CIT and Calpine Complete $400 Million Financing for Pasadena Cogeneration Merchant Power Plant.

Business Editors

NEW YORK--(BUSINESS WIRE)--Sept. 6, 2000

CIT Project Finance, a unit of Structured Finance of The CIT Group (NYSE:CIT) (TSE:CIT.U), and Calpine Corporation (NYSE:CPN), a leading independent power company, today announced the completion of a US $400 million leveraged lease financing transaction to provide the term financing for both Phase I and Phase II of the Pasadena, Texas cogeneration project.

Within the last 14 months, CIT has financed over $800 million of power generating facilities for Calpine. The long term project-leveraged lease financing that CIT and Calpine have structured is unique in many ways. Calpine has contracted to purchase and market the power from the project in tandem with the pricing and dispatch it receives for all of its Texas generation assets. This portfolio approach to power marketing allows the power generation from Pasadena to be marketed as part of Calpine's large and highly efficient fleet of Texas assets. For the investors, this approach has reduced much of the risk of operating as a single merchant power plant by broadening the customer base and improving the stability of the project's cash flows. The strategy provided Calpine with the benefit of complete flexibility in the project's operation and marketing.

"Calpine is an innovative power developer. The challenge for us is to match their innovation as their project financiers," said Guy Piazza, managing director of CIT's Project Finance Group. "I think we have met that challenge by closing approximately $1 billion of financing for them in the past year. Our ability to underwrite and syndicate these innovative transactions has been the key to our success."

"We were looking for a financing partner with the expertise and financial strength to provide the capital for these very attractive opportunities and close these transactions on an accelerated basis," said Robert Kelly, senior vice president of Finance for Calpine. "CIT and Calpine are able to structure a unique financing solution that will provide us with the flexibility to maximize the operations and value of our Texas portfolio. They understand our industry and their strong relationship with the US institutional lenders means that they have direct access to major funding sources."

The Pasadena facility was developed in two phases. Phase I, commissioned in July 1998, is a 240 megawatt power plant and produces 300,000 lbs. of steam to service a large petrochemical facility in Houston, TX. The steam sales and 90 megawatts of power are sold under a long-term contract and the remaining power is sold on a merchant basis into the Texas market. Phase II is a 510-megawatt expansion project, which recently begun commercial operation.

CIT structured, arranged and fully underwrote this US$400 million transaction as a leveraged lease comprising $240 million in senior debt, $100 million in subordinated debt and approximately $60 million in lease equity. The senior debt has received a credit rating of BBB - reflecting the credit strength of the well-structured project financing.

"Our ability to arrange private institutional debt as well as lease and partnership equity on a turnkey basis is unparalleled in the market," said Dan Morash, managing director and global head of Project Finance for CIT's Structured Finance Unit. "Power and energy facility financing is a major growth engine for CIT," said David McKerroll, president of CIT Structured Finance.

The project senior debt was funded through co-investment with the Newcourt Capital Project Finance Fund, a US$500 million fund, involving major US insurance companies including John Hancock, CIGNA and New York Life.

About CIT

Founded in 1908 and with over $50 billion in total managed assets, CIT is the world's largest publicly owned commercial finance company. CIT was named one of Fortune magazine's "America's Most Admired Companies" in February 2000 and a "Top Technology Innovator" by Information Week magazine for two years running. For more information visit www.cit.com.

About Calpine

Based in San Jose, Calif., Calpine Corporation is dedicated to providing customers with reliable and competitively priced electricity. Calpine is focused on clean, efficient combined-cycle, natural gas-fired generation and is the nation's largest producer of renewable geothermal energy. Calpine has launched the largest power development program in the U.S. To date, the company has approximately 26,000 megawatts of base load capacity and 4,700 megawatts of peaking capacity in operation, under construction and in announced development in 27 states and Alberta, Canada. 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, visit its Web site at www.calpine.com.