UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
FORM 10-Q
[ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarter ended March 31, 2000
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from ______________________
to ______________________
Commission File Number: 033-
CALPINE CORPORATION
(A Delaware Corporation)
I.R.S. Employer Identification No. 77-0212977
50 West San Fernando Street
San Jose, California 95113
Telephone: (408) 995-5115
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [ X ] No [ ]
Indicate the number of shares outstanding of each of the Registrant's classes of
common stock, as of the latest practicable date: $0.001 par value Common Stock
63,779,325 shares outstanding on May 11, 2000.
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CALPINE CORPORATION AND SUBSIDIARIES
Report on Form 10-Q
For the Quarter Ended March 31, 2000
<TABLE>
<CAPTION>
INDEX
PART I. FINANCIAL INFORMATION Page No.
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ITEM 1. Financial Statements
Consolidated Balance Sheets
March 31, 2000 and December 31, 1999............................3
Consolidated Statements of Operations
Three Months Ended March 31, 2000 and 1999......................4
Consolidated Statements of Cash Flows
Three Months Ended March 31, 2000 and 1999......................5
Notes to Consolidated Financial Statements......................6
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations...................10
PART II. OTHER INFORMATION
ITEM 2. Change in Securities..................................14
ITEM 5. Other Information.....................................14
ITEM 6. Exhibits and Reports on Form 8-K......................15
Signatures....................................................................26
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CALPINE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, 2000 and December 31, 1999
(in thousands)
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
------------ -----------
(unaudited)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents ............................ $ 250,591 $ 349,371
Accounts receivable .................................. 124,342 127,485
Inventories .......................................... 15,824 16,417
Other current assets ................................. 39,359 33,135
---------- ----------
Total current assets ......................... 430,116 526,408
---------- ----------
Property, plant and equipment, net ..................... 3,359,037 2,866,447
Investments in power projects .......................... 377,551 284,834
Project development costs .............................. 78,125 24,018
Notes receivable ....................................... 29,609 23,548
Restricted cash ........................................ 43,384 43,615
Deferred financing costs ............................... 52,391 54,215
Other assets ........................................... 161,203 168,521
---------- ----------
Total assets ................................. $4,531,416 $3,991,606
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and borrowings under line of credit,
current portion .................................... $ 38,225 $ 38,867
Project financing, current portion ................... 8,603 8,603
Accounts payable ..................................... 74,879 84,353
Income taxes payable ................................. 12,176 8,835
Accrued payroll and related expenses ................. 7,615 24,345
Accrued interest payable ............................. 65,115 37,058
Other current liabilities ............................ 59,712 73,250
---------- ----------
Total current liabilities .................... 266,325 275,311
---------- ----------
Notes payable and borrowings under line of credit,
net of current portion ............................... 92,877 97,303
Project financing, net of current portion .............. 457,014 357,137
Senior notes ........................................... 1,551,750 1,551,750
Capital lease obligation ............................... 101,248 --
Deferred income taxes, net ............................. 279,254 291,458
Deferred lease incentive ............................... 63,353 64,245
Other liabilities ...................................... 57,563 57,352
---------- ----------
Total liabilities ............................ 2,869,384 2,694,556
---------- ----------
Company-obligated mandatorily redeemable convertible
preferred securities of a subsidiary trust ........... 614,641 270,713
Minority interests ..................................... 61,928 61,705
Stockholders' equity:
Preferred stock, $0.001 par value per share;
authorized 10,000,000 shares; none issued
and outstanding in 2000 and 1999 ................... -- --
Common stock, $0.001 par value per share;
authorized 100,000,000 shares; issued and
outstanding 63,753,426 shares in 2000 and
63,053,920 shares in 1999 .......................... 64 63
Additional paid-in capital ........................... 754,107 751,404
Retained earnings .................................... 231,292 213,165
---------- ----------
Total stockholders' equity ................... 985,463 964,632
---------- ----------
Total liabilities and stockholders' equity ... $4,531,416 $3,991,606
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
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<TABLE>
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CALPINE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended March 31, 2000 and 1999
(in thousands, except per share amounts)
(unaudited)
Three Months Ended
March 31,
-------------------------
2000 1999
<S> <C> <C>
Revenue:
Electricity and steam sales ......................... $ 193,924 $ 128,026
Service contract revenue ............................ 23,129 11,502
Income from unconsolidated investments in 9,774 10,812
power projects
Interest income on loans to power projects .......... -- 303
Other revenue ....................................... 8,575 --
--------- ---------
Total revenue ................................... 235,402 150,643
--------- ---------
Cost of revenue:
Fuel expenses ...................................... 73,652 53,937
Plant operating expenses ........................... 40,604 24,055
Depreciation expense ............................... 27,818 18,979
Production royalties ............................... 3,707 2,417
Operating lease expenses ........................... 10,458 5,593
Service contract expenses .......................... 20,488 10,175
--------- ---------
Total cost of revenue ........................... 176,727 115,156
--------- ---------
Gross profit ..................................... 58,675 35,487
Project development expenses ......................... 3,755 1,956
General and administrative expenses .................. 8,619 9,112
--------- ---------
Income from operations ........................... 46,301 24,419
Interest expense ..................................... 17,907 21,027
Distributions on trust preferred securities .......... 6,978 --
Interest income ...................................... (7,562) (2,778)
Minority interest, net ............................... 217 --
Other income ......................................... (1,053) (163)
--------- ---------
Income before provision for income taxes ......... 29,814 6,333
Provision for income taxes ........................... 11,687 2,483
--------- ---------
Net income ....................................... $ 18,127 $ 3,850
========= =========
Basic earnings per common share:
Weighted average shares of common stock outstanding 63,337 41,190
Basic earnings per share ........................... $ 0.29 $ 0.09
Diluted earnings per common share:
Weighted average shares of common stock outstanding 67,314 43,890
Diluted earnings per share ......................... $ 0.27 $ 0.09
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
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<TABLE>
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CALPINE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 2000 and 1999
(in thousands)
(unaudited)
Three Months Ended
March 31,
-------------------
2000 1999
------- -------
<S> <C> <C>
Cash flows from operating activities:
Net income ........................................... $ 18,127 $ 3,850
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization ..................... 29,264 19,379
Deferred income taxes, net ........................ (8,862) 2,273
Income from unconsolidated investments
in power projects ............................... (9,774) (10,812)
Distributions from unconsolidated power projects .. 10,260 10,272
Minority Interest ................................. (224) --
Change in operating assets and liabilities,
net of effects of acquisitions:
Accounts receivable ............................. 3,143 13,086
Inventories ..................................... 594 (324)
Other current assets ............................ (6,734) 1,243
Notes receivable ................................ (4,794) --
Other assets .................................... 7,317 (6,414)
Accounts payable and accrued expenses ........... (15,032) (824)
Other liabilities ............................... 681 1,650
--------- ---------
Net cash provided by operating activities .... 23,966 33,379
--------- ---------
Cash flows from investing activities:
Acquisition of property, plant and equipment ......... (271,075) (104,350)
Acquisitions, net of cash acquired ................... (148,709) (102,057)
Capital expenditures on joint ventures ............... (94,263) (17,265)
Maturities of collateral securities .................. 1,630 1,850
Project development costs ............................ (52,191) (15,264)
(Increase) decrease in restricted cash ............... 231 (6,789)
Other ................................................ (236) (4,725)
--------- ---------
Net cash used in investing activities ........ (564,613) (248,600)
--------- ---------
Cash flows from financing activities:
Borrowings from project financing .................... 99,877 176,155
Repayments of borrowings ............................. (5,503) (127,625)
Proceeds from issuance of Senior Notes ............... -- 600,000
Proceeds from issuance of preferred securities........ 360,000 --
Proceeds from issuance of common stock ............... 2,826 177,900
Financing costs ...................................... (15,333) (8,784)
--------- ---------
Net cash provided by financing activities .... 441,867 817,646
--------- ---------
Net increase (decrease) in cash and cash equivalents ... (98,780) 602,425
Cash and cash equivalents, beginning of period ......... 349,371 96,532
--------- ---------
Cash and cash equivalents, end of period ............... $ 250,591 $ 698,957
========= =========
Cash paid during the period for:
Interest ............................................. $ 19,726 $ 19,365
Income taxes ......................................... $ 13,621 $ 1,175
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
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CALPINE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2000
(unaudited)
1. Organization and Operation of the Company
Calpine Corporation ("Calpine"), a Delaware corporation, and subsidiaries
(collectively, the "Company") is engaged in the development and acquisition of
power projects and generation of electricity in the United States and Canada.
2. Summary of Significant Accounting Policies
Basis of Interim Presentation -- The accompanying interim consolidated financial
statements of the Company have been prepared by the Company, without audit by
independent public accountants, pursuant to the rules and regulations of the
Securities and Exchange Commission. In the opinion of management, the
consolidated financial statements include the adjustments necessary to present
fairly the information required to be set forth therein. Certain information and
note disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted from these statements pursuant to such rules and regulations and,
accordingly, should be read in conjunction with the audited consolidated
financial statements of the Company included in the Company's annual report on
Form 10-K for the year ended December 31, 1999. The results for interim periods
are not necessarily indicative of the results for the entire year.
Use of Estimates in Preparation of Financial Statements -- The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates. The most significant estimates with regard to these
financial statements relate to future development costs and useful lives of the
generation facilities (see Property, Plant and Equipment, net).
Capitalized interest -- The Company capitalizes interest on capital invested in
projects during the construction period. For the three months ended March 31,
2000 and 1999, the Company recorded net interest expense of $17.9 million and
$21.0 million, respectively, after capitalizing $25.1 million and $2.3 million
of interest on general corporate funds used for construction in 2000 and 1999,
respectively, and after $4.8 million and $1.5 million of interest capitalized on
funds borrowed for specific construction projects in 2000 and 1999,
respectively. Upon the start-up of plant operations, capitalized interest is
transferred to property, plant and equipment and is amortized over the estimated
useful life of the plant. The increase in the amount of interest capitalized
reflects the significant increase in the Company's power plant construction
program.
New Accounting Pronouncements -- In June 1999, the Financial Accounting
Standards Board ("FASB") issued Statement of Financial Accounting Standards ("
SFAS") No. 137, "Accounting for Derivative Instruments and Hedging
Activities--Deferral of the Effective Date of FASB Statement No. 133--an
Amendment of FASB Statement No. 133". The Statement amends SFAS No. 133 to defer
its effective date to all fiscal quarters of all fiscal years beginning after
June 15, 2000. The Company has not yet completed its analysis of the impact of
adopting SFAS No. 133 on the financial statements and has not determined the
timing of or method of the adoption of SFAS No. 133. However, the Statement
could increase the volatility of the Company's earnings.
Reclassifications -- Prior period amounts in the consolidated financial
statements have been reclassified where necessary to conform to the 2000
presentation.
3. Property, Plant and Equipment
Property, plant and equipment consisted of the following (in thousands):
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<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
------------ ------------
<S> <C> <C>
Geothermal properties ............................ $ 377,054 $ 366,059
Oil and gas properties ........................... 219,527 214,794
Buildings, machinery and equipment ............... 1,242,354 1,215,063
Power sales agreements ........................... 145,957 145,957
Gas contracts .................................... 128,356 122,593
Other assets ..................................... 156,778 78,735
----------- -----------
2,270,026 2,143,201
Less accumulated depreciation and amortization ... (253,026) (227,059)
----------- -----------
2,017,000 1,916,142
Land ............................................. 3,567 3,419
Construction in progress ......................... 1,338,470 946,886
----------- -----------
Property, plant and equipment, net ............... $ 3,359,037 $ 2,866,447
=========== ===========
</TABLE>
Construction in progress represents the costs relating to the construction of
power plants, including the procurement of equipment, such as gas turbine
generators, capitalized interest and capitalized project development costs.
4. Results of Unconsolidated Investments in Power Projects
The following details the Company's income from investments in unconsolidated
power projects and the distributions received by the Company related to those
power projects (in thousands):
<TABLE>
<CAPTION>
Ownership Income Distributions
Interest For the three months ended March 31,
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Sumas Power Plant ........... - $ 7,089 $ 8,243 $ 7,089 $ 8,243
Gordonsville Power Plant .... 50.0% 1,965 1,345 -- --
Lockport Power Plant ........ 11.4% 1,038 1,068 910 1,023
Bayonne Power Plant ......... 7.5% 672 1,156 748 635
Kennedy International 50.0% (1,267) (1,038) -- --
Airport Power
Aidlin Power Plant (1) ...... 55.0% -- 88 -- --
Stony Brook Power Plant ..... 50.0% (399) (78) 1,364 371
Agnews Power Plant .......... 20.0% 2 65 -- --
Auburndale Power Plant ...... 50.0% 128 (37) -- --
Grays Ferry (2) ............. 40.0% 481 -- -- --
Other ....................... - 65 -- 149 --
-------- -------- -------- --------
Total ............ $ 9,774 $ 10,812 $ 10,260 $ 10,272
======== ======== ======== ========
</TABLE>
(1) The Company acquired an additional 50% interest in the Aidlin Power Plant
on August 31, 1999. Accordingly, the Company thereafter consolidated the
operations of the Aidlin Power Plant.
(2) On December 17, 1999, the Company acquired 80% of the common stock of
Cogeneration Corporation of America ("CGCA")which has a 50% partnership
interest in the Grays Ferry Cogeneration Partnership.
5. Trust Preferred Securities
On January 26, 2000, Calpine through its wholly-owned subsidiary, Calpine
Capital Trust II, a statutory business trust created under Delaware law,
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completed a private offering of 6,000,000 Remarketable Term Income Deferrable
Equity Securities ("trust preferred securities") ("HIGH TIDES") at a value of
$50.00 per share. The gross proceeds from the offering were $300.0 million.
On February 10, 2000, Calpine, through its subsidiary, privately placed an
additional 1,200,000 trust preferred securities at a value of $50.00 per share
pursuant to the exercise of the underwriters' over-allotment option generating
gross proceeds of $60.0 million.
The net proceeds from the offerings were used by Calpine's subsidiary to invest
in convertible subordinated debentures of Calpine, which represent substantially
all of the subsidiary's assets. Calpine effectively has guaranteed all of the
subsidiary's obligations under the trust preferred securities. The trust
preferred securities are reflected on the balance sheet as "Company-obligated
mandatorily redeemable convertible preferred securities of a subsidiary trust",
while distributions are reflected in the statements of operations as
"Distributions on trust preferred securities". Financing costs related to the
issuance of the trust preferred securities are amortized over 30 years. The
trust preferred securities accrue distributions at a rate of 5 1/2 % per annum,
have a liquidation value of $50.00 per share, are convertible into shares of
Calpine's common stock at the holders option on or prior to the tender
notification date, at a rate of 0.4881 shares of common stock for each trust
preferred security, and may be redeemed at any time on or after February 5, 2003
at a redemption price equal to 101.375% of the principal amount plus any accrued
and unpaid distributions declining to 100% of the principal amount on or after
February 5, 2004. Additionally, Calpine has the right to defer the interest
payments on the debentures for up to twenty consecutive quarters, which would
also cause a deferral of distributions on the trust preferred securities.
Currently, the Company has no intention of deferring interest payments on the
debentures.
6. Acquisitions
On January 14, 2000, Calpine acquired a 50% interest in the Aries Power Plant, a
600 megawatt natural gas-fired plant currently under construction near Pleasant
Hill, Missouri, from a subsidiary of Aquila Energy Corporation. Construction
started in October 1999. Commercial operation of the first 330 megawatts is
scheduled to begin June 2001 with the balance of the plant starting in January
2002. The majority of the facility's output will be sold to Missouri Public
Service through May 2005. Thereafter, power will be sold into the Southwest
Power Pool.
On February 4, 2000, Calpine acquired 100% of the stock of Western Gas Resources
California from Western Gas Resources, Inc. for $14.9 million. Western's assets
include the 130-mile Steelhead natural gas pipeline and the remaining interest
in the Sacramento River Gas System natural gas pipeline, now 100% owned by
Calpine.
On March 30, 2000, Calpine purchased a 78.5% interest in the 500-megawatt
Hidalgo Energy Center, which is under construction in Edinburg, Texas, from Duke
Energy North America for $235 million. The purchase includes a cash payment of
$134 million and the assumption of a $101 million capital lease obligation. The
Hidalgo Energy Center will sell power utilizing the Company's system approach
into the Electric Reliability Council of Texas' ("ERCOT") wholesale market and
potentially into northern Mexico. Construction of the facility began in February
1999, and commercial operation is expected in June 2000.
7. Credit Facilities
Calpine maintains a credit facility of $100.0 million, which is available
through a consortium of commercial lending institutions led by The Bank of Nova
Scotia as agent. A maximum of $50.0 million of the credit facility may be
allocated to letters of credit. At March 31, 2000, Calpine had no borrowings and
$39.7 million of letters of credit outstanding under the credit facility.
Borrowings bear interest at The Bank of Nova Scotia's base rate plus an
applicable margin or at LIBOR plus an applicable margin. Interest is paid on the
last day of each interest period for such loans. The credit facility specifies
that Calpine maintain certain covenants, with which Calpine was in compliance as
of March 31, 2000. Commitment fees related to this credit facility are charged
based on 0.375% of committed unused funds.
On November 4, 1999, Calpine entered into a credit agreement for $1.0 billion
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through its wholly-owned subsidiary, Calpine Construction Finance Company L.P.,
with a consortium of banks with the lead arranger being The Bank of Nova Scotia
and the lead arranger syndication agent being Credit Suisse First Boston. The
non-recourse credit facility will be utilized to finance a portion of the
construction of Calpine's diversified portfolio of gas-fired power plants
currently under development. Calpine currently intends to refinance this
construction facility in the long-term capital markets prior to its four-year
maturity. As of March 31, 2000, Calpine had $64.3 million outstanding under the
facility. Borrowings under this facility bear interest, at Calpine's option, at
the prime commercial lending rate, the Federal Funds Rate plus 0.50% or LIBOR.
The credit facility specifies that Calpine maintain certain covenants, with
which Calpine was in compliance as of March 31, 2000. Costs associated with the
credit agreement have been deferred and will be amortized over the life of the
assets financed.
Additionally, Calpine maintains other credit facilities through certain of
its subsidiaries.
8. Earnings per Share
Basic earnings per share were computed by dividing net earnings by the weighted
average number of common shares outstanding for the period. The dilutive effect
of the potential exercise of outstanding options to purchase shares of common
stock is calculated using the treasury stock method. The reconciliation of basic
earnings per share to diluted earnings per share is shown in the following table
(dollars in thousands except share data). All share data has been adjusted to
reflect the two-for-one stock split effective October 7, 1999.
<TABLE>
<CAPTION>
Periods Ended March 31, 2000 1999
----------------------------- ----------------------
Net Net
Income Shares EPS Income Shares EPS
----------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Basic earnings per
common share:
Basic earnings per share $18,127 63,337 $0.29 $3,850 41,190 $0.09
====== ====== ====== ====== ====== ======
Common shares issuable upon
exercise of stock options
using treasury stock method 3,977 2,700
------ -----
Diluted earnings per
common share:
Diluted earnings per share $18,127 67,314 $0.27 $3,850 43,890 $0.09
====== ====== ====== ====== ====== ======
</TABLE>
Unexercised employee stock options to purchase 275,380 and 23,000 shares of the
Company's common stock during the three months ended March 31, 2000 and 1999,
respectively, were not included in the computation of diluted shares outstanding
because such inclusion would be anti-dilutive.
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Except for historical financial information contained herein, the matters
discussed in this quarterly report may be considered forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended and subject to
the safe harbor created by the Securities Litigation Reform Act of 1995. Such
statements include declarations regarding our intent, belief or current
expectations. Prospective investors are cautioned that any such forward-looking
statements are not guarantees of future performance and involve a number of
risks and uncertainties; actual results could differ materially from those
indicated by such forward-looking statements. Among the important factors that
could cause actual results to differ materially from those indicated by such
forward-looking statements are: (i) that the information is of a preliminary
nature and may be subject to further adjustment, (ii) the possible
unavailability of financing, (iii) risks related to the development,
acquisition, and operation of power plants, (iv) the impact of avoided cost
pricing, energy price fluctuations and gas price increases, (v) the impact of
curtailment, (vi) the seasonal nature of our business, (vii) start-up risks,
(viii) general operating risks, (ix) the dependence on third parties, (x) risks
associated with international investments, (xi) risks associated with the power
marketing business, (xii) changes in government regulation, (xiii) the
availability of natural gas, (xiv) the effects of competition, (xv) the
dependence on senior management, (xvi) volatility in our stock price, (xvii)
fluctuations in quarterly results and seasonality, and (xviii) other risks
identified from time to time in our reports and registration statements filed
with the Securities and Exchange Commission.
ITEM 2. 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. Today, we have interests in 44 operating power plants having
a net capacity of 3,355 megawatts, 15 power plants under construction having a
net capacity of 6,568 megawatts, and 13 projects under development with a net
capacity of 7,268 megawatts.
On January 11, 2000, we announced our plans to expand our presence into the
Florida wholesale power market. Our plans are to invest approximately $750
million in power generation facilities and manage these development activities
in the Southeast from a new office in Tampa, Florida. We will develop two
natural gas-fired energy centers, the 1,080-megawatt Blue Heron Energy Center,
to be located outside of Vero Beach, and the 540-megawatt Osprey Energy Center,
to be located in the City of Auburndale adjacent to an existing power facility
in which we have an interest. Construction for the proposed facilities is
planned for 2001 or 2002, with both projects expected to commence operation in
2003 or 2004.
On January 14, 2000, we acquired a 50% interest in the Aries Power Plant, a 600
megawatt natural gas-fired plant currently under construction near Pleasant
Hill, Missouri, from a subsidiary of Aquila Energy Corporation. Construction
started in October 1999. Commercial operation of the first 330 megawatts is
scheduled to begin June 2001 with the balance of the plant starting in January
2002. The majority of the facility's output will be sold to Missouri Public
Service through May 2005. Thereafter, power will be sold into the Southwest
Power Pool.
On January 18, 2000, we entered into an agreement to provide the Sacramento
Municipal Utility District ("SMUD") with a five year supply of electricity from
our 545-megawatt Sutter Power Plant. The plant is currently under construction
near Yuba City, California. We will provide 150 megawatts of electricity to
SMUD's customer base beginning with the plant's startup in mid-2001.
On January 26, 2000, we completed a private offering under Rule 144A of the
Securities Act of 1933 of 6,000,000 5 1/2% HIGH TIDES issued by a subsidiary
trust at $50.00 each, raising $300.0 million of aggregate gross proceeds. On
February 10, 2000, we privately placed an additional 1,200,000 5 1/2% HIGH TIDES
pursuant to the exercise of the underwriters' over-allotment option generating
gross proceeds of $60.0 million.
10
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On January 28, 2000, we acquired the development rights for the Hermiston Power
Plant, a 540 megawatt gas-fired cogeneration power facility located near
Hermiston, Oregon, from Ida-West Energy Company and TransCanada Pipelines.
Construction of the facility is expected to commence in the summer of 2000 with
commercial operation commencing in 2002.
On February 2, 2000, we announced plans to build, own and operate the Decatur
Energy Center, a 700 megawatt gas-fired cogeneration power plant at Solutia
Inc.'s Decatur, Alabama chemical facility. Under terms of a 20-year contract,
Solutia will lease a portion of the facility to meet its electricity needs and
purchase its steam requirements from us. Excess power from the facility will be
sold into the Southeastern Wholesale Power Market under a variety of short-,
mid-, and long-term contracts. We will also build a new intrastate natural gas
pipeline to fuel the plant. Construction is scheduled to commence in 2000 with
commercial operations commencing in 2002.
On February 4, 2000, we acquired 100% of the stock of Western Gas Resources
California ("Western") from Western Gas Resources, Inc. for $14.9 million.
Western's assets include the 130-mile Steelhead natural gas pipeline and the
remaining interest in the Sacramento River Gas System natural gas pipeline, now
100% owned by us.
On February 8, 2000, we announced that the Towantic Energy Center received
approval through a townwide referendum to purchase the town-owned land on which
the facility will be built. The referendum also approved a Tax Stabilization
Agreement that will even out the property taxes paid to the town of Oxford,
Connecticut over a 22-year period.
On February 9, 2000, we announced that the California Energy Commission approved
plans to construct the Delta Energy Center in Pittsburg, California. The Delta
Energy Center, an 880 megawatt gas-fired power plant located at the Dow Chemical
facility, is the first power plant that will be developed, owned and operated
under a joint venture with Bechtel Enterprises, and will provide power to
Pittsburg, California and to the greater San Francisco Bay Area.
On February 22, 2000, we announced plans to build, own and operate the Lone Oak
Energy Center, an 800 megawatt gas-fired cogeneration facility located in
Lowndes County, Mississippi. We anticipate that construction will commence in
early 2001 and that commercial operation of the facility will commence in early
2003.
On February 24, 2000, we announced plans to build, own and operate the Hillabee
Energy Center, a 700 megawatt gas-fired cogeneration facility located in
Tallapoosa County, Alabama. We anticipate that construction will commence in
early 2001 and that commercial operation of the facility will commence in early
2003.
On March 6, 2000, we announced that we entered into a partnership agreement with
Cleco Midstream Resources, an affiliate of Pineville, Louisiana-based Cleco
Corporation to participate in the Acadia Power Project. The partners plan to
build, own and operate the 1,000 megawatt natural gas-fired generating plant
near Eunice, Louisiana. Construction is expected to begin in mid-2000 and
commercial operation for the energy center is expected in June 2002.
On March 7, 2000, we announced plans to purchase a 78.5 % interest in the
500-megawatt Hidalgo Energy Center, which is under construction in Edinburg,
Texas, from Duke Energy North America for $235 million. The purchase includes a
cash payment of $134 million and the assumption of a $101 million capital lease
obligation. The Hidalgo Energy Center will sell power utilizing our system
approach into ERCOT's wholesale market and potentially into northern Mexico.
Construction of the facility began in February 1999, and commercial operation is
expected in June 2000.
On March 23, 2000, we announced plans to build, own and operate the Wawayanda
Energy Center, a 540 megawatt natural gas-fired electricity generation facility
to be located near Middletown, New York. We anticipate that construction will
begin in 2002 and commercial operation will begin in early 2004.
On March 30, 2000, we announced a 50 megawatt expansion of the 117 megawatt
natural gas-fired, cogeneration power plant in Morris, Illinois. We also
announced the signing of a power sales agreement to deliver approximately 100
megawatts of capacity from the Morris Cogeneration Facility to Commonwealth
Edison Company through the end of 2000. The majority of the electricity and all
of the steam produced from the plant are sold to Equistar Chemicals, L.P. under
a long-term agreement that expires in 2023.
11
<PAGE>
Transactions Announced or Consummated Subsequent to March 31, 2000
On April 20, 2000, we announced plans to construct the Calgary Energy Centre.
Scheduled to begin commercial operation in 2003, the 250 megawatt
combined-cycle, natural gas-fired facility will be the first independent power
project announced in the Calgary area, and represents our first investment in
the Canadian power industry.
On May 2, 2000, we announced an agreement with an affiliate of Alexandria,
Virginia-based Statoil Energy, Inc. to acquire the remaining 50% interests in
the 107-megawatt Kennedy International Airport Power Plant in Queens, New York,
and the 40-megawatt Stony Brook Power Plant located at the State University of
New York at Stony Brook on Long Island. Calpine initially acquired a 50%
interest in both facilities in December 1997. We will assume operation and
maintenance of the plants upon completion of the acquisition expected in late
May 2000.
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 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, the Texas City and Clear Lake Power Plants, the
Pasadena Power Plant, the Sonoma Power Plant, the Pittsburg Power Plant, the 12
Sonoma County and 2 Lake County power plants purchased from PG&E on May 7, 1999,
the acquisition of an additional 50% interest in the Aidlin Power Plant on
August 31, 1999, the Calistoga Power Plant since its acquisition on October 21,
1999 and five facilities (Newark, Pryor, Parlin, and Morris Power Plants and
Philadelphia Water Project) that we acquired with our purchase of 80% of CGCA on
December 17, 1999. The information set forth under thermal and other revenue
consists of the results for the Thermal Power Company Steam Fields prior to the
acquisition of Unocal Corporation's interest in the Thermal Power Company steam
fields on March 19, 1999 and of the PG&E power plants on May 7, 1999, in
addition to host thermal sales and other revenue.
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------------
2000 1999
----------------- -------------
(in thousands, except average prices)
(unaudited)
<S> <C> <C>
Electricity and steam revenue:
Energy $ 124,483 $ 64,956
Capacity $ 55,483 $ 46,087
Thermal and other $ 13,958 $ 16,983
Megawatt hours produced 4,381,189 2,475,149
Average energy price per kilowatt hour $ 0.0284 $ 0.0262
</TABLE>
Megawatt hours produced at the power plants increased 77% for the three months
ended March 31, 2000 as compared with the same period in 1999, primarily due to
1,085,672 megawatt hours of production at The Geysers units acquired from PG&E
on May 7, 1999, 416,159 megawatt hours of production at the Morris, Newark,
Parlin and Pryor facilities which were acquired on December 17, 1999, and due to
higher operation at certain of the Company's other facilities.
12
<PAGE>
Results of Operations
Three Months Ended March 31, 2000 Compared to Three Months Ended March 31, 1999
Revenue -- Total revenue increased 56% to $235.4 million for the three months
ended March 31, 2000 compared to $150.6 million in 1999.
Electricity and steam sales revenue increased 51% to $193.9 million in
2000 compared to $128.0 million in 1999. The increase is primarily due
to the acquisition of 14 geothermal facilities from PG&E on May 7,
1999, which contributed an additional $47.9 million during 2000. An
additional $23.5 million was contributed by the Newark, Parlin, Morris,
and Pryor facilities which were acquired on December 17, 1999. The King
City facility contributed $6.0 million more than for the same period
last year due to less curtailment. The Clear Lake and Pasadena
facilities reported an additional $4.5 million and $4.3 million,
respectively, due to favorable pricing. These increases were partially
offset by a $20.5 million decrease in contractual capacity payments at
Texas City.
Service contract revenue increased to $23.1 million in 2000 compared to
$11.5 million in 1999. The 101% increase was primarily attributable to
increased energy and gas marketing and trading activity associated with
power and gas obtained from third parties, which contributed an
additional $11.7 million in revenue in 2000.
Income from unconsolidated investments in power projects decreased 10%
to $9.8 million in 2000 compared to $10.8 million during 1999. The
variance is primarily due to a $1.2 million decrease in distributions
from the Company's investment in the Sumas Power Plant, partially
offset by income recorded by the Company's investment in Grays Ferry,
which was acquired on December 17, 1999.
Interest income on loans to power projects decreased from $303,000 to
none in 2000. On October 1, 1999, the Company completed its acquisition
of Sheridan Energy, Inc., until which time interest income was recorded
on convertible preferred stock held by the Company. From October 1,
1999, the results of operations have been consolidated.
Other revenue increased to $8.6 million in 2000 compared to none in
1999. Other revenue is comprised primarily of oil and natural gas sales
to third parties. The increase is attributable to the acquisition of
Sheridan Energy, Inc., on October 1, 1999.
Cost of revenue -- Cost of revenue increased 53% to $176.7 million in 2000
compared to $115.2 million in 1999. The $61.5 million increase was primarily
attributable to $51.2 million in incremental effects of acquisitions consummated
after March 31, 1999 on plant operating expenses, fuel expense, depreciation
expense, operating lease expense, and production royalties expense. A $10.3
million increase in service contract expense was attributable to increased
energy and gas marketing and trading activity associated with power and gas
obtained from third parties.
General and administrative expenses -- General and administrative expenses
decreased 5% to $8.6 million for the three months in 2000 compared to $9.1
million in 1999. The decrease was primarily attributable to the effect of a
reserve for leasehold improvements made in 1999.
Interest expense -- Interest expense decreased 15% to $17.9 million for the
three months in 2000 from $21.0 million for the same period in 1999. The
decrease was primarily attributable to interest capitalized on corporate funds
invested in construction projects of $25.1 million and $2.3 million,
respectively, which was offset by increased interest expense on additional
borrowings during 1999.
Provision for income taxes -- The effective income tax rate was approximately
39% for the three months ended March 31, 2000 and 1999. The increase in the
nominal provision was due to higher taxable income in 2000.
13
<PAGE>
Outlook
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 provide us with a competitive
advantage. The key elements of our strategy are as follows:
o Development and expansion of power plants. We are actively pursuing the
development of new and the expansion of existing highly efficient,
low-cost, gas-fired power plants that 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 leverage 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.
o Acquisition of power plants. Our strategy is to acquire power generating
facilities that meet our stringent acquisition criteria and provide
significant potential for revenue, cash flow and earnings growth, and
that 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.
o Enhance the performance and efficiency of existing power projects. We
continually seek to maximize the power generation 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 72 power plants
with a net capacity of 17,265 megawatts, after completion of our
projects currently under construction and development. We focus on
operating our plants as an integrated system of power generation, which
enables us to minimize costs and maximize operating efficiencies. We
believe that achieving and maintaining a low-cost of production will be
increasingly important to compete effectively in the power generation
market.
PART II. OTHER INFORMATION
ITEM 2. CHANGE IN SECURITIES
On January 26, 2000, Calpine completed a private offering under Rule 144A of the
Securities Act of 1933 of 6,000,000 5 1/2% HIGH TIDES issued by a subsidiary
trust at $50.00 each, raising $300.0 million of aggregate gross proceeds. On
February 10, 2000, Calpine privately placed an additional 1,200,000 5 1/2% HIGH
TIDES pursuant to the exercise of the underwriters' over-allotment option
generating gross proceeds of $60.0 million.
ITEM 5. OTHER INFORMATION
1. On April 20, 2000, Calpine announced plans to construct the Calgary Energy
Centre. Scheduled to begin commercial operation in 2003, the 250 megawatt
combined-cycle, natural gas-fired facility will be the first independent
power project announced in the Calgary area, and represents our first
investment in the Canadian power industry.
2. On April 27, 2000, Calpine announced record financial results for the
quarter ended March 31, 2000.
3. On May 2, 2000, Calpine announced an agreement with an affiliate of
Alexandria, Virginia-based Statoil Energy, Inc. to acquire the remaining
50% interests in the 107-megawatt Kennedy International Airport Power Plant
in Queens, New York and the 40-megawatt Stony Brook Power Plant located at
the State University of New York at Stony Brook on Long Island. Calpine
initially acquired a 50% interest in both facilities in December 1997. We
will assume operation and maintenance of the plants upon completion of the
acquisition expected in late May 2000.
14
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The following exhibits are filed herewith unless otherwise indicated:
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
27.0 Financial Data Schedule
99.1 Press Release dated April 20, 2000
99.2 Press Release dated April 27, 2000
99.3 Press Release dated May 2, 2000
</TABLE>
(b) Reports on Form 8-K
1. Current report dated January 26, 2000 and filed on February 9, 2000
Item 5. Other Events - Announcement of the offering of approximately $360
million of convertible preferred securities in a private placement
Item 7. Exhibits - - Press Release dated January 26, 2000
2. Current report dated February 3, 2000 and filed on February 9, 2000
Item 5. Other Events - Announcement of financial results for the three and
twelve months ended December 31, 1999
Item 7. Exhibits - - Press Release dated February 3, 2000
3. Current report dated March 6, 2000 and filed on March 31, 2000
Item 5. Other Events - Announcement of Joint Venture with Cleco; plans to
purchase interest in Hidalgo Energy Center; development of Wawayanda
Energy Center; and continued growth
Item 7. Exhibits - - Press releases dated March 6, 2000, March 7, 2000,
March 23, 2000 and March 27, 2000
4. Current report dated March 30, 2000 and filed on April 3, 2000
Item 5. Other Events - Announcement of expansion of Morris Power Plant and
signing of power sales agreement; filing of Annual Management
Incentive Plan; filing of consulting agreements for a board member;
and loan to a Company officer
Item 7. Exhibits - - Press release dated March 30, 2000, Calpine
Corporation Annual Management Incentive Plan, consulting contracts and
note to officer
15
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CALPINE
CORPORATION'S CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 2000 AND FROM THE
CONSOLIDATED STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2000
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH STATEMENTS
</LEGEND>
<CIK> 0000916457
<NAME> CALPINE CORPORATION
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLAR
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<EXCHANGE-RATE> 1
<CASH> 250,591
<SECURITIES> 0
<RECEIVABLES> 124,342
<ALLOWANCES> 3,343
<INVENTORY> 15,824
<CURRENT-ASSETS> 430,116
<PP&E> 3,612,063
<DEPRECIATION> 253,026
<TOTAL-ASSETS> 4,531,416
<CURRENT-LIABILITIES> 266,325
<BONDS> 0
614,641
0
<COMMON> 64
<OTHER-SE> 985,399
<TOTAL-LIABILITY-AND-EQUITY> 4,531,416
<SALES> 193,924
<TOTAL-REVENUES> 235,402
<CGS> 156,239
<TOTAL-COSTS> 176,727
<OTHER-EXPENSES> 12,374
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 17,907
<INCOME-PRETAX> 29,814
<INCOME-TAX> 11,687
<INCOME-CONTINUING> 18,127
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 18,127
<EPS-BASIC> 0.29
<EPS-DILUTED> 0.27
</TABLE>
Exhibit 99.1 Press Release Dated April 20, 2000
NEWS RELEASE
Contact: Calpine (408) 995-5115
Public Relations Katherine Potter ext. 1168
Investor Relations Rick Barraza ext. 1125
CALPINE ANNOUNCES 250-MEGAWATT "CALGARY ENERGY CENTRE"
The Proposed State-of-the-Art Project Will Help Meet the Needs of Calgary's
Energy Future
(SAN JOSE, CALIF./CALGARY, AB) - April 20, 2000 - Calpine Corporation
[NYSE:CPN], the San Jose, Calif.-based independent power producer, today
announced plans to construct the US$135 million Calgary Energy Centre (CEC) to
increase security of electricity supply for Calgarians.
Scheduled to begin commercial operation in 2003, the 250-megawatt
combined-cycle, natural gas-fired facility will be the first independent power
project (IPP) announced in the Calgary area, and represents Calpine's first
investment in the Canadian power industry. The facility will generate enough
power to supply approximately a quarter of a million homes, and will have the
ability to produce an additional 50 megawatts of electricity during peak demand
periods.
"We are pleased to announce the Calgary Energy Centre," stated Dan Allard,
vice-president of business development for Calpine. "This project responds to
rising demand for power, to a real need for generation near Calgary, and to the
opportunities provided by Alberta's deregulation process. The Calgary Energy
Centre exemplifies Calpine's commitment to repowering North America with
high-efficiency, environmentally responsible power generation."
Alberta's Resource Development Minister and acting Provincial Treasurer, Dr.
Steve West, welcomed the announcement, saying the arrival of Calpine to the
Alberta market shows that restructuring in the electricity industry is working.
"This is an example of the benefits of a competitive market, where the private
sector makes investment decisions based on market needs - in this case, a need
for additional power generation in southern Alberta - not on the direction of
the regulator," West said. "This is the kind of innovation and responsiveness a
competitive electricity marketplace will bring to Alberta."
The Calgary Energy Centre will supply electricity to the Alberta Power Pool and
provide a competitive source of supply to Calgary customers as the market
prepares for full electricity deregulation and customer choice on January 1,
2001. It will also help meet the recommendations of the province's Transmission
Administrator and the Alberta Energy and Utilities Board to attract 500 new
megawatts of power generation to meet demand growth in southern Alberta.
Calpine proposes to build a clean, modern natural gas-fired facility. It will be
located adjacent to an existing natural gas processing plant in northeast
Calgary. The project will utilize Selective Catalytic Reduction Technology. The
plant will be permitted at 3.5 parts per million of nitrogen oxide
emissions-significantly lower than Canadian regulatory limits. In addition,
sulfur dioxide emissions will be eliminated, and carbon dioxide emissions will
be minimized.
Calpine's project will create approximately 300 jobs during peak construction
and 20-to-25 full time positions when the facility enters operation.
Construction is expected to commence this fall.
Calpine Corporation, the leading independent power company in the United States,
is dedicated to providing customers with clean, reliable and competitively
priced electricity. Calpine is active in 20 states and Alberta, Canada.
Calpine's Corporate headquarters are located in San Jose, Calif., with regional
offices in Houston, Texas; Pleasanton, Calif.; and Boston, Mass. Calpine
currently has approximately 17,200 megawatts of capacity in operation, under
construction or in announced development - enough energy to power more than 17
million households. The company was founded in 1984 and is publicly traded on
the New York Stock Exchange under the symbol CPN.
This news release discusses certain matters that may be considered
"forward-looking" statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended, including statements regarding the intent, belief or current
expectations of Calpine Corporation ("the Company") and its management.
Prospective investors are cautioned that any such forward-looking statements are
not guarantees of future performance and involve a number of risks and
uncertainties that could materially affect actual results such as, but not
limited to, (i) changes in government regulations and anticipated deregulation
of the electric energy industry; (ii) commercial operations of new plants that
may be delayed or prevented because of various development and construction
risks, such as a failure to obtain financing and the necessary permits to
operate or the failure of third-party contractors to perform their contractual
obligations (iii) cost estimates are preliminary and actual cost may be higher
than estimated, (iv) the assurance that the Company will develop additional
plants, (v) a competitor's development of a lower-cost generating gas-fired
power plant or (vi) the risks associated with marketing and selling power from
power plants in the newly competitive energy market. Prospective investors are
also referred to the other risks identified from time to time in the Company's
reports and registration statements filed with the Securities and Exchange
Commission.
Exhibit 99.2 Press Release Dated April 27, 2000
NEWS RELEASE
Contact: Calpine (408) 995-5115
Public Relations Katherine Potter ext. 1168
Investor Relations Rick Barraza ext. 1125
CALPINE REPORTS 200% INCREASE IN EARNINGS PER SHARE FOR FIRST QUARTER 2000
SAN JOSE, CALIF. (April 27, 2000)--Calpine Corporation [NYSE:CPN], the nation's
fastest growing independent power company, today announced record financial
results for the quarter ended March 31, 2000.
Net income was $18.1 million for the quarter ended March 31, 2000, representing
a 364% increase over 1999 first quarter net income of $3.9 million. Diluted
earnings per share for the first quarter rose to $0.27 per share, from $0.09 per
share for the same period last year. Revenue for the quarter rose 56% to $235.4
million, from $150.6 million a year ago. Earnings Before Interest, Tax,
Depreciation and Amortization (EBITDA) increased 113% to $108.6 million for the
quarter, compared to $51.1 million a year ago. Total assets at March 31, 2000
were $4.5 billion as compared to $4.0 billion at December 31, 1999.
Earnings for the quarter benefited primarily from Calpine's acquisition of 14
geothermal power plants in May 1999 at The Geysers and its purchase of
Cogeneration Corporation of America in December 1999. In addition, the company's
earnings benefited from continued outstanding plant performance throughout
Calpine's national power portfolio.
"Our strong earnings reflect Calpine's continued success as the nation's
leading independent power company," stated Calpine CEO and President Peter
Cartwright. "We continue to make great strides in advancing our program to
repower America, while turning in another consecutive quarter of exceptional
financial results. By the end of 2004, we expect to have 25,000 megawatts of
clean, cost-competitive generation in place. We're well on our way to achieving
this goal. To date, Calpine has 17,200 megawatts of generation in operation,
under construction or in announced development throughout the U.S.
Highlights of recent activities include:
Development Program - Calpine continues to lead the nation in the development of
modern natural gas-fired energy centers. Calpine currently has more than 13,800
megawatts of generating facilities under construction or in announced
development.
o Calpine announced it has acquired a 50% interest in the Aries Power
Plant, a 600-megawatt natural gas-fired energy center currently under
construction near Pleasant Hill, Mo. The Aries Power Plant marks
Calpine's entry into the Southwest Power Pool--a strategically
important energy market. Construction of the $280 million facility
began in October 1999. Commercial operation for the first 330 megawatts
is expected to begin in June 2001, with the plant entering full
production in January 2002.
o Calpine entered into an agreement to provide the Sacramento Municipal
Utility District (SMUD) with a five-year supply of electricity from its
545-megawatt Sutter Power Plant, currently under construction in Sutter
County, north of Sacramento, Calif. Calpine will provide 150 megawatts
of electricity to SMUD's growing customer base beginning with plant
start-up in the summer of 2001--in time to help offset anticipated
system strains in northern California.
o Expanding its development program into the Pacific Northwest, Calpine
acquired the development rights for the Hermiston Energy Center, a
540-megawatt combined-cycle facility fueled by natural gas. The new
energy center, located in Hermiston, Ore., will have access to the
California-Oregon border and the Mid-Columbia markets.
o Calpine entered the Alabama electric power market with the announcement
of plans to build, own and operate a natural gas-fired cogeneration
facility at Solutia, Inc.'s Decatur, Ala. chemical facility. The
proposed Decatur Energy Center will generate 700 megawatts of
electricity for Solutia's industrial processing and for Alabama's
growing power market. Permitting for the $350 million facility has
commenced. Construction is scheduled to begin in mid-2000, with energy
deliveries slated to begin in the summer of 2002.
o Calpine expanded its operations in the fast-growing Florida energy
market with the development of two new natural gas-fired energy
centers. Calpine will be investing $750 million to build, own and
operate the 1,080-megawatt Blue Heron Energy Center, to be located in
Indian River County outside the City of Vero Beach, and the
540-megawatt Osprey Energy Center, which will be built adjacent to
Calpine's existing Auburndale power facility. In addition, Calpine has
opened a Tampa, Fla. office to manage the company's Southeast
development activities.
o Voters in Oxford, Conn. approved agreements that will allow Calpine to
move ahead with its proposed Towantic Energy Center, a 500-megawatt
natural gas-fired facility under development in Oxford, Conn. During a
townwide referendum, voters approved the sale of town-owned land for
the project, as well as a Tax Stabilization Agreement that will
levelize the property taxes paid to the Town over a 22-year period.
o Calpine has announced plans for its first energy facility in
Mississippi. The Lone Oak Energy Center will be an 800-megawatt natural
gas-fired energy facility to be located in Lowndes County. The facility
represents an investment of $425 million and is expected to enter
production in early 2003.
o Permitting efforts are under way for Calpine's second energy center in
Alabama. Calpine is developing the Hillabee Energy Center, a
700-megawatt natural gas-fired facility to be located in Tallapoosa
County, north of Alexander City. The proposed facility will serve
Southeast wholesale customers beginning in early 2003. Calpine expects
to begin construction in the first quarter of 2001.
o Calpine has partnered with Cleco Midstream Resources to develop the
Acadia Energy Center. The partners plan to build, own and operate the
1,000-megawatt natural gas-fired generating facility near Eunice, La.
Cleco announced the energy center in late 1999. The proposed $500
million facility will be designed to help relieve the
transmission-constrained Southwest Power Pool market. Construction is
slated to begin in mid-2000, with energy deliveries scheduled for June
2002.
o Extending its market presence in the rapidly growing south Texas power
market, Calpine acquired a 78.5% interest in the 500-megawatt Hidalgo
Energy Center--under construction in Edinburg, Texas--for $235 million.
The Hidalgo facility will sell power into ERCOT's wholesale market,
utilizing Calpine's unique system approach. Construction of the
facility began in February 1999, and commercial operation is expected
to begin in June 2000. Calpine will operate and maintain the plant.
o The 540-megawatt Wawayanda Energy Center, under development near
Middletown, N.Y., represents Calpine's flagship project for developing
a strong position in the New York merchant power market. The new
natural gas-fired facility will complement Calpine's existing power
assets on Long Island. Commercial operation will begin in early 2004.
o A 50-megawatt expansion program is under way at Calpine's 117-megawatt
Morris Cogeneration Facility. Calpine is installing a steam turbine at
its Morris, Ill. facility to maximize fuel efficiency, lower operating
costs and increase plant output. In addition, the company has entered
into a power sales agreement to deliver approximately 100 megawatts of
capacity from its Morris plant to Commonwealth Edison Company (COMED).
COMED is currently purchasing 50 megawatts of electricity, and upon
completion of the expansion in June 2000, will take the second
50-megawatt segment.
o Calpine recently unveiled its plans to build, own and operate the
Calgary Energy Centre. The facility will be the first independent power
project announced in the Calgary area, and represents Calpine's first
investment in the Canadian power market. The facility will help
increase security of electricity supply for Alberta and Calgary and
will have the ability to produce an additional 50 megawatts of
electricity during peak power demand periods.
Acquisition Program - Acquiring strategic power and natural gas assets is a key
component of Calpine's growth strategy. In 2000, Calpine announced the
completion of two major acquisitions, significantly strengthening its position
as a low-cost power provider.
o To help fuel its natural gas power program in northern California,
Calpine acquired 90 billion cubic feet of proven, natural gas reserves
from Vintage Petroleum, Inc. for approximately $71.5 million. This
acquisition established Calpine as the largest natural gas producer in
the Sacramento basin.
o Calpine further expanded its northern California gas operations with
the acquisition of the 130-mile Steelhead gas pipeline and the
remaining interest in the Sacramento River Gas System. The new
pipelines have doubled Calpine's existing capacity to deliver gas to
its existing and future power plants in the region.
Capital Program
o Calpine raised $360 million through a private placement of convertible
preferred securities, priced to yield 5-1/2%, with a conversion premium
of 27%. Proceeds from the offering will be used to finance the
company's power plant development and construction program.
o Duff & Phelps Credit Rating Co. (DCR) upgraded Calpine's senior
unsecured debt to investment grade "BBB-" from "BB+" and convertible
preferred securities to "BB" from "BB-". Calpine's rating outlook is
stable. DCR's upgrade was attributed to Calpine's outstanding natural
gas-fired and geothermal plant performance, and the company's unique,
integrated approach that focuses on developing its low-cost generating
portfolio.
About Calpine
Calpine Corporation, the leading independent power company in the United States,
is dedicated to providing customers with clean, reliable and competitively
priced electricity. Calpine is active in 20 states and Alberta, Canada.
Calpine's corporate headquarters are located in San Jose, Calif., with regional
offices in Houston, Texas; Pleasanton, Calif.; and Boston, Mass. Calpine
currently has approximately 17,200 megawatts of capacity in operation, under
construction or in announced development--enough energy to power more than 17
million households. The company was founded in 1984 and is publicly traded on
the New York Stock Exchange under the symbol CPN. For more information about
Calpine, please see our website at www.calpine.com.
This news release discusses certain matters that may be considered
"forward-looking" statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended, including statements regarding the intent, belief or current
expectations of Calpine Corporation ("the Company") and its management.
Prospective investors are cautioned that any such forward-looking statements are
not guarantees of future performance and involve a number of risks and
uncertainties that could materially affect actual results such as, but not
limited to, (i) changes in government regulations and anticipated deregulation
of the electric energy industry, (ii) commercial operations of new plants that
may be delayed or prevented because of various development and construction
risks, such as a failure to obtain financing and the necessary permits to
operate or the failure of third-party contractors to perform their contractual
obligations, (iii) cost estimates that are preliminary and actual costs that may
be higher than estimated, (iv) the assurance that the Company will develop
additional plants, (v) a competitor's development of a lower-cost generating
gas-fired power plant or (vi) the risks associated with marketing and selling
power from power plants in the newly competitive energy market. Prospective
investors are also referred to the other risks identified from time to time in
the Company's reports and registration statements filed with the Securities and
Exchange Commission.
<PAGE>
CALPINE CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
For the Three Months Ended March 31, 2000
(in thousands, except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------
2000 1999
-------------------------
<S> <C> <C>
Revenue:
Electricity and steam sales ................... $ 193,924 $ 128,026
Oil and gas revenue ........................... 8,575 --
Service contract revenue ...................... 23,129 11,502 (1)
Income from unconsolidated investments in power 9,774 10,812
Interest income on loans to power projects .... -- 303
--------- ---------
Total revenue 235,402 150,643
--------- ---------
Cost of revenue:
Plant operating expense ....................... 40,604 24,055 (2)
Fuel expense .................................. 73,652 53,937
Depreciation expense .......................... 27,818 18,979
Operating lease expense ....................... 10,458 5,593
Production royalties expense .................. 3,707 2,417
Service contract expense ...................... 20,488 10,175 (1)
--------- ---------
Total cost of revenue 176,727 115,156
--------- ---------
Gross profit ................................ 58,675 35,487
Project development expense ...................... 3,755 1,956
General and administrative expense 8,619 9,112 (2)
--------- ---------
Income from operations ...................... 46,301 24,419
Other expense (income):
Interest expense .............................. 17,907 21,027
Interest income ............................... (7,562) (2,778)
Distributions on trust preferred securities ... 6,978 --
Minority interest expense ..................... 217 --
Other income, net ............................. (1,053) (163)
--------- ---------
Income before provision for income taxes .... 29,814 6,333
Provision for income taxes ....................... 11,687 2,483
--------- ---------
Net income .................................. $ 18,127 $ 3,850
========= =========
Basic earnings per common share:
Weighted average shares outstanding ........... 63,337 41,190
Basic earnings per share ...................... $ 0.29 $ 0.09
Diluted earnings per common share:
Weighted average shares outstanding ........... 67,314 43,890
Diluted earnings per share .................... $ 0.27 $ 0.09
Depreciation and amortization $ 29,911 $ 19,455
Interest expense per indenture $ 21,447 $ 23,103
EBITDA $ 108,558 $ 51,138
EBITDA to total interest expense ................. 5.06x 2.21x
</TABLE>
- -------
1 Service contract revenue and expense in 1999 have been reclassed to conform
with the 2000 presentation.
2 Certain 1999 expenses have been reclassed from general and administrative
expense to plant operating expense to conform with 2000 presentation.
Exhibit 99.3 Press Release Dated May 2, 2000
NEWS RELEASE
Contact: Calpine (408) 995-5115
Public Relations Katherine Potter ext. 1168
Investor Relations Rick Barraza ext. 1125
Calpine To Acquire Remaining 50% Interests In Two Gas-Fired Energy Facilities In
New York
Company to Add 74 Megawatts of Generation in Northeast Power Market
(SAN JOSE, CALIF.) May 2, 2000 -- Calpine Corporation [NYSE:CPN], the nation's
leading independent power company, today announced it has reached an agreement
with an affiliate of Alexandria, Va.-based Statoil Energy, Inc. to acquire the
remaining 50 percent interests in the 107-megawatt Kennedy International Airport
Power Plant in Queens, N.Y. and the 40-megawatt Stony Brook Power Plant located
at the State University of New York at Stony Brook on Long Island. Calpine
initially acquired a 50 percent interest in both facilities in December 1997.
The company will assume operation and maintenance of the plants upon completion
of the acquisition in May 2000.
"This acquisition furthers Calpine's goal of establishing a significant market
presence in certain key markets, one of which is the area in and around New York
City," stated Calpine Senior Vice President and Eastern Region Manager, Bob
Alff. "These efficient natural gas-fired power plants will play an important
role in a planned system of Calpine generating plants to serve the customers in
this market."
Kennedy International Airport Power Plant - Electricity and thermal energy from
this 107-megawatt cogeneration plant in Queens, N.Y., is sold to the New York
Port Authority for use at the John F. Kennedy International Airport under a
long-term power sales agreement. Power is also sold to Consolidated Edison
Company of New York, Inc., other utility customers and to the New York Power
Authority.
Stony Brook Power Plant - Stony Brook is a 40-megawatt cogeneration plant.
Electricity and steam are sold to the State University of New York at Stony
Brook through 2023. Excess power is sold to Long Island Power Authority.
Calpine Corporation is the leading independent power company dedicated to
providing customers with reliable and competitively priced electricity and
thermal energy. Calpine is active in 20 states and Alberta, Canada, with
corporate headquarters in San Jose, Calif. and regional offices in Houston,
Texas; Pleasanton, Calif.; and Boston, Mass. Calpine currently has approximately
17,200 megawatts of capacity in operation, under construction or in announced
development - enough energy to power approximately 17 million households. The
company was founded in 1984 and is publicly traded on the New York Stock
Exchange under the symbol CPN.
The matters discussed in this news release may be considered "forward looking"
statements within the meaning of Section 27A of the Securities and Exchange Act
of 1993, as amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. Such statements include declarations regarding the intent, belief or
current expectations of the Company and its management. Prospective investors
are cautioned that any such forward-looking statements are not guarantees of
future performance and involve a number of risks and uncertainties; actual
results could differ materially from those indicated by such forward-looking
statements. Among the important factors that could cause results to differ
materially from those indicated by such forward-looking statements are: (i) that
the information is of a preliminary nature and may be subject to further
adjustments, (ii) risks associated with power plant acquisitions or
mergers,including obtaining any necessary third party approvals (iii) changes in
government regulation, (iv) general operating risks, (v) the dependence on third
parties, (vi) the dependence on senior management and (vii) other risks
identified from time to time in the Company's reports and registration
statements filed with the Securities and Exchange Commission.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CALPINE CORPORATION
By: /s/ Ann B. Curtis Date: May 15, 2000
---------------------------
Ann B. Curtis
Executive Vice President
(Chief Financial Officer)
By: /s/ Charles B. Clark, Jr. Date: May 15, 2000
---------------------------
Charles B. Clark, Jr.
Vice President and Corporate Controller
(Chief Accounting Officer)
