Calpine Invests in Sacramento Basin Gas Reserves; Calpine and Sheridan Energy Form New Fuels Partnership.

SAN JOSE, Calif.--(BUSINESS WIRE)--Jan. 27, 1999--San Jose-based Calpine Corporation (NYSE:CPN), one of the nation's fastest growing independent power companies, announced today that it has acquired a 20 percent interest in 82 billion cubic feet (bcf) of proven natural gas reserves located in the Sacramento basin of Northern California.

Calpine's $15 million investment provided a portion of the financing for Houston, Texas-based Sheridan Energy, Inc.'s (Sheridan) acquisition of oil and gas properties from Amerada Hess Corporation. This acquisition will support Calpine's active natural gas fuel program in Northern California.

"This transaction significantly diversifies Calpine's gas portfolio, providing access to proven, local reserves to help fuel our growing natural gas-fired power plant portfolio," said Brad Barnds, Calpine's director of fuels management. "These Sacramento basin reserves can provide enough clean-burning natural gas to supply a 120-megawatt power plant," Barnds added.

In return for its $15 million investment, Calpine received approximately $13 million in redeemable non-voting preferred stock and 20 percent of the outstanding common stock of Sheridan California Energy, Inc. (SCEI). SCEI was founded to acquire, own and operate the new Sacramento gas reserves. Sheridan owns the remaining 80 percent in SCEI. In addition, Calpine and Sheridan have signed a ten-year gas contract enabling Calpine to purchase 100 percent of SCEI's Sacramento basin production. Overall, the Sacramento gas reserves currently produce approximately 20 million cubic feet of gas per day.

Calpine Corporation is a leading independent power company dedicated to providing customers with low-cost electricity and thermal energy. Calpine brings in-depth expertise to the development, acquisition, ownership and operation of power generation facilities. Calpine currently has 5,900 megawatts of capacity in operation, under construction or in announced development in 11 states -- enough energy to power six million households. The company was founded in 1984 and is publicly traded on the New York Stock Exchange under the symbol CPN. Please visit Calpine's website at www.calpine.com for more information.

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; (v) the risks associated with marketing and selling power from power plants in the newly competitive energy market; or (vi) the successful exploitation of an oil or gas resource that ultimately depends upon the geology of the resource, the total amount of recoverable reserves and operational factors relating to the extraction of natural gas. 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.