A Power Industry First -- Calpine Completes $150 Million Financing of Merchant Power Plant.

SAN JOSE, Calif.--(BUSINESS WIRE)--Jan. 6, 1997--Calpine Corp. (NYSE:CPN), the San Jose-based power company, announced today the closing of a $150 million non-recourse project financing with ING (U.S.) Capital Corp. (ING Capital) for the development of the Pasadena Power Plant, a 240 megawatt gas-fired merchant plant in Pasadena, Texas.

Calpine will develop, own and operate the merchant facility, which will be built next to the Phillips Petroleum Houston Chemical Complex in Pasadena. This is the first merchant power plant in the U.S. to be developed and funded with non-recourse project debt. When the Pasadena Plant comes on line in 1998, it will be the lowest cost producer of electricity selling into the Texas market.

"The financing of the Pasadena Plant represents a true milestone in the power industry and paves the way for a new generation of power plants. ING Capital made this possible by working closely with Calpine to create this template for financing future merchant power plants," stated John Rocchio, vice president of business development for Calpine.

The Pasadena Plant is the first in a series of low-cost merchant plants the company plans to develop. A "merchant power plant" is a power generation facility which sells electricity directly to the newly competitive wholesale power market without the majority of its output being committed to long-term power sales agreements.

ING Capital, a subsidiary of ING Group, one of the largest diversified financial institutions in the world, is providing $150 million of non-recourse project construction financing. Upon completion of construction, the loan will convert to a $100 million term financing, with Calpine providing $50 million in equity.

Erwin Thomet, managing director of ING Capital, stated, "Merchant facilities will be the future of a deregulated power industry. We are excited to be part of this industry first and look forward to partnering with Calpine to finance future merchant power facilities."

For Phillips and Calpine, the Pasadena Plant is a win-win situation. Phillips benefits from low-cost electricity and steam, while Calpine enjoys the benefits of a quality anchor tenant. When the Pasadena Plant comes on line it will provide approximately 90 megawatts of electricity and roughly 200,000 pounds per hour of steam to the Phillips Petroleum Houston Chemical Complex, pursuant to a 20-year contract with Phillips Petroleum Company. Calpine will market the remaining electricity to the Texas market.

This highly efficient power project will utilize the latest combustion turbine and emission control technologies. Calpine will manage the engineering, equipment procurement, and construction of the facility using its "Calpine Construct" concept to assure that the facility meets Calpine's high standards while costs are carefully controlled. Calpine recently entered into a 15-year agreement with Aquila Energy of Omaha, Neb., to purchase 45,000 million btu per day of clean burning natural gas to fuel the facility.

Calpine Corp. is a fully integrated power company, dedicated to providing reliable, economic and clean power generation to customers in the United States and in selected international markets. With interests in more than 1,000 megawatts of power generation facilities, Calpine produces enough electricity to meet the electrical needs of more than one million households. -0-

Note to Editors: This news release discusses certain matters that may be considered "forward-looking" statements within the meaning of Section 27A of the Securities Act of 1993, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including statements 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 that could materially affect actual results. Such as, but not limited to, the risk that the company may not successfully complete the Pasadena Plant or that it may be delayed because of various development risks, such as a failure to obtain the necessary permits to operate or the failure of third party contractors to perform their contractual obligations and the risks that there is no assurance that the company will develop further merchant plants, that a competitor could develop a facility with a lower cost generating gas-fired power plant or that the company could fail to market the remainder of the power.

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.

CONTACT: Calpine Corp., San Jose

Katherine Potter, 408/995-5115