Calpine (CPNLQ) 8-K Calpine Reports First Quarter 2005 Financial and Operating Results

Exhibit 99.1

CONTACTS: 408-995-5115
Media Relations: Bill Highlander, Ext. 1244
Investor Relations: Rick Barraza, Ext. 1125
Karen Bunton, Ext. 1121
Lisa Poelle, Ext. 1285

CALPINE REPORTS FIRST QUARTER 2005
FINANCIAL AND OPERATING RESULTS

     (SAN JOSE, CALIF.) /PR NEWSWIRE-First Call/ May 5, 2005 — Calpine Corporation [NYSE:CPN] reported financial and operating results for the three months ended March 31, 2005. A conference call, set for 8:30 a.m. PDT today, will be accompanied by a comprehensive presentation of the first quarter results. The presentation will be posted on Calpine’s investor relations page atwww.calpine.com prior to the conference call.

	First Quarter
	(unaudited)
	2005			2004			% Chg
Megawatt-hours Generated (millions)(a)		22.4			21.1			6	%
Megawatts in Operation at March 31		26,649			23,179			15	%
Revenue (millions)	$	2,212.7		$	2,032.3			9	%
Net (Loss) (millions)	$	(168.7	)	$	(71.2	)		(137	)%
Basic and Diluted (Loss) Per Share	$	(0.38	)	$	(0.17	)		(124	)%
Operating Cash Flow (millions)	$	(114.6	)	$	(173.2	)		34	%
EBITDA, as adjusted (millions)(b)	$	262.4		$	293.3			(11	)%
EBITDA, as adjusted, for non-cash and other charges (millions)(c)	$	244.6		$	303.0			(19	)%
Total Assets (billions)	$	27.6		$	27.4			0.7	%

(a)	From continuing operations.
(b)	Earnings Before Interest, Tax, Depreciation and Amortization, as adjusted; see attachedSupplemental Datafor reconciliation from net income.
(c)	SeeSupplemental Datafor reconciliation from EBITDA, as adjusted.

     Pete Cartwright, Calpine president and chief executive officer, stated, “Traditionally, we experience seasonably low revenue and spark spread during the first quarter. And, while Calpine operated at a loss for the quarter, results were in-line with our expectations and we remain on target for our year-end financial results.

     “Let’s begin with where we were for the quarter. Calpine’s total spark spread and power production increased over 2004 levels; however, financial results continued to be impacted by higher operating and interest expense associated with new plants coming on line. As a result, Calpine recorded a net loss per share of $0.38.

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     “Nearer-term, market conditions continue to improve, and Calpine is pursuing opportunities to further leverage our operating fleet, especially in California and Texas where forward pricing for the summer is strong. And we remain on track to complete our previously announced programs of raising nearly $900 million of liquidity-enhancing transactions and repurchasing over $1 billion of corporate debt.”

2005 First Quarter Financial Results

     For the three months ended March 31, 2005, Calpine reported revenue of $2.2 billion, representing an increase of 9% over the same period in the prior year, and a net loss per share of $0.38, or a net loss of $168.7 million, compared to a net loss per share of $0.17, or a net loss of $71.2 million, for the same quarter in the prior year.

     For the three months ended March 31, 2005, Calpine’s average capacity in operation for consolidated projects increased by 21% to 26,368 megawatts. The company generated approximately 22.4 million megawatt-hours, which equated to a baseload capacity factor of 44%, and realized an average spark spread of $24.10 per megawatt-hour. For the same period in 2004, Calpine generated 21.1 million megawatt-hours, which equated to a capacity factor of 50%, and realized an average spark spread of $20.65 per megawatt-hour.

     Gross profit increased by $28.5 million, or 25%, to $140.6 million in the three months ended March 31, 2005, over the same period in the prior year. Despite improvements in market fundamentals, total spark spread—which increased by $104.2 million, or 24%, in the first quarter of 2005, compared to the same period in 2004—did not increase commensurately with the increases in plant operating expense, transmission purchase expense, depreciation, and interest expense associated with new power plants coming on line. In the first quarter of 2005, gross profit was reduced by transaction fees of $17.3 million associated with prepaid commodity transactions at Calpine’s Deer Park Energy Center.

     During the three months ended March 31, 2005, financial results were affected by a $100.5 million increase in interest expense, as compared to the same period in 2004. This occurred as a result of higher average interest rates and lower capitalization of interest expense as new plants entered commercial operation. During the quarter, the company recorded a $21.8 million gain from the repurchase of debt.

     Other expense was $4.0 million for the three months ended March 31, 2005, compared to other income of $18.4 million for the three months ended March 31, 2004. The difference includes a $4.7 million decrease in foreign currency transaction gain between periods and, in addition, in 2004 Calpine recorded non-recurring gains on the sale of a variety of oil and gas properties to the Calpine Natural Gas Trust of $6.2 million and a favorable warranty settlement in the amount of $5.1 million.

     In the first quarter of 2004, Calpine recognized $36.0 million of income from discontinued operations, net of tax primarily resulting from the gain from the sale of the Lost Pines 1 Power Project. There was no corresponding income from discontinued operations in the first quarter of 2005 and no assets held for sale as of March 31, 2005.

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Liquidity and Financing Highlights

     During the quarter, as part of its 2005 liquidity program, Calpine:

•   Completed a $503 million, non-recourse project finance facility to complete construction of its 375-megawatt Mankato and 250-megawatt Freeport power plants. Upon closing, Calpine received approximately $97 million for construction costs spent to date on the two projects. The remaining amount available under the facility will be used to fund completion of the projects; and

•   Entered into a 650-megawatt, six-year power sales agreement with Merrill Lynch Commodities, Inc. As part of the transaction, Calpine’s Deer Park Energy Center received an upfront payment, net of fees, of approximately $195 million for future power deliveries, and expects to receive approximately $70 million in additional up-front payments over the next several months.

     Calpine ended the quarter with cash and cash equivalents on hand of approximately $800 million. In addition to this amount, the company’s current portion of restricted cash totaled approximately $500 million.

     During the first quarter, Calpine repurchased $80.6 million of the principal amount of its outstanding debt as listed below:

-	8 5/8% Senior Notes Due 2010	$	48,725,000
-	8 1/2% Senior Notes Due 2011	$	31,843,000

     The securities were repurchased in exchange for $58.1 million in cash. After the write-off of deferred financing costs and unamortized discounts on the notes, Calpine recorded a pre-tax gain on the repurchase of debt totaling $21.8 million.

     Subsequent to March 31, 2005, Calpine has repurchased $94.3 million of the principal amount of its outstanding debt as listed below:

-	10 1/2% Senior Notes Due 2006	$	3,485,000
-	7 5/8% Senior Notes Due 2006	$	1,335,000
-	8 3/4% Senior Notes Due 2007	$	3,000,000
-	7 3/4% Senior Notes Due 2009	$	26,000,000
-	8 5/8% Senior Notes Due 2010	$	29,468,000
-	8 1/2% Senior Notes Due 2011	$	31,000,000

     The securities were repurchased in exchange for approximately $56.1 million in cash. After the write-off of deferred financing costs and unamortized discounts on the notes, Calpine recorded a pre-tax gain on the repurchase of debt totaling approximately $37 million, which will be reflected in the second quarter financial results.

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Additional Opportunities

     In addition to its liquidity-enhancing transactions and debt repurchases described above, Calpine is moving forward on a number of opportunities that it expects will provide additional liquidity and reduce debt. These transactions include:

•   A $130 million project financing of Calpine’s 80-megawatt Bethpage power plant, which is projected to close by May 31. This financing will provide for $10 million of letters of credit and will provide approximately $60 million to Calpine for construction costs spent to date on this plant. The balance will be used to complete construction of Bethpage, currently scheduled for commercial operation in July; and

•   The potential sale of the company’s 1,200-megawatt Saltend Energy Centre. Final bids are expected on May 6. While the company has not made a final decision to sell Saltend, if the bids meet Calpine’s expectations, the company expects the sale to be completed by July 31, 2005. Proceeds from the potential sale would be used to repay the two outstanding preferred securities totaling $620 million, with the balance of the proceeds to be used to repurchase debt.

Operations Update

     Calpine continues to improve power plant efficiencies and lower operating costs. During the first quarter, Calpine:

•   Decreased its average baseload heat rate to 7,091 million British thermal units per kilowatt-hour for the year, compared to 7,115 in 2004;

•   Reduced total plant operating expense (based on a trailing 12-month period at an assumed 70% capacity factor) to $5.15 per megawatt-hour from $5.24 per megawatt-hour in 2004;

•   Operated its natural gas-fired and geothermal power plants with an average availability of 90%, compared to 92% in 2004;

•   Was awarded three patents from the U.S. Patents and Trademark Office to Power Systems Manufacturing (PSM), Calpine’s turbine parts manufacturing subsidiary, bringing PSM’s total patents held to 35; and

•   Continued to reduce its fleetwide emissions and improve operating efficiencies with the installation of two newly designed PSM combustion systems at Calpine’s Texas City 501D5 and the South Point 501F combined-cycle power plants. These systems will reduce nitrogen oxide and carbon monoxide emissions to single-digit levels without the need for selective catalytic reduction and will enhance fuel efficiencies.

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New Market Opportunities

     For the quarter, Calpine signed one renegotiated and 23 new power contracts, representing more than 1,340 megawatts of capacity and approximately 4.0 million megawatt-hours. The weighted average on-peak spark spread for these contracts is approximately $16.50 per megawatt-hour, with a two-year weighted average life.

     Calpine recently announced:

•   A contract to provide 75 megawatts of transmission must-run services to the Alberta Electric System Operator to help provide voltage support to the transmission system in southern Alberta; and

•   A 20-year power sales agreement in partnership with Mitsui & Co., Ltd., with the Ontario Power Authority to provide energy from a new 1,005-megawatt natural gas-fired power plant to be located in Ontario. As part of its turbine inventory deployment program, Calpine’s equity in the project will be three of the company’s gas turbines and one steam turbine.

     Included in the attachedSupplemental Datato this news release is an updated report summarizing Calpine’s total estimated generation capacity and capacity currently under contract through 2009. A full detailed report is available on the company’s website atwww.calpine.com.

Conference Call Information

     Calpine will host a conference call to discuss its first quarter 2005 financial and operating results on Thursday, May 5, 2005, at 8:30 a.m. PDT. To participate via the teleconference (in listen-only mode), dial 1-888-603-6685 at least five minutes before the start of the call. In addition, Calpine will simulcast the conference call and presentation live via the Internet. The web cast and presentation will be available for 30 days on Calpine’s investor relations page atwww.calpine.com.

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About Calpine

     A major power company, Calpine Corporation supplies customers and communities with electricity from clean, efficient, natural gas-fired and geothermal power plants. Calpine owns, leases and operates integrated systems of plants in 21 U.S. states, three Canadian provinces and the United Kingdom. Its customized products and services include wholesale and retail electricity, natural gas, gas turbine components and services, energy management, and a wide range of power plant engineering, construction and operations services. Calpine was founded in 1984. It is included in the S&P 500 Index and is publicly traded on the New York Stock Exchange under the symbol CPN. For more information, visithttp://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) the timing and extent of deregulation of energy markets and the rules and regulations adopted on a transitional basis with respect thereto; (ii) the timing and extent of changes in commodity prices for energy, particularly natural gas and electricity; (iii) commercial operations of new plants that may be delayed or prevented because of various development and construction risks, such as a failure to obtain the necessary permits to operate, failure of third-party contractors to perform their contractual obligations or failure to obtain financing on acceptable terms; (iv) unscheduled outages of operating plants; (v) a competitor’s development of lower cost generating gas-fired power plants; (vi) risks associated with marketing and selling power from power plants in the newly-competitive energy market; (vii) the successful exploitation of an oil or gas resource that ultimately depends upon the geology of the resource, the total amount and costs to develop recoverable reserves and operations factors relating to the extraction of natural gas; (viii) the effects on the company’s business resulting from reduced liquidity in the trading and power industry; (ix) the company’s ability to access the capital markets or obtain bank financing on attractive terms; (x) the direct or indirect effects on the company’s business of a lowering of its credit rating (or actions it may take in response to changing credit rating criteria), including, increased collateral requirements, refusal by the company’s current or potential counterparties to enter into transactions with it and its inability to obtain credit or capital in desired amounts or on favorable terms; and (xi) other risks identified from time-to-time in the company’s reports and registration statements filed with the SEC, including the risk factors identified in its Annual Report onForm 10-K for the year ended Dec. 31, 2004, which can also be found on the company’s website at www.calpine.com. All information set forth in this news release is as of today’s date, and the company undertakes no duty to update this information.

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CALPINE CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
For the Three Months Ended March 31, 2005 and 2004
(in thousands, except per share amounts)
(unaudited)

	Three Months Ended
	March 31,
	2005			2004
Revenue:
Electric generation and marketing revenue Electricity and steam revenue	$	1,403,549		$	1,245,887
Transmission sales revenue		3,744			5,675
Sales of purchased power for hedging and optimization		356,130			380,028
Total electric generation and marketing revenue		1,763,423			1,631,590
Oil and gas production and marketing revenue Oil and gas sales		10,820			14,135
Sales of purchased gas for hedging and optimization		420,296			352,737
Total oil and gas production and marketing revenue		431,116			366,872
Mark-to-market activities, net		(3,531	)		12,518
Other revenue		21,670			21,312
Total revenue		2,212,678			2,032,292
Cost of revenue:
Electric generation and marketing expense Plant operating expense		195,626			172,777
Transmission purchase expense		23,510			19,483
Royalty expense		10,329			5,882
Purchased power expense for hedging and optimization		288,787			374,939
Total electric generation and marketing expense		518,252			573,081
Oil and gas operating and marketing expense Oil and gas operating expense		13,000			13,236
Purchased gas expense for hedging and optimization		413,259			360,487
Total oil and gas operating and marketing expense		426,259			373,723
Fuel expense		921,349			789,749
Depreciation, depletion and amortization expense		143,228			129,407
Operating lease expense		24,777			27,799
Other cost of revenue		38,171			26,380
Total cost of revenue		2,072,036			1,920,139
Gross profit		140,642			112,153
(Income) loss from unconsolidated investments		(6,064	)		(1,185	)
Equipment cancellation and impairment cost		(73	)		2,360
Project development expense		8,720			7,717
Research and development expense		7,034			3,816
Sales, general and administrative expense		57,137			54,328
Income from operations		73,888			45,117
Interest expense		348,937			248,466
Interest (income)		(14,331	)		(12,060	)
Minority interest expense		10,614			8,435
(Income) from repurchase of various issuances of debt		(21,772	)		(835	)
Other expense (income), net		3,980			(18,425	)
Income (loss) before provision or benefit for income taxes		(253,540	)		(180,464	)
Provision (benefit) for income taxes		(84,809	)		(73,232	)
Income (loss) before discontinued operations		(168,731	)		(107,232	)

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	Three Months Ended
	March 31,
	2005			2004
(in thousands, except per share amounts)	(Unaudited)
Discontinued operations, net of tax provision (benefit) of $— and $(392)		—			36,040
Net income (loss)	$	(168,731	)	$	(71,192	)
Basic and diluted earnings (loss) per common share:
Weighted average shares of common stock outstanding		447,599			415,308
Income (loss) before discontinued operations	$	(0.38	)	$	(0.26	)
Discontinued operations, net of tax	$	—		$	0.09
Net income (loss)	$	(0.38	)	$	(0.17	)

The financial information presented above and in theSupplemental Datais subject to adjustment until the company files its Form 10-Q with the United States Securities and Exchange Commission for the three months ended March 31, 2005.

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CALPINE CORPORATION AND SUBSIDIARIES
Supplemental Data
(unaudited)

CASH FLOW DATA

	Three Months Ended
	March 31,
	2005			2004
(in thousands)
Cash used in operating activities	$	(114,592	)	$	(173,230	)
Cash used in investing activities		(220,848	)		(71,371	)
Cash provided by (used in) financing activities		368,710			(160,091	)
Effect of exchange rate changes on cash and cash equivalents		(4,086	)		(4,310	)
Net increase (decrease) in cash and cash equivalents.	$	29,184		$	(409,002	)

RECONCILIATION OF GAAP CASH USED IN OPERATING ACTIVITIES TO
EBITDA, AS ADJUSTED (1)

	Three Months Ended
	March 31,
	2005			2004
(in thousands)
Cash used in operating activities	$	(114,592	)	$	(173,230	)
Less: Changes in operating assets and liabilities, excluding the effects of acquisitions		(82,826	)		(137,745	)
Less: Additional adjustments to reconcile net income to net cash used in operating activities, net		136,965			35,707
GAAP net income (loss)		(168,731	)		(71,192	)
(Income) loss from unconsolidated investments		(6,064	)		(1,185	)
Distributions from unconsolidated investments		4,872			5,140
Subtotal		(169,923	)		(67,237	)
Interest expense		348,937			248,466
1/3 of operating lease expense		8,259			9,266
Provision (benefit) for income taxes		(84,809	)		(73,232	)
Depreciation, depletion and amortization expense (“DD&A”)		159,954			151,396
Interest expense, provision (benefit) for income taxes, DD&A and income from unconsolidated investments from discontinued operations		—			24,633
EBITDA, as adjusted	$	262,418		$	293,292

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RECONCILIATION OF EBITDA, AS ADJUSTED TO EBITDA, AS ADJUSTED FOR NON-CASH AND OTHER CHARGES (2)

	Three Months Ended
	March 31,
	2005			2004
(in thousands)
EBITDA, as adjusted	$	262,418		$	293,292
Equipment cancellation and impairment cost		(73	)		2,360
Foreign currency transaction (gain) loss		(5,240	)		(9,984	)
Unrealized mark-to-market activity (gain) loss		(8,838	)		4,945
(Income) from repurchase of various issuances of debt		(21,772	)		(835	)
SFAS No. 123 (stock-based compensation expense)		7,136			4,266
Minority interest expense		10,614			8,435
(Income) loss on interest rate swap ineffectiveness		33			398
Other non-cash and other charges		338			168
EBITDA, as adjusted, for non-cash and other charges	$	244,616		$	303,045

SUPPLEMENTARY POWER DATA

	Three Months Ended
	March 31,
	2005		2004
Generation (in MWh, in thousands) (3)		22,360		21,050
Average electric price realized (per MWh)	$	65.78	$	59.43
Average spark spread adjusted for benefits of equity gas production (per MWh)	$	24.10	$	20.65

SUPPLEMENTARY EQUIVALENT NATURAL GAS PRODUCTION DATA (4)

	Three Months Ended
	March 31,
	2005		2004
(in Bcfe)
Natural Gas Production
United States		8		11
Canada		—		—
Total		8		11
Average daily production rate (millions of cfe)		88		118
Average realized price per Mcfe	$	6.36	$	5.80
Average unit production cost per Mcfe (excluding interest expense)	$	1.45	$	0.91
Average unit DD&A cost per Mcfe (excluding impairment and interest expense)	$	1.92	$	1.76

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CALPINE CONTRACTUAL PORTFOLIO – AS OF MARCH 31, 2005

	Apr - Dec
	2005			2006			2007			2008			2009
Estimated Generation Capacity
(in millions of MWh)
- Baseload		143.5			200.3			211.6			221.8			221.2
- Peaking		19.2			25.8			26.3			26.9			26.8
Total		162.7			226.1			237.9			248.7			248.0
Contractual Generation
(in millions of MWh)
- Baseload		80.0			78.1			60.0			58.0			55.2
- Peaking		14.9			18.9			18.7			18.0			15.0
Total		94.9			97.0			78.7			76.0			70.2
% Sold
- Baseload		56	%		39	%		28	%		26	%		25	%
- Peaking		78	%		73	%		71	%		67	%		56	%
Total		58	%		43	%		33	%		31	%		28	%
Contractual Spark Spread (in millions)	$	1,474		$	1,851		$	1,602		$	1,526		$	1,439

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	As of			As of
CAPITALIZATION	March 31, 2005			December 31, 2004
Cash and cash equivalents (in billions)	$	0.8		$	0.8
Total debt (in billions)	$	18.1		$	18.0
Debt to capitalization ratio		79	%		78	%
Present value of operating leases (in billions)	$	1.2		$	1.3
Unconsolidated debt of equity and cost method investments (estimated, in billions) (5)	$	0.2		$	0.1
($ in thousands):
Short-term debt
Notes payable and borrowings under lines of credit, current portion	$	209,652		$	204,775
Preferred interests, current portion		268,794			8,641
Capital lease obligation, current portion		5,780			5,490
CCFC I financing, current portion		3,208			3,208
Construction/project financing, current portion		100,773			93,393
Senior notes and term loans, current portion		711,769			718,449
Total short-term debt		1,299,976			1,033,956
Long-term debt
Notes payable and borrowings under lines of credit, net of current portion		682,429			769,490
Notes payable to Calpine Capital Trust		517,500			517,500
Preferred interests, net of current portion		493,396			497,896
Capital lease obligation, net of current portion		281,756			283,429
CCFC I financing, net of current portion		782,020			783,542
CalGen/CCFC II financing		2,395,795			2,395,332
Construction/project financing, net of current portion		2,003,443			1,905,658
Convertible Senior Notes Due 2006		1,311			1,326
Convertible Senior Notes Due 2014		623,429			620,197
Convertible Senior Notes Due 2023		633,775			633,775
Senior notes, net of current portion		8,429,128			8,532,664
Total long-term debt		16,843,982			16,940,809
Total debt	$	18,143,958		$	17,974,765
Minority interests		388,499			393,445
Total stockholders’ equity		4,349,852			4,587,673
Total capitalization	$	22,882,309		$	22,955,883
Debt to capitalization ratio Total debt	$	18,143,958		$	17,974,765
Total capitalization	$	22,882,309		$	22,955,883
Debt to capitalization		79	%		78	%

(1)	This non-GAAP measure is presented not as a measure of operating results, but rather as a measure of our ability to service debt and to raise additional funds. It should not be construed as an alternative to either (i) income from operations or (ii) cash flows from operating activities. It is defined as net income less income from unconsolidated investments, plus cash received from unconsolidated investments, plus interest expense (including one-third of operating lease expense, which is management’s estimate of the component of operating lease expense that constitutes interest expense), plus provision for tax, plus DD&A. The interest, tax, DD&A and income from unconsolidated investments components of discontinued operations are added back in calculating EBITDA, as adjusted.
(2)	This non-GAAP measure is presented as a further refinement of EBITDA, as adjusted, to reflect the company’s ability to service debt with cash.
(3)	Does not include MWh generated by unconsolidated investments in power projects.
(4)	From continuing operations.
(5)	Amounts based on Calpine’s ownership percentage.