Calpine Purchases 72 Megawatt Geothermal Power Plant; Acquisition Strengthens Company's Leadership in Green Power Market.

SAN JOSE, Calif.--(BUSINESS WIRE)--July 17, 1998--San Jose-based Calpine Corporation (NYSE:CPN), one of the nation's fastest growing independent power companies and second largest producer of geothermal energy, today announced that it has completed the purchase of a 72 megawatt geothermal power plant from the Sacramento Municipal Utility District (SMUD) for $13 million.

The transaction for the Sonoma Power Plant (formerly referred to as the SMUDGEO No. 1 plant) will lower costs for the 1.1 million customers of SMUD -- the nation's fifth largest publicly-owned utility. The Sonoma Power Plant is the most efficient geothermal power plant in The Geysers area of northern California.

The Geysers is the world's largest producing geothermal field. As part of the transaction, SMUD will purchase 50 megawatts of electricity from the plant through 2001 at market prices, plus a renewable power premium.

"The acquisition of the Sonoma Power Plant enhances our leadership position as a low-cost producer of geothermal power. Geothermal power will play a significant role in the very attractive green power market," said Calpine Vice President of Geothermal Operations, Jake Rudisill.

"This plant will showcase the environmental and economic advantages of geothermal power. It will also demonstrate the benefits of deregulation, which provides once-captive customers with a choice of energy supplier and technology."

Calpine will pay SMUD $10.6 million initially, plus $2.4 million over the next two years. SMUD also received an option to purchase 10 megawatts of peak power production from 2002 through 2005. Calpine will sell electricity not committed to SMUD into California's green power market.

In commercial operation since 1983, the Sonoma Power Plant utilizes a very efficient power cycle design. It currently operates at approximately 70 percent of capacity as a result of the current capacity of the steam field.

"This acquisition unifies the power plant and steam field operations and consequently will enable Calpine to significantly decrease operating costs," Rudisill said. Geothermal energy -- which today represents about four percent of California's power mix -- can help achieve the national goal of reducing harmful air emissions.

Calpine -- with net interests in 467 megawatts of geothermal power plants and steam fields at The Geysers -- has long recognized geothermal energy's environmental and economic advantages. Calpine is highly experienced in developing and operating geothermal projects. To date, Calpine's Geysers plants have operated at 98.5 percent availability.

Availability, the most commonly used measure of a power plant's performance, refers to the percentage of time a plant is available to generate electricity.

In addition to its expertise in geothermal power production, Calpine is developing state-of-the-art, gas-fired power plants -- totaling 6,000 megawatts of capacity -- in other attractive energy markets. By 2004, Calpine expects to have more than 10,000 megawatts of power production on line in the United States.

Calpine is a leading power company dedicated to providing customers with low-cost electricity and thermal energy.

Calpine has 4,400 megawatts of capacity in operation, under construction or in development in Arizona, California, Florida, Massachusetts, New Jersey, New York, Rhode Island, Texas, Virginia and Washington. Calpine was founded in 1984 and is publicly traded on the New York Stock Exchange under the symbol CPN. For more information on Calpine, please visit its website at www.calpine.com.

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) risks associated with power plant acquisitions, (iii) changes in government regulation, (iv) general operating risks, (v) the dependence on third parties, (vi) the dependence on senior management and (vii) other risks identified from time to time in the Company's reports and registration statements filed with the Securities and Exchange Commission.

CONTACT: Calpine, San Jose

Katherine Potter, 408/995-5115 ext. 1168 (PR)

Rick Barraza, 408/995-5115 ext. 1125 (IR)