Calpine Leads Texas Merchant Power Industry; Company Announces Plans to Build Second Merchant Plant.

SAN JOSE, Calif.--(BUSINESS WIRE)--Aug. 21, 1997--Calpine Corp. (NYSE:CPN), a leading independent power company, today announced plans to build its second merchant power plant in Texas.

The proposed Edinburg Power Plant will be a 430 megawatt natural gas-fired facility. Recognizing the increasing market demand for low-cost electricity, Calpine will utilize a state-of-the-art, combined-cycle power plant to obtain maximum plant efficiency. This new series of combustion turbine generates electricity approximately 40% more efficiently than the average gas-fired plant operating in the Texas market today. Scheduled to enter commercial operation in 2001, the power facility will be built in Edinburg, Texas.

In less than a year, Calpine has emerged as the second largest independent power producer in Texas. The San Jose power company operates 827 megawatts of low-cost power generation in Clear Lake and Texas City, which are supported by a regional office in Houston and a special turbine maintenance facility near Houston. In addition, the company is building a 240 megawatt merchant plant in Pasadena, Texas, scheduled to begin operations in July 1998.

Merchant power plants are the new wave of power generation in the U.S. Designed to sell power to the deregulated wholesale and retail power markets, these plants can meet a customer's unique electricity or industrial steam demands under a variety of short-, mid- and long-term contracts. In 1992, the U.S. wholesale electric power market was deregulated with the passage of the National Energy Policy Act. Legislation is expected to be introduced during the 1999 legislative session to deregulate the Texas retail market.

The company selected the south Texas location for its newest merchant plant, citing favorable market conditions.

"The south Texas power market is poised for tremendous growth. Transmission constraints, old inefficient plants, and a demand for low-cost power make this an exceptionally attractive market," explained Calpine Vice President, Diana Naylor. "Edinburg is well positioned in this growing market. We've enjoyed working with them to develop a valuable new resource for the community and expanding Texas power market."

As recently announced by the Magic Valley Electric Cooperative, Calpine was short-listed to provide the Mercedes, Texas-based cooperative with 250 megawatts of electricity by 2001. Other potential wholesale customers in south Texas include Central Power & Light and the Public Utility Board of Brownsville. In addition, Calpine will market to customers in Northern Texas and Mexico.

Edinburg Mayor Joe Ochoa commented, "We're delighted Calpine selected Edinburg as the site for its new power plant. Having worked closely with Calpine over the past year, we're impressed with their track record of developing and operating safe, reliable and clean electric power plants, and their proactive approach to partnering with communities. This partnership of industry and community results in a truly win-win situation. Edinburg benefits from new jobs and a new tax base to support vital local programs. Calpine, as a producer of low-cost electricity, attracts new industry and customers to the growing Rio Grande Valley."

Calpine recently entered into exclusive negotiations with the City of Edinburg for the right to purchase up to 4.0 million gallons per day from the City's wastewater treatment facility. The water will be utilized at the new power plant.

The company estimates creating 300 jobs during construction and some 20 full-time positions when the plant enters commercial operation.

Calpine Corporation is a fully integrated power company, providing electricity and thermal energy to customers in the U.S. and selected international markets. The company currently owns interests in approximately 1,800 megawatts of operating power facilities. -0-

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 Edinburg Power 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.

Kimberly Mejia, 408/995-5115