Calpine Enters New England Power Market: Company to Invest with EMI on Region's First Merchant Power Plants.

SAN JOSE, Calif.--(BUSINESS WIRE)--Oct. 14, 1997--Calpine Corp. (NYSE:CPN), a leading independent power company, today announced it has executed agreements with Energy Management Inc. (EMI), a New England-based power developer, to invest in two merchant power plants.

Slated for start-up in 1999 and early 2000, these New England power facilities, developed by EMI, will sell 434 megawatts of electricity into the deregulated New England Power Pool (NEPOOL) and to wholesale and retail customers. The proposed transaction will strengthen Calpine's East Coast market presence. Calpine has separately announced plans to acquire interests in four gas-fired power plants in New York.

Calpine's CEO Peter Cartwright stated, "Our venture with EMI is an exciting opportunity for Calpine. The New England power market provides attractive opportunities for expanding our merchant program. The region's consumers pay some of the highest electric prices in the nation. With increased demand for new capacity and the potential retirement of several large nuclear plants, the Dighton and Tiverton facilities will provide new sources of low-cost, reliable power generation."

Under the terms of the agreements, Calpine will invest $16 million in a 169 megawatt gas-fired, combined-cycle plant to be built in Dighton, Mass. Calpine will receive a preferred payment stream at a rate of approximately 12% on its investment. Construction of the project will begin in the fourth quarter of 1997. EMI will operate the plant when it enters commercial operation in 1999.

Calpine has also been granted an exclusive option to purchase an ownership interest in and to partner with EMI on the 265 megawatt gas-fired Tiverton plant under development in Rhode Island. EMI and Calpine will be co-general partners for the Tiverton project. EMI will operate the facility and provide management services. Calpine will provide power marketing and fuel management services for the facility.

Over the life of the project, Calpine and EMI will each receive approximately 50% of project cash flows. Calpine will initially receive 70% of project cash flows until it has received cash equal to its initial equity investment of approximately $40 million.

Most new power plants in the U.S. will be merchant plants. These state-of-the-art facilities are designed to generate low-cost electricity to be sold on a competitive basis in the open market without long-term power sales agreements. The Dighton and Tiverton plants will incorporate the most modern combined-cycle turbine technology to achieve maximum plant efficiency. These plants will generate electricity approximately 40% more efficiently than the average utility plant operating in New England today.

EMI President James Gordon stated, "EMI is pleased to be partnering with Calpine on New England's premiere merchant power plants. The combined skills of both companies will make us a powerful competitor in this exciting new market."

Based in North Dartmouth, Mass., EMI is a leading Northeast power developer. Since 1985, in addition to Dighton and Tiverton, EMI has successfully developed three gas-fired plants and one wood-fired facility with a combined capacity of 191 megawatts.

Recognizing the tremendous growth opportunities in New England and other eastern power markets, Calpine will open an office in Boston, Mass. to support its growing power base. The company recently acquired 50% interests in two gas-fired plants, with a combined capacity of 390 megawatts, in Virginia and Florida. In August, the company announced plans to acquire 120 net megawatts in four gas-fired plants in New York. These four facilities have a combined 388 megawatts of capacity.

Calpine Corp. is a fully integrated power company, providing electricity and thermal energy to customers in the U.S. and selected international markets.

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) the possible unavailability of financing, (iii) risks associated with power plant development, (iv) changes in government regulation, (v) general operating risks, (vi) the dependence on third parties, (vii) the dependence on senior management and (viii) 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.

Katherine Potter, 408/995-5115 x1168 (PR)

Rick Barraza, 408/995-5115 x1125 (IR)