the trust's common securities upon the trust's termination, the form,
book-entry and transfer procedures with respect to the HIGH TIDES as described
under "Description of HIGH TIDES -- Form, Book-Entry Procedures and Transfer,"
will apply to the debentures with such changes to the details of the procedures
as are necessary.

PAYMENT AND PAYING AGENTS

Payment of the principal of and interest on the debentures will be made at
the office or agency we maintain for that purpose in New York, New York, in the
coin or currency of the United States of America as at the time of payment is
legal tender for payment of public and private debts. However, at our option,
payment of interest may be made, except in the case of debentures that are held
in global form, by check mailed to each registered holder or by wire transfer.
Payment of any interest on any debentures will be made to the person in whose
name the debentures are registered at the close of business on the record date
for that interest payment date, except in the case of defaulted interest.

GOVERNING LAW

The indenture and the debentures will be governed by and construed in
accordance with the laws of the State of New York.

INFORMATION CONCERNING THE DEBENTURE TRUSTEE

The debenture trustee will be subject to all the duties and
responsibilities specified with respect to an indenture trustee under the Trust
Indenture Act. Subject to those provisions, the debenture trustee is under no
obligation to exercise any of the powers vested in it by the indenture at the
request of any holder of debentures, unless offered reasonable indemnity by the
holder against the costs, expenses and liabilities that it might incur by doing
so. The debenture trustee is not required to expend or risk its own funds or
otherwise incur personal financial liability in the performance of its duties if
the debenture trustee reasonably believes that repayment or adequate indemnity
is not reasonably assured to it.

DESCRIPTION OF THE GUARANTEE

When the HIGH TIDES are issued, we will execute and deliver a guarantee for
the benefit of the holders of the HIGH TIDES. The Bank of New York will act as
guarantee trustee under the guarantee. The guarantee will be qualified under the
Trust Indenture Act upon the effectiveness of the registration statement of
which this prospectus is a part. This summary of certain provisions of the
guarantee is not complete. For a complete description of the guarantee, we
encourage you to read the guarantee. The guarantee trustee will hold the

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guarantee for the benefit of the holders of the HIGH TIDES. We have filed the
form of guarantee as an exhibit to the registration statement of which this
prospectus is a part. Unless the context requires otherwise, "Calpine," "we,"
"us," "our" or similar terms in this section refer solely to Calpine Corporation
and not the trust or any of our other consolidated subsidiaries.

GENERAL

Pursuant to the guarantee, we will irrevocably agree to make guarantee
payments to you, as and when due, regardless of any defense, right of set-off or
counterclaim that the trust may have or assert other than the defense of
payment. The guarantee covers the following payments with respect to the HIGH
TIDES, to the extent not paid by or on behalf of the trust:

- any accrued and unpaid distributions required to be paid on the HIGH
TIDES, to the extent that the trust has funds on hand available at that
time;

- the applicable redemption price of any HIGH TIDES called for redemption,
to the extent that the trust has funds on hand available at that time;
and

- upon a voluntary or involuntary dissolution, winding up or liquidation of
the trust unless the debentures are distributed to you or are redeemed,
the lesser of:

- the liquidation distribution, to the extent the trust has funds
available; or

- the amount of assets of the trust remaining available for
distribution to you upon liquidation of the trust after
satisfaction of liabilities to the trust's creditors as required
by applicable law.

Our obligation to make a guarantee payment may be satisfied by direct
payment of the required amounts by us to you or by causing the trust to pay
those amounts to you.

The guarantee will be an irrevocable guarantee on a subordinated basis of
the trust's obligations under the HIGH TIDES, but applies only to the extent
that the trust has funds sufficient to make the required payments. If we do not
make interest payments on the debentures held by the trust, the trust will not
be able to pay distributions on the HIGH TIDES and will not have funds legally
available for the distributions.

The guarantee will rank subordinate and junior in right of payment to all
senior debt. See "-- Status of the guarantee." Our right to participate in any
distribution of assets of any of our subsidiaries, upon the subsidiary's
liquidation or reorganization or otherwise (and thus the ability of the holders
of HIGH TIDES to benefit indirectly from any such distribution), is subject to
the prior claims of creditors of the subsidiary, except to the extent we may
ourselves be recognized as a creditor of that subsidiary. Accordingly, our
obligations under the guarantee will be effectively subordinated to all existing
and future liabilities of our subsidiaries, and claimants should look only to
our assets for payments thereunder. The guarantee does not limit our incurrence
or issuance of other secured or unsecured debt, including senior debt.

See "Relationship Among the HIGH TIDES, the Convertible Subordinated
Debentures and the Guarantee" for a discussion of other important terms and
conditions of the guarantee.

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STATUS OF THE GUARANTEE

The guarantee will constitute our unsecured obligation and will rank
subordinate and junior in right of payment to all senior debt in the same manner
as the debentures.

The guarantee will constitute a guarantee of payment and not of collection
(i.e., you may institute a legal proceeding directly against us to enforce your
rights under the guarantee without first instituting a legal proceeding against
any other person or entity). The guarantee will be held for your benefit. The
guarantee will not be discharged except by payment of the guarantee payments in
full to the extent not paid by the trust or upon distribution to the holders of
the HIGH TIDES or the debentures. The guarantee does not place a limitation on
the amount of additional senior debt that may be incurred by us. We expect from
time to time to incur additional indebtedness constituting senior debt.

AMENDMENTS AND ASSIGNMENT

The guarantee may not be amended without the prior approval of the holders
of not less than a majority of the aggregate liquidation amount of the
outstanding HIGH TIDES, except that no approval is required for changes that do
not materially adversely affect your rights. The manner of obtaining such
approval will be as set forth under "Description of HIGH TIDES -- Voting Rights;
Amendment of the Declaration." All guarantees and agreements contained in the
guarantee will bind our successors, assigns, receivers, trustees and
representatives and will inure to the benefit of the holders of the HIGH TIDES
then outstanding.

EVENTS OF DEFAULT

We will be in default under the guarantee if we do not make required
payments when due or if we fail to perform other obligations and we do not cure
our failure to perform within 60 days after we receive notice of our failure.
The holders of not less than a majority in aggregate liquidation amount of the
HIGH TIDES have the right:

- to direct the time, method and place of conducting any proceeding for any
remedy available to the guarantee trustee in respect of the guarantee; or

- to direct the exercise of any trust or power conferred upon the guarantee
trustee under the guarantee.

You may institute a legal proceeding directly against us to enforce your
rights under the guarantee without first instituting a legal proceeding against
the trust, the guarantee trustee or any other person or entity.

As guarantor, we are required to file annually with the guarantee trustee a
certificate as to whether or not we are in compliance with all the conditions
and covenants applicable to us under the guarantee.

INFORMATION CONCERNING THE GUARANTEE TRUSTEE

The guarantee trustee undertakes to perform only those duties as are
specifically set forth in the guarantee, unless we are in default in performing
the guarantee. When we are in default under the guarantee, the guarantee trustee
must exercise the same degree of care and skill as a prudent person would
exercise or use in the conduct of his or her own affairs. Subject to this
provision, the guarantee trustee is under no obligation to exercise

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any of the powers vested in it by the guarantee at the request of any holder of
the HIGH TIDES unless it is offered reasonable indemnity against the costs,
expenses and liabilities that might incur by doing so.

TERMINATION OF THE GUARANTEE

The guarantee will terminate as to you upon:

- full payment of the redemption price of the HIGH TIDES held by you and
any accrued and unpaid distributions;

- distribution of the debentures held by the trust to you;

- liquidation of the trust; or

- distribution of our common stock to you in respect of the conversion of
your HIGH TIDES into common stock.

The guarantee will terminate completely upon full payment of the amounts
payable in accordance with the declaration of trust. The guarantee will continue
to be effective or will be reinstated, as the case may be, if at any time any
holder of the HIGH TIDES must restore payment of any sums paid under the HIGH
TIDES or the guarantee.

GOVERNING LAW

The guarantee will be governed by and construed in accordance with the laws
of the State of New York.

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RELATIONSHIP AMONG THE HIGH TIDES, THE CONVERTIBLE
SUBORDINATED DEBENTURES AND THE GUARANTEE

FULL AND UNCONDITIONAL GUARANTEE

We will irrevocably guarantee payments of distributions and other amounts
due on the HIGH TIDES (to the extent the trust has funds available for the
payment of those distributions) as and to the extent set forth under
"Description of the Guarantee." Taken together, our obligations under the
debentures, the indenture, the declaration of trust and the guarantee, including
our obligation to pay the trust's costs, expenses and other liabilities (other
than the trust's obligations to the holders of the HIGH TIDES and its common
securities pursuant to the terms of those securities) provide in the aggregate,
a full, irrevocable and unconditional guarantee of all of the trust's
obligations under the HIGH TIDES. No single document standing alone or operating
in conjunction with fewer than all of the other documents constitutes the full
guarantee. It is only the combined operation of these documents that has the
effect of providing a full, irrevocable and unconditional guarantee of the
trust's obligations under the HIGH TIDES and its common securities.

If and to the extent that we do not make payments on the debentures, the
trust will not pay distributions or other amounts due on the HIGH TIDES. The
guarantee does not cover payment of distributions when the trust does not have
sufficient funds to pay those distributions. In that event, your remedy is to
institute a direct action against us. Our obligations under the guarantee are
subordinate and junior in right of payment to all senior debt. Unless the
context requires otherwise, "Calpine," "we," "us," "our" or similar terms in
this section refer solely to Calpine Corporation and not the trust or any of our
other consolidated subsidiaries.

SUFFICIENCY OF PAYMENTS

As long as payments of interest and other payments are made when due on the
debentures, the payments will be sufficient to cover distributions and other
payments due on the HIGH TIDES. This is primarily because:

- the aggregate principal amount or applicable redemption price of the
debentures will be equal to the sum of the aggregate liquidation amount
or applicable redemption price, as applicable, of the HIGH TIDES and the
trust's common securities;

- the applicable rate and interest and other payment dates on the
debentures will match the distribution rate and distributions and other
payment dates for the HIGH TIDES;

- we will pay for all of the trust's costs, expenses and liabilities except
the trust's obligations to holders of HIGH TIDES and its common
securities pursuant to the terms of those securities; and

- the declaration of trust provides that the trust will not engage in any
activity that is not consistent with the limited purposes of the
declaration of trust.

We have the right to set off any payment we are otherwise required to make
under the indenture with and to the extent we have already made, or are
concurrently on the

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date of that payment making, any payment under the guarantee used to satisfy the
related payment of indebtedness under the indenture.

ENFORCEMENT RIGHTS OF HOLDERS OF HIGH TIDES

You may institute a legal proceeding directly against us to enforce your
rights under the guarantee without first instituting a legal proceeding against
the guarantee trustee, the trust or any other person or entity.

A default or event of default under any senior debt would not constitute a
default or event of default under the declaration of trust. However, in the
event of payment and certain other defaults under, or acceleration of, senior
debt, the subordination provisions of the indenture provide that no payments may
be made in respect of the debentures until the senior debt has been paid in full
or the payment or other default under any senior debt has been cured or waived.
Failure to make required payments on debentures would constitute an event of
default under the declaration of trust.

LIMITED PURPOSE OF THE TRUST

The HIGH TIDES evidence an undivided beneficial ownership interest in the
assets of the trust, and the trust exists for the sole purpose of issuing the
HIGH TIDES and the trust's common securities and investing the proceeds of the
HIGH TIDES and the trust's common securities in the debentures and engaging in
only those other activities necessary, convenient or incidental to those
purposes.

RIGHTS UPON DISSOLUTION

Upon any voluntary or involuntary dissolution, winding-up or liquidation of
the trust involving the liquidation of the debentures, after satisfaction of the
liabilities of the creditors of the trust as required by applicable law, you and
the holders of the trust's common securities will be entitled to receive, out of
the trust's assets held, the liquidation distribution in cash. See "Description
of HIGH TIDES -- Liquidation of the Trust and Distribution of Convertible
Subordinated Debentures." If we become subject to any voluntary or involuntary
liquidation or bankruptcy, the property trustee, as holder of the debentures,
would be one of our subordinated creditors. The property trustee would be
subordinated in right of payment to all senior debt as set forth in the
indenture, but entitled to receive payment in full of principal and interest,
before any of our stockholders receive payments or distributions. We are the
guarantor under the guarantee and have agreed to pay for all of the trust's
costs, expenses and liabilities other than the trust's obligations to the
holders of its HIGH TIDES and common securities. Accordingly, in the event of
our liquidation or bankruptcy, the positions of a holder of HIGH TIDES and a
holder of debentures are expected to be substantially the same relative to our
other creditors and to our shareholders.

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CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES

GENERAL

The following is a summary of the material United States federal income tax
consequences of the purchase, ownership, disposition, and conversion of HIGH
TIDES and our common stock by persons that acquire HIGH TIDES pursuant to the
initial offering at their original offering price. This summary represents the
views of Brobeck, Phleger & Harrison LLP, counsel to Calpine and the trust.
Unless otherwise stated, this summary deals only with HIGH TIDES and Calpine's
common stock held as capital assets by United States persons which, as defined
in the Internal Revenue Code of 1986, as amended, include any beneficial owners,
that are, for United States federal income tax purposes, (1) citizens or
residents of the United States, (2) corporations or partnerships created or
organized in or under the laws of the United States, any state thereof or the
District of Columbia (other than partnerships that are not treated as a United
States person under any applicable Treasury regulations), (3) estates, the
income of which is subject to United States federal income taxation regardless
of its source, or (4) trusts if (A) a court within the United States is able to
exercise primary supervision over the administration of the trust and (B) one or
more United States persons have the authority to control all substantial
decisions of the trust. It does not deal with special classes of holders such as
banks, thrifts, real estate investment trusts, regulated investment companies,
insurance companies, dealers in securities or currencies, or tax-exempt
investors. This summary also does not address the tax consequences to persons
that have a functional currency other than the U.S. dollar or the tax
consequences to shareholders, partners or beneficiaries of a holder of HIGH
TIDES or Calpine's common stock. Further, it does not include any description of
any alternative minimum tax consequences or the tax laws of any state or local
government or of any foreign government that may be applicable to the HIGH TIDES
or Calpine's common stock. This summary is based on the Internal Revenue Code,
the Treasury regulations promulgated thereunder and administrative and judicial
interpretations thereof, all as of the date hereof, and all of which are subject
to change, possibly on a retroactive basis.

In part because of the uncertainties concerning the proper tax treatment of
HIGH TIDES as discussed below, it is particularly important that you consult
with your own tax advisor regarding the federal, state, local and foreign
income, franchise, personal property, and any other tax consequences of the
purchase, ownership, disposition and conversion of the HIGH TIDES and the
ownership and disposition of Calpine's common stock.

CLASSIFICATION OF THE TRUST AS A GRANTOR TRUST

In connection with the issuance of the HIGH TIDES, Brobeck, Phleger &
Harrison LLP will render its opinion that, under then current law and assuming
full compliance with the terms of the declaration of trust (and certain other
documents), and based on certain facts and assumptions contained in such
opinion, the trust will be classified for United States federal income tax
purposes as a grantor trust and not as a partnership, an association or a
publicly traded partnership taxable as a corporation. Accordingly, for United
States federal income tax purposes, each holder of HIGH TIDES generally will be
considered the owner of an undivided interest in the debentures issued by us to
the trust, and each holder will be required to include in its gross income all
income or gain with respect to its allocable share of those debentures.

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CLASSIFICATION OF THE DEBENTURES AS INDEBTEDNESS

In connection with the issuance by us of the debentures, Brobeck, Phleger &
Harrison LLP will render its opinion that, under then current law and assuming
full compliance with the terms of the debentures (and certain other documents),
and based on certain facts and assumptions contained in such opinion, the
debentures will be classified for United States federal income tax purposes as
indebtedness of Calpine. This opinion is not binding on the Internal Revenue
Service and, accordingly, no complete assurance can be given that the Internal
Revenue Service will not challenge the classification of the debentures as debt,
or if the classification were challenged, that such a challenge would not be
successful. The remainder of this discussion assumes that the debentures will be
classified as indebtedness of Calpine for United States federal income tax
purposes.

TAX TREATMENT OF DEBENTURES AS RESET BONDS

Because no debt instrument closely comparable to the debentures has been
the subject of any Treasury regulation, revenue ruling or judicial decision, the
United States federal income tax treatment of debt obligations such as the
debentures is not certain. We intend to treat the debentures for United States
federal income tax purposes as "reset bonds" under Treasury regulations relating
to variable rate debt instruments. Assuming the debentures are reset bonds, they
will be treated, solely for purposes of the original issue discount rules of the
Internal Revenue Code, as maturing on the date immediately preceding the reset
date for the reset price and, if the remarketing agent remarkets the HIGH TIDES,
as being reissued on the reset date at the reset price.

There can be no assurance that the Internal Revenue Service will agree
with, or that a court would uphold, the treatment of the debentures as reset
bonds. In particular, the Internal Revenue Service could instead attempt to
treat the debentures as maturing at their stated maturity on October , 2029. If
the debentures were treated as maturing on such date, the debentures would be
treated as having contingent interest under the Treasury regulations governing
debt instruments that provide for contingent payments. In that event, we would
be required to construct a projected payment schedule for the debentures, based
on our current borrowing costs for comparable noncontingent debt instruments,
from which an estimated yield on the debentures would be calculated. A holder
would be required to include in income original issue discount in an amount
equal to the product of the "adjusted issue price" of the debentures at the
beginning of each interest accrual period and the estimated yield of the
debentures and to make certain adjustments to such income accruals for
differences between actual payments and projected payments. In general, the
"adjusted issue price" of a debenture would be equal to its "issue price" (the
first price at which a substantial amount of the HIGH TIDES are sold to the
public, ignoring sales to bond houses, brokers and similar persons acting as
underwriters, placement agents or wholesalers), increased by the original issue
discount, if any, previously accrued on the debenture, and reduced by any
payments made on the debenture. During the period prior to the reset date, the
original issue discount would accrue at a rate that is greater than the
applicable rate, and holders would have more taxable income than the cash
payable on the HIGH TIDES.

In addition, under the Treasury regulations governing debt instruments that
provide for contingent payments, holders who sold or redeemed their HIGH TIDES
would recognize ordinary loss or reduced gain at that time to reflect any excess
of prior original issue discount accruals over actual interest payments
received. Holders who retain their

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HIGH TIDES following the reset date would reduce their original issue discount
accruals after that date to reflect any such excess prior to the reset date.
Furthermore, under the Treasury regulations, any gain realized with respect to
the HIGH TIDES would generally be treated as ordinary income; any loss realized
would generally be treated as ordinary loss to the extent of the holder's prior
ordinary income inclusions with respect to the HIGH TIDES, and any additional
loss would be capital loss.

The following discussion assumes the debentures are properly treated as
reset bonds rather than as contingent payment debt instruments.

INTEREST INCOME

Under the Treasury regulations, a "remote" contingency that stated interest
will not be timely paid will be ignored in determining whether a debt instrument
is issued with original issue discount. We believe that the likelihood of
interest payments being deferred is remote. Based on the foregoing, we believe
that the debentures will not be considered to be issued with original issue
discount at the time of their original issuance and, accordingly, a holder of
HIGH TIDES should include in gross income such holder's allocable share of
interest on the debentures in accordance with such holder's method of tax
accounting. If it is determined that the possible deferral of interest payments
should not be treated as a remote contingency, interest on the debentures would
not be treated as "qualified stated interest" and, thus, the debentures would be
treated as having been issued with original issue discount. In such case,
holders of HIGH TIDES would be required to include in income their allocable
share of the original issue discount accrued by the trust with respect to the
debentures on an economic accrual basis over the period of time the HIGH TIDES
(and the underlying allocable share of the debentures) are held, regardless of
their regular methods of accounting and regardless of whether interest has been
paid on the debentures or distributions are made on the HIGH TIDES. Actual
payments of interest on the debentures and corresponding distributions or the
HIGH TIDES would not result in additional income being recognized by the holders
of the HIGH TIDES. In such event, the interest income included by the holders of
the HIGH TIDES should not differ from the actual interest paid on the
debentures.

In addition, under the Treasury regulations, if at any time the payment of
interest on the debentures is deferred, the debentures would, solely for
purposes of determining the existence and amount of original issue discount with
respect to the debentures, at that time be treated as retired and reissued with
original issue discount, and all stated interest on the debentures would
thereafter be treated as original issue discount as long as the debentures
remained outstanding. In such event, holders of HIGH TIDES would be required to
include in income their allocable share of the original issue discount accrued
by the trust with respect to the debentures on an economic accrual basis over
the period of time that the HIGH TIDES (and the underlying allocable share of
the debentures) are held, regardless of their regular methods of tax accounting
and regardless of whether interest has been paid on the debentures or
distributions are made on the HIGH TIDES. Assuming that the debentures are
treated as reset bonds (as discussed above), the total original issue discount
that would accrue during the period up to the day before the reset date if we
were to exercise our option to defer payments of interest would be equal to the
excess of (1) the sum of (A) the reset price, plus (B) the total stated interest
payments called for under the debentures prior to the reset date after the date
we exercise our option to defer interest payments on the debentures, over (2)
the adjusted issue price of the debentures as of the date we exercised our
option to defer payments of interest. Because the reset price

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exceeds the principal amount of the debentures, during the period following the
date we exercise our option to defer interest payments on the debentures through
the reset date holders will accrue original issue discount at a rate slightly in
excess of the applicable initial rate.

The following discussion assumes that we will not defer payments of
interest on the debentures, and that the debentures will not be issued with
original issue discount.

Because the income underlying the HIGH TIDES will not be characterized as
dividends for United States federal income tax purposes, corporate holders of
the HIGH TIDES will not be entitled to a dividends received deduction for any
income recognized with respect to the HIGH TIDES.

RECEIPT OF DEBENTURES OR CASH UPON LIQUIDATION OF THE TRUST

Under certain circumstances, as described under the caption "Description of
HIGH TIDES -- Tax Event or Investment Company Event Redemption or Distribution,"
debentures may be distributed to holders in exchange for the HIGH TIDES and in
liquidation of the trust. Under current law, such a distribution to holders, for
United States federal income tax purposes, would be treated as a nontaxable
event to each holder, and each holder would receive an aggregate tax basis in
the debentures equal to such holder's aggregate tax basis in its HIGH TIDES. A
holder's holding period in the debentures so received in liquidation of the
trust would include the period during which the HIGH TIDES were held by such
holder. If, however, the exchange is caused by a tax event which results in the
trust being treated as an association taxable as a corporation, the distribution
would likely constitute a taxable event to holders of the HIGH TIDES.

Under certain circumstances described herein (see "Description of HIGH
TIDES"), the debentures may be redeemed for cash and the proceeds of such
redemption distributed to holders in redemption of their HIGH TIDES. Under
current law, such a redemption would, for United States federal income tax
purposes, constitute a taxable disposition of the redeemed HIGH TIDES as to
holders, and a holder would recognize gain or loss as if it sold such redeemed
HIGH TIDES for cash. See "-- Sale of HIGH TIDES."

SALE OF HIGH TIDES

A holder that sells its HIGH TIDES will recognize capital gain or loss
equal to the difference between the amount realized on the sale of the HIGH
TIDES and the holder's adjusted tax basis in such HIGH TIDES. A holder's
adjusted tax basis in its HIGH TIDES generally will be the initial purchase
price paid therefor. In the case of a holder other than a corporation, the
maximum marginal United States federal income tax rate applicable to gain
recognized in the sale of HIGH TIDES is 20% if such holder's holding period for
such HIGH TIDES exceeds one year.

To the extent the selling price is less than the holder's adjusted tax
basis, the holder will recognize a capital loss. Subject to certain limited
exceptions, capital losses cannot be applied to offset ordinary income for
United States federal income tax purposes.

CONVERSION OF HIGH TIDES INTO COMMON STOCK

A holder of HIGH TIDES will not recognize income, gain or loss upon the
conversion, through the conversion agent, of debentures into common stock. The
holder

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will recognize gain upon the receipt of cash in lieu of a fractional share of
common stock equal to the amount of cash received less the holder's adjusted tax
basis in such fractional share. A holder's tax basis in the common stock
received upon conversion generally will be equal to the holder's tax basis in
the HIGH TIDES delivered to the conversion agent for exchange less the tax basis
allocated to any fractional share for which cash is received, and a holder's
holding period in the common stock received upon conversion generally will
include the period during which the HIGH TIDES were held by such holder.

DIVIDENDS

The amount of any distribution we make in respect of our common stock will
be equal to the amount of cash and the fair market value, on the date of
distribution, of any property distributed. Generally, distributions will be
treated as a dividend, subject to tax as ordinary income, to the extent of our
current or accumulated earnings and profits, then as a tax-free return of
capital to the extent of a holder's tax basis in the common stock and thereafter
as gain from the sale or exchange of such stock (as described below).

In general, a dividend distribution to a corporate holder will qualify for
the 70% dividends received deduction if the holder owns less than 20% of the
voting power and value of our stock (other than any non-voting, non-convertible,
non-participating preferred stock). A corporate holder that owns 20% or more of
the voting power and value of our stock (other than any non-voting,
non-convertible, non-participating preferred stock) generally will qualify for
an 80% dividends received deduction. The dividends received deduction is subject
to certain holding period, taxable income and other limitations.

SALE OF COMMON STOCK

Upon the sale or exchange of common stock, a holder generally will
recognize capital gain or loss equal to the difference between (1) the amount of
cash and the fair market value of any property received upon the sale or
exchange and (2) such holder's adjusted tax basis in the common stock. In the
case of a holder other than a corporation, the maximum marginal United States
federal income tax rate applicable to such gain is 20% if such holder's holding
period for such common stock exceeds one year. A holder's basis and holding
period in common stock received upon conversion of HIGH TIDES are determined as
discussed above under "-- Conversion of HIGH TIDES into Common Stock."

ADJUSTMENT OF CONVERSION PRICE

Treasury regulations promulgated under Section 305 of the Internal Revenue
Code would treat holders of HIGH TIDES as having received a constructive
distribution from us in the event the applicable conversion ratio of the
debentures were adjusted if (1) as a result of such adjustment, the
proportionate interest (measured by the amount of common stock into which the
debentures are convertible) of the holders of the HIGH TIDES in the assets or
earnings and profits of Calpine were increased, and (2) the adjustment was not
made pursuant to a bona fide, reasonable antidilution formula. An adjustment in
the applicable conversion ratio would not be considered made pursuant to such a
formula if the adjustment was made to compensate for certain taxable
distributions with respect to the common stock. Thus, under certain
circumstances, a reduction in the conversion price for the holders may result in
deemed dividend income to holders to the extent of the current or accumulated
earnings and profits of Calpine. Holders of the HIGH TIDES

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would be required to include their allocable share of such deemed dividend
income in gross income but will not receive any cash related thereto.

We will take the position that the adjustment to the initial conversion
ratio in connection with the remarketing will constitute an "isolated"
recapitalization for United States federal income tax purposes and, therefore,
not be deemed a constructive dividend under Section 305. However, the Internal
Revenue Service might contend that any increase in such initial conversion ratio
on the reset date is a constructive dividend to holders of the HIGH TIDES who
hold the HIGH TIDES immediately before the reset date and that any decrease in
such initial conversion ratio on the reset date (or elimination of the
conversion feature on the reset date) is a constructive dividend to all holders
of common stock at that time. In each case, the amount of the constructive
dividend would be the fair market value on the reset date of the number of
shares of common stock which, if actually distributed to holders of HIGH TIDES
(in the case of an increase in the initial conversion ratio) or to holders of
the common stock (in the case of a decrease in the initial conversion ratio or
elimination of convertibility of HIGH TIDES), would produce the same increase in
the proportionate interests of such holders in the assets or earnings and
profits of Calpine as that produced by the adjustment. The aggregate deemed
dividend is limited to the current or accumulated earnings and profits of
Calpine. Holders of HIGH TIDES would be required to include any such
constructive dividend to them in gross income but would not receive any cash
related thereto.

INFORMATION REPORTING AND BACKUP WITHHOLDING TAX

In general, information reporting requirements will apply to payments of
principal, premium, if any, and interest on HIGH TIDES, payments of dividends on
common stock, payments of the proceeds of the sale of HIGH TIDES and payments of
the proceeds of the sale of common stock, and a 31% backup withholding tax may
apply to such payments if the holder (1) fails to furnish or certify his correct
taxpayer identification number to the payor in the manner required, (2) is
notified by the Internal Revenue Service that he has failed to report payments
of interest and dividends properly, or (3) under certain circumstances, fails to
certify that he has not been notified by the Internal Revenue Service that he is
subject to backup withholding for failure to report interest and dividend
payments. Any amounts withheld under the backup withholding rules from a payment
to a holder will be allowed as a credit against such holder's United States
federal income tax and may entitle the holder to a refund, provided that the
required information is furnished to the Internal Revenue Service.

NON-U.S. HOLDERS

The rules governing United States federal income taxation of a beneficial
owner of HIGH TIDES or common stock that, for United States federal income tax
purposes, is a holder who is not a U.S. person as that term is defined in the
Internal Revenue Code are complex and no attempt will be made herein to provide
more than a summary of such rules. Non-U.S. holders should consult with their
own tax advisors to determine the effect of federal, state, local and foreign
income tax laws, as well as treaties, with regard to an investment in the HIGH
TIDES and common stock, including any reporting requirements.

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INTEREST INCOME

Generally, interest income of a non-U.S. holder that is not effectively
connected with a United States trade or business will be subject to a
withholding tax at a 30% rate (or, if applicable, a lower tax rate specified by
a treaty). However, interest income earned on the debentures by a non-U.S.
holder will qualify for the "portfolio interest" exemption and therefore will
not be subject to United States federal income tax or withholding tax, provided
that such interest income is not effectively connected with a United States
trade or business of the non-U.S. holder and provided that (1) the non-U.S.
holder does not actually or constructively (including by virtue of its interest
in the underlying debentures) own 10% or more of the total combined voting power
of all classes of our stock entitled to vote; (2) the non-U.S. holder is not a
controlled foreign corporation that is related to us through stock ownership;
(3) the non-U.S. holder is not a bank which acquired the HIGH TIDES in
consideration for an extension of credit made pursuant to a loan agreement
entered into in the ordinary course of business and (4) either (A) the non-U.S.
holder certifies to the trust or its agent, under penalties of perjury, that it
is not a United States person and provides its name and address or (B) a
securities clearing organization, bank or other financial institution that holds
customer securities in the ordinary course of its trade or business, and holds
HIGH TIDES in such capacity, certifies to the trust or its agent, under
penalties of perjury, that such statement has been received from the beneficial
owner by it or by a financial institution between it and the beneficial owner
and furnishes the trust or its agent with a copy thereof.

Final Treasury regulations would modify the certification requirements on
payments of interest made after December 31, 2000. Prospective investors should
consult their own tax advisors as to the effect, if any, of the final Treasury
regulations on their purchase, ownership and disposition of the HIGH TIDES and
common stock.

Except to the extent that an applicable treaty otherwise provides, a
non-U.S. holder generally will be taxed with respect to interest in the same
manner as a holder that is a United States person if the interest income is
effectively connected with a United States trade or business of the non-U.S.
holder. Effectively connected interest received or accrued by a corporate
non-U.S. holder may also, under certain circumstances, be subject to an
additional "branch profits" tax at a 30% rate (or, if applicable, a lower tax
rate specified by a treaty). Even though such effectively connected interest is
subject to income tax, and may be subject to the branch profits tax, it is not
subject to withholding tax if the non-U.S. holder delivers a properly executed
Internal Revenue Service Form 4224 (or successor form) to the payor.

SALE, EXCHANGE OR REDEMPTION OF HIGH TIDES

A non-U.S. holder of HIGH TIDES generally will not be subject to United
States federal income tax or withholding tax on any gain realized on the sale,
exchange or redemption of the HIGH TIDES (including the receipt of cash in lieu
of fractional shares upon conversion of HIGH TIDES into common stock) unless (1)
the gain is effectively connected with a United States trade or business of the
non-U.S. holder, (2) in the case of a non-U.S. holder who is an individual, such
holder is present in the United States for a period or periods aggregating 183
days or more during the taxable year of the disposition, and either such holder
has a "tax home" in the United States or the disposition is attributable to an
office or other fixed place of business maintained by such holder in the United
States, or

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(3) the non-U.S. holder is subject to tax pursuant to the provisions of the
Internal Revenue Code applicable to certain United States expatriates.

CONVERSION OF HIGH TIDES

In general, no United States federal income tax or withholding tax will be
imposed upon the conversion of HIGH TIDES into common stock by a non-U.S. holder
(except with respect to the non-U.S. holder's receipt of cash in lieu of
fractional shares where one of the conditions described above under "-- Sale,
Exchange or Redemption of HIGH TIDES" is satisfied).

SALE OR EXCHANGE OF COMMON STOCK

A non-U.S. holder generally will not be subject to United States federal
income tax or withholding tax on the sale or exchange of common stock unless one
of the conditions described above under "-- Sale, Exchange or Redemption HIGH
TIDES" is satisfied.

DIVIDENDS

Distributions by Calpine with respect to the common stock that are treated
as dividends paid (or deemed paid), as described above under "-- Dividends" to a
non-U.S. holder (excluding dividends that are effectively connected with the
conduct of a United States trade or business by such holder and are taxable as
described below), will be subject to United States federal withholding tax at a
30% rate (or a lower rate provided under any applicable income tax treaty).
Except to the extent that an applicable tax treaty otherwise provides, a
non-U.S. holder will be taxed in the same manner as a holder who is a United
States person on dividends paid (or deemed paid) that are effectively connected
with the conduct of a United States trade or business by the non-U.S. holder. If
such non-U.S. holder is a foreign corporation, it may also be subject to a
United States branch profits tax on such effectively connected income at a 30%
rate (or such lower rate as may be specified by an applicable tax treaty). Even
though such effectively connected dividends are subject to income tax, and may
be subject to the branch profits tax, they will not be subject to U.S.
withholding tax if the holder delivers a properly executed Internal Revenue
Service Form 4224 (or successor form) to the payor.

Under current Treasury regulations, dividends paid to an address in a
foreign country are presumed to be paid to a resident of that country (unless
the payor has knowledge to the contrary) for purposes of the 30% withholding
discussed above and for purposes of determining the applicability of a tax
treaty rate. Under final Treasury regulations effective with respect to payments
made after December 31, 2000, however, non-U.S. holders of common stock who wish
to claim the benefit of an applicable treaty rate would be required to satisfy
certain certification requirements. Prospective investors should consult their
own tax advisors as to the effect, if any, of the final Treasury regulations on
their purchase, ownership and disposition of the HIGH TIDES and common stock.

CERTAIN UNITED STATES FEDERAL ESTATE TAX CONSIDERATIONS APPLICABLE TO A NON-U.S.
HOLDER

HIGH TIDES held by an individual who is a non-U.S. holder at the time of
death will not be includable in the decedent's gross estate for United States
federal estate tax purposes, provided that such holder or beneficial owner did
not at the time of death

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actually or constructively (including by virtue of its interest in the
underlying debentures) own 10% or more of the combined voting power of all
classes of our stock entitled to vote, and provided that at the time of death,
payments with respect to such HIGH TIDES would not have been effectively
connected with the conduct by such non-U.S. holder of a trade or business within
the United States.

Common stock actually or beneficially held by a non-U.S. holder at the time
of his or her death (or previously transferred subject to certain retained
rights or powers) will be subject to United States federal estate tax unless
otherwise provided by an applicable estate tax treaty.

INFORMATION REPORTING AND BACKUP WITHHOLDING TAX

United States information reporting requirements and backup withholding tax
will not apply to payments on HIGH TIDES to a non-U.S. holder if the statement
described in "-- Interest Income" is duly provided by such holder, provided that
the payor does not have actual knowledge that the holder is a United States
person.

Information reporting requirements and backup withholding tax will not
apply to any payment of the proceeds of the sale of HIGH TIDES, or any payment
of the proceeds of the sale of common stock effected outside the United States
by a foreign office of a "broker" as defined in applicable Treasury regulations,
unless such broker (1) is a United States person as defined in the Internal
Revenue Code, (2) is a foreign person that derives 50% or more of its gross
income for certain periods from the conduct of a trade or business in the United
States or (3) is a controlled foreign corporation for United States federal
income tax purposes. Payment of the proceeds of any such sale effected outside
the United States by a foreign office of any broker that is described in (1),
(2) or (3) of the preceding sentence will not be subject to backup withholding
tax, but will be subject to information reporting requirements, unless such
broker has documentary evidence in its records that the beneficial owner is a
non-U.S. holder and certain other conditions are met, or the beneficial owner
otherwise establishes an exemption. Payment of the proceeds of any such sale to
or through the United States office of a broker is subject to information
reporting and backup withholding requirements unless the beneficial owner of the
HIGH TIDES provides the statement described in "-- Interest Income" or otherwise
establishes an exemption.

If paid to an address outside the United States, dividends on common stock
held by a non-U.S. holder generally will not be subject to the information
reporting and backup withholding requirements described in this section.
However, under final Treasury regulations, dividend payments made after December
31, 2000 will be subject to information reporting and backup withholding unless
certain certification requirements are satisfied. Prospective investors should
consult their own tax advisors as to the effect, if any, of the final Treasury
regulations on their purchase, ownership and disposition of the HIGH TIDES and
common stock.

FOREIGN INVESTMENT IN REAL PROPERTY TAX ACT

Under the Foreign Investment in Real Property Tax Act, any person who
acquires a "United States real property interest" (as described below) from a
foreign person must deduct and withhold a tax equal to 10% of the amount
realized by the foreign transferor. In addition, a foreign person who disposes
of a United States real property interest generally is required to recognize
gain or loss that is subject to United States federal income tax. A

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"United States real property interest" generally includes any interest (other
than an interest solely as a creditor) in a United States corporation unless it
is established under specific procedures that the corporation is not (and was
not for the prior five-year period) a "United States real property holding
corporation." We do not believe that we are or have been a United States real
property holding corporation as of the date hereof, nor do we believe that we
have been a United States real property holding corporation at any time during
the past five years. Further, we do not expect to become a United States real
property holding corporation in the future (although there can be no assurance
that this future expectation will be accurate). Brobeck, Phleger & Harrison LLP
has rendered no opinion as to whether we are, at any time within the past 5
years have been, or will in the future become, a United States real property
holding corporation. If it is determined that we are, have been in the past five
years or in the future become, a United States real property holding
corporation, so long as our stock is regularly traded on an established
securities market, an exemption should apply to the HIGH TIDES and the common
stock except with respect to a non-U.S. holder whose beneficial ownership of
HIGH TIDES or common stock exceeds 5% of the total fair market value of the
common stock.

Any investor that may approach or exceed the 5% ownership threshold
discussed above, either alone or in conjunction with related persons, should
consult its own tax advisor concerning the United States tax consequences that
may result. A non-U.S. holder who sells or otherwise disposes of HIGH TIDES or
common stock may be required to inform its transferee whether such HIGH TIDES or
common stock constitute a United States real property interest.

THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED
FOR GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A HOLDER'S
PARTICULAR SITUATION. HOLDERS SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO
THE TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE
HIGH TIDES AND COMMON STOCK, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL,
FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN UNITED STATES
FEDERAL OR OTHER TAX LAWS.

DESCRIPTION OF CAPITAL STOCK

Our authorized capital stock consists of 100,000,000 shares of common
stock, $.001 par value, and 10,000,000 shares of preferred stock, $.001 par
value. The following summary is qualified in its entirety by the provisions of
our certificate of incorporation and bylaws, which have been filed as exhibits
to the registration statement of which this prospectus constitutes a part. The
information provided below reflects the 2 for 1 stock split declared by us on
September 20, 1999.

COMMON STOCK

There will be 61,769,788 shares of common stock outstanding upon the
completion of the concurrent common stock offering, based on the 54,569,788
shares outstanding as of October 26, 1999. The holders of common stock are
entitled to one vote per share on all matters to be voted upon by the
stockholders. Subject to preferences that may be applicable to any outstanding
preferred stock, the holders of common stock are entitled to

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receive ratably such dividends, if any, as may be declared from time to time by
the board of directors out of funds legally available therefor. See "Dividend
Policy." In the event of our liquidation, dissolution or winding up, the holders
of common stock are entitled to share ratably in all assets remaining after
payment of liabilities, subject to prior liquidation rights of preferred stock,
if any, then outstanding. The common stock has no preemptive or conversion
rights or other subscription rights. There are no redemption or sinking fund
provisions applicable to the common stock. All outstanding shares of common
stock to be outstanding upon the completion of the common stock offering will be
fully paid and non-assessable.

PREFERRED STOCK

ANTI-TAKEOVER EFFECTS OF PROVISIONS OF THE CERTIFICATE OF INCORPORATION, BYLAWS
AND DELAWARE LAW

CERTIFICATE OF INCORPORATION AND BYLAWS

Our certificate of incorporation and bylaws provide that our board of
directors is classified into three classes of Directors serving staggered,
three-year terms. The certificate of incorporation also provides that Directors
may be removed only by the affirmative vote of the holders of two-thirds of the
shares of our capital stock entitled to vote. Any vacancy on the board of
directors may be filled only by vote of the majority of Directors then in
office. Further, the certificate of incorporation provides that any "Business
Combination" (as therein defined) requires the affirmative vote of the holders
of two-thirds of the shares of our capital stock entitled to vote, voting
together as a single class. The certificate of incorporation also provides that
all stockholder actions must be effected at a duly called meeting and not by a
consent in writing. The bylaws provide that our stockholders may call a special
meeting of stockholders only upon a request of stockholders owning at least 50%
of our capital stock. These provisions of the certificate of incorporation and
bylaws could discourage potential acquisition proposals and could delay or
prevent a change in control of our company. These provisions are intended to
enhance the likelihood of continuity and stability in the composition of the
board of directors and in the policies formulated by the board of directors and
to discourage certain types of transactions that may involve an actual or
threatened change of control of our company. These provisions are designed to
reduce our vulnerability to an unsolicited acquisition proposal. The provisions
also are intended to discourage certain tactics that may be used in proxy
fights. However, such provisions could have the effect of discouraging others
from making tender offers for our shares and, as a consequence, they also may
inhibit fluctuations in the market price of our shares that could result from
actual or rumored takeover attempts. Such provisions also may have the effect of
preventing changes in our management.

145
<PAGE> 235

DELAWARE ANTI-TAKEOVER STATUTE

CERTAIN ERISA CONSIDERATIONS

Each fiduciary of a pension, profit-sharing or other employee benefit plan
subject to the Employee Retirement Income Security Act of 1974, as amended
("ERISA") should consider the fiduciary standards of ERISA in the context of the
plan's particular circumstances before authorizing an investment in the HIGH
TIDES. Accordingly, among other factors, the fiduciary should consider whether
the investment would satisfy the prudence and diversification requirements of
ERISA, whether the investment could result in an improper delegation of
fiduciary authority and whether the investment would be consistent with the
documents and instruments governing the plan.

Section 406 of ERISA and Section 4975 of the Internal Revenue Code prohibit
plans, as well as individual retirement accounts and Keogh plans subject to
Section 4975 of the Internal Revenue Code, from engaging in certain transactions
involving "plan assets" with persons who are "parties in interest" under ERISA
or "disqualified persons" under the Internal Revenue Code with respect to such
plans. A violation of these "prohibited transaction" rules may result in an
excise tax or other liabilities under ERISA and/or

146
<PAGE> 236

Section 4975 of the Internal Revenue Code for such persons, unless exemptive
relief is available under an applicable statutory or administrative exemption.
Employee benefit plans that are governmental plans (as defined in Section 3(32)
of ERISA), certain church plans (as defined in Section 3(33) of ERISA) and
foreign plans (as described in Section 4(b)(4) of ERISA) not subject to Section
401 of the Internal Revenue Code are not subject to the requirements of ERISA or
Section 4975 of the Internal Revenue Code.

Under a regulation relating to plan assets issued by the United States
Department of Labor, the assets of the trust would be deemed to be "plan assets"
of a plan for purposes of ERISA and Section 4975 of the Internal Revenue Code if
"plan assets" of the plan were used to acquire an equity interest in the trust
and no exception were applicable under the plan assets regulation. An "equity
interest" is defined under the plan assets regulation as any interest in an
entity other than an instrument which is treated as indebtedness under
applicable local law and which has no substantial equity features and
specifically includes a beneficial interest in a trust.

Pursuant to an exception contained in the plan assets regulation, the
assets of the trust would not be deemed to be "plan assets" of investing plans
if, immediately after the most recent acquisition of any equity interest in the
trust, less than 25% of the value of each class of equity interests in the trust
were held by plans, other employee benefit plans not subject to ERISA or Section
4975 of the Internal Revenue Code (such as governmental, church and foreign
plans), and entities holding assets deemed to be "plan assets" of any plan. No
assurance can be given that the value of the HIGH TIDES held by benefit plan
investors will be less than 25% of the total value of such HIGH TIDES at the
completion of the initial offering or otherwise. All of the common securities
will be purchased and held by us. If assets of the trust are treated as "plan
assets," the trust trustees could be treated as fiduciaries to plans that
acquired the HIGH TIDES.

Some transactions involving the trust could be deemed to constitute direct
or indirect prohibited transactions under ERISA and Section 4975 of the Internal
Revenue Code with respect to a plan if the HIGH TIDES were acquired with "plan
assets" of such plan and assets of the trust were deemed to be "plan assets" of
plans investing in the trust. For example, if Calpine is a party in interest
with respect to an investing plan (either directly or by reason of its ownership
of its subsidiaries), extensions of credit between Calpine and the trust (as
represented by the convertible junior subordinated debentures and the guarantee)
would likely be prohibited by Section 406(a)(1)(B) of ERISA and Section
4975(c)(1)(B) of the Internal Revenue Code, unless exemptive relief were
available under an applicable administrative exemption (see below). In that
regard, it is noted that Calpine is a party in interest with respect to certain
employee benefit plans covering employees of Calpine and its subsidiaries.
However, Calpine does not currently provide services to plans, or serve as a
fiduciary of plans, other than our plans and accordingly might not be treated as
a party in interest with respect to any plans other than our plans. If Calpine
is not a party in interest with respect to a plan which is not our plan, then a
direct or indirect loan between Calpine and the plan would not appear to
constitute a prohibited transaction.

The Department of Labor has issued five prohibited transaction class
exemptions ("PTCEs") that may provide exemptive relief for direct or indirect
prohibited transactions resulting from the purchase or holding of the HIGH
TIDES, assuming that assets of the trust were deemed to be "plan assets" of
plans investing in the trust (see above). Those class exemptions are PTCE 96-23
(for some transactions determined by in-house asset managers), PTCE 95-60 (for
some transactions involving insurance company general

147
<PAGE> 237

accounts), PTCE 91-38 (for some transactions involving bank collective
investment funds), PTCE 90-1 (for some transactions involving insurance company
separate accounts) and PTCE 84-14 (for some transactions determined by qualified
professional asset managers).

Because the HIGH TIDES may be deemed to be equity interests in the trust
for purposes of applying ERISA and Section 4975 of the Internal Revenue Code,
the HIGH TIDES may not be purchased or held by any plan, any entity whose
underlying assets include "plan assets" by reason of any plan's investment in an
entity or any person investing "plan assets" of any plan, unless such purchaser
or holder is eligible for the exemptive relief available under PTCE 96-23,
95-60, 91-38, 90-1 or 84-14. Any purchaser or holder of the HIGH TIDES or any
interest therein will be deemed to have represented by its purchase and holding
thereof that it either (a) is not a plan or a plan asset entity and is not
purchasing such securities on behalf of or with "plan assets" of any plan or (b)
is eligible for the exemptive relief available under PTCE 96-23, 95-60, 91-38,
90-1 or 84-14. Further, the fiduciaries of any plan or plan asset entity which
may purchase or hold HIGH TIDES will be deemed as a result of such acquisition
or holding to have (a) directed the trust to invest in the HIGH TIDES, (b)
authorized and directed any of the actions taken or which may be taken with
respect to the trust and the HIGH TIDES by any of Calpine, the declaration
trustees, the debenture trustee, or the guarantee trustee as contemplated by the
indenture, the debentures or the guarantee and (c) to have appointed the
declaration trustees.

Due to the complexity of these rules and the penalties that may be imposed
upon persons involved in non-exempt prohibited transactions, it is particularly
important that fiduciaries or other persons considering purchasing the HIGH
TIDES on behalf of or with "plan assets" of any plan consult with their counsel
regarding the potential consequences if the assets of the trust were deemed to
be "plan assets" and whether Calpine is a party in interest with respect to the
plan and if so, the availability of exemptive relief under PTCE 96-23, 95-60,
91-38, 90-1 or 84-14 with respect to the acquisition or holding of HIGH TIDES.

148
<PAGE> 238

UNDERWRITING

Under the terms and subject to the conditions contained in an underwriting
agreement dated , 1999, we and the trust have agreed that the trust
shall sell to the underwriters named below, the following respective number of
HIGH TIDES:

<TABLE>
<CAPTION>
Number of
Underwriter HIGH TIDES
----------- ----------
<S> <C>
Credit Suisse First Boston Corporation................
CIBC World Markets Corp...............................
ING Barings LLC.......................................
---------
Total......................................... 4,800,000
=========
</TABLE>

The underwriting agreement provides that the underwriters are obligated to
purchase all of the HIGH TIDES in the offering if any are purchased, other than
those HIGH TIDES covered by the over-allotment option described below. The
underwriting agreement also provides that if an underwriter defaults, the
purchase commitments of non-defaulting underwriters may be increased or the
offering of the HIGH TIDES may be terminated.

Since the proceeds of the sale of the HIGH TIDES will be used by the trust
to purchase the debentures, the underwriting agreement provides that we will pay
as compensation to the underwriters a commission of $ per HIGH TIDES or
$ in the aggregate.

We have granted to the underwriters a 30-day option to purchase on a pro
rata basis up to 720,000 additional HIGH TIDES from us at the public offering
price, plus accrued distributions. The option may be exercised only to cover any
over-allotments in the sale of HIGH TIDES.

The underwriters propose to offer the HIGH TIDES initially at the public
offering price on the cover page of this prospectus and to selling group members
at a discount of up to $ per HIGH TIDES. The underwriters and selling group
members may allow a discount of $ per HIGH TIDES on sales to other
broker/dealers. After the initial public offering, the public offering price and
other selling terms may be changed by the underwriters.

We estimate that our out of pocket expenses of the offering, excluding
commissions, will be approximately $ .

The HIGH TIDES are new securities for which there currently is no market.
One or more of the underwriters have advised us and the trust that they intend
to make a secondary market for the HIGH TIDES. However, they are not obligated
to do so, and may discontinue making a secondary market for the HIGH TIDES at
any time without notice. No assurance can be given as to how liquid the trading
market for the HIGH TIDES will be.

We, the trust and each of our officers and directors have agreed that we
will not offer, sell, contract to sell, pledge or otherwise dispose of, directly
or indirectly, or file with the SEC a registration statement under the
Securities Act of 1933 relating to any additional shares of (a) any preferred
securities, any preferred stock or any other securities of the trust (other than
the HIGH TIDES offered or the common securities of the trust), (b) any preferred
stock or any other security of Calpine that is substantially similar to the HIGH
TIDES, (c) any shares of common stock of Calpine other than shares of common

149
<PAGE> 239

stock issuable upon conversion of the HIGH TIDES and/or the debentures or (d)
any other securities which are convertible into, or exchangeable or exercisable
for, any of (a) through (c), or publicly disclose the intention to make an
offer, sale, pledge, disposition or filing as described above, without the prior
written consent of Credit Suisse First Boston Corporation for a period of 90
days after the date of this prospectus, except in our case issuances pursuant to
the exercise of employee stock option outstanding on the date hereof and the
shares of common stock being offered concurrently with the offering of HIGH
TIDES.

We and the trust have agreed to indemnify the underwriters against
liabilities under the Securities Act of 1933 or contribute to payments which the
underwriters may be required to make in that respect.

The underwriters may engage in over-allotment, stabilizing transactions,
syndicate covering transactions and penalty bids in accordance with Regulation M
under the Securities Exchange Act of 1934.

- Over-allotment involves syndicate sales in excess of the offering size,
which creates a syndicate short position.

- Stabilizing transactions permit bids to purchase the underlying security
so long as the stabilizing bids do not exceed a specified maximum.

- Syndicate covering transactions involve purchases of the HIGH TIDES in
the open market after the distribution has been completed in order to
cover syndicate short positions.

- Penalty bids permit the underwriters to reclaim a selling concession from
a syndicate member when the HIGH TIDES originally sold by such syndicate
member are purchased in a syndicate covering transaction to cover
syndicate short positions.

These stabilizing transactions, syndicate covering transactions and penalty bids
may cause the price of the HIGH TIDES to be higher than it would otherwise be in
the absence of such transactions. These transactions, if commenced, may be
discontinued at any time.

Credit Suisse First Boston, New York branch expects to be the lead arranger
and a lender for our proposed $1.0 billion revolving construction loan facility
and, in such capacity, expects to receive customary fees for such services. The
decision of Credit Suisse First Boston Corporation to distribute the HIGH TIDES
offered hereby and the common stock being offered concurrently was made
independent of Credit Suisse First Boston, New York branch which lender had no
involvement in determining whether or when to distribute the common stock or
HIGH TIDES under the offerings or the terms of either offering. Credit Suisse
First Boston Corporation will not receive any benefit from the offerings other
than its portion of the underwriting fees as paid by us.

From time to time, certain of the underwriters and their affiliates have
provided advisory and investment banking services to us, for which customary
compensation has been received. It is expected that such underwriters will
continue to provide such services to us in the future. In addition, Credit
Suisse First Boston Corporation, CIBC World Markets Corp., Donaldson, Lufkin and
Jenrette Securities Corporation, Goldman, Sachs & Co., Salomon Smith Barney Inc.
and Gerard Klauer Mattison & Co., Inc. are acting as underwriters in our
concurrent offering of common stock.

150
<PAGE> 240

NOTICE TO CANADIAN RESIDENTS

RESALE RESTRICTIONS

The distribution of the HIGH TIDES in Canada is being made only on a
private placement basis exempt from the requirement that we and the trust
prepare and file a prospectus with the securities regulatory authorities in each
province where trades of the HIGH TIDES are effected. Accordingly, any resale of
the HIGH TIDES in Canada must be made in accordance with applicable securities
law which will vary depending on the relevant jurisdiction, and which may
require resales to be made in accordance with available statutory exemptions or
pursuant to a discretionary exemption granted by the applicable Canadian
securities regulatory authority. Purchasers are advised to seek legal advice
prior to any resale of the HIGH TIDES.

REPRESENTATIONS OF PURCHASERS

Each purchaser of HIGH TIDES in Canada who receives a purchase confirmation
will be deemed to represent to us, the trust and the dealer from whom such
purchase confirmation is received that (1) the purchaser is entitled under
applicable provincial securities laws to purchase such HIGH TIDES without the
benefit of a prospectus qualified under such securities laws, (2) where required
by law, that the purchaser is purchasing as principal and not as agent, and (3)
the purchaser has reviewed the text above under "Resale Restrictions."

RIGHTS OF ACTION (ONTARIO PURCHASERS)

ENFORCEMENT OF LEGAL RIGHTS

All of our directors and officers as well as the experts named herein and
the trust may be located outside of Canada and, as a result, it may not be
possible for Canadian purchasers to effect service of process within Canada upon
us, the trust or these persons. All or a substantial portion of our assets, the
assets of the trust and the assets of these persons may be located outside of
Canada and, as a result, it may not be possible to satisfy a judgment against
us, the trust or these persons in Canada or to enforce a judgment obtained in
Canadian courts against us, the trust or these persons outside of Canada.

NOTICE TO BRITISH COLUMBIA RESIDENTS

A purchaser of HIGH TIDES to whom the Securities Act (British Columbia)
applies is advised that the purchaser is required to file with the British
Columbia Securities Commission a report within ten days of the sale of any HIGH
TIDES acquired by the purchaser pursuant to this offering. The report must be in
the form attached to British Columbia Securities Commission Blanket Order BOR
#95/17, a copy of which may be obtained from Calpine. Only one report must be
filed in respect of HIGH TIDES acquired on the same date and under the same
prospectus exemption.

151
<PAGE> 241

TAXATION AND ELIGIBILITY FOR INVESTMENT

Canadian purchasers of HIGH TIDES should consult their own legal and tax
advisors with respect to the tax consequences of an investment in the shares of
HIGH TIDES in their particular circumstances and with respect to the eligibility
of the shares of HIGH TIDES for investment by the purchaser under relevant
Canadian legislation.

LEGAL MATTERS

Richards, Layton & Finger, P.A., special Delaware counsel to the trust and
Calpine, will pass on certain matters of Delaware law relating to the validity
of the HIGH TIDES. The validity of the debentures and the guarantee offered
hereby will be passed upon for us by Brobeck, Phleger & Harrison LLP, San
Francisco, California. The underwriters have been represented by Skadden, Arps,
Slate, Meagher & Flom LLP, New York, New York.

EXPERTS

The consolidated financial statements of Sumas Cogeneration Company, L.P.
and Subsidiary as of December 31, 1998 and 1997 and for each of the years ended
December 31, 1998, 1997 and 1996 included in our Annual Report on Form 10-K as
amended filed with the Securities and Exchange Commission on February 18, 1999
and incorporated by reference in this prospectus have been audited by Moss Adams
LLP, independent public accountant, as indicated in their reports with respect
thereto, and are included herein in reliance upon authority of said firm as
experts in giving said reports.

152
<PAGE> 242

[CALPINE LOGO]
<PAGE> 243

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by Calpine in connection with
the sale of common stock being registered. All amounts are estimates except the
SEC registration fee.

<TABLE>
<S> <C>
SEC Registration Fee....................................... $ 180,623
NASD Filing Fee............................................ $ 30,500
Legal Fees and Expenses.................................... 150,000
Accounting Fees and Expenses............................... 150,000
Printing Fees.............................................. 400,000
Transfer Agent fees........................................ 15,000
Miscellaneous.............................................. 373,877
----------
Total............................................ 1,300,000
==========
</TABLE>

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

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Section 145 of the General Corporation Law of the state of Delaware (the
"Delaware Law") empowers a Delaware corporation to indemnify any persons who
are, or are threatened to be made, parties to any threatened, pending or
completed legal action, suit or proceedings, whether civil, criminal,
administrative or investigative (other than action by or in the right of such
corporation), by reason of the fact that such person was an officer or director
of such corporation, or is or was serving at the request of such corporation as
a director, officer, employee or agent of another corporation or enterprise. The
indemnity may include expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding, provided that such officer or
director acted in good faith and in a manner he reasonably believed to be in or
not opposed to the corporation's best interests, and, for criminal proceedings,
had no reasonable cause to believe his conduct was illegal. A Delaware
corporation may indemnify officers and directors in an action by or in the right
of the corporation under the same conditions, except that no indemnification is
permitted without judicial approval if the officer or director is adjudged to be
liable to the corporation in the performance of his duty. Where an officer or
director is successful on the merits or otherwise in the defense of any action
referred to above, the corporation must indemnify him against the expenses which
such officer or director actually and reasonably incurred.

In accordance with Delaware Law, the certificate of incorporation of the
Company contains a provision to limit the personal liability of the directors of
the Registrant for violations of their fiduciary duty. This provision eliminates
each director's liability to the Registrant or its stockholders for monetary
damages except (i) for any breach of the director's duty of loyalty to the
Registrant or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the Delaware Law providing for liability of directors for
unlawful payment of dividends or unlawful stock purchases or redemptions, or
(iv) for any transaction from which a director derived an improper personal
benefit. The effect of this provision is to eliminate the personal liability of
directors for monetary damages for actions

II-1
<PAGE> 244

involving a breach of their fiduciary duty of care, including any such actions
involving gross negligence.

Article Ten of the bylaws of the Registrant provides for indemnification of
the officers and directors of the Registrant to the fullest extent permitted by
applicable law.

We have entered into indemnification agreements with our directors and
officers. These agreements provide substantially broader indemnity rights than
those provided under the Delaware Law and the Company's bylaws. The
indemnification agreements are not intended to deny or otherwise limit
third-party or derivative suits against the Company or its directors or
officers, but if a director or officer were entitled to indemnity or
contribution under the indemnification agreement, the financial burden of a
third-party suit would be borne by the Company, and the Company would not
benefit from derivative recoveries against the director or officer. Such
recoveries would accrue to the benefit of the Company but would be offset by the
Company's obligations to the director or officer under the indemnification
agreement.

ITEM 16. EXHIBITS

II-2
<PAGE> 245

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
+4.10 Form of Amended and Restated Declaration of Trust of
Calpine Capital Trust among Calpine Corporation as
Depositor and Debenture Issuer, The Bank of New York as
Delaware Trustee and Property Trustee and Peter
Cartwright, Ann B. Curtis and Thomas R. Mason as
Administrative Trustees
+4.11 Form of Indenture for the Convertible Subordinated
Debentures due 2029 among Calpine Corporation and The Bank
of New York as Trustee
+4.12 Form of Calpine Capital Trust % Convertible Preferred
Securities (included in Exhibit 4.10)
+4.13 Form of Calpine Corporation Convertible Subordinated
Debentures due 2029 (included in Exhibit 4.11)
+4.14 Form of Preferred Securities Guarantee Agreement among
Calpine Corporation as Guarantor and The Bank of New York
as Guarantee Trustee
+4.15 Form of Remarketing Agreement among Calpine Corporation,
Calpine Capital Trust, The Bank of New York as Tender
Agent, Peter Cartwright, Ann B. Curtis and Thomas R. Mason
as Administrative Trustees and Credit Suisse First Boston
Corporation as Remarketing Agent
5.1 Opinion of Brobeck, Phleger & Harrison LLP as to the
legality of the Common Stock, the % Convertible
Subordinated Debentures, the Preferred Securities
Guarantee and the underlying Common Stock
5.2 Opinion of Richards, Layton & Finger P.A. as to the
legality of the % Convertible Preferred Securities and
as to certain matters of Delaware law
8.1 Opinion of Brobeck, Phleger & Harrison LLP as to certain
tax matters
+12.1 Statement Regarding Computation of Ratios
23.1 Consent of Arthur Andersen LLP, independent public
accountants
23.2 Consent of Moss Adams LLP, independent public accountants
+23.3 Consent of Brobeck, Phleger & Harrison LLP (included in
Exhibits 5.1 and 8.1)
+23.4 Consent of Richards, Layton & Finger, P.A. (included in
Exhibit 5.2)
+24.1 Power of Attorney (included in signature page of this
Registration Statement)
+25.1 Form T-1 Statement of Eligibility under the Trust
Indenture Act of 1939, as amended, of The Bank of New
York, as Trustee under the Indenture for the Convertible
Subordinated Debentures due 2029
+25.2 Form T-1 Statement of Eligibility under the Trust
Indenture Act of 1939, as amended, of The Bank of New
York, as Property Trustee under the Amended and Restated
Declaration of Trust
+25.3 Form T-1 Statement of Eligibility under the Trust
Indenture Act of 1939, as amended, of The Bank of New
York, as Guarantee Trustee under the Preferred Securities
Guarantee Agreement
</TABLE>

II-3
<PAGE> 246

- -------------------------
+ Previously filed.

(a) Incorporated by reference to registrant's Registration Statement on Form S-1
(Registration Statement 33-07497)

(b) Incorporated by reference to registrant's Registration Statement on Form S-1
(Registration Statement No. 33-73160)

(c) Incorporated by reference to registrant's Current Report on Form 8-K dated
August 29, 1996 and filed on September 13, 1996.

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

(e) Incorporated by reference to registrant's Registration Statement on Form S-4
(Registration Statement No. 333-61047)

(f) Incorporated by reference to registrant's Registration Statement on Form
S-3 (Registration Statement No. 333-72583)

ITEM 17. UNDERTAKINGS

The undersigned registrant hereby undertakes:

(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions or otherwise, the registrant has
been advised that in the opinion of the SEC such indemnification is against
public policy as expressed in the Securities Act and therefore is unenforceable.
In the event that a claim for indemnification against such liabilities, other
than the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of any
action, suit or proceeding is asserted by such director, officer or controlling
person in connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.

The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934, and, where applicable, each filing of an
employee benefit plan's annual report pursuant to

II-4
<PAGE> 247

Section 15(d) of the Securities Exchange Act of 1934, that is incorporated by
reference in the registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.

II-5
<PAGE> 248

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of San Jose, State of California, on this 27th day of
October, 1999.

CALPINE CORPORATION

By /s/ ANN B. CURTIS

------------------------------------
Ann B. Curtis
Executive Vice President and
Director

Pursuant to the requirements of the Securities Act of 1933, as amended,
this registration statement has been signed below by the following persons on
behalf of Calpine and in the capacities and on the dates indicated:

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
* Chairman, President, October 27, 1999
- --------------------------------------------- Chief Executive Officer,
Peter Cartwright and Director
(Principal Executive
Officer)

/s/ ANN B. CURTIS Executive Vice President October 27, 1999
- --------------------------------------------- and Director
Ann B. Curtis (Principal Financial and
Accounting Officer)

* Director October 27, 1999
- ---------------------------------------------
Jeffrey E. Garten

* Director October 27, 1999
- ---------------------------------------------
Susan C. Schwab

* Director October 27, 1999
- ---------------------------------------------
George J. Stathakis

* Director October 27, 1999
- ---------------------------------------------
John O. Wilson

* Director October 27, 1999
- ---------------------------------------------
V. Orville Wright

*By: /s/ ANN B. CURTIS Attorney-in-Fact October 27, 1999
---------------------------------------
Ann B. Curtis
</TABLE>

II-6
<PAGE> 249

SIGNATURES

CALPINE CAPITAL TRUST

By: /s/ PETER CARTWRIGHT
-----------------------------------
Peter Cartwright
As Administrative Trustee

Pursuant to the requirements of the Securities Act of 1933, as amended,
this registration statement has been signed below by the following persons on
behalf of Calpine Capital Trust and in the capacities and on the dates
indicated:

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>

/s/ PETER CARTWRIGHT Administrative Trustee October 27, 1999
- ---------------------------------------------
Peter Cartwright

/s/ ANN B. CURTIS Administrative Trustee October 27, 1999
- ---------------------------------------------
Ann B. Curtis

/s/ THOMAS R. MASON Administrative Trustee October 27, 1999
- ---------------------------------------------
Thomas R. Mason
</TABLE>

II-7
<PAGE> 250

INDEX TO EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
+1.1 Form of Underwriting Agreement (Common Stock)
+1.2 Form of Underwriting Agreement (HIGH TIDES)
+3.1 Amended and Restated Certificate of Incorporation of
Calpine Corporation, a Delaware corporation(a)
+3.2 Amended and Restated By-laws of Calpine Corporation, a
Delaware corporation(a)
+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(b)
+4.2 Indenture dated as of May 16, 1996 between the Company and
Fleet National Bank, as Trustee, including form of
Notes(c)
+4.3 Indenture dated as of July 8, 1997 between the Company and
The Bank of New York, as Trustee, including form of
Notes(d)
+4.4 Indenture dated as of March 31, 1998 between the Company
and The Bank of New York, as Trustee, including form of
Senior Notes(e)
+4.5 Indenture dated as of March 26, 1999 between the Company
and The Bank of New York, as Trustee, including the form
of Senior Notes(f)
+4.6 Indenture dated as of April 21, 1999 between the Company
and The Bank of New York, as Trustee, including the form
of Senior Notes(f)
+4.7 Certificate of Trust of Calpine Capital Trust
+4.8 Corrected Certificate of the Certificate of Trust of
Calpine Capital Trust
+4.9 Declaration of Trust of Calpine Capital Trust
+4.10 Form of Amended and Restated Declaration of Trust of
Calpine Capital Trust among Calpine Corporation as
Depositor and Debenture Issuer, The Bank of New York as
Delaware Trustee and Property Trustee and Peter
Cartwright, Ann B. Curtis and Thomas R. Mason as
Administrative Trustees
+4.11 Form of Indenture for the Convertible Subordinated
Debentures due 2029 among Calpine Corporation and The Bank
of New York as Trustee
+4.12 Form of Calpine Capital Trust % Convertible Preferred
Securities (included in Exhibit 4.10)
+4.13 Form of Calpine Corporation Convertible Subordinated
Debentures due 2029 (included in Exhibit 4.11)
+4.14 Form of Preferred Securities Guarantee Agreement among
Calpine Corporation as Guarantor and The Bank of New York
as Guarantee Trustee
+4.15 Form of Remarketing Agreement among Calpine Corporation,
Calpine Capital Trust, The Bank of New York as Tender
Agent, Peter Cartwright, Ann B. Curtis and Thomas R. Mason
as Administrative Trustees and Credit Suisse First Boston
Corporation as Remarketing Agent
</TABLE>

<PAGE> 251

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
5.1 Opinion of Brobeck, Phleger & Harrison LLP as to the
legality of the Common Stock, the % Convertible
Subordinated Debentures, the Preferred Securities
Guarantee and the underlying Common Stock
5.2 Opinion of Richards, Layton & Finger P.A. as to the
legality of the % Convertible Preferred Securities and
as to certain matters of Delaware law
8.1 Opinion of Brobeck, Phleger & Harrison LLP as to certain
tax matters
+12.1 Statement Regarding Computation of Ratios
23.1 Consent of Arthur Andersen LLP, independent accountants
23.2 Consent of Moss Adams LLP, independent accountants
+23.3 Consent of Brobeck, Phleger & Harrison LLP (included in
Exhibits 5.1 and 8.1)
+23.4 Consent of Richards, Layton & Finger, P.A. (included in
Exhibit 5.2)
+24.1 Power of Attorney (included in signature page of this
Registration Statement)
+25.1 Form T-1 Statement of Eligibility under the Trust
Indenture Act of 1939, as amended, of The Bank of New
York, as Trustee under the Indenture for the Convertible
Subordinated Debentures due 2029
+25.2 Form T-1 Statement of Eligibility under the Trust
Indenture Act of 1939, as amended, of The Bank of New
York, as Property Trustee under the Amended and Restated
Declaration of Trust
+25.3 Form T-1 Statement of Eligibility under the Trust
Indenture Act of 1939, as amended, of The Bank of New
York, as Guarantee Trustee under the Preferred Securities
Guarantee Agreement
</TABLE>

- -------------------------
+ Previously filed.

(a) Incorporated by reference to registrant's Registration Statement on Form S-1
(Registration Statement 33-07497)

(b) Incorporated by reference to registrant's Registration Statement on Form S-1
(Registration Statement No. 33-73160)

(c) Incorporated by reference to registrant's Current Report on Form 8-K dated
August 29, 1996 and filed on September 13, 1996.

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

(e) Incorporated by reference to registrant's Registration Statement on Form S-4
(Registration Statement No. 333-61047)

(f) Incorporated by reference to registrant's Registration Statement on Form
S-3 (Registration Statement No. 333-72583)

<PAGE> 1
EXHIBIT 5.1

[Brobeck, Phleger & Harrison, LLP Letterhead]

October 27, 1999

Calpine Corporation
50 West San Fernando Street
San Jose, CA 95113

Ladies and Gentlemen:

We have acted as counsel to Calpine Corporation, a Delaware corporation
(the "Company") in connection with the registration, pursuant to a Registration
Statement of Form S-3 (File No. 333-87427) filed with the Securities and
Exchange Commission (the "Commission") on September 20, 1999, as amended by
Amendment No. 1 filed with the Commission on October 6, 1999, Amendment No. 2
filed with the Commission on October 25, 1999 and Amendment No. 3 filed with the
Commission on October 27, 1999 (collectively, the "Registration Statement"), of
the Company and Calpine Capital Trust, a statutory business trust formed under
the laws of the State of Delaware (the "Trust") under the Securities Act of
1933, as amended (the "Securities Act"), of (i) up to 8,280,000 shares of the
Company's Common Stock, $0.001 par value (including 1,080,000 shares to cover
over-allotments, if any) (the "Shares"), (ii) up to 5,520,000 shares of __%
Convertible Preferred Securities, Remarketable Term Income Deferrable Equity
Securities of the Trust (including 720,000 shares to cover over-allotments, if
any) (the "HIGH TIDES"), (iii) the __% Convertible Subordinated Debentures due
2029 of the Company (the "Convertible Subordinated Debentures"), (iv) the shares
of Common Stock, $0.001 par value, of the Company issuable upon the conversion
of the HIGH TIDES and the Convertible Subordinated Debentures (the "Underlying
Common Stock") and (v) the Preferred Securities Guarantee of the Company for the
benefit of the holders of the HIGH TIDES (the "Guarantee").

The HIGH TIDES will be issued pursuant to the Amended and Restated
Declaration of Trust of Calpine Capital Trust (the "Trust Agreement") among the
Company, as Depositor and Debenture Issuer, The Bank of New York, as Delaware
Trustee and Property Trustee, and Peter Cartwright, Ann B. Curtis and Thomas R.
Mason, as Administrative Trustees. The proceeds from the sale by the Trust of
the HIGH TIDES will be invested in the Convertible Subordinated Debentures,
which will be issued pursuant to an Indenture (the "Indenture") among the
Company and The Bank of New York, as Trustee (the "Trustee").

This opinion is being furnished in accordance with the requirements of
Item 16 of Form S-3 and Item 601(b)(5)(i) of Regulation S-K.

In connection with this opinion letter, we have examined the originals,
or copies certified or otherwise identified to our satisfaction, of such
documents, corporate records, certificates, including certificates of public
officials, and other instruments as we have deemed necessary or advisable for
purposes of this opinion letter, including the Company's charter documents and
the corporate proceedings taken by the Company in connection with the issuance
and sale of the Shares and

<PAGE> 2

Calpine Corporation October 27, 1999
Page 2

the Convertible Subordinated Debentures and the Company's delivery of the
Guarantee.

In our examination and review we have assumed the genuineness of all
signatures, the legal capacity of natural persons, the authenticity of the
documents submitted to us as originals, the conformity to original documents of
all documents submitted to us as certified, facsimile or photostatic copies, and
the authenticity of the originals of such copies. As to any facts material to
the opinions hereinafter expressed which we did not independently establish or
verify, we have relied without investigation upon certificates, statements and
representations of representatives of the Company. Regarding documents executed
by parties other than the Company, we have assumed (i) that each such other
party had the power to enter into and perform all its obligations thereunder,
(ii) the due authorization, execution and delivery of such documents by each
such party, and (iii) that such documents constitute the legal, valid, binding
and enforceable obligations of each such party.

This opinion relates solely to the laws of the State of New York, the
General Corporation Law of the State of Delaware and the applicable laws of
the United States, and we express no opinion with respect to the effect or
applicability of any other jurisdiction.

Based on such review as described above and subject to the limitations,
qualifications and exceptions set forth herein, we are of the opinion that:

1. The Shares have been duly authorized, and if, as and when
issued in accordance with the Registration Statement and the related
prospectus (as amended and supplemented through the date of issuance)
will be legally issued, fully paid and nonassessable;

2. The Convertible Subordinated Debentures have been duly
authorized, and, when duly executed by the Company and duly
authenticated by the Trustee in accordance with the provisions of the
Indenture, will constitute valid and legally binding obligations of the
Company;

3. The Guarantee has been duly authorized, and, upon due
execution, authentication and delivery of the Guarantee by or on behalf
of the Company, the Guarantee will constitute a valid and binding
obligation of the Company; and

4. The Underlying Common Stock has been duly authorized, and if,
as and when issued upon conversion of the HIGH TIDES and the Convertible
Subordinated Debentures in accordance with the terms of the Trust
Agreement and the Indenture (as amended and supplemented through the
date of issuance), will be legally issued, fully paid and nonassessable.

<PAGE> 3

Calpine Corporation October 25, 1999
Page 3

The opinions rendered above relating to the enforceability of the
Convertible Subordinated Debentures and the Guarantee are subject to the
following exceptions, limitations and qualifications:

(a) The enforceability of the obligations of the company under
the Convertible Subordinated Debentures and the Guarantee may be subject to or
limited by (i) bankruptcy, insolvency, reorganization, arrangement, moratorium,
fraudulent transfer and other similar laws affecting the rights of creditors
generally; and (ii) general equitable principles (whether relief is sought in a
proceeding at law or in equity), including, without limitation, concepts or
materiality, reasonableness, good faith, and fair dealing.

(b) We express no opinion as to provisions of the Convertible
Subordinated Debentures and the Guarantee purporting to establish an
evidentiary standard or to authorize conclusive determinations by any party
thereto or any other person or allowing any party thereto or any other person to
make determinations in its sole discretion.

(c) We also express no opinion as to: (i) the enforceability of
any provisions of the Convertible Subordinated Debentures and the Guarantee
pursuant to which the Company agrees to make payments without set-off, defense
or counterclaim; (ii) the enforceability of provisions relating to
indemnification, contribution or exculpation, to the extent any such provision
is contrary to public policy or prohibited by law (including, without
limitation, federal and state securities laws); (iii) any provision providing
for the exclusive jurisdiction of a particular court or purporting to waive
rights to trial by jury, service of process or objections to the laying of venue
or to forum on the basis of forum non conveniens, in connection with any
litigation arising out of or pertaining to the Convertible Subordinated
Debentures and the Guarantee; (iv) any provision contained in the Convertible
Subordinated Debentures and the Guarantee purporting to waive either illegality
as a defense to the performance of contract obligations or any other defense to
such performance which cannot, as a matter of law, be effectively waived; (v)
any provision of the Convertible Subordinated Debentures and the Guarantee
permitting modification thereof only by means of an agreement in writing signed
by the parties thereto; (vi) any provision of the Convertible Subordinated
Debentures and the Guarantee requiring payment of attorneys' fees, except to the
extent a court determines such fees to be reasonable; or (vii) the effect of the
law of any jurisdiction other than the State of New York which limits the rates
of interest legally chargeable or collectible.

(d) You should be aware that under applicable New York law a
number of statutory and common law rights and protections exist in favor of
guarantors. We express no opinion herein as to the enforceability of any waivers
and other provisions of the Guarantee which purport to waive or alter rights
provided to the Guarantor by statute or judicial decision.

We consent to the filing of this opinion letter as Exhibit 5.1 to the
Registration Statement and to the reference to this firm under the caption
"Legal Matters" in each prospectus which is part of the registration Statement.
In giving this consent, we do not thereby admit that we are within the category
of persons whose consent is required under Section 7 of the Securities Act, the
Rules and Regulations of the Commission promulgated thereunder, or Item 509 of
Regulation S-K.

<PAGE> 4

Calpine Corporation October 27, 1999
Page 3

This opinion letter is rendered as of the date first written above and
we disclaim any obligation to advise you of facts, circumstances, events or
developments which hereafter may be brought to our attention and which may
alter, affect or modify the opinion expressed herein. Our opinion is expressly
limited to the matters set forth above and we render no opinion, whether by
implication or otherwise, as to any other matters relating to the Company or the
Shares, the Convertible Subordinated Debentures, the Guarantee or the Underlying
Common Stock.

Very truly yours,

/s/ Brobeck, Phleger & Harrison LLP

BROBECK, PHLEGER & HARRISON LLP

<PAGE> 1
EXHIBIT 5.2

[Letterhead of Richards, Layton & Finger, P.A.]

October 27, 1999

Calpine Capital Trust
c/o Calpine Corporation
50 West San Fernando Street
San Jose, California 95113

Re: Calpine Capital Trust

Ladies and Gentlemen:

We have acted as special Delaware counsel for Calpine
Corporation, a Delaware corporation (the "Company"), and Calpine Capital Trust,
a Delaware business trust (the "Trust"), in connection with the matters set
forth herein. At your request, this opinion is being furnished to you.

For purposes of giving the opinions hereinafter set forth, our
examination of documents has been limited to the examination of originals or
copies of the following:

(a) The Certificate of Trust of the Trust, dated October 4, 1999
(the "Certificate"), as filed in the office of the Secretary of State of the
State of Delaware (the "Secretary of State") on October 4, 1999;

(b) The Declaration of Trust of the Trust, dated as of October
4, 1999, among the Company and the trustees of the Trust named therein;

(c) A form of Amended and Restated Declaration of Trust of the
Trust (including Annex I and Exhibits A-1 and A-2 thereto) (the "Declaration"),
to be entered into among the Company, as depositor, the trustees of the Trust
named therein, and the holders, from time to time, of undivided beneficial
interests in the assets of the Trust, attached as an exhibit to the Registration
Statement (as defined below);

<PAGE> 2

Calpine Capital Trust
October 27, 1999
Page 2

(d) Amendment No. 3 to the Registration Statement on Form S-3
(the "Registration Statement"), including a prospectus (the "Prospectus"),
relating to the Convertible Preferred Securities, Remarketable Term Income
Deferred Equity Securities (HIGH TIDES) (liquidation amount $50 per HIGH TIDES)
of the Trust representing undivided beneficial interests in the assets of the
Trust (each, a "Preferred Security" and collectively, the "Preferred
Securities"), as proposed to be filed by the Company and the Trust with the
Securities and Exchange Commission on or about October 27, 1999; and

(e) A Certificate of Good Standing for the Trust, dated October
27, 1999, obtained from the Secretary of State.

Capitalized terms used herein and not otherwise defined are used
as defined in the Declaration.

For purposes of this opinion, we have not reviewed any documents
other than the documents listed in paragraphs (a) through (e) above. In
particular, we have not reviewed any document (other than the documents listed
in paragraphs (a) through (e) above) that is referred to in or incorporated by
reference into the documents reviewed by us. We have assumed that there exists
no provision in any document that we have not reviewed that is inconsistent with
the opinions stated herein. We have conducted no independent factual
investigation of our own but rather have relied solely upon the foregoing
documents, the statements and information set forth therein and the additional
matters recited or assumed herein, all of which we have assumed to be true,
complete and accurate in all material respects.

With respect to all documents examined by us, we have assumed
(i) the authenticity of all documents submitted to us as authentic originals,
(ii) the conformity with the originals of all documents submitted to us as
copies or forms, and (iii) the genuineness of all signatures.

For purposes of this opinion, we have assumed (i) that the
Declaration and the Certificate are in full force and effect and have not been
amended, (ii) except to the extent provided in paragraph 1 below, that each of
the parties to the documents examined by us has been duly created, organized or
formed, as the case may be, and is validly existing in good standing under the
laws of the jurisdiction governing its creation, organization or formation,
(iii) the legal capacity of natural persons who are parties to the documents
examined by us, (iv) that each of the parties to the documents examined by us
has the power and authority to execute and deliver, and to perform its
obligations under, such documents, (v) that each of the parties to the documents
examined by us has duly authorized, executed and delivered such documents, (vi)
the receipt by each Person to whom a Preferred Security is to be issued by the
Trust (collectively, the "Preferred Security Holders") of a preferred security
certificate (substantially in the form of Exhibit A-1 to the Declaration) for
such Preferred Security and

<PAGE> 3

Calpine Capital Trust
October 27, 1999
Page 3

the payment for the Preferred Security acquired by it, in accordance with the
Declaration and the Registration Statement, and (vii) that the Preferred
Securities are issued and sold to the Preferred Security Holders in accordance
with the Declaration and the Registration Statement. We have not participated in
the preparation of the Registration Statement and assume no responsibility for
its contents.

This opinion is limited to the laws of the State of Delaware
(excluding the securities laws of the State of Delaware), and we have not
considered and express no opinion on the laws of any other jurisdiction,
including federal laws and rules and regulations relating thereto. Our opinions
are rendered only with respect to Delaware laws and rules, regulations and
orders thereunder that are currently in effect.

Based upon the foregoing, and upon our examination of such
questions of law and statutes of the State of Delaware as we have considered
necessary or appropriate, and subject to the assumptions, qualifications,
limitations and exceptions set forth herein, we are of the opinion that:

1. The Trust has been duly created and is validly existing in
good standing as a business trust under the Business Trust Act.

2. The Preferred Securities will represent valid and, subject to
the qualifications set forth in paragraph 3 below, fully paid and nonassessable
undivided beneficial interests in the assets of the Trust.

3. The Preferred Security Holders, as beneficial owners of the
Trust, will be entitled to the same limitation of personal liability extended to
stockholders of private corporations for profit organized under the General
Corporation Law of the State of Delaware. We note that the Preferred Security
Holders may be obligated to make payments as set forth in the Declaration.

We consent to the filing of this opinion with the Securities and
Exchange Commission as an exhibit to the Registration Statement. In addition, we
hereby consent to the use of our name under the heading "Legal Matters" in the
Prospectus. In giving the foregoing consents, we do not thereby admit that we
come within the category of Persons whose consent is required under Section 7 of
the Securities Act of 1933, as amended, or the rules and regulations of the
Securities and Exchange Commission thereunder. Except as stated above,

<PAGE> 4

Calpine Capital Trust
October 27, 1999
Page 4

without our prior written consent, this opinion may not be furnished or quoted
to, or relied upon by, any other Person for any purpose.

Very truly yours,

/s/ Richards, Layton & Finger, P.A.

BJK/MKS

<PAGE> 1
[Brobeck, Phleger & Harrison LLP Letterhead]

EXHIBIT 8.1

October 27, 1999

Calpine Corporation
Calpine Capital Trust
50 West San Fernando Street
San Jose, CA 95113

Ladies and Gentlemen:

We have acted as counsel to Calpine Corporation (the "Company")
and Calpine Capital Trust (the "Trust") in connection with the issuance of (i)
the Convertible Subordinated Debentures due 2029 (the "Subordinated Debentures")
of the Company pursuant to the terms of an indenture between the Company and The
Bank of New York (the "Indenture"); and (ii) the Remarketable Term Income
Deferrable Equity Securities (the "HIGH TIDES") to be issued by the Trust. The
Subordinated Debentures and the HIGH TIDES are described in the registration
statement on Form S-3 (Registration No. 333-87427) filed by the Company and the
Trust with the Securities and Exchange Commission on September 20, 1999 (as
amended, the "Registration Statement"). (Capitalized terms used herein that are
not otherwise defined herein have the meaning assigned to such terms in the
Registration Statement.)

In rendering the opinion set forth below, we have examined
copies, certified or otherwise identified to our satisfaction, of the following
executed documents and are relying upon the truth and accuracy of the
statements, covenants, representations and warranties set forth therein:

1. The Registration Statement;

2. The Indenture;

3. The Subordinated Debentures;

4. The Amended and Restated Declaration of Trust among the
Company, The Bank of New York, Peter Cartwright, Ann B.
Curtis and Thomas R. Mason (the "Declaration");

5. The HIGH TIDES;

6. The Remarketing Agreement among the Company, the Trust,
The Bank of New York, Peter Cartwright, Ann B. Curtis,
Thomas R. Mason and Credit Suisse First Boston Corporation
(the "Remarketing Agreement");

7. The Guarantee Agreement, executed and delivered by the
Company and The Bank of New York for the benefit of the
holders of the HIGH TIDES (the "Preferred Securities
Guarantee Agreement");

<PAGE> 2
Calpine Corporation October 27, 1999
Calpine Capital Trust Page 2

8. The Common Securities Guarantee Agreement, executed and
delivered by the Company for the benefit of the holders of
the Common Securities (the "Common Securities Guarantee
Agreement");

9. Certain statements and representations contained in the
Company's Representation Certificate attached hereto; and

10. Such other agreements and documents as we have considered
necessary or appropriate for the purpose of rendering the
opinion set forth below.

In addition, we have assumed that (i) each of the Indenture, the
Subordinated Debentures, the Declaration, the HIGH TIDES, the Remarketing
Agreement, the Preferred Securities Guarantee Agreement and the Common
Securities Guarantee Agreement has been validly executed, will be binding and
enforceable in accordance with its terms and will not be amended in any material
respect; and (ii) the Trust will at all times be operated in accordance with the
terms of the Declaration.

Based on and subject to the foregoing, we are of the opinion
that:

(1) the Trust will not be classified as an association taxable
as a corporation for United States federal income tax
purposes and, instead, under Subpart E, Part I of
Subchapter J of the Internal Revenue Code of 1986, as
amended (the "Code"), will be treated as a grantor trust,
and the beneficial owners of the HIGH TIDES will be
treated as owning undivided pro rata interests in the
income and corpus of the Trust;

(2) the Subordinated Debentures will be classified for United
States federal income tax purposes as indebtedness of
Calpine; and

(3) the statements of law and legal conclusions set forth in
the Prospectus constituting part of the Registration
Statement under the caption "Certain United States Federal
Income Tax Consequences" have been reviewed by us and were
accurate in all material respects.

We express no opinion as to other tax issues affecting the
holders of the HIGH TIDES or the other parties to the transactions described in
the Registration Statement, nor does our opinion address state, local or foreign
tax consequences that may result from such transactions.

Our opinion represents only our best judgment regarding the
application of United States federal income tax laws under the Code, existing
judicial decisions, administrative regulations and published rulings and
procedures. We note that there is no authority directly on point dealing with
securities such as the Subordinated Debentures or the HIGH TIDES or transactions
of the type described herein. Our opinion is not binding upon the Internal
Revenue Service or the courts, and there is no assurance that the Internal
Revenue Service will not

<PAGE> 3
Calpine Corporation October 27, 1999
Calpine Capital Trust Page 3

successfully assert contrary positions. Furthermore, no assurance can be given
that future legislation, judicial decisions or administrative changes,
applicable either on a prospective or retroactive basis, might not materially
alter our opinion.

We consent to the use of this opinion for filing as an exhibit to
the Registration Statement and further consent to all references to us in the
Registration Statement. Subject to the foregoing sentence, this opinion is given
as of the date hereof solely for your benefit and may not be relied upon,
circulated, quoted or otherwise referred to for any purpose without our prior
written consent.

Respectfully,

/s/ Brobeck, Phleger & Harrison LLP

<PAGE> 1

EXHIBIT 23.1

CONSENT OF INDEPENDENT ACCOUNTANTS

As independent public accountants, we hereby consent to the incorporation
by reference in this registration statement of our reports dated February 5,
1999 in Calpine Corporation's Form 10-K for the year ended December 31, 1998 and
to all references to our Firm included in this registration statement.

ARTHUR ANDERSEN LLP

San Francisco, CA

October 27, 1999

<PAGE> 1

EXHIBIT 23.2

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

We consent to the incorporation by reference in this Amendment No. 3 to
Form S-3 Registration Statement of Calpine Corporation for the registration of
8,280,000 shares of its common stock and 5,520,000 % convertible preferred
securities, remarketable term income deferrable equity securities, of our report
of Sumas Cogeneration Company, L.P. and Subsidiary dated January 20, 1999, on
our audits of the consolidated financial statements of Sumas Cogeneration
Company, L.P. and Subsidiary as of December 31, 1998 and 1997, and for each of
the three years ended December 31, 1998, which report is included in Calpine
Corporation's 1998 Annual Report on Form 10-K, filed with the Securities and
Exchange Commission. We also consent to the reference to our firm under the
caption "Experts."

MOSS ADAMS LLP

Everett, Washington

October 27, 1999