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UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
   Form 10-Q (Mark One)þ
    

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended March 31, 2005oro
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period
from                     to
 Commission file number: 333-117335   Calpine Generating Company, LLC (A Delaware Limited Liability Company)
 CalGen Finance Corp. (A Delaware Corporation)
 I.R.S. Employer Identification Nos.77-0555128
20-1162632 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. Yes þ No o Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule
12b-2 of the Exchange Act). Yes o No þ Indicate the number of shares outstanding of each of the issuers classes of common
stock, as of the latest practicable date: Calpine Generating Company, LLC is a single member limited liability company and has no common
stock. With respect to CalGen Finance Corp., 1,000 shares of common stock, par value $1, were
outstanding as of the date hereof.




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##### Table of Contents



TABLE OF ADDITIONAL REGISTRANTS State of
    
    
    
    I.R.S. EmployerIncorporation
    
    Commission File
    
    IdentificationRegistrant
    
    or Organization
    
    Number
    
    NumberCalGen Expansion Company, LLC
    
    Delaware
    
    333-117335-39
    
    77-0555127Baytown Energy Center, LP
    
    Delaware
    
    333-117335-38
    
    77-0555135Calpine Baytown Energy Center GP, LLC
    
    Delaware
    
    333-117335-37
    
    77-0555133Calpine Baytown Energy Center LP, LLC
    
    Delaware
    
    333-117335-36
    
    77-0555138Baytown Power GP, LLC
    
    Delaware
    
    333-117335-35
    
    86-1056699Baytown Power, LP
    
    Delaware
    
    333-117335-34
    
    86-1056708Carville Energy LLC
    
    Delaware
    
    333-117335-33
    
    36-4309608Channel Energy Center, LP
    
    Delaware
    
    333-117335-32
    
    77-0555137Calpine Channel Energy Center GP, LLC
    
    Delaware
    
    333-117335-31
    
    77-0555139Calpine Channel Energy Center LP, LLC
    
    Delaware
    
    333-117335-09
    
    77-0555140Channel Power GP, LLC
    
    Delaware
    
    333-117335-08
    
    86-1056758Channel Power, LP
    
    Delaware
    
    333-117335-07
    
    86-1056755Columbia Energy LLC
    
    Delaware
    
    333-117335-06
    
    36-4380154Corpus Christi Cogeneration LP
    
    Delaware
    

    333-117335-05
    
    36-4337040Nueces Bay Energy LLC
    
    Delaware
    
    333-117335-04
    
    36-4216016Calpine Northbrook Southcoast Investors, LLC
    
    Delaware
    
    333-117335-03
    
    36-4337045Calpine Corpus Christi Energy GP, LLC
    
    Delaware
    
    333-117335-02
    
    86-1056770Calpine Corpus Christi Energy, LP
    
    Delaware
    
    333-117335-30
    
    86-1056497Decatur Energy Center, LLC
    
    Delaware
    
    333-117335-29
    
    77-0555708Delta Energy Center, LLC
    
    Delaware
    
    333-117335-28
    
    95-4812214CalGen Project Equipment Finance Company Two, LLC
    
    Delaware
    
    333-117335-27
    
    77-0585399Freestone Power Generation LP
    
    Texas
    
    333-117335-26
    
    76-0608559Calpine Freestone, LLC
    
    Delaware
    
    333-117335-25
    
    77-0486738CPN Freestone, LLC
    
    Delaware
    
    333-117335-24
    
    77-0545937Calpine Freestone Energy GP, LLC
    
    Delaware
    
    333-117335-23
    
    86-1056713Calpine Freestone Energy, LP
    
    Delaware
    
    333-117335-22
    
    86-1056720Calpine Power Equipment LP
    
    Texas
    
    333-117335-21
    
    76-0645514Los Medanos Energy Center, LLC
    
    Delaware
    
    333-117335-20
    
    77-0553164CalGen Project Equipment Finance Company One, LLC
    
    Delaware
    
    333-117335-19
    
    77-0556245Morgan Energy Center, LLC
    
    Delaware
    
    333-117335-18
    
    77-0555141Pastoria Energy Facility L.L.C.
    
    Delaware
    
    333-117335-17
    
    77-0581976Calpine Pastoria Holdings, LLC
    
    Delaware
    
    333-117335-16
    
    77-0559247Calpine Oneta Power, L.P.
    
    Delaware
    
    333-117335-15
    
    75-2815392Calpine Oneta Power I, LLC
    
    Delaware
    
    333-117335-14
    
    75-2815390Calpine Oneta Power II, LLC
    
    Delaware
    
    333-117335-13
    
    75-2815394Zion Energy LLC
    
    Delaware
    
    333-117335-12
    
    36-4330312CalGen Project Equipment Finance Company Three LLC
    
    Delaware
    
    333-117335-11
    
    10-0008436CalGen Equipment Finance Holdings, LLC
    
    Delaware
    
    333-117335-10
    
    77-0555519CalGen Equipment Finance Company, LLC
    
    Delaware
    
    333-117335-01
    
    77-0555523
 2




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CALPINE GENERATING COMPANY, LLC
(a wholly-owned subsidiary of Calpine CalGen Holdings, Inc.) REPORT ON FORM 10-Q
For the Quarter Ended March 31, 2005 INDEX PageNo.PART I  FINANCIAL INFORMATIONItem 1. Financial Statements
    
    
    4Consolidated Condensed Balance Sheets as of March 31, 2005 and December 31, 2004
    
    
    4Consolidated Condensed Statements of Operations for the Three Months Ended March 31, 2005 and 2004
    
    
    5Consolidated Condensed Statements of Cash Flows for the Three Months Ended March 31, 2005 and 2004
    
    
    6Notes to Consolidated Condensed Financial Statements
    
    
    8Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    22Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    31Item 4. Controls and Procedures
    
    
    31PART II  OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    33Item 6. Exhibits
    
    
    33Signatures
    
    
    39Certification of Chairman, President, & CEO Pursuant to Section 302Certification of EVP, & CFO Pursuant to Section 302Certification of CEO & CFO Pursuant to Section 906              302
  3




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PART I  FINANCIAL INFORMATION 
 Item 1.Financial Statements. CALPINE GENERATING COMPANY, LLC
(a wholly-owned subsidiary of Calpine CalGen Holdings, Inc.) 
 CONSOLIDATED CONDENSED BALANCE SHEETS
March 31, 2005 and December 31, 2004
(Unaudited) March 31,
    
    
    December 31,2005
    
    
    2004(In thousands)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    90,259
    
    
    $
    64,538Restricted cash, current portion
    
    
    81
    
    
    
    Accounts
receivable, net
    
    
    62,984
    
    
    
    59,320Accounts
receivable, net  related party
    
    
    
    
    
    
    600Notes receivable, current portion
    
    
    1,115
    
    
    
    367Inventories
    
    
    19,635
    
    
    
    19,601Current derivative assets
    
    
    7,231
    
    
    
    9,272Prepaid and other current assets
    
    
    25,071
    
    
    
    21,169Total current assets
    
    
    206,376
    
    
    
    174,867Property, plant and equipment, net
    
    
    6,285,611
    
    
    
    6,294,429Notes receivable, net of current portion
    
    
    19,284
    
    
    
    19,381Restricted cash, net of current portion
    
    
    95
    
    
    
    Deferred financing costs, net
    
    
    48,673
    
    
    
    51,496Long-term derivative assets
    
    
    21,400
    
    
    
    26,644Deferred tax asset
    
    
    17,672
    
    
    
    17,672Other assets
    
    
    51,229
    
    
    
    54,245Total assets
    
    $
    6,650,340
    
    
    $
    6,638,734LIABILITIES & MEMBERS EQUITYCurrent liabilities:Accounts payable
    
    $
    79,050
    
    
    $
    99,212Accounts payable, net  related party
    
    
    36,624
    
    
    
    Notes payable, current portion
    
    
    903
    
    
    
    168Accrued interest payable
    
    
    78,219
    
    
    
    53,324Deferred tax liability
    
    
    17,672
    
    
    
    17,672Other current liabilities
    
    
    2,540
    
    
    
    2,970Total current liabilities
    
    
    215,008
    
    
    
    173,346Notes payable, net of current portion
    
    
    2,114
    
    
    
    2,109Priority notes and term loans
    
    
    2,395,795
    
    
    
    2,395,332Deferred revenue
    
    
    6,430
    
    
    
    5,671Other liabilities
    
    
    20,856
    
    
    
    20,286Total liabilities
    
    
    2,640,203
    
    
    
    2,596,744Members equity
    
    
    4,010,137
    
    
    
    4,041,990Total liabilities and members equity
    
    $
    6,650,340
    
    
    $
    6,638,734
 The accompanying notes are an integral part of these Consolidated Condensed Financial Statements. 4




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CALPINE GENERATING COMPANY, LLC
(a wholly-owned subsidiary of Calpine CalGen Holdings, Inc.) 
 CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
For the Three Months Ended March 31, 2005 and 2004
(Unaudited) Three Months EndedMarch 31,20042005
    
    
    (Restated)(In thousands)Revenue:Electricity and steam revenue  related party
    
    $
    345,326
    
    
    $
    172,469Electricity and steam revenue  third-party
    
    
    108,359
    
    
    
    99,942Total electricity and steam revenue
    
    
    453,685
    
    
    
    272,411Mark-to-market activity, net
    
    
    (7,285
    )
    
    
    115Sale of purchased power
    
    
    4,680
    
    
    
    298Other revenue
    
    
    1,200
    
    
    
    824Total revenue
    
    
    452,280
    
    
    
    273,648Cost of revenue:Plant operating expense    related party
    
    
    43,474
    
    
    
    43,657Fuel expense
    
    
    340,725
    
    
    
    182,144Purchased power expense
    
    
    4,418
    
    
    
    490Depreciation and amortization expense
    
    
    40,643
    
    
    
    34,883Total cost of revenue
    
    
    429,260
    
    
    
    261,174Gross profit
    
    
    23,020
    
    
    
    12,474Sales, general and administrative expense    related party
    
    
    3,251
    
    
    
    4,681Income from operations
    
    
    19,769
    
    
    
    7,793Interest expense  related party
    
    
    
    
    
    
    72,173Interest expense  third party
    
    
    50,749
    
    
    
    30,774Interest (income)
    
    
    (789
    )
    
    
    (785
    )Other expense (income), net
    
    
    613
    
    
    
    (651
    )Loss before income taxes
    
    
    (30,804
    )
    
    
    (93,718
    )Income taxes
    
    
    
    
    
    
    Net loss
    
    $
    (30,804
    )
    
    $
    (93,718
    )
 The accompanying notes are an integral part of these Consolidated Condensed Financial Statements. 5




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CALPINE GENERATING COMPANY, LLC
(a wholly-owned subsidiary of Calpine CalGen Holdings, Inc.) 
 CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 2005 and 2004
(Unaudited) Three Months EndedMarch 31,20042005
    
    
    (Restated)(1)(In thousands)Cash flows from operating activities:Net loss
    
    $
    (30,804
    )
    
    $
    (93,718
    )Adjustments to reconcile net loss to net cash provided by operating activities:Depreciation and amortization
    
    
    40,643
    
    
    
    34,883Amortization of discount and deferred financing costs
    
    
    2,982
    
    
    
    4,183Write-off of deferred financing costs
    
    
    
    
    
    
    12,457Mark-to-market activities, net
    
    
    7,285
    
    
    
    (115
    )Interest on subordinated parent debt
    
    
    
    
    
    
    72,173Cost allocated from parent
    
    
    
    
    
    
    1,308Change in operating assets and liabilities:Accounts receivable
    
    
    (3,664
    )
    
    
    (3,235
    )Accounts receivable/accounts payable  related party
    
    
    37,224
    
    
    
    (4,276
    )Inventories
    
    
    (34
    )
    
    
    (539
    )Prepaid and other current assets
    
    
    (4,650
    )
    
    
    (1,384
    )Other assets
    
    
    2,064
    
    
    
    (2,096
    )Accounts payable
    
    
    (20,162
    )
    
    
    (1,083
    )Accrued interest payable
    
    
    24,895
    
    
    
    4,512Other accrued liabilities
    
    
    1,639
    
    
    
    (2,833
    )Net cash provided by operating activities
    
    
    57,418
    
    
    
    20,237Cash flows from investing activities:(Increase) decrease in restricted cash
    
    
    (176
    )
    
    
    152,290Purchases of derivative asset
    
    
    
    
    
    
    (45,000
    )Purchases of property, plant and equipment
    
    
    (31,521
    )
    
    
    (112,597
    )Net cash used in investing activities
    
    
    (31,697
    )
    
    
    (5,307
    )Cash flows from financing activities:Financing costs
    
    
    
    
    
    
    (56,350
    )Borrowings from subordinated parent debt
    
    
    
    
    
    
    46,417Repayments of subordinated parent debt
    
    
    
    
    
    
    (238,137
    )Borrowings on project financing
    
    
    
    
    
    
    2,393,900Borrowings from credit facility
    
    
    
    
    
    
    178,995Repayments of credit facility
    
    
    
    
    
    
    (2,379,353
    )Net cash used in financing activities
    
    
    
    
    
    
    (54,528
    )Net increase (decrease) in cash and cash equivalents
    
    
    25,721
    
    
    
    (39,598
    )Cash and cash equivalents, beginning of period
    
    
    64,538
    
    
    
    39,598Cash and cash equivalents, end of period
    
    $
    90,259
    
    
    $
    
   (1)
    
    Only individual line items in cash flows from operating activities have been restated. Total
cash flows from operating, investing and financing activities were unaffected. The accompanying notes are an integral part of these Consolidated Condensed Financial Statements. 6




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CALPINE GENERATING COMPANY, LLC
(a wholly-owned subsidiary of Calpine CalGen Holdings, Inc.) CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (CONTINUED)
For the Three Months Ended March 31, 2005 and 2004
(Unaudited) Three Months EndedMarch 31,2005
    
    

2004
(Restated)(In thousands)Supplemental cash flow information:Cash paid during the period for:Interest, net of amounts capitalized
    
    $
    22,236
    
    
    $
    10,266Non cash transactions:Interest on subordinated parent debt added to principal balance
    
    $
    
    
    
    $
    72,173Capital expenditures included in accounts payable
    
    
    1,587
    
    
    
    38,219Financing costs contributed by parent
    
    
    
    
    
    
    5,803Disposition of property, plant and equipment through subordinated parent debt
    
    
    
    
    
    
    119,647Conversion of subordinated parent debt to equity
    
    
    
    
    
    
    4,381,619
 The accompanying notes are an integral part of these Consolidated Condensed Financial Statements. 7




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CALPINE GENERATING COMPANY, LLC
(a wholly-owned subsidiary of Calpine CalGen Holdings, Inc.) 
 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
March 31, 2005
(Unaudited) 1. Organization and Operations of the Company Calpine Generating Company, LLC (the Company or CalGen), a Delaware limited liability
company, is an indirect wholly-owned subsidiary of Calpine Corporation (Calpine or the Parent).
CalGen is engaged, through its subsidiaries, in the construction, ownership and operation of
electric power generation facilities and the sale of energy, capacity and related products in the
United States of America. The purpose of these Consolidated Condensed Financial Statements is to
present the financial position and results of operations of the 14 power projects (collectively,
the projects or the facilities) listed below and other legal entities that are indirectly owned
by CalGen. CalGen is comprised of the following 14 power projects (the dates represent commercial
operation of the project, or expected commercial operation for phase 2 at the Pastoria Energy
Center, which is under construction): (1) Delta project near Pittsburg, California, June 2002; (2)
Goldendale project near Goldendale, Washington, September 2004; (3) Los Medanos project near
Pittsburg, California, August 2001; (4) Pastoria project under construction near Kern County,
California, Phase 1 May 2005, Phase 2 June 2005; (5) Baytown project near Baytown, Texas, June
2002; (6) Channel project near Houston, Texas, Phase 1 August 2001, Phase 2 April 2002; (7) Corpus
Christi project located near Corpus Christi, Texas, October 2002; (8) Freestone project near
Fairfield, Texas, Phase 1 June 2002, Phase 2 July 2002; (9) Carville project near St. Gabriel,
Louisiana, June 2003; (10) Columbia project near Columbia, South Carolina, May 2004; (11) Decatur
project near Decatur, Alabama, Phase 1 June 2002, Phase 2 June 2003; (12) Morgan project near
Morgan County, Alabama, Phase 1 July 2003, Phase 2 January 2004; (13) Oneta project near Coweta,
Oklahoma, Phase 1 July 2002, Phase 2 June 2003; and (14) Zion project near Zion, Illinois, Phase 1
June 2002, Phase 2 June 2003. These facilities comprise substantially all of CalGens assets. 2. Basis of Interim Presentation The accompanying unaudited interim Consolidated Condensed Financial Statements of the Company
have been prepared by the Company pursuant to the rules and regulations of the Securities and
Exchange Commission (SEC). In the opinion of management, the Consolidated Condensed Financial
Statements include the adjustments necessary to present fairly the information required to be set
forth therein (which were all of a normal recurring nature, except as
described in Note 3). Certain information and note disclosures normally included in financial statements
prepared in accordance with Generally Accepted Accounting Principles
(GAAP) in the United States of
America 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, 2004, included in
the Companys Annual Report on Form 10-K and the Companys
Registration Statement on Form S-4
filed with the SEC on July 13, 2004, which was updated in
Amendment No. 1 to Form S-4 filed with the SEC on October
19, 2004. The results for interim periods are not necessarily indicative of the results for the
entire year. CalGens financial statements for all periods reflect an allocation of charges for Calpines
common expenditures. Such charges have been made in accordance with Staff Accounting Bulletin
(SAB) No. 55, Allocation of Expenses and Related Disclosure in Financial Statements of
Subsidiaries, Divisions or Lesser Business Components of Another Entity. The accompanying consolidated condensed financial statements reflect all costs of doing
business, including those incurred by the Parent on CalGens behalf. Costs that are clearly
identifiable as being applicable to CalGen have been allocated to CalGen. The most significant
costs included in this category include costs incurred during the construction phase of the
facilities when salaries and other costs are charged directly to the related construction project.
Costs of centralized departments that serve all business segments have been allocated, where such
charges would be material, using relevant allocation measures, primarily the base labor of CalGen
as a percentage of the consolidated base labor of the Parent. The most significant costs in this
category include salary and benefits of certain employees, legal and other professional fees,
information technology costs and facilities costs, including office rent. Parent corporate costs
that clearly relate to other business segments of Calpine have not been allocated to CalGen.
Charges associated with the termination of certain long-term service agreements related to major
maintenance paid by Calpine have been recorded as contributions from the Parent. There were no such
termination charges for the three-month period ended March 31, 2005. Long-term service agreement
cancellation charges for the three-month period ended March 31, 2004 totaled $1.3 million. For all periods presented, CalGen accounted for income taxes associated with the projects
using the separate return method, pursuant to Financial Accounting Standards Board (FASB)
Statement of Financial Accounting Standards (SFAS) No. 109, Accounting for Income Taxes. (SFAS
No. 109). 8




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CALPINE GENERATING COMPANY, LLC
(a wholly-owned subsidiary of Calpine CalGen Holdings, Inc.) NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
March 31, 2005
(Unaudited) 3. Restatement In connection with the automation of its billing process, the Company identified an error made
in determining payments due from Calpine Energy Services, L.P.
(CES), a subsidiary of its Parent, to the Company for capacity
pursuant to the Index Based Gas Sale and Power Purchase Agreement (Index Based Agreement) and the
WECC Fixed Price Gas Sale and Power Purchase Agreement (the
Fixed Price Agreement). The error caused the Company to over-report revenue by approximately $16.9
million from March 23, 2004, the date of the 2004 Refinancing, until September 30, 2004. This error
had no impact on the Companys Parents (Calpines) financial statements because the revenue
transactions between the Company and CES are eliminated in
consolidation on Calpines books. All amounts in this
Form 10-Q for the quarter ended March 31, 2005 reflect the
impact of this restatement. CalGen bills for its power sales and gas purchases under two agreements between CalGen and
CES: the Index Based Agreement and the Fixed Price Agreement. Billings under these agreements
include payment for fixed capacity fees and variable energy and Operation and Maintenance (O&M)
fees for all of CalGens power plants. Capacity charges billed under the Fixed Price Agreement
should have been deducted from amounts used to calculate the charges under the Index Based
Agreement; however, an error occurred when capacity for two of the Companys plants was
inadvertently billed under both agreements. The following table reflects the originally reported and restated amounts for the quarter
ended March 31, 2004 (in thousands): As
previouslyRestated
    
    
    reported(i)Electricity
and steam revenue-related party
    
    $
    172,469
    
    
    $
    172,785Total revenue
    
    
    273,648
    
    
    
    273,964Gross profit
    
    
    12,474
    
    
    
    12,790Income from operations
    
    
    7,793
    
    
    
    8,109Net loss
    
    
    (93,718
    )
    
    
    (93,402
    )
   (i)
    
    The consolidated condensed financial statements for the three months ended March
31, 2004 are herein restated to correct revenue, gross profit, income from operations and net
loss, which had been overstated due to the billing error discussed above. 4. Summary of Significant Accounting Policies Principles of Consolidation- The accompanying consolidated condensed financial statements
include accounts of the Company and its wholly-owned subsidiaries. The basis of consolidating the
financial statements is common ownership of the facilities and other assets. Intercompany accounts
and transactions are eliminated in the Consolidated Condensed Financial Statements. Reclassifications Certain prior year amounts in the Consolidated Condensed Financial
Statements have been reclassified to conform to the 2005 presentation. Use of Estimates in Preparation of Financial Statements The preparation of financial
statements in conformity with GAAP in the United States of
America requires management to make estimates and assumptions that affect the reported amounts of
assets and liabilities, disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenue and expense during the reporting period.
Actual results could differ from those estimates. The most significant estimates with regard to
these financial statements relate to useful lives and carrying values of assets, salvage value
assumptions, tax valuation allowance, fair value calculations of derivative instruments,
capitalization of interest, the outcome of pending litigation, the allocation of the Parents
shared expenditures and the ability of CalGen to recover the carrying value of the facilities. Restricted
Cash    CalGen is required  to maintain cash balances that
are restricted by provisions of its regulatory agencies.
These amounts are held by depository banks in order to comply with the contractual provisions requiring reserves for environmental payments. 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. The carrying value approximates fair value due to the short-term maturities of these balances. Such cash is excluded from cash and cash
equivalents in the Consolidated Condensed Statement of Cash Flows. Effective Tax Rate CalGen is a single member limited liability company that has been
treated as a taxable entity for financial reporting purposes. For all periods presented, the
Company accounted for income taxes using the separate return method, pursuant to SFAS No. 109.
Under SFAS No. 109, a valuation allowance is recognized if, based on the weight of available
evidence, it is more likely than not that some portion or all of the deferred tax assets will not
be realized. Because of significant historical net losses incurred by the Company, a valuation
allowance has been established for the entire amount of the excess of deferred tax assets over
deferred tax liabilities. Accordingly, the Companys net tax liability has been reduced to zero and
no tax provision or benefit has been 9




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CALPINE GENERATING COMPANY, LLC
(a wholly-owned subsidiary of Calpine CalGen Holdings, Inc.) NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
March 31, 2005
(Unaudited) recorded. The taxable income or loss of the Company is included with the consolidated income
tax returns of Calpine Corporation. For the three months ended March 31, 2005 and 2004, the
effective rate was 0%. Executory Contracts  Where commodity contracts do not qualify as leases or derivatives, the
contracts are classified as executory contracts. These contracts apply traditional accrual
accounting unless the revenue must be levelized per EITF Issue
No. 91-06, Revenue Recognition of Long-Term Power Sales
Contracts (EITF Issue No. 91-06). The Company currently
accounts for one commodity contract under EITF Issue No. 91-06 which is levelized over the term of
the agreement. Revenue Recognition Capacity revenue is recognized monthly, based on the plants
availability. Energy revenue is recognized upon transmission or delivery to the customer. In
addition to various third-party contracts, CalGen has entered into long-term power sales agreements
with CES, whereby CES purchases
virtually all of the projects available electric energy and capacity (other than that sold under
third-party power and steam agreements) and provides the facilities substantially all of their
required natural gas needs. For the period from January 1, 2004 through March 23, 2004, for all
fuel contracts where title for fuel did not transfer, the related power sales agreements were
accounted for as tolling agreements and the associated fuel costs were presented as a reduction of
the related power revenues. In connection with the issuance of the secured term loans and secured
notes on March 23, 2004, new contracts were executed with CES. Under these new contracts, the title
for fuel transfers to CalGen; therefore, they are not considered to be tolling agreements. As a
result, the projects record gross revenues and fuel expense. Steam is generated as a by-product at
our facilities and is recognized upon delivery to the customer. Under certain circumstances, CalGen is a party to a number of buy-sell transactions whereby
CalGen purchases gas from a third-party, sells the gas to CES at substantially the same price, and
then repurchases the gas from CES at the
contract price. Revenues from these transactions are netted against the
affiliated fuel expense. For the three-month period ended March 31, 2005, revenues of approximately
$78.1 million from these transactions were netted against $78.1 million of associated fuel expense. 5. Property, Plant and Equipment, Net and Capitalized Interest As of March 31, 2005 and December 31, 2004, the components of property, plant and equipment,
net, are stated at cost less accumulated depreciation and amortization as follows (in thousands): March 31,
    
    
    December 31,2005
    
    
    2004Buildings, machinery, and equipment
    
    $
    5,919,719
    
    
    $
    5,917,575Less: Accumulated depreciation and amortization
    
    
    (378,713
    )
    
    
    (338,172
    )5,541,006
    
    
    
    5,579,403Land
    
    
    7,854
    
    
    
    7,854Construction in progress
    
    
    736,751
    
    
    
    707,172Property, plant and equipment, net
    
    $
    6,285,611
    
    
    $
    6,294,429
 Total depreciation and amortization expense for the quarters ended March 31, 2005 and 2004 was
$40.6 million and $34.9 million, respectively. Buildings, Machinery, and Equipment This component primarily includes electric power plants
and related equipment. Depreciation is recorded utilizing the straight-line method over the
estimated original composite useful life, generally 35 years for baseload power plants, exclusive
of the estimated salvage value, typically 10%. Zion, which is a peaking facility, is depreciated
over 40 years, less the estimated salvage value of 10%. Major Maintenance The Company capitalizes costs for major turbine generator refurbishments
for the hot gas path section and compressor components, which include such significant items as
combustor parts (e.g. fuel nozzles, transition pieces and baskets), compressor blades, vanes and
diaphragms. These refurbishments are done either under long term service agreements by the original
equipment manufacturer or by Calpines Turbine Maintenance Group. The capitalized costs are
depreciated over their estimated useful lives. The Company expenses annual planned maintenance. Construction in Progress Construction in progress (CIP) is primarily attributable to
projects under construction. Upon commencement of plant operation, these costs are transferred to
the applicable property category, generally buildings, machinery and equipment. The Pastoria Energy
Center, which commenced Phase I operations in May 2005 and expects to commence phase II 10




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CALPINE GENERATING COMPANY, LLC
(a wholly-owned subsidiary of Calpine CalGen Holdings, Inc.) NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
March 31, 2005
(Unaudited) operations
in June 2005, was the only facility under construction at March 31, 2005 and December 31, 2004.
Construction in progress increased $29.6 million between December 31, 2004 and March 31,
2005 primarily due to capital additions at the Pastoria facility. Capitalized Interest The Company capitalizes interest on capital invested in projects
during the advanced stages of development and the construction period in accordance with SFAS No.
34, Capitalization of Interest Cost, (SFAS No. 34) as amended by SFAS No. 58, Capitalization
of Interest Cost in Financial Statements That Include Investments Accounted for by the Equity
Method (an
Amendment of FASB Statement No. 34) (SFAS No. 58). Upon commencement of plant operation,
capitalized interest, as a component of the total cost of the plant, is amortized over the
estimated useful life of the plant. For the quarters ended March 31, 2005 and 2004, the total
amount of interest capitalized was $5.0 million and $33.3 million, respectively. The decrease in
the amount of interest capitalized during the quarter ended March 31, 2005 reflects the completion
of the Columbia and Goldendale power plants in 2004. Capitalized interest is computed using two methods: (1) capitalized interest on funds borrowed
for specific construction projects and (2) capitalized interest on general debt. For capitalization
of interest on specific funds, the Company capitalizes the interest cost incurred related to debt
entered into for specific projects under construction. The methodology for capitalizing interest on
general debt, consistent with paragraphs 13 and 14 of SFAS No. 34 begins with a determination of
the borrowings applicable to the Companys qualifying assets. The basis of this approach is the
assumption that the portion of the interest costs that are capitalized on expenditures during an
assets acquisition period could have been avoided if the expenditures had not been made. This
methodology takes the view that if funds are not required for construction then they would have
been used to pay off debt. The Company uses its best judgment in determining which borrowings
represent the cost of financing the acquisition of the assets. The interest rate is derived by
dividing the total interest cost by the average borrowings. This weighted average interest rate is
applied to the Companys average qualifying assets in excess of specific debt on which interest is
capitalized. For the period from January 1, 2004 through March 23, 2004, general debt consisted
primarily of subordinated debt from our Parent (the Subordinated Parent Debt). All Subordinated
Parent Debt was converted to equity in connection with the issuance of debt securities on March 23,
2004 (See Note 6). Impairment Evaluation All long-lived assets, such as property, plant and equipment, are
reviewed for impairment whenever there is an indication of a potential reduction in fair value.
Factors which could trigger an impairment include significant underperformance relative to
historical or projected future operating results, significant changes in how the Company uses the
acquired assets in its overall business strategy and significant negative industry or economic
trends. The determination of whether impairment has occurred is based on an estimate of undiscounted
cash flows attributable to the assets, as compared to the carrying value of the assets. The
significant assumptions used in the Companys undiscounted future cash flow estimates include the
future supply and demand relationships for electricity and natural gas and the expected pricing for
those commodities as well as the resultant spark spreads in the various regions where the Company
generates. If an impairment has occurred, the amount of the impairment loss recognized would be
determined by estimating the fair value of the assets and recording a loss to the extent that the
fair value was less than the book value. The Companys assessment regarding the existence of impairment factors is based on market
conditions, operational performance and legal factors related to its projects. The Companys review
of factors present and the resulting appropriate carrying value of long-lived assets are subject to
judgments and estimates that management is required to make. No impairment charge has been recorded
to date for any projects. However, future events could cause us to conclude that impairment
indicators exist and that long-lived assets might be impaired. 6. Notes Payable, Term Loans and Other Financings On March 23, 2004, the Company completed its offerings of secured term loans and secured notes
totaling $2.4 billion. Net proceeds from the offerings were used to repay amounts outstanding under
the $2.5 billion CCFC II revolving construction credit facility (the Construction Facility),
which was scheduled to mature in November 2004, and to pay fees and transaction costs associated
with the 2004 Refinancing. The new debt securities (the Notes)
and the new term loans (the Loans) are in several traunches and,
except for the Third Priority Secured Notes Due 2011, carry a floating interest rate based on LIBOR
plus a spread. The Third Priority Secured Notes Due 2011 carry a fixed interest rate of 11.5%. The
offerings included: 11




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##### Table of Contents



CALPINE GENERATING COMPANY, LLC
(a wholly-owned subsidiary of Calpine CalGen Holdings, Inc.) NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
March 31, 2005
(Unaudited) Carrying Amount atAmount
    
    Description
    
    Interest Rate
    
    March 31,2005$235.0 million
    
    First Priority Secured Floating Rate Notes Due 2009
    
    LIBOR plus 375 basis points
    
    $
    235.0 million$640.0 million
    
    Second Priority Secured Floating Rate Notes Due 2010
    
    LIBOR plus 575 basis points
    
    $
    632.0 million$680.0 million
    
    Third Priority Secured Floating Rate Notes Due 2011
    
    LIBOR plus 900 basis points
    
    $
    680.0 million$150.0 million
    
    Third Priority Secured Notes Due 2011

    

11.50%
    
    $
    150.0 million$600.0 million
    
    First Priority Secured Term Loans due 2009
    
    LIBOR plus 375 basis points(1)
    
    $
    600.0 million$100.0 million
    
    Second Priority Secured Term Loans due 2010
    
    LIBOR plus 575 basis points(2)
    
    $
    98.8 million$ 2,405.0 million
    
    
    
    
    
    
    
    $
    2,395.8 million
   (1)
    
    The Company may also elect a Base Rate plus 275 basis points.(2)
    
    The Company may also elect a Base Rate plus 475 basis points. The Loans and Notes described above are collateralized through a
combination of pledges of the equity interests in CalGen and its first tier subsidiary, CalGen
Expansion Company, liens on the assets of CalGens power generating facilities (other than its
Goldendale facility) and related assets located throughout the United States. The lenders recourse
is limited to such security and none of the indebtedness is guaranteed by Calpine. (see Note 11,
Guarantor Subsidiaries  Supplemental Consolidating Financial Statements). Other Financings Concurrently with the refinancing, described above, the Company entered into an agreement with
a group of banks led by The Bank of Nova Scotia for a $200.0 million revolving credit facility (the
Revolving Credit Facility). This three-year facility is available for specified working capital
purposes, capital expenditures on Pastoria, and for letters of credit. All amounts outstanding
under the Revolving Credit Facility will bear interest at either (i) the Base Rate plus 250 basis
points, or (ii) at LIBOR plus 350 basis points as defined in the indenture. At March 31, 2005 and
December 31, 2004, there were no outstanding borrowings under the facility; however, there were
$182.0 million and $190.0 million, respectively, in letters of credit issued and outstanding. These
letters of credit were primarily issued to support fuel purchases and other operational activities. Concurrently
with the refinancing, the Company also entered into a $750.0 million unsecured subordinated working capital facility
(the Working Capital Facility) with CalGen Holdings,
Inc., the Companys sole member. The Working Capital Facility is guaranteed by Calpine. Under the
Working Capital Facility, the Company may borrow funds only for specific purposes including claims
under its business interruption insurance with respect to any of the facilities or a delay in the
start up of the Pastoria facility; losses incurred as a result of uninsured force majeure events;
claims for liquidated damages against third party contractors with respect to the Goldendale and
Pastoria facilities and spark spread diminution after expiration of the three-year Index Hedge
agreement with Morgan Stanley Capital Group (MSCG) (see Note 9). Borrowings under the Working
Capital Facility will bear interest at LIBOR plus 4.0% and will mature in 2019. At March 31, 2005
and December 31, 2004, there were no outstanding borrowings under the Working Capital Facility. Prior to the refinancing on March 23, 2004, the Companys long-term debt consisted of the
Construction Facility and the Subordinated Parent Debt. The Construction Facility was repaid and
terminated on March 23, 2004 and the balance of the Subordinated Parent Debt totaling $4.4 billion
was converted to equity as a non-cash capital contribution. In
connection with a Raw Water Service Agreement (the Water Agreement) entered into with Contra
Costa Water District for raw water service through April 2015, Delta and Los Medanos issued a
promissory note valued at $3.5 million for the service connection fee. Payments are annual, due
April 1 of each year. The interest rate charged is based on the average rate for the preceding
calendar year for the Local Agency Investment Fund plus 2.5%. The note is split 70% Delta and 30%
Los Medanos per the terms of the Water Agreement. At March 31, 2005 and December 31, 2004, the
balance of the note was $2.3 million. 7. Significant Customers In addition to third-party agreements, each of the Companys facilities entered into the Index
Based Agreement with CES. The Delta and Los Medanos facilities also entered into Fixed Price Agreement with CES. Under these
agreements, CES purchases substantially all of the output for each facility (subject to certain
exceptions for direct sales to third parties) and sells or delivers to each facility substantially
all of the gas required for its operations (subject to certain exceptions for gas purchases from
third parties) CES is a significant customer and the Companys revenues from sales to CES were as
follows (in thousands): 12




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##### Table of Contents



CALPINE GENERATING COMPANY, LLC
(a wholly-owned subsidiary of Calpine CalGen Holdings, Inc.) NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
March 31, 2005
(Unaudited) Three Months EndedMarch 31,2005
    
    

2004(Restated)Revenues:CES
    
    $
    345,326
    
    
    $
    172,469
 CES invoices the Company for the power they purchase during the period net of the gas they
sell to the facilities during the period. As such, the Company could be in a net payable or
receivable position at the end of any given period, depending on the fuel consumption used to
generate power sold to third-party customers during the respective period. See note 8 below
regarding related-party transactions. 8. Related Party Transactions Concurrently
with the closing of the Loans and Notes refinancing on March 23, 2004, the Company entered into
various agreements with Calpine affiliates. Under these agreements, the facilities sell
power and purchase gas from CES, and other Calpine affiliates provide
operations and maintenance (O&M), major maintenance
and administrative services to the Company. The agreements between
the Company and CES provide for the netting of payment obligations
due and owing to each other, and the related party balances among and
between Calpine and its affiliates are netted for presentation
purposes in the Company's Consolidated Condensed Financial Statements. The combined related-party balances as of March 31, 2005 and December 31, 2004, reflected in the
accompanying Consolidated Condensed Balance sheets and the related-party transactions for the three months
ended March 31, 2005 and 2004, reflected in the accompanying
Consolidated Condensed Statements of Operations
are summarized as follows (in thousands): March 31,
    
    
    December 31,2005
    
    
    2004Accounts receivable, net
    
    $
    
    
    
    $
    600Accounts payable, net
    
    
    36,624
    
    
    
    
 Three Months EndedMarch 31,2005
    
    

2004(Restated)Revenue
    
    $
    345,326
    
    
    $
    172,469Fuel expense
    
    
    262,768
    
    
    
    181,875Plant operating expense
    
    
    43,474
    
    
    
    43,657Sales, general and administrative expense
    
    
    3,251
    
    
    
    4,681Interest expense
    
    
    
    
    
    
    72,173
 9. Derivative Instruments To manage forward exposure to price fluctuations, the Company entered into a three-year Index
Hedge with MSCG. The Index Hedge will provide for semi-annual payments to the Company if the
aggregate spark spread amount calculated under the Index Hedge for any six-month period during the
term of the Index Hedge is less than $50.0 million. The semi-annual payment dates are March 31 and
September 30, beginning September 30, 2004. Based on the aggregate spark spread calculation, no
payment was made to the Company under the Index Hedge for the quarter ended March 31, 2005. The
Company paid $45.0 million for the Index Hedge. The amount paid includes a value of $38.3 million
over the estimated exercise value of the Index Hedge calculated based on the Companys internally
developed models. The Company recorded the valuation difference as a component of derivative
assets. In accordance with EITF Issue No. 02-03, Issues Involved in Accounting for Derivative Contracts Held
for Trading Purposes and Contracts Involved in Energy Trading and Risk Management Activities the
valuation difference is accounted for as a deferred amount and amortized to income over the term of
the contract. The amount amortized (realized expense) for the quarter ended March 31, 2005 was $5.6
million. The Index Hedge qualifies as a derivative under SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities but does not meet hedge accounting requirements and, therefore,
changes in the value are recognized in the Consolidated Condensed Statement of Operations as an unrealized
gain or loss. There was an unrealized loss from such changes in value of $1.7 million for the
quarter ended March 31, 2005. The table below reflects the amounts that are recorded as assets and liabilities at March 31,
2005, for the Companys derivative instruments (in thousands): 13




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##### Table of Contents



CALPINE GENERATING COMPANY, LLC
(a wholly-owned subsidiary of Calpine CalGen Holdings, Inc.) NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
March 31, 2005
(Unaudited) March 31,2005Current derivative assets
    
    $
    7,231Long-term derivative assets
    
    
    21,400Total derivative assets
    
    $
    28,631
 10. Commitments and Contingencies Litigation The Company is 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 the Company 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 may potentially be material
to the Companys Consolidated Condensed Financial Statements. Estate of Jones, et al. v. Calpine Corporation. On June 11, 2003, the Estate of Darrell Jones
and the Estate of Cynthia Jones filed a complaint against Calpine in the United States District
Court for the Western District of Washington. Calpine purchased Goldendale Energy, Inc., a
Washington corporation, from Darrell Jones of National Energy Systems Company (NESCO). The
agreement provided, among other things, that upon Substantial Completion of the Goldendale
facility, Calpine would pay Mr. Jones (i) $6.0 million and (ii) $18.0 million less $0.2 million per
day for each day that elapsed between July 1, 2002, and the date of substantial
completion. Substantial completion of the Goldendale facility occurred in September 2004 and
the daily reduction in the payment amount has reduced the $18.0 million payment to zero. The
complaint alleged that by not achieving substantial completion by July 1, 2002, Calpine breached
its contract with Mr. Jones, violated a duty of good faith and fair dealing, and caused an
inequitable forfeiture. On July 28, 2003, Calpine filed a motion to dismiss the complaint for
failure to state a claim upon which relief can be granted. The court granted Calpines motion to
dismiss the complaint on March 10, 2004. Plaintiffs filed a motion for reconsideration of the
decision, which was denied. Subsequently, on June 7, 2004, plaintiffs filed a notice of appeal.
Calpine filed a motion to recover attorneys fees from NESCO, which was recently granted at a
reduced amount. Calpine held back $100,000 of the $6 million payment to the estates (which has been
remitted) to ensure payment of these fees. The matter is currently on appeal, and both parties have
filed briefs with the appellate court. Solutia Bankruptcy. Solutia, Inc. (Decatur Energy Center, LLCs (Decatur) steam host) filed
for bankruptcy on December 17, 2003. Effective May 27, 2004, Solutia, Inc. rejected certain cogen
agreements relating to the sale of steam and supply of electricity and entered a term sheet with
Decatur confirming the agreement of the parties with respect to property rights going forward. By
this term sheet, Decatur has secured all necessary rights to continue operating the plant. The
parties are in active discussions to attempt to reach a negotiated settlement on the rejection
damage claim, but if such discussions are not successful, Decatur maintains the right to litigate
the amount of the damage claim. The parties entered into an amended and restated agreement setting
forth their respective rights and obligations going forward pursuant to the term sheet and the
bankruptcy court approved this agreement on June 30, 2004. On November 19, 2004, Decatur and its
affiliates filed proofs of claim with the bankruptcy court totaling approximately $383 million.
Solutia is expected to contest these claims, but has taken no action to date. Panda Energy International, Inc., et al. v. Calpine Corporation, et al.On November 5, 2003,
Panda Energy International, Inc. and certain related parties, including PLC II, LLC, (collectively
Panda) filed suit against Calpine and certain of its affiliates in the United States District
Court for the Northern District of Texas, alleging, among other things, that the Company breached
duties of care and loyalty allegedly owed to Panda by failing to correctly construct and operate
the Oneta Energy Center (Oneta), which the Company acquired from Panda, in accordance with
Pandas original plans. Panda alleges that it is entitled to a portion of the profits from Oneta
and that Calpine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 interest through December 1, 2003) is currently outstanding and past due.
The note is collateralized by Pandas carried interest in the income generated from Oneta, which
achieved full commercial operations in June 2003. Calpine filed a counterclaim against Panda Energy
International, Inc. (and PLC II, LLC) based on a guaranty and a motion to dismiss as to the causes
of action alleging federal and state securities laws violations. The court recently granted
Calpines motion to dismiss, but allowed Panda an opportunity to replead. The 14




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CALPINE GENERATING COMPANY, LLC
(a wholly-owned subsidiary of Calpine CalGen Holdings, Inc.) NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
March 31, 2005
(Unaudited) Company considers
Pandas lawsuit to be without merit and intends to vigorously defend it. Discovery is currently in
progress. Calpine stopped accruing interest income on the promissory note due December 1, 2003,
as of the due date because of Pandas default in repayment of the note. 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. 11. Guarantor Subsidiaries  Supplemental Consolidating Financial Statements The securities issued in connection with the 2004 Refinancing were guaranteed by substantially
all of the Companys assets and the assets of its subsidiaries (Subsidiary Guarantors) other than
CalGen Finance and CalGens subsidiary that owns the Goldendale facility (the Other
Subsidiaries). The Goldendale facility is collateralized through the Companys equity interest in
CalGen Expansion Company. CalGen Expansion Company owns, through its direct and indirect wholly
owned subsidiaries, 100% of the interests in the Companys facilities. CalGen Holdings membership
interest in CalGen and CalGens membership interest in CalGen Expansion are pledged as collateral.
CalGen Holdings has no assets or operations separate from its investment in CalGen. The Notes
discussed in Note 6 are guaranteed on a joint and several and unconditional basis by the Subsidiary
Guarantors. Each guarantee is a non-recourse senior secured obligation of the respective guarantor. Pursuant to Rule 3.10 of Regulation S-X, CalGen is required to present consolidating financial
information with respect to the Subsidiary Guarantors and the Other Subsidiaries. Consolidating
balance sheets as of March 31, 2005 and December 31, 2004, consolidating statements of operations
and cash flows for the three-month periods ended March 31, 2005 and 2004, are presented below. 15




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CALPINE GENERATING COMPANY, LLC
(a wholly-owned subsidiary of Calpine CalGen Holdings, Inc.) NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
March 31, 2005
(Unaudited) SUPPLEMENTAL CONSOLIDATING CONDENSED BALANCE SHEET
March 31, 2005 CalpineGeneratingCompany,Subsidiary
    
    
    Other
    
    
    Consolidating
    
    
    LLCParent
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    Adjustments
    
    
    Consolidated(In thousands)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    90,227
    
    
    $
    31
    
    
    $
    1
    
    
    $
    
    
    
    $
    90,259Restricted cash, current portion
    
    
    
    
    
    
    
    
    
    
    81
    
    
    
    
    
    
    
    81Accounts receivable
    
    
    122
    
    
    
    62,820
    
    
    
    42
    
    
    
    
    
    
    
    62,984Accounts receivable  related party
    
    
    62,927
    
    
    
    147,453
    
    
    
    
    
    
    
    (210,380
    )
    
    
    Notes receivable, current portion
    
    
    
    
    
    
    1,115
    
    
    
    
    
    
    
    
    
    
    
    1,115Inventories
    
    
    
    
    
    
    18,462
    
    
    
    1,173
    
    
    
    
    
    
    
    19,635Current derivative assets
    
    
    7,231
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,231Prepaid and other current assets
    
    
    572
    
    
    
    23,834
    
    
    
    665
    
    
    
    
    
    
    
    25,071Total current assets
    
    
    161,079
    
    
    
    253,715
    
    
    
    1,962
    
    
    
    (210,380
    )
    
    
    206,376Property, plant and equipment, net
    
    
    6
    
    
    
    5,962,602
    
    
    
    323,003
    
    
    
    
    
    
    
    6,285,611Investment in affiliates
    
    
    4,026,557
    
    
    
    
    
    
    
    
    
    
    
    (4,026,557
    )
    
    
    Notes receivable, net of current portion
    
    
    
    
    
    
    19,284
    
    
    
    
    
    
    
    
    
    
    
    19,284Notes receivable  affiliate
    
    
    2,425,341
    
    
    
    
    
    
    
    
    
    
    
    (2,425,341
    )
    
    
    Restricted cash, net of current portion
    
    
    
    
    
    
    
    
    
    
    95
    
    
    
    
    
    
    
    95Deferred financing costs, net
    
    
    48,673
    
    
    
    46,634
    
    
    
    2,039
    
    
    
    (48,673
    )
    
    
    48,673Long-term derivative assets
    
    
    21,400
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21,400Deferred tax asset
    
    
    
    
    
    
    16,310
    
    
    
    1,362
    
    
    
    
    
    
    
    17,672Other assets
    
    
    
    
    
    
    51,229
    
    
    
    
    
    
    
    
    
    
    
    51,229Total assets
    
    $
    6,683,056
    
    
    $
    6,349,774
    
    
    $
    328,461
    
    
    $
    (6,710,951
    )
    
    $
    6,650,340LIABILITIES AND MEMBERS EQUITYCurrent liabilities:Accounts payable
    
    $
    31,898
    
    
    $
    46,969
    
    
    $
    183
    
    
    $
    
    
    
    $
    79,050Accounts payable  related party
    
    
    167,007
    
    
    
    36,624
    
    
    
    43,373
    
    
    
    (210,380
    )
    
    
    36,624Notes payable, current portion
    
    
    
    
    
    
    903
    
    
    
    
    
    
    
    
    
    
    
    903Accrued interest payable
    
    
    78,219
    
    
    
    74,782
    
    
    
    3,437
    
    
    
    (78,219
    )
    
    
    78,219Deferred tax liability
    
    
    
    
    
    
    16,310
    
    
    
    1,362
    
    
    
    
    
    
    
    17,672Other current liabilities
    
    
    
    
    
    
    2,417
    
    
    
    123
    
    
    
    
    
    
    
    2,540Total current liabilities
    
    
    277,124
    
    
    
    178,005
    
    
    
    48,478
    
    
    
    (288,599
    )
    
    
    215,008Notes payable, net of current portion
    
    
    
    
    
    
    2,114
    
    
    
    
    
    
    
    
    
    
    
    2,114Priority notes and term loans
    
    
    2,395,795
    
    
    
    2,285,748
    
    
    
    110,047
    
    
    
    (2,395,795
    )
    
    
    2,395,795Deferred revenue
    
    
    
    
    
    
    6,430
    
    
    
    
    
    
    
    
    
    
    
    6,430Other liabilities
    
    
    
    
    
    
    20,856
    
    
    
    
    
    
    
    
    
    
    
    20,856Total liabilities
    
    
    2,672,919
    
    
    
    2,493,153
    
    
    
    158,525
    
    
    
    (2,684,394
    )
    
    
    2,640,203Members equity
    
    
    4,010,137
    
    
    
    3,856,621
    
    
    
    169,936
    
    
    
    (4,026,557
    )
    
    
    4,010,137Total liabilities and members equity
    
    $
    6,683,056
    
    
    $
    6,349,774
    
    
    $
    328,461
    
    
    $
    (6,710,951
    )
    
    $
    6,650,340
 16




---



##### Table of Contents



CALPINE GENERATING COMPANY, LLC
(a wholly-owned subsidiary of Calpine CalGen Holdings, Inc.) NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
March 31, 2005
(Unaudited) SUPPLEMENTAL CONSOLIDATING CONDENSED BALANCE SHEET
December 31, 2004 CalpineGeneratingCompany,Subsidiary
    
    
    Other
    
    
    Consolidating
    
    
    LLCParent
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    Adjustments
    
    
    Consolidated(In thousands)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    64,510
    
    
    $
    28
    
    
    $
    
    
    
    $
    
    
    
    $
    64,538Accounts receivable
    
    
    
    
    
    
    59,302
    
    
    
    18
    
    
    
    
    
    
    
    59,320Accounts receivable  related party
    
    
    62,131
    
    
    
    119,589
    
    
    
    
    
    
    
    (181,120
    )
    
    
    600Notes
receivable, current portion
    
    
    
    
    
    
    367
    
    
    
    
    
    
    
    
    
    
    
    367Inventories
    
    
    
    
    
    
    18,456
    
    
    
    1,145
    
    
    
    
    
    
    
    19,601Current derivative assets
    
    
    9,272
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,272Prepaid and other current assets
    
    
    62
    
    
    
    21,019
    
    
    
    88
    
    
    
    
    
    
    
    21,169Total current assets
    
    
    135,975
    
    
    
    218,761
    
    
    
    1,251
    
    
    
    (181,120
    )
    
    
    174,867Property, plant and equipment, net
    
    
    7
    
    
    
    5,969,576
    
    
    
    324,846
    
    
    
    
    
    
    
    6,294,429Investment in affiliates
    
    
    4,051,326
    
    
    
    
    
    
    
    
    
    
    
    (4,051,326
    )
    
    
    Notes receivable, net of current portion
    
    
    
    
    
    
    19,381
    
    
    
    
    
    
    
    
    
    
    
    19,381Notes receivable  affiliate
    
    
    2,397,160
    
    
    
    
    
    
    
    
    
    
    
    (2,397,160
    )
    
    
    Deferred financing costs, net
    
    
    51,496
    
    
    
    49,329
    
    
    
    2,167
    
    
    
    (51,496
    )
    
    
    51,496Long-term derivative assets
    
    
    26,644
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    26,644Deferred tax asset
    
    
    
    
    
    
    16,310
    
    
    
    1,362
    
    
    
    
    
    
    
    17,672Other assets
    
    
    
    
    
    
    54,245
    
    
    
    
    
    
    
    
    
    
    
    54,245Total assets
    
    $
    6,662,608
    
    
    $
    6,327,602
    
    
    $
    329,626
    
    
    $
    (6,681,102
    )
    
    $
    6,638,734LIABILITIES AND MEMBERS EQUITYCurrent liabilities:Accounts payable
    
    $
    31,809
    
    
    $
    66,880
    
    
    $
    523
    
    
    $
    
    
    
    $
    99,212Accounts payable  related party
    
    
    140,153
    
    
    
    
    
    
    
    40,967
    
    
    
    (181,120
    )
    
    
    Notes payable, current portion
    
    
    
    
    
    
    168
    
    
    
    
    
    
    
    
    
    
    
    168Accrued interest payable
    
    
    53,324
    
    
    
    51,028
    
    
    
    2,296
    
    
    
    (53,324
    )
    
    
    53,324Deferred tax liability
    
    
    
    
    
    
    16,310
    
    
    
    1,362
    
    
    
    
    
    
    
    17,672Other current liabilities
    
    
    
    
    
    
    2,871
    
    
    
    99
    
    
    
    
    
    
    
    2,970Total current liabilities
    
    
    225,286
    
    
    
    137,257
    
    
    
    45,247
    
    
    
    (234,444
    )
    
    
    173,346Notes payable, net of current portion
    
    
    
    
    
    
    2,109
    
    
    
    
    
    
    
    
    
    
    
    2,109Priority notes and term loans
    
    
    2,395,332
    
    
    
    2,285,307
    
    
    
    110,025
    
    
    
    (2,395,332
    )
    
    
    2,395,332Deferred revenue
    
    
    
    
    
    
    5,671
    
    
    
    
    
    
    
    
    
    
    
    5,671Other liabilities
    
    
    
    
    
    
    20,286
    
    
    
    
    
    
    
    
    
    
    
    20,286Total liabilities
    
    
    2,620,618
    
    
    
    2,450,630
    
    
    
    155,272
    
    
    
    (2,629,776
    )
    
    
    2,596,744Members equity
    
    
    4,041,990
    
    
    
    3,876,972
    
    
    
    174,354
    
    
    
    (4,051,326
    )
    
    
    4,041,990Total liabilities and members equity
    
    $
    6,662,608
    
    
    $
    6,327,602
    
    
    $
    329,626
    
    
    $
    (6,681,102
    )
    
    $
    6,638,734
 17




---



##### Table of Contents



CALPINE GENERATING COMPANY, LLC
(a wholly-owned subsidiary of Calpine CalGen Holdings, Inc.) NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
March 31, 2005
(Unaudited) SUPPLEMENTAL CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS
For the quarter ended March 31, 2005 CalpineGeneratingCompany,Subsidiary
    
    
    Other
    
    
    Consolidating
    
    
    LLCParent
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    Adjustments
    
    
    Consolidated(In thousands)Revenue:Electricity and steam revenue  related party
    
    $
    
    
    
    $
    329,878
    
    
    $
    15,448
    
    
    $
    
    
    
    $
    345,326Electricity and steam revenue  third-party
    
    
    
    
    
    
    108,359
    
    

    
    
    
    
    
    
    
    
    
    108,359Total electricity and steam revenue
    
    
    
    
    
    
    438,237
    
    
    
    15,448
    
    
    
    
    
    
    
    453,685Mark-to-market activity, net
    
    
    (7,285
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,285
    )Sale of purchased power
    
    
    
    
    
    
    4,680
    
    
    
    
    
    
    
    
    
    
    
    4,680Other revenue
    
    
    
    
    
    
    1,200
    
    
    
    
    
    
    
    
    
    
    
    1,200Total revenue
    
    
    (7,285
    )
    
    
    444,117
    
    
    
    15,448
    
    
    
    
    
    
    
    452,280Cost of revenue:Plant
operating expense  related party
    
    
    
    
    
    
    39,708
    
    
    
    3,766
    
    
    
    
    
    
    
    43,474Fuel expense
    
    
    
    
    
    
    329,218
    
    
    
    11,507
    
    
    
    
    
    
    
    340,725Purchased power expense
    
    
    
    
    
    
    4,418
    
    
    
    
    
    
    
    
    
    
    
    4,418Depreciation and amortization expense
    
    
    
    
    
    
    38,842
    
    
    
    1,801
    
    
    
    
    
    
    
    40,643Total cost of revenue
    
    
    
    
    
    
    412,186
    
    
    
    17,074
    
    
    
    
    
    
    
    429,260Gross profit (loss)
    
    
    (7,285
    )
    
    
    31,931
    
    
    
    (1,626
    )
    
    
    
    
    
    
    23,020Sales,
general and administrative expense  related party
    
    
    185
    
    
    
    2,898
    
    
    
    168
    
    
    
    
    
    
    
    3,251Income (loss) from operations
    
    
    (7,470
    )
    
    
    29,033
    
    
    
    (1,794
    )
    
    
    
    
    
    
    19,769Interest expense  third party
    
    
    50,749
    
    
    
    48,215
    
    
    
    2,534
    
    
    
    (50,749
    )
    
    
    50,749Interest (income)
    
    
    (51,058
    )
    
    
    (480
    )
    
    
    
    
    
    
    50,749
    
    
    
    (789
    )Equity loss in subsidiary
    
    
    (23,720
    )
    
    
    
    
    
    
    
    
    
    
    23,720
    
    
    
    Other (income) expense, net
    
    
    (77
    )
    
    
    600
    
    
    
    90
    
    
    
    
    
    
    
    613Loss before income taxes
    
    
    (30,804
    )
    
    
    (19,302
    )
    
    
    (4,418
    )
    
    
    23,720
    
    
    
    (30,804
    )Income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net loss
    
    $
    (30,804
    )
    
    $
    (19,302
    )
    
    $
    (4,418
    )
    
    $
    23,720
    
    
    $
    (30,804
    )
 18




---



##### Table of Contents



CALPINE GENERATING COMPANY, LLC
(a wholly-owned subsidiary of Calpine CalGen Holdings, Inc.) NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
March 31, 2005
(Unaudited) SUPPLEMENTAL CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS
For the quarter ended March 31, 2004 CalpineGeneratingCompany,Subsidiary
    
    
    Other
    
    
    Consolidating
    
    
    LLCParent
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    Adjustments
    
    
    Consolidated(Restated, in thousands)Revenue:Electricity and steam revenue  related party
    
    $
    
    
    
    $
    172,469
    
    
    $
    
    
    
    $
    
    
    
    $
    172,469Electricity and steam revenue  third-party
    
    
    
    
    
    
    99,942
    
    
    
    
    
    
    
    
    
    
    
    99,942Total electricity and steam revenue
    
    
    
    
    
    
    272,411
    
    
    
    
    
    
    
    
    
    
    
    272,411Mark-to-market activity, net
    
    
    115
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    115Sale of purchased power
    
    
    
    
    
    
    298
    
    
    
    
    
    
    
    
    
    
    
    298Other revenue
    
    
    
    
    
    
    824
    
    
    
    
    
    
    
    
    
    
    
    824Total revenue
    
    
    115
    
    
    
    273,533
    
    
    
    
    
    
    
    
    
    
    
    273,648Cost of revenue:Plant
operating expense  related party
    
    
    
    
    
    
    43,657
    
    
    
    
    
    
    
    
    
    
    
    43,657Fuel expense
    
    
    
    
    
    
    182,144
    
    
    
    
    
    
    
    
    
    
    
    182,144Purchased power expense
    
    
    
    
    
    
    490
    
    
    
    
    
    
    
    
    
    
    
    490Depreciation and amortization expense
    
    
    
    
    
    
    34,883
    
    
    
    
    
    
    
    
    
    
    
    34,883Total cost of revenue
    
    
    
    
    
    
    261,174
    
    
    
    
    
    
    
    
    
    
    
    261,174Gross profit (loss)
    
    
    115
    
    
    
    12,359
    
    
    
    
    
    
    
    
    
    
    
    12,474Sales, general and administrative expense  related party
    
    
    111
    
    
    
    3,444
    
    
    
    1,126
    
    
    
    
    
    
    
    4,681Income (loss) from operations
    
    
    4
    
    
    
    8,915
    
    
    
    (1,126
    )
    
    
    
    
    
    
    7,793Interest expense  related party
    
    
    
    
    
    
    72,026
    
    
    
    147
    
    
    
    
    
    
    
    72,173Interest expense  third party
    
    
    
    
    
    
    30,636
    
    
    
    138
    
    
    
    
    
    
    
    30,774Interest (income)
    
    
    (218
    )
    
    
    (567
    )
    
    
    
    
    
    
    
    
    
    
    (785
    )Equity loss in subsidiary
    
    
    (93,940
    )
    
    
    
    
    
    
    
    
    
    
    93,940
    
    
    
    Other (income) expense, net
    
    
    
    
    
    
    (651
    )
    
    
    
    
    
    
    
    
    
    
    (651
    )Loss before income taxes
    
    
    (93,718
    )
    
    
    (92,529
    )
    
    
    (1,411
    )
    
    
    93,940
    
    
    
    (93,718
    )Income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net loss
    
    $
    (93,718
    )
    
    $
    (92,529
    )
    
    $
    (1,411
    )
    
    $
    93,940
    
    
    $
    (93,718
    )
 19




---



##### Table of Contents



CALPINE GENERATING COMPANY, LLC
(a wholly-owned subsidiary of Calpine CalGen Holdings, Inc.) NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
March 31, 2005
(Unaudited) SUPPLEMENTAL CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS
For the quarter ended March 31, 2005 CalpineGeneratingCompany,Subsidiary
    
    
    Other
    
    
    Consolidating
    
    
    LLCParent
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    Adjustments
    
    
    Consolidated(In thousands)Cash flows from operating activities:Net loss
    
    $
    (30,804
    )
    
    $
    (19,302
    )
    
    $
    (4,418
    )
    
    $
    23,720
    
    
    $
    (30,804
    )Adjustments
to reconcile net loss to net cash provided by
operating activities:Depreciation and amortization
    
    
    
    
    
    
    38,842
    
    
    
    1,801
    
    
    
    
    
    
    
    40,643Amortization
of discount and deferred financing costs
    
    
    3,244
    
    
    
    2,833
    
    
    
    149
    
    
    
    (3,244
    )
    
    
    2,982Mark-to-market
activities, net
    
    
    7,285
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,285Equity loss in subsidiary
    
    
    23,720
    
    
    
    
    
    
    
    
    
    
    
    (23,720
    )
    
    
    Change in operating assets and liabilities:Accounts receivable
    
    
    (122
    )
    
    
    (3,518
    )
    
    
    (24
    )
    
    
    
    
    
    
    (3,664
    )Accounts receivable/accounts payable  related party
    
    
    26,058
    
    
    
    8,760
    
    
    
    2,406
    
    
    
    
    
    
    
    37,224Inventories
    
    
    
    
    
    
    (6
    )
    
    
    (28
    )
    
    
    
    
    
    
    (34
    )Prepaid and other current assets
    
    
    (509
    )
    
    
    (3,564
    )
    
    
    (577
    )
    
    
    
    
    
    
    (4,650
    )Other assets
    
    
    (28,181
    )
    
    
    2,064
    
    
    
    
    
    
    
    28,181
    
    
    
    2,064Accounts payable
    
    
    89
    
    
    
    (19,911
    )
    
    
    (340
    )
    
    
    
    
    
    
    (20,162
    )Accrued interest payable
    
    
    24,895
    
    
    
    23,754
    
    
    
    1,141
    
    
    
    (24,895
    )
    
    
    24,895Other accrued liabilities
    
    
    
    
    
    
    1,615
    
    
    
    24
    
    
    
    
    
    
    
    1,639Net cash provided by operating activities
    
    
    25,675
    
    
    
    31,567
    
    
    
    134
    
    
    
    42
    
    
    
    57,418Cash flows from investing activities:(Increase) in restricted cash
    
    
    
    
    
    
    
    
    
    
    (176
    )
    
    
    
    
    
    
    (176
    )Purchases of property, plant and equipment
    
    
    42
    
    
    
    (31,564
    )
    
    
    43
    
    
    
    (42
    )
    
    
    (31,521
    )Net cash used in investing activities
    
    
    42
    
    
    
    (31,564
    )
    
    
    (133
    )
    
    
    (42
    )
    
    
    (31,697
    )Cash flows
from financing activities:Net cash provided by (used in) financing activities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net increase (decrease) in cash and cash equivalents
    
    
    25,717
    
    
    
    3
    
    
    
    1
    
    
    
    
    
    
    
    25,721Cash and cash equivalents, beginning of period
    
    
    64,510
    
    
    
    28
    
    
    
    
    
    
    
    
    
    
    
    64,538Cash and cash equivalents, end of period
    
    $
    90,227
    
    
    $
    31
    
    
    $
    1
    
    
    $
    
    
    
    $
    90,259
 20




---



##### Table of Contents



CALPINE GENERATING COMPANY, LLC
(a wholly-owned subsidiary of Calpine CalGen Holdings, Inc.) NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
March 31, 2005
(Unaudited) SUPPLEMENTAL CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS
For the quarter ended March 31, 2004 CalpineGeneratingCompany,Subsidiary
    
    
    Other

    
    
    Consolidating
    
    
    LLCParent
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    Adjustments
    
    
    Consolidated(Restated, in thousands)Cash flows from operating activities:Net income (loss)
    
    $
    (93,718
    )
    
    $
    (92,529
    )
    
    $
    (1,411
    )
    
    $
    93,940
    
    
    $
    (93,718
    )Adjustments to reconcile net income to net cash provided by
operating activities:Depreciation and amortization
    
    
    
    
    
    
    34,883
    
    
    
    
    
    
    
    
    
    
    
    34,883Amortization of discount and deferred financing costs
    
    
    385
    
    
    
    4,183
    
    
    
    
    
    
    
    (385
    )
    
    
    4,183Write-off of deferred financing costs
    
    
    
    
    
    
    12,457
    
    
    
    
    
    
    
    
    
    
    
    12,457Mark-to-market activities
    
    
    (115
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (115
    )Interest on subordinated parent debt
    
    
    
    
    
    
    72,026
    
    
    
    147
    
    
    
    
    
    
    
    72,173Equity loss in subsidiary
    
    
    93,940
    
    
    
    
    
    
    
    
    
    
    
    (93,940
    )
    
    
    Cost allocated from parent
    
    
    
    
    
    
    1,308
    
    
    
    
    
    
    
    
    
    
    
    1,308Change in operating assets and liabilities:Accounts receivable
    
    
    
    
    
    
    (3,235
    )
    
    
    
    
    
    
    
    
    
    
    (3,235
    )Accounts receivable/accounts payable, net  related party
    
    
    39,775
    
    
    
    (40,700
    )
    
    
    (3,351
    )
    
    
    
    
    
    
    (4,276
    )Inventories
    
    
    
    
    
    
    (539
    )
    
    
    
    
    
    
    
    
    
    
    (539
    )Prepaid and other current assets
    
    
    
    
    
    
    (1,983
    )
    
    
    599
    
    
    
    
    
    
    
    (1,384
    )Other assets
    
    
    (2,342,546
    )
    
    
    (2,096
    )
    
    
    
    
    
    
    2,342,546
    
    
    
    (2,096
    )Accounts payable
    
    
    5,118
    
    
    
    (8,841
    )
    
    
    2,640
    
    
    
    
    
    
    
    (1,083
    )Accrued interest payable
    
    
    4,611
    
    
    
    4,313
    
    
    
    199
    
    
    
    (4,611
    )
    
    
    4,512Other accrued liabilities
    
    
    
    
    
    
    (2,882
    )
    
    
    49
    
    
    
    
    
    
    
    (2,833
    )Net cash provided by (used in) operating activities
    
    
    (2,292,550
    )
    
    
    (23,635
    )
    
    
    (1,128
    )
    
    
    2,337,550
    
    
    
    20,237Cash flows from investing activities:(Increase) decrease in restricted cash
    
    
    
    
    
    
    152,290
    
    
    
    
    
    
    
    
    
    
    
    152,290Purchases of derivative asset
    
    
    (45,000
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (45,000
    )Purchases of property, plant and equipment
    
    
    
    
    
    
    (96,269
    )
    
    
    (16,328
    )
    
    
    
    
    
    
    (112,597
    )Net cash used in investing activities
    
    
    (45,000
    )
    
    
    56,021
    
    
    
    (16,328
    )
    
    
    
    
    
    
    (5,307
    )Cash flows from financing activities:Financing costs
    
    
    (56,350
    )
    
    
    (54,004
    )
    
    
    (2,346
    )
    
    
    56,350
    
    
    
    (56,350
    )Borrowings from subordinated parent debt
    
    
    
    
    
    
    29,539
    
    
    
    16,878
    
    
    
    
    
    
    
    46,417Repayments of subordinated parent debt
    
    
    
    
    
    
    (131,096
    )
    
    
    (107,041
    )
    
    
    
    
    
    
    (238,137
    )Borrowings from credit facility
    
    
    
    
    
    
    178,995
    
    
    
    
    
    
    
    
    
    
    
    178,995Repayments of credit facility
    
    
    
    
    
    
    (2,379,353
    )
    
    
    
    
    
    
    
    
    
    
    (2,379,353
    )Issuance of secured notes and term loans
    
    
    2,393,900
    
    
    
    2,283,938
    
    
    
    109,962
    
    
    
    (2,393,900
    )
    
    
    2,393,900Net cash provided by (used in) financing activities
    
    
    2,337,550
    
    
    
    (71,981
    )
    
    
    17,453
    
    
    
    (2,337,550
    )
    
    
    (54,528
    )Net increase (decrease) in cash and cash equivalents
    
    
    
    
    
    
    (39,595
    )
    
    
    (3
    )
    
    
    
    
    
    
    (39,598
    )Cash and cash equivalents, beginning of period
    
    
    
    
    
    
    39,595
    
    
    
    3
    
    
    
    
    
    
    
    39,598Cash and cash equivalents, end of period
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
 21




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##### Table of Contents



Item 2.Managements Discussion and Analysis (MD&A) 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 of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. 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 timing and extent of deregulation of
energy markets and the rules and regulations adopted on a transitional basis with respect thereto,
(ii) the timing and extent of changes in commodity prices for energy, particularly natural gas and
electricity, and the impact of related derivatives transactions, (iii) unscheduled outages of
operating plants, (iv) unseasonable weather patterns that reduce demand for power, (v) economic
slowdowns that can adversely affect consumption of power by businesses and consumers, (vi)
uncertainties associated with cost estimates, that actual costs may be higher than estimated, (vii)
development of lower-cost power plants or of a lower cost means of operating a fleet of power
plants by our competitors, (viii) uncertainties associated with estimates of sources and uses of
cash, that actual sources may be lower and actual uses may be higher than estimated, (ix) present
and possible future claims, litigation and enforcement actions, (x) effects of the application of
regulations, including changes in regulations or the interpretation
thereof, (xi) risks related to the ability of Calpine and its
affiliates to continue to perform under the various affiliate
agreements including in the Index Based Gas Sale and Power Purchase
Agreement (the Index Based Agreement) and the WECC Fixed
Price Gas Sale and Power Purchase Agreement (the Fixed Price
Agreement) with Calpine Energy Services, L.P. (CES), and (xii) other risks
identified in this report. You should also carefully review the risks described in other reports
that we file with the Securities and Exchange Commission, including without limitation our annual
report on Form 10-K for the year ended December 31, 2004 and our Registration Statement on Form S-4
filed on July 13, 2004 with the Securities and Exchange Commission and amended on Form S-4/A on
October 19, 2004. We undertake no obligation to update any forward-looking statements, whether as a
result of new information, future developments or otherwise. We file annual, quarterly and periodic 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 450 Fifth Street, N.W., 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 450 Fifth Street, N.W., Washington, D.C. 20549-1004. The SEC maintains an
Internet website at http://www.sec.gov that contains reports and other information regarding
issuers that file electronically with the SEC. Our SEC filings 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. 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: Lisa M.
Bodensteiner, Assistant 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. Executive Overview Calpine Generating Company, LLC (CalGen) is a Delaware limited liability company and an
indirect wholly owned subsidiary of Calpine Corporation (Calpine or the Parent). We are
engaged, through our subsidiaries, in the construction, ownership and operation of electric power
generation facilities and the sale of energy, capacity and related products in the United States of
America. We indirectly own 14 power generation facilities (the projects or facilities) that are
expected to have an aggregate combined estimated peak capacity of 9,834 MW (nominal 8,425 MW
without peaking capacity). Our aggregate combined estimated peak capacity represents approximately
30.6% of Calpines 32,149 MW of aggregate estimated peak capacity in operation and under
construction. Thirteen of our facilities are natural gas-fired combined cycle facilities, and our
Zion facility is a natural gas-fired simple cycle facility. As of March 31, 2005, thirteen of our facilities were operating and had an aggregate estimated peak capacity of 9,065 MW. The Pastoria
facility commenced Phase I operation on May 5, 2005. The Pastoria facility will have a total baseload
capacity of 759 MW upon the completion of both Phase I and Phase II which is expected to be in June 2005. Our
revenues are generated from the sale of electrical capacity and energy together with a by-product, steam, through a series of agreements with third parties and
through the Fixed Price Agreement and
Index Based Agreement with CES. In connection with our refinancing on March 23, 2004, we entered
into the Fixed Price and Index Based Agreements with CES. Previously, CES had purchased most of the
available capacity and energy of our facilities, including ancillary services and other
generation-based products and services, at negotiated internal transfer prices agreed upon when the
various facilities commenced operations. In addition, CES supplied substantially all fuel
requirements to the facilities, also at negotiated internal transfer prices. Under the Fixed Price
and Index Based Agreements, CES purchases a portion of our energy at a fixed price and all of our
remaining energy (after sales pursuant to our third-party agreements) at floating prices based on
day-ahead energy and gas prices. 22




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##### Table of Contents



On March 23, 2004, CalGen closed on $2.4 billion
of the Loans and Notes (the
2004 Refinancing) to replace the $2.5 billion credit facility entered into in October 2000
(the Construction Facility). The Notes and Loans comprise of various traunches and except
for the Third Priority Secured Notes Due 2011, the Notes and Loans carry a floating interest rate based on LIBOR plus a
spread. The Third Priority Secured Notes Due 2011 carry a fixed interest rate of 11.5%. Concurrently with the 2004 Refinancing, CalGen entered into an agreement for a $200 million
revolving credit facility (the Revolving Credit Facility) with a group of banks led by The Bank
of Nova Scotia and a $750 million unsecured subordinated working capital facility (the Working
Capital Facility) with CalGen Holdings, Inc., our sole member. The working capital facility is
guaranteed by Calpine and may only be drawn in limited circumstances. In addition, CalGen had
previously received additional financing from Calpine in the form of subordinated debt (the
Subordinated Parent Debt). Effective March 23, 2004, Calpine converted the Subordinated Parent
Debt, totaling approximately $4.4 billion, to equity in a non-cash capital contribution. All
amounts in this Managements Discussion and Analysis of Financial
Condition and Results of Operations reflect the restatement
discussed in Note 3 of the Consolidated Condensed Financial Statements. See Liquidity and Capital Resources below for discussion of the financial challenges facing CalGen. Results of Operations Three Months Ended March 31, 2005, Compared to Three Months Ended March 31, 2004 (in millions, except for unit pricing information, percentages and MW volumes); in the comparative
tables below, increases in revenue/income or decreases in expense (for favorable variances) are
shown without brackets. Decreases in revenue/income or increase in
expense (unfavorable variances)
are shown with brackets. Revenue Three Months EndedMarch 31,2005
    
    
    2004
    
    
    $ Change
    
    
    % ChangeElectricity and steam revenue  related party
    
    $
    345.3
    
    
    $
    172.5
    
    
    $
    172.8
    
    
    
    100.2
    %Electricity and steam revenue  third-party
    
    
    108.4
    
    
    
    99.9
    
    
    
    8.5
    
    
    
    8.5
    %Mark-to-market activity, net
    
    
    (7.3
    )
    
    
    0.1
    
    
    
    (7.4
    )
    
    
    (7400.0
    )%Sale of purchased power
    
    
    4.7
    
    
    
    0.3
    
    
    
    4.4
    
    
    
    1466.7
    %Other revenue
    
    
    1.2
    
    
    
    0.8
    
    
    
    0.4
    
    
    
    50.0
    %Total revenue
    
    $
    452.3
    
    
    $
    273.6
    
    
    $
    178.7
    
    
    
    65.3
    %
 Electricity and steam revenue increased as we completed construction and brought into
operation the Goldendale and Columbia facilities in September 2004 and May 2004, respectively. New
revenue generated at these facilities contributed $15.4 million and $21.0 million, respectively. In
addition, the Morgan facility commenced operations in January 2004. Additional revenues in 2005 from this
facility contributed $9.9 million to the increase. Prior to the 2004 Refinancing, the
gas purchase and power sales agreements at Delta and Los Medanos were accounted for as tolling
agreements. As such, fuel costs were recorded as a reduction of the related power revenues. Under
the new gas purchase and power sales agreements executed in connection with the 2004 Refinancing, fuel
costs are no longer netted against revenue. Revenues at Delta and Los Medanos increased
approximately $104.4 million under these new agreements. Overall, revenues increased with the
execution of new gas purchase and power sales agreements on March 23, 2004. Previously, CES
purchased most of the available capacity and energy at negotiated internal transfer prices. Under
the Fixed Price and Index Based Agreements, CES purchases a portion of the energy at a fixed price
and all of the remaining energy (after sales pursuant to our third-party agreements) at floating
prices based on day-ahead energy and gas prices. The increases in electricity and steam revenue
were partially offset by a $9.7 million decrease in revenue at the Channel facility. This decrease
resulted from a forced outage in the first quarter of 2005. Sale of purchased power increased $4.4 million as we purchased replacement power to meet
contract sales requirements while the Channel plant was shut down due to forced outages. Average megawatts in operation of our consolidated plants increased by 13.6% to 9,065 MW while
generation increased by 8.9% to 6,584 MW. The increase in generation lagged behind the increase in
average MW in operation as our baseload capacity factor dropped to 35.6% in 2005 from 37.1% in 2004
primarily because of unattractive off-peak margins in the merchant market reflecting near-term
over-supply conditions. The overall increase in revenue was due to an increase in generation
combined with the increase in average pricing, which increased 53.2% as average realized
electricity prices increased to $68.95/MWh in 2005 from $45.02/MWh in 2004, primarily because of
the new contractual agreements in 2004. Three Months EndedMarch 31,2005
    
    
    2004
    
    
    $ Change
    
    
    % ChangeRealized (loss) on derivative instruments, net
    
    $
    (5.6
    )
    
    $
    
    
    
    $
    (5.6
    )
    
    
    (100.0
    )%Unrealized (loss) on derivative instruments, net
    
    
    (1.7
    )
    
    
    0.1
    
    
    
    (1.8
    )
    
    
    (1800.0
    )%Mark-to-market activity, net
    
    $
    (7.3
    )
    
    $
    0.1
    
    
    $
    (7.4
    )
    
    
    (7400.0
    )%
 23




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##### Table of Contents



To manage forward exposure to price fluctuations, the Company entered into a three-year Index
Hedge (Index Hedge) with Morgan Stanley Capital Group (MSCG). The Index Hedge provides for semi-annual payments
to the Company if the aggregate spark spread amount calculated under the Index Hedge for any
six-month period during the term of the Index Hedge is less than $50.0 million. No payments have
been made under the Index Hedge to date. Realized loss on derivative instruments is accounted for
in accordance with EITF Issue No. 02-03, Issues Involved in Accounting for Derivative Contracts Held for
Trading Purposes and Contracts Involved in Energy Trading and Risk Management Activities and
represents the amortization of the excess of the amount paid for the Index Hedge over its
internally calculated fair value at the date of purchase. Unrealized loss represents changes in the
value of the Index Hedge. Cost of Revenue Three Months EndedMarch 31,2005
    
    
    2004
    
    
    $ Change
    
    
    % ChangePlant operating expense
    
    $
    43.5
    
    
    $
    43.7
    
    
    $
    0.2
    
    
    
    0.5
    %
 Plant operating expense for the quarter
ended March 31, 2004 included a charge of $5.1 million related to scheduled maintenance outages at our Freestone facility. There were no
such charges at Freestone in 2005. That decrease was partially offset as we completed construction and brought into
operation the Goldendale and Columbia power plants. The Goldendale and Columbia facilities contributed $2.2 million and $2.5 million, respectively, of additional plant operating expense.
In addition, we incurred additional plant operating expense in 2005
due to the expansion of our Morgan facility.
Expressed per MWh of generation, plant operating expense decreased by
8.7% from $7.22/MWh to $6.59/MWh due to an increase of 8.9% in generation. Three Months EndedMarch 31,2005
    
    
    2004
    
    
    $ Change
    
    
    % ChangePurchased power expense
    
    $
    4.4
    
    
    $
    0.5
    
    
    $
    (3.9
    )
    
    
    (780.0
    )%
 Purchased power expense increased due to outages at our Channel facility in 2005. Three Months EndedMarch 31,2005
    
    
    2004
    
    
    $ Change
    
    
    % ChangeFuel expense
    
    $
    340.7
    
    
    $
    182.1
    
    
    $
    (158.6
    )
    
    
    (87.1
    )%
 Fuel expense increased due to replacement of certain tolling agreements, which existed in the
first quarter of 2004 before the 2004 Refinancing. Under the tolling agreements, revenue was reported
net of fuel expense. In the first quarter of 2005, tolling agreements were not in place as a result
of the 2004 Refinancing. Therefore, revenue was reported gross of fuel expense. The increase in fuel
costs and consumption also contributed to the increase in fuel expense. As noted above we completed
construction and brought into operation the Goldendale and Columbia baseload power plants which
contributed $11.5 million and $13.9 million, respectively, of the total increase. We also brought
into operation the expansion of the Morgan baseload power plant in 2004, contributing $3.8 million
of the total increase. Fuel expense also increased in 2005 due to the 8.9% increase in gas-fired
megawatt hours generated and because of a 14% increase in gas prices. Three Months EndedMarch 31,2005
    
    
    2004
    
    
    $ Change
    
    
    % ChangeDepreciation and amortization expense
    
    $
    40.6
    
    
    $
    34.9
    
    
    $
    (5.7
    )
    
    
    (16.3
    )%
 Depreciation and amortization expense increased due to the additional capacity brought on line
as explained above. Other (Income)/Expenses Three Months EndedMarch 31,2005
    
    
    2004
    
    
    $ Change
    
    
    % ChangeSales, general and administrative expense
    
    $
    3.3
    
    
    $
    4.7
    
    
    $
    1.4
    
    
    
    29.8
    %
 Sales, general and administrative expense decreased in 2005 due to non-recurring accounting
and related fees in the first quarter of 2004 in the amount of $1.6 million associated with the 2004
Refinancing. Partially offsetting this decrease were increases of $0.5 million
related to the operation of new plants. Sales, general and administrative expense expressed per MWh
of generation decreased to $0.49/MWh in 2005 from $0.77/MWh in 2004 due to lower costs on increased
generation. 24




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##### Table of Contents



Three Months EndedMarch 31,2005
    
    
    2004
    
    
    $ Change
    
    
    % ChangeInterest expense, related party
    
    $
    
    
    
    $
    72.2
    
    
    $
    72.2
    
    
    
    100.0
    %Interest expense, third-party
    
    
    50.7
    
    
    
    30.8
    
    
    
    (19.9
    )
    
    
    (64.6
    )%Total interest expense
    
    $
    50.7
    
    
    $
    103.0
    
    
    $
    52.3
    
    
    
    50.8
    %
 Interest expense, related party decreased primarily due to the 2004 Refinancing in
March 2004. At the time of this refinancing, the Subordinated Parent Debt was converted to equity
by the Parent in a non-cash capital contribution. Partially offsetting the decrease in related
party interest expense was an increase in third-party interest expense. This increase is primarily
due to the CalGen project debt, which replaced the Construction Facility in March 2004. This debt accrued interest at a weighted average rate
of approximately 8.6% during the first quarter of 2005 compared with a weighted average interest
rate of 2.6% on the Construction Facility. In addition, $6.6 million of the increase is due to the
new plants entering commercial operations at which time capitalization of interest expense at these
plants ceased. Three Months EndedMarch 31,2005
    
    
    2004
    
    
    $ Change
    
    
    % ChangeOther expense (income), net
    
    $
    0.6
    
    
    $
    (0.7
    )
    
    $
    (1.3
    )
    
    
    (185.7
    )%
 Other
expense (income), net was unfavorable primarily due to a
non-recurring $0.8 million gain at Corpus Christi
for the quarter ended March 31, 2004 as a result of a water capacity agreement termination. Zion, Columbia
and Decatur recorded letter of credit fees of $0.3 million, $0.2 million and $0.1 million respectively, in the first quarter of 2005. There were no such fees in 2004. Liquidity and Capital Resources As discussed above, most of our revenues are generated from the sale of electrical capacity
and energy through agreements with CES, which is a subsidiary of Calpine. Consequently, our cash
flows from operations are dependent on cash generated from these
sales. As Calpine described in its Quarterly Report on Form 10-Q for
the period ending March 31, 2005 (the Calpine 10-Q), access to capital for many
in the energy sector, including Calpine, has been restricted since
late 2001, and the timing of the
availability of capital at Calpine is uncertain and is dependent, in part, on market conditions
that are difficult to predict and are outside of Calpines control. In addition, in the Calpine 10-Q, Calpine reported that it is facing
several challenges related to satisfying its obligations under
outstanding indebtedness and
funding anticipated capital expenditures and working capital requirements for the next twelve
months. In the near term, Calpine reported its cash requirements are expected to exceed its unrestricted
cash on hand and cash from operations. Calpine reports that it has implemented a liquidity-enhancing
program to address these issues. There is no assurance, however, that Calpine or its affiliates can continue to meet their
obligations under their agreements with us and, more particularly,
the Index Based and Fixed Price Agreements, in the near term or otherwise. If Calpine is unable to meet its obligations
under these agreements, CalGen would be required to enter
into power purchase agreements and arrange for scheduling and marketing services and operating and maintenance services with third parties.
If CalGen is unable to secure these third-party agreements, it would have a material adverse effect on our financial condition and results of operations and could cause us to be unable to make
payments under our outstanding indebtedness, including the Notes and the Loans. Prior to the 2004 Refinancing, our
primary sources of liquidity were cash flows from operations, borrowing capacity under the Construction Facility and subordinated borrowings from our parent.
Currently our sources of liquidity include cash flows from operations and borrowings under our existing credit facilities. The Construction Facility was established in October 2000 with a consortium of banks and was
scheduled to mature in November 2004. As of December 31, 2003, we had $2.2 billion in borrowings
and $53.2 million in letters of credit outstanding under this facility. The Construction Facility
was repaid and terminated on March 23, 2004 in connection with the 2004 Refinancing. The Subordinated Parent Debt was evidenced by a note agreement dated January 1, 2002 and bore
interest at 8.75% per annum. At December 31, 2003, the outstanding balance was $4.6 billion. Under
the debt subordination agreement, interest payments to the Parent were not permissible until all
senior debt was repaid. Accordingly, the interest on the Subordinated Parent Debt was treated
as a non-cash transaction and was added back to net income for purposes of computing cash
flows from operations in the accompanying statements of cash flows. Effective March 23, 2004,
in connection with the 2004 Refinancing, the Parent transferred the Subordinated Parent Debt
balance, which included accrued interest, totaling $4.4 billion, to equity as a non-cash capital
contribution. On March 23, 2004, we completed the 2004 Refinancing, including the issuance of Notes and Loans totaling
$2.4 billion. Net proceeds from the 2004 Refinancing were used to repay amounts outstanding under the
Construction Facility and to pay fees and transaction costs associated with the 2004 Refinancing. The
Notes and Loans are in various traunches and, except for the
Third Priority Secured Notes Due 2011, carry a floating interest rate based on LIBOR plus a spread.
The Third Priority Secured Notes Due 2011 carry a fixed interest rate of 11.5%. 25




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##### Table of Contents



As part of the 2004 Refinancing, we entered into an agreement with a group of banks led
by The Bank of Nova Scotia for a $200.0 million revolving credit facility (the Revolving Credit
Facility). This three-year facility is available for specified working capital purposes, capital
expenditures to complete the Pastoria facility and for letters of credit. All amounts outstanding
under the Revolving Credit Facility will bear interest at either (i) the Base Rate plus 250 basis
points, or (ii) at LIBOR plus 350 basis points. At March 31, 2005 and December 31, 2004, there were
no outstanding borrowings under the facility; however, at March 31, 2005 and December 31, 2004, we had
approximately $182.0 million and $190.0 million, respectively, in letters of credit outstanding
under this credit facility to support fuel purchases and other operational activities. The Company also entered into a $750.0 million unsecured subordinated working capital facility
(the Working Capital Facility) with CalGen Holdings, Inc., our sole member, which is guaranteed
by Calpine. Under the Working Capital Facility, the Company may borrow funds only for specific
purposes including claims under its business interruption insurance with respect to any of the
facilities or a delay in the start up of the Pastoria facility; losses incurred as a result of
uninsured force majeure events; claims for liquidated damages against third party contractors with
respect to the Goldendale and Pastoria facilities and spark spread diminution after expiration of
the Index Hedge agreement with MSCG. Borrowings under the
Working Capital Facility will bear interest at LIBOR plus 4.0% and interest will be payable
annually in arrears and will mature in 2019. At March 31, 2005 and December 31, 2004, there were no
outstanding borrowings under the Working Capital Facility. To manage forward exposure to price fluctuations, we entered into the Index Hedge. The Index
Hedge provides for semi-annual payments to us equal to the amount, if any, that the aggregate spark
spread amount calculated under the Index Based Agreement, in each six-month period, falls below
$50.0 million. We paid $45.0 million for the Index Hedge, which is in place through April 1, 2007.
No payments have been made to us under the Index Hedge to date. Historically, our funding requirements related primarily to the construction of our
facilities. With the completion of the Columbia Energy Center and the Goldendale Energy Center in
2004, all of our facilities are operational except for Pastoria, which commenced
operations of phase I in May 2005 and  is expected to commence operations of phase II in June 2005, respectively. We expect to have
sufficient cash flow from operations and borrowings available under our credit facilities to
satisfy all obligations under our outstanding indebtedness, and to fund anticipated capital
expenditures and working capital requirements for the next twelve months. On March 31, 2005, our
liquidity totaled approximately $108.3 million. This includes cash and cash equivalents on hand of
approximately $90.3 million and $18.0 million of borrowing capacity under our Revolving Credit
Facility. Additionally, as explained above, we have $750 million of borrowing capacity under our
Working Capital Facility for specific permitted purposes. However, if
Calpine and its affiliates are unable to meet their obligations under their agreements
with us, particularly the Index Based and Fixed Price Agreements, as well as the Working Capital Facility, we would be unable to satisfy
all obligations under our outstanding indebtedness unless we were able to enter into new third party agreements sufficient to support such obligations. As described above, there can be no assurance that Calpine and its affiliates will continue to meet their obligations or, if they do not, that we will be able to enter into new third party
arrangements. Cash Flow Activities The following table summarizes our cash flow activities for the
periods indicated: Three Months Ended March 31,2005
    
    
    2004(In thousands)Beginning cash and cash equivalents
    
    $
    64.5
    
    
    $
    39.6Net cash provided by:Operating activities
    
    
    57.4
    
    
    
    20.2Investing activities
    
    
    (31.7
    )
    
    
    (5.3
    )Financing activities
    
    
    
    
    
    
    (54.5
    )Net increase (decrease) in cash and cash equivalents
    
    
    25.7
    
    
    
    (39.6
    )Ending cash and cash equivalents
    
    $
    90.2
    
    
    $
    
 Operating activities for the three months ended March 31, 2005 provided net cash of $57.4
million compared with $20.2 million for the same period in 2004. The increase in operating cash
flow in 2005 compared with 2004 primarily relates to the completion and commencement of operations
of the Columbia and Goldendale facilities, which contributed to our 8.9% increase in generation. In
addition, favorable contracts were executed in connection with our 2004 Refinancing, contributing
to an increase in operating cash flows from increased gross profit. This was partially offset by
higher interest cost from third-party debt and a reduction in our working capital investment during
2005. Investing activities for the three months ended March 31, 2005, consumed net cash of $31.7
million, compared with $5.3 million in the same period of 2004. In both periods capital
expenditures for new construction of plants represent the majority of investing cash outflows,
though amounts decreased significantly in the first quarter of 2005. In 2004, capital expenditures
for new construction of plants was offset by a decrease in restricted cash as a result of the
refinancing. Financing activities for the three months ended March 31, 2005, provided no net cash activity,
compared with financing activities consuming $54.5 million in the same period in 2004. Cash
outflows for the first quarter of 2004 were primarily the result of refinancing transactions,
repayments of Subordinated Parent Debt and financing costs. 26




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##### Table of Contents



Revolving Credit Facilities At March 31, 2005 and December 31, 2004, we had approximately
$182.0 million and $190.0 million, respectively, in letters of credit outstanding under our $200 million
revolving credit facility to support fuel purchases and other operational activities. Working
Capital At March 31, 2005, we had a negative working capital balance (current
assets less current liabilities) of approximately $8.6 million
compared to a positive balance of approximately $1.5 million at
December 31, 2004. The
reduction in working capital is due primarily to an increase of
$24.9 million in accrued interest payable and an increase of
$16.5 million in accounts payable (including accounts payable,
net to related party) which were partially offset by an increase of
$25.7 million in cash and equivalents. Credit
Considerations On May 12, 2005, Moodys
Investors Services lowered its credit ratings on CalGen's debt
obligations reducing CalGen's first priority debt rating to B2
from B1, its second priority debt to B3 from B2 and its third
priority debt to Caal from B3 (with negative outlook). On May 9,
2005, Standard & Poor's lowered its credit ratings on CalGen's debt
obligations, reducing CalGen's first priority debt rating to B from
B+, its second priority debt to B- from B, leaving its third priority
debt unchanged at CCC+ (with negative outlook). Because the pricing of our debt is
not linked to debt and credit ratings by the rating agencies and the
majority of the Companys revenues are from CES, a related
party, the Company does not currently expect the downgrade to
have a material impact on the Companys operations or financial
condition. However, the downgrade could potentially impact the cost
of doing business with third parties in the future. Capital Expenditures and Sources Our projected capital expenditures from April 2005 to
December 2005 include approximately $48.3 million in construction costs required to complete the
Pastoria facility. We also expect to make capital expenditures in 2005 with respect to operations
and maintenance, including major maintenance, of approximately $18.2 million. We expect to fund
these expenditures through cash on hand and operating cash flow, or potentially from borrowings
under our revolving credit facility. Distributions to Sole Member Under the indentures governing the notes, we are generally
permitted to make distributions to CalGen Holdings, our sole member, out of excess cash flow
generated by operations, provided that cumulative cash flow is positive and that no default or
event of default exists and there are no amounts outstanding under our new working capital
facility. We expect that all distributable collections (after the payment of operating expenses,
debt service and deposits to the reserve accounts) will be distributed to our sole member, as
permitted. No such distributions were made in the first quarter of 2005. Capital Availability Under the indentures governing the notes, our ability to borrow
additional indebtedness is severely limited. If a need for capital does arise, either because our
business changes or because the sources on which we are depending are not available, we may not be
able to obtain such capital under the indentures governing the notes or on terms that are
attractive to us. Compliance with Covenants Some of our senior notes indentures and our credit facilities
contain financial and other restrictive covenants that limit or prohibit our ability to incur
indebtedness, make prepayments on or purchase indebtedness in whole or in part, pay dividends, make
investments, lease properties, engage in transactions with affiliates, create liens, consolidate or
merge with another entity or allow one of our subsidiaries to do so, sell assets, and acquire
facilities or other businesses. We are currently in compliance with all of such financial and other
restrictive covenants. Any failure to comply could give holders of debt the right to accelerate the
maturity of all debt outstanding thereunder if the default was not cured or waived. As of and for
the quarter ended March 31, 2005, we were in compliance with our covenants, and we were also in
compliance with our covenants as of and for the year ended
December 31, 2004. For a further discussion of our restrictive
covenants, see our Risk Factors in the Form S‐4, filed on
July 13, 2004 and amended on October 19, 2004, under the
risk factor entitled The agreements governing our indebtedness,
as well as indebtedness of our affiliates, impose restrictions on our
business. Performance Indicators We believe the following factors are important in assessing our
ability to continue to fund our growth in the capital markets: (a) various interest coverage
ratios; (b) our credit and debt ratings by the rating agencies; (c) our anticipated capital
requirements over the coming quarters and years; (d) the profitability of our operations; (e) the
non-Generally Accepted Accounting Principles (GAAP) financial measures and other performance
metrics discussed in Performance Metrics below; (f) our cash balances and remaining capacity
under existing revolving credit construction and general purpose credit facilities; (g) compliance
with covenants in existing debt facilities; (h) progress in raising new or replacement capital; and
(i) the stability of future contractual cash flows, particularly cash flows from the Index Based and Fixed Price Agreements with CES. The amounts included above for purchase obligations include the minimum requirements under
contract. Agreements that we can cancel without significant cancellation fees are excluded. Performance Metrics In understanding our business, we believe that certain operational and certain non-GAAP financial metrics
are particularly important. These are described below: Total deliveries of power.We generate power which is sold to CES and third parties, and
steam which is primarily sold to third-party hosts. These sales are recorded as electricity and
steam revenue. The volume in MWh for power is a key indicator of our level of 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 megawatt hours generated by our power plants (excluding
peakers) by the product of multiplying (b) the weighted average megawatts in operation during the
period by (c) the total hours in the period. The capacity factor is thus a measure of total actual
generation as a percent of total potential generation. If we elect not to generate during 27




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##### Table of Contents



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 Btus 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s by (b) KWh generated. The resultant heat rate is a
measure of fuel efficiency. Therefore, the lower the heat rate, the better. We also calculate a
steam-adjusted heat rate, in which we adjust the fuel consumption in Btus 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. Our goal is to have the lowest average heat rate in the industry. Average all-in realized electric price expressed in dollars per MWh generated.We calculate
the all-in realized electric price per MWh generated by dividing (a) the sum of adjusted
electricity and steam (E&S) revenue, which includes capacity revenues, energy revenues, thermal revenues,
plus realized gain or (loss) on the Index Hedge plus other revenue related to the Index Hedge by
(b) total generated MWh in the period. Average cost of natural gas expressed in dollars per millions of Btus of fuel consumed.The
fuel costs for our gas-fired power plants are a function of volumes consumed and the prices we pay
for fuel purchased from CES. Accordingly, we calculate the cost of natural gas per millions of
Btus of fuel consumed in our power plants by dividing (a) adjusted fuel expense by (b) the heat
content in millions of Btus of the fuel we consumed in our power plants for the period. Average spark spread expressed in dollars per MWh generated.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 normalized MWh.To assess trends in power plant operating
expense (POX) per MWh, we normalize the results from period to period by assuming a constant 70%
total company-wide capacity factor (including both baseload and peaker capacity) in deriving
normalized MWh. By normalizing the cost per MWh with a constant capacity factor, we can better
analyze trends and the results of our program to realize economies of scale, cost reductions and
efficiencies at our electric generating plants. For comparison purposes we also include POX per
actual MWh. 28




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##### Table of Contents



The table below shows the operating performance metrics discussed above. Three Months Ended March 31,2005
    
    
    2004(In thousands)Operating Performance Metrics:Total deliveries of power:MWh generated and delivered
    
    
    6,584
    
    
    
    6,046Average availability
    
    
    91.1
    %
    
    
    90.0
    %Average baseload capacity factor:Average total MW in operation
    
    
    9,065
    
    
    
    7,980Less: Average MW of pure peakers
    
    
    513
    
    
    
    513Average baseload MW in operation
    
    
    8,552
    
    
    
    7,467Hours in the period
    
    
    2,160
    
    
    
    2,184Potential baseload generation (MWh)
    
    
    18,472
    
    
    
    16,308Actual total generation (MWh)
    
    
    6,584
    
    
    
    6,046Less: Actual pure peakers generation (MWh)
    
    
    
    
    
    
    Actual baseload generation (MWh)
    
    
    6,584
    
    
    
    6,046Average baseload capacity factor
    
    
    35.6
    %
    
    
    37.1
    %Average heat rate for gas-fired power plants (excluding peakers) (Btus/KWh):Not steam adjusted
    
    
    8,124
    
    
    
    7,979Steam adjusted
    
    
    7,052
    
    
    
    7,183Average all-in realized electric price:Electricity and steam revenue
    
    $
    453,685
    
    
    $
    272,411Spread on sales of purchased power for hedging and optimization
    
    
    262
    
    
    
    (192
    )Adjusted electricity and steam revenue (in thousands)
    
    $
    453,947
    
    
    $
    272,219MWh generated (in thousands)
    
    
    6,584
    
    
    
    6,046Average all-in realized electric price per MWh
    
    $
    68.95
    
    
    $
    45.02Average cost of natural gas:Fuel expense
    
    $
    340,725
    
    
    $
    182,144Million Btus (MMBtu) of fuel consumed by generating plants. (in
thousands)
    
    
    52,224
    
    
    
    45,060Average cost of natural gas per MMBtu
    
    $
    6.52
    
    
    $
    4.04MWh generated (in thousands)
    
    
    6,584
    
    
    
    6,046Average cost of adjusted fuel expense per MWh
    
    $
    51.75
    
    
    $
    30.13Average spark spread:Adjusted electricity and steam revenue (in thousands)
    
    $
    453,947
    
    
    $
    272,219Less: Fuel expense (in thousands)
    
    
    340,725
    
    
    
    182,144Less: Realized amortization expense on Index Hedge (in thousands)
    
    
    5,611
    
    
    
    Spark spread (in thousands)
    
    $
    107,611
    
    
    $
    90,075MWh generated (in thousands)
    
    
    6,584
    
    
    
    6,046Average spark spread per MWh
    
    $
    16.34
    
    
    $
    14.90Average plant operating expense (POX) per normalized MWh (for comparison
purposes we also include POX per actual MWh):Average total consolidated MW in operations
    
    
    9,065
    
    
    
    7,980Hours per year
    
    
    2,160
    
    
    
    2,184Total potential MWh
    
    
    19,580
    
    
    
    17,428Normalized MWh (at 70% capacity factor)
    
    
    13,706
    
    
    
    12,200Plant operating expense (POX)
    
    $
    43,417
    
    
    $
    43,657POX per normalized MWh
    
    $
    3.17
    
    
    $
    3.58POX per actual MWh
    
    $
    6.59
    
    
    $
    7.22
 29




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##### Table of Contents



Financial Market Risks Debt Financing Certain debt instruments may affect us adversely because of changes in
market conditions. In connection with the 2004 Refinancing on March 23, 2004, we issued approximately $2.4
billion in new debt of which $150 million is at a fixed rate, and
the balance is at floating rates, based on Libor plus a spread.
Significant LIBOR increases could have a negative impact on our future interest expense.
In addition, borrowings under our Revolving Credit Facility and our Working Capital Facility carry
an interest rate based on LIBOR plus a spread. The following table summarizes our variable-rate debt, by repayment year, exposed to interest
rate risk as of March 31, 2005. All fair market values are shown net of applicable premium or
discount, if any (dollars in thousands): Fair Value2005
    
    
    2006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    Thereafter
    
    
    3/31/2005(1)First
Priority Secured Floating Rate Notes Due 2009(2)
    
    $
    
    
    
    $
    
    
    
    $
    1,175
    
    
    $
    2,350
    
    
    $
    231,475
    
    
    $
    
    
    
    $
    235,000Second
Priority Secured Floating Rate Notes Due 2010(2)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,200
    
    
    
    6,400
    
    
    
    622,439
    
    
    
    632,039Third
Priority Secured Floating Rate Notes Due 2011(2)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    680,000
    
    
    
    680,000Total Floating Rate Notes(2)
    
    
    
    
    
    
    
    
    
    
    1,175
    
    
    
    5,550
    
    
    
    237,875
    
    
    
    1,302,439
    
    
    
    1,547,039First
Priority Secured Term Loans Due 2009(3)
    
    
    
    
    
    
    
    
    
    
    3,000
    
    
    
    6,000
    
    
    
    591,000
    
    
    
    
    
    
    
    600,000Second
Priority Secured Term Loans Due 2010(3)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    500
    
    
    
    1,000
    
    
    
    97,256
    
    
    
    98,756Total Floating Rate Term Loans(3)
    
    
    
    
    
    
    
    
    
    
    3,000
    
    
    
    6,500
    
    
    
    592,000
    
    
    
    97,256
    
    
    
    698,756Revolving Credit Facility(3)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Working Capital Facility(2)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total Other Financings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Grand total variable-rate debt instruments
    
    $
    
    
    
    $
    
    
    
    $
    4,175
    
    
    $
    12,050
    
    
    $
    829,875
    
    
    $
    1,399,695
    
    
    $
    2,245,795
   (1)
    
    Fair value equals carrying value, which is the aggregate principal amount subject to variable rate risk.(2)
    
    Interest rate based on LIBOR plus a spread(3)
    
    Interest rate based on LIBOR plus a spread; however the Company may elect the Base Rate plus a spread (see Note 6 to the Consolidated Condensed Financial Statements) Derivatives We are primarily focused on generation of electricity using gas-fired
turbines. As a result, 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
fluctuations in these commodities, we entered into the Index Hedge with MSCG discussed in Note 9 of
the Notes to Consolidated Condensed Financial Statements. The Index Hedge will provide for semi-annual payments to us equal to the amount, if any, that
the aggregate spark spread amount calculated under the Index Based Gas Sale and Power Purchase
Agreement, in each six-month period, falls below $50 million. The Hedge Index is in place until
April 1, 2007. The change in fair value of outstanding derivative instruments for the three months ended
March 31, 2005, is summarized in the table below (in thousands): Fair value of contracts outstanding at December 31, 2004
    
    $
    35,916Amortization during the period, net (1)
    
    
    (5,611
    )Changes in fair value attributable to price movements, net
    
    
    (1,674
    )Fair value of contracts outstanding at March 31, 2005 (2)
    
    $
    28,631
   (1)
    
    Non-cash losses from roll-off (amortization) of deferred premium (see discussion in Note 9 to the financial statements).(2)
    
    Net derivative assets are reported in Note 9 of the Notes to the Consolidated Condensed Financial Statements. The fair value of the outstanding derivative instrument at March 31, 2005, based on price
source and the period during which the instrument will mature, are summarized in the table below
(in thousands): Fair Value Source
    
    2005
    
    
    2006-2007
    
    
    2008-2009
    
    
    After 2009
    
    
    TotalPrices actively quoted
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Prices provided by other external sources
    
    
    3,661
    
    
    
    19,408
    
    
    
    
    
    
    
    
    
    
    
    23,069Prices based on models and other valuation methods
    
    
    
    
    
    
    5,562
    
    
    
    
    
    
    
    
    
    
    
    5,562Total fair value
    
    $
    3,661
    
    
    $
    24,970
    
    
    $
    
    
    
    $
    
    
    
    $
    28,631
 The credit quality of the counterparty holding our Index Hedge at March 31, 2005 and for
the period then ended is investment grade. 30




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##### Table of Contents



Calpines risk managers maintain and validate the fair value information associated with the
Index Hedge. This information is derived from various sources. 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 fair value of outstanding derivative 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 ValueAfter 10% AdverseFair Value
    
    
    Price ChangeAt March 31, 2005:Other mark-to-market activity
    
    $
    28,631
    
    
    $
    27,152
 The derivative instrument included in this table is the Index Hedge discussed in Note 9 of the
Notes to Consolidated Condensed Financial Statements. Valuation of the Index Hedge depends, to a
large degree, upon assumptions about future gas and power prices. Accordingly, we have calculated
the change in fair value shown above based upon an assumed 10% increase in power prices and
an assumed 10% decrease in gas prices. Changes in fair value of the Index Hedge
economically offset the price risk exposure of our physical assets. We have included none of the
offsetting changes in value of our physical assets in the table above. The primary factors affecting the fair value of our derivative at any point in time are (1)
the term of our open derivative position and (2) changing market prices for electricity and natural
gas. The Index Hedge is valued using the mean reversion model, and as prices for electricity and
natural gas are among the most volatile of all commodity prices, there may be material changes in
the fair value of our derivative over time, driven by price volatility and the realized portion of
the derivative asset. Under SFAS No. 133, Accounting for Derivative Instruments and Hedging
Activities, the change since the last balance sheet date in the total value of the derivative is
reflected in the statement of operations as an item (gain or loss) of current earnings. 
 Item 3.Quantitative and Qualitative Disclosures About Market Risk. See Financial Market Risks in Item 2. 
 Item 4.Controls and Procedures. Calpine
Generating Company, LLC (the Company) maintains
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 Securities Exchange Act of 1934 is recorded,
processed, summarized and reported within the time periods specified
in Securities and Exchange Commission rules and forms, and that such
information is accumulated and communicated to the Companys
management, including its Chief Executive Officer and Chief Financial
Officer, as appropriate, to allow timely decisions regarding required
disclosure. As
of December 31, 2004, management of the Company identified a
material weakness related to our revenue processes, procedures and
controls that was discussed in Item 9A of the Companys
2004 Form 10-K. During the first quarter of 2005, the Company
began taking the steps necessary to improve its internal controls
over our revenue process and to remediate this material weakness.
While significant progress has been made in remediation of these
controls, the controls have not yet operated for a sufficient period
of time to be able to conclude that they are designed and operating
effectively. The
Companys senior management, including the Companys Chief
Executive Officer and Chief Financial Officer, evaluated the
effectiveness of the Companys disclosure controls and procedures
as of the end of the period covered by this quarterly report. Based
on the status of the remediation of the material weakness discussed
below, the Companys Chief Executive Officer along with the
Companys Chief Financial Officer concluded that the
Companys disclosure controls and procedures are not effective.
In light of the material weakness identified as of December 31,
2004, and that continues to exist at March 31, 2005, the Company
continued to perform additional analysis and post-closing procedures
to ensure its consolidated financial statements are prepared in
accordance with generally accepted accounting principles
(GAAP). Accordingly, management believes that the
financial statements included in this report fairly present in all
material respects the Companys 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. 31




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##### Table of Contents



Status of Remediation of
the Material Weakness During
the first quarter of 2005, the Company began taking the steps
necessary to improve its internal controls relating to our revenue
process. The Company implemented a control checklist used to
recalculate the revenues based on the power purchase agreements
between the Company and CES. The Company has also enhanced its review
procedures over revenues generated from CES. The Company will
continue to monitor the effectiveness of these procedures and
continue to make any changes that management deems appropriate. Changes in Internal
Control Over Financial Reporting The
Company continuously seeks to improve the efficiency and
effectiveness of its internal controls. This results in refinements
to processes throughout the Company. During the first quarter of
2005, there were no significant changes in the Companys
internal control over financial reporting, other than the changes
related to the Companys revenue processes, procedures and
controls discussed above, that materially affected, or are
reasonably likely to materially affect, the Companys internal
control over financial reporting. 32




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##### Table of Contents



PART II  OTHER INFORMATION 
 Item 1.Legal Proceedings. See Note 10 of the Notes to Consolidated Condensed Financial Statements for a description of
our legal proceedings. 
 Item 6.Exhibits. (a) Exhibits The following exhibits are filed herewith unless otherwise indicated: EXHIBIT INDEX ExhibitNumber
    
    Description3.1
    
    Amended and Restated Certificate of Formation of Calpine Generating Company, LLC.*3.2
    
    Certificate of Incorporation of CalGen Finance Corp.*3.3
    
    Certificate of Formation of CalGen Expansion Company, LLC (f/k/a CCFC II Development Company, LLC).*3.4
    
    Certificate of Amendment to Certificate of Formation of CalGen Expansion Company, LLC (f/k/a CCFC II Development Company, LLC).*3.5
    
    Certificate of Amendment to Certificate of Formation of CalGen Expansion Company, LLC (f/k/a CCFC II Development Company, LLC).*3.6
    
    Certificate of Limited Partnership of Baytown Energy Center, LP.*3.7
    
    Certificate of Amendment to Certificate of Limited Partnership of Baytown Energy Center, LP.*3.8
    
    Certificate of Formation of Calpine Baytown Energy Center GP, LLC.*3.9
    
    Certificate of Amendment to Certificate of Formation of Calpine Baytown Energy Center GP, LLC.*3.10
    
    Certificate of Formation of Calpine Baytown Energy Center LP, LLC.*3.11
    
    Certificate of Amendment to Certificate of Formation of Calpine Baytown Energy Center LP, LLC.*3.12
    
    Certificate of Formation of Baytown Power GP, LLC.*3.13
    
    Certificate of Amendment to Certificate of Formation of Baytown Power GP, LLC.*3.14
    
    Certificate of Limited Partnership of Baytown Power, LP.*3.15
    
    Certificate of Amendment to Certificate of Limited Partnership of Baytown Power, LP.*3.16
    
    Certificate of Formation of Carville Energy LLC (f/k/a Bayou Verret Energy LLC and Bayou Verret LLC).*3.17
    
    Certificate of Amendment to Certificate of Formation of Carville Energy LLC(f/k/a Bayou Verret Energy LLC and Bayou Verret LLC).*3.18
    
    Certificate of Amendment to Certificate of Formation of Carville Energy LLC (f/k/a Bayou Verret Energy LLC and Bayou Verret LLC).*3.19
    
    Certificate of Amendment to Certificate of Formation of Carville Energy LLC (f/k/a Bayou Verret Energy LLC and Bayou Verret LLC).*
 33




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##### Table of Contents



ExhibitNumber
    
    Description3.20
    
    Certificate of Amendment to Certificate of Formation of Carville Energy LLC (f/k/a Bayou Verret Energy LLC and Bayou Verret LLC).*3.21
    
    Certificate of Amendment to Certificate of Formation of Carville Energy LLC (f/k/a Bayou Verret Energy LLC and Bayou Verret LLC).*3.22
    
    Certificate of Limited Partnership of Channel Energy Center, LP.*3.23
    
    Certificate of Amendment to Certificate of Limited Partnership of Channel Energy Center, LP.*3.24
    
    Certificate of Formation of Calpine Channel Energy Center GP, LLC.*3.25
    
    Certificate of Amendment to Certificate of Formation of Calpine Channel Energy Center GP, LLC.*3.26
    
    Certificate of Formation of Calpine Channel Energy Center LP, LLC.*3.27
    
    Certificate of Amendment to Certificate of Formation of Calpine Channel Energy Center LP, LLC.*3.28
    
    Certificate of Formation of Channel Power GP, LLC.*3.29
    
    Certificate of Amendment to Certificate of Formation of Channel Power GP, LLC.*3.30
    
    Certificate of Limited Partnership of Channel Power, LP.*3.31
    
    Certificate of Amendment to Certificate of Limited Partnership of Channel Power, LP.*3.32
    
    Certificate of Formation of Columbia Energy LLC.*3.33
    
    Certificate of Amendment to Certificate of Formation of Columbia Energy LLC.*3.34
    
    Certificate of Amendment to Certificate of Formation of Columbia Energy LLC.*3.35
    
    Certificate of Limited Partnership of Corpus Christi Cogeneration LP.*3.36
    
    Certificate of Amendment to Certificate of Limited Partnership of Corpus Christi Cogeneration LP.*3.37
    
    Certificate of Amendment to Certificate of Limited Partnership of Corpus Christi Cogeneration LP.*3.38
    
    Certificate of Formation of Nueces Bay Energy LLC.*3.39
    
    Certificate of Amendment to Certificate of Formation of Nueces Bay Energy LLC.*3.40
    
    Certificate of Amendment to Certificate of Formation of Nueces Bay Energy LLC.*3.41
    
    Amended and Restated Certificate of Formation of Calpine Northbrook Southcoast Investors, LLC (f/k/a Skygen Southcoast Investors LLC).*3.42
    
    Certificate of Amendment to Certificate of Formation of Calpine Northbrook Southcoast Investors, LLC (f/k/a Skygen Southcoast Investors LLC).*3.43
    
    Certificate of Formation of Calpine Corpus Christi Energy GP, LLC.*3.44
    
    Certificate of Amendment to Certificate of Formation of Calpine Corpus Christi Energy GP, LLC.*3.45
    
    Certificate of Limited Partnership of Calpine Corpus Christi Energy, LP.*3.46
    
    Certificate of Amendment to Certificate of Limited Partnership of Calpine Corpus Christi Energy, LP.*3.47
    
    Certificate of Formation of Decatur Energy Center, LLC.*3.48
    
    Certificate of Amendment to Certificate of Formation of Decatur Energy Center, LLC.*3.49
    
    Certificate of Formation of Delta Energy Center, LLC.*
 34




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##### Table of Contents



ExhibitNumber
    
    Description3.50
    
    Certificate of Amendment to Certificate of Formation of Delta Energy Center, LLC.*3.51
    
    Certificate of Amendment to Certificate of Formation of Delta Energy Center, LLC.*3.52
    
    Certificate of Formation of CalGen Project Equipment Finance Company Two, LLC (f/k/a CCFC II Project Equipment Finance Company Two, LLC).*3.53
    
    Certificate of Amendment to Certificate of Formation of CalGen Project Equipment Finance Company Two, LLC (f/k/a CCFC II Project Equipment Finance Company Two, LLC).*3.54
    
    Certificate of Amendment to Certificate of Formation of CalGen Project Equipment Finance Company Two, LLC (f/k/a CCFC II Project Equipment Finance Company Two, LLC).*3.55
    
    Amended and Restated Certificate of Limited Partnership of Freestone Power Generation LP.*3.56
    
    Certificate of Formation of Calpine Freestone, LLC.*3.57
    
    Certificate of Formation of CPN Freestone, LLC.*3.58
    
    Certificate of Formation of Calpine Freestone Energy GP, LLC.*3.59
    
    Certificate of Amendment to Certificate of Formation of Calpine Freestone Energy GP, LLC.*3.60
    
    Certificate of Limited Partnership of Calpine Freestone Energy, LP.*3.61
    
    Certificate of Amendment to Certificate of Limited Partnership of Calpine Freestone Energy, LP.*3.62
    
    Amended and Restated Certificate of Limited Partnership of Calpine Power Equipment LP.*3.63
    
    Amended and Restated Certificate of Formation of Los Medanos Energy Center LLC (f/k/a Pittsburg District Energy Facility, LLC).*3.64
    
    Certificate of Amendment to Certificate of Formation of Los Medanos Energy Center LLC (f/k/a Pittsburg District Energy Facility, LLC).*3.65
    
    Certificate of Formation of CalGen Project Equipment Finance Company One, LLC (f/k/a CCFC II Project Equipment Finance Company One, LLC).*3.66
    
    Certificate of Amendment to Certificate of Formation of CalGen Project Equipment Finance Company One, LLC (f/k/a CCFC II Project Equipment Finance Company One, LLC).*3.67
    
    Certificate of Amendment to Certificate of Formation of CalGen Project Equipment Finance Company One, LLC (f/k/a CCFC II Project Equipment Finance Company One, LLC).*3.68
    
    Certificate of Formation of Morgan Energy Center, LLC.*3.69
    
    Certificate of Amendment to Certificate of Formation of Morgan Energy Center, LLC.*3.70
    
    Certificate of Formation of Pastoria Energy Facility L.L.C.*3.71
    
    Certificate of Amendment to Certificate of Formation of Pastoria Energy Facility L.L.C.*3.72
    
    Certificate of Amendment to Certificate of Formation of Pastoria Energy Facility L.L.C.*3.73
    
    Amended and Restated Certificate of Formation of Calpine Pastoria Holdings, LLC (f/k/a Pastoria Energy Center, LLC).*3.74
    
    Certificate of Amendment to Certificate of Formation of Calpine Pastoria Holdings, LLC (f/k/a Pastoria Energy Center, LLC).*3.75
    
    Amended and Restated Certificate of Limited Partnership of Calpine Oneta Power, L.P. (f/k/a Panda Oneta Power, L.P.).*
 35




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##### Table of Contents



ExhibitNumber
    
    Description3.76
    
    Certificate of Amendment to Certificate of Limited Partnership of Calpine Oneta Power, L.P. (f/k/a Panda Oneta Power, L.P.).*3.77
    
    Amended and Restated Certificate of Formation of Calpine Oneta Power I, LLC (f/k/a Panda Oneta Power I, LLC).*3.78
    
    Certificate of Amendment to Certificate of Formation of Calpine Oneta Power I, LLC (f/k/a Panda Oneta Power I, LLC).*3.79
    
    Amended and Restated Certificate of Formation of Calpine Oneta Power II, LLC (f/k/a Panda Oneta Power II, LLC).*3.80
    
    Certificate of Amendment to Certificate of Formation of Calpine Oneta Power II, LLC (f/k/a Panda Oneta Power II, LLC).*3.81
    
    Certificate of Formation of Zion Energy LLC.*3.82
    
    Certificate of Amendment to Certificate of Formation of Zion Energy LLC.*3.83
    
    Certificate of Amendment to Certificate of Formation of Zion Energy LLC.*3.84
    
    Certificate of Formation of CalGen Project Equipment Finance Company Three, LLC (f/k/a CCFC II Project Equipment Finance Company Three, LLC).*3.85
    
    Certificate of Amendment to Certificate of Formation of CalGen Project Equipment Finance Company Three, LLC (f/k/a CCFC II Project Equipment Finance Company Three, LLC).*3.86
    
    Certificate of Amendment to Certificate of Formation of CalGen Project Equipment Finance Company Three, LLC (f/k/a CCFC II Project Equipment Finance Company Three, LLC).*3.87
    
    Amended and Restated Certificate of Formation of CalGen Equipment Finance Holdings, LLC (f/k/a CCFC II Leasing Holdings, LLC and CCFC II Equipment Finance Holdings, LLC).*3.88
    
    Certificate of Amendment to Certificate of Formation of CalGen Equipment Finance Holdings, LLC (f/k/a CCFC II Leasing Holdings, LLC and CCFC II Equipment Finance Holdings, LLC).*3.89
    
    Certificate of Amendment to Amended and Restated Certificate of Formation of CalGen Equipment Finance Holdings, LLC (f/k/a CCFC II Leasing Holdings, LLC and CCFC II Equipment Finance Holdings, LLC).*3.90
    
    Amended and Restated Certificate of Formation of CalGen Equipment Finance Company, LLC (f/k/a CCFC II Leasing Company, LLC and CCFC II Equipment Finance Company, LLC)*3.91
    
    Certificate of Amendment to Certificate of Formation of CalGen Equipment Finance Company, LLC (f/k/a CCFC II Leasing Company, LLC and CCFC II Equipment Finance Company, LLC).*3.92
    
    Certificate of Amendment to Amended and Restated Certificate of Formation of CalGen Equipment Finance Company, LLC (f/k/a CCFC II Leasing Company, LLC and CCFC II Equipment Finance Company, LLC).*3.93
    
    Limited Liability Company Operating Agreement of Calpine Generating Company, LLC.*3.94
    
    Bylaws of CalGen Finance Corp.*3.95
    
    Limited Liability Company Operating Agreement of CalGen Expansion Company, LLC.*3.96
    
    Agreement of Limited Partnership of Baytown Energy Center, LP.*3.97
    
    Amended and Restated Limited Liability Company Operating Agreement of Calpine Baytown Energy Center GP, LLC.*3.98
    
    Amended and Restated Limited Liability Company Operating Agreement of Calpine Baytown Energy Center LP, LLC.*3.99
    
    Limited Liability Company Operating Agreement of Baytown Power GP, LLC.*3.100
    
    Agreement of Limited Partnership of Baytown Power, LP.*3.101
    
    Amended and Restated Limited Liability Company Operating Agreement of Carville Energy LLC.*
 36




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##### Table of Contents



ExhibitNumber
    
    Description3.102
    
    Agreement of Limited Partnership of Channel Energy Center, LP, October 2000.*3.103
    
    Amended and Restated Limited Liability Company Operating Agreement of Calpine Channel Energy Center GP, LLC.*3.104
    
    Amended and Restated Limited Liability Company Operating Agreement of Calpine Channel Energy Center LP, LLC.*3.105
    
    Limited Liability Company Operating Agreement of Channel Power GP, LLC.*3.106
    
    Agreement of Limited Partnership of Channel Power, LP.*3.107
    
    Amended and Restated Limited Liability Company Operating Agreement of Columbia Energy LLC.*3.108
    
    Amended and Restated Agreement of Limited Partnership of Corpus Christi Cogeneration LP.*3.109
    
    Amended and Restated Limited Liability Company Operating Agreement of Nueces Bay Energy LLC.*3.110
    
    Amended and Restated Limited Liability Company Operating Agreement of Calpine Northbrook Southcoast Investors, LLC.*3.111
    
    Limited Liability Company Operating Agreement of Calpine Corpus Christi Energy GP, LLC.*3.112
    
    Agreement of Limited Partnership of Calpine Corpus Christi Energy, LP.*3.113
    
    Amended and Restated Limited Liability Company Operating Agreement of Decatur Energy Center, LLC.*3.114
    
    Amended and Restated Limited Liability Company Operating Agreement of Delta Energy Center, LLC.*3.115
    
    Limited Liability Company Operating Agreement of CalGen Project Equipment Finance Company Two, LLC.*3.116
    
    Second Amended and Restated Agreement of Limited Partnership of Freestone Power Generation LP.*3.117
    
    Limited Liability Company Operating Agreement of Calpine Freestone, LLC.*3.118
    
    Limited Liability Company Operating Agreement of CPN Freestone, LLC.*3.119
    
    Limited Liability Company Operating Agreement of Calpine Freestone Energy GP, LLC.*3.120
    
    Agreement of Limited Partnership of Calpine Freestone Energy, LP.*3.121
    
    Amended and Restated Agreement of Limited Partnership of Calpine Power Equipment LP.*3.122
    
    Amended and Restated Limited Liability Company Operating Agreement of Los Medanos Energy Center LLC.*3.123
    
    Limited Liability Company Operating Agreement of CalGen Project Equipment Finance Company One, LLC.*3.124
    
    Amended and Restated Limited Liability Company Operating Agreement of Morgan Energy Center, LLC.*3.125
    
    Amended and Restated Limited Liability Company Operating Agreement of Pastoria Energy Facility L.L.C.*3.126
    
    Limited Liability Company Operating Agreement of Calpine Pastoria Holdings, LLC.*3.127
    
    Amended and Restated Agreement of Limited Partnership of Calpine Oneta Power, L.P.*3.128
    
    Amended and Restated Limited Liability Company Operating Agreement of Calpine Oneta Power I, LLC.*3.129
    
    Amended and Restated Limited Liability Company Operating Agreement of Calpine Oneta Power II, LLC.*3.130
    
    Limited Liability Company Operating Agreement of Zion Energy LLC.*3.131
    
    Limited Liability Company Operating Agreement of CalGen Project Equipment Finance Company Three, LLC.*3.132
    
    Limited Liability Company Operating Agreement of CalGen Equipment Finance Holdings, LLC.*
 37




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##### Table of Contents



ExhibitNumber
    
    Description3.133
    
    Limited Liability Company Operating Agreement of CalGen Equipment Finance Company, LLC.*31.1
    
    Certification of the Chairman, President and 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 and Chief Financial 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 Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
   
    
    Filed herewith*
    
    Incorporated by reference to the
Registrants Registration Statement on Form S-4 (Registration No 333-117335),
filed with the SEC on July 13, 2004. 38




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##### Table of Contents



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 GENERATING COMPANY, LLC
CALGEN FINANCE CORP.
CALGEN EXPANSION COMPANY, LLC
BAYTOWN ENERGY CENTER, LP
CALPINE BAYTOWN ENERGY CENTER GP, LLC
CALPINE BAYTOWN ENERGY CENTER LP, LLC
BAYTOWN POWER GP, LLC
BAYTOWN POWER, LP
CARVILLE ENERGY LLC
CHANNEL ENERGY CENTER, LP
CALPINE CHANNEL ENERGY CENTER GP, LLC
CALPINE CHANNEL ENERGY CENTER LP, LLC
CHANNEL POWER GP, LLC
CHANNEL POWER, LP
COLUMBIA ENERGY LLC
CORPUS CHRISTI COGENERATION LP
NUECES BAY ENERGY LLC
CALPINE NORTHBROOK SOUTHCOAST INVESTORS, LLC
CALPINE CORPUS CHRISTI ENERGY GP, LLC
CALPINE CORPUS CHRISTI ENERGY, LP
DECATUR ENERGY CENTER, LLC
DELTA ENERGY CENTER, LLC
CALGEN PROJECT EQUIPMENT FINANCE COMPANY TWO, LLC
FREESTONE POWER GENERATION LP
CALPINE FREESTONE, LLC
CPN FREESTONE, LLC
CALPINE FREESTONE ENERGY GP, LLC
CALPINE FREESTONE ENERGY, LP
CALPINE POWER EQUIPMENT LP
LOS MEDANOS ENERGY CENTER, LLC
CALGEN PROJECT EQUIPMENT FINANCE COMPANY ONE, LLC
MORGAN ENERGY CENTER, LLC
PASTORIA ENERGY FACILITY L.L.C.
CALPINE PASTORIA HOLDINGS, LLC
CALPINE ONETA POWER, L.P.
CALPINE ONETA POWER I, LLC
CALPINE ONETA POWER II, LLC
ZION ENERGY LLC
CALGEN PROJECT EQUIPMENT FINANCE COMPANY THREE LLC
CALGEN EQUIPMENT FINANCE HOLDINGS, LLC
CALGEN EQUIPMENT FINANCE COMPANY, LLCBy:
    /s/ ROBERT D. KELLYRobert D. KellyDate: May 17, 2005
    
    Executive Vice President and Chief Financial
Officer (Principal Financial Officer)By:
    /s/ CHARLES B. CLARK, JR.Charles B. Clark, Jr.Date: May 17, 2005
    
    Senior Vice President and Corporate Controller(Principal Accounting Officer) 39




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##### Table of Contents



Exhibit Index 31.1
    
    Certification of the Chairman, President and 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 and Chief Financial 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 Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
   
    
    Filed herewith*
    
    Incorporated by reference 40