Calpine Receives Court Approval for the Sale of Power Systems Manufacturing, LLC for $242 Million

SAN JOSE, Calif., March 7 /PRNewswire-FirstCall/ — Calpine Corporation (OTC Pink Sheets: CPNLQ) announced today that it has received approval from the U.S. Bankruptcy Court, Southern District of New York for the sale of substantially all of the assets of Power Systems Mfg., LLC (PSM), a subsidiary of Calpine, to Alstom Power, Inc. for a cash purchase price of $242 million. The asset sale will advance Calpine’s restructuring program to further focus the Company’s resources on those core business activities involving the production and sale of power in key markets in which Calpine can best compete. The Company expects to close the transaction, pending certain regulatory approvals, in the next 30 days.

Calpine Chief Executive Officer Robert P. May stated, “The sale of PSM represents another successful step toward emerging from Chapter 11 as a stronger, more competitive power company. We continue to identify and execute on opportunities that generate near-term results and enhance the long-term value of Calpine for all of our stakeholders. The sale of PSM represents a new beginning for PSM to grow and strengthen its business. For Calpine, the sale will eliminate the capital commitment associated with the research, development and manufacturing of turbine components, while maintaining our ability to enhance our operations with the purchase of innovative PSM turbine products and services.”

Calpine is PSM’s largest customer, and both Calpine and PSM desire to continue their business relationship after the sale. Calpine will purchase, on a preferential basis from PSM, turbine parts to be used in certain of Calpine’s combustion gas turbines throughout the Company’s fleet of clean, reliable and fuel-efficient natural gas-fired power generation facilities.

Formed in 1998 and located in Jupiter, Florida, PSM designs, manufactures and sells highly engineered turbine and combustion aftermarket components for industrial, heavy-duty gas turbines. Under the leadership of Tom Churbuck and due to the strength of its highly skilled and experienced team of professionals, PSM has quickly grown to become recognized as a quality source of alternative technology for the industrial gas turbine market. With its dedicated staff of over 100 employees, whom are expected to be retained by Alstom, PSM also provides turbine services, which include system modernizations and conversions, maintenance and fuel system repairs, to independent power producers, industrial self-generators and electric utilities.

In January, the Company initially obtained a $200 million bid from Marubeni Corporation and in February, Calpine received approval from the Bankruptcy Court of the bidding procedures to sell substantially all of the assets of PSM. In accordance with bidding procedures approved by the Bankruptcy Court, Calpine held an auction on March 5, 2007 to allow other potential buyers to bid on the assets of PSM. At the conclusion of this auction, Alstom Power, Inc. was selected as the winning bidder. Proceeds from the sale will be used to reduce debt and enhance liquidity.

Calpine Corporation is helping to meet the needs of an economy that demands more and cleaner sources of electricity. Founded in 1984, Calpine is a major U.S. power company, capable of delivering nearly 25,000 megawatts of clean, cost-effective, reliable and fuel-efficient electricity to customers and communities in 18 states in the U.S. The Company owns, leases and operates low-carbon, natural gas-fired and renewable geothermal power plants. Using advanced technologies, Calpine generates electricity in a reliable and environmentally responsible manner for the customers and communities it serves. Please visit http://www.calpine.com/ for more information.

This news release discusses certain matters that may be considered “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, including statements regarding the intent, belief or current expectations of Calpine Corporation and its subsidiaries (the “Company”) and its management and uses 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 the Company’s expected financial performance and strategic and operational plans, as well as all assumptions, expectations, predictions, intentions or beliefs about future events. Readers are cautioned that any such forward-looking statements are not guarantees of future performance and that a number of risks and uncertainties could cause actual results to differ materially from those anticipated in the forward-looking statements. Such risks and uncertainties include, but are not limited to: (i) the risks and uncertainties associated with the Company’s Chapter 11 cases and Company’s Creditors Arrangement Act proceedings, including impact on operations; (ii) the Company’s ability to attract, retain and motivate key employees and successfully implement new strategies; (iii) the Company’s ability to successfully reorganize and emerge from Chapter 11; (iv) the Company’s ability to attract and retain customers and counterparties; (v) the Company’s ability to implement its business plan; (vi) financial results that may be volatile and may not reflect historical trends; (vii) the Company’s ability to manage liquidity needs and comply with financing obligations; (viii) the direct or indirect effects on the Company’s business of its impaired credit including increased cash collateral requirements; (ix) the expiration or termination of the Company’s power purchase agreements and the related results on revenues; (x) potential volatility in earnings and requirements for cash collateral associated with the use of commodity contracts; (xi) price and supply of natural gas; (xii) risks associated with power project development, acquisition and construction activities; (xiii) risks associated with the operation of power plants, including unscheduled outages of operating plants; (xiv) factors that impact the output of the Company’s geothermal resources and generation facilities, including unusual or unexpected steam field well and pipeline maintenance and variables associated with the waste water injection projects that supply added water to the steam reservoir; (xv) quarterly and seasonal fluctuations of the Company’s results; (xvi) competition; (xvii) risks associated with marketing and selling power from plants in the evolving energy markets; (xviii) present and possible future claims, litigation and enforcement actions; (xix) effects of the application of laws or regulations, including changes in laws or regulations or the interpretation thereof; and (xx) other risks identified the risk factors identified in its Annual Report on Form 10-K for the year ended December 31, 2005, and its Quarterly Report on Form 10-Q for the quarter ended September 30,2006, which can also be found on the Company’s website at http://www.calpine.com/. All information set forth in this news release is as of today’s date, and the Company undertakes no duty to update this information.

Calpine Corporation

CONTACT: Media Relations, Mel Scott, +1-713-570-4553, ormscott@calpine.com; or Investor Relations, Rick Barraza, +1-408-792-1125, orrickb@calpine.com

Web site: http://www.calpine.com/