Calpine Corporation completes acquisition of San Diego Power Project from PG&E National Energy Group

SAN JOSE, Calif. & SAN FRANCISCO, July 10, 2001 — Calpine Corporation and PG&E Corporation's PG&E National Energy Group announced today that Calpine has completed the acquisition of the Otay Mesa Generating Project in San Diego County.

The PG&E National Energy Group developed the project, which was licensed by the California Energy Commission in April. Construction of the 500-megawatt energy center is expected to begin later this summer, with completion targeted for mid-2003.

Under the terms of the sale, Calpine will build, own and operate the facility and PG&E National Energy Group will contract for up to 250 megawatts of output.

"This project will directly address the electricity supply imbalance that currently exists in San Diego County," said Ron Walter, Senior Vice President - Business Development. "Otay Mesa is an important component needed to ensure price stability and power reliability for San Diego and all of California."

"The PG&E National Energy Group is committed to being part of the energy solution in California," said Thomas B. King, president and Chief Operating Officer of the PG&E National Energy Group, West Region. "Generation from the Otay Mesa plant will be an important part of our growing western resource portfolio."

The Otay Mesa Generating Project will be located within a 46-acre property on the eastern portion of Otay Mesa, near the base of the San Ysidro Mountains, approximately 1.5 miles from the United States-Mexico border.

Designed as a highly efficient, combined-cycle generating station, the Otay Mesa facility will be fueled by natural gas and will include state-of-the-art emission control equipment and water conservation technology. In addition, in a first-of-its-kind program, the Otay Mesa Generating Project will utilize mobile emission reduction credits to offset emissions. A large portion of the mobile credits will be created through the conversion of refuse-hauling vehicles in San Diego to natural gas fuel.

Power from the Otay Mesa plant will be sold into the California wholesale market. As part of the agreement to sell the project to Calpine, the PG&E National Energy Group will enter into a 10-year tolling arrangement under which it will contract for up to 250 megawatts. Calpine will market the balance of the output through its energy services group.

In addition to the capacity it will receive from the Otay Mesa Plant, the PG&E National Energy Group is constructing a 1,000-megawatt LaPaloma plant near Bakersfield, Calif., which is expected to be fully operational by mid-2002. Additionally, the PG&E National Energy Group is in the process of acquiring 66 megawatts of wind generation near Palm Springs, and it is also developing with Sempra International the proposed North Baja Pipeline, which will provide a potential new source of natural gas for Southern California and Northern Mexico.

In total throughout the West, the PG&E National Energy Group has more than 4,000 megawatts of new generation in construction or advanced development.

Building upon its existing 2,425-megawatt natural gas and geothermal operating portfolio, Calpine has launched the largest power generating initiative in the state with 1,950 megawatts of energy centers under construction in and around California, and has announced the development of an additional 3,850 megawatts of generation.

By the end of 2005, Calpine plans to build more than 12,000 megawatts of generation dedicated to restoring the stability of California's energy markets. Calpine's total North American portfolio will exceed 70,000 megawatts by the end of 2005. The company recently announced the acquisition of a 1,200-megawatt natural gas-fired plant in the United Kingdom.

Calpine Corporation, based in San Jose, Calif., is dedicated to providing customers with reliable and competitively priced electricity. Calpine is focused on clean, efficient, natural gas-fired generation and is the world's largest producer of renewable geothermal energy. Calpine has launched the largest power development program in North America.

To date, the company has approximately 34,000 megawatts of base load capacity and 7,200 megawatts of peaking capacity in operation, under construction, pending acquisition and in announced development in 29 states, the United Kingdom and Canada. The company was founded in 1984 and is publicly traded on the New York Stock Exchange under the symbol CPN.

Headquartered in Bethesda, Md., PG&E National Energy Group develops, owns and operates electric generating and gas pipeline facilities and provides energy trading, marketing and risk-management services.

More information about each company can be found at their respective websites at www.calpine.com or www.pgecorp.com.

Sponsored by FLSmidth

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