Calpine Corporation Acquires Dow Chemical's Pittsburg, Calif. Power Plant and Gas Pipeline Assets; State-of-the-Art Power Plant Planned at Dow Site.

SAN JOSE, Calif.--(BUSINESS WIRE)--July 23, 1998--San Jose-based Calpine Corporation (NYSE:CPN), one of the nation's fastest growing independent power companies, today announced it has completed the acquisition of The Dow Chemical Company's (Dow) 70 megawatt natural gas-fired power plant, located at Dow's Pittsburg, Calif. chemical facility, for approximately $13 million.

The acquisition includes Dow's extensive gas pipeline system that provides the plant with low-cost fuel from Sacramento basin gas fields. Key to the transaction is Calpine's plan to build a 500 to 700 megawatt state-of-the-art, natural gas-fired power plant adjacent to Dow's Pittsburg chemical plant. The new power plant will require a capital investment of $250 million to $350 million and will generate enough electricity to power half a million households.

Calpine has hired the majority of former Dow power plant employees to operate the plant. As the new owner/operator of the Pittsburg Power Plant, Calpine will sell up to 18 megawatts of electricity to Dow for up to 15 years. The balance of the power will be sold to Pacific Gas and Electric Co. under a long-term contract. Calpine will sell approximately 200,000 pounds per hour of steam generated from the plant to Dow for use at its chemical facility for up to 20 years and to USS-POSCO Industries' nearby steel mill.

"Deregulation of the power industry in California, and in many other states, is opening up new opportunities for independent power companies to acquire and develop low-cost power generation," said Calpine Vice President John King. "The former Dow plant and gas pipeline system are excellent additions to our portfolio."

King added, "We welcome the opportunity to help extend the benefits of deregulation to these communities. When fully implemented, deregulation will lower energy prices by encouraging power companies to build modern, natural gas-fired combined-cycle power plants.

"These new plants will also generate substantial environmental benefits. The plant we propose to build in Pittsburg will provide a cost-effective, environmentally friendly power source to the region for decades to come."

Construction of the new plant can begin after the California Energy Commission conducts a thorough environmental review. The environmental review process takes approximately one year. This process begins when the Commission receives and deems Calpine's environmental application complete. The review involves close examination of every possible impact the plant's construction and operation may have on the local environment, including factors such as air and water quality, wildlife, public health and more.

King added, "Calpine is dedicated to building a partnership with the city of Pittsburg and Contra Costa County communities. We want to include local communities in the plant development process to ensure this project will be a welcome and valuable resource."

Calpine anticipates construction of the new plant to begin in 2000. The natural gas-fired plant will burn approximately 40 percent less fuel to generate a kilowatt hour of electricity than the average gas-fired plant in operation today. The plant will incorporate advanced emissions control technology that reduces nitrogen oxide emissions by over 95 percent. In addition, carbon dioxide, the principal pollutant associated with global warming, would be reduced by approximately 40 percent.

In Yuba City (near Sacramento), Calpine is well into the permitting process for northern California's newest natural gas-fired power plant, the 500 megawatt Sutter Power Plant, which uses the same technology as the proposed new plant at the Dow site. The Sutter Plant, expected to be online by 2000, is Calpine's first new development project in California and serves as a useful model for the proposed new plant.

About Calpine

Calpine Corporation is a leading independent power company dedicated to providing customers with low-cost electricity and thermal energy. Calpine currently has 4,400 megawatts of capacity in operation, under construction or in development in 10 states -- enough electricity to power 4.5 million households.

Calpine serves 14 electric utilities and 19 major industrial customers throughout the U.S., including Union Carbide, Sunsweet Growers, John F. Kennedy International Airport (N.Y.), General Motors and Phillips Petroleum Company. The company was founded in 1984 and is publicly traded on the New York Stock Exchange under the symbol CPN.

For more information, please visit Calpine's 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 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) the assurance that the Company will develop additional plants, (iv) a competitor's development of a lower-cost generating gas-fired power plant or (v) 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.

    CONTACT:  Calpine Corporation
               Katherine Potter (Media Relations), 408/995-5115 x1168
               Rick Barraza (Investor Relations), 408/995-5115 x1125