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- Calpine Reports Second Quarter 2017 Results and Reaffirms 2017
Guidance
Jul 28, 2017 · businesswire.com
HOUSTON--(BUSINESS WIRE)--Calpine Corporation (NYSE: CPN): Summary of Second Quarter 2017 Financial Results (in millions): Reaffirming 2017 Guidance (in millions): Recent Achievements: Power and Commercial Operations:— Generated more than 22 million MWh3 in the second quarter of 2017— Delivered strong fleetwide starting reliability: 97.7% Portfolio Management:— Returned our Delta Energy Center to service in simple-cycle steam bypass configuration in June 2017; plan to return the unit to full combined-cycle configuration in fourth quarter of 2017— Negotiating Reliability Must Run contracts with CAISO for two natural gas-fired peaking power plants in California Balance Sheet Management:— As part of our $2.7 billion plan to delever and reduce interest expense, we have paid down approximately $294 million of debt (net) through the second quarter of 2017 out of $850 million paydown planned for 2017 Strategy:— Board of Directors and management in discussions regarding a potential sale of Calpine Calpine Corporation (NYSE:CPN) today reported Net Loss1 of $216 million, or $0.61 per diluted share, for the second quarter of 2017 compared to $29 million, or $0.08 per diluted share, in the prior year period. The period-over-period increase in Net Loss was primarily due to higher income tax expense in the current year in jurisdictions where we do not have net operating losses, an unfavorable variance in mark-to-market gain/loss, net, and increases in plant operating expense and depreciation and amortization expense. Cash provided by operating activities for the second quarter of 2017 was $152 million compared to $94 million in the prior year. The increase in cash provided by operating activities in the second quarter of 2017 was primarily due to a decrease in working capital employed resulting from the period-over-period change in net margining requirements associated with our commodity hedging activity, partially offset by a decrease in income from operations, adjusted for non-cash items. Adjusted EBITDA2 for the second quarter of 2017 was $419 million compared to $452 million in the prior year period. The decrease in Adjusted EBITDA was primarily due to lower Commodity Margin2, largely driven by a $40 million natural gas transportation billing credit received in the second quarter of 2016 that did not recur in the current year period, as well as higher plant operating expense, primarily due to our retail acquisitions. Adjusted Unlevered Free Cash Flow2 for the second quarter of 2017 was $263 million compared to $324 million in the prior year period, and Adjusted Free Cash Flow2 was $103 million compared to $158 million in the prior year period. The decreases in Adjusted Unlevered Free Cash Flow and Adjusted Free Cash Flow were primarily driven by lower Adjusted EBITDA, as previously discussed, and higher major maintenance expense and capital expenditures due to the timing of our outage schedule. Net loss for the first half of 2017 was $272 million, or $0.77 per diluted share, compared to $227 million, or $0.64 per diluted share in the prior year period. The period-over-period increase in Net Loss was primarily due to increases in plant operating expense and depreciation and amortization expense, and a decrease in commodity revenue, net of commodity expense partially offset by a favorable variance in mark-to-market gain/loss, net and a gain recorded in the first half of 2017 for the sale of Osprey Energy Center. Cash provided by operating activities for the first half of 2017 was $246 million compared to $125 million in the prior year period. The increase in cash provided by operating activities in the first half of 2017 was primarily due to a decrease in working capital employed resulting from the period-over-period change in net margining requirements associated with our commodity hedging activity, partially offset by a decrease in income from operations, adjusted for non-cash items. Adjusted EBITDA for the first half of 2017 was $745 million compared to $826 million in the prior year period. The decrease in Adjusted EBITDA was primarily due to lower Commodity Margin, largely driven by a gas transportation billing credit received in the second quarter of 2016 that did not recur in the current year period, and lower energy margins due to decreased contribution from wholesale hedges and weaker market conditions in the first quarter, as well as higher plant operating expense, primarily due to our retail acquisitions. Adjusted Unlevered Free Cash Flow for the first half of 2017 was $470 million compared to $590 million in the prior year period, and Adjusted Free Cash Flow was $146 million compared to $260 million in the prior year period. The decreases in Adjusted Unlevered Free Cash Flow and Adjusted Free Cash Flow were primarily driven by lower Adjusted EBITDA, as previously discussed, and higher major maintenance expense and capital expenditures due to the timing of our outage schedule. “I am pleased to report solid second quarter results, and I am proud of the hard work of our team and the operational excellence of our portfolio,” said Thad Hill, Calpine’s President and Chief Executive Officer. “During the second quarter, we saw stronger power prices for our Texas plants in the constrained Houston zone, and the PJM capacity auction yielded positive prints for our locationally advantaged Mid-Atlantic fleet. In California, our natural gas-fired assets were critical to grid reliability during the recent June heat wave, particularly during the daily evening peaks. “While these trends support what we believe to be a sound investment thesis for Calpine, the public equity markets have undervalued our business and underappreciated our strong track record of executing on our financial commitments and our stable cash flows. Early this spring, our Board of Directors decided to explore strategic alternatives for the company, seeking to enhance value for our shareholders. At this time, our Board, together with management and financial and legal advisors, are in discussions regarding a potential sale of Calpine." The Board plans to proceed in a timely manner but has not set a definitive timetable for completion of these discussions. There can be no assurance that these discussions will result in a transaction of any kind, or if a transaction is undertaken, as to terms or timing. Calpine does not intend to disclose developments or provide updates on the status of these discussions unless or until it is determined that further disclosure is appropriate or required by law. Notwithstanding these discussions, the Calpine team remains committed to operational excellence, customer focus and financial discipline. ________ 1 Reported as Net Loss attributable to Calpine on our Consolidated Condensed Statements of Operations. 2 Non-GAAP financial measure, see “Regulation G Reconciliations” for further details. 3 Includes generation from power plants owned but not operated by Calpine and our share of generation from unconsolidated power plants. SUMMARY OF FINANCIAL PERFORMANCE Second Quarter Results Adjusted EBITDA for the second quarter of 2017 was $419 million compared to $452 million in the prior year period. The year-over-year decrease in Adjusted EBITDA was primarily related to a $10 million decrease in Commodity Margin and an $18 million increase in plant operating expense4, which was largely driven by net portfolio changes including our retail acquisitions. Excluding the benefit from a $40 million natural gas transportation billing credit received in the second quarter of 2016, Commodity Margin would have been up $30 million, primarily due to: + + higher on-peak spark spreads in the ERCOT Houston zone and in California during the hours in which we generated, partially offset by lower market spark spreads in the East and lower fleetwide generation, – – Adjusted Unlevered Free Cash Flow was $263 million in the second quarter of 2017 compared to $324 million in the prior year period. Adjusted Free Cash Flow was $103 million in the second quarter of 2017 compared to $158 million in the prior year period. Adjusted Unlevered Free Cash Flow and Adjusted Free Cash flow decreased primarily due to lower Adjusted EBITDA, as previously discussed, and higher major maintenance expense and capital expenditures due to outage timing. Year-to-Date Results Adjusted EBITDA for the first half of 2017 was $745 million compared to $826 million in the prior year period. The year-over-year decrease in Adjusted EBITDA was primarily related to a $32 million decrease in Commodity Margin and a $42 million increase in plant operating expense4, which was largely driven by net portfolio changes including our retail acquisitions. The decrease in Commodity Margin was primarily due to: – – – – + + higher market spark spreads in ERCOT, partially offset by lower market spark spreads in our East region. Adjusted Unlevered Free Cash Flow was $470 million for the first half of 2017 compared to $590 million in the prior year period. Adjusted Free Cash Flow was $146 million for the first half of 2017 compared to $260 million in the prior year period. Adjusted Unlevered Free Cash Flow and Adjusted Free Cash flow decreased primarily due to lower Adjusted EBITDA, as previously discussed, and higher major maintenance expense and capital expenditures due to outage timing. __________ 4 Increase in plant operating expense excludes changes in major maintenance expense, stock-based compensation expense, non-cash loss on disposition of assets and other costs. See the table titled “Consolidated Adjusted EBITDA Reconciliation” for the actual amounts of these items for the three and six months ended June 30, 2017 and 2016. REGIONAL SEGMENT REVIEW OF RESULTS Table 1: Commodity Margin by Segment (in millions) West Region Second Quarter: Commodity Margin in our West segment decreased by $10 million in the second quarter of 2017 compared to the prior year period. Primary drivers were: – + + Year-to-Date: Commodity Margin in our West segment increased by $14 million in the first half of 2017 compared to the prior year period. Primary drivers were: + increased contribution from the expansion of our retail hedging activity following the acquisition of Calpine Energy Solutions in December 2016 and + – Texas Region Second Quarter: Commodity Margin in our Texas segment increased by $7 million in the second quarter of 2017 compared to the prior year period. Primary drivers were: + + – Year-to-Date: Commodity Margin in our Texas segment increased by $2 million in the first half of 2017 compared to the prior year period. Primary drivers were: + higher market spark spreads and + – – East Region Second Quarter: Commodity Margin in our East segment decreased $7 million in the second quarter of 2017 compared to the prior year period. Primary drivers were: – – – + Year-to-Date: Commodity Margin in our East segment decreased by $48 million in the first half of 2017 compared to the prior year period. Primary drivers were: – – – – + + LIQUIDITY, CASH FLOW AND CAPITAL RESOURCES Table 2: Liquidity (in millions) ____________ (1) Includes $1 million and $16 million of margin deposits posted with us by our counterparties at June 30, 2017, and December 31, 2016, respectively. (2) Our ability to use availability under our Corporate Revolving Facility is unrestricted. (3) Our ability to use corporate cash and cash equivalents is unrestricted. Our $300 million CDHI letter of credit facility is restricted to support certain obligations under PPAs and power transmission and natural gas transportation agreements. Liquidity was approximately $1.8 billion as of June 30, 2017. Cash and cash equivalents decreased in the first half of 2017 primarily due to net repayments of debt, consistent with our announced plan to reduce leverage. Table 3: Cash Flow Activities (in millions) Cash provided by operating activities in the first half of 2017 was $246 million compared to $125 million in the prior year period. The year-over-year increase was primarily due to a decrease in working capital employed resulting from the period-over-period change in net margining requirements associated with our commodity hedging activity, partially offset by a decrease in income from operations, adjusted for non-cash items. Cash used in investing activities was $51 million during the first half of 2017 compared to $676 million in the prior year period. The decrease was primarily related to acquisitions, divestitures and capital expenditures. In the first quarter of 2017, we closed on the acquisition of North American Power for $111 million and closed on the sale of Osprey Energy Center, receiving net proceeds of $162 million. In the first quarter of 2016, we purchased Granite Ridge Energy Center for $526 million. There was also a year-over-year decrease of $36 million in capital expenditures, primarily due to lower expenditures on construction projects during the first half of 2017 as compared to 2016. Cash used in financing activities was $319 million during the first half of 2017 and primarily related to net repayment of debt in accordance with our deleveraging plan. Managing Our Balance Sheet We further optimized our capital structure during the first half of 2017, as follows: 2023 First Lien Notes: — As part of our commitment to reduce debt and interest expense, on March 6, 2017, we redeemed the remaining $453 million of our 7.875% First Lien Notes due in 2023 using cash on hand along with the proceeds from a new $400 million, three-year First Lien Term Loan priced at LIBOR + 1.75% per annum. We intend to repay the 2019 First Lien Term Loan in full by the end of 2018. This accelerates debt reduction and results in substantial annual interest savings of more than $20 million in the interim. 2017 First Lien Term Loan: — We repaid approximately $150 million of our 2017 First Lien Term Loan using cash on hand during the first quarter of 2017. Expanding Our Customer Sales Channels We continue to focus on getting closer to our customers through expansion of our retail platform, which began with the acquisition of Champion Energy in 2015 and was followed by the acquisitions of Calpine Energy Solutions in late 2016 and North American Power in early 2017. Our retail platform geographically and strategically complements our wholesale generation fleet by providing forward liquidity with sufficient margins. The combination of our wholesale origination and retail platform provides Calpine access to both direct and mass market sales channels. Our direct sales efforts aim to provide our larger customers with customized products, leveraging both our successful wholesale origination efforts and Calpine Energy Solutions’ presence among large commercial and industrial organizations to secure new contracts. Our mass market approach relies upon our expanded Champion Energy retail platform to serve the needs of both residential and smaller commercial and industrial customers across the country. We believe that our retail platform is strategically complete and are now focused on integrating it into our business and optimizing its financial performance. Acquisition of North American Power & Gas, LLC On January 17, 2017, we completed the purchase of North American Power for approximately $105 million, excluding working capital and other adjustments. North American Power is a growing retail energy supplier for homes and small businesses and is primarily concentrated in the Northeast U.S., where Calpine has a substantial power generation presence. Champion Energy also has a substantial retail sales footprint in the Northeast U.S. that is enhanced by the addition of North American Power, which has been integrated into our Champion Energy retail platform. With this acquisition, we now serve residential load in 63 utility service territories as compared to 51 in 2016. Portfolio Management East: Washington Parish: On April 21, 2017, we entered into an agreement with Entergy Louisiana (Entergy), a subsidiary of Entergy Corporation, to construct an approximately 360 MW natural gas-fired peaking power plant on a partially developed site that we own near Bogalusa, Louisiana. Within a short period of time subsequent to the plant commencing commercial operations and meeting certain performance objectives, Entergy will purchase the plant for a fixed payment, including a fair market return. Construction on the facility will not commence until 2019 with COD expected in early 2021. The agreement contains conditions precedent to effectiveness including, but not limited to, approval of the Louisiana Public Service Commission. We plan to fund the project with a construction loan that will be repaid upon receipt of sale proceeds. York 2 Energy Center: York 2 Energy Center is an 828 MW dual-fuel, combined-cycle project that is co-located with our York Energy Center in Peach Bottom Township, Pennsylvania. Once complete, the power plant will feature two combustion turbines, two heat recovery steam generators and one steam turbine. Due to construction delays, we are now targeting COD in the first half of 2018. Osprey Energy Center: On January 3, 2017, we completed the sale of Osprey Energy Center to Duke Energy Florida, Inc. for approximately $166 million, excluding working capital and other adjustments. This transaction supports our effort to divest non-core assets outside our strategic concentration. Texas: Clear Lake Power Plant: On February 1, 2017, we retired our 400 MW Clear Lake Power Plant due to a lack of adequate compensation in Texas. Built in 1985, Clear Lake utilized an older, less efficient technology. Guadalupe Peaking Energy Center: In April 2017, we canceled an agreement with Guadalupe Valley Electric Cooperative (GVEC) related to the construction of a 418 MW natural gas-fired peaking power plant to be co-located with our existing Guadalupe Energy Center. In lieu of building the facility, we will now serve GVEC with 200 MW of generating capacity under a 10-year PPA beginning in June 2019. West: California Peakers: As a result of the pending expiration of a PPA in December 2017, we informed CAISO of our intent to suspend operations at four of our California peaking natural gas-fired power plants with capacity totaling 186 MW. CAISO has determined that two of these power plants, Yuba City and Feather River energy centers, are needed to continue reliable operation of the power grid. We are currently negotiating Reliability Must Run contracts for these two power plants. South Point Energy Center: As a result of the denial by the Nevada Public Utility Commission of the sale of South Point Energy Center to Nevada Power Company in February 2017, we terminated the corresponding asset sale agreement in the first quarter of 2017. We are currently assessing our options related to South Point Energy Center. OPERATIONS UPDATE Second Quarter Power Operations Achievements: Availability Performance:— Delivered strong fleetwide starting reliability: 97.7% Power Generation:— Generated more than 22 million MWh3— Four merchant plants achieved greater than 65% net capacity factor: Bosque, Garrison, Freestone and Pasadena 2017 Operating Event at our Delta Energy Center On January 29, 2017, we experienced an operating event at our Delta Energy Center that resulted in an emergency shutdown of the power plant and significant damage to the steam turbine and steam turbine generator. The unit returned to service in simple-cycle steam bypass configuration in June 2017, and our current plan is to return the unit to full combined-cycle configuration in the fourth quarter of 2017. We anticipate that insurance will cover a significant portion of our losses, after applicable deductibles. 2017 FINANCIAL OUTLOOK ____________ (1) Maintenance capital expenditures exclude major construction and development projects. (2) Includes commitment, letter of credit and other bank fees from consolidated and unconsolidated investments, net of capitalized interest and interest income. (3) Includes projected major maintenance expense of $275 million and maintenance capital expenditures of $160 million. As detailed above, today we are reaffirming our 2017 Adjusted EBITDA and Adjusted Free Cash Flow guidance ranges and are introducing guidance for Adjusted Unlevered Free Cash Flow. We expect Adjusted EBITDA of $1.8 billion to $1.95 billion, Adjusted Unlevered Free Cash Flow of $1.355 billion to $1.505 billion and Adjusted Free Cash Flow of $710 million to $860 million in 2017. INVESTOR CONFERENCE CALL AND WEBCAST We will host a conference call to discuss our financial and operating results for the second quarter on Friday, July 28, 2017, at 10 a.m. Eastern time / 9 a.m. Central time. A listen-only webcast of the call may be accessed through our website at www.calpine.com, or by dialing (800) 446-1671 in the U.S. or (847) 413-3362 outside the U.S. The confirmation code is 45310747. A recording of the call will be made available for a limited time on our website or by dialing (888) 843-7419 in the U.S. or (630) 652-3042 outside the U.S. and providing confirmation code 45310747. Presentation materials to accompany the conference call will be posted on our website on July 28, 2017. ABOUT CALPINE Calpine Corporation is America’s largest generator of electricity from natural gas and geothermal resources with operations in competitive power markets. Our fleet of 80 power plants in operation or under construction represents approximately 26,000 megawatts of generation capacity. Through wholesale power operations and our retail businesses Calpine Energy Solutions and Champion Energy, we serve customers in 25 states, Canada and Mexico. Our clean, efficient, modern and flexible fleet uses advanced technologies to generate power in a low-carbon and environmentally responsible manner. We are uniquely positioned to benefit from the secular trends affecting our industry, including the abundant and affordable supply of clean natural gas, environmental regulation, aging power generation infrastructure and the increasing need for dispatchable power plants to successfully integrate intermittent renewables into the grid. Please visit www.calpine.com to learn more about how Calpine is creating power for a sustainable future. Calpine’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2017, has been filed with the Securities and Exchange Commission (SEC) and is available on the SEC’s website at www.sec.gov. FORWARD-LOOKING INFORMATION In addition to historical information, this release contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act, and Section 21E of the Exchange Act. Forward-looking statements may appear throughout this release. We use words such as “believe,” “intend,” “expect,” “anticipate,” “plan,” “may,” “will,” “should,” “estimate,” “potential,” “project” and similar expressions to identify forward-looking statements. Such statements include, among others, those concerning our expected financial performance and strategic and operational plans, as well as all assumptions, expectations, predictions, intentions or beliefs about future events. We believe that the forward-looking statements are based upon reasonable assumptions and expectations. However, you are cautioned that any such forward-looking statements are not guarantees of future performance and that a number of risks and uncertainties could cause actual results to differ materially from those anticipated in the forward-looking statements. Such risks and uncertainties include, but are not limited to: Financial results that may be volatile and may not reflect historical trends due to, among other things, seasonality of demand, fluctuations in prices for commodities such as natural gas and power, changes in U.S. macroeconomic conditions, fluctuations in liquidity and volatility in the energy commodities markets and our ability and extent to which we hedge risks; Laws, regulations and market rules in the wholesale and retail markets in which we participate and our ability to effectively respond to changes in laws, regulations or market rules or the interpretation thereof including those related to the environment, derivative transactions and market design in the regions in which we operate; Our ability to manage our liquidity needs, access the capital markets when necessary and comply with covenants under our Senior Unsecured Notes, First Lien Notes, First Lien Term Loans, Corporate Revolving Facility, CCFC Term Loans and other existing financing obligations; Risks associated with the operation, construction and development of power plants, including unscheduled outages or delays and plant efficiencies; Risks related to our geothermal resources, including the adequacy of our steam reserves, unusual or unexpected steam field well and pipeline maintenance requirements, variables associated with the injection of water to the steam reservoir and potential regulations or other requirements related to seismicity concerns that may delay or increase the cost of developing or operating geothermal resources; Competition, including from renewable sources of power, interference by states in competitive power markets through subsidies or similar support for new or existing power plants, and other risks associated with marketing and selling power in the evolving energy markets; Structural changes in the supply and demand of power resulting from the development of new fuels or technologies and demand-side management tools (such as distributed generation, power storage and other technologies); The expiration or early termination of our PPAs and the related results on revenues; Future capacity revenue may not occur at expected levels; Natural disasters, such as hurricanes, earthquakes, droughts, wildfires and floods, acts of terrorism or cyber-attacks that may affect our power plants or the markets our power plants or retail operations serve and our corporate offices; Disruptions in or limitations on the transportation of natural gas or fuel oil and the transmission of power; Our ability to manage our counterparty and customer exposure and credit risk, including our commodity positions; Our ability to attract, motivate and retain key employees; Present and possible future claims, litigation and enforcement actions that may arise from noncompliance with market rules promulgated by the SEC, CFTC, FERC and other regulatory bodies; and Other risks identified in this press release, in our Annual Report on Form 10-K for the year ended December 31, 2016, and in other reports filed by us with the SEC. Given the risks and uncertainties surrounding forward-looking statements, you should not place undue reliance on these statements. Many of these factors are beyond our ability to control or predict. Our forward-looking statements speak only as of the date of this release. Other than as required by law, we undertake no obligation to update or revise forward-looking statements, whether as a result of new information, future events, or otherwise. (51 __________ (1) Includes amortization recorded in Commodity revenue and Commodity expense associated with intangible assets and amortization recorded in interest expense associated with debt issuance costs and discounts. (2) On April 3, 2017, we completed the purchase of the King City Cogeneration Plant lease in exchange for a three-year promissory note with a discounted value of $57 million. We recorded a net increase to property, plant and equipment, net on our Consolidated Condensed Balance Sheet of $15 million due to the increased value of the promissory note as compared to the carrying value of the lease. REGULATION G RECONCILIATIONS In addition to disclosing financial results in accordance with U.S. GAAP, the accompanying second quarter 2017 earnings release contains non-GAAP financial measures. Commodity Margin, Adjusted Free Cash Flow, Adjusted Unlevered Free Cash Flow and Adjusted EBITDA are non-GAAP financial measures that we use as measures of our performance and liquidity. These non-GAAP measures should be viewed as a supplement to and not a substitute for our U.S. GAAP measures of performance and liquidity, and the financial results calculated in accordance with U.S. GAAP and reconciliations from these results should be carefully evaluated. Commodity Margin includes revenues recognized on our wholesale and retail power sales activity, electric capacity sales, renewable energy credit sales, steam sales, realized settlements associated with our marketing, hedging, optimization and trading activity, fuel and purchased energy expenses, commodity transmission and transportation expenses and environmental compliance expenses. We believe that Commodity Margin is a useful tool for assessing the performance of our core operations and is a key operational measure reviewed by our chief operating decision maker. Commodity Margin is not a measure calculated in accordance with U.S. GAAP and should be viewed as a supplement to and not a substitute for our results of operations presented in accordance with U.S. GAAP. Commodity Margin does not intend to represent income (loss) from operations, the most comparable U.S. GAAP measure, as an indicator of operating performance and is not necessarily comparable to similarly titled measures reported by other companies. Adjusted Free Cash Flow represents cash flows from operating activities including the effects of maintenance capital expenditures, adjustments to reflect the Adjusted Free Cash Flow from unconsolidated investments and to exclude the noncontrolling interest and other miscellaneous adjustments such as the effect of changes in working capital. Adjusted Unlevered Free Cash Flow is calculated on the same basis as Adjusted Free Cash Flow but excludes the effect of cash interest, net, and operating lease payments, thus capturing the performance of our business independent of its capital structure. Adjusted Free Cash Flow and Adjusted Unlevered Free Cash Flow are presented because we believe they are useful measures of liquidity to assist in comparing financial results from period to period on a consistent basis and to readily view operating trends, as measures for planning and forecasting overall expectations and for evaluating actual results against such expectations and in communications with our Board of Directors, shareholders, creditors, analysts and investors concerning our financial results. Adjusted Free Cash Flow and Adjusted Unlevered Free Cash Flow are liquidity measures and are not intended to represent cash flows from operations, the most directly comparable U.S. GAAP measure, and are not necessarily comparable to similarly titled measures reported by other companies. Adjusted EBITDA represents net loss attributable to Calpine before net (income) attributable to the noncontrolling interest, interest, taxes, depreciation and amortization, and is also adjusted for the effects of impairment losses, gains or losses on sales, dispositions or retirements of assets, any mark-to-market gains or losses from accounting for derivatives, adjustments to exclude the Adjusted EBITDA related to the noncontrolling interest, stock-based compensation expense, operating lease expense, non-cash gains and losses from foreign currency translations, major maintenance expense, gains or losses on the repurchase, modification or extinguishment of debt, non-cash GAAP-related adjustments to levelize revenues from tolling agreements and any unusual or non-recurring items plus adjustments to reflect the Adjusted EBITDA from our unconsolidated investments. We adjust for these items in our Adjusted EBITDA as our management believes that these items would distort their ability to efficiently view and assess our core operating trends. We believe that investors commonly adjust EBITDA information to eliminate the effects of restructuring and other expenses, which vary widely from company to company and impair comparability. Adjusted EBITDA is not intended to represent net income (loss) as defined by U.S. GAAP as an indicator of operating performance and is not necessarily comparable to similarly titled measures reported by other companies. We are presenting Adjusted EBITDA along with a reconciliation to Adjusted Unlevered Free Cash Flow to demonstrate the relationship between our traditional performance measure, Adjusted EBITDA, and our new liquidity measure, Adjusted Unlevered Free Cash Flow. Commodity Margin Reconciliation The following tables reconcile income (loss) from operations to Commodity Margin for the three and six months ended June 30, 2017 and 2016 (in millions): _________ (1) Includes $(24) million and $(20) million of lease levelization and $44 million and $27 million of amortization expense for the three months ended June 30, 2017 and 2016, respectively. (2) Includes $(46) million and $(42) million of lease levelization and $104 million and $54 million of amortization expense for the six months ended June 30, 2017 and 2016, respectively. Consolidated Adjusted EBITDA Reconciliation In the following table, we have reconciled our Adjusted EBITDA to our Commodity Margin, both of which are non-GAAP measures, for the three and six months ended June 30, 2017 and 2016. Reconciliations for both Adjusted EBITDA and Commodity Margin to comparable U.S. GAAP measures are provided above. Amounts below are shown exclusive of the noncontrolling interest (in millions): _________ (1) Shown net of major maintenance expense, stock-based compensation expense, non-cash loss on dispositions of assets and other costs. (2) Shown net of stock-based compensation expense and other costs. (3) Shown net of operating lease expense, amortization and other costs. In the following table, we have reconciled our net loss attributable to Calpine to Adjusted EBITDA for the three and six months ended June 30, 2017 and 2016, as reported under U.S. GAAP (in millions). We also reconciled Adjusted EBITDA to Adjusted Unlevered Free Cash Flow to demonstrate the relationship between our traditional performance measure, Adjusted EBITDA, and our new liquidity measure, Adjusted Unlevered Free Cash Flow. ____________ (1) Excludes depreciation and amortization expense attributable to the non-controlling interest. (2) Adjustments to reflect Adjusted EBITDA from unconsolidated investments include (gain) loss on mark-to-market activity of nil for each of the three and six months ended June 30, 2017 and 2016. (3) Includes $86 million and $151 million in major maintenance expense for the three and six months ended June 30, 2017, respectively, and $59 million and $109 million in maintenance capital expenditures for the three and six months ended June 30, 2017, respectively. Includes $81 million and $146 million in major maintenance expenditures for the three and six months ended June 30, 2016, respectively, and $41 million and $81 million in maintenance capital expenditures for the three and six months ended June 30, 2016, respectively. (4) Includes commitment, letter of credit and other bank fees from both consolidated and unconsolidated investments, net of capitalized interest and interest income. (5) Adjusted Free Cash Flow, as reported, excludes changes in working capital, such that it is calculated on the same basis as our guidance. Adjusted Unlevered Free Cash Flow Reconciliation In the following table, we have reconciled our cash flows from operating activities to our Adjusted Unlevered Free Cash Flow for the three and six months ended June 30, 2017 and 2016 (in millions). _________ (1) Maintenance capital expenditures exclude major construction and development projects. (2) Adjustment excludes $3 million and $35 million in amortization of acquired derivatives contracts for three months ended June 30, 2017 and 2016, respectively, and $(10) million and $45 million in amortization of acquired derivatives contracts for the six months ended June 30, 2017 and 2016, respectively. (3) Other primarily represents miscellaneous items excluded from Adjusted Free Cash Flow that are included in cash flow from operations. (4) Includes commitment, letter of credit and other bank fees from both consolidated and unconsolidated investments, net of capitalized interest and interest income. (5) Includes $86 million and $151 million in major maintenance expense for the three and six months ended June 30, 2017, respectively, and $59 million and $109 million in maintenance capital expenditures for the three and six months ended June 30, 2017, respectively. Includes $81 million and $146 million in major maintenance expense for the three and six months ended June 30, 2016, respectively, and $41 million and $81 million in maintenance capital expenditures for the three and six months ended June 30, 2016, respectively. Adjusted Unlevered Free Cash Flow Reconciliation for Guidance (in millions) ____________ (1) Maintenance capital expenditures exclude major construction and development projects. (2) Includes commitment, letter of credit and other bank fees from both consolidated and unconsolidated investments, net of capitalized interest and interest income. (3) Includes projected major maintenance expense of $275 million and maintenance capital expenditures of $160 million. OPERATING PERFORMANCE METRICS The table below shows the operating performance metrics for the periods presented: ________ (1) Excludes generation from unconsolidated power plants and power plants owned but not operated by us. (2) Generation, average availability and steam adjusted heat rate exclude power plants and units that are inactive.
- CALPINE REPORTS SECOND QUARTER 2017 RESULTS AND REAFFIRMS 2017
GUIDANCE
Jul 28, 2017
HOUSTON--(BUSINESS WIRE)--CALPINE CORPORATION (NYSE: CPN): SUMMARY OF SECOND QUARTER 2017 FINANCIAL RESULTS (IN MILLIONS): REAFFIRMING 2017 GUIDANCE (IN MILLIONS): RECENT ACHIEVEMENTS: POWER AND COMMERCIAL OPERATIONS:— GENERATED MORE THAN 22 MILLION MWH3 IN THE SECOND QUARTER OF 2017— DELIVERED STRONG FLEETWIDE STARTING RELIABILITY: 97.7% PORTFOLIO MANAGEMENT:— RETURNED OUR DELTA ENERGY CENTER TO SERVICE IN SIMPLE-CYCLE STEAM BYPASS CONFIGURATION IN JUNE 2017; PLAN TO RETURN THE UNIT TO FULL COMBINED-CYCLE CONFIGURATION IN FOURTH QUARTER OF 2017— NEGOTIATING RELIABILITY MUST RUN CONTRACTS WITH CAISO FOR TWO NATURAL GAS-FIRED PEAKING POWER PLANTS IN CALIFORNIA BALANCE SHEET MANAGEMENT:— AS PART OF OUR $2.7 BILLION PLAN TO DELEVER AND REDUCE INTEREST EXPENSE, WE HAVE PAID DOWN APPROXIMATELY $294 MILLION OF DEBT (NET) THROUGH THE SECOND QUARTER OF 2017 OUT OF $850 MILLION PAYDOWN PLANNED FOR 2017 STRATEGY:— BOARD OF DIRECTORS AND MANAGEMENT IN DISCUSSIONS REGARDING A POTENTIAL SALE OF CALPINE CALPINE CORPORATION (NYSE:CPN) TODAY REPORTED NET LOSS1 OF $216 MILLION, OR $0.61 PER DILUTED SHARE, FOR THE SECOND QUARTER OF 2017 COMPARED TO $29 MILLION, OR $0.08 PER DILUTED SHARE, IN THE PRIOR YEAR PERIOD. THE PERIOD-OVER-PERIOD INCREASE IN NET LOSS WAS PRIMARILY DUE TO HIGHER INCOME TAX EXPENSE IN THE CURRENT YEAR IN JURISDICTIONS WHERE WE DO NOT HAVE NET OPERATING LOSSES, AN UNFAVORABLE VARIANCE IN MARK-TO-MARKET GAIN/LOSS, NET, AND INCREASES IN PLANT OPERATING EXPENSE AND DEPRECIATION AND AMORTIZATION EXPENSE. CASH PROVIDED BY OPERATING ACTIVITIES FOR THE SECOND QUARTER OF 2017 WAS $152 MILLION COMPARED TO $94 MILLION IN THE PRIOR YEAR. THE INCREASE IN CASH PROVIDED BY OPERATING ACTIVITIES IN THE SECOND QUARTER OF 2017 WAS PRIMARILY DUE TO A DECREASE IN WORKING CAPITAL EMPLOYED RESULTING FROM THE PERIOD-OVER-PERIOD CHANGE IN NET MARGINING REQUIREMENTS ASSOCIATED WITH OUR COMMODITY HEDGING ACTIVITY, PARTIALLY OFFSET BY A DECREASE IN INCOME FROM OPERATIONS, ADJUSTED FOR NON-CASH ITEMS. ADJUSTED EBITDA2 FOR THE SECOND QUARTER OF 2017 WAS $419 MILLION COMPARED TO $452 MILLION IN THE PRIOR YEAR PERIOD. THE DECREASE IN ADJUSTED EBITDA WAS PRIMARILY DUE TO LOWER COMMODITY MARGIN2, LARGELY DRIVEN BY A $40 MILLION NATURAL GAS TRANSPORTATION BILLING CREDIT RECEIVED IN THE SECOND QUARTER OF 2016 THAT DID NOT RECUR IN THE CURRENT YEAR PERIOD, AS WELL AS HIGHER PLANT OPERATING EXPENSE, PRIMARILY DUE TO OUR RETAIL ACQUISITIONS. ADJUSTED UNLEVERED FREE CASH FLOW2 FOR THE SECOND QUARTER OF 2017 WAS $263 MILLION COMPARED TO $324 MILLION IN THE PRIOR YEAR PERIOD, AND ADJUSTED FREE CASH FLOW2 WAS $103 MILLION COMPARED TO $158 MILLION IN THE PRIOR YEAR PERIOD. THE DECREASES IN ADJUSTED UNLEVERED FREE CASH FLOW AND ADJUSTED FREE CASH FLOW WERE PRIMARILY DRIVEN BY LOWER ADJUSTED EBITDA, AS PREVIOUSLY DISCUSSED, AND HIGHER MAJOR MAINTENANCE EXPENSE AND CAPITAL EXPENDITURES DUE TO THE TIMING OF OUR OUTAGE SCHEDULE. NET LOSS FOR THE FIRST HALF OF 2017 WAS $272 MILLION, OR $0.77 PER DILUTED SHARE, COMPARED TO $227 MILLION, OR $0.64 PER DILUTED SHARE IN THE PRIOR YEAR PERIOD. THE PERIOD-OVER-PERIOD INCREASE IN NET LOSS WAS PRIMARILY DUE TO INCREASES IN PLANT OPERATING EXPENSE AND DEPRECIATION AND AMORTIZATION EXPENSE, AND A DECREASE IN COMMODITY REVENUE, NET OF COMMODITY EXPENSE PARTIALLY OFFSET BY A FAVORABLE VARIANCE IN MARK-TO-MARKET GAIN/LOSS, NET AND A GAIN RECORDED IN THE FIRST HALF OF 2017 FOR THE SALE OF OSPREY ENERGY CENTER. CASH PROVIDED BY OPERATING ACTIVITIES FOR THE FIRST HALF OF 2017 WAS $246 MILLION COMPARED TO $125 MILLION IN THE PRIOR YEAR PERIOD. THE INCREASE IN CASH PROVIDED BY OPERATING ACTIVITIES IN THE FIRST HALF OF 2017 WAS PRIMARILY DUE TO A DECREASE IN WORKING CAPITAL EMPLOYED RESULTING FROM THE PERIOD-OVER-PERIOD CHANGE IN NET MARGINING REQUIREMENTS ASSOCIATED WITH OUR COMMODITY HEDGING ACTIVITY, PARTIALLY OFFSET BY A DECREASE IN INCOME FROM OPERATIONS, ADJUSTED FOR NON-CASH ITEMS. ADJUSTED EBITDA FOR THE FIRST HALF OF 2017 WAS $745 MILLION COMPARED TO $826 MILLION IN THE PRIOR YEAR PERIOD. THE DECREASE IN ADJUSTED EBITDA WAS PRIMARILY DUE TO LOWER COMMODITY MARGIN, LARGELY DRIVEN BY A GAS TRANSPORTATION BILLING CREDIT RECEIVED IN THE SECOND QUARTER OF 2016 THAT DID NOT RECUR IN THE CURRENT YEAR PERIOD, AND LOWER ENERGY MARGINS DUE TO DECREASED CONTRIBUTION FROM WHOLESALE HEDGES AND WEAKER MARKET CONDITIONS IN THE FIRST QUARTER, AS WELL AS HIGHER PLANT OPERATING EXPENSE, PRIMARILY DUE TO OUR RETAIL ACQUISITIONS. ADJUSTED UNLEVERED FREE CASH FLOW FOR THE FIRST HALF OF 2017 WAS $470 MILLION COMPARED TO $590 MILLION IN THE PRIOR YEAR PERIOD, AND ADJUSTED FREE CASH FLOW WAS $146 MILLION COMPARED TO $260 MILLION IN THE PRIOR YEAR PERIOD. THE DECREASES IN ADJUSTED UNLEVERED FREE CASH FLOW AND ADJUSTED FREE CASH FLOW WERE PRIMARILY DRIVEN BY LOWER ADJUSTED EBITDA, AS PREVIOUSLY DISCUSSED, AND HIGHER MAJOR MAINTENANCE EXPENSE AND CAPITAL EXPENDITURES DUE TO THE TIMING OF OUR OUTAGE SCHEDULE. “I AM PLEASED TO REPORT SOLID SECOND QUARTER RESULTS, AND I AM PROUD OF THE HARD WORK OF OUR TEAM AND THE OPERATIONAL EXCELLENCE OF OUR PORTFOLIO,” SAID THAD HILL, CALPINE’S PRESIDENT AND CHIEF EXECUTIVE OFFICER. “DURING THE SECOND QUARTER, WE SAW STRONGER POWER PRICES FOR OUR TEXAS PLANTS IN THE CONSTRAINED HOUSTON ZONE, AND THE PJM CAPACITY AUCTION YIELDED POSITIVE PRINTS FOR OUR LOCATIONALLY ADVANTAGED MID-ATLANTIC FLEET. IN CALIFORNIA, OUR NATURAL GAS-FIRED ASSETS WERE CRITICAL TO GRID RELIABILITY DURING THE RECENT JUNE HEAT WAVE, PARTICULARLY DURING THE DAILY EVENING PEAKS. “WHILE THESE TRENDS SUPPORT WHAT WE BELIEVE TO BE A SOUND INVESTMENT THESIS FOR CALPINE, THE PUBLIC EQUITY MARKETS HAVE UNDERVALUED OUR BUSINESS AND UNDERAPPRECIATED OUR STRONG TRACK RECORD OF EXECUTING ON OUR FINANCIAL COMMITMENTS AND OUR STABLE CASH FLOWS. EARLY THIS SPRING, OUR BOARD OF DIRECTORS DECIDED TO EXPLORE STRATEGIC ALTERNATIVES FOR THE COMPANY, SEEKING TO ENHANCE VALUE FOR OUR SHAREHOLDERS. AT THIS TIME, OUR BOARD, TOGETHER WITH MANAGEMENT AND FINANCIAL AND LEGAL ADVISORS, ARE IN DISCUSSIONS REGARDING A POTENTIAL SALE OF CALPINE." THE BOARD PLANS TO PROCEED IN A TIMELY MANNER BUT HAS NOT SET A DEFINITIVE TIMETABLE FOR COMPLETION OF THESE DISCUSSIONS. THERE CAN BE NO ASSURANCE THAT THESE DISCUSSIONS WILL RESULT IN A TRANSACTION OF ANY KIND, OR IF A TRANSACTION IS UNDERTAKEN, AS TO TERMS OR TIMING. CALPINE DOES NOT INTEND TO DISCLOSE DEVELOPMENTS OR PROVIDE UPDATES ON THE STATUS OF THESE DISCUSSIONS UNLESS OR UNTIL IT IS DETERMINED THAT FURTHER DISCLOSURE IS APPROPRIATE OR REQUIRED BY LAW. NOTWITHSTANDING THESE DISCUSSIONS, THE CALPINE TEAM REMAINS COMMITTED TO OPERATIONAL EXCELLENCE, CUSTOMER FOCUS AND FINANCIAL DISCIPLINE. ________ 1 REPORTED AS NET LOSS ATTRIBUTABLE TO CALPINE ON OUR CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS. 2 NON-GAAP FINANCIAL MEASURE, SEE “REGULATION G RECONCILIATIONS” FOR FURTHER DETAILS. 3 INCLUDES GENERATION FROM POWER PLANTS OWNED BUT NOT OPERATED BY CALPINE AND OUR SHARE OF GENERATION FROM UNCONSOLIDATED POWER PLANTS. SUMMARY OF FINANCIAL PERFORMANCE SECOND QUARTER RESULTS ADJUSTED EBITDA FOR THE SECOND QUARTER OF 2017 WAS $419 MILLION COMPARED TO $452 MILLION IN THE PRIOR YEAR PERIOD. THE YEAR-OVER-YEAR DECREASE IN ADJUSTED EBITDA WAS PRIMARILY RELATED TO A $10 MILLION DECREASE IN COMMODITY MARGIN AND AN $18 MILLION INCREASE IN PLANT OPERATING EXPENSE4, WHICH WAS LARGELY DRIVEN BY NET PORTFOLIO CHANGES INCLUDING OUR RETAIL ACQUISITIONS. EXCLUDING THE BENEFIT FROM A $40 MILLION NATURAL GAS TRANSPORTATION BILLING CREDIT RECEIVED IN THE SECOND QUARTER OF 2016, COMMODITY MARGIN WOULD HAVE BEEN UP $30 MILLION, PRIMARILY DUE TO: + + HIGHER ON-PEAK SPARK SPREADS IN THE ERCOT HOUSTON ZONE AND IN CALIFORNIA DURING THE HOURS IN WHICH WE GENERATED, PARTIALLY OFFSET BY LOWER MARKET SPARK SPREADS IN THE EAST AND LOWER FLEETWIDE GENERATION, – – ADJUSTED UNLEVERED FREE CASH FLOW WAS $263 MILLION IN THE SECOND QUARTER OF 2017 COMPARED TO $324 MILLION IN THE PRIOR YEAR PERIOD. ADJUSTED FREE CASH FLOW WAS $103 MILLION IN THE SECOND QUARTER OF 2017 COMPARED TO $158 MILLION IN THE PRIOR YEAR PERIOD. ADJUSTED UNLEVERED FREE CASH FLOW AND ADJUSTED FREE CASH FLOW DECREASED PRIMARILY DUE TO LOWER ADJUSTED EBITDA, AS PREVIOUSLY DISCUSSED, AND HIGHER MAJOR MAINTENANCE EXPENSE AND CAPITAL EXPENDITURES DUE TO OUTAGE TIMING. YEAR-TO-DATE RESULTS ADJUSTED EBITDA FOR THE FIRST HALF OF 2017 WAS $745 MILLION COMPARED TO $826 MILLION IN THE PRIOR YEAR PERIOD. THE YEAR-OVER-YEAR DECREASE IN ADJUSTED EBITDA WAS PRIMARILY RELATED TO A $32 MILLION DECREASE IN COMMODITY MARGIN AND A $42 MILLION INCREASE IN PLANT OPERATING EXPENSE4, WHICH WAS LARGELY DRIVEN BY NET PORTFOLIO CHANGES INCLUDING OUR RETAIL ACQUISITIONS. THE DECREASE IN COMMODITY MARGIN WAS PRIMARILY DUE TO: – – – – + + HIGHER MARKET SPARK SPREADS IN ERCOT, PARTIALLY OFFSET BY LOWER MARKET SPARK SPREADS IN OUR EAST REGION. ADJUSTED UNLEVERED FREE CASH FLOW WAS $470 MILLION FOR THE FIRST HALF OF 2017 COMPARED TO $590 MILLION IN THE PRIOR YEAR PERIOD. ADJUSTED FREE CASH FLOW WAS $146 MILLION FOR THE FIRST HALF OF 2017 COMPARED TO $260 MILLION IN THE PRIOR YEAR PERIOD. ADJUSTED UNLEVERED FREE CASH FLOW AND ADJUSTED FREE CASH FLOW DECREASED PRIMARILY DUE TO LOWER ADJUSTED EBITDA, AS PREVIOUSLY DISCUSSED, AND HIGHER MAJOR MAINTENANCE EXPENSE AND CAPITAL EXPENDITURES DUE TO OUTAGE TIMING. __________ 4 INCREASE IN PLANT OPERATING EXPENSE EXCLUDES CHANGES IN MAJOR MAINTENANCE EXPENSE, STOCK-BASED COMPENSATION EXPENSE, NON-CASH LOSS ON DISPOSITION OF ASSETS AND OTHER COSTS. SEE THE TABLE TITLED “CONSOLIDATED ADJUSTED EBITDA RECONCILIATION” FOR THE ACTUAL AMOUNTS OF THESE ITEMS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2017 AND 2016. REGIONAL SEGMENT REVIEW OF RESULTS TABLE 1: COMMODITY MARGIN BY SEGMENT (IN MILLIONS) WEST REGION SECOND QUARTER: COMMODITY MARGIN IN OUR WEST SEGMENT DECREASED BY $10 MILLION IN THE SECOND QUARTER OF 2017 COMPARED TO THE PRIOR YEAR PERIOD. PRIMARY DRIVERS WERE: – + + YEAR-TO-DATE: COMMODITY MARGIN IN OUR WEST SEGMENT INCREASED BY $14 MILLION IN THE FIRST HALF OF 2017 COMPARED TO THE PRIOR YEAR PERIOD. PRIMARY DRIVERS WERE: + INCREASED CONTRIBUTION FROM THE EXPANSION OF OUR RETAIL HEDGING ACTIVITY FOLLOWING THE ACQUISITION OF CALPINE ENERGY SOLUTIONS IN DECEMBER 2016 AND + – TEXAS REGION SECOND QUARTER: COMMODITY MARGIN IN OUR TEXAS SEGMENT INCREASED BY $7 MILLION IN THE SECOND QUARTER OF 2017 COMPARED TO THE PRIOR YEAR PERIOD. PRIMARY DRIVERS WERE: + + – YEAR-TO-DATE: COMMODITY MARGIN IN OUR TEXAS SEGMENT INCREASED BY $2 MILLION IN THE FIRST HALF OF 2017 COMPARED TO THE PRIOR YEAR PERIOD. PRIMARY DRIVERS WERE: + HIGHER MARKET SPARK SPREADS AND + – – EAST REGION SECOND QUARTER: COMMODITY MARGIN IN OUR EAST SEGMENT DECREASED $7 MILLION IN THE SECOND QUARTER OF 2017 COMPARED TO THE PRIOR YEAR PERIOD. PRIMARY DRIVERS WERE: – – – + YEAR-TO-DATE: COMMODITY MARGIN IN OUR EAST SEGMENT DECREASED BY $48 MILLION IN THE FIRST HALF OF 2017 COMPARED TO THE PRIOR YEAR PERIOD. PRIMARY DRIVERS WERE: – – – – + + LIQUIDITY, CASH FLOW AND CAPITAL RESOURCES TABLE 2: LIQUIDITY (IN MILLIONS) ____________ (1) INCLUDES $1 MILLION AND $16 MILLION OF MARGIN DEPOSITS POSTED WITH US BY OUR COUNTERPARTIES AT JUNE 30, 2017, AND DECEMBER 31, 2016, RESPECTIVELY. (2) OUR ABILITY TO USE AVAILABILITY UNDER OUR CORPORATE REVOLVING FACILITY IS UNRESTRICTED. (3) OUR ABILITY TO USE CORPORATE CASH AND CASH EQUIVALENTS IS UNRESTRICTED. OUR $300 MILLION CDHI LETTER OF CREDIT FACILITY IS RESTRICTED TO SUPPORT CERTAIN OBLIGATIONS UNDER PPAS AND POWER TRANSMISSION AND NATURAL GAS TRANSPORTATION AGREEMENTS. LIQUIDITY WAS APPROXIMATELY $1.8 BILLION AS OF JUNE 30, 2017. CASH AND CASH EQUIVALENTS DECREASED IN THE FIRST HALF OF 2017 PRIMARILY DUE TO NET REPAYMENTS OF DEBT, CONSISTENT WITH OUR ANNOUNCED PLAN TO REDUCE LEVERAGE. TABLE 3: CASH FLOW ACTIVITIES (IN MILLIONS) CASH PROVIDED BY OPERATING ACTIVITIES IN THE FIRST HALF OF 2017 WAS $246 MILLION COMPARED TO $125 MILLION IN THE PRIOR YEAR PERIOD. THE YEAR-OVER-YEAR INCREASE WAS PRIMARILY DUE TO A DECREASE IN WORKING CAPITAL EMPLOYED RESULTING FROM THE PERIOD-OVER-PERIOD CHANGE IN NET MARGINING REQUIREMENTS ASSOCIATED WITH OUR COMMODITY HEDGING ACTIVITY, PARTIALLY OFFSET BY A DECREASE IN INCOME FROM OPERATIONS, ADJUSTED FOR NON-CASH ITEMS. CASH USED IN INVESTING ACTIVITIES WAS $51 MILLION DURING THE FIRST HALF OF 2017 COMPARED TO $676 MILLION IN THE PRIOR YEAR PERIOD. THE DECREASE WAS PRIMARILY RELATED TO ACQUISITIONS, DIVESTITURES AND CAPITAL EXPENDITURES. IN THE FIRST QUARTER OF 2017, WE CLOSED ON THE ACQUISITION OF NORTH AMERICAN POWER FOR $111 MILLION AND CLOSED ON THE SALE OF OSPREY ENERGY CENTER, RECEIVING NET PROCEEDS OF $162 MILLION. IN THE FIRST QUARTER OF 2016, WE PURCHASED GRANITE RIDGE ENERGY CENTER FOR $526 MILLION. THERE WAS ALSO A YEAR-OVER-YEAR DECREASE OF $36 MILLION IN CAPITAL EXPENDITURES, PRIMARILY DUE TO LOWER EXPENDITURES ON CONSTRUCTION PROJECTS DURING THE FIRST HALF OF 2017 AS COMPARED TO 2016. CASH USED IN FINANCING ACTIVITIES WAS $319 MILLION DURING THE FIRST HALF OF 2017 AND PRIMARILY RELATED TO NET REPAYMENT OF DEBT IN ACCORDANCE WITH OUR DELEVERAGING PLAN. MANAGING OUR BALANCE SHEET WE FURTHER OPTIMIZED OUR CAPITAL STRUCTURE DURING THE FIRST HALF OF 2017, AS FOLLOWS: 2023 FIRST LIEN NOTES: — AS PART OF OUR COMMITMENT TO REDUCE DEBT AND INTEREST EXPENSE, ON MARCH 6, 2017, WE REDEEMED THE REMAINING $453 MILLION OF OUR 7.875% FIRST LIEN NOTES DUE IN 2023 USING CASH ON HAND ALONG WITH THE PROCEEDS FROM A NEW $400 MILLION, THREE-YEAR FIRST LIEN TERM LOAN PRICED AT LIBOR + 1.75% PER ANNUM. WE INTEND TO REPAY THE 2019 FIRST LIEN TERM LOAN IN FULL BY THE END OF 2018. THIS ACCELERATES DEBT REDUCTION AND RESULTS IN SUBSTANTIAL ANNUAL INTEREST SAVINGS OF MORE THAN $20 MILLION IN THE INTERIM. 2017 FIRST LIEN TERM LOAN: — WE REPAID APPROXIMATELY $150 MILLION OF OUR 2017 FIRST LIEN TERM LOAN USING CASH ON HAND DURING THE FIRST QUARTER OF 2017. EXPANDING OUR CUSTOMER SALES CHANNELS WE CONTINUE TO FOCUS ON GETTING CLOSER TO OUR CUSTOMERS THROUGH EXPANSION OF OUR RETAIL PLATFORM, WHICH BEGAN WITH THE ACQUISITION OF CHAMPION ENERGY IN 2015 AND WAS FOLLOWED BY THE ACQUISITIONS OF CALPINE ENERGY SOLUTIONS IN LATE 2016 AND NORTH AMERICAN POWER IN EARLY 2017. OUR RETAIL PLATFORM GEOGRAPHICALLY AND STRATEGICALLY COMPLEMENTS OUR WHOLESALE GENERATION FLEET BY PROVIDING FORWARD LIQUIDITY WITH SUFFICIENT MARGINS. THE COMBINATION OF OUR WHOLESALE ORIGINATION AND RETAIL PLATFORM PROVIDES CALPINE ACCESS TO BOTH DIRECT AND MASS MARKET SALES CHANNELS. OUR DIRECT SALES EFFORTS AIM TO PROVIDE OUR LARGER CUSTOMERS WITH CUSTOMIZED PRODUCTS, LEVERAGING BOTH OUR SUCCESSFUL WHOLESALE ORIGINATION EFFORTS AND CALPINE ENERGY SOLUTIONS’ PRESENCE AMONG LARGE COMMERCIAL AND INDUSTRIAL ORGANIZATIONS TO SECURE NEW CONTRACTS. OUR MASS MARKET APPROACH RELIES UPON OUR EXPANDED CHAMPION ENERGY RETAIL PLATFORM TO SERVE THE NEEDS OF BOTH RESIDENTIAL AND SMALLER COMMERCIAL AND INDUSTRIAL CUSTOMERS ACROSS THE COUNTRY. WE BELIEVE THAT OUR RETAIL PLATFORM IS STRATEGICALLY COMPLETE AND ARE NOW FOCUSED ON INTEGRATING IT INTO OUR BUSINESS AND OPTIMIZING ITS FINANCIAL PERFORMANCE. ACQUISITION OF NORTH AMERICAN POWER & GAS, LLC ON JANUARY 17, 2017, WE COMPLETED THE PURCHASE OF NORTH AMERICAN POWER FOR APPROXIMATELY $105 MILLION, EXCLUDING WORKING CAPITAL AND OTHER ADJUSTMENTS. NORTH AMERICAN POWER IS A GROWING RETAIL ENERGY SUPPLIER FOR HOMES AND SMALL BUSINESSES AND IS PRIMARILY CONCENTRATED IN THE NORTHEAST U.S., WHERE CALPINE HAS A SUBSTANTIAL POWER GENERATION PRESENCE. CHAMPION ENERGY ALSO HAS A SUBSTANTIAL RETAIL SALES FOOTPRINT IN THE NORTHEAST U.S. THAT IS ENHANCED BY THE ADDITION OF NORTH AMERICAN POWER, WHICH HAS BEEN INTEGRATED INTO OUR CHAMPION ENERGY RETAIL PLATFORM. WITH THIS ACQUISITION, WE NOW SERVE RESIDENTIAL LOAD IN 63 UTILITY SERVICE TERRITORIES AS COMPARED TO 51 IN 2016. PORTFOLIO MANAGEMENT EAST: WASHINGTON PARISH: ON APRIL 21, 2017, WE ENTERED INTO AN AGREEMENT WITH ENTERGY LOUISIANA (ENTERGY), A SUBSIDIARY OF ENTERGY CORPORATION, TO CONSTRUCT AN APPROXIMATELY 360 MW NATURAL GAS-FIRED PEAKING POWER PLANT ON A PARTIALLY DEVELOPED SITE THAT WE OWN NEAR BOGALUSA, LOUISIANA. WITHIN A SHORT PERIOD OF TIME SUBSEQUENT TO THE PLANT COMMENCING COMMERCIAL OPERATIONS AND MEETING CERTAIN PERFORMANCE OBJECTIVES, ENTERGY WILL PURCHASE THE PLANT FOR A FIXED PAYMENT, INCLUDING A FAIR MARKET RETURN. CONSTRUCTION ON THE FACILITY WILL NOT COMMENCE UNTIL 2019 WITH COD EXPECTED IN EARLY 2021. THE AGREEMENT CONTAINS CONDITIONS PRECEDENT TO EFFECTIVENESS INCLUDING, BUT NOT LIMITED TO, APPROVAL OF THE LOUISIANA PUBLIC SERVICE COMMISSION. WE PLAN TO FUND THE PROJECT WITH A CONSTRUCTION LOAN THAT WILL BE REPAID UPON RECEIPT OF SALE PROCEEDS. YORK 2 ENERGY CENTER: YORK 2 ENERGY CENTER IS AN 828 MW DUAL-FUEL, COMBINED-CYCLE PROJECT THAT IS CO-LOCATED WITH OUR YORK ENERGY CENTER IN PEACH BOTTOM TOWNSHIP, PENNSYLVANIA. ONCE COMPLETE, THE POWER PLANT WILL FEATURE TWO COMBUSTION TURBINES, TWO HEAT RECOVERY STEAM GENERATORS AND ONE STEAM TURBINE. DUE TO CONSTRUCTION DELAYS, WE ARE NOW TARGETING COD IN THE FIRST HALF OF 2018. OSPREY ENERGY CENTER: ON JANUARY 3, 2017, WE COMPLETED THE SALE OF OSPREY ENERGY CENTER TO DUKE ENERGY FLORIDA, INC. FOR APPROXIMATELY $166 MILLION, EXCLUDING WORKING CAPITAL AND OTHER ADJUSTMENTS. THIS TRANSACTION SUPPORTS OUR EFFORT TO DIVEST NON-CORE ASSETS OUTSIDE OUR STRATEGIC CONCENTRATION. TEXAS: CLEAR LAKE POWER PLANT: ON FEBRUARY 1, 2017, WE RETIRED OUR 400 MW CLEAR LAKE POWER PLANT DUE TO A LACK OF ADEQUATE COMPENSATION IN TEXAS. BUILT IN 1985, CLEAR LAKE UTILIZED AN OLDER, LESS EFFICIENT TECHNOLOGY. GUADALUPE PEAKING ENERGY CENTER: IN APRIL 2017, WE CANCELED AN AGREEMENT WITH GUADALUPE VALLEY ELECTRIC COOPERATIVE (GVEC) RELATED TO THE CONSTRUCTION OF A 418 MW NATURAL GAS-FIRED PEAKING POWER PLANT TO BE CO-LOCATED WITH OUR EXISTING GUADALUPE ENERGY CENTER. IN LIEU OF BUILDING THE FACILITY, WE WILL NOW SERVE GVEC WITH 200 MW OF GENERATING CAPACITY UNDER A 10-YEAR PPA BEGINNING IN JUNE 2019. WEST: CALIFORNIA PEAKERS: AS A RESULT OF THE PENDING EXPIRATION OF A PPA IN DECEMBER 2017, WE INFORMED CAISO OF OUR INTENT TO SUSPEND OPERATIONS AT FOUR OF OUR CALIFORNIA PEAKING NATURAL GAS-FIRED POWER PLANTS WITH CAPACITY TOTALING 186 MW. CAISO HAS DETERMINED THAT TWO OF THESE POWER PLANTS, YUBA CITY AND FEATHER RIVER ENERGY CENTERS, ARE NEEDED TO CONTINUE RELIABLE OPERATION OF THE POWER GRID. WE ARE CURRENTLY NEGOTIATING RELIABILITY MUST RUN CONTRACTS FOR THESE TWO POWER PLANTS. SOUTH POINT ENERGY CENTER: AS A RESULT OF THE DENIAL BY THE NEVADA PUBLIC UTILITY COMMISSION OF THE SALE OF SOUTH POINT ENERGY CENTER TO NEVADA POWER COMPANY IN FEBRUARY 2017, WE TERMINATED THE CORRESPONDING ASSET SALE AGREEMENT IN THE FIRST QUARTER OF 2017. WE ARE CURRENTLY ASSESSING OUR OPTIONS RELATED TO SOUTH POINT ENERGY CENTER. OPERATIONS UPDATE SECOND QUARTER POWER OPERATIONS ACHIEVEMENTS: AVAILABILITY PERFORMANCE:— DELIVERED STRONG FLEETWIDE STARTING RELIABILITY: 97.7% POWER GENERATION:— GENERATED MORE THAN 22 MILLION MWH3— FOUR MERCHANT PLANTS ACHIEVED GREATER THAN 65% NET CAPACITY FACTOR: BOSQUE, GARRISON, FREESTONE AND PASADENA 2017 OPERATING EVENT AT OUR DELTA ENERGY CENTER ON JANUARY 29, 2017, WE EXPERIENCED AN OPERATING EVENT AT OUR DELTA ENERGY CENTER THAT RESULTED IN AN EMERGENCY SHUTDOWN OF THE POWER PLANT AND SIGNIFICANT DAMAGE TO THE STEAM TURBINE AND STEAM TURBINE GENERATOR. THE UNIT RETURNED TO SERVICE IN SIMPLE-CYCLE STEAM BYPASS CONFIGURATION IN JUNE 2017, AND OUR CURRENT PLAN IS TO RETURN THE UNIT TO FULL COMBINED-CYCLE CONFIGURATION IN THE FOURTH QUARTER OF 2017. WE ANTICIPATE THAT INSURANCE WILL COVER A SIGNIFICANT PORTION OF OUR LOSSES, AFTER APPLICABLE DEDUCTIBLES. 2017 FINANCIAL OUTLOOK ____________ (1) MAINTENANCE CAPITAL EXPENDITURES EXCLUDE MAJOR CONSTRUCTION AND DEVELOPMENT PROJECTS. (2) INCLUDES COMMITMENT, LETTER OF CREDIT AND OTHER BANK FEES FROM CONSOLIDATED AND UNCONSOLIDATED INVESTMENTS, NET OF CAPITALIZED INTEREST AND INTEREST INCOME. (3) INCLUDES PROJECTED MAJOR MAINTENANCE EXPENSE OF $275 MILLION AND MAINTENANCE CAPITAL EXPENDITURES OF $160 MILLION. AS DETAILED ABOVE, TODAY WE ARE REAFFIRMING OUR 2017 ADJUSTED EBITDA AND ADJUSTED FREE CASH FLOW GUIDANCE RANGES AND ARE INTRODUCING GUIDANCE FOR ADJUSTED UNLEVERED FREE CASH FLOW. WE EXPECT ADJUSTED EBITDA OF $1.8 BILLION TO $1.95 BILLION, ADJUSTED UNLEVERED FREE CASH FLOW OF $1.355 BILLION TO $1.505 BILLION AND ADJUSTED FREE CASH FLOW OF $710 MILLION TO $860 MILLION IN 2017. INVESTOR CONFERENCE CALL AND WEBCAST WE WILL HOST A CONFERENCE CALL TO DISCUSS OUR FINANCIAL AND OPERATING RESULTS FOR THE SECOND QUARTER ON FRIDAY, JULY 28, 2017, AT 10 A.M. EASTERN TIME / 9 A.M. CENTRAL TIME. A LISTEN-ONLY WEBCAST OF THE CALL MAY BE ACCESSED THROUGH OUR WEBSITE AT WWW.CALPINE.COM, OR BY DIALING (800) 446-1671 IN THE U.S. OR (847) 413-3362 OUTSIDE THE U.S. THE CONFIRMATION CODE IS 45310747. A RECORDING OF THE CALL WILL BE MADE AVAILABLE FOR A LIMITED TIME ON OUR WEBSITE OR BY DIALING (888) 843-7419 IN THE U.S. OR (630) 652-3042 OUTSIDE THE U.S. AND PROVIDING CONFIRMATION CODE 45310747. PRESENTATION MATERIALS TO ACCOMPANY THE CONFERENCE CALL WILL BE POSTED ON OUR WEBSITE ON JULY 28, 2017. ABOUT CALPINE CALPINE CORPORATION IS AMERICA’S LARGEST GENERATOR OF ELECTRICITY FROM NATURAL GAS AND GEOTHERMAL RESOURCES WITH OPERATIONS IN COMPETITIVE POWER MARKETS. OUR FLEET OF 80 POWER PLANTS IN OPERATION OR UNDER CONSTRUCTION REPRESENTS APPROXIMATELY 26,000 MEGAWATTS OF GENERATION CAPACITY. THROUGH WHOLESALE POWER OPERATIONS AND OUR RETAIL BUSINESSES CALPINE ENERGY SOLUTIONS AND CHAMPION ENERGY, WE SERVE CUSTOMERS IN 25 STATES, CANADA AND MEXICO. OUR CLEAN, EFFICIENT, MODERN AND FLEXIBLE FLEET USES ADVANCED TECHNOLOGIES TO GENERATE POWER IN A LOW-CARBON AND ENVIRONMENTALLY RESPONSIBLE MANNER. WE ARE UNIQUELY POSITIONED TO BENEFIT FROM THE SECULAR TRENDS AFFECTING OUR INDUSTRY, INCLUDING THE ABUNDANT AND AFFORDABLE SUPPLY OF CLEAN NATURAL GAS, ENVIRONMENTAL REGULATION, AGING POWER GENERATION INFRASTRUCTURE AND THE INCREASING NEED FOR DISPATCHABLE POWER PLANTS TO SUCCESSFULLY INTEGRATE INTERMITTENT RENEWABLES INTO THE GRID. PLEASE VISIT WWW.CALPINE.COM TO LEARN MORE ABOUT HOW CALPINE IS CREATING POWER FOR A SUSTAINABLE FUTURE. CALPINE’S QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2017, HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION (SEC) AND IS AVAILABLE ON THE SEC’S WEBSITE AT WWW.SEC.GOV. FORWARD-LOOKING INFORMATION IN ADDITION TO HISTORICAL INFORMATION, THIS RELEASE CONTAINS “FORWARD-LOOKING STATEMENTS” WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995, SECTION 27A OF THE SECURITIES ACT, AND SECTION 21E OF THE EXCHANGE ACT. FORWARD-LOOKING STATEMENTS MAY APPEAR THROUGHOUT THIS RELEASE. WE USE WORDS SUCH AS “BELIEVE,” “INTEND,” “EXPECT,” “ANTICIPATE,” “PLAN,” “MAY,” “WILL,” “SHOULD,” “ESTIMATE,” “POTENTIAL,” “PROJECT” AND SIMILAR EXPRESSIONS TO IDENTIFY FORWARD-LOOKING STATEMENTS. SUCH STATEMENTS INCLUDE, AMONG OTHERS, THOSE CONCERNING OUR EXPECTED FINANCIAL PERFORMANCE AND STRATEGIC AND OPERATIONAL PLANS, AS WELL AS ALL ASSUMPTIONS, EXPECTATIONS, PREDICTIONS, INTENTIONS OR BELIEFS ABOUT FUTURE EVENTS. WE BELIEVE THAT THE FORWARD-LOOKING STATEMENTS ARE BASED UPON REASONABLE ASSUMPTIONS AND EXPECTATIONS. HOWEVER, YOU ARE CAUTIONED THAT ANY SUCH FORWARD-LOOKING STATEMENTS ARE NOT GUARANTEES OF FUTURE PERFORMANCE AND THAT A NUMBER OF RISKS AND UNCERTAINTIES COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE ANTICIPATED IN THE FORWARD-LOOKING STATEMENTS. SUCH RISKS AND UNCERTAINTIES INCLUDE, BUT ARE NOT LIMITED TO: FINANCIAL RESULTS THAT MAY BE VOLATILE AND MAY NOT REFLECT HISTORICAL TRENDS DUE TO, AMONG OTHER THINGS, SEASONALITY OF DEMAND, FLUCTUATIONS IN PRICES FOR COMMODITIES SUCH AS NATURAL GAS AND POWER, CHANGES IN U.S. MACROECONOMIC CONDITIONS, FLUCTUATIONS IN LIQUIDITY AND VOLATILITY IN THE ENERGY COMMODITIES MARKETS AND OUR ABILITY AND EXTENT TO WHICH WE HEDGE RISKS; LAWS, REGULATIONS AND MARKET RULES IN THE WHOLESALE AND RETAIL MARKETS IN WHICH WE PARTICIPATE AND OUR ABILITY TO EFFECTIVELY RESPOND TO CHANGES IN LAWS, REGULATIONS OR MARKET RULES OR THE INTERPRETATION THEREOF INCLUDING THOSE RELATED TO THE ENVIRONMENT, DERIVATIVE TRANSACTIONS AND MARKET DESIGN IN THE REGIONS IN WHICH WE OPERATE; OUR ABILITY TO MANAGE OUR LIQUIDITY NEEDS, ACCESS THE CAPITAL MARKETS WHEN NECESSARY AND COMPLY WITH COVENANTS UNDER OUR SENIOR UNSECURED NOTES, FIRST LIEN NOTES, FIRST LIEN TERM LOANS, CORPORATE REVOLVING FACILITY, CCFC TERM LOANS AND OTHER EXISTING FINANCING OBLIGATIONS; RISKS ASSOCIATED WITH THE OPERATION, CONSTRUCTION AND DEVELOPMENT OF POWER PLANTS, INCLUDING UNSCHEDULED OUTAGES OR DELAYS AND PLANT EFFICIENCIES; RISKS RELATED TO OUR GEOTHERMAL RESOURCES, INCLUDING THE ADEQUACY OF OUR STEAM RESERVES, UNUSUAL OR UNEXPECTED STEAM FIELD WELL AND PIPELINE MAINTENANCE REQUIREMENTS, VARIABLES ASSOCIATED WITH THE INJECTION OF WATER TO THE STEAM RESERVOIR AND POTENTIAL REGULATIONS OR OTHER REQUIREMENTS RELATED TO SEISMICITY CONCERNS THAT MAY DELAY OR INCREASE THE COST OF DEVELOPING OR OPERATING GEOTHERMAL RESOURCES; COMPETITION, INCLUDING FROM RENEWABLE SOURCES OF POWER, INTERFERENCE BY STATES IN COMPETITIVE POWER MARKETS THROUGH SUBSIDIES OR SIMILAR SUPPORT FOR NEW OR EXISTING POWER PLANTS, AND OTHER RISKS ASSOCIATED WITH MARKETING AND SELLING POWER IN THE EVOLVING ENERGY MARKETS; STRUCTURAL CHANGES IN THE SUPPLY AND DEMAND OF POWER RESULTING FROM THE DEVELOPMENT OF NEW FUELS OR TECHNOLOGIES AND DEMAND-SIDE MANAGEMENT TOOLS (SUCH AS DISTRIBUTED GENERATION, POWER STORAGE AND OTHER TECHNOLOGIES); THE EXPIRATION OR EARLY TERMINATION OF OUR PPAS AND THE RELATED RESULTS ON REVENUES; FUTURE CAPACITY REVENUE MAY NOT OCCUR AT EXPECTED LEVELS; NATURAL DISASTERS, SUCH AS HURRICANES, EARTHQUAKES, DROUGHTS, WILDFIRES AND FLOODS, ACTS OF TERRORISM OR CYBER-ATTACKS THAT MAY AFFECT OUR POWER PLANTS OR THE MARKETS OUR POWER PLANTS OR RETAIL OPERATIONS SERVE AND OUR CORPORATE OFFICES; DISRUPTIONS IN OR LIMITATIONS ON THE TRANSPORTATION OF NATURAL GAS OR FUEL OIL AND THE TRANSMISSION OF POWER; OUR ABILITY TO MANAGE OUR COUNTERPARTY AND CUSTOMER EXPOSURE AND CREDIT RISK, INCLUDING OUR COMMODITY POSITIONS; OUR ABILITY TO ATTRACT, MOTIVATE AND RETAIN KEY EMPLOYEES; PRESENT AND POSSIBLE FUTURE CLAIMS, LITIGATION AND ENFORCEMENT ACTIONS THAT MAY ARISE FROM NONCOMPLIANCE WITH MARKET RULES PROMULGATED BY THE SEC, CFTC, FERC AND OTHER REGULATORY BODIES; AND OTHER RISKS IDENTIFIED IN THIS PRESS RELEASE, IN OUR ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2016, AND IN OTHER REPORTS FILED BY US WITH THE SEC. GIVEN THE RISKS AND UNCERTAINTIES SURROUNDING FORWARD-LOOKING STATEMENTS, YOU SHOULD NOT PLACE UNDUE RELIANCE ON THESE STATEMENTS. MANY OF THESE FACTORS ARE BEYOND OUR ABILITY TO CONTROL OR PREDICT. OUR FORWARD-LOOKING STATEMENTS SPEAK ONLY AS OF THE DATE OF THIS RELEASE. OTHER THAN AS REQUIRED BY LAW, WE UNDERTAKE NO OBLIGATION TO UPDATE OR REVISE FORWARD-LOOKING STATEMENTS, WHETHER AS A RESULT OF NEW INFORMATION, FUTURE EVENTS, OR OTHERWISE. (51 __________ (1) INCLUDES AMORTIZATION RECORDED IN COMMODITY REVENUE AND COMMODITY EXPENSE ASSOCIATED WITH INTANGIBLE ASSETS AND AMORTIZATION RECORDED IN INTEREST EXPENSE ASSOCIATED WITH DEBT ISSUANCE COSTS AND DISCOUNTS. (2) ON APRIL 3, 2017, WE COMPLETED THE PURCHASE OF THE KING CITY COGENERATION PLANT LEASE IN EXCHANGE FOR A THREE-YEAR PROMISSORY NOTE WITH A DISCOUNTED VALUE OF $57 MILLION. WE RECORDED A NET INCREASE TO PROPERTY, PLANT AND EQUIPMENT, NET ON OUR CONSOLIDATED CONDENSED BALANCE SHEET OF $15 MILLION DUE TO THE INCREASED VALUE OF THE PROMISSORY NOTE AS COMPARED TO THE CARRYING VALUE OF THE LEASE. REGULATION G RECONCILIATIONS IN ADDITION TO DISCLOSING FINANCIAL RESULTS IN ACCORDANCE WITH U.S. GAAP, THE ACCOMPANYING SECOND QUARTER 2017 EARNINGS RELEASE CONTAINS NON-GAAP FINANCIAL MEASURES. COMMODITY MARGIN, ADJUSTED FREE CASH FLOW, ADJUSTED UNLEVERED FREE CASH FLOW AND ADJUSTED EBITDA ARE NON-GAAP FINANCIAL MEASURES THAT WE USE AS MEASURES OF OUR PERFORMANCE AND LIQUIDITY. THESE NON-GAAP MEASURES SHOULD BE VIEWED AS A SUPPLEMENT TO AND NOT A SUBSTITUTE FOR OUR U.S. GAAP MEASURES OF PERFORMANCE AND LIQUIDITY, AND THE FINANCIAL RESULTS CALCULATED IN ACCORDANCE WITH U.S. GAAP AND RECONCILIATIONS FROM THESE RESULTS SHOULD BE CAREFULLY EVALUATED. COMMODITY MARGIN INCLUDES REVENUES RECOGNIZED ON OUR WHOLESALE AND RETAIL POWER SALES ACTIVITY, ELECTRIC CAPACITY SALES, RENEWABLE ENERGY CREDIT SALES, STEAM SALES, REALIZED SETTLEMENTS ASSOCIATED WITH OUR MARKETING, HEDGING, OPTIMIZATION AND TRADING ACTIVITY, FUEL AND PURCHASED ENERGY EXPENSES, COMMODITY TRANSMISSION AND TRANSPORTATION EXPENSES AND ENVIRONMENTAL COMPLIANCE EXPENSES. WE BELIEVE THAT COMMODITY MARGIN IS A USEFUL TOOL FOR ASSESSING THE PERFORMANCE OF OUR CORE OPERATIONS AND IS A KEY OPERATIONAL MEASURE REVIEWED BY OUR CHIEF OPERATING DECISION MAKER. COMMODITY MARGIN IS NOT A MEASURE CALCULATED IN ACCORDANCE WITH U.S. GAAP AND SHOULD BE VIEWED AS A SUPPLEMENT TO AND NOT A SUBSTITUTE FOR OUR RESULTS OF OPERATIONS PRESENTED IN ACCORDANCE WITH U.S. GAAP. COMMODITY MARGIN DOES NOT INTEND TO REPRESENT INCOME (LOSS) FROM OPERATIONS, THE MOST COMPARABLE U.S. GAAP MEASURE, AS AN INDICATOR OF OPERATING PERFORMANCE AND IS NOT NECESSARILY COMPARABLE TO SIMILARLY TITLED MEASURES REPORTED BY OTHER COMPANIES. ADJUSTED FREE CASH FLOW REPRESENTS CASH FLOWS FROM OPERATING ACTIVITIES INCLUDING THE EFFECTS OF MAINTENANCE CAPITAL EXPENDITURES, ADJUSTMENTS TO REFLECT THE ADJUSTED FREE CASH FLOW FROM UNCONSOLIDATED INVESTMENTS AND TO EXCLUDE THE NONCONTROLLING INTEREST AND OTHER MISCELLANEOUS ADJUSTMENTS SUCH AS THE EFFECT OF CHANGES IN WORKING CAPITAL. ADJUSTED UNLEVERED FREE CASH FLOW IS CALCULATED ON THE SAME BASIS AS ADJUSTED FREE CASH FLOW BUT EXCLUDES THE EFFECT OF CASH INTEREST, NET, AND OPERATING LEASE PAYMENTS, THUS CAPTURING THE PERFORMANCE OF OUR BUSINESS INDEPENDENT OF ITS CAPITAL STRUCTURE. ADJUSTED FREE CASH FLOW AND ADJUSTED UNLEVERED FREE CASH FLOW ARE PRESENTED BECAUSE WE BELIEVE THEY ARE USEFUL MEASURES OF LIQUIDITY TO ASSIST IN COMPARING FINANCIAL RESULTS FROM PERIOD TO PERIOD ON A CONSISTENT BASIS AND TO READILY VIEW OPERATING TRENDS, AS MEASURES FOR PLANNING AND FORECASTING OVERALL EXPECTATIONS AND FOR EVALUATING ACTUAL RESULTS AGAINST SUCH EXPECTATIONS AND IN COMMUNICATIONS WITH OUR BOARD OF DIRECTORS, SHAREHOLDERS, CREDITORS, ANALYSTS AND INVESTORS CONCERNING OUR FINANCIAL RESULTS. ADJUSTED FREE CASH FLOW AND ADJUSTED UNLEVERED FREE CASH FLOW ARE LIQUIDITY MEASURES AND ARE NOT INTENDED TO REPRESENT CASH FLOWS FROM OPERATIONS, THE MOST DIRECTLY COMPARABLE U.S. GAAP MEASURE, AND ARE NOT NECESSARILY COMPARABLE TO SIMILARLY TITLED MEASURES REPORTED BY OTHER COMPANIES. ADJUSTED EBITDA REPRESENTS NET LOSS ATTRIBUTABLE TO CALPINE BEFORE NET (INCOME) ATTRIBUTABLE TO THE NONCONTROLLING INTEREST, INTEREST, TAXES, DEPRECIATION AND AMORTIZATION, AND IS ALSO ADJUSTED FOR THE EFFECTS OF IMPAIRMENT LOSSES, GAINS OR LOSSES ON SALES, DISPOSITIONS OR RETIREMENTS OF ASSETS, ANY MARK-TO-MARKET GAINS OR LOSSES FROM ACCOUNTING FOR DERIVATIVES, ADJUSTMENTS TO EXCLUDE THE ADJUSTED EBITDA RELATED TO THE NONCONTROLLING INTEREST, STOCK-BASED COMPENSATION EXPENSE, OPERATING LEASE EXPENSE, NON-CASH GAINS AND LOSSES FROM FOREIGN CURRENCY TRANSLATIONS, MAJOR MAINTENANCE EXPENSE, GAINS OR LOSSES ON THE REPURCHASE, MODIFICATION OR EXTINGUISHMENT OF DEBT, NON-CASH GAAP-RELATED ADJUSTMENTS TO LEVELIZE REVENUES FROM TOLLING AGREEMENTS AND ANY UNUSUAL OR NON-RECURRING ITEMS PLUS ADJUSTMENTS TO REFLECT THE ADJUSTED EBITDA FROM OUR UNCONSOLIDATED INVESTMENTS. WE ADJUST FOR THESE ITEMS IN OUR ADJUSTED EBITDA AS OUR MANAGEMENT BELIEVES THAT THESE ITEMS WOULD DISTORT THEIR ABILITY TO EFFICIENTLY VIEW AND ASSESS OUR CORE OPERATING TRENDS. WE BELIEVE THAT INVESTORS COMMONLY ADJUST EBITDA INFORMATION TO ELIMINATE THE EFFECTS OF RESTRUCTURING AND OTHER EXPENSES, WHICH VARY WIDELY FROM COMPANY TO COMPANY AND IMPAIR COMPARABILITY. ADJUSTED EBITDA IS NOT INTENDED TO REPRESENT NET INCOME (LOSS) AS DEFINED BY U.S. GAAP AS AN INDICATOR OF OPERATING PERFORMANCE AND IS NOT NECESSARILY COMPARABLE TO SIMILARLY TITLED MEASURES REPORTED BY OTHER COMPANIES. WE ARE PRESENTING ADJUSTED EBITDA ALONG WITH A RECONCILIATION TO ADJUSTED UNLEVERED FREE CASH FLOW TO DEMONSTRATE THE RELATIONSHIP BETWEEN OUR TRADITIONAL PERFORMANCE MEASURE, ADJUSTED EBITDA, AND OUR NEW LIQUIDITY MEASURE, ADJUSTED UNLEVERED FREE CASH FLOW. COMMODITY MARGIN RECONCILIATION THE FOLLOWING TABLES RECONCILE INCOME (LOSS) FROM OPERATIONS TO COMMODITY MARGIN FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2017 AND 2016 (IN MILLIONS): _________ (1) INCLUDES $(24) MILLION AND $(20) MILLION OF LEASE LEVELIZATION AND $44 MILLION AND $27 MILLION OF AMORTIZATION EXPENSE FOR THE THREE MONTHS ENDED JUNE 30, 2017 AND 2016, RESPECTIVELY. (2) INCLUDES $(46) MILLION AND $(42) MILLION OF LEASE LEVELIZATION AND $104 MILLION AND $54 MILLION OF AMORTIZATION EXPENSE FOR THE SIX MONTHS ENDED JUNE 30, 2017 AND 2016, RESPECTIVELY. CONSOLIDATED ADJUSTED EBITDA RECONCILIATION IN THE FOLLOWING TABLE, WE HAVE RECONCILED OUR ADJUSTED EBITDA TO OUR COMMODITY MARGIN, BOTH OF WHICH ARE NON-GAAP MEASURES, FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2017 AND 2016. RECONCILIATIONS FOR BOTH ADJUSTED EBITDA AND COMMODITY MARGIN TO COMPARABLE U.S. GAAP MEASURES ARE PROVIDED ABOVE. AMOUNTS BELOW ARE SHOWN EXCLUSIVE OF THE NONCONTROLLING INTEREST (IN MILLIONS): _________ (1) SHOWN NET OF MAJOR MAINTENANCE EXPENSE, STOCK-BASED COMPENSATION EXPENSE, NON-CASH LOSS ON DISPOSITIONS OF ASSETS AND OTHER COSTS. (2) SHOWN NET OF STOCK-BASED COMPENSATION EXPENSE AND OTHER COSTS. (3) SHOWN NET OF OPERATING LEASE EXPENSE, AMORTIZATION AND OTHER COSTS. IN THE FOLLOWING TABLE, WE HAVE RECONCILED OUR NET LOSS ATTRIBUTABLE TO CALPINE TO ADJUSTED EBITDA FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2017 AND 2016, AS REPORTED UNDER U.S. GAAP (IN MILLIONS). WE ALSO RECONCILED ADJUSTED EBITDA TO ADJUSTED UNLEVERED FREE CASH FLOW TO DEMONSTRATE THE RELATIONSHIP BETWEEN OUR TRADITIONAL PERFORMANCE MEASURE, ADJUSTED EBITDA, AND OUR NEW LIQUIDITY MEASURE, ADJUSTED UNLEVERED FREE CASH FLOW. ____________ (1) EXCLUDES DEPRECIATION AND AMORTIZATION EXPENSE ATTRIBUTABLE TO THE NON-CONTROLLING INTEREST. (2) ADJUSTMENTS TO REFLECT ADJUSTED EBITDA FROM UNCONSOLIDATED INVESTMENTS INCLUDE (GAIN) LOSS ON MARK-TO-MARKET ACTIVITY OF NIL FOR EACH OF THE THREE AND SIX MONTHS ENDED JUNE 30, 2017 AND 2016. (3) INCLUDES $86 MILLION AND $151 MILLION IN MAJOR MAINTENANCE EXPENSE FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2017, RESPECTIVELY, AND $59 MILLION AND $109 MILLION IN MAINTENANCE CAPITAL EXPENDITURES FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2017, RESPECTIVELY. INCLUDES $81 MILLION AND $146 MILLION IN MAJOR MAINTENANCE EXPENDITURES FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2016, RESPECTIVELY, AND $41 MILLION AND $81 MILLION IN MAINTENANCE CAPITAL EXPENDITURES FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2016, RESPECTIVELY. (4) INCLUDES COMMITMENT, LETTER OF CREDIT AND OTHER BANK FEES FROM BOTH CONSOLIDATED AND UNCONSOLIDATED INVESTMENTS, NET OF CAPITALIZED INTEREST AND INTEREST INCOME. (5) ADJUSTED FREE CASH FLOW, AS REPORTED, EXCLUDES CHANGES IN WORKING CAPITAL, SUCH THAT IT IS CALCULATED ON THE SAME BASIS AS OUR GUIDANCE. ADJUSTED UNLEVERED FREE CASH FLOW RECONCILIATION IN THE FOLLOWING TABLE, WE HAVE RECONCILED OUR CASH FLOWS FROM OPERATING ACTIVITIES TO OUR ADJUSTED UNLEVERED FREE CASH FLOW FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2017 AND 2016 (IN MILLIONS). _________ (1) MAINTENANCE CAPITAL EXPENDITURES EXCLUDE MAJOR CONSTRUCTION AND DEVELOPMENT PROJECTS. (2) ADJUSTMENT EXCLUDES $3 MILLION AND $35 MILLION IN AMORTIZATION OF ACQUIRED DERIVATIVES CONTRACTS FOR THREE MONTHS ENDED JUNE 30, 2017 AND 2016, RESPECTIVELY, AND $(10) MILLION AND $45 MILLION IN AMORTIZATION OF ACQUIRED DERIVATIVES CONTRACTS FOR THE SIX MONTHS ENDED JUNE 30, 2017 AND 2016, RESPECTIVELY. (3) OTHER PRIMARILY REPRESENTS MISCELLANEOUS ITEMS EXCLUDED FROM ADJUSTED FREE CASH FLOW THAT ARE INCLUDED IN CASH FLOW FROM OPERATIONS. (4) INCLUDES COMMITMENT, LETTER OF CREDIT AND OTHER BANK FEES FROM BOTH CONSOLIDATED AND UNCONSOLIDATED INVESTMENTS, NET OF CAPITALIZED INTEREST AND INTEREST INCOME. (5) INCLUDES $86 MILLION AND $151 MILLION IN MAJOR MAINTENANCE EXPENSE FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2017, RESPECTIVELY, AND $59 MILLION AND $109 MILLION IN MAINTENANCE CAPITAL EXPENDITURES FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2017, RESPECTIVELY. INCLUDES $81 MILLION AND $146 MILLION IN MAJOR MAINTENANCE EXPENSE FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2016, RESPECTIVELY, AND $41 MILLION AND $81 MILLION IN MAINTENANCE CAPITAL EXPENDITURES FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2016, RESPECTIVELY. ADJUSTED UNLEVERED FREE CASH FLOW RECONCILIATION FOR GUIDANCE (IN MILLIONS) ____________ (1) MAINTENANCE CAPITAL EXPENDITURES EXCLUDE MAJOR CONSTRUCTION AND DEVELOPMENT PROJECTS. (2) INCLUDES COMMITMENT, LETTER OF CREDIT AND OTHER BANK FEES FROM BOTH CONSOLIDATED AND UNCONSOLIDATED INVESTMENTS, NET OF CAPITALIZED INTEREST AND INTEREST INCOME. (3) INCLUDES PROJECTED MAJOR MAINTENANCE EXPENSE OF $275 MILLION AND MAINTENANCE CAPITAL EXPENDITURES OF $160 MILLION. OPERATING PERFORMANCE METRICS THE TABLE BELOW SHOWS THE OPERATING PERFORMANCE METRICS FOR THE PERIODS PRESENTED: ________ (1) EXCLUDES GENERATION FROM UNCONSOLIDATED POWER PLANTS AND POWER PLANTS OWNED BUT NOT OPERATED BY US. (2) GENERATION, AVERAGE AVAILABILITY AND STEAM ADJUSTED HEAT RATE EXCLUDE POWER PLANTS AND UNITS THAT ARE INACTIVE.
- Calpine Reports First Quarter 2017 Results, Reaffirms 2017 Guidance;
Announces Cancellation of New Texas Power Plant, Replaces with 10-Year
Supply Contract
Apr 28, 2017 · businesswire.com
HOUSTON--(BUSINESS WIRE)--Calpine Corporation (NYSE: CPN): Summary of First Quarter 2017 Financial Results (in millions): NM Reaffirming 2017 Full Year Guidance (in millions): Recent Achievements: Power and Commercial Operations:— Generated more than 21 million MWh3 in the first quarter of 2017— Delivered strong fleetwide starting reliability: 97.5% Portfolio Management:— Signed a 10-year PPA with Guadalupe Valley Electric Cooperative for 200 MW beginning in 2019, concurrently canceling construction of a 418 MW natural gas-fired peaking power plant in Texas— Retired 400 MW Clear Lake Power Plant due to lack of adequate compensation in Texas— Monetizing legacy site through an agreement to construct and sell an approximately 360 MW natural gas-fired peaking power plant to Entergy Louisiana after commercial operation, expected in early 2021— Negotiating Reliability Must Run contracts with CAISO for two natural gas-fired peakers in California— Closed on the sale of Osprey Energy Center to Duke Energy for $166 million4— Acquired growing residential retail provider North American Power for approximately $105 million4, representing an attractively priced portfolio addition to our Champion Energy retail platform Balance Sheet Management:— As part of our $2.7 billion plan to delever and reduce interest expense, we paid down approximately $233 million of debt (net) in the first quarter of 2017 out of $850 million paydown planned for 2017 Calpine Corporation (NYSE: CPN) today reported Net Loss1 of $56 million, or $0.16 per diluted share, for the first quarter of 2017 compared to $198 million, or $0.56 per diluted share, in the prior year period. The period-over-period decrease in Net Loss was primarily due to the favorable variance in our net mark-to-market activities driven by changes in forward commodity prices and the positive effect of our retail hedging activities. Cash provided by operating activities for the first quarter of 2017 was $94 million compared to $31 million in the prior year. The increase in cash provided by operating activities was primarily due to a decrease in working capital employed resulting from the period over period change in net margining requirements associated with our commodity hedging activity, partially offset by a decrease in income from operations, adjusted for non-cash items. Adjusted EBITDA2 for the first quarter was $326 million compared to $374 million in the prior year period, and Adjusted Free Cash Flow2 was $43 million compared to $102 million in the prior year period. The decreases in Adjusted EBITDA and Adjusted Free Cash Flow were primarily due to lower Commodity Margin2, largely driven by lower energy margins due to decreased contribution from wholesale hedges and weaker market conditions, lower regulatory capacity revenue in our East segment and the sales of Mankato Power Plant in October 2016 and Osprey Energy Center in January 2017. These changes were partially offset by our retail acquisitions of Calpine Energy Solutions in December 2016 and North American Power in January 2017. Net Loss, As Adjusted2, for the first quarter of 2017 was $114 million compared to $104 million in the prior year period. The increase in Net Loss, As Adjusted, was primarily due to lower Commodity Margin, as previously discussed, as well as increases in plant operating expense and depreciation and amortization expense primarily due to our retail acquisitions, partially offset by a higher income tax benefit resulting primarily from changes in estimated tax benefits and a favorable adjustment to our reserve for uncertain tax positions. “This year’s first quarter results reflect our ability to meet our financial commitments despite a very mild winter in Texas and the East and above-normal hydroelectric generation in the West,” said Thad Hill, Calpine’s President and Chief Executive Officer. “We are reaffirming our full year guidance range of $1.8 to $1.95 billion of Adjusted EBITDA, given upside in the back half of the year from our retail acquisitions and higher regulatory capacity payments in the East. “During the quarter, we began executing on our deleveraging plan while continuing to make progress on controlling costs and integrating our retail platform. We have completed $233 million of our full year target of $850 million in debt reduction, and we are on track to complete our $2.7 billion of planned debt paydown by the end of 2019. “We also continued our relentless focus on managing our portfolio for long-term value. Specifically, I am pleased to announce three great examples of how our customer-focused efforts helped us find mutually beneficial solutions. First, we have signed a 10-year PPA with Guadalupe Valley Electric Cooperative to supply 200 MW of power from our existing Texas fleet, replacing our prior agreement to construct a new 418 MW peaking power plant. Secondly, we are announcing the monetization of a legacy development site in Louisiana, where we have entered into a construction and sale agreement with Entergy Louisiana for a natural gas-fired peaking power plant. Finally, we completed the sale of our Osprey Energy Center to Duke Energy Florida. “We also took further action to economically optimize our portfolio by filing to retire four of our natural gas-fired peakers in California at the beginning of 2018 when their contracts expire. The California Independent System Operator has since declared that two of the units are required for reliability, and we are currently negotiating Reliability Must Run contracts that will appropriately compensate us for providing critical reliability to the grid. “Finally, we have been advocating for competitive power markets, including opposing out-of-market nuclear bailouts that are being debated or implemented in multiple states. We fundamentally disagree with adding more subsidies into functioning wholesale markets and are actively challenging them at the state level and in the courts. Regardless of those outcomes, we are optimistic that independent system operators and the new FERC will move through tariff reform to protect the integrity of their markets from state intervention. Competitive wholesale power markets need to provide non-discriminatory forward price signals that result in market-driven solutions that ensure reliable power. Calpine’s clean, modern and flexible fleet is integral to maintaining reliability in each of our wholesale power markets.” ________ 1 Reported as Net Loss attributable to Calpine on our Consolidated Condensed Statements of Operations. 2 Non-GAAP financial measure, see “Regulation G Reconciliations” for further details. 3 Includes generation from power plants owned but not operated by Calpine and our share of generation from unconsolidated power plants. 4 Excluding working capital and other adjustments. SUMMARY OF FINANCIAL PERFORMANCE First Quarter Results Adjusted EBITDA for the first quarter of 2017 was $326 million compared to $374 million in the prior year period. The year-over-year decrease in Adjusted EBITDA was primarily related to a $22 million decrease in Commodity Margin and $24 million increase in plant operating expense5, which was largely driven by net portfolio changes including our retail acquisitions, as previously discussed. The decrease in Commodity Margin was primarily due to: Adjusted Free Cash Flow was $43 million in the first quarter of 2017 compared to $102 million in the prior year period. Adjusted Free Cash Flow decreased due to lower Adjusted EBITDA, as previously discussed, and higher major maintenance capital expenditures primarily due to improvements of our Geysers assets. __________ 5 Increase in plant operating expense excludes changes in major maintenance expense, stock-based compensation expense, non-cash loss on disposition of assets and other costs. See the table titled “Consolidated Adjusted EBITDA Reconciliation” for the actual amounts of these items for the three months ended March 31, 2017 and 2016. REGIONAL SEGMENT REVIEW OF RESULTS Table 1: Commodity Margin by Segment (in millions) West Region First Quarter: Commodity Margin in our West segment increased by $24 million in the first quarter of 2017 compared to the prior year period. Primary drivers were: Texas Region First Quarter: Commodity Margin in our Texas segment decreased by $5 million in the first quarter of 2017 compared to the prior year period. Primary drivers were: East Region First Quarter: Commodity Margin in our East segment decreased $41 million in the first quarter of 2017 compared to the prior year period. Primary drivers were: LIQUIDITY, CASH FLOW AND CAPITAL RESOURCES Table 2: Liquidity (in millions) ____________ (1) Includes $9 million and $16 million of margin deposits posted with us by our counterparties at March 31, 2017, and December 31, 2016, respectively. (2) Our ability to use availability under our Corporate Revolving Facility is unrestricted. (3) Our ability to use corporate cash and cash equivalents is unrestricted. Our $300 million CDHI letter of credit facility is restricted to support certain obligations under PPAs and power transmission and natural gas transportation agreements. Liquidity was approximately $1.8 billion as of March 31, 2017. Cash and cash equivalents decreased in the first quarter of 2017 primarily due to the acquisition of North American Power, capital expenditures on construction projects and outages, and net repayments of debt, partially offset by cash provided by the sale of Osprey Energy Center, as well as from operating activities. Table 3: Cash Flow Activities (in millions) Cash provided by operating activities in the first quarter of 2017 was $94 million compared to $31 million in the prior year period, as previously discussed. Cash used in investing activities was $13 million during the first quarter of 2017 compared to $611 million in the prior year period. The decrease was primarily related to acquisitions, divestitures and capital expenditures. In the first quarter of 2017, we closed on the acquisition of North American Power for $111 million and closed on the sale of Osprey Energy Center, receiving net proceeds of $162 million. In the first quarter of 2016, we purchased Granite Ridge Energy Center for $527 million. There was also a decrease of $42 million for capital expenditures primarily due to lower expenditures on construction projects and outages during the first quarter of 2017 as compared to 2016. Cash used in financing activities was $256 million during the first quarter of 2017 and primarily related to net repayment of debt in accordance with our deleveraging plan. CAPITAL ALLOCATION Our capital allocation philosophy seeks to maximize levered cash returns to equity while maintaining a strong balance sheet. We seek to enhance shareholder value through a diverse and balanced capital allocation approach that includes portfolio management, organic or acquisitive growth, returning capital to shareholders and debt reduction. The mix of this activity shifts over time given the external market environment and the opportunity set. In the current environment, we believe that paying down debt and strengthening our balance sheet is a high-return investment for our shareholders. We also consider the repurchases of our own shares of common stock as an attractive investment opportunity, and we utilize the expected returns from this investment as the benchmark against which we evaluate all other capital allocation decisions. We believe this philosophy closely aligns our objectives with those of our shareholders. Managing Our Balance Sheet We further optimized our capital structure during the quarter ended March 31, 2017, as follows: 2023 First Lien Notes: — As part of our commitment to reduce debt and interest expense, on March 6, 2017, we redeemed the remaining $453 million of our 7.875% First Lien Notes due in 2023 using cash on hand along with the proceeds from a new $400 million, three-year First Lien Term Loan priced at LIBOR + 1.75% per annum. We intend to repay the 2019 First Lien Term Loan in full by the end of 2018. This accelerates debt reduction and results in substantial annual interest savings of more than $20 million in the interim. 2017 First Lien Term Loan: — We repaid approximately $150 million of our 2017 First Lien Term Loan using cash on hand during the first quarter of 2017. Expanding Our Customer Sales Channels We continue to focus on getting closer to our customers through expansion of our retail platform, which began with the acquisition of Champion Energy in 2015 and was followed by the acquisitions of Calpine Energy Solutions in late 2016 and North American Power in early 2017. Our retail platform geographically and strategically complements our wholesale generation fleet by providing forward liquidity with sufficient margins. The combination of our wholesale origination and retail platform provides Calpine access to both direct and mass market sales channels. Our direct sales efforts aim to provide our larger customers with customized products, leveraging both our successful wholesale origination efforts and Calpine Energy Solutions’ presence among large commercial and industrial organizations to secure new contracts. Our mass market approach relies upon our expanded Champion Energy retail platform to serve the needs of both residential and smaller commercial and industrial customers across the country. We believe that our retail platform is strategically complete and are now focused on integrating it into our business and optimizing its financial performance. Acquisition of North American Power & Gas, LLC On January 17, 2017, we completed the purchase of North American Power for approximately $105 million, excluding working capital and other adjustments. North American Power is a growing retail energy supplier for homes and small businesses and is primarily concentrated in the Northeast U.S., where Calpine has a substantial power generation presence and where Champion Energy has a substantial retail sales footprint that is enhanced by the addition of North American Power, which has been integrated into our Champion Energy retail platform. With this acquisition, we now serve residential load in 63 utility service territories as compared to 51 in 2016. Portfolio Management East: Washington Parish: On April 21, 2017, we entered into an agreement with Entergy Louisiana (Entergy), a subsidiary of Entergy Corporation, to construct an approximately 360 MW natural gas-fired peaking power plant on a partially developed site that we own near Bogalusa, Louisiana. Within a short period of time subsequent to the plant commencing commercial operations and meeting certain performance objectives, Entergy will purchase the plant for a fixed payment, including a fair market return. Construction on the facility will not commence until 2019 with COD expected in early 2021. The agreement contains conditions precedent to effectiveness including, but not limited to, approval of the Louisiana Public Service Commission. We plan to fund the project with a construction loan that will be repaid upon receipt of sale proceeds. York 2 Energy Center: York 2 Energy Center is an 828 MW dual-fuel, combined-cycle project that is co-located with our York Energy Center in Peach Bottom Township, Pennsylvania. Once complete, the power plant will feature two combustion turbines, two heat recovery steam generators and one steam turbine. The project is under construction, and the initial 760 MW of capacity cleared PJM’s last three base residual auctions with the 68 MW of incremental capacity clearing the last two base residual auctions. Due to construction delays, we are now targeting COD in early 2018. Osprey Energy Center: On January 3, 2017, we completed the sale of Osprey Energy Center to Duke Energy Florida, Inc. for approximately $166 million, excluding working capital and other adjustments. This transaction supports our effort to divest non-core assets outside our strategic concentration. Texas: Clear Lake Power Plant: On February 1, 2017, we retired our 400 MW Clear Lake Power Plant due to a lack of adequate compensation in Texas. Built in 1985, Clear Lake utilized an older, less efficient technology. Guadalupe Peaking Energy Center: In April 2017, we canceled an agreement with Guadalupe Valley Electric Cooperative (GVEC) related to the construction of a 418 MW natural gas-fired peaking power plant to be co-located with our existing Guadalupe Energy Center. In lieu of building the facility, we will now serve GVEC with 200 MW of generating capacity under a 10-year PPA beginning in June 2019. West: California Peakers: As a result of the pending expiration of a PPA in December 2017, we informed CAISO of our intent to suspend operations at four of our California peaking natural gas-fired power plants with capacity totaling 186 MW. CAISO has determined that two of these power plants, Yuba City and Feather River energy centers, are needed to continue reliable operation of the power grid. We are currently negotiating Reliability Must Run contracts for these two power plants. South Point Energy Center: As a result of the denial by the Nevada Public Utility Commission of the sale of South Point Energy Center to Nevada Power Company in February 2017, we terminated the corresponding asset sale agreement in the first quarter of 2017. We are currently assessing our options related to South Point Energy Center. OPERATIONS UPDATE First Quarter Power Operations Achievements: Availability Performance:— Delivered strong fleetwide starting reliability: 97.5% Power Generation:— Generated more than 21 million MWh3— Texas fleet: Record low first quarter forced outage factor— Westbrook Energy Center: 100% starting reliability across 215 starts 2017 Operating Event at our Delta Energy Center On January 29, 2017, we experienced an operating event at our Delta Energy Center that resulted in an emergency shutdown of the power plant and significant damage to the steam turbine and steam turbine generator. Our current plan is to return the unit to service in simple-cycle steam bypass configuration in June 2017 and full combined-cycle configuration in the fourth quarter of 2017. We anticipate that insurance will cover a significant portion of our losses, after applicable deductibles. 2017 FINANCIAL OUTLOOK — ____________ (1) Includes projected major maintenance expense of $315 million and maintenance capital expenditures of $120 million in 2017. Capital expenditures exclude major construction and development projects. (2) Includes commitment, letter of credit and other fees from consolidated and unconsolidated investments, net of capitalized interest and interest income. (3) Amount includes $200 million of recurring amortization, as well as the $550 million repayment of the 2017 First Lien Term Loan, a portion of the $453 million of our callable 7 7/8% 2023 Senior Secured Notes and the buyout of the Pasadena lessor interest. As detailed above, today we are reaffirming our 2017 guidance range. We expect Adjusted EBITDA of $1.8 billion to $1.95 billion and Adjusted Free Cash Flow of $710 million to $860 million. We expect to invest $220 million in our ongoing growth-related projects during 2017, primarily the construction of York 2 Energy Center. INVESTOR CONFERENCE CALL AND WEBCAST We will host a conference call to discuss our financial and operating results for the first quarter on Friday, April 28, 2017, at 10 a.m. Eastern time / 9 a.m. Central time. A listen-only webcast of the call may be accessed through our website at www.calpine.com, or by dialing (800) 446-1671 in the U.S. or (847) 413-3362 outside the U.S. The confirmation code is 44658283. A recording of the call will be made available for a limited time on our website or by dialing (888) 843-7419 in the U.S. or (630) 652-3042 outside the U.S. and providing confirmation code 44658283. Presentation materials to accompany the conference call will be posted on our website on April 28, 2017. ABOUT CALPINE Calpine Corporation is America’s largest generator of electricity from natural gas and geothermal resources with operations in competitive power markets. Our fleet of 80 power plants in operation or under construction represents approximately 26,000 megawatts of generation capacity. Through wholesale power operations and our retail businesses Calpine Energy Solutions and Champion Energy, we serve customers in 25 states, Canada and Mexico. Our clean, efficient, modern and flexible fleet uses advanced technologies to generate power in a low-carbon and environmentally responsible manner. We are uniquely positioned to benefit from the secular trends affecting our industry, including the abundant and affordable supply of clean natural gas, environmental regulation, aging power generation infrastructure and the increasing need for dispatchable power plants to successfully integrate intermittent renewables into the grid. Please visit www.calpine.com to learn more about how Calpine is creating power for a sustainable future. Calpine’s Annual Report on Form 10-Q for the quarter ended March 31, 2017, has been filed with the Securities and Exchange Commission (SEC) and is available on the SEC’s website at www.sec.gov. FORWARD-LOOKING INFORMATION In addition to historical information, this release contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act, and Section 21E of the Exchange Act. Forward-looking statements may appear throughout this release. We use words such as “believe,” “intend,” “expect,” “anticipate,” “plan,” “may,” “will,” “should,” “estimate,” “potential,” “project” and similar expressions to identify forward-looking statements. Such statements include, among others, those concerning our expected financial performance and strategic and operational plans, as well as all assumptions, expectations, predictions, intentions or beliefs about future events. We believe that the forward-looking statements are based upon reasonable assumptions and expectations. However, you are cautioned that any such forward-looking statements are not guarantees of future performance and that a number of risks and uncertainties could cause actual results to differ materially from those anticipated in the forward-looking statements. Such risks and uncertainties include, but are not limited to: Financial results that may be volatile and may not reflect historical trends due to, among other things, seasonality of demand, fluctuations in prices for commodities such as natural gas and power, changes in U.S. macroeconomic conditions, fluctuations in liquidity and volatility in the energy commodities markets and our ability and extent to which we hedge risks; Laws, regulations and market rules in the markets in which we participate and our ability to effectively respond to changes in laws, regulations or market rules or the interpretation thereof including those related to the environment, derivative transactions and market design in the regions in which we operate; Our ability to manage our liquidity needs, access the capital markets when necessary and comply with covenants under our Senior Unsecured Notes, First Lien Notes, First Lien Term Loans, Corporate Revolving Facility, CCFC Term Loans and other existing financing obligations; Risks associated with the operation, construction and development of power plants, including unscheduled outages or delays and plant efficiencies; Risks related to our geothermal resources, including the adequacy of our steam reserves, unusual or unexpected steam field well and pipeline maintenance requirements, variables associated with the injection of water to the steam reservoir and potential regulations or other requirements related to seismicity concerns that may delay or increase the cost of developing or operating geothermal resources; Competition, including from renewable sources of power, interference by states in competitive power markets through subsidies or similar support for new or existing power plants, and other risks associated with marketing and selling power in the evolving energy markets; Structural changes in the supply and demand of power resulting from the development of new fuels or technologies and demand-side management tools (such as distributed generation, power storage and other technologies); The expiration or early termination of our PPAs and the related results on revenues; Future capacity revenue may not occur at expected levels; Natural disasters, such as hurricanes, earthquakes, droughts, wildfires and floods, acts of terrorism or cyber-attacks that may affect our power plants or the markets our power plants or retail operations serve and our corporate headquarters; Disruptions in or limitations on the transportation of natural gas or fuel oil and the transmission of power; Our ability to manage our counterparty and customer exposure and credit risk, including our commodity positions; Our ability to attract, motivate and retain key employees; Present and possible future claims, litigation and enforcement actions that may arise from noncompliance with market rules promulgated by the SEC, CFTC, FERC and other regulatory bodies; and Other risks identified in this press release, in our Annual Report on Form 10-K for the year ended December 31, 2016, and in other reports filed by us with the SEC. Given the risks and uncertainties surrounding forward-looking statements, you should not place undue reliance on these statements. Many of these factors are beyond our ability to control or predict. Our forward-looking statements speak only as of the date of this release. Other than as required by law, we undertake no obligation to update or revise forward-looking statements, whether as a result of new information, future events, or otherwise. Preferred stock, $0.001 par value per share; authorized 100,000,000 shares, none issued and outstanding CALPINE CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited) (in millions) (13 (611 396 — __________ (1) Includes amortization included in Commodity revenue and Commodity expense associated with intangible assets and amortization recorded in interest expense associated with debt issuance costs and discounts. REGULATION G RECONCILIATIONS In addition to disclosing financial results in accordance with U.S. GAAP, the accompanying first quarter 2017 earnings release contains non-GAAP financial measures. Net Income (Loss), As Adjusted, Commodity Margin, Adjusted EBITDA and Adjusted Free Cash Flow are non-GAAP financial measures that we use as measures of our performance. These non-GAAP measures should be viewed as a supplement to and not a substitute for our U.S. GAAP measures of performance, and the financial results calculated in accordance with U.S. GAAP and reconciliations from these results should be carefully evaluated. Net Loss, As Adjusted, represents net loss attributable to Calpine, adjusted for certain non-cash and non-recurring items, including mark-to-market (gain) loss on derivatives, debt modification and extinguishment costs and other adjustments. Net Loss, As Adjusted, is presented because we believe it is a useful tool for assessing the operating performance of our company in the current period. Net Loss, As Adjusted, is not intended to represent net income (loss), the most comparable U.S. GAAP measure, as an indicator of operating performance, and is not necessarily comparable to similarly titled measures reported by other companies. Commodity Margin includes our power and steam revenues, sales of purchased power and physical natural gas, capacity revenue, revenue from renewable energy credits, sales of surplus emission allowances, transmission revenue and expenses, fuel and purchased energy expense, fuel transportation expense, environmental compliance expense, and realized settlements from our marketing, hedging, optimization and trading activities, but excludes mark-to-market activity and other revenues. We believe that Commodity Margin is a useful tool for assessing the performance of our core operations and is a key operational measure reviewed by our chief operating decision maker. Commodity Margin is not a measure calculated in accordance with U.S. GAAP and should be viewed as a supplement to and not a substitute for our results of operations presented in accordance with U.S. GAAP. Commodity Margin does not intend to represent income from operations, the most comparable U.S. GAAP measure, as an indicator of operating performance and is not necessarily comparable to similarly titled measures reported by other companies. Adjusted EBITDA represents net loss attributable to Calpine before net (income) attributable to the noncontrolling interest, interest, taxes, depreciation and amortization, adjusted for certain non-cash and non-recurring items as detailed in the following reconciliation. Adjusted EBITDA is not intended to represent cash flows from operations or net income (loss) as defined by U.S. GAAP as an indicator of operating performance and is not necessarily comparable to similarly titled measures reported by other companies. We believe Adjusted EBITDA is useful to investors and other users of our financial statements in evaluating our operating performance because it provides them with an additional tool to compare business performance across companies and across periods. We believe that EBITDA is widely used by investors to measure a company’s operating performance without regard to items such as interest expense, taxes, depreciation and amortization, which can vary substantially from company to company depending upon accounting methods and book value of assets, capital structure and the method by which assets were acquired. Additionally, we believe that investors commonly adjust EBITDA information to eliminate the effects of restructuring and other expenses, which vary widely from company to company and impair comparability. As we define it, Adjusted EBITDA represents EBITDA adjusted for the effects of impairment losses, gains or losses on sales, dispositions or retirements of assets, any mark-to-market gains or losses from accounting for derivatives, adjustments to exclude the Adjusted EBITDA related to the noncontrolling interest, stock-based compensation expense, operating lease expense, non-cash gains and losses from foreign currency translations, major maintenance expense, gains or losses on the repurchase, modification or extinguishment of debt, non-cash GAAP-related adjustments to levelize revenues from tolling agreements and any unusual or non-recurring items plus adjustments to reflect the Adjusted EBITDA from our unconsolidated investments. We adjust for these items in our Adjusted EBITDA as our management believes that these items would distort their ability to efficiently view and assess our core operating trends. In summary, our management uses Adjusted EBITDA as a measure of operating performance to assist in comparing performance from period to period on a consistent basis and to readily view operating trends, as a measure for planning and forecasting overall expectations and for evaluating actual results against such expectations, and in communications with our Board of Directors, shareholders, creditors, analysts and investors concerning our financial performance. Adjusted Free Cash Flow represents net income (loss) before interest, taxes, depreciation and amortization, as adjusted, less operating lease payments, major maintenance expense and maintenance capital expenditures, net cash interest, cash taxes and other adjustments, including non-recurring items. Adjusted Free Cash Flow is presented because we believe it is a useful tool for assessing the financial performance of our company in the current period. Adjusted Free Cash Flow is a liquidity measure and is not intended to represent cash flows from operating activities, the most directly comparable U.S. GAAP measure, and is not necessarily comparable to similarly titled measures reported by other companies. Net Loss, As Adjusted Reconciliation The following table reconciles our Net Loss, As Adjusted, to its U.S. GAAP results for the three months ended March 31, 2017 and 2016 (in millions): __________ (1) Assumes a 0% effective tax rate for these items. (2) In addition to changes in market value on derivatives not designated as hedges, changes in mark-to-market (gain) loss also include hedge ineffectiveness and adjustments to reflect changes in credit default risk exposure. Commodity Margin Reconciliation The following tables reconcile Income (loss) from operations to Commodity Margin for the three months ended March 31, 2017 and 2016 (in millions): $ 88 $ 221 $ (114 ) $ — (6 ) (110 ) (6 ) $ 153 $ — _________ (1) Includes $(22) million and $(22) million of lease levelization and $60 million and $27 million of amortization expense for the three months ended March 31, 2017 and 2016, respectively. Consolidated Adjusted EBITDA Reconciliation In the following table, we have reconciled our Adjusted EBITDA and Adjusted Free Cash Flow to our net income attributable to Calpine for the three months ended March 31, 2017 and 2016, as reported under U.S. GAAP (in millions): _________ (1) Excludes depreciation and amortization expense attributable to the non-controlling interest. (2) Adjustments to reflect Adjusted EBITDA from unconsolidated investments include (gain) loss on mark-to-market activity of nil for each of the three months ended March 31, 2017 and 2016. (3) Includes $65 million and $65 million in major maintenance expense for the three months ended March 31, 2017 and 2016, respectively, and $50 million and $40 million in maintenance capital expenditures for the three months ended March 31, 2017 and 2016, respectively. (4) Includes commitment, letter of credit and other bank fees from both consolidated and unconsolidated investments, net of capitalized interest and interest income. (5) Adjusted Free Cash Flow, as reported, excludes changes in working capital, such that it is calculated on the same basis as our guidance. In the following table, we have reconciled our Adjusted EBITDA to our Commodity Margin, both of which are non-GAAP measures, for the three months ended March 31, 2017 and 2016. Reconciliations for both Adjusted EBITDA and Commodity Margin to comparable U.S. GAAP measures are provided above. Amounts below are shown exclusive of the noncontrolling interest (in millions): _________ (1) Shown net of major maintenance expense, stock-based compensation expense, non-cash loss on dispositions of assets and other costs. (2) Shown net of stock-based compensation expense and other costs. (3) Shown net of operating lease expense, amortization and other costs. Adjusted Free Cash Flow Reconciliation In the following table, we have reconciled our cash flows from operating activities to our Adjusted Free Cash Flow for the three months ended March 31, 2017 and 2016 (in millions): _________ (1) Adjustment excludes $(13) million and $10 million in amortization of acquired derivatives contracts for the three months ended March 31, 2017 and 2016, respectively. (2) Adjustment primarily represents miscellaneous items excluded from Adjusted EBITDA that are included in cash flow from operations. Adjusted EBITDA and Adjusted Free Cash Flow Reconciliation for Guidance (in millions) _________ (1) For purposes of Net Income guidance reconciliation, mark-to-market adjustments are assumed to be nil. (2) Other includes stock-based compensation expense, adjustments to reflect Adjusted EBITDA from unconsolidated investments, income tax expense and other items. (3) Includes projected major maintenance expense of $315 million and maintenance capital expenditures of $120 million. Capital expenditures exclude major construction and development projects. (4) Includes commitment, letter of credit and other bank fees from both consolidated and unconsolidated investments, net of capitalized interest and interest income. OPERATING PERFORMANCE METRICS The table below shows the operating performance metrics for the periods presented: ________ (1) Excludes generation from unconsolidated power plants and power plants owned but not operated by us. (2) Generation, average availability and steam adjusted heat rate exclude power plants and units that are inactive.
- CALPINE REPORTS FIRST QUARTER 2017 RESULTS, REAFFIRMS 2017 GUIDANCE;
ANNOUNCES CANCELLATION OF NEW TEXAS POWER PLANT, REPLACES WITH 10-YEAR
SUPPLY CONTRACT
Apr 28, 2017
HOUSTON--(BUSINESS WIRE)--CALPINE CORPORATION (NYSE: CPN): SUMMARY OF FIRST QUARTER 2017 FINANCIAL RESULTS (IN MILLIONS): NM REAFFIRMING 2017 FULL YEAR GUIDANCE (IN MILLIONS): RECENT ACHIEVEMENTS: POWER AND COMMERCIAL OPERATIONS:— GENERATED MORE THAN 21 MILLION MWH3 IN THE FIRST QUARTER OF 2017— DELIVERED STRONG FLEETWIDE STARTING RELIABILITY: 97.5% PORTFOLIO MANAGEMENT:— SIGNED A 10-YEAR PPA WITH GUADALUPE VALLEY ELECTRIC COOPERATIVE FOR 200 MW BEGINNING IN 2019, CONCURRENTLY CANCELING CONSTRUCTION OF A 418 MW NATURAL GAS-FIRED PEAKING POWER PLANT IN TEXAS— RETIRED 400 MW CLEAR LAKE POWER PLANT DUE TO LACK OF ADEQUATE COMPENSATION IN TEXAS— MONETIZING LEGACY SITE THROUGH AN AGREEMENT TO CONSTRUCT AND SELL AN APPROXIMATELY 360 MW NATURAL GAS-FIRED PEAKING POWER PLANT TO ENTERGY LOUISIANA AFTER COMMERCIAL OPERATION, EXPECTED IN EARLY 2021— NEGOTIATING RELIABILITY MUST RUN CONTRACTS WITH CAISO FOR TWO NATURAL GAS-FIRED PEAKERS IN CALIFORNIA— CLOSED ON THE SALE OF OSPREY ENERGY CENTER TO DUKE ENERGY FOR $166 MILLION4— ACQUIRED GROWING RESIDENTIAL RETAIL PROVIDER NORTH AMERICAN POWER FOR APPROXIMATELY $105 MILLION4, REPRESENTING AN ATTRACTIVELY PRICED PORTFOLIO ADDITION TO OUR CHAMPION ENERGY RETAIL PLATFORM BALANCE SHEET MANAGEMENT:— AS PART OF OUR $2.7 BILLION PLAN TO DELEVER AND REDUCE INTEREST EXPENSE, WE PAID DOWN APPROXIMATELY $233 MILLION OF DEBT (NET) IN THE FIRST QUARTER OF 2017 OUT OF $850 MILLION PAYDOWN PLANNED FOR 2017 CALPINE CORPORATION (NYSE: CPN) TODAY REPORTED NET LOSS1 OF $56 MILLION, OR $0.16 PER DILUTED SHARE, FOR THE FIRST QUARTER OF 2017 COMPARED TO $198 MILLION, OR $0.56 PER DILUTED SHARE, IN THE PRIOR YEAR PERIOD. THE PERIOD-OVER-PERIOD DECREASE IN NET LOSS WAS PRIMARILY DUE TO THE FAVORABLE VARIANCE IN OUR NET MARK-TO-MARKET ACTIVITIES DRIVEN BY CHANGES IN FORWARD COMMODITY PRICES AND THE POSITIVE EFFECT OF OUR RETAIL HEDGING ACTIVITIES. CASH PROVIDED BY OPERATING ACTIVITIES FOR THE FIRST QUARTER OF 2017 WAS $94 MILLION COMPARED TO $31 MILLION IN THE PRIOR YEAR. THE INCREASE IN CASH PROVIDED BY OPERATING ACTIVITIES WAS PRIMARILY DUE TO A DECREASE IN WORKING CAPITAL EMPLOYED RESULTING FROM THE PERIOD OVER PERIOD CHANGE IN NET MARGINING REQUIREMENTS ASSOCIATED WITH OUR COMMODITY HEDGING ACTIVITY, PARTIALLY OFFSET BY A DECREASE IN INCOME FROM OPERATIONS, ADJUSTED FOR NON-CASH ITEMS. ADJUSTED EBITDA2 FOR THE FIRST QUARTER WAS $326 MILLION COMPARED TO $374 MILLION IN THE PRIOR YEAR PERIOD, AND ADJUSTED FREE CASH FLOW2 WAS $43 MILLION COMPARED TO $102 MILLION IN THE PRIOR YEAR PERIOD. THE DECREASES IN ADJUSTED EBITDA AND ADJUSTED FREE CASH FLOW WERE PRIMARILY DUE TO LOWER COMMODITY MARGIN2, LARGELY DRIVEN BY LOWER ENERGY MARGINS DUE TO DECREASED CONTRIBUTION FROM WHOLESALE HEDGES AND WEAKER MARKET CONDITIONS, LOWER REGULATORY CAPACITY REVENUE IN OUR EAST SEGMENT AND THE SALES OF MANKATO POWER PLANT IN OCTOBER 2016 AND OSPREY ENERGY CENTER IN JANUARY 2017. THESE CHANGES WERE PARTIALLY OFFSET BY OUR RETAIL ACQUISITIONS OF CALPINE ENERGY SOLUTIONS IN DECEMBER 2016 AND NORTH AMERICAN POWER IN JANUARY 2017. NET LOSS, AS ADJUSTED2, FOR THE FIRST QUARTER OF 2017 WAS $114 MILLION COMPARED TO $104 MILLION IN THE PRIOR YEAR PERIOD. THE INCREASE IN NET LOSS, AS ADJUSTED, WAS PRIMARILY DUE TO LOWER COMMODITY MARGIN, AS PREVIOUSLY DISCUSSED, AS WELL AS INCREASES IN PLANT OPERATING EXPENSE AND DEPRECIATION AND AMORTIZATION EXPENSE PRIMARILY DUE TO OUR RETAIL ACQUISITIONS, PARTIALLY OFFSET BY A HIGHER INCOME TAX BENEFIT RESULTING PRIMARILY FROM CHANGES IN ESTIMATED TAX BENEFITS AND A FAVORABLE ADJUSTMENT TO OUR RESERVE FOR UNCERTAIN TAX POSITIONS. “THIS YEAR’S FIRST QUARTER RESULTS REFLECT OUR ABILITY TO MEET OUR FINANCIAL COMMITMENTS DESPITE A VERY MILD WINTER IN TEXAS AND THE EAST AND ABOVE-NORMAL HYDROELECTRIC GENERATION IN THE WEST,” SAID THAD HILL, CALPINE’S PRESIDENT AND CHIEF EXECUTIVE OFFICER. “WE ARE REAFFIRMING OUR FULL YEAR GUIDANCE RANGE OF $1.8 TO $1.95 BILLION OF ADJUSTED EBITDA, GIVEN UPSIDE IN THE BACK HALF OF THE YEAR FROM OUR RETAIL ACQUISITIONS AND HIGHER REGULATORY CAPACITY PAYMENTS IN THE EAST. “DURING THE QUARTER, WE BEGAN EXECUTING ON OUR DELEVERAGING PLAN WHILE CONTINUING TO MAKE PROGRESS ON CONTROLLING COSTS AND INTEGRATING OUR RETAIL PLATFORM. WE HAVE COMPLETED $233 MILLION OF OUR FULL YEAR TARGET OF $850 MILLION IN DEBT REDUCTION, AND WE ARE ON TRACK TO COMPLETE OUR $2.7 BILLION OF PLANNED DEBT PAYDOWN BY THE END OF 2019. “WE ALSO CONTINUED OUR RELENTLESS FOCUS ON MANAGING OUR PORTFOLIO FOR LONG-TERM VALUE. SPECIFICALLY, I AM PLEASED TO ANNOUNCE THREE GREAT EXAMPLES OF HOW OUR CUSTOMER-FOCUSED EFFORTS HELPED US FIND MUTUALLY BENEFICIAL SOLUTIONS. FIRST, WE HAVE SIGNED A 10-YEAR PPA WITH GUADALUPE VALLEY ELECTRIC COOPERATIVE TO SUPPLY 200 MW OF POWER FROM OUR EXISTING TEXAS FLEET, REPLACING OUR PRIOR AGREEMENT TO CONSTRUCT A NEW 418 MW PEAKING POWER PLANT. SECONDLY, WE ARE ANNOUNCING THE MONETIZATION OF A LEGACY DEVELOPMENT SITE IN LOUISIANA, WHERE WE HAVE ENTERED INTO A CONSTRUCTION AND SALE AGREEMENT WITH ENTERGY LOUISIANA FOR A NATURAL GAS-FIRED PEAKING POWER PLANT. FINALLY, WE COMPLETED THE SALE OF OUR OSPREY ENERGY CENTER TO DUKE ENERGY FLORIDA. “WE ALSO TOOK FURTHER ACTION TO ECONOMICALLY OPTIMIZE OUR PORTFOLIO BY FILING TO RETIRE FOUR OF OUR NATURAL GAS-FIRED PEAKERS IN CALIFORNIA AT THE BEGINNING OF 2018 WHEN THEIR CONTRACTS EXPIRE. THE CALIFORNIA INDEPENDENT SYSTEM OPERATOR HAS SINCE DECLARED THAT TWO OF THE UNITS ARE REQUIRED FOR RELIABILITY, AND WE ARE CURRENTLY NEGOTIATING RELIABILITY MUST RUN CONTRACTS THAT WILL APPROPRIATELY COMPENSATE US FOR PROVIDING CRITICAL RELIABILITY TO THE GRID. “FINALLY, WE HAVE BEEN ADVOCATING FOR COMPETITIVE POWER MARKETS, INCLUDING OPPOSING OUT-OF-MARKET NUCLEAR BAILOUTS THAT ARE BEING DEBATED OR IMPLEMENTED IN MULTIPLE STATES. WE FUNDAMENTALLY DISAGREE WITH ADDING MORE SUBSIDIES INTO FUNCTIONING WHOLESALE MARKETS AND ARE ACTIVELY CHALLENGING THEM AT THE STATE LEVEL AND IN THE COURTS. REGARDLESS OF THOSE OUTCOMES, WE ARE OPTIMISTIC THAT INDEPENDENT SYSTEM OPERATORS AND THE NEW FERC WILL MOVE THROUGH TARIFF REFORM TO PROTECT THE INTEGRITY OF THEIR MARKETS FROM STATE INTERVENTION. COMPETITIVE WHOLESALE POWER MARKETS NEED TO PROVIDE NON-DISCRIMINATORY FORWARD PRICE SIGNALS THAT RESULT IN MARKET-DRIVEN SOLUTIONS THAT ENSURE RELIABLE POWER. CALPINE’S CLEAN, MODERN AND FLEXIBLE FLEET IS INTEGRAL TO MAINTAINING RELIABILITY IN EACH OF OUR WHOLESALE POWER MARKETS.” ________ 1 REPORTED AS NET LOSS ATTRIBUTABLE TO CALPINE ON OUR CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS. 2 NON-GAAP FINANCIAL MEASURE, SEE “REGULATION G RECONCILIATIONS” FOR FURTHER DETAILS. 3 INCLUDES GENERATION FROM POWER PLANTS OWNED BUT NOT OPERATED BY CALPINE AND OUR SHARE OF GENERATION FROM UNCONSOLIDATED POWER PLANTS. 4 EXCLUDING WORKING CAPITAL AND OTHER ADJUSTMENTS. SUMMARY OF FINANCIAL PERFORMANCE FIRST QUARTER RESULTS ADJUSTED EBITDA FOR THE FIRST QUARTER OF 2017 WAS $326 MILLION COMPARED TO $374 MILLION IN THE PRIOR YEAR PERIOD. THE YEAR-OVER-YEAR DECREASE IN ADJUSTED EBITDA WAS PRIMARILY RELATED TO A $22 MILLION DECREASE IN COMMODITY MARGIN AND $24 MILLION INCREASE IN PLANT OPERATING EXPENSE5, WHICH WAS LARGELY DRIVEN BY NET PORTFOLIO CHANGES INCLUDING OUR RETAIL ACQUISITIONS, AS PREVIOUSLY DISCUSSED. THE DECREASE IN COMMODITY MARGIN WAS PRIMARILY DUE TO: ADJUSTED FREE CASH FLOW WAS $43 MILLION IN THE FIRST QUARTER OF 2017 COMPARED TO $102 MILLION IN THE PRIOR YEAR PERIOD. ADJUSTED FREE CASH FLOW DECREASED DUE TO LOWER ADJUSTED EBITDA, AS PREVIOUSLY DISCUSSED, AND HIGHER MAJOR MAINTENANCE CAPITAL EXPENDITURES PRIMARILY DUE TO IMPROVEMENTS OF OUR GEYSERS ASSETS. __________ 5 INCREASE IN PLANT OPERATING EXPENSE EXCLUDES CHANGES IN MAJOR MAINTENANCE EXPENSE, STOCK-BASED COMPENSATION EXPENSE, NON-CASH LOSS ON DISPOSITION OF ASSETS AND OTHER COSTS. SEE THE TABLE TITLED “CONSOLIDATED ADJUSTED EBITDA RECONCILIATION” FOR THE ACTUAL AMOUNTS OF THESE ITEMS FOR THE THREE MONTHS ENDED MARCH 31, 2017 AND 2016. REGIONAL SEGMENT REVIEW OF RESULTS TABLE 1: COMMODITY MARGIN BY SEGMENT (IN MILLIONS) WEST REGION FIRST QUARTER: COMMODITY MARGIN IN OUR WEST SEGMENT INCREASED BY $24 MILLION IN THE FIRST QUARTER OF 2017 COMPARED TO THE PRIOR YEAR PERIOD. PRIMARY DRIVERS WERE: TEXAS REGION FIRST QUARTER: COMMODITY MARGIN IN OUR TEXAS SEGMENT DECREASED BY $5 MILLION IN THE FIRST QUARTER OF 2017 COMPARED TO THE PRIOR YEAR PERIOD. PRIMARY DRIVERS WERE: EAST REGION FIRST QUARTER: COMMODITY MARGIN IN OUR EAST SEGMENT DECREASED $41 MILLION IN THE FIRST QUARTER OF 2017 COMPARED TO THE PRIOR YEAR PERIOD. PRIMARY DRIVERS WERE: LIQUIDITY, CASH FLOW AND CAPITAL RESOURCES TABLE 2: LIQUIDITY (IN MILLIONS) ____________ (1) INCLUDES $9 MILLION AND $16 MILLION OF MARGIN DEPOSITS POSTED WITH US BY OUR COUNTERPARTIES AT MARCH 31, 2017, AND DECEMBER 31, 2016, RESPECTIVELY. (2) OUR ABILITY TO USE AVAILABILITY UNDER OUR CORPORATE REVOLVING FACILITY IS UNRESTRICTED. (3) OUR ABILITY TO USE CORPORATE CASH AND CASH EQUIVALENTS IS UNRESTRICTED. OUR $300 MILLION CDHI LETTER OF CREDIT FACILITY IS RESTRICTED TO SUPPORT CERTAIN OBLIGATIONS UNDER PPAS AND POWER TRANSMISSION AND NATURAL GAS TRANSPORTATION AGREEMENTS. LIQUIDITY WAS APPROXIMATELY $1.8 BILLION AS OF MARCH 31, 2017. CASH AND CASH EQUIVALENTS DECREASED IN THE FIRST QUARTER OF 2017 PRIMARILY DUE TO THE ACQUISITION OF NORTH AMERICAN POWER, CAPITAL EXPENDITURES ON CONSTRUCTION PROJECTS AND OUTAGES, AND NET REPAYMENTS OF DEBT, PARTIALLY OFFSET BY CASH PROVIDED BY THE SALE OF OSPREY ENERGY CENTER, AS WELL AS FROM OPERATING ACTIVITIES. TABLE 3: CASH FLOW ACTIVITIES (IN MILLIONS) CASH PROVIDED BY OPERATING ACTIVITIES IN THE FIRST QUARTER OF 2017 WAS $94 MILLION COMPARED TO $31 MILLION IN THE PRIOR YEAR PERIOD, AS PREVIOUSLY DISCUSSED. CASH USED IN INVESTING ACTIVITIES WAS $13 MILLION DURING THE FIRST QUARTER OF 2017 COMPARED TO $611 MILLION IN THE PRIOR YEAR PERIOD. THE DECREASE WAS PRIMARILY RELATED TO ACQUISITIONS, DIVESTITURES AND CAPITAL EXPENDITURES. IN THE FIRST QUARTER OF 2017, WE CLOSED ON THE ACQUISITION OF NORTH AMERICAN POWER FOR $111 MILLION AND CLOSED ON THE SALE OF OSPREY ENERGY CENTER, RECEIVING NET PROCEEDS OF $162 MILLION. IN THE FIRST QUARTER OF 2016, WE PURCHASED GRANITE RIDGE ENERGY CENTER FOR $527 MILLION. THERE WAS ALSO A DECREASE OF $42 MILLION FOR CAPITAL EXPENDITURES PRIMARILY DUE TO LOWER EXPENDITURES ON CONSTRUCTION PROJECTS AND OUTAGES DURING THE FIRST QUARTER OF 2017 AS COMPARED TO 2016. CASH USED IN FINANCING ACTIVITIES WAS $256 MILLION DURING THE FIRST QUARTER OF 2017 AND PRIMARILY RELATED TO NET REPAYMENT OF DEBT IN ACCORDANCE WITH OUR DELEVERAGING PLAN. CAPITAL ALLOCATION OUR CAPITAL ALLOCATION PHILOSOPHY SEEKS TO MAXIMIZE LEVERED CASH RETURNS TO EQUITY WHILE MAINTAINING A STRONG BALANCE SHEET. WE SEEK TO ENHANCE SHAREHOLDER VALUE THROUGH A DIVERSE AND BALANCED CAPITAL ALLOCATION APPROACH THAT INCLUDES PORTFOLIO MANAGEMENT, ORGANIC OR ACQUISITIVE GROWTH, RETURNING CAPITAL TO SHAREHOLDERS AND DEBT REDUCTION. THE MIX OF THIS ACTIVITY SHIFTS OVER TIME GIVEN THE EXTERNAL MARKET ENVIRONMENT AND THE OPPORTUNITY SET. IN THE CURRENT ENVIRONMENT, WE BELIEVE THAT PAYING DOWN DEBT AND STRENGTHENING OUR BALANCE SHEET IS A HIGH-RETURN INVESTMENT FOR OUR SHAREHOLDERS. WE ALSO CONSIDER THE REPURCHASES OF OUR OWN SHARES OF COMMON STOCK AS AN ATTRACTIVE INVESTMENT OPPORTUNITY, AND WE UTILIZE THE EXPECTED RETURNS FROM THIS INVESTMENT AS THE BENCHMARK AGAINST WHICH WE EVALUATE ALL OTHER CAPITAL ALLOCATION DECISIONS. WE BELIEVE THIS PHILOSOPHY CLOSELY ALIGNS OUR OBJECTIVES WITH THOSE OF OUR SHAREHOLDERS. MANAGING OUR BALANCE SHEET WE FURTHER OPTIMIZED OUR CAPITAL STRUCTURE DURING THE QUARTER ENDED MARCH 31, 2017, AS FOLLOWS: 2023 FIRST LIEN NOTES: — AS PART OF OUR COMMITMENT TO REDUCE DEBT AND INTEREST EXPENSE, ON MARCH 6, 2017, WE REDEEMED THE REMAINING $453 MILLION OF OUR 7.875% FIRST LIEN NOTES DUE IN 2023 USING CASH ON HAND ALONG WITH THE PROCEEDS FROM A NEW $400 MILLION, THREE-YEAR FIRST LIEN TERM LOAN PRICED AT LIBOR + 1.75% PER ANNUM. WE INTEND TO REPAY THE 2019 FIRST LIEN TERM LOAN IN FULL BY THE END OF 2018. THIS ACCELERATES DEBT REDUCTION AND RESULTS IN SUBSTANTIAL ANNUAL INTEREST SAVINGS OF MORE THAN $20 MILLION IN THE INTERIM. 2017 FIRST LIEN TERM LOAN: — WE REPAID APPROXIMATELY $150 MILLION OF OUR 2017 FIRST LIEN TERM LOAN USING CASH ON HAND DURING THE FIRST QUARTER OF 2017. EXPANDING OUR CUSTOMER SALES CHANNELS WE CONTINUE TO FOCUS ON GETTING CLOSER TO OUR CUSTOMERS THROUGH EXPANSION OF OUR RETAIL PLATFORM, WHICH BEGAN WITH THE ACQUISITION OF CHAMPION ENERGY IN 2015 AND WAS FOLLOWED BY THE ACQUISITIONS OF CALPINE ENERGY SOLUTIONS IN LATE 2016 AND NORTH AMERICAN POWER IN EARLY 2017. OUR RETAIL PLATFORM GEOGRAPHICALLY AND STRATEGICALLY COMPLEMENTS OUR WHOLESALE GENERATION FLEET BY PROVIDING FORWARD LIQUIDITY WITH SUFFICIENT MARGINS. THE COMBINATION OF OUR WHOLESALE ORIGINATION AND RETAIL PLATFORM PROVIDES CALPINE ACCESS TO BOTH DIRECT AND MASS MARKET SALES CHANNELS. OUR DIRECT SALES EFFORTS AIM TO PROVIDE OUR LARGER CUSTOMERS WITH CUSTOMIZED PRODUCTS, LEVERAGING BOTH OUR SUCCESSFUL WHOLESALE ORIGINATION EFFORTS AND CALPINE ENERGY SOLUTIONS’ PRESENCE AMONG LARGE COMMERCIAL AND INDUSTRIAL ORGANIZATIONS TO SECURE NEW CONTRACTS. OUR MASS MARKET APPROACH RELIES UPON OUR EXPANDED CHAMPION ENERGY RETAIL PLATFORM TO SERVE THE NEEDS OF BOTH RESIDENTIAL AND SMALLER COMMERCIAL AND INDUSTRIAL CUSTOMERS ACROSS THE COUNTRY. WE BELIEVE THAT OUR RETAIL PLATFORM IS STRATEGICALLY COMPLETE AND ARE NOW FOCUSED ON INTEGRATING IT INTO OUR BUSINESS AND OPTIMIZING ITS FINANCIAL PERFORMANCE. ACQUISITION OF NORTH AMERICAN POWER & GAS, LLC ON JANUARY 17, 2017, WE COMPLETED THE PURCHASE OF NORTH AMERICAN POWER FOR APPROXIMATELY $105 MILLION, EXCLUDING WORKING CAPITAL AND OTHER ADJUSTMENTS. NORTH AMERICAN POWER IS A GROWING RETAIL ENERGY SUPPLIER FOR HOMES AND SMALL BUSINESSES AND IS PRIMARILY CONCENTRATED IN THE NORTHEAST U.S., WHERE CALPINE HAS A SUBSTANTIAL POWER GENERATION PRESENCE AND WHERE CHAMPION ENERGY HAS A SUBSTANTIAL RETAIL SALES FOOTPRINT THAT IS ENHANCED BY THE ADDITION OF NORTH AMERICAN POWER, WHICH HAS BEEN INTEGRATED INTO OUR CHAMPION ENERGY RETAIL PLATFORM. WITH THIS ACQUISITION, WE NOW SERVE RESIDENTIAL LOAD IN 63 UTILITY SERVICE TERRITORIES AS COMPARED TO 51 IN 2016. PORTFOLIO MANAGEMENT EAST: WASHINGTON PARISH: ON APRIL 21, 2017, WE ENTERED INTO AN AGREEMENT WITH ENTERGY LOUISIANA (ENTERGY), A SUBSIDIARY OF ENTERGY CORPORATION, TO CONSTRUCT AN APPROXIMATELY 360 MW NATURAL GAS-FIRED PEAKING POWER PLANT ON A PARTIALLY DEVELOPED SITE THAT WE OWN NEAR BOGALUSA, LOUISIANA. WITHIN A SHORT PERIOD OF TIME SUBSEQUENT TO THE PLANT COMMENCING COMMERCIAL OPERATIONS AND MEETING CERTAIN PERFORMANCE OBJECTIVES, ENTERGY WILL PURCHASE THE PLANT FOR A FIXED PAYMENT, INCLUDING A FAIR MARKET RETURN. CONSTRUCTION ON THE FACILITY WILL NOT COMMENCE UNTIL 2019 WITH COD EXPECTED IN EARLY 2021. THE AGREEMENT CONTAINS CONDITIONS PRECEDENT TO EFFECTIVENESS INCLUDING, BUT NOT LIMITED TO, APPROVAL OF THE LOUISIANA PUBLIC SERVICE COMMISSION. WE PLAN TO FUND THE PROJECT WITH A CONSTRUCTION LOAN THAT WILL BE REPAID UPON RECEIPT OF SALE PROCEEDS. YORK 2 ENERGY CENTER: YORK 2 ENERGY CENTER IS AN 828 MW DUAL-FUEL, COMBINED-CYCLE PROJECT THAT IS CO-LOCATED WITH OUR YORK ENERGY CENTER IN PEACH BOTTOM TOWNSHIP, PENNSYLVANIA. ONCE COMPLETE, THE POWER PLANT WILL FEATURE TWO COMBUSTION TURBINES, TWO HEAT RECOVERY STEAM GENERATORS AND ONE STEAM TURBINE. THE PROJECT IS UNDER CONSTRUCTION, AND THE INITIAL 760 MW OF CAPACITY CLEARED PJM’S LAST THREE BASE RESIDUAL AUCTIONS WITH THE 68 MW OF INCREMENTAL CAPACITY CLEARING THE LAST TWO BASE RESIDUAL AUCTIONS. DUE TO CONSTRUCTION DELAYS, WE ARE NOW TARGETING COD IN EARLY 2018. OSPREY ENERGY CENTER: ON JANUARY 3, 2017, WE COMPLETED THE SALE OF OSPREY ENERGY CENTER TO DUKE ENERGY FLORIDA, INC. FOR APPROXIMATELY $166 MILLION, EXCLUDING WORKING CAPITAL AND OTHER ADJUSTMENTS. THIS TRANSACTION SUPPORTS OUR EFFORT TO DIVEST NON-CORE ASSETS OUTSIDE OUR STRATEGIC CONCENTRATION. TEXAS: CLEAR LAKE POWER PLANT: ON FEBRUARY 1, 2017, WE RETIRED OUR 400 MW CLEAR LAKE POWER PLANT DUE TO A LACK OF ADEQUATE COMPENSATION IN TEXAS. BUILT IN 1985, CLEAR LAKE UTILIZED AN OLDER, LESS EFFICIENT TECHNOLOGY. GUADALUPE PEAKING ENERGY CENTER: IN APRIL 2017, WE CANCELED AN AGREEMENT WITH GUADALUPE VALLEY ELECTRIC COOPERATIVE (GVEC) RELATED TO THE CONSTRUCTION OF A 418 MW NATURAL GAS-FIRED PEAKING POWER PLANT TO BE CO-LOCATED WITH OUR EXISTING GUADALUPE ENERGY CENTER. IN LIEU OF BUILDING THE FACILITY, WE WILL NOW SERVE GVEC WITH 200 MW OF GENERATING CAPACITY UNDER A 10-YEAR PPA BEGINNING IN JUNE 2019. WEST: CALIFORNIA PEAKERS: AS A RESULT OF THE PENDING EXPIRATION OF A PPA IN DECEMBER 2017, WE INFORMED CAISO OF OUR INTENT TO SUSPEND OPERATIONS AT FOUR OF OUR CALIFORNIA PEAKING NATURAL GAS-FIRED POWER PLANTS WITH CAPACITY TOTALING 186 MW. CAISO HAS DETERMINED THAT TWO OF THESE POWER PLANTS, YUBA CITY AND FEATHER RIVER ENERGY CENTERS, ARE NEEDED TO CONTINUE RELIABLE OPERATION OF THE POWER GRID. WE ARE CURRENTLY NEGOTIATING RELIABILITY MUST RUN CONTRACTS FOR THESE TWO POWER PLANTS. SOUTH POINT ENERGY CENTER: AS A RESULT OF THE DENIAL BY THE NEVADA PUBLIC UTILITY COMMISSION OF THE SALE OF SOUTH POINT ENERGY CENTER TO NEVADA POWER COMPANY IN FEBRUARY 2017, WE TERMINATED THE CORRESPONDING ASSET SALE AGREEMENT IN THE FIRST QUARTER OF 2017. WE ARE CURRENTLY ASSESSING OUR OPTIONS RELATED TO SOUTH POINT ENERGY CENTER. OPERATIONS UPDATE FIRST QUARTER POWER OPERATIONS ACHIEVEMENTS: AVAILABILITY PERFORMANCE:— DELIVERED STRONG FLEETWIDE STARTING RELIABILITY: 97.5% POWER GENERATION:— GENERATED MORE THAN 21 MILLION MWH3— TEXAS FLEET: RECORD LOW FIRST QUARTER FORCED OUTAGE FACTOR— WESTBROOK ENERGY CENTER: 100% STARTING RELIABILITY ACROSS 215 STARTS 2017 OPERATING EVENT AT OUR DELTA ENERGY CENTER ON JANUARY 29, 2017, WE EXPERIENCED AN OPERATING EVENT AT OUR DELTA ENERGY CENTER THAT RESULTED IN AN EMERGENCY SHUTDOWN OF THE POWER PLANT AND SIGNIFICANT DAMAGE TO THE STEAM TURBINE AND STEAM TURBINE GENERATOR. OUR CURRENT PLAN IS TO RETURN THE UNIT TO SERVICE IN SIMPLE-CYCLE STEAM BYPASS CONFIGURATION IN JUNE 2017 AND FULL COMBINED-CYCLE CONFIGURATION IN THE FOURTH QUARTER OF 2017. WE ANTICIPATE THAT INSURANCE WILL COVER A SIGNIFICANT PORTION OF OUR LOSSES, AFTER APPLICABLE DEDUCTIBLES. 2017 FINANCIAL OUTLOOK — ____________ (1) INCLUDES PROJECTED MAJOR MAINTENANCE EXPENSE OF $315 MILLION AND MAINTENANCE CAPITAL EXPENDITURES OF $120 MILLION IN 2017. CAPITAL EXPENDITURES EXCLUDE MAJOR CONSTRUCTION AND DEVELOPMENT PROJECTS. (2) INCLUDES COMMITMENT, LETTER OF CREDIT AND OTHER FEES FROM CONSOLIDATED AND UNCONSOLIDATED INVESTMENTS, NET OF CAPITALIZED INTEREST AND INTEREST INCOME. (3) AMOUNT INCLUDES $200 MILLION OF RECURRING AMORTIZATION, AS WELL AS THE $550 MILLION REPAYMENT OF THE 2017 FIRST LIEN TERM LOAN, A PORTION OF THE $453 MILLION OF OUR CALLABLE 7 7/8% 2023 SENIOR SECURED NOTES AND THE BUYOUT OF THE PASADENA LESSOR INTEREST. AS DETAILED ABOVE, TODAY WE ARE REAFFIRMING OUR 2017 GUIDANCE RANGE. WE EXPECT ADJUSTED EBITDA OF $1.8 BILLION TO $1.95 BILLION AND ADJUSTED FREE CASH FLOW OF $710 MILLION TO $860 MILLION. WE EXPECT TO INVEST $220 MILLION IN OUR ONGOING GROWTH-RELATED PROJECTS DURING 2017, PRIMARILY THE CONSTRUCTION OF YORK 2 ENERGY CENTER. INVESTOR CONFERENCE CALL AND WEBCAST WE WILL HOST A CONFERENCE CALL TO DISCUSS OUR FINANCIAL AND OPERATING RESULTS FOR THE FIRST QUARTER ON FRIDAY, APRIL 28, 2017, AT 10 A.M. EASTERN TIME / 9 A.M. CENTRAL TIME. A LISTEN-ONLY WEBCAST OF THE CALL MAY BE ACCESSED THROUGH OUR WEBSITE AT WWW.CALPINE.COM, OR BY DIALING (800) 446-1671 IN THE U.S. OR (847) 413-3362 OUTSIDE THE U.S. THE CONFIRMATION CODE IS 44658283. A RECORDING OF THE CALL WILL BE MADE AVAILABLE FOR A LIMITED TIME ON OUR WEBSITE OR BY DIALING (888) 843-7419 IN THE U.S. OR (630) 652-3042 OUTSIDE THE U.S. AND PROVIDING CONFIRMATION CODE 44658283. PRESENTATION MATERIALS TO ACCOMPANY THE CONFERENCE CALL WILL BE POSTED ON OUR WEBSITE ON APRIL 28, 2017. ABOUT CALPINE CALPINE CORPORATION IS AMERICA’S LARGEST GENERATOR OF ELECTRICITY FROM NATURAL GAS AND GEOTHERMAL RESOURCES WITH OPERATIONS IN COMPETITIVE POWER MARKETS. OUR FLEET OF 80 POWER PLANTS IN OPERATION OR UNDER CONSTRUCTION REPRESENTS APPROXIMATELY 26,000 MEGAWATTS OF GENERATION CAPACITY. THROUGH WHOLESALE POWER OPERATIONS AND OUR RETAIL BUSINESSES CALPINE ENERGY SOLUTIONS AND CHAMPION ENERGY, WE SERVE CUSTOMERS IN 25 STATES, CANADA AND MEXICO. OUR CLEAN, EFFICIENT, MODERN AND FLEXIBLE FLEET USES ADVANCED TECHNOLOGIES TO GENERATE POWER IN A LOW-CARBON AND ENVIRONMENTALLY RESPONSIBLE MANNER. WE ARE UNIQUELY POSITIONED TO BENEFIT FROM THE SECULAR TRENDS AFFECTING OUR INDUSTRY, INCLUDING THE ABUNDANT AND AFFORDABLE SUPPLY OF CLEAN NATURAL GAS, ENVIRONMENTAL REGULATION, AGING POWER GENERATION INFRASTRUCTURE AND THE INCREASING NEED FOR DISPATCHABLE POWER PLANTS TO SUCCESSFULLY INTEGRATE INTERMITTENT RENEWABLES INTO THE GRID. PLEASE VISIT WWW.CALPINE.COM TO LEARN MORE ABOUT HOW CALPINE IS CREATING POWER FOR A SUSTAINABLE FUTURE. CALPINE’S ANNUAL REPORT ON FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2017, HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION (SEC) AND IS AVAILABLE ON THE SEC’S WEBSITE AT WWW.SEC.GOV. FORWARD-LOOKING INFORMATION IN ADDITION TO HISTORICAL INFORMATION, THIS RELEASE CONTAINS “FORWARD-LOOKING STATEMENTS” WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995, SECTION 27A OF THE SECURITIES ACT, AND SECTION 21E OF THE EXCHANGE ACT. FORWARD-LOOKING STATEMENTS MAY APPEAR THROUGHOUT THIS RELEASE. WE USE WORDS SUCH AS “BELIEVE,” “INTEND,” “EXPECT,” “ANTICIPATE,” “PLAN,” “MAY,” “WILL,” “SHOULD,” “ESTIMATE,” “POTENTIAL,” “PROJECT” AND SIMILAR EXPRESSIONS TO IDENTIFY FORWARD-LOOKING STATEMENTS. SUCH STATEMENTS INCLUDE, AMONG OTHERS, THOSE CONCERNING OUR EXPECTED FINANCIAL PERFORMANCE AND STRATEGIC AND OPERATIONAL PLANS, AS WELL AS ALL ASSUMPTIONS, EXPECTATIONS, PREDICTIONS, INTENTIONS OR BELIEFS ABOUT FUTURE EVENTS. WE BELIEVE THAT THE FORWARD-LOOKING STATEMENTS ARE BASED UPON REASONABLE ASSUMPTIONS AND EXPECTATIONS. HOWEVER, YOU ARE CAUTIONED THAT ANY SUCH FORWARD-LOOKING STATEMENTS ARE NOT GUARANTEES OF FUTURE PERFORMANCE AND THAT A NUMBER OF RISKS AND UNCERTAINTIES COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE ANTICIPATED IN THE FORWARD-LOOKING STATEMENTS. SUCH RISKS AND UNCERTAINTIES INCLUDE, BUT ARE NOT LIMITED TO: FINANCIAL RESULTS THAT MAY BE VOLATILE AND MAY NOT REFLECT HISTORICAL TRENDS DUE TO, AMONG OTHER THINGS, SEASONALITY OF DEMAND, FLUCTUATIONS IN PRICES FOR COMMODITIES SUCH AS NATURAL GAS AND POWER, CHANGES IN U.S. MACROECONOMIC CONDITIONS, FLUCTUATIONS IN LIQUIDITY AND VOLATILITY IN THE ENERGY COMMODITIES MARKETS AND OUR ABILITY AND EXTENT TO WHICH WE HEDGE RISKS; LAWS, REGULATIONS AND MARKET RULES IN THE MARKETS IN WHICH WE PARTICIPATE AND OUR ABILITY TO EFFECTIVELY RESPOND TO CHANGES IN LAWS, REGULATIONS OR MARKET RULES OR THE INTERPRETATION THEREOF INCLUDING THOSE RELATED TO THE ENVIRONMENT, DERIVATIVE TRANSACTIONS AND MARKET DESIGN IN THE REGIONS IN WHICH WE OPERATE; OUR ABILITY TO MANAGE OUR LIQUIDITY NEEDS, ACCESS THE CAPITAL MARKETS WHEN NECESSARY AND COMPLY WITH COVENANTS UNDER OUR SENIOR UNSECURED NOTES, FIRST LIEN NOTES, FIRST LIEN TERM LOANS, CORPORATE REVOLVING FACILITY, CCFC TERM LOANS AND OTHER EXISTING FINANCING OBLIGATIONS; RISKS ASSOCIATED WITH THE OPERATION, CONSTRUCTION AND DEVELOPMENT OF POWER PLANTS, INCLUDING UNSCHEDULED OUTAGES OR DELAYS AND PLANT EFFICIENCIES; RISKS RELATED TO OUR GEOTHERMAL RESOURCES, INCLUDING THE ADEQUACY OF OUR STEAM RESERVES, UNUSUAL OR UNEXPECTED STEAM FIELD WELL AND PIPELINE MAINTENANCE REQUIREMENTS, VARIABLES ASSOCIATED WITH THE INJECTION OF WATER TO THE STEAM RESERVOIR AND POTENTIAL REGULATIONS OR OTHER REQUIREMENTS RELATED TO SEISMICITY CONCERNS THAT MAY DELAY OR INCREASE THE COST OF DEVELOPING OR OPERATING GEOTHERMAL RESOURCES; COMPETITION, INCLUDING FROM RENEWABLE SOURCES OF POWER, INTERFERENCE BY STATES IN COMPETITIVE POWER MARKETS THROUGH SUBSIDIES OR SIMILAR SUPPORT FOR NEW OR EXISTING POWER PLANTS, AND OTHER RISKS ASSOCIATED WITH MARKETING AND SELLING POWER IN THE EVOLVING ENERGY MARKETS; STRUCTURAL CHANGES IN THE SUPPLY AND DEMAND OF POWER RESULTING FROM THE DEVELOPMENT OF NEW FUELS OR TECHNOLOGIES AND DEMAND-SIDE MANAGEMENT TOOLS (SUCH AS DISTRIBUTED GENERATION, POWER STORAGE AND OTHER TECHNOLOGIES); THE EXPIRATION OR EARLY TERMINATION OF OUR PPAS AND THE RELATED RESULTS ON REVENUES; FUTURE CAPACITY REVENUE MAY NOT OCCUR AT EXPECTED LEVELS; NATURAL DISASTERS, SUCH AS HURRICANES, EARTHQUAKES, DROUGHTS, WILDFIRES AND FLOODS, ACTS OF TERRORISM OR CYBER-ATTACKS THAT MAY AFFECT OUR POWER PLANTS OR THE MARKETS OUR POWER PLANTS OR RETAIL OPERATIONS SERVE AND OUR CORPORATE HEADQUARTERS; DISRUPTIONS IN OR LIMITATIONS ON THE TRANSPORTATION OF NATURAL GAS OR FUEL OIL AND THE TRANSMISSION OF POWER; OUR ABILITY TO MANAGE OUR COUNTERPARTY AND CUSTOMER EXPOSURE AND CREDIT RISK, INCLUDING OUR COMMODITY POSITIONS; OUR ABILITY TO ATTRACT, MOTIVATE AND RETAIN KEY EMPLOYEES; PRESENT AND POSSIBLE FUTURE CLAIMS, LITIGATION AND ENFORCEMENT ACTIONS THAT MAY ARISE FROM NONCOMPLIANCE WITH MARKET RULES PROMULGATED BY THE SEC, CFTC, FERC AND OTHER REGULATORY BODIES; AND OTHER RISKS IDENTIFIED IN THIS PRESS RELEASE, IN OUR ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2016, AND IN OTHER REPORTS FILED BY US WITH THE SEC. GIVEN THE RISKS AND UNCERTAINTIES SURROUNDING FORWARD-LOOKING STATEMENTS, YOU SHOULD NOT PLACE UNDUE RELIANCE ON THESE STATEMENTS. MANY OF THESE FACTORS ARE BEYOND OUR ABILITY TO CONTROL OR PREDICT. OUR FORWARD-LOOKING STATEMENTS SPEAK ONLY AS OF THE DATE OF THIS RELEASE. OTHER THAN AS REQUIRED BY LAW, WE UNDERTAKE NO OBLIGATION TO UPDATE OR REVISE FORWARD-LOOKING STATEMENTS, WHETHER AS A RESULT OF NEW INFORMATION, FUTURE EVENTS, OR OTHERWISE. PREFERRED STOCK, $0.001 PAR VALUE PER SHARE; AUTHORIZED 100,000,000 SHARES, NONE ISSUED AND OUTSTANDING CALPINE CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED) (IN MILLIONS) (13 (611 396 — __________ (1) INCLUDES AMORTIZATION INCLUDED IN COMMODITY REVENUE AND COMMODITY EXPENSE ASSOCIATED WITH INTANGIBLE ASSETS AND AMORTIZATION RECORDED IN INTEREST EXPENSE ASSOCIATED WITH DEBT ISSUANCE COSTS AND DISCOUNTS. REGULATION G RECONCILIATIONS IN ADDITION TO DISCLOSING FINANCIAL RESULTS IN ACCORDANCE WITH U.S. GAAP, THE ACCOMPANYING FIRST QUARTER 2017 EARNINGS RELEASE CONTAINS NON-GAAP FINANCIAL MEASURES. NET INCOME (LOSS), AS ADJUSTED, COMMODITY MARGIN, ADJUSTED EBITDA AND ADJUSTED FREE CASH FLOW ARE NON-GAAP FINANCIAL MEASURES THAT WE USE AS MEASURES OF OUR PERFORMANCE. THESE NON-GAAP MEASURES SHOULD BE VIEWED AS A SUPPLEMENT TO AND NOT A SUBSTITUTE FOR OUR U.S. GAAP MEASURES OF PERFORMANCE, AND THE FINANCIAL RESULTS CALCULATED IN ACCORDANCE WITH U.S. GAAP AND RECONCILIATIONS FROM THESE RESULTS SHOULD BE CAREFULLY EVALUATED. NET LOSS, AS ADJUSTED, REPRESENTS NET LOSS ATTRIBUTABLE TO CALPINE, ADJUSTED FOR CERTAIN NON-CASH AND NON-RECURRING ITEMS, INCLUDING MARK-TO-MARKET (GAIN) LOSS ON DERIVATIVES, DEBT MODIFICATION AND EXTINGUISHMENT COSTS AND OTHER ADJUSTMENTS. NET LOSS, AS ADJUSTED, IS PRESENTED BECAUSE WE BELIEVE IT IS A USEFUL TOOL FOR ASSESSING THE OPERATING PERFORMANCE OF OUR COMPANY IN THE CURRENT PERIOD. NET LOSS, AS ADJUSTED, IS NOT INTENDED TO REPRESENT NET INCOME (LOSS), THE MOST COMPARABLE U.S. GAAP MEASURE, AS AN INDICATOR OF OPERATING PERFORMANCE, AND IS NOT NECESSARILY COMPARABLE TO SIMILARLY TITLED MEASURES REPORTED BY OTHER COMPANIES. COMMODITY MARGIN INCLUDES OUR POWER AND STEAM REVENUES, SALES OF PURCHASED POWER AND PHYSICAL NATURAL GAS, CAPACITY REVENUE, REVENUE FROM RENEWABLE ENERGY CREDITS, SALES OF SURPLUS EMISSION ALLOWANCES, TRANSMISSION REVENUE AND EXPENSES, FUEL AND PURCHASED ENERGY EXPENSE, FUEL TRANSPORTATION EXPENSE, ENVIRONMENTAL COMPLIANCE EXPENSE, AND REALIZED SETTLEMENTS FROM OUR MARKETING, HEDGING, OPTIMIZATION AND TRADING ACTIVITIES, BUT EXCLUDES MARK-TO-MARKET ACTIVITY AND OTHER REVENUES. WE BELIEVE THAT COMMODITY MARGIN IS A USEFUL TOOL FOR ASSESSING THE PERFORMANCE OF OUR CORE OPERATIONS AND IS A KEY OPERATIONAL MEASURE REVIEWED BY OUR CHIEF OPERATING DECISION MAKER. COMMODITY MARGIN IS NOT A MEASURE CALCULATED IN ACCORDANCE WITH U.S. GAAP AND SHOULD BE VIEWED AS A SUPPLEMENT TO AND NOT A SUBSTITUTE FOR OUR RESULTS OF OPERATIONS PRESENTED IN ACCORDANCE WITH U.S. GAAP. COMMODITY MARGIN DOES NOT INTEND TO REPRESENT INCOME FROM OPERATIONS, THE MOST COMPARABLE U.S. GAAP MEASURE, AS AN INDICATOR OF OPERATING PERFORMANCE AND IS NOT NECESSARILY COMPARABLE TO SIMILARLY TITLED MEASURES REPORTED BY OTHER COMPANIES. ADJUSTED EBITDA REPRESENTS NET LOSS ATTRIBUTABLE TO CALPINE BEFORE NET (INCOME) ATTRIBUTABLE TO THE NONCONTROLLING INTEREST, INTEREST, TAXES, DEPRECIATION AND AMORTIZATION, ADJUSTED FOR CERTAIN NON-CASH AND NON-RECURRING ITEMS AS DETAILED IN THE FOLLOWING RECONCILIATION. ADJUSTED EBITDA IS NOT INTENDED TO REPRESENT CASH FLOWS FROM OPERATIONS OR NET INCOME (LOSS) AS DEFINED BY U.S. GAAP AS AN INDICATOR OF OPERATING PERFORMANCE AND IS NOT NECESSARILY COMPARABLE TO SIMILARLY TITLED MEASURES REPORTED BY OTHER COMPANIES. WE BELIEVE ADJUSTED EBITDA IS USEFUL TO INVESTORS AND OTHER USERS OF OUR FINANCIAL STATEMENTS IN EVALUATING OUR OPERATING PERFORMANCE BECAUSE IT PROVIDES THEM WITH AN ADDITIONAL TOOL TO COMPARE BUSINESS PERFORMANCE ACROSS COMPANIES AND ACROSS PERIODS. WE BELIEVE THAT EBITDA IS WIDELY USED BY INVESTORS TO MEASURE A COMPANY’S OPERATING PERFORMANCE WITHOUT REGARD TO ITEMS SUCH AS INTEREST EXPENSE, TAXES, DEPRECIATION AND AMORTIZATION, WHICH CAN VARY SUBSTANTIALLY FROM COMPANY TO COMPANY DEPENDING UPON ACCOUNTING METHODS AND BOOK VALUE OF ASSETS, CAPITAL STRUCTURE AND THE METHOD BY WHICH ASSETS WERE ACQUIRED. ADDITIONALLY, WE BELIEVE THAT INVESTORS COMMONLY ADJUST EBITDA INFORMATION TO ELIMINATE THE EFFECTS OF RESTRUCTURING AND OTHER EXPENSES, WHICH VARY WIDELY FROM COMPANY TO COMPANY AND IMPAIR COMPARABILITY. AS WE DEFINE IT, ADJUSTED EBITDA REPRESENTS EBITDA ADJUSTED FOR THE EFFECTS OF IMPAIRMENT LOSSES, GAINS OR LOSSES ON SALES, DISPOSITIONS OR RETIREMENTS OF ASSETS, ANY MARK-TO-MARKET GAINS OR LOSSES FROM ACCOUNTING FOR DERIVATIVES, ADJUSTMENTS TO EXCLUDE THE ADJUSTED EBITDA RELATED TO THE NONCONTROLLING INTEREST, STOCK-BASED COMPENSATION EXPENSE, OPERATING LEASE EXPENSE, NON-CASH GAINS AND LOSSES FROM FOREIGN CURRENCY TRANSLATIONS, MAJOR MAINTENANCE EXPENSE, GAINS OR LOSSES ON THE REPURCHASE, MODIFICATION OR EXTINGUISHMENT OF DEBT, NON-CASH GAAP-RELATED ADJUSTMENTS TO LEVELIZE REVENUES FROM TOLLING AGREEMENTS AND ANY UNUSUAL OR NON-RECURRING ITEMS PLUS ADJUSTMENTS TO REFLECT THE ADJUSTED EBITDA FROM OUR UNCONSOLIDATED INVESTMENTS. WE ADJUST FOR THESE ITEMS IN OUR ADJUSTED EBITDA AS OUR MANAGEMENT BELIEVES THAT THESE ITEMS WOULD DISTORT THEIR ABILITY TO EFFICIENTLY VIEW AND ASSESS OUR CORE OPERATING TRENDS. IN SUMMARY, OUR MANAGEMENT USES ADJUSTED EBITDA AS A MEASURE OF OPERATING PERFORMANCE TO ASSIST IN COMPARING PERFORMANCE FROM PERIOD TO PERIOD ON A CONSISTENT BASIS AND TO READILY VIEW OPERATING TRENDS, AS A MEASURE FOR PLANNING AND FORECASTING OVERALL EXPECTATIONS AND FOR EVALUATING ACTUAL RESULTS AGAINST SUCH EXPECTATIONS, AND IN COMMUNICATIONS WITH OUR BOARD OF DIRECTORS, SHAREHOLDERS, CREDITORS, ANALYSTS AND INVESTORS CONCERNING OUR FINANCIAL PERFORMANCE. ADJUSTED FREE CASH FLOW REPRESENTS NET INCOME (LOSS) BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION, AS ADJUSTED, LESS OPERATING LEASE PAYMENTS, MAJOR MAINTENANCE EXPENSE AND MAINTENANCE CAPITAL EXPENDITURES, NET CASH INTEREST, CASH TAXES AND OTHER ADJUSTMENTS, INCLUDING NON-RECURRING ITEMS. ADJUSTED FREE CASH FLOW IS PRESENTED BECAUSE WE BELIEVE IT IS A USEFUL TOOL FOR ASSESSING THE FINANCIAL PERFORMANCE OF OUR COMPANY IN THE CURRENT PERIOD. ADJUSTED FREE CASH FLOW IS A LIQUIDITY MEASURE AND IS NOT INTENDED TO REPRESENT CASH FLOWS FROM OPERATING ACTIVITIES, THE MOST DIRECTLY COMPARABLE U.S. GAAP MEASURE, AND IS NOT NECESSARILY COMPARABLE TO SIMILARLY TITLED MEASURES REPORTED BY OTHER COMPANIES. NET LOSS, AS ADJUSTED RECONCILIATION THE FOLLOWING TABLE RECONCILES OUR NET LOSS, AS ADJUSTED, TO ITS U.S. GAAP RESULTS FOR THE THREE MONTHS ENDED MARCH 31, 2017 AND 2016 (IN MILLIONS): __________ (1) ASSUMES A 0% EFFECTIVE TAX RATE FOR THESE ITEMS. (2) IN ADDITION TO CHANGES IN MARKET VALUE ON DERIVATIVES NOT DESIGNATED AS HEDGES, CHANGES IN MARK-TO-MARKET (GAIN) LOSS ALSO INCLUDE HEDGE INEFFECTIVENESS AND ADJUSTMENTS TO REFLECT CHANGES IN CREDIT DEFAULT RISK EXPOSURE. COMMODITY MARGIN RECONCILIATION THE FOLLOWING TABLES RECONCILE INCOME (LOSS) FROM OPERATIONS TO COMMODITY MARGIN FOR THE THREE MONTHS ENDED MARCH 31, 2017 AND 2016 (IN MILLIONS): $ 88 $ 221 $ (114 ) $ — (6 ) (110 ) (6 ) $ 153 $ — _________ (1) INCLUDES $(22) MILLION AND $(22) MILLION OF LEASE LEVELIZATION AND $60 MILLION AND $27 MILLION OF AMORTIZATION EXPENSE FOR THE THREE MONTHS ENDED MARCH 31, 2017 AND 2016, RESPECTIVELY. CONSOLIDATED ADJUSTED EBITDA RECONCILIATION IN THE FOLLOWING TABLE, WE HAVE RECONCILED OUR ADJUSTED EBITDA AND ADJUSTED FREE CASH FLOW TO OUR NET INCOME ATTRIBUTABLE TO CALPINE FOR THE THREE MONTHS ENDED MARCH 31, 2017 AND 2016, AS REPORTED UNDER U.S. GAAP (IN MILLIONS): _________ (1) EXCLUDES DEPRECIATION AND AMORTIZATION EXPENSE ATTRIBUTABLE TO THE NON-CONTROLLING INTEREST. (2) ADJUSTMENTS TO REFLECT ADJUSTED EBITDA FROM UNCONSOLIDATED INVESTMENTS INCLUDE (GAIN) LOSS ON MARK-TO-MARKET ACTIVITY OF NIL FOR EACH OF THE THREE MONTHS ENDED MARCH 31, 2017 AND 2016. (3) INCLUDES $65 MILLION AND $65 MILLION IN MAJOR MAINTENANCE EXPENSE FOR THE THREE MONTHS ENDED MARCH 31, 2017 AND 2016, RESPECTIVELY, AND $50 MILLION AND $40 MILLION IN MAINTENANCE CAPITAL EXPENDITURES FOR THE THREE MONTHS ENDED MARCH 31, 2017 AND 2016, RESPECTIVELY. (4) INCLUDES COMMITMENT, LETTER OF CREDIT AND OTHER BANK FEES FROM BOTH CONSOLIDATED AND UNCONSOLIDATED INVESTMENTS, NET OF CAPITALIZED INTEREST AND INTEREST INCOME. (5) ADJUSTED FREE CASH FLOW, AS REPORTED, EXCLUDES CHANGES IN WORKING CAPITAL, SUCH THAT IT IS CALCULATED ON THE SAME BASIS AS OUR GUIDANCE. IN THE FOLLOWING TABLE, WE HAVE RECONCILED OUR ADJUSTED EBITDA TO OUR COMMODITY MARGIN, BOTH OF WHICH ARE NON-GAAP MEASURES, FOR THE THREE MONTHS ENDED MARCH 31, 2017 AND 2016. RECONCILIATIONS FOR BOTH ADJUSTED EBITDA AND COMMODITY MARGIN TO COMPARABLE U.S. GAAP MEASURES ARE PROVIDED ABOVE. AMOUNTS BELOW ARE SHOWN EXCLUSIVE OF THE NONCONTROLLING INTEREST (IN MILLIONS): _________ (1) SHOWN NET OF MAJOR MAINTENANCE EXPENSE, STOCK-BASED COMPENSATION EXPENSE, NON-CASH LOSS ON DISPOSITIONS OF ASSETS AND OTHER COSTS. (2) SHOWN NET OF STOCK-BASED COMPENSATION EXPENSE AND OTHER COSTS. (3) SHOWN NET OF OPERATING LEASE EXPENSE, AMORTIZATION AND OTHER COSTS. ADJUSTED FREE CASH FLOW RECONCILIATION IN THE FOLLOWING TABLE, WE HAVE RECONCILED OUR CASH FLOWS FROM OPERATING ACTIVITIES TO OUR ADJUSTED FREE CASH FLOW FOR THE THREE MONTHS ENDED MARCH 31, 2017 AND 2016 (IN MILLIONS): _________ (1) ADJUSTMENT EXCLUDES $(13) MILLION AND $10 MILLION IN AMORTIZATION OF ACQUIRED DERIVATIVES CONTRACTS FOR THE THREE MONTHS ENDED MARCH 31, 2017 AND 2016, RESPECTIVELY. (2) ADJUSTMENT PRIMARILY REPRESENTS MISCELLANEOUS ITEMS EXCLUDED FROM ADJUSTED EBITDA THAT ARE INCLUDED IN CASH FLOW FROM OPERATIONS. ADJUSTED EBITDA AND ADJUSTED FREE CASH FLOW RECONCILIATION FOR GUIDANCE (IN MILLIONS) _________ (1) FOR PURPOSES OF NET INCOME GUIDANCE RECONCILIATION, MARK-TO-MARKET ADJUSTMENTS ARE ASSUMED TO BE NIL. (2) OTHER INCLUDES STOCK-BASED COMPENSATION EXPENSE, ADJUSTMENTS TO REFLECT ADJUSTED EBITDA FROM UNCONSOLIDATED INVESTMENTS, INCOME TAX EXPENSE AND OTHER ITEMS. (3) INCLUDES PROJECTED MAJOR MAINTENANCE EXPENSE OF $315 MILLION AND MAINTENANCE CAPITAL EXPENDITURES OF $120 MILLION. CAPITAL EXPENDITURES EXCLUDE MAJOR CONSTRUCTION AND DEVELOPMENT PROJECTS. (4) INCLUDES COMMITMENT, LETTER OF CREDIT AND OTHER BANK FEES FROM BOTH CONSOLIDATED AND UNCONSOLIDATED INVESTMENTS, NET OF CAPITALIZED INTEREST AND INTEREST INCOME. OPERATING PERFORMANCE METRICS THE TABLE BELOW SHOWS THE OPERATING PERFORMANCE METRICS FOR THE PERIODS PRESENTED: ________ (1) EXCLUDES GENERATION FROM UNCONSOLIDATED POWER PLANTS AND POWER PLANTS OWNED BUT NOT OPERATED BY US. (2) GENERATION, AVERAGE AVAILABILITY AND STEAM ADJUSTED HEAT RATE EXCLUDE POWER PLANTS AND UNITS THAT ARE INACTIVE.
- Calpine Reports Fourth Quarter and Full Year 2016 Results, Reaffirms
2017 Guidance
Feb 10, 2017 · businesswire.com
HOUSTON--(BUSINESS WIRE)--Calpine Corporation (NYSE: CPN): Summary of 2016 Financial Results (in millions): NM NM NM NM Reaffirming 2017 Full Year Guidance (in millions): Recent Achievements: Power and Commercial Operations:— Achieved new Calpine record and top quartile3 safety metric: 0.55 total recordable incident rate in 2016— Generated approximately 110 million MWh4 in 2016— Delivered strong fleetwide starting reliability: 97.9% Portfolio Management:— Announced and closed accretive acquisition of leading commercial and industrial retail electricity provider Calpine Energy Solutions, formerly Noble Americas Energy Solutions, LLC— Acquired growing residential retail provider North American Power for approximately $105 million5, representing an attractively priced portfolio addition to our Champion Energy retail platform— Closed on the sale of our Mankato Power Plant to Southern Company for $396 million5— Closed on the sale of our Osprey Power Plant to Duke Energy for $166 million5 Balance Sheet Management:— As part of our commitment to delever and reduce interest expense, we have commenced the redemption and refinancing of $453 million of our 7.875% First Lien Notes due 2023, resulting in more than $20 million of annual interest savings— Redeemed $120 million of our 7.875% First Lien Notes due 2023 at a price of 103— Repriced our 2023 First Lien Term Loans by lowering the margin over LIBOR by 0.25% to 2.75% and extended the maturity of 2024 First Lien Term Loan from May 2022 to January 2024— Increased revolver capacity by approximately $112 million to $1,790 million through June 2020 Calpine Corporation (NYSE: CPN) today reported Net Income1 of $24 million, or $0.07 per diluted share, for the fourth quarter of 2016 compared to Net Loss1 of $47 million, or $0.13 per diluted share, in the prior year period. Net Income in 2016 was $92 million, or $0.26 per diluted share, compared to $235 million, or $0.64 per diluted share, in the prior year. The year-over-year increase in Net Income during the fourth quarter was primarily due to a gain recognized on the sale of our Mankato Power Plant and lower planet operating expense, partially offset by a higher income tax expense due to the restructuring of certain international entities in 2015 that did not recur in 2016. The decrease in Net Income in 2016 compared to 2015 was primarily due to lower operating revenue, net of operating expense, and higher income tax expense, as previously discussed, partially offset by the gain recognized on the sale of our Mankato Power Plant. Adjusted EBITDA2 for the fourth quarter was $357 million compared to $390 million in the prior year period, and Adjusted Free Cash Flow2 was $93 million compared to $97 million in the prior year period. The decreases in Adjusted EBITDA and Adjusted Free Cash Flow were primarily due to lower Commodity Margin2, largely driven by lower energy margins due to decreased contribution from wholesale hedges, partially offset by a decrease in plant operating expense6 due to the net period-over-period impact from a wildfire at our Geysers assets in 2015. Net Loss, As Adjusted2, for the fourth quarter of 2016 was $145 million compared to Net Income, As Adjusted, of $67 million in the prior year period. The decrease in Net Income, As Adjusted, was primarily due to lower Commodity Margin and higher income tax expense, as previously discussed. Adjusted EBITDA in 2016 was $1,815 million compared to $1,976 million in the prior year, and Adjusted Free Cash Flow was $736 million compared to $842 million in the prior year. The decreases in Adjusted EBITDA and Adjusted Free Cash Flow were largely due to lower Commodity Margin, driven primarily by lower energy margins due to decreased contribution from wholesale hedges, partially offset by a decrease in plant operating expense6 due to the net year-over-year impact from a wildfire at our Geysers assets in 2015 and a decrease in repairs and maintenance expense and production-related expense. Net Loss, As Adjusted, was $28 million in 2016 compared to Net Income, As Adjusted, of $385 million in the prior year. The decrease in Net Income, As Adjusted, was primarily due to lower Commodity Margin and higher income tax expense, as previously discussed. “Today, I am pleased to announce solid full-year 2016 earnings, continuing our strong, stable track record,” said Thad Hill, Calpine’s President and Chief Executive Officer. “Specifically, for the eighth consecutive year, we delivered on our financial performance commitments, achieving full-year Adjusted EBITDA and Adjusted Free Cash Flow within our guidance range, despite a challenging commodity environment in 2016. Our enduring commitment to operational excellence, customer focus and financial discipline is reflected in our 2016 accomplishments - our best safety performance on record; maintaining a competitive cost structure while continuing to achieve best-in-class operating performance and leading the industry in advocacy efforts; the successful integration of Champion Energy and the strategic completion of our broader retail platform through two additional acquisitions; and the divestiture of non-core generation assets for good value. Difficult markets come and go, but the Calpine team has stayed focused where it matters. I extend my sincere personal thanks to the entire Calpine team. “As I look ahead at 2017, our top priorities are to successfully integrate our retail platforms, execute on our delevering plan and, once again, deliver on our 2017 guidance of $1.8 - $1.95 billion of Adjusted EBITDA and $710 - $860 million of Adjusted Free Cash Flow. “On the retail front, over the past several months, we have strategically solidified and expanded our platform with acquisitions that complement our wholesale fleet and increase our access to end-use customers while boosting our margins in core power markets. We accretively recycled capital by completing the sales of our Mankato and Osprey power plants in non-core regions and reinvesting the proceeds into the purchases of Calpine Energy Solutions, one of the nation’s largest suppliers of power to commercial and industrial customers, and North American Power, a residential retail energy provider. With these changes to our portfolio, the integration of our retail businesses, not only with each other but also with our existing wholesale power business, is a priority. In order to assure a successful effort, Trey Griggs, formerly our Executive Vice President and Chief Commercial Officer, has assumed a new role as Executive Vice President and President, Calpine Retail, leading the integration and expanding the retail platform going forward. Andrew Novotny, Senior Vice President of Commercial Operations, and Caleb Stephenson, Senior Vice President of Wholesale Origination and Commercial Analytics, will oversee our wholesale activities and report directly to me. These organizational changes will establish alignment for our team to meet our goals for 2017 and beyond. “In terms of debt reduction, we have begun to execute on and are today updating the delevering plan we laid out on our third quarter earnings call. In December 2016, we redeemed $120 million of our 7.875% First Lien Notes that mature in 2023. More recently, we called the remaining $453 million of these notes, which will be funded with cash and proceeds from a 2019 term loan that we are committed to paying off in 2018. This structure accelerates our delevering plan and achieves interest savings in the interim. Our updated plan calls for $2.7 billion of committed or planned debt paydown by 2019, reducing our leverage by almost 1.5 turns at current Adjusted EBITDA levels. Importantly, after this paydown, we project that we will still have several hundred million dollars of deployable cash by the end of 2019, as well as increased financial flexibility. “In 2017, our delevering and retail integration efforts will be enhanced by our continued focus on financial discipline, maintaining our active advocacy for and defense of competitive power markets and remaining the premier operator of the highest quality assets. In short, these attributes have and will continue to enable us to deliver stable results through commodity market cycles. As these aspects of the strategy complement each other, our continued results and cash generation will provide value to shareholders for years to come.” __________ 1 Reported as Net Income (Loss) attributable to Calpine on our Consolidated Statements of Operations. 2 Non-GAAP financial measure, see “Regulation G Reconciliations” for further details. 3 According to EEI Safety Survey (2015). 4 Includes generation from power plants owned but not operated by Calpine and our share of generation from unconsolidated power plants. 5 Excluding working capital and other adjustments. 6 Increase in plant operating expense excludes changes in major maintenance expense, stock-based compensation expense, non-cash loss on disposition of assets and other costs. See the table titled “Consolidated Adjusted EBITDA Reconciliation” for the actual amounts of these items for the three months and years ended December 31, 2016 and 2015. SUMMARY OF FINANCIAL PERFORMANCE Fourth Quarter Results Adjusted EBITDA for the fourth quarter of 2016 was $357 million compared to $390 million in the prior year period. The year-over-year decrease in Adjusted EBITDA was primarily related to a $73 million decrease in Commodity Margin, partially offset by a $36 million decrease in plant operating expense6, as previously discussed. The decrease in Commodity Margin was primarily due to: the net impact of our portfolio management activities, including the acquisition of Granite Ridge Energy Center in February 2016, partially offset by the sale of Mankato Power Plant in October 2016 and Adjusted Free Cash Flow was $93 million in the fourth quarter of 2016 compared to $97 million in the prior year period. Adjusted Free Cash Flow decreased due to lower Adjusted EBITDA, as previously discussed, partially offset by lower major maintenance expense and capital expenditures associated with the timing of planned outages. Full Year Results Adjusted EBITDA in 2016 was $1,815 million compared to $1,976 million in the prior year. The year-over-year decrease in Adjusted EBITDA was primarily related to a $182 million decrease in Commodity Margin, partially offset by a $22 million decrease in plant operating expense6, as previously discussed. The decrease in Commodity Margin was primarily due to: the net impact of our contracts, including the expiration of a PPA and a resource adequacy contract at our Pastoria Energy Center in December 2015, partially offset by a new PPA at our Morgan Energy Center in February 2016 and the receipt of a natural gas pipeline transportation billing credit in the West in the second quarter of 2016, the net impact of our portfolio management activities, including the acquisition of Granite Ridge Energy Center in February 2016 and the commencement of commercial operations at Garrison Energy Center in June 2015, partially offset by the expiration of the Greenleaf operating lease in June 2015 and the sale of Mankato Power Plant in October 2016. Adjusted Free Cash Flow was $736 million in 2016, compared to $842 million in the prior year. Adjusted Free Cash Flow decreased during the period primarily due to due to lower Adjusted EBITDA, as previously discussed, partially offset by lower major maintenance expense and capital expenditures associated with the timing of planned outages. REGIONAL SEGMENT REVIEW OF RESULTS Table 1: Commodity Margin by Segment (in millions) West Region Fourth Quarter: Commodity Margin in our West segment decreased by $21 million in the fourth quarter of 2016 compared to the prior year period. Primary drivers were: Full Year: Commodity Margin in our West segment decreased by $115 million in 2016, compared to the prior year. Primary drivers were: Texas Region Fourth Quarter: Commodity Margin in our Texas segment decreased by $9 million in the fourth quarter of 2016 compared to the prior year period. Primary drivers were: Full Year: Commodity Margin in our Texas segment decreased by $81 million in 2016, compared to the prior year. Primary drivers were: East Region Fourth Quarter: Commodity Margin in our East segment decreased $43 million in the fourth quarter of 2016 compared to the prior year period. Primary drivers were: the net impact of our portfolio management activities, including the acquisition of Granite Ridge Energy Center in February 2016, partially offset by the sale of Mankato Power Plant in October 2016 and Full Year: Commodity Margin in our East segment increased by $14 million in 2016, compared to the prior year. Primary drivers were: the net impact of our portfolio management activities, including the acquisition of Granite Ridge Energy Center in February 2016 and the commencement of commercial operations at Garrison Energy Center in June 2015, partially offset by the sale of Mankato Power Plant in October 2016, the positive impact of a new PPA associated with our Morgan Energy Center, which became effective in February 2016, and higher contribution from our retail hedging activity during 2016 following the acquisitions of Champion Energy in October 2015 and Calpine Energy Solutions in December 2016, partially offset by LIQUIDITY, CASH FLOW AND CAPITAL RESOURCES Table 2: Liquidity (in millions) __________ (1) Includes $16 million and $35 million of margin deposits posted with us by our counterparties at December 31, 2016 and 2015, respectively. On January 3, 2017, we received $162 million in cash proceeds from the sale of Osprey Energy Center. (2) Our ability to use availability under our Corporate Revolving Facility is unrestricted. On February 8, 2016, we amended our Corporate Revolving Facility, extending the maturity by two years to June 27, 2020, and increasing the capacity by an additional $178 million to $1,678 million through June 27, 2018, reverting back to $1,520 million through the maturity date. Further, we increased the letter of credit sublimit by $250 million to $1.0 billion and extended the maturity by two years to June 27, 2020. On December 1, 2016, we further amended our Corporate Revolving Facility, increasing the capacity by $112 million to $1,790 million for the full term through June 27, 2020. (3) Our ability to use corporate cash and cash equivalents is unrestricted. Our $300 million CDHI letter of credit facility is restricted to support certain obligations under PPAs and power transmission and natural gas transportation agreements. Liquidity was approximately $1.9 billion as of December 31, 2016. Cash and cash equivalents decreased in 2016 primarily due to the acquisitions of Granite Ridge Energy Center and Calpine Energy Solutions, capital expenditures on construction projects and outages, and repayments of project financing, notes payable and financing costs, partially offset by cash provided by the sale of our Mankato Power Plant, as well as from operating and financing activities. Table 3: Cash Flow Activities (in millions) ) Cash provided by operating activities in 2016 was $1,030 million compared to $876 million in the prior year. The increase in cash provided by operating activities was primarily due to a decrease in working capital employed, a reduction in cash paid for interest due to our refinancing activities and a reduction in debt modification and extinguishment payments, partially offset by a decrease in income from operations, adjusted for non-cash items. Cash used in investing activities was $1,919 million during 2016 compared to $841 million in the prior year. The increase was primarily related to the purchases of Calpine Energy Solutions for $1,150 million (before recovery of working capital and collateral) and Granite Ridge Energy Center for $526 million, partially offset by approximately $164 million of net proceeds from the sale of Mankato Power Plant and a decrease in capital expenditures on construction projects and outages. Cash provided by financing activities was $401 million during 2016 and was primarily related to proceeds from the issuances of our 2017 First Lien Term Loan, 2023 First Lien Term Loan and 2026 First Lien Notes. These inflows were partially offset by payments associated with the redemption of our 2023 First Lien Notes and repayment of our 2019 and 2020 First Lien Term Loans. CAPITAL ALLOCATION Our capital allocation philosophy seeks to maximize levered cash returns to equity while maintaining a strong balance sheet. We seek to enhance shareholder value through a diverse and balanced capital allocation approach that includes portfolio management, organic or acquisitive growth, returning capital to shareholders and debt reduction. The mix of this activity shifts over time given the external market environment and the opportunity set. In the current environment, we believe that paying down debt and strengthening our balance sheet is a high return investment for our shareholders. We also consider the repurchases of our own shares of common stock as an attractive investment opportunity, and we utilize the expected returns from this investment as the benchmark against which we evaluate all other capital allocation decisions. We believe this philosophy closely aligns our objectives with those of our shareholders. Managing Our Balance Sheet We further optimized our capital structure by refinancing, redeeming or amending several of our debt instruments during the year ended December 31, 2016: 2023 First Lien Notes: — As part of our commitment to reduce debt and interest expense, on February 3, 2017, we issued a notice of redemption to repay the remaining $453 million of our 7.875% First Lien Notes due in 2023 using cash on hand along with the proceeds from a new $400 million three-year First Lien Term Loan priced at LIBOR + 1.75% per annum. We intend to repay the 2019 First Lien Term Loan in full by the end of 2018. This accelerates debt reduction and achieves substantial annual interest savings of more than $20 million in the interim.— In December 2016, we used cash on hand to redeem $120 million of our 7.875% First Lien Notes due in 2023 at a price of 103. First Lien Term Loans: — In December 2016, we repriced our 2023 First Lien Term Loans by lowering the margin over LIBOR by 0.25% to 2.75% and extended the maturity of our 2024 First Lien Term Loan from May 2022 to January 2024. Russell City Project Debt: — In November 2016, we repriced our Russell City project debt by lowering the margin over LIBOR by 0.50% - 0.75% through the maturity date. Corporate Revolving Facility: — On December 1, 2016, we amended our Corporate Revolving Facility to increase the aggregate revolving loan commitments available thereunder by approximately $112 million to $1,790 million for the full term through the maturity date of June 27, 2020. Expanding Our Customer Sales Channels We continue to focus on getting closer to our customers through expansion of our retail platform, which began with the acquisition of Champion Energy in 2015, and was followed by the acquisitions of Calpine Energy Solutions in late 2016 and North American Power in early 2017. Our retail platform geographically and strategically complements our wholesale generation fleet by providing forward liquidity with sufficient margins. The combination of our wholesale origination and retail platform provides Calpine access to both direct and mass market sales channels. Our direct sales efforts aim to provide our larger customers with customized products, leveraging both our successful wholesale origination efforts and Calpine Energy Solutions’ presence among large commercial and industrial organizations to secure new contracts. Our mass market approach relies upon our expanded Champion Energy retail platform to serve the needs of both residential and smaller commercial and industrial customers across the country. We believe that our retail platform is strategically complete and are now focused on integrating it into our business and optimizing its financial performance. Acquisition of Calpine Energy Solutions On December 1, 2016, we completed the purchase of Calpine Energy Solutions, formerly Noble Americas Energy Solutions, along with a swap contract for approximately $800 million plus approximately $350 million of net working capital at closing. We recovered approximately $250 million in cash subsequent to closing and expect to recover an additional approximately $200 million through collateral synergies and the runoff of acquired legacy hedges, substantially within the first year. Calpine Energy Solutions is a commercial and industrial retail electricity provider with customers in 19 states in the U.S., including presence in California, Texas, the Mid-Atlantic and Northeast, where our wholesale power generation fleet is primarily concentrated. The acquisition of this best-in-class direct energy sales platform is consistent with our stated goal of getting closer to our end-use customers and expands our retail customer base, complementing our existing retail business while providing us a valuable sales channel for reaching a much greater portion of the load we seek to serve. Acquisition of North American Power & Gas, LLC On January 17, 2017, we completed the purchase of North American Power for approximately $105 million, excluding working capital and other adjustments. North American Power is a growing retail energy supplier for homes and small businesses and is primarily concentrated in the Northeast U.S., where Calpine has a substantial power generation presence and where Champion Energy has a substantial retail sales footprint that will be enhanced by the addition of North American Power, which will be integrated into our Champion Energy retail platform. Portfolio Management East: York 2 Energy Center: York 2 Energy Center is an 828 MW dual-fuel, combined-cycle project that is co-located with our York Energy Center in Peach Bottom Township, Pennsylvania. Once complete, the power plant will feature two combustion turbines, two heat recovery steam generators and one steam turbine. The project is under construction, and the initial 760 MW of capacity cleared PJM’s last three base residual auctions with the 68 MW of incremental capacity clearing the last two base residual auctions. Due to construction delays, we are now targeting COD in late 2017. Mankato Power Plant: On October 26, 2016, we completed the sale of our Mankato Power Plant, a 375 MW natural gas-fired, combined-cycle power plant and a 345 MW expansion project under advanced development located in Minnesota, to Southern Power Company, a subsidiary of Southern Company, for $396 million, excluding working capital and other adjustments. This transaction supports our effort to divest non-core assets outside our strategic concentration. Osprey Energy Center: On January 3, 2017, we completed the sale of our Osprey Energy Center to Duke Energy Florida, Inc. for approximately $166 million, excluding working capital and other adjustments. This transaction supports our effort to divest non-core assets outside our strategic concentration. Texas: Clear Lake Power Plant: During the third quarter of 2016, we filed with ERCOT to retire our 400 MW Clear Lake Power Plant. ERCOT subsequently approved our plan to discontinue operations. Built in 1985, Clear Lake utilized an older technology. Due to growing maintenance costs and lack of adequate compensation in Texas, we retired the power plant on February 1, 2017. Guadalupe Peaking Energy Center: In April 2015, we executed an agreement with Guadalupe Valley Electric Cooperative (“GVEC”) related to the construction of a 418 MW natural gas-fired peaking power plant to be co-located with our Guadalupe Energy Center. Under the terms of the agreement, construction of the Guadalupe Peaking Energy Center (“GPEC”) may commence at our discretion, so long as the power plant reaches commercial operation by June 1, 2019. When the power plant begins commercial operation, GVEC will purchase a 50% ownership interest in GPEC. Once built, GPEC will feature two fast-ramping combustion turbines capable of responding to peaks in power demand. This project represents a mutually beneficial response to our customer’s desire to have direct access to peaking generation resources, as it leverages the benefits of our existing site and development rights and our construction and operating expertise, as well as our customer’s ability to fund its investment at attractive rates, all while affording us the flexibility of timing the plant’s construction in response to market pricing signals. West: South Point Energy Center: On April 1, 2016, we entered into an asset sale agreement for the sale of substantially all of the assets comprising our South Point Energy Center to Nevada Power Company d/b/a NV Energy for approximately $76 million plus the assumption by the purchaser of existing transmission capacity contracts with a future net present value payment obligation of approximately $112 million, approximately $9 million in remaining tribal lease costs and approximately $21 million in near-term repairs, maintenance and capital improvements to restore the power plant to full capacity. The sale is subject to certain conditions precedent, as well as federal and state regulatory approvals. This transaction supports our effort to divest non-core assets outside our strategic concentration. In December 2016, the Nevada Public Utility Commission (NPUC) issued an order rejecting the asset sale agreement. In January 2017, Nevada Power Company filed a motion for reconsideration of this order. In February 2017, the FERC approved Nevada Power Company’s acquisition of South Point. However, on February 8, 2017, the NPUC denied Nevada Power Company’s purchase of South Point. Nevada Power Company has the right to appeal this decision. We are also currently assessing our options; however, we do not anticipate that the denial of the sale by the NPUC will have a material effect on our financial condition, results of operations or cash flows. OPERATIONS UPDATE 2016 Power Operations Achievements: Safety Performance:— Maintained top quartile4 safety metrics: 0.55 total recordable incident rate Availability Performance:— Achieved low fleetwide forced outage factor7: 2.1%— Delivered strong fleetwide starting reliability: 97.9% Power Generation:— Three Texas merchant power plants with full-year capacity factors greater than 65%:Bosque, Freestone and Pasadena— California peakers achieved 98.2% starting reliability on 1,483 start attempts 2015 Wildfire at our Geysers assets In September 2015, a wildfire spread to our Geysers assets in Lake and Sonoma counties, California. The wildfire affected several of our geothermal power plants in the region, which sustained damage to ancillary structures such as cooling towers and communication/electric deliverability infrastructure. Repairs have been completed, and our Geysers assets are currently generating renewable power for our customers at pre-fire levels. The repair and replacement costs, as well as our net revenue losses relating to the wildfire, were limited to our insurance deductibles of approximately $36 million, all of which was recognized in 2015. The losses incurred in 2016 related to the wildfire were primarily offset by insurance proceeds. We record insurance proceeds in the same financial statement line as the related loss is incurred and recorded approximately $24 million and $2 million in business interruption proceeds in operating revenues during the years ended December 31, 2016 and 2015, respectively. The wildfire and insurance proceeds recovery did not have a material effect on our financial condition, results of operations or cash flows. 2017 Operating Event at our Delta Energy Center On January 29, 2017, we experienced an operating event at our Delta Energy Center that resulted in an emergency shutdown of the power plant; the duration of which has yet to be determined. We are currently assessing the damage to the plant, in particular the steam turbine and steam turbine generator. Based on preliminary information, we anticipate that insurance will cover a significant portion of our losses, after applicable deductibles. 2016 Customer-Based Achievements: Wholesale: — We entered into a new ten-year PPA with the Tennessee Valley Authority to provide 615 MW of energy and capacity from our Morgan Energy Center commencing in February 2016.— Our ten-year PPA with Southern California Edison for 50 MW of capacity and renewable energy from our Geysers assets commencing in January 2018 was approved by the California Public Utility Commission in the second quarter of 2016.— We entered into a new five-year steam agreement, subject to certain conditions precedent, with a wholly owned subsidiary of The Dow Chemical Company to provide steam from our Texas City Power Plant through 2021.— We entered into a new five-year PPA with USS-POSCO Industries to provide 50 MW of energy and steam from our Los Medanos Energy Center commencing in January 2017, which also provides for annual extensions through 2024.— We entered into a new five-year PPA with a third party to provide 50 MW of capacity from our RockGen Energy Center commencing in June 2017, which increases to 100 MW of capacity commencing in June 2019. Retail: — In 2016, our retail subsidiaries served approximately 65 million MWh of customer load consisting of approximately 6.5 million annualized residential customer equivalents at December 31, 2016.— Champion Energy was ranked highest in customer satisfaction among Texas retail electric providers according to the J.D. Power 2016 Electric Provider Retail Customer Satisfaction Study. This is the sixth time Champion Energy has received the top ranking in the past seven years.— During 2016, Champion Energy expanded its service territory to include commercial and industrial customers in Maine, Connecticut and California. ___________ 7 Excludes the impacts of the 2015 Geysers wildfire, Sutter Energy Center (suspended operations) and South Point (pending sale). 2017 FINANCIAL OUTLOOK — ____________ (1) Includes projected major maintenance expense of $315 million and maintenance capital expenditures of $120 million in 2017. Capital expenditures exclude major construction and development projects. (2) Includes commitment, letter of credit and other fees from consolidated and unconsolidated investments, net of capitalized interest and interest income. (3) Amount includes $200 million of recurring amortization, as well as the $550 million repayment of the 2017 First Lien Term Loan, a portion of the of $453 million of our callable 7 7/8% 2023 Senior Secured Notes and the buyout of the Pasadena lessor interest. As detailed above, today we are reaffirming our 2017 guidance range. We expect Adjusted EBITDA of $1.8 billion to $1.95 billion and Adjusted Free Cash Flow of $710 million to $860 million. We expect to invest $220 million in our ongoing growth-related projects during 2017, primarily the construction of York 2 Energy Center. INVESTOR CONFERENCE CALL AND WEBCAST We will host a conference call to discuss our financial and operating results for the fourth quarter and full year 2016 on Friday, February 10, 2017, at 10 a.m. Eastern time / 9 a.m. Central time. A listen-only webcast of the call may be accessed through our website at www.calpine.com, or by dialing (800) 447-0521 in the U.S. or (847) 413-3238 outside the U.S. The confirmation code is 43994310. A recording of the call will be made available for a limited time on our website or by dialing (888) 843-7419 in the U.S. or (630) 652-3042 outside the U.S. and providing confirmation code 43994310. Presentation materials to accompany the conference call will be posted on our website on February 10, 2017. ABOUT CALPINE Calpine Corporation is America’s largest generator of electricity from natural gas and geothermal resources with operations in competitive power markets. Our fleet of 80 power plants in operation or under construction represents approximately 26,000 megawatts of generation capacity. Through wholesale power operations and our retail businesses Calpine Energy Solutions and Champion Energy, we serve customers in 25 states, Canada and Mexico. Our clean, efficient, modern and flexible fleet uses advanced technologies to generate power in a low-carbon and environmentally responsible manner. We are uniquely positioned to benefit from the secular trends affecting our industry, including the abundant and affordable supply of clean natural gas, stricter environmental regulation, aging power generation infrastructure and the increasing need for dispatchable power plants to successfully integrate intermittent renewables into the grid. Please visit www.calpine.com to learn more about why Calpine is a generation ahead - today. Calpine’s Annual Report on Form 10-K for the year ended December 31, 2016, has been filed with the Securities and Exchange Commission (SEC) and is available on the SEC’s website at www.sec.gov. FORWARD-LOOKING INFORMATION In addition to historical information, this release contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act, and Section 21E of the Exchange Act. Forward-looking statements may appear throughout this release. We use words such as “believe,” “intend,” “expect,” “anticipate,” “plan,” “may,” “will,” “should,” “estimate,” “potential,” “project” and similar expressions to identify forward-looking statements. Such statements include, among others, those concerning our expected financial performance and strategic and operational plans, as well as all assumptions, expectations, predictions, intentions or beliefs about future events. We believe that the forward-looking statements are based upon reasonable assumptions and expectations. However, you are cautioned that any such forward-looking statements are not guarantees of future performance and that a number of risks and uncertainties could cause actual results to differ materially from those anticipated in the forward-looking statements. Such risks and uncertainties include, but are not limited to: Financial results that may be volatile and may not reflect historical trends due to, among other things, seasonality of demand, fluctuations in prices for commodities such as natural gas and power, changes in U.S. macroeconomic conditions, fluctuations in liquidity and volatility in the energy commodities markets and our ability and extent to which we hedge risks; Laws, regulations and market rules in the markets in which we participate and our ability to effectively respond to changes in laws, regulations or market rules or the interpretation thereof including those related to the environment, derivative transactions and market design in the regions in which we operate; Our ability to manage our liquidity needs, access the capital markets when necessary and comply with covenants under our Senior Unsecured Notes, First Lien Notes, First Lien Term Loans, Corporate Revolving Facility, CCFC Term Loans and other existing financing obligations; Risks associated with the operation, construction and development of power plants, including unscheduled outages or delays and plant efficiencies; Risks related to our geothermal resources, including the adequacy of our steam reserves, unusual or unexpected steam field well and pipeline maintenance requirements, variables associated with the injection of water to the steam reservoir and potential regulations or other requirements related to seismicity concerns that may delay or increase the cost of developing or operating geothermal resources; Competition, including from renewable sources of power, interference by states in competitive power markets through subsidies or similar support for new or existing power plants, and other risks associated with marketing and selling power in the evolving energy markets; Structural changes in the supply and demand of power, resulting from the development of new fuels or technologies and demand-side management tools (such as distributed generation, power storage and other technologies); The expiration or early termination of our PPAs and the related results on revenues; Future capacity revenue may not occur at expected levels; Natural disasters, such as hurricanes, earthquakes, droughts, wildfires and floods, acts of terrorism or cyber-attacks that may affect our power plants or the markets our power plants or retail operations serve and our corporate headquarters; Disruptions in or limitations on the transportation of natural gas or fuel oil and the transmission of power; Our ability to manage our counterparty and customer exposure and credit risk, including our commodity positions; Our ability to attract, motivate and retain key employees; Present and possible future claims, litigation and enforcement actions that may arise from noncompliance with market rules promulgated by the SEC, CFTC, FERC and other regulatory bodies; and Other risks identified in this press release, in our Annual Report on Form 10-K for the year ended December 31, 2016, and in other reports filed by us with the SEC. Given the risks and uncertainties surrounding forward-looking statements, you should not place undue reliance on these statements. Many of these factors are beyond our ability to control or predict. Our forward-looking statements speak only as of the date of this release. Other than as required by law, we undertake no obligation to update or revise forward-looking statements, whether as a result of new information, future events, or otherwise. Three Months Ended December 31, Weighted average shares of common stock outstanding (in thousands) Net income (loss) per common share attributable to Calpine — basic Weighted average shares of common stock outstanding (in thousands) CALPINE CORPORATION AND SUBSIDIARIES CALPINE CORPORATION AND SUBSIDIARIES $ $ $ (1,231 ) — (120 ) (364 ) (9 ) (58 ) (6 ) (1 154 (488 ) 189 717 $ $ $ (37 ) $ $ $ $ __________ (1) Includes amortization included in Commodity revenue and Commodity expense associated with intangible assets and amortization recorded in interest expense associated with debt issuance costs and discounts. (2) On October 26, 2016, we completed the sale of Mankato Power Plant for $407 million, including working capital and other adjustments. We received net proceeds of $164 million after the noncash reduction of Steamboat project debt of $243 million as the funds were provided directly to the lender in conjunction with the sale of the power plant. (3) On December 1, 2016, we completed the purchase of Calpine Solutions, formerly Noble Americas Energy Solutions, along with a swap contract for approximately $800 million plus approximately $350 million of net working capital at closing. We recovered approximately $250 million in cash subsequent to closing and prior to year end December 31, 2016. REGULATION G RECONCILIATIONS In addition to disclosing financial results in accordance with U.S. GAAP, the accompanying fourth quarter 2016 earnings release contains non-GAAP financial measures. Net Income (Loss), As Adjusted, Commodity Margin, Adjusted EBITDA and Adjusted Free Cash Flow are non-GAAP financial measures that we use as measures of our performance. These non-GAAP measures should be viewed as a supplement to and not a substitute for our U.S. GAAP measures of performance, and the financial results calculated in accordance with U.S. GAAP and reconciliations from these results should be carefully evaluated. Net Income (Loss), As Adjusted, represents net income (loss) attributable to Calpine, adjusted for certain non-cash and non-recurring items, including mark-to-market (gain) loss on derivatives, debt modification and extinguishment costs and other adjustments. Net Income (Loss), As Adjusted, is presented because we believe it is a useful tool for assessing the operating performance of our company in the current period. Net Income (Loss), As Adjusted, is not intended to represent net income (loss), the most comparable U.S. GAAP measure, as an indicator of operating performance, and is not necessarily comparable to similarly titled measures reported by other companies. Commodity Margin includes our power and steam revenues, sales of purchased power and physical natural gas, capacity revenue, revenue from renewable energy credits, sales of surplus emission allowances, transmission revenue and expenses, fuel and purchased energy expense, fuel transportation expense, environmental compliance expense, and realized settlements from our marketing, hedging, optimization and trading activities, but excludes mark-to-market activity and other revenues. We believe that Commodity Margin is a useful tool for assessing the performance of our core operations and is a key operational measure reviewed by our chief operating decision maker. Commodity Margin is not a measure calculated in accordance with U.S. GAAP and should be viewed as a supplement to and not a substitute for our results of operations presented in accordance with U.S. GAAP. Commodity Margin does not intend to represent income from operations, the most comparable U.S. GAAP measure, as an indicator of operating performance and is not necessarily comparable to similarly titled measures reported by other companies. Adjusted EBITDA represents net income (loss) attributable to Calpine before net (income) attributable to the noncontrolling interest, interest, taxes, depreciation and amortization, adjusted for certain non-cash and non-recurring items as detailed in the following reconciliation. Adjusted EBITDA is not intended to represent cash flows from operations or net income (loss) as defined by U.S. GAAP as an indicator of operating performance and is not necessarily comparable to similarly titled measures reported by other companies. We believe Adjusted EBITDA is useful to investors and other users of our financial statements in evaluating our operating performance because it provides them with an additional tool to compare business performance across companies and across periods. We believe that EBITDA is widely used by investors to measure a company’s operating performance without regard to items such as interest expense, taxes, depreciation and amortization, which can vary substantially from company to company depending upon accounting methods and book value of assets, capital structure and the method by which assets were acquired. Additionally, we believe that investors commonly adjust EBITDA information to eliminate the effect of restructuring and other expenses, which vary widely from company to company and impair comparability. As we define it, Adjusted EBITDA represents EBITDA adjusted for the effects of impairment losses, gains or losses on sales, dispositions or retirements of assets, any mark-to-market gains or losses from accounting for derivatives, adjustments to exclude the Adjusted EBITDA related to the noncontrolling interest, stock-based compensation expense, operating lease expense, non-cash gains and losses from foreign currency translations, major maintenance expense, gains or losses on the repurchase, modification or extinguishment of debt, non-cash GAAP-related adjustments to levelize revenues from tolling agreements and any unusual or non-recurring items plus adjustments to reflect the Adjusted EBITDA from our unconsolidated investments. We adjust for these items in our Adjusted EBITDA as our management believes that these items would distort their ability to efficiently view and assess our core operating trends. In summary, our management uses Adjusted EBITDA as a measure of operating performance to assist in comparing performance from period to period on a consistent basis and to readily view operating trends, as a measure for planning and forecasting overall expectations and for evaluating actual results against such expectations, and in communications with our Board of Directors, shareholders, creditors, analysts and investors concerning our financial performance. Adjusted Free Cash Flow represents net income (loss) before interest, taxes, depreciation and amortization, as adjusted, less operating lease payments, major maintenance expense and maintenance capital expenditures, net cash interest, cash taxes and other adjustments, including non-recurring items. Adjusted Free Cash Flow is presented because we believe it is a useful tool for assessing the financial performance of our company in the current period. Adjusted Free Cash Flow is a performance measure and is not intended to represent net income (loss), the most directly comparable U.S. GAAP measure, or liquidity and is not necessarily comparable to similarly titled measures reported by other companies. Net Income (Loss), As Adjusted Reconciliation The following table reconciles our Net Income, As Adjusted, to its U.S. GAAP results for the three months and years ended December 31, 2016 and 2015 (in millions): __________ (1) Assumes a 0% effective tax rate for these items. (2) In addition to changes in market value on derivatives not designated as hedges, changes in mark-to-market (gain) loss also include hedge ineffectiveness and adjustments to reflect changes in credit default risk exposure. Commodity Margin Reconciliation The following tables reconcile our Commodity Margin to its U.S. GAAP results for the three months and years ended December 31, 2016 and 2015 (in millions): Income (loss) from operations Income (loss) from operations Income (loss) from operations Income (loss) from operations _________ (1) Includes nil and $(1) million of lease levelization and $43 million and $9 million of amortization expense for the three months ended December 31, 2016 and 2015, respectively. (2) Includes $(2) million and $(2) million of lease levelization and $122 million and $20 million of amortization expense for the years ended December 31, 2016 and 2015, respectively. Consolidated Adjusted EBITDA Reconciliation In the following table, we have reconciled our Adjusted EBITDA and Adjusted Free Cash Flow to our net income attributable to Calpine for the three months and years ended December 31, 2016 and 2015, as reported under U.S. GAAP (in millions): (76 ) _________ (1) Excludes depreciation and amortization expense attributable to the non-controlling interest. (2) Adjustments to reflect Adjusted EBITDA from unconsolidated investments include (gain) loss on mark-to-market activity of nil for each of the three months and years ended December 31, 2016 and 2015. (3) Includes $66 million and $257 million in major maintenance expense for the three months and year ended December 31, 2016, respectively, and $28 million and $148 million in maintenance capital expenditures for the three months and year ended December 31, 2016, respectively. Includes $74 million and $272 million in major maintenance expense for the three months and year ended December 31, 2015, respectively, and $57 million and $189 million in maintenance capital expenditures for the three months and year ended December 31, 2015, respectively. (4) Includes commitment, letter of credit and other bank fees from both consolidated and unconsolidated investments, net of capitalized interest and interest income. (5) Adjusted Free Cash Flow, as reported, excludes changes in working capital, such that it is calculated on the same basis as our guidance. Consolidated Adjusted EBITDA Reconciliation In the following table, we have reconciled our Adjusted EBITDA to our Commodity Margin, both of which are non-GAAP measures, for the three months and years ended December 31, 2016 and 2015. Reconciliations for both Adjusted EBITDA and Commodity Margin to comparable U.S. GAAP measures are provided above. Amounts below are shown exclusive of the noncontrolling interest (in millions): _________ (1) Shown net of major maintenance expense, stock-based compensation expense, non-cash loss on dispositions of assets and other costs. (2) Shown net of stock-based compensation expense and other costs. (3) Shown net of operating lease expense, amortization and other costs. Adjusted EBITDA and Adjusted Free Cash Flow Reconciliation for Guidance (in millions) _________ (1) For purposes of Net Income guidance reconciliation, mark-to-market adjustments are assumed to be nil. (2) Other includes stock-based compensation expense, adjustments to reflect Adjusted EBITDA from unconsolidated investments, income tax expense and other items. (3) Includes projected major maintenance expense of $315 million and maintenance capital expenditures of $120 million. Capital expenditures exclude major construction and development projects. (4) Includes commitment, letter of credit and other bank fees from both consolidated and unconsolidated investments, net of capitalized interest and interest income. OPERATING PERFORMANCE METRICS The table below shows the operating performance metrics for the periods presented: 7,432 ________ (1) Excludes generation from unconsolidated power plants and power plants owned but not operated by us. (2) Generation, average availability and steam adjusted heat rate exclude power plants and units that are inactive.
- CALPINE REPORTS FOURTH QUARTER AND FULL YEAR 2016 RESULTS, REAFFIRMS
2017 GUIDANCE
Feb 10, 2017
HOUSTON--(BUSINESS WIRE)--CALPINE CORPORATION (NYSE: CPN): SUMMARY OF 2016 FINANCIAL RESULTS (IN MILLIONS): NM NM NM NM REAFFIRMING 2017 FULL YEAR GUIDANCE (IN MILLIONS): RECENT ACHIEVEMENTS: POWER AND COMMERCIAL OPERATIONS:— ACHIEVED NEW CALPINE RECORD AND TOP QUARTILE3 SAFETY METRIC: 0.55 TOTAL RECORDABLE INCIDENT RATE IN 2016— GENERATED APPROXIMATELY 110 MILLION MWH4 IN 2016— DELIVERED STRONG FLEETWIDE STARTING RELIABILITY: 97.9% PORTFOLIO MANAGEMENT:— ANNOUNCED AND CLOSED ACCRETIVE ACQUISITION OF LEADING COMMERCIAL AND INDUSTRIAL RETAIL ELECTRICITY PROVIDER CALPINE ENERGY SOLUTIONS, FORMERLY NOBLE AMERICAS ENERGY SOLUTIONS, LLC— ACQUIRED GROWING RESIDENTIAL RETAIL PROVIDER NORTH AMERICAN POWER FOR APPROXIMATELY $105 MILLION5, REPRESENTING AN ATTRACTIVELY PRICED PORTFOLIO ADDITION TO OUR CHAMPION ENERGY RETAIL PLATFORM— CLOSED ON THE SALE OF OUR MANKATO POWER PLANT TO SOUTHERN COMPANY FOR $396 MILLION5— CLOSED ON THE SALE OF OUR OSPREY POWER PLANT TO DUKE ENERGY FOR $166 MILLION5 BALANCE SHEET MANAGEMENT:— AS PART OF OUR COMMITMENT TO DELEVER AND REDUCE INTEREST EXPENSE, WE HAVE COMMENCED THE REDEMPTION AND REFINANCING OF $453 MILLION OF OUR 7.875% FIRST LIEN NOTES DUE 2023, RESULTING IN MORE THAN $20 MILLION OF ANNUAL INTEREST SAVINGS— REDEEMED $120 MILLION OF OUR 7.875% FIRST LIEN NOTES DUE 2023 AT A PRICE OF 103— REPRICED OUR 2023 FIRST LIEN TERM LOANS BY LOWERING THE MARGIN OVER LIBOR BY 0.25% TO 2.75% AND EXTENDED THE MATURITY OF 2024 FIRST LIEN TERM LOAN FROM MAY 2022 TO JANUARY 2024— INCREASED REVOLVER CAPACITY BY APPROXIMATELY $112 MILLION TO $1,790 MILLION THROUGH JUNE 2020 CALPINE CORPORATION (NYSE: CPN) TODAY REPORTED NET INCOME1 OF $24 MILLION, OR $0.07 PER DILUTED SHARE, FOR THE FOURTH QUARTER OF 2016 COMPARED TO NET LOSS1 OF $47 MILLION, OR $0.13 PER DILUTED SHARE, IN THE PRIOR YEAR PERIOD. NET INCOME IN 2016 WAS $92 MILLION, OR $0.26 PER DILUTED SHARE, COMPARED TO $235 MILLION, OR $0.64 PER DILUTED SHARE, IN THE PRIOR YEAR. THE YEAR-OVER-YEAR INCREASE IN NET INCOME DURING THE FOURTH QUARTER WAS PRIMARILY DUE TO A GAIN RECOGNIZED ON THE SALE OF OUR MANKATO POWER PLANT AND LOWER PLANET OPERATING EXPENSE, PARTIALLY OFFSET BY A HIGHER INCOME TAX EXPENSE DUE TO THE RESTRUCTURING OF CERTAIN INTERNATIONAL ENTITIES IN 2015 THAT DID NOT RECUR IN 2016. THE DECREASE IN NET INCOME IN 2016 COMPARED TO 2015 WAS PRIMARILY DUE TO LOWER OPERATING REVENUE, NET OF OPERATING EXPENSE, AND HIGHER INCOME TAX EXPENSE, AS PREVIOUSLY DISCUSSED, PARTIALLY OFFSET BY THE GAIN RECOGNIZED ON THE SALE OF OUR MANKATO POWER PLANT. ADJUSTED EBITDA2 FOR THE FOURTH QUARTER WAS $357 MILLION COMPARED TO $390 MILLION IN THE PRIOR YEAR PERIOD, AND ADJUSTED FREE CASH FLOW2 WAS $93 MILLION COMPARED TO $97 MILLION IN THE PRIOR YEAR PERIOD. THE DECREASES IN ADJUSTED EBITDA AND ADJUSTED FREE CASH FLOW WERE PRIMARILY DUE TO LOWER COMMODITY MARGIN2, LARGELY DRIVEN BY LOWER ENERGY MARGINS DUE TO DECREASED CONTRIBUTION FROM WHOLESALE HEDGES, PARTIALLY OFFSET BY A DECREASE IN PLANT OPERATING EXPENSE6 DUE TO THE NET PERIOD-OVER-PERIOD IMPACT FROM A WILDFIRE AT OUR GEYSERS ASSETS IN 2015. NET LOSS, AS ADJUSTED2, FOR THE FOURTH QUARTER OF 2016 WAS $145 MILLION COMPARED TO NET INCOME, AS ADJUSTED, OF $67 MILLION IN THE PRIOR YEAR PERIOD. THE DECREASE IN NET INCOME, AS ADJUSTED, WAS PRIMARILY DUE TO LOWER COMMODITY MARGIN AND HIGHER INCOME TAX EXPENSE, AS PREVIOUSLY DISCUSSED. ADJUSTED EBITDA IN 2016 WAS $1,815 MILLION COMPARED TO $1,976 MILLION IN THE PRIOR YEAR, AND ADJUSTED FREE CASH FLOW WAS $736 MILLION COMPARED TO $842 MILLION IN THE PRIOR YEAR. THE DECREASES IN ADJUSTED EBITDA AND ADJUSTED FREE CASH FLOW WERE LARGELY DUE TO LOWER COMMODITY MARGIN, DRIVEN PRIMARILY BY LOWER ENERGY MARGINS DUE TO DECREASED CONTRIBUTION FROM WHOLESALE HEDGES, PARTIALLY OFFSET BY A DECREASE IN PLANT OPERATING EXPENSE6 DUE TO THE NET YEAR-OVER-YEAR IMPACT FROM A WILDFIRE AT OUR GEYSERS ASSETS IN 2015 AND A DECREASE IN REPAIRS AND MAINTENANCE EXPENSE AND PRODUCTION-RELATED EXPENSE. NET LOSS, AS ADJUSTED, WAS $28 MILLION IN 2016 COMPARED TO NET INCOME, AS ADJUSTED, OF $385 MILLION IN THE PRIOR YEAR. THE DECREASE IN NET INCOME, AS ADJUSTED, WAS PRIMARILY DUE TO LOWER COMMODITY MARGIN AND HIGHER INCOME TAX EXPENSE, AS PREVIOUSLY DISCUSSED. “TODAY, I AM PLEASED TO ANNOUNCE SOLID FULL-YEAR 2016 EARNINGS, CONTINUING OUR STRONG, STABLE TRACK RECORD,” SAID THAD HILL, CALPINE’S PRESIDENT AND CHIEF EXECUTIVE OFFICER. “SPECIFICALLY, FOR THE EIGHTH CONSECUTIVE YEAR, WE DELIVERED ON OUR FINANCIAL PERFORMANCE COMMITMENTS, ACHIEVING FULL-YEAR ADJUSTED EBITDA AND ADJUSTED FREE CASH FLOW WITHIN OUR GUIDANCE RANGE, DESPITE A CHALLENGING COMMODITY ENVIRONMENT IN 2016. OUR ENDURING COMMITMENT TO OPERATIONAL EXCELLENCE, CUSTOMER FOCUS AND FINANCIAL DISCIPLINE IS REFLECTED IN OUR 2016 ACCOMPLISHMENTS - OUR BEST SAFETY PERFORMANCE ON RECORD; MAINTAINING A COMPETITIVE COST STRUCTURE WHILE CONTINUING TO ACHIEVE BEST-IN-CLASS OPERATING PERFORMANCE AND LEADING THE INDUSTRY IN ADVOCACY EFFORTS; THE SUCCESSFUL INTEGRATION OF CHAMPION ENERGY AND THE STRATEGIC COMPLETION OF OUR BROADER RETAIL PLATFORM THROUGH TWO ADDITIONAL ACQUISITIONS; AND THE DIVESTITURE OF NON-CORE GENERATION ASSETS FOR GOOD VALUE. DIFFICULT MARKETS COME AND GO, BUT THE CALPINE TEAM HAS STAYED FOCUSED WHERE IT MATTERS. I EXTEND MY SINCERE PERSONAL THANKS TO THE ENTIRE CALPINE TEAM. “AS I LOOK AHEAD AT 2017, OUR TOP PRIORITIES ARE TO SUCCESSFULLY INTEGRATE OUR RETAIL PLATFORMS, EXECUTE ON OUR DELEVERING PLAN AND, ONCE AGAIN, DELIVER ON OUR 2017 GUIDANCE OF $1.8 - $1.95 BILLION OF ADJUSTED EBITDA AND $710 - $860 MILLION OF ADJUSTED FREE CASH FLOW. “ON THE RETAIL FRONT, OVER THE PAST SEVERAL MONTHS, WE HAVE STRATEGICALLY SOLIDIFIED AND EXPANDED OUR PLATFORM WITH ACQUISITIONS THAT COMPLEMENT OUR WHOLESALE FLEET AND INCREASE OUR ACCESS TO END-USE CUSTOMERS WHILE BOOSTING OUR MARGINS IN CORE POWER MARKETS. WE ACCRETIVELY RECYCLED CAPITAL BY COMPLETING THE SALES OF OUR MANKATO AND OSPREY POWER PLANTS IN NON-CORE REGIONS AND REINVESTING THE PROCEEDS INTO THE PURCHASES OF CALPINE ENERGY SOLUTIONS, ONE OF THE NATION’S LARGEST SUPPLIERS OF POWER TO COMMERCIAL AND INDUSTRIAL CUSTOMERS, AND NORTH AMERICAN POWER, A RESIDENTIAL RETAIL ENERGY PROVIDER. WITH THESE CHANGES TO OUR PORTFOLIO, THE INTEGRATION OF OUR RETAIL BUSINESSES, NOT ONLY WITH EACH OTHER BUT ALSO WITH OUR EXISTING WHOLESALE POWER BUSINESS, IS A PRIORITY. IN ORDER TO ASSURE A SUCCESSFUL EFFORT, TREY GRIGGS, FORMERLY OUR EXECUTIVE VICE PRESIDENT AND CHIEF COMMERCIAL OFFICER, HAS ASSUMED A NEW ROLE AS EXECUTIVE VICE PRESIDENT AND PRESIDENT, CALPINE RETAIL, LEADING THE INTEGRATION AND EXPANDING THE RETAIL PLATFORM GOING FORWARD. ANDREW NOVOTNY, SENIOR VICE PRESIDENT OF COMMERCIAL OPERATIONS, AND CALEB STEPHENSON, SENIOR VICE PRESIDENT OF WHOLESALE ORIGINATION AND COMMERCIAL ANALYTICS, WILL OVERSEE OUR WHOLESALE ACTIVITIES AND REPORT DIRECTLY TO ME. THESE ORGANIZATIONAL CHANGES WILL ESTABLISH ALIGNMENT FOR OUR TEAM TO MEET OUR GOALS FOR 2017 AND BEYOND. “IN TERMS OF DEBT REDUCTION, WE HAVE BEGUN TO EXECUTE ON AND ARE TODAY UPDATING THE DELEVERING PLAN WE LAID OUT ON OUR THIRD QUARTER EARNINGS CALL. IN DECEMBER 2016, WE REDEEMED $120 MILLION OF OUR 7.875% FIRST LIEN NOTES THAT MATURE IN 2023. MORE RECENTLY, WE CALLED THE REMAINING $453 MILLION OF THESE NOTES, WHICH WILL BE FUNDED WITH CASH AND PROCEEDS FROM A 2019 TERM LOAN THAT WE ARE COMMITTED TO PAYING OFF IN 2018. THIS STRUCTURE ACCELERATES OUR DELEVERING PLAN AND ACHIEVES INTEREST SAVINGS IN THE INTERIM. OUR UPDATED PLAN CALLS FOR $2.7 BILLION OF COMMITTED OR PLANNED DEBT PAYDOWN BY 2019, REDUCING OUR LEVERAGE BY ALMOST 1.5 TURNS AT CURRENT ADJUSTED EBITDA LEVELS. IMPORTANTLY, AFTER THIS PAYDOWN, WE PROJECT THAT WE WILL STILL HAVE SEVERAL HUNDRED MILLION DOLLARS OF DEPLOYABLE CASH BY THE END OF 2019, AS WELL AS INCREASED FINANCIAL FLEXIBILITY. “IN 2017, OUR DELEVERING AND RETAIL INTEGRATION EFFORTS WILL BE ENHANCED BY OUR CONTINUED FOCUS ON FINANCIAL DISCIPLINE, MAINTAINING OUR ACTIVE ADVOCACY FOR AND DEFENSE OF COMPETITIVE POWER MARKETS AND REMAINING THE PREMIER OPERATOR OF THE HIGHEST QUALITY ASSETS. IN SHORT, THESE ATTRIBUTES HAVE AND WILL CONTINUE TO ENABLE US TO DELIVER STABLE RESULTS THROUGH COMMODITY MARKET CYCLES. AS THESE ASPECTS OF THE STRATEGY COMPLEMENT EACH OTHER, OUR CONTINUED RESULTS AND CASH GENERATION WILL PROVIDE VALUE TO SHAREHOLDERS FOR YEARS TO COME.” __________ 1 REPORTED AS NET INCOME (LOSS) ATTRIBUTABLE TO CALPINE ON OUR CONSOLIDATED STATEMENTS OF OPERATIONS. 2 NON-GAAP FINANCIAL MEASURE, SEE “REGULATION G RECONCILIATIONS” FOR FURTHER DETAILS. 3 ACCORDING TO EEI SAFETY SURVEY (2015). 4 INCLUDES GENERATION FROM POWER PLANTS OWNED BUT NOT OPERATED BY CALPINE AND OUR SHARE OF GENERATION FROM UNCONSOLIDATED POWER PLANTS. 5 EXCLUDING WORKING CAPITAL AND OTHER ADJUSTMENTS. 6 INCREASE IN PLANT OPERATING EXPENSE EXCLUDES CHANGES IN MAJOR MAINTENANCE EXPENSE, STOCK-BASED COMPENSATION EXPENSE, NON-CASH LOSS ON DISPOSITION OF ASSETS AND OTHER COSTS. SEE THE TABLE TITLED “CONSOLIDATED ADJUSTED EBITDA RECONCILIATION” FOR THE ACTUAL AMOUNTS OF THESE ITEMS FOR THE THREE MONTHS AND YEARS ENDED DECEMBER 31, 2016 AND 2015. SUMMARY OF FINANCIAL PERFORMANCE FOURTH QUARTER RESULTS ADJUSTED EBITDA FOR THE FOURTH QUARTER OF 2016 WAS $357 MILLION COMPARED TO $390 MILLION IN THE PRIOR YEAR PERIOD. THE YEAR-OVER-YEAR DECREASE IN ADJUSTED EBITDA WAS PRIMARILY RELATED TO A $73 MILLION DECREASE IN COMMODITY MARGIN, PARTIALLY OFFSET BY A $36 MILLION DECREASE IN PLANT OPERATING EXPENSE6, AS PREVIOUSLY DISCUSSED. THE DECREASE IN COMMODITY MARGIN WAS PRIMARILY DUE TO: THE NET IMPACT OF OUR PORTFOLIO MANAGEMENT ACTIVITIES, INCLUDING THE ACQUISITION OF GRANITE RIDGE ENERGY CENTER IN FEBRUARY 2016, PARTIALLY OFFSET BY THE SALE OF MANKATO POWER PLANT IN OCTOBER 2016 AND ADJUSTED FREE CASH FLOW WAS $93 MILLION IN THE FOURTH QUARTER OF 2016 COMPARED TO $97 MILLION IN THE PRIOR YEAR PERIOD. ADJUSTED FREE CASH FLOW DECREASED DUE TO LOWER ADJUSTED EBITDA, AS PREVIOUSLY DISCUSSED, PARTIALLY OFFSET BY LOWER MAJOR MAINTENANCE EXPENSE AND CAPITAL EXPENDITURES ASSOCIATED WITH THE TIMING OF PLANNED OUTAGES. FULL YEAR RESULTS ADJUSTED EBITDA IN 2016 WAS $1,815 MILLION COMPARED TO $1,976 MILLION IN THE PRIOR YEAR. THE YEAR-OVER-YEAR DECREASE IN ADJUSTED EBITDA WAS PRIMARILY RELATED TO A $182 MILLION DECREASE IN COMMODITY MARGIN, PARTIALLY OFFSET BY A $22 MILLION DECREASE IN PLANT OPERATING EXPENSE6, AS PREVIOUSLY DISCUSSED. THE DECREASE IN COMMODITY MARGIN WAS PRIMARILY DUE TO: THE NET IMPACT OF OUR CONTRACTS, INCLUDING THE EXPIRATION OF A PPA AND A RESOURCE ADEQUACY CONTRACT AT OUR PASTORIA ENERGY CENTER IN DECEMBER 2015, PARTIALLY OFFSET BY A NEW PPA AT OUR MORGAN ENERGY CENTER IN FEBRUARY 2016 AND THE RECEIPT OF A NATURAL GAS PIPELINE TRANSPORTATION BILLING CREDIT IN THE WEST IN THE SECOND QUARTER OF 2016, THE NET IMPACT OF OUR PORTFOLIO MANAGEMENT ACTIVITIES, INCLUDING THE ACQUISITION OF GRANITE RIDGE ENERGY CENTER IN FEBRUARY 2016 AND THE COMMENCEMENT OF COMMERCIAL OPERATIONS AT GARRISON ENERGY CENTER IN JUNE 2015, PARTIALLY OFFSET BY THE EXPIRATION OF THE GREENLEAF OPERATING LEASE IN JUNE 2015 AND THE SALE OF MANKATO POWER PLANT IN OCTOBER 2016. ADJUSTED FREE CASH FLOW WAS $736 MILLION IN 2016, COMPARED TO $842 MILLION IN THE PRIOR YEAR. ADJUSTED FREE CASH FLOW DECREASED DURING THE PERIOD PRIMARILY DUE TO DUE TO LOWER ADJUSTED EBITDA, AS PREVIOUSLY DISCUSSED, PARTIALLY OFFSET BY LOWER MAJOR MAINTENANCE EXPENSE AND CAPITAL EXPENDITURES ASSOCIATED WITH THE TIMING OF PLANNED OUTAGES. REGIONAL SEGMENT REVIEW OF RESULTS TABLE 1: COMMODITY MARGIN BY SEGMENT (IN MILLIONS) WEST REGION FOURTH QUARTER: COMMODITY MARGIN IN OUR WEST SEGMENT DECREASED BY $21 MILLION IN THE FOURTH QUARTER OF 2016 COMPARED TO THE PRIOR YEAR PERIOD. PRIMARY DRIVERS WERE: FULL YEAR: COMMODITY MARGIN IN OUR WEST SEGMENT DECREASED BY $115 MILLION IN 2016, COMPARED TO THE PRIOR YEAR. PRIMARY DRIVERS WERE: TEXAS REGION FOURTH QUARTER: COMMODITY MARGIN IN OUR TEXAS SEGMENT DECREASED BY $9 MILLION IN THE FOURTH QUARTER OF 2016 COMPARED TO THE PRIOR YEAR PERIOD. PRIMARY DRIVERS WERE: FULL YEAR: COMMODITY MARGIN IN OUR TEXAS SEGMENT DECREASED BY $81 MILLION IN 2016, COMPARED TO THE PRIOR YEAR. PRIMARY DRIVERS WERE: EAST REGION FOURTH QUARTER: COMMODITY MARGIN IN OUR EAST SEGMENT DECREASED $43 MILLION IN THE FOURTH QUARTER OF 2016 COMPARED TO THE PRIOR YEAR PERIOD. PRIMARY DRIVERS WERE: THE NET IMPACT OF OUR PORTFOLIO MANAGEMENT ACTIVITIES, INCLUDING THE ACQUISITION OF GRANITE RIDGE ENERGY CENTER IN FEBRUARY 2016, PARTIALLY OFFSET BY THE SALE OF MANKATO POWER PLANT IN OCTOBER 2016 AND FULL YEAR: COMMODITY MARGIN IN OUR EAST SEGMENT INCREASED BY $14 MILLION IN 2016, COMPARED TO THE PRIOR YEAR. PRIMARY DRIVERS WERE: THE NET IMPACT OF OUR PORTFOLIO MANAGEMENT ACTIVITIES, INCLUDING THE ACQUISITION OF GRANITE RIDGE ENERGY CENTER IN FEBRUARY 2016 AND THE COMMENCEMENT OF COMMERCIAL OPERATIONS AT GARRISON ENERGY CENTER IN JUNE 2015, PARTIALLY OFFSET BY THE SALE OF MANKATO POWER PLANT IN OCTOBER 2016, THE POSITIVE IMPACT OF A NEW PPA ASSOCIATED WITH OUR MORGAN ENERGY CENTER, WHICH BECAME EFFECTIVE IN FEBRUARY 2016, AND HIGHER CONTRIBUTION FROM OUR RETAIL HEDGING ACTIVITY DURING 2016 FOLLOWING THE ACQUISITIONS OF CHAMPION ENERGY IN OCTOBER 2015 AND CALPINE ENERGY SOLUTIONS IN DECEMBER 2016, PARTIALLY OFFSET BY LIQUIDITY, CASH FLOW AND CAPITAL RESOURCES TABLE 2: LIQUIDITY (IN MILLIONS) __________ (1) INCLUDES $16 MILLION AND $35 MILLION OF MARGIN DEPOSITS POSTED WITH US BY OUR COUNTERPARTIES AT DECEMBER 31, 2016 AND 2015, RESPECTIVELY. ON JANUARY 3, 2017, WE RECEIVED $162 MILLION IN CASH PROCEEDS FROM THE SALE OF OSPREY ENERGY CENTER. (2) OUR ABILITY TO USE AVAILABILITY UNDER OUR CORPORATE REVOLVING FACILITY IS UNRESTRICTED. ON FEBRUARY 8, 2016, WE AMENDED OUR CORPORATE REVOLVING FACILITY, EXTENDING THE MATURITY BY TWO YEARS TO JUNE 27, 2020, AND INCREASING THE CAPACITY BY AN ADDITIONAL $178 MILLION TO $1,678 MILLION THROUGH JUNE 27, 2018, REVERTING BACK TO $1,520 MILLION THROUGH THE MATURITY DATE. FURTHER, WE INCREASED THE LETTER OF CREDIT SUBLIMIT BY $250 MILLION TO $1.0 BILLION AND EXTENDED THE MATURITY BY TWO YEARS TO JUNE 27, 2020. ON DECEMBER 1, 2016, WE FURTHER AMENDED OUR CORPORATE REVOLVING FACILITY, INCREASING THE CAPACITY BY $112 MILLION TO $1,790 MILLION FOR THE FULL TERM THROUGH JUNE 27, 2020. (3) OUR ABILITY TO USE CORPORATE CASH AND CASH EQUIVALENTS IS UNRESTRICTED. OUR $300 MILLION CDHI LETTER OF CREDIT FACILITY IS RESTRICTED TO SUPPORT CERTAIN OBLIGATIONS UNDER PPAS AND POWER TRANSMISSION AND NATURAL GAS TRANSPORTATION AGREEMENTS. LIQUIDITY WAS APPROXIMATELY $1.9 BILLION AS OF DECEMBER 31, 2016. CASH AND CASH EQUIVALENTS DECREASED IN 2016 PRIMARILY DUE TO THE ACQUISITIONS OF GRANITE RIDGE ENERGY CENTER AND CALPINE ENERGY SOLUTIONS, CAPITAL EXPENDITURES ON CONSTRUCTION PROJECTS AND OUTAGES, AND REPAYMENTS OF PROJECT FINANCING, NOTES PAYABLE AND FINANCING COSTS, PARTIALLY OFFSET BY CASH PROVIDED BY THE SALE OF OUR MANKATO POWER PLANT, AS WELL AS FROM OPERATING AND FINANCING ACTIVITIES. TABLE 3: CASH FLOW ACTIVITIES (IN MILLIONS) ) CASH PROVIDED BY OPERATING ACTIVITIES IN 2016 WAS $1,030 MILLION COMPARED TO $876 MILLION IN THE PRIOR YEAR. THE INCREASE IN CASH PROVIDED BY OPERATING ACTIVITIES WAS PRIMARILY DUE TO A DECREASE IN WORKING CAPITAL EMPLOYED, A REDUCTION IN CASH PAID FOR INTEREST DUE TO OUR REFINANCING ACTIVITIES AND A REDUCTION IN DEBT MODIFICATION AND EXTINGUISHMENT PAYMENTS, PARTIALLY OFFSET BY A DECREASE IN INCOME FROM OPERATIONS, ADJUSTED FOR NON-CASH ITEMS. CASH USED IN INVESTING ACTIVITIES WAS $1,919 MILLION DURING 2016 COMPARED TO $841 MILLION IN THE PRIOR YEAR. THE INCREASE WAS PRIMARILY RELATED TO THE PURCHASES OF CALPINE ENERGY SOLUTIONS FOR $1,150 MILLION (BEFORE RECOVERY OF WORKING CAPITAL AND COLLATERAL) AND GRANITE RIDGE ENERGY CENTER FOR $526 MILLION, PARTIALLY OFFSET BY APPROXIMATELY $164 MILLION OF NET PROCEEDS FROM THE SALE OF MANKATO POWER PLANT AND A DECREASE IN CAPITAL EXPENDITURES ON CONSTRUCTION PROJECTS AND OUTAGES. CASH PROVIDED BY FINANCING ACTIVITIES WAS $401 MILLION DURING 2016 AND WAS PRIMARILY RELATED TO PROCEEDS FROM THE ISSUANCES OF OUR 2017 FIRST LIEN TERM LOAN, 2023 FIRST LIEN TERM LOAN AND 2026 FIRST LIEN NOTES. THESE INFLOWS WERE PARTIALLY OFFSET BY PAYMENTS ASSOCIATED WITH THE REDEMPTION OF OUR 2023 FIRST LIEN NOTES AND REPAYMENT OF OUR 2019 AND 2020 FIRST LIEN TERM LOANS. CAPITAL ALLOCATION OUR CAPITAL ALLOCATION PHILOSOPHY SEEKS TO MAXIMIZE LEVERED CASH RETURNS TO EQUITY WHILE MAINTAINING A STRONG BALANCE SHEET. WE SEEK TO ENHANCE SHAREHOLDER VALUE THROUGH A DIVERSE AND BALANCED CAPITAL ALLOCATION APPROACH THAT INCLUDES PORTFOLIO MANAGEMENT, ORGANIC OR ACQUISITIVE GROWTH, RETURNING CAPITAL TO SHAREHOLDERS AND DEBT REDUCTION. THE MIX OF THIS ACTIVITY SHIFTS OVER TIME GIVEN THE EXTERNAL MARKET ENVIRONMENT AND THE OPPORTUNITY SET. IN THE CURRENT ENVIRONMENT, WE BELIEVE THAT PAYING DOWN DEBT AND STRENGTHENING OUR BALANCE SHEET IS A HIGH RETURN INVESTMENT FOR OUR SHAREHOLDERS. WE ALSO CONSIDER THE REPURCHASES OF OUR OWN SHARES OF COMMON STOCK AS AN ATTRACTIVE INVESTMENT OPPORTUNITY, AND WE UTILIZE THE EXPECTED RETURNS FROM THIS INVESTMENT AS THE BENCHMARK AGAINST WHICH WE EVALUATE ALL OTHER CAPITAL ALLOCATION DECISIONS. WE BELIEVE THIS PHILOSOPHY CLOSELY ALIGNS OUR OBJECTIVES WITH THOSE OF OUR SHAREHOLDERS. MANAGING OUR BALANCE SHEET WE FURTHER OPTIMIZED OUR CAPITAL STRUCTURE BY REFINANCING, REDEEMING OR AMENDING SEVERAL OF OUR DEBT INSTRUMENTS DURING THE YEAR ENDED DECEMBER 31, 2016: 2023 FIRST LIEN NOTES: — AS PART OF OUR COMMITMENT TO REDUCE DEBT AND INTEREST EXPENSE, ON FEBRUARY 3, 2017, WE ISSUED A NOTICE OF REDEMPTION TO REPAY THE REMAINING $453 MILLION OF OUR 7.875% FIRST LIEN NOTES DUE IN 2023 USING CASH ON HAND ALONG WITH THE PROCEEDS FROM A NEW $400 MILLION THREE-YEAR FIRST LIEN TERM LOAN PRICED AT LIBOR + 1.75% PER ANNUM. WE INTEND TO REPAY THE 2019 FIRST LIEN TERM LOAN IN FULL BY THE END OF 2018. THIS ACCELERATES DEBT REDUCTION AND ACHIEVES SUBSTANTIAL ANNUAL INTEREST SAVINGS OF MORE THAN $20 MILLION IN THE INTERIM.— IN DECEMBER 2016, WE USED CASH ON HAND TO REDEEM $120 MILLION OF OUR 7.875% FIRST LIEN NOTES DUE IN 2023 AT A PRICE OF 103. FIRST LIEN TERM LOANS: — IN DECEMBER 2016, WE REPRICED OUR 2023 FIRST LIEN TERM LOANS BY LOWERING THE MARGIN OVER LIBOR BY 0.25% TO 2.75% AND EXTENDED THE MATURITY OF OUR 2024 FIRST LIEN TERM LOAN FROM MAY 2022 TO JANUARY 2024. RUSSELL CITY PROJECT DEBT: — IN NOVEMBER 2016, WE REPRICED OUR RUSSELL CITY PROJECT DEBT BY LOWERING THE MARGIN OVER LIBOR BY 0.50% - 0.75% THROUGH THE MATURITY DATE. CORPORATE REVOLVING FACILITY: — ON DECEMBER 1, 2016, WE AMENDED OUR CORPORATE REVOLVING FACILITY TO INCREASE THE AGGREGATE REVOLVING LOAN COMMITMENTS AVAILABLE THEREUNDER BY APPROXIMATELY $112 MILLION TO $1,790 MILLION FOR THE FULL TERM THROUGH THE MATURITY DATE OF JUNE 27, 2020. EXPANDING OUR CUSTOMER SALES CHANNELS WE CONTINUE TO FOCUS ON GETTING CLOSER TO OUR CUSTOMERS THROUGH EXPANSION OF OUR RETAIL PLATFORM, WHICH BEGAN WITH THE ACQUISITION OF CHAMPION ENERGY IN 2015, AND WAS FOLLOWED BY THE ACQUISITIONS OF CALPINE ENERGY SOLUTIONS IN LATE 2016 AND NORTH AMERICAN POWER IN EARLY 2017. OUR RETAIL PLATFORM GEOGRAPHICALLY AND STRATEGICALLY COMPLEMENTS OUR WHOLESALE GENERATION FLEET BY PROVIDING FORWARD LIQUIDITY WITH SUFFICIENT MARGINS. THE COMBINATION OF OUR WHOLESALE ORIGINATION AND RETAIL PLATFORM PROVIDES CALPINE ACCESS TO BOTH DIRECT AND MASS MARKET SALES CHANNELS. OUR DIRECT SALES EFFORTS AIM TO PROVIDE OUR LARGER CUSTOMERS WITH CUSTOMIZED PRODUCTS, LEVERAGING BOTH OUR SUCCESSFUL WHOLESALE ORIGINATION EFFORTS AND CALPINE ENERGY SOLUTIONS’ PRESENCE AMONG LARGE COMMERCIAL AND INDUSTRIAL ORGANIZATIONS TO SECURE NEW CONTRACTS. OUR MASS MARKET APPROACH RELIES UPON OUR EXPANDED CHAMPION ENERGY RETAIL PLATFORM TO SERVE THE NEEDS OF BOTH RESIDENTIAL AND SMALLER COMMERCIAL AND INDUSTRIAL CUSTOMERS ACROSS THE COUNTRY. WE BELIEVE THAT OUR RETAIL PLATFORM IS STRATEGICALLY COMPLETE AND ARE NOW FOCUSED ON INTEGRATING IT INTO OUR BUSINESS AND OPTIMIZING ITS FINANCIAL PERFORMANCE. ACQUISITION OF CALPINE ENERGY SOLUTIONS ON DECEMBER 1, 2016, WE COMPLETED THE PURCHASE OF CALPINE ENERGY SOLUTIONS, FORMERLY NOBLE AMERICAS ENERGY SOLUTIONS, ALONG WITH A SWAP CONTRACT FOR APPROXIMATELY $800 MILLION PLUS APPROXIMATELY $350 MILLION OF NET WORKING CAPITAL AT CLOSING. WE RECOVERED APPROXIMATELY $250 MILLION IN CASH SUBSEQUENT TO CLOSING AND EXPECT TO RECOVER AN ADDITIONAL APPROXIMATELY $200 MILLION THROUGH COLLATERAL SYNERGIES AND THE RUNOFF OF ACQUIRED LEGACY HEDGES, SUBSTANTIALLY WITHIN THE FIRST YEAR. CALPINE ENERGY SOLUTIONS IS A COMMERCIAL AND INDUSTRIAL RETAIL ELECTRICITY PROVIDER WITH CUSTOMERS IN 19 STATES IN THE U.S., INCLUDING PRESENCE IN CALIFORNIA, TEXAS, THE MID-ATLANTIC AND NORTHEAST, WHERE OUR WHOLESALE POWER GENERATION FLEET IS PRIMARILY CONCENTRATED. THE ACQUISITION OF THIS BEST-IN-CLASS DIRECT ENERGY SALES PLATFORM IS CONSISTENT WITH OUR STATED GOAL OF GETTING CLOSER TO OUR END-USE CUSTOMERS AND EXPANDS OUR RETAIL CUSTOMER BASE, COMPLEMENTING OUR EXISTING RETAIL BUSINESS WHILE PROVIDING US A VALUABLE SALES CHANNEL FOR REACHING A MUCH GREATER PORTION OF THE LOAD WE SEEK TO SERVE. ACQUISITION OF NORTH AMERICAN POWER & GAS, LLC ON JANUARY 17, 2017, WE COMPLETED THE PURCHASE OF NORTH AMERICAN POWER FOR APPROXIMATELY $105 MILLION, EXCLUDING WORKING CAPITAL AND OTHER ADJUSTMENTS. NORTH AMERICAN POWER IS A GROWING RETAIL ENERGY SUPPLIER FOR HOMES AND SMALL BUSINESSES AND IS PRIMARILY CONCENTRATED IN THE NORTHEAST U.S., WHERE CALPINE HAS A SUBSTANTIAL POWER GENERATION PRESENCE AND WHERE CHAMPION ENERGY HAS A SUBSTANTIAL RETAIL SALES FOOTPRINT THAT WILL BE ENHANCED BY THE ADDITION OF NORTH AMERICAN POWER, WHICH WILL BE INTEGRATED INTO OUR CHAMPION ENERGY RETAIL PLATFORM. PORTFOLIO MANAGEMENT EAST: YORK 2 ENERGY CENTER: YORK 2 ENERGY CENTER IS AN 828 MW DUAL-FUEL, COMBINED-CYCLE PROJECT THAT IS CO-LOCATED WITH OUR YORK ENERGY CENTER IN PEACH BOTTOM TOWNSHIP, PENNSYLVANIA. ONCE COMPLETE, THE POWER PLANT WILL FEATURE TWO COMBUSTION TURBINES, TWO HEAT RECOVERY STEAM GENERATORS AND ONE STEAM TURBINE. THE PROJECT IS UNDER CONSTRUCTION, AND THE INITIAL 760 MW OF CAPACITY CLEARED PJM’S LAST THREE BASE RESIDUAL AUCTIONS WITH THE 68 MW OF INCREMENTAL CAPACITY CLEARING THE LAST TWO BASE RESIDUAL AUCTIONS. DUE TO CONSTRUCTION DELAYS, WE ARE NOW TARGETING COD IN LATE 2017. MANKATO POWER PLANT: ON OCTOBER 26, 2016, WE COMPLETED THE SALE OF OUR MANKATO POWER PLANT, A 375 MW NATURAL GAS-FIRED, COMBINED-CYCLE POWER PLANT AND A 345 MW EXPANSION PROJECT UNDER ADVANCED DEVELOPMENT LOCATED IN MINNESOTA, TO SOUTHERN POWER COMPANY, A SUBSIDIARY OF SOUTHERN COMPANY, FOR $396 MILLION, EXCLUDING WORKING CAPITAL AND OTHER ADJUSTMENTS. THIS TRANSACTION SUPPORTS OUR EFFORT TO DIVEST NON-CORE ASSETS OUTSIDE OUR STRATEGIC CONCENTRATION. OSPREY ENERGY CENTER: ON JANUARY 3, 2017, WE COMPLETED THE SALE OF OUR OSPREY ENERGY CENTER TO DUKE ENERGY FLORIDA, INC. FOR APPROXIMATELY $166 MILLION, EXCLUDING WORKING CAPITAL AND OTHER ADJUSTMENTS. THIS TRANSACTION SUPPORTS OUR EFFORT TO DIVEST NON-CORE ASSETS OUTSIDE OUR STRATEGIC CONCENTRATION. TEXAS: CLEAR LAKE POWER PLANT: DURING THE THIRD QUARTER OF 2016, WE FILED WITH ERCOT TO RETIRE OUR 400 MW CLEAR LAKE POWER PLANT. ERCOT SUBSEQUENTLY APPROVED OUR PLAN TO DISCONTINUE OPERATIONS. BUILT IN 1985, CLEAR LAKE UTILIZED AN OLDER TECHNOLOGY. DUE TO GROWING MAINTENANCE COSTS AND LACK OF ADEQUATE COMPENSATION IN TEXAS, WE RETIRED THE POWER PLANT ON FEBRUARY 1, 2017. GUADALUPE PEAKING ENERGY CENTER: IN APRIL 2015, WE EXECUTED AN AGREEMENT WITH GUADALUPE VALLEY ELECTRIC COOPERATIVE (“GVEC”) RELATED TO THE CONSTRUCTION OF A 418 MW NATURAL GAS-FIRED PEAKING POWER PLANT TO BE CO-LOCATED WITH OUR GUADALUPE ENERGY CENTER. UNDER THE TERMS OF THE AGREEMENT, CONSTRUCTION OF THE GUADALUPE PEAKING ENERGY CENTER (“GPEC”) MAY COMMENCE AT OUR DISCRETION, SO LONG AS THE POWER PLANT REACHES COMMERCIAL OPERATION BY JUNE 1, 2019. WHEN THE POWER PLANT BEGINS COMMERCIAL OPERATION, GVEC WILL PURCHASE A 50% OWNERSHIP INTEREST IN GPEC. ONCE BUILT, GPEC WILL FEATURE TWO FAST-RAMPING COMBUSTION TURBINES CAPABLE OF RESPONDING TO PEAKS IN POWER DEMAND. THIS PROJECT REPRESENTS A MUTUALLY BENEFICIAL RESPONSE TO OUR CUSTOMER’S DESIRE TO HAVE DIRECT ACCESS TO PEAKING GENERATION RESOURCES, AS IT LEVERAGES THE BENEFITS OF OUR EXISTING SITE AND DEVELOPMENT RIGHTS AND OUR CONSTRUCTION AND OPERATING EXPERTISE, AS WELL AS OUR CUSTOMER’S ABILITY TO FUND ITS INVESTMENT AT ATTRACTIVE RATES, ALL WHILE AFFORDING US THE FLEXIBILITY OF TIMING THE PLANT’S CONSTRUCTION IN RESPONSE TO MARKET PRICING SIGNALS. WEST: SOUTH POINT ENERGY CENTER: ON APRIL 1, 2016, WE ENTERED INTO AN ASSET SALE AGREEMENT FOR THE SALE OF SUBSTANTIALLY ALL OF THE ASSETS COMPRISING OUR SOUTH POINT ENERGY CENTER TO NEVADA POWER COMPANY D/B/A NV ENERGY FOR APPROXIMATELY $76 MILLION PLUS THE ASSUMPTION BY THE PURCHASER OF EXISTING TRANSMISSION CAPACITY CONTRACTS WITH A FUTURE NET PRESENT VALUE PAYMENT OBLIGATION OF APPROXIMATELY $112 MILLION, APPROXIMATELY $9 MILLION IN REMAINING TRIBAL LEASE COSTS AND APPROXIMATELY $21 MILLION IN NEAR-TERM REPAIRS, MAINTENANCE AND CAPITAL IMPROVEMENTS TO RESTORE THE POWER PLANT TO FULL CAPACITY. THE SALE IS SUBJECT TO CERTAIN CONDITIONS PRECEDENT, AS WELL AS FEDERAL AND STATE REGULATORY APPROVALS. THIS TRANSACTION SUPPORTS OUR EFFORT TO DIVEST NON-CORE ASSETS OUTSIDE OUR STRATEGIC CONCENTRATION. IN DECEMBER 2016, THE NEVADA PUBLIC UTILITY COMMISSION (NPUC) ISSUED AN ORDER REJECTING THE ASSET SALE AGREEMENT. IN JANUARY 2017, NEVADA POWER COMPANY FILED A MOTION FOR RECONSIDERATION OF THIS ORDER. IN FEBRUARY 2017, THE FERC APPROVED NEVADA POWER COMPANY’S ACQUISITION OF SOUTH POINT. HOWEVER, ON FEBRUARY 8, 2017, THE NPUC DENIED NEVADA POWER COMPANY’S PURCHASE OF SOUTH POINT. NEVADA POWER COMPANY HAS THE RIGHT TO APPEAL THIS DECISION. WE ARE ALSO CURRENTLY ASSESSING OUR OPTIONS; HOWEVER, WE DO NOT ANTICIPATE THAT THE DENIAL OF THE SALE BY THE NPUC WILL HAVE A MATERIAL EFFECT ON OUR FINANCIAL CONDITION, RESULTS OF OPERATIONS OR CASH FLOWS. OPERATIONS UPDATE 2016 POWER OPERATIONS ACHIEVEMENTS: SAFETY PERFORMANCE:— MAINTAINED TOP QUARTILE4 SAFETY METRICS: 0.55 TOTAL RECORDABLE INCIDENT RATE AVAILABILITY PERFORMANCE:— ACHIEVED LOW FLEETWIDE FORCED OUTAGE FACTOR7: 2.1%— DELIVERED STRONG FLEETWIDE STARTING RELIABILITY: 97.9% POWER GENERATION:— THREE TEXAS MERCHANT POWER PLANTS WITH FULL-YEAR CAPACITY FACTORS GREATER THAN 65%:BOSQUE, FREESTONE AND PASADENA— CALIFORNIA PEAKERS ACHIEVED 98.2% STARTING RELIABILITY ON 1,483 START ATTEMPTS 2015 WILDFIRE AT OUR GEYSERS ASSETS IN SEPTEMBER 2015, A WILDFIRE SPREAD TO OUR GEYSERS ASSETS IN LAKE AND SONOMA COUNTIES, CALIFORNIA. THE WILDFIRE AFFECTED SEVERAL OF OUR GEOTHERMAL POWER PLANTS IN THE REGION, WHICH SUSTAINED DAMAGE TO ANCILLARY STRUCTURES SUCH AS COOLING TOWERS AND COMMUNICATION/ELECTRIC DELIVERABILITY INFRASTRUCTURE. REPAIRS HAVE BEEN COMPLETED, AND OUR GEYSERS ASSETS ARE CURRENTLY GENERATING RENEWABLE POWER FOR OUR CUSTOMERS AT PRE-FIRE LEVELS. THE REPAIR AND REPLACEMENT COSTS, AS WELL AS OUR NET REVENUE LOSSES RELATING TO THE WILDFIRE, WERE LIMITED TO OUR INSURANCE DEDUCTIBLES OF APPROXIMATELY $36 MILLION, ALL OF WHICH WAS RECOGNIZED IN 2015. THE LOSSES INCURRED IN 2016 RELATED TO THE WILDFIRE WERE PRIMARILY OFFSET BY INSURANCE PROCEEDS. WE RECORD INSURANCE PROCEEDS IN THE SAME FINANCIAL STATEMENT LINE AS THE RELATED LOSS IS INCURRED AND RECORDED APPROXIMATELY $24 MILLION AND $2 MILLION IN BUSINESS INTERRUPTION PROCEEDS IN OPERATING REVENUES DURING THE YEARS ENDED DECEMBER 31, 2016 AND 2015, RESPECTIVELY. THE WILDFIRE AND INSURANCE PROCEEDS RECOVERY DID NOT HAVE A MATERIAL EFFECT ON OUR FINANCIAL CONDITION, RESULTS OF OPERATIONS OR CASH FLOWS. 2017 OPERATING EVENT AT OUR DELTA ENERGY CENTER ON JANUARY 29, 2017, WE EXPERIENCED AN OPERATING EVENT AT OUR DELTA ENERGY CENTER THAT RESULTED IN AN EMERGENCY SHUTDOWN OF THE POWER PLANT; THE DURATION OF WHICH HAS YET TO BE DETERMINED. WE ARE CURRENTLY ASSESSING THE DAMAGE TO THE PLANT, IN PARTICULAR THE STEAM TURBINE AND STEAM TURBINE GENERATOR. BASED ON PRELIMINARY INFORMATION, WE ANTICIPATE THAT INSURANCE WILL COVER A SIGNIFICANT PORTION OF OUR LOSSES, AFTER APPLICABLE DEDUCTIBLES. 2016 CUSTOMER-BASED ACHIEVEMENTS: WHOLESALE: — WE ENTERED INTO A NEW TEN-YEAR PPA WITH THE TENNESSEE VALLEY AUTHORITY TO PROVIDE 615 MW OF ENERGY AND CAPACITY FROM OUR MORGAN ENERGY CENTER COMMENCING IN FEBRUARY 2016.— OUR TEN-YEAR PPA WITH SOUTHERN CALIFORNIA EDISON FOR 50 MW OF CAPACITY AND RENEWABLE ENERGY FROM OUR GEYSERS ASSETS COMMENCING IN JANUARY 2018 WAS APPROVED BY THE CALIFORNIA PUBLIC UTILITY COMMISSION IN THE SECOND QUARTER OF 2016.— WE ENTERED INTO A NEW FIVE-YEAR STEAM AGREEMENT, SUBJECT TO CERTAIN CONDITIONS PRECEDENT, WITH A WHOLLY OWNED SUBSIDIARY OF THE DOW CHEMICAL COMPANY TO PROVIDE STEAM FROM OUR TEXAS CITY POWER PLANT THROUGH 2021.— WE ENTERED INTO A NEW FIVE-YEAR PPA WITH USS-POSCO INDUSTRIES TO PROVIDE 50 MW OF ENERGY AND STEAM FROM OUR LOS MEDANOS ENERGY CENTER COMMENCING IN JANUARY 2017, WHICH ALSO PROVIDES FOR ANNUAL EXTENSIONS THROUGH 2024.— WE ENTERED INTO A NEW FIVE-YEAR PPA WITH A THIRD PARTY TO PROVIDE 50 MW OF CAPACITY FROM OUR ROCKGEN ENERGY CENTER COMMENCING IN JUNE 2017, WHICH INCREASES TO 100 MW OF CAPACITY COMMENCING IN JUNE 2019. RETAIL: — IN 2016, OUR RETAIL SUBSIDIARIES SERVED APPROXIMATELY 65 MILLION MWH OF CUSTOMER LOAD CONSISTING OF APPROXIMATELY 6.5 MILLION ANNUALIZED RESIDENTIAL CUSTOMER EQUIVALENTS AT DECEMBER 31, 2016.— CHAMPION ENERGY WAS RANKED HIGHEST IN CUSTOMER SATISFACTION AMONG TEXAS RETAIL ELECTRIC PROVIDERS ACCORDING TO THE J.D. POWER 2016 ELECTRIC PROVIDER RETAIL CUSTOMER SATISFACTION STUDY. THIS IS THE SIXTH TIME CHAMPION ENERGY HAS RECEIVED THE TOP RANKING IN THE PAST SEVEN YEARS.— DURING 2016, CHAMPION ENERGY EXPANDED ITS SERVICE TERRITORY TO INCLUDE COMMERCIAL AND INDUSTRIAL CUSTOMERS IN MAINE, CONNECTICUT AND CALIFORNIA. ___________ 7 EXCLUDES THE IMPACTS OF THE 2015 GEYSERS WILDFIRE, SUTTER ENERGY CENTER (SUSPENDED OPERATIONS) AND SOUTH POINT (PENDING SALE). 2017 FINANCIAL OUTLOOK — ____________ (1) INCLUDES PROJECTED MAJOR MAINTENANCE EXPENSE OF $315 MILLION AND MAINTENANCE CAPITAL EXPENDITURES OF $120 MILLION IN 2017. CAPITAL EXPENDITURES EXCLUDE MAJOR CONSTRUCTION AND DEVELOPMENT PROJECTS. (2) INCLUDES COMMITMENT, LETTER OF CREDIT AND OTHER FEES FROM CONSOLIDATED AND UNCONSOLIDATED INVESTMENTS, NET OF CAPITALIZED INTEREST AND INTEREST INCOME. (3) AMOUNT INCLUDES $200 MILLION OF RECURRING AMORTIZATION, AS WELL AS THE $550 MILLION REPAYMENT OF THE 2017 FIRST LIEN TERM LOAN, A PORTION OF THE OF $453 MILLION OF OUR CALLABLE 7 7/8% 2023 SENIOR SECURED NOTES AND THE BUYOUT OF THE PASADENA LESSOR INTEREST. AS DETAILED ABOVE, TODAY WE ARE REAFFIRMING OUR 2017 GUIDANCE RANGE. WE EXPECT ADJUSTED EBITDA OF $1.8 BILLION TO $1.95 BILLION AND ADJUSTED FREE CASH FLOW OF $710 MILLION TO $860 MILLION. WE EXPECT TO INVEST $220 MILLION IN OUR ONGOING GROWTH-RELATED PROJECTS DURING 2017, PRIMARILY THE CONSTRUCTION OF YORK 2 ENERGY CENTER. INVESTOR CONFERENCE CALL AND WEBCAST WE WILL HOST A CONFERENCE CALL TO DISCUSS OUR FINANCIAL AND OPERATING RESULTS FOR THE FOURTH QUARTER AND FULL YEAR 2016 ON FRIDAY, FEBRUARY 10, 2017, AT 10 A.M. EASTERN TIME / 9 A.M. CENTRAL TIME. A LISTEN-ONLY WEBCAST OF THE CALL MAY BE ACCESSED THROUGH OUR WEBSITE AT WWW.CALPINE.COM, OR BY DIALING (800) 447-0521 IN THE U.S. OR (847) 413-3238 OUTSIDE THE U.S. THE CONFIRMATION CODE IS 43994310. A RECORDING OF THE CALL WILL BE MADE AVAILABLE FOR A LIMITED TIME ON OUR WEBSITE OR BY DIALING (888) 843-7419 IN THE U.S. OR (630) 652-3042 OUTSIDE THE U.S. AND PROVIDING CONFIRMATION CODE 43994310. PRESENTATION MATERIALS TO ACCOMPANY THE CONFERENCE CALL WILL BE POSTED ON OUR WEBSITE ON FEBRUARY 10, 2017. ABOUT CALPINE CALPINE CORPORATION IS AMERICA’S LARGEST GENERATOR OF ELECTRICITY FROM NATURAL GAS AND GEOTHERMAL RESOURCES WITH OPERATIONS IN COMPETITIVE POWER MARKETS. OUR FLEET OF 80 POWER PLANTS IN OPERATION OR UNDER CONSTRUCTION REPRESENTS APPROXIMATELY 26,000 MEGAWATTS OF GENERATION CAPACITY. THROUGH WHOLESALE POWER OPERATIONS AND OUR RETAIL BUSINESSES CALPINE ENERGY SOLUTIONS AND CHAMPION ENERGY, WE SERVE CUSTOMERS IN 25 STATES, CANADA AND MEXICO. OUR CLEAN, EFFICIENT, MODERN AND FLEXIBLE FLEET USES ADVANCED TECHNOLOGIES TO GENERATE POWER IN A LOW-CARBON AND ENVIRONMENTALLY RESPONSIBLE MANNER. WE ARE UNIQUELY POSITIONED TO BENEFIT FROM THE SECULAR TRENDS AFFECTING OUR INDUSTRY, INCLUDING THE ABUNDANT AND AFFORDABLE SUPPLY OF CLEAN NATURAL GAS, STRICTER ENVIRONMENTAL REGULATION, AGING POWER GENERATION INFRASTRUCTURE AND THE INCREASING NEED FOR DISPATCHABLE POWER PLANTS TO SUCCESSFULLY INTEGRATE INTERMITTENT RENEWABLES INTO THE GRID. PLEASE VISIT WWW.CALPINE.COM TO LEARN MORE ABOUT WHY CALPINE IS A GENERATION AHEAD - TODAY. CALPINE’S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2016, HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION (SEC) AND IS AVAILABLE ON THE SEC’S WEBSITE AT WWW.SEC.GOV. FORWARD-LOOKING INFORMATION IN ADDITION TO HISTORICAL INFORMATION, THIS RELEASE CONTAINS “FORWARD-LOOKING STATEMENTS” WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995, SECTION 27A OF THE SECURITIES ACT, AND SECTION 21E OF THE EXCHANGE ACT. FORWARD-LOOKING STATEMENTS MAY APPEAR THROUGHOUT THIS RELEASE. WE USE WORDS SUCH AS “BELIEVE,” “INTEND,” “EXPECT,” “ANTICIPATE,” “PLAN,” “MAY,” “WILL,” “SHOULD,” “ESTIMATE,” “POTENTIAL,” “PROJECT” AND SIMILAR EXPRESSIONS TO IDENTIFY FORWARD-LOOKING STATEMENTS. SUCH STATEMENTS INCLUDE, AMONG OTHERS, THOSE CONCERNING OUR EXPECTED FINANCIAL PERFORMANCE AND STRATEGIC AND OPERATIONAL PLANS, AS WELL AS ALL ASSUMPTIONS, EXPECTATIONS, PREDICTIONS, INTENTIONS OR BELIEFS ABOUT FUTURE EVENTS. WE BELIEVE THAT THE FORWARD-LOOKING STATEMENTS ARE BASED UPON REASONABLE ASSUMPTIONS AND EXPECTATIONS. HOWEVER, YOU ARE CAUTIONED THAT ANY SUCH FORWARD-LOOKING STATEMENTS ARE NOT GUARANTEES OF FUTURE PERFORMANCE AND THAT A NUMBER OF RISKS AND UNCERTAINTIES COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE ANTICIPATED IN THE FORWARD-LOOKING STATEMENTS. SUCH RISKS AND UNCERTAINTIES INCLUDE, BUT ARE NOT LIMITED TO: FINANCIAL RESULTS THAT MAY BE VOLATILE AND MAY NOT REFLECT HISTORICAL TRENDS DUE TO, AMONG OTHER THINGS, SEASONALITY OF DEMAND, FLUCTUATIONS IN PRICES FOR COMMODITIES SUCH AS NATURAL GAS AND POWER, CHANGES IN U.S. MACROECONOMIC CONDITIONS, FLUCTUATIONS IN LIQUIDITY AND VOLATILITY IN THE ENERGY COMMODITIES MARKETS AND OUR ABILITY AND EXTENT TO WHICH WE HEDGE RISKS; LAWS, REGULATIONS AND MARKET RULES IN THE MARKETS IN WHICH WE PARTICIPATE AND OUR ABILITY TO EFFECTIVELY RESPOND TO CHANGES IN LAWS, REGULATIONS OR MARKET RULES OR THE INTERPRETATION THEREOF INCLUDING THOSE RELATED TO THE ENVIRONMENT, DERIVATIVE TRANSACTIONS AND MARKET DESIGN IN THE REGIONS IN WHICH WE OPERATE; OUR ABILITY TO MANAGE OUR LIQUIDITY NEEDS, ACCESS THE CAPITAL MARKETS WHEN NECESSARY AND COMPLY WITH COVENANTS UNDER OUR SENIOR UNSECURED NOTES, FIRST LIEN NOTES, FIRST LIEN TERM LOANS, CORPORATE REVOLVING FACILITY, CCFC TERM LOANS AND OTHER EXISTING FINANCING OBLIGATIONS; RISKS ASSOCIATED WITH THE OPERATION, CONSTRUCTION AND DEVELOPMENT OF POWER PLANTS, INCLUDING UNSCHEDULED OUTAGES OR DELAYS AND PLANT EFFICIENCIES; RISKS RELATED TO OUR GEOTHERMAL RESOURCES, INCLUDING THE ADEQUACY OF OUR STEAM RESERVES, UNUSUAL OR UNEXPECTED STEAM FIELD WELL AND PIPELINE MAINTENANCE REQUIREMENTS, VARIABLES ASSOCIATED WITH THE INJECTION OF WATER TO THE STEAM RESERVOIR AND POTENTIAL REGULATIONS OR OTHER REQUIREMENTS RELATED TO SEISMICITY CONCERNS THAT MAY DELAY OR INCREASE THE COST OF DEVELOPING OR OPERATING GEOTHERMAL RESOURCES; COMPETITION, INCLUDING FROM RENEWABLE SOURCES OF POWER, INTERFERENCE BY STATES IN COMPETITIVE POWER MARKETS THROUGH SUBSIDIES OR SIMILAR SUPPORT FOR NEW OR EXISTING POWER PLANTS, AND OTHER RISKS ASSOCIATED WITH MARKETING AND SELLING POWER IN THE EVOLVING ENERGY MARKETS; STRUCTURAL CHANGES IN THE SUPPLY AND DEMAND OF POWER, RESULTING FROM THE DEVELOPMENT OF NEW FUELS OR TECHNOLOGIES AND DEMAND-SIDE MANAGEMENT TOOLS (SUCH AS DISTRIBUTED GENERATION, POWER STORAGE AND OTHER TECHNOLOGIES); THE EXPIRATION OR EARLY TERMINATION OF OUR PPAS AND THE RELATED RESULTS ON REVENUES; FUTURE CAPACITY REVENUE MAY NOT OCCUR AT EXPECTED LEVELS; NATURAL DISASTERS, SUCH AS HURRICANES, EARTHQUAKES, DROUGHTS, WILDFIRES AND FLOODS, ACTS OF TERRORISM OR CYBER-ATTACKS THAT MAY AFFECT OUR POWER PLANTS OR THE MARKETS OUR POWER PLANTS OR RETAIL OPERATIONS SERVE AND OUR CORPORATE HEADQUARTERS; DISRUPTIONS IN OR LIMITATIONS ON THE TRANSPORTATION OF NATURAL GAS OR FUEL OIL AND THE TRANSMISSION OF POWER; OUR ABILITY TO MANAGE OUR COUNTERPARTY AND CUSTOMER EXPOSURE AND CREDIT RISK, INCLUDING OUR COMMODITY POSITIONS; OUR ABILITY TO ATTRACT, MOTIVATE AND RETAIN KEY EMPLOYEES; PRESENT AND POSSIBLE FUTURE CLAIMS, LITIGATION AND ENFORCEMENT ACTIONS THAT MAY ARISE FROM NONCOMPLIANCE WITH MARKET RULES PROMULGATED BY THE SEC, CFTC, FERC AND OTHER REGULATORY BODIES; AND OTHER RISKS IDENTIFIED IN THIS PRESS RELEASE, IN OUR ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2016, AND IN OTHER REPORTS FILED BY US WITH THE SEC. GIVEN THE RISKS AND UNCERTAINTIES SURROUNDING FORWARD-LOOKING STATEMENTS, YOU SHOULD NOT PLACE UNDUE RELIANCE ON THESE STATEMENTS. MANY OF THESE FACTORS ARE BEYOND OUR ABILITY TO CONTROL OR PREDICT. OUR FORWARD-LOOKING STATEMENTS SPEAK ONLY AS OF THE DATE OF THIS RELEASE. OTHER THAN AS REQUIRED BY LAW, WE UNDERTAKE NO OBLIGATION TO UPDATE OR REVISE FORWARD-LOOKING STATEMENTS, WHETHER AS A RESULT OF NEW INFORMATION, FUTURE EVENTS, OR OTHERWISE. THREE MONTHS ENDED DECEMBER 31, WEIGHTED AVERAGE SHARES OF COMMON STOCK OUTSTANDING (IN THOUSANDS) NET INCOME (LOSS) PER COMMON SHARE ATTRIBUTABLE TO CALPINE — BASIC WEIGHTED AVERAGE SHARES OF COMMON STOCK OUTSTANDING (IN THOUSANDS) CALPINE CORPORATION AND SUBSIDIARIES CALPINE CORPORATION AND SUBSIDIARIES $ $ $ (1,231 ) — (120 ) (364 ) (9 ) (58 ) (6 ) (1 154 (488 ) 189 717 $ $ $ (37 ) $ $ $ $ __________ (1) INCLUDES AMORTIZATION INCLUDED IN COMMODITY REVENUE AND COMMODITY EXPENSE ASSOCIATED WITH INTANGIBLE ASSETS AND AMORTIZATION RECORDED IN INTEREST EXPENSE ASSOCIATED WITH DEBT ISSUANCE COSTS AND DISCOUNTS. (2) ON OCTOBER 26, 2016, WE COMPLETED THE SALE OF MANKATO POWER PLANT FOR $407 MILLION, INCLUDING WORKING CAPITAL AND OTHER ADJUSTMENTS. WE RECEIVED NET PROCEEDS OF $164 MILLION AFTER THE NONCASH REDUCTION OF STEAMBOAT PROJECT DEBT OF $243 MILLION AS THE FUNDS WERE PROVIDED DIRECTLY TO THE LENDER IN CONJUNCTION WITH THE SALE OF THE POWER PLANT. (3) ON DECEMBER 1, 2016, WE COMPLETED THE PURCHASE OF CALPINE SOLUTIONS, FORMERLY NOBLE AMERICAS ENERGY SOLUTIONS, ALONG WITH A SWAP CONTRACT FOR APPROXIMATELY $800 MILLION PLUS APPROXIMATELY $350 MILLION OF NET WORKING CAPITAL AT CLOSING. WE RECOVERED APPROXIMATELY $250 MILLION IN CASH SUBSEQUENT TO CLOSING AND PRIOR TO YEAR END DECEMBER 31, 2016. REGULATION G RECONCILIATIONS IN ADDITION TO DISCLOSING FINANCIAL RESULTS IN ACCORDANCE WITH U.S. GAAP, THE ACCOMPANYING FOURTH QUARTER 2016 EARNINGS RELEASE CONTAINS NON-GAAP FINANCIAL MEASURES. NET INCOME (LOSS), AS ADJUSTED, COMMODITY MARGIN, ADJUSTED EBITDA AND ADJUSTED FREE CASH FLOW ARE NON-GAAP FINANCIAL MEASURES THAT WE USE AS MEASURES OF OUR PERFORMANCE. THESE NON-GAAP MEASURES SHOULD BE VIEWED AS A SUPPLEMENT TO AND NOT A SUBSTITUTE FOR OUR U.S. GAAP MEASURES OF PERFORMANCE, AND THE FINANCIAL RESULTS CALCULATED IN ACCORDANCE WITH U.S. GAAP AND RECONCILIATIONS FROM THESE RESULTS SHOULD BE CAREFULLY EVALUATED. NET INCOME (LOSS), AS ADJUSTED, REPRESENTS NET INCOME (LOSS) ATTRIBUTABLE TO CALPINE, ADJUSTED FOR CERTAIN NON-CASH AND NON-RECURRING ITEMS, INCLUDING MARK-TO-MARKET (GAIN) LOSS ON DERIVATIVES, DEBT MODIFICATION AND EXTINGUISHMENT COSTS AND OTHER ADJUSTMENTS. NET INCOME (LOSS), AS ADJUSTED, IS PRESENTED BECAUSE WE BELIEVE IT IS A USEFUL TOOL FOR ASSESSING THE OPERATING PERFORMANCE OF OUR COMPANY IN THE CURRENT PERIOD. NET INCOME (LOSS), AS ADJUSTED, IS NOT INTENDED TO REPRESENT NET INCOME (LOSS), THE MOST COMPARABLE U.S. GAAP MEASURE, AS AN INDICATOR OF OPERATING PERFORMANCE, AND IS NOT NECESSARILY COMPARABLE TO SIMILARLY TITLED MEASURES REPORTED BY OTHER COMPANIES. COMMODITY MARGIN INCLUDES OUR POWER AND STEAM REVENUES, SALES OF PURCHASED POWER AND PHYSICAL NATURAL GAS, CAPACITY REVENUE, REVENUE FROM RENEWABLE ENERGY CREDITS, SALES OF SURPLUS EMISSION ALLOWANCES, TRANSMISSION REVENUE AND EXPENSES, FUEL AND PURCHASED ENERGY EXPENSE, FUEL TRANSPORTATION EXPENSE, ENVIRONMENTAL COMPLIANCE EXPENSE, AND REALIZED SETTLEMENTS FROM OUR MARKETING, HEDGING, OPTIMIZATION AND TRADING ACTIVITIES, BUT EXCLUDES MARK-TO-MARKET ACTIVITY AND OTHER REVENUES. WE BELIEVE THAT COMMODITY MARGIN IS A USEFUL TOOL FOR ASSESSING THE PERFORMANCE OF OUR CORE OPERATIONS AND IS A KEY OPERATIONAL MEASURE REVIEWED BY OUR CHIEF OPERATING DECISION MAKER. COMMODITY MARGIN IS NOT A MEASURE CALCULATED IN ACCORDANCE WITH U.S. GAAP AND SHOULD BE VIEWED AS A SUPPLEMENT TO AND NOT A SUBSTITUTE FOR OUR RESULTS OF OPERATIONS PRESENTED IN ACCORDANCE WITH U.S. GAAP. COMMODITY MARGIN DOES NOT INTEND TO REPRESENT INCOME FROM OPERATIONS, THE MOST COMPARABLE U.S. GAAP MEASURE, AS AN INDICATOR OF OPERATING PERFORMANCE AND IS NOT NECESSARILY COMPARABLE TO SIMILARLY TITLED MEASURES REPORTED BY OTHER COMPANIES. ADJUSTED EBITDA REPRESENTS NET INCOME (LOSS) ATTRIBUTABLE TO CALPINE BEFORE NET (INCOME) ATTRIBUTABLE TO THE NONCONTROLLING INTEREST, INTEREST, TAXES, DEPRECIATION AND AMORTIZATION, ADJUSTED FOR CERTAIN NON-CASH AND NON-RECURRING ITEMS AS DETAILED IN THE FOLLOWING RECONCILIATION. ADJUSTED EBITDA IS NOT INTENDED TO REPRESENT CASH FLOWS FROM OPERATIONS OR NET INCOME (LOSS) AS DEFINED BY U.S. GAAP AS AN INDICATOR OF OPERATING PERFORMANCE AND IS NOT NECESSARILY COMPARABLE TO SIMILARLY TITLED MEASURES REPORTED BY OTHER COMPANIES. WE BELIEVE ADJUSTED EBITDA IS USEFUL TO INVESTORS AND OTHER USERS OF OUR FINANCIAL STATEMENTS IN EVALUATING OUR OPERATING PERFORMANCE BECAUSE IT PROVIDES THEM WITH AN ADDITIONAL TOOL TO COMPARE BUSINESS PERFORMANCE ACROSS COMPANIES AND ACROSS PERIODS. WE BELIEVE THAT EBITDA IS WIDELY USED BY INVESTORS TO MEASURE A COMPANY’S OPERATING PERFORMANCE WITHOUT REGARD TO ITEMS SUCH AS INTEREST EXPENSE, TAXES, DEPRECIATION AND AMORTIZATION, WHICH CAN VARY SUBSTANTIALLY FROM COMPANY TO COMPANY DEPENDING UPON ACCOUNTING METHODS AND BOOK VALUE OF ASSETS, CAPITAL STRUCTURE AND THE METHOD BY WHICH ASSETS WERE ACQUIRED. ADDITIONALLY, WE BELIEVE THAT INVESTORS COMMONLY ADJUST EBITDA INFORMATION TO ELIMINATE THE EFFECT OF RESTRUCTURING AND OTHER EXPENSES, WHICH VARY WIDELY FROM COMPANY TO COMPANY AND IMPAIR COMPARABILITY. AS WE DEFINE IT, ADJUSTED EBITDA REPRESENTS EBITDA ADJUSTED FOR THE EFFECTS OF IMPAIRMENT LOSSES, GAINS OR LOSSES ON SALES, DISPOSITIONS OR RETIREMENTS OF ASSETS, ANY MARK-TO-MARKET GAINS OR LOSSES FROM ACCOUNTING FOR DERIVATIVES, ADJUSTMENTS TO EXCLUDE THE ADJUSTED EBITDA RELATED TO THE NONCONTROLLING INTEREST, STOCK-BASED COMPENSATION EXPENSE, OPERATING LEASE EXPENSE, NON-CASH GAINS AND LOSSES FROM FOREIGN CURRENCY TRANSLATIONS, MAJOR MAINTENANCE EXPENSE, GAINS OR LOSSES ON THE REPURCHASE, MODIFICATION OR EXTINGUISHMENT OF DEBT, NON-CASH GAAP-RELATED ADJUSTMENTS TO LEVELIZE REVENUES FROM TOLLING AGREEMENTS AND ANY UNUSUAL OR NON-RECURRING ITEMS PLUS ADJUSTMENTS TO REFLECT THE ADJUSTED EBITDA FROM OUR UNCONSOLIDATED INVESTMENTS. WE ADJUST FOR THESE ITEMS IN OUR ADJUSTED EBITDA AS OUR MANAGEMENT BELIEVES THAT THESE ITEMS WOULD DISTORT THEIR ABILITY TO EFFICIENTLY VIEW AND ASSESS OUR CORE OPERATING TRENDS. IN SUMMARY, OUR MANAGEMENT USES ADJUSTED EBITDA AS A MEASURE OF OPERATING PERFORMANCE TO ASSIST IN COMPARING PERFORMANCE FROM PERIOD TO PERIOD ON A CONSISTENT BASIS AND TO READILY VIEW OPERATING TRENDS, AS A MEASURE FOR PLANNING AND FORECASTING OVERALL EXPECTATIONS AND FOR EVALUATING ACTUAL RESULTS AGAINST SUCH EXPECTATIONS, AND IN COMMUNICATIONS WITH OUR BOARD OF DIRECTORS, SHAREHOLDERS, CREDITORS, ANALYSTS AND INVESTORS CONCERNING OUR FINANCIAL PERFORMANCE. ADJUSTED FREE CASH FLOW REPRESENTS NET INCOME (LOSS) BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION, AS ADJUSTED, LESS OPERATING LEASE PAYMENTS, MAJOR MAINTENANCE EXPENSE AND MAINTENANCE CAPITAL EXPENDITURES, NET CASH INTEREST, CASH TAXES AND OTHER ADJUSTMENTS, INCLUDING NON-RECURRING ITEMS. ADJUSTED FREE CASH FLOW IS PRESENTED BECAUSE WE BELIEVE IT IS A USEFUL TOOL FOR ASSESSING THE FINANCIAL PERFORMANCE OF OUR COMPANY IN THE CURRENT PERIOD. ADJUSTED FREE CASH FLOW IS A PERFORMANCE MEASURE AND IS NOT INTENDED TO REPRESENT NET INCOME (LOSS), THE MOST DIRECTLY COMPARABLE U.S. GAAP MEASURE, OR LIQUIDITY AND IS NOT NECESSARILY COMPARABLE TO SIMILARLY TITLED MEASURES REPORTED BY OTHER COMPANIES. NET INCOME (LOSS), AS ADJUSTED RECONCILIATION THE FOLLOWING TABLE RECONCILES OUR NET INCOME, AS ADJUSTED, TO ITS U.S. GAAP RESULTS FOR THE THREE MONTHS AND YEARS ENDED DECEMBER 31, 2016 AND 2015 (IN MILLIONS): __________ (1) ASSUMES A 0% EFFECTIVE TAX RATE FOR THESE ITEMS. (2) IN ADDITION TO CHANGES IN MARKET VALUE ON DERIVATIVES NOT DESIGNATED AS HEDGES, CHANGES IN MARK-TO-MARKET (GAIN) LOSS ALSO INCLUDE HEDGE INEFFECTIVENESS AND ADJUSTMENTS TO REFLECT CHANGES IN CREDIT DEFAULT RISK EXPOSURE. COMMODITY MARGIN RECONCILIATION THE FOLLOWING TABLES RECONCILE OUR COMMODITY MARGIN TO ITS U.S. GAAP RESULTS FOR THE THREE MONTHS AND YEARS ENDED DECEMBER 31, 2016 AND 2015 (IN MILLIONS): INCOME (LOSS) FROM OPERATIONS INCOME (LOSS) FROM OPERATIONS INCOME (LOSS) FROM OPERATIONS INCOME (LOSS) FROM OPERATIONS _________ (1) INCLUDES NIL AND $(1) MILLION OF LEASE LEVELIZATION AND $43 MILLION AND $9 MILLION OF AMORTIZATION EXPENSE FOR THE THREE MONTHS ENDED DECEMBER 31, 2016 AND 2015, RESPECTIVELY. (2) INCLUDES $(2) MILLION AND $(2) MILLION OF LEASE LEVELIZATION AND $122 MILLION AND $20 MILLION OF AMORTIZATION EXPENSE FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015, RESPECTIVELY. CONSOLIDATED ADJUSTED EBITDA RECONCILIATION IN THE FOLLOWING TABLE, WE HAVE RECONCILED OUR ADJUSTED EBITDA AND ADJUSTED FREE CASH FLOW TO OUR NET INCOME ATTRIBUTABLE TO CALPINE FOR THE THREE MONTHS AND YEARS ENDED DECEMBER 31, 2016 AND 2015, AS REPORTED UNDER U.S. GAAP (IN MILLIONS): (76 ) _________ (1) EXCLUDES DEPRECIATION AND AMORTIZATION EXPENSE ATTRIBUTABLE TO THE NON-CONTROLLING INTEREST. (2) ADJUSTMENTS TO REFLECT ADJUSTED EBITDA FROM UNCONSOLIDATED INVESTMENTS INCLUDE (GAIN) LOSS ON MARK-TO-MARKET ACTIVITY OF NIL FOR EACH OF THE THREE MONTHS AND YEARS ENDED DECEMBER 31, 2016 AND 2015. (3) INCLUDES $66 MILLION AND $257 MILLION IN MAJOR MAINTENANCE EXPENSE FOR THE THREE MONTHS AND YEAR ENDED DECEMBER 31, 2016, RESPECTIVELY, AND $28 MILLION AND $148 MILLION IN MAINTENANCE CAPITAL EXPENDITURES FOR THE THREE MONTHS AND YEAR ENDED DECEMBER 31, 2016, RESPECTIVELY. INCLUDES $74 MILLION AND $272 MILLION IN MAJOR MAINTENANCE EXPENSE FOR THE THREE MONTHS AND YEAR ENDED DECEMBER 31, 2015, RESPECTIVELY, AND $57 MILLION AND $189 MILLION IN MAINTENANCE CAPITAL EXPENDITURES FOR THE THREE MONTHS AND YEAR ENDED DECEMBER 31, 2015, RESPECTIVELY. (4) INCLUDES COMMITMENT, LETTER OF CREDIT AND OTHER BANK FEES FROM BOTH CONSOLIDATED AND UNCONSOLIDATED INVESTMENTS, NET OF CAPITALIZED INTEREST AND INTEREST INCOME. (5) ADJUSTED FREE CASH FLOW, AS REPORTED, EXCLUDES CHANGES IN WORKING CAPITAL, SUCH THAT IT IS CALCULATED ON THE SAME BASIS AS OUR GUIDANCE. CONSOLIDATED ADJUSTED EBITDA RECONCILIATION IN THE FOLLOWING TABLE, WE HAVE RECONCILED OUR ADJUSTED EBITDA TO OUR COMMODITY MARGIN, BOTH OF WHICH ARE NON-GAAP MEASURES, FOR THE THREE MONTHS AND YEARS ENDED DECEMBER 31, 2016 AND 2015. RECONCILIATIONS FOR BOTH ADJUSTED EBITDA AND COMMODITY MARGIN TO COMPARABLE U.S. GAAP MEASURES ARE PROVIDED ABOVE. AMOUNTS BELOW ARE SHOWN EXCLUSIVE OF THE NONCONTROLLING INTEREST (IN MILLIONS): _________ (1) SHOWN NET OF MAJOR MAINTENANCE EXPENSE, STOCK-BASED COMPENSATION EXPENSE, NON-CASH LOSS ON DISPOSITIONS OF ASSETS AND OTHER COSTS. (2) SHOWN NET OF STOCK-BASED COMPENSATION EXPENSE AND OTHER COSTS. (3) SHOWN NET OF OPERATING LEASE EXPENSE, AMORTIZATION AND OTHER COSTS. ADJUSTED EBITDA AND ADJUSTED FREE CASH FLOW RECONCILIATION FOR GUIDANCE (IN MILLIONS) _________ (1) FOR PURPOSES OF NET INCOME GUIDANCE RECONCILIATION, MARK-TO-MARKET ADJUSTMENTS ARE ASSUMED TO BE NIL. (2) OTHER INCLUDES STOCK-BASED COMPENSATION EXPENSE, ADJUSTMENTS TO REFLECT ADJUSTED EBITDA FROM UNCONSOLIDATED INVESTMENTS, INCOME TAX EXPENSE AND OTHER ITEMS. (3) INCLUDES PROJECTED MAJOR MAINTENANCE EXPENSE OF $315 MILLION AND MAINTENANCE CAPITAL EXPENDITURES OF $120 MILLION. CAPITAL EXPENDITURES EXCLUDE MAJOR CONSTRUCTION AND DEVELOPMENT PROJECTS. (4) INCLUDES COMMITMENT, LETTER OF CREDIT AND OTHER BANK FEES FROM BOTH CONSOLIDATED AND UNCONSOLIDATED INVESTMENTS, NET OF CAPITALIZED INTEREST AND INTEREST INCOME. OPERATING PERFORMANCE METRICS THE TABLE BELOW SHOWS THE OPERATING PERFORMANCE METRICS FOR THE PERIODS PRESENTED: 7,432 ________ (1) EXCLUDES GENERATION FROM UNCONSOLIDATED POWER PLANTS AND POWER PLANTS OWNED BUT NOT OPERATED BY US. (2) GENERATION, AVERAGE AVAILABILITY AND STEAM ADJUSTED HEAT RATE EXCLUDE POWER PLANTS AND UNITS THAT ARE INACTIVE.
