UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________
Form 10-Q
(Mark One)
x      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2006
or
o          TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
 
Commission file number: 1-12079
_______________
Calpine Corporation
(A Delaware Corporation)
I.R.S. Employer Identification No.
77-0212977
50 West San Fernando Street
San Jose, California 95113
Telephone: (408) 995-5115
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.                x  Yes       o  No
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer    x                Accelerated filer    o                Non-accelerated filer    o
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).           o  Yes       x  No
 
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:  568,957,616 shares of Common Stock, par value $.001 per share, outstanding on August 11, 2006.

 

 
 
CALPINE CORPORATION AND SUBSIDIARIES
(Debtor-in-Possession)
 
REPORT ON FORM 10-Q
 
For the Quarter Ended June 30, 2006
 
INDEX	
 	 	
 	Page	
PART I — FINANCIAL INFORMATION	 	
 	 	 	 	
 	Item 1.	Financial Statements	 	
 	 	 	Consolidated Condensed Balance Sheets June 30, 2006 and December 31, 2005	1	
 	 	 	Consolidated Condensed Statements of Operations for the Three and Six Months
Ended June 30, 2006 and 2005	3	
 	 	 	Consolidated Condensed Statements of Cash Flows for the Six Months
Ended June 30, 2006 and 2005	5	
 	 	 	Notes to Consolidated Condensed Financial Statements	7	
 	 	1.	Basis of Presentation and Summary of Significant Accounting Policies	7	
 	 	2.	Chapter 11 Cases and CCAA Proceedings	9	
 	 	3.	U.S. Debtors Condensed Combined Financial Statements	14	
 	 	4.	Property, Plant and Equipment, Net and Capitalized Interest	16	
 	 	5.	Investments	17	
 	 	6.	Comprehensive Loss	17	
 	 	7.	Debt	18	
 	 	8.	Liabilities Subject to Compromise	22	
 	 	9.	Derivative Instruments	23	
 	 	10.	Loss Per Share	24	
 	 	11.	Stock-Based Compensation	24	
 	 	12.	Commitments and Contingencies	26	
 	 	13.	Operating Segments	31	
 	 	14.	California Power Market	32	
 	 	15.	Subsequent Events	34	
 	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	34	
 	 	 	Selected Operating Information	35	
 	 	 	Overview	35	
 	 	 	Results of Operations	37	
 	 	 	Performance Metrics	43	
 	 	 	Liquidity and Capital Resources	46	
 	 	 	Summary of Key Activities for the Three Months Ended June 30, 2006	51	
 	 	 	California Power Market	52	
 	 	 	Financial Market Risks	52	
 	 	 	Recent Accounting Pronouncements	56	
 	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	56	
 	Item 4.	Controls and Procedures	56	
 	 	
PART II — OTHER INFORMATION	 	
 	 	 	 	
 	Item 1.	Legal Proceedings	57	
 	Item 3.	Defaults Upon Senior Securities	57	
 	Item 6.	Exhibits	58	
Signatures	62	

 
i

 
 
DEFINITIONS
 
As used in this Report, the abbreviations contained herein have the meanings set forth below. Additionally, the terms, “Calpine,” “we,” “us” and “our” refer to Calpine Corporation and its consolidated subsidiaries, unless the context clearly indicates otherwise. For clarification, such terms will not include the Canadian and other foreign subsidiaries that were deconsolidated as a result of the filings by the Canadian Debtors under the CCAA in the Canadian Court effective December 31, 2005. The term “Calpine Corporation” shall refer only to Calpine Corporation and not to any of its subsidiaries. Unless and as otherwise stated, any references in this Report to any agreement means such agreement and all schedules, exhibits and attachments thereto in each case as amended, restated, supplemented or otherwise modified to the date of this Report.
 
ABBREVIATION	 	DEFINITION	
 	 	 	
2005 Form 10-K	 	Calpine Corporation’s Annual Report on Form 10-K for the year ended December 31, 2005, filed with the SEC on May 19, 2006	
 	 	 	
2014 Convertible Notes	 	Contingent Convertible Notes Due 2014	
 	 	 	
345(b) Waiver Order	 	Order pursuant to Section 345(b) of the Bankruptcy Code authorizing continued (i) use of existing investment guidelines and (ii) operation of certain bank accounts dated May 4, 2006	
 	 	 	
401k Plan	 	Calpine Corporation Retirement Savings Plan	
 	 	 	
Acadia PP	 	Acadia Power Partners, LLC	
 	 	 	
AOCI	 	Accumulated Other Comprehensive Income	
 	 	 	
APB	 	Accounting Principles Board	
 	 	 	
Aries	 	MEP Pleasant Hill, LLC	
 	 	 	
Bankruptcy Code	 	United States Bankruptcy Code	
 	 	 	
Bankruptcy Courts	 	The U.S. Bankruptcy Court and the Canadian Court	
 	 	 	
Btu(s)	 	British thermal unit(s)	
 	 	 	
CAISO	 	California Independent System Operator	
 	 	 	
Calgary Energy Centre	 	Calgary Energy Centre Limited Partnership	
 	 	 	
CalGen	 	Calpine Generating Company, LLC, formerly Calpine Construction Finance Company II LLC	
 	 	 	
Calpine Debtor(s)	 	The U.S. Debtors and the Canadian Debtors	
 	 	 	
Calpine Jersey II	 	Calpine European Funding (Jersey) Limited	
 	 	 	
CalPX	 	California Power Exchange	
 	 	 	
CalPX Price	 	CalPX zonal day-ahead clearing price	
 	 	 	
Canadian Court	 	The Court of Queen’s Bench of Alberta, Judicial District of Calgary	
 	 	 	
Canadian Debtor(s)	 	The subsidiaries and affiliates of Calpine Corporation that have been granted creditor protection under the CCAA in the Canadian Court	

ii

 

ABBREVIATION	 	DEFINITION	
 	 	 	
Cash Collateral Order	 	Second Amended Final Order of the U.S. Bankruptcy Court Authorizing Use of Cash Collateral and Granting Adequate Protection, dated February 24, 2006, as modified by the Order Granting U.S. Debtors’ Motion for Entry of an Order pursuant to 11 U.S.C. Sections 105,361 and 105,363 modifying Order Authorizing Use of Cash Collateral and Granting Adequate Protection, dated June 21, 2006	
 	 	 	
CCAA	 	Companies’ Creditors Arrangement Act (Canada)	
 	 	 	
CCFC	 	Calpine Construction Finance Company, L.P	
 	 	 	
CCFCP	 	CCFC Preferred Holdings, LLC	
 	 	 	
CCRC	 	Calpine Canada Resources Company, formerly Calpine Canada Resources Ltd.	
 	 	 	
CDWR	 	California Department of Water Resources	
 	 	 	
CES	 	Calpine Energy Services, L.P.	
 	 	 	
CES-Canada	 	Calpine Energy Services Canada Partnership	
 	 	 	
Chapter 11	 	Chapter 11 of the Bankruptcy Code	
 	 	 	
Chubu	 	Chubu Electric Power Company, Inc.	
 	 	 	
Cleco	 	Cleco Corp.	
 	 	 	
CMSC	 	Calpine Merchant Services Company, Inc.	
 	 	 	
CNEM	 	Calpine Northbrook Energy Marketing, LLC	
 	 	 	
Collateral Trustee	 	The Bank of New York as collateral trustee for holders of the First Priority Notes and the Second Priority Debt	
 	 	 	
Committees	 	The Creditors’ Committee and the Ad Hoc Committee of Second Lien Holders of Calpine Corporation	
 	 	 	
Company	 	Calpine Corporation, a Delaware corporation, and subsidiaries	
 	 	 	
Creditors’ Committee	 	The Official Committee of Unsecured Creditors of Calpine Corporation	
 	 	 	
CPUC	 	California Public Utilities Commission	
 	 	 	
DB London	 	Deutsche Bank AG London	
 	 	 	
Deer Park	 	Deer Park Energy Center Limited Partnership	
 	 	 	
DIP	 	Debtor-in-possession	

iii

 

ABBREVIATION	 	DEFINITION	
 	 	 	
DIP Facility	 	The Revolving Credit, Term Loan and Guarantee Agreement, dated as of December 22, 2005, as amended on January 26, 2006, and as amended and restated by that certain Amended and Restated Revolving Credit, Term Loan and Guarantee Agreement, dated as of February 23, 2006, among Calpine Corporation, as borrower, the Guarantors party thereto, the Lenders from time to time party thereto, Credit Suisse Securities (USA) LLC and Deutsche Bank Securities Inc., as joint syndication agents, Deutsche Bank Trust Company Americas, as administrative agent for the First Priority Lenders, General Electric Capital Corporation, as Sub-Agent for the Revolving Lenders, Credit Suisse, as administrative agent for the Second Priority Term Lenders, Landesbank Hessen Thuringen Girozentrale, New York Branch, General Electric Capital Corporation and HSH Nordbank AG, New York Branch, as joint documentation agents for the first priority Lenders and Bayerische Landesbank, General Electric Capital Corporation and Union Bank of California, N.A., as joint documentation agents for the second priority Lenders	
 	 	 	
E&S	 	Electricity and steam	
 	 	 	
EOB	 	California Electricity Oversight Board	
 	 	 	
EPS	 	Earnings per share	
 	 	 	
ERISA	 	Employee Retirement Income Security Act	
 	 	 	
ESPP	 	2000 Employee Stock Purchase Plan	
 	 	 	
Exchange Act	 	United States Securities Exchange Act of 1934, as amended	
 	 	 	
FASB	 	Financial Accounting Standards Board	
 	 	 	
FERC	 	Federal Energy Regulatory Commission	
 	 	 	
FFIC	 	Fireman’s Fund Insurance Company	
 	 	 	
FIN	 	FASB Interpretation Number	
 	 	 	
FIN 46-R	 	FIN 46, as revised	
 	 	 	
First Priority Notes	 	9 5/8% First Priority Senior Secured Notes Due 2014	
 	 	 	
First Priority Trustee	 	Until February 2, 2006, Wilmington Trust Company, as trustee, and from February 3, 2006, and thereafter, Law Debenture Trust Company of New York, as successor trustee, under the Indenture, dated as of September 30, 2004, with respect to the First Priority Notes	
 	 	 	
FPA	 	Federal Power Act	
 	 	 	
Freeport	 	Freeport Energy Center, LP	
 	 	 	
GAAP	 	Generally accepted accounting principles in the United States	

iv

 

ABBREVIATION	 	DEFINITION	
 	 	 	
GEC	 	Gilroy Energy Center, LLC	
 	 	 	
General Electric	 	General Electric Company	
 	 	 	
Gilroy	 	Calpine Gilroy Cogen, L.P.	
 	 	 	
Gilroy 1	 	Calpine Gilroy 1, Inc.	
 	 	 	
GPC	 	Geysers Power Company, LLC	
 	 	 	
Harbert Convertible Fund	 	Harbert Convertible Arbitrage Master Fund, L.P.	
 	 	 	
Harbert Distressed Fund	 	Harbert Distressed Investment Master Fund, Ltd.	
 	 	 	
Heat Rate	 	A measure of the amount of fuel required to produce a unit of electricity	
 	 	 	 	
IRS	 	United States Internal Revenue Service	 	
 	 	 	 	
ISO	 	Independent System Operator	 	
 	 	 	 	
King City Cogen	 	Calpine King City Cogen, LLC	 	
 	 	 	 	
KWh	 	Kilowatt hour(s)	 	
 	 	 	 	
LIBOR	 	London Inter-Bank Offered Rate	 	
 	 	 	 	
LSTC	 	Liabilities Subject to Compromise	 	
 	 	 	 	
Mankato	 	Mankato Energy Center, LLC	 	
 	 	 	 	
Metcalf	 	Metcalf Energy Center, LLC	 	
 	 	 	 	
Mitsui	 	Mitsui & Co., Ltd.	 	
 	 	 	 	
MMBtu	 	Million Btu	 	
 	 	 	 	
Moapa	 	Moapa Energy Center, LLC	 	
 	 	 	 	
MW	 	Megawatt(s)	 	
 	 	 	 	
MWh	 	Megawatt hour(s)	 	
 	 	 	 	
Ninth Circuit Court of Appeals	 	United States Court of Appeals for the Ninth Circuit	 	
 	 	 	 	
NOL	 	Net operating loss	 	
 	 	 	 	
Non-Debtor(s)	 	The subsidiaries and affiliates of Calpine Corporation that are not Calpine Debtors	 	
 	 	 	 	
Non-U.S. Debtor(s)	 	The consolidated subsidiaries and affiliates of Calpine Corporation that are not U.S. Debtor(s)	 	
 	 	 	 	
Northern District Court	 	United States District Court for the Northern District of California	 	
 	 	 	 	
NPC	 	Nevada Power Company	 	
 	 	 	 	
OCI	 	Other Comprehensive Income	 	

v

 

ABBREVIATION	 	DEFINITION	
 	 	 	 	
Oneta	 	Oneta Energy Center	 	
 	 	 	 	
OSHA	 	Occupational Safety and Health Administration	 	
 	 	 	 	
Panda	 	Panda Energy International, Inc., and related party PLC II, LLC	 	
 	 	 	 	
PCF	 	Power Contract Financing, L.L.C.	 	
 	 	 	 	
PCF III	 	Power Contract Financing III, LLC	 	
 	 	 	 	
Petition Date	 	December 20, 2005	 	
 	 	 	 	
PG&E	 	Pacific Gas and Electric	 	
 	 	 	 	
POX	 	Plant operating expense	 	
 	 	 	 	
PPA(s)	 	Power purchase agreement(s)	 	
 	 	 	 	
QF(s)	 	Qualifying facility(ies)	 	
 	 	 	 	
RMR Contracts	 	Reliability Must Run contracts	 	
 	 	 	 	
Rosetta	 	Rosetta Resources Inc.	 	
 	 	 	 	
Saltend	 	Saltend Energy Centre	 	
 	 	 	 	
SDG&E	 	San Diego Gas & Electric Company	 	
 	 	 	 	
SDNY Court	 	United States District Court for the Southern District of New York	 	
 	 	 	 	
SEC	 	United States Securities and Exchange Commission	 	
 	 	 	 	
Second Priority Debt	 	Calpine Corporation’s Second Priority Secured Floating Rate Notes due 2007, 8 1/2% Second Priority Senior Secured Notes Due 2010, 8 3/4% Second Priority Senior Secured Notes Due 2013, 9 7/8% Second Priority Senior Secured Notes Due 2011, and Senior Secured Term Loans Due 2007	 	
 	 	 	 	
Second Priority Notes	 	Calpine Corporation’s Second Priority Senior Secured Floating Rate Notes due 2007, 8.500% Second Priority Senior Secured Notes due 2010, 8.750% Second Priority Senior Secured Notes due 2013 and 9.875% Second Priority Senior Secured Notes due 2011	 	
 	 	 	 	
Second Priority Secured
Debt Instruments	 	The Indentures between the Company and Wilmington Trust Company, as Trustee, relating to the Second Priority Notes and the Credit Agreement among the Company, as Borrower, Goldman Sachs Credit Partners L.P., as Administrative Agent, Sole Lead Arranger and Sole Book Runner, The Bank of Nova Scotia, as Arranger and Syndication Agent, TD Securities (USA) Inc., ING (U.S.) Capital LLC and Landesbank Hessen-Thuringen, as Co-Arrangers, and Credit Lyonnais New York Branch and Union Bank of California, N.A., as Managing Agent, relating to the Company’s Senior Secured Term Loans Due 2007	 	
 	 	 	 	
Second Priority Trustee	 	Wilmington Trust Company, as trustee under the Indentures with respect to the Second Priority Notes	 	
 	 	 	 	
Securities Act	 	United States Securities Act of 1933, as amended	 	

vi

 

ABBREVIATION	 	DEFINITION	
 	 	 	 	
SFAS	 	Statement of Financial Accounting Standards	 	
 	 	 	 	
SFAS No. 123-R	 	FASB Statement No. 123-R (As Amended), “Accounting for Stock-Based Compensation—Share-Based Payment”	 	
 	 	 	 	
SIP	 	1996 Stock Incentive Plan	 	
 	 	 	 	
SPPC	 	Sierra Pacific Power Company	 	
 	 	 	 	
The Geysers Assets	 	19 geothermal power plant assets located in Geyserville, California	 	
 	 	 	 	
TSA(s)	 	Transmission service agreement(s)	 	
 	 	 	 	
TTS	 	Thomassen Turbine Systems, B.V.	 	
 	 	 	 	
ULC I	 	Calpine Canada Energy Finance ULC	 	
 	 	 	 	
ULC II	 	Calpine Canada Energy Finance II ULC	 	
 	 	 	 	
U.S.	 	United States of America	 	
 	 	 	 	
U.S. Bankruptcy Court	 	United States Bankruptcy Court for the Southern District of New York	 	
 	 	 	 	
U.S. Debtor(s)	 	Calpine Corporation and each of its subsidiaries and affiliates that have filed voluntary petitions for reorganization under Chapter 11 of the Bankruptcy Code in the U.S. Bankruptcy Court, which matters are being jointly administered in the U.S. Bankruptcy Court under the caption In re Calpine Corporation, et al. , Case No. 05-60200 (BRL)	 	
 	 	 	 	
Valladolid	 	Valladolid III Energy Center	 	

vii

 
 
PART I — FINANCIAL INFORMATION
 
Item 1. Financial Statements.
 
CALPINE CORPORATION AND SUBSIDIARIES
(DEBTOR-IN-POSSESSION)
 
CONSOLIDATED CONDENSED BALANCE SHEETS
June 30, 2006 and December 31, 2005
(Unaudited)

 	 	June 30,	 	December 31,	 	
 	 	2006	 	2005	 	
 	 	(In thousands, except
share and per share amounts)	 	
ASSETS	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	
Current assets:	 	 	 	 	 	 	 	
Cash and cash equivalents	 	$	844,102	 	$	785,637	 	
Accounts receivable, net	 	 	881,545	 	 	1,008,430	 	
Margin deposits and other prepaid expense	 	 	307,129	 	 	434,363	 	
Inventories	 	 	150,457	 	 	150,444	 	
Restricted cash	 	 	473,471	 	 	457,510	 	
Current derivative assets	 	 	277,443	 	 	489,499	 	
Current assets held for sale	 	 	39,542	 	 	39,542	 	
Other current assets	 	 	119,211	 	 	62,612	 	
Total current assets	 	 	3,092,900	 	 	3,428,037	 	
Restricted cash, net of current portion	 	 	194,539	 	 	613,440	 	
Notes receivable, net of current portion	 	 	157,804	 	 	165,124	 	
Project development costs	 	 	24,247	 	 	24,232	 	
Investments	 	 	63,457	 	 	83,620	 	
Deferred financing costs	 	 	169,661	 	 	210,809	 	
Prepaid lease, net of current portion	 	 	199,911	 	 	515,828	 	
Property, plant and equipment, net	 	 	14,293,342	 	 	14,119,215	 	
Goodwill	 	 	45,160	 	 	45,160	 	
Other intangible assets, net	 	 	52,297	 	 	54,143	 	
Long-term derivative assets	 	 	517,627	 	 	714,226	 	
Other assets	 	 	628,704	 	 	570,963	 	
Total assets	 	$	19,439,649	 	$	20,544,797	 	

The accompanying notes are an integral part of these
Consolidated Condensed Financial Statements.
 
1

 
 
CONSOLIDATED CONDENSED BALANCE SHEETS – (Continued)
(Unaudited)
 
 	 	June 30,	 	December 31,	 	
 	 	2006	 	2005	 	
 	 	(In thousands, except
share and per share amounts)	 	
LIABILITIES & STOCKHOLDERS’ EQUITY (DEFICIT)	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	
Current liabilities:	 	 	 	 	 	 	 	
Accounts payable	 	$	488,624	 	$	399,450	 	
Accrued payroll and related expense	 	 	39,765	 	 	29,483	 	
Accrued interest payable	 	 	181,050	 	 	195,980	 	
Income taxes payable	 	 	99,073	 	 	99,073	 	
Notes payable and other borrowings, current portion	 	 	187,558	 	 	188,221	 	
Preferred interest, current portion	 	 	9,124	 	 	9,479	 	
Capital lease obligations, current portion	 	 	286,852	 	 	191,497	 	
CCFC financing, current portion	 	 	783,394	 	 	784,513	 	
CalGen financing, current portion	 	 	2,510,365	 	 	2,437,982	 	
Construction/project financing, current portion	 	 	1,987,135	 	 	1,160,593	 	
Senior notes and term loans, current portion	 	 	—	 	 	641,652	 	
DIP Facility, current portion	 	 	3,500	 	 	—	 	
Current derivative liabilities	 	 	396,583	 	 	728,894	 	
Other current liabilities	 	 	313,313	 	 	275,595	 	
Total current liabilities	 	 	7,286,336	 	 	7,142,412	 	
Notes payable and other borrowings, net of current portion	 	 	467,777	 	 	558,353	 	
Preferred interests, net of current portion	 	 	579,122	 	 	583,417	 	
Capital lease obligations, net of current portion	 	 	366	 	 	95,260	 	
Construction/project financing, net of current portion	 	 	419,998	 	 	1,200,432	 	
DIP Facility, net of current portion	 	 	994,750	 	 	25,000	 	
Deferred income taxes, net of current portion	 	 	348,996	 	 	353,386	 	
Deferred revenue	 	 	135,045	 	 	138,653	 	
Long-term derivative liabilities	 	 	678,960	 	 	919,084	 	
Other liabilities	 	 	152,883	 	 	151,437	 	
Total liabilities not subject to compromise	 	 	11,064,233	 	 	11,167,434	 	
Liabilities subject to compromise	 	 	14,963,726	 	 	14,610,064	 	
Commitments and contingencies (see Note 12)	 	 	 	 	 	 	 	
Minority interests	 	 	275,284	 	 	275,384	 	
Stockholders’ equity (deficit):	 	 	 	 	 	 	 	
Preferred stock, $.001 par value per share; authorized 10,000,000 shares; none issued and outstanding in 2006 and 2005	 	 	—	 	 	—	 	
Common stock, $.001 par value per share; authorized 2,000,000,000 shares; issued and outstanding 568,957,616 in 2006 and 569,081,863 in 2005	 	 	569	 	 	569	 	
Additional paid-in capital	 	 	3,268,331	 	 	3,265,458	 	
Additional paid-in capital, loaned shares	 	 	258,100	 	 	258,100	 	
Additional paid-in capital, returnable shares	 	 	(258,100	)	 	(258,100	)	
Accumulated deficit	 	 	(10,020,362	)	 	(8,613,160	)	
Accumulated other comprehensive loss	 	 	(112,132	)	 	(160,952	)	
Total stockholders’ deficit	 	 	(6,863,594	)	 	(5,508,085	)	
Total liabilities and stockholders’ deficit	 	$	19,439,649	 	$	20,544,797	 	

The accompanying notes are an integral part of these
Consolidated Condensed Financial Statements.
 
2

 
 
CALPINE CORPORATION AND SUBSIDIARIES
(DEBTOR-IN-POSSESSION)
 
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
For the Three and Six Months Ended June 30, 2006 and 2005
(Unaudited)

 	 	Three Months Ended	 	Six Months Ended	 	
 	 	June 30,	 	June 30,	 	
 	 	2006	 	2005	 	2006	 	2005	 	
 	 	(In thousands, except per share amounts)	 	
Revenue:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Electricity and steam revenue	 	$	1,207,479	 	$	1,272,060	 	$	2,227,470	 	$	2,528,756	 	
Sales of purchased power and gas for hedging and optimization	 	 	341,815	 	 	889,767	 	 	618,160	 	 	1,657,472	 	
Mark-to-market activities, net	 	 	23,465	 	 	2,874	 	 	59,690	 	 	(657	)	
Other revenue	 	 	19,172	 	 	34,206	 	 	42,246	 	 	59,067	 	
Total revenue	 	 	1,591,931	 	 	2,198,907	 	 	2,947,566	 	 	4,244,638	 	
Cost of revenue:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Plant operating expense	 	 	194,622	 	 	196,994	 	 	345,325	 	 	375,098	 	
Royalty expense	 	 	4,781	 	 	8,081	 	 	11,260	 	 	18,360	 	
Transmission purchase expense	 	 	17,328	 	 	19,807	 	 	38,005	 	 	40,681	 	
Purchased power and gas expense for hedging and optimization	 	 	312,830	 	 	821,219	 	 	561,099	 	 	1,515,673	 	
Fuel expense	 	 	700,234	 	 	891,946	 	 	1,368,409	 	 	1,768,745	 	
Depreciation and amortization expense	 	 	113,964	 	 	123,601	 	 	229,073	 	 	240,334	 	
Operating plant impairments	 	 	2,847	 	 	—	 	 	52,500	 	 	—	 	
Operating lease expense	 	 	19,998	 	 	25,528	 	 	41,598	 	 	50,305	 	
Other cost of revenue	 	 	19,259	 	 	33,273	 	 	39,201	 	 	73,245	 	
Total cost of revenue	 	 	1,385,863	 	 	2,120,449	 	 	2,686,470	 	 	4,082,441	 	
Gross profit	 	 	206,068	 	 	78,458	 	 	261,096	 	 	162,197	 	
(Income) from unconsolidated investments	 	 	—	 	 	(3,268	)	 	—	 	 	(9,260	)	
Equipment, development project and other impairments	 	 	62,076	 	 	46,968	 	 	67,631	 	 	46,896	 	
Long-term service agreement cancellation charge	 	 	—	 	 	33,892	 	 	—	 	 	33,892	 	
Project development expense	 	 	3,840	 	 	5,853	 	 	8,096	 	 	14,573	 	
Research and development expense	 	 	3,267	 	 	5,126	 	 	6,994	 	 	12,159	 	
Sales, general and administrative expense	 	 	47,377	 	 	68,519	 	 	98,323	 	 	121,725	 	
Income (loss) from operations	 	 	89,508	 	 	(78,632	)	 	80,052	 	 	(57,788	)	
Interest expense	 	 	299,586	 	 	328,387	 	 	591,852	 	 	646,388	 	
Interest (income)	 	 	(19,319	)	 	(16,793	)	 	(39,524	)	 	(30,778	)	
Minority interest expense	 	 	1,210	 	 	10,172	 	 	2,667	 	 	20,786	 	
Loss (income) from repurchase of various issuances of debt	 	 	18,131	 	 	(129,154	)	 	18,131	 	 	(150,926	)	
Other (income) expense, net	 	 	(14,238	)	 	25,765	 	 	(1,854	)	 	21,136	 	

The accompanying notes are an integral part of these
Consolidated Condensed Financial Statements.
 
3

 
 
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS — (Continued)
(Unaudited)

 	 	Three Months Ended	 	Six Months Ended	 	
 	 	June 30,	 	June 30,	 	
 	 	2006	 	2005	 	2006	 	2005	 	
 	 	(In thousands, except per share amounts)	 	
Loss before reorganization items, benefit for income taxes, discontinued operations and cumulative effect of a change in accounting principle	 	$	(195,862	)	$	(297,009	)	$	(491,220	)	$	(564,394	)	
Reorganization items	 	 	655,106	 	 	—	 	 	953,321	 	 	—	 	
Loss before benefit for income taxes, discontinued operations and cumulative effect of a change in accounting principle	 	 	(850,968	)	 	(297,009	)	 	(1,444,541	)	 	(564,394	)	
(Benefit) for income taxes	 	 	(33,209	)	 	(88,827	)	 	(36,834	)	 	(185,353	)	
Loss before discontinued operations and cumulative effect of a change in accounting principle	 	 	(817,759	)	 	(208,182	)	 	(1,407,707	)	 	(379,041	)	
Discontinued operations, net of tax benefit of $—, $44,602, $— and $32,885	 	 	—	 	 	(90,276	)	 	—	 	 	(88,148	)	
Cumulative effect of a change in accounting principle, net of tax provision of $—, $—, $312, and $—	 	 	—	 	 	—	 	 	505	 	 	—	 	
Net loss	 	$	(817,759	)	$	(298,458	)	$	(1,407,202	)	$	(467,189	)	
Basic and diluted loss per common share:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Weighted average shares of common stock outstanding	 	 	478,710	 	 	449,183	 	 	478,729	 	 	448,391	 	
Loss before discontinued operations and cumulative effect of a change in accounting principle	 	$	(1.71	)	$	(0.46	)	$	(2.94	)	$	(0.85	)	
Discontinued operations, net of tax	 	 	—	 	 	(0.20	)	 	—	 	 	(0.19	)	
Cumulative effect of a change in accounting principle, net of tax	 	 	—	 	 	—	 	 	—	 	 	—	 	
Net loss	 	$	(1.71	)	$	(0.66	)	$	(2.94	)	$	(1.04	)	

The accompanying notes are an integral part of these
Consolidated Condensed Financial Statements.
 
4

 
 
CALPINE CORPORATION AND SUBSIDIARIES
(DEBTOR-IN-POSSESSION)
 
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2006 and 2005
(Unaudited)
 
 	 	Six Months Ended	 	
 	 	June 30,	 	
 	 	2006	 	2005	 	
 	 	(In thousands)	 	
Cash flows from operating activities:	 	 	 	 	 	 	 	
Net loss	 	$	(1,407,202	)	$	(467,189	)	
Adjustments to reconcile net income to net cash provided by operating activities:	 	 	 	 	 	 	 	
Depreciation and amortization (1)	 	 	288,568	 	 	414,468	 	
Impairment charges	 	 	120,131	 	 	171,167	 	
Deferred income taxes, net	 	 	(36,834	)	 	(218,237	)	
Gain on sale of assets	 	 	(4,940	)	 	(50	)	
Foreign currency transaction loss (gain)	 	 	1,217	 	 	(1,751	)	
Loss (gain) on repurchase of debt	 	 	18,131	 	 	(150,926	)	
Minority interest expense	 	 	2,667	 	 	20,786	 	
Change in net derivative liability	 	 	7,638	 	 	28,116	 	
Income from unconsolidated investments in power projects	 	 	-	 	 	(9,420	)	
Distributions from unconsolidated investments in power projects	 	 	-	 	 	10,288	 	
Stock compensation expense	 	 	3,670	 	 	11,973	 	
Reorganization items	 	 	870,285	 	 	-	 	
Other	 	 	171	 	 	2,772	 	
Change in operating assets and liabilities:	 	 	 	 	 	 	 	
Accounts receivable	 	 	122,207	 	 	57,674	 	
Other current assets	 	 	74,577	 	 	21,282	 	
Other assets	 	 	(74,057	)	 	(42,242	)	
Accounts payable, liabilities subject to compromise and accrued expenses	 	 	(268,517	)	 	(112,927	)	
Other liabilities	 	 	78,602	 	 	24,957	 	
Net cash used in operating activities	 	 	(203,686	)	 	(239,259	)	
Cash flows from investing activities:	 	 	 	 	 	 	 	
Purchases of property, plant and equipment	 	 	(120,197	)	 	(539,561	)	
Purchase of The Geysers Assets	 	 	(266,846	)	 	-	 	
Disposals of investments, net of holdbacks	 	 	37,988	 	 	-	 	
Advances to joint ventures	 	 	(21,000	)	 	-	 	
Project development costs	 	 	-	 	 	(8,208	)	
Cash flows from derivatives not designated as hedges	 	 	(91,581	)	 	21,611	 	
Decrease (increase) in restricted cash	 	 	402,940	 	 	(433,212	)	
Other	 	 	11,998	 	 	735	 	
Net cash used in investing activities	 	 	(46,698	)	 	(958,635	)	

The accompanying notes are an integral part of these
Consolidated Condensed Financial Statements.
 
5

 
 
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS – (Continued)
(Unaudited)

 	 	Six Months Ended	 	
 	 	June 30,	 	
 	 	2006	 	2005	 	
 	 	(In thousands)	 	
Cash flows from financing activities:	 	 	 	 	 	 	 	
Borrowings from notes payable and lines of credit	 	$	—	 	$	4,298	 	
Repayments of notes payable and lines of credit	 	 	(89,652	)	 	(98,538	)	
Borrowings from project financing	 	 	84,986	 	 	524,944	 	
Repayments of project financing	 	 	(43,596	)	 	(138,162	)	
Borrowings under CalGen revolver	 	 	86,359	 	 	-	 	
Repayments on CalGen financing	 	 	(14,901	)	 	-	 	
DIP Facility borrowings	 	 	1,150,000	 	 	-	 	
Repayments of DIP Facility	 	 	(176,750	)	 	-	 	
Proceeds from issuance of convertible senior notes	 	 	-	 	 	650,000	 	
Repurchase of convertible senior notes	 	 	-	 	 	(15	)	
Repayments and repurchases of senior notes	 	 	(646,105	)	 	(402,176	)	
Proceeds from issuance of preferred interests (2)	 	 	-	 	 	415,000	 	
Redemptions of preferred interests	 	 	(4,650	)	 	-	 	
Proceeds from Deer Park prepaid commodity contract	 	 	-	 	 	265,667	 	
Financing costs	 	 	(30,985	)	 	(80,346	)	
Other	 	 	(5,857	)	 	(15,951	)	
Net cash provided by financing activities	 	 	308,849	 	 	1,124,721	 	
Effect of exchange rate changes on cash and cash equivalents	 	 	-	 	 	(8,897	)	
Net increase (decrease) in cash and cash equivalents, including discontinued operations cash	 	 	58,465	 	 	(82,070	)	
Change in discontinued operations cash classified as current assets held for sale	 	 	-	 	 	255	 	
Net increase (decrease) in cash and cash equivalents	 	 	58,465	 	 	(81,815	)	
Cash and cash equivalents, beginning of period	 	 	785,637	 	 	718,023	 	
Cash and cash equivalents, end of period	 	$	844,102	 	$	636,208	 	
Cash paid during the period for:	 	 	 	 	 	 	 	
Interest, net of amounts capitalized	 	$	565,926	 	$	607,236	 	
Income taxes	 	$	199	 	$	20,316	 	
Reorganization items included in operating activities	 	$	72,782	 	$	-	 	
____________
(1)	Includes depreciation and amortization that is recorded in sales, general and administrative expense and interest expense.	
(2)	2005 amount relates to the $260.0 million Calpine Jersey II offering of redeemable preferred shares issued on January 31, 2005, and the $155.0 million Metcalf offering of redeemable preferred shares issued on June 20, 2005.	
 
Schedule of non-cash investing and financing activities:
 	•	2006 purchase of The Geysers Assets for $266.8 million in cash resulted in non-cash increases in assets for property, plant and equipment of $180.6 million, and non-cash decreases of $8.0 million in prepaid assets, $1.2 million in deferred financing costs, and $196.7 million in non-current prepaid lease expense, and non-cash decreases in liabilities of $23.8 million in deferred revenue and $1.4 million in other current liabilities.	
 	•	2005 issuance of 27.5 million shares of common stock in exchange for $94.3 million in principal amount at maturity of 2014 Convertible Notes.	
 
The accompanying notes are an integral part of these
Consolidated Condensed Financial Statements.
 
6

 
 
CALPINE CORPORATION AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
June 30, 2006
( Unaudited )
 
1.    Basis of Presentation and Summary of Significant Accounting Policies
 
Basis of Interim Presentation — The accompanying unaudited interim Consolidated Condensed Financial Statements of Calpine Corporation, a Delaware corporation, and subsidiaries have been prepared by the Company pursuant to the rules and regulations of the SEC. In the opinion of management, the Consolidated Condensed Financial Statements include the adjustments necessary for a fair statement of the information required to be set forth therein. Certain information and note disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted from these statements pursuant to such rules and regulations and, accordingly, these financial statements should be read in conjunction with the audited Consolidated Financial Statements of the Company for the year ended December 31, 2005, included in our 2005 Form 10-K. The results for interim periods are not necessarily indicative of the results for the entire year.
 
Upon filing under Chapter 11 in the United States and for creditor protection under the CCAA in Canada, we deconsolidated most of our Canadian and other foreign entities as we determined that the administration of the CCAA proceedings in a jurisdiction other than that of the U.S. Debtors resulted in a loss of the elements of control necessary for consolidation. Because the Company’s Consolidated Condensed Financial Statements exclude the financial statements of the Canadian Debtors, the information in this Report principally describes the Chapter 11 cases and only describes the CCAA proceedings where they have a material effect on our operations or where such information provides necessary background information. See Note 2 for further discussion.
 
Reclassifications — Certain prior years’ amounts in the Consolidated Condensed Financial Statements were reclassified to conform to the current period presentation. Sales of purchased gas for hedging and optimization were combined with sales of purchased power for hedging and optimization and are now being reported as sales of purchased power and gas for hedging and optimization. Purchased gas expense for hedging and optimization was combined with purchased power expense for hedging and optimization and is now being reported as purchased power and gas expense for hedging and optimization. Equipment cancellation and impairment cost is now being reported as equipment, development project and other impairments. Transmission sales revenue is now included in other revenue.
 
Certain prior year amounts have also been reclassified to conform with discontinued operations presentation.
 
Unrestricted Subsidiaries — The information in this paragraph is required to be provided under the terms of the Second Priority Secured Debt Instruments. We have designated certain of our subsidiaries as “unrestricted subsidiaries” under the Second Priority Secured Debt Instruments. A subsidiary with “unrestricted” status thereunder generally is not required to comply with the covenants contained therein that are applicable to “restricted subsidiaries.” We have designated Calpine Gilroy 1, Inc., Calpine Gilroy 2, Inc. and Calpine Gilroy Cogen, L.P. as “unrestricted subsidiaries” for purposes of the Second Priority Secured Debt Instruments.
 
Cash and Cash Equivalents — We have certain project finance facilities and lease agreements that establish segregated cash accounts. These accounts have been pledged as security in favor of the lenders to such project finance facilities, and the use of certain cash balances on deposit in such accounts with our project financed securities is limited to the operations of the respective projects. At June 30, 2006, and December 31, 2005, $414.5 million and $518.1 million, respectively, of the cash and cash equivalents balance was subject to such project finance facilities and lease agreements.
 
Restricted Cash — We are required to maintain cash balances that are restricted by provisions of certain of our debt and lease agreements or by regulatory agencies. These amounts are held by depository banks in order to comply with the
 
7

 
contractual provisions requiring reserves for payments such as for debt service, rent, major maintenance and debt repurchases. Funds that can be used to satisfy obligations due during the next twelve months are classified as current restricted cash, with the remainder classified as non-current restricted cash. Restricted cash is generally invested in accounts earning market rates; therefore the carrying value approximates fair value. Such cash is excluded from cash and cash equivalents in the Consolidated Condensed Statements of Cash Flows.
 
The table below represents the components of our consolidated restricted cash as of June 30, 2006, and December 31, 2005 (in thousands):
 
 	 	June 30, 2006	 	December 31, 2005	 	
 	 	Current	 	Non-Current	 	Total	 	Current	 	Non-Current	 	Total	 	
Debt service	 	$	178,359	 	$	119,723	 	$	298,082	 	$	152,512	 	$	118,000	 	$	270,512	 	
Rent reserve	 	 	14,349	 	 	—	 	 	14,349	 	 	50,020	 	 	—	 	 	50,020	 	
Construction/major maintenance	 	 	83,763	 	 	32,407	 	 	116,170	 	 	77,448	 	 	36,732	 	 	114,180	 	
Proceeds from assets sales	 	 	—	 	 	—	 	 	—	 	 	—	 	 	406,905	 	 	406,905	 	
Collateralized letters of credit and other credit support	 	 	113,852	 	 	—	 	 	113,852	 	 	148,959	 	 	9,327	 	 	158,286	 	
Other	 	 	83,148	 	 	42,409	 	 	125,557	 	 	28,571	 	 	42,476	 	 	71,047	 	
Total	 	$	473,471	 	$	194,539	 	$	668,010	 	$	457,510	 	$	613,440	 	$	1,070,950	 	
 
Commodity Margin Deposits — As of June 30, 2006, and December 31, 2005, to support commodity transactions, we had margin deposits with third parties of $157.7 million and $287.5 million, respectively. Counterparties had deposited with us $13.7 million and $27.0 million as margin deposits at June 30, 2006, and December 31, 2005, respectively.
 
Effective Tax Rate — For the three months ended June 30, 2006 and 2005, the effective tax rate from continuing operations was 3.9% and 29.9%, respectively. For the six months ended June 30, 2006 and 2005, the effective tax rate from continuing operations was 2.5% and 32.8%, respectively. The quarterly tax provision on continuing operations is based on the estimated annual effective tax rate calculated by considering the Company’s annual forecast; the effect of permanent non-taxable and non-deductible items; and the establishment of valuation allowances on deferred tax assets. Primarily due to valuation allowances recorded against deferred tax assets, we recognized less tax benefit on our pre-tax loss from continuing operations for the three and six months ended June 30, 2006, than for the same periods in the prior year.
 
During the fourth quarter of 2005, Calpine Corporation and many of its subsidiaries filed for Chapter 11 protection and recorded significant restructuring charges. Further, in accordance with Section 382 of the Internal Revenue Code certain transfers of our equity, or issuances of equity in connection with our restructuring, may impair our ability to utilize our federal income tax NOL carryforwards in the future. Under federal income tax law, a corporation is generally permitted to deduct from taxable income in any year NOLs carried forward from prior years subject to certain time limitations as prescribed by the Internal Revenue Code. Our ability to deduct such NOL carryforwards could be subject to a significant limitation if we were to undergo an “ownership change” during or as a result of our Chapter 11 filings. The U.S. Bankruptcy Court has entered an order that places certain limitations on trading in our common stock or certain securities, including options, convertible into our common stock during the pendency of the Chapter 11 cases. However, we can provide no assurances that these limitations will prevent an “ownership change” or that our ability to utilize our NOL carryforwards may not be significantly limited as a result of our reorganization. We also cannot provide any assurances that our NOL carryforwards will exist after our Chapter 11 restructuring, in light of the cancellation of indebtedness income that may be recognized as a result of the Chapter 11 restructuring.
 
SFAS No. 109 requires that all available evidence, both positive and negative, be considered to determine whether, based on the weight of that evidence, a valuation allowance is needed. Future realization of the tax benefit of an existing deductible temporary difference or carryforward ultimately depends on the existence of sufficient taxable income of the appropriate character within the carryback or carryforward periods available under the tax law. Primarily due to our inability
 
8

 
to assume future profits and due to our reduced ability to implement tax-planning strategies to utilize our NOLs while in Chapter 11, we concluded that valuation allowances on a portion of our deferred tax assets were required. For the three and six months ended June 30, 2006, we have provided valuation allowances of approximately $242 million and approximately $399 million, respectively, against deferred tax assets to the extent they cannot be used to offset future income arising from the expected reversal of taxable differences. See Note 2 for information regarding our Chapter 11 filings.
 
We are under an IRS review for the years 1999 through 2002 and are periodically under audit for various state and foreign jurisdictions for income and sales and use taxes. We believe that the ultimate resolution of these examinations will not have a material effect on our consolidated financial position.
 
Recent Accounting Pronouncements
 
SFAS No. 123-R
 
In December 2004, FASB issued SFAS No. 123-R which requires a public company to use the fair value method of accounting for stock-based compensation. We adopted this standard as of January 1, 2006, and applied the modified prospective transition method. The modified prospective approach applies to the unvested portion of all awards granted prior to January 1, 2006, and to all prospective awards. Prior financial statements are not restated under this method.
 
SFAS No. 123-R also requires the cash flows resulting from the tax benefits that occur from estimated tax deductions in excess of the compensation cost recognized be presented as financing cash flows in the statement of cash flows. Prior to adopting this statement, we presented tax benefits from allowable deductions as operating cash flows in our Consolidated Condensed Statement of Cash Flows.
 
As we previously adopted the fair value method of accounting under SFAS No. 123 as amended by SFAS No. 148, “Accounting for Stock-Based Compensation—Transition and Disclosure” (“SFAS No. 123”) on January 1, 2003, the adoption of SFAS No. 123-R did not have a material impact on our results of operations, cash flows or financial position. Upon adoption as of January 1, 2006, we recorded a cumulative effect of a change in accounting principle that increased income by $0.5 million, net of tax. See Note 11 for further details.
 
SFAS No. 154
 
In May 2005, FASB issued SFAS No. 154, “Accounting Changes and Error Corrections.” This statement replaces APB Opinion No. 20, “Accounting Changes,” and FASB Statement No. 3, “Reporting Accounting Changes in Interim Financial Statements,” and changes the requirements for the accounting for and reporting of a change in accounting principle. SFAS No. 154 applies to all voluntary changes in accounting principle. SFAS No. 154 is effective for fiscal years beginning after December 15, 2005. Adoption of this statement did not materially impact our consolidated results of operations, cash flows or financial position.
 
FASB Interpretation No. 48
 
In June 2006, FASB issued FIN 48, “Accounting for Uncertainty in Income Taxes – An Interpretation of FASB Statement No. 109.” FIN 48 addresses the recognition and measurement of a tax position taken or expected to be taken in a tax return. This interpretation also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006, with early adoption permitted. We are currently assessing the impact this standard will have on our results of operations, cash flows and financial position.
 
2.    Chapter 11 Cases and CCAA Proceedings
 
Since the Petition Date, Calpine Corporation and 273 of its wholly owned subsidiaries in the U.S. have filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code in the U.S. Bankruptcy Court. Similarly, since December 20,
 
9

 
2005, 12 of Calpine’s Canadian subsidiaries have filed for creditor protection under the CCAA in the Canadian Court. Certain other subsidiaries could file under Chapter 11 in the U.S. or for creditor protection under the CCAA in Canada in the future. The Chapter 11 cases are being jointly administered for procedural purposes only by the U.S. Bankruptcy Court under the case captioned In re Calpine Corporation et al. , Case No. 05-60200 (BRL). The Calpine Debtors are continuing to operate their business as debtors-in-possession and will continue to conduct business in the ordinary course under the protection of the Bankruptcy Courts. Generally, while a plan or plans of reorganization (with respect to the U.S. Debtors) or arrangement (with respect to the Canadian Debtors) are developed, all actions to enforce or otherwise effect repayment of liabilities preceding the Petition Date as well as all pending litigation against the Calpine Debtors are stayed while the Calpine Debtors continue their business operations as debtors-in-possession.
 
At this time, it is not possible to accurately predict the effects of the reorganization process on our business or if and when some or all of the U.S. Debtors may emerge from Chapter 11 or the Canadian Debtors may emerge from the CCAA proceedings. The prospects for future results depend primarily on the timely and successful development, confirmation and implementation of a plan or plans of reorganization by the U.S. Debtors. There can be no assurance that a successful plan or plans of reorganization will be proposed by the U.S. Debtors, supported by the U.S. Debtors’ creditors or confirmed by the U.S. Bankruptcy Court, or that any such plan or plans will be consummated. The ultimate recovery, if any, that creditors and equity security holders receive will not be determined until confirmation of a plan or plans of reorganization. No assurance can be given as to what values, if any, will be ascribed in the Chapter 11 cases or in the CCAA proceedings to the interests of each of the various creditor and equity or other security holder constituencies, and it is possible that the equity interests in or other securities issued by Calpine and the other Calpine Debtors will be restructured in a manner that will substantially reduce or eliminate any remaining value of such equity interests or other securities, or that certain creditors may ultimately receive little or no payment with respect to their claims. Whether or not a plan or plans of reorganization or arrangement are approved, it is possible that the assets of any one or more of the Calpine Debtors may be liquidated.
 
As a result of our Chapter 11 filings and the other matters described herein, including the uncertainties related to the fact that we have not yet had time to complete and have approved a plan of reorganization, there is substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern, including our ability to meet our ongoing operational obligations, is dependent upon, among other things: (i) our ability to maintain adequate cash on hand; (ii) our ability to generate cash from operations; (iii) the cost, duration and outcome of the restructuring process; (iv) our ability to comply with our DIP Facility agreement and the adequate assurance provisions of the Cash Collateral Order and (v) our ability to achieve profitability following a restructuring. These challenges are in addition to those operational and competitive challenges faced by us in connection with our business. In conjunction with our advisors, we are implementing strategies to ensure that we maintain adequate liquidity and will be able to continue as a going concern. However, there can be no assurance as to the success of such efforts.
 
Chapter 11 Cases
 
On January 26, 2006, the U.S. Bankruptcy Court entered a final order approving our DIP Facility and removing its previously imposed limitation on our ability to borrow thereunder. See Note 7 for further details regarding the DIP Facility. In addition, the U.S. Bankruptcy Court approved cash collateral and adequate assurance stipulations in connection with the approval of the DIP Facility, which has allowed our business activities to continue to function. We have also sought and obtained U.S. Bankruptcy Court approval through our “first day” and subsequent motions to continue to pay critical vendors, meet our pre-petition and post-petition payroll obligations, maintain our cash management systems, collateralize certain of our gas supply contracts, enter into and collateralize trading contracts, pay our taxes, continue to provide employee benefits, maintain our insurance programs and implement an employee severance program, which has allowed us to continue to operate the existing business in the ordinary course. In addition, the U.S. Bankruptcy Court has approved certain trading notification and transfer procedures designed to allow us to restrict trading in our common stock (and related securities) which could negatively impact our accrued NOLs and other tax attributes, and granted us extensions of time during which we have the exclusive right to file and seek approval of a plan of reorganization.
 
The U.S. Bankruptcy Court had established August 1, 2006, as the bar date for filing proofs of claim against the U.S. Debtors’ estates. Under certain limited circumstances, some creditors will be permitted to file claims after August 1, 2006.
 
10

 
Differences between amounts recorded by the U.S. Debtors and proofs of claim filed by the creditors will be investigated and resolved through the claims reconciliation process. Because of the number of creditors and claims, the claims reconciliation process may take considerable time to complete and we expect will continue after our emergence from Chapter 11. Accordingly, the ultimate number and amount of allowed claims is not presently known, nor can the ultimate recovery with respect to such allowed claims be presently determined. Notwithstanding the foregoing, we have recognized certain charges related to expected allowed claims. The U.S. Bankruptcy Court will ultimately determine liability amounts that will be allowed for claims. As claims are resolved, or where better information becomes available and is evaluated, we will make adjustments to the liabilities recorded on our financial statements as appropriate. Any such adjustments could be material to our consolidated financial position and results of operations in any given period.
 
Under the Bankruptcy Code, we have the right to assume, assume and assign, or reject certain executory contracts and unexpired leases, subject to the approval of the U.S. Bankruptcy Court and certain other conditions. Parties to executory contracts or unexpired leases rejected or deemed rejected by a U.S. Debtor may file proofs of claim against that U.S. Debtor’s estate for damages and parties to executory contracts or unexpired leases that are assumed have an opportunity to assert cure amounts prior to such assumptions. Due to ongoing evaluation of contracts for assumption or rejection and the uncertain nature of many of the potential claims for damages, we cannot project the magnitude of these potential claims at this time. We had until July 18, 2006, to assume unexpired non-residential real property leases. Absent the consent of the applicable counterparty, such leases not assumed by that date are deemed rejected (except for Calpine Debtors filing after the Petition Date, which have a commensurately longer period of time). Accordingly, we have entered into stipulations with counterparties extending the time to assume certain of such leases that we are still examining. All other non-assumed leases have been deemed rejected. Further, on July 12, 2006, the U.S. Bankruptcy Court approved our motion to extend the time for us to assume leases between U.S. Debtor-lessees and any affiliated lessors until the confirmation of a plan of reorganization of the applicable U.S. Debtor-lessee. Without an extension of time to assume, leases between U.S. Debtors and their affiliates would also have been deemed rejected if not assumed by July 18, 2006.
 
Under the Bankruptcy Code, we have the exclusive right to file and solicit acceptances of a plan or plans of reorganization for a limited period of time specified by the Bankruptcy Code. On April 11, 2006, the U.S. Bankruptcy Court granted our application for an extension of the period during which we have the exclusive right to file a reorganization plan or plans from April 20, 2006, to December 31, 2006, and granted us the exclusive right until March 31, 2007, to solicit acceptances of such plan or plans.
 
Significant Pending Matters and Recent Developments
 
The U.S. Debtors have assumed certain contracts and unexpired leases related to non-residential real property and have identified certain significant contracts and leases to be rejected or repudiated. The following list describes the most significant of these matters.
 	•	On December 21, 2005, we filed a motion with the U.S. Bankruptcy Court to reject eight PPAs and to enjoin FERC from asserting jurisdiction over the rejections. The U.S. Bankruptcy Court issued a temporary restraining order against FERC and set the matter for a hearing on January 5, 2006. Under most of the PPAs sought to be rejected, we are obligated to sell power at prices that are significantly lower than currently prevailing market prices. On December 29, 2005, certain counterparties to the various PPAs filed an action in the SDNY Court arguing that the U.S. Bankruptcy Court did not have jurisdiction over the dispute. On January 5, 2006, the SDNY Court entered an order that had the effect of transferring our motion seeking to reject the eight PPAs and our related request for an injunction against FERC to the SDNY Court from the U.S. Bankruptcy Court. Earlier, however, on December 19, 2005, CDWR, a counterparty to one of the eight PPAs, had filed a complaint with FERC seeking to obtain injunctive relief to prevent us from rejecting our PPA with CDWR and contending that FERC had exclusive jurisdiction over the matter. On January 3, 2006, FERC determined that it did not have exclusive jurisdiction, and that the matter could be heard by the U.S. Bankruptcy Court. However, despite the FERC ruling, on January 27, 2006, the SDNY Court determined that FERC had jurisdiction over whether the contracts could be rejected. We appealed the SDNY Court’s decision to the United States Court of Appeals for the Second Circuit. The appeal was heard on April 10, 2006, and we have not yet received a decision. We cannot	
 
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determine at this time whether the SDNY Court, the U.S. Bankruptcy Court or FERC will ultimately determine whether we may reject any or all of the eight PPAs, or when such determination will be made. In the meantime, three of the PPAs have been terminated by the applicable counterparties, and two of the PPAs are the subject of negotiated settlements. We continue to perform under the three PPAs that remain in effect. We cannot presently determine the ultimate outcome of the pending court cases nor the market factors that will need to be considered in valuing the rejected contracts and therefore are unable to estimate the expected allowed claims related to these PPAs.
 	•	On February 6, 2006, we filed with the U.S. Bankruptcy Court, a notice of rejection of certain of our leases related to the Rumford Power Plant and the Tiverton Power Plant and noticed the proposed surrender of the two plants to their owner-lessor. The owner-lessor declined to take possession and control of the plants at that time and certain objections to the rejection notice and other opposing pleadings were filed by various interested parties. After negotiations with the indenture trustee related to the two leasehold properties, on May 18, 2006, we filed a motion with the U.S. Bankruptcy Court seeking approval of the terms and conditions of a transition agreement to be entered into between us, the indenture trustee and a receiver for certain assets of the owner-lessor to be appointed on a motion filed with the SDNY Court by the indenture trustee. A receiver was appointed by the SDNY Court on June 6, 2006, and on June 9, 2006, the U.S. Bankruptcy Court approved the transition agreement and the effective date of the rejection of the leases. On June 23, 2006, we closed the transaction contemplated in the transition agreement and the receiver now has possession and control of the Rumford and Tiverton power plants, as well as the ancillary assets related to the power plants transferred under the transition agreement. In connection with the lease rejections, we recorded a non-cash charge of $234.6 million which includes our current estimate of the expected allowed claim related to the lease rejections, the write-off of prepaid lease expense and certain fees and expenses related to the transaction. The amount is reported as a reorganization item in our Consolidated Condensed Statements of Operations for the three and six months ended June 30, 2006, and the portion representing the expected allowed claim is included in liabilities subject to compromise in the Consolidated Condensed Balance Sheet at June 30, 2006. After our evaluation of the Rumford and Tiverton power plants and based on the fact that we will continue to have significant revenue activity in the market in which they participate, we determined that the losses related to the lease rejections and historical results of operations of the Rumford and Tiverton power plants should not be reported as discontinued operations.	
 	•	On May 24, 2006, the U.S. Bankruptcy Court authorized the amendment and assumption of a steam agreement and related ground lease between Texas City Cogeneration, L.P. and Union Carbide Corporation and the amendment and assumption of a gas refinery agreement between Texas City Cogeneration, L.P. and BP Products North America Inc.	
 	•	On June 5, 2006, the U.S. Bankruptcy Court approved our motion to assume geothermal leases related to The Geysers Assets steam field operations and the Glass Mountain area, and the associated executory contracts, surface use agreements and site leases that allow the geothermal leases to be utilized to harness geothermal energy and operate these facilities. The geothermal leases combined with the operations at these facilities make up the core collateral for the DIP Facility.	
 	•	On June 21 and July 12, 2006, the U.S. Bankruptcy Court approved our motions to assume more than 60 natural gas pipeline leases and related real property licenses that support our pipelines across the country, covering more than 350 miles of both gathering and transmission pipelines. Assumption of these leases and licenses is necessary to allow for gas transportation to our customers, including Calpine affiliates.	
 	•	On June 21 and July 12, 2006, the U.S. Bankruptcy Court approved our motion to assume more than 20 leases related to the operation of our power plants (including ground leases, facility leases, operating leases, warehouse leases, etc). Assumption of these leases is necessary to allow for continued operation of the affected power plants.	
 	•	On July 12, 2006, the U.S. Bankruptcy Court approved our motions to assume (or assume and assign) office leases in Folsom, Houston, Pasadena, San Jose, Boca Raton, Jupiter, and Washington.	
 
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 	•	On July 12, 2006, the U.S. Bankruptcy Court approved our motion to assume approximately 130 oil and gas leases, to the extent that such leases are, in fact, leases of real property. Many of these oil and gas leases are the subject of an ongoing dispute with Rosetta stemming from our sale of domestic oil and gas assets to Rosetta in July 2005. By assuming these leases, we preserved our rights in the leases by avoiding the rejection of such leases on July 18, 2006.	
 	•	During the course of the Chapter 11 cases the U.S. Debtors have determined that certain gas transportation contracts no longer provide any benefit to the U.S. Debtors or their estates. In certain instances, the U.S. Debtors have given notice to counterparties to these contracts that the U.S. Debtors will no longer accept or pay for service under such contracts. We believe that any claims resulting from the repudiation of these contracts will be treated as pre-petition general unsecured claims. Accordingly, we recorded a non-cash charge of $308.8 million as our current estimate of the expected allowed claim related to the repudiation of these contracts. This charge is reported as a reorganization item in our Consolidated Condensed Statements of Operations for the three and six months ended June 30, 2006, and is included in liabilities subject to compromise in the Consolidated Condensed Balance Sheet at June 30, 2006.	
 
By order dated May 10, 2006 (as well as successive orders implementing the May 10 order), the U.S. Bankruptcy Court approved our motion to repay the outstanding principal amount of First Priority Notes at par ($646.1 million) plus accrued and unpaid interest. The repayment orders provided that such repayment was without prejudice to the rights of the holders of the First Priority Notes to pursue their demand for payment of a “make whole” premium they alleged to be due as a result of our repayment of First Priority Notes prior to their stated maturity. Pursuant to the U.S. Bankruptcy Court’s repayment orders, we completed the repayment of the First Priority Notes in June 2006. The First Priority Trustee appealed each of the repayment orders to the SDNY Court, and in addition, on May 5, 2006, the First Priority Trustee filed an adversary proceeding in the U.S. Bankruptcy Court on behalf of the holders of the First Priority Notes seeking a declaratory judgment on the merits of their demand for a “make whole” premium. On June 21, 2006, the U.S. Bankruptcy Court entered an order approving our request to extend the date by which we must answer or otherwise move with respect to the First Priority Trustee’s adversary proceeding until after the conclusion of the First Priority Trustee’s appeal to the SDNY Court of the U.S. Bankruptcy Court’s repayment orders. The First Priority Trustee then appealed the U.S. Bankruptcy Court’s June 21, 2006 order to the SDNY Court as well, and both appeals are pending. The SDNY Court will schedule briefing and argument of the appeals.
 
On July 26, 2006, the U.S. Bankruptcy Court approved our motion to effectuate the sale of our leasehold interest in the Fox Energy Center. See Note 4 for further discussion. Also on July 26, 2006, the U.S. Bankruptcy Court approved the bidding procedures for the auction of our Dighton project assets. Previously on July 6, 2006, we entered into an asset purchase agreement to sell substantially all the Dighton project assets for approximately $90.2 million, subject to higher offers through an auction process. Closing of the Dighton transaction is subject to certain conditions including the receipt of regulatory approvals.
 
CCAA Proceedings
 
The following describes certain significant recent events, pending matters, and recent developments in the CCAA proceedings:
 	•	Unlike the automatic stay provided under the Bankruptcy Code, there is no provision for an automatic stay under the CCAA. Accordingly, the Canadian Debtors sought and obtained a stay of proceedings from the Canadian Court in connection with the CCAA filings. By order dated April 11, 2006, the Canadian Court extended its stay of proceedings through July 20, 2006, and later again extended its stay of proceedings through October 20, 2006 by order entered July 12, 2006.	
 	•	By order entered April 11, 2006, the Canadian Court established June 30, 2006 as the date by which claims must be filed against the Canadian Debtors. This bar date was later extended through August 1, 2006 by order entered June 23, 2006.	
 
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 	•	On July 21, 2006, the Canadian Debtors filed a motion for authority to market and sell (i) approximately US$360 million principal amount of senior notes issued by ULC I, (ii) approximately Euro 57.6 million of senior notes issued by ULC II, and (iii) approximately Pound Sterling 78.6 million of senior notes issued by ULC II, all of which senior notes are currently held by the Canadian Debtors and are guaranteed by Calpine Corporation. This sale motion is scheduled to be heard on August 17, 2006.	
 
3.    U.S. Debtors Condensed Combined Financial Statements
 
Condensed combined financial statements of the U.S. Debtors are set forth below.
 
Condensed Combined Balance Sheet
June 30, 2006 and December 31, 2005
 
 	 	U.S. Debtors	 	
 	 	June 30,
2006	 	December 31,
2005	 	
 	 	(in millions)	 	
Assets:	 	 	 	 	 	 	 	
Current assets	 	$	4,478	 	$	5,448	 	
Restricted cash, net of current portion	 	 	54	 	 	458	 	
Investments	 	 	2,046	 	 	2,113	 	
Property, plant and equipment, net	 	 	8,001	 	 	7,730	 	
Other assets	 	 	1,391	 	 	1,647	 	
Total assets	 	$	15,970	 	$	17,396	 	
Liabilities not subject to compromise:	 	 	 	 	 	 	 	
Current liabilities	 	$	3,934	 	$	4,866	 	
Long-term debt	 	 	1,370	 	 	175	 	
Long-term derivative liabilities	 	 	539	 	 	744	 	
Other liabilities	 	 	345	 	 	235	 	
Liabilities subject to compromise	 	 	16,667	 	 	16,714	 	
Minority interest	 	 	—	 	 	275	 	
Stockholders’ (deficit)	 	 	(6,885	)	 	(5,613	)	
Total liabilities and stockholders’ (deficit)	 	$	15,970	 	$	17,396	 	
 
See Note 8 for detail of liabilities subject to compromise.
 
Condensed Combined Statements of Operations
For the Three and Six Months Ended June 30, 2006
 
 	 	U.S. Debtors	 	
 	 	Three Months
Ended
June 30, 2006	 	Six Months
Ended
June 30, 2006	 	
 	 	(in millions)	 	
Total revenue	 	$	1,456	 	$	2,634	 	
Total cost of revenue	 	 	1,380	 	 	2,572	 	
Operating expenses	 	 	94	 	 	181	 	
Loss from operations	 	 	(18	)	 	(119	)	
Interest expense	 	 	186	 	 	362	 	
Other (income) expense, net	 	 	8	 	 	21	 	
Reorganization items, net	 	 	655	 	 	953	 	
(Benefit) for income taxes	 	 	(26	)	 	(22	)	
Loss before cumulative effect of a change in accounting principle	 	 	(841	)	 	(1,433	)	
Cumulative effect of a change in accounting principle	 	 	—	 	 	1	 	
Net loss	 	$	(841	)	$	(1,432	)	

 
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Condensed Combined Statements of Cash Flows
For the Six Months Ended June 30, 2006
 
 	 	U.S. Debtors	 	
 	 	(in millions)	 	
Net cash provided by (used in):	 	 	 	 	
Operating	 	$	(294	)	
Investing activities	 	 	53	 	
Financing activities	 	 	357	 	
Net increase in cash and cash equivalents	 	 	116	 	
Cash and cash equivalents, beginning of period	 	 	444	 	
Effect on cash of new debtor filings	 	 	66	 	
Cash and cash equivalents, end of period	 	$	626	 	
Cash paid for reorganization items included in operating activities	 	$	73	 	
 
Basis of Presentation
 
The U.S. Debtors’ Condensed Combined Financial Statements exclude the financial statements of the Non-U.S. Debtor parties. Transactions and balances of receivables and payables between U.S. Debtors are eliminated in consolidation. However, the U.S. Debtors’ Condensed Combined Balance Sheet includes receivables from and payables to related Non-U.S. Debtor parties. Actual settlement of these related party receivables and payables is, by historical practice, made on a net basis.
 
Interest Expense
 
Interest expense related to pre-petition LSTC has been reported only to the extent that it will be paid during the pendency of the Chapter 11 cases or is permitted by the Cash Collateral Order or is expected to be an allowed claim. Contractual interest (at non-default rates) to unrelated parties on LSTC not reflected in the financial statements for the three and six months ended June 30, 2006, was approximately $83.0 million and $160.2 million, respectively. Pursuant to an order of the U.S. Bankruptcy Court, we made periodic cash interest payments to the holders of the Second Priority Debt through June 30, 2006. The Cash Collateral Order provides that the holders of the Second Priority Debt must seek further orders from the U.S. Bankruptcy Court for any additional interest to be paid.
 
Reorganization Items
 
Reorganization items represent the direct and incremental costs of being in Chapter 11, such as professional fees, pre-petition liability claim adjustments related to terminated contracts that are probable and can be estimated and charges related to expected allowed claims. The table below lists the significant items recognized within this category for the three and six months ended June 30, 2006 (in millions).
 
 	 	Three Months
Ended
June 30, 2006	 	Six Months
Ended
June 30, 2006	 	
 	 	(in millions)	 	
Provision for expected allowed claims (1)	 	$	559.1	 	$	788.9	 	
Professional fees	 	 	40.1	 	 	68.0	 	
DIP financing costs	 	 	3.9	 	 	31.7	 	
Other (2)	 	 	52.0	 	 	64.7	 	
Total reorganization items	 	$	655.1	 	$	953.3	 	
__________
(1)	This charge primarily includes repudiation, rejection or settlement of contracts or guarantee of obligations.	
(2)	This charge primarily includes foreign exchange on LSTC items denominated in a foreign currency and governed by foreign law, employee severance costs and interest income earned on cash accumulated as a result of our Chapter 11 cases.	
 
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4.    Property, Plant and Equipment, Net and Capitalized Interest
 
As of June 30, 2006, and December 31, 2005, the components of property, plant and equipment are stated at cost less accumulated depreciation as follows (in thousands):
 
 	 	June 30,
2006	 	December 31,
2005	 	
Buildings, machinery and equipment	 	$	14,165,483	 	$	14,023,358	 	
Oil and gas pipelines	 	 	90,673	 	 	106,752	 	
Geothermal properties	 	 	933,676	 	 	480,149	 	
Other	 	 	179,545	 	 	178,145	 	
 	 	 	15,369,377	 	 	14,788,404	 	
Less: Accumulated depreciation	 	 	(2,091,661	)	 	(1,872,989	)	
 	 	 	13,277,716	 	 	12,915,415	 	
Land	 	 	89,630	 	 	92,595	 	
Construction in progress	 	 	925,996	 	 	1,111,205	 	
Property, plant and equipment, net	 	$	14,293,342	 	$	14,119,215	 	
 
Geothermal Properties — Our subsidiary GPC acquired The Geysers Assets on February 3, 2006. Previously, GPC leased the plants from Geysers Statutory Trust (which is not an affiliate of ours) pursuant to a leveraged operating lease. The purchase price for the plants was approximately $157.6 million, plus certain costs and expenses (including an $8.0 million option payment). Immediately following the acquisition, we redeemed certain notes issued by Geysers Statutory Trust in connection with the leveraged lease structure at a cost of approximately $109.3 million. As a result of the acquisition, prepaid lease expense, net of deferred items, of $172.6 million was reclassified to Property, plant and equipment, net in the Consolidated Condensed Balance Sheet. We applied a remaining useful life of 35 years from the date in May 1999 when we acquired the majority of our geothermal resource assets, in calculating depreciation on these power plant assets, which is consistent with the useful life for our other (gas-fired) base load power plants.
 
Construction in Progress — In January 2006, the Freeport Energy Center in Freeport, Texas began producing steam through the use of auxiliary boilers. In March 2006, Phase II of the Fox Energy Center in Kaukauna, Wisconsin began commercial operation. Accordingly, the construction in progress costs were transferred to the applicable property category, primarily buildings, machinery and equipment. No projects began commercial operation during the three months ended June 30, 2006.
 
Capitalized Interest — For the three months ended June 30, 2006 and 2005, the total amount of interest capitalized was $6.7 million and $64.2 million, including $3.8 million and $11.8 million, respectively, of interest incurred on funds borrowed for specific construction projects and $2.9 million and $52.4 million, respectively, of interest incurred on general corporate funds used for construction. For the six months ended June 30, 2006 and 2005, the total amount of interest capitalized was $17.0 million and $134.4 million, including $10.9 million and $22.5 million, respectively, of interest incurred on funds borrowed for specific construction projects and $6.1 million and $111.8 million, respectively, of interest incurred on general corporate funds used for construction. The decrease in the amount of interest capitalized year over year reflects the completion of construction for several power plants, the suspension of certain of our development and construction projects, and a reduction in our development and construction program in general.
 
Impairment Evaluation — In the three months ended June 30, 2006, we recorded to operating plant impairments in the Consolidated Condensed Statement of Operations net impairment charges of $2.8 million for leasehold improvement costs related to a power plant for which a disposal is deemed likely. Additionally, in the three months ended June 30, 2006, we recorded to equipment, development project and other impairments in the Consolidated Condensed Statement of Operations a $62.1 million non-cash impairment charge, primarily related to certain turbine-generator equipment not assigned to projects which are included in other assets in our Consolidated Condensed Balance Sheet. During the quarter, we determined that a near-term sale of this equipment is likely and recorded an impairment charge to write down the net book value to estimated market prices.
 
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Asset Sales — During the three months ended June 30, 2006, we entered into a non-binding letter of intent to sell our leasehold interest in the 560-MW Fox Energy Center for approximately $16.3 million, subject to certain closing and post closing adjustments. Closing of the transaction is subject to certain conditions including receipt of regulatory approval and the execution of definitive documentation. Since we determined as of March 31, 2006, that a near-term sale was likely, we reported an impairment charge of $49.7 million in the first quarter of 2006 related to the leasehold interest in Fox Energy Center.
 
5.    Investments
 
At June 30, 2006, and December 31, 2005, our joint venture investments included the following (in thousands):
 
 	 	Ownership
Interest as of	 	
Investment Balance at	 	
 	 	June 30,
2006	 	June 30,
2006	 	December 31,
2005	 	
Greenfield Energy Centre	 	 	50.0%	 	$	63,435	 	$	40,698	 	
Valladolid	 	 	—	 	 	—	 	 	42,900	 	
Other (1)	 	 	—	 	 	22	 	 	22	 	
Total investments in power projects	 	 	 	 	$	63,457	 	$	83,620	 	
__________
(1)	We also hold a 100% interest in Canadian and other foreign subsidiaries most of which were deconsolidated at December 31, 2005, due to the Canadian subsidiaries’ filing for creditor protection under the CCAA in Canada. In addition, we hold a 32.3% interest in Androscoggin Energy Center. All of these investments were fully impaired at December 31, 2005.	
 
Contribution — During the three months ended June 30, 2006, we contributed $21.0 million in cash to our investment in Greenfield LP, the owner of the Greenfield Energy Centre.
 
Asset Sales — On April 18, 2006, we completed the sale of our 45% indirect equity interest in the 525-MW Valladolid to the two remaining partners in the project, Mitsui and Chubu, for $42.9 million, less a 10% holdback and transaction fees. Under the terms of the purchase and sale agreement, we received cash proceeds of $38.6 million at closing. The 10% holdback, plus interest, will be returned to us in one year’s time. We eliminated $87.8 million of non-recourse unconsolidated project debt, representing our 45% share of the total project debt of approximately $195.0 million. In addition, funds held in escrow for credit support of $9.4 million were released to us. We recorded an impairment charge of $41.3 million for our investment in the project during the year ended December 31, 2005; accordingly, no material gain or loss was recognized on this sale.
 
6.    Comprehensive Loss
 
Comprehensive loss is the total of net loss and all other non-owner changes in equity. Comprehensive loss includes our net loss, unrealized gains and losses from derivative instruments that qualify as cash flow hedges, unrealized gains and losses from available-for-sale securities, which are marked-to-market, our share of equity method investee’s OCI, and the effects of foreign currency translation adjustments. We report AOCI in our Consolidated Condensed Balance Sheet. The table below details the changes during the three and six months ended June 30, 2006 and 2005, in the Company’s AOCI balance and the components of our comprehensive loss (in thousands):

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Statement of Comprehensive Loss:
 
 	 	Three Months Ended June 30,	 	Six Months Ended June 30,	 	
 	 	2006	 	2005	 	2006	 	2005	 	
 	 	(in thousands)	 	
Net loss	 	$	(817,759	)	$	(298,458	)	$	(1,407,202	)	$	(467,189	)	
Other comprehensive income (loss), net of tax:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Comprehensive pre-tax gain (loss) on cash flow hedges before reclassification adjustment	 	 	7,274	 	 	(134,289	)	 	72,359	 	 	(225,008	)	
Reclassification adjustment for losses included in net loss	 	 	23,028	 	 	41,074	 	 	11,085	 	 	37,030	 	
Pre-tax gain on available-for-sale investments	 	 	—	 	 	2,415	 	 	—	 	 	3,565	 	
Foreign currency translation (loss)	 	 	(1,990	)	 	(20,860	)	 	(1,671	)	 	(33,690	)	
Income tax benefit (provision)	 	 	(11,612	)	 	26,925	 	 	(32,953	)	 	56,472	 	
Total comprehensive loss	 	$	(801,059	)	$	(383,193	)	$	(1,358,382	)	$	(628,820	)	
 
7.    Debt
 
DIP Facility — On January 26, 2006, the U.S. Bankruptcy Court entered a final order approving the $2.0 billion DIP Facility and removing its previously imposed limitation on our ability to borrow thereunder. The DIP Facility, which will remain in place until the earlier of an effective plan of reorganization or December 20, 2007, is comprised of a $1.0 billion revolving credit facility priced at LIBOR plus 225 basis points or base rate plus 125 basis points, a $400 million first-priority term loan priced at LIBOR plus 225 basis points or base rate plus 125 basis points and a $600 million second-priority term loan priced at LIBOR plus 400 basis points or base rate plus 300 basis points. The DIP Facility is secured by first priority liens on all of the unencumbered assets of the U.S. Debtors, including The Geysers Assets, and junior liens on all of their encumbered assets. The proceeds of borrowings and letters of credit issued under the DIP Facility’s revolving loan will be used, among other things, for working capital and other general corporate purposes.
 
The DIP Facility was amended on May 3, 2006, to, among other things, provide us with extensions of time to provide certain financial information to the DIP Facility lenders, including financial statements for the year ended December 31, 2005, and for the quarter ended March 31, 2006. Also in May 2006, the DIP Facility lenders consented to the use of borrowings under the DIP Facility to repay a portion of the First Priority Notes in accordance with the orders of the U.S. Bankruptcy Court.
 
In July 2006, the DIP Facility lenders consented to the assignment of certain PPAs by Broad River Energy, LLC, our subsidiary that leases the Broad River facility pursuant to a leveraged lease, to the owner-lessors of such facility in connection with a settlement agreement with the owner-lessors. The DIP Facility lenders also consented to Broad River’s granting to the owner-lessors a temporary security interest in the same PPAs until FERC approves the assignment. The July 2006 consent was conditioned upon the U.S. Bankruptcy Court’s approval of the settlement agreement with the owner-lessors, and the U.S. Bankruptcy Court approved the settlement agreement on June 27, 2006. FERC approval of the assignment of the PPAs is pending.
 
As of June 30, 2006, there was $998.3 million outstanding under the term loan facilities, nothing outstanding under the revolving loan facility, and $11.7 million of letters of credit were issued against the revolving loan facility. In May 2006 and June 2006, a portion of the funds drawn under the term loan facilities, together with approximately $409 million of restricted cash, plus accrued interest, were used to repay the remaining outstanding $646.1 million of our First Priority Notes.
 
Debt, Lease and Indenture Covenant Compliance — Pursuant to the DIP Facility, we are subject to a number of affirmative and restrictive covenants, reporting requirements and financial covenants. As of the date of filing of this Report, we are in compliance with the DIP Facility covenants.
 
Our filings under Chapter 11 and the CCAA constituted events of default or otherwise triggered repayment obligations under the instruments governing substantially all of the indebtedness of the Calpine Debtors outstanding at the
 
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Petition Date. As a result of the events of default, the debt outstanding under the affected debt instruments generally became automatically and immediately due and payable. We believe that any efforts to enforce such payment obligations against U.S. Debtors are stayed as a result of the Chapter 11 filings and subject to our Chapter 11 cases. Although the CCAA does not provide an automatic stay, the Canadian Court has granted a stay to the Canadian Debtors which currently extends to October 20, 2006. Such events of default generally also constituted breaches of executory contracts and unexpired leases of U.S. Debtors. Actions taken by counterparties or lessors based on such breaches, we believe, are also stayed as a result of the Chapter 11 filings. However, under the Bankruptcy Code, we must cure all pre-petition defaults of executory contracts and unexpired leases that we seek to assume. Once we assume an executory contract or unexpired lease pursuant to an order of the U.S. Bankruptcy Court, such executory contract or unexpired lease becomes a post-petition obligation of the applicable U.S. Debtor, and efforts on the part of counterparties or lessors to enforce the U.S. Debtor’s obligations under such contracts or leases may or may not be stayed as a result of the Chapter 11 filings. See Note 2 for information regarding the assumption of executory contracts and unexpired leases.
 
In addition, as described further below, the Chapter 11 filings by certain of the U.S. Debtors caused, directly or indirectly, defaults or events of default under the debt of certain Non-Debtor entities. Such events of default (or defaults that become events of default) could give holders of debt under the relevant instruments the right to accelerate the maturity of all debt outstanding thereunder if the defaults or events of default were not cured or waived. There can be no assurance that such remedies can be obtained.
 
Calpine Debtor Entities
 
In addition to the events of default caused as a result of our Chapter 11 or CCAA filings, we may not be in compliance with certain other covenants under the indentures or other debt or lease instruments of certain Calpine Debtor entities, the obligations under all of which have been accelerated. In particular:
 	•	We were required to use the proceeds of certain asset sales and issuances of preferred stock completed in 2005 to make capital expenditures, to acquire permitted assets or capital stock, or to repurchase or repay indebtedness in the first three quarters of 2006. However, as a result of the Chapter 11 filings, we have not been, and do not expect to be, able to do so.	
 
 	•	We sold substantially all of our remaining oil and gas assets on July 7, 2005. The gas component of such sale constituted a sale of “designated assets” under certain of our indentures, which restrict the use of the proceeds of sales of designated assets. In accordance with the indentures, we used $138.9 million of the net proceeds of $902.8 million from the sale to repurchase First Priority Notes from holders pursuant to an offer to purchase. We used approximately $308.2 million, plus accrued interest, of the net proceeds to purchase natural gas assets in storage. The remaining $406.9 million and interest income subsequently earned thereon, remained in a restricted designated asset sale proceeds account pursuant to the indentures governing the First Priority Notes and the Second Priority Notes until it was used to purchase First Priority Notes in May 2006. As described in Note 12, in a lawsuit captioned Calpine Corporation v. The Bank of New York, Collateral Trustee for Senior Secured Note Holders, et al. , the Delaware Court of Chancery found in November 2005 that our use of the approximately $308.2 million of proceeds to make purchases of gas assets in storage was in violation of such indentures and ordered that amount plus accrued interest (for a total of approximately $313 million) be returned to a designated asset sale proceeds account. The Delaware Supreme Court affirmed the Delaware Court of Chancery’s decision on December 20, 2005. Later that same day, the case was stayed upon our Chapter 11 filing. As a result, we have not refunded the amount to date.	
 
Further, as part of our “first day” filings in the Chapter 11 cases, we assumed certain unexpired leases and executory contracts related to the sale/leaseback transaction at the Agnews power plant. We have failed to deliver to the financing parties certain financial reports, operational reports and officers’ certificates for this project as required under the financing documents. Such delayed delivery may become an event of default if the information is not provided, entitling the financing parties to certain rights and remedies. As a result, our obligations under this financing have been classified as current.

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While it does not affect a debt instrument, we own a 50% interest in Acadia PP through our wholly owned subsidiary, Calpine Acadia Holdings, LLC, which is a U.S. Debtor. The remaining 50% is owned by a subsidiary of Cleco, Acadia Power Holdings, LLC. Calpine Acadia Holdings, LLC and Acadia Power Holdings, LLC are subject to a limited liability company agreement which, among other things, governs their relationship with regard to ownership of Acadia PP. The limited liability company agreement provides that bankruptcy of Calpine Acadia Holdings, LLC is an event of default under such agreement and sets forth certain exclusive remedies in the event that an event of default occurs, including winding up Acadia PP or permitting the non-defaulting party to buy out the defaulting party’s interest at market value less 20%. However, we believe that any efforts to enforce such remedies would be stayed as a result of the Chapter 11 filings and subject to our Chapter 11 cases. To date, no default of the limited liability company agreement has been declared. The parties are currently discussing a restructure of the ownership of Acadia PP.
 
Non-Debtor Entities
 
Blue Spruce Energy Center .  In connection with the project financing transaction by Blue Spruce, an event of default existed under the project credit agreement as of March 31, 2006, due to cross default provisions related to the Chapter 11 filing by CES. Subsequently, we have obtained an amendment and waiver under the project credit agreement from the lender, which waived the defaults unless and until the CES tolling agreement related to the Blue Spruce facility is rejected in the Chapter 11 cases. In addition, the waiver agreement and the terms of the project credit agreement provide us with additional time to deliver certain financial information required under the project financing documents so long as we are seeking to cure such failure and it does not have a material adverse effect. Because the CES tolling agreement has not yet been assumed in the Chapter 11 cases, our obligations under this financing have been classified as current.
 
Calpine King City Cogen .  In connection with the sale/leaseback transaction at the King City power plant, the Chapter 11 filings by certain affiliates of King City Cogen constituted an event of default under the lease agreement. We have obtained a forbearance agreement that is in effect until January 1, 2007. In addition, we have failed to deliver certain financial information and officers’ certificates for this project within the times provided under the lease and participation agreement, which failures have become events of default, entitling the parties to certain rights and remedies. As a result, our obligations under this financing have been classified as current.
 
CCFC .  In connection with the note and term loan financing at CCFC, on June 9, 2006, CCFC entered into waiver agreements under the indenture governing its notes and the credit agreement governing its term loans upon the receipt by CCFC of the consent of the holders of a majority in outstanding principal amount of CCFC’s notes and the agreement of the lenders of a majority in outstanding principal amount of the CCFC term loans pursuant to a consent solicitation and request for amendment. The June 9 waiver agreements provide for the waiver of certain defaults and events of default that resulted from (i) the failure of CES, a U. S. Debtor, to make a portion of the payments due to CCFC in March 2006 under a PPA between CES and CCFC and (ii) CCFC’s failure to timely deliver certain financial reports as required pursuant to the CCFC notes indenture and the term loan credit facility. The June 9 waiver agreements required CCFC to reach agreement with its noteholders and term loan lenders regarding the treatment of the CES PPA with CCFC in the Chapter 11 cases by August 4, 2006; if such agreement was not reached by that time, the June 9 waivers would have ceased to be effective. On each of August 4, 2006, and August 11, 2006, in each case upon the receipt by CCFC of the consent of holders of a majority of the outstanding principal amount of its notes and the agreement of the lenders of a majority in outstanding principal amount of its term loans pursuant to a consent solicitation and request for amendment, the June 9 waivers were amended to extend the August 4, 2006, deadline to August 11, 2006, and August 25, 2006, respectively. Due to the contingent nature of the waivers, the CCFC notes and term loans are classified as current.
 
CCFCP .  If the June 9 waiver agreements with respect to the CCFC notes and term loans cease to be effective and an event of default therefore occurs under the CCFC notes indenture and term loan credit facility, the holders of the CCFCP redeemable preferred shares may be entitled to declare a voting rights trigger event to have occurred. Upon the occurrence of a CCFCP voting rights trigger event, the holders of CCFCP redeemable preferred shares may, at their option, remove and replace the existing CCFCP directors unless and until the consequences of the CCFCP voting rights trigger event have been fully cured. On June 21, 2006, CCFCP notified its preferred members that a CCFCP voting rights trigger event could be
 
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declared if CCFCP fails, within the applicable cure period, to provide certain quarterly financial reports as required under its LLC operating agreement. Such reports were subsequently delivered within the applicable cure period.
 
Fox Energy Center .  The Chapter 11 filings by certain affiliates of Calpine Fox LLC constituted an event of default under the lease and certain other agreements relating to the sale/leaseback transaction at the Fox Energy Center. In addition, Calpine Fox LLC failed to pay a portion of the rent payment due on March 30, 2006 (which failure to pay was subsequently cured) and failed to deliver certain financial information and officers’ certificates within prescribed deadlines. Calpine Fox LLC entered into a forbearance agreement and side letter, as amended from time to time, with the Fox Energy Center owner lessor and owner participant, pursuant to which the owner lessor and owner participant have agreed not to exercise certain rights and remedies under the lease and other agreements relating to the events of default. The protections afforded by the forbearance agreement and side letter, as amended from time to time, have been extended to August 18, 2006. As a result, our obligations under the credit agreement have been classified as current. See Note 4 for information regarding the proposed sale of this facility.
 
Freeport Energy Center and Mankato Energy Center .  In connection with the project financing transaction by Freeport and Mankato, an event of default existed under the project credit agreement due to cross default provisions related to the Chapter 11 filings by certain Calpine affiliates. The lenders under the project credit agreement provided a waiver of the event of default in exchange for a fee of 6.25 basis points (0.06%) of the total outstanding amounts of the loans unless and until any of the major project documents related to the facilities, to which such Calpine affiliates are party is rejected in the Chapter 11 cases. Subsequently, we have failed to deliver certain financial information for these projects within the times provided under the project credit agreement. Such failure has become an event of default because the information was not provided within applicable cure periods. As a result, our obligations under the project credit agreement have been classified as current.
 
Metcalf Energy Center .  In connection with the financing transactions by Metcalf, certain events of default occurred under the project credit agreement as a result of our Chapter 11 filings and related failures to fulfill certain payment obligations under a PPA between CES and Metcalf. Such events of default also constituted a voting rights trigger event under Metcalf’s limited liability company agreement, which contains the terms of Metcalf’s redeemable preferred shares. Upon the occurrence of a voting rights trigger event, the holders of the Metcalf redeemable preferred shares may, at their option, remove and replace the existing Metcalf directors unless and until the voting rights trigger event has been waived by the holders of a majority of the Metcalf redeemable preferred shares or until the consequences of the voting rights trigger event have been fully cured. Metcalf entered into waiver agreements on April 18, 2006, and June 21, 2006, with the requisite lenders under the credit agreement waiving the foregoing events of default in exchange for a fee of 20 basis points (0.20%) of the total outstanding amounts of the loans and Metcalf’s commitment to assert claims in the Chapter 11 cases against Calpine, CES, and Calpine Construction Management Company, Inc., which claims were timely filed by Metcalf in accordance with the waiver. The waiver is effective unless and until any major project document, as defined under the credit agreement, is rejected in connection with the Chapter 11 cases. As a result of the contingent nature of the waiver, our obligations under the credit agreement have been classified as current.
 
Newark Power Plant and Parlin Power Plant .  In connection with our financing transaction at the Newark and Parlin power plants, both of which are designated projects for which further funding has been limited in connection with our Chapter 11 cases, we are not in compliance with certain covenants under a credit agreement under which a letter of credit was issued. Such defaults occurred as a result of our Chapter 11 filings, our failure to fulfill requirements relating to the payment of certain obligations, and our failure to comply with terms of certain of the Newark and Parlin project agreements. Consequently, we may be required to fully cash collateralize the letter of credit.
 
Pasadena Power Plant .  In connection with our Pasadena lease financing transaction, our Chapter 11 filings constituted an event of default under Pasadena’s participation agreement and certain other agreements relating to the transaction, which resulted in events of default under the indenture governing certain notes issued by the Pasadena owner lessor. We entered into a forbearance agreement with the holders of a majority of the outstanding notes pursuant to which the noteholders have agreed to forebear from taking any action with respect to the events of default, which forbearance agreement was extended from month to month until May 1, 2006. Such forbearance agreement has lapsed and there is
 
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currently no forbearance agreement in place. In addition, we have failed to deliver certain financial information for this project within the times provided under the participation agreement, which could result in events of default under the participation agreement and certain other agreements related to the transaction after receipt of notice and with the passage of time. As a result, our obligations with respect to this lease financing have been classified as current.
 
Riverside Energy Center and Rocky Mountain Energy Center .  In connection with the project financing transactions by Riverside and Rocky Mountain, an event of default occurred under the project credit agreements due to cross default provisions related to the Chapter 11 filings by certain Calpine affiliates. The lenders under the project credit agreements provided an omnibus amendment and waiver of such events of default unless and until any of the major project documents related to the facilities to which any U.S. Debtor is a party are rejected in the Chapter 11 cases. We have also failed to deliver certain financial information for these projects within the times provided under the project credit agreements. Such failures have become events of default because the information was not provided within applicable cure periods. As a result, our obligations under the project credit agreements have been classified as current.
 
8.    Liabilities Subject to Compromise
 
The claims bar dates—the dates by which claims against the Calpine Debtors must be filed with the applicable Bankruptcy Court—had been set for August 1, 2006 by each of the Bankruptcy Courts. Accordingly, not all potential claims would have been filed as of June 30, 2006. See Note 2 for subsequent event disclosure related to the claims bar dates. The amounts of LSTC at June 30, 2006, and December 31, 2005, consisted of the following (in millions):
 
 	 	June 30,
2006	 	December 31,
2005	 	
Accounts payable and accrued liabilities (1)	 	$	369.1	 	$	724.2	 	
Terminated derivative liabilities	 	 	443.0	 	 	133.6	 	
Project financing	 	 	164.0	 	 	166.5	 	
Convertible notes	 	 	1,823.5	 	 	1,823.5	 	
Second priority senior secured notes (2)	 	 	3,671.9	 	 	3,671.9	 	
Unsecured senior notes	 	 	1,880.0	 	 	1,880.0	 	
Notes payable and other liabilities – related party	 	 	1,138.0	 	 	1,078.0	 	
Provision for expected allowed claims (3)	 	 	5,474.2	 	 	5,132.4	 	
Total liabilities subject to compromise	 	$	14,963.7	 	$	14,610.1	 	
____________
(1)	Accounts payable and accrued liabilities within LSTC declined due primarily to settling by netting accounts receivables against pre-petition payables with certain CES counterparties, where netting agreements were in place.	
(2)	We have not made, and currently do not propose to make, an affirmative determination whether our Second Priority Debt is fully secured or under-secured. We do, however, believe that there is uncertainty about whether the market value of the assets securing the obligations owing in respect of the Second Priority Debt is less than, equals or exceeds the amount of these obligations. Accordingly, we have classified the Second Priority Debt as LSTC.	
(3)	Consists primarily of estimated allowed claims related to guarantees by Calpine Corporation of repayment of unsecured senior notes (original principal amount of $2,597.2 million) for two wholly owned finance subsidiaries of ours, ULC I and ULC II. The amounts outstanding to unrelated security holders had been reduced to $1,943.0 million at December 31, 2005, due to repurchases of such senior notes. However, some of the repurchased notes are held by certain of Calpine Corporation’s Canadian subsidiaries and are expected to give rise to allowed claims by these subsidiaries under the above guarantees. Additionally, there is a guarantee by Calpine Corporation of the obligations of its wholly owned subsidiary, Quintana Canada Holdings, LLC, under certain subscription agreements with ULC I, under which claims may be asserted for the same amounts sought under the Calpine Corporation guarantees of the ULC I notes. Although the expected claims are redundant relative to the underlying exposure to unrelated security holders, we determined that these duplicative claims were probable of being allowed into the claim pool by the U.S. Bankruptcy Court, although the U.S. Debtors fully reserve their rights in this regard.	

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9.    Derivative Instruments
 
The table below reflects the amounts (in thousands) that are recorded as assets and liabilities at June 30, 2006, for our derivative instruments:
 
 	 	Interest Rate
Derivative
Instruments	 	Commodity
Derivative
Instruments
Net	 	Total
Derivative
Instruments	 	
Current derivative assets	 	$	6,962	 	$	270,481	 	$	277,443	 	
Long-term derivative assets	 	 	17,016	 	 	500,611	 	 	517,627	 	
Total assets	 	$	23,978	 	$	771,092	 	$	795,070	 	
Current derivative liabilities	 	$	2,951	 	$	393,632	 	$	396,583	 	
Long-term derivative liabilities	 	 	11,092	 	 	667,868	 	 	678,960	 	
Total liabilities	 	$	14,043	 	$	1,061,500	 	$	1,075,543	 	
Net derivative assets (liabilities)	 	$	9,935	 	$	(290,408	)	$	(280,473	)	
 
Of our net derivative assets, $132.3 million and $13.8 million are net derivative assets of PCF and CNEM, respectively, each of which is an entity with its existence separate from us and other subsidiaries of ours. We fully consolidate CNEM and we record the derivative assets of PCF in our balance sheet.
 
Below is a reconciliation of our net derivative liabilities to our accumulated other comprehensive loss, net of tax from derivative instruments at June 30, 2006 (in thousands):
 
 	 	Six Months
Ended
June 30, 2006	 	
Net derivative liabilities	 	$	(280,473	)	
Derivatives not designated as cash flow hedges and recognized hedge ineffectiveness	 	 	300,942	 	
Cash flow hedges terminated prior to maturity	 	 	(184,875	)	
Cumulative OCI tax benefit	 	 	56,169	 	
Accumulated other comprehensive loss from derivative instruments, net of tax (1)	 	$	(108,237	)	
____________
(1)	Amount represents one portion of our total AOCI balance.	
 
The tables below reflect the impact of mark-to-market gains (losses) on our pre-tax earnings for the three and six months ended June 30, 2006 and 2005, respectively (in thousands):
 
 	 	Three Months Ended June 30,	 	Six Months Ended June 30,	 	
 	 	2006	 	2005	 	2006	 	2005	 	
 	 	(in thousands)	 	
Natural gas derivatives (1)	 	$	(43,874	)	$	(61,702	)	$	(123,617	)	$	(78,405	)	
Power derivatives (1)	 	 	61,439	 	 	64,576	 	 	167,723	 	 	77,748	 	
Interest rate derivatives (1)(2)	 	 	5,900	 	 	840	 	 	15,584	 	 	807	 	
Total	 	$	23,465	 	$	3,714	 	$	59,690	 	$	150	 	
____________
(1)	Represents the realized and unrealized mark-to-market activity. The activity is presented in the Consolidated Condensed Statements of Operations as Mark-to-market activities, net.	
(2)	Recorded within Other income in the Consolidated Condensed Statements of Operations for periods prior to January 2006.	

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The table below reflects the contribution of our cash flow hedge activity to pre-tax earnings based on the reclassification adjustment from AOCI to earnings for the three and six months ended June 30, 2006 and 2005, respectively (in thousands):
 
 	 	Three Months Ended June 30,	 	Six Months Ended June 30,	 	
 	 	2006	 	2005	 	2006	 	2005	 	
Natural gas and crude oil derivatives	 	$	38,025	 	$	(11,483	)	$	183,711	 	$	17,317	 	
Power derivatives	 	 	(58,732	)	 	(21,669	)	 	(190,014	)	 	(39,441	)	
Interest rate derivatives	 	 	(2,321	)	 	(7,424	)	 	(4,782	)	 	(13,905	)	
Foreign currency derivatives	 	 	—	 	 	(498	)	 	—	 	 	(1,001	)	
Total derivatives	 	$	(23,028	)	$	(41,074	)	$	(11,085	)	$	(37,030	)	
 
As of June 30, 2006, the maximum length of time over which we were hedging our exposure to the variability in future cash flows for forecasted transactions was 1 and 11 years, for commodity and interest rate derivative instruments, respectively. We currently estimate that pre-tax losses of $123.5 million would be reclassified from AOCI into earnings during the twelve months ended June 30, 2007, as the hedged transactions affect earnings assuming constant gas and power prices, interest rates and exchange rates over time; however, the actual amounts that will be reclassified will likely vary based on the probability that gas and power prices as well as interest rates and exchange rates will, in fact, change. Therefore, management is unable to predict what the actual reclassification from AOCI to earnings (positive or negative) will be for the next twelve months.
 
The table below presents (in thousands) the pre-tax gains (losses) currently held in AOCI that will be recognized annually into earnings, assuming constant gas and power prices, interest rates and exchange rates over time.
 
 	 	2006	 	2007	 	2008	 	2009	 	2010	 	Thereafter	 	Total	 	
Gas OCI	 	$	92,386	 	$	11,804	 	$	—	 	$	—	 	$	—	 	$	—	 	$	104,190	 	
Power OCI	 	 	(205,700	)	 	(33,835	)	 	(5,959	)	 	(4,335	)	 	(3,037	)	 	—	 	 	(252,866	)	
Interest Rate OCI	 	 	30	 	 	1,331	 	 	1,738	 	 	51	 	 	(1,723	)	 	(17,157	)	 	(15,730	)	
Total pre-tax OCI	 	$	(113,284	)	$	(20,700	)	$	(4,221	)	$	(4,284	)	$	(4,760	)	$	(17,157	)	$	(164,406	)	
 
10.    Loss per Share
 
Basic and diluted loss per common share was computed by dividing net loss by the weighted average number of common shares outstanding for the respective periods. Potentially convertible securities and unexercised employee stock options to purchase a weighted average of 0.1 million and 10.5 million shares of our common stock for the three months ended June 30, 2006 and 2005, respectively, and 0.1 million and 10.8 million for the six months ended June 30, 2006 and 2005, respectively, were not considered in the calculation as such inclusion would have been anti-dilutive. We also excluded 89 million shares of common stock subject to a share lending agreement with DB London.
 
11.    Stock-Based Compensation
 
1996 Stock Incentive Plan
 
We adopted the SIP in September 1996. The SIP succeeded our previously adopted stock option program. Prior to our adoption of SFAS No. 123 prospectively on January 1, 2003, we accounted for the SIP under APB No. 25, under which compensation cost was generally not recognized through December 31, 2002.
 
Under the SIP, we may grant stock options to directors, certain employees and consultants or other independent advisors at an exercise price that generally equals the stock’s fair market value on the date of grant. The SIP options generally vest ratably over four years with a maximum exercise period of 7 or 10 years after the grant date. Any stock exercised under the SIP would be satisfied by authorized but unissued or reacquired shares of our common stock. Currently, the number of common shares reserved for issuance over the term of the SIP is 78,555,845.
 
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A summary of the SIP for the six months ended June 30, 2006, is as follows:
 
 	 	Number of
Options	 	Weighted
Average
Exercise Price	 	Remaining
Term
(in years)	 	Aggregate
Intrinsic
Value
(in millions)	 	
Outstanding – December 31, 2005	 	 	37,090,268	 	$	7.62	 	 	 	 	 	 	 	
Granted	 	 	—	 	 	—	 	 	 	 	 	 	 	
Exercised	 	 	—	 	 	—	 	 	 	 	 	 	 	
Forfeited	 	 	2,235,000	 	 	4.13	 	 	 	 	 	 	 	
Expired	 	 	6,552,798	 	 	7.06	 	 	 	 	 	 	 	
Outstanding – June 30, 2006	 	 	28,302,470	 	$	8.03	 	 	 	 	 	 	 	
Exercisable – June 30, 2006	 	 	23,750,685	 	$	8.76	 	 	4.88	 	$	—	 	
Vested and expected to vest – June 30, 2006	 	 	27,659,200	 	$	8.13	 	 	5.10	 	$	—	 	
 
The fair value of options granted was determined on the grant date using the Black-Scholes pricing model. Certain assumptions were used in order to estimate fair value for options granted during the three and six months ended June 30, 2005, as noted in the following table. No options were granted during the six months ended June 30, 2006.
 
 	 	Three Months
Ended
June 30, 2005	 	Six Months
Ended
June 30, 2005	 	
Expected term (in years) (1)	 	 	7.3	 	 	1.6 – 7.3	 	
Risk-free interest rate (2)	 	 	4.0%	 	 	3.4 – 4.2	 	
Expected volatility (3)	 	 	77.8%	 	 	75.1 – 91.0%	 	
Dividend yield	 	 	—	 	 	—	 	
Weighted-average grant-date fair value (per option)	 	$	1.98	 	$	1.35 – 2.33	 	
__________
(1)	Expected term based on the remaining actual contractual term.	
(2)	U.S. Treasury rate based on expected term.	
(3)	Volatility based on expected term of the options over the period from September 1996 to May 2005.	
 
The total intrinsic value of options exercised and cash received for options exercised during the three and six months ended June 30, 2005, was $0.82 million and $0.67 million, respectively. No options were exercised during the six months ended June 30, 2006.
 
Stock-based compensation expense recognized for stock options was $1.5 million and $3.8 million for the three months ended June 30, 2006 and 2005, respectively, and $3.7 million and $7.0 million for the six months ended June 30, 2006 and 2005, respectively. A full valuation allowance has been provided against the associated deferred tax asset at June 30, 2006. At June 30, 2006, there was $4.6 million of unrecognized compensation cost related to stock options, which is expected to be recognized over a weighted-average period of 5.13 years.
 
Restricted Stock Awards
 
In general, we refer to an award of common stock that is subject to time-based vesting or achievement of performance measures as “restricted stock.” Restricted stock awards are generally subject to certain transfer restrictions and forfeiture upon termination of employment.
 
The following table summarizes activity during the six months ended June 30, 2006, related to restricted stock awards classified as equity awards.

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 	 	Number of
Stock
Options	 	Weighted-
Average
Grant-Date
Fair Value	 	
Nonvested – December 31, 2005	 	 	946,222	 	$	3.32	 	
Granted	 	 	—	 	 	—	 	
Forfeited	 	 	124,247	 	 	3.32	 	
Vested	 	 	—	 	 	—	 	
Nonvested – June 30, 2006	 	 	821,975	 	$	3.32	 	
 
At June 30, 2006, there was $2.3 million of unrecognized compensation cost related to restricted stock, which is expected to be recognized over a weighted average period of 3.5 years.
 
2000 Employee Stock Purchase Plan
 
Prior to the suspension of the ESPP effective November 29, 2005, eligible employees could purchase, in the aggregate, up to 28,000,000 shares of our common stock through periodic payroll deductions. The purchase price for the shares under the ESPP was 85% of the lower of (i) the fair market value of the common stock on the participant’s entry date into the offering period, or (ii) the fair market value on the semi-annual purchase date. Shares could be purchased on May 31 and November 30 of each year until termination of the ESPP. This plan is considered compensatory under SFAS No. 123-R.
 
Due to the suspension of the ESPP, no compensation cost was recognized and no shares were purchased during the three and six months ended June 30, 2006. During the three and six months ended June 30, 2005, we recognized $0.7 million and $2.0 million, respectively, of compensation expense and 2.4 million shares were purchased in May 2005.
 
Pro Forma Impact of Stock-Based Compensation
 
The following table presents the effect on net loss and loss per share for the three and six months ended June 30 2005, if we had used the fair value method of accounting for all periods prior to the prospective adoption of SFAS No. 123 as of January 1, 2003 (in thousands, except per share amounts):
 
 	 	Three Months
Ended	 	Six Months
Ended	 	
 	 	June 30, 2005	 	June 30, 2005	 	
Net loss:	 	 	 	 	 	 	 	
As reported	 	$	(298,458	)	$	(467,189	)	
Pro Forma	 	 	(298,885	)	 	(467,934	)	
Loss per share data:	 	 	 	 	 	 	 	
Basic and diluted loss per share:	 	 	 	 	 	 	 	
As reported	 	 	(0.66	)	 	(1.04	)	
Pro Forma	 	 	(0.67	)	 	(1.04	)	
Stock-based compensation cost included in net loss, as reported (net of tax)	 	$	2,815	 	$	7,104	 	
Stock-based compensation cost included in net loss, pro forma (net of tax)	 	$	3,242	 	$	7,849	 	
 
12.    Commitments and Contingencies
 
Litigation — We are party to various litigation matters arising out of the normal course of business, the more significant of which are summarized below. The ultimate outcome of each of these matters cannot presently be determined, nor can the liability that could potentially result from a negative outcome be reasonably estimated presently for every case. The liability we may ultimately incur with respect to any one of these matters in the event of a negative outcome may be in excess of amounts currently accrued with respect to such matters and, as a result of these matters, may potentially be material
 
26

 
to our financial position or results of operations. Further, we and the majority of our subsidiaries filed either for reorganization under Chapter 11 in the U.S. Bankruptcy Court or creditor protection under the CCAA in the Canadian Court on the Petition Date, and additional subsidiaries have filed thereafter. Generally, all actions to enforce or otherwise effect repayment of liabilities preceding the Petition Date as well as pending litigation against the Calpine Debtors are stayed while the Calpine Debtors continue their business operations as debtors-in-possession. Accordingly, unless indicated otherwise, each case listed below is currently stayed. To the extent that there are any judgments against us in any of these matters during the pendency of our Chapter 11 cases, we expect that such judgments would be classified as LSTC. See Note 2 for information regarding our Chapter 11 cases and CCAA proceedings.
 
Hawaii Structural Ironworkers Pension Fund v. Calpine, et al .  This case was brought as a class action on behalf of purchasers in Calpine’s April 2002 stock offering under Section 11 of the Securities Act. This case was filed in San Diego County Superior Court on March 11, 2003, and subsequently transferred to Santa Clara County Superior Court. Defendants in this case are Calpine Corporation, Peter Cartwright, Ann B. Curtis, John Wilson, Kenneth Derr, George Stathakis, Credit Suisse First Boston, Banc of America Securities, Deutsche Bank Securities, and Goldman, Sachs & Co. The Hawaii Structural Ironworkers Pension Fund alleges that the prospectus and registration statement for the April 2002 offering contained false or misleading statements regarding: Calpine’s actual financial results for 2000 and 2001; Calpine’s projected financial results for 2002; Mr. Cartwright’s agreement not to sell or purchase shares within 90 days of the April 2002 offering; and Calpine’s alleged involvement in “wash trades.” This action is stayed as to Calpine Corporation as a result of our Chapter 11 filing. In addition, Calpine Corporation filed a motion with the U.S. Bankruptcy Court to extend the automatic stay to the individual defendants listed above (or enjoin further prosecution of the action). The Hawaii Structural Ironworkers Pension Fund opposed that motion. On June 5, 2006, the motion was granted by the U.S. Bankruptcy Court. On June 13, 2006, the Santa Clara County Superior Court stayed the action as to Credit Suisse First Boston, Banc of America Securities, Deutsche Bank Securities, and Goldman, Sachs & Co., setting a case management conference for December 12, 2006, to review the status of the case. The case is now stayed as to all defendants. On June 16, 2006, the Hawaii Structural Ironworkers Pension Fund filed a notice of appeal of the U.S. Bankruptcy Court’s order extending the automatic stay to the individual defendants. Once a briefing schedule is established, the appeal will be briefed and argued. There is no trial date in this action. We consider this lawsuit to be without merit and, should the case proceed against Calpine Corporation, intend to continue to defend vigorously against the allegations.
 
Phelps v. Calpine Corporation, et al .  Two nearly identical class action complaints alleging claims under ERISA were consolidated under the caption In re Calpine Corp. ERISA Litig. , Master File No. C 03-1685 SBA as filed in the Northern District Court against Calpine Corporation, the members of Calpine Corporation’s Board of Directors, the 401k Plan’s Advisory Committee and its members, signatories of the 401k Plan’s Annual Return/Report of Employee Benefit Plan Forms 5500 for 2001 and 2002, an employee of a consulting firm hired by the 401k Plan, and unidentified fiduciary defendants alleging claims under ERISA purportedly on behalf of the participants in the 401k Plan from January 5, 2001, to the present who invested in the Calpine unitized stock fund. Plaintiffs allege that defendants breached their fiduciary duties involving the 401k Plan, in violation of ERISA. All of the plaintiffs’ claims were dismissed with prejudice by the Northern District Court. The plaintiffs appealed the dismissal to the Ninth Circuit Court of Appeals. In addition, Calpine Corporation filed a motion with the U.S. Bankruptcy Court to extend the automatic stay to the individual defendants. Plaintiffs opposed the motion and the hearing was scheduled for June 5, 2006; however, prior to the hearing, the parties stipulated to allow the appeal to proceed. If the Northern District Court ruling is reversed, the plaintiffs may then seek leave from the U.S. Bankruptcy Court to proceed with the action. Plaintiff’s opening brief is due to be filed with the Ninth Circuit Court of Appeals on August 21, 2006. Defendant’s opposition will be due in mid October 2006. We consider this lawsuit to be without merit and, should the case proceed against Calpine Corporation, intend to continue to defend vigorously against the allegations.
 
Johnson v. Peter Cartwright, et al .  On December 17, 2001, a shareholder filed a derivative lawsuit on behalf of Calpine Corporation against its directors and one of its senior officers. This lawsuit is styled Johnson vs. Cartwright, et al . (No. CV803872) and is pending, but stayed, in Santa Clara County Superior Court. Calpine Corporation is a nominal defendant in this lawsuit, which alleges claims relating to purportedly misleading statements about Calpine Corporation and stock sales by certain of the director defendants and the officer defendant. On July 1, 2003, the Santa Clara County Superior Court granted Calpine Corporation’s motion to stay this proceeding until In re Calpine Corporation Securities Litigation , an action then-pending in the Northern District of California, was resolved, or until its further order. In re Calpine Corporation
 
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Securities Litigation was resolved by a settlement in November 2005. This case is stayed as to Calpine Corporation as a result of our Chapter 11 filing. In addition, Calpine Corporation filed a motion with the U.S. Bankruptcy Court to extend the automatic stay to the individual defendants and plaintiff opposed the motion. On June 5, 2006, the motion was granted by the U.S. Bankruptcy Court extending the stay to the individual defendants and ruling that plaintiff has no standing to pursue derivative claims because they are now property of the estate. Accordingly, the case is now stayed as to Calpine Corporation and the individual defendants. We consider this lawsuit to be without merit and, should the case proceed against Calpine Corporation, intend to defend vigorously against the allegations if the stay is lifted.
 
Panda Energy International, Inc., et al. v. Calpine Corporation, et al .  On November 5, 2003, Panda filed suit in the U.S. District Court, Northern District of Texas against Calpine Corporation and certain of its affiliates alleging, among other things, that defendants breached duties of care and loyalty allegedly owed to Panda by failing to correctly construct and operate the Oneta power plant, which we had acquired from Panda, in accordance with Panda’s original plans. Panda alleges that it is entitled to a portion of the profits of the Oneta plant and that the defendant’s actions have reduced the profits from Oneta thereby undermining Panda’s ability to repay monies owed to Calpine on December 1, 2003, under a promissory note on which approximately $38.6 million (including related interest) is currently outstanding. Calpine has filed a counterclaim against Panda based on a guaranty. Defendants have also been successful in dismissing the causes of action alleged by Panda for federal and state securities laws violations. We consider Panda’s lawsuit to be without merit and intend to vigorously defend it. Calpine stopped accruing interest income on the promissory note due December 1, 2003, as of the due date because of Panda’s default on repayment of the note. Trial was set for May 22, 2006, but did not proceed due to the stay. There has been no activity since the Petition Date.
 
Snohomish PUD No. 1, et al. v. FERC (regarding Nevada Power Company and Sierra Pacific Power Company v. Calpine Energy Services, L.P. complaint dismissed by FERC) .  On December 4, 2001, NPC and SPPC filed a complaint with FERC under Section 206 of the FPA against a number of parties to their PPAs, including CES. NPC and SPPC allege in their complaint, that the prices they agreed to pay in certain of the PPAs, including those signed with CES, were negotiated during a time when the spot power market was dysfunctional and that they are unjust and unreasonable. The complaint therefore sought modification of the contract prices. The administrative law judge issued an Initial Decision on December 19, 2002, that found for CES and the other respondents in the case and denied NPC and SPPC the relief that they were seeking. In a June 26, 2003 order, FERC affirmed the judge’s findings and dismissed the complaint, and subsequently denied rehearing of that order. The matter is pending on appeal before the Ninth Circuit Court of Appeals. CES has participated in briefing and arguments before the Ninth Circuit Court of Appeals defending the FERC orders, but we are not able to predict at this time the outcome of appeal before the Ninth Circuit Court of Appeals. There has been no activity since the Petition Date.
 
Transmission Service Agreement with Nevada Power Company .  On September 30, 2004, NPC filed a complaint in state district court of Clark County, Nevada against Calpine Corporation, Moapa, FFIC and unnamed parties alleging, among other things, breach by Calpine Corporation of its obligations under a TSA between Calpine Corporation and NPC for 400 MW of transmission capacity and breach by FFIC of its obligations under a surety bond, which surety bond was issued by FFIC to NPC to support Calpine Corporation’s obligations under this TSA. This proceeding was removed from state court to the United States District Court for the District of Nevada. On December 10, 2004, FFIC filed a motion to dismiss, which was granted on May 25, 2005 with respect to claims asserted by NPC that FFIC had breached its obligations under the surety bond by not honoring NPC’s demand that the full amount of the surety bond ($33,333,333.00) be paid to NPC in light of Calpine Corporation’s failure to provide replacement collateral upon the expiration of the surety bond on May 1, 2004. NPC’s motion to amend the complaint was granted on November 17, 2005 and its amended complaint was filed December 8, 2005. This case was stayed as to Calpine Corporation and Moapa on the Petition Date, but not as to co-defendant FFIC. On February 10, 2006, FFIC filed a motion to dismiss NPC’s amended complaint for failure to state a claim against FFIC. On June 1, 2006, the district court issued an order denying FFIC’s motion. FFIC answered the amended complaint on June 16, 2006. On August 1, 2006, the U.S. Debtors filed an adversary complaint against NPC seeking an extension of the automatic stay, or in the alternative, an injunction to preclude NPC from continuing to pursue its derivative claims against FFIC. Also on August 1, 2006, the U.S. Debtors filed a motion for a stay.
 
Harbert Distressed Investment Master Fund, Ltd. v. Calpine Canada Energy Finance II ULC, et al .  On May 5, 2005, the Harbert Distressed Fund filed an application in the Supreme Court of Nova Scotia against Calpine Corporation and certain of its subsidiaries, including ULC II, the issuer of certain senior notes held by the Harbert Distressed Fund, and
 
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CCRC, the parent company of ULC II. Calpine Corporation has guaranteed the ULC II senior notes. In June 2005, the ULC II senior notes indenture trustee joined the application as co-applicant on behalf of all holders of the ULC II senior notes. The Harbert Distressed Fund and the ULC II senior notes indenture trustee alleged that Calpine Corporation, CCRC and ULC II violated the Harbert Distressed Fund’s rights under Nova Scotia laws in connection with certain financing transactions completed by CCRC or subsidiaries of CCRC.
 
On August 2, 2005, the Supreme Court of Nova Scotia denied all relief to the Harbert Distressed Fund and all other holders of the ULC II senior notes that purchased ULC II senior notes on or after September 1, 2004. However, the Supreme Court of Nova Scotia did state that a remedy should be granted to any holder of ULC II senior notes, other than the Calpine respondent companies, that purchased ULC II senior notes prior to September 1, 2004 and that continued to hold those ULC II senior notes on August 2, 2005 and in connection therewith ordered CCRC to maintain control of the net proceeds from the sale of the Saltend facility until a final order was issued. On November 30, 2005, the ULC II senior notes indenture trustee filed a final report confirming the aggregate face value of bonds held by holders of the ULC II senior notes that purchased such ULC II senior notes prior to September 30, 2004 and that continued to hold those ULC II senior notes on August 2, 2005 was (at then-current exchange rates) approximately $42,125,000.
 
On December 19 and 20, 2005, the parties reappeared before the Supreme Court of Nova Scotia to settle the terms of the final order. After argument, and to enable the parties to address an application by the ULC II senior notes indenture trustee to produce further information and documentation, this application was adjourned to January 12, 2006. On the Petition Date, in addition to Calpine’s Chapter 11 filing, the Canadian Debtors, including ULC II and CCRC instituted the CCAA proceedings before the Canadian Court. As a result of the Chapter 11 cases and CCAA proceedings, all Canadian legal proceedings are stayed, and in particular the application to settle the final order in the application has been adjourned indefinitely.
 
In connection with the CCAA proceedings, Calpine Corporation has given undertakings to the Canadian Court and to the ULC II senior notes indenture trustee that: (i) the net Saltend sale proceeds remain at Calpine UK Holdings Limited, a subsidiary of CCRC; (ii) Calpine Corporation intends to continue to hold the monies there and will provide advance notice to the ULC II senior notes indenture trustee and the service list in the CCAA proceedings if that intention changes; (iii) the Saltend sale proceeds held at Calpine UK Holdings Limited are not pledged as collateral for the DIP Facility; and (iv) Calpine Corporation will provide advance notice to the ULC II senior notes indenture trustee and the service list in the CCAA proceedings of any filing of Calpine UK Holdings Limited in Canada, the U.S. or the United Kingdom. On July 31, 2006, consistent with the undertakings given to the Canadian Court and the order entered by the Supreme Court of Nova Scotia dated August 2, 2005, the Canadian Debtors gave notice that the net proceeds of the Saltend sale were being (and now have been) repatriated to Canadian Debtor CCRC.
 
Harbert Convertible Arbitrage Master Fund, Ltd. et al. v. Calpine Corporation .  Plaintiff Harbert Convertible Fund and two affiliated funds filed this action on July 11, 2005, in the New York County Supreme Court, and filed an amended complaint on July 19, 2005. In their amended complaint, plaintiffs allege that in a July 5, 2005 letter to Calpine Corporation they provided “reasonable evidence” as required under the indenture governing the 2014 Convertible Notes that, on one or more days beginning on July 1, 2005, the trading price of the 2014 Convertible Notes was less than 95% of the product of the common stock price multiplied by the conversion rate, as those terms are defined in the 2014 Convertible Notes indenture, and that Calpine Corporation therefore was required to instruct the bid solicitation agent for the 2014 Convertible Notes to determine the trading price beginning on the next trading day. If the trading price as determined by the bid solicitation agent was below 95% of the product of the common stock price multiplied by the conversion rate for the next five consecutive trading days, then the 2014 Convertible Notes would become convertible into cash and common stock for a limited period of time. Plaintiffs have asserted a claim for breach of contract, seeking unspecified damages, because Calpine Corporation did not instruct the bid solicitation agent to begin to calculate the trading price. In addition, plaintiffs sought a declaration that Calpine had a duty, based on the statements in the July 5th letter, to commence the bid solicitation process, and also sought injunctive relief to force Calpine Corporation to instruct the bid solicitation agent to determine the trading price of the 2014 Convertible Notes.
 
On November 18, 2005, Harbert Convertible Fund filed a second amended complaint for breach and anticipatory breach of indenture, which also added the 2014 Convertible Notes trustee as a plaintiff. At a court hearing on November 22,
 
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2005, counsel for Harbert Convertible Fund and the 2014 Convertible Notes trustee again sought an expedited trial, stating that plaintiffs were willing to forego affirmative discovery and could respond to Calpine Corporation’s forthcoming discovery requests promptly. The New York County Supreme Court ordered Harbert Convertible Fund and the 2014 Convertible Notes trustee to provide specified discovery immediately, to respond promptly to any additional discovery demands from Calpine Corporation, and ordered the parties to commence depositions in January. The New York County Supreme Court did not set a firm trial date, but suggested that a trial could occur by early March. Calpine Corporation moved to dismiss the second amended complaint on December 13, 2005. In the meantime, Harbert Convertible Fund and the 2014 Convertible Notes trustee delayed providing any discovery, stating their belief that a bankruptcy filing was imminent that could moot the case or in any event stay it. There has been no activity since the Petition Date.
 
Whitebox Convertible Arbitrage Fund, L.P., et al. v. Calpine Corporation .  Plaintiff Whitebox Convertible Arbitrage Fund, L.P. and seven affiliated funds filed an action in the New York County Supreme Court for breach of contract on October 17, 2004. The factual allegations and legal basis for the claims set forth in that action are nearly identical to those set forth in the Harbert Convertible Fund filings. On October 19, 2005, the Whitebox plaintiffs filed a motion for preliminary injunctive relief, but withdrew the motion on November 7, 2005. Whitebox had informed Calpine Corporation and the New York County Supreme Court that the Trustee was considering intervening in the case and/or filing a similar action for the benefit of all holders of the 2014 Convertible Notes. There has been no activity since the Petition Date.
 
Calpine Corporation v. The Bank of New York, Collateral Trustee for Senior Secured Note Holders, et al .  In September of 2005, Calpine Corporation received a letter from the Collateral Trustee informing Calpine of disagreements purportedly raised by certain holders of First Priority Notes regarding Calpine Corporation’s reinvestment of the proceeds from its recent sale of natural gas assets to Rosetta. As a result of these concerns, the Collateral Trustee informed Calpine Corporation that it would not allow further withdrawals from the gas sale proceeds account until these disagreements were resolved. On September 26, 2005, Calpine Corporation filed a Declaratory Relief Action in the Delaware Court of Chancery against the Collateral Trustee and the First Priority Trustee, seeking a declaration that Calpine Corporation’s past and proposed purchases of natural gas assets were permitted by the indenture for the First Priority Notes and related documents, and also seeking an injunction compelling the Collateral Trustee to release funds requested to be withdrawn.
 
The First Priority Trustee counterclaimed, seeking an order compelling Calpine Corporation to, among other things, (i) pay damages in an amount not less than $365 million plus prejudgment interest either to the First Priority Trustee or into the gas sale proceeds account; (ii) return to the gas sale proceeds account all amounts previously withdrawn from such account and used by Calpine Corporation to purchase natural gas in storage; and (iii) indemnify the First Priority Trustee for all expenses incurred in connection with defending the lawsuit and pursuing counterclaims. In addition, the Second Priority Trustee intervened on behalf of the holders of the Second Priority Notes. Calpine Corporation filed a motion to dismiss the First Priority Trustee’s counterclaims on the grounds that the holders of the First Priority Notes (and the First Priority Trustee on behalf of the holders of the First Priority Notes) had no remaining right under the indenture governing the First Priority Notes to obtain the relief requested because Calpine Corporation had made, and the holders of the First Priority Notes had subsequently declined, an offer to purchase all of the First Priority Notes at par. A bench trial on the above claims was held before the Delaware Court of Chancery on November 11, 2005.
 
Following a one-day bench trial, post-trial briefing and oral argument, the Delaware Chancery Court ruled against Calpine Corporation on November 22, 2005, holding that Calpine’s use of approximately $313 million of gas sale proceeds (including related interest) to purchase certain gas storage inventory violated the indentures governing Calpine’s Second Priority Notes and that use of the proceeds for similar contracts was impermissible. The Chancery Court denied the First Priority Trustee’s counterclaims on the grounds asserted in Calpine Corporation’s motion to dismiss—namely, that the First Priority Trustee had no right to the requested relief under the indenture governing the First Priority Notes because the holders of the First Priority Notes had declined an offer made by Calpine Corporation to purchase all of the First Priority Notes at par. On December 5, 2005, the Chancery Court entered a Final Order and Judgment affording Calpine Corporation until January 22, 2006, to restore to a collateral account $311,782,955.55, plus interest. Calpine Corporation appealed, and the First Priority Trustee and Second Priority Trustee cross-appealed. On December 16, 2005, the Delaware Supreme Court affirmed the Chancery Court’s ruling that Calpine’s use of proceeds was impermissible; reversed the decision that the First Priority Trustee lacked standing to object to such use; and directed the Chancery Court to issue a modified final order in
 
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accordance with the Supreme Court’s decision. An Amended Final Order was entered by the Chancery Court on December 20, 2005. There has been no activity since the Petition Date.
 
See Note 2 for a description of the Chapter 11 cases and CCAA proceedings, including the description of a pending proceeding regarding our motion to reject eight PPAs and related FERC and other court proceedings. See also Note 14 for information concerning several matters with respect to the California power market.
 
In addition, the Company is involved in various other claims and legal actions arising out of the normal course of its business. The Company does not expect that the outcome of these proceedings will have a material adverse effect on its financial position or results of operations.
 
13.    Operating Segments
 
We are first and foremost an electric generating company. In pursuing this business strategy, it was our objective to produce a portion of our fuel consumption requirements from our own natural gas reserves. In July 2005, we sold substantially all of our remaining domestic oil and gas assets to Rosetta. As a result of the sale of substantially all of our oil and gas assets, we now have two reportable segments, “Electric Generation and Marketing” and “Other.” The Electric Generation and Marketing segment includes the development, acquisition, ownership and operation of power production facilities, including hedging, balancing, optimization, and trading activity related to power generation. The Other segment includes the activities of our parts and services businesses and our gas pipeline assets.
 
We evaluate performance based upon several criteria including profits before tax. The financial results for our operating segments have been prepared on a basis consistent with the manner in which our management internally disaggregates financial information for the purposes of assisting in making internal operating decisions.
 
Certain costs related to company-wide functions are allocated to each segment, such as interest expense and interest income, based on a ratio of segment assets to total assets. Due to the integrated nature of the business segments, estimates and judgments have been made in allocating certain revenue and expense items, and reclassifications have been made to prior periods to present the allocation consistently.
 
 	 	Electric
Generation
and Marketing	 	Other	 	Corporate
and
Eliminations	 	Total	 	
For the three months ended June 30, 2006:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total revenue from external customers	 	$	1,579,497	 	$	29,662	 	$	(17,228	)	$	1,591,931	 	
(Loss) income before reorganization items and benefit for taxes	 	 	(168,720	)	 	401	 	 	(27,543	)	 	(195,862	)	
 
 	 	Electric
Generation
and Marketing	 	Other	 	Corporate
and
Eliminations	 	Total	 	
For the three months ended June 30, 2005:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total revenue from external customers	 	$	2,171,948	 	$	82,092	 	$	(55,133	)	$	2,198,907	 	
(Loss) income before benefit for taxes and discontinued operations	 	 	(350,015	)	 	(35,352	)	 	88,358	 	 	(297,009	)	
 
 	 	Electric
Generation
and Marketing	 	Other	 	Corporate
and
Eliminations	 	Total	 	
For the six months ended June 30, 2006:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total revenue from external customers	 	$	2,922,826	 	$	55,156	 	$	(30,416	)	$	2,947,566	 	
Loss before reorganization items, benefit for taxes and cumulative effect of a change in accounting principle	 	 	(392,506	)	 	(600	)	 	(98,114	)	 	(491,220	)	

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 	 	Electric
Generation
and Marketing	 	Other	 	Corporate
and
Eliminations	 	Total	 	
For the six months ended June 30, 2005:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total revenue from external customers	 	$	4,200,340	 	$	153,881	 	$	(109,583	)	$	4,244,638	 	
(Loss) income before benefit for taxes and discontinued operations	 	 	(590,598	)	 	(56,403	)	 	82,607	 	 	(564,394	)	
 
 	 	Electric
Generation
and Marketing	 	Other	 	Corporate
and
Eliminations	 	Total	 	
Total assets:	 	 	 	 	 	 	 	 	 	 	 	 	 	
June 30, 2006	 	$	18,636,400	 	$	296,703	 	$	506,546	 	$	19,439,649	 	
December 31, 2005	 	$	19,380,779	 	$	311,902	 	$	852,116	 	$	20,544,797	 	
 
14.    California Power Market
 
CPUC Proceeding Regarding QF Contract Pricing for Past Periods .  Our QF contracts with PG&E provide that the CPUC has the authority to determine the appropriate utility “avoided cost” to be used to set energy payments by determining the short run avoided cost, or SRAC, energy price formula. In mid-2000, our QF facilities elected the option set forth in Section 390 of the California Public Utilities Code, which provided QFs the right to elect to receive energy payments based on the CalPX market clearing price instead of the SRAC price administratively determined by the CPUC. Having elected such option, our QF facilities were paid based upon the CalPX Price for various periods commencing in the summer of 2000 until January 19, 2001, when the CalPX ceased operating a day-ahead market. The CPUC has conducted proceedings (R.99-11-022) to determine whether the CalPX Price was the appropriate price for the energy component upon which to base payments to QFs which had elected the CalPX-based pricing option. In late 2000, the CPUC Commissioner assigned to the matter issued a proposed decision to the effect that the CalPX Price was the appropriate energy price to pay QFs who selected the pricing option then offered by Section 390, but the CPUC has yet to issue a final decision. Therefore, it is possible that the CPUC could order a payment adjustment based on a different energy price determination.
 
On April 14, 2006, our QFs with existing QF contracts with PG&E executed amendments to, among other matters, adjust the energy price paid and to be paid to QFs and extinguish any potential refund obligation to PG&E for energy payments these QFs received based on the CalPX Price. The effectiveness of our individual amendments to these existing QF contracts is subject, where applicable, to approval of the Committees in our Chapter 11 cases, the project lender(s), the U.S. Bankruptcy Court and the CPUC. If effective, each amendment would authorize PG&E to pay an adjusted energy price under our existing QF contracts prospectively for a number of years as part of the consideration for the extinguishment of the potential for any retroactive refund liability relating to the energy payments based on the CalPX Price. On April 18, 2006, PG&E and the Independent Energy Producers Association filed a joint motion requesting that the CPUC approve the settlement and the individual QF contract amendments, including our existing QF contracts. On June 21, 2006, a proposed decision was issued by the CPUC administrative law judges assigned to the case approving the joint motion. The amendments and the settlement are not effective until the CPUC issues a decision and such decision is deemed final. On July 20, 2006, the CPUC issued a decision approving both the settlement and the individual QF contract amendments. Pursuant to the settlement, both the settlement and the amendments are not effective until the thirty-day appeal period has been exhausted. Therefore, to the extent that no person appeals the CPUC decision approving the settlement or individual QF amendments on or before August 19, 2006, the settlement will be effective as of that date. We are unable to predict at this time whether the July 20, 2006, decision will be appealed and, if so, what effect such appeal may have on the effectiveness of the settlement.
 
California Refund Proceeding .  On August 2, 2000, the California refund proceeding was initiated by a complaint made at the FERC, by SDG&E under Section 206 of the FPA alleging, among other things, that the markets operated by CAISO, and the CalPX, were dysfunctional. FERC established a refund effective period of October 2, 2000, to June 19, 2001 (the “Refund Period”), for sales made into those markets.

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On December 12, 2002, an Administrative Law Judge issued a Certification of Proposed Finding on California Refund Liability (the “December 12 Certification”) making an initial determination of refund liability. On March 26, 2003, FERC issued an order (the “March 26 Order”) adopting many of the findings set forth in the December 12 Certification. In addition, as a result of certain findings by the FERC staff concerning the unreliability or misreporting of certain reported indices for gas prices in California during the Refund Period, FERC ordered that the basis for calculating a party’s potential refund liability be modified by substituting a gas proxy price based upon gas prices in the producing areas plus the tariff transportation rate for the California gas price indices previously adopted in the California refund proceeding. We believe, based on the available information, that any refund liability that may be attributable to us could total approximately $10.1 million (plus interest, if applicable), after taking the appropriate set-offs for outstanding receivables owed by the CalPX and CAISO to Calpine. We believe we have appropriately reserved for the refund liability that by our current analysis would potentially be owed under the refund calculation clarification in the March 26 Order. The final determination of the refund liability and the allocation of payment obligations among the numerous buyers and sellers in the California markets is subject to further FERC proceedings to ascertain the allocation of payment obligations among the numerous buyers and sellers in the California markets.
 
The numerous FERC orders concerning the refund proceeding are pending on appeal before the U.S. Ninth Circuit Court of Appeals. On August 2, 2006, the court issued an opinion on several discrete issues raised in the various appeals. Among other things, the court determined that FERC had properly established the Refund Period as beginning on October 2, 2000, and had properly limited the transactions subject to refund to transactions occurring within the CalPX and CAISO markets. However, the court also found that FERC had erred in not considering (1) whether any tariff violations had occurred prior to October 2, 2000 which might justify imposition of additional remedies, (2) whether refunds should be required for any transactions within the CalPX and CAISO markets for periods longer than 24 hours, and (3) whether certain “exchange transactions” within the CalPX and CAISO markets should be subject to refund. These latter issues were remanded to FERC for its further consideration. At this time, we are unable to predict the timing of the completion of these proceedings or the final refund liability. Thus, the impact on our business is uncertain.
 
Geysers RMR Section 206 Proceeding .  CAISO, EOB, CPUC, PG&E, SDG&E, and Southern California Edison Company, which we refer to collectively as the “Buyers Coalition” filed a complaint on November 2, 2001, at FERC requesting the commencement of a FPA Section 206 proceeding to challenge one component of a number of separate settlements previously reached on the terms and conditions of RMR Contracts with certain generation owners, including GPC, which settlements were also previously approved by FERC. RMR Contracts require the owner of the specific generation unit to provide energy and ancillary services when called upon to do so by the ISO to meet local transmission reliability needs or to manage transmission constraints. The Buyers Coalition asked FERC to find that the availability payments under these RMR Contracts are not just and reasonable. On June 3, 2005, FERC issued an order dismissing the Buyers Coalition’s complaint against all named generation owners, including GPC. On August 2, 2005, FERC issued an order denying requests for rehearing of its order. On September 23, 2005, the Buyers Coalition (with the exclusion of the CAISO) filed a Petition for Review with the U.S. Court of Appeals for the D.C. Circuit, seeking review of FERC’s order dismissing the complaint. On May 18, 2006, FERC filed a motion with the D.C. Circuit Court requesting the court to hold the proceeding in abeyance and to voluntarily remand the case to FERC in order to permit FERC to further consider the issues raised. On June 19, 2006, the D.C. Circuit Court granted FERC’s motion. On July 10, 2006, the Buyers Coalition filed a motion asking FERC to establish hearing procedures in this proceeding. On July 25, 2006, Calpine submitted an answer to the Buyers Coalition motion, urging FERC to uphold its prior decisions rejecting the complaint and terminating the proceedings. FERC has taken no action on remand.
 
Delta RMR Proceeding .  Through our subsidiary Delta Energy Center, LLC, we are party to a recurring, yearly RMR Contract, which the CAISO originally entered into in 2003. When the Delta RMR Contract was first offered by us, several issues about the contract were disputed, including whether the CAISO accepted Delta’s bid for RMR service; whether the CAISO was bound by Delta’s bid price; and whether Delta’s bid price was just and reasonable. The Delta RMR Contract was filed and accepted by FERC effective February 10, 2003, subject to refund. On May 30, 2003, the CAISO, PG&E and Delta entered into a settlement regarding the Delta RMR Contract. Under the terms of this settlement, the parties agreed to interim RMR rates which Delta would collect, subject to refund, from February 10, 2003, forward. The parties agreed to defer further proceedings on the Delta RMR Contract until a similar RMR proceeding involving Mirant Corp. was resolved by FERC.
 
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Under the terms of the settlement, Delta continued to provide services to the CAISO pursuant to the interim RMR rates, terms and conditions. Since the settlement was entered into, Delta and CAISO have entered into RMR Contracts for the years 2003, 2004 and 2005 pursuant to the terms of the settlement.
 
On June 3, 2005, FERC issued a final order in the Mirant Corp. RMR proceeding, resolving that proceeding and triggering the reopening of the settlement. On November 30, 2005, Delta filed revisions to the Delta RMR contract with FERC, proposing to change the method by which RMR rates are calculated for Delta effective January 1, 2006. On January 27, 2006, FERC issued an order accepting the new Delta RMR rates effective January 1, 2006 and consolidated the issues from the settlement with the 2006 RMR case. FERC set the proceeding for hearing, but has suspended hearing procedures pending settlement discussions among the parties with respect to the rates for both the February 10, 2003 through December 31, 2005, period and the calendar year 2006 period. In addition, to resolve credit concerns raised by certain intervening parties, Delta has begun to direct into an escrow account the difference between the previously filed rate and the 2006 rate pending the determination by FERC as to whether Delta is obligated to refund some portion of the rate collected in 2006. We are unable at this time to predict the result of any settlement process or the ultimate ruling by FERC on the rates for Delta’s RMR services for the period between February 10, 2003 and December 31, 2005 or for calendar year 2006.
 
15.    Subsequent Events
 
See Note 2 for a discussion of subsequent events related to our Chapter 11 cases and CCAA proceedings. See Note 7 for a discussion of subsequent events related to the DIP Facility and Debt, Lease and Indenture Covenant Compliance.
 
In July 2006, Mankato Power Plant in Mankato, Minnesota began commercial operations. Accordingly, the construction in progress costs were transferred to the applicable property category, primarily buildings, machinery and equipment in the third quarter of 2006.
 
Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations
 
In addition to historical information, this Report contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. We use words such as “believe,” “intend,” “expect,” “anticipate,” “plan,” “may,” “will” 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. 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: (i) the risks and uncertainties associated with our Chapter 11 cases and CCAA proceedings, including impact on operations; (ii) our ability to attract, retain, and motivate key employees and successfully implement new strategies; (iii) our ability to successfully reorganize and emerge from Chapter 11; (iv) our ability to attract and retain customers and counterparties; (v) our ability to implement our business plan; (vi) financial results that may be volatile and may not reflect historical trends; (vii) our ability to manage liquidity needs and comply with financing obligations; (viii) the direct or indirect effects on our business of our impaired credit, including increased cash collateral requirements; (ix) the expiration or termination of our PPAs and the related results on revenues; (x) potential volatility in earnings and requirements for cash collateral associated with the use of commodity contracts; (xi) price and supply of natural gas; (xii) risks associated with power project development, acquisition and construction activities; (xiii) unscheduled outages of operating plants; (xiv) factors that impact the output of our geothermal resources and generation facilities, including unusual or unexpected steam field well and pipeline maintenance and variables associated with the waste water injection projects that supply added water to the steam reservoir; (xv) quarterly and seasonal fluctuations of our results; (xvi) competition; (xvii) risks associated with marketing and selling power from plants in the evolving energy markets; (xviii) present and possible future claims, litigation and enforcement actions; (xix) effects of the application of laws or regulations, including changes in laws or regulations or the interpretation thereof; and (xx) other risks identified in this Report. You should also carefully review other reports that we file with the SEC, including without limitation our 2005 Form 10-K. We undertake no obligation to update any forward-looking statements, whether as a result of new information, future developments or otherwise.
 
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We file annual, quarterly and other reports, proxy statements and other information with the SEC. You may obtain and copy any document we file with the SEC at the SEC’s public reference room at 100 F Street, NE, Room 1580, Washington, D.C. 20549. You may obtain information on the operation of the SEC’s public reference facilities by calling the SEC at 1-800-SEC-0330. You can request copies of these documents, upon payment of a duplicating fee, by writing to the SEC at its principal office at 100 F Street, NE, Room 1580, Washington, D.C. 20549-1004. The SEC maintains an Internet website at http://www.sec.gov that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. Our SEC filings, including exhibits filed therewith, are accessible through the Internet at that website.
 
Our reports on Forms 10-K, 10-Q and 8-K, and amendments to those reports, are available for download, free of charge, as soon as reasonably practicable after these reports are filed with the SEC, at our website at www.calpine.com. The content of our website is not a part of this Report. You may request a copy of our SEC filings, at no cost to you, by writing or telephoning us at: Calpine Corporation, 50 West San Fernando Street, San Jose, California 95113, attention: Corporate Secretary, telephone: (408) 995-5115. We will not send exhibits to the documents, unless the exhibits are specifically requested and you pay our fee for duplication and delivery.
 
Selected Operating Information
 
 	 	Three Months Ended	 	Six Months Ended	 	
 	 	June 30,	 	June 30,	 	
 	 	2006	 	2005	 	2006	 	2005	 	
 	 	(in thousands, except pricing data)	 	
Power Plants (1) :	 	 	 	 	 	 	 	 	 	 	 	 	 	
Electricity and steam revenues:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Energy	 	$	891,715	 	$	890,294	 	$	1,593,325	 	$	1,796,347	 	
Capacity	 	 	227,056	 	 	269,343	 	 	442,759	 	 	515,405	 	
Thermal and other	 	 	88,708	 	 	112,423	 	 	191,386	 	 	217,004	 	
Total electricity and steam revenues	 	 	1,207,479	 	 	1,272,060	 	 	2,227,470	 	 	2,528,756	 	
MWh produced	 	 	18,961	 	 	19,068	 	 	34,440	 	 	38,284	 	
Average electric price per MWh generated (2)	 	$	63.68	 	$	66.71	 	$	64.68	 	$	66.05	 	
____________
(1)	From continuing operations only. Discontinued operations are excluded.	
(2)	Excluding the effects of hedging, balancing and optimization activities related to our generating assets.	
 
Set forth above is certain selected operating information for our power plants for which results are consolidated in our statements of operations. Electricity revenue is composed of fixed capacity payments, which are not related to production, and variable energy payments, which are related to production. Capacity revenues include, besides traditional capacity payments, other revenues such as those from RMR Contracts and ancillary service revenues. The information set forth under thermal and other revenue consists of host steam sales and other thermal revenue.
 
Overview
 
Our core business and primary source of revenue is the generation and delivery of electric power. We provide power to our U.S. and Canadian customers through the integrated development, construction or acquisition, and operation of efficient and environmentally friendly electric power plants fueled primarily by natural gas and, to a much lesser degree, by geothermal resources. We protect and enhance the value of our electric assets and gas positions with a sophisticated risk management organization. We control certain of our costs by producing certain of the combustion turbine replacement parts that we use at our power plants, and we generate revenue by providing combustion turbine parts to third parties, although we are evaluating these activities in light of our Chapter 11 restructuring.

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Currently, the Calpine Debtors continue to conduct business in the ordinary course as debtors-in-possession under the protection of the Bankruptcy Courts. Accordingly, we are devoting a substantial amount of our resources to our Chapter 11 restructuring, which includes developing a plan of reorganization and, developing a new business plan, beginning with a top-to-bottom review of our power assets, business units and markets where we are active, as well as resolving claims disputes and contingencies and determining enterprise value and capital structure. In addition to financial restructuring activities, we are preparing to operate after our emergence from Chapter 11 and from the CCAA proceedings.
 
Our historical financial performance is likely not indicative of our future performance during the pendency of the Chapter 11 cases and CCAA proceedings or beyond because, among other things: (1) we generally will not accrue interest expense on all debt classified as LSTC during the pendency of the Chapter 11 cases; (2) we expect to dispose of or restructure agreements relating to certain plants that do not generate positive cash flow or which are considered non-strategic; (3) we have begun to implement overhead reduction programs, including staff reductions and office closures; (4) we have been able to or are seeking to reject certain unprofitable or burdensome contracts and leases, and we may further seek to reject contracts and leases in the future; (5) we have been able to or are seeking to assume certain beneficial contracts and leases, and we may further seek to assume contracts and leases in the future pursuant to the time frames set forth in the Bankruptcy Code; and (6) we have deconsolidated certain Canadian and other foreign subsidiaries as a result of the CCAA proceedings and currently account for our investment in such entities on a cost basis; upon restructuring we may again consolidate such entities. We expect to incur substantial reorganization expenses and could record additional impairment charges, which may be at different levels than in 2005. In addition, as part of our emergence from Chapter 11, we may be required to adopt fresh start accounting in a future period. If fresh start accounting is applicable, our assets and liabilities will be recorded at fair value as of the fresh start reporting date. The fair value of our assets and liabilities as of such fresh start reporting date may differ materially from the recorded values of assets and liabilities on our consolidated balance sheets. In addition, if fresh start accounting is required, our financial results after the application of fresh start accounting may be different from historical trends.
 
Among other things, we arranged, and the U.S. Bankruptcy Court approved, our DIP Facility, including related cash collateral and adequate assurance motions which has allowed our business activities to continue to function. We have also sought and obtained U.S. Bankruptcy Court approval through our “first day” and subsequent motions to continue to pay critical vendors, meet our payroll pre-petition and post-petition obligations, maintain our cash management systems, collateralize our gas supply contracts, enter into and collateralize trading contracts, pay our taxes, continue to provide employee benefits, maintain our insurance programs and implement an employee severance program, which has allowed us to continue to operate the existing business in the ordinary course. In addition, the U.S. Bankruptcy Court has approved certain trading notification and transfer procedures designed to allow us to restrict trading in our common stock (and related securities) which could negatively impact our accrued NOLs and other tax attributes, and granted us extensions of time to file and seek approval of a plan of reorganization. Additionally, we have established a systematic and comprehensive lease and executory contract review process to determine which leases and contracts we should assume and which we should reject in the Chapter 11 process. In addition, the Canadian Debtors have obtained protection under the CCAA in Canada, including obtaining a stay that has been extended through October 20, 2006. See Note 2 of the Notes to Consolidated Condensed Financial Statements for additional information regarding our Chapter 11 cases and the CCAA proceedings.
 
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Comparative Table – Quarter to Date Results of Operations
 
In the comparative tables below, increases in revenue/income or decreases in expense (favorable variances) are shown without brackets while decreases in revenue/income or increases in expense (unfavorable variances) are shown with brackets. Prior year amounts reflect reclassifications for discontinued operations. Amounts are shown in thousands.
 
 	 	Three Months Ended June 30,	 	 	 	
 	 	2006	 	2005	 	$ Change	 	% Change	 	
 	 	(unaudited)	 	 	 	 	 	
Revenue:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Electricity and steam revenue	 	$	1,207,479	 	$	1,272,060	 	$	(64,581	)	 	(5)%	 	
Sales of purchased power and gas for hedging and optimization	 	 	341,815	 	 	889,767	 	 	(547,952	)	 	(62)%	 	
Mark-to-market activities, net	 	 	23,465	 	 	2,874	 	 	20,591	 	 	#	 	
Other revenue	 	 	19,172	 	 	34,206	 	 	(15,034	)	 	(44)%	 	
Total revenue	 	 	1,591,931	 	 	2,198,907	 	 	(606,976	)	 	(28)%	 	
Cost of revenue:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Plant operating expense	 	 	194,622	 	 	196,994	 	 	2,372	 	 	1%	 	
Royalty expense	 	 	4,781	 	 	8,081	 	 	3,300	 	 	41%	 	
Transmission purchase expense	 	 	17,328	 	 	19,807	 	 	2,479	 	 	13%	 	
Purchased power and gas expense for hedging and optimization	 	 	312,830	 	 	821,219	 	 	508,389	 	 	62%	 	
Fuel expense	 	 	700,234	 	 	891,946	 	 	191,712	 	 	21%	 	
Depreciation and amortization expense	 	 	113,964	 	 	123,601	 	 	9,637	 	 	8%	 	
Operating plant impairments	 	 	2,847	 	 	—	 	 	(2,847	)	 	—	 	
Operating lease expense	 	 	19,998	 	 	25,528	 	 	5,530	 	 	22%	 	
Other cost of revenue	 	 	19,259	 	 	33,273	 	 	14,014	 	 	42%	 	
Total cost of revenue	 	 	1,385,863	 	 	2,120,449	 	 	734,586	 	 	35%	 	
Gross profit	 	 	206,068	 	 	78,458	 	 	127,610	 	 	#	 	
(Income) from unconsolidated investments	 	 	—	 	 	(3,268	)	 	(3,268	)	 	#	 	
Equipment, development project and other impairments	 	 	62,076	 	 	46,968	 	 	(15,108	)	 	(32)%	 	
Long-term service cancellation charge	 	 	—	 	 	33,892	 	 	33,892	 	 	#	 	
Project development expense	 	 	3,840	 	 	5,853	 	 	2,013	 	 	34%	 	
Research and development expense	 	 	3,267	 	 	5,126	 	 	1,859	 	 	36%	 	
Sales, general and administrative expense	 	 	47,377	 	 	68,519	 	 	21,142	 	 	31%	 	
Income (loss) from operations	 	 	89,508	 	 	(78,632	)	 	168,140	 	 	#	 	
Interest expense	 	 	299,586	 	 	328,387	 	 	28,801	 	 	9%	 	
Interest (income)	 	 	(19,319	)	 	(16,793	)	 	2,526	 	 	15%	 	
Minority interest expense	 	 	1,210	 	 	10,172	 	 	8,962	 	 	88%	 	
Loss (income) from repurchase of various issuances of debt	 	 	18,131	 	 	(129,154	)	 	(147,285	)	 	#	 	
Other (income) expense, net	 	 	(14,238	)	 	25,765	 	 	40,003	 	 	#	 	
Loss before reorganization items, benefit for income taxes and discontinued operations	 	 	(195,862	)	 	(297,009	)	 	101,147	 	 	34%	 	
Reorganization items	 	 	655,106	 	 	—	 	 	(655,106	)	 	—	 	
Loss before benefit for income taxes and discontinued operations	 	 	(850,968	)	 	(297,009	)	 	(553,959	)	 	#	 	
(Benefit) for income taxes	 	 	(33,209	)	 	(88,827	)	 	(55,618	)	 	(63)%	 	
Loss before discontinued operations	 	 	(817,759	)	 	(208,182	)	 	(609,577	)	 	#	 	
Discontinued operations, net of tax benefit of $— and $44,602	 	 	—	 	 	(90,276	)	 	90,276	 	 	#	 	
Net loss	 	$	(817,759	)	$	(298,458	)	$	(519,301	)	 	#	 	
____________
#	Variance of 100% or greater	
 
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Three Months Ended June 30, 2006, Compared to Three Months Ended June 30, 2005
 
Set forth below is a discussion of our results of operations for the three months ended June 30, 2006, as compared to the same period a year ago. Most of our Canadian and other foreign subsidiaries were deconsolidated effective December 31, 2005, as a result of the filing of the CCAA proceedings. Although not material to the financial statements taken as a whole, period to period comparisons are impacted. Accordingly, this Report principally describes the Chapter 11 cases and only describes the CCAA proceedings where they have a material effect on our operations or where such information provides necessary background information.
 
Total revenue decreased by 28% during the three months ended June 30, 2006, over the same period a year ago primarily due to decreases in electricity and steam revenue and sales of purchased power and gas for hedging and optimization. These decreases were partially offset by an increase in net mark-to-market activities, as further described below.
 
Electricity and steam revenue declined by approximately 5% due primarily to a 5% reduction in average electric prices before the effects of hedging, balancing and optimization. MWh generated were relatively unchanged from the same period a year ago. However, the average baseload capacity factor declined to 35.6% from 39.9% in the same period a year ago as our average baseload capacity increased by 12% or 2,570 MW as new plants achieved commercial operations.
 
The decline in sales of purchased power and gas for hedging and optimization resulted primarily from lower electricity and natural gas prices together with a reduction in fleet capacity factors which thereby reduced the amount of hedging and optimization activity during the three months ended June 30, 2006, compared to the same period a year ago. Additionally, reduced availability of credit and the termination or disruption of certain customer relationships following our Chapter 11 and CCAA filings further limited our ability to conduct hedging and optimization activities. Correspondingly, purchased power and gas expense for hedging and optimization declined for similar reasons. As a result, the gross profit on these sales and purchases declined by $39.6 million period-to-period.
 
Net mark-to-market activities was favorable for the three months ended June 30, 2006, compared to the same period a year ago primarily due to the impact of lower gas prices on our short mark-to-market gas position.
 
Total cost of revenue decreased during the three months ended June 30, 2006 over the same period a year ago primarily due to decreases in purchased power and gas expense for hedging and optimization (see discussion above), fuel expense and other cost of revenue, which were partially offset by an increase in operating plant impairments, as discussed below.
 
The decline in fuel expense resulted primarily from a 21% decrease in average realized fuel costs per MMBtu before the effects of hedging, balancing and optimization. MWh generated were relatively unchanged from the same period a year ago.
 
Depreciation expense declined by $9.6 million for the three months ended June 30, 2006, as increases related to newly commissioned power plants, the purchase of The Geysers Assets and the consolidation of the Acadia project were more than offset by the effects of deconsolidating most of our Canadian and other foreign subsidiaries, and lower depreciation resulting from the impairment of certain of our operating power plants in the three months ended December 31, 2005.
 
During the three months ended June 30, 2006, we recorded a non-cash impairment charge of $2.8 million for leasehold improvement costs related to a power plant for which a disposal is deemed likely. No operating plant or equipment impairments were recorded during the three months ended June 30, 2005.
 
The decline in other cost of revenue resulted primarily from lower costs associated with the deconsolidation of TTS and non-recurrence of prior period transaction costs associated with a derivative contract at our Deer Park facility.

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Gross profit improved by $127.6 million in the three months ended June 30, 2006, primarily because all-in realized spark spread increased by $78.4 million driven by lower gas prices; net mark-to-market activities was favorable by $20.6 million; depreciation expense was favorable by $9.6 million; and operating lease expense was favorable by $5.5 million due primarily to the purchase of The Geysers Assets and the termination of the operating leases for those facilities.
 
In the three months ended June 30, 2006, we recorded impairment charges of $62.1 million primarily related to turbine-generator equipment deemed likely to be disposed of by sale or auction in the second half of 2006. The $47.0 million charge in the comparable period in 2005 related to impairments on the Lone Oak, Towantic, Sherry and Hillabee development projects.
 
During the three months ended June 30, 2005, we recorded charges of $33.1 million related to the cancellation of nine long-term service agreements with General Electric as part of a restructuring of the service relationship.
 
Interest expense decreased during the three months ended June 30, 2006 over the same period a year ago primarily due to discontinuing the accrual of interest expense related to debt instruments reclassified to LSTC, other than certain debt classified as LSTC on which interest was accrued in accordance with U.S. Bankruptcy Court orders, primarily the Second Priority Debt on which we continued to pay interest through June 30, 2006, pursuant to the Cash Collateral Order. This favorable variance was partially offset by less capitalized interest related to certain power plants entering commercial operations and project development activities winding down, prior year interest expense reclassified to discontinued operations, higher interest rates on floating rate debt, and interest on borrowings under the DIP Facility in the current period.
 
During the three months ended June 30, 2006, we recognized a loss of $18.1 on the repurchase of the First Priority Notes. During the comparable period in the prior year, we recorded an aggregate gain of $129.2 million primarily related to the repurchase of $479.8 million principal amount of senior notes.
 
The net other income for the three months ended June 30, 2006 was primarily due to a $6.7 million gain on the sale of certain auxiliary boilers, a $3.8 million gain on the sale of emission reduction credits and nitrate allowances and foreign exchange transaction gains of $4.0 million. During the comparable period in the prior year, we recorded net other expense primarily due to an impairment charge of $18.5 million related to our investment in Grays Ferry and the write-off of $5.8 million of unamortized deferred financing costs in connection with the refinancing of the Metcalf project debt.
 
Reorganization items of $655.1 million were recorded during the three months ended June 30, 2006, while no similar costs were incurred in the same period a year ago. Reorganization items represent direct and incremental costs related to our Chapter 11 filings, such as professional fees, pre-petition liability claim adjustments and losses that are probable and can be estimated related to terminated contracts. The increase in reorganization items consisted primarily of the following:
 	•	The U.S. Debtors repudiated certain gas transportation and power transmission contracts. We believe that any claims resulting from the repudiation of these contracts will be treated as pre-petition general unsecured claims. Accordingly, we recorded a non-cash charge of $308.8 million as our current estimate of the expected allowed claim related to the repudiation of these contracts.	
 	•	We closed the transaction for the rejection of certain of our leases related to the Rumford and Tiverton power plants. In connection with the lease rejections, we recorded a non-cash charge of $234.6 million which includes our current estimate of the expected allowed claim related to the lease rejections, the write-off of prepaid lease expense and certain fees and expenses related to the transaction.	
 	•	We recorded $50.0 million of additional reorganization expense related to increases in certain LSTC items denominated in foreign currencies and governed by foreign law.	
 	•	We incurred $40.1 million in professional service fees for legal, financial advisory, valuation and administrative services related to our Chapter 11 cases.	

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The tax benefit on pre-tax loss was unfavorable by $55.6 million in the three months ended June 30, 2006, compared to prior year due primarily to the establishment of additional valuation allowances on deferred tax assets.
 
Discontinued operations, net of tax was favorable by $90.3 million due to the non-recurrence of losses in 2005 driven by impairment charges on power plants held for sale at June 30, 2005, and subsequently disposed of in 2005.
 
Comparative Table – Year to Date Results of Operations
 
In the comparative tables below, increases in revenue/income or decreases in expense (favorable variances) are shown without brackets while decreases in revenue/income or increases in expense (unfavorable variances) are shown with brackets. Prior year amounts reflect reclassifications for discontinued operations. Amounts are shown in thousands.
 
 	 	Six Months Ended June 30,	 	 	 	
 	 	2006	 	2005	 	$ Change	 	% Change	 	
 	 	(unaudited)	 	 	 	 	 	
Revenue:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Electricity and steam revenue	 	$	2,227,470	 	$	2,528,756	 	$	(301,286	)	 	(12)%	 	
Sales of purchased power and gas for hedging and optimization	 	 	618,160	 	 	1,657,472	 	 	(1,039,312	)	 	(63)%	 	
Mark-to-market activities, net	 	 	59,690	 	 	(657	)	 	60,347	 	 	#	 	
Other revenue	 	 	42,246	 	 	59,067	 	 	(16,821	)	 	(28)%	 	
Total revenue	 	 	2,947,566	 	 	4,244,638	 	 	(1,297,072	)	 	(31)%	 	
Cost of revenue:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Plant operating expense	 	 	345,325	 	 	375,098	 	 	29,773	 	 	8%	 	
Royalty expense	 	 	11,260	 	 	18,360	 	 	7,100	 	 	39%	 	
Transmission purchase expense	 	 	38,005	 	 	40,681	 	 	2,676	 	 	7%	 	
Purchased power and gas expense for hedging and optimization	 	 	561,099	 	 	1,515,673	 	 	954,574	 	 	63%	 	
Fuel expense	 	 	1,368,409	 	 	1,768,745	 	 	400,336	 	 	23%	 	
Depreciation and amortization expense	 	 	229,073	 	 	240,334	 	 	11,261	 	 	5%	 	
Operating plant impairments	 	 	52,500	 	 	—	 	 	(52,500	)	 	—	 	
Operating lease expense	 	 	41,598	 	 	50,305	 	 	8,707	 	 	17%	 	
Other cost of revenue	 	 	39,201	 	 	73,245	 	 	34,044	 	 	46%	 	
Total cost of revenue	 	 	2,686,470	 	 	4,082,441	 	 	1,395,971	 	 	34%	 	
Gross profit	 	 	261,096	 	 	162,197	 	 	98,899	 	 	61%	 	
(Income) from unconsolidated investments	 	 	—	 	 	(9,260	)	 	(9,260	)	 	#	 	
Equipment, development project and other impairments	 	 	67,631	 	 	46,896	 	 	(20,735	)	 	(44)%	 	
Long-term service cancellation charge	 	 	—	 	 	33,892	 	 	33,892	 	 	#	 	
Project development expense	 	 	8,096	 	 	14,573	 	 	6,477	 	 	44%	 	
Research and development expense	 	 	6,994	 	 	12,159	 	 	5,165	 	 	42%	 	
Sales, general and administrative expense	 	 	98,323	 	 	121,725	 	 	23,402	 	 	19%	 	
Income (loss) from operations	 	 	80,052	 	 	(57,788	)	 	137,840	 	 	#	 	
Interest expense	 	 	591,852	 	 	646,388	 	 	54,536	 	 	8%	 	
Interest (income)	 	 	(39,524	)	 	(30,778	)	 	8,746	 	 	28%	 	
Minority interest expense	 	 	2,667	 	 	20,786	 	 	18,119	 	 	87%	 	
Loss (income) from repurchase of various issuances of debt	 	 	18,131	 	 	(150,926	)	 	(169,057	)	 	#	 	
Other (income) expense, net	 	 	(1,854	)	 	21,136	 	 	22,990	 	 	#	 	
Loss before reorganization items, benefit for income taxes, discontinued operations and cumulative effect of a change in accounting principle	 	 	(491,220	)	 	(564,394	)	 	73,174	 	 	13%	 	
Reorganization items	 	 	953,321	 	 	—	 	 	(953,321	)	 	—	 	
Loss before benefit for income taxes, discontinued operations and cumulative effect of a change in accounting principle	 	 	(1,444,541	)	 	(564,394	)	 	(880,147	)	 	#	 	
(Benefit) for income taxes	 	 	(36,834	)	 	(185,353	)	 	(148,519	)	 	(80)%	 	
Loss before discontinued operations and cumulative effect of a change in accounting principle	 	 	(1,407,707	)	 	(379,041	)	 	(1,028,666	)	 	#	 	
Discontinued operations, net of tax benefit of $— and $32,885	 	 	—	 	 	(88,148	)	 	88,148	 	 	#	 	
Cumulative effect of a change in accounting principle, net of tax provision of $312, and $—	 	 	505	 	 	—	 	 	505	 	 	—	 	
Net loss	 	$	(1,407,202	)	$	(467,189	)	$	(940,013	)	 	#	 	
____________
#	Variance of 100% or greater	
 
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Six Months Ended June 30, 2006, Compared to Six Months Ended June 30, 2005
 
Set forth below is a discussion of our results of operations for the six months ended June 30, 2006, as compared to the same period a year ago. Most of our Canadian and other foreign subsidiaries were deconsolidated effective December 31, 2005, as a result of the filing of the CCAA proceedings. Although not material to the financial statements taken as a whole, period to period comparisons are impacted. Accordingly, this Report principally describes the Chapter 11 cases and only describes the CCAA proceedings where they have a material effect on our operations or where such information provides necessary background information.
 
Total revenue decreased by 31% during the three months ended June 30, 2006 over the same period a year ago primarily due to decreases in electricity and steam revenue and sales of purchased power and gas for hedging and optimization. These decreases were partially offset by an increase in net mark-to-market activities, as further described below.
 
Electricity and steam revenue declined by approximately 12% due primarily to a 10% reduction in MWh generated and a 2% reduction in average electric prices before the effects of hedging, balancing and optimization. The decrease in generation reflected soft demand in the first quarter of 2006 as a result of strong hydroelectric production in the Northwest and mild weather in general in most of our markets. Also, the average baseload capacity factor declined to 32.7% from 40.9% in the same period a year ago as our average baseload capacity increased by 13% or 2,770 MW as new plants achieved commercial operations.
 
The decline in sales of purchased power and gas for hedging and optimization resulted primarily from lower electricity and natural gas prices together with a reduction in fleet capacity factors, partly as a result of soft demand in the first quarter of 2006, which thereby reduced the amount of hedging and optimization activity during the six months ended June 30, 2006, compared to the same period a year ago. Additionally, reduced availability of credit and the termination or disruption of certain customer relationships following our Chapter 11 and CCAA filings further limited our ability to conduct hedging and optimization activities. Correspondingly, purchased power and gas expense for hedging and optimization declined for similar reasons. As a result, the gross profit on these sales and purchases declined by $84.7 million period-to-period.
 
Net mark-to-market activities was favorable for the six months ended June 30, 2006, compared to the same period a year ago primarily due to the impact of lower gas prices on our short mark-to-market gas position.
 
Total cost of revenue decreased during the six months ended June 30, 2006, over the same period a year ago primarily due to decreases in purchased power and gas expense for hedging and optimization (see discussion above), fuel expense and other cost of revenue, which were partially offset by an increase in operating plant impairments, as discussed below.
 
The decline in fuel expense resulted primarily from a 13% decrease in average realized fuel costs per MMBtu before the effects of hedging, balancing and optimization. Also, MWh generated declined by 10% from the same period a year ago.
 
Depreciation expense declined by $11.3 million for the six months ended June 30, 2006, as increases related to newly commissioned power plants, the purchase of The Geysers Assets and the consolidation of the Acadia project were more than offset by the effects of deconsolidating most of our Canadian and other foreign subsidiaries, and lower depreciation resulting from the impairment of certain of our operating power plants in the three months ended December 31, 2005.
 
During the six months ended June 30, 2006, we recorded non-cash impairment charges of $52.5 million primarily related to the Fox Energy Center for which a near-term sale is likely. No operating plant impairments were recorded during the six months ended June 30, 2005.
 
The decline in other cost of revenue resulted primarily from lower costs associated with the deconsolidation of TTS and non-recurrence of prior period transaction costs associated with a derivative contract at our Deer Park facility.

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Gross profit improved by $98.9 million in the six months ended June 30, 2006, primarily because net mark-to-market activity was favorable by $60.3 million, plant operating expense was favorable by $29.8 million, depreciation expense was favorable by $11.3 million, operating lease expense was favorable by $8.7 million due primarily to the purchase of The Geysers Assets and termination of the operating lease for those facilities, royalty expense was favorable by $7.1 million and all-in realized spark spread was favorable by $3.1 million.
 
In the six months ended June 30, 2006, we recorded impairment charges of $67.6 million related primarily to turbine-generator equipment deemed likely to be disposed of by sale or auction in the second half of 2006. The $46.9 million charge in the comparable period in 2005 related to impairments on the Lone Oak, Towantic, Sherry and Hillabee development projects.
 
Interest expense decreased during the six months ended June 30, 2006 over the same period a year ago primarily due to discontinuing the accrual of interest expense related to debt instruments reclassified to LSTC, other than certain debt classified as LSTC on which interest was accrued in accordance with U.S. Bankruptcy Court orders, primarily the Second Priority Debt on which we continued to pay interest through June 30, 2006, pursuant to the Cash Collateral Order. This favorable variance was partially offset by less capitalized interest related to certain power plants entering commercial operations and project development activities winding down, prior year interest expense reclassified to discontinued operations, higher interest rates on floating rate debt, and interest on borrowings under the DIP Facility in the current period.
 
During the six months ended June 30, 2006, we recognized a loss of $18.1 on the repurchase of the First Priority Notes. During the comparable period in the prior year, we recorded an aggregate gain of $150.9 million primarily related to the repurchase of $560.4 million principal amount of senior notes.
 
Reorganization items of $953.3 million were recorded during the six months ended June 30, 2006, while no similar costs were incurred in the same period a year ago. Reorganization items represent direct and incremental costs related to our Chapter 11 filings, such as professional fees, pre-petition liability claim adjustments and losses that are probable and can be estimated related to terminated contracts. The increase in reorganization items consisted primarily of the following:
 	•	On January 16, 2006, CES-Canada repudiated its tolling agreement with Calgary Energy Centre. Calpine Corporation had guaranteed CES-Canada’s performance under the tolling agreement. We recorded a non-cash charge of $232.5 million, which represents the estimated out-of-money value of the contract to CES-Canada on the repudiation date and the expected allowed claim from Calgary Energy Centre to Calpine Corporation under the guarantee.	
 	•	The U.S. Debtors repudiated certain gas transportation and power transmission contracts in the quarter ended June 30, 2006. We believe that any claims resulting from the repudiation of these contracts will be treated as pre-petition general unsecured claims. Accordingly, we recorded a non-cash charge of $308.8 million as our current estimate of the expected allowed claim related to the repudiation of these contracts.	
 	•	We closed the transaction for the rejection of certain of our leases related to the Rumford and Tiverton power plants. In connection with the lease rejections, we recorded a non-cash charge of $234.6 million which includes our current estimate of the expected allowed claim related to the lease rejections, the write-off of prepaid lease expense and certain fees and expenses related to the transaction.	
 	•	We recorded $43.4 million of additional reorganization expense related to increases in certain LSTC items denominated in foreign currencies and governed by foreign law.	
 	•	We incurred $68.0 million in professional service fees for legal, financial advisory, valuation and administrative services related to our Chapter 11 cases.	
 	•	We incurred $29.1 million in origination fees and expenses related to our DIP Facility.	

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The tax benefit on pre-tax loss was unfavorable by $148.5 million in the six months ended June 30, 2006, compared to prior year, despite a larger pre-tax loss in 2006, due primarily to the establishment of additional valuation allowances on deferred tax assets.
 
Discontinued operations, net of tax was favorable by $88.1 million due to the non-recurrence of losses in 2005 driven by impairment charges on power plants held for sale at June 30, 2005, and subsequently disposed of in 2005.
 
Performance Metrics
 
In understanding our business, we believe that certain non-GAAP operating performance metrics are particularly important. These are described below:
 	•	MWh generated .  We generate power that we sell to third parties. These sales are recorded as E&S revenue. The volume in MWh is a direct indicator of our level of electricity generation activity.	
 	•	Average availability and average baseload capacity factor .  Availability represents the percent of total hours during the period that our plants were available to run after taking into account the downtime associated with both scheduled and unscheduled outages. The baseload capacity factor is calculated by dividing (a) total MWh generated by our power plants (excluding peakers) by the product of multiplying (b) the weighted average MW in operation during the period by (c) the total hours in the period. The average baseload capacity factor is thus a measure of total actual generation as a percent of total potential generation. If we elect not to generate during periods when electricity pricing is too low or gas prices too high to operate profitably, the baseload capacity factor will reflect that decision as well as both scheduled and unscheduled outages due to maintenance and repair requirements.	
 	•	Average Heat Rate for gas-fired fleet of power plants expressed in Btus of fuel consumed per KWh generated .  We calculate the average Heat Rate for our gas-fired power plants (excluding peakers) by dividing (a) fuel consumed in Btu by (b) KWh generated. The resultant Heat Rate is a measure of fuel efficiency, so the lower the Heat Rate, the lower our cost of generation. We also calculate a “steam-adjusted” Heat Rate, in which we adjust the fuel consumption in Btu down by the equivalent heat content in steam or other thermal energy exported to a third party, such as to steam hosts for our cogeneration facilities.	
 	•	Average all-in realized electric price expressed in dollars per MWh generated .  Our risk management and optimization activities are integral to our power generation business and directly impact our total realized revenues from generation. Accordingly, we calculate the all-in realized electric price per MWh generated by dividing (a) adjusted E&S revenue, which includes capacity revenues, energy revenues, thermal revenues, the spread on sales of purchased electricity for hedging, balancing, and optimization activity and generating revenue recorded in mark-to-market activities, net, by (b) total generated MWh in the period.	
 	•	Average cost of natural gas expressed in dollars per MMBtu of fuel consumed .  Our risk management and optimization activities related to fuel procurement directly impact our total fuel expense. The fuel costs for our gas-fired power plants are a function of the price we pay for fuel purchased and the results of the fuel hedging, balancing, and optimization activities by CES. Accordingly, we calculate the cost of natural gas per MMBtu of fuel consumed in our power plants by dividing (a) adjusted fuel expense, which includes the cost of fuel consumed by our plants (adding back cost of inter-company gas pipeline costs, which is eliminated in consolidation), the spread on sales of purchased gas for hedging, balancing, and optimization activity, and fuel expense related to generation recorded in mark-to-market activities, net by (b) the heat content in millions of Btu of the fuel we consumed in our power plants for the period.	
 	•	Average spark spread expressed in dollars per MWh generated .  Our risk management activities focus on managing the spark spread for our portfolio of power plants, the spread between the sales price for electricity	
 
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generated and the cost of fuel. We calculate the spark spread per MWh generated by subtracting (a) adjusted fuel expense from (b) adjusted E&S revenue and dividing the difference by (c) total generated MWh in the period.
 	•	Average plant operating expense per MWh .  To assess trends in electric power plant operating expense or POX per MWh, we divide POX by actual MWh.	
 
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The table below shows the operating performance metrics for continuing operations discussed above.
 
 	 	Three Months Ended June 30,	 	Six Months Ended June 30,	 	
 	 	2006	 	2005	 	2006	 	2005	 	
 	 	(in thousands except hours in period, percentages,
Heat Rate, price and cost information)	 	
Operating Performance Metrics:	 	 	 	 	 	 	 	 	 	 	 	 	 	
MWh generated	 	 	18,961	 	 	19,068	 	 	34,440	 	 	38,284	 	
Average availability	 	 	90.4	%	 	89.2	%	 	91.1	%	 	89.4	%	
Average baseload capacity factor:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Average total MW in operation	 	 	26,983	 	 	24,399	 	 	26,946	 	 	24,162	 	
Less: Average MW of pure peakers	 	 	2,965	 	 	2,951	 	 	2,965	 	 	2,951	 	
Average baseload MW in operation	 	 	24,018	 	 	21,448	 	 	23,981	 	 	21,211	 	
Hours in the period	 	 	2,184	 	 	2,184	 	 	4,344	 	 	4,344	 	
Potential baseload generation (MWh)	 	 	52,455	 	 	46,842	 	 	104,173	 	 	92,141	 	
Actual total generation (MWh)	 	 	18,961	 	 	19,068	 	 	34,440	 	 	38,284	 	
Less: Actual pure peakers’ generation (MWh)	 	 	278	 	 	371	 	 	364	 	 	600	 	
Actual baseload generation (MWh)	 	 	18,683	 	 	18,697	 	 	34,076	 	 	37,684	 	
Average baseload capacity factor	 	 	35.6	%	 	39.9	%	 	32.7	%	 	40.9	%	
Average Heat Rate for gas-fired power plants (excluding peakers)(Btu’s/KWh):	 	 	 	 	 	 	 	 	 	 	 	 	 	
Not steam adjusted	 	 	8,551	 	 	8,658	 	 	8,684	 	 	8,591	 	
Steam adjusted	 	 	7,275	 	 	7,310	 	 	7,253	 	 	7,235	 	
Average all-in realized electric price:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Electricity and steam revenue	 	$	1,207,479	 	$	1,272,060	 	$	2,227,470	 	$	2,528,756	 	
Spread on sales of purchased power for hedging and optimization	 	 	75,943	 	 	97,710	 	 	60,833	 	 	163,924	 	
Revenue related to power generation in mark-to-market activity, net	 	 	42,991	 	 	74,514	 	 	86,172	 	 	74,514	 	
Adjusted electricity and steam revenue	 	$	1,326,413	 	$	1,444,284	 	$	2,374,475	 	$	2,767,194	 	
MWh generated	 	 	18,961	 	 	19,068	 	 	34,440	 	 	38,284	 	
Average all-in realized electric price per MWh	 	$	69.95	 	$	75.74	 	$	68.95	 	$	72.28	 	
Average cost of natural gas:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Fuel expense	 	$	700,234	 	$	891,946	 	$	1,368,409	 	$	1,768,745	 	
Fuel cost elimination	 	 	2,980	 	 	1,700	 	 	6,026	 	 	4,935	 	
Spread on sales of purchased gas for hedging and optimization	 	 	46,957	 	 	29,162	 	 	3,772	 	 	22,125	 	
Fuel expense related to power generation in mark-to-market activity, net	 	 	30,893	 	 	54,489	 	 	76,298	 	 	54,489	 	
Adjusted fuel expense	 	$	781,064	 	$	977,297	 	$	1,454,505	 	$	1,850,294	 	
MMBtu of fuel consumed by generating plants	 	 	127,905	 	 	129,577	 	 	230,846	 	 	260,656	 	
Average cost of natural gas per MMBtu	 	$	6.11	 	$	7.54	 	$	6.30	 	$	7.10	 	
MWh generated	 	 	18,961	 	 	19,068	 	 	34,440	 	 	38,284	 	
Average cost of adjusted fuel expense per MWh	 	$	41.19	 	$	51.25	 	$	42.23	 	$	48.33	 	
Average spark spread:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Adjusted electricity and steam revenue	 	$	1,326,413	 	$	1,444,284	 	$	2,374,475	 	$	2,767,194	 	
Less: Adjusted fuel expense	 	 	781,064	 	$	977,297	 	$	1,454,505	 	$	1,850,294	 	
Spark spread	 	$	545,349	 	$	466,987	 	$	919,970	 	$	916,900	 	
MWh generated	 	 	18,961	 	 	19,068	 	 	34,440	 	 	38,284	 	
Average spark spread per MWh	 	$	28.76	 	$	24.49	 	$	26.71	 	$	23.95	 	
Average plant operating expense (POX) per actual MWh:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Plant operating expense (POX)	 	$	194,622	 	$	196,994	 	$	345,325	 	$	375,098	 	
POX per actual MWh	 	$	10.26	 	$	10.33	 	$	10.03	 	$	9.80	 	

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Liquidity and Capital Resources
 
Currently, the Calpine Debtors continue to conduct business in the ordinary course as debtors-in-possession under the protection of the Bankruptcy Courts while a plan or plans of reorganization are developed. Accordingly, the matters described in this section may be significantly affected by our Chapter 11 cases and CCAA proceedings, and by the risks and other factors described in “Forward-Looking Statements,” including the risk factors included in Item 1A. “Risk Factors” included in our 2005 Form 10-K.
 
Ultimately, whether we will have sufficient liquidity from cash flow from operations and borrowings available under our DIP Facility sufficient to fund our operations, including anticipated capital expenditures and working capital requirements, as well as to satisfy our current obligations under our outstanding indebtedness while we remain in Chapter 11 will depend, to some extent, on whether our business plan is successful, including whether we are able to realize expected cost savings from implementing that plan, as well as the other factors noted in “Forward-Looking Statements” including the risk factors included in Item 1A. “Risk Factors” included in our 2005 Form 10-K.
 
As a result of our Chapter 11 filings and the other matters described herein, including the uncertainties related to the fact that we have not yet had time to complete and have approved a plan of reorganization, there is substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern, including our ability to meet our ongoing operational obligations, is dependent upon, among other things: (i) our ability to maintain adequate cash on hand; (ii) our ability to generate cash from operations; (iii) the cost, duration and outcome of the restructuring process; (iv) our ability to comply with our DIP Facility agreement and the adequate assurance provisions of the Cash Collateral Order and (v) our ability to achieve profitability following a restructuring. These challenges are in addition to those operational and competitive challenges faced by us in connection with our business. In conjunction with our advisors, we are working to design and implement strategies to ensure that we maintain adequate liquidity and will be able to continue as a going concern. However, there can be no assurance as to the success of such efforts.
 
Chapter 11 Cases and Financing Activities
 
Our business is capital intensive. Our ability to successfully reorganize and emerge from Chapter 11 protection, while continuing to operate our current fleet of power plants, including completing our remaining plants under construction and maintaining our relationships with vendors, suppliers, customers and others with whom we conduct or seek to conduct business, is dependent on the continued availability of capital on attractive terms. As described below, we have entered into, and obtained U.S. Bankruptcy Court approval of, a $2.0 billion DIP Facility, which we believe will be sufficient to support our operations for the anticipated duration of our Chapter 11 cases. In addition, we have obtained U.S. Bankruptcy Court approval of several other matters that we believe are important to maintaining our ability to operate in the ordinary course during our Chapter 11 cases, including (i) our cash management program (as described under “-- Cash Management” below), (ii) payments to our employees, vendors and suppliers necessary in order to keep our facilities operational and (iii) procedures for the rejection of certain leases and executory contracts. In order to improve our liquidity position, we also expect to continue our efforts to reduce overhead and discontinue activities without compelling profit potential, particularly in the near term. In addition, development activities will continue to be further reduced, and we expect that certain power plants or other of our assets will be sold or that the agreements relating to certain of our facilities will be restructured, and that commercial operations may be suspended at certain of our power plants during our reorganization effort. See “— Rejection of Executory Contracts and Unexpired Leases” below for further details.
 
In general, we paid current interest on our First Priority Notes until they were repurchased, and we pay current interest on other debt of the Calpine Debtors that has been determined to be fully secured, made periodic cash interest payments pursuant to an order of the U.S. Bankruptcy Court through June 30, 2006, to the holders of Second Priority Debt of the Calpine Debtors and make payments of interest or principal, as applicable, on the debt of our subsidiaries that have not filed for protection under Chapter 11 or are subject to the CCAA proceedings. The Cash Collateral Order provides that the holders of the Second Priority Debt must seek further orders from the U.S. Bankruptcy Court for any further interest to be paid. We do not generally pay interest or make other debt service payments on the debt of the Calpine Debtors classified as LSTC other than pursuant to applicable U.S. Bankruptcy Court orders (for example, pursuant to an order of the U.S. Bankruptcy
 
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Court, we paid current interest on the Second Priority Debt until June 30, 2006). As a result, in the six months ended June 30, 2006, our actual interest payments to unrelated parties were less by $160.0 million, compared to contractually specified interest payments (at non-default rates). The $160.0 million is comprised of $44.8 million for the three months ended June 30, 2006, and $115.2 million for the three months ended March 31, 2006. The amount for the three months ended March 31, 2006, has been adjusted from the amount previously reported in the Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2006. Total annual contractual interest (at non-default rates) related to debt classified as LSTC is expected to be approximately $650 million for 2006.
 
We have initiated a comprehensive program designed to stabilize, improve and strengthen our power generation business and our financial health by reducing activities and curtailing expenditures in certain non-core areas and business units. As part of this program, we have begun to implement staff reductions of approximately 1,100 positions, or over one third of our pre-petition workforce, which is expected to be completed by the end of 2007. We expect that the staff reductions, together with non-core office closures and reductions in controllable overhead costs, will reduce annual operating costs by approximately $150 to $180 million, significantly improving our financial and liquidity positions. We estimate severance costs for the workforce reduction to be in the range of approximately $22 to $25 million.
 
We currently obtain cash from our operations; borrowings under credit facilities, including the DIP Facility described below; sale or partial sale of certain assets; and project financings or refinancings. In the past we have also obtained cash from issuances of debt, equity, trust preferred securities and convertible debentures and contingent convertible notes; proceeds from sale/leaseback transactions; and contract monetizations, and we or our subsidiaries may in the future complete similar transactions. We utilize this cash to fund our operations, service or prepay debt obligations, fund acquisitions, develop and construct power generation facilities, finance capital expenditures, support our hedging, balancing and optimization activities, and meet our other cash and liquidity needs. We reinvest any cash from operations into our business or use it to reduce debt, rather than to pay cash dividends.
 
DIP Facility .  On January 26, 2006, the U.S. Bankruptcy Court entered a final order approving the $2.0 billion DIP Facility and removing its previously imposed limitation on our ability to borrow thereunder. The DIP Facility, which will remain in place until the earlier of an effective plan of reorganization or December 20, 2007, is comprised of a $1.0 billion revolving credit facility priced at LIBOR plus 225 basis points or base rate plus 125 basis points, a $400 million first-priority term loan priced at LIBOR plus 225 basis points or base rate plus 125 basis points and a $600 million second-priority term loan priced at LIBOR plus 400 basis points or base rate plus 300 basis points. The DIP Facility is secured by first priority liens on all of the unencumbered assets of the U.S. Debtors, including The Geysers Assets, and junior liens on all of their encumbered assets. The proceeds of borrowings and letters of credit issued under the DIP Facility’s revolving loan will be used, among other things, for working capital and other general corporate purposes.
 
The DIP Facility was amended on May 3, 2006, to, among other things, provide us with extensions of time to provide certain financial information to the DIP Facility lenders, including financial statements for the year ended December 31, 2005, and for the quarter ended March 31, 2006. Also in May 2006, the DIP Facility lenders consented to the use of borrowings under the DIP Facility to repay a portion of the First Priority Notes in accordance with the orders of the U.S. Bankruptcy Court.
 
In July 2006, the DIP Facility lenders consented to the assignment of certain PPAs by Broad River Energy, LLC, our subsidiary that leases the Broad River facility pursuant to a leveraged lease, to the owner-lessors of such facility in connection with a settlement agreement with the owner-lessors. The DIP Facility lenders also consented to Broad River’s granting to the owner-lessors a temporary security interest in the same PPAs until FERC approves the assignment. The July 2006 consent was conditioned upon the U.S. Bankruptcy Court’s approval of the settlement agreement with the owner-lessors, and the U.S. Bankruptcy Court approved the settlement agreement on June 27, 2006. FERC approval of the assignment of the PPAs is pending.
 
As of June 30, 2006, there was $998.3 million outstanding under the term loan facilities, nothing outstanding under the revolving loan facility, and $11.7 million of letters of credit were issued against the revolving loan facility. In May 2006
 
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and June 2006, a portion of the funds drawn under the term loan facilities, together with approximately $409 million of restricted cash, plus accrued interest, were used to repay the remaining outstanding $646.1 million of our First Priority Notes.
 
Cash Management .  We have received U.S. Bankruptcy Court approval to continue to manage our cash in accordance with our pre-existing intercompany cash management system during the pendency of the Chapter 11 cases. This program allows us to maintain our existing bank and other investment accounts and to continue to manage our cash on an integrated basis through Calpine Corporation. Such cash management systems are subject to the requirements of the DIP Facility, Cash Collateral Order and the 345(b) Waiver Order. Pursuant to the cash management system, and in accordance with our cash collateral requirements in connection with the DIP Facility and relevant U.S. Bankruptcy Court orders, intercompany transfers are generally recorded as intercompany loans. Upon the closing of the DIP Facility, the cash balances of the U.S. Debtors (each of whom is a participant in the cash management system) became subject to security interests in favor of the DIP Facility lenders. The DIP Facility provides that all cash of the U.S. Debtors and certain other subsidiaries be maintained in a concentration account at Deutsche Bank Trust Company Americas, one of the DIP Facility agents.
 
Rejection of Executory Contracts and Unexpired Leases .  On December 21, 2005, we filed a motion with the U.S. Bankruptcy Court to reject eight PPAs and to enjoin FERC from asserting jurisdiction over the rejections. The U.S. Bankruptcy Court issued a temporary restraining order against FERC and set the matter for a hearing on January 5, 2006. Under most of the PPAs sought to be rejected, we are obligated to sell power at prices that are significantly lower than currently prevailing market prices. On December 29, 2005, certain counterparties to the various PPAs filed an action in the SDNY Court arguing that the U.S. Bankruptcy Court did not have jurisdiction over the dispute. On January 5, 2006, the SDNY Court entered an order that had the effect of transferring our motion seeking to reject the eight PPAs and our related request for an injunction against FERC to the SDNY Court from the U.S. Bankruptcy Court. Earlier, however, on December 19, 2005, CDWR, a counterparty to one of the eight PPAs, had filed a complaint with FERC seeking to obtain injunctive relief to prevent us from rejecting our PPA with CDWR and contending that FERC had exclusive jurisdiction over the matter. On January 3, 2006, FERC determined that it did not have exclusive jurisdiction, and that the matter could be heard by the U.S. Bankruptcy Court. However, despite the FERC ruling, on January 27, 2006, the SDNY Court determined that FERC had jurisdiction over whether the contracts could be rejected. We appealed the SDNY Court’s decision to the United States Court of Appeals for the Second Circuit. The appeal was heard on April 10, 2006 and we have not yet received a decision. We can not determine at this time whether the SDNY Court, the U.S. Bankruptcy Court or FERC will ultimately determine whether we may reject any or all of the eight PPAs, or when such determination will be made. In the meantime, three of the PPAs have been terminated by the applicable counterparties, and two of the PPAs are the subject of negotiated settlements. We continue to perform under the three PPAs that remain in effect. We can not presently determine the ultimate outcome of the pending court proceedings nor the market factors that will need to be considered in valuing the rejected contracts and therefore are unable to estimate the expected allowed claims related to these PPAs.
 
On February 6, 2006, we filed with the U.S. Bankruptcy Court, a notice of rejection of certain of our leases related to the Rumford Power Plant and the Tiverton Power Plant and noticed the proposed surrender of the two plants to their owner-lessor. The owner-lessor declined to take possession and control of the plants at that time and certain objections to the rejection notice and other opposing pleadings were filed by various interested parties. After negotiations with the indenture trustee related to the two leasehold properties, on May 18, 2006, we filed a motion with the U.S. Bankruptcy Court seeking approval of the terms and conditions of a transition agreement to be entered into between us, the indenture trustee and a receiver for certain assets of the owner-lessor to be appointed on a motion filed with the SDNY Court by the indenture trustee. A receiver was appointed by the SDNY Court on June 6, 2006, and on June 9, 2006, the U.S. Bankruptcy Court approved the transition agreement and the effective date of the rejection of the leases. On June 23, 2006, we closed the transaction contemplated in the transition agreement and the receiver now has possession and control of the Rumford and Tiverton power plants, as well as the ancillary assets related to the power plants transferred under the transition agreement. In connection with the lease rejections, we recorded a non-cash charge of $234.6 million which includes our current estimate of the expected allowed claim related to the lease rejections, the write-off of prepaid lease expense and certain fees and expenses related to the transaction. The amount is reported as a reorganization item in our Consolidated Condensed Statements of Operations for the three and six months ended June 30, 2006, and the portion representing the expected allowed claim is included in liabilities subject to compromise in the Consolidated Condensed Balance Sheet at June 30, 2006. After our evaluation of the Rumford and Tiverton power plants and based on the fact that we will continue to have significant
 
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revenue activity in the market in which they participate, we determined that the losses related to the lease rejections and historical results of operations of the Rumford and Tiverton power plants should not be reported as discontinued operations.
 
Cash Flow Activities — The following table summarizes our cash flow activities for the periods indicated:
 
 	 	Six Months Ended June 30,	 	
 	 	2006	 	2005	 	
 	 	(in thousands)	 	
Beginning cash and cash equivalents	 	$	785,637	 	$	718,023	 	
Net cash provided by (used in):	 	 	 	 	 	 	 	
Operating activities	 	 	(203,686	)	 	(239,259	)	
Investing activities	 	 	(46,698	)	 	(958,635	)	
Financing activities	 	 	308,849	 	 	1,124,721	 	
Effect of exchange rates changes on cash and cash equivalents, including discontinued operations cash	 	 	-	 	 	(8,897	)	
Net increase (decrease) in cash and cash equivalents including discontinued operations cash	 	 	58,465	 	 	(82,070	)	
Change in discontinued operations cash classified as current assets held for sale	 	 	-	 	 	255	 	
Net increase (decrease) in cash and cash equivalents	 	$	58,465	 	$	(81,815	)	
Ending cash and cash equivalents	 	$	844,102	 	$	636,208	 	
 
Operating activities for the six months ended June 30, 2006, used net cash of $203.7 million, as compared to a use of $239.3 million for the same period in 2005. In the first half of 2006, there was a $67.2 million use of funds from net changes in operating assets and liabilities, primarily due to a decrease in accounts payable, liabilities subject to compromise and accrued expenses of $268.5 million and an increase in other assets of $74.1 million, offset by decreases in accounts receivable of $122.2 million, other current assets of $74.6 million, as well as increases in other liabilities of $78.6 million.
 
Operating activities for the six months ended June 30, 2005, used net cash of $239.3 million. In the first six months of 2005 there was a $51.3 million use of funds from net changes in operating assets and liabilities comprised of a decrease in accounts payable and accrued expenses of $112.9 million, and an increase in net margin deposits posted to support CES contracting activity of $36.9 million. This was offset by decreases in accounts receivable of $57.7 million and inventory of $37.6 million.
 
Investing activities for the six months ended June 30, 2006, used net cash of $46.7 million, as compared to consuming $958.6 million in the same period of 2005. The purchase of The Geysers Assets from the lessor was completed in 2006, which used $266.8 million in cash. Capital expenditures, including capitalized interest, for the completion of our power facilities decreased from $539.6 million in 2005 to $120.2 million in 2006. Investing activities in the first six months of 2006 also reflected a use of funds of $91.6 million from derivatives not designated as hedges, as well as a $21.0 million advance to a joint venture. These uses of funds were offset by a $402.9 million decrease in restricted cash, as well as proceeds of $38.0 million from disposal of investments, net of holdbacks. Investing activities in 2005 reflected a $21.6 million source of funds from derivatives not designated as hedges, offset by a $433.2 million increase in restricted cash.
 
Financing activities for the six months ended June 30, 2006, provided $308.8 million as compared to $1,124.7 million for the same period in 2005. Funds provided were primarily borrowings from the Company’s DIP Facility of $1,150.0 million and CalGen revolver and project borrowings of $171.3 million. These sources were offset by $31.0 million of financing costs primarily related to the DIP Facility and repayments of: $646.1 million of First Priority Notes, $176.8 million of DIP Facility borrowings, $89.7 million of notes payable, $58.5 million of CalGen revolver and project borrowings and $4.7 million of preferred interests.
 
Negative Working Capital — At June 30, 2006, we had negative working capital of $4.2 billion which is primarily due to defaults under certain of our indentures and other financing instruments requiring us to record approximately $5.3 billion of debt as current that otherwise would have been recorded as long-term. Generally, we are seeking waivers or other resolutions with respect to the defaults in the case of Non-Debtor entities. With respect to the Calpine Debtor entities, such
 
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obligations may have been accelerated due to such defaults, but generally, all actions to enforce or otherwise effect repayment of liabilities preceding the Petition Date are stayed in accordance with the Bankruptcy Code or orders of the Canadian Court, as applicable, while the Calpine Debtors continue their business operations as debtors-in-possession.
 
Letter of Credit Facilities — At June 30, 2006 and December 31, 2005, we had approximately $235.7 million and $370.3 million, respectively, in letters of credit outstanding under various credit facilities to support our risk management and other operational and construction activities.
 
Commodity Margin Deposits and Other Credit Support — As of June 30, 2006 and December 31, 2005, to support commodity transactions, we had margin deposits with third parties of $157.7 million and $287.5 million, respectively; we had gas and power prepayment balances of $91.6 million and $103.2 million, respectively; and had letters of credit outstanding of $2.9 million and $88.1 million, respectively. Counterparties had deposited with us $13.7 million and $27.0 million as margin deposits at June 30, 2006 and December 31, 2005, respectively. We use margin deposits, prepayments and letters of credit as credit support for commodity procurement and risk management activities. Future cash collateral requirements may increase based on the extent of our involvement in standard contracts and movements in commodity prices and also based on our credit ratings and general perception of creditworthiness in this market. While we believe that we have adequate liquidity to support our operations at this time, it is difficult to predict future developments and the amount of credit support that we may need to provide as part of our business operations.
 
Asset Sales — On March 3, 2006, pursuant to the Cash Collateral Order, we, together with the Committees agreed, in consultation with the indenture trustee for our First Priority Notes, on the designation of nine projects that, absent the consent of such Committees or unless ordered by the U.S. Bankruptcy Court, may not receive funding, other than certain limited amounts that were agreed to by us and the committees in consultation with the First Priority Notes trustee. On May 17, 2006, an additional five projects were added to this list. The 14 designated projects are: Acadia Energy Center, Aries Energy Center, Clear Lake Power Plant, Dighton Power Plant, Fox Energy Center, Pryor Power Plant, Newark Power Plant, Parlin Power Plant, Pine Bluff Energy Center, Hog Bayou Energy Center, Rumford Power Plant, Santa Rosa Energy Center, Texas City Power Plant, and Tiverton Power Plant. In accordance with the Cash Collateral Order, it is possible that additional power plants will be added (or certain of the listed plants may be removed) as designated projects. As discussed in Note 2 of the Notes to Consolidated Condensed Financial Statements, in June 2006, the U.S. Bankruptcy Court approved the necessary agreements allowing for the rejection of the Rumford and Tiverton leases and the transition of those power plants to a receiver of certain assets of the owner-lessor. Additionally, we have entered into a non-binding letter of intent to sell our leasehold interest in the Fox Energy Center, and have entered into an agreement to sell the Dighton project assets subject to auction procedures established by the U.S. Bankruptcy Court. We have not yet determined what actions we will take with respect to the other power plants; however, it is possible that we could seek to sell our interests in those facilities or, as applicable, reject the related leases. Such actions could result in additional impairment charges that could be material to our financial condition and results of operations in any given period.
 
On April 18, 2006, we completed the sale of our 45% indirect equity interest in the 525-MW Valladolid to the two remaining partners in the project, Mitsui and Chubu, for $42.9 million, less a 10% holdback and transaction fees. Under the terms of the purchase and sale agreement, we received cash proceeds of $38.6 million at closing. The 10% holdback, plus interest, will be returned to us in one year’s time. We eliminated $87.8 million of non-recourse unconsolidated project debt, representing our 45% share of the total project debt of approximately $195.0 million. In addition, funds held in escrow for credit support of $9.4 million were released to us. We recorded an impairment charge of $41.3 million for our investment in the project during the year ended December 31, 2005; accordingly, no material gain or loss was recognized on this sale.
 
Debt, Lease and Indenture Covenant Compliance — See Note 7 of the Notes to Consolidated Condensed Financial Statements for compliance information.
 
Unrestricted Subsidiaries — The information in this paragraph is required to be provided under the terms of the Second Priority Secured Debt Instruments. We have designated certain of our subsidiaries as “unrestricted subsidiaries” under the Second Priority Secured Debt Instruments. A subsidiary with “unrestricted” status thereunder generally is not required to comply with the covenants contained therein that are applicable to “restricted subsidiaries.” The Company has
 
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designated Calpine Gilroy 1, Inc., Calpine Gilroy 2, Inc. and Calpine Gilroy Cogen, L.P. as “unrestricted subsidiaries” for purposes of the Second Priority Secured Debt Instruments.
 
The following table sets forth selected balance sheet information of Calpine Corporation and restricted subsidiaries and of such unrestricted subsidiaries at June 30, 2006, and selected income statement information for the six months ended June 30, 2006 (in thousands):
 
 	 	Calpine
Corporation
and Restricted
Subsidiaries	 	Unrestricted
Subsidiaries	 	Eliminations	 	Total	 	
Assets	 	$	19,088,616	 	$	351,033	 	$	—	 	$	19,439,649	 	
Liabilities not subject to compromise	 	$	10,862,442	 	$	201,791	 	$	—	 	$	11,064,233	 	
Liabilities subject to compromise	 	$	14,935,141	 	$	28,585	 	$	—	 	$	14,963,726	 	
Total revenue	 	 	2,947,581	 	 	1,366	 	 	(1,381	)	 	2,947,566	 	
Total cost of revenue	 	 	(2,684,565	)	 	(5,499	)	 	3,594	 	 	(2,686,470	)	
Equipment, development project and other impairments	 	 	(67,631	)	 	—	 	 	—	 	 	(67,631	)	
Interest income	 	 	34,906	 	 	4,618	 	 	—	 	 	39,524	 	
Interest (expense)	 	 	(585,750	)	 	(6,102	)	 	—	 	 	(591,852	)	
Reorganization items	 	 	(953,320	)	 	(1	)	 	—	 	 	(953,321	)	
Other	 	 	(94,576	)	 	(442	)	 	—	 	 	(95,018	)	
Net income (loss)	 	$	(1,403,355	)	$	(6,060	)	$	2,213	 	$	(1,407,202	)	
 
Special Purpose Subsidiaries — Pursuant to applicable transaction agreements, we have established certain of our entities separate from Calpine and our other subsidiaries. At June 30, 2006, these entities included: Rocky Mountain Energy Center, LLC, Riverside Energy Center, LLC, Calpine Riverside Holdings, LLC, Calpine Energy Management, L.P., CES GP, LLC, PCF, PCF III, Calpine Northbrook Energy Marketing, LLC, CNEM Holdings, LLC, GEC, Calpine Gilroy Cogen, L.P., Calpine Gilroy 1, Inc., Calpine King City Cogen, LLC, Calpine Securities Company, L.P. (a parent company of Calpine King City Cogen, LLC), Calpine King City, LLC (an indirect parent company of Calpine Securities Company, L.P.), Calpine Fox Holdings, LLC, Calpine Fox LLC, Calpine Deer Park Partner, LLC, Calpine Deer Park, LLC, Deer Park Energy Center Limited Partnership, CCFC Preferred Holdings, LLC and Metcalf Energy Center, LLC.
 
Summary of Key Activities for the Three Months Ended June 30, 2006
 
Finance — Repurchases and Extinguishments:
 
Date	 	Amount	 	Description	
5/18/06-
6/08/06	 	$646.1 million	 	Repay the remaining outstanding $646.1 million of our First Priority Notes, plus accrued interest	

 
Asset Sales:
 
Date	 	Description	
4/18/06	 	Complete the sale of our 45% interest in Valladolid for $42.9 million, less a 10% holdback and transaction fees	

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Other:
 
Date	 	Description	
4/04/06	 	Announce certain power plants in operation or under construction are no longer considered to be core operations and evaluation of all assets continues to determine optimal course of action, including possible restructuring of agreements or sale of assets	
 	 	 	
5/16/06	 	Kevin G. McMahon named Senior Vice President – Internal Audit	
 	 	 	
5/17/06	 	Designate the following five projects as projects that may not receive funding: Acadia Energy Center, Aries Energy Center, Hog Bayou Energy Center, Pryor Power Plant and Santa Rosa Energy Center	
 	 	 	
5/30/06	 	Thomas N. May named Executive Vice President and President of Calpine Merchant Services Company	
 	 	 	
6/01/06	 	Announce designation of Morgan Energy Center as a Star Worksite, highest level of recognition, under the Voluntary Protection Program of OSHA	
 	 	 	
6/12/06	 	Appointment of Glen H. Hiner to the Board of Directors	
 	 	 	
6/14/06	 	Execute a non-binding letter of intent with SDG&E to revise the previously approved PPA and to include put and call options for the sale of Otay Mesa Energy Center after 10 years of operations	
 	 	 	
6/21/06	 	Announce Gregory L. Doody named Executive Vice President, General Counsel and Secretary	
 	 	 	
6/26/06	 	John R. Moore named Senior Vice President – Human Resources	
 
California Power Market
 
The volatility in the California power market from mid-2000 through mid-2001 produced significant unanticipated results. The unresolved issues arising in that market, where 42 of our 93 power plants are located, could adversely affect our performance. See Note 14 of the Notes to Consolidated Condensed Financial Statements for a further discussion.
 
Financial Market Risks
 
As we are primarily focused on generation of electricity using gas-fired turbines, our natural physical commodity position is “short” fuel (i.e., natural gas consumer) and “long” power (i.e., electricity seller). To manage forward exposure to price fluctuation in these and (to a lesser extent) other commodities, we enter into derivative commodity instruments.
 
The change in fair value of outstanding commodity derivative instruments from January 1, 2006, through June 30, 2006, is summarized in the table below (in thousands):
 
Fair value of contracts outstanding at January 1, 2006	 	$	(439,814	)	
(Gains) losses recognized or otherwise settled during the period	 	 	82,835	 	
Fair value attributable to new contracts	 	 	9,655	 	
Changes in fair value attributable to price movements	 	 	47,292	 	
Terminated derivatives	 	 	9,624	 	
Fair value of contracts outstanding at June 30, 2006 (1)	 	$	(290,408	)	
____________
(1)	Net commodity derivative liabilities reported in Note 9 of the Notes to Consolidated Condensed Financial Statements.	

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The fair value of outstanding derivative commodity instruments at June 30, 2006, based on price source and the period during which the instruments will mature, are summarized in the table below (in thousands):
 
Fair Value Source	 	2006	 	2007-2008	 	2009-2010	 	After 2010	 	Total	 	
Prices actively quoted	 	$	(18,313	)	$	1,205	 	$	—	 	$	—	 	$	(17,108	)	
Prices provided by other external sources.	 	 	(67,562	)	 	(126,116	)	 	(83,755	)	 	—	 	 	(277,433	)	
Prices based on models and other valuation methods	 	 	—	 	 	511	 	 	3,622	 	 	—	 	 	4,133	 	
Total fair value	 	$	(85,875	)	$	(124,400	)	$	(80,133	)	$	—	 	$	(290,408	)	
 
Our risk managers maintain fair value price information derived from various sources in our risk management systems. The propriety of that information is validated by our risk control group. Prices actively quoted include validation with prices sourced from commodities exchanges (e.g., New York Mercantile Exchange). Prices provided by other external sources include quotes from commodity brokers and electronic trading platforms. Prices based on models and other valuation methods are validated using quantitative methods.
 
The counterparty credit quality associated with the fair value of outstanding derivative commodity instruments at June 30, 2006, and the period during which the instruments will mature are summarized in the table below (in thousands):
 
Credit Quality
(Based on Standard & Poor’s Ratings
as of June 30, 2006)	 	2006	 	2007-2008	 	2009-2010	 	After 2010	 	Total	 	
Investment grade	 	$	(82,959	)	$	(124,366	)	$	(80,133	)	$	—	 	$	(287,458	)	
Non-investment grade	 	 	(7,825	)	 	(34	)	 	—	 	 	—	 	 	(7,859	)	
No external ratings	 	 	4,909	 	 	—	 	 	—	 	 	—	 	 	4,909	 	
Total fair value	 	$	(85,875	)	$	(124,400	)	$	(80,133	)	$	—	 	$	(290,408	)	
 
The fair value of outstanding derivative commodity instruments and the fair value that would be expected after a ten percent adverse price change are shown in the table below (in thousands):
 
 	 	Fair Value	 	Fair Value After
10% Adverse
Price Change	 	
At June 30, 2006:	 	 	 	 	 	 	 	
Electricity	 	$	(340,522	)	$	(499,539	)	
Natural gas	 	 	50,114	 	 	37,063	 	
Total	 	$	(290,408	)	$	(462,476	)	
 
Derivative commodity instruments included in the table are those included in Note 9 of the Notes to Consolidated Condensed Financial Statements. The fair value of derivative commodity instruments included in the table is based on present value adjusted quoted market prices of comparable contracts. The fair value of electricity derivative commodity instruments after a 10% adverse price change includes the effect of increased power prices versus our derivative forward commitments. Conversely, the fair value of the natural gas derivatives after a 10% adverse price change reflects a general decline in gas prices versus our derivative forward commitments. Derivative commodity instruments offset the price risk exposure of our physical assets. None of the offsetting physical positions are included in the table above.
 
Price changes were calculated by assuming an across-the-board ten percent adverse price change regardless of term or historical relationship between the contract price of an instrument and the underlying commodity price. In the event of an actual ten percent change in prices, the fair value of our derivative portfolio would typically change by more than ten percent for earlier forward months and less than ten percent for later forward months because of the higher volatilities in the near term and the effects of discounting expected future cash flows.

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Interest Rate Swaps — From time to time, we use interest rate swap agreements to mitigate our exposure to interest rate fluctuations associated with certain of our debt instruments and to adjust the mix between fixed and floating rate debt in our capital structure to desired levels. We do not use interest rate swap agreements for speculative or trading purposes. The following tables summarize the fair market values of our existing interest rate swap agreements as of June 30, 2006 (dollars in thousands):
 
Variable to Fixed Swaps
 
Maturity Date	 	Notional
Principal
Amount	 	Weighted   Average
Interest Rate
(Pay)	 	Weighted   Average
Interest Rate
(Receive)	 	Fair Market
Value	 	
2007	 	$	53,241	 	 	4.5%	 	 	3-month US$LIBOR	 	$	1,549	 	
2007	 	 	282,179	 	 	4.5%	 	 	3-month US$LIBOR	 	 	7,825	 	
2009	 	 	36,769	 	 	4.4%	 	 	3-month US$LIBOR	 	 	1,011	 	
2009	 	 	184,483	 	 	4.4%	 	 	3-month US$LIBOR	 	 	5,072	 	
2009	 	 	50,000	 	 	4.8%	 	 	3-month US$LIBOR	 	 	1,027	 	
2011	 	 	45,451	 	 	4.9%	 	 	3-month US$LIBOR	 	 	1,580	 	
2011	 	 	43,000	 	 	4.8%	 	 	3-month US$LIBOR	 	 	1,417	 	
2011	 	 	21,500	 	 	4.8%	 	 	3-month US$LIBOR	 	 	709	 	
2011	 	 	22,726	 	 	4.9%	 	 	3-month US$LIBOR	 	 	790	 	
2011	 	 	22,726	 	 	4.9%	 	 	3-month US$LIBOR	 	 	790	 	
2011	 	 	21,500	 	 	4.8%	 	 	3-month US$LIBOR	 	 	709	 	
2011	 	 	22,726	 	 	4.9%	 	 	3-month US$LIBOR	 	 	790	 	
2011	 	 	21,500	 	 	4.8%	 	 	3-month US$LIBOR	 	 	709	 	
2012	 	 	94,878	 	 	6.5%	 	 	3-month US$LIBOR	 	 	(3,241	)	
2016	 	 	19,410	 	 	7.3%	 	 	3-month US$LIBOR	 	 	(1,625	)	
2016	 	 	12,940	 	 	7.3%	 	 	3-month US$LIBOR	 	 	(1,080	)	
2016	 	 	38,820	 	 	7.3%	 	 	3-month US$LIBOR	 	 	(3,239	)	
2016	 	 	25,880	 	 	7.3%	 	 	3-month US$LIBOR	 	 	(2,159	)	
2016	 	 	32,350	 	 	7.3%	 	 	3-month US$LIBOR	 	 	(2,699	)	
 	 	$	1,052,079	 	 	5.5%	 	 	 	 	$	9,935	 	
 
Certain of our interest rate swaps were designated as cash flow hedges of debt instruments that became subject to compromise as a result of our Chapter 11 filings beginning on the Petition Date. Consequently, such interest rate swaps no longer were effective hedges and we began to recognize changes in their fair value through earnings rather than through OCI.
 
The fair value of outstanding interest rate swaps and the fair value that would be expected after a one percent (100 basis points) adverse interest rate change are shown in the table below (in thousands). Given our net variable to fixed portfolio position, a 100 basis point decrease would adversely impact our portfolio as follows:
 
Net Fair Value as of June 30, 2006	 	Fair Value After a 1.0%
(100 Basis Points) Adverse
Interest Rate Change	 	
$9,935	 	$	(24,869	)	

Variable Rate Debt Financing — We have used debt financing to meet the significant capital requirements needed to fund our growth. Certain debt instruments related to our non-debtor entities and debt instruments not considered subject to compromise at June 30, 2006, may affect us adversely because of changes in market conditions. Our variable rate financings are indexed to base rates, generally LIBOR, as shown below. Significant LIBOR increases could have a negative impact on our future interest expense.

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The following table summarizes our variable-rate debt, by repayment year, exposed to interest rate risk as of June 30, 2006. All outstanding balances and fair market values are shown net of applicable premium or discount, if any (in thousands):
 
 	 	July-
December
2006	 	2007	 	2008	 	2009	 	2010	 	Thereafter	 	Fair Value
June 30,
2006	 	
3-month US$LIBOR weighted average interest rate basis (3)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Riverside Energy Center project financing	 	$	1,843	 	$	3,685	 	$	3,685	 	$	3,685	 	$	3,685	 	$	336,868	 	$	353,451	 	
Rocky Mountain Energy Center project financing	 	 	1,325	 	 	2,649	 	 	2,649	 	 	2,649	 	 	2,649	 	 	232,627	 	 	244,548	 	
Total of 3-month US$LIBOR rate debt	 	 	3,168	 	 	6,334	 	 	6,334	 	 	6,334	 	 	6,334	 	 	569,495	 	 	597,999	 	
1-month US$LIBOR interest rate basis (3)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Freeport Energy Center, LP project financing	 	 	—	 	 	3,160	 	 	2,904	 	 	2,567	 	 	2,794	 	 	193,073	 	 	204,498	 	
Mankato Energy Center, LLC project financing	 	 	—	 	 	2,803	 	 	2,892	 	 	2,485	 	 	2,296	 	 	180,345	 	 	190,821	 	
Total of 1-month US$LIBOR interest rate	 	 	—	 	 	5,963	 	 	5,796	 	 	5,052	 	 	5,090	 	 	373,418	 	 	395,319	 	
(1)(3)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Metcalf Energy Center, LLC preferred interest	 	 	—	 	 	—	 	 	—	 	 	—	 	 	155,000	 	 	—	 	 	155,000	 	
Third Priority Secured Floating Rate Notes Due 2011 (CalGen)	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	680,000	 	 	717,400	 	
Second Priority Senior Secured Floating Rate Notes Due 2011 (CCFC)	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	410,024	 	 	410,024	 	
CCFC Preferred Holdings, LLC preferred interest	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	300,000	 	 	300,000	 	
Total of variable rate debt as defined at (1) below	 	 	—	 	 	—	 	 	—	 	 	—	 	 	155,000	 	 	1,390,024	 	 	1,582,424	 	
(2)(3)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Blue Spruce Energy Center project financing	 	 	1,875	 	 	3,750	 	 	3,750	 	 	3,750	 	 	3,750	 	 	77,645	 	 	94,520	 	
Total of variable rate debt as defined at (2) below	 	 	1,875	 	 	3,750	 	 	3,750	 	 	3,750	 	 	3,750	 	 	77,645	 	 	94,520	 	
(4)(3)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
First Priority Secured Floating Rate Notes Due 2009 (CalGen)	 	 	—	 	 	1,175	 	 	2,350	 	 	231,475	 	 	—	 	 	—	 	 	240,288	 	
First Priority Secured Institutional Term Loans Due 2009 (CalGen)	 	 	—	 	 	3,000	 	 	6,000	 	 	591,000	 	 	—	 	 	—	 	 	600,000	 	
First Priority Senior Secured Institutional Term Loan Due 2009 (CCFC)	 	 	1,604	 	 	3,208	 	 	3,208	 	 	365,750	 	 	—	 	 	—	 	 	373,770	 	
Second Priority Secured Institutional Floating Rate Notes Due 2010 (CalGen)	 	 	—	 	 	—	 	 	3,200	 	 	6,400	 	 	624,439	 	 	—	 	 	660,986	 	
Second Priority Secured Term Loans Due 2010 (CalGen)	 	 	—	 	 	—	 	 	500	 	 	1,000	 	 	97,569	 	 	—	 	 	99,069	 	
Metcalf Energy Center, LLC project financing	 	 	—	 	 	—	 	 	—	 	 	—	 	 	100,000	 	 	—	 	 	100,000	 	
DIP First Priority Term Loan	 	 	1,750	 	 	396,500	 	 	—	 	 	—	 	 	—	 	 	—	 	 	398,250	 	
DIP Second Priority Term Loan	 	 	—	 	 	600,000	 	 	—	 	 	—	 	 	—	 	 	—	 	 	600,000	 	
Total of variable rate debt as defined at (4) below	 	 	3,354	 	 	1,003,883	 	 	15,258	 	 	1,195,625	 	 	822,008	 	 	—	 	 	3,072,363	 	
(5)(4)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Contra Costa	 	 	161	 	 	168	 	 	179	 	 	190	 	 	202	 	 	1,217	 	 	2,117	 	
Total of variable rate debt as defined at (5) below	 	 	161	 	 	168	 	 	179	 	 	190	 	 	202	 	 	1,217	 	 	2,117	 	
Grand total variable-rate debt instruments	 	$	8,558	 	$	1,020,098	 	$	31,317	 	$	1,210,951	 	$	992,384	 	$	2,411,799	 	$	5,744,742	 	
____________
(1)	British Bankers Association LIBOR Rate for deposit in U.S. dollars for a period of six months.	
(2)	British Bankers Association LIBOR Rate for deposit in U.S. dollars for a period of three months.	
(3)	Actual interest rates include a spread over the basis amount.	
(4)	Choice of 1-month US$LIBOR, 2-month US$LIBOR, 3-month US$LIBOR, 6-month US$LIBOR, 12-month US$LIBOR or a base rate.	
(5)	Bankers Acceptance Rate.	
 
55

 
 
Recent Accounting Pronouncements
 
See Note 1 of the Notes to Consolidated Condensed Financial Statements for a discussion of recent accounting pronouncements.
 
Item 3.    Quantitative and Qualitative Disclosures About Market Risk .
 
See “Financial Market Risks” in Item 2.
 
Item 4.    Controls and Procedures .
 
Disclosure Controls and Procedures
 
We maintain disclosure controls and procedures that are designed to ensure that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
 
As of December 31, 2005, management identified a material weakness related to the controls over accounting for income taxes that was discussed in Item 9A. of our 2005 Form 10-K. During 2006, we have taken steps necessary to begin the remediation of this material weakness.
 
Our senior management, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q. Because the process of remediating the aforementioned material weakness is not complete, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures are not effective. We continue to perform additional analysis and post-closing procedures to ensure our consolidated financial statements are prepared and presented in accordance with GAAP. Accordingly, management believes that the financial statements included in this Report fairly present in all material respects our financial condition, results of operations and cash flows for the periods presented. The certificates required by this item are filed as Exhibits 31.1 and 31.2 to this Form 10-Q.
 
Personnel Developments at CMSC
 
During the second quarter, we experienced resignations of key personnel in the operational areas of our risk management and trading organization, CMSC. The risk created by turnover in our CMSC organization primarily affected our ability to ensure the completeness and accuracy of commodity price curve information. We believe that risks created by the turnover are mitigated by the reduced hedging, optimization and structured transaction volumes we have had since our Chapter 11 filing, by the addition of key management personnel and by processes that we put in place to address the completeness and accuracy risks, as discussed below:
 	•	We named a new President of CMSC (Executive Vice President of Calpine) on May 30, 2006;	
 	•	Our Senior Vice President, Commodity Structuring and Valuation rejoined CMSC as of June 29, 2006; and	
 	•	Additionally, we named additional members of CMSC senior management in mid-July of 2006 in the areas of structured finance and strategy, origination, trading and merchant services.	
 	•	We performed additional confirmations of volumetric and pricing information associated with our structured deals;	
 	•	We increased scrutiny of accounting data related to purchases and sales of gas and power; and	
 
56

 
 
 	•	We use newly designed system tools to check price curves for accuracy and comparability to external price quotes.	
 
Status of Remediation of the Material Weakness
 
During 2006, we have taken steps necessary to improve our internal controls relating to the preparation and review of interim and annual income tax provisions, specifically related to the timely reconciliation of the underlying data being provided by the accounting department to the tax department to ensure the accuracy and validity of such information for purposes of our tax calculations, principally relating to the book and tax basis of our property, plant and equipment.
 
Our remediation efforts include the following:
 	•	Implementing software to perform the tax depreciation, supporting book to tax reconciliations and valuation allowance computations. This software will be run parallel with the tax calculations during 2006;	
 	•	Implemented quarterly meetings between the Tax and Accounting Departments to ensure timely performance of book-tax reconciliations;	
 	•	Implemented consistent terminology related to fixed asset transactions types in the accounting system to ensure effective conversion of accounting data for use in the tax calculation; and	
 	•	Hired a Director of Federal Income Tax Accounting.	
 
Additionally, we are implementing tax provision software to aid in performing the tax provision calculation. This software will be run parallel with the tax calculation during 2006. We continue to monitor the effectiveness of the tax controls and procedures and will make any additional changes that management deems appropriate. We will not be able to conclude that this material weakness has been successfully remediated until management’s testing and assessment demonstrates the controls have operated effectively for a sufficient period of time.
 
Changes in Internal Control Over Financial Reporting
 
During the second quarter of 2006, there were no significant changes in our internal control over financial reporting that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
 
PART II — OTHER INFORMATION
 
Item 1.    Legal Proceedings .
 
See Note 12 of the Notes to Consolidated Condensed Financial Statements for a description of our legal proceedings.
 
Item 3.    Defaults Upon Senior Securities .
 
See Note 7 of the Notes to Consolidated Condensed Financial Statements for a description of defaults under our indebtedness, as well as our Current Report on Form 8-K filed on December 23, 2005.
 
See also Note 8 of the Notes to Consolidated Condensed Financial Statements for our liabilities subject to compromise, which sets forth the amounts of our indebtedness classified as LSTC. We are no longer paying current interest on any LSTC other than pursuant to applicable U.S. Bankruptcy Court orders (for example, pursuant to an order of the U.S. Bankruptcy Court, we paid current interest on the Second Priority Debt until June 30, 2006). That order provides that the Second Priority Debt must seek further orders from the U.S. Bankruptcy Court for any further interest to be paid. We continue to make current payments of interest and, if applicable, principal on all debt of Non-U.S. Debtor entities, including debt under which there are defaults.
 
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Item 6.    Exhibits .
 
(a)  Exhibits
 
The following exhibits are filed herewith unless otherwise indicated:
 
EXHIBIT INDEX
 
Exhibit	 	 	
Number	 	Description	
 	 	 	
3.1.1	 	Amended and Restated Certificate of Incorporation of the Company, as amended through June 2, 2004 (incorporated by reference to Exhibit 3.1 to Calpine Corporation’s Quarterly Report on Form 10-Q dated June 30, 2004, filed with the SEC on August 9, 2004).	
 	 	 	
3.1.2	 	Amendment to Amended and Restated Certificate of Incorporation of the Company, dated June 20, 2005 (incorporated by reference to Exhibit 3.1.2 to Calpine Corporation’s Quarterly Report on Form 10-Q dated June 30, 2005, filed with the SEC on August 9, 2005).	
 	 	 	
3.2	 	Amended and Restated By-laws of the Company (incorporated by reference to Exhibit 3.1.8 to Calpine Corporation’s Annual Report on Form 10-K dated December 31, 2001, filed with the SEC on March 29, 2002).	
 	 	 	
4.1.1	 	Indenture, dated as of August 14, 2003, among Calpine Construction Finance Company, L.P., CCFC Finance Corp., each of Calpine Hermiston, LLC, CPN Hermiston, LLC and Hermiston Power Partnership, as Guarantors, and Wilmington Trust FSB, as Trustee, including form of Notes (incorporated by reference to Exhibit 4.4 to Calpine Corporation’s Quarterly Report on Form 10-Q dated September 30, 2003, filed with the SEC on November 13, 2003).	
 	 	 	
4.1.2	 	Supplemental Indenture, dated as of September 18, 2003, among Calpine Construction Finance Company, L.P., CCFC Finance Corp., each of Calpine Hermiston, LLC, CPN Hermiston, LLC and Hermiston Power Partnership, as Guarantors, and Wilmington Trust FSB, as Trustee (incorporated by reference to Exhibit 4.5 to Calpine Corporation’s Quarterly Report on Form 10-Q dated September 30, 2003, filed with the SEC on November 13, 2003).	
 	 	 	
4.1.3	 	Second Supplemental Indenture, dated as of January 14, 2004, among Calpine Construction Finance Company, L.P., CCFC Finance Corp., each of Calpine Hermiston, LLC, CPN Hermiston, LLC and Hermiston Power Partnership, as Guarantors, and Wilmington Trust FSB, as Trustee (incorporated by reference to Exhibit 4.14.3 to Calpine Corporation’s Annual Report on Form 10-K for the year ended December 31, 2003, filed with the SEC on March 25, 2004).	

58

 

Exhibit	 	 	
Number	 	Description	
 	 	 	
4.1.4	 	Third Supplemental Indenture, dated as of March 5, 2004, among Calpine Construction Finance Company, L.P., CCFC Finance Corp., each of Calpine Hermiston, LLC, CPN Hermiston, LLC and Hermiston Power Partnership, as Guarantors, and Wilmington Trust FSB, as Trustee (incorporated by reference to Exhibit 4.14.4 to Calpine Corporation’s Annual Report on Form 10-K for the year ended December 31, 2003, filed with the SEC on March 25, 2004).	
 	 	 	
4.1.5	 	Fourth Supplemental Indenture, dated as of March 15, 2006, among Calpine Construction Finance Company, L.P., CCFC Finance Corp., each of Calpine Hermiston, LLC, CPN Hermiston, LLC and Hermiston Power Partnership, as Guarantors, and Wilmington Trust FSB, as Trustee (incorporated by reference to Exhibit 4.13.5 to Calpine Corporation’s Annual Report on Form 10-K for the year ended December 31, 2005, filed with the SEC on May 19, 2006).	
 	 	 	
4.1.6	 	Waiver Agreement, dated as of March 15, 2006, among Calpine Construction Finance Company, L.P., CCFC Finance Corp., each of Calpine Hermiston, LLC, CPN Hermiston, LLC and Hermiston Power Partnership, as Guarantors, and Wilmington Trust FSB, as Trustee (incorporated by reference to Exhibit 4.13.6 to Calpine Corporation’s Annual Report on Form 10-K for the year ended December 31, 2005, filed with the SEC on May 19, 2006).	
 	 	 	
4.1.7	 	Waiver Agreement, dated as of June 9, 2006, among Calpine Construction Finance Company, L.P., CCFC Finance Corp., each of Calpine Hermiston, LLC, CPN Hermiston, LLC and Hermiston Power Partnership, as Guarantors, and Wilmington Trust FSB, as Trustee (incorporated by reference to Exhibit 4.1.7 to Calpine Corporation’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2006, filed with the SEC on July 3, 2006).	
 	 	 	
4.1.8	 	Amendment to Waiver Agreement, dated as of August 4, 2006, among Calpine Construction Finance Company, L.P., CCFC Finance Corp., each of Calpine Hermiston, LLC, CPN Hermiston, LLC and Hermiston Power Partnership, as Guarantors, and Wilmington Trust FSB, as Trustee.(*)	
 	 	 	
4.1.9	 	Second Amendment to Waiver Agreement, dated as of August 11, 2006, among Calpine Construction Finance Company, L.P., CCFC Finance Corp., each of Calpine Hermiston, LLC, CPN Hermiston, LLC and Hermiston Power Partnership, as Guarantors, and Wilmington Trust FSB, as Trustee.(*)	
 	 	 	
10.1	 	DIP Financing Agreements.	
 	 	 	
10.1.1.1	 	$2,000,000,000 Amended & Restated Revolving Credit, Term Loan and Guarantee Agreement, dated as of February 23, 2006, among the Company, as borrower, the Subsidiaries of the Company named therein, as guarantors, the Lenders from time to time party thereto, Credit Suisse Securities (USA) LLC and Deutsche Bank Trust Company Americas, as Joint Syndication Agents, Deutsche Bank Securities Inc. and Credit Suisse Securities (USA) LLC, as Joint Lead Arrangers and Joint Bookrunners, and Credit Suisse and Deutsche Bank Trust Company Americas, as Joint Administrative Agents (incorporated by reference to Exhibit 10.1.1.1 to Calpine Corporation’s Annual Report on Form 10-K for the year ended December 31, 2005, filed with the SEC on May 19, 2006).	
 	 	 	
10.1.1.2	 	First Consent, Waiver and Amendment, dated as of May 3, 2006, to and under the Amended and Restated Revolving Credit, Term Loan and Guarantee Agreement, dated as of February 23, 2006, among Calpine Corporation, as borrower, its subsidiaries named therein, as guarantors, the Lenders party thereto, Deutsche Bank Trust Company Americas, as administrative agent for the First Priority Lenders, Credit Suisse, Cayman Islands Branch, as administrative agent for the Second Priority Term Lenders (incorporated by reference to Exhibit 10.1.1.2 to Calpine Corporation’s Annual Report on Form 10-K for the year ended December 31, 2005, filed with the SEC on May 19, 2006).	

59

 

Exhibit	 	 	
Number	 	Description	
 	 	 	
10.1.1.3	 	Consent, dated as of June 28, 2006, under the Amended and Restated Revolving Credit, Term Loan and Guarantee Agreement, dated as of February 23, 2006, among Calpine Corporation, as borrower, its subsidiaries named therein, as guarantors, the Lenders party thereto, Deutsche Bank Trust Company Americas, as administrative agent for the First Priority Lenders, Credit Suisse, Cayman Islands Branch, as administrative agent for the Second Priority Term Lenders.(*)	
 	 	 	
10.1.2	 	Amended and Restated Security and Pledge Agreement, dated as of February 23, 2006, among the Company, the Subsidiaries of the Company signatory thereto and Deutsche Bank Trust Company Americas, as collateral agent (incorporated by reference to Exhibit 10.1.2 to Calpine Corporation’s Annual Report on Form 10-K for the year ended December 31, 2005, filed with the SEC on May 19, 2006).	
 	 	 	
10.2	 	Financing and Term Loan Agreements.	
 	 	 	
10.2.1.1	 	Credit and Guarantee Agreement, dated as of August 14, 2003, among Calpine Construction Finance Company, L.P., each of Calpine Hermiston, LLC, CPN Hermiston, LLC and Hermiston Power Partnership, as Guarantors, the Lenders named therein, and Goldman Sachs Credit Partners L.P., as Administrative Agent and Sole Lead Arranger (incorporated by reference to Exhibit 10.29 to Calpine Corporation’s Quarterly Report on Form 10-Q dated September 30, 2003, filed with the SEC on November 13, 2003).	
 	 	 	
10.2.1.2	 	Amendment No. 1 to the Credit and Guarantee Agreement, dated as of September 12, 2003, among Calpine Construction Finance Company, L.P., each of Calpine Hermiston, LLC, CPN Hermiston, LLC and Hermiston Power Partnership, as Guarantors, the Lenders named therein, and Goldman Sachs Credit Partners L.P., as Administrative Agent and Sole Lead Arranger (incorporated by reference to Exhibit 10.30 to Calpine Corporation’s Quarterly Report on Form 10-Q dated September 30, 2003, filed with the SEC on November 13, 2003).	
 	 	 	
10.2.1.3	 	Amendment No. 2 to the Credit and Guarantee Agreement, dated as of January 13, 2004, among Calpine Construction Finance Company, L.P., each of Calpine Hermiston, LLC, CPN Hermiston, LLC and Hermiston Power Partnership, as Guarantors, the Lenders named therein, and Goldman Sachs Credit Partners L.P., as Administrative Agent and Sole Lead Arranger (incorporated by reference to Exhibit 10.2.2.3 to Calpine Corporation’s Annual Report on Form 10-K for the year ended December 31, 2003, filed with the SEC on March 25, 2004).	
 	 	 	
10.2.1.4	 	Amendment No. 3 to the Credit and Guarantee Agreement, dated as of March 5, 2004, among Calpine Construction Finance Company, L.P., each of Calpine Hermiston, LLC, CPN Hermiston, LLC and Hermiston Power Partnership, as Guarantors, the Lenders named therein, and Goldman Sachs Credit Partners L.P., as Administrative Agent and Sole Lead Arranger (incorporated by reference to Exhibit 10.2.2.4 to Calpine Corporation’s Annual Report on Form 10-K for the year ended December 31, 2003, filed with the SEC on March 25, 2004).	
 	 	 	
10.2.1.5	 	Amendment No. 4 to the Credit and Guarantee Agreement, dated as of March 15, 2006, among Calpine Construction Finance Company, L.P., each of Calpine Hermiston, LLC, CPN Hermiston, LLC and Hermiston Power Partnership, as Guarantors, the Lenders named therein, and Goldman Sachs Credit Partners L.P., as Administrative Agent and Sole Lead Arranger (incorporated by reference to Exhibit 10.2.6.5 to Calpine Corporation’s Annual Report on Form 10-K for the year ended December 31, 2005, filed with the SEC on May 19, 2006).	

60

 

Exhibit	 	 	
Number	 	Description	
 	 	 	
10.2.1.6	 	Waiver Agreement, dated as of March 15, 2006 among Calpine Construction Finance Company, L.P., each of Calpine Hermiston, LLC, CPN Hermiston, LLC and Hermiston Power Partnership, as Guarantors, the Lenders named therein, and Goldman Sachs Credit Partners L.P., as Administrative Agent and Sole Lead Arranger (incorporated by reference to Exhibit 10.2.6.6 to Calpine Corporation’s Annual Report on Form 10-K for the year ended December 31, 2005, filed with the SEC on May 19, 2006).	
 	 	 	
10.2.1.7	 	Waiver Agreement, dated as of June 9, 2006, among Calpine Construction Finance Company, L.P., each of Calpine Hermiston, LLC, CPN Hermiston, LLC and Hermiston Power Partnership, as Guarantors, the Lenders named therein, and Goldman Sachs Credit Partners L.P., as Administrative Agent and Sole Lead Arranger (incorporated by reference to Exhibit 10.2.1.7 to Calpine Corporation’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2006, filed with the SEC on July 3, 2006).	
 	 	 	
10.2.1.8	 	Amendment to Waiver Agreement, dated as of August 4, 2006, among Calpine Construction Finance Company, L.P., CCFC Finance Corp., each of Calpine Hermiston, LLC, CPN Hermiston, LLC and Hermiston Power Partnership, as Guarantors, the Lenders named therein, and Goldman Sachs Credit Partners L.P., as Administrative Agent and Sole Lead Arranger.(*)	
 	 	 	
10.2.1.9	 	Second Amendment to Waiver Agreement, dated as of August 11, 2006, among Calpine Construction Finance Company, L.P., CCFC Finance Corp., each of Calpine Hermiston, LLC, CPN Hermiston, LLC and Hermiston Power Partnership, as Guarantors, the Lenders named therein, and Goldman Sachs Credit Partners L.P., as Administrative Agent and Sole Lead Arranger.(*)	
 	 	 	
31.1	 	Certification of the Chief Executive Officer Pursuant to Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.(*)	
 	 	 	
31.2	 	Certification of the Executive Vice President, Chief Financial Officer and Chief Restructuring Officer Pursuant to Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.(*)	
 	 	 	
32.1	 	Certification of Chief Executive Officer and Executive Vice President, Chief Financial Officer and Chief Restructuring Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.(*)	
____________
 
(*)	Filed herewith.	

61

 
 
SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
CALPINE CORPORATION
 
 	By:    	/s/ SCOTT J. DAVIDO	
 	 	Scott J. Davido	
 	 	Executive Vice President,	
 	 	Chief Financial Officer and	
 	 	Chief Restructuring Officer	
 	 	 	
Date:  August 14, 2006                                	 	 	

 	By:    	/s/ CHARLES B. CLARK, JR.	
 	 	Charles B. Clark, Jr.	
 	 	Senior Vice President,	
 	 	Corporate Controller and	
 	 	Chief Accounting Officer	
 	 	 	
Date:  August 14, 2006                                	 	 	

 
62

 
 
The following exhibits are filed herewith unless otherwise indicated:
 
EXHIBIT INDEX
 
Exhibit	 	 	
Number	 	Description	
 	 	 	
3.1.1	 	Amended and Restated Certificate of Incorporation of the Company, as amended through June 2, 2004 (incorporated by reference to Exhibit 3.1 to Calpine Corporation’s Quarterly Report on Form 10-Q dated June 30, 2004, filed with the SEC on August 9, 2004).	
 	 	 	
3.1.2	 	Amendment to Amended and Restated Certificate of Incorporation of the Company, dated June 20, 2005 (incorporated by reference to Exhibit 3.1.2 to Calpine Corporation’s Quarterly Report on Form 10-Q dated June 30, 2005, filed with the SEC on August 9, 2005).	
 	 	 	
3.2	 	Amended and Restated By-laws of the Company (incorporated by reference to Exhibit 3.1.8 to Calpine Corporation’s Annual Report on Form 10-K dated December 31, 2001, filed with the SEC on March 29, 2002).	
 	 	 	
4.1.1	 	Indenture, dated as of August 14, 2003, among Calpine Construction Finance Company, L.P., CCFC Finance Corp., each of Calpine Hermiston, LLC, CPN Hermiston, LLC and Hermiston Power Partnership, as Guarantors, and Wilmington Trust FSB, as Trustee, including form of Notes (incorporated by reference to Exhibit 4.4 to Calpine Corporation’s Quarterly Report on Form 10-Q dated September 30, 2003, filed with the SEC on November 13, 2003).	
 	 	 	
4.1.2	 	Supplemental Indenture, dated as of September 18, 2003, among Calpine Construction Finance Company, L.P., CCFC Finance Corp., each of Calpine Hermiston, LLC, CPN Hermiston, LLC and Hermiston Power Partnership, as Guarantors, and Wilmington Trust FSB, as Trustee (incorporated by reference to Exhibit 4.5 to Calpine Corporation’s Quarterly Report on Form 10-Q dated September 30, 2003, filed with the SEC on November 13, 2003).	
 	 	 	
4.1.3	 	Second Supplemental Indenture, dated as of January 14, 2004, among Calpine Construction Finance Company, L.P., CCFC Finance Corp., each of Calpine Hermiston, LLC, CPN Hermiston, LLC and Hermiston Power Partnership, as Guarantors, and Wilmington Trust FSB, as Trustee (incorporated by reference to Exhibit 4.14.3 to Calpine Corporation’s Annual Report on Form 10-K for the year ended December 31, 2003, filed with the SEC on March 25, 2004).	

63

 

Exhibit	 	 	
Number	 	Description	
 	 	 	
4.1.4	 	Third Supplemental Indenture, dated as of March 5, 2004, among Calpine Construction Finance Company, L.P., CCFC Finance Corp., each of Calpine Hermiston, LLC, CPN Hermiston, LLC and Hermiston Power Partnership, as Guarantors, and Wilmington Trust FSB, as Trustee (incorporated by reference to Exhibit 4.14.4 to Calpine Corporation’s Annual Report on Form 10-K for the year ended December 31, 2003, filed with the SEC on March 25, 2004).	
 	 	 	
4.1.5	 	Fourth Supplemental Indenture, dated as of March 15, 2006, among Calpine Construction Finance Company, L.P., CCFC Finance Corp., each of Calpine Hermiston, LLC, CPN Hermiston, LLC and Hermiston Power Partnership, as Guarantors, and Wilmington Trust FSB, as Trustee (incorporated by reference to Exhibit 4.13.5 to Calpine Corporation’s Annual Report on Form 10-K for the year ended December 31, 2005, filed with the SEC on May 19, 2006).	
 	 	 	
4.1.6	 	Waiver Agreement, dated as of March 15, 2006, among Calpine Construction Finance Company, L.P., CCFC Finance Corp., each of Calpine Hermiston, LLC, CPN Hermiston, LLC and Hermiston Power Partnership, as Guarantors, and Wilmington Trust FSB, as Trustee (incorporated by reference to Exhibit 4.13.6 to Calpine Corporation’s Annual Report on Form 10-K for the year ended December 31, 2005, filed with the SEC on May 19, 2006).	
 	 	 	
4.1.7	 	Waiver Agreement, dated as of June 9, 2006, among Calpine Construction Finance Company, L.P., CCFC Finance Corp., each of Calpine Hermiston, LLC, CPN Hermiston, LLC and Hermiston Power Partnership, as Guarantors, and Wilmington Trust FSB, as Trustee (incorporated by reference to Exhibit 4.1.7 to Calpine Corporation’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2006, filed with the SEC on July 3, 2006).	
 	 	 	
4.1.8	 	Amendment to Waiver Agreement, dated as of August 4, 2006, among Calpine Construction Finance Company, L.P., CCFC Finance Corp., each of Calpine Hermiston, LLC, CPN Hermiston, LLC and Hermiston Power Partnership, as Guarantors, and Wilmington Trust FSB, as Trustee.(*)	
 	 	 	
4.1.9	 	Second Amendment to Waiver Agreement, dated as of August 11, 2006, among Calpine Construction Finance Company, L.P., CCFC Finance Corp., each of Calpine Hermiston, LLC, CPN Hermiston, LLC and Hermiston Power Partnership, as Guarantors, and Wilmington Trust FSB, as Trustee.(*)	
 	 	 	
10.1	 	DIP Financing Agreements.	
 	 	 	
10.1.1.1	 	$2,000,000,000 Amended & Restated Revolving Credit, Term Loan and Guarantee Agreement, dated as of February 23, 2006, among the Company, as borrower, the Subsidiaries of the Company named therein, as guarantors, the Lenders from time to time party thereto, Credit Suisse Securities (USA) LLC and Deutsche Bank Trust Company Americas, as Joint Syndication Agents, Deutsche Bank Securities Inc. and Credit Suisse Securities (USA) LLC, as Joint Lead Arrangers and Joint Bookrunners, and Credit Suisse and Deutsche Bank Trust Company Americas, as Joint Administrative Agents (incorporated by reference to Exhibit 10.1.1.1 to Calpine Corporation’s Annual Report on Form 10-K for the year ended December 31, 2005, filed with the SEC on May 19, 2006).	
 	 	 	
10.1.1.2	 	First Consent, Waiver and Amendment, dated as of May 3, 2006, to and under the Amended and Restated Revolving Credit, Term Loan and Guarantee Agreement, dated as of February 23, 2006, among Calpine Corporation, as borrower, its subsidiaries named therein, as guarantors, the Lenders party thereto, Deutsche Bank Trust Company Americas, as administrative agent for the First Priority Lenders, Credit Suisse, Cayman Islands Branch, as administrative agent for the Second Priority Term Lenders (incorporated by reference to Exhibit 10.1.1.2 to Calpine Corporation’s Annual Report on Form 10-K for the year ended December 31, 2005, filed with the SEC on May 19, 2006).	

64

 

Exhibit	 	 	
Number	 	Description	
 	 	 	
10.1.1.3	 	Consent, dated as of June 28, 2006, under the Amended and Restated Revolving Credit, Term Loan and Guarantee Agreement, dated as of February 23, 2006, among Calpine Corporation, as borrower, its subsidiaries named therein, as guarantors, the Lenders party thereto, Deutsche Bank Trust Company Americas, as administrative agent for the First Priority Lenders, Credit Suisse, Cayman Islands Branch, as administrative agent for the Second Priority Term Lenders.(*)	
 	 	 	
10.1.2	 	Amended and Restated Security and Pledge Agreement, dated as of February 23, 2006, among the Company, the Subsidiaries of the Company signatory thereto and Deutsche Bank Trust Company Americas, as collateral agent (incorporated by reference to Exhibit 10.1.2 to Calpine Corporation’s Annual Report on Form 10-K for the year ended December 31, 2005, filed with the SEC on May 19, 2006).	
 	 	 	
10.2	 	Financing and Term Loan Agreements.	
 	 	 	
10.2.1.1	 	Credit and Guarantee Agreement, dated as of August 14, 2003, among Calpine Construction Finance Company, L.P., each of Calpine Hermiston, LLC, CPN Hermiston, LLC and Hermiston Power Partnership, as Guarantors, the Lenders named therein, and Goldman Sachs Credit Partners L.P., as Administrative Agent and Sole Lead Arranger (incorporated by reference to Exhibit 10.29 to Calpine Corporation’s Quarterly Report on Form 10-Q dated September 30, 2003, filed with the SEC on November 13, 2003).	
 	 	 	
10.2.1.2	 	Amendment No. 1 to the Credit and Guarantee Agreement, dated as of September 12, 2003, among Calpine Construction Finance Company, L.P., each of Calpine Hermiston, LLC, CPN Hermiston, LLC and Hermiston Power Partnership, as Guarantors, the Lenders named therein, and Goldman Sachs Credit Partners L.P., as Administrative Agent and Sole Lead Arranger (incorporated by reference to Exhibit 10.30 to Calpine Corporation’s Quarterly Report on Form 10-Q dated September 30, 2003, filed with the SEC on November 13, 2003).	
 	 	 	
10.2.1.3	 	Amendment No. 2 to the Credit and Guarantee Agreement, dated as of January 13, 2004, among Calpine Construction Finance Company, L.P., each of Calpine Hermiston, LLC, CPN Hermiston, LLC and Hermiston Power Partnership, as Guarantors, the Lenders named therein, and Goldman Sachs Credit Partners L.P., as Administrative Agent and Sole Lead Arranger (incorporated by reference to Exhibit 10.2.2.3 to Calpine Corporation’s Annual Report on Form 10-K for the year ended December 31, 2003, filed with the SEC on March 25, 2004).	
 	 	 	
10.2.1.4	 	Amendment No. 3 to the Credit and Guarantee Agreement, dated as of March 5, 2004, among Calpine Construction Finance Company, L.P., each of Calpine Hermiston, LLC, CPN Hermiston, LLC and Hermiston Power Partnership, as Guarantors, the Lenders named therein, and Goldman Sachs Credit Partners L.P., as Administrative Agent and Sole Lead Arranger (incorporated by reference to Exhibit 10.2.2.4 to Calpine Corporation’s Annual Report on Form 10-K for the year ended December 31, 2003, filed with the SEC on March 25, 2004).	
 	 	 	
10.2.1.5	 	Amendment No. 4 to the Credit and Guarantee Agreement, dated as of March 15, 2006, among Calpine Construction Finance Company, L.P., each of Calpine Hermiston, LLC, CPN Hermiston, LLC and Hermiston Power Partnership, as Guarantors, the Lenders named therein, and Goldman Sachs Credit Partners L.P., as Administrative Agent and Sole Lead Arranger (incorporated by reference to Exhibit 10.2.6.5 to Calpine Corporation’s Annual Report on Form 10-K for the year ended December 31, 2005, filed with the SEC on May 19, 2006).	

65

 

Exhibit	 	 	
Number	 	Description	
 	 	 	
10.2.1.6	 	Waiver Agreement, dated as of March 15, 2006 among Calpine Construction Finance Company, L.P., each of Calpine Hermiston, LLC, CPN Hermiston, LLC and Hermiston Power Partnership, as Guarantors, the Lenders named therein, and Goldman Sachs Credit Partners L.P., as Administrative Agent and Sole Lead Arranger (incorporated by reference to Exhibit 10.2.6.6 to Calpine Corporation’s Annual Report on Form 10-K for the year ended December 31, 2005, filed with the SEC on May 19, 2006).	
 	 	 	
10.2.1.7	 	Waiver Agreement, dated as of June 9, 2006, among Calpine Construction Finance Company, L.P., each of Calpine Hermiston, LLC, CPN Hermiston, LLC and Hermiston Power Partnership, as Guarantors, the Lenders named therein, and Goldman Sachs Credit Partners L.P., as Administrative Agent and Sole Lead Arranger (incorporated by reference to Exhibit 10.2.1.7 to Calpine Corporation’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2006, filed with the SEC on July 3, 2006).	
 	 	 	
10.2.1.8	 	Amendment to Waiver Agreement, dated as of August 4, 2006, among Calpine Construction Finance Company, L.P., CCFC Finance Corp., each of Calpine Hermiston, LLC, CPN Hermiston, LLC and Hermiston Power Partnership, as Guarantors, the Lenders named therein, and Goldman Sachs Credit Partners L.P., as Administrative Agent and Sole Lead Arranger.(*)	
 	 	 	
10.2.1.9	 	Second Amendment to Waiver Agreement, dated as of August 11, 2006, among Calpine Construction Finance Company, L.P., CCFC Finance Corp., each of Calpine Hermiston, LLC, CPN Hermiston, LLC and Hermiston Power Partnership, as Guarantors, the Lenders named therein, and Goldman Sachs Credit Partners L.P., as Administrative Agent and Sole Lead Arranger.(*)	
 	 	 	
31.1	 	Certification of the Chief Executive Officer Pursuant to Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.(*)	
 	 	 	
31.2	 	Certification of the Executive Vice President, Chief Financial Officer and Chief Restructuring Officer Pursuant to Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.(*)	
 	 	 	
32.1	 	Certification of Chief Executive Officer and Executive Vice President, Chief Financial Officer and Chief Restructuring Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.(*)	
____________
 
(*)	Filed herewith.	

 
66

 
 
Exhibit 4.1.9
 
SECOND AMENDMENT TO WAIVER AGREEMENT
 
Dated as of August 11, 2006
 
among
 
CALPINE CONSTRUCTION FINANCE COMPANY, L.P.
 
CCFC FINANCE CORP.
 
THE GUARANTORS NAMED HEREIN
 
and
 
WILMINGTON TRUST FSB,
 
as Trustee
 
Relating to the Indenture
Dated as of August 14, 2003
and
Amended as of September 18, 2003, January 14, 2004, March 5, 2004 and March 15, 2006

Exhibit 4.1.9

SECOND AMENDMENT TO WAIVER AGREEMENT UNDER INDENTURE, dated as of August 11, 2006 (“ Amendment ”), among Calpine Construction Finance Company, L.P., a Delaware limited partnership (the “ Company ”), CCFC Finance Corp., a Delaware corporation (“ Finance Corp. ”), the Guarantors and Wilmington Trust FSB, as trustee (the “ Trustee ”).
WHEREAS, the Company, Finance Corp., the Guarantors and the Trustee have executed that certain Indenture, dated as of August 14, 2003, as supplemented by that certain Supplemental Indenture, dated as of September 18, 2003, as further supplemented by that certain Second Supplemental Indenture, dated as of January 14, 2004, as further supplemented by that certain Third Supplemental Indenture, dated as of March 5, 2004, and as further supplemented by that certain Fourth Supplemental Indenture, dated as of March 15, 2006 (as supplemented, the “ Indenture ”), in connection with the co-issuance by the Company and Finance Corp. of certain Second Priority Senior Secured Floating Rate Notes due 2011 (the “ Notes ”);
WHEREAS, the Company, Finance Corp., the Guarantors and the Trustee executed that certain Waiver Agreement under Indenture dated as of June 9, 2006 (the “ Waiver Agreement ”) pursuant to which the Holders waived the Specified Defaults (as defined therein);
WHEREAS, pursuant to a consent solicitation commenced as of August 1, 2006, the Company and Finance Corp. proposed an amendment to the Waiver Agreement which was approved by the Holders of at least a majority in aggregate principal amount of the Notes, which amendment amended Section 2.4 of the Waiver Agreement to substitute “August 11, 2006” in place of “August 4, 2006” in clause (i) thereof;
WHEREAS, pursuant to a consent solicitation commenced as of August 8, 2006 (the “ Consent Solicitation ”), the Company and Finance Corp. proposed this Amendment;
WHEREAS, pursuant to Sections 6.04 and 9.02 of the Indenture, the Holders of at least a majority in aggregate principal amount of the Notes have consented to this Amendment; and
WHEREAS, the Company and Finance Corp. have directed the Trustee to execute and deliver this Amendment, in accordance with the terms of the Indenture.
NOW, THEREFORE, for and in consideration of the premises and mutual covenants herein contained, the Company, Finance Corp., the Guarantors and the Trustee agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1          Definition of Terms . Unless the context otherwise requires, capitalized terms used herein that are not otherwise defined herein shall have the meaning assigned to such terms in the Indenture.
 
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ARTICLE II
AMENDMENT
Section 2.1          Amendment . Section 2.4 of the Waiver Agreement is hereby amended to substitute “August 25, 2006” in place of “August 11, 2006” in clause (i) thereof.
Section 2.2           Conditions . The effectiveness of Section 2.1 of this Amendment is subject to the satisfaction of the following conditions precedent:
(a)            Holders of at least a majority in aggregate principal amount of the Notes shall have consented to this Amendment, and the Company, Finance Corp., and the Guarantors named as signatories hereto and the Trustee shall have executed and delivered their respective counterparts of this Amendment;
(b)            an amendment to waiver agreement (in form and substance reasonably acceptable to the Trustee) with the Lenders under (and as defined in) the Term Loan Agreement shall have been negotiated and shall become effective concurrently with this Amendment, provided that , any conditions to effectiveness or consideration made available to such Lenders for such agreement shall be made available to the Holders as conditions to effectiveness of, or as consideration for, this Amendment; and
(c)            the conditions specified in the Indenture which are applicable to this Amendment shall have been satisfied.
Section 2.3          Representations and Warranties . The Company, Finance Corp. and each Guarantor hereby represents and warrants to the Trustee that (a) this Amendment has been duly authorized, executed and delivered by the Company , Finance Corp. or Guarantor, as applicable, and constitutes its valid and legally binding obligation, enforceable against it in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of generally applicability relating to or affecting creditors’ rights and to general equity principles; (b) the execution and delivery of this Amendment (i) does not require any consent, approval, authorization or order of, or filing with, any governmental agency or body or any court, except such as have been obtained or made and are in full force and effect as of the date hereof and (ii) will not violate any applicable law or regulation or the charter, by laws or other organizational documents of the Company or Guarantor, as applicable, or any order of any governmental agency or body, or breach or conflict with any material agreement to which the Company, Finance Corp. or Guarantor, as applicable, is a party or by which the Company, Finance Corp. or Guarantor, as applicable, is bound; and (c) no Default or Event of Default under the Indenture exists and is continuing.
ARTICLE III
MISCELLANEOUS
Section 3.1          Interpretation . This Amendment shall become effective on the first date that all of the conditions specified in Section 2.2 shall have been satisfied (the “ Effective Date )” and shall bind every Holder. After the Effective Date, the Waiver Agreement shall be modified and amended in accordance with this Amendment, and all the terms and conditions of both shall be read together as though they constitute one instrument, except that, in case of
 
2

 
conflict, the provisions of this Amendment will control. The Waiver Agreement, as modified by this Amendment, is hereby ratified and confirmed in all respects and shall bind every Holder.
Section 3.2          The Trustee . The Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Amendment or for or in respect of the recitals contained herein, all of which are made solely by the Company and Finance Corp.
Section 3.3           Certain Duties and Responsibilities of the Trustee . In entering into this Amendment, the Trustee shall be entitled to the benefit of every provision of the Indenture relating to the conduct or affecting the liability or affording protection to the Trustee, whether or not elsewhere herein so provided.
Section 3.4           Continuing Effect of the Waiver Agreement and Indenture . Except as expressly set forth herein, this Amendment shall not by implication or otherwise limit, impair, constitute a waiver of, or otherwise affect the rights and remedies of the Holders, the Trustee, the Company, Finance Corp. or the Guarantors under the Waiver Agreement or the Indenture and shall not alter, modify, amend or in any way affect any of the terms, conditions, obligations, covenants or agreements contained in the Waiver Agreement or the Indenture, all of which are ratified and affirmed in all respects and shall continue in full force and effect. Nothing herein shall be deemed to entitle the Company, Finance Corp. or the Guarantors to a consent to, or a waiver, amendment, modification or other change of, any of the terms, conditions, obligations, covenants or agreements contained in the Waiver Agreement or the Indenture in similar or different circumstances. This Amendment shall apply and be effective only with respect to the provision of the Waiver Agreement specifically referred to herein. After the Effective Date, any reference to the Waiver Agreement shall mean the Waiver Agreement as amended and modified hereby.
Section 3.5           Counterparts . This Amendment may be executed in any number of counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument. The delivery of an executed signature of this Amendment by facsimile transmission shall be effective as delivery of a manually executed counterpart hereof.
Section 3.6          Applicable Law . This Amendment and the right and obligations of the parties hereunder shall be governed by, and shall be construed and enforced in accordance with, the laws of the State of New York.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
 
3

Exhibit 4.1.9

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed as of the day and year first above written.
CALPINE CONSTRUCTION FINANCE COMPANY, L.P.
 	By:	        /s/  Zamir Rauf                                          	
 	Name:	Zamir Rauf	 	
 	Title:	Vice President	 	
						
CCFC FINANCE CORP.
 	By:	        /s/  Zamir Rauf                                          	
 	Name:	Zamir Rauf	 	
 	Title:	Vice President	 	
						
CALPINE HERMISTON, LLC, as a Guarantor
 	By:	        /s/  Zamir Rauf                                          	
 	Name:	Zamir Rauf	 	
 	Title:	Vice President	 	
						
CPN HERMISTON, LLC, as a Guarantor
 	By:	        /s/  Zamir Rauf                                          	
 	Name:	Zamir Rauf	 	
 	Title:	Vice President	 	
						
HERMISTON POWER PARTNERSHIP, as a Guarantor
By: Calpine Hermiston, LLC, its General Partner
 	By:	        /s/  Zamir Rauf                                          	
 	Name:	Zamir Rauf	 	
 	Title:	Vice President	 	
						
WILMINGTON TRUST FSB, as Trustee
 	By:	        /s/  W. Chris Sponenberg                          	
 	Name:	W. Chris Sponenberg	 	
 	Title:	Authorized Signer	 	

 
4
[ Signature Page of Amendment to Waiver Agreement under Indenture ]

 
 
Exhibit 10.1.1.3
CONSENT
CONSENT, dated as of June 28, 2006 (this “ Consent ”), under the Amended and Restated Revolving Credit, Term Loan and Guarantee Agreement, dated as of February 23, 2006 (as heretofore amended, supplemented or otherwise modified, the “ Credit Agreement ”), among (i) CALPINE CORPORATION (the “ Borrower ”), (ii) the subsidiaries of the Borrower named therein (the “ Guarantors ”), (iii) CREDIT SUISSE SECURITIES (USA) LLCand DEUTSCHE BANK SECURITIES INC. (“ DBSI ”), as joint syndication agents (in such capacities, collectively, the “ Syndication Agents ”), (iv) DEUTSCHE BANK TRUST COMPANY AMERICAS (“ DB ”), as administrative agent for the First Priority Lenders hereunder (in such capacity and including any successors, the “ First Priority Agent ”), (v) GENERAL ELECTRIC CAPITAL CORPORATION (including its successors, “ GE Capital ”), as Sub-Agent for the Revolving Lenders hereunder (in such capacity and including any successors, the “ Sub-Agent ”), (vi) CREDIT SUISSE (“ CS ”), as administrative agent for the Second Priority Term Lenders hereunder (in such capacity and including any successors, the “ Second Priority Agent ”), (vii) LANDESBANK HESSEN THÜRINGEN GIROZENTRALE, NEW YORK BRANCH, GE CAPITAL and HSH NORDBANK AG, NEW YORK BRANCH, as joint documentation agents for the First Priority Lenders hereunder, and BAYERISCHE LANDESBANK, GE CAPITAL and UNION BANK OF CALIFORNIA, N.A., as joint documentation agents for the Second Priority Lenders hereunder (in such capacities and including any successors, collectively, the “ Documentation Agents ”), and (viii) each of the financial institutions from time to time party hereto (collectively, the “ Lenders ”).
W I T N E S S E T H :
WHEREAS, the Borrower, the Lenders and the Agents are parties to the Credit Agreement;
WHEREAS, the Borrower has entered into the Settlement Agreement, dated as of June 14, 2006 between, the Borrower, South Point Energy Center, LLC (“ South Point ”), Broad River Energy, LLC (“ Broad River ”), on the one hand, and Broad River OL-1, LLC, Broad River OL-2, LLC, Broad River OL-3, LLC and Broad River OL-4, LLC (collectively the “ Broad River Owner Lessors ”), South Point OL-1, LLC, South Point OL-2, LLC, South Point OL-3, LLC and South Point OL-4, LLC, and SBR OP-1, LLC, SBR OP-2, LLC, SBR OP-3, LLC and SBR OP-4, LLC, on the other hand, pursuant to which (a) the parties have agreed to amendcertain contracts and leases related to the Broad River facilities and South Point facilities, (b) Broad River and South Point have agreed to assume certain contracts and leases relating to the Broad River and South Point facilities, and (c) Broad River has agreed, subject to obtaining this consent, to grant to the Broad River Owner Lessors a temporary Lien on, and subsequently assigning to the Broad River Owner Lessors, the Power Purchase Agreements dated December 31, 1998 and July 7, 2000, respectively, between Broad River and Carolina Power and Light Company (the “ PPA Assignments ”);

2

WHEREAS, the Borrower has requested that the Lenders agree to consent under the Credit Agreement to the PPA Assignments; and
WHEREAS, the Lenders have agreed to such requested consent, but only upon the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual agreements contained herein, and for other valuable consideration the receipt of which is hereby acknowledged, the Borrower, the Lenders and the Administrative Agents hereby agree as follows:
SECTION 1.        DEFINITIONS.  Unless otherwise defined herein, capitalized terms are used herein as defined in the Credit Agreement.
SECTION 2.         CONSENT.  Effective upon entry by the Bankruptcy Court on the docket in the Cases of a final, non-appealable order or orders of the Bankruptcy Court, in each case, in form and substance reasonably acceptable to the Administrative Agents, approving the Settlement Agreement (the “ Approval Order ”), the Lenders hereby consent to the PPA Assignment pursuant to the Settlement Agreement as approved by the Approval Order.

 	SECTION 3.	CONDITIONS PRECEDENT.	
3.1            Effective Date.   This Consent shall become effective as of the date first set forth above (the “ Effective Date ”) following the date on which all of the following conditions have been satisfied or waived:
(a)            Execution and Delivery.   The Administrative Agents shall have received counterparts of this Consent duly executed by (A) the Borrower and the Guarantors and (B) the Required Lenders; and
(b)            No Default.   After giving effect to this Consent, there shall be no Default or Event of Default.

 	SECTION 4.	GENERAL.	
4.1            Representations and Warranties .  In order to induce the Administrative Agents and the Lenders to enter into this Consent, the Borrower hereby represents and warrants to the Administrative Agents and the Lenders that after giving effect to this Consent, the representations and warranties of the Borrower contained in the Credit Agreement and the other Loan Documents are true and correct in all material respects on and as of the Effective Date (after giving effect hereto) as if made on and as of the Effective Date (except where such representations and warranties expressly relate to an earlier date in which case such representations and warranties were true and correct in all material respects as of such earlier date); provided that all references to the “Credit Agreement” in any Loan Document shall be and are deemed to mean the Credit Agreement as modified hereby.

 	4.2	Loan Document .  This Consent constitutes a Loan Document.	

3

4.3            GOVERNING LAW .  THIS CONSENT, AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES TO THIS CONSENT, SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK AND, TO THE EXTENT APPLICABLE, THE BANKRUPTCY CODE.
4.4            Counterparts.   This Consent may be executed by the parties hereto in any number of separate counterparts and all of said counterparts taken together shall be deemed to constitute one and the same instrument.
4.5            Consent of Guarantors.   Each of the Guarantors hereby consents to the modifications to the Credit Agreement contemplated hereby.
4.6            Successors and Assigns.   This Consent shall be binding upon and inure to the benefit of the Borrower and the Guarantors and each of their respective successors and assigns, and upon the Administrative Agents and the Lenders and their successors and assigns.The execution and delivery of this Consent by any Lender prior to the Effective Date shall be binding upon its successors and assigns and shall be effective as to any loans or commitments assigned to it after such execution and delivery.
4.7            Limited Effect .  Except as expressly modified by this Consent, the Credit Agreement and the other Loan Documents are ratified and confirmed and are, and shall continue to be, in full force and effect in accordance with their respective terms. Each Loan Party acknowledges and agrees that such Loan Party is truly and justly indebted to the Lenders and the Administrative Agents for the Obligations, without defense, counterclaim or offset of any kind, and such Loan Party ratifies and reaffirms the validity, enforceability and binding nature of such Obligations. The Borrower acknowledges and agrees that nothing in this Consent shall constitute an indication of the Lenders’ willingness to consent to any other amendment, waiver or other modification of any other provision of the Credit Agreement or a waiver of any Default or Event of Default not referenced in this Consent or for any other time period.
4.8            Headings .  Section headings used in this Consent are for convenience of reference only, are not part of this Consent and are not to affect the constructions of, or to be taken into consideration in interpreting, this Consent.

4

IN WITNESS WHEREOF, the parties hereto have caused this Consent to be executed and delivered by their respective duly authorized officers as of the date first above written.
 
BORROWER :
 
CALPINE CORPORATION
 
 	By:	        /s/  Robert E. Fishman                  	
 	Name:	Robert E. Fishman	 	
 	Title:	Executive Vice President	 	

IN WITNESS WHEREOF, the parties hereto have caused this Consent to be executed and delivered by their respective duly authorized officers as of the date first above written.
 
BORROWER :
 
CALPINE CORPORATION
 
 	By:	        /s/  Robert E. Fishman                  	
 	Name:	Robert E. Fishman	 	
 	Title:	Executive Vice President	 	

 

 
GUARANTORS:
 
AMELIA ENERGY CENTER, LP
ANACAPA LAND COMPANY, LLC
ANDERSON SPRINGS ENERGY COMPANY
ANDROSCOGGIN ENERGY, INC.
AUBURNDALE PEAKER ENERGY CENTER, LLC
AUGUSTA DEVELOPMENT COMPANY, LLC
AVIATION FUNDING CORP.
BAYTOWN ENERGY CENTER, LP
BAYTOWN POWER GP, LLC
BAYTOWN POWER, LP
BELLINGHAM COGEN, INC.
BETHPAGE FUEL MANAGEMENT INC.
BLUE HERON ENERGY CENTER, LLC
BLUE SPRUCE HOLDINGS, LLC
BROAD RIVER ENERGY LLC
BROAD RIVER HOLDINGS, LLC
CALGEN EQUIPMENT FINANCE COMPANY, LLC
CALGEN EQUIPMENT FINANCE HOLDINGS, LLC
CALGEN EXPANSION COMPANY, LLC
CALGEN FINANCE CORPORATION
CALGEN PROJECT EQUIPMENT FINANCE
COMPANY ONE, LLC
CALGEN PROJECT EQUIPMENT FINANCE
COMPANY THREE, LLC
CALGEN PROJECT EQUIPMENT FINANCE
COMPANY TWO, LLC
CALPINE ACADIA HOLDINGS, LLC
CALPINE ADMINISTRATIVE SERVICES COMPANY, INC.
CALPINE AGNEWS, INC.
CALPINE AMELIA ENERGY CENTER GP, LLC
CALPINE AMELIA ENERGY CENTER LP, LLC
CALPINE AUBURNDALE HOLDINGS, LLC
CALPINE BAYTOWN ENERGY CENTER GP, LLC
CALPINE BAYTOWN ENERGY CENTER LP, LLC
CALPINE BETHPAGE 3 PIPELINE CONSTRUCTION
COMPANY, INC.
CALPINE BETHPAGE 3, LLC
CALPINE C*POWER, INC.
CALPINE CALGEN HOLDINGS, INC.
CALPINE CALIFORNIA DEVELOPMENT COMPANY, LLC
CALPINE CALIFORNIA ENERGY FINANCE, LLC
CALPINE CALIFORNIA EQUIPMENT FINANCE
COMPANY, LLC

 
 
CALPINE CALISTOGA HOLDINGS, LLC
CALPINE CENTRAL TEXAS GP, INC.
CALPINE CENTRAL, INC.
CALPINE CENTRAL, L.P.
CALPINE CENTRAL-TEXAS, INC.
CALPINE CHANNEL ENERGY CENTER GP, LLC
CALPINE CHANNEL ENERGY CENTER LP, LLC
CALPINE CLEAR LAKE ENERGY GP, LLC
CALPINE CLEAR LAKE ENERGY, LP
CALPINE COGENERATION CORPORATION
CALPINE CORPUS CHRISTI ENERGY GP, LLC
CALPINE CORPUS CHRISTI ENERGY, LP
CALPINE DECATUR PIPELINE, INC.
CALPINE DECATUR PIPELINE, L.P.
CALPINE DIGHTON, INC.
CALPINE EAST FUELS, INC.
CALPINE EASTERN CORPORATION
CALPINE ENERGY SERVICES HOLDINGS, INC.
CALPINE FINANCE COMPANY
CALPINE FREESTONE ENERGY GP, LLC
CALPINE FREESTONE ENERGY, LP
CALPINE FREESTONE, LLC
CALPINE FUELS CORPORATION
CALPINE GAS HOLDINGS, LLC
CALPINE GENERATING COMPANY, LLC
CALPINE GEYSERS COMPANY, L.P.
CALPINE GILROY 1, INC.
CALPINE GILROY 2, INC.
CALPINE GILROY COGEN, L.P.
CALPINE GLOBAL SERVICES COMPANY, INC.
CALPIRIE GORDONSVILLE GP HOLDINGS, LLC
CALPINE GORDONSVILLE LP HOLDINGS, LLC
CALPINE GORDONSVILLE, LLC
CALPINE GREENLEAF HOLDINGS, INC.
CALPINE GREENLEAF, INC.
CALPINE HIDALGO DESIGN, L.P.
CALPINE HIDALGO ENERGY CENTER, L.P.
CALPINE HIDALGO HOLDINGS, INC.
CALIPNE HIDALGO POWER GP, LLC
CALPINE HIDALGO POWER, LP
CALPINE HIDALGO, INC.
CALPINE INTERNATIONAL HOLDINGS, INC.
CALPINE INTERNATIONAL, LLC
CALPINE INVESTMENT HOLDINGS, LLC
CALPINE KENNEDY AIRPORT, INC.
CALPINE KENNEDY OPERATORS INC.
 
Guarantors - Consent

 
 
CALPINE KIA, INC.
CALPINE LEASING INC.
CALPINE LONG ISLAND, INC.
CALPINE LOST PINES OPERATIONS, INC.
CALPINE LOUISIANA PIPELINE COMPANY
CALPINE MAGIC VALLEY PIPELINE, INC.
CALPINE MONTEREY COGENERATION, INC.
CALPINE MVP, INC.
CALPINE NCTP GP, LLC
CALPINE NCTP, LP
CALPINE NORTHBROOK CORPORATION OF MAINE, INC.
CALPINE NORTHBROOK ENERGY HOLDING, LLC
CALPINE NORTHBROOK ENERGY, LLC
CALPINE NORTHBROOK HOLDINGS CORPORATION
CALPINE NORTHBROOK INVESTORS, LLC
CALPINE NORTHBROOK PROJECT HOLDINGS, LLC
CALPINE NORTHBROOK SERVICES, LLC
CALPINE NORTHBROOK SOUTHCOAST INVESTORS, LLC
CALPINE NTC, LP
CALPINE ONETA POWER I, LLC
CALPINE ONETA POWER II LLC
CALPINE ONETA POWER, L.P.
CALPINE OPERATIONS MANAGEMENT COMPANY, INC.
CALPINE PASTORIA HOLDINGS, LLC
CALPINE PHILADELPHIA, INC.
CALPINE PITTSBURG, LLC
CALPINE POWER COMPANY
CALPINE POWER EQUIPMENT LP
CALPINE POWER MANAGEMENT, INC.
CALPINE POWER MANAGEMENT, LP
CALPINE POWER, INC.
CALPINE POWERAMERICA, INC.
CALPINE POWERAMERICA - CA, LLC
CALPINE POWERAMERICA - CT, LLC
CALPINE POWERAMERICA - MA, LLC
CALPINE POWERAMERICA - ME, LLC
CALPINE POWERAMERICA - NH, LLC
CALPINE POWERAMERICA - NY, LLC
CALPINE POWERAMERICA - OR, LLC
CALPINE POWERAMERICA, LP
CALPINE PROJECT HOLDINGS, INC.
CALPINE PRYOR, INC.
CALPINE RUMFORD I, INC.
CALPINE RUMFORD, INC.
CALPINE SCHUYLKILL, INC.
CALPINE SISKIYOU GEOTHERMAL PARTNERS, L.P.
 
Guarantors - Consent

 
 
CALPINE SONORAN PIPELINE LLC
CALPINE STONY BROOK, INC.
CALPINE STONY BROOK OPERATORS, INC.
CALPINE STONY BROOK POWER MARKETING, LLC
CALPINE SUMAS, INC.
CALPINE TCCL HOLDINGS, INC.
CALPINE TEXAS PIPELINE GP, INC.
CALPINE TEXAS PIPELINE LP, INC.
CALPINE TEXAS PIPELINE, L.P.
CALPINE TIVERTON 1, INC.
CALPINE TIVERTON, INC.
CALPINE ULC I HOLDING, LLC
CALPINE UNIVERSITY POWER, INC.
CALPINE UNRESTRICTED FUNDING, LLC
CALPINE UNRESTRICTED HOLDINGS, LLC
CALPINE VAPOR, INC.
CARVILLE ENERGY LLC
CCFC DEVELOPMENT COMPANY, LLC
CCFC EQUIPMENT FINANCE COMPANY, LLC
CCFC PROJECT EQUIPMENT FINANCE COMPANY
ONE, LLC
CES GP, LLC
CGC DIGHTON, LLC
CHANNEL ENERGY CENTER, LP
CHANNEL POWER GP, LLC
CHANNEL POWER, LP
CLEAR LAKE COGENERATION LIMITED PARTNERSHIP
COGENAMERICA ASIA INC.
COGENAMERICA PARLIN SUPPLY CORP.
COLUMBIA ENERGY LLC
CORPUS CHRISTI COGENERATION L.P.
CPN 3RD TURBINE, INC.
CPN ACADIA, INC.
CPN BERKS GENERATION, INC.
CPN BERKS, LLC
CPN BETHPAGE 3RD TURBINE, INC.
CPN CASCADE, INC.
CPN CLEAR LAKE, INC.
CPN DECATUR PIPELINE, INC.
CPN ENERGY SERVICES LP, INC.
CPN FREESTONE, LLC
CPN FUNDING, INC.
CPN MORRIS, INC.
CPN OXFORD, INC.
CPN PIPELINE COMPANY
CPN PLEASANT HILL OPERATING, LLC
 
Guarantors - Consent

 
 
CPN PLEASANT HILL, LLC
CPN POWER SERVICES GP, LLC
CPN POWER SERVICES, LP
CPN PRYOR FUNDING CORPORATION
CPN TELEPHONE FLAT, INC.
DECATUR ENERGY CENTER, LLC
DEER PARK POWER GP, LLC
DEER PARK POWER, LP
DELTA ENERGY CENTER, LLC
DIGHTON POWER ASSOCIATES LIMITED PARTNERSHIP
EAST ALTAMONT ENERGY CENTER, LLC
FOND DU LAC ENERGY CENTER, LLC
FONTANA ENERGY CENTER, LLC
FREESTONE POWER GENERATION, LP
GEC BETHPAGE INC.
GEOTHERMAL ENERGY PARTNERS LTD.
GEYSERS POWER COMPANY II, LLC
GEYSERS POWER COMPANY, LLC
GEYSERS POWER I COMPANY
GOLDENDALE ENERGY CENTER, LLC
HAMMOND ENERGY LLC
HILLABEE ENERGY CENTER, LLC
IDELWILD FUEL MANAGEMENT CORP.
JMC BETHPAGE, INC.
KIAC PARTNERS
LAKE WALES ENERGY CENTER, LLC
LAWRENCE ENERGY CENTER, LLC
LONE OAK ENERGY CENTER, LLC
LOS ESTEROS CRITICAL ENERGY FACILITY, LLC
LOS MEDANOS ENERGY CENTER LLC
MAGIC VALLEY GAS PIPELINE GP, LLC
MAGIC VALLEY GAS PIPELINE, LP
MAGIC VALLEY PIPELINE, L.P.
MEP PLEASANT HILL, LLC
MOAPA ENERGY CENTER, LLC
MOBILE ENERGY LLC
MODOC POWER, INC.
MORGAN ENERGY CENTER, LLC
MOUNT HOFFMAN GEOTHERMAL COMPANY, L.P.
MT. VERNON ENERGY LLC
NISSEQUOGUE COGEN PARTNERS
NORTHWEST COGENERATION, INC.
NTC FIVE, INC.
NTC GP, LLC
NUECES BAY ENERGY LLC
O.L.S. ENERGY-AGNEWS, INC.
 
Guarantors - Consent

 
 
ODYSSEY LAND ACQUISITION COMPANY
PAJARO ENERGY CENTER, LLC
PASTORIA ENERGY CENTER, LLC
PASTORIA ENERGY FACILITY, LLC
PHILADELPHIA BIOGAS SUPPLY, INC.
PHIPPS BEND ENERGY CENTER, LLC
PINE BLUFF ENERGY, LLC
POWER INVESTORS, L.L.C.
QUINTANA CANADA HOLDINGS, LLC
ROCKGEN ENERGY LLC
RUMFORD POWER ASSOCIATES LIMITED PARTNERSHIP
RUSSELL CITY ENERGY CENTER, LLC
SAN JOAQUIN VALLEY ENERGY CENTER, LLC
SILVERADO GEOTHERMAL RESOURCES, INC.
SKIPANON NATURAL GAS, LLC
SOUTH POINT ENERGY CENTER, LLC
SOUTH POINT HOLDINGS, LLC
STONY BROOK COGENERATION, INC.
STONY BROOK FUEL MANAGEMENT CORP.
SUTTER DRYERS, INC.
TBG COGEN PARTNERS
TEXAS CITY COGENERATION, L.P.
TEXAS COGENERATION COMPANY
TEXAS COGENERATION FIVE, INC.
TEXAS COGENERATION ONE COMPANY
THERMAL POWER COMPANY
TIVERTON POWER ASSOCIATES LIMITED PARTNERSHIP
TOWANTIC ENERGY, L.L.C.
VEC HOLDINGS, LLC
VENTURE ACQUISITION COMPANY
VINEYARD ENERGY CENTER, LLC
WAWAYANDA ENERGY CENTER, LLC
WHATCOM COGENERATION PARTNERS, L.P.
ZION ENERGY LLC
 
 	By:	        /s/  Robert E. Fishman                  	
 	Name:	Robert E. Fishman	 	
 	Title:	Vice President	 	

 
Guarantors - Consent

 
 
AGENTS AND LENDERS :
 
DEUTSCHE BANK TRUST
COMPANY AMERICAS, as an
Administrative Agent and as a
Lender
 
 	By:	        /s/    Marcus M. Tarkington                                    	
 	Name:	Marcus M. Tarkington	 	
 	Title:	Director	 	

 	By:	        /s/    Paul O’Leary                                                   	
 	Name:	Paul O’Leary	 	
 	Title:	Vice President	 	

< PAGE >
 
SIGNATURE PAGE TO CONSENT DATED AS OF
JUNE __, 2006 TO THE AMENDED AND
RESTATED REVOLVING CREDIT, TERM LOAN
AND GUARANTEE AGREEMENT, DATED AS
OF FEBRUARY 23, 2006, AMONG CALPINE
CORPORATION, THE SUBSIDIARIES OF
CALPINE CORPORATION NAMED THEREIN,
THE LENDERS FROM TIME TO TIME PARTIES
THERETO, CREDIT SUISSE AND DEUTSCHE
BANK TRUST COMPANY AMERICAS, AS
ADMINISTRATIVE AGENT AND THE OTHER
AGENTS PARTIES THERETO.
 
FIRST LIEN
 
NAME OF INSTITUTION:
 
CREDIT SUISSE, CAYMAN ISLANDS BRANCH
 
 	By:	        /s/    Dana F. Klein                                                 	
 	Name:	Dana F. Klein	 	
 	Title:	Managing Director	 	

 	By:	        /s/    Michael T. Wotanowski                                	
 	Name:	Michael T. Wotanowski	 	
 	Title:	Vice President	 	

 

 
SIGNATURE PAGE TO CONSENT DATED AS OF
JUNE __, 2006 TO THE AMENDED AND
RESTATED REVOLVING CREDIT, TERM LOAN
AND GUARANTEE AGREEMENT, DATED AS
OF FEBRUARY 23, 2006, AMONG CALPINE
CORPORATION, THE SUBSIDIARIES OF
CALPINE CORPORATION NAMED THEREIN,
THE LENDERS FROM TIME TO TIME PARTIES
THERETO, CREDIT SUISSE AND DEUTSCHE
BANK TRUST COMPANY AMERICAS, AS
ADMINISTRATIVE AGENT AND THE OTHER
AGENTS PARTIES THERETO.
 
FIRST AND SECOND LIEN
 
NAME OF INSTITUTION:
 
CREDIT SUISSE CAPITAL LLC
 
 	By:	        /s/    Michael T. Wotanowski                                	
 	Name:	Michael T. Wotanowski	 	
 	Title:	Vice President	 	

< PAGE >
 
SIGNATURE PAGE TO CONSENT DATED AS OF
JUNE __, 2006 TO THE AMENDED AND
RESTATED REVOLVING CREDIT, TERM LOAN
AND GUARANTEE AGREEMENT, DATED AS
OF FEBRUARY 23, 2006, AMONG CALPINE
CORPORATION, THE SUBSIDIARIES OF
CALPINE CORPORATION NAMED THEREIN,
THE LENDERS FROM TIME TO TIME PARTIES
THERETO, CREDIT SUISSE AND DEUTSCHE
BANK TRUST COMPANY AMERICAS, AS
ADMINISTRATIVE AGENT AND THE OTHER
AGENTS PARTIES THERETO.
 
NAME OF INSTITUTION:
 
General Electric Capital Corporation
 
 	By:	        /s/Ali Imran Mirza                                                   	
 	Name:	Ali Imran Mirza	 	
 	Title:	Duly Authorized Signatory	 	

 

 
SIGNATURE PAGE TO CONSENT DATED AS OF
JUNE __, 2006 TO THE AMENDED AND
RESTATED REVOLVING CREDIT, TERM LOAN
AND GUARANTEE AGREEMENT, DATED AS
OF FEBRUARY 23, 2006, AMONG CALPINE
CORPORATION, THE SUBSIDIARIES OF
CALPINE CORPORATION NAMED THEREIN,
THE LENDERS FROM TIME TO TIME PARTIES
THERETO, CREDIT SUISSE AND DEUTSCHE
BANK TRUST COMPANY AMERICAS, AS
ADMINISTRATIVE AGENT AND THE OTHER
AGENTS PARTIES THERETO.
 
NAME OF INSTITUTION:
 
LANDESBANK HESSEN-THÜRINGEN
 
 	By:	        /s/    Erica A. Egan                                                 	
 	Name:	Erica A. Egan	 	
 	Title:	Vice President	 	
 	Corporate Finance Division	 	
 	Structured Finance Dept.	 	

 	By:	        /s/    David A. Leech                                               	
 	Name:	David A. Leech	 	
 	Title:	Senior Vice President	 	
 	Manager, Corporate Finance	 	
 	Corporate Finance Division	 	

 

 
 
SIGNATURE PAGE TO CONSENT DATED AS OF
JUNE __, 2006 TO THE AMENDED AND
RESTATED REVOLVING CREDIT, TERM LOAN
AND GUARANTEE AGREEMENT, DATED AS
OF FEBRUARY 23, 2006, AMONG CALPINE
CORPORATION, THE SUBSIDIARIES OF
CALPINE CORPORATION NAMED THEREIN,
THE LENDERS FROM TIME TO TIME PARTIES
THERETO, CREDIT SUISSE AND DEUTSCHE
BANK TRUST COMPANY AMERICAS, AS
ADMINISTRATIVE AGENT AND THE OTHER
AGENTS PARTIES THERETO.
 
NAME OF INSTITUTION:
 
Union Bank of California, N.A.
 
 	By:	        /s/    Bryan Read                                                     	
 	Name:	Bryan Read	 	
 	Title:	Vice President	 	

< PAGE >
 
SIGNATURE PAGE TO CONSENT DATED AS OF
JUNE __, 2006 TO THE AMENDED AND
RESTATED REVOLVING CREDIT, TERM LOAN
AND GUARANTEE AGREEMENT, DATED AS
OF FEBRUARY 23, 2006, AMONG CALPINE
CORPORATION, THE SUBSIDIARIES OF
CALPINE CORPORATION NAMED THEREIN,
THE LENDERS FROM TIME TO TIME PARTIES
THERETO, CREDIT SUISSE AND DEUTSCHE
BANK TRUST COMPANY AMERICAS, AS
ADMINISTRATIVE AGENT AND THE OTHER
AGENTS PARTIES THERETO.
 
NAME OF INSTITUTION:
 
TRICAP MANAGEMENT LIMITED
 
 	By:	        /s/    Bryan Davis                                                     	
 	Name:	Bryan Davis	 	
 	Title:	Vice President	 	

 

 
SIGNATURE PAGE TO CONSENT DATED AS OF
JUNE __, 2006 TO THE AMENDED AND
RESTATED REVOLVING CREDIT, TERM LOAN
AND GUARANTEE AGREEMENT, DATED AS
OF FEBRUARY 23, 2006, AMONG CALPINE
CORPORATION, THE SUBSIDIARIES OF
CALPINE CORPORATION NAMED THEREIN,
THE LENDERS FROM TIME TO TIME PARTIES
THERETO, CREDIT SUISSE AND DEUTSCHE
BANK TRUST COMPANY AMERICAS, AS
ADMINISTRATIVE AGENT AND THE OTHER
AGENTS PARTIES THERETO.
 
NAME OF INSTITUTION:
 
Oppenheimer Senior Floating Rate Fund
 
 	By:	        /s/    Jason Reuter                                                   	
 	Name:	Jason Reuter	 	
 	Title:	Manager	 	

< PAGE >
 
SIGNATURE PAGE TO CONSENT DATED AS OF
JUNE __, 2006 TO THE AMENDED AND
RESTATED REVOLVING CREDIT, TERM LOAN
AND GUARANTEE AGREEMENT, DATED AS
OF FEBRUARY 23, 2006, AMONG CALPINE
CORPORATION, THE SUBSIDIARIES OF
CALPINE CORPORATION NAMED THEREIN,
THE LENDERS FROM TIME TO TIME PARTIES
THERETO, CREDIT SUISSE AND DEUTSCHE
BANK TRUST COMPANY AMERICAS, AS
ADMINISTRATIVE AGENT AND THE OTHER
AGENTS PARTIES THERETO.
 
NAME OF INSTITUTION:
 
HarbourView 2006-1, Ltd.
 
 	By:	        /s/    Jason Reuter                                                   	
 	Name:	Jason Reuter	 	
 	Title:	Manager	 	

 

 
SIGNATURE PAGE TO CONSENT DATED AS OF
JUNE __, 2006 TO THE AMENDED AND
RESTATED REVOLVING CREDIT, TERM LOAN
AND GUARANTEE AGREEMENT, DATED AS
OF FEBRUARY 23, 2006, AMONG CALPINE
CORPORATION, THE SUBSIDIARIES OF
CALPINE CORPORATION NAMED THEREIN,
THE LENDERS FROM TIME TO TIME PARTIES
THERETO, CREDIT SUISSE AND DEUTSCHE
BANK TRUST COMPANY AMERICAS, AS
ADMINISTRATIVE AGENT AND THE OTHER
AGENTS PARTIES THERETO.
 
NAME OF INSTITUTION:
 
BEAR STEARNS CREDIT PRODUCTS INC.
 
 	By:	        /s/    Jeffery Tuck                                                     	
 	Name:	Jeffery Tuck	 	
 	Title:	Authorized Signatory	 	

< PAGE >
 
SIGNATURE PAGE TO CONSENT DATED AS OF
JUNE __, 2006 TO THE AMENDED AND
RESTATED REVOLVING CREDIT, TERM LOAN
AND GUARANTEE AGREEMENT, DATED AS
OF FEBRUARY 23, 2006, AMONG CALPINE
CORPORATION, THE SUBSIDIARIES OF
CALPINE CORPORATION NAMED THEREIN,
THE LENDERS FROM TIME TO TIME PARTIES
THERETO, CREDIT SUISSE AND DEUTSCHE
BANK TRUST COMPANY AMERICAS, AS
ADMINISTRATIVE AGENT AND THE OTHER
AGENTS PARTIES THERETO.
 
NAME OF INSTITUTION:
 
Erste Bank der Oesterreichischen Sparkassen AG
 
 	By:	        /s/    Patrick W. Kunkel                                          	
 	Name:	Patrick W. Kunkel	 	
 	Title:	Director	 	

 	By:	        /s/    John Fay                                                         	
 	Name:	John Fay	 	
 	Title:	Director	 	

 

 
SIGNATURE PAGE TO CONSENT DATED AS OF
JUNE __, 2006 TO THE AMENDED AND
RESTATED REVOLVING CREDIT, TERM LOAN
AND GUARANTEE AGREEMENT, DATED AS
OF FEBRUARY 23, 2006, AMONG CALPINE
CORPORATION, THE SUBSIDIARIES OF
CALPINE CORPORATION NAMED THEREIN,
THE LENDERS FROM TIME TO TIME PARTIES
THERETO, CREDIT SUISSE AND DEUTSCHE
BANK TRUST COMPANY AMERICAS, AS
ADMINISTRATIVE AGENT AND THE OTHER
AGENTS PARTIES THERETO.
 
NAME OF INSTITUTION:
 
Fortress Credit Investments I, LTD.
 
 	By:	        /s/    Glenn P. Cummins                                        	
 	Name:	Glenn P. Cummins	 	
 	Title:	Chief Financial Officer	 	

< PAGE >
 
SIGNATURE PAGE TO CONSENT DATED AS OF
JUNE __, 2006 TO THE AMENDED AND
RESTATED REVOLVING CREDIT, TERM LOAN
AND GUARANTEE AGREEMENT, DATED AS
OF FEBRUARY 23, 2006, AMONG CALPINE
CORPORATION, THE SUBSIDIARIES OF
CALPINE CORPORATION NAMED THEREIN,
THE LENDERS FROM TIME TO TIME PARTIES
THERETO, CREDIT SUISSE AND DEUTSCHE
BANK TRUST COMPANY AMERICAS, AS
ADMINISTRATIVE AGENT AND THE OTHER
AGENTS PARTIES THERETO.
 
NAME OF INSTITUTION:
 
Fortress Credit Investments II, LTD.
 
 	By:	        /s/    Glenn P. Cummins                                        	
 	Name:	Glenn P. Cummins	 	
 	Title:	Chief Financial Officer	 	

 

 
 
CALPINE DIP – 2 ND LIEN
 
SIGNATURE PAGE TO CONSENT DATED AS OF
JUNE __, 2006 TO THE AMENDED AND
RESTATED REVOLVING CREDIT, TERM LOAN
AND GUARANTEE AGREEMENT, DATED AS
OF FEBRUARY 23, 2006, AMONG CALPINE
CORPORATION, THE SUBSIDIARIES OF
CALPINE CORPORATION NAMED THEREIN,
THE LENDERS FROM TIME TO TIME PARTIES
THERETO, CREDIT SUISSE AND DEUTSCHE
BANK TRUST COMPANY AMERICAS, AS
ADMINISTRATIVE AGENT AND THE OTHER
AGENTS PARTIES THERETO.
 
NAME OF INSTITUTION:
 
Taconic Capital Partners 1.5 LP
 
by Taconic Capital Advisors LLC, as Investment Advisor
 
 	By:	        /s/    Christopher DeLong                                      	
 	Name:	Christopher DeLong	 	
 	Title:	Principal	 	

< PAGE >
 
CALPINE DIP – 1 ST LIEN
 
SIGNATURE PAGE TO CONSENT DATED AS OF
JUNE __, 2006 TO THE AMENDED AND
RESTATED REVOLVING CREDIT, TERM LOAN
AND GUARANTEE AGREEMENT, DATED AS
OF FEBRUARY 23, 2006, AMONG CALPINE
CORPORATION, THE SUBSIDIARIES OF
CALPINE CORPORATION NAMED THEREIN,
THE LENDERS FROM TIME TO TIME PARTIES
THERETO, CREDIT SUISSE AND DEUTSCHE
BANK TRUST COMPANY AMERICAS, AS
ADMINISTRATIVE AGENT AND THE OTHER
AGENTS PARTIES THERETO.
 
NAME OF INSTITUTION:
 
Taconic Capital Partners 1.5 LP
by Taconic Capital Advisors LLC, as Investment Advisor
 
 	By:	        /s/    Christopher DeLong                                      	
 	Name:	Christopher DeLong	 	
 	Title:	Principal	 	

 

 
SIGNATURE PAGE TO CONSENT DATED AS OF
JUNE __, 2006 TO THE AMENDED AND
RESTATED REVOLVING CREDIT, TERM LOAN
AND GUARANTEE AGREEMENT, DATED AS
OF FEBRUARY 23, 2006, AMONG CALPINE
CORPORATION, THE SUBSIDIARIES OF
CALPINE CORPORATION NAMED THEREIN,
THE LENDERS FROM TIME TO TIME PARTIES
THERETO, CREDIT SUISSE AND DEUTSCHE
BANK TRUST COMPANY AMERICAS, AS
ADMINISTRATIVE AGENT AND THE OTHER
AGENTS PARTIES THERETO.
 
NAME OF INSTITUTION:
 
Grand Central Asset Trust, DHM Series
 
 	By:	        /s/    Beata Konopko                                               	
 	Name:	Beata Konopko	 	
 	Title:	As attorney in fact	 	

 

 
 
SIGNATURE PAGE TO CONSENT DATED AS OF
JUNE __, 2006 TO THE AMENDED AND
RESTATED REVOLVING CREDIT, TERM LOAN
AND GUARANTEE AGREEMENT, DATED AS
OF FEBRUARY 23, 2006, AMONG CALPINE
CORPORATION, THE SUBSIDIARIES OF
CALPINE CORPORATION NAMED THEREIN,
THE LENDERS FROM TIME TO TIME PARTIES
THERETO, CREDIT SUISSE AND DEUTSCHE
BANK TRUST COMPANY AMERICAS, AS
ADMINISTRATIVE AGENT AND THE OTHER
AGENTS PARTIES THERETO.
 
NAME OF INSTITUTION:
 
OCM High Yield Plus Fund, L.P.
 
 	By:	OCM High Yield Plus Fund GP, LLC	
Its: General Partner
 
 	By:	Oaktree Capital Management, LLC	
Its: Managing Member
 
 	By:	        /s/    Timothy J. Andrews                                      	
 	Name:	Timothy J. Andrews	 	
 	Title:	Managing Director	 	

 	By:	        /s/    Richard Ting                                                   	
 	Name:	Richard Ting	 	
 	Title:	Senior Vice President	 	

 

 
SIGNATURE PAGE TO CONSENT DATED AS OF
JUNE __, 2006 TO THE AMENDED AND
RESTATED REVOLVING CREDIT, TERM LOAN
AND GUARANTEE AGREEMENT, DATED AS
OF FEBRUARY 23, 2006, AMONG CALPINE
CORPORATION, THE SUBSIDIARIES OF
CALPINE CORPORATION NAMED THEREIN,
THE LENDERS FROM TIME TO TIME PARTIES
THERETO, CREDIT SUISSE AND DEUTSCHE
BANK TRUST COMPANY AMERICAS, AS
ADMINISTRATIVE AGENT AND THE OTHER
AGENTS PARTIES THERETO.
 
NAME OF INSTITUTION:
 
Restoration Holdings, LTD
 
 	By:	        /s/    Ivona Smith                                                     	
 	Name:	Ivona Smith	 	
 	Title:	Principal	 	

< PAGE >
 
SIGNATURE PAGE TO CONSENT DATED AS OF
JUNE __, 2006 TO THE AMENDED AND
RESTATED REVOLVING CREDIT, TERM LOAN
AND GUARANTEE AGREEMENT, DATED AS
OF FEBRUARY 23, 2006, AMONG CALPINE
CORPORATION, THE SUBSIDIARIES OF
CALPINE CORPORATION NAMED THEREIN,
THE LENDERS FROM TIME TO TIME PARTIES
THERETO, CREDIT SUISSE AND DEUTSCHE
BANK TRUST COMPANY AMERICAS, AS
ADMINISTRATIVE AGENT AND THE OTHER
AGENTS PARTIES THERETO.
 
NAME OF INSTITUTION:
 
HFR DS Restoration Master Trust
 
 	By:	        /s/    Ivona Smith                                                     	
 	Name:	Ivona Smith	 	
 	Title:	Manager	 	

 

 
SIGNATURE PAGE TO CONSENT DATED AS OF
JUNE __, 2006 TO THE AMENDED AND
RESTATED REVOLVING CREDIT, TERM LOAN
AND GUARANTEE AGREEMENT, DATED AS
OF FEBRUARY 23, 2006, AMONG CALPINE
CORPORATION, THE SUBSIDIARIES OF
CALPINE CORPORATION NAMED THEREIN,
THE LENDERS FROM TIME TO TIME PARTIES
THERETO, CREDIT SUISSE AND DEUTSCHE
BANK TRUST COMPANY AMERICAS, AS
ADMINISTRATIVE AGENT AND THE OTHER
AGENTS PARTIES THERETO.
 
NAME OF INSTITUTION:
 
WATERVILLE FUNDING LLC
 
 	By:	        /s/    M. Cristina Higgins                                        	
 	Name:	M. Cristina Higgins	 	
 	Title:	Assistant Vice President	 	

< PAGE >
 
SIGNATURE PAGE TO CONSENT DATED AS OF
JUNE __, 2006 TO THE AMENDED AND
RESTATED REVOLVING CREDIT, TERM LOAN
AND GUARANTEE AGREEMENT, DATED AS
OF FEBRUARY 23, 2006, AMONG CALPINE
CORPORATION, THE SUBSIDIARIES OF
CALPINE CORPORATION NAMED THEREIN,
THE LENDERS FROM TIME TO TIME PARTIES
THERETO, CREDIT SUISSE AND DEUTSCHE
BANK TRUST COMPANY AMERICAS, AS
ADMINISTRATIVE AGENT AND THE OTHER
AGENTS PARTIES THERETO.
 
NAME OF INSTITUTION:
 
BlueMountain CLO Ltd:
 
 	By:	        /s/    Kimberly Reina                                               	
 	Name:	Kimberly Reina	 	
 	Title:	Associate	 	

 

 
SIGNATURE PAGE TO CONSENT DATED AS OF
JUNE __, 2006 TO THE AMENDED AND
RESTATED REVOLVING CREDIT, TERM LOAN
AND GUARANTEE AGREEMENT, DATED AS
OF FEBRUARY 23, 2006, AMONG CALPINE
CORPORATION, THE SUBSIDIARIES OF
CALPINE CORPORATION NAMED THEREIN,
THE LENDERS FROM TIME TO TIME PARTIES
THERETO, CREDIT SUISSE AND DEUTSCHE
BANK TRUST COMPANY AMERICAS, AS
ADMINISTRATIVE AGENT AND THE OTHER
AGENTS PARTIES THERETO.
 
NAME OF INSTITUTION:
 
BlueMountain CLO II Ltd:
 
 	By:	        /s/    Kimberly Reina                                               	
 	Name:	Kimberly Reina	 	
 	Title:	Associate	 	

< PAGE >
 
SIGNATURE PAGE TO CONSENT DATED AS OF
JUNE __, 2006 TO THE AMENDED AND
RESTATED REVOLVING CREDIT, TERM LOAN
AND GUARANTEE AGREEMENT, DATED AS
OF FEBRUARY 23, 2006, AMONG CALPINE
CORPORATION, THE SUBSIDIARIES OF
CALPINE CORPORATION NAMED THEREIN,
THE LENDERS FROM TIME TO TIME PARTIES
THERETO, CREDIT SUISSE AND DEUTSCHE
BANK TRUST COMPANY AMERICAS, AS
ADMINISTRATIVE AGENT AND THE OTHER
AGENTS PARTIES THERETO.
 
NAME OF INSTITUTION:
 
Highland Floating Rate Advantage Fund
 
 	By:	        /s/    Mickey Minces                                               	
 	Name:	Mickey Minces	 	
 	Title:	Compliance Officer	 	

 

 
SIGNATURE PAGE TO CONSENT DATED AS OF
JUNE __, 2006 TO THE AMENDED AND
RESTATED REVOLVING CREDIT, TERM LOAN
AND GUARANTEE AGREEMENT, DATED AS
OF FEBRUARY 23, 2006, AMONG CALPINE
CORPORATION, THE SUBSIDIARIES OF
CALPINE CORPORATION NAMED THEREIN,
THE LENDERS FROM TIME TO TIME PARTIES
THERETO, CREDIT SUISSE AND DEUTSCHE
BANK TRUST COMPANY AMERICAS, AS
ADMINISTRATIVE AGENT AND THE OTHER
AGENTS PARTIES THERETO.
 
NAME OF INSTITUTION:
 
Highland Floating Rate LLC
 
 	By:	        /s/    Mickey Minces                                               	
 	Name:	Mickey Minces	 	
 	Title:	Compliance Officer	 	

< PAGE >
 
SIGNATURE PAGE TO CONSENT DATED AS OF
JUNE __, 2006 TO THE AMENDED AND
RESTATED REVOLVING CREDIT, TERM LOAN
AND GUARANTEE AGREEMENT, DATED AS
OF FEBRUARY 23, 2006, AMONG CALPINE
CORPORATION, THE SUBSIDIARIES OF
CALPINE CORPORATION NAMED THEREIN,
THE LENDERS FROM TIME TO TIME PARTIES
THERETO, CREDIT SUISSE AND DEUTSCHE
BANK TRUST COMPANY AMERICAS, AS
ADMINISTRATIVE AGENT AND THE OTHER
AGENTS PARTIES THERETO.
 
NAME OF INSTITUTION:
 
Highland Legacy Limited
 	By:	Highland Capital Management, L.P.,	
As Collateral Manager
 	By:	Strand Advisors, Inc., Its General Partner	
 
 	By:	        /s/    J. Kevin Ciavarra                                             	
 	Name:	J. Kevin Ciavarra	 	
 	Title:	Officer	 	
 	Highland Capital Management, L.P.	 	
 	By: the General Partner,	 	
 	Strand Advisors, Inc.	 	

 

 
SIGNATURE PAGE TO CONSENT DATED AS OF
JUNE __, 2006 TO THE AMENDED AND
RESTATED REVOLVING CREDIT, TERM LOAN
AND GUARANTEE AGREEMENT, DATED AS
OF FEBRUARY 23, 2006, AMONG CALPINE
CORPORATION, THE SUBSIDIARIES OF
CALPINE CORPORATION NAMED THEREIN,
THE LENDERS FROM TIME TO TIME PARTIES
THERETO, CREDIT SUISSE AND DEUTSCHE
BANK TRUST COMPANY AMERICAS, AS
ADMINISTRATIVE AGENT AND THE OTHER
AGENTS PARTIES THERETO.
 
NAME OF INSTITUTION:
 
Loan Funding IV LLC
 	By:	Highland Capital Management, L.P.,	
As Collateral Manager
 	By:	Strand Advisors, Inc., Its General Partner	
 
 	By:	        /s/    J. Kevin Ciavarra                                             	
 	Name:	J. Kevin Ciavarra	 	
 	Title:	Officer	 	
 	Highland Capital Management, L.P.	 	
 	By: the General Partner,	 	
 	Strand Advisors, Inc.	 	

< PAGE >
 
SIGNATURE PAGE TO CONSENT DATED AS OF
JUNE __, 2006 TO THE AMENDED AND
RESTATED REVOLVING CREDIT, TERM LOAN
AND GUARANTEE AGREEMENT, DATED AS
OF FEBRUARY 23, 2006, AMONG CALPINE
CORPORATION, THE SUBSIDIARIES OF
CALPINE CORPORATION NAMED THEREIN,
THE LENDERS FROM TIME TO TIME PARTIES
THERETO, CREDIT SUISSE AND DEUTSCHE
BANK TRUST COMPANY AMERICAS, AS
ADMINISTRATIVE AGENT AND THE OTHER
AGENTS PARTIES THERETO.
 
NAME OF INSTITUTION:
 
Loan Funding VII LLC
 	By:	Highland Capital Management, L.P.,	
As Collateral Manager
 	By:	Strand Advisors, Inc., Its General Partner	
 
 	By:	        /s/    J. Kevin Ciavarra                                             	
 	Name:	J. Kevin Ciavarra	 	
 	Title:	Officer	 	
 	Highland Capital Management, L.P.	 	
 	By: the General Partner,	 	
 	Strand Advisors, Inc.	 	

 

 
SIGNATURE PAGE TO CONSENT DATED AS OF
JUNE __, 2006 TO THE AMENDED AND
RESTATED REVOLVING CREDIT, TERM LOAN
AND GUARANTEE AGREEMENT, DATED AS
OF FEBRUARY 23, 2006, AMONG CALPINE
CORPORATION, THE SUBSIDIARIES OF
CALPINE CORPORATION NAMED THEREIN,
THE LENDERS FROM TIME TO TIME PARTIES
THERETO, CREDIT SUISSE AND DEUTSCHE
BANK TRUST COMPANY AMERICAS, AS
ADMINISTRATIVE AGENT AND THE OTHER
AGENTS PARTIES THERETO.
 
NAME OF INSTITUTION:
 
Rockwall CDO LTD.
 	By:	Highland Capital Management, L.P.,	
As Collateral Manager
 	By:	Strand Advisors, Inc., Its General Partner	
 
 	By:	        /s/    J. Kevin Ciavarra                                             	
 	Name:	J. Kevin Ciavarra	 	
 	Title:	Officer	 	
 	Highland Capital Management, L.P.	 	
 	By: the General Partner,	 	
 	Strand Advisors, Inc.	 	

< PAGE >
 
SIGNATURE PAGE TO CONSENT DATED AS OF
JUNE __, 2006 TO THE AMENDED AND
RESTATED REVOLVING CREDIT, TERM LOAN
AND GUARANTEE AGREEMENT, DATED AS
OF FEBRUARY 23, 2006, AMONG CALPINE
CORPORATION, THE SUBSIDIARIES OF
CALPINE CORPORATION NAMED THEREIN,
THE LENDERS FROM TIME TO TIME PARTIES
THERETO, CREDIT SUISSE AND DEUTSCHE
BANK TRUST COMPANY AMERICAS, AS
ADMINISTRATIVE AGENT AND THE OTHER
AGENTS PARTIES THERETO.
 
NAME OF INSTITUTION:
 
Liberty CLO, Ltd.
 	By:	Highland Capital Management, L.P.,	
As Collateral Manager
 	By:	Strand Advisors, Inc., Its General Partner	
 
 	By:	        /s/    J. Kevin Ciavarra                                             	
 	Name:	J. Kevin Ciavarra	 	
 	Title:	Officer	 	
 	Highland Capital Management, L.P.	 	
 	By: the General Partner,	 	
 	Strand Advisors, Inc.	 	

 

 
SIGNATURE PAGE TO CONSENT DATED AS OF
JUNE __, 2006 TO THE AMENDED AND
RESTATED REVOLVING CREDIT, TERM LOAN
AND GUARANTEE AGREEMENT, DATED AS
OF FEBRUARY 23, 2006, AMONG CALPINE
CORPORATION, THE SUBSIDIARIES OF
CALPINE CORPORATION NAMED THEREIN,
THE LENDERS FROM TIME TO TIME PARTIES
THERETO, CREDIT SUISSE AND DEUTSCHE
BANK TRUST COMPANY AMERICAS, AS
ADMINISTRATIVE AGENT AND THE OTHER
AGENTS PARTIES THERETO.
 
NAME OF INSTITUTION:
 
Sankaty Advisors, LLC as Collateral Manager for Loan
Funding XI LLC, As Term Lender
 
 	By:	        /s/    James F. Kellogg III                                      	
 	Name:	James F. Kellogg III	 	
 	Title:	Managing Director	 	

< PAGE >
 
SIGNATURE PAGE TO CONSENT DATED AS OF
JUNE __, 2006 TO THE AMENDED AND
RESTATED REVOLVING CREDIT, TERM LOAN
AND GUARANTEE AGREEMENT, DATED AS
OF FEBRUARY 23, 2006, AMONG CALPINE
CORPORATION, THE SUBSIDIARIES OF
CALPINE CORPORATION NAMED THEREIN,
THE LENDERS FROM TIME TO TIME PARTIES
THERETO, CREDIT SUISSE AND DEUTSCHE
BANK TRUST COMPANY AMERICAS, AS
ADMINISTRATIVE AGENT AND THE OTHER
AGENTS PARTIES THERETO.
 
NAME OF INSTITUTION:
 
Sankaty Advisors, LLC as Collateral Manager for Castle
Hill III CLO, Limited, as Term Lender
 
 	By:	        /s/    James F. Kellogg III                                      	
 	Name:	James F. Kellogg III	 	
 	Title:	Managing Director	 	

 

 
SIGNATURE PAGE TO CONSENT DATED AS OF
JUNE __, 2006 TO THE AMENDED AND
RESTATED REVOLVING CREDIT, TERM LOAN
AND GUARANTEE AGREEMENT, DATED AS
OF FEBRUARY 23, 2006, AMONG CALPINE
CORPORATION, THE SUBSIDIARIES OF
CALPINE CORPORATION NAMED THEREIN,
THE LENDERS FROM TIME TO TIME PARTIES
THERETO, CREDIT SUISSE AND DEUTSCHE
BANK TRUST COMPANY AMERICAS, AS
ADMINISTRATIVE AGENT AND THE OTHER
AGENTS PARTIES THERETO.
 
NAME OF INSTITUTION:
 
Sankaty Advisors, LLC as Collateral Manager for Race
Point III, CLO Ltd., As Term Lender
 
 	By:	        /s/    James F. Kellogg III                                      	
 	Name:	James F. Kellogg III	 	
 	Title:	Managing Director	 	

< PAGE >
 
SIGNATURE PAGE TO CONSENT DATED AS OF
JUNE __, 2006 TO THE AMENDED AND
RESTATED REVOLVING CREDIT, TERM LOAN
AND GUARANTEE AGREEMENT, DATED AS
OF FEBRUARY 23, 2006, AMONG CALPINE
CORPORATION, THE SUBSIDIARIES OF
CALPINE CORPORATION NAMED THEREIN,
THE LENDERS FROM TIME TO TIME PARTIES
THERETO, CREDIT SUISSE AND DEUTSCHE
BANK TRUST COMPANY AMERICAS, AS
ADMINISTRATIVE AGENT AND THE OTHER
AGENTS PARTIES THERETO.
 
NAME OF INSTITUTION:
 
Sankaty Advisors, LLC as Collateral Manager for Race
Point CLO, Limited, As Term Lender
 
 	By:	        /s/    James F. Kellogg III                                      	
 	Name:	James F. Kellogg III	 	
 	Title:	Managing Director	 	

 

 
SIGNATURE PAGE TO CONSENT DATED AS OF
JUNE __, 2006 TO THE AMENDED AND
RESTATED REVOLVING CREDIT, TERM LOAN
AND GUARANTEE AGREEMENT, DATED AS
OF FEBRUARY 23, 2006, AMONG CALPINE
CORPORATION, THE SUBSIDIARIES OF
CALPINE CORPORATION NAMED THEREIN,
THE LENDERS FROM TIME TO TIME PARTIES
THERETO, CREDIT SUISSE AND DEUTSCHE
BANK TRUST COMPANY AMERICAS, AS
ADMINISTRATIVE AGENT AND THE OTHER
AGENTS PARTIES THERETO.
 
NAME OF INSTITUTION:
 
Sankaty Advisors, LLC as Collateral Manager for
Prospect Funding I, LLC, As Term Lender
 
 	By:	        /s/    James F. Kellogg III                                      	
 	Name:	James F. Kellogg III	 	
 	Title:	Managing Director	 	

< PAGE >
 
SIGNATURE PAGE TO CONSENT DATED AS OF
JUNE __, 2006 TO THE AMENDED AND
RESTATED REVOLVING CREDIT, TERM LOAN
AND GUARANTEE AGREEMENT, DATED AS
OF FEBRUARY 23, 2006, AMONG CALPINE
CORPORATION, THE SUBSIDIARIES OF
CALPINE CORPORATION NAMED THEREIN,
THE LENDERS FROM TIME TO TIME PARTIES
THERETO, CREDIT SUISSE AND DEUTSCHE
BANK TRUST COMPANY AMERICAS, AS
ADMINISTRATIVE AGENT AND THE OTHER
AGENTS PARTIES THERETO.
 
NAME OF INSTITUTION:
 
Sankaty Advisors, LLC as Collateral Manager for Castle
Hill II – INGOTS, Ltd., as Term Lender
 
 	By:	        /s/    James F. Kellogg III                                      	
 	Name:	James F. Kellogg III	 	
 	Title:	Managing Director	 	

 

 
SIGNATURE PAGE TO CONSENT DATED AS OF
JUNE __, 2006 TO THE AMENDED AND
RESTATED REVOLVING CREDIT, TERM LOAN
AND GUARANTEE AGREEMENT, DATED AS
OF FEBRUARY 23, 2006, AMONG CALPINE
CORPORATION, THE SUBSIDIARIES OF
CALPINE CORPORATION NAMED THEREIN,
THE LENDERS FROM TIME TO TIME PARTIES
THERETO, CREDIT SUISSE AND DEUTSCHE
BANK TRUST COMPANY AMERICAS, AS
ADMINISTRATIVE AGENT AND THE OTHER
AGENTS PARTIES THERETO.
 
NAME OF INSTITUTION:
 
Chatham Light II CLO, Limited, by Sankaty Advisors,
LLC, as Collateral Manager
 
 	By:	        /s/    James F. Kellogg III                                      	
 	Name:	James F. Kellogg III	 	
 	Title:	Managing Director	 	

< PAGE >
 
SIGNATURE PAGE TO CONSENT DATED AS OF
JUNE __, 2006 TO THE AMENDED AND
RESTATED REVOLVING CREDIT, TERM LOAN
AND GUARANTEE AGREEMENT, DATED AS
OF FEBRUARY 23, 2006, AMONG CALPINE
CORPORATION, THE SUBSIDIARIES OF
CALPINE CORPORATION NAMED THEREIN,
THE LENDERS FROM TIME TO TIME PARTIES
THERETO, CREDIT SUISSE AND DEUTSCHE
BANK TRUST COMPANY AMERICAS, AS
ADMINISTRATIVE AGENT AND THE OTHER
AGENTS PARTIES THERETO.
 
NAME OF INSTITUTION:
 
Katonah III, Ltd. by Sankaty Advisors LLC as Sub-
Advisors
 
 	By:	        /s/    James F. Kellogg III                                      	
 	Name:	James F. Kellogg III	 	
 	Title:	Managing Director	 	

 

 
SIGNATURE PAGE TO CONSENT DATED AS OF
JUNE __, 2006 TO THE AMENDED AND
RESTATED REVOLVING CREDIT, TERM LOAN
AND GUARANTEE AGREEMENT, DATED AS
OF FEBRUARY 23, 2006, AMONG CALPINE
CORPORATION, THE SUBSIDIARIES OF
CALPINE CORPORATION NAMED THEREIN,
THE LENDERS FROM TIME TO TIME PARTIES
THERETO, CREDIT SUISSE AND DEUTSCHE
BANK TRUST COMPANY AMERICAS, AS
ADMINISTRATIVE AGENT AND THE OTHER
AGENTS PARTIES THERETO.
 
NAME OF INSTITUTION:
 
Sankaty High Yield Partners, II, L.P.
 
 	By:	        /s/    James F. Kellogg III                                      	
 	Name:	James F. Kellogg III	 	
 	Title:	Managing Director	 	

< PAGE >
 
SIGNATURE PAGE TO CONSENT DATED AS OF
JUNE __, 2006 TO THE AMENDED AND
RESTATED REVOLVING CREDIT, TERM LOAN
AND GUARANTEE AGREEMENT, DATED AS
OF FEBRUARY 23, 2006, AMONG CALPINE
CORPORATION, THE SUBSIDIARIES OF
CALPINE CORPORATION NAMED THEREIN,
THE LENDERS FROM TIME TO TIME PARTIES
THERETO, CREDIT SUISSE AND DEUTSCHE
BANK TRUST COMPANY AMERICAS, AS
ADMINISTRATIVE AGENT AND THE OTHER
AGENTS PARTIES THERETO.
 
NAME OF INSTITUTION:
 
Sankaty High Yield Partners, III, L.P.
 
 	By:	        /s/    James F. Kellogg III                                      	
 	Name:	James F. Kellogg III	 	
 	Title:	Managing Director	 	

 

 
 
SIGNATURE PAGE TO CONSENT DATED AS OF
JUNE __, 2006 TO THE AMENDED AND
RESTATED REVOLVING CREDIT, TERM LOAN
AND GUARANTEE AGREEMENT, DATED AS
OF FEBRUARY 23, 2006, AMONG CALPINE
CORPORATION, THE SUBSIDIARIES OF
CALPINE CORPORATION NAMED THEREIN,
THE LENDERS FROM TIME TO TIME PARTIES
THERETO, CREDIT SUISSE AND DEUTSCHE
BANK TRUST COMPANY AMERICAS, AS
ADMINISTRATIVE AGENT AND THE OTHER
AGENTS PARTIES THERETO.
 
NAME OF INSTITUTION:
 
HARBOUR TOWN FUNDING LLC
 
 	By:	        /s/    M. Cristina Higgins                                        	
 	Name:	M. Cristina Higgins	 	
 	Title:	Assistant Vice President	 	

< PAGE >
 
SIGNATURE PAGE TO CONSENT DATED AS OF
JUNE __, 2006 TO THE AMENDED AND
RESTATED REVOLVING CREDIT, TERM LOAN
AND GUARANTEE AGREEMENT, DATED AS
OF FEBRUARY 23, 2006, AMONG CALPINE
CORPORATION, THE SUBSIDIARIES OF
CALPINE CORPORATION NAMED THEREIN,
THE LENDERS FROM TIME TO TIME PARTIES
THERETO, CREDIT SUISSE AND DEUTSCHE
BANK TRUST COMPANY AMERICAS, AS
ADMINISTRATIVE AGENT AND THE OTHER
AGENTS PARTIES THERETO.
 
NAME OF INSTITUTION:
 
LONG LANE MASTER TRUST IV
 
 	By:	        /s/    M. Cristina Higgins                                        	
 	Name:	M. Cristina Higgins	 	
 	Title:	Assistant Vice President	 	

 

 
SIGNATURE PAGE TO CONSENT DATED AS OF
JUNE __, 2006 TO THE AMENDED AND
RESTATED REVOLVING CREDIT, TERM LOAN
AND GUARANTEE AGREEMENT, DATED AS
OF FEBRUARY 23, 2006, AMONG CALPINE
CORPORATION, THE SUBSIDIARIES OF
CALPINE CORPORATION NAMED THEREIN,
THE LENDERS FROM TIME TO TIME PARTIES
THERETO, CREDIT SUISSE AND DEUTSCHE
BANK TRUST COMPANY AMERICAS, AS
ADMINISTRATIVE AGENT AND THE OTHER
AGENTS PARTIES THERETO.
 
NAME OF INSTITUTION:
 
SKY CBNA LOAN FUNDING
 
 	By:	        /s/    Lori Phillips                                                     	
 	Name:	Lori Phillips	 	
 	Title:	Authorized Signatory	 	

< PAGE >
 
SIGNATURE PAGE TO CONSENT DATED AS OF
JUNE __, 2006 TO THE AMENDED AND
RESTATED REVOLVING CREDIT, TERM LOAN
AND GUARANTEE AGREEMENT, DATED AS
OF FEBRUARY 23, 2006, AMONG CALPINE
CORPORATION, THE SUBSIDIARIES OF
CALPINE CORPORATION NAMED THEREIN,
THE LENDERS FROM TIME TO TIME PARTIES
THERETO, CREDIT SUISSE AND DEUTSCHE
BANK TRUST COMPANY AMERICAS, AS
ADMINISTRATIVE AGENT AND THE OTHER
AGENTS PARTIES THERETO.
 
NAME OF INSTITUTION:
 
Freestyle Special Opportunities Master Fund, Ltd.
 
 	By:	        /s/    Adrian Mackay                                               	
 	Name:	Adrian Mackay	 	
 	Title:	Managing Member of Freestyle	 	
 	Fund Services Company LLC,	 	
 	Investment Manager	 	

 

 
SIGNATURE PAGE TO CONSENT DATED AS OF
JUNE __, 2006 TO THE AMENDED AND
RESTATED REVOLVING CREDIT, TERM LOAN
AND GUARANTEE AGREEMENT, DATED AS
OF FEBRUARY 23, 2006, AMONG CALPINE
CORPORATION, THE SUBSIDIARIES OF
CALPINE CORPORATION NAMED THEREIN,
THE LENDERS FROM TIME TO TIME PARTIES
THERETO, CREDIT SUISSE AND DEUTSCHE
BANK TRUST COMPANY AMERICAS, AS
ADMINISTRATIVE AGENT AND THE OTHER
AGENTS PARTIES THERETO.
 
NAME OF INSTITUTION:
 
SOL Loan Funding LLC for itself or as
agent for SOL2 Loan Funding LLC
 
 	By:	        /s/    Roy Hykal                                                       	
 	Name:	Roy Hykal	 	
 	Title:	Attorney-in-fact	 	

< PAGE >
 
SIGNATURE PAGE TO CONSENT DATED AS OF
JUNE __, 2006 TO THE AMENDED AND
RESTATED REVOLVING CREDIT, TERM LOAN
AND GUARANTEE AGREEMENT, DATED AS
OF FEBRUARY 23, 2006, AMONG CALPINE
CORPORATION, THE SUBSIDIARIES OF
CALPINE CORPORATION NAMED THEREIN,
THE LENDERS FROM TIME TO TIME PARTIES
THERETO, CREDIT SUISSE AND DEUTSCHE
BANK TRUST COMPANY AMERICAS, AS
ADMINISTRATIVE AGENT AND THE OTHER
AGENTS PARTIES THERETO.
 
NAME OF INSTITUTION:
 
LightPoint CLO 2004-I, Ltd.
Premium Loan Trust I, Ltd.
LightPoint CLO III, Ltd.
LightPoint CLI IV, Ltd.
 
 	By:	        /s/    Colin Donlan                                                   	
 	Name:	Colin Donlan	 	
 	Title:	Director	 	

 

 
SIGNATURE PAGE TO CONSENT DATED AS OF
JUNE __, 2006 TO THE AMENDED AND
RESTATED REVOLVING CREDIT, TERM LOAN
AND GUARANTEE AGREEMENT, DATED AS
OF FEBRUARY 23, 2006, AMONG CALPINE
CORPORATION, THE SUBSIDIARIES OF
CALPINE CORPORATION NAMED THEREIN,
THE LENDERS FROM TIME TO TIME PARTIES
THERETO, CREDIT SUISSE AND DEUTSCHE
BANK TRUST COMPANY AMERICAS, AS
ADMINISTRATIVE AGENT AND THE OTHER
AGENTS PARTIES THERETO.
 
NAME OF INSTITUTION:
 
TRS CALLISTO LLC
 
 	By:	Deutsche Bank AG New York Branch, Its Sole Member	
 	By:	DB Services New Jersey, Inc.	 	

 	By:	        /s/    Alice L. Wagner                                             	
 	Name:	Alice L. Wagner	 	
 	Title:	Vice President	 	

 	By:	        /s/    Edward Schaffer                                             	
 	Name:	Edward Schaffer	 	
 	Title:	Vice President	 	

< PAGE >
 
SIGNATURE PAGE TO CONSENT DATED AS OF
JUNE __, 2006 TO THE AMENDED AND
RESTATED REVOLVING CREDIT, TERM LOAN
AND GUARANTEE AGREEMENT, DATED AS
OF FEBRUARY 23, 2006, AMONG CALPINE
CORPORATION, THE SUBSIDIARIES OF
CALPINE CORPORATION NAMED THEREIN,
THE LENDERS FROM TIME TO TIME PARTIES
THERETO, CREDIT SUISSE AND DEUTSCHE
BANK TRUST COMPANY AMERICAS, AS
ADMINISTRATIVE AGENT AND THE OTHER
AGENTS PARTIES THERETO.
 
NAME OF INSTITUTION:
 
TRS CALLISTO LLC
 
 	By:	Deutsche Bank AG New York Branch, Its Sole Member	
 	By:	DB Services New Jersey, Inc.	 	

 	By:	        /s/    Alice L. Wagner                                             	
 	Name:	Alice L. Wagner	 	
 	Title:	Vice President	 	

 	By:	        /s/    Edward Schaffer                                             	
 	Name:	Edward Schaffer	 	
 	Title:	Vice President	 	

 

 
SIGNATURE PAGE TO CONSENT DATED AS OF
JUNE __, 2006 TO THE AMENDED AND
RESTATED REVOLVING CREDIT, TERM LOAN
AND GUARANTEE AGREEMENT, DATED AS
OF FEBRUARY 23, 2006, AMONG CALPINE
CORPORATION, THE SUBSIDIARIES OF
CALPINE CORPORATION NAMED THEREIN,
THE LENDERS FROM TIME TO TIME PARTIES
THERETO, CREDIT SUISSE AND DEUTSCHE
BANK TRUST COMPANY AMERICAS, AS
ADMINISTRATIVE AGENT AND THE OTHER
AGENTS PARTIES THERETO.
 
NAME OF INSTITUTION:
 
Taconic Capital Partners 1.5 LP
 
 	By:	Taconic Capital Advisors LLC,	
as Investment Advisor
 
 	By:	        /s/    Christopher DeLong                                      	
 	Name:	Christopher DeLong	 	
 	Title:	Principal	 	

< PAGE >
 
SIGNATURE PAGE TO CONSENT DATED AS OF
JUNE __, 2006 TO THE AMENDED AND
RESTATED REVOLVING CREDIT, TERM LOAN
AND GUARANTEE AGREEMENT, DATED AS
OF FEBRUARY 23, 2006, AMONG CALPINE
CORPORATION, THE SUBSIDIARIES OF
CALPINE CORPORATION NAMED THEREIN,
THE LENDERS FROM TIME TO TIME PARTIES
THERETO, CREDIT SUISSE AND DEUTSCHE
BANK TRUST COMPANY AMERICAS, AS
ADMINISTRATIVE AGENT AND THE OTHER
AGENTS PARTIES THERETO.
 
NAME OF INSTITUTION:
 
CSAM Funding IV
 
 	By:	        /s/    Thomas Flannery                                             	
 	Name:	Thomas Flannery	 	
 	Title:	Authorized Signatory	 	

DIP Revolver
Second Priority DIP Term Loan
First Priority DIP Term Loan

 
 
SIGNATURE PAGE TO CONSENT DATED AS OF
JUNE __, 2006 TO THE AMENDED AND
RESTATED REVOLVING CREDIT, TERM LOAN
AND GUARANTEE AGREEMENT, DATED AS
OF FEBRUARY 23, 2006, AMONG CALPINE
CORPORATION, THE SUBSIDIARIES OF
CALPINE CORPORATION NAMED THEREIN,
THE LENDERS FROM TIME TO TIME PARTIES
THERETO, CREDIT SUISSE AND DEUTSCHE
BANK TRUST COMPANY AMERICAS, AS
ADMINISTRATIVE AGENT AND THE OTHER
AGENTS PARTIES THERETO.
 
NAME OF INSTITUTION:
 
Atrium III
 
 	By:	        /s/    Thomas Flannery                                             	
 	Name:	Thomas Flannery	 	
 	Title:	Authorized Signatory	 	

DIP Revolver
Second Priority DIP Term Loan
First Priority DIP Term Loan
 
< PAGE >
 
SIGNATURE PAGE TO CONSENT DATED AS OF
JUNE __, 2006 TO THE AMENDED AND
RESTATED REVOLVING CREDIT, TERM LOAN
AND GUARANTEE AGREEMENT, DATED AS
OF FEBRUARY 23, 2006, AMONG CALPINE
CORPORATION, THE SUBSIDIARIES OF
CALPINE CORPORATION NAMED THEREIN,
THE LENDERS FROM TIME TO TIME PARTIES
THERETO, CREDIT SUISSE AND DEUTSCHE
BANK TRUST COMPANY AMERICAS, AS
ADMINISTRATIVE AGENT AND THE OTHER
AGENTS PARTIES THERETO.
 
NAME OF INSTITUTION:
 
Atrium V
 
 	By:	        /s/    Thomas Flannery                                             	
 	Name:	Thomas Flannery	 	
 	Title:	Authorized Signatory	 	

DIP Revolver
Second Priority DIP Term Loan
First Priority DIP Term Loan

 
 
SIGNATURE PAGE TO CONSENT DATED AS OF
JUNE __, 2006 TO THE AMENDED AND
RESTATED REVOLVING CREDIT, TERM LOAN
AND GUARANTEE AGREEMENT, DATED AS
OF FEBRUARY 23, 2006, AMONG CALPINE
CORPORATION, THE SUBSIDIARIES OF
CALPINE CORPORATION NAMED THEREIN,
THE LENDERS FROM TIME TO TIME PARTIES
THERETO, CREDIT SUISSE AND DEUTSCHE
BANK TRUST COMPANY AMERICAS, AS
ADMINISTRATIVE AGENT AND THE OTHER
AGENTS PARTIES THERETO.
 
NAME OF INSTITUTION:
 
Madison Park Funding II, Ltd.
 
 	By:	        /s/    Thomas Flannery                                             	
 	Name:	Thomas Flannery	 	
 	Title:	Authorized Signatory	 	

DIP Revolver
Second Priority DIP Term Loan
First Priority DIP Term Loan
 
< PAGE >
 
SIGNATURE PAGE TO CONSENT DATED AS OF
JUNE __, 2006 TO THE AMENDED AND
RESTATED REVOLVING CREDIT, TERM LOAN
AND GUARANTEE AGREEMENT, DATED AS
OF FEBRUARY 23, 2006, AMONG CALPINE
CORPORATION, THE SUBSIDIARIES OF
CALPINE CORPORATION NAMED THEREIN,
THE LENDERS FROM TIME TO TIME PARTIES
THERETO, CREDIT SUISSE AND DEUTSCHE
BANK TRUST COMPANY AMERICAS, AS
ADMINISTRATIVE AGENT AND THE OTHER
AGENTS PARTIES THERETO.
 
NAME OF INSTITUTION:
 
CSAM FUNDING I
 
 	By:	        /s/    Thomas Flannery                                             	
 	Name:	Thomas Flannery	 	
 	Title:	Authorized Signatory	 	

DIP Revolver
Second Priority DIP Term Loan
First Priority DIP Term Loan

 
 
SIGNATURE PAGE TO CONSENT DATED AS OF
JUNE __, 2006 TO THE AMENDED AND
RESTATED REVOLVING CREDIT, TERM LOAN
AND GUARANTEE AGREEMENT, DATED AS
OF FEBRUARY 23, 2006, AMONG CALPINE
CORPORATION, THE SUBSIDIARIES OF
CALPINE CORPORATION NAMED THEREIN,
THE LENDERS FROM TIME TO TIME PARTIES
THERETO, CREDIT SUISSE AND DEUTSCHE
BANK TRUST COMPANY AMERICAS, AS
ADMINISTRATIVE AGENT AND THE OTHER
AGENTS PARTIES THERETO.
 
NAME OF INSTITUTION:
 
Atrium CDO
 
 	By:	        /s/    Thomas Flannery                                             	
 	Name:	Thomas Flannery	 	
 	Title:	Authorized Signatory	 	

DIP Revolver
Second Priority DIP Term Loan
First Priority DIP Term Loan
 
< PAGE >
 
SIGNATURE PAGE TO CONSENT DATED AS OF
JUNE __, 2006 TO THE AMENDED AND
RESTATED REVOLVING CREDIT, TERM LOAN
AND GUARANTEE AGREEMENT, DATED AS
OF FEBRUARY 23, 2006, AMONG CALPINE
CORPORATION, THE SUBSIDIARIES OF
CALPINE CORPORATION NAMED THEREIN,
THE LENDERS FROM TIME TO TIME PARTIES
THERETO, CREDIT SUISSE AND DEUTSCHE
BANK TRUST COMPANY AMERICAS, AS
ADMINISTRATIVE AGENT AND THE OTHER
AGENTS PARTIES THERETO.
 
NAME OF INSTITUTION:
 
CS Credit Strageies Master Fund, Ltd.
 
 	By:	        /s/    Thomas Flannery                                             	
 	Name:	Thomas Flannery	 	
 	Title:	Authorized Signatory	 	

DIP Revolver
TRS-CS-1st Lien L+0.55%
TRS-CS Second Priority DIP TL L + 0.55%
TRS-CS-First Priority DIP TL L + 0.55%
Margin Deposit – 1st Lien DIP TL
Margin Deposit – 2nd Lien DIP TL

 
 
SIGNATURE PAGE TO CONSENT DATED AS OF
JUNE __, 2006 TO THE AMENDED AND
RESTATED REVOLVING CREDIT, TERM LOAN
AND GUARANTEE AGREEMENT, DATED AS
OF FEBRUARY 23, 2006, AMONG CALPINE
CORPORATION, THE SUBSIDIARIES OF
CALPINE CORPORATION NAMED THEREIN,
THE LENDERS FROM TIME TO TIME PARTIES
THERETO, CREDIT SUISSE AND DEUTSCHE
BANK TRUST COMPANY AMERICAS, AS
ADMINISTRATIVE AGENT AND THE OTHER
AGENTS PARTIES THERETO.
 
NAME OF INSTITUTION:
 
CSAM FUNDING III
 
 	By:	        /s/    Thomas Flannery                                             	
 	Name:	Thomas Flannery	 	
 	Title:	Authorized Signatory	 	

DIP Revolver
Second Priority DIP Term Loan
First Priority DIP Term Loan

 
 
SIGNATURE PAGE TO CONSENT DATED AS OF
JUNE __, 2006 TO THE AMENDED AND
RESTATED REVOLVING CREDIT, TERM LOAN
AND GUARANTEE AGREEMENT, DATED AS
OF FEBRUARY 23, 2006, AMONG CALPINE
CORPORATION, THE SUBSIDIARIES OF
CALPINE CORPORATION NAMED THEREIN,
THE LENDERS FROM TIME TO TIME PARTIES
THERETO, CREDIT SUISSE AND DEUTSCHE
BANK TRUST COMPANY AMERICAS, AS
ADMINISTRATIVE AGENT AND THE OTHER
AGENTS PARTIES THERETO.
 
NAME OF INSTITUTION:
 
DUNES FUNDING LLC
 
 	By:	        /s/    M. Cristina Higgins                                        	
 	Name:	M. Cristina Higgins	 	
 	Title:	Assistant Vice President	 	

< PAGE >
 
SIGNATURE PAGE TO CONSENT DATED AS OF
JUNE __, 2006 TO THE AMENDED AND
RESTATED REVOLVING CREDIT, TERM LOAN
AND GUARANTEE AGREEMENT, DATED AS
OF FEBRUARY 23, 2006, AMONG CALPINE
CORPORATION, THE SUBSIDIARIES OF
CALPINE CORPORATION NAMED THEREIN,
THE LENDERS FROM TIME TO TIME PARTIES
THERETO, CREDIT SUISSE AND DEUTSCHE
BANK TRUST COMPANY AMERICAS, AS
ADMINISTRATIVE AGENT AND THE OTHER
AGENTS PARTIES THERETO.
 
Durham Acquisition Co., LLC
 
 	By:	        /s/    Christopher Mackey                                      	
 	Name:	Christopher Mackey	 	
 	Title:	Managing Principal	 	

 

 
SIGNATURE PAGE TO CONSENT DATED AS OF
JUNE __, 2006 TO THE AMENDED AND
RESTATED REVOLVING CREDIT, TERM LOAN
AND GUARANTEE AGREEMENT, DATED AS
OF FEBRUARY 23, 2006, AMONG CALPINE
CORPORATION, THE SUBSIDIARIES OF
CALPINE CORPORATION NAMED THEREIN,
THE LENDERS FROM TIME TO TIME PARTIES
THERETO, CREDIT SUISSE AND DEUTSCHE
BANK TRUST COMPANY AMERICAS, AS
ADMINISTRATIVE AGENT AND THE OTHER
AGENTS PARTIES THERETO.
 
Credit Genesis CLO 2005-1 Ltd.
 
 	By:	        /s/    Christopher Mackey                                      	
 	Name:	Christopher Mackey	 	
 	Title:	Managing Principal	 	

< PAGE >
 
SIGNATURE PAGE TO CONSENT DATED AS OF
JUNE __, 2006 TO THE AMENDED AND
RESTATED REVOLVING CREDIT, TERM LOAN
AND GUARANTEE AGREEMENT, DATED AS
OF FEBRUARY 23, 2006, AMONG CALPINE
CORPORATION, THE SUBSIDIARIES OF
CALPINE CORPORATION NAMED THEREIN,
THE LENDERS FROM TIME TO TIME PARTIES
THERETO, CREDIT SUISSE AND DEUTSCHE
BANK TRUST COMPANY AMERICAS, AS
ADMINISTRATIVE AGENT AND THE OTHER
AGENTS PARTIES THERETO.
 
NAME OF INSTITUTION:
 
TRS VENOR LLC
 	By:	DEUTSCHE BANK AG	
CAYMAN ISLANDS BRANCH, ITS SOLE MEMBER
 	By:	DB SERVICES NEW JERSEY, INC.	
 
 	By:	        /s/    Alice L. Wagner                                             	
 	Name:	Alice L. Wagner	 	
 	Title:	Vice President	 	

 	By:	        /s/    Michelle M. McCarthy                                  	
 	Name:	Michelle M. McCarthy	 	
 	Title:	Authorized Signatory	 	

 

 
SIGNATURE PAGE TO CONSENT DATED AS OF
JUNE __, 2006 TO THE AMENDED AND
RESTATED REVOLVING CREDIT, TERM LOAN
AND GUARANTEE AGREEMENT, DATED AS
OF FEBRUARY 23, 2006, AMONG CALPINE
CORPORATION, THE SUBSIDIARIES OF
CALPINE CORPORATION NAMED THEREIN,
THE LENDERS FROM TIME TO TIME PARTIES
THERETO, CREDIT SUISSE AND DEUTSCHE
BANK TRUST COMPANY AMERICAS, AS
ADMINISTRATIVE AGENT AND THE OTHER
AGENTS PARTIES THERETO.
 
NAME OF INSTITUTION:
 
TRS BRUIN LLC
 	By:	DEUTSCHE BANK AG	
CAYMAN ISLANDS BRANCH, ITS SOLE MEMBER
 	By:	DB SERVICES NEW JERSEY, INC.	
 
 	By:	        /s/    Alice L. Wagner                                             	
 	Name:	Alice L. Wagner	 	
 	Title:	Vice President	 	

 	By:	        /s/    Michelle M. McCarthy                                  	
 	Name:	Michelle M. McCarthy	 	
 	Title:	Authorized Signatory	 	

 

 
 
SIGNATURE PAGE TO CONSENT DATED AS OF
JUNE __, 2006 TO THE AMENDED AND
RESTATED REVOLVING CREDIT, TERM LOAN
AND GUARANTEE AGREEMENT, DATED AS
OF FEBRUARY 23, 2006, AMONG CALPINE
CORPORATION, THE SUBSIDIARIES OF
CALPINE CORPORATION NAMED THEREIN,
THE LENDERS FROM TIME TO TIME PARTIES
THERETO, CREDIT SUISSE AND DEUTSCHE
BANK TRUST COMPANY AMERICAS, AS
ADMINISTRATIVE AGENT AND THE OTHER
AGENTS PARTIES THERETO.
 
NAME OF INSTITUTION:
 
KNIGHT CBNA LOAN FUNDING
KNIGHT CFPI LOAN FUNDING LLC
 
Knight CBNA Loan Funding LLC, for itself or as Agent
for Knight CFPI Loan Funding LLC
 
 	By:	        /s/ Suzanne Smith                                                   	
 	Name:	Suzanne Smith	 	
 	Title:	As Attorney In Fact	 	

< PAGE >
 
SIGNATURE PAGE TO CONSENT DATED AS OF
JUNE __, 2006 TO THE AMENDED AND
RESTATED REVOLVING CREDIT, TERM LOAN
AND GUARANTEE AGREEMENT, DATED AS
OF FEBRUARY 23, 2006, AMONG CALPINE
CORPORATION, THE SUBSIDIARIES OF
CALPINE CORPORATION NAMED THEREIN,
THE LENDERS FROM TIME TO TIME PARTIES
THERETO, CREDIT SUISSE AND DEUTSCHE
BANK TRUST COMPANY AMERICAS, AS
ADMINISTRATIVE AGENT AND THE OTHER
AGENTS PARTIES THERETO.
 
NAME OF INSTITUTION:
 
Four Corners CLO II, LTD.
 
 	By:	        /s/ Suzanne Smith                                                   	
 	Name:	Suzanne Smith	 	
 	Title:	As Attorney In Fact	 	

 

 
 
SIGNATURE PAGE TO CONSENT DATED AS OF
JUNE __, 2006 TO THE AMENDED AND
RESTATED REVOLVING CREDIT, TERM LOAN
AND GUARANTEE AGREEMENT, DATED AS
OF FEBRUARY 23, 2006, AMONG CALPINE
CORPORATION, THE SUBSIDIARIES OF
CALPINE CORPORATION NAMED THEREIN,
THE LENDERS FROM TIME TO TIME PARTIES
THERETO, CREDIT SUISSE AND DEUTSCHE
BANK TRUST COMPANY AMERICAS, AS
ADMINISTRATIVE AGENT AND THE OTHER
AGENTS PARTIES THERETO.
 
NAME OF INSTITUTION:
 
TRS IO LLC
 	By:	DEUTSCHE BANK AG	
CAYMAN ISLANDS BRANCH, ITS SOLE MEMBER
 	By:	DB SERVICES NEW JERSEY, INC.	
 
 	By:	        /s/    Alice L. Wagner                                             	
 	Name:	Alice L. Wagner	 	
 	Title:	Vice President	 	

 	By:	        /s/    Michelle M. McCarthy                                  	
 	Name:	Michelle M. McCarthy	 	
 	Title:	Authorized Signatory	 	

< PAGE >
 
SIGNATURE PAGE TO CONSENT DATED AS OF
JUNE __, 2006 TO THE AMENDED AND
RESTATED REVOLVING CREDIT, TERM LOAN
AND GUARANTEE AGREEMENT, DATED AS
OF FEBRUARY 23, 2006, AMONG CALPINE
CORPORATION, THE SUBSIDIARIES OF
CALPINE CORPORATION NAMED THEREIN,
THE LENDERS FROM TIME TO TIME PARTIES
THERETO, CREDIT SUISSE AND DEUTSCHE
BANK TRUST COMPANY AMERICAS, AS
ADMINISTRATIVE AGENT AND THE OTHER
AGENTS PARTIES THERETO.
 
NAME OF INSTITUTION:
 
HSH Nordbank
 
 	By:	        /s/    Thomas Emmons                                             	
 	Name:	Thomas Emmons	 	
 	Title:	Senior Vice President	 	

 	By:	        /s/    Steven R. Pottle                                               	
 	Name:	Steven R. Pottle	 	
 	Title:	Vice President	 	

 

 
SIGNATURE PAGE TO CONSENT DATED AS OF
JUNE __, 2006 TO THE AMENDED AND
RESTATED REVOLVING CREDIT, TERM LOAN
AND GUARANTEE AGREEMENT, DATED AS
OF FEBRUARY 23, 2006, AMONG CALPINE
CORPORATION, THE SUBSIDIARIES OF
CALPINE CORPORATION NAMED THEREIN,
THE LENDERS FROM TIME TO TIME PARTIES
THERETO, CREDIT SUISSE AND DEUTSCHE
BANK TRUST COMPANY AMERICAS, AS
ADMINISTRATIVE AGENT AND THE OTHER
AGENTS PARTIES THERETO.
 
NAME OF INSTITUTION:
 
CONTINENTAL CASUALTY COMPANY
 
 	By:	        /s/    Marilou R. McGirr                                        	
 	Name:	Marilou R. McGirr	 	
 	Title:	Vice President and Assistant Treasurer	 	

< PAGE >
 
SIGNATURE PAGE TO CONSENT DATED AS OF
JUNE __, 2006 TO THE AMENDED AND
RESTATED REVOLVING CREDIT, TERM LOAN
AND GUARANTEE AGREEMENT, DATED AS
OF FEBRUARY 23, 2006, AMONG CALPINE
CORPORATION, THE SUBSIDIARIES OF
CALPINE CORPORATION NAMED THEREIN,
THE LENDERS FROM TIME TO TIME PARTIES
THERETO, CREDIT SUISSE AND DEUTSCHE
BANK TRUST COMPANY AMERICAS, AS
ADMINISTRATIVE AGENT AND THE OTHER
AGENTS PARTIES THERETO.
 
NAME OF INSTITUTION:
 
Raven Credit Opportunities Master Fund, Ltd.
By Raven Asset Management LLC
As Investment Advisor
 
 	By:	        /s/    Kevin Gerlitz                                                   	
 	Name:	Kevin Gerlitz	 	
 	Title:	CFO/COO	 	

 

 
SIGNATURE PAGE TO CONSENT DATED AS OF
JUNE __, 2006 TO THE AMENDED AND
RESTATED REVOLVING CREDIT, TERM LOAN
AND GUARANTEE AGREEMENT, DATED AS
OF FEBRUARY 23, 2006, AMONG CALPINE
CORPORATION, THE SUBSIDIARIES OF
CALPINE CORPORATION NAMED THEREIN,
THE LENDERS FROM TIME TO TIME PARTIES
THERETO, CREDIT SUISSE AND DEUTSCHE
BANK TRUST COMPANY AMERICAS, AS
ADMINISTRATIVE AGENT AND THE OTHER
AGENTS PARTIES THERETO.
 
NAME OF INSTITUTION:
 
MERRILL LYNCH CREDIT PRODUCTS, LLC
 
 	By:	        /s/    Neyda Darias                                                   	
 	Name:	Neyda Darias	 	
 	Title:	Vice President	 	

< PAGE >
 
SIGNATURE PAGE TO CONSENT DATED AS OF
JUNE __, 2006 TO THE AMENDED AND
RESTATED REVOLVING CREDIT, TERM LOAN
AND GUARANTEE AGREEMENT, DATED AS
OF FEBRUARY 23, 2006, AMONG CALPINE
CORPORATION, THE SUBSIDIARIES OF
CALPINE CORPORATION NAMED THEREIN,
THE LENDERS FROM TIME TO TIME PARTIES
THERETO, CREDIT SUISSE AND DEUTSCHE
BANK TRUST COMPANY AMERICAS, AS
ADMINISTRATIVE AGENT AND THE OTHER
AGENTS PARTIES THERETO.
 
NAME OF INSTITUTION:
 
ARES ENHANCED LOAN INVESTMENT
STRATEGY, LTD.
 
 	By:	Ares Enhanced Loan Management, L.P.,	
Investment Manager
 
 	By:	Ares Enhanced Loan GP, LLC,	
Its General Partner
 
 	By:	        /s/    David A. Sachs                                               	
 	Name:	David A. Sachs	 	
 	Title:	Vice President	 	

 

 
SIGNATURE PAGE TO CONSENT DATED AS OF
JUNE __, 2006 TO THE AMENDED AND
RESTATED REVOLVING CREDIT, TERM LOAN
AND GUARANTEE AGREEMENT, DATED AS
OF FEBRUARY 23, 2006, AMONG CALPINE
CORPORATION, THE SUBSIDIARIES OF
CALPINE CORPORATION NAMED THEREIN,
THE LENDERS FROM TIME TO TIME PARTIES
THERETO, CREDIT SUISSE AND DEUTSCHE
BANK TRUST COMPANY AMERICAS, AS
ADMINISTRATIVE AGENT AND THE OTHER
AGENTS PARTIES THERETO.
 
NAME OF INSTITUTION:
 
ARES ENHANCED LOAN INVESTMENT STRATEGY II, LTD.
 
 	By:	Ares Enhanced Loan Management, L.P.,	
Investment Manager
 
 	By:	Ares Enhanced Loan GP, LLC,	
Its General Partner
 
 	By:	        /s/    David A. Sachs                                               	
 	Name:	David A. Sachs	 	
 	Title:	Vice President	 	

< PAGE >
 
SIGNATURE PAGE TO CONSENT DATED AS OF
JUNE __, 2006 TO THE AMENDED AND
RESTATED REVOLVING CREDIT, TERM LOAN
AND GUARANTEE AGREEMENT, DATED AS
OF FEBRUARY 23, 2006, AMONG CALPINE
CORPORATION, THE SUBSIDIARIES OF
CALPINE CORPORATION NAMED THEREIN,
THE LENDERS FROM TIME TO TIME PARTIES
THERETO, CREDIT SUISSE AND DEUTSCHE
BANK TRUST COMPANY AMERICAS, AS
ADMINISTRATIVE AGENT AND THE OTHER
AGENTS PARTIES THERETO.
 
NAME OF INSTITUTION:
 
Ares X CLO Ltd.
 
 	By:	Ares CLO Management X, L.P., Investment Manager	
 
 	By:	Ares CLO GP X, LLC,	
Its General Partner
 
 	By:	        /s/    David A. Sachs                                               	
 	Name:	David A. Sachs	 	
 	Title:	Vice President	 	

 

 
SIGNATURE PAGE TO CONSENT DATED AS OF
JUNE __, 2006 TO THE AMENDED AND
RESTATED REVOLVING CREDIT, TERM LOAN
AND GUARANTEE AGREEMENT, DATED AS
OF FEBRUARY 23, 2006, AMONG CALPINE
CORPORATION, THE SUBSIDIARIES OF
CALPINE CORPORATION NAMED THEREIN,
THE LENDERS FROM TIME TO TIME PARTIES
THERETO, CREDIT SUISSE AND DEUTSCHE
BANK TRUST COMPANY AMERICAS, AS
ADMINISTRATIVE AGENT AND THE OTHER
AGENTS PARTIES THERETO.
 
NAME OF INSTITUTION:
 
ARES IIR CLO Management IIR, L.P.
 
 	By:	Ares CLO Management IIR, L.P., Investment Manager	
 
 	By:	Ares CLO GP IIR, LLC,	
Its General Partner
 
 	By:	        /s/    David A. Sachs                                               	
 	Name:	David A. Sachs	 	
 	Title:	Vice President	 	

< PAGE >
 
SIGNATURE PAGE TO CONSENT DATED AS OF
JUNE __, 2006 TO THE AMENDED AND
RESTATED REVOLVING CREDIT, TERM LOAN
AND GUARANTEE AGREEMENT, DATED AS
OF FEBRUARY 23, 2006, AMONG CALPINE
CORPORATION, THE SUBSIDIARIES OF
CALPINE CORPORATION NAMED THEREIN,
THE LENDERS FROM TIME TO TIME PARTIES
THERETO, CREDIT SUISSE AND DEUTSCHE
BANK TRUST COMPANY AMERICAS, AS
ADMINISTRATIVE AGENT AND THE OTHER
AGENTS PARTIES THERETO.
 
NAME OF INSTITUTION:
 
ARES VR CLO Ltd.
 
 	By:	Ares CLO Management VR, L.P., Investment Manager	
 
 	By:	Ares CLO GP VR, LLC,	
Its General Partner
 
 	By:	        /s/    David A. Sachs                                               	
 	Name:	David A. Sachs	 	
 	Title:	Vice President	 	

 

 
SIGNATURE PAGE TO CONSENT DATED AS OF
JUNE __, 2006 TO THE AMENDED AND
RESTATED REVOLVING CREDIT, TERM LOAN
AND GUARANTEE AGREEMENT, DATED AS
OF FEBRUARY 23, 2006, AMONG CALPINE
CORPORATION, THE SUBSIDIARIES OF
CALPINE CORPORATION NAMED THEREIN,
THE LENDERS FROM TIME TO TIME PARTIES
THERETO, CREDIT SUISSE AND DEUTSCHE
BANK TRUST COMPANY AMERICAS, AS
ADMINISTRATIVE AGENT AND THE OTHER
AGENTS PARTIES THERETO.
 
NAME OF INSTITUTION:
 
ARES VIR CLO Ltd.
 
 	By:	Ares CLO Management VIR, L.P., Investment Manager	
 
 	By:	Ares CLO GP VIR, LLC,	
Its General Partner
 
 	By:	        /s/    David A. Sachs                                               	
 	Name:	David A. Sachs	 	
 	Title:	Vice President	 	

< PAGE >
 
SIGNATURE PAGE TO CONSENT DATED AS OF
JUNE __, 2006 TO THE AMENDED AND
RESTATED REVOLVING CREDIT, TERM LOAN
AND GUARANTEE AGREEMENT, DATED AS
OF FEBRUARY 23, 2006, AMONG CALPINE
CORPORATION, THE SUBSIDIARIES OF
CALPINE CORPORATION NAMED THEREIN,
THE LENDERS FROM TIME TO TIME PARTIES
THERETO, CREDIT SUISSE AND DEUTSCHE
BANK TRUST COMPANY AMERICAS, AS
ADMINISTRATIVE AGENT AND THE OTHER
AGENTS PARTIES THERETO.
 
NAME OF INSTITUTION:
 
ARES VIII CLO Ltd.
 
 	By:	Ares CLO Management VIII, L.P., Investment Manager	
 
 	By:	Ares CLO GP VIII, LLC,	
Its General Partner
 
 	By:	        /s/    David A. Sachs                                               	
 	Name:	David A. Sachs	 	
 	Title:	Vice President	 	

 

 
SIGNATURE PAGE TO CONSENT DATED AS OF
JUNE __, 2006 TO THE AMENDED AND
RESTATED REVOLVING CREDIT, TERM LOAN
AND GUARANTEE AGREEMENT, DATED AS
OF FEBRUARY 23, 2006, AMONG CALPINE
CORPORATION, THE SUBSIDIARIES OF
CALPINE CORPORATION NAMED THEREIN,
THE LENDERS FROM TIME TO TIME PARTIES
THERETO, CREDIT SUISSE AND DEUTSCHE
BANK TRUST COMPANY AMERICAS, AS
ADMINISTRATIVE AGENT AND THE OTHER
AGENTS PARTIES THERETO.
 
NAME OF INSTITUTION:
 
ARES IX CLO Ltd.
 
 	By:	Ares CLO Management IX, L.P., Investment Manager	
 
 	By:	Ares CLO GP IX, LLC,	
Its General Partner
 
 	By:	        /s/    David A. Sachs                                               	
 	Name:	David A. Sachs	 	
 	Title:	Vice President	 	

< PAGE >
 
SIGNATURE PAGE TO CONSENT DATED AS OF
JUNE __, 2006 TO THE AMENDED AND
RESTATED REVOLVING CREDIT, TERM LOAN
AND GUARANTEE AGREEMENT, DATED AS
OF FEBRUARY 23, 2006, AMONG CALPINE
CORPORATION, THE SUBSIDIARIES OF
CALPINE CORPORATION NAMED THEREIN,
THE LENDERS FROM TIME TO TIME PARTIES
THERETO, CREDIT SUISSE AND DEUTSCHE
BANK TRUST COMPANY AMERICAS, AS
ADMINISTRATIVE AGENT AND THE OTHER
AGENTS PARTIES THERETO.
 
NAME OF INSTITUTION:
 
CONFLUENT 2 LIMITED
 	By:	Ares Private Account Management I, L.P., as Sub-Manager	
 
 	By:	Ares Private Account Management I GP, LLC, as General Partner	
 
 	By:	Ares Management LLC, As Manager	
 
 	By:	        /s/    David A. Sachs                                               	
 	Name:	David A. Sachs	 	
 	Title:	Vice President	 	

 

 
SIGNATURE PAGE TO CONSENT DATED AS OF
JUNE __, 2006 TO THE AMENDED AND
RESTATED REVOLVING CREDIT, TERM LOAN
AND GUARANTEE AGREEMENT, DATED AS
OF FEBRUARY 23, 2006, AMONG CALPINE
CORPORATION, THE SUBSIDIARIES OF
CALPINE CORPORATION NAMED THEREIN,
THE LENDERS FROM TIME TO TIME PARTIES
THERETO, CREDIT SUISSE AND DEUTSCHE
BANK TRUST COMPANY AMERICAS, AS
ADMINISTRATIVE AGENT AND THE OTHER
AGENTS PARTIES THERETO.
 
NAME OF INSTITUTION:
 
WIND RIVER CLO I LTD.
 	By:	McDonnell Investment Management, LLC, as	
Manager
 
 	By:	        /s/    Kathleen A. Zarn                                             	
 	Name:	Kathleen A. Zarn	 	
 	Title:	Vice President	 	

< PAGE >
 
SIGNATURE PAGE TO CONSENT DATED AS OF
JUNE __, 2006 TO THE AMENDED AND
RESTATED REVOLVING CREDIT, TERM LOAN
AND GUARANTEE AGREEMENT, DATED AS
OF FEBRUARY 23, 2006, AMONG CALPINE
CORPORATION, THE SUBSIDIARIES OF
CALPINE CORPORATION NAMED THEREIN,
THE LENDERS FROM TIME TO TIME PARTIES
THERETO, CREDIT SUISSE AND DEUTSCHE
BANK TRUST COMPANY AMERICAS, AS
ADMINISTRATIVE AGENT AND THE OTHER
AGENTS PARTIES THERETO.
 
NAME OF INSTITUTION:
 
WIND RIVER CLO II LTD.
 	By:	McDonnell Investment Management, LLC, as	
Manager
 
 	By:	        /s/    Kathleen A. Zarn                                             	
 	Name:	Kathleen A. Zarn	 	
 	Title:	Vice President	 	

 

 
SIGNATURE PAGE TO CONSENT DATED AS OF
JUNE __, 2006 TO THE AMENDED AND
RESTATED REVOLVING CREDIT, TERM LOAN
AND GUARANTEE AGREEMENT, DATED AS
OF FEBRUARY 23, 2006, AMONG CALPINE
CORPORATION, THE SUBSIDIARIES OF
CALPINE CORPORATION NAMED THEREIN,
THE LENDERS FROM TIME TO TIME PARTIES
THERETO, CREDIT SUISSE AND DEUTSCHE
BANK TRUST COMPANY AMERICAS, AS
ADMINISTRATIVE AGENT AND THE OTHER
AGENTS PARTIES THERETO.
 
NAME OF INSTITUTION:
 
MCDONNELL LOAN OPPORTUNITY LTD.
 	By:	McDonnell Investment Management, LLC, as	
Investment Manager
 
 	By:	        /s/    Kathleen A. Zarn                                             	
 	Name:	Kathleen A. Zarn	 	
 	Title:	Vice President	 	

< PAGE >
 
SIGNATURE PAGE TO CONSENT DATED AS OF
JUNE __, 2006 TO THE AMENDED AND
RESTATED REVOLVING CREDIT, TERM LOAN
AND GUARANTEE AGREEMENT, DATED AS
OF FEBRUARY 23, 2006, AMONG CALPINE
CORPORATION, THE SUBSIDIARIES OF
CALPINE CORPORATION NAMED THEREIN,
THE LENDERS FROM TIME TO TIME PARTIES
THERETO, CREDIT SUISSE AND DEUTSCHE
BANK TRUST COMPANY AMERICAS, AS
ADMINISTRATIVE AGENT AND THE OTHER
AGENTS PARTIES THERETO.
 
NAME OF INSTITUTION:
 
GANNETT PEAK CLO I, LTD.
 	By:	McDonnell Investment Management, LLC, as	
Investment Manager
 
 	By:	        /s/    Kathleen A. Zarn                                             	
 	Name:	Kathleen A. Zarn	 	
 	Title:	Vice President	 	

 

 
SIGNATURE PAGE TO CONSENT DATED AS OF
JUNE __, 2006 TO THE AMENDED AND
RESTATED REVOLVING CREDIT, TERM LOAN
AND GUARANTEE AGREEMENT, DATED AS
OF FEBRUARY 23, 2006, AMONG CALPINE
CORPORATION, THE SUBSIDIARIES OF
CALPINE CORPORATION NAMED THEREIN,
THE LENDERS FROM TIME TO TIME PARTIES
THERETO, CREDIT SUISSE AND DEUTSCHE
BANK TRUST COMPANY AMERICAS, AS
ADMINISTRATIVE AGENT AND THE OTHER
AGENTS PARTIES THERETO.
 
NAME OF INSTITUTION:
 
KC CLO II PLC.
 
 	By:	        /s/    Irina Bo      va                                          		
 	Name:	Irina Bo___va	 		
 	Title:	Vice President	 	

 	By:	        /s/                       Martin                                		
 	Name:	                Martin	 		
 	Title:	Vice President	 	

< PAGE >
 
SIGNATURE PAGE TO CONSENT DATED AS OF
JUNE __, 2006 TO THE AMENDED AND
RESTATED REVOLVING CREDIT, TERM LOAN
AND GUARANTEE AGREEMENT, DATED AS
OF FEBRUARY 23, 2006, AMONG CALPINE
CORPORATION, THE SUBSIDIARIES OF
CALPINE CORPORATION NAMED THEREIN,
THE LENDERS FROM TIME TO TIME PARTIES
THERETO, CREDIT SUISSE AND DEUTSCHE
BANK TRUST COMPANY AMERICAS, AS
ADMINISTRATIVE AGENT AND THE OTHER
AGENTS PARTIES THERETO.
 
NAME OF INSTITUTION:
 
Thracia, LLC
 
 	By:	        /s/    Frank Argenziano                                          	
 	Name:	Frank Argenziano	 	
 	Title:	CFO	 	

 

 
SIGNATURE PAGE TO CONSENT DATED AS OF
JUNE __, 2006 TO THE AMENDED AND
RESTATED REVOLVING CREDIT, TERM LOAN
AND GUARANTEE AGREEMENT, DATED AS
OF FEBRUARY 23, 2006, AMONG CALPINE
CORPORATION, THE SUBSIDIARIES OF
CALPINE CORPORATION NAMED THEREIN,
THE LENDERS FROM TIME TO TIME PARTIES
THERETO, CREDIT SUISSE AND DEUTSCHE
BANK TRUST COMPANY AMERICAS, AS
ADMINISTRATIVE AGENT AND THE OTHER
AGENTS PARTIES THERETO.
 
NAME OF INSTITUTION:
 
Union Bank of California, N.A.
 
 	By:	        /s/    Bryan Read                                                     	
 	Name:	Bryan Read	 	
 	Title:	Vice President	 	

< PAGE >
 
SIGNATURE PAGE TO CONSENT DATED AS OF
JUNE __, 2006 TO THE AMENDED AND
RESTATED REVOLVING CREDIT, TERM LOAN
AND GUARANTEE AGREEMENT, DATED AS
OF FEBRUARY 23, 2006, AMONG CALPINE
CORPORATION, THE SUBSIDIARIES OF
CALPINE CORPORATION NAMED THEREIN,
THE LENDERS FROM TIME TO TIME PARTIES
THERETO, CREDIT SUISSE AND DEUTSCHE
BANK TRUST COMPANY AMERICAS, AS
ADMINISTRATIVE AGENT AND THE OTHER
AGENTS PARTIES THERETO.
 
NAME OF INSTITUTION:
 
Grand Central Asset Trust, STK Series
 
 	By:	                                                                                          	
 	Name:	 	
 	Title:	 	

 

 
SIGNATURE PAGE TO CONSENT DATED AS OF
JUNE __, 2006 TO THE AMENDED AND
RESTATED REVOLVING CREDIT, TERM LOAN
AND GUARANTEE AGREEMENT, DATED AS
OF FEBRUARY 23, 2006, AMONG CALPINE
CORPORATION, THE SUBSIDIARIES OF
CALPINE CORPORATION NAMED THEREIN,
THE LENDERS FROM TIME TO TIME PARTIES
THERETO, CREDIT SUISSE AND DEUTSCHE
BANK TRUST COMPANY AMERICAS, AS
ADMINISTRATIVE AGENT AND THE OTHER
AGENTS PARTIES THERETO.
 
NAME OF INSTITUTION:
 
Grand Central Asset Trust, BAS Series
 
 	By:	        /s/    Beata Konopko                                               	
 	Name:	Beata Konopko	 	
 	Title:	As attorney in fact	 	

< PAGE >
 
SIGNATURE PAGE TO CONSENT DATED AS OF
JUNE __, 2006 TO THE AMENDED AND
RESTATED REVOLVING CREDIT, TERM LOAN
AND GUARANTEE AGREEMENT, DATED AS
OF FEBRUARY 23, 2006, AMONG CALPINE
CORPORATION, THE SUBSIDIARIES OF
CALPINE CORPORATION NAMED THEREIN,
THE LENDERS FROM TIME TO TIME PARTIES
THERETO, CREDIT SUISSE AND DEUTSCHE
BANK TRUST COMPANY AMERICAS, AS
ADMINISTRATIVE AGENT AND THE OTHER
AGENTS PARTIES THERETO.
 
NAME OF INSTITUTION:
 
Grand Central Asset Trust, STK Series
 
 	By:	        /s/    Beata Konopko                                               	
 	Name:	Beata Konopko	 	
 	Title:	As attorney in fact	 	

 

 
SIGNATURE PAGE TO CONSENT DATED AS OF
JUNE __, 2006 TO THE AMENDED AND
RESTATED REVOLVING CREDIT, TERM LOAN
AND GUARANTEE AGREEMENT, DATED AS
OF FEBRUARY 23, 2006, AMONG CALPINE
CORPORATION, THE SUBSIDIARIES OF
CALPINE CORPORATION NAMED THEREIN,
THE LENDERS FROM TIME TO TIME PARTIES
THERETO, CREDIT SUISSE AND DEUTSCHE
BANK TRUST COMPANY AMERICAS, AS
ADMINISTRATIVE AGENT AND THE OTHER
AGENTS PARTIES THERETO.
 
FIRST TRUST/FOUR CORNERS SENIOR FLOATING RATE
INCOME FUND
 	By:	Four Corners Capital Management LLC	
As Sub-Advisor
 
 	By:	        /s/    Vijay Srinivasan                                             	
 	Name:	Vijay Srinivasan	 	
 	Title:	Vice President	 	

FIRST TRUST/FOUR CORNERS SENIOR FLOATING RATE
INCOME FUND II
 	By:	Four Corners Capital Management LLC	
As Sub-Advisor
 
 	By:	        /s/    Vijay Srinivasan                                             	
 	Name:	Vijay Srinivasan	 	
 	Title:	Vice President	 	

SECURITY INCOME FUND-INCOME OPPORTUNITY SERIES
 	By:	Four Corners Capital Management LLC	
As Sub-Advisors
 
 	By:	        /s/    Vijay Srinivasan                                             	
 	Name:	Vijay Srinivasan	 	
 	Title:	Vice President	 	

MACQUARIE/FIRST TRUST GLOBAL
INFRASTRUCTURE/UTILITIES DIVIDEND & INCOME FUND
 	By:	Four Corners Capital Management LLC	
As Sub-Advisors
 
 	By:	        /s/    Vijay Srinivasan                                             	
 	Name:	Vijay Srinivasan	 	
 	Title:	Vice President	 	

 

 
SIGNATURE PAGE TO CONSENT DATED AS OF
JUNE __, 2006 TO THE AMENDED AND
RESTATED REVOLVING CREDIT, TERM LOAN
AND GUARANTEE AGREEMENT, DATED AS
OF FEBRUARY 23, 2006, AMONG CALPINE
CORPORATION, THE SUBSIDIARIES OF
CALPINE CORPORATION NAMED THEREIN,
THE LENDERS FROM TIME TO TIME PARTIES
THERETO, CREDIT SUISSE AND DEUTSCHE
BANK TRUST COMPANY AMERICAS, AS
ADMINISTRATIVE AGENT AND THE OTHER
AGENTS PARTIES THERETO.
 
FORTRESS PORTFOLIO TRUST
 	BY:	Four Corners Capital Management LLC,	
As Investment Manager
 
 	By:	        /s/    Vijay Srinivasan                                             	
 	Name:	Vijay Srinivasan	 	
 	Title:	Vice President	 	

FOUR CORNERS CLO 2005-I, LLC
 	By:	Four Corners Capital Management LLC,	
As Investment Manager
 
 	By:	        /s/    Vijay Srinivasan                                             	
 	Name:	Vijay Srinivasan	 	
 	Title:	Vice President	 	

< PAGE >
 
SIGNATURE PAGE TO CONSENT DATED AS OF
JUNE __, 2006 TO THE AMENDED AND
RESTATED REVOLVING CREDIT, TERM LOAN
AND GUARANTEE AGREEMENT, DATED AS
OF FEBRUARY 23, 2006, AMONG CALPINE
CORPORATION, THE SUBSIDIARIES OF
CALPINE CORPORATION NAMED THEREIN,
THE LENDERS FROM TIME TO TIME PARTIES
THERETO, CREDIT SUISSE AND DEUTSCHE
BANK TRUST COMPANY AMERICAS, AS
ADMINISTRATIVE AGENT AND THE OTHER
AGENTS PARTIES THERETO.
 
NAME OF INSTITUTION:
 
AUGUSTA TRADING LLC
 
 	By:	        /s/    M. Cristina Higgins                                        	
 	Name:	M. Cristina Higgins	 	
 	Title:	Assistant Vice President	 	

 

 
 
Exhibit 10.2.1.8
 
Execution Copy
 
AMENDMENT TO WAIVER AGREEMENT
 
THIS AMENDMENT TO WAIVER AGREEMENT (this “ Agreement ”) is entered into as of the 4th day of August, 2006, by and among CALPINE CONSTRUCTION FINANCE COMPANY, L.P., a Delaware limited partnership (the “ Borrower ”), CALPINE HERMISTON, LLC, a Delaware limited liability company (“ Calpine LLC ”), CPN HERMISTON, LLC, a Delaware limited liability company (“ CPN LLC ”), and HERMISTON POWER PARTNERSHIP, an Oregon general partnership (the “ Hermiston Partnership ” and, together with Calpine LLC and CPN LLC, the “ Guarantors ”), the lenders party hereto (the “ Lenders ”), and GOLDMAN SACHS CREDIT PARTNERS L.P., as administrative agent (together with its successors in such capacity, the “ Administrative Agent ”).
RECITALS
WHEREAS, the Borrower, the Guarantors, the Lenders, the Administrative Agent and the Sole Lead Arranger entered into a Credit and Guarantee Agreement, dated as of August 14, 2003 (as amended on September 12, 2003, January 13, 2004, March 5, 2004, and March 15, 2006, and as may be further amended from time to time, the “ Credit Agreement ”), pursuant to which the Borrower borrowed, on a non-recourse basis as described in the Credit Agreement, $385,000,000 in aggregate principal amount of First Priority Senior Secured Institutional Term Loans due 2009;
WHEREAS, the Borrower, the Guarantors, the Lenders, and the Administrative Agent entered into a Waiver Agreement dated as of June 9, 2006 (the “ Waiver Agreement ”) pursuant to which the Lenders waived the Specified Defaults (as defined therein); and
WHEREAS, the Borrower, the Guarantors, the Lenders, and the Administrative Agent desire to amend the Waiver Agreement as provided herein.
NOW THEREFORE, in consideration of the premises and the mutual agreements set forth, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:
1.              Definitions . Unless otherwise defined herein, capitalized terms used herein that are not otherwise defined herein shall have the respective meanings assigned to such terms in the Credit Agreement
2.              Amendment . Section 4 of the Waiver Agreement is hereby amended to substitute “August 11, 2006” in place of “August 4, 2006” in clause (i) thereof.
3.              Conditions . The effectiveness of Section 2 of this Agreement is subject to the satisfaction of the following conditions precedent (unless specifically waived in writing by the Requisite Lenders):

 
 
(a)            the Borrower and the Guarantors named as signatories hereto and the Requisite Lenders shall have executed and delivered to the Administrative Agent their respective counterparts of this Agreement;
(b)            the Borrower shall have paid in cash or other immediately available funds, reimbursement of all outstanding fees and expenses of the Administrative Agent owing under Section 13.02 of the Credit Agreement as well as all other fees owing to the Administrative Agent arising under this Agreement, the Credit Agreement or any other agreement; and
(c)            an amendment to waiver agreement (in form and substance reasonably acceptable to the Administrative Agent) with the Holders of Notes shall have been negotiated and shall become effective concurrently with this Agreement, provided, that any conditions to effectiveness or consideration made available to the Holders of Notes for such agreement shall be made available to the Administrative Agent and the Lenders as conditions to effectiveness of, or as consideration for, this Agreement.
4.              Representations and Warranties . The Borrower and each Guarantor hereby represents and warrants to each Lender and the Administrative Agent that (a) this Agreement has been duly authorized, executed and delivered by the Borrower or Guarantor, as applicable, and constitutes its valid and legally binding obligation, enforceable against it in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of generally applicability relating to or affecting creditors’ rights and to general equity principles; (b) the execution and delivery of this Agreement (i) does not require any consent, approval, authorization or order of, or filing with, any governmental agency or body or any court, except such as have been obtained or made and are in full force and effect as of the date hereof and (ii) will not violate any applicable law or regulation or the charter, by-laws or other organizational documents of the Borrower or Guarantor, as applicable, or any order of any governmental agency or body, or breach or conflict with any material agreement to which the Borrower or Guarantor, as applicable, is a party or by which the Borrower or Guarantor, as applicable, is bound; and (c) no Default or Event of Default under the Credit Agreement exists and is continuing.
5.              Execution in Counterparts . This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which when taken together shall constitute but one and the same instrument.
6.              Continuing Effect of the Waiver Agreement and Credit Agreement . Except as expressly set forth herein, this Agreement shall not by implication or otherwise limit, impair, constitute a waiver of, or otherwise affect the rights and remedies of the Lenders, the Administrative Agent, the Borrower or the Guarantors under the Waiver Agreement or Credit Agreement and shall not alter, modify, amend or in any way affect any of the terms, conditions, obligations, covenants or agreements contained in the Waiver Agreement and Credit Agreement, all of which are ratified and affirmed in all respects and shall continue in full force and effect. Nothing herein shall be deemed to entitle the Borrowers or the Guarantors to a consent to, or a waiver, amendment, modification or other change of, any of the terms, conditions, obligations, covenants or agreements contained in the Waiver Agreement or Credit Agreement in similar or

 
different circumstances. This Agreement shall apply and be effective only with respect to the provision of the Waiver Agreement specifically referred to herein.
7.              Applicable Law . This Agreement and the rights and obligations of the parties hereunder shall be governed by, and shall be construed and enforced in accordance with, the laws of the State of New York without regard to conflict of laws principles thereof.
8.              Headings . Headings herein are include herein for convenience of reference only and shall not constitute a part hereof for any other purpose or be given any substantive effect.
9.              Administrative Agent’s Expense . Without limiting any of the Administrative Agent’s rights, or any of the Borrower’s obligations under Section 13.02 of the Credit Agreement, the Borrower hereby agrees to promptly reimburse the Administrative Agent for all reasonable out-of-pocket expenses, including, without limitation, attorneys’ and paralegals fees, it has heretofore or hereafter incurred or incurs in connection with the preparation, negotiation and execution of this Agreement or any document, instrument, agreement delivered pursuant to this Agreement.
10.            Preservation of Prior Representations . Notwithstanding anything herein to the contrary, all agreements, admissions, affirmations, representations, ratifications and releases by the Borrower and each Guarantor made in the Waiver Agreement dated March 15, 2006, including, but not limited to, those in Sections 6 and 8 thereof, are expressly confirmed and preserved.
 
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 
 
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered by their respective officers thereunto duly authorized as of the date first written above.
 
CALPINE CONSTRUCTION FINANCE
COMPANY, L.P.
 
 	By:	   /s/  Zamir Rauf                                        	
Name:  Zamir Rauf
Title:  Vice President
CALPINE HERMISTON, LLC
 
 	By:	   /s/  Zamir Rauf                                        	
Name:  Zamir Rauf
Title:  Vice President
CPN HERMISTON, LLC
 
 	By:	   /s/  Zamir Rauf                                        	
Name:  Zamir Rauf
Title:  Vice President
HERMISTON POWER PARTNERSHIP
 
 	By:	   /s/  Zamir Rauf                                        	
Name:  Zamir Rauf
Title:  Vice President

 
 
GOLDMAN SACHS CREDIT PARTNERS L.P.,
as Administrative Agent, Sole Lead Arranger,
Syndication Agent and a Lender

 	By:	        /s/  Bruce H. Mendelsohn                  	
 	Name:	Bruce H. Mendelsohn	
 	Title:	Authorized Signatory	 	

 
 
CONSENTING LENDER:
NORTHWOODS CAPITAL VI, LIMITED
 	BY:	ANGELO, GORDON & CO., L.P.	
 	AS COLLATERAL MANAGER	 	

By:	/s/  Bradley Pattelli	
 	Name:     Bradley Pattelli	
 	Title:        Managing Director	

< PAGE >
CONSENTING LENDER:
BEAR STEARNS INVESTMENT PRODUCTS INC.
 
By:	/s/  Jonathan Weiss	
 	Name:     Jonathan Weiss	
 	Title:        Authorized Signatory	

< PAGE >
CONSENTING LENDER:
CITIBANK, N.A.
 
By:	/s/  Deborah R. Clark	
 	Name:     Deborah R. Clark	
 	Title:        Attorney-in-fact	

< PAGE >

 

CONSENTING LENDER:
CDL LOAN FUNDING LLC
 
By:	/s/  Anthony Severs	
 	Name:     Anthony Severs	
 	Title:        Authorized Signatory	

< PAGE >
CONSENTING LENDER:
CYPRESS POINT TRADING LLC
 
By:	/s/  Christina L. Ramseur	
 	Name:     Christina L. Ramseur	
 	Title:        Assistant Vice President	

< PAGE >
CONSENTING LENDER:
SEMINOLE FUNDING LLC
 
By:	/s/  Christina L. Ramseur	
 	Name:     Christina L. Ramseur	
 	Title:        Assistant Vice President	

< PAGE >

 

CONSENTING LENDER:
WATCHTOWER CLO I PLC
By: Citadel Limited Partnership,
 	Collateral Manager	
By: Citadel Investment Group, LLC,
 	as General Partner	
 
By:	/s/  Erica L. Tarpey	
 	Name:     Erica L. Tarpey	
 	Title:        Authorized Signatory	

< PAGE >
CONSENTING LENDER:
Grand Central Asset Trust, SIL Series
 
By:	/s/  Beata Konopko	
 	Name:     Beata Konopko	
 	Title:        As attorney in fact	

< PAGE >
CONSENTING LENDER:
Highland Floating Rate LLC
 
By:	/s/  M. Jason Blackburn	
 	Name:     M. Jason Blackburn	
 	Title:        Treasurer	

< PAGE >

 

CONSENTING LENDER:
Atrium CDO
 
By:	/s/  David H. Lerner	
 	Name:     David H. Lerner	
 	Title:        Authorized Signatory	

< PAGE >
CONSENTING LENDER:
CSAM Funding I
 
By:	/s/  David H. Lerner	
 	Name:     David H. Lerner	
 	Title:        Authorized Signatory	

< PAGE >
CONSENTING LENDER:
CSAM Funding II
 
By:	/s/  David H. Lerner	
 	Name:     David H. Lerner	
 	Title:        Authorized Signatory	

< PAGE >

 

CONSENTING LENDER:
CSAM Funding III
 
By:	/s/  David H. Lerner	
 	Name:     David H. Lerner	
 	Title:        Authorized Signatory	

< PAGE >
CONSENTING LENDER:
Robson Trust
 
By:	/s/  David H. Lerner	
 	Name:     David H. Lerner	
 	Title:        Authorized Signatory	

< PAGE >
CONSENTING LENDER:
First Dominion Funding II
 
By:	/s/  David H. Lerner	
 	Name:     David H. Lerner	
 	Title:        Authorized Signatory	

< PAGE >

 

CONSENTING LENDER:
THE FOOTHILL GROUP INC.
 
By:	/s/  Dennis R. Ascher	
 	Name:     Dennis R. Ascher	
 	Title:        Sr. VP	

< PAGE >
CONSENTING LENDER:
Highland Floating Rate Advantage Fund
 
By:	/s/  M. Jason Blackburn	
 	Name:     M. Jason Blackburn	
 	Title:        Treasurer	

< PAGE >
CONSENTING LENDER:
ELF Funding Trust I
By: Highland Capital Management, L.P., As
Collateral Manager
By: Strand Advisors, Inc., Its General Partner
 
By:	/s/  Chad Schramek	
 	Name:     Chad Schramek	
 	Title:        Assistant Treasurer,	
 	Strand Advisors, Inc., General Partner of	
 	Highland Capital Management, L.P.	

< PAGE >

 

CONSENTING LENDER:
CONTINENTAL CASUALTY COMPANY
 
By:	/s/  Marilou R. McGirr	
 	Name:     Marilou R. McGirr	
 	Title:        Vice President and Assistant Treasurer	

< PAGE >
CONSENTING LENDER:
MEDTRONIC INC. RETIREMENT
 
By:	/s/  Joseph D. Hattesohl	
 	Name:     Joseph D. Hattesohl	
 	Title:        CFO of Metropolitan West Asset	
 	Management, LLC, as agent	

< PAGE >
CONSENTING LENDER:
NEW JERSEY TRANSIT
 
By:	/s/  Joseph D. Hattesohl	
 	Name:     Joseph D. Hattesohl	
 	Title:        CFO of Metropolitan West Asset	
 	Management, LLC, as agent	

< PAGE >

 

CONSENTING LENDER:
THE NORTHERN CALIFORNIA NEWS MEDIA
GUILD RETIREMENT PLAN
 
By:	/s/  Joseph D. Hattesohl	
 	Name:     Joseph D. Hattesohl	
 	Title:        CFO of Metropolitan West Asset	
 	Management, LLC, as agent	

< PAGE >
CONSENTING LENDER:
ADVENTIST HEALTH SYSTEM
 
By:	/s/  Joseph D. Hattesohl	
 	Name:     Joseph D. Hattesohl	
 	Title:        CFO of Metropolitan West Asset	
 	Management, LLC, as agent	

< PAGE >
CONSENTING LENDER:
ILLINOIS STATE UNIVERSITIES
RETIREMENT SYSTEM
 
By:	/s/  Joseph D. Hattesohl	
 	Name:     Joseph D. Hattesohl	
 	Title:        CFO of Metropolitan West Asset	
 	Management, LLC, as agent	

< PAGE >

 

CONSENTING LENDER:
METROPOLITAN WEST
TOTAL RETURN BOND FUND
 
By:	/s/  Joseph D. Hattesohl	
 	Name:     Joseph D. Hattesohl	
 	Title:        Treasurer	

< PAGE >
CONSENTING LENDER:
METROPOLITAN WEST HIGH YIELD BOND
FUND
 
By:	/s/  Joseph D. Hattesohl	
 	Name:     Joseph D. Hattesohl	
 	Title:        Treasurer	

< PAGE >
CONSENTING LENDER:
WESTGATE STRATEGIC INCOME FUND
 
By:	/s/  Joseph D. Hattesohl	
 	Name:     Joseph D. Hattesohl	
 	Title:        Director	

< PAGE >

 

CONSENTING LENDER:
SEI INSTITUTIONAL INVESTMENT TRUST
HIGH YIELD
 
By:	/s/  Joseph D. Hattesohl	
 	Name:     Joseph D. Hattesohl	
 	Title:        CFO of Metropolitan West Asset	
 	Management, LLC, as agent	

< PAGE >
CONSENTING LENDER:
SEI GLOBAL MASTER FUND HIGH YIELD
 
By:	/s/  Joseph D. Hattesohl	
 	Name:     Joseph D. Hattesohl	
 	Title:        CFO of Metropolitan West Asset	
 	Management, LLC, as agent	

< PAGE >
CONSENTING LENDER:
SEI INSTITUTIONAL MANAGED TRUST HIGH
YIELD BOND FUND
 
By:	/s/  Joseph D. Hattesohl	
 	Name:     Joseph D. Hattesohl	
 	Title:        CFO of Metropolitan West Asset	
 	Management, LLC, as agent	

< PAGE >

 

CONSENTING LENDER:
WATERVILLE FUNDING LLC
 
By:	/s/  Christina L. Ramseur	
 	Name:     Christina L. Ramseur	
 	Title:        Assistant Vice President	

< PAGE >
CONSENTING LENDER :
THE FOOTHILL GROUP, INC.
 
By:	/s/  Dennis R. Ascher	
 	Name:     Dennis R. Ascher	
 	Title:        Sr. VP	

< PAGE >
CONSENTING LENDER:
REDWOOD CAPITAL
 
By:	/s/  Jonathan Koraten	
 	Name:     Jonathan Koraten	
 	Title:        Redwood Master Fund, Ltd. Director	

< PAGE >

 

CONSENTING LENDER:
FIELD POINT I, LTD.
 
By:	/s/  Richard Petrilli	
 	Name:     Richard Petrilli	
 	Title:        Authorized Signatory	

< PAGE >
CONSENTING LENDER:
FIELD POINT II, LTD.
 
By:	/s/  Richard Petrilli	
 	Name:     Richard Petrilli	
 	Title:        Authorized Signatory	

< PAGE >
CONSENTING LENDER:
SIL Loan Funding
 
By:	/s/  Jose Mayorga	
 	Name:     Jose Mayorga	
 	Title:        Officer	

< PAGE >

 

CONSENTING LENDER:
SIL Loan Funding
 
By:	/s/  Jose Mayorga	
 	Name:     Jose Mayorga	
 	Title:        Officer	

< PAGE >
CONSENTING LENDER:
SPCP GROUP, L.L.C.
 
By:	/s/  Richard Petrilli	
 	Name:     Richard Petrilli	
 	Title:        Authorized Signatory	

< PAGE >
CONSENTING LENDER:
Stonehill Institutional Partners, L.P.
 
By:	/s/  Wayne Teetsel	
 	Name:     Wayne Teetsel	
 	Title:        General Partner	

< PAGE >

 

CONSENTING LENDER:
Stonehill Offshore Partners, LLC
 
By:	/s/  Wayne Teetsel	
 	Name:     Wayne Teetsel	
 	Title:        Managing Member	

< PAGE >
CONSENTING LENDER:
KINGS CROSS ASSET FUNDING 3 SARC
 
By:	/s/  Helena Lewtschenko	
 	Name:     Helena Lewtschenko	
 	Title:        Authorized Signatory	

 
By:	/s/  John Kane	
 	Name:     John Kane	
 	Title:        Authorized Signatory	

< PAGE >
CONSENTING LENDER:
Grand Central Asset Trust, KMT Series
 
By:	/s/  Roy Hykal	
 	Name:     Roy Hykal	
 	Title:        Attorney-in-fact	

< PAGE >

 

Exhibit 10.2.1.9
 
SECOND AMENDMENT TO WAIVER AGREEMENT
 
THIS SECOND AMENDMENT TO WAIVER AGREEMENT (this “ Agreement ”) is entered into as of the 11 th day of August, 2006, by and among CALPINE CONSTRUCTION FINANCE COMPANY, L.P., a Delaware limited partnership (the “ Borrower ”), CALPINE HERMISTON, LLC, a Delaware limited liability company (“ Calpine LLC ”), CPN HERMISTON, LLC, a Delaware limited liability company (“ CPN LLC ”), and HERMISTON POWER PARTNERSHIP, an Oregon general partnership (the “ Hermiston Partnership ” and, together with Calpine LLC and CPN LLC, the “ Guarantors ”), the lenders party hereto (the “ Lenders ”), and GOLDMAN SACHS CREDIT PARTNERS L.P., as administrative agent (together with its successors in such capacity, the “ Administrative Agent ”).
RECITALS
WHEREAS, the Borrower, the Guarantors, the Lenders, the Administrative Agent and the Sole Lead Arranger entered into a Credit and Guarantee Agreement, dated as of August 14, 2003 (as amended on September 12, 2003, January 13, 2004, March 5, 2004, and March 15, 2006, and as may be further amended from time to time, the “ Credit Agreement ”), pursuant to which the Borrower borrowed, on a non-recourse basis as described in the Credit Agreement, $385,000,000 in aggregate principal amount of First Priority Senior Secured Institutional Term Loans due 2009;
WHEREAS, the Borrower, the Guarantors, the Lenders, and the Administrative Agent entered into a Waiver Agreement dated as of June 9, 2006 (the “ Waiver Agreement ”) pursuant to which the Lenders waived the Specified Defaults (as defined therein);
WHEREAS, the Borrower, the Guarantors, the Lenders, and the Administrative Agent entered into an amendment to the Waiver Agreement on August 4, 2006, pursuant to which Section 4 of the Waiver Agreement was amended to substitute “August 11, 2006” in place of “August 4, 2006” in clause (i) thereof; and
WHEREAS, the Borrower, the Guarantors, the Lenders, and the Administrative Agent desire to amend the Waiver Agreement as provided herein.
NOW THEREFORE, in consideration of the premises and the mutual agreements set forth, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:
1.              Definitions . Unless otherwise defined herein, capitalized terms used herein that are not otherwise defined herein shall have the respective meanings assigned to such terms in the Credit Agreement.
2.              Amendment . Section 4 of the Waiver Agreement is hereby amended to substitute “August 25, 2006” in place of “August 11, 2006” in clause (i) thereof.
3.              Conditions . The effectiveness of Section 2 of this Agreement is subject to the satisfaction of the following conditions precedent (unless specifically waived in writing by the Requisite Lenders):

 
 
(a)            the Borrower and the Guarantors named as signatories hereto and the Requisite Lenders shall have executed and delivered to the Administrative Agent their respective counterparts of this Agreement;
(b)            an amendment to waiver agreement (in form and substance reasonably acceptable to the Administrative Agent) with the Holders of Notes shall have been negotiated and shall become effective concurrently with this Agreement, provided, that any conditions to effectiveness or consideration made available to the Holders of Notes for such agreement shall be made available to the Administrative Agent and the Lenders as conditions to effectiveness of, or as consideration for, this Agreement.
4.              Representations and Warranties . The Borrower and each Guarantor hereby represents and warrants to each Lender and the Administrative Agent that (a) this Agreement has been duly authorized, executed and delivered by the Borrower or Guarantor, as applicable, and constitutes its valid and legally binding obligation, enforceable against it in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of generally applicability relating to or affecting creditors’ rights and to general equity principles; (b) the execution and delivery of this Agreement (i) does not require any consent, approval, authorization or order of, or filing with, any governmental agency or body or any court, except such as have been obtained or made and are in full force and effect as of the date hereof and (ii) will not violate any applicable law or regulation or the charter, by-laws or other organizational documents of the Borrower or Guarantor, as applicable, or any order of any governmental agency or body, or breach or conflict with any material agreement to which the Borrower or Guarantor, as applicable, is a party or by which the Borrower or Guarantor, as applicable, is bound; and (c) no Default or Event of Default under the Credit Agreement exists and is continuing.
5.              Execution in Counterparts . This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which when taken together shall constitute but one and the same instrument.
6.              Continuing Effect of the Waiver Agreement and Credit Agreement . Except as expressly set forth herein, this Agreement shall not by implication or otherwise limit, impair, constitute a waiver of, or otherwise affect the rights and remedies of the Lenders, the Administrative Agent, the Borrower or the Guarantors under the Waiver Agreement or Credit Agreement and shall not alter, modify, amend or in any way affect any of the terms, conditions, obligations, covenants or agreements contained in the Waiver Agreement and Credit Agreement, all of which are ratified and affirmed in all respects and shall continue in full force and effect. Nothing herein shall be deemed to entitle the Borrowers or the Guarantors to a consent to, or a waiver, amendment, modification or other change of, any of the terms, conditions, obligations, covenants or agreements contained in the Waiver Agreement or Credit Agreement in similar or different circumstances. This Agreement shall apply and be effective only with respect to the provision of the Waiver Agreement specifically referred to herein.
7.              Applicable Law . This Agreement and the rights and obligations of the parties hereunder shall be governed by, and shall be construed and enforced in accordance with, the laws of the State of New York without regard to conflict of laws principles thereof.
 
2

 
 
8.              Headings . Headings herein are include herein for convenience of reference only and shall not constitute a part hereof for any other purpose or be given any substantive effect.
9.              Administrative Agent’s Expense . Without limiting any of the Administrative Agent’s rights, or any of the Borrower’s obligations under Section 13.02 of the Credit Agreement, the Borrower hereby agrees to promptly reimburse the Administrative Agent for all reasonable out-of-pocket expenses, including, without limitation, attorneys’ and paralegals fees, it has heretofore or hereafter incurred or incurs in connection with the preparation, negotiation and execution of this Agreement or any document, instrument, agreement delivered pursuant to this Agreement.
10.            Preservation of Prior Representations . Notwithstanding anything herein to the contrary, all agreements, admissions, affirmations, representations, ratifications and releases by the Borrower and each Guarantor made in the Waiver Agreement dated March 15, 2006, including, but not limited to, those in Sections 6 and 8 thereof, are expressly confirmed and preserved.
 
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
 
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered by their respective officers thereunto duly authorized as of the date first written above.
 
CALPINE CONSTRUCTION FINANCE
COMPANY, L.P.

 	By:	        /s/ Zamir Rauf                                          	
 	Name:	Zamir Rauf	 	
 	Title:	Vice President	 	
							
CALPINE HERMISTON, LLC

 	By:	        /s/ Zamir Rauf                                          	
 	Name:	Zamir Rauf	 	
 	Title:	Vice President	 	
						
CPN HERMISTON, LLC

 	By:	        /s/ Zamir Rauf                                          	
 	Name:	Zamir Rauf	 	
 	Title:	Vice President	 	
						
HERMISTON POWER PARTNERSHIP

 	By:	        /s/ Zamir Rauf                                          	
 	Name:	Zamir Rauf	 	
 	Title:	Vice President	 	
						
GOLDMAN SACHS CREDIT PARTNERS L.P.,
as Administrative Agent, Sole Lead Arranger,
Syndication Agent and a Lender

 	By:	        /s/ Bruce H. Mendelsohn                          	
 	Name:	Bruce H. Mendelsohn	 	
 	Title:	Authorized Signatory	 	

[ Signature Page to Second Amendment under Credit Agreement ]

 
 
CONSENTING LENDER:
WATCHTOWER CLO I PLC
 	By:	Citadel Limited Partnership,	 	
 	Collateral Manager	 	
 	By:	Citadel Investment Group, LLC,	
 	as General Partner	 	

 	By:	        /s/  Christopher L. Ramsey                      	
 	Name:	Christopher L. Ramsey	 	
 	Title:	Authorized Signatory	 	
						
< PAGE >
CONSENTING LENDER:
NORTHWOODS CAPITAL VI, LIMITED
 	BY:	ANGELO, GORDON & CO., L.P.	 	
 	AS COLLATERAL MANAGER	 	
 	By:	        /s/  Bruce Martin                                      	
 	Name:	Bruce Martin	 	
 	Title:	Managing Director	 	

< PAGE >
CONSENTING LENDER:
CYPRESS POINT TRADING LLC

 	By:	        /s/  Christina L. Ramseur                          	
 	Name:	Christina L. Ramseur	 	
 	Title:	Assistant Vice President	 	

< PAGE
CONSENTING LENDER:
SEMINOLE FUNDING LLC

 	By:	        /s/  Christina L. Ramseur                          	
 	Name:	Christina L. Ramseur	 	
 	Title:	Assistant Vice President	 	

 
 
[ Signature Page to Second Amendment under Credit Agreement ]

 
 
< PAGE >
CONSENTING LENDER:
SIL/SIL 2 Loan Funding, LLC

 	By:	        /s/  Jose Mayorga                                      	
 	Name:	Jose Mayorga	 	
 	Title:	Officer	 	

< PAGE >
CONSENTING LENDER:
SIL/SIL 2 Loan Funding, LLC

 	By:	        /s/  Jose Mayorga                                      	
 	Name:	Jose Mayorga	 	
 	Title:	Officer	 	

< PAGE >
CONSENTING LENDER:
BEAR STEARNS INVESTMENT PRODUCTS INC.

 	By:	        /s/  John McDermott                                	
 	Name:	John McDermott	 	
 	Title:	Vice President	 	

< PAGE >
CONSENTING LENDER:
CITIBANK, N.A.

 	By:	        /s/  Thomas A. Neville                              	
 	Name:	Thomas A. Neville	 	
 	Title:	Attorney-in-fact	 	

 
[ Signature Page to Second Amendment under Credit Agreement ]

 
 
< PAGE >
CONSENTING LENDER:
CDL LOAN FUNDING LLC
CITIBANK, N.A.

 	By:	        /s/  Thomas A. Neville                              	
 	Name:	Thomas A. Neville	 	
 	Title:	Attorney-in-fact	 	

< PAGE >
CONSENTING LENDER:
Highland Floating Rate Advantage Fund

 	By:	        /s/  Joe Dougherty                                    	
 	Name:	Joe Dougherty	 	
 	Title:	Senior Vice President	 	

< PAGE >
CONSENTING LENDER:
ELF Funding Trust I
 	By:	Highland Capital Management, L.P., As	
Collateral Manager
 	By:	Strand Advisors, Inc., Its General Partner	 	
 	By:	        /s/  Brian Lohrding                                  	
 	Name:	Brian Lohrding	 	
 	Title:	Assistant Treasurer,	 	
 	Strand Advisors, Inc., General Partner of	 	
 	Highland Capital Management, L.P.	 	

< PAGE >
 
[ Signature Page to Second Amendment under Credit Agreement ]

 
 
CONSENTING LENDER:
Highland Floating Rate LLC

 	By:	        /s/  Joe Dougherty                                    	
 	Name:	Joe Dougherty	 	
 	Title:	Senior Vice President	 	

< PAGE >
CONSENTING LENDER:
Grand Central Asset Trust, SIL Series

 	By:	        /s/  Roy Hykal                                          	
 	Name:	Roy Hykal	 	
 	Title:	Attorney-in-fact	 	
						
< PAGE >
CONSENTING LENDER:
Grand Central Asset Trust, SIL Series

 	By:	        /s/  Roy Hykal                                          	
 	Name:	Roy Hykal	 	
 	Title:	Attorney-in-fact	 	
						
< PAGE >
CONSENTING LENDER:
Mulberry Master Fund Ltd.

 	By:	        /s/  Ara Cohen                                          	
 	Name:	Ara Cohen	 	
 	Title:	Director	 	
						
< PAGE >
 
[ Signature Page to Second Amendment under Credit Agreement ]

 
 
CONSENTING LENDER:
SPCP Group, L.L.C.

 	By:	        /s/  Richard Petrilli                                    	
 	Name:	Richard Petrilli	 	
 	Title:	Authorized Signatory	 	

< PAGE >
CONSENTING LENDER:
FIELD POINT I, LTD.

 	By:	        /s/  Richard Petrilli                                    	
 	Name:	Richard Petrilli	 	
 	Title:	Authorized Signatory	 	

< PAGE >
CONSENTING LENDER:
FIELD POINT II, LTD.

 	By:	        /s/  Richard Petrilli                                    	
 	Name:	Richard Petrilli	 	
 	Title:	Authorized Signatory	 	

< PAGE >
CONSENTING LENDER:
MERRILL LYNCH CREDIT PRODUCTS, LLC

 	By:	        /s/  Nevda Darias                                      	
 	Name:	Nevda Darias	 	
 	Title:	Vice President	 	

< PAGE >
 
[ Signature Page to Second Amendment under Credit Agreement ]

 
 
CONSENTING LENDER:
REDWOOD CAPITAL

 	By:	        /s/  Jonathan Koraten                                	
 	Name:	Jonathan Koraten	 	
 	Title:	Redwood Master Fund, Ltd. Director	 	

< PAGE >
CONSENTING LENDER:
Stonehill Institutional Partners, L.P.

 	By:	        /s/  Wayne Teetsel                                    	
 	Name:	Wayne Teetsel	 	
 	Title:	General Partner	 	

< PAGE >
CONSENTING LENDER:
Stonehill Offshore Partners, LLC
 	By:	Stonehill Capital Management LLC	 	
 	By:	        /s/  Wayne Teetsel                                    	
 	Name:	Wayne Teetsel	 	
 	Title:	Managing Member	 	

< PAGE >
CONSENTING LENDER:
Grand Central Asset Trust, KMT Series

 	By:	        /s/  Roy Hykal                                          	
 	Name:	Roy Hykal	 	
 	Title:	Attorney-in-fact	 	
						
< PAGE >
 
[ Signature Page to Second Amendment under Credit Agreement ]

 
 
CONSENTING LENDER:
MEDTRONIC INC. RETIREMENT

 	By:	        /s/  Joseph D. Hattesohl                            	
 	Name:	Joseph D. Hattesohl	 	
 	Title:	CFO of Metropolitan West Asset	 	
 	Management, LLC, as agent	 	

< PAGE >
CONSENTING LENDER:
NEW JERSEY TRANSIT

 	By:	        /s/  Joseph D. Hattesohl                            	
 	Name:	Joseph D. Hattesohl	 	
 	Title:	CFO of Metropolitan West Asset	 	
 	Management, LLC, as agent	 	

< PAGE >
 
CONSENTING LENDER:
THE NORTHERN CALIFORNIA NEWS MEDIA
GUILD RETIREMENT PLAN

 	By:	        /s/  Joseph D. Hattesohl                            	
 	Name:	Joseph D. Hattesohl	 	
 	Title:	CFO of Metropolitan West Asset	 	
 	Management, LLC, as agent	 	

< PAGE >
 
[ Signature Page to Second Amendment under Credit Agreement ]

 
 
CONSENTING LENDER:
ADVENTIST HEALTH SYSTEM

 	By:	        /s/  Joseph D. Hattesohl                            	
 	Name:	Joseph D. Hattesohl	 	
 	Title:	CFO of Metropolitan West Asset	 	
 	Management, LLC, as agent	 	

< PAGE >
CONSENTING LENDER:
ILLINOIS STATE UNIVERSITIES
RETIREMENT SYSTEM

 	By:	        /s/  Joseph D. Hattesohl                            	
 	Name:	Joseph D. Hattesohl	 	
 	Title:	CFO of Metropolitan West Asset	 	
 	Management, LLC, as agent	 	

< PAGE >
CONSENTING LENDER:
METROPOLITAN WEST
TOTAL RETURN BOND FUND

 	By:	        /s/  Joseph D. Hattesohl                            	
 	Name:	Joseph D. Hattesohl	 	
 	Title:	Treasurer	 	

< PAGE >
 
[ Signature Page to Second Amendment under Credit Agreement ]

 
 
CONSENTING LENDER:
METROPOLITAN WEST HIGH YIELD BOND
FUND

 	By:	        /s/  Joseph D. Hattesohl                            	
 	Name:	Joseph D. Hattesohl	 	
 	Title:	Treasurer	 	

< PAGE >
CONSENTING LENDER:
SEI INSTITUTIONAL INVESTMENT
MANAGED TRUST HIGH YIELD BOND FUND

 	By:	        /s/  Joseph D. Hattesohl                            	
 	Name:	Joseph D. Hattesohl	 	
 	Title:	CFO of Metropolitan West Asset	 	
 	Management, LLC, as agent	 	
							
< PAGE >
CONSENTING LENDER:
SEI GLOBAL MASTER FUND HIGH YIELD

 	By:	        /s/  Joseph D. Hattesohl                            	
 	Name:	Joseph D. Hattesohl	 	
 	Title:	CFO of Metropolitan West Asset	 	
 	Management, LLC, as agent	 	

< PAGE >
 
[ Signature Page to Second Amendment under Credit Agreement ]

 
 
CONSENTING LENDER:
WESTGATE STRATEGIC INCOME FUND

 	By:	        /s/  Joseph D. Hattesohl                            	
 	Name:	Joseph D. Hattesohl	 	
 	Title:	Director	 	

< PAGE >
CONSENTING LENDER :
THE FOOTHILL GROUP, INC.

 	By:	        /s/  Dennis R. Ascher                                	
 	Name:	Dennis R. Ascher	 	
 	Title:	Sr. VP	 	

< PAGE >
CONSENTING LENDER:
SEI INSTITUTIONAL INVESTMENT TRUST HIGH YIELD

 	By:	        /s/  Joseph D. Hattesohl                            	
 	Name:	Joseph D. Hattesohl	 	
 	Title:	CFO of Metropolitan West Asset	 	
 	Management, LLC, as agent	 	
							
< PAGE >

[ Signature Page to Second Amendment under Credit Agreement ]

 
 
EXHIBIT 31.1
 
CERTIFICATIONS
 
I, Robert P. May, certify that:
 
1. I have reviewed this quarterly report on Form 10-Q of Calpine Corporation (the “registrant”);
 
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
 
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
 
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
 
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
 
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
 
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
 
Date:  August 14, 2006
        /s/ Robert P. May         
Robert P. May
CHIEF EXECUTIVE OFFICER
CALPINE CORPORATION

 

EXHIBIT 31.2
 
CERTIFICATIONS
 
I, Scott J. Davido, certify that:
 
1. I have reviewed this quarterly report on Form 10-Q of Calpine Corporation (the “registrant”);
 
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
 
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
 
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
 
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
 
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
 
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
 
Date:  August 14, 2006	
 
        /s/ Scott J. Davido         
Scott J. Davido
EXECUTIVE VICE PRESIDENT,
CHIEF FINANCIAL OFFICER AND
CHIEF RESTRUCTURING OFFICER
CALPINE CORPORATION

 

EXHIBIT 32.1
 
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Calpine Corporation (the “Company”) on Form 10-Q for the period ending June 30, 2006, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned does hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge, based upon a review of the Report:
 
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
 
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company.
 
/s/ ROBERT P. MAY          
Robert P. May
Chief Executive Officer
Calpine Corporation	/s/ SCOTT J. DAVIDO      
Scott J. Davido
Executive Vice President,
Chief Financial Officer and
Chief Restructuring Officer
Calpine Corporation	

Dated:  August 14, 2006
 
A signed original of this written statement required by Section 906 has been provided to Calpine Corporation and will be retained by Calpine Corporation and furnished to the Securities and Exchange Commission or its staff upon request.