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Texas City Facility - The relationship between HPL and Calpine has become and continues to be strained. Calpine purchased the Texas City Cogeneration Facility from Enron and Dominion Resources in early 1998. Prior to that time ENA supplied 45,000 MMBtu of gas under a fixed price contract and a Market Price agreement was in place to provide any additional volumes that might be needed in addition to that which Union Carbide Corporation had the contractual right to supply under the historic arrangement, since they were the steam host for the facility. After Calpine took over, these contracts either expired or were terminated. At this point HPL became the sole supplier to the facility although the interconnection with the Union Carbide delivery point with the Calpine facility remained active and a new Transaction Agreement was put in place whereby Calpine agreed to certain minimum and maximum quantity obligations and agreed on the prices that would be paid for any short fall in volumes. Since then, measurement disputes have been alleged and Calpine has shortpaid HPL's invoices even after verbally agreeing that the amounts invoiced were correct. Additionally, as a result of Calpine's power purchaser's last minute notification to Calpine of reductions in the purchase of power for the next day, which notification is usually after Calpine's next day notification deadline to HPL, Calpine has resorted to the use of creative force majeure situations in an effort to reduce their costs. These notifications have occurred some thirteen (I think) times and Calpine has provided little explanation to HPL of the nature of these events of force majeure. When pressed for a more detailed explanation, they merely state that they had to take down various unit(s) to repair or replace leaking valves, etc. Clear Lake Facility - The relationship between Calpine and HPL is not as strained with regard to deliveries at this facility. This may be because the contract covering the base volume of gas being delivered by HPL has not changed since it was negotiated by ENA in 1995. Midcon remains connected to the facility and delivers certain quantities of market priced gas. Market priced gas is required by the facility when its requirements exceed the base volumes supplied under the 1995 agreement. Should the power purchase agreement be amended to allow Calpine not to deliver powered or should the power purchaser cancel the power purchase agreement, Calpine has negotiated an amendment allowing for the delivery of the base volumes at alternative delivery points. Currently, HPL has advised Calpine of an upcoming event of force majeure which will require a cessation of deliveries of gas to the facility which certain regulatory mandated tests are being performed on the A-S pipeline. It is not known whether the Midcon delivery point has the capacity to handle the entire facility gas requirements or not.

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Calpine Cogeneration Facility(s) relations