CALPINE CORP (Form: 10-Q, Received: 05/10/2018 15:33:49)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

____________________

Form 10-Q

(Mark One)



[X]		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
		OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2018

		Or

[ ]		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
		OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File No. 001-12079

______________________

Calpine Corporation

(A Delaware Corporation)

I.R.S. Employer Identification No. 77-0212977

717 Texas Avenue, Suite 1000, Houston, Texas 77002

Telephone: (713) 830-2000

Not Applicable

(Former Address)

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 [X] No [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer	[X]		Accelerated filer	[ ]
Non-accelerated filer	[ ]	(Do not check if a smaller reporting company)	Smaller reporting company	[ ]
Emerging growth company	[ ]

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date: 105.15966616429208 shares of common stock, par value $0.001, were outstanding as of May 10, 2018, none of which were publicly traded.

CALPINE CORPORATION AND SUBSIDIARIES

REPORT ON FORM 10-Q

For the Quarter Ended March 31, 2018

INDEX




	Page

Definitions	ii

Forward-Looking Statements	vii

Where You Can Find Other Information	viii

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements	1
Consolidated Condensed Statements of Operations for the Three Months Ended March 31, 2018 and 2017	1
Consolidated Condensed Statements of Comprehensive Loss for the Three Months Ended March 31, 2018 and 2017	2
Consolidated Condensed Balance Sheets at March 31, 2018 and December 31, 2017	3
Consolidated Condensed Statement of Stockholder’s Equity for the Three Months Ended March 31, 2018	4
Consolidated Condensed Statements of Cash Flows for the Three Months Ended March 31, 2018 and 2017	5
Notes to Consolidated Condensed Financial Statements	7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	31
Forward-Looking Information	31
Introduction and Overview	31
Results of Operations	33
Commodity Margin by Segment	35
Liquidity and Capital Resources	37
Risk Management and Commodity Accounting	41
New Accounting Standards and Disclosure Requirements	44
Item 3. Quantitative and Qualitative Disclosures About Market Risk	44
Item 4. Controls and Procedures	44

PART II – OTHER INFORMATION

Item 1. Legal Proceedings	45
Item 1A. Risk Factors	45
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	46
Item 3. Defaults Upon Senior Securities	46
Item 4. Mine Safety Disclosures	46
Item 5. Other Information	46
Item 6. Exhibits	47
Signatures	48

DEFINITIONS

As used in this report for the quarter ended March 31, 2018 (this “Report”), the following abbreviations and terms have the meanings as listed below. Additionally, the terms “Calpine,” “we,” “us” and “our” refer to Calpine Corporation and its consolidated subsidiaries, unless the context clearly indicates otherwise. The term “Calpine Corporation” refers only to Calpine Corporation and not to any of its subsidiaries. Unless and as otherwise stated, any references in this Report to any agreement means such agreement and all schedules, exhibits and attachments in each case as amended, restated, supplemented or otherwise modified to the date of filing this Report.



ABBREVIATION		DEFINITION
2008 Director Plan		The Amended and Restated Calpine Corporation 2008 Director Incentive Plan

2008 Equity Plan		The Amended and Restated Calpine Corporation 2008 Equity Incentive Plan

2017 Form 10-K		Calpine Corporation’s Annual Report on Form 10-K for the year ended December 31, 2017, filed with the SEC on February 16, 2018

2017 Director Plan		The Calpine Corporation 2017 Equity Compensation Plan for Non-Employee Directors

2017 Equity Plan		The Calpine Corporation 2017 Equity Incentive Plan

2017 First Lien Term Loan		The $550 million first lien senior secured term loan, dated December 1, 2016, among Calpine Corporation, as borrower, the lenders party thereto, Morgan Stanley Senior Funding, Inc., as administrative agent and MUFG Union Bank, N.A., as collateral agent, repaid in a series of transactions on March 16, 2017, August 31, 2017, September 29, 2017, October 31, 2017 and November 30, 2017

2019 First Lien Term Loan		The $400 million first lien senior secured term loan, dated February 3, 2017, among Calpine Corporation, as borrower, the lenders party thereto, Morgan Stanley Senior Funding, Inc., as administrative agent and MUFG Union Bank, N.A., as collateral agent

2022 First Lien Notes		The $750 million aggregate principal amount of 6.0% senior secured notes due 2022, issued October 31, 2013

2023 First Lien Notes		The $1.2 billion aggregate principal amount of 7.875% senior secured notes due 2023, issued January 14, 2011, repaid in series of transactions on November 7, 2012, December 2, 2013, December 4, 2014, February 3, 2015, December 7, 2015, December 19, 2016 and March 6, 2017

2023 First Lien Term Loans		The $550 million first lien senior secured term loan, dated December 15, 2015, among Calpine Corporation, as borrower, the lenders party thereto, Morgan Stanley Senior Funding, Inc., as administrative agent and Goldman Sachs Credit Partners L.P., as collateral agent and the $562 million first lien senior secured term loan, dated May 31, 2016, among Calpine Corporation, as borrower, the lenders party thereto, Citibank, N.A., as administrative agent and MUFG Union Bank, N.A., as collateral agent

2023 Senior Unsecured Notes		The $1.25 billion aggregate principal amount of 5.375% senior unsecured notes due 2023, issued July 22, 2014

2024 First Lien Notes		The $490 million aggregate principal amount of 5.875% senior secured notes due 2024, issued October 31, 2013

2024 First Lien Term Loan		The $1.6 billion first lien senior secured term loan, dated May 28, 2015 (as amended December 21, 2016), among Calpine Corporation, as borrower, the lenders party thereto, Morgan Stanley Senior Funding, Inc., as administrative agent and Goldman Sachs Credit Partners L.P., as collateral agent

2024 Senior Unsecured Notes		The $650 million aggregate principal amount of 5.5% senior unsecured notes due 2024, issued February 3, 2015

2025 Senior Unsecured Notes		The $1.55 billion aggregate principal amount of 5.75% senior unsecured notes due 2025, issued July 22, 2014



ABBREVIATION		DEFINITION
2026 First Lien Notes		Collectively, the $625 million aggregate principal amount of 5.25% senior secured notes due 2026, issued May 31, 2016, and the $560 million aggregate principal amount of 5.25% senior secured notes due 2026, issued on December 15, 2017

Accounts Receivable Sales Program		Receivables purchase agreement between Calpine Solutions and Calpine Receivables and the purchase and sale agreement between Calpine Receivables and an unaffiliated financial institution, both which allows for the revolving sale of up to $250 million in certain trade accounts receivables to third parties

AOCI		Accumulated Other Comprehensive Income

Average availability		Represents the total hours during the period that our plants were in-service or available for service as a percentage of the total hours in the period

Average capacity factor, excluding peakers		A measure of total actual power generation as a percent of total potential power generation. It is calculated by dividing (a) total MWh generated by our power plants, excluding peakers, by (b) the product of multiplying (i) the average total MW in operation, excluding peakers, during the period by (ii) the total hours in the period

Btu		British thermal unit(s), a measure of heat content

Calpine Equity Incentive Plans		Collectively, the Director Plans and the Equity Plans, which provided for grants of equity awards to Calpine non-union employees and non-employee members of Calpine’s Board of Directors

Calpine Receivables		Calpine Receivables, LLC, an indirect, wholly-owned subsidiary of Calpine, which was established as bankruptcy remote, special purpose subsidiary and is responsible for administering the Accounts Receivable Sales Program

Calpine Solutions		Calpine Energy Solutions, LLC, an indirect, wholly-owned subsidiary of Calpine, which is the third largest supplier of power to commercial and industrial retail customers in the United States with customers in 20 states, including presence in California, Texas, the Mid-Atlantic and the Northeast

CCFC		Calpine Construction Finance Company, L.P., an indirect, wholly-owned subsidiary of Calpine

CCFC Term Loan		The $1.0 billion first lien senior secured term loan entered into on December 15, 2017 among CCFC as borrower, the lenders party thereto, and Credit Suisse AG, Cayman Islands Branch, as administrative agent and collateral agent

CCFC Term Loans		Collectively, the $900 million first lien senior secured term loan and the $300 million first lien senior secured term loan entered into on May 3, 2013, and the $425 million first lien senior secured term loan entered into on February 26, 2014, between CCFC, as borrower, and Goldman Sachs Lending Partners, LLC, as administrative agent and as collateral agent, and the lenders party thereto, repaid on December 15, 2017

CDHI		Calpine Development Holdings, Inc., an indirect, wholly-owned subsidiary of Calpine

CFTC		Commodities Futures Trading Commission

Champion Energy		Champion Energy Marketing, LLC, which owns a retail electric provider that serves residential, governmental, commercial and industrial customers in deregulated electricity markets in 14 states and the District of Columbia, including presence in California, Texas, the Mid-Atlantic and Northeast

Cogeneration		Using a portion or all of the steam generated in the power generating process to supply a customer with steam for use in the customer’s operations

Commodity expense		The sum of our expenses from fuel and purchased energy expense, commodity transmission and transportation expense, environmental compliance expenses, ancillary retail expense and realized settlements from our marketing, hedging and optimization activities including natural gas and fuel oil transactions hedging future power sales

iii



ABBREVIATION		DEFINITION
Commodity Margin		Measure of profit reviewed by our chief operating decision maker that includes revenue recognized on our wholesale and retail power sales activity, electric capacity sales, REC sales, steam sales, realized settlements associated with our marketing, hedging, optimization and trading activities, fuel and purchased energy expenses, commodity transmission and transportation expenses, environmental compliance expenses and ancillary retail expense. Commodity Margin is a measure of segment profit or loss under FASB Accounting Standards Codification 280 used by our chief operating decision maker to make decisions about allocating resources to the relevant segments and assessing their performance

Commodity revenue		The sum of our revenues recognized on our wholesale and retail power sales activity, electric capacity sales, REC sales, steam sales and realized settlements from our marketing, hedging, optimization and trading activities

Company		Calpine Corporation, a Delaware corporation, and its subsidiaries

Corporate Revolving Facility		The $1.47 billion aggregate amount revolving credit facility credit agreement, dated as of December 10, 2010, as amended on June 27, 2013, July 30, 2014, February 8, 2016, December 1, 2016, September 15, 2017, October 20, 2017 and March 8, 2018 among Calpine Corporation, the Bank of Tokyo-Mitsubishi UFJ, Ltd., as successor administrative agent, MUFG Union Bank, N.A., as successor collateral agent, the lenders party thereto and the other parties thereto

Director Plans		Collectively, the 2008 Director Plan and the 2017 Director Plan

Equity Plans		Collectively, the 2008 Equity Plan and the 2017 Equity Plan

Exchange Act		U.S. Securities Exchange Act of 1934, as amended

FASB		Financial Accounting Standards Board

FDIC		U.S. Federal Deposit Insurance Corporation

FERC		U.S. Federal Energy Regulatory Commission

First Lien Notes		Collectively, the 2022 First Lien Notes, the 2024 First Lien Notes and the 2026 First Lien Notes

First Lien Term Loans		Collectively, the 2019 First Lien Term Loan, the 2023 First Lien Term Loans and the 2024 First Lien Term Loan

Geysers Assets		Our geothermal power plant assets, including our steam extraction and gathering assets, located in northern California consisting of 13 operating power plants

Greenfield LP		Greenfield Energy Centre LP, a 50% partnership interest between certain of our subsidiaries and a third party which operates the Greenfield Energy Centre, a 1,038 MW natural gas-fired, combined-cycle power plant in Ontario, Canada

Heat Rate(s)		A measure of the amount of fuel required to produce a unit of power

IRS		U.S. Internal Revenue Service

ISO(s)		Independent System Operator which is an entity that coordinates, controls and monitors the operation of an electric power system

ISO-NE		ISO New England Inc., an independent, nonprofit RTO serving states in the New England area, including Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island and Vermont

KWh		Kilowatt hour(s), a measure of power produced, purchased or sold

LIBOR		London Inter-Bank Offered Rate

Lyondell		LyondellBasell Industries N.V.



ABBREVIATION		DEFINITION
Market Heat Rate(s)		The regional power price divided by the corresponding regional natural gas price

Merger		Merger of Volt Merger Sub, Inc. with and into Calpine pursuant to the terms of the Merger Agreement, which was consummated on March 8, 2018

Merger Agreement		Agreement and Plan of Merger, dated, August 17, 2017, by and among Calpine Corporation, Volt Parent, LP and Volt Merger Sub, Inc.

MMBtu		Million Btu

MW		Megawatt(s), a measure of plant capacity

MWh		Megawatt hour(s), a measure of power produced, purchased or sold

NOL(s)		Net operating loss(es)

North American Power		North American Power & Gas, LLC, an indirect, wholly-owned subsidiary of Calpine, which was acquired on January 17, 2017 and is a retail energy supplier for homes and small businesses primarily concentrated in the Northeast U.S.

OCI		Other Comprehensive Income

OMEC		Otay Mesa Energy Center, LLC, an indirect, wholly owned subsidiary that owns the Otay Mesa Energy Center, a 608 MW power plant located in San Diego County, California

OTC		Over-the-Counter

PJM		PJM Interconnection is a RTO that coordinates the movement of wholesale electricity in all or parts of Delaware, Illinois, Indiana, Kentucky, Maryland, Michigan, New Jersey, North Carolina, Ohio, Pennsylvania, Tennessee, Virginia, West Virginia and the District of Columbia

PPA(s)		Any term power purchase agreement or other contract for a physically settled sale (as distinguished from a financially settled future, option or other derivative or hedge transaction) of any power product, including power, capacity and/or ancillary services, in the form of a bilateral agreement or a written or oral confirmation of a transaction between two parties to a master agreement, including sales related to a tolling transaction in which the purchaser provides the fuel required by us to generate such power and we receive a variable payment to convert the fuel into power and steam

REC(s)		Renewable energy credit(s)

Risk Management Policy		Calpine’s policy applicable to all employees, contractors, representatives and agents, which defines the risk management framework and corporate governance structure for commodity risk, interest rate risk, currency risk and other risks

RTO(s)		Regional Transmission Organization which is an entity that coordinates, controls and monitors the operation of an electric power system and administers the transmission grid on a regional basis

SDG&E		San Diego Gas & Electric Company

SEC		U.S. Securities and Exchange Commission

Securities Act		U.S. Securities Act of 1933, as amended

Senior Unsecured Notes		Collectively, the 2023 Senior Unsecured Notes, the 2024 Senior Unsecured Notes and the 2025 Senior Unsecured Notes

Short Term Credit Facility		The $300 million aggregate amount credit agreement, dated as of April 11, 2018, among Calpine Corporation, Morgan Stanley Senior Funding, Inc., as administrative agent, and the lenders party thereto



ABBREVIATION		DEFINITION
Spark Spread(s)		The difference between the sales price of power per MWh and the cost of natural gas to produce it

Steam Adjusted Heat Rate		The adjusted Heat Rate for our natural gas-fired power plants, excluding peakers, calculated by dividing (a) the fuel consumed in Btu reduced by the net equivalent Btu in steam exported to a third party by (b) the KWh generated. Steam Adjusted Heat Rate is a measure of fuel efficiency, so the lower our Steam Adjusted Heat Rate, the lower our cost of generation

U.S. GAAP		Generally accepted accounting principles in the U.S.

VAR		Value-at-risk

VIE(s)		Variable interest entity(ies)

Whitby		Whitby Cogeneration Limited Partnership, a 50% partnership interest between certain of our subsidiaries and a third party, which operates Whitby, a 50 MW natural gas-fired, simple-cycle cogeneration power plant located in Ontario, Canada

Forward-Looking Statements

This Report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act, and Section 21E of the Exchange Act. Forward-looking statements may appear throughout this Report, including without limitation, the “Management’s Discussion and Analysis” section. We use words such as “believe,” “intend,” “expect,” “anticipate,” “plan,” “may,” “will,” “should,” “estimate,” “potential,” “project” 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. We believe that the forward-looking statements are based upon reasonable assumptions and expectations. However, 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:


•	The effect of the Merger on our customer relationships, operating results and business;


•	Financial results that may be volatile and may not reflect historical trends due to, among other things, seasonality of demand, fluctuations in prices for commodities such as natural gas and power, changes in U.S. macroeconomic conditions, fluctuations in liquidity and volatility in the energy commodities markets and our ability and extent to which we hedge risks;


•	Laws, regulations and market rules in the wholesale and retail markets in which we participate and our ability to effectively respond to changes in laws, regulations or market rules or the interpretation thereof including those related to the environment, derivative transactions and market design in the regions in which we operate;


•	Our ability to manage our liquidity needs, access the capital markets when necessary and comply with covenants under our Senior Unsecured Notes, First Lien Notes, First Lien Term Loans, Corporate Revolving Facility, CCFC Term Loan and other existing financing obligations;


•	Risks associated with the operation, construction and development of power plants, including unscheduled outages or delays and plant efficiencies;

•

Risks related to our geothermal resources, including the adequacy of our steam reserves, unusual or unexpected steam field well and pipeline maintenance requirements, variables associated with the injection of water to the steam reservoir and potential regulations or other requirements related to seismicity concerns that may delay or increase the cost of developing or operating geothermal resources;


•	Competition, including from renewable sources of power, interference by states in competitive power markets through subsidies or similar support for new or existing power plants, and other risks associated with marketing and selling power in the evolving energy markets;


•	Structural changes in the supply and demand of power, resulting from the development of new fuels or technologies and demand-side management tools (such as distributed generation, power storage and other technologies);


•	The expiration or early termination of our PPAs and the related results on revenues;


•	Future capacity revenue may not occur at expected levels;


•	Natural disasters, such as hurricanes, earthquakes, droughts, wildfires and floods, acts of terrorism or cyber attacks that may affect our power plants or the markets our power plants or retail operations serve and our corporate offices;


•	Disruptions in or limitations on the transportation of natural gas or fuel oil and the transmission of power;


•	Our ability to manage our counterparty and customer exposure and credit risk, including our commodity positions;


•	Our ability to attract, motivate and retain key employees;


•	Present and possible future claims, litigation and enforcement actions that may arise from noncompliance with market rules promulgated by the SEC, CFTC, FERC and other regulatory bodies; and


•	Other risks identified in this Report, in our 2017 Form 10-K and in other reports filed by us with the SEC.

Given the risks and uncertainties surrounding forward-looking statements, you should not place undue reliance on these statements. Many of these factors are beyond our ability to control or predict. Our forward-looking statements speak only as of the date of this Report. Other than as required by law, we undertake no obligation to update or revise forward-looking statements, whether as a result of new information, future events, or otherwise.

vii

Where You Can Find Other Information

Our website is www.calpine.com. Information contained on our website is not part of this Report. Information that we furnish or file with the SEC, including our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to, or exhibits included in, these reports are available for download, free of charge, on our website as soon as reasonably practicable after such materials are filed with or furnished to the SEC. Our SEC filings, including exhibits filed therewith, are also available on the SEC’s website at www.sec.gov. You may obtain and copy any document we furnish or file with the SEC at the SEC’s public reference room at 100 F Street, NE, Room 1580, Washington, D.C. 20549. You may obtain information on the operation of the SEC’s public reference facilities by calling the SEC at 1-800-SEC-0330. You may request copies of these documents, upon payment of a duplicating fee, by writing to the SEC at its principal office at 100 F Street, NE, Room 1580, Washington, D.C. 20549.

viii

PART I — FINANCIAL INFORMATION


Item 1.	Financial Statements

CALPINE CORPORATION AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)



	Three Months Ended March 31,
	2018			2017
	(in millions)
Operating revenues:
Commodity revenue	$	2,396		$	2,063
Mark-to-market gain (loss)	(391		)	214
Other revenue	4			4
Operating revenues	2,009			2,281
Operating expenses:
Fuel and purchased energy expense:
Commodity expense	1,790			1,533
Mark-to-market (gain) loss	(20		)	159
Fuel and purchased energy expense	1,770			1,692
Operating and maintenance expense	275			282
Depreciation and amortization expense	201			206
General and other administrative expense	60			40
Other operating expenses	37			20
Total operating expenses	2,343			2,240
(Gain) on sale of assets, net	—			(27		)
(Income) from unconsolidated subsidiaries	(6		)	(4		)
Income (loss) from operations	(328		)	72
Interest expense	151			159
Debt extinguishment costs	—			24
Other (income) expense, net	7			2
Loss before income taxes	(486		)	(113		)
Income tax expense (benefit)	108			(61		)
Net loss	(594		)	(52		)
Net income attributable to the noncontrolling interest	(4		)	(4		)
Net loss attributable to Calpine	$	(598	)	$	(56	)

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

CALPINE CORPORATION AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE LOSS

(Unaudited)



	Three Months Ended March 31,
	2018			2017
	(in millions)
Net loss	$	(594	)	$	(52	)
Cash flow hedging activities:
Gain (loss) on cash flow hedges before reclassification adjustment for cash flow hedges realized in net loss	48			(15		)
Reclassification adjustment for loss on cash flow hedges realized in net loss	7			11
Foreign currency translation gain (loss)	(6		)	2
Income tax expense	(11		)	—
Other comprehensive income (loss)	38			(2		)
Comprehensive loss	(556		)	(54		)
Comprehensive (income) attributable to the noncontrolling interest	(6		)	(4		)
Comprehensive loss attributable to Calpine	$	(562	)	$	(58	)

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

CALPINE CORPORATION AND SUBSIDIARIES

CONSOLIDATED CONDENSED BALANCE SHEETS

(Unaudited)



	March 31,			December 31,
	2018			2017
	(in millions, except share and per share amounts)
ASSETS
Current assets:
Cash and cash equivalents ($38 and $39 attributable to VIEs)	$	215		$	284
Accounts receivable, net of allowance of $15 and $9	839			970
Inventories	581			498
Margin deposits and other prepaid expense	275			203
Restricted cash, current ($64 and $74 attributable to VIEs)	128			134
Derivative assets, current	197			174
Other current assets	46			43
Total current assets	2,281			2,306
Property, plant and equipment, net ($4,007 and $4,048 attributable to VIEs)	12,623			12,724
Restricted cash, net of current portion ($27 and $24 attributable to VIEs)	28			25
Investments in unconsolidated subsidiaries	110			106
Long-term derivative assets	228			218
Goodwill	242			242
Intangible assets, net	485			512
Other assets ($24 and $22 attributable to VIEs)	280			320
Total assets	$	16,277		$	16,453
LIABILITIES & STOCKHOLDER’S EQUITY
Current liabilities:
Accounts payable	$	709		$	777
Accrued interest payable	134			104
Debt, current portion ($177 and $175 attributable to VIEs)	227			225
Derivative liabilities, current	338			197
Other current liabilities	535			571
Total current liabilities	1,943			1,874
Debt, net of current portion ($2,191 and $2,238 attributable to VIEs)	11,455			11,180
Long-term derivative liabilities	178			119
Other long-term liabilities	254			213
Total liabilities	13,830			13,386

Commitments and contingencies (see Note 11)
Stockholder’s equity:
Common stock, $0.001 par value per share; authorized 1,400,000,000 shares, 105.15966616429208 and 361,677,891 shares issued, respectively, and 105.15966616429208 and 360,516,091 shares outstanding, respectively	—			—
Treasury stock, at cost, nil and 1,161,800 shares, respectively	—			(15		)
Additional paid-in capital	9,582			9,661
Accumulated deficit	(7,150		)	(6,552		)
Accumulated other comprehensive loss	(70		)	(106		)
Total Calpine stockholder’s equity	2,362			2,988
Noncontrolling interest	85			79
Total stockholder’s equity	2,447			3,067
Total liabilities and stockholder’s equity	$	16,277		$	16,453

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

CALPINE CORPORATION AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENT OF STOCKHOLDER ’ S EQUITY

(Unaudited)

(in millions)



	Common Stock		Treasury Stock			Additional Paid-In Capital			Accumulated Deficit			Accumulated Other Comprehensive Loss			Noncontrolling Interest			Total Stockholder’s Equity
Balance, December 31, 2017	$	—	$	(15	)	$	9,661		$	(6,552	)	$	(106	)	$	79		$	3,067
Treasury stock transactions	—		(7		)	—			—			—			—			(7		)
Stock-based compensation expense	—		—			41			—			—			—			41
Effects of the Merger	—		22			(120		)	—			—			—			(98		)
Contribution from the noncontrolling interest	—		—			—			—			—			2			2
Distribution to the noncontrolling interest	—		—			—			—			—			(2		)	(2		)
Net income (loss)	—		—			—			(598		)	—			4			(594		)
Other comprehensive income	—		—			—			—			36			2			38
Balance, March 31, 2018	$	—	$	—		$	9,582		$	(7,150	)	$	(70	)	$	85		$	2,447

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

CALPINE CORPORATION AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)



	Three Months Ended March 31,
	2018			2017
	(in millions)
Cash flows from operating activities:
Net loss	$	(594	)	$	(52	)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization ⁽¹⁾	223			265
Debt extinguishment costs	—			24
Deferred income taxes	69			(61		)
Gain on sale of assets, net	—			(27		)
Mark-to-market activity, net	369			(55		)
(Income) from unconsolidated subsidiaries	(6		)	(4		)
Return on investments from unconsolidated subsidiaries	3			13
Stock-based compensation expense	57			8
Other	6			—
Change in operating assets and liabilities, net of effects of acquisitions:
Accounts receivable	164			82
Derivative instruments, net	(150		)	(29		)
Other assets	(184		)	33
Accounts payable and accrued expenses	(46		)	(105		)
Other liabilities	(26		)	20
Net cash (used in) provided by operating activities	(115		)	112
Cash flows from investing activities:
Purchases of property, plant and equipment	(114		)	(91		)
Proceeds from sale of Osprey Energy Center	—			162
Purchase of North American Power, net of cash acquired	—			(111		)
Other	(1		)	16
Net cash used in investing activities	(115		)	(24		)
Cash flows from financing activities:
Borrowings under First Lien Term Loans	—			396
Repayment of CCFC Term Loan, CCFC Term Loans and First Lien Term Loans	(10		)	(161		)
Repurchase of First Lien Notes	—			(453		)
Borrowings under Corporate Revolving Facility	325			25
Repayments of project financing, notes payable and other	(43		)	(44		)
Distribution to noncontrolling interest holder	(2		)	(6		)
Financing costs	(6		)	(26		)
Stock repurchases	(79		)	—
Shares repurchased for tax withholding on stock-based awards	(7		)	(6		)
Other	(20		)	1
Net cash provided by (used in) financing activities	158			(274		)
Net decrease in cash, cash equivalents and restricted cash	(72		)	(186		)
Cash, cash equivalents and restricted cash, beginning of period	443			606
Cash, cash equivalents and restricted cash, end of period	$	371		$	420

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

CALPINE CORPORATION AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS — (CONTINUED)

(Unaudited)



	Three Months Ended March 31,
	2018			2017
	(in millions)
Cash paid during the period for:
Interest, net of amounts capitalized	$	110		$	141
Income taxes	$	4		$	3

Supplemental disclosure of non-cash investing activities:
Change in capital expenditures included in accounts payable	$	(6	)	$	—

____________


(1)	Includes amortization recorded in Commodity revenue and Commodity expense associated with intangible assets and amortization recorded in interest expense associated with debt issuance costs and discounts.

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

CALPINE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

March 31, 2018

(Unaudited)


1.	Basis of Presentation and Summary of Significant Accounting Policies

We are a power generation company engaged in the ownership and operation of primarily natural gas-fired and geothermal power plants in North America. We have a significant presence in major competitive wholesale and retail power markets in California, Texas and the Northeast and Mid-Atlantic regions of the U.S. We sell power, steam, capacity, renewable energy credits and ancillary services to our customers, which include utilities, independent electric system operators, industrial and agricultural companies, retail power providers, municipalities and other governmental entities, power marketers as well as retail commercial, industrial, governmental and residential customers. We continue to focus on getting closer to our customers through expansion of our retail platform which began with the acquisition of Champion Energy in 2015 and was followed by the acquisitions of Calpine Solutions in late 2016 and North American Power in early 2017. We purchase primarily natural gas and some fuel oil as fuel for our power plants and engage in related natural gas transportation and storage transactions. We also purchase power for sale to our customers and purchase electric transmission rights to deliver power to our customers. Additionally, consistent with our Risk Management Policy, we enter into natural gas, power, environmental product, fuel oil and other physical and financial commodity contracts to hedge certain business risks and optimize our portfolio of power plants.

Basis of Interim Presentation — The accompanying unaudited, interim Consolidated Condensed Financial Statements of Calpine Corporation, a Delaware corporation, and consolidated subsidiaries have been prepared pursuant to the rules and regulations of the SEC. In the opinion of management, the Consolidated Condensed Financial Statements include the normal, recurring adjustments necessary for a fair statement of the information required to be set forth therein. Certain information and note disclosures, normally included in financial statements prepared in accordance with U.S. GAAP, have been condensed or omitted from these statements pursuant to such rules and regulations and, accordingly, these financial statements should be read in conjunction with our audited Consolidated Financial Statements for the year ended December 31, 2017 , included in our 2017 Form 10-K. The results for interim periods are not indicative of the results for the entire year primarily due to acquisitions and disposals of assets, seasonal fluctuations in our revenues and expenses, timing of major maintenance expense, variations resulting from the application of the method to calculate the provision for income tax for interim periods, volatility of commodity prices and mark-to-market gains and losses from commodity and interest rate derivative contracts.

Use of Estimates in Preparation of Financial Statements — The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosures included in our Consolidated Condensed Financial Statements. Actual results could differ from those estimates.

Reclassifications — We have reclassified certain prior period amounts for comparative purposes. These reclassifications did not have a material effect on our financial condition, results of operations or cash flows.

Cash and Cash Equivalents — We consider all highly liquid investments with an original maturity of three months or less to be cash equivalents. We have cash and cash equivalents held in non-corporate accounts relating to certain project finance facilities and lease agreements that require us to establish and maintain segregated cash accounts. These accounts have been pledged as security in favor of the lenders under such project finance facilities, and the use of certain cash balances on deposit in such accounts is limited, at least temporarily, to the operations of the respective projects.

Restricted Cash — Certain of our debt agreements, lease agreements or other operating agreements require us to establish and maintain segregated cash accounts, the use of which is restricted, making these cash funds unavailable for general use. These amounts are held by depository banks in order to comply with the contractual provisions requiring reserves for payments such as for debt service, rent and major maintenance or with applicable regulatory requirements. Funds that can be used to satisfy obligations due during the next 12 months are classified as current restricted cash, with the remainder classified as non-current restricted cash. Restricted cash is generally invested in accounts earning market rates; therefore, the carrying value approximates fair value. Such cash is excluded from cash and cash equivalents on our Consolidated Condensed Balance Sheets.

The table below represents the components of our restricted cash as of March 31, 2018 and December 31, 2017 (in millions):



	March 31, 2018						December 31, 2017
	Current		Non-Current		Total		Current		Non-Current		Total
Debt service	$	12	$	7	$	19	$	11	$	8	$	19
Construction/major maintenance	25		18		43		28		16		44
Security/project/insurance	88		—		88		92		—		92
Other	3		3		6		3		1		4
Total	$	128	$	28	$	156	$	134	$	25	$	159

Property, Plant and Equipment, Net — At March 31, 2018 and December 31, 2017 , the components of property, plant and equipment are stated at cost less accumulated depreciation as follows (in millions):



	March 31, 2018		December 31, 2017		Depreciable Lives
Buildings, machinery and equipment	$	16,512	$	16,506	3	–	46	Years
Geothermal properties	1,500		1,494		13	–	58	Years
Other	252		236		3	–	46	Years
	18,264		18,236
Less: Accumulated depreciation	6,545		6,383
	11,719		11,853
Land	117		117
Construction in progress	787		754
Property, plant and equipment, net	$	12,623	$	12,724

Depreciable Lives — During the first quarter of 2018, we reviewed our accounting policies related to depreciation associated with our estimates of useful lives related to our componentized balance of plant parts. As a result, the useful lives of our rotable parts are now generally estimated to range from 1.5 to 12 years. Our change in the method of depreciation for rotable parts is considered a change in accounting estimate and will result in changes to our depreciation expense prospectively.

Capitalized Interest — The total amount of interest capitalized was $7 million and $7 million during the three months ended March 31, 2018 and 2017 , respectively.

Goodwill — We have not recorded any impairment losses associated with our goodwill. During the first quarter of 2018, we altered the composition of our segments to report the results associated with our retail business as a separate segment. This change reflects the manner in which our segment information is presented internally to our chief operating decision maker associated with the strategic utilization of our retail business subsequent to the consummation of the Merger. Thus, beginning in the first quarter of 2018, our geographic reportable segments for our wholesale business are West (including geothermal), Texas and East (including Canada) and we have a separate reportable segment for our retail business. As our goodwill resulted from the acquisition of our retail business over the last several years, our goodwill balance of $242 million was allocated to our Retail segment in connection with the change in segment presentation.

New Accounting Standards and Disclosure Requirements

Revenue Recognition — On January 1, 2018, we adopted Accounting Standards Update 2014-09, “Revenue from Contracts with Customers” (“Topic 606”) . The comprehensive new revenue recognition standard supersedes all pre-existing revenue recognition guidance. The core principle of Topic 606 is that a company will recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard also requires expanded disclosures surrounding the recognition of revenue from contracts with customers. We adopted the new revenue recognition standards under Topic 606 using the modified retrospective method and applied Topic 606 to those contracts which were not completed as of January 1, 2018. Results for reporting periods beginning after December 31, 2017 are presented under Topic 606, while prior period amounts continue to be reported in accordance with historical accounting standards. The adoption of Topic 606 resulted in no adjustment to our opening retained earnings as of January 1, 2018. There was no material effect to our revenues, results of operations or cash flows for the three months ending March 31,

2018 from the adoption of Topic 606 and we do not expect the new revenue standard to have a material effect on our results of operations in future periods. See Note 3 for additional disclosures required by Topic 606.

Leases — In February 2016, the FASB issued Accounting Standards Update 2016-02, “Leases.” The comprehensive new lease standard will supersede all existing lease guidance. The standard requires that a lessee should recognize a right-to-use asset and a lease liability for substantially all operating leases based on the present value of the minimum rental payments. Entities may make an accounting policy election to not recognize lease assets and liabilities for leases with a term of 12 months or less. For lessors, the accounting for leases remains substantially unchanged. The standard also requires expanded disclosures surrounding leases. The standard is effective for fiscal periods beginning after December 15, 2018, including interim periods within that reporting period and requires modified retrospective adoption with early adoption permitted. In January 2018, the FASB issued Accounting Standards Update 2018-01, “Land Easement Practical Expedient for Transition to Topic 842” that allows an entity to not evaluate existing and expired land easements that were not previously accounted for as leases upon adoption of Accounting Standards Update 2016-02. Any land easements entered into prospectively or modified after adoption should be evaluated to assess whether they meet the definition of a lease. We expect to adopt the standard in the first quarter of 2019. We have completed our initial evaluation of the standard and believe that the key changes that will affect us relate to our accounting for operating leases that are currently off-balance sheet and tolling contracts which we currently account for as operating leases. Additionally, we are evaluating the potential effects of the removal of the real estate guidance currently applicable to lessors. We are also considering electing the practical expedients in our implementation of the standard; however, this may change as we complete our assessment of the standard.

Statement of Cash Flows — In August 2016, the FASB issued Accounting Standards Update 2016-15, “Classification of Certain Cash Receipts and Cash Payments.” The standard addresses several matters of diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows including the presentation of debt extinguishment costs and distributions received from equity method investments. The standard is effective for fiscal years beginning after December 15, 2017, and requires retrospective adoption. We adopted Accounting Standards Update 2016-15 in the first quarter of 2018 which resulted in the reclassification of cash payments for debt extinguishment costs from a cash outflow for operating activities to a cash outflow for financing activities. The adoption of this standard did not have a material effect on our financial condition, results of operations or cash flows.

Income Taxes — In October 2016, the FASB issued Accounting Standards Update 2016-16, “Intra-Entity Transfers of Assets Other than Inventory.” The standard requires an entity to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs which differs from the current requirement that prohibits the recognition of current and deferred income taxes for an intra-entity asset transfer until the asset has been sold to an outside party. The standard is effective for fiscal years beginning after December 15, 2017, including interim periods within that reporting period and requires modified retrospective adoption. We adopted Accounting Standards Update 2016-16 in the first quarter of 2018 which did not have a material effect on our financial condition, results of operations or cash flows as a result of adopting this standard.

Restricted Cash — In November 2016, the FASB issued Accounting Standards Update 2016-18, “Restricted Cash.” The standard requires restricted cash to be included with cash and cash equivalents when reconciling the beginning and ending amounts in the statement of cash flows and also requires disclosures regarding the nature of restrictions on cash, cash equivalents and restricted cash. The standard is effective for fiscal years beginning after December 15, 2017, including interim periods and requires retrospective adoption with early adoption permitted. We adopted Accounting Standards Update 2016-18 in the first quarter of 2018 which did not have a material effect on our financial condition, results of operations or cash flows as a result of adopting this standard.

Derivatives and Hedging — In August 2017, the FASB issued Accounting Standards Update 2017-12, “Targeted Improvements to Accounting for Hedging Activities.” The standard better aligns an entity’s hedging activities and financial reporting for hedging relationships through changes to both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results in the financial statements. The standard will prospectively make hedge accounting easier to apply to hedging activities and also enhances disclosure requirements for how hedge transactions are reflected in the financial statements when hedge accounting is elected. The standard is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. We are currently assessing the future effect this standard may have on our financial condition, results of operations or cash flows.


2.	Merger

Merger — On August 17, 2017, we entered into the Merger Agreement with Volt Parent, LP (“Volt Parent”) and Volt Merger Sub, Inc. (“Merger Sub”), a wholly-owned subsidiary of Volt Parent, pursuant to which Merger Sub merged with and into

Calpine, with Calpine surviving the Merger as a subsidiary of Volt Parent. On March 8, 2018, we completed the Merger contemplated in the Merger Agreement.

At the effective time of the Merger, each share of Calpine common stock outstanding as of immediately prior to the effective time of the Merger (excluding certain shares as described in the Merger Agreement) ceased to be outstanding and was converted into the right to receive $15.25 per share in cash or approximately $5.6 billion in total. See Note 10 for a discussion of the treatment of the outstanding share-based awards to employees at the effective time of the Merger.

During the three months ended March 31, 2018 and 2017 , we recorded approximately $ 31 million and nil , respectively, in Merger-related costs which was recorded in other operating expenses on our Consolidated Condensed Statements of Operations and primarily related to legal, investment banking and other professional fees associated with the Merger. We elected not to apply pushdown accounting in connection with the consummation of the Merger.


3.	Revenue from Contracts with Customers

Disaggregation of Revenues with Customers

The following table represents a disaggregation of our revenue for the three months ended March 31, 2018 by reportable segment (in millions). See Note 13 for a description of our segments.



	Wholesale
	West		Texas		East		Retail		Elimination			Total
Third Party:
Energy & other products	$	199	$	304	$	132	$	443	$	—		$	1,078
Capacity	19		26		149		—		—			194
Revenues relating to physical or executory contracts – third party	$	218	$	330	$	281	$	443	$	—		$	1,272

Affiliate ⁽¹⁾ :	$	8	$	4	$	21	$	1	$	(34	)	$	—

Revenues relating to leases and derivative instruments ⁽²⁾												$	737
Total operating revenues												$	2,009

___________


(1)	Affiliate energy, other and capacity revenues reflect revenues on transactions between wholesale and retail affiliates excluding affiliate activity related to leases and derivative instruments. All such activity supports retail supply needs from the wholesale business and/or allows for collateral margin netting efficiencies at Calpine Corporation.

(2)

Revenues relating to contracts accounted for as leases and derivatives include energy and capacity revenues relating to PPAs that we are required to account for as operating leases and physical and financial commodity derivative contracts, primarily relating to power, natural gas and environmental products. For revenue related to derivative instruments, includes revenue recorded in Commodity revenue and mark-to-market gain (loss) on our Consolidated Condensed Statement of Operations.

For contracts that do not meet the requirements of a lease and either do not meet the definition of a derivative instrument or are exempt from derivative accounting, we have applied the new revenue recognition guidance beginning in the first quarter of 2018. Under the new guidance, the majority of our operating revenue continues to be recognized as the underlying commodity or service is delivered to our customers.

Energy and Other Products

Variable payments for power and steam that are based on generation, including retail sales of power, are recognized over time as the underlying commodity is generated and control is transferred to our customer upon transmission and delivery. Ancillary service revenues are also included within energy-related revenues and are recognized over time as the service is provided.

For our power, steam and ancillary service contracts, we have elected the practical expedient that allows us to recognize revenue in the amount to which we have the right to invoice to the extent we determine that we have a right to consideration in an amount that corresponds directly with the value provided to date. To the extent this practical expedient cannot be utilized, we

will recognize revenue over time based on the quantity of the commodity delivered to the customer for power and steam sales and over time as the service is provided for our ancillary service sales.

Energy and other revenues also includes revenues generated from the sale of natural gas and environmental products, including RECs and are recognized at either a point in time or over time when control of the commodity has transferred. Revenues from the sale of RECs are primarily related to credits that are generated upon generation of renewable power from our Geysers Assets and are recognized over a period of time similar to the timing of the related energy sale. Revenues from sales of RECs or other environmental products that are not generated from our assets are recognized once all certifications have been completed and the credits are delivered to the customer at a point in time. Revenues from our natural gas sales are recognized at a point in time when delivery of the natural gas is provided. Revenues from natural gas and emission product sales are generally at the contracted transaction price, which may be fixed or index-based.

Capacity

Capacity revenues include fixed and variable capacity payments, which are based on generation volumes and include capacity payments received from RTO and ISO capacity auctions. For these contracts, we have elected the practical expedient that allows us to recognize revenue in the amount to which we have the right to invoice to the extent we determine that we have a right to consideration in an amount that corresponds directly with the value provided to date. To the extent this practical expedient cannot be utilized, we will recognize revenue over time as the service is being provided to the customer.

Performance Obligations and Contract Balances

Certain of our contracts have multiple performance obligations. The revenues associated with each individual performance obligation is based on the relative stand-alone sales price of each good or service or, when not available, is based on a cost incurred plus margin approach. For a significant portion of our contracts with multiple performance obligations, management has applied the practical expedient that results in recognition of revenue commensurate with the invoiced amount and no allocation is required as all performance obligations are transferred over the same period of time.

Certain of our contracts include volumetric optionality based on the customer’s needs. The transaction price within these contracts are based on a stand-alone sale price of the good or service being provided and revenue is recognized based on the customer’s usage. On a monthly basis, revenue is recognized based on estimated or actual usage by the customer at the transaction price. To the extent estimated usage is used in the recognition of revenue, revenues are adjusted for actual usage once known; however, this adjustment is not material to the revenues recognized. Generally, we have applied the practical expedient that allows us to recognize revenue based on the invoiced amount for these contracts.

Changes in estimates for our contracts are not material and revisions to estimates are recognized when the amounts can be reasonably estimated. Unbilled retail sales are based upon estimates of customer usage since the date of the last meter reading provided by the ISOs or electric distribution companies by applying the estimated revenue per KWh by customer class to the estimated number of KWhs delivered but not yet billed. Estimated amounts are adjusted when actual usage is known and billed. During the three months ended March 31, 2018 , there were no significant changes to revenue amounts recognized in prior periods as a result of a change in estimates. Sales and other taxes we collect concurrent with revenue-producing activities are excluded from our operating revenues.

Billing requirements for our wholesale customers generally result in billing customers on a monthly basis in the month following the delivery of the good or service. Once billed, payment is generally required within 20 days resulting in payment for the delivery of the good or service in the month following delivery of the good or service. Billing requirements for our retail customers are generally once every 30 days and may result in billed amounts relating to our retail customers extending up to 60 days. Based on the terms of our agreements, payment is generally received at or shortly after delivery of the good or service.

Changes in accounts receivable relating to our customers is primarily due to the timing difference between payment and when the good or service is provided. During the three months ended March 31, 2018 , there were no significant changes in accounts receivable other than normal billing and collection transactions and there were no material credit or impairment losses recognized relating to accounts receivable balances associated with contracts with customers.

When we receive consideration from a customer prior to transferring goods or services to the customer under the terms of a contract, we record deferred revenue, which represents a contract liability. Such deferred revenue typically results from consideration received prior to the transfer of goods and services relating to our capacity contracts and the sale of RECs that are not generated from our power plants. Based on the nature of these contracts and the timing between when consideration is received and delivery of the good or service is provided, these contracts do not contain any material financing elements.

At March 31, 2018 and December 31, 2017 , deferred revenue balances relating to contracts with our customers were included in other current liabilities on our Consolidated Condensed Balance Sheets. We classify deferred revenue as current or long-term based on the timing of when we expect to recognize revenue. The balances outstanding at both March 31, 2018 and December 31, 2017 were not material. The revenue recognized during the three months ended March 31, 2018 , relating to the deferred revenue balance at the beginning of the period was immaterial and resulted from our performance under the customer contracts. The change in deferred revenues during the period ended March 31, 2018 was primarily due to the timing difference of when consideration was received and when the related good or service was transferred.

Contract Costs

For certain retail contracts, we incur third party incremental broker costs that are capitalized on our Consolidated Condensed Balance Sheets. Capitalized contract costs are amortized on a straight line basis over the term of the underlying sales contract to the extent the term extends beyond one year. Contract costs associated with sales contracts that are less than one year are expensed as incurred under a practical expedient.

At both March 31, 2018 and December 31, 2017 , the capitalized contract cost balance was not material. There were no impairment losses or changes in amortization during the three months ended March 31, 2018 and amortization of contract costs during the period ending March 31, 2018 was immaterial.

Performance Obligations not yet Satisfied

As of March 31, 2018 , we have entered into certain contracts with customers under which we have not yet completed our performance obligations. This includes agreements for which we are providing power and/or capacity from our generating facilities for an aggregate transaction price of approximately $200 million based on current market conditions. We expect to recognize such amounts as revenue through 2029 as we transfer control of the commodities to our customers. These contracts do not include contracts where we have elected the practical expedient that allows us to recognize revenue in the amount to which we have the right to invoice to the extent we determine that we have a right to consideration in an amount that corresponds directly with the value provided to date.


4.	Variable Interest Entities and Unconsolidated Investments

We consolidate all of our VIEs where we have determined that we are the primary beneficiary. There were no changes to our determination of whether we are the primary beneficiary of our VIEs for the three months ended March 31, 2018 . See Note 6 in our 2017 Form 10-K for further information regarding our VIEs.

VIE Disclosures

Our consolidated VIEs include natural gas-fired power plants with an aggregate capacity of 7,880 MW and 7,880 MW at March 31, 2018 and December 31, 2017 , respectively. For these VIEs, we may provide other operational and administrative support through various affiliate contractual arrangements among the VIEs, Calpine Corporation and its other wholly-owned subsidiaries whereby we support the VIE through the reimbursement of costs and/or the purchase and sale of energy. Other than amounts contractually required, we provided support to these VIEs in the form of cash and other contributions of nil during each of the three months ended March 31, 2018 and 2017 , respectively.

OMEC — OMEC has a ten-year tolling agreement with SDG&E which commenced on October 3, 2009. Under a ground lease agreement, OMEC holds a put option to sell the Otay Mesa Energy Center for $280 million to SDG&E, which is exercisable through April 2019 and SDG&E holds a call option to purchase the Otay Mesa Energy Center for $377 million , which is exercisable through October 2018. If either option is exercised, the sale would occur upon the conclusion of the tolling agreement in October 2019. We have concluded that we are the primary beneficiary of OMEC as we believe the activity that has the most effect on the financial performance of OMEC is operations and maintenance which is controlled by us. As a result, we consolidate OMEC.

Unconsolidated VIEs and Investments in Unconsolidated Subsidiaries

We have a 50% partnership interest in Greenfield LP and in Whitby. Greenfield LP and Whitby are VIEs; however, we do not have the power to direct the most significant activities of these entities and therefore do not consolidate them. Greenfield LP is a limited partnership between certain subsidiaries of ours and of Mitsui & Co., Ltd., which operates the Greenfield Energy Centre, a 1,038 MW natural gas-fired, combined-cycle power plant located in Ontario, Canada. We and Mitsui & Co., Ltd. each hold a 50% interest in Greenfield LP. Whitby is a limited partnership between certain of our subsidiaries and Atlantic Packaging Ltd., which operates the Whitby facility, a 50 MW natural gas-fired, simple-cycle cogeneration power plant located in Ontario, Canada. We and Atlantic Packaging Ltd. each hold a 50% partnership interest in Whitby.

In December 2016, we acquired Calpine Receivables, a bankruptcy remote entity created for the special purpose of purchasing trade accounts receivable from Calpine Solutions under the Accounts Receivable Sales Program. Calpine Receivables is a VIE. We have determined that we do not have the power to direct the activities of the VIE that most significantly affect the VIE’s economic performance nor the obligation to absorb losses or receive benefits from the VIE. Accordingly, we have determined that we are not the primary beneficiary of Calpine Receivables because we do not have the power to affect its financial performance as the unaffiliated financial institutions that purchase the receivables from Calpine Receivables control the selection criteria of the receivables sold and appoint the servicer of the receivables which controls management of default. Thus, we do not consolidate Calpine Receivables in our Consolidated Condensed Financial Statements and use the equity method of accounting to record our net interest in Calpine Receivables.

We account for these entities under the equity method of accounting and include our net equity interest in investments in unconsolidated subsidiaries on our Consolidated Condensed Balance Sheets. At March 31, 2018 and December 31, 2017 , our equity method investments included on our Consolidated Condensed Balance Sheets were comprised of the following (in millions):



	Ownership Interest as of March 31, 2018	March 31, 2018		December 31, 2017
Greenfield LP	50%	$	95	$	92
Whitby	50%	7		6
Calpine Receivables	100%	8		8
Total investments in unconsolidated subsidiaries		$	110	$	106

Our risk of loss related to our investments in Greenfield LP, Whitby and Calpine Receivables is limited to our investment balance. Holders of the debt of our unconsolidated investments do not have recourse to Calpine Corporation and its other subsidiaries; therefore, the debt of our unconsolidated investments is not reflected on our Consolidated Condensed Balance Sheets. At March 31, 2018 and December 31, 2017 , Greenfield LP’s debt was approximately $244 million and $ 256 million , respectively, and based on our pro rata share of our investment in Greenfield LP, our share of such debt would be approximately $122 million and $ 128 million at March 31, 2018 and December 31, 2017 , respectively.

Our equity interest in the net income from our investments in unconsolidated subsidiaries for the three months ended March 31, 2018 and 2017 , is recorded in (income) from unconsolidated subsidiaries. We did not have material income or receive any distributions from our investment in Calpine Receivables for the three months ended March 31, 2018 and 2017 . The following table sets forth details of our (income) from unconsolidated subsidiaries for the periods indicated (in millions):



	Three Months Ended March 31,
	2018			2017
Greenfield LP	$	(2	)	$	(2	)
Whitby	(4		)	(2		)
Total	$	(6	)	$	(4	)

Distributions from Greenfield LP were nil during each of the three months ended March 31, 2018 and 2017 . Distributions from Whitby were $3 million and $13 million during the three months ended March 31, 2018 and 2017 , respectively.


5.	Debt

Our debt at March 31, 2018 and December 31, 2017 , was as follows (in millions):



	March 31, 2018		December 31, 2017
Senior Unsecured Notes	$	3,419	$	3,417
First Lien Term Loans	2,990		2,995
First Lien Notes	2,396		2,396
Project financing, notes payable and other	1,461		1,498
CCFC Term Loan	980		984
Capital lease obligations	111		115
Corporate Revolving Facility	325		—
Subtotal	11,682		11,405
Less: Current maturities	227		225
Total long-term debt	$	11,455	$	11,180

Our effective interest rate on our consolidated debt, excluding the effects of capitalized interest and mark-to-market gains (losses) on interest rate hedging instruments, increased to 5.6% for the three months ended March 31, 2018 , from 5.4% for the same period in 2017.

Senior Unsecured Notes

The amounts outstanding under our Senior Unsecured Notes are summarized in the table below (in millions):



	March 31, 2018		December 31, 2017
2023 Senior Unsecured Notes	$	1,240	$	1,239
2024 Senior Unsecured Notes	644		644
2025 Senior Unsecured Notes	1,535		1,534
Total Senior Unsecured Notes	$	3,419	$	3,417

First Lien Term Loans

The amounts outstanding under our senior secured First Lien Term Loans are summarized in the table below (in millions):



	March 31, 2018		December 31, 2017
2019 First Lien Term Loan	$	389	$	389
2023 First Lien Term Loans	1,063		1,064
2024 First Lien Term Loan	1,538		1,542
Total First Lien Term Loans	$	2,990	$	2,995

First Lien Notes

The amounts outstanding under our senior secured First Lien Notes are summarized in the table below (in millions):



	March 31, 2018		December 31, 2017
2022 First Lien Notes	$	742	$	741
2024 First Lien Notes	485		485
2026 First Lien Notes	1,169		1,170
Total First Lien Notes	$	2,396	$	2,396

Corporate Revolving Facility and Other Letter of Credit Facilities

The table below represents amounts issued under our letter of credit facilities at March 31, 2018 and December 31, 2017 (in millions):



	March 31, 2018		December 31, 2017
Corporate Revolving Facility ⁽¹⁾	$	953	$	629
CDHI	235		244
Various project financing facilities	181		196
Total	$	1,369	$	1,069

____________


(1)	The Corporate Revolving Facility represents our primary revolving facility.

On September 15, 2017, we amended our Corporate Revolving Facility to, among other things, provide that the Merger does not constitute a “Change of Control” thereunder, effective upon consummation of the Merger. On October 20, 2017, we further amended our Corporate Revolving Facility to extend the maturity of most revolving commitments (totaling $1.3 billion in the aggregate) to March 8, 2023, and reduce the capacity thereunder from $1.79 billion to $1.47 billion . Both amendments to the Corporate Revolving Facility became effective upon consummation of the Merger on March 8, 2018. See Note 2 for further information related to the Merger. On March 8, 2018, we further amended our Corporate Revolving Facility to increase the letter of credit facility from $1.15 billion to $1.3 billion and increased the Incremental Revolving Facilities (as defined in the credit agreement) amount to $500 million .

Short Term Credit Facility — On April 11, 2018, we entered into a credit agreement which allows us access to $300 million in aggregate available borrowings until August 31, 2018. Any cash draws from the Short Term Credit Facility are unsecured but will be converted to first lien senior secured term loans if not repaid within 21 days of the initial draw date. Any borrowings converted into first lien senior secured loans have a 364 -day maturity from the initial draw date and will contain substantially similar interest rates, covenants, qualifications, exceptions and limitations as our 2019 First Lien Term Loan.

Fair Value of Debt

We record our debt instruments based on contractual terms, net of any applicable premium or discount and debt issuance costs. The following table details the fair values and carrying values of our debt instruments at March 31, 2018 and December 31, 2017 (in millions):



	March 31, 2018				December 31, 2017
	Fair Value		Carrying Value		Fair Value		Carrying Value
Senior Unsecured Notes	$	3,203	$	3,419	$	3,294	$	3,417
First Lien Term Loans	3,047		2,990		3,043		2,995
First Lien Notes	2,398		2,396		2,437		2,396
Project financing, notes payable and other ⁽¹⁾	1,397		1,372		1,439		1,409
CCFC Term Loan	998		980		1,000		984
Corporate Revolving Facility	325		325		—		—
Total	$	11,368	$	11,482	$	11,213	$	11,201

____________


(1)	Excludes a lease that is accounted for as a failed sale-leaseback transaction under U.S. GAAP.

Our Senior Unsecured Notes, First Lien Term Loans, First Lien Notes, CCFC Term Loan and Corporate Revolving Facility are categorized as level 2 within the fair value hierarchy. Our project financing, notes payable and other debt instruments are categorized as level 3 within the fair value hierarchy. We do not have any debt instruments with fair value measurements categorized as level 1 within the fair value hierarchy.


6.	Assets and Liabilities with Recurring Fair Value Measurements

Cash Equivalents — Highly liquid investments which meet the definition of cash equivalents, primarily investments in money market accounts and other interest-bearing accounts, are included in both our cash and cash equivalents and our restricted

cash on our Consolidated Condensed Balance Sheets. Certain of our money market accounts invest in U.S. Treasury securities or other obligations issued or guaranteed by the U.S. Government, its agencies or instrumentalities. We do not have any cash equivalents invested in institutional prime money market funds which require use of a floating net asset value and are subject to liquidity fees and redemption restrictions. Certain of our cash equivalents are classified within level 1 of the fair value hierarchy.

Derivatives — The primary factors affecting the fair value of our derivative instruments at any point in time are the volume of open derivative positions (MMBtu, MWh and $ notional amounts); changing commodity market prices, primarily for power and natural gas; our credit standing and that of our counterparties and customers for energy commodity derivatives; and prevailing interest rates for our interest rate hedging instruments. Prices for power and natural gas and interest rates are volatile, which can result in material changes in the fair value measurements reported in our financial statements in the future.

We utilize market data, such as pricing services and broker quotes, and assumptions that we believe market participants would use in pricing our assets or liabilities including assumptions about the risks inherent to the inputs in the valuation technique. These inputs can be either readily observable, market corroborated or generally unobservable. The market data obtained from broker pricing services is evaluated to determine the nature of the quotes obtained and, where accepted as a reliable quote, used to validate our assessment of fair value. We use other qualitative assessments to determine the level of activity in any given market. We primarily apply the market approach and income approach for recurring fair value measurements and utilize what we believe to be the best available information. We utilize valuation techniques that seek to maximize the use of observable inputs and minimize the use of unobservable inputs. We classify fair value balances based on the observability of those inputs.

The fair value of our derivatives includes consideration of our credit standing, the credit standing of our counterparties and customers and the effect of credit enhancements, if any. We have also recorded credit reserves in the determination of fair value based on our expectation of how market participants would determine fair value. Such valuation adjustments are generally based on market evidence, if available, or our best estimate.

Our level 1 fair value derivative instruments primarily consist of power and natural gas swaps, futures and options traded on an exchange.

Our level 2 fair value derivative instruments primarily consist of interest rate hedging instruments and OTC power and natural gas forwards for which market-based pricing inputs in the principal or most advantageous market are representative of executable prices for market participants. These inputs are observable at commonly quoted intervals for substantially the full term of the instruments. In certain instances, our level 2 derivative instruments may utilize models to measure fair value. These models are industry-standard models, including the Black-Scholes option-pricing model, that incorporate various assumptions, including quoted interest rates, correlation, volatility, as well as other relevant economic measures. Substantially all of these assumptions are observable in the marketplace throughout the full term of the instrument, can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace.

Our level 3 fair value derivative instruments may consist of OTC power and natural gas forwards and options where pricing inputs are unobservable, as well as other complex and structured transactions primarily for the sale and purchase of power and natural gas to both wholesale counterparties and retail customers. Complex or structured transactions are tailored to our customers’ needs and can introduce the need for internally-developed model inputs which might not be observable in or corroborated by the market. When such inputs have a significant effect on the measurement of fair value, the instrument is categorized in level 3. Our valuation models may incorporate historical correlation information and extrapolate available broker and other information to future periods.

Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement at period end. Our assessment of the significance of a particular input to the fair value measurement requires judgment and may affect our estimate of the fair value of our assets and liabilities and their placement within the fair value hierarchy levels. The following tables present our financial assets and liabilities that were accounted for at fair value on a recurring basis as of March 31, 2018 and December 31, 2017 , by level within the fair value hierarchy:



	Assets and Liabilities with Recurring Fair Value Measures as of March 31, 2018
	Level 1			Level 2			Level 3			Total
	(in millions)
Assets:
Cash equivalents ⁽¹⁾	$	131		$	—		$	—		$	131
Commodity instruments:
Commodity exchange traded derivatives contracts	629			—			—			629
Commodity forward contracts ⁽²⁾	—			800			263			1,063
Interest rate hedging instruments	—			68			—			68
Effect of netting and allocation of collateral ⁽³⁾⁽⁴⁾	(629		)	(678		)	(28		)	(1,335		)
Total assets	$	131		$	190		$	235		$	556
Liabilities:
Commodity instruments:
Commodity exchange traded derivatives contracts	$	733		$	—		$	—		$	733
Commodity forward contracts ⁽²⁾	—			1,184			132			1,316
Interest rate hedging instruments	—			21			—			21
Effect of netting and allocation of collateral ⁽³⁾⁽⁴⁾	(733		)	(795		)	(26		)	(1,554		)
Total liabilities	$	—		$	410		$	106		$	516



	Assets and Liabilities with Recurring Fair Value Measures as of December 31, 2017
	Level 1			Level 2			Level 3			Total
	(in millions)
Assets:
Cash equivalents ⁽¹⁾	$	131		$	—		$	—		$	131
Commodity instruments:
Commodity exchange traded derivatives contracts	746			—			—			746
Commodity forward contracts ⁽²⁾	—			327			265			592
Interest rate hedging instruments	—			29			—			29
Effect of netting and allocation of collateral ⁽³⁾⁽⁴⁾	(746		)	(206		)	(23		)	(975		)
Total assets	$	131		$	150		$	242		$	523
Liabilities:
Commodity instruments:
Commodity exchange traded derivatives contracts	$	790		$	—		$	—		$	790
Commodity forward contracts ⁽²⁾	—			461			68			529
Interest rate hedging instruments	—			34			—			34
Effect of netting and allocation of collateral ⁽³⁾⁽⁴⁾	(790		)	(224		)	(23		)	(1,037		)
Total liabilities	$	—		$	271		$	45		$	316

___________


(1)	At March 31, 2018 and December 31, 2017 , we had cash equivalents of $20 million and $21 million included in cash and cash equivalents and $111 million and $110 million included in restricted cash, respectively.


(2)	Includes OTC swaps and options and retail contracts.

(3)

We offset fair value amounts recognized for derivative instruments executed with the same counterparty under a master netting arrangement for financial statement presentation; therefore, amounts recognized for the right to reclaim, or the obligation to return, cash collateral are presented net with the corresponding derivative instrument fair values. See Note 7 for further discussion of our derivative instruments subject to master netting arrangements.

(4)

Cash collateral posted with (received from) counterparties allocated to level 1, level 2 and level 3 derivative instruments totaled $104 million , $117 million and $(2) million , respectively, at March 31, 2018 . Cash collateral posted with (received from) counterparties allocated to level 1, level 2 and level 3 derivative instruments totaled $44 million , $18 million and nil , respectively, at December 31, 2017 .

At March 31, 2018 and December 31, 2017 , the derivative instruments classified as level 3 primarily included commodity contracts, which are classified as level 3 because the contract terms relate to a delivery location or tenor for which observable market rate information is not available. The fair value of the net derivative position classified as level 3 is predominantly driven by market commodity prices. The following table presents quantitative information for the unobservable inputs used in our most significant level 3 fair value measurements at March 31, 2018 and December 31, 2017 :



	Quantitative Information about Level 3 Fair Value Measurements
	March 31, 2018
	Fair Value, Net Asset			Significant Unobservable
	(Liability)		Valuation Technique	Input	Range
	(in millions)
Power Contracts	$	94	Discounted cash flow	Market price (per MWh)	$	2.58		—	$215.31	/MWh
Power Congestion Products	$	4	Discounted cash flow	Market price (per MWh)	$	(7.52	)	—	$9.40	/MWh
Natural Gas Contracts	$	11	Discounted cash flow	Market price (per MMBtu)	$	0.95		—	$10.05	/MMBtu

	December 31, 2017
	Fair Value, Net Asset			Significant Unobservable
	(Liability)		Valuation Technique	Input	Range
	(in millions)
Power Contracts	$	149	Discounted cash flow	Market price (per MWh)	$	4.13		—	$119.20	/MWh
Power Congestion Products	$	11	Discounted cash flow	Market price (per MWh)	$	(10.54	)	—	$9.13	/MWh
Natural Gas Contracts	$	34	Discounted cash flow	Market price (per MMBtu)	$	1.62		—	$13.67	/MMBtu

The following table sets forth a reconciliation of changes in the fair value of our net derivative assets (liabilities) classified as level 3 in the fair value hierarchy for the periods indicated (in millions):



	Three Months Ended March 31,
	2018			2017
Balance, beginning of period	$	197		$	416
Realized and mark-to-market gains (losses):
Included in net income (loss):
Included in operating revenues ⁽¹⁾	(57		)	113
Included in fuel and purchased energy expense ⁽²⁾	(2		)	13
Change in collateral	(2		)	(9		)
Purchases and settlements:
Purchases	4			—
Settlements	(14		)	(26		)
Transfers in and/or out of level 3 ⁽³⁾ :
Transfers into level 3 ⁽⁴⁾	6			(7		)
Transfers out of level 3 ⁽⁵⁾	(3		)	(150		)
Balance, end of period	$	129		$	350
Change in unrealized gains (losses) relating to instruments still held at end of period	$	(59	)	$	126

___________


(1)	For power contracts and other power-related products, included on our Consolidated Condensed Statements of Operations.


(2)	For natural gas and power contracts, swaps and options, included on our Consolidated Condensed Statements of Operations.


(3)	We transfer amounts among levels of the fair value hierarchy as of the end of each period. There were no transfers into or out of level 1 for each of the three months ended March 31, 2018 and 2017 .


(4)	We had $6 million in gains and $(7) million in losses transferred out of level 2 into level 3 for the three months ended March 31, 2018 and 2017 , respectively, due to changes in market liquidity in various power markets.


(5)	We had $3 million and $150 million in gains transferred out of level 3 into level 2 for the three months ended March 31, 2018 and 2017 , respectively, due to changes in market liquidity in various power markets.


7.	Derivative Instruments

Types of Derivative Instruments and Volumetric Information

Commodity Instruments — We are exposed to changes in prices for the purchase and sale of power, natural gas, fuel oil, environmental products and other energy commodities. We use derivatives, which include physical commodity contracts and financial commodity instruments such as OTC and exchange traded swaps, futures, options, forward agreements and instruments that settle on the power price to natural gas price relationships (Heat Rate swaps and options) or instruments that settle on power or natural gas price relationships between delivery points for the purchase and sale of power and natural gas to attempt to maximize the risk-adjusted returns by economically hedging a portion of the commodity price risk associated with our assets. By entering into these transactions, we are able to economically hedge a portion of our Spark Spread at estimated generation and prevailing price levels.

We also engage in limited trading activities related to our commodity derivative portfolio as authorized by our Board of Directors and monitored by our Chief Risk Officer and Risk Management Committee of senior management. These transactions are executed primarily for the purpose of providing improved price and price volatility discovery, greater market access, and profiting from our market knowledge, all of which benefit our asset hedging activities. Our trading results were not material for each of the three months ended March 31, 2018 and 2017 .

Interest Rate Hedging Instruments — A portion of our debt is indexed to base rates, primarily LIBOR. We have historically used interest rate hedging instruments to adjust the mix between fixed and variable rate debt to hedge our interest rate risk for potential adverse changes in interest rates. As of March 31, 2018 , the maximum length of time over which we were hedging using interest rate hedging instruments designated as cash flow hedges was 8 years.

As of March 31, 2018 and December 31, 2017 , the net forward notional buy (sell) position of our outstanding commodity derivative instruments that did not qualify or were not designated under the normal purchase normal sale exemption and our interest rate hedging instruments were as follows (in millions):



Derivative Instruments	Notional Amounts
Derivative Instruments	March 31, 2018			December 31, 2017
Power (MWh)	(147		)	(119		)
Natural gas (MMBtu)	845			405
Environmental credits (Tonnes)	13			12
Interest rate hedging instruments	$	4,600		$	4,600

Certain of our derivative instruments contain credit risk-related contingent provisions that require us to maintain collateral balances consistent with our credit ratings. If our credit rating were to be downgraded, it could require us to post additional collateral or could potentially allow our counterparty to request immediate, full settlement on certain derivative instruments in liability positions. The aggregate fair value of our derivative liabilities with credit risk-related contingent provisions as of March 31, 2018 , was $525 million for which we have posted collateral of $439 million by posting margin deposits or granting additional first priority liens on the assets currently subject to first priority liens under our First Lien Notes, First Lien Term Loans and Corporate Revolving Facility. However, if our credit rating were downgraded by one notch from its current level, we estimate that additional collateral of $11 million related to our derivative liabilities would be required and that no counterparty could request immediate, full settlement.

Accounting for Derivative Instruments

We recognize all derivative instruments that qualify for derivative accounting treatment as either assets or liabilities and measure those instruments at fair value unless they qualify for, and we elect, the normal purchase normal sale exemption. For transactions in which we elect the normal purchase normal sale exemption, gains and losses are not reflected on our Consolidated Condensed Statements of Operations until the period of delivery. Revenues and expenses derived from instruments that qualified for hedge accounting or represent an economic hedge are recorded in the same financial statement line item as the item being hedged. Hedge accounting requires us to formally document, designate and assess the effectiveness of transactions that receive hedge accounting. We present the cash flows from our derivatives in the same category as the item being hedged (or economically hedged) within operating activities on our Consolidated Condensed Statements of Cash Flows unless they contain an other-than-insignificant financing element in which case their cash flows are classified within financing activities.

Cash Flow Hedges — We currently apply hedge accounting to our interest rate hedging instruments. We report the effective portion of the mark-to-market gain or loss on our interest rate hedging instruments designated and qualifying as a cash flow hedging instrument as a component of OCI and reclassify such gains and losses into earnings in the same period during which the hedged forecasted transaction affects earnings. Gains and losses due to ineffectiveness on interest rate hedging instruments are recognized currently in earnings as a component of interest expense. If it is determined that the forecasted transaction is no longer probable of occurring, then hedge accounting will be discontinued prospectively and future changes in fair value are recorded in earnings. If the hedging instrument is terminated or de-designated prior to the occurrence of the hedged forecasted transaction, the net accumulated gain or loss associated with the changes in fair value of the hedge instrument remains deferred in AOCI until such time as the forecasted transaction affects earnings or until it is determined that the forecasted transaction is probable of not occurring.

Derivatives Not Designated as Hedging Instruments — We enter into power, natural gas, interest rate, environmental product and fuel oil transactions that primarily act as economic hedges to our asset and interest rate portfolio, but either do not qualify as hedges under the hedge accounting guidelines or qualify under the hedge accounting guidelines and the hedge accounting designation has not been elected. Changes in fair value of commodity derivatives not designated as hedging instruments are recognized currently in earnings and are separately stated on our Consolidated Condensed Statements of Operations in mark-to-market gain/loss as a component of operating revenues (for physical and financial power and Heat Rate and commodity option activity) and fuel and purchased energy expense (for physical and financial natural gas, power, environmental product and fuel oil activity). Changes in fair value of interest rate derivatives not designated as hedging instruments are recognized currently in earnings as interest expense.

Derivatives Included on Our Consolidated Condensed Balance Sheets

During the third quarter of 2017, we elected to begin offsetting fair value amounts associated with our derivative instruments and related cash collateral and margin deposits on our Consolidated Condensed Balance Sheets that are executed with

the same counterparty under master netting arrangements. Our netting arrangements include a right to set off or net together purchases and sales of similar products in the margining or settlement process. In some instances, we have also negotiated cross commodity netting rights which allow for the net presentation of activity with a given counterparty regardless of product purchased or sold. We also post cash collateral in support of our derivative instruments which may also be subject to a master netting arrangement with the same counterparty.

The following tables present the fair values of our derivative instruments and our net exposure after offsetting amounts subject to a master netting arrangement with the same counterparty to our derivative instruments recorded on our Consolidated Condensed Balance Sheets by location and hedge type at March 31, 2018 and December 31, 2017 (in millions):



	March 31, 2018
	Gross Amounts of Assets and (Liabilities)			Gross Amounts Offset on the Consolidated Condensed Balance Sheets			Net Amount Presented on the Consolidated Condensed Balance Sheets ⁽¹⁾
Derivative assets:
Commodity exchange traded derivatives contracts	$	489		$	(489	)	$	—
Commodity forward contracts	816			(643		)	173
Interest rate hedging instruments	24			—			24
Total current derivative assets ⁽²⁾	$	1,329		$	(1,132	)	$	197
Commodity exchange traded derivatives contracts	140			(140		)	—
Commodity forward contracts	247			(63		)	184
Interest rate hedging instruments	44			—			44
Total long-term derivative assets ⁽²⁾	$	431		$	(203	)	$	228
Total derivative assets	$	1,760		$	(1,335	)	$	425

Derivative (liabilities):
Commodity exchange traded derivatives contracts	$	(561	)	$	561		$	—
Commodity forward contracts	(1,039		)	714			(325		)
Interest rate hedging instruments	(13		)	—			(13		)
Total current derivative (liabilities) ⁽²⁾	$	(1,613	)	$	1,275		$	(338	)
Commodity exchange traded derivatives contracts	(172		)	172			—
Commodity forward contracts	(277		)	107			(170		)
Interest rate hedging instruments	(8		)	—			(8		)
Total long-term derivative (liabilities) ⁽²⁾	$	(457	)	$	279		$	(178	)
Total derivative liabilities	$	(2,070	)	$	1,554		$	(516	)
Net derivative assets (liabilities)	$	(310	)	$	219		$	(91	)



	December 31, 2017
	Gross Amounts of Assets and (Liabilities)			Gross Amounts Offset on the Consolidated Condensed Balance Sheets			Net Amount Presented on the Consolidated Condensed Balance Sheets ⁽¹⁾
Derivative assets:
Commodity exchange traded derivatives contracts	$	672		$	(672	)	$	—
Commodity forward contracts	361			(194		)	167
Interest rate hedging instruments	7			—			7
Total current derivative assets ⁽³⁾	$	1,040		$	(866	)	$	174
Commodity exchange traded derivatives contracts	74			(74		)	—
Commodity forward contracts	231			(32		)	199
Interest rate hedging instruments	22			(3		)	19
Total long-term derivative assets ⁽³⁾	$	327		$	(109	)	$	218
Total derivative assets	$	1,367		$	(975	)	$	392

Derivative (liabilities):
Commodity exchange traded derivatives contracts	$	(702	)	$	702		$	—
Commodity forward contracts	(389		)	209			(180		)
Interest rate hedging instruments	(17		)	—			(17		)
Total current derivative (liabilities) ⁽³⁾	$	(1,108	)	$	911		$	(197	)
Commodity exchange traded derivatives contracts	(88		)	88			—
Commodity forward contracts	(140		)	35			(105		)
Interest rate hedging instruments	(17		)	3			(14		)
Total long-term derivative (liabilities) ⁽³⁾	$	(245	)	$	126		$	(119	)
Total derivative liabilities	$	(1,353	)	$	1,037		$	(316	)
Net derivative assets (liabilities)	$	14		$	62		$	76

____________


(1)	At March 31, 2018 and December 31, 2017 , we had $206 million and $155 million of collateral under master netting arrangements that were not offset against our derivative instruments on the Consolidated Condensed Balance Sheets primarily related to initial margin requirements.


(2)	At March 31, 2018 , current and long-term derivative assets are shown net of collateral of $(21) million and $(3) million , respectively, and current and long-term derivative liabilities are shown net of collateral of $164 million and $79 million , respectively.


(3)	At December 31, 2017 , current and long-term derivative assets are shown net of collateral of $(8) million and $(2) million , respectively, and current and long-term derivative liabilities are shown net of collateral of $52 million and $20 million , respectively.



	March 31, 2018				December 31, 2017
	Fair Value of Derivative Assets		Fair Value of Derivative Liabilities		Fair Value of Derivative Assets		Fair Value of Derivative Liabilities
Derivatives designated as cash flow hedging instruments:
Interest rate hedging instruments	$	67	$	21	$	26	$	31
Total derivatives designated as cash flow hedging instruments	$	67	$	21	$	26	$	31

Derivatives not designated as hedging instruments:
Commodity instruments	$	357	$	495	$	366	$	285
Interest rate hedging instruments	1		—		—		—
Total derivatives not designated as hedging instruments	$	358	$	495	$	366	$	285
Total derivatives	$	425	$	516	$	392	$	316

Derivatives Included on Our Consolidated Condensed Statements of Operations

Changes in the fair values of our derivative instruments are reflected either in cash for option premiums paid or collected, in OCI, net of tax, for the effective portion of derivative instruments which qualify for and we have elected cash flow hedge accounting treatment, or on our Consolidated Condensed Statements of Operations as a component of mark-to-market activity within our earnings.

The following tables detail the components of our total activity for both the net realized gain (loss) and the net mark-to-market gain (loss) recognized from our derivative instruments in earnings and where these components were recorded on our Consolidated Condensed Statements of Operations for the periods indicated (in millions):



	Three Months Ended March 31,
	2018			2017
Realized gain (loss) ⁽¹⁾⁽²⁾
Commodity derivative instruments	$	(3	)	$	29
Total realized gain (loss)	$	(3	)	$	29

Mark-to-market gain (loss) ⁽³⁾
Commodity derivative instruments	$	(371	)	$	55
Interest rate hedging instruments	2			—
Total mark-to-market gain (loss)	$	(369	)	$	55
Total activity, net	$	(372	)	$	84

___________


(1)	Does not include the realized value associated with derivative instruments that settle through physical delivery.


(2)	Includes amortization of acquisition date fair value of financial derivative activity related to the acquisition of Champion Energy, Calpine Solutions and North American Power.


(3)	In addition to changes in market value on derivatives not designated as hedges, changes in mark-to-market gain (loss) also includes hedge ineffectiveness and adjustments to reflect changes in credit default risk exposure.



	Three Months Ended March 31,
	2018			2017
Realized and mark-to-market gain (loss) ⁽¹⁾
Derivatives contracts included in operating revenues ⁽²⁾⁽³⁾	$	(359	)	$	223
Derivatives contracts included in fuel and purchased energy expense ⁽²⁾⁽³⁾	(15		)	(139		)
Interest rate hedging instruments included in interest expense	2			—
Total activity, net	$	(372	)	$	84

___________


(1)	In addition to changes in market value on derivatives not designated as hedges, changes in mark-to-market gain (loss) also includes adjustments to reflect changes in credit default risk exposure and hedge ineffectiveness.


(2)	Does not include the realized value associated with derivative instruments that settle through physical delivery.


(3)	Includes amortization of acquisition date fair value of financial derivative activity related to the acquisition of Champion Energy, Calpine Solutions and North American Power.

Derivatives Included in OCI and AOCI

The following table details the effect of our net derivative instruments that qualified for hedge accounting treatment and are included in OCI and AOCI for the periods indicated (in millions):



	Three Months Ended March 31,					Three Months Ended March 31,
	Gain (Loss) Recognized in OCI (Effective Portion)					Gain (Loss) Reclassified from AOCI into Income (Effective Portion) ⁽³⁾
	2018		2017			2018			2017			Affected Line Item on the Consolidated Condensed Statements of Operations
Interest rate hedging instruments ⁽¹⁾⁽²⁾	$	54	$	(4	)	$	(6	)	$	(11	)	Interest expense
Interest rate hedging instruments ⁽¹⁾⁽²⁾	1		—			(1		)	—			Depreciation expense
Total	$	55	$	(4	)	$	(7	)	$	(11	)

____________


(1)	We did not record any material gain (loss) on hedge ineffectiveness related to our interest rate hedging instruments designated as cash flow hedges during the three months ended March 31, 2018 and 2017 .


(2)	We recorded an income tax expense of $11 million and nil for the three months ended March 31, 2018 and 2017 , respectively, in AOCI related to our cash flow hedging activities.


(3)	Cumulative cash flow hedge losses attributable to Calpine, net of tax, remaining in AOCI were $30 million and $72 million at March 31, 2018 and December 31, 2017 , respectively. Cumulative cash flow hedge losses attributable to the noncontrolling interest, net of tax, remaining in AOCI were $4 million and $6 million at March 31, 2018 and December 31, 2017 , respectively.

We estimate that pre-tax net gains of $1 million would be reclassified from AOCI into interest expense during the next 12 months as the hedged transactions settle; however, the actual amounts that will be reclassified will likely vary based on changes in interest rates. Therefore, we are unable to predict what the actual reclassification from AOCI into earnings (positive or negative) will be for the next 12 months.


8.	Use of Collateral

We use margin deposits, prepayments and letters of credit as credit support with and from our counterparties for commodity procurement and risk management activities. In addition, we have granted additional first priority liens on the assets currently subject to first priority liens under various debt agreements as collateral under certain of our power and natural gas agreements and certain of our interest rate hedging instruments in order to reduce the cash collateral and letters of credit that we would otherwise be required to provide to the counterparties under such agreements. The counterparties under such agreements share the benefits of the collateral subject to such first priority liens pro rata with the lenders under our various debt agreements.

The table below summarizes the balances outstanding under margin deposits, natural gas and power prepayments, and exposure under letters of credit and first priority liens for commodity procurement and risk management activities as of March 31, 2018 and December 31, 2017 (in millions):



	March 31, 2018		December 31, 2017
Margin deposits ⁽¹⁾	$	439	$	221
Natural gas and power prepayments	46		23
Total margin deposits and natural gas and power prepayments with our counterparties ⁽²⁾	$	485	$	244

Letters of credit issued	$	1,176	$	885
First priority liens under power and natural gas agreements	28		102
First priority liens under interest rate hedging instruments	21		31
Total letters of credit and first priority liens with our counterparties	$	1,225	$	1,018

Margin deposits posted with us by our counterparties ⁽¹⁾⁽³⁾	$	14	$	4
Letters of credit posted with us by our counterparties	31		30
Total margin deposits and letters of credit posted with us by our counterparties	$	45	$	34

___________

(1)


(2)	At March 31, 2018 and December 31, 2017 , $226 million and $64 million , respectively, were included in current and long-term derivative assets and liabilities, $250 million and $171 million , respectively, were included in margin deposits and other prepaid expense and $9 million and $9 million , respectively, were included in other assets on our Consolidated Condensed Balance Sheets.


(3)	At March 31, 2018 and December 31, 2017 , $7 million and $2 million , respectively, were included in current and long-term derivative assets and liabilities and $7 million and $2 million , respectively, were included in other current liabilities on our Consolidated Condensed Balance Sheets.

Future collateral requirements for cash, first priority liens and letters of credit may increase or decrease based on the extent of our involvement in hedging and optimization contracts, movements in commodity prices, and also based on our credit ratings and general perception of creditworthiness in our market.


9.	Income Taxes

Tax Cuts and Jobs Act (the “Act”)

On December 22, 2017, the Act was signed into law resulting in significant changes from previous tax law. Some of the more meaningful provisions which will affect us are:


•	a reduction in the U.S. federal corporate tax rate from 35% to 21% ;


•	limitation on the deduction of certain interest expense;


•	full expense deduction for certain business capital expenditures;


•	limitation on the utilization of NOLs arising after December 31, 2017; and


•	a system of taxing foreign-sourced income from multinational corporations.

Because of the complexity of the new Global Intangible Low Taxed Income (“GILTI”) rules in the Act, we are continuing to evaluate this provision and its application under U.S. GAAP and have recorded a reasonable estimate of the effect of this provision of the Act in our Consolidated Condensed Financial Statements. We have not made a policy decision regarding whether to record deferred taxes on GILTI.

In December 2017, the SEC issued Staff Accounting Bulletin No. 118 “Income Tax Accounting Implications of the Tax Cuts and Jobs Act” (“SAB 118”) which allows a company up to one year to finalize and record the tax effects of the Act. We are currently in the process of finalizing and quantifying the tax effects of the Act, but have recorded provisional amounts based on reasonable estimates for the measurement and accounting of certain effects of the Act in our Consolidated Condensed Financial Statements for the three months ended March 31, 2018 . Under SAB 118, we will complete the required analyses and accounting during the year ended December 31, 2018.

Comprehensive Income — In February 2018, the FASB issued Accounting Standards Update 2018-02, “Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.” The standard allows an entity to reclassify the income tax effects of the Act on items within AOCI to retained earnings and also requires additional disclosures. The standard is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. We do not anticipate a material effect on our financial condition, results of operations or cash flows as a result of adopting this standard.

Income Tax Expense (Benefit)

The table below shows our consolidated income tax expense (benefit) and our effective tax rates for the periods indicated (in millions):



	Three Months Ended March 31,
	2018			2017
Income tax expense (benefit)	$	108		$	(61	)
Effective tax rate	(22		)%	52		%

Our income tax rates do not bear a customary relationship to statutory income tax rates primarily as a result of the effect of our NOLs, changes in unrecognized tax benefits and valuation allowances. For the three months ended March 31, 2018 and 2017 , our income tax expense (benefit) is largely comprised of discrete tax items and estimated state and foreign income taxes in jurisdictions where we do not have NOLs or valuation allowances. As a result of the Merger, an increase of approximately $62 million in the valuation allowance and a related charge to deferred tax expense was recorded during the three months ended March 31, 2018, due to our Canadian NOLs being fully limited and not available to offset future income.

NOL Carryforwards — As of December 31, 2017, our NOL carryforwards consisted primarily of federal NOL carryforwards of approximately $6.6 billion , which expire between 2024 and 2037 , and NOL carryforwards in 27 states and the District of Columbia totaling approximately $3.5 billion , which expire between 2018 and 2037 . Substantially all of the federal and state NOLs are offset with a full valuation allowance. Certain of the state NOL carryforwards may be subject to limitations on their annual usage. As a result of the ownership change, our ability to utilize the NOL carryforwards will be limited. The reduction in our federal NOLs will be offset by an adjustment to the existing valuation allowance for an equal and offsetting amount. Additionally, our state NOLs available to offset future state income could materially decrease which would also be offset by an equal and offsetting adjustment to the existing valuation allowance. Given the offsetting adjustments to the existing valuation allowance, the ownership change is not expected to have a material adverse effect on our Consolidated Condensed Financial Statements.

As of December 31, 2017, we had approximately $659 million in foreign NOLs, which expire between 2026 and 2037 , and the associated deferred tax asset of approximately $165 million is partially offset by a valuation allowance of $106 million . As a result of the Merger, an increase of approximately $62 million in the valuation allowance and a related charge to deferred tax expense occurred, which resulted in our Canadian NOLs being fully limited and not available to offset future income.

Income Tax Audits — We remain subject to periodic audits and reviews by taxing authorities; however, we do not expect these audits will have a material effect on our tax provision. Any NOLs we claim in future years to reduce taxable income could be subject to IRS examination regardless of when the NOLs were generated. Any adjustment of state or federal returns could result in a reduction of deferred tax assets rather than a cash payment of income taxes in tax jurisdictions where we have NOLs. We have concluded our U.S. federal income tax examination for the year ended December 31, 2015 with no adjustments. We are currently under various state income tax audits for various periods. Our Canadian subsidiaries are currently under examination by the Canada Revenue Agency for the years ended December 31, 2013 through 2016.

Valuation Allowance — U.S. GAAP requires that we consider all available evidence, both positive and negative, and tax planning strategies to determine whether, based on the weight of that evidence, a valuation allowance is needed to reduce the value of deferred tax assets. Future realization of the tax benefit of an existing deductible temporary difference or carryforward ultimately depends on the existence of sufficient taxable income of the appropriate character within the carryback or carryforward periods

available under the tax law. Due to our history of losses, we were unable to assume future profits; however, we are able to consider available tax planning strategies.

Unrecognized Tax Benefits — At March 31, 2018 , we had unrecognized tax benefits of $35 million . If recognized, $15 million of our unrecognized tax benefits could affect the annual effective tax rate and $20 million , related to deferred tax assets, could be offset against the recorded valuation allowance resulting in no effect on our effective tax rate. We had accrued interest and penalties of $2 million for income tax matters at March 31, 2018 . We recognize interest and penalties related to unrecognized tax benefits in income tax expense (benefit) on our Consolidated Condensed Statements of Operations and recorded a $ 1 million tax benefit for the three months ended March 31, 2018. We believe that it is reasonably possible that a decrease within the range of nil and $9 million in unrecognized tax benefits could occur within the next twelve months primarily related to federal tax issues.


10.	Stock-Based Compensation

Calpine Equity Incentive Plans

Prior to the effective date of the Merger on March 8, 2018, the Calpine Equity Incentive Plans provided for the issuance of equity awards to all non-union employees as well as the non-employee members of our Board of Directors. As a result of the Merger, the outstanding share-awards were treated as follows during the three months ended March 31, 2018 :


•	all restricted stock and restricted stock units were vested and canceled and the holders received a cash payment equal to a share price of $15.25 per share less any applicable withholding taxes;


•	all vested and unvested stock options were vested (in the case of unvested stock options) and canceled and the holders of the stock options received a cash payment equal to the intrinsic value based on a share price of $15.25 per share less any applicable withholding taxes; and


•	all Performance Share Units (PSUs), including the PSUs awarded in 2015 for the measurement period of January 1, 2015 through December 31, 2017, were vested and canceled in exchange for a cash payment with the payout value based on the greater of target value or actual performance over the truncated period using a share price of $15.25 per share less any applicable withholding taxes.

The amount of cash transferred to repurchase the share-based awards associated with our equity classified share-based awards totaled $79 million and was recorded to additional paid-in capital on our Consolidated Condensed Balance Sheet during the three months ended March 31, 2018 . The amount of unrecognized compensation related to our equity classified share-based awards that we recognized in connection with the shortened service period associated with the completion of the Merger was $35 million for the three months ended March 31, 2018 , which did not include any incremental compensation cost as the amount paid did not exceed the fair value of the equity classified share-based awards at the effective time of the Merger. The total stock-based compensation expense for our equity classified share-based awards was $41 million and $8 million for the three months ended March 31, 2018 and 2017, respectively.

The amount of cash transferred to repurchase the share-based awards associated with our liability classified share-based awards totaled $25 million and was recorded to the associated liability in other long-term liabilities on our Consolidated Condensed Balance Sheet during the three months ended March 31, 2018 . The amount of unrecognized compensation related to our liability classified share-based awards that we recognized in connection with the shortened implied service period associated with the completion of the Merger was $16 million for the three months ended March 31, 2018 . The total stock-based compensation expense for our liability classified share-based awards was $16 million and nil for the three months ended March 31, 2018 and 2017 , respectively.

The total intrinsic value of our employee stock options exercised was $11 million and nil for the three months ended March 31, 2018 and 2017 , respectively. We did not receive any material cash proceeds from the exercise of our employee stock for the three months ended March 31, 2018 and 2017 , respectively.

The total fair value of our restricted stock and restricted stock units that vested during the three months ended March 31, 2018 and 2017 was approximately $ 88 million and $ 17 million , respectively.


11.	Commitments and Contingencies

Litigation

We are party to various litigation matters, including regulatory and administrative proceedings arising out of the normal course of business. At the present time, we do not expect that the outcome of any of these proceedings, individually or in the aggregate, will have a material adverse effect on our financial condition, results of operations or cash flows.

On a quarterly basis, we review our litigation activities and determine if an unfavorable outcome to us is considered “remote,” “reasonably possible” or “probable” as defined by U.S. GAAP. Where we determine an unfavorable outcome is probable and is reasonably estimable, we accrue for potential litigation losses. The liability we may ultimately incur with respect to such litigation matters, in the event of a negative outcome, may be in excess of amounts currently accrued, if any; however, we do not expect that the reasonably possible outcome of these litigation matters would, individually or in the aggregate, have a material adverse effect on our financial condition, results of operations or cash flows. Where we determine an unfavorable outcome is not probable or reasonably estimable, we do not accrue for any potential litigation loss. The ultimate outcome of these litigation matters cannot presently be determined, nor can the liability that could potentially result from a negative outcome be reasonably estimated. As a result, we give no assurance that such litigation matters would, individually or in the aggregate, not have an adverse effect on our financial condition, results of operations or cash flows.

Former Stockholder Appraisal Rights — We have received demands for appraisal pursuant to Section 262 of the Delaware General Corporate Law from certain dissenting stockholders. As of the date of this Report, no stockholder has filed an appraisal petition in the Delaware Court of Chancery. The outcome of any appraisal proceedings is uncertain. A judgment determining the fair value of Calpine in excess of $15.25 per share for any shares properly subject to appraisal could have an adverse effect on our financial condition.

Environmental Matters

We are subject to complex and stringent environmental laws and regulations related to the operation of our power plants. On occasion, we may incur environmental fees, penalties and fines associated with the operation of our power plants. At the present time, we do not have environmental violations or other matters that would have a material effect on our financial condition, results of operations or cash flows or that would significantly change our operations.

Guarantees and Indemnifications

Our potential exposure under guarantee and indemnification obligations can range from a specified amount to an unlimited dollar amount, depending on the nature of the claim and the particular transaction. Our total maximum exposure under our guarantee and indemnification obligations is not estimable due to uncertainty as to whether claims will be made or how any potential claim will be resolved. As of March 31, 2018 , there are no material outstanding claims related to our guarantee and indemnification obligations and we do not anticipate that we will be required to make any material payments under our guarantee and indemnification obligations. There have been no material changes to our guarantees and indemnifications from those disclosed in Note 16 of our 2017 Form 10-K.


12.	Related Party Transactions

We have entered into various agreements with related parties associated with the operation of our business. A description of these related party transactions is provided below (see Note 2 for a description of the Merger):

Calpine Receivables — Under the Accounts Receivable Sales Program, at March 31, 2018 and December 31, 2017 , we had $198 million and $196 million , respectively, in trade accounts receivable outstanding that were sold to Calpine Receivables and $44 million and $26 million , respectively, in notes receivable from Calpine Receivables which were recorded on our Consolidated Condensed Balance Sheets. During the three months ended March 31, 2018 and 2017 , we sold an aggregate of $579 million and $542 million , respectively, in trade accounts receivable and recorded $573 million and $546 million , respectively, in proceeds. For a further discussion of the Accounts Receivable Sales Program and Calpine Receivables, see Notes 3 and 6 in our 2017 Form 10-K.

Lyondell — We have a ground lease agreement with Houston Refining LP (“Houston Refining”), a subsidiary of Lyondell, for our Channel Energy Center site from which we sell power, capacity and steam to Houston Refining under a PPA. We purchase refinery gas and raw water from Houston Refining under a facilities services agreement. One of the entities which obtained an ownership interest in Calpine through the Merger which closed on March 8, 2018, also has an ownership interest in Lyondell whereby they may significantly influence the management and operating policies of Lyondell. The terms of the PPA with Lyondell were negotiated prior to the Merger closing. At March 31, 2018 , the related party receivable and payable associated with Lyondell were immaterial.

Other — Following the Merger, we have identified other related party contracts for the sale of power, capacity and RECs which are entered into in the ordinary course of our business. Most of these contracts relate to the retail sale of power for varying tenors. The terms of most of these contracts were negotiated prior to the Merger. As of March 31, 2018 , the related party receivables and payables associated with these transactions were immaterial.


13.	Segment Information

We assess our wholesale business on a regional basis due to the effect on our financial performance of the differing characteristics of these regions, particularly with respect to competition, regulation and other factors affecting supply and demand. During the first quarter of 2018, we altered the composition of our segments to report the results associated with our retail business as a separate segment. This change reflects the manner in which our segment information is presented internally to our chief operating decision maker associated with the strategic utilization of our retail business subsequent to the consummation of the Merger. Thus, beginning in the first quarter of 2018, our geographic reportable segments for our wholesale business are West (including geothermal), Texas and East (including Canada) and we have a separate reportable segment for our retail business. The tables below have been updated to present our segments on this revised basis for all periods. We continue to evaluate the optimal manner in which we assess our performance including our segments and future changes may result in changes to the composition of our segments. Commodity Margin is a key operational measure of profit reviewed by our chief operating decision maker to assess the performance of our segments. The tables below show financial data for our segments (including a reconciliation of our Commodity Margin to income (loss) from operations by segment) for the periods indicated (in millions):



	Three Months Ended March 31, 2018
	Wholesale										Consolidation
	West		Texas			East			Retail		Elimination			Total
Total operating revenues ⁽¹⁾	$	480	$	140		$	614		$	938	$	(163	)	$	2,009

Commodity Margin	$	185	$	166		$	184		$	77	$	—		$	612
Add: Mark-to-market commodity activity, net and other ⁽²⁾	13		(547		)	40			128		(7		)	(373		)
Less:
Operating and maintenance expense	90		80			71			40		(6		)	275
Depreciation and amortization expense	67		76			45			13		—			201
General and other administrative expense	16		25			15			4		—			60
Other operating expenses	14		16			7			—		—			37
(Income) from unconsolidated subsidiaries	—		—			(6		)	—		—			(6		)
Income (loss) from operations	11		(578		)	92			148		(1		)	(328		)
Interest expense														151
Other (income) expense, net														7
Loss before income taxes														$	(486	)



	Three Months Ended March 31, 2017
	Wholesale										Consolidation
	West		Texas		East			Retail			Elimination			Total
Total operating revenues ⁽¹⁾	$	519	$	608	$	416		$	960		$	(222	)	$	2,281

Commodity Margin	$	203	$	125	$	142		$	88		$	—		$	558
Add: Mark-to-market commodity activity, net and other ⁽²⁾	80		43		14			(98		)	(8		)	31
Less:
Operating and maintenance expense	91		81		81			36			(7		)	282
Depreciation and amortization expense	87		54		48			17			—			206
General and other administrative expense	12		16		7			5			—			40
Other operating expenses	9		3		9			—			(1		)	20
(Gain) on sale of assets, net	—		—		(27		)	—			—			(27		)
(Income) from unconsolidated subsidiaries	—		—		(4		)	—			—			(4		)
Income (loss) from operations	84		14		42			(68		)	—			72
Interest expense														159
Debt extinguishment costs and other (income) expense, net														26
Loss before income taxes														$	(113	)

_________

(1)

Includes intersegment revenues of $114 million and $61 million in the West, $(67) million and $72 million in Texas, $115 million and $88 million in the East and $1 million and $1 million in Retail for the three months ended March 31, 2018 and 2017 , respectively. Intersegment revenues for sales between wholesale and retail operations are executed to manage supply needs for our retail operations from our wholesale fleet or to facilitate margin collateral netting at Calpine Corporation.


(2)	Includes $(16) million and $(22) million of lease levelization and $28 million and $60 million of amortization expense for the three months ended March 31, 2018 and 2017 , respectively.


Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operation s

Forward-Looking Information

This Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our accompanying Consolidated Condensed Financial Statements and related Notes. See the cautionary statement regarding forward-looking statements at the beginning of this Report for a description of important factors that could cause actual results to differ from expected results.

Introduction and Overview

Our wholesale power plant portfolio, including partnership interests, consists of 80 power plants, including one under construction, with an aggregate current generation capacity of 25,967 MW and 828 MW under construction. Our fleet, including projects under construction, consists of 65 natural gas-fired combustion turbine-based plants, one natural gas and fuel oil-fired steam-based plant, 13 geothermal steam turbine-based plants and one photovoltaic solar plant. Our wholesale geographic segments have an aggregate generation capacity of 7,425 MW in the West, 9,086 MW in Texas and 9,456 MW with an additional 828 MW under construction in the East. Inclusive of our power generation portfolio and our retail sales platforms, we serve customers in 25 states in the U.S. and in Canada and Mexico.

Merger

On August 17, 2017, we entered into the Merger Agreement with Volt Parent, LP (“Volt Parent”) and Volt Merger Sub, Inc. (“Merger Sub”), a wholly-owned subsidiary of Volt Parent, pursuant to which Merger Sub merged with and into Calpine, with Calpine surviving the Merger as a subsidiary of Volt Parent. On March 8, 2018, we completed the Merger contemplated in the Merger Agreement.

Governmental and Regulatory Matters

We are subject to complex and stringent energy, environmental and other laws and regulations at the federal, state and local levels as well as rules within the ISO and RTO markets in which we participate. Federal and state legislative and regulatory actions, including those by ISO/RTOs, continue to change how our business is regulated. We are actively participating in these debates at the federal, regional, state and ISO/RTO levels. Significant updates are discussed below. For a further discussion of the environmental and other governmental regulations that affect us, see “— Governmental and Regulatory Matters” in Part I, Item 1 of our 2017 Form 10-K.

U.S. Department of Energy

On March 29, 2018, First Energy Solutions ( “ FES ” ), a wholesale power generator with coal and nuclear power plants in the PJM market currently seeking protection under Chapter 11 of Federal bankruptcy law, formally requested the Secretary of the U.S. Department of Energy ( “DOE” ) to take action under Section 202(c) of the Federal Power Act (“FPA”) to economically support its plants by ordering PJM to contract with and compensate FES and other owners of nuclear and coal power plants for the “full benefits” the plants provide to the PJM system. FES argues that PJM’s system will be in jeopardy if these plants are retired despite PJM’s assertion that such action is unnecessary at this time. We understand that the DOE has initiated a formal inter-agency review process to consider possible action under Section 202(c) of the FPA, the Defense Production Act, or the Fixing America’s Surface Transportation Act. We and others are vigorously advocating against any such politically motivated action arguing that there is no support under law or the facts for such action. We cannot predict what action, if any, the DOE may take in response to this request, nor can we predict what effect such action would have on our business.

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2018 AND 2017

Below are our results of operations for the three months ended March 31, 2018 as compared to the same period in 2017 (in millions, except for percentages and operating performance metrics). In the comparative tables below, increases in revenue/income or decreases in expense (favorable variances) are shown without brackets while decreases in revenue/income or increases in expense (unfavorable variances) are shown with brackets.



	2018			2017			Change			% Change
Operating revenues:
Commodity revenue	$	2,396		$	2,063		$	333		16
Mark-to-market gain (loss)	(391		)	214			(605		)	#
Other revenue	4			4			—			—
Operating revenues	2,009			2,281			(272		)	(12	)
Operating expenses:
Fuel and purchased energy expense:
Commodity expense	1,790			1,533			(257		)	(17	)
Mark-to-market (gain) loss	(20		)	159			179			#
Fuel and purchased energy expense	1,770			1,692			(78		)	(5	)
Operating and maintenance expense	275			282			7			2
Depreciation and amortization expense	201			206			5			2
General and other administrative expense	60			40			(20		)	(50	)
Other operating expenses	37			20			(17		)	(85	)
Total operating expenses	2,343			2,240			(103		)	(5	)
(Gain) on sale of assets, net	—			(27		)	(27		)	#
(Income) from unconsolidated subsidiaries	(6		)	(4		)	2			50
Income (loss) from operations	(328		)	72			(400		)	#
Interest expense	151			159			8			5
Debt extinguishment costs	—			24			24			#
Other (income) expense, net	7			2			(5		)	#
Loss before income taxes	(486		)	(113		)	(373		)	#
Income tax expense (benefit)	108			(61		)	(169		)	#
Net loss	(594		)	(52		)	(542		)	#
Net income attributable to the noncontrolling interest	(4		)	(4		)	—			—
Net loss attributable to Calpine	$	(598	)	$	(56	)	$	(542	)	#



	2018		2017		Change		% Change
Operating Performance Metrics:
MWh generated (in thousands) ⁽¹⁾⁽²⁾	20,800		20,824		(24	)	—
Average availability ⁽²⁾	87.6	%	87.3	%	0.3	%	—
Average total MW in operation ⁽¹⁾	25,187		25,274		(87	)	—
Average capacity factor, excluding peakers	41.9	%	42.8	%	(0.9	)%	(2	)
Steam Adjusted Heat Rate ⁽²⁾	7,325		7,346		21		—

__________


#	Variance of 100% or greater


(1)	Represents generation and capacity from power plants that we both consolidate and operate and excludes Greenfield LP, Whitby, Freeport Energy Center, 21.5% of Hidalgo Energy Center and 25% each of Freestone Energy Center and Russell City Energy Center.


(2)	Generation, average availability and Steam Adjusted Heat Rate exclude power plants and units that are inactive.

We evaluate our Commodity revenue and Commodity expense on a collective basis because the price of power and natural gas tend to move together as the price for power is generally determined by the variable operating cost of the next marginal generator to be dispatched to meet demand. The spread between our Commodity revenue and Commodity expense represents a significant portion of our Commodity Margin. Our financial performance is correlated to how we maximize our Commodity Margin through management of our portfolio of power plants, as well as our hedging and optimization activities. See additional segment discussion in “Commodity Margin by Segment.”

Commodity revenue, net of Commodity expense, increased $76 million for the three months ended March 31, 2018, compared to the same period in 2017, primarily due to (favorable variances are shown without brackets while unfavorable variances are shown with brackets):



(in millions)
$	39		Higher regulatory capacity revenue in our East segment
31			Higher revenue associated with the sale of environmental credits in our Texas segment during the first quarter of 2018 with no similar activity in the same period in 2017
(16		)	Lower energy margins associated with our Retail segment resulting from higher purchase energy and capacity supply expense and lower contribution from hedges. The decrease was partially offset by the positive effect of new contracts in the West and higher market Spark Spreads in Texas
22			Period-over-period change in contract amortization, lease levelization relating to tolling contracts and other ⁽¹⁾
$	76

__________


(1)	Commodity Margin excludes amortization expense related to contracts recorded at fair value, non-cash GAAP-related adjustments to levelize revenues from tolling agreements, Commodity revenue and Commodity expense attributable to the noncontrolling interest and other unusual items or non-recurring items.

Mark-to-market gain/loss, net from hedging our future generation, fuel supply requirements and retail activities had an unfavorable variance of $426 million primarily driven by the increase in forward commodity prices and corresponding Market Heat Rate expansion in ERCOT during the quarter ended March 31, 2018.

Our normal, recurring operating and maintenance expense increased by $4 million for the three months ended March 31, 2018 compared to the same period in 2017, after excluding the effect of a $27 million increase related to the acceleration of unrecognized compensation expense for share-based equity awards and performance share units following the Merger, a $4 million decrease in severance and other-employee related costs, a $9 million decrease in equipment failure costs related to outages and a $29 million decrease in major maintenance expense resulting from a decrease in plant outages and changes in our capitalization accounting policy.

General and other administrative expense increased by $20 million for the three months ended March 31, 2018 compared to the same period in 2017 primarily due to the acceleration of the unamortized expense for the share-based equity awards and performance share units resulting from the change in control associated with the consummation of the Merger during the first quarter of 2018.

Other operating expenses increased by $17 million for the three months ended March 31, 2018 compared to the same period in 2017 primarily due to Merger-related costs associated with legal, investment banking and other professional fees associated with the Merger, partially offset by the write-off of unamortized liabilities associated with the termination of a PPA during the first quarter of 2018. See Note 2 of the Notes to Consolidated Condensed Financial Statements for further information related to the Merger.

In line with our strategy to focus on competitive wholesale markets and sell or contract power plants located in power markets dominated by regulated utilities or outside our strategic concentration, we completed the sale of the Osprey Energy Center in our East segment on January 3, 2017, resulting in a gain on sale of assets, net of $27 million during the three months ended March 31, 2017.

Debt extinguishment costs for the three months ended March 31, 2017, consisted of $21 million in connection with the redemption of our 2023 First Lien Notes in March 2017, which is comprised of $18 million in prepayment penalty and $3 million from the write-off of debt issuance costs, as well as $3 million in debt extinguishment costs from the write-off of debt issuance costs associated with the $150 million partial repayment of our 2017 First Lien Term Loan in March 2017.

During the three months ended March 31, 2018, we recorded an income tax expense of $108 million compared to an income tax benefit of $61 million for the three months ended March 31, 2017. The unfavorable period-over-period change primarily

resulted from a valuation allowance recorded on our foreign NOLs during the first quarter of 2018 and from an increase in state and foreign income tax expense due to higher income in the current year in tax jurisdictions where we do not have NOLs. See Note 9 of the Notes to Consolidated Condensed Financial Statements for further discussion of our NOLs.

COMMODITY MARGIN BY SEGMENT

We use Commodity Margin to assess reportable segment performance. Commodity Margin includes revenues recognized on our wholesale and retail power sales activity, electric capacity sales, REC sales, steam sales, realized settlements associated with our marketing, hedging, optimization and trading activity less costs from our fuel and purchased energy expenses, commodity transmission and transportation expenses, environmental compliance expenses and ancillary retail expense. We believe that Commodity Margin is a useful tool for assessing the performance of our core operations and is a key operational measure of profit reviewed by our chief operating decision maker. See Note 13 of the Notes to Consolidated Condensed Financial Statements for a reconciliation of Commodity Margin to income (loss) from operations by segment.

During the first quarter of 2018, we altered the composition of our segments to report the results associated with our retail business as a separate segment. This change reflects the manner in which our segment information is presented internally to our chief operating decision maker associated with the strategic utilization of our retail business subsequent to the consummation of the Merger. Thus, beginning in the first quarter of 2018, our geographic reportable segments for our wholesale business are West (including geothermal), Texas and East (including Canada) and we have a separate reportable segment for our retail business. The tables below have been updated to present our segments on this revised basis for all periods.

Commodity Margin by Segment for the Three Months Ended March 31, 2018 and 2017

The following tables show our Commodity Margin by segment and related operating performance metrics by regional segment for our wholesale business for the three months ended March 31, 2018 and 2017 (exclusive of the noncontrolling interest). In the comparative tables below, favorable variances are shown without brackets while unfavorable variances are shown with brackets. The MWh generated by regional segment below represent generation from power plants that we both consolidate and operate. Generation, average availability and Steam Adjusted Heat Rate exclude power plants and units that are inactive.



West:	2018			2017			Change			% Change
Commodity Margin (in millions)	$	185		$	203		$	(18	)	(9	)
Commodity Margin per MWh generated	$	36.21		$	37.25		$	(1.04	)	(3	)

MWh generated (in thousands)	5,109			5,449			(340		)	(6	)
Average availability	87.1		%	86.3		%	0.8		%	1
Average total MW in operation	7,425			7,425			—			—
Average capacity factor, excluding peakers	33.5		%	36.3		%	(2.8		)%	(8	)
Steam Adjusted Heat Rate	7,215			7,336			121			2

West — Commodity Margin in our West segment decreased by $18 million, or 9%, for the three months ended March 31, 2018 compared to the three months ended March 31, 2017, primarily resulting from lower contribution from hedges, net of the positive effect of new contracts.



Texas:	2018			2017			Change			% Change
Commodity Margin (in millions)	$	166		$	125		$	41		33
Commodity Margin per MWh generated	$	17.21		$	13.30		$	3.91		29

MWh generated (in thousands)	9,647			9,398			249			3
Average availability	85.1		%	86.9		%	(1.8		)%	(2	)
Average total MW in operation	8,850			8,924			(74		)	(1	)
Average capacity factor, excluding peakers	49.1		%	48.8		%	0.3		%	1
Steam Adjusted Heat Rate	7,118			7,121			3			—

Texas — Commodity Margin in our Texas segment increased by $41 million, or 33%, for the three months ended March 31, 2018 compared to the three months ended March 31, 2017, primarily due to higher market Spark Spreads predominately in January 2018 and higher revenue associated with the sale of environmental credits in the first quarter of 2018 with no similar

activity in same period in 2017. The increase in Commodity Margin was partially offset by lower contribution from hedges during the three months ended March 31, 2018, compared to the three months ended March 31, 2017.



East:	2018			2017			Change			% Change
Commodity Margin (in millions)	$	184		$	142		$	42		30
Commodity Margin per MWh generated	$	30.44		$	23.76		$	6.68		28

MWh generated (in thousands)	6,044			5,977			67			1
Average availability	90.6		%	88.5		%	2.1		%	2
Average total MW in operation	8,912			8,925			(13		)	—
Average capacity factor, excluding peakers	41.1		%	41.5		%	(0.4		)%	(1	)
Steam Adjusted Heat Rate	7,729			7,718			(11		)	—

East — Commodity Margin in our East segment increased by $42 million, or 30%, for the three months ended March 31, 2018 compared to the three months ended March 31, 2017, primarily due to higher regulatory capacity revenue in PJM and ISO-NE and the positive effect of colder than normal weather resulting in higher power prices in January 2018 compared to the same period in 2017. The increase in Commodity Margin was partially offset by lower contribution from hedges during the three months ended March 31, 2018, compared to the three months ended March 31, 2017.



Retail:	2018		2017		Change			% Change
Commodity Margin (in millions)	$	77	$	88	$	(11	)	(13	)

Retail — Commodity Margin in our retail segment decreased by $11 million, or 13%, for the three months ended March 31, 2018 compared to the three months ended March 31, 2017, primarily due to colder than normal weather in January 2018 and higher capacity payments in the Northeast resulting in increased purchased energy and capacity supply expenses in the first quarter of 2018 compared to the same period in 2017.

LIQUIDITY AND CAPITAL RESOURCES

We maintain a strong focus on liquidity. We manage our liquidity to help provide access to sufficient funding to meet our business needs and financial obligations throughout business cycles.

Our business is capital intensive. Our ability to successfully implement our strategy is dependent on the continued availability of capital on attractive terms. In addition, our ability to successfully operate our business is dependent on maintaining sufficient liquidity. We believe that we have adequate resources from a combination of cash and cash equivalents on hand and cash expected to be generated from future operations to continue to meet our obligations as they become due.

Liquidity

The following table provides a summary of our liquidity position at March 31, 2018 and December 31, 2017 (in millions):



	March 31, 2018		December 31, 2017
Cash and cash equivalents, corporate ⁽¹⁾	$	164	$	228
Cash and cash equivalents, non-corporate	51		56
Total cash and cash equivalents	215		284
Restricted cash	156		159
Corporate Revolving Facility availability ⁽²⁾	192		1,161
CDHI letter of credit facility availability	65		56
Total current liquidity availability ⁽³⁾⁽⁴⁾	$	628	$	1,660

____________


(1)	Includes $14 million and $4 million of margin deposits posted with us by our counterparties at March 31, 2018 and December 31, 2017 , respectively. See Note 8 of the Notes to Consolidated Condensed Financial Statements for further information related to our collateral.


(2)	Our ability to use availability under our Corporate Revolving Facility is unrestricted. The availability under our Corporate Revolving Facility decreased primarily due to payments associated with the consummation of the Merger on March 8, 2018 and an increase in collateral requirements during the three months ended March 31, 2018 as discussed below.


(3)	On April 11, 2018, we executed our Short Term Credit Facility which allows us unrestricted access to an additional $300 million in liquidity. See Note 5 of the Notes to Consolidated Condensed Financial Statements for further information related to our Short Term Credit Facility.

(4)

Our ability to use corporate cash and cash equivalents is unrestricted. See Note 1 of the Notes to Consolidated Condensed Financial Statements for a description of the restrictions on our use of non-corporate cash and cash equivalents and restricted cash. Our $300 million CDHI letter of credit facility is restricted to support certain obligations under PPAs and power transmission and natural gas transportation agreements.

Our principal source for future liquidity is cash flows generated from our operations. We believe that cash on hand and expected future cash flows from operations will be sufficient to meet our liquidity needs for our operations, both in the near and longer term. See “Cash Flow Activities” below for a further discussion of our change in cash and cash equivalents.

In addition to funding our operations, our principal uses of liquidity and capital resources include, but are not limited to, collateral requirements to support our commercial hedging and optimization activities. During the first quarter of 2018, forward wholesale power prices in ERCOT improved meaningfully, requiring us to post incremental cash collateral and letters of credit with hedging counterparties. In order to meet the need for additional collateral while maintaining sufficient liquidity for other uses, we executed a $300 million Short Term Credit Facility on April 11, 2018, bringing total current liquidity availability to $863 million at April 30, 2018. A significant portion of the incremental collateral postings will be short-term in nature because, as our Summer 2018 hedge positions liquidate, the collateral will be returned to us. See Note 5 of the Notes to our Consolidated Condensed Financial Statements for further information related to our Short Term Credit Facility.

Cash Management — We manage our cash in accordance with our cash management system subject to the requirements of our Corporate Revolving Facility and requirements under certain of our project debt and lease agreements or by regulatory agencies. Our cash and cash equivalents, as well as our restricted cash balances, are invested in money market funds that are not FDIC insured. We place our cash, cash equivalents and restricted cash in what we believe to be creditworthy financial institutions.

We have never paid cash dividends on our common stock. Future cash dividends, if any, may be authorized at the discretion of our Board of Directors and will depend upon, among other things, our future operations and earnings, capital requirements,

general financial condition, contractual and financing restrictions and such other factors as our Board of Directors may deem relevant.

Liquidity Sensitivity

Significant changes in commodity prices and Market Heat Rates can affect our liquidity as we use margin deposits, cash prepayments and letters of credit as credit support (collateral) with and from our counterparties for commodity procurement and risk management activities. Utilizing our portfolio of transactions subject to collateral exposure, we estimate that as of March 31, 2018 , an increase of $1/MMBtu in natural gas prices would result in a increase of collateral required by approximately $106 million. If natural gas prices decreased by $1/MMBtu, we estimate that our collateral requirements would increase by approximately $42 million. Changes in Market Heat Rates also affect our liquidity. For example, as demand increases, less efficient generation is dispatched, which increases the Market Heat Rate and results in increased collateral requirements. Historical relationships of natural gas and Market Heat Rate movements for our portfolio of assets have been volatile over time and are influenced by the absolute price of natural gas and the regional characteristics of each power market. We estimate that at March 31, 2018 , an increase of 500 Btu/KWh in the Market Heat Rate would result in an increase in collateral required by approximately $88 million. If Market Heat Rates were to fall at a similar rate, we estimate that our collateral required would decrease by approximately $87 million. These amounts are not necessarily indicative of the actual amounts that could be required, which may be higher or lower than the amounts estimated above, and also exclude any correlation between the changes in natural gas prices and Market Heat Rates that may occur concurrently. These sensitivities will change as new contracts or hedging activities are executed.

In order to effectively manage our future Commodity Margin, we have economically hedged a portion of our expected generation and natural gas portfolio as well as retail load supply obligations, where appropriate, mostly through power and natural gas forward physical and financial transactions including retail power sales; however, we currently remain susceptible to significant price movements for 2018 and beyond. In addition to the price of natural gas, our Commodity Margin is highly dependent on other factors such as:


•	the level of Market Heat Rates;


•	our continued ability to successfully hedge our Commodity Margin;


•	changes in U.S. macroeconomic conditions;


•	maintaining acceptable availability levels for our fleet;


•	the effect of current and pending environmental regulations in the markets in which we participate;


•	improving the efficiency and profitability of our operations;


•	increasing future contractual cash flows; and


•	our significant counterparties performing under their contracts with us.

Additionally, scheduled outages related to the life cycle of our power plant fleet in addition to unscheduled outages may result in maintenance expenditures that are disproportionate in differing periods. In order to manage such liquidity requirements, we maintain additional liquidity availability in the form of our Corporate Revolving Facility (noted in the table above), letters of credit and the ability to issue first priority liens for collateral support. It is difficult to predict future developments and the amount of credit support that we may need to provide should such conditions occur, we experience another economic recession or energy commodity prices increase significantly.

Letter of Credit Facilities

The table below represents amounts issued under our letter of credit facilities at March 31, 2018 and December 31, 2017 (in millions):



	March 31, 2018		December 31, 2017
Corporate Revolving Facility ⁽¹⁾	$	953	$	629
CDHI	235		244
Various project financing facilities	181		196
Total	$	1,369	$	1,069

____________


(1)	The Corporate Revolving Facility represents our primary revolving facility.

NOLs

We have significant NOLs that will provide future tax deductions when we generate sufficient taxable income during the applicable carryover periods. At December 31, 2017 , our consolidated federal NOLs totaled approximately $6.6 billion. Under federal and state income tax law, our NOL carryforwards can be utilized to reduce future taxable income subject to certain new limitations including after undergoing our ownership change as defined by Section 382 of the Internal Revenue Code and similar state provisions. See Note 9 of the Notes to Consolidated Condensed Financial Statements for further discussion of our NOLs.

Cash Flow Activities

The following table summarizes our cash flow activities for the three months ended March 31, 2018 and 2017 (in millions):



	2018			2017
Beginning cash and cash equivalents	$	443		$	606
Net cash provided by (used in):
Operating activities	(115		)	112
Investing activities	(115		)	(24		)
Financing activities	158			(274		)
Net decrease in cash, cash equivalents and restricted cash	(72		)	(186		)
Ending cash, cash equivalents and restricted cash	$	371		$	420

Net Cash (Used In) Provided By Operating Activities

Cash used in operating activities for the three months ended March 31, 2018, was $115 million compared to cash provided by operating activities of $112 million for the three months ended March 31, 2017. The decrease was primarily due to:

•

Working capital employed — Working capital employed increased by $284 million for the three months ended March 31, 2018 compared to the same period in 2017 after adjusting for changes in debt extinguishment costs and mark-to-market related balances which did not impact cash provided by operating activities. This change was primarily due to an increase in net collateral margining requirements on our commodity hedging activities following a meaningful increase in forward commodity prices during the period ended March 31, 2018.


•	Interest paid — Cash paid for interest decreased by $31 million to $110 million for the three months ended March 31, 2018, from $141 million for the three months ended March 31, 2017. The decrease was primarily due to our refinancing activities and timing of interest payments.

Net Cash Used In Investing Activities

Cash used in investing activities for the three months ended March 31, 2018, was $115 million compared to $24 million for the three months ended March 31, 2017. The increase was primarily due to:


•	Acquisitions and Divestitures — During the three months ended March 31, 2017, we closed on the acquisition of the retail electric provider North American Power for a net purchase price paid of $111 million and also closed on the sale of Osprey Energy Center receiving net proceeds of $162 million. There were no similar acquisitions or divestitures during the three months ended March 31, 2018.

•

Capital expenditures — Capital expenditures for the three months ended March 31, 2018, were $115 million, an increase of $24 million, compared to expenditures of $91 million for the three months ended March 31, 2017. The increase was primarily due to higher expenditures on outages, partially offset by lower expenditures on construction projects during the first quarter of 2018 as compared to the first quarter of 2017.

Net Cash Provided By (Used In) Financing Activities

Cash provided by financing activities for the three months ended March 31, 2018, was $158 million compared to cash used in financing activities of $274 million for the three months ended March 31, 2017. The increase was primarily due to:

•

First Lien Term Loans and First Lien Notes — During the three months ended March 31, 2017, we received proceeds of $396 million from the issuance of the 2019 First Lien Term Loan which was used, together with cash on hand, to redeem $453 million of the 2023 First Lien Notes. In addition, we used cash on hand to repay $150 million of our outstanding 2017 First Lien Term Loan. There were no similar activities during the first quarter of 2018.


•	Corporate Revolving Facility — During the three months ended March 31, 2018, we borrowed $325 million under our Corporate Revolving Facility, compared to $25 million borrowed under our Corporate Revolving Facility during the three months ended March 31, 2017.


•	Stock Repurchases — During the three months ended March 31, 2018, we repurchased $79 million of our equity classified share-based awards on the effective date of the Merger. There was no similar activity during the first quarter of 2017.

Off Balance Sheet Arrangements

There have been no material changes to our off balance sheet arrangements from those disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2017 Form 10-K.

Special Purpose Subsidiaries

Pursuant to applicable transaction agreements, we have established certain of our entities separate from Calpine Corporation and our other subsidiaries. In accordance with applicable accounting standards, we consolidate these entities with the exception of Calpine Receivables (see Notes 3 and 6 of the Notes to Consolidated Financial Statements in our 2017 Form 10-K for further information related to Calpine Receivables). As of the date of filing of this Report, these entities included: Russell City Energy Company, LLC, OMEC, Johanna Energy Center and Calpine Receivables.

RISK MANAGEMENT AND COMMODITY ACCOUNTING

Our commercial hedging and optimization strategies are designed to maximize our risk-adjusted Commodity Margin by leveraging our knowledge, experience and fundamental views on natural gas and power. We actively manage our risk exposures with a variety of physical and financial instruments with varying time horizons. These instruments include PPAs, tolling arrangements, Heat Rate swaps and options, retail power sales including through our retail affiliates, steam sales, buying and selling standard physical power and natural gas products, buying and selling exchange traded instruments, buying and selling environmental and capacity products, natural gas transportation and storage arrangements, electric transmission service and other contracts for the sale and purchase of power products. We utilize these instruments to maximize the risk-adjusted returns for our Commodity Margin. Our retail portfolio has been established to provide an additional source of liquidity for our generation fleet as we hedge retail load from our wholesale generation assets as appropriate.

We conduct our hedging and optimization activities within a structured risk management framework based on controls, policies and procedures. We monitor these activities through active and ongoing management and oversight, defined roles and responsibilities, and daily risk estimates and reporting. Additionally, we seek to manage the associated risks through diversification, by controlling position sizes, by using portfolio position limits, and by actively managing hedge positions to lock in margin. We are exposed to commodity price movements (both profits and losses) in connection with these transactions. These positions are included in and subject to our consolidated risk management portfolio position limits and controls structure. Changes in fair value of commodity positions that do not qualify for or for which we do not elect either hedge accounting or the normal purchase normal sale exemption are recognized currently in earnings and are separately stated on our Consolidated Condensed Statements of Operations in mark-to-market gain/loss as a component of operating revenues (for physical and financial power and Heat Rate and commodity option activity) and fuel and purchased energy expense (for physical and financial natural gas, power, environmental product and fuel oil activity). Our future hedged status and marketing and optimization activities are subject to change as determined by our commercial operations group, Chief Risk Officer, senior management and Board of Directors.

At any point in time, the relative quantity of our products hedged or sold under longer-term contracts is determined by the availability of forward product sales opportunities and our view of the attractiveness of the pricing available for forward sales. We have economically hedged a portion of our expected generation and natural gas portfolio as well as retail load supply obligations, where appropriate, mostly through power and natural gas forward physical and financial transactions including retail power sales; however, we currently remain susceptible to significant price movements for 2018 and beyond. When we elect to enter into these transactions, we are able to economically hedge a portion of our Spark Spread at pre-determined generation and price levels.

We have historically used interest rate hedging instruments to adjust the mix between our fixed and variable rate debt. To the extent eligible, our interest rate hedging instruments have been designated as cash flow hedges, and changes in fair value are recorded in OCI to the extent they are effective with gains and losses reclassified into earnings in the same period during which the hedged forecasted transaction affects earnings. See Note 7 of the Notes to Consolidated Condensed Financial Statements for further discussion of our derivative instruments.

The primary factors affecting our market risk and the fair value of our derivatives at any point in time are the volume of open derivative positions (MMBtu, MWh and $ notional amounts); changing commodity market prices, primarily for power and natural gas; our credit standing and that of our counterparties for energy commodity derivatives; and prevailing interest rates for our interest rate hedging instruments. Since prices for power and natural gas and interest rates are volatile, there may be material changes in the fair value of our derivatives over time, driven both by price volatility and the changes in volume of open derivative transactions. Our derivative assets have increased to approximately $425 million at March 31, 2018 , when compared to approximately $392 million at December 31, 2017 , and our derivative liabilities have increased to approximately $516 million at March 31, 2018 , when compared to approximately $316 million at December 31, 2017 . The fair value of our level 3 derivative assets and liabilities at March 31, 2018 represents approximately 42% and 21% of our total assets and liabilities measured at fair value, respectively. See Note 6 of the Notes to Consolidated Condensed Financial Statements for further information related to our level 3 derivative assets and liabilities.

The change in fair value of our outstanding commodity and interest rate hedging instruments from January 1, 2018, through March 31, 2018 , is summarized in the table below (in millions):



	Commodity Instruments			Interest Rate Hedging Instruments			Total
Fair value of contracts outstanding at January 1, 2018	$	81		$	(5	)	$	76
Items recognized or otherwise settled during the period ⁽¹⁾⁽²⁾	14			5			19
Fair value attributable to new contracts ⁽³⁾	(52		)	—			(52		)
Changes in fair value attributable to price movements	(181		)	47			(134		)
Fair value of contracts outstanding at March 31, 2018 ⁽⁴⁾	$	(138	)	$	47		$	(91	)

__________

(1)

Commodity contract settlements consist of the realization of previously recognized losses on contracts not designated as hedging instruments of $23 million (represents a portion of Commodity revenue and Commodity expense as reported on our Consolidated Condensed Statements of Operations) and $9 million related to current period losses from other changes in derivative assets and liabilities not reflected in OCI or earnings.


(2)	Interest rate settlements consist of $4 million related to realized losses from settlements of designated cash flow hedges and $1 million related to realized losses from settlements of undesignated interest rate hedging instruments (represents a portion of interest expense as reported on our Consolidated Condensed Statements of Operations).


(3)	Fair value attributable to new contracts includes $4 million and nil of fair value related to commodity contracts and interest rate hedging instruments, respectively, which are not reflected in OCI or earnings.


(4)	Net commodity and interest rate derivative assets and liabilities reported in Notes 6 and 7 of the Notes to Consolidated Condensed Financial Statements.

Commodity Price Risk — Commodity price risks result from exposure to changes in spot prices, forward prices, price volatilities and correlations between the price of power, steam and natural gas. We manage the commodity price risk and the variability in future cash flows from forecasted sales of power and purchases of natural gas of our entire portfolio of generating assets and contractual positions by entering into various derivative and non-derivative instruments.

The net fair value of outstanding derivative commodity instruments, net of allocated collateral, at March 31, 2018 , based on price source and the period during which the instruments will mature, are summarized in the table below (in millions):



Fair Value Source	2018			2019-2020			2021-2022		After 2022		Total
Prices actively quoted	$	—		$	—		$	—	$	—	$	—
Prices provided by other external sources	(163		)	(111		)	7		—		(267		)
Prices based on models and other valuation methods	3			99			20		7		129
Total fair value	$	(160	)	$	(12	)	$	27	$	7	$	(138	)

We measure the energy commodity price risk in our portfolio on a daily basis using a VAR model to estimate the potential one-day risk of loss based upon historical experience resulting from potential market movements. Our VAR is calculated for our entire portfolio comprising energy commodity derivatives, expected generation and natural gas consumption from our power plants, PPAs, and other physical and financial transactions. We measure VAR using a variance/covariance approach based on a confidence level of 95%, a one-day holding period and actual observed historical correlation. While we believe that our VAR assumptions and approximations are reasonable, different assumptions and/or approximations could produce materially different estimates.

The table below presents the high, low and average of our daily VAR for the three months ended March 31, 2018 and 2017 (in millions):



	2018		2017
Three months ended March 31:
High	$	36	$	22
Low	$	19	$	16
Average	$	26	$	19
As of March 31	$	31	$	17

Due to the inherent limitations of statistical measures such as VAR, the VAR calculation may not capture the full extent of our commodity price exposure. As a result, actual changes in the value of our energy commodity portfolio could be different from the calculated VAR, and could have a material effect on our financial results. In order to evaluate the risks of our portfolio on a comprehensive basis and augment our VAR analysis, we also measure the risk of the energy commodity portfolio using several analytical methods including sensitivity analysis, non-statistical scenario analysis, including stress testing, and daily position report analysis.

We utilize the forward commodity markets to hedge price risk associated with our power plant portfolio. Our ability to hedge relies in part on market liquidity and the number of counterparties with which to transact. While the number of counterparties in these markets has decreased, to date this occurrence has not had a material adverse effect on our results of operations or financial condition. However, should these conditions persist or increase, it could decrease our ability to hedge our forward commodity price risk and create incremental volatility in our earnings. The effects of declining liquidity in the forward commodity markets is also mitigated by our retail subsidiaries which provides us with an additional outlet to transact hedging activities related to our wholesale power plant portfolio.

Liquidity Risk — Liquidity risk arises from the general funding requirements needed to manage our activities and assets and liabilities. Fluctuating natural gas prices or Market Heat Rates can cause our collateral requirements for our wholesale and retail activities to increase or decrease. Our liquidity management framework is intended to maximize liquidity access and minimize funding costs during times of rising prices. See further discussion regarding our uses of collateral as they relate to our commodity procurement and risk management activities in Note 8 of the Notes to Consolidated Condensed Financial Statements.

Credit Risk — Credit risk relates to the risk of loss resulting from nonperformance or non-payment by our counterparties or customers related to their contractual obligations with us. Risks surrounding counterparty and customer performance and credit could ultimately affect the amount and timing of expected cash flows. We also have credit risk if counterparties or customers are unable to provide collateral or post margin. We monitor and manage our credit risk through credit policies that include:


•	credit approvals;


•	routine monitoring of counterparties’ and customer’s credit limits and their overall credit ratings;


•	limiting our marketing, hedging and optimization activities with high risk counterparties;


•	margin, collateral, or prepayment arrangements; and


•	payment netting arrangements, or master netting arrangements that allow for the netting of positive and negative exposures of various contracts associated with a single counterparty.

We have concentrations of credit risk with a few of our wholesale counterparties and retail customers relating to our sales of power and steam and our hedging, optimization and trading activities. We believe that our credit policies and portfolio of transactions adequately monitor and diversify our credit risk, and currently our counterparties and customers are performing and financially settling timely according to their respective agreements. We monitor and manage our total comprehensive credit risk associated with all of our contracts irrespective of whether they are accounted for as an executory contract, a normal purchase normal sale or whether they are marked-to-market and included in our derivative assets and liabilities on our Consolidated Condensed Balance Sheets. Our counterparty and customer credit quality associated with the net fair value of outstanding derivative commodity instruments is included in our derivative assets and (liabilities), net of allocated collateral, at March 31, 2018 , and the period during which the instruments will mature are summarized in the table below (in millions):



Credit Quality (Based on Credit Ratings as of March 31, 2018)	2018			2019-2020			2021-2022			After 2022			Total
Investment grade	$	(211	)	$	(80	)	$	16		$	(1	)	$	(276	)
Non-investment grade	(3		)	3			(5		)	—			(5		)
No external ratings ⁽¹⁾	54			65			16			8			143
Total fair value	$	(160	)	$	(12	)	$	27		$	7		$	(138	)

__________


(1)	Primarily comprised of the fair value of derivative instruments held with customers that are not rated by third party credit agencies due to the nature and size of the customers.

Interest Rate Risk — Our variable rate financings are indexed to base rates, generally LIBOR. Interest rate risk represents the potential loss in earnings arising from adverse changes in market interest rates. The fair value of our interest rate hedging instruments are validated based upon external quotes. Our interest rate hedging instruments are with counterparties we believe are primarily high quality institutions, and we do not believe that our interest rate hedging instruments expose us to any significant credit risk. Holding all other factors constant, we estimate that a 10% decrease in interest rates would result in a change in the fair value of our interest rate hedging instruments hedging our variable rate debt of approximately $(30) million at March 31, 2018 .

New Accounting Standards and Disclosure Requirements

See Note 1 of the Notes to Consolidated Condensed Financial Statements for a discussion of new accounting standards and disclosure requirements.


Item 3.	Quantitative and Qualitative Disclosures About Market Risk

The information required to be disclosed under this Item 3 is set forth under Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Risk Management and Commodity Accounting.” This information should be read in conjunction with the information disclosed in our 2017 Form 10-K.


Item 4.	Controls and Procedures

Disclosure Controls and Procedures

As of the end of the period covered by this Report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act. Based upon, and as of the date of, this evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that our disclosure controls and procedures were effective such that the information required to be disclosed in our SEC reports is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

During the first quarter of 2018, there were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION


Item 1.	Legal Proceedings

See Note 11 of the Notes to Consolidated Condensed Financial Statements for a description of our legal proceedings.


Item 1A.	Risk Factors

Various risk factors could have a negative effect on our business. These include the following risk factor, in addition to the risk factors previously disclosed in Part I, Item 1A “Risk Factors” of our 2017 Form 10-K:

We may be subject to future claims, litigation and enforcement.

Our power generating operations are inherently hazardous and may lead to catastrophic events, including loss of life, personal injury and destruction of property, and subject us to litigation. Natural gas is highly explosive and power generation involves hazardous activities, including acquiring, transporting and delivering fuel, operating large pieces of rotating equipment and delivering power to transmission and distribution systems. These and other hazards can cause severe damage to and destruction of property, plant and equipment and suspension of operations. In the worst circumstances, catastrophic events can cause significant personal injury or loss of life. Further, the occurrence of any one of these events may result in us being named as a defendant in lawsuits asserting claims for substantial damages. We maintain an amount of insurance protection that we consider adequate; however, we cannot provide any assurance that the insurance will be sufficient or effective under all circumstances and against all hazards or liabilities to which we are subject.

Additionally, we are party to various litigation matters, including regulatory and administrative proceedings arising out of the normal course of business, and we may in the future become party to appraisal proceedings initiated in the Delaware Court of Chancery seeking a judicial determination of the “ fair ” value of shares under Delaware law, together with statutory interest, of Calpine common stock by certain dissenting holders in connection with the Merger. We review our litigation activities and determine if an unfavorable outcome to us is considered “remote,” “reasonably possible” or “probable” as defined by U.S. GAAP. Where we have determined an unfavorable outcome is probable and is reasonably estimable, we accrue for potential litigation losses. A successful claim against us that is not fully insured could be material. The liability we may ultimately incur with respect to such litigation matters, in the event of a negative outcome, may be in excess of amounts currently accrued, if any. Where we determine an unfavorable outcome is not probable or reasonably estimable, we do not accrue for any potential litigation loss. The ultimate outcome of these litigation matters cannot presently be determined, nor can the liability that could potentially result from a negative outcome be reasonably estimated. As a result, we give no assurance that such litigation matters would, individually or in the aggregate, not have a material adverse effect on our financial condition, results of operations or cash flows.

Failures in our systems or a cyber attack or breach of our IT systems or technology could significantly disrupt our business operations or result in sensitive customer information being compromised, which would negatively materially affect our reputation and/or results of operations.

Our IT systems contain personal, financial and other information that is entrusted to us by our customers and employees as well as financial, proprietary and other confidential information related to our business, which makes us a target of cyber attacks on our systems. We rely on electronic networks, computers, systems, including our gateways, programs to run our business and operations, our employees and third party technology and IT infrastructure providers and, as a result, are potentially exposed to the risk of security breaches, computer or other malware, viruses, social engineering or general hacking, industrial espionage, employee or third party error or malfeasance, or other irregularities or compromises on our systems or those to third parties, which could result in the loss or misappropriation of sensitive data or other disruption to our operations.

We depend on computer and telecommunications systems we do not own or control. We have entered into agreements with third parties for hardware, software, telecommunications and other information technology services in connection with the operation of our power plants. In addition, we have developed proprietary software systems, management techniques and other information technologies incorporating software licensed from third parties. We also rely on software systems owned and operated by third parties, such as ISOs and RTOs, to be functioning in order to be able to transmit the electricity produced by our power plants to our customers. It is possible that we, or a third party that we rely on, could incur interruptions from a loss of communications, hardware or software failures, a cyber attack or a breach of our IT systems or technology, computer viruses or malware. We believe that we have positive relations with our vendors and maintain adequate anti-virus and malware software and controls; however, any interruptions to our arrangements with third parties, to our computing and communications infrastructure, or to our information systems or any of those operated by a third party that we rely on could significantly disrupt our business operations.

A cyber attack on our systems or networks that impairs our information technology systems could disrupt our business operations and result in loss of service to customers. We have a comprehensive cybersecurity program designed to protect and

preserve the integrity of our information technology systems. We have experienced and expect to continue to experience actual or attempted cyber attacks on our IT systems or networks; however, none of these actual or attempted cyber attacks has had a material effect on our operations or financial condition. Even when a security breach is detected, the full extent of the breach may not be determined for some time. The risk of a security breach or disruption, particularly through a cyber attack or a cyber intrusion, including by computer hackers, foreign governments and cyber terrorists, has magnified as the number, intensity and sophistication of attempted attacks and intrusions from around the world has increased. An increasing number of companies have disclosed security breaches of their IT systems and networks, some of which have involved sophisticated and highly targeted attacks. We believe such incidents are likely to continue, and we are unable to predict the direct or indirect effect of any future attacks on our business.

Additionally, our retail subsidiaries require access to sensitive customer information in the ordinary course of business. If a significant data breach occurred, the reputation of our retail subsidiaries may be adversely affected, customer confidence may be diminished, and our retail subsidiaries may become subject to legal claims, any of which may contribute to the loss of customers and have a material adverse effect on our retail subsidiaries.


Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds

Repurchase of Equity Securities



Period	(a) Total Number of Shares Purchased ⁽¹⁾	(b) Average Price Paid Per Share		(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs ⁽²⁾	(d) Maximum Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs (in millions) ⁽²⁾
January	2,035	$	15.13	—	$	307
February	472,433	$	15.16	—	$	307
March	3,243	$	15.22	—	$	—
Total	477,711	$	15.16	—	$	—

___________


(1)	Represents shares withheld by us to satisfy tax withholding obligations associated with the vesting of restricted stock awarded to employees during the first quarter of 2018.


(2)	In November 2014, our Board of Directors authorized an increase in the total authorization of our multi-year share repurchase program to $1.0 billion. In connection with the consummation of the Merger on March 8, 2018, all of our shares of common stock previously outstanding were repurchased and retired in accordance with the Merger Agreement.


Item 3.	Defaults Upon Senior Securities

None.


Item 4.	Mine Safety Disclosures

Not applicable.


Item 5.	Other Information

None.


Item 6.	Exhibits

EXHIBIT INDEX



Exhibit Number		Description

3.1		Fourth Amended and Restated Certificate of Incorporation of Calpine Corporation (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on From 8-K filed with the SEC on April 13, 2018).

3.2		Third Amended and Restated By-Laws of Calpine Corporation (incorporated by reference to Exhibit 3.3 to the Company’s Current Report on From 8-K filed with the SEC on April 13, 2018).

10.1		Amended and Restated Limited Partnership Agreement of CPN Management, LP a Delaware Limited Partnership, dated March 8, 2018.†

10.2		Form of Award Agreement of Class B Interest in CPN Management, L.P.†

31.1		Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certification of the Chief Executive Officer and the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. *

101.INS		XBRL Instance Document.

101.SCH		XBRL Taxonomy Extension Schema.

101.CAL		XBRL Taxonomy Extension Calculation Linkbase.

101.DEF		XBRL Taxonomy Extension Definition Linkbase.

101.LAB		XBRL Taxonomy Extension Label Linkbase.

101.PRE		XBRL Taxonomy Extension Presentation Linkbase.

_______________


*	Furnished herewith.


†	Management contract or compensatory plan, contract or arrangement.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.



CALPINE CORPORATION
(Registrant)

By:		/s/ ZAMIR RAUF
		Zamir Rauf Executive Vice President and Chief Financial Officer (Principal Financial Officer)

Date: May 10, 2018

Exhibit 10.1

Execution Version

AMENDED AND RESTATED

LIMITED PARTNERSHIP AGREEMENT

CPN Management, LP

a Delaware Limited Partnership

effective as of March 8, 2018

PARTNERSHIP INTERESTS IN CPN MANAGEMENT, LP, A DELAWARE LIMITED PARTNERSHIP, HAVE NOT BEEN REGISTERED WITH OR QUALIFIED BY THE U.S. SECURITIES AND EXCHANGE COMMISSION OR ANY SECURITIES REGULATORY AUTHORITY OF ANY STATE. THE INTERESTS ARE BEING SOLD IN RELIANCE UPON EXEMPTIONS FROM SUCH REGISTRATION OR QUALIFICATION REQUIREMENTS. THE INTERESTS CANNOT BE SOLD, TRANSFERRED, ASSIGNED OR OTHERWISE DISPOSED OF EXCEPT IN COMPLIANCE WITH THE RESTRICTIONS ON TRANSFERABILITY CONTAINED IN THIS AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT OF CPN MANAGEMENT, LP AND APPLICABLE FEDERAL AND STATE SECURITIES LAWS.



TABLE OF CONTENTS

ARTICLE I. DEFINITIONS			1

	1.01	Certain Definitions	1
	1.02	Construction	12

ARTICLE II. FORMATION			12

	2.01	Continuation of the Partnership	12
	2.02	Name	12
	2.03	Registered Office; Registered Agent	12
	2.04	Principal Place of Business	12
	2.05	Purpose; Powers	13
	2.06	Fiscal Year	13
	2.07	Foreign Qualification Governmental Filings	13
	2.08	Duration	13

ARTICLE III. PARTNERS; REPRESENTATIONS AND WARRANTIES OF PARTNERS			13

	3.01	Partners	13
	3.02	Additional Partners	14
	3.03	Representations and Warranties	14
	3.04	Liability to Third Parties	15

ARTICLE IV. INTERESTS AND CAPITAL CONTRIBUTIONS			15

	4.01	Interests	15
	4.02	Capital Contributions	15
	4.03	Return of Contribution	15
	4.04	Withdrawal of Capital	16
	4.05	Further Contributions	16
	4.06	Capital Accounts	16
	4.07	Award of Interests to Class B Partners	16

ARTICLE V. DISTRIBUTIONS, REDEMPTIONS AND ALLOCATIONS			18

	5.01	Distributions	18
	5.02	Benchmark Amounts; Other Adjustments	18
	5.03	Tax Distributions	18
	5.04	Distributions in Error	19
	5.05	Allocations	19
	5.06	Withholding	23

ARTICLE VI. TRANSFERS OF INTERESTS			23

	6.01	Transfers	23



	6.02	Drag-Along Rights	25
	6.03	Tag-Along Rights	26
	6.04	Pledge of Interests	28
	6.05	Repurchase Rights	28
	6.06	Elective Transfer	31
	6.07	IPO	31
	6.08	Power of Attorney	33
	6.09	Incapacity	33
	6.10	Non-Competition; Non-Solicitation; Non-Disparagement	33
	6.11	Parent Distribution	36

ARTICLE VII. MANAGEMENT			36

	7.01	Management	36
	7.02	Limitation of Duties	37
	7.03	Transactions with Affiliates	37
	7.04	Officers; Partners	37
	7.05	Indemnification; Limitation of Liability	38
	7.06	Officers’ Insurance	39

ARTICLE VIII. OTHER RIGHTS AND OBLIGATIONS OF PARTNERS			40

	8.01	Books and Records	40
	8.02	Schedule K-1 Information	40
	8.03	Confidentiality	40

ARTICLE IX. TAXES			40

	9.01	Tax Returns	40
	9.02	Tax Classification	40
	9.03	Partnership Representative	41
	9.04	Section 409A	41

ARTICLE X. CERTIFICATION OF INTERESTS; REPORTS; BANK ACCOUNTS			41

	10.01	Certification of Interests	41
	10.02	Reports	41
	10.03	Bank Accounts	41

ARTICLE XI. DISSOLUTION, LIQUIDATION TERMINATION AND CONVERSION			41

	11.01	Dissolution	41
	11.02	Liquidation and Termination	42
	11.03	Cancellation of Filing	43



ARTICLE XII. GENERAL PROVISIONS			43

	12.01	Changes in Interests; Disposition of Assets	43
	12.02	Offset	43
	12.03	Notices	43
	12.04	Entire Agreement; Supersedure	44
	12.05	Effect of Waiver or Consent	44
	12.06	Amendment or Modification	44
	12.07	Binding Effect	44
	12.08	Governing Law; Severability	45
	12.09	Further Assurances	45
	12.10	Consent to Jurisdiction; Service of Process; Waiver of Jury Trial	45
	12.11	Waiver of Certain Rights	46
	12.12	Counterparts	46

EXHIBIT A			A-1

EXHIBIT B			B-1

EXHIBIT C			C-1

EXHIBIT D			D-1

EXHIBIT E			E-1

iii

AMENDED AND RESTATED

LIMITED PARTNERSHIP AGREEMENT

CPN MANAGEMENT, LP

This AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT (this “ Agreement ”) of CPN MANAGEMENT, LP, a Delaware limited partnership (the “ Partnership ”), effective as of March 8, 2018 (the “ Effective Date ”), is made and entered into by and among VOLT PARENT GP, LLC, a Delaware limited liability company, as the “ General Partner ,” and each of VOLT PARENT, LP, a Delaware limited partnership (“ Parent ”), and the holders of Class B Interests who execute this Agreement or a joinder hereto. Capitalized terms used but not otherwise defined herein have the meanings set forth in Section 1.01 .

R E C I T A L S

WHEREAS, the Partnership was formed as a limited partnership under the Act pursuant to a certificate of limited partnership (the “ Delaware Certificate ”) filed in the office of the Delaware Secretary of State on January 10, 2018;

WHEREAS, the General Partner and Parent previously entered into that certain Limited Partnership Agreement of the Partnership, dated as of January 10, 2018 (the “ Prior Agreement ”); and

WHEREAS, the Partners desire to amend and restate the Prior Agreement in its entirety as set forth herein and do hereby adopt this Agreement as the Limited Partnership Agreement of the Partnership.

A G R E E M E N T

NOW, THEREFORE, in consideration of the promises and the covenants hereinafter contained and to induce the parties hereto to enter into this Agreement, it is agreed as follows:

ARTICLE I.
DEFINITIONS

1.01 Certain Definitions . As used in this Agreement, the following terms have the following meanings:

“ Act ” means the Delaware Revised Uniform Limited Partnership Act and any successor statute, as amended from time to time.

“ Adjusted Capital Account ” means, with respect to any Partner, the balance in such Partner’s Capital Account as of the end of the relevant Fiscal Year or other period, after giving effect to the following adjustments:

(a) add to such Capital Account any amounts which such Partner is obligated to restore pursuant to this Agreement or is deemed to be obligated to restore to the Partnership pursuant to Treasury Regulations Section 1.704-1(b)(2)(ii)(c) or the penultimate sentence of each of Treasury Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5); and

(b) subtract from such Capital Account such Partner’s share of the items described in Treasury Regulations Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6).

“ Affiliate ” of a Person means any other Person directly or indirectly Controlling or Controlled by or under direct or indirect common Control with the first Person.

“ Agreement ” has the meaning set forth in the introductory paragraph hereof.

“ Amended Drag-Along Notice ” has the meaning set forth in Section 6.02(c) .

“ Amended Tag-Along Notice ” has the meaning set forth in Section 6.03(b) .

“ Assumed Tax Liability ” means, with respect to any Partner, an amount, as determined in good faith by the General Partner, that is equal to the excess, if any, of (i) an amount sufficient to satisfy such Partner’s projected deemed federal, state and local income tax liability with respect to the income and gain allocated to such Partner (giving effect to any current or prior allocations of losses and deductions) for tax purposes pursuant to Section 5.05 of this Agreement for the portion of the then-current year through the end of the then-current fiscal quarter (determined without regard to any activities, income or loss of that Partner realized other than in its capacity as a Partner of the Partnership) over (ii) the distributions made to such Partner pursuant to Sections 5.01 , 5.02 and 5.03 of this Agreement for such year. For each Partner other than Parent, the Assumed Tax Liability will be calculated based on the highest combined marginal income tax rate for an individual residing in New York, New York. For Parent, the Assumed Tax Liability will be calculated based on the highest combined marginal income tax rate for an individual or a corporation (whichever is higher) resident for tax purposes in New York, New York. In each case, the Assumed Tax Liability will also be calculated by utilizing the rates for ordinary income or capital gain (as applicable) depending on the character of the Partnership’s income and gain and (solely if and to the extent that Section 164(b)(6) of the Code is amended or repealed or expires after the date hereof and no longer applies to limit such deduction) taking into account the deductibility (if any) of state and local taxes for federal income tax purposes for the relevant period(s).

“ Available Cash ” means the gross cash proceeds from the Partnership’s operations (including sales and dispositions of property whether or not in the ordinary course of business) and any net cash proceeds from any issuance of equity, less amounts used to pay or establish reserves for all Partnership expenses, debt payments, capital improvements, replacements, future acquisitions and investments and contingencies, in each case as reasonably determined by the General Partner.

“ Award ” has the meaning set forth in Section 4.07(a) .

“ Award Agreement ” means the written agreement between the Partnership and a Limited Partner of the Partnership pursuant to which Class B Interests may be issued to such Limited Partner in accordance with the terms of Section 3.02 .

“ Benchmark Amount ” has the meaning set forth in Section 4.07(c) .

“ Benchmark Component ” has the meaning set forth in Section 4.07(c) .

“ Business Day ” means any day other than a Saturday, Sunday or legal holiday on which banks in New York are authorized or obligated by law to close.

“ Calpine ” means Calpine Corporation, a Delaware corporation and a wholly-owned subsidiary of the Partnership.

“ Calpine Repurchase Right ” has the meaning set forth in Section 6.05(a) .

“ Calpine Shares ” means shares of common stock of Calpine.

“ Capital ” means the amount of cash and/or the initial Gross Asset Value of any non-cash property contributed to the Partnership (at the time of such contribution) by the Partners pursuant to the terms of this Agreement.

“ Capital Account ” means the capital account maintained for each Partner on the Partnership’s books and records in accordance with the following provisions:

(a) To each Partner’s Capital Account there will be added (i) the amount of cash and the Gross Asset Value of any other asset contributed by such Partner (at the time of such contribution) to the Partnership pursuant to Article IV hereof, (ii) such Partner’s allocable share of Profits and any items in the nature of income or gain that are specially allocated to such Partner pursuant to Section 5.05(a) and (b) hereof or other provisions of this Agreement, and (iii) the amount of any Partnership liabilities assumed by such Partner or which are secured by any property distributed to such Partner.

(b) From each Partner’s Capital Account there will be subtracted (i) the amount of cash and the Gross Asset Value of any other Partnership assets distributed to such Partner pursuant to any provision of this Agreement, (ii) such Partner’s allocable share of Losses and any other items in the nature of expenses or losses that are specially allocated to such Partner pursuant to Section 5.05(a) and (b) or other provisions of this Agreement, and (iii) liabilities of such Partner assumed by the Partnership or which are secured by any property contributed by such Partner to the Partnership.

(c) In the event any Interest is Transferred in accordance with the terms of this Agreement, the transferee will succeed to the Capital Account of the transferor to the extent it relates to the transferred Interest.

(d) Determination of the amount of any liability for purposes of subparagraphs (a) and (b) above will take into account Code Section 752(c) and any other applicable provisions of the Code and Treasury Regulations.

(e) The foregoing provisions and the other provisions of this Agreement relating to the maintenance of Capital Accounts are intended to comply with Treasury Regulations Sections 1.704-1(b) and 1.704-2 and will be interpreted and applied in a manner consistent with such Treasury Regulations. In the event that the General Partner determines that it is prudent to modify the manner

in which the Capital Accounts, or any additions or subtractions thereto, are computed in order to comply with such Treasury Regulations, the General Partner may make such modification, provided that it is not likely to have a material effect on the amounts distributable to any Partner pursuant to Article XI hereof upon the dissolution of the Partnership.

“ Capital Contribution ” means any amount of Capital contributed to the Partnership by a Partner pursuant to the terms of this Agreement. Any reference to the Capital Contributions of a Partner will include the Capital Contributions made by a predecessor holder of the Interest of such Partner.

“ Class A Interest ” means any Interests (other than the Class B Interests), which may be denominated in one or more sub-classes and all such sub-classes together shall be deemed Class A Interests.

“ Class A Partner ” and “ Class A Partners ” means a Partner, in its capacity as a holder of record of Class A Interests, with a Capital Account as set forth on Exhibit A hereto.

“ Class B Interests ” means the Interests in the Partnership having the rights and obligations set forth in this Agreement with respect to Class B Interests and issued pursuant to Sections 3.02 and 4.07, as set forth on Exhibit A hereto.

“ Class B Partner ” and “ Class B Partners ” means a Limited Partner, in its capacity as a holder of record of Class B Interests, in each case so long as such Person is shown on the Partnership’s books and records as the owner of Class B Interests hereunder (or Calpine Shares received in redemption therefor pursuant to Section 6.05 ), but excluding the Partnership, the General Partner and the Class A Partners in the event the Partnership, the General Partner and/or the Class A Partners purchase Class B Interests pursuant to this Agreement.

“ Code ” means the Internal Revenue Code of 1986 and any successor statute, as amended from time to time.

“ Control ” means possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through ownership of voting securities, by agreement or otherwise.

“ Conversion Date ” has the meaning set forth in Section 6.07(b) .

“ Conversion Shares ” has the meaning set forth in Section 6.07(a) .

“ Date of Termination ” means, with respect to each Class B Partner, the date on which such Class B Partner’s employment with or other service for the Partnership or its Affiliates terminates for any reason.

“ Deemed Fair Value ” means the price which, if paid for all of the Partnership’s assets, would produce net proceeds after payment of the Partnership’s liabilities (limited, in the case of nonrecourse liabilities, to the fair market value of the assets securing those liabilities) which, if distributed to the applicable Partner pursuant to Section 11.02(c)(iii) with respect to that portion of

such Partner’s aggregate Interest being Transferred, would equal the applicable purchase price payable to such Partner in connection with any Drag-Along Sale or Tag-Along Sale, as applicable.

“ Delaware Certificate ” has the meaning set forth in the Recitals.

“ Depreciation ” means, for each Fiscal Year or other period, an amount equal to the depreciation, amortization or other cost recovery deduction allowable for federal income tax purposes with respect to an asset for such Fiscal Year or other period, except that if the Gross Asset Value of an asset differs from its adjusted basis for federal income tax purposes at the beginning of such Fiscal Year or other period, Depreciation will be an amount that bears the same ratio to such beginning Gross Asset Value as the federal income tax depreciation, amortization or other cost recovery deduction for such Fiscal Year or other period bears to such beginning adjusted tax basis; provided , that if the method described in Treasury Regulations Section 1.704-3(d) is used to take account of the difference between an asset’s Gross Asset Value and its adjusted tax basis, then Depreciation in respect of such asset (or the relevant portion thereof) shall be determined in accordance with Treasury Regulations Section 1.704-3(d)(2). Notwithstanding the foregoing, if the federal income tax depreciation, amortization or other cost recovery deduction allowable for such Fiscal Year or other period is zero, Depreciation will be determined with reference to such beginning Gross Asset Value using any reasonable method selected by the General Partner.

“ Disability Notice ” has the meaning set forth in Section 6.05(f)(ii) .

“ Drag-Along Co-Seller ” has the meaning set forth in Section 6.02(a) .

“ Drag-Along Notice ” has the meaning set forth in Section 6.02(c) .

“ Drag-Along Rights ” has the meaning set forth in Section 6.02(a) .

“ Drag-Along Sale ” has the meaning set forth in Section 6.02(a) .

“ Drag-Along Transferee ” has the meaning set forth in Section 6.02(a) .

“ Economic Interest ” means a Person’s right to share in the Profits, Losses or similar items of, and to receive distributions from, the Partnership, but does not include any other rights of a Partner including the right to vote, consent or otherwise participate in the management of the Partnership, or, except as specifically provided in this Agreement or required under the Act, any right to information concerning the business and affairs of the Partnership.

“ ECP ” means, collectively, Energy Capital Partners III, LP, Energy Capital Partners IV, LP and any of their respective parallel funds, co-investment vehicles, acquisition vehicles or alternative investment vehicles.

“ ECP Aggregate Ownership ” has the meaning set forth in Section 4.07(e) .

“ Effective Date ” has the meaning set forth in the introductory paragraph hereof.

“ Entity ” means any corporation, limited liability company, general partnership, limited partnership, venture, trust, business trust, unincorporated association, estate or other entity.

“ Fair Market Value ” means the price at which property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or sell, and both having reasonable knowledge of the relevant facts, as determined by the General Partner in good faith and consistent with any contemporaneous arm’s length transaction using such reasonable methods of valuation as it may adopt.

“Financing Documents ” has the meaning set forth in Section 6.05(f)(i) .

“ Fiscal Year ” has the meaning set forth in Section 2.06 .

“ GAAP ” means generally accepted accounting principles in effect from time to time in the United States, applied on a consistent basis.

“ General Partner ” means Volt Parent GP, LLC, a Delaware limited liability company, and its successors and permitted assigns as general partner of the Partnership. The General Partner has no obligation to make Capital Contributions or right to receive distributions under this Agreement.

“ Gross Asset Value ” means, with respect to any asset, the asset’s adjusted basis for federal income tax purposes, except as follows:

(a) The initial Gross Asset Value of any non-cash asset contributed by a Partner to the Partnership is the gross Fair Market Value of such asset.

(b) The Gross Asset Value of all Partnership assets immediately prior to the occurrence of any event described in subparagraphs (i) through (v) below may be adjusted to equal their respective gross Fair Market Values:

(i) the acquisition of an additional Interest in the Partnership by a new or existing Partner in exchange for a more than de minimis Capital Contribution, if the General Partner reasonably determines that such adjustment is necessary or appropriate to reflect the relative Interests of the Partners in the Partnership;

(ii) the distribution by the Partnership to a Partner of more than a de minimis amount of Partnership assets as consideration for an Interest in the Partnership, if the General Partner reasonably determines that such adjustment is necessary or appropriate to reflect the relative Interests of the Partners in the Partnership;

(iii) the liquidation or dissolution of the Partnership within the meaning of Treasury Regulations Section 1.704-1(b)(2)(ii)(g);

(iv) the grant of a more than de minimis Interest in the Partnership as consideration for the provision of services to or for the benefit of the Partnership by an existing Partner acting in his capacity as a Partner, or by a new Partner acting in his capacity as a Partner or in anticipation of becoming a Partner of the Partnership, if the General Partner

reasonably determines that such adjustment is necessary or appropriate to reflect the relative Interests of the Partners in the Partnership, provided that such adjustment is consistent with the economic results contemplated by the parties under this Agreement; and

(v) at such other times as the General Partner may reasonably determine necessary or advisable in order to comply with Treasury Regulations Sections 1.704-1(b) and 1.704-2 in a manner consistent with the economic results contemplated by the parties under this Agreement.

(c) The Gross Asset Value of any Partnership asset distributed to a Partner is the gross Fair Market Value of such asset (taking Section 7701(g) of the Code into account) on the date of distribution.

(d) The Gross Asset Values of Partnership assets will be increased (or decreased) to reflect any adjustments to the adjusted basis of such assets pursuant to Code Section 734(b) or Code Section 743(b), but only to the extent that such adjustments are taken into account in determining Capital Accounts pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(m), except that Gross Asset Values will not be adjusted pursuant to this subparagraph (d) to the extent that an adjustment pursuant to subparagraph (b) above is made in connection with a transaction that would otherwise result in an adjustment pursuant to this subparagraph (d) .

(e) If the Gross Asset Value of a Partnership asset has been determined or adjusted pursuant to subparagraph (a) , (b) or (d) above, such Gross Asset Value will thereafter be adjusted by the Depreciation taken into account with respect to such asset for purposes of computing Profits and Losses, and not by the depreciation, amortization and other cost recovery deductions taken into account with respect to that asset for federal income tax purposes.

“ Hypothetical Value ” means, in respect of a Partner’s Interests (or ECP’s direct or indirect equity interest in Parent), a pro rata portion (based on the ratio which (i) the portion of such Partner’s Interests (or ECP’s direct or indirect equity interest in Parent) being Transferred pursuant to Tag-Along Rights or Drag-Along Rights bears to (ii) such Partner’s entire Interest (or ECP’s entire direct or indirect equity interest in Parent)) of the amount that would have been distributed with respect to such Partner’s entire Interest (or ECP’s entire direct or indirect equity interest in Parent) pursuant to Section 11.02(c)(iii) , if all of the Partnership’s assets and liabilities had been sold for their Deemed Fair Value and, immediately following the consummation of such hypothetical sale, the Partnership distributed the proceeds in accordance with Section 11.02(c)(iii) .

“ Incapacity ” means the entry of an order of incompetence or of insanity, or the death, dissolution, bankruptcy (as defined in the Act), or termination (other than by merger or consolidation) of any Person.

“ Indemnitee ” has the meaning set forth in Section 7.05(a) .

“ Initial Repurchase Deadline ” has the meaning set forth in Section 6.05(a) .

“ Interest ” means the partnership interest of a Partner in the Partnership at any particular time including such Partner’s Economic Interest and the right, if any, to participate in the management of the business and affairs of the Partnership, including the right (if any) to vote on, consent to or otherwise participate in any decision or action of or by the Partners, the right (if any) to designate members to the board of managers (or similar governing body) of the General Partner, and the right (if any) to receive information concerning the business and affairs of the Partnership, in each case to the extent expressly provided in this Agreement or otherwise required by the Act.

“ IPO ” means the initial public offering of the Partnership’s equity securities or the equity securities of a Person that owns not less than 50.1% of the equity securities of the Partnership and holds no assets other than equity securities of the Partnership or any successor of the Partnership, in either case pursuant to an effective registration statement under the Securities Act.

“ Lien ” means (a) any lien, mortgage, pledge, assignment, security interest, charge or encumbrance of any kind (including any agreement to give any of the foregoing, any conditional sale or other title retention agreement, and any lease in the nature thereof) and any option, trust or other preferential arrangement having the practical effect of any of the foregoing and (b) in the case of securities, any purchase option, call or similar right of a third party with respect to such securities.

“ Limited Partner ” means a limited partner of the Partnership.

“ Nonrecourse Deductions ” has the meaning set forth in Treasury Regulations Sections 1.704-2(b)(1) and 1.704-2(c).

“ Nonrecourse Liability ” has the meaning set forth in Treasury Regulations Sections 1.704-2(b)(3) and 1.752-1(a)(2).

“ Obligations ” means all obligations of every nature of the Partnership under this Agreement.

“ Officer ” means any Person designated as an officer of the Partnership pursuant to Section 7.04(a) .

“ Parent ” has the meaning set forth in the introductory paragraph hereof.

“ Parent Distribution ” has the meaning set forth in Section 6.11 .

“ Parent LPA ” means that certain Second Amended and Restated Limited Partnership Agreement of Parent, dated March 7, 2018, as the same may be amended, restated, supplemented or otherwise modified from time to time in accordance with its terms.

“ Parent-Related Indemnitee ” has the meaning set forth in Section 7.05(g).

“ Parent-Related Indemnitors ” has the meaning set forth in Section 7.05(g) .

“ Parent-Related Partner ” means Parent and (i) any Affiliate of Parent or any direct or indirect partner, member or other equity participant of any of the foregoing, and (ii) any Transferee of the foregoing, in each case for so long as such Person owns any Interests.

“ Partner ” means each of the General Partner, Parent, each other Limited Partner, and any other Person who becomes a Partner in accordance with the terms of this Agreement, but does not include any Person who has ceased to hold any Interests in the Partnership.

“ Partner Minimum Gain ” means an amount, with respect to each Partner Nonrecourse Debt, equal to the Partnership Minimum Gain that would result if such Partner Nonrecourse Debt were treated as a Nonrecourse Liability, determined in accordance with Treasury Regulations Section 1.704-2(i) with respect to “partner minimum gain.”

“ Partner Nonrecourse Debt ” has the meaning set forth in Treasury Regulations Section 1.704-2(b)(4) for the phrase “partner nonrecourse debt.”

“ Partner Nonrecourse Deductions ” has the meaning set forth in Treasury Regulations Section 1.704-2(i) for the phrase “partner nonrecourse deductions.”

“ Partnership ” has the meaning set forth in the introductory paragraph hereof.

“ Partnership Minimum Gain ” has the meaning set forth in Treasury Regulations Sections 1.704-2(b)(2) and 1.704-2(d)(1) for the phrase “partnership minimum gain.”

“ Partnership Redemption Right ” has the meaning set forth in Section 6.05(a) .

“ Percentage Interest ” means, (i) as to each Class B Partner, its Percentage Interest (including both the vested and unvested portions), as set forth on Exhibit A attached hereto, as shall be amended from time to time by the General Partner to reflect any changes, and (ii) with respect to each Class A Partner, the product of (A) 100% minus the aggregate then outstanding Percentage Interests held by the Class B Partners at such time and (B) a fraction, the numerator of which is the total Capital contributed by such Class A Partner, as applicable, to the Partnership and the denominator of which is the aggregate total Capital contributed by all Class A Partners to the Partnership.

“ Performance Class B Interests ” has the meaning set forth in Section 4.07(e) .

“ Person ” means any individual or Entity.

“ Prime Rate ” means the prime rate listed from time to time in The Wall Street Journal , which listing appears as of the relevant date of determination under the caption “Money Rates.”

“ Prior Agreement ” has the meaning set forth in the Recitals.

“ Profits ” and “ Losses ” means, for each Fiscal Year or other period, an amount equal to the Partnership’s taxable income or loss for such year or period determined in accordance with Code Section 703(a) (for this purpose, all items of income, gain, loss, deduction or credit required to be stated separately pursuant to Code Section 703(a)(1) will be included in taxable income or loss), with the following adjustments:

(a) Any income of the Partnership that is exempt from federal income tax and not otherwise taken into account in computing Profits or Losses pursuant to this definition of Profits and Losses will increase the amount of such income and/or decrease the amount of such loss;

(b) Any expenditure of the Partnership described in Code Section 705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into account in computing Profits or Losses pursuant to this definition of Profits and Losses, will decrease the amount of such income and/or increase the amount of such loss;

(c) Gain or loss resulting from any disposition of Partnership assets where such gain or loss is recognized for federal income tax purposes will be computed by reference to the Gross Asset Value of the Partnership assets disposed of, notwithstanding that the adjusted tax basis of such Partnership assets differs from their Gross Asset Value;

(d) In lieu of the depreciation, amortization and other cost recovery deductions taken into account in computing such income or loss, Depreciation will be taken into account for such Fiscal Year or other period;

(e) To the extent an adjustment to the adjusted tax basis of any asset included in Partnership assets pursuant to Code Section 734(b) or Code Section 743(b) is required pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(m) to be taken into account in determining Capital Accounts as a result of a distribution other than in liquidation of a Partner’s Interest, the amount of such adjustment will be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases the basis of the asset) from the disposition of the asset and will be taken into account for the purposes of computing Profits and Losses;

(f) If the Gross Asset Value of any Partnership asset is adjusted in accordance with subparagraph (b) or subparagraph (c) of the definition of “Gross Asset Value” above, the amount of such adjustment will be taken into account in the taxable year of such adjustment as gain or loss from the disposition of such asset for purposes of computing Profits or Losses; and

(g) Notwithstanding any other provision of this definition of Profits and Losses, any items that are specially allocated pursuant to Article V hereof will not be taken into account in computing Profits or Losses. The amounts of the items of Partnership income, gain, loss or deduction available to be specially allocated pursuant to Article V hereof will be determined by applying rules analogous to those set forth in this definition of Profits and Losses.

“ Proposed Regulations ” has the meaning set forth in Section 5.05(d)(iv) .

“ Proprietary Information ” has the meaning set forth in Section 6.10(c) .

“ Regulatory Allocations ” has the meaning set forth in Section 5.05(b)(viii) .

“ Reinstatement Notice ” has the meaning set forth in Section 6.05(f)(ii) .

“ Repurchase Disability ” has the meaning set forth in Section 6.05(f)(i) .

“ Repurchase Price ” means, with respect to any Calpine Shares held by a Class B Partner subject to the repurchase rights in Section 6.05 , the “Repurchase Price” as defined in the Award Agreement between the Partnership and the triggering Class B Partner.

“ Repurchase Trigger ” has the meaning set forth in Section 6.05(a) .

“ Restricted Business ” has the meaning set forth in Section 6.10(a) .

“ Restricted Period ” has, with respect to each Class B Partner, the meaning set forth in any Award Agreement entered into with such Class B Partner.

“ Section 409A ” means Section 409A of the Code and the Department of Treasury Regulations and other interpretive guidance issued thereunder, including without limitation any such regulations or other guidance that may be issued after the Effective Date hereof.

“ Securities Act ” means the Securities Act of 1933, as amended.

“ Stockholders Agreement ” means that certain Stockholders Agreement of Calpine, dated as of the date hereof, by and among Calpine, the Partnership and each of the other stockholders who become parties thereto from time to time in accordance with the terms thereof, as such agreement may be amended, restated, supplemented or otherwise modified from time to time in accordance with the terms thereof.

“ Substitute Partner ” means (i) any Person (A) to whom a Partner (or transferee thereof) Transfers all or any part of such Partner’s Interest in the Partnership, and (B) which has been admitted to the Partnership as a Substitute Partner pursuant to Section 6.01(e) and (ii) any Person that purchases any Interest(s) pursuant to and in compliance with Sections 6.02 , 6.03 or 6.06 .

“ Tag-Along Notice ” has the meaning set forth in Section 6.03(b) .

“ Tag-Along Participant ” has the meaning set forth in Section 6.03(a) .

“ Tag-Along Rights ” has the meaning set forth in Section 6.03(a) .

“ Tag-Along Sale ” means any Transfer subject to Section 6.03(a) .

“ Tag-Along Transferee ” has the meaning set forth in Section 6.03(a) .

“ Third Party ” means any “person” or related “group” of “persons” (as such terms are used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended) other than (i) Calpine, the Partnership, Parent or any of their respective Affiliates or (ii) any employee benefit plan maintained by Calpine or any of its subsidiaries.

“ Transfer ” means a sale, assignment, transfer, exchange, or other disposition of or a pledge or grant of a security interest in or other encumbrance on any Interest.

“ Transferee ” means a Person that acquires all or any portion of an Interest as a result of a Transfer.

“ Transferor ” means a Person that Transfers all or any portion of an Interest to another Person.

“ Unreturned Capital ” means, with respect to any Class A Partner, an amount equal to the aggregate Capital Contributions made or deemed made by such Partner with respect to such Partner’s Interest, minus the aggregate amount of such Capital Contributions that have been returned to such Partner pursuant to Section 5.01 and Section 5.03 .

1.02 Construction . Whenever the context requires, the gender of all words used in this Agreement includes the masculine, feminine, and neuter. All references to Articles and Sections refer to articles and sections of this Agreement, and all references to Exhibits and Schedules are to exhibits and schedules attached hereto, each of which is made a part hereof for all purposes. The use herein of the word “include” or “including,” when following any general statement, term or matter, will not be construed to limit such statement, term or matter to the specific items or matters set forth following such word or to similar items or matters, whether or not non-limiting language (such as “without limitation” or “but not limited to” or words of similar import) is used with reference thereto, but rather will be deemed to refer to all other items or matters that fall within the broadest possible scope of such general statement, term or matter. The term “or” is not exclusive. The definitions set forth or referred to in Section 1.01 will apply equally to both the singular and plural forms of the terms defined. All accounting terms used herein and not otherwise defined herein will have the meanings accorded them in accordance with GAAP and, except as expressly provided herein, all accounting determinations will be made in accordance with GAAP.

ARTICLE II.
FORMATION

2.01 Continuation of the Partnership . The Partnership was formed as a Delaware limited partnership on January 10, 2018 by the filing of the Delaware Certificate. The Partners desire to continue the Partnership for the purposes and upon the terms and conditions set forth herein. As of the Effective Date, the General Partner, Parent and the holders of Class B Interests party to this Agreement constitute all of the Partners of the Partnership. Except as provided herein, the rights, duties and liabilities of each Partner will be as provided in the Act.

2.02 Name . The name of the Partnership is “CPN Management, LP”. Partnership business will be conducted in such name or such other names that comply with applicable law as the General Partner may select from time to time.

2.03 Registered Office; Registered Agent . The registered office of the Partnership in the State of Delaware will be the initial registered office designated in the Delaware Certificate or such other office (which need not be a place of business of the Partnership) as the General Partner may designate from time to time in the manner provided by law. The registered agent of the Partnership in the State of Delaware will be the initial registered agent designated in the Delaware Certificate, or such other Person or Persons as the General Partner may designate from time to time in the manner provided by law.

2.04 Principal Place of Business . The principal place of business of the Partnership will be at 717 Texas Avenue, Suite 100, Houston Texas 77002, or such other location as the General

Partner may designate from time to time, which need not be in the State of Delaware. The Partnership may have such other offices as the General Partner may determine appropriate.

2.05 Purpose; Powers . The purpose of the Partnership is to directly or indirectly own Calpine and to issue the Class B Interests to the Class B Partners. The Partnership shall have the power to engage in any and all lawful businesses or activities and exercise any powers in which a limited partnership may be engaged under applicable law, including the Act. The Partnership will have all powers permitted to be exercised by a limited partnership organized in the State of Delaware.

2.06 Fiscal Year . The fiscal year of the Partnership (the “ Fiscal Year ”) for financial statement and federal income tax purposes will end on December 31st unless otherwise determined by the General Partner or required under the Code.

2.07 Foreign Qualification Governmental Filings . The General Partner is authorized to cause the Partnership to comply, to the extent procedures are available, with all requirements necessary to qualify the Partnership as a foreign limited partnership in any jurisdiction where the Partnership may conduct business. Each Officer is authorized, on behalf of the Partnership, to execute, acknowledge, swear to and deliver all certificates and other instruments as may be necessary or appropriate in connection with such qualifications. Further, each Partner will execute, acknowledge, swear to and deliver all certificates and other instruments that are necessary or appropriate to qualify, or, as appropriate, to continue or terminate such qualification of, the Partnership as a foreign limited partnership in all such jurisdictions in which the Partnership may conduct business.

2.08 Duration . The Partnership commenced on the date the Delaware Certificate was filed with the Delaware Secretary of State, and the Partnership will be perpetual in duration unless terminated pursuant to this Agreement.

ARTICLE III.
PARTNERS; REPRESENTATIONS AND WARRANTIES OF PARTNERS

3.01 Partners . As of the Effective Date, the General Partner, Parent and the holders of Class B Interests party to this Agreement are the only Partners of the Partnership. The names, addresses, type of Interests held by the Partners, Benchmark Components, Capital Contributions and Percentage Interests of the Partners are set forth on Exhibit A attached hereto and incorporated herein. The General Partner is hereby authorized to complete or amend Exhibit A from time to time to reflect the admission of additional Partners, the withdrawal of a Partner, the change of address of any Partner, the Capital Contribution of a Partner, the Percentage Interests of a Partner upon any issuance, redemption or Transfer of such Partner’s Interests, and other information called for by Exhibit A , and to correct or amend Exhibit A . Such completion, correction or amendment may be made from time to time as and when the General Partner considers it appropriate. The General Partner may, in its discretion, in lieu of providing each Partner with a complete version of Exhibit A , elect to provide any Partner with a redacted or partial version of Exhibit A containing only such information as the General Partner determines appropriate under the circumstances; provided , that any such redacted or partial version of Exhibit A shall contain at least such Partner’s Capital Contributions and Percentage Interests.

3.02 Additional Partners . Subject to the provisions of this Agreement, including Section 8.03 and Article VI , as applicable, hereof upon the approval of the General Partner, additional Persons may be admitted to the Partnership as Partners and Interests may be created and issued to such Persons as determined by the General Partner on such terms and conditions as the General Partner may determine at the time of admission (including subject to such Person’s agreement to be bound by and execution of an Award Agreement containing vesting and other terms and conditions determined in the General Partner’s sole discretion), provided that any Person that acquires Interests pursuant to a Transfer permitted by, and effected in accordance with, this Agreement will be deemed to be automatically approved by the General Partner. The terms of admission may provide for the creation of different classes or series of Interests having different rights, powers and duties. As a condition to the admission of any Person as a Partner of the Partnership, such Person must agree to be bound by the terms of this Agreement by executing and delivering a joinder to this Agreement in the form attached hereto as Exhibit B , and must make the representations and warranties set forth in Section 3.03 as of the date of such Person’s admission as a Partner of the Partnership.

3.03 Representations and Warranties . Each Partner hereby represents and warrants to the Partnership and each other Partner that, as of the Effective Date (or, for any Partner that becomes a Partner after the Effective Date, as of such date he, she or it becomes a Partner):

(a) Power and Authority . Such Partner has full power and authority to enter into this Agreement and to perform its obligations hereunder;

(b) No Conflicts . The execution, delivery and performance of this Agreement do not conflict with any other agreement or arrangement to which such Partner is a party or by which it is or its assets are bound;

(c) Own Account . Such Partner is and will be acquiring such Partner’s Interest for investment purposes only for his, her or its own account and not with a view to distribution, reoffer, resale or any other disposition not in compliance with the Securities Act and applicable state securities laws;

(d) Expertise . Such Partner alone, or together with such Partner’s representatives, possesses such expertise, knowledge and sophistication in financial and business matters generally, and in the type of transactions in which the Partnership proposes to engage in particular, that such Partner is capable of evaluating the merits and economic risks of acquiring and holding an Interest, and such Partner is able to bear all such economic risks now and in the future;

(e) Access to Information . Such Partner has had access to all of the information with respect to the Partnership and his, her or its Interest that such Partner deems necessary to make a complete evaluation thereof;

(f) Own Evaluation . Such Partner’s decision to acquire an Interest for investment has been based solely upon the evaluation made by such Partner;

(g) Awareness of Economic Risk . Such Partner is aware that such Partner must bear the economic risk of such Partner’s investment in the Partnership for an indefinite

period of time because the Interests have not been registered under the Securities Act or under the securities laws of any state, and, therefore, such Interests cannot be sold unless they are subsequently registered under the Securities Act and any applicable state securities laws or an exemption from registration is available;

(h) No Registration Rights . Such Partner is aware that only the Partnership can take action to register Interests in the Partnership and that the Partnership is under no such obligation and does not propose or intend to attempt to do so;

(i) Transfer Restrictions . Such Partner is aware that this Agreement provides restrictions on the ability of a Partner to Transfer Interests, and such Partner will not seek to effect any Transfer other than in accordance with such restrictions; and

(j) Accredited Investor . Such Partner is, and at such time that such Partner acquires any Interests of the Partnership or makes Capital Contributions (if any) to the Partnership, will be, an “accredited investor” within the meaning of Rule 501 under the Securities Act, unless such Partner has notified the Partnership in writing that such Partner is not an accredited investor.

3.04 Liability to Third Parties . No Limited Partner or Officer will have any personal liability for any obligations or liabilities of the Partnership, whether such liabilities arise in contract, tort or otherwise, except to the extent that any such liabilities or obligations are expressly assumed in writing by such Limited Partner or Officer. Nothing in this Section 3.04 comprises or will be construed as an agreement by the Partnership to indemnify or hold harmless any Limited Partner or Officer.

ARTICLE IV.
INTERESTS AND CAPITAL CONTRIBUTIONS

4.01 Interests . Each Partner’s interest in the Partnership will be represented by its Capital Account and by Interests issued by the Partnership to such Partner. Subject to Sections 3.02 and 8.03 , additional Interests may be issued from time to time as may be determined by the General Partner. The General Partner may create additional series or classes through subdivision or by issuance of Interests of such class or series.

4.02 Capital Contributions . As of the Effective Date, Parent has made the initial Capital Contribution set forth on Exhibit A hereto. The General Partner will determine, in its sole discretion at any time and from time to time, whether Parent will make additional Capital Contributions.

4.03 Return of Contribution . Except as provided in this Agreement, a Partner is not entitled to the return of any part of its Capital Contributions or to be paid interest in respect of either its Capital Account or its Capital Contributions. Any Capital Contribution that has not been repaid is not a liability of the Partnership or of the other Partners. A Partner is not required to contribute or to lend any cash or property to the Partnership to enable the Partnership to return the other Partners’ Capital Contributions.

4.04 Withdrawal of Capital . Except as provided in Article VI , no Partner has the right to withdraw any part of its Capital Contribution from the Partnership or to receive the return of any part of its Interest in the Partnership prior to its liquidation and termination pursuant to Article XI hereof.

4.05 Further Contributions . Except as specifically set forth in Section 4.02 , no Partner shall be required or permitted to make further Capital Contributions to the Partnership.

4.06 Capital Accounts . The Partnership will maintain for each Limited Partner owning any Interests a separate Capital Account with respect to such Interests in accordance with the rules of Treasury Regulations Section 1.704-1(b)(2)(iv) and as set forth in this Agreement.

4.07 Award of Interests to Class B Partners .

(a) Each issuance of Interests to a Class B Partner hereunder (an “ Award ”) shall be subject to the terms and conditions of this Agreement and an Award Agreement containing such vesting and other terms, conditions and limitations (including provisions regarding repurchases of interests) as may be determined in the sole discretion of the General Partner; provided that, (i) no Award Agreement shall be entered into by the Partnership, and the Partnership shall not issue any Award, without the prior approval of Parent, and (ii) except as expressly provided in the Award Agreement or any employment agreement, if the Award Agreement or employment agreement contains any provision that conflicts with this Agreement, the applicable provision of this Agreement shall prevail and control and the conflicting provision of such Award Agreement or employment agreement (and only such provision) shall be of no force or effect. Each Award Agreement shall be executed by an authorized Officer, on behalf of the Partnership, and by such Class B Partner. No Class B Partner or any employee of, or service provider to, the Partnership or any subsidiary thereof shall execute or approve, on behalf of the Partnership, such employee or service provider’s own, or such Class B Partner’s own Award Agreement or any other instrument that directly relates to such employee or service provider’s specific interests under this Agreement or the Award Agreement. Neither this Agreement nor any Award Agreement shall confer upon any Class B Partner or any other Person any right with respect to continuation of service with the Partnership or any subsidiary thereof, nor shall it interfere in any way with the right of the Partnership or any subsidiary thereof to terminate any employee’s, service provider’s or any other Person’s service at any time. Absent express provisions to the contrary, Awards and related benefits or payments shall not be deemed compensation for purposes of computing benefits or contributions under any retirement plan of the Partnership or any subsidiary thereof and shall not affect any benefits under any other benefit plan of any kind or subsequently in effect under which the availability or amount of benefits is related to level of compensation.

(b) A separate series of Class B Interests shall be created with respect to the Awards issued to any Class B Partner on any given issuance date, and shall be set forth on Exhibit A along with the applicable information determined in accordance with Section 4.07(c) below.

(c) The General Partner shall determine the benchmark amount with respect to each series of Class B Interests as of a given date, which amount shall, unless otherwise specified by the General Partner or as provided in Section 4.07(e) , be the sum of (x) the amount set forth with respect to such series in the “Benchmark Component” column on Exhibit A (with such “Benchmark Component” representing the Fair Market Value of the equity Interests of the Partnership at such time such series is issued or such greater amount as determined by the General Partner in its sole discretion) and (y) the amount of all Capital Contributions (if any) made on or after the date such series is issued (the “ Benchmark Amount ”). This Section 4.07(c) , together with the provisions of Section 5.02 , is intended to result in each series of Class B Interests being treated as a “profits interest” for U.S. federal income tax purposes as of the date such series is issued.

(d) Except as provided in Section 4.07(e) , in no event shall the aggregate amount of outstanding Class B Interests held by Class B Partners represent an aggregate Percentage Interest (including both vested and unvested Percentage Interests) in excess of 6%, of which an aggregate Percentage Interest of 5.5% shall be granted as soon as practicable following the Effective Date. The allocation of the remaining 0.5% among the employees of Calpine shall be made by the Chief Executive Officer of Calpine, with the approval of the General Partner.

(e) In addition to the Class B Interests described in Section 4.07(d), the Partnership shall grant Class B Interests with an aggregate Percentage Interest of 2.5% (the “ Performance Class B Interests ”). Each Performance Class B Interest shall have a Benchmark Component equal to the greater of (i) 2.00x the aggregate Fair Market Value of the equity Interests of the Partnership as of the Effective Date and (ii) the aggregate Fair Market Value of the equity Interests of the Partnership as of the date such Performance Class B Interest is granted and, notwithstanding Section 4.07(c) , shall have a Benchmark Amount equal to the sum of (x) the Benchmark Component and (y) 2.00x the amount of all Capital Contributions (if any) made on or after the Effective Date. The Performance Class B Interests shall vest only upon a Change in Control (as defined in the applicable Award Agreement) that occurs within seven (7) years following the Effective Date, subject to the holder’s continuous employment with Calpine or any of its subsidiaries through the date of such Change in Control; provided that, in the event of such a Change in Control arising from a transaction or series of transactions in which ECP directly or indirectly Transfers to a Third Party securities of Parent possessing less than 100% of the total combined voting power of the securities of Parent beneficially owned, directly or indirectly, in the aggregate by ECP as of the Effective Date (such combined voting power as of the Effective Date, the “ ECP Aggregate Ownership ”), then only a portion of the Performance Class B Interests held by each Limited Partner shall vest, with such portion equal to the percentage of the ECP Aggregate Ownership directly or indirectly Transferred by ECP in such Change in Control, and the remainder of such Limited Partner’s Performance Class B Interests shall be forfeited upon such Change in Control without payment therefor. Any unvested Performance Class B Interests shall be forfeited on the day after the seventh (7th) anniversary of the Effective Date without payment therefor. The allocation of the Performance Class B Interests among

the employees of Calpine shall be made by the Chief Executive Officer of Calpine, with the approval of the General Partner.

ARTICLE V.
DISTRIBUTIONS, REDEMPTIONS AND ALLOCATIONS

5.01 Distributions . Subject to Sections 5.02 , 5.03 , 5.04 , and 5.06 , Available Cash will be applied or distributed to the Partners in accordance with the provisions of this Section 5.01 solely at the discretion of the General Partner, as follows:

(a) first, to the Class A Partners, pro rata in accordance with their respective amounts of Unreturned Capital, until each such Partner’s Unreturned Capital is reduced to zero; and

(b) second, among all of the Limited Partners in accordance with their respective Percentage Interests as of the date of such distribution;

provided that, except for distributions pursuant to Section 5.03 , any distributions with respect to any Percentage Interests that are not vested pursuant to the applicable Award Agreement shall not be distributed to such holder pursuant to this Section 5.01(b) and shall be held by the Partnership in a segregated money market account (separate from and not commingled with the general funds of the Partnership) and shall be credited with interest that accrues in accordance with the terms of such account. Any such amount with respect to any unvested Percentage Interests (including any interest with respect thereto) shall be distributed to the holder of such Percentage Interest upon the vesting of such Percentage Interest; provided that, if any such unvested Percentage Interest is forfeited or is otherwise cancelled or ceases to remain outstanding prior to vesting in accordance with the terms of the relevant Award Agreement, then such amount (including any interest with respect thereto) shall be distributable to the Partners pursuant to this Section 5.01 .

5.02 Benchmark Amounts; Other Adjustments . Notwithstanding anything to the contrary in Section 5.01 , no distribution (other than any tax distribution pursuant to Section 5.03 ) shall be made to any Class B Partner with respect to any series of Class B Interests until the aggregate distributions made to all Partners (or, in the case of the Performance Class B Interests, to the Class A Partner) pursuant to Section 5.01 (including pursuant to the immediately following sentence) from the date of issuance of such series equals the Benchmark Amount of such series. An amount equal to the amount of any reduction in distributions to the Class B Partners resulting from the application of the foregoing sentence (i.e., the incremental amount that the Class B Partners would have otherwise been distributed with respect to a series of Class B Interests) shall be distributed, in accordance with Section 5.01(b) , to all of the Limited Partners, including the Class B Partners with respect to any series of Class B Interests with a lower Benchmark Amount than that of the series with respect to which each Class B Partner’s distributions were reduced and which would otherwise be entitled to participate in such distribution pursuant to Section 5.01(b) , taking into account the application of the first sentence of this Section 5.02 .

5.03 Tax Distributions . Notwithstanding Sections 5.01 or 5.02 hereof, to the extent the General Partner determines that the Partnership has Available Cash, the Partnership shall make

quarterly distributions to each Partner in an amount equal to such Partner’s Assumed Tax Liability (if any); provided that if the amount of Available Cash is not sufficient to make the foregoing payments in full, the amount that is available will be distributed among the Partners in the same proportion as if the full amount were available. Distributions made pursuant to this Section 5.03 will be treated as advances of distributions to be made under Sections 5.01 , 5.02 and 11.02 of this Agreement and will be credited against and will reduce the next future distributions to be made to each Partner under Sections 5.01 , 5.02 and 11.02 of this Agreement.

5.04 Distributions in Error . Any distributions pursuant to this Article V made in error or in violation of Section 18-607(a) of the Act, will, upon demand by the General Partner, be returned to the Partnership.

5.05 Allocations .

(a) Profits and Losses . Profits and Losses will be determined and allocated with respect to each Fiscal Year of the Partnership as of the end of such Fiscal Year, at such times as the Partnership assets are revalued in accordance with the definition of Gross Asset Value and at such other times as determined appropriate by the General Partner. Subject to the other provisions of this Article V , an allocation to a Partner of a share of Profits or Losses will be treated as an allocation of the same share of each item of income, gain, loss or deduction that is taken into account in computing those Profits or Losses. Subject to the other provisions of this Article V , for purposes of adjusting the Capital Accounts of the Partners, the Profits and Losses for any Fiscal Year or other period will be allocated among the Partners in a manner such that the Adjusted Capital Account of each Partner immediately after making such allocation is, as nearly as possible, equal (proportionately) to the distributions that would be made to such Partner pursuant to Section 11.02(c)(iii) if the Partnership were dissolved, its affairs wound up and its assets sold for cash equal to their Gross Asset Value, all Partnership liabilities were satisfied (limited with respect to each Nonrecourse Liability to the Gross Asset Value of the asset securing such liability), and the net assets of the Partnership were distributed in accordance with Section 11.02(c)(iii) to the Partners immediately after making such allocation (for this purpose treating all Interests held by all Partners as being 100% vested).

(b) Regulatory Allocations . Notwithstanding the foregoing provisions of Section 5.05(a) , the following special allocations will be made in the following order of priority:

(i) If there is a net decrease in Partnership Minimum Gain during a Partnership taxable year, then each Partner will be allocated items of Partnership income and gain for such taxable year (and, if necessary, for subsequent years) in an amount equal to such Partner’s share of the net decrease in Partnership Minimum Gain, determined in accordance with Treasury Regulations Section 1.704-2(g)(2). This Section 5.05(b)(i) is intended to comply with the minimum gain chargeback requirement of Treasury Regulations Section 1.704-2(f) and will be interpreted consistently therewith.

(ii) If there is a net decrease in Partner Minimum Gain attributable to a Partner Nonrecourse Debt during any Partnership taxable year, each Partner who

has a share of the Partner Minimum Gain attributable to such Partner Nonrecourse Debt, determined in accordance with Regulations Section 1.704-2(i)(5), will be specially allocated items of Partnership income and gain for such taxable year (and, if necessary, subsequent years) in an amount equal to such Partner’s share of the net decrease in Partner Minimum Gain attributable to such Partner Nonrecourse Debt, determined in a manner consistent with the provisions of Treasury Regulations Section 1.704-2(g)(2). This Section 5.05(b)(ii) is intended to comply with the partner nonrecourse debt minimum gain chargeback requirement of Treasury Regulations Section 1.704-2(i)(4) and will be interpreted consistently therewith.

(iii) If any Partner unexpectedly receives an adjustment, allocation, or distribution of the type contemplated by Treasury Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6), items of income and gain will be allocated to all such Partners (in proportion to the amounts of their respective deficit Adjusted Capital Accounts) in an amount and manner sufficient to eliminate the deficit balance in the Adjusted Capital Account of such Partner as quickly as possible, provided that an allocation pursuant to this Section 5.05(b)(iii) will be made if and only to the extent that such Partner would have an Adjusted Capital Account deficit after all other allocations provided for in this Article V have been tentatively made as if this Section 5.05(b)(iii) were not in this Agreement. It is intended that this Section 5.05(b)(iii) qualify and be construed as a “qualified income offset” within the meaning of Treasury Regulations Section 1.704-1(b)(2)(ii)(d).

(iv) If the allocation of Losses to a Partner as provided in Section 5.05(a) hereof would create or increase an Adjusted Capital Account deficit, there will be allocated to such Partner only that amount of Losses as will not create or increase an Adjusted Capital Account deficit. The Losses that would, absent the application of the preceding sentence, otherwise be allocated to such Partner will be allocated to the other Partners in accordance with their relative positive Adjusted Capital Account balances, subject to the limitations of this Section 5.05(b)(iv) .

(v) To the extent that an adjustment to the adjusted tax basis of any Partnership asset pursuant to Code Section 734(b) or Code Section 743(b) is required, pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(m)(2) or, as the result of a distribution to a Partner in complete liquidation of its Interest, Treasury Regulations Section 1.704-1(b)(2)(iv)(m)(4), to be taken into account in determining Capital Accounts, the amount of such adjustment to the Capital Accounts will be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases such basis), and such gain or loss will be specially allocated to the Partners in accordance with their Percentage Interests in the Partnership in the event that Treasury Regulations Section 1.704-1(b)(2)(iv)(m)(2) applies, or to the Partners to whom such distribution was made in the event that Treasury Regulations Section 1.704-1(b)(2)(iv)(m)(4) applies.

(vi) The Nonrecourse Deductions for each taxable year of the Partnership will be allocated to the Partners in proportion to their respective Percentage Interests.

(vii) The Partner Nonrecourse Deductions will be allocated each year to the Partner that bears the economic risk of loss (within the meaning of Treasury Regulations Section 1.752-2) for the Partner Nonrecourse Debt to which such Partner Nonrecourse Deductions are attributable.

(viii) The allocations set forth in Sections 5.05(b)(i) through (vii) hereof (the “ Regulatory Allocations ”) are intended to comply with certain requirements of Treasury Regulations Sections 1.704-1(b) and 1.704-2(i). It is the intent of the Partners that, to the extent possible, all Regulatory Allocations will be offset either with other Regulatory Allocations or with special allocations of other items of Partnership income, gain, loss, credit or deduction pursuant to this Section 5.05(b)(viii) . Therefore, notwithstanding Section 5.05(a) , the General Partner will make such offsetting special allocations of Partnership income, gain, loss or deduction so that, to the extent possible, the net amount of such allocations of other items pursuant to this Section 5.05(b)(viii) and the Regulatory Allocations to each Partner will be equal to the net amount that would have been allocated to each such Partner if the Regulatory Allocations had not occurred.

(i) Except as provided in Section 5.05(c)(ii) hereof, for income tax purposes under the Code and the Treasury Regulations, each Partnership item of income, gain, loss and deduction will be allocated among the Partners as its correlative item of “book” income, gain, loss or deduction is allocated pursuant to this Article V .

(ii) Tax items with respect to any Partnership asset that is contributed to the Partnership with a Gross Asset Value that varies from its tax basis in the hands of the contributing Partner immediately preceding the contribution will be allocated between the Partners for income tax purposes pursuant to the Treasury Regulations promulgated under Code Section 704(c) so as to take into account such variation. The Partnership will account for such variation under any method approved under Code Section 704(c) and the applicable Treasury Regulations. If the Gross Asset Value of any Partnership asset is adjusted pursuant to the definition of “Gross Asset Value” herein, subsequent allocations of income, gain, loss, deduction and credit with respect to such Partnership asset will take account of any variation between the adjusted basis of such Partnership asset for federal income tax purposes and its Gross Asset Value in a manner consistent with Code Section 704(c) and the Treasury Regulations promulgated thereunder. Allocations pursuant to this Section 5.05(c)(ii) are solely for purposes of federal, state and local taxes and will not affect, or in any way be taken into account in computing, any Partner’s Capital Account or share of Profits, Losses and any other items or distributions pursuant to any provision of this Agreement.

(d) Other Provisions .

(i) For any Fiscal Year or other period during which any part of an Interest in the Partnership is transferred between Partners or to another person, the portion

of the Profits, Losses and other items of income, gain, loss, deduction and credit that are allocable with respect to such part of an Interest in the Partnership will be apportioned between the transferor and the transferee under any method allowed pursuant to Section 706 of the Code and the applicable Treasury Regulations as determined in good faith by the General Partner.

(ii) In the event that the Code or any Treasury Regulations require allocations of items of income, gain, loss, deduction or credit different from those set forth in this Article V , the General Partner is hereby authorized to make new allocations in reliance on the Code and such Treasury Regulations, and no such new allocation will give rise to any claim or cause of action by any Partner.

(iii) For purposes of determining a Partner’s proportional share of the Partnership’s “excess nonrecourse liabilities” within the meaning of Treasury Regulations Section 1.752-3(a)(3), each Partner’s interest in Profits will be equal to its Percentage Interest.

(iv) The Partnership will follow the proposed Treasury Regulations that were issued on May 24, 2005 regarding the issuance of partnership equity for services (including Prop. Treas. Reg. §§1.83-3, 1.83-6, 1.704-1, 1.706-3, 1.721-1 and 1.761-1), as such regulations may be subsequently amended (the “ Proposed Regulations ”), upon the issuance of Class B Interests issued for services rendered or to be rendered to or for the benefit of the Partnership or a subsidiary thereof, until final Treasury Regulations or other succeeding legal authorities regarding these matters are issued. In furtherance of the foregoing, the definition of Capital Accounts and Gross Asset Value, and the allocations of Profits and Losses of the Partnership set forth in this Agreement, will be made in a manner that is consistent with the Proposed Regulations. The General Partner is expressly authorized by each Partner to elect to apply the safe harbor set forth in the Proposed Regulations if the provisions of the Proposed Regulations and the proposed Revenue Procedure described in IRS Notice 2005-43, or provisions similar thereto, are adopted as final (or temporary) Treasury Regulations. If the General Partner determines that the Partnership should make such election, the General Partner is hereby authorized to amend this Agreement without the consent of any other Partner to provide that (A) the Partnership is authorized and directed to elect the safe harbor, (B) the Partnership and each of its Partners (including any person to whom a partnership interest is transferred in connection with the performance of services) will comply with all requirements of the safe harbor with respect to all Class B Interests transferred in connection with the performance of services while such election remains in effect and (C) the Partnership and each of its Partners will take all actions necessary, including providing the Partnership with any required information, to permit the Partnership to comply with the requirements set forth or referred to in the applicable Proposed Regulations for such election to be effective until such time (if any) as the General Partner determines, in its discretion, that the Partnership should terminate such election. The General Partner is further authorized to amend this Agreement to the extent the General Partner determines in its discretion that such modification is

necessary or desirable as a result of the issuance of such Regulations relating to the tax treatment of the transfer of a partnership interest in connection with the performance of services. Notwithstanding anything to the contrary in this Agreement, each Partner expressly confirms and agrees that it will be legally bound by any such amendment.

(e) Valuation; Revaluation . For tax purposes only, valuations will be made by the General Partner or by independent third parties appointed by the General Partner and deemed qualified by the General Partner to render an opinion as to the value of the Partnership’s assets, using such methods and considering such information relating to the investments, assets and liabilities of the Partnership as the General Partner or independent third party, as the case may be, may determine in the reasonable discretion of the General Partner.

5.06 Withholding . The Partnership may withhold in connection with distributions, allocations or portions thereof (or any other amounts that are withholdable in respect of Awards or otherwise in respect of a Partner hereunder) if it is required to do so by any applicable rule, regulation, or law, and each Partner hereby authorizes the Partnership to withhold from or pay on behalf of or with respect to such Partner any amount of federal, state, local or foreign taxes that the General Partner determines that the Partnership is required to withhold or pay with respect to any such Partner pursuant to this Agreement (including any amounts payable in respect of Awards hereunder and including any “imputed underpayment” within the meaning of Section 6232 of the Code). Any amounts withheld or paid pursuant to this Section 5.06 will be treated as having been distributed to such Partner. To the extent that the cumulative amount of such withholding or payments exceeds the amount actually withheld from distributions to which such Partner would otherwise then have been entitled, the amount of such excess will be considered a loan from the Partnership to such Partner, with interest accruing at the Prime Rate plus two percent. Such loan may, at the option of the General Partner, be satisfied (a) out of the next distributions to which such Partner would otherwise be subsequently entitled, or (b) by the immediate payment in cash by such Partner to the Partnership of such excess amount. The General Partner, on behalf of the Partnership, may take any other action it determines to be necessary or appropriate in connection with any obligation or possible obligation to impose withholding pursuant to any tax law or to pay any amounts on account of tax with respect to a Partner. Each Partner hereby unconditionally and irrevocably grants to the Partnership a security interest in such Partner’s Interests to secure such Partner’s obligation to pay to the Partnership any amounts required to be paid by that Partner pursuant to this Section 5.06 . Each Partner will take such actions as the Partnership may request in order to perfect or enforce the security interest created hereunder.

ARTICLE VI.
TRANSFERS OF INTERESTS

6.01 Transfers .

(a) Restricted and Unrestricted Transfers . The General Partner and Parent may each Transfer all or any portion of its Interest from time to time to any Person, including to any Affiliate. None of the Class B Partners may Transfer all or any portion of their respective Interests without the prior written approval of the General Partner in its sole discretion,

except in the case of Transfers effected pursuant to and in accordance with this Section 6.01 and Sections 6.02 , 6.03 , 6.05 and 6.06 of this Agreement (including pursuant to the power of attorney in Section 6.08 ) or for bona fide estate planning purposes. Each Class B Partner further agrees that, in connection with any Transfer by such Class B Partner (including any Transfer approved by the General Partner), such Class B Partner will, if requested by the General Partner, deliver to the Partnership an opinion of counsel, in form and substance reasonably satisfactory to the General Partner and counsel for the Partnership, to the effect that such Transfer is not in violation of this Agreement, the Securities Act or the securities laws of any state.

(b) Prohibited Tax Consequences . No Transfer may be effected by any Class B Partner if such Transfer would cause the Partnership to be treated as an association or “publicly traded partnership” taxable as a corporation for federal income tax purposes. In addition, unless otherwise consented to by the General Partner, no Transfer may be effected by any Class B Partner if such Transfer would cause the Partnership not to be able to qualify for the safe harbor contained in Treasury Regulations Section 1.7704-1(h) and if there is a reasonable risk (as determined by the General Partner) that the Partnership may be treated as a “publicly traded partnership” taxable as a corporation for US federal income tax purposes.

(c) VOID TRANSFERS . NOTWITHSTANDING ANY OTHER PROVISION OF THIS AGREEMENT, ANY PURPORTED TRANSFER IN VIOLATION OF ANY OF THE PROVISIONS OF THIS ARTICLE VI WILL BE NULL AND VOID AND WILL HAVE NO FORCE OR EFFECT.

(d) Admission of Transferees as Partners . Until such time, if any, as a Transferee is admitted to the Partnership as a Substitute Partner pursuant to Section 6.01(e) : provided such Transfer is permitted under the terms of this Agreement, (i) such Transferee shall receive only, to the extent Transferred, the Economic Interest associated with the Interest so Transferred, and (ii) such Transferee shall not be entitled or enabled to exercise any other rights or powers of a Partner, such other rights remaining with the Transferring Partner (even if such Partner has transferred such Partner’s entire Economic Interest in the Partnership to one or more Transferees). If any Transferee desires to make a further assignment of any Economic Interest in the Partnership, such Transferee shall be subject to all of the provisions of this Agreement to the same extent and in the same manner as any Partner desiring to make such a Transfer.

(e) Substitute Partners . A Transferee shall become a Substitute Partner only if and when each of the following conditions are satisfied: (i) the General Partner consents to such admission and (ii) the Transferee (A) provides such information concerning the Transferee’s financial capacities and investment experience as may be reasonably requested by the General Partner, (B) agrees to become a party to this Agreement as a Partner, and (C) executes a joinder in the form attached as Exhibit B hereto acknowledging that such Transferee agrees to be bound by the terms hereof, together with such other written instruments of Transfer in a form reasonably satisfactory to the General Partner. Upon admission of any Substitute Partner, the Transferor shall (x) cease to be a Partner with respect to the portion of the Interest so Transferred to the extent such obligations are Transferred

and assumed, (y) be released from any obligations arising after the date of such Transfer with respect to the portion of the Interest so Transferred, and (z) Exhibit A shall be amended to reflect the name and address of such Substitute Partner and to eliminate, if necessary, the name and address of the predecessor of such Substitute Partner and to reflect the Interest of such Substitute Partner and to eliminate or adjust, if necessary, the Interest of the predecessor of such Substitute Partner. Notwithstanding the foregoing, any Person that purchases any Interest pursuant to and in accordance with Sections 6.02 , 6.03 , or 6.06 shall be deemed Substitute Partners without regard to the foregoing.

6.02 Drag-Along Rights .

(a) General . If, at any time, (i) Parent elects to consummate a Transfer to any Person or Persons (other than to any Affiliate) (collectively, a “ Drag-Along Transferee ”) in a bona fide arm’s-length transaction or series of related transactions (including by way of a purchase agreement, tender offer, merger or other business combination transaction or otherwise) of Interests consisting of more than 50% of the aggregate Class A Interests held by Parent on the Effective Date, (ii) ECP elects to consummate a Transfer to any Drag-Along Transferee in a bona fide arm’s-length transaction or series of related transactions (including by way of a purchase agreement, tender offer, merger or other business combination transaction or otherwise) of more than 50% of its aggregate interest in Parent as of the Effective Date or (iii) ECP elects to consummate a Transfer to any Drag-Along Transferee in a bona fide arm’s-length transaction or series of related transactions (including by way of a purchase agreement, tender offer, merger or other business combination transaction or otherwise) of interest in Parent such that, following such Transfer, ECP (directly or indirectly) is no longer the largest holder of interests in Parent (a “ Drag-Along Sale ”), Parent or ECP, as applicable, may, subject to the other provisions of this Section 6.02 , require each other Limited Partner (including each Class B Partner) to Transfer a percentage of its Interests (and solely in the case of a Class B Partner, its vested Class B Interests) equal to the percentage of the aggregate Class A Interests of Parent or ECP’s (direct or indirect) interests in Parent, as applicable, proposed to be Transferred (such rights arising under clauses (i) through (iii) of this Section 6.02(a) being referred to as “ Drag-Along Rights ”). Each Limited Partner or Class B Partner Transferee required to Transfer its Interests pursuant to this Section 6.02 shall be referred to herein as a “ Drag-Along Co-Seller ”. In connection with any Drag-Along Sale:

(i) subject to Section 6.02(b) , each Drag-Along Co-Seller will transfer the applicable percentage of its Interests (and solely in the case of a Class B Partner, its vested Class B Interests) on substantially the same terms (other than aggregate price) and conditions applicable to, and, for the same type of consideration payable to, Parent or ECP, as applicable, at the price calculated in accordance with Section 6.02(a)(ii) ;

(ii) the aggregate purchase price payable for the Interests purchased by a Drag-Along Transferee will be allocated among Parent or ECP, as applicable, and Drag-Along Co-Sellers based upon the Hypothetical Value of such Partner’s Interests so Transferred; and

(iii) any indemnification or other obligations will be apportioned pro rata as among Parent or ECP, as applicable, and the Drag-Along Co-Sellers, other than with respect to representations, warranties and covenants made individually by a Partner or other Drag-Along Co-Seller (e.g., representations as to title or authority or representations qualified by the individual knowledge of such or other Drag-Along Co-Seller).

(b) Terms of Sale . In connection with a Drag-Along Sale, the Drag-Along Co-Sellers will execute such documents, and make such representations, warranties, covenants and indemnities, as are executed and made by Parent or ECP, as applicable. At the request of the Drag-Along Transferee, all or a portion of the purchase price payable to the Partners and the other Drag-Along Co-Sellers in connection with a Drag-Along Sale may be held back in an escrow account for the purpose of satisfying such Partners’ and such other Drag-Along Co-Sellers’ obligations under the applicable documents, including indemnity obligations. In connection with a Drag-Along Sale, the Drag-Along Co-Sellers will also (A) consent to and raise no objections against the Drag-Along Sale or the process pursuant to which the Drag-Along Sale was arranged, (B) waive any dissenter’s rights and other similar rights, (C) take all actions reasonably required or desirable or requested by Parent or ECP, as applicable, to consummate such Drag-Along Sale and (D) comply with the terms of the documentation relating to the Drag-Along Sale.

(c) Drag-Along Notice . The rights set forth in this Section 6.02 will be exercised by Parent or ECP, as applicable, giving written notice (the “ Drag-Along Notice ”) to each other Partner, at least 30 days prior to the date on which Parent or ECP, as applicable, expect to consummate the Drag-Along Sale. In the event that the material terms and/or conditions set forth in the Drag-Along Notice are thereafter amended in any material respect, Parent or ECP, as applicable, will give written notice (an “ Amended Drag-Along Notice ”) of the amended terms and conditions of the proposed Transfer to each other Partner. Each Drag-Along Notice and Amended Drag-Along Notice will set forth: (i) the name and address of the Drag-Along Transferee, (ii) the proposed amount and form of consideration and terms and conditions of payment offered by the Drag-Along Transferee, and (iii) the material terms of the proposed transaction including the expected closing date of the transaction.

(d) Upstream Sale . In addition to the foregoing, the provisions of this Section 6.02 will be interpreted so as to apply to any indirect sale, transfer, exchange or other disposition of Interests by Parent or ECP to a Drag-Along Transferee.

6.03 Tag-Along Rights .

(a) General . If (i) Parent elects to consummate a Transfer to any Person or Persons (other than to any Affiliate) (collectively, a “ Tag-Along Transferee ”) in a bona fide arm’s-length transaction or series of transactions (including by way of a purchase agreement, tender offer, merger or other business combination transaction or otherwise) consisting of more than 50% of the aggregate Interests held by Parent on the Effective Date, (ii) ECP elects to consummate a Transfer to any Tag-Along Transferee in a bona fide arm’s-length transaction or series of related transactions (including by way of a purchase agreement, tender offer,

merger or other business combination transaction or otherwise) of more than 50% of its aggregate interest in Parent as of the Effective Date or (iii) ECP elects to consummate a Transfer to any Tag-Along Transferee in a bona fide arm’s-length transaction or series of related transactions (including by way of a purchase agreement, tender offer, merger or other business combination transaction or otherwise) of interest in Parent such that, following such Transfer, ECP (directly or indirectly) is no longer the largest holder of interests in Parent (a “ Tag-Along Sale ”), then, subject to the other provisions of this Section 6.03(a) , each Partner may participate in the proposed Transfer by Parent or ECP, as applicable, to the Tag-Along Transferee. Each Partner, other than Parent, shall be referred to herein as a “ Tag-Along Participant ” solely to the extent that such Partner is entitled to participate in such proposed Transfer pursuant to this Section 6.03(a) .

(i) Subject to Section 6.03(b) , each Tag-Along Participant may participate in such transaction by Transferring to the Tag-Along Transferee a percentage of its Interests (and solely in the case of a Class B Partner, its vested Class B Interests) equal to the percentage of the aggregate Class A Interests of Parent or ECP’s (direct or indirect) interest in Parent, as applicable, proposed to be Transferred (such participation rights being hereinafter referred to as “ Tag-Along Rights ”).

(ii) The aggregate purchase price payable for the Interests purchased by a Tag-Along Transferee will be allocated among Parent or ECP, as applicable, and the Tag-Along Participants participating in such Tag-Along Sale based upon the Hypothetical Value of such Partner’s or such other Tag-Along Participant’s Interests so Transferred.

(iii) Any indemnification or other obligations will be apportioned pro rata as among Parent or ECP, as applicable, and the Tag-Along Participants, other than with respect to representations, warranties and covenants made individually by a Partner or other Tag-Along Participant (e.g., representations as to title or authority or representations qualified by the individual knowledge of such Partner or other Tag-Along Participant).

(b) Tag-Along Notice . At least five days prior to Parent or ECP, as applicable, making any Transfer which gives rise to Tag-Along Rights pursuant to this Section 6.03 , Parent or ECP, as applicable, will give written notice (a “ Tag-Along Notice ”) to each potential Tag-Along Participant, setting forth in reasonable detail the terms and conditions of such proposed Transfer, including (i) the name and address of the Tag-Along Transferee, (ii) the proposed amount and form of consideration and terms and conditions of payment offered by the Tag-Along Transferee, and (iii) the material terms of the proposed transaction including the expected closing date of the transaction. In the event that the terms and/or conditions set forth in the Tag-Along Notice are thereafter amended in any material respect, Parent or ECP, as applicable, will give written notice (an “ Amended Tag-Along Notice ”) of the amended terms and conditions of the proposed Transfer to each other Partner. Those Tag-Along Participants opting to exercise their Tag-Along Rights will give written notice

to Parent or ECP, as applicable, within ten Business Days after receipt of the Tag-Along Notice, or, if later, within five Business Days after receipt of the most recent Amended Tag-Along Notice (but in any event prior to the closing date of the proposed Transfer as specified in such Tag-Along Notice or Amended Tag-Along Notice) of their intention to participate in the proposed Transfer by Parent or ECP, as applicable, to the Tag-Along Transferee on the terms and conditions set forth in such Tag-Along Notice or the most recent Amended Tag-Along Notice. Any Partner or other Tag-Along Participant that has not notified Parent or ECP, as applicable, of its intent to exercise Tag-Along Rights within the period of time specified in this Section 6.03(b) will be conclusively deemed to have elected not to exercise such Tag-Along Rights with respect to the Transfer contemplated by such notice.

(c) Terms of Sale . In connection with a Tag-Along Sale, each Tag-Along Participant will execute such documents, and make such representations, warranties, covenants and indemnities, as are executed and made by Parent or ECP, as applicable. At the request of the Tag-Along Transferee, all or a portion of the purchase price payable to the Partners or the other Tag-Along Participants in connection with a Tag-Along Sale may be held back in an escrow account for the purpose of satisfying such Partners’ or other Tag-Along Participants’ obligations under the applicable documents, including indemnity obligations. In connection with a Tag-Along Sale, each Tag-Along Participant will also (A) consent to and raise no objections against the Tag-Along Sale or the process pursuant to which the Tag-Along Sale was arranged, (B) waive any dissenter’s rights and other similar rights, (C) take all actions reasonably required or desirable or requested by Parent or ECP, as applicable, to consummate such Tag-Along Sale and (D) comply with the terms of the documentation relating to the Tag-Along Sale.

(d) Upstream Sale . In addition to the foregoing, the provisions of this Section 6.03 will be interpreted so as to apply to any indirect sale, transfer, exchange or other disposition of Interests by Parent or ECP to a Tag-Along Transferee.

6.04 Pledge of Interests . In connection with any indebtedness of the Partnership, the General Partner shall be authorized to cause each Partner to pledge, hypothecate, mortgage, assign, transfer or grant security interests in or other liens on the Partners’ Interests. Each Partner agrees to, if requested by the General Partner, execute and deliver such consent letters and estoppel certificates as are reasonably and customarily requested by lenders and any and all reasonable and customary ancillary documents thereto; provided , however , that no such pledge, hypothecation, mortgage, assignment, transfer or grant shall convey to the transferee recourse against any Partner.

6.05 Repurchase Rights .

(a) Repurchase Right . Except to the extent provided in any employment agreement or Award Agreement, in the event that any Class B Partner (i) experiences a termination of employment or termination of other services with the Partnership or its Affiliates for any reason or (ii) engages in a purported Transfer in violation of the provisions of this Article VI (each, a “ Repurchase Trigger ”), then (A) the unvested Interests of such Class B Partner shall be forfeited without payment therefor and (B) at any time and from time to time during the period commencing on the date of such Repurchase Trigger and

ending on the later of (I) the six-month anniversary of the Repurchase Trigger and (II) the one-month anniversary of the date of expiration of any holding period that would prohibit the exercise of rights pursuant to this Section 6.05(a) , as determined by the General Partner in good faith (such later date, the “ Initial Repurchase Deadline ”), (x) the Partnership will have the right, but not the obligation, to redeem the vested Class B Interests of such employee or other service provider (taking into account any acceleration of vesting that occurs in connection with such Repurchase Trigger pursuant to the applicable Award Agreement) in exchange for such number of Calpine Shares with a Fair Market Value equal in the aggregate to the Fair Market Value (if any) of the Interests (or portion thereof) to be redeemed on the date of the redemption (the “ Partnership Redemption Right ”), and (y) following any redemption pursuant to the foregoing clause (x), the Partnership shall have the right, but not the obligation, to cause Calpine to purchase, and if the Partnership exercises such right, such Class B Partner will be required to sell to Calpine, any or all of the Calpine Shares so received by such Class B Partner, at a price equal to the applicable Repurchase Price with respect to the Interests in exchange for which the Class B Partner received such Calpine Shares to be purchased on the date of the purchase (the “ Calpine Repurchase Right ”). The rights and obligations applicable to a holder of Class B Interests under this Agreement shall apply mutatis mutandis to any Class B Partner who receives Calpine Shares pursuant to a Partnership Redemption Right, taking into account the difference in tax consequences of the Class B Interests and the Calpine Shares. For the avoidance of doubt, (1) the Partnership Redemption Right and the Calpine Repurchase Right, respectively, may be exercised more than once, and, any Calpine Shares subject to purchase hereunder may be purchased at different Repurchase Prices, (2) the Partnership, in its sole discretion, may elect to redeem all or any portion of such Interests, and (3) the Partnership, in its sole discretion, may cause Calpine to purchase all or any portion of such Calpine Shares, including purchasing only such Calpine Shares that are subject to purchase at a lower Repurchase Price. Notwithstanding the foregoing, in no event will the Partnership redeem any Interests pursuant to the Partnership Redemption Right prior to the day immediately following the six-month anniversary of the date such Interests first became vested, and the Partnership Redemption Right and the Calpine Repurchase Right shall be subject to the terms of any employment agreement or Award Agreement. Each Partner agrees that Calpine shall be deemed a third-party beneficiary of, and shall be entitled to enforce, this Section 6.05 .

(b) In the event that the Partnership (or its assignee) exercises the Calpine Repurchase Right pursuant to Section 6.05(a) and, within the six (6) month period following the date that the Partnership pays the Class B Partner the Repurchase Price, the stock of Calpine or its affiliates becomes readily tradeable on an established securities market pursuant to an IPO or a Tag-Along Sale occurs, within ten (10) business days following the date of the IPO or the Tag-Along Sale, as applicable, the Partnership shall pay such Class B Partner an amount equal to the product of (A) the excess of (x) the per share price of the Partnership’s common shares or other equity interests, as applicable, as of the date of the IPO or the Tag-Along Sale, as applicable, over (y) the amount the Partnership paid the Class B Partner with respect to each Class B Interest purchased pursuant to the Calpine Repurchase Right and (B) the number of Class B Interests purchased pursuant to the Calpine Repurchase Right up to, in the case of a Tag-Along Sale, the number of Class B Interests that the Class

B Partner would have been entitled to sell in connection with the Tag-Along Sale. In the event of two or more Tag-Along Sales during any such period, the foregoing sentence shall apply to each such sale, provided that the number Class B Interests taken into account in the aggregate under Clause (B) above shall not exceed the number of shares with respect to which the Partnership exercises its Calpine Repurchase Right.

(c) Form of Consideration . Subject to Section 6.05(f) , Calpine may pay the Repurchase Price for such Calpine Shares by delivery of funds deposited into an account designated by such Class B Partner, a bank cashier’s check, a certified check or a company check of Calpine for the Repurchase Price. Notwithstanding anything to the contrary in this Agreement, Calpine may deduct and withhold from the amounts otherwise payable pursuant to this Agreement such amounts as necessary to comply with the Code, or any other provision of applicable law, with respect to the making of such payment.

(d) Release . As a condition of any Transfer of Interests or repurchase of Calpine Shares under this Section 6.05 , the Class B Partner will be required to execute a release in favor of the Partnership and its Partners and Affiliates, releasing the Partnership and its Partners and Affiliates from all liabilities to such Class B Partner.

(e) Breach of Restrictive Covenants . Notwithstanding anything to the contrary herein, each Class B Partner agrees that in the event of the breach by such Class B Partner of any restrictive covenants contained in this Agreement or any employment, consulting or other agreement between such Class B Partner and the Partnership or any Affiliate thereof, in addition to any other remedy which may be available at law or in equity, Calpine will be entitled to reimbursement by such Class B Partner, and such Class B Partner shall be obligated to reimburse Calpine, for the aggregate Repurchase Price of any Calpine Shares purchased by Calpine in respect of such Class B Partner.

(f) Repurchase Disability .

(i) Notwithstanding anything to the contrary herein, except as otherwise provided by Section 6.05(f)(iii) , Calpine shall not be permitted to purchase any Calpine Shares upon exercise of the Calpine Repurchase Right if the General Partner determines that: (A) the purchase of such Calpine Shares would render Calpine or its subsidiaries unable to meet their Obligations in the ordinary course of business taking into account any pending or proposed transactions, capital expenditures or other budgeted cash outlays by Calpine or any of its subsidiaries, including any proposed acquisition of any other entity by Calpine or any of its subsidiaries, (B) Calpine is prohibited from purchasing Calpine Shares by applicable law restricting the purchase by an entity of its own equity securities, or (C) the purchase of Calpine Shares would constitute a breach of, default, or event of default under, or is otherwise prohibited by, the terms of any loan agreement or other agreement or instrument to which Calpine or any of its subsidiaries is a party (the “ Financing Documents ”) or Calpine or any of its subsidiaries is not able to obtain the requisite consent of any of its senior lenders to effect the purchase of the Interests. The events described in (A) through (C) above each constitute a “ Repurchase Disability .”

(ii) Except as otherwise provided in Section 6.05(f)(iii) , in the event a Repurchase Disability shall occur, the Partnership shall notify in writing such Class B Partner (such notice, a “ Disability Notice ”). The Disability Notice shall specify the nature of the Repurchase Disability. The Partnership shall thereafter cause Calpine to purchase the Calpine Shares described in the Disability Notice as soon as reasonably practicable after all Repurchase Disabilities cease to exist (or Calpine may elect, but shall have no obligation, to cause its nominee to purchase such Calpine Shares while any Repurchase Disabilities continue to exist). In the event that the Calpine suspends its obligations to purchase such Calpine Shares pursuant to a Repurchase Disability, (A) the Partnership shall provide written notice to such Class B Partner as soon as practicable after all Repurchase Disabilities cease to exist (the “ Reinstatement Notice ”); (B) the Repurchase Price, if applicable, of such Calpine Shares shall be determined as of the date the Reinstatement Notice is delivered to such Class B Partner; and (C) the redemption shall occur on a date specified by the Partnership within ten days following the later of (x) the date the Reinstatement Notice is delivered to such Class B Partner or (y) if applicable, the date of the determination of the Repurchase Price of the Calpine Shares to be repurchased.

(iii) Notwithstanding Sections 6.05(f)(i) and (ii) , if (x) the Partnership has caused Calpine to exercise the Calpine Repurchase Right and (y) a Repurchase Disability shall occur, then, in the sole discretion of the Partnership, the Partnership may cause Calpine to purchase such Calpine Shares, and, in lieu of cash consideration, issue a promissory note to the Class B Partner in the amount of the Repurchase Price, the terms of which promissory note shall be acceptable to Calpine’s senior lenders and shall not result in a breach or violation of any of the Financing Documents. The promissory note shall (A) bear simple interest at the Prime Rate as published in the Wall Street Journal on the date such payment is due and owing from such date to the date such payment is made and (B) have such other reasonable terms and conditions as may be determined by the Partnership. All payments of interest accrued under the promissory note shall be paid only at the date of payment by Calpine of the principal amount of such promissory note.

6.06 Elective Transfer In lieu of causing Calpine to consummate a purchase of a Class B Partner’s Calpine Shares pursuant to Section 6.05 , the General Partner may instead require the Class B Partner to Transfer to the Partnership, for the same aggregate consideration that would be otherwise payable in such purchase under Section 6.05 , all or any portion of the Calpine Shares then held by such Class B Partner, and such Transfer shall be subject to Sections 6.05(b) , (d) and (e) .

6.07 IPO .

(a) Authority . In the event that the Partnership determines to consummate an IPO, the General Partner shall have the power and authority, without any vote or consent of the Partners, to convert the Partnership to a master limited partnership structure, incorporate the Partnership, or take such other actions as it may deem advisable, including (i) creating one or more subsidiaries of the newly incorporated corporation (or other form

of entity selected by the General Partner) and transferring to such subsidiaries any or all of the assets of the Partnership (including by merger) or (ii) causing the Partners to exchange their Interests for common shares of the newly-formed corporation (or for limited partnership interests or other equity interests, as applicable, in such other form of entity as may be selected by the General Partner) with equivalent value (“ Conversion Shares ”); provided that if the Interests of Class A Partners are exchanged for Conversion Shares or cash, the Interests of Class B Partners shall be concurrently exchanged for Conversion Shares or cash to the same extent as the Class A Partners, proportionate to their respective Interests. Prior to consummating any such transaction, the General Partner shall approve the proposed forms of a certificate of incorporation, by-laws, stockholders’ agreement and/or any other applicable governing documents proposed to be established for such corporation (or other entity) and its subsidiaries, if any. For the avoidance of doubt, the General Partner may, in its sole discretion in connection with any IPO, impose such customary lock-up and resale restrictions or other customary conditions on any Conversion Shares in connection with the IPO as the General Partner may deem appropriate.

(b) Vesting of Conversion Shares . Conversion Shares issued to Class B Partners will be vested only to the extent that the related original Interests are vested on the date of such conversion (the “ Conversion Date ”), and vesting thereafter will continue in accordance with the schedule set forth in the respective Award Agreements.

(c) Delivery . As promptly as practicable after the determination of the number of Conversion Shares each holder shall receive under Section 6.07 above, each holder of Interests shall deliver to the Partnership the certificate or certificates, if any, representing the Interests to be converted into Conversion Shares, duly endorsed or assigned in blank or to the Partnership (if required by it) and stating the name or names (with address) in which the certificate or certificates for the Conversion Shares, if any, are to be issued. Upon receipt of any such certificates representing the Interests, the Partnership shall issue and deliver to each holder entitled to Conversion Shares, to the place and in the name designated by such holder, a certificate or certificates, if any, for the number of Conversion Shares to which such Partner is entitled (including any fractional shares). The Person in whose name the certificate or certificates of the Conversion Shares may be issued shall be deemed to have become a holder of record on the Conversion Date unless the transfer books of the Partnership are closed on that date, in which event such Person shall be deemed to have become a holder of record on the next succeeding date on which the transfer books are open.

(d) Approvals; Stockholders’ Agreement . The Partners agree to take all necessary and desirable actions, and to vote their Interests (or Conversion Shares, as applicable), as requested by the General Partner in connection with the consummation of those actions contemplated by this Section 6.07 . In connection with the conversion of the Partnership into a corporation, such actions by the Partners shall include, without limitation, entering into a stockholders’ agreement containing provisions similar to the provisions in this Agreement, except that the stockholders’ agreement will include such customary lock-up and resale restrictions or other customary conditions in connection therewith as the General Partner may deem appropriate.

6.08 Power of Attorney . Each Class B Partner hereby makes, constitutes and appoints the General Partner and Parent as his, her or its true and lawful attorney-in-fact for his, her or it and in his, her or its name, place, and stead and for his, her or its use and benefit, to sign, execute, certify, acknowledge, swear to, file and record any instrument that is now or may hereafter be deemed necessary by Parent in its reasonable discretion to carry out fully the provisions and the agreements, obligations and covenants of such Class B Partner in Sections 6.02 , 6.03 , 6.04 , 6.05 and 6.06 in the event that he, she or it is required to Transfer Interests pursuant to such provisions. Each Class B Partner hereby gives such attorney-in-fact full power and authority to do and perform each and every act or thing whatsoever requisite or advisable to be done in connection with his, her or its obligations and agreements pursuant to Sections 6.02 , 6.03 , 6.04 , 6.05 and 6.06 as fully as he, she or it might or could do himself, herself or itself, and hereby ratifies and confirms all that any such attorney-in-fact will lawfully do or cause to be done by virtue of the power of attorney granted hereby. The power of attorney granted pursuant to this Section 6.08 is a special power of attorney, coupled with an interest, and is irrevocable, and will survive the bankruptcy, insolvency, dissolution or cessation of existence of any Class B Partner.

6.09 Incapacity . Upon the Incapacity of a Partner, such Partner’s Interest shall automatically be converted to an Economic Interest, and such Partner (or its executor, administrator, trustee or receiver, if applicable) shall thereafter be deemed a Transferee of such Interests for all purposes hereunder, with the same Economic Interest as was held by such Partner, but without any other rights of a Partner, except that the General Partner may in its discretion cause the Partnership to redeem such interest on the same basis as would apply pursuant to Section 6.05 .

6.10 Non-Competition; Non-Solicitation; Non-Disparagement . In consideration for (i) the issuance of any initial Interest to a Class B Partner pursuant to Section 3.01 and Section 4.07 above and/or (ii) the issuance of any additional Interest to an existing Class B Partner pursuant to Section 4.01 above, the adequacy of which such Class B Partner hereby acknowledges, such Class B Partner hereby agrees as follows:

(a) Non-Competition . Such Class B Partner shall not, at any time during the Restricted Period, directly or indirectly engage in, have any interest in (including, without limitation, through the investment of capital or lending of money or property), or manage, operate or otherwise render any services to, any Person (whether on his or her own or in association with others, as a principal, director, manager, officer, employee, agent, representative, partner, member, security holder, consultant, advisor, independent contractor, owner, investor, participant or in any other capacity) that engages in (either directly or through any subsidiary or affiliate thereof) any business or activity in North America relating to (i) the sale or generation of electricity from natural gas renewables and geothermal resources (including retail sales of electricity) in competitive wholesale and retail power markets or (ii) any other business that constitutes more than 20% of the revenue or net operating profit of Calpine at the time (any such business or activity in clause (i) or (ii), a “ Restricted Business ”). Notwithstanding the foregoing, engagement in (x) a natural gas production, transportation or trading business, (y) a business that, incidental to its core business, sells wholesale power into a market and the Class B Partner is not engaged in such activity, or (z) a financial commodities trading business, shall not be considered a Restricted Business. Notwithstanding the foregoing, such Class B Partner shall be permitted to acquire a passive stock or equity interest in

such a business; provided that such stock or other equity interest acquired is not more than five percent of the outstanding interest in such business.

(b) Non-Solicitation . Such Class B Partner shall not, at any time during the Restricted Period, directly or indirectly, either for himself or herself or on behalf of any other Person, (i) recruit or otherwise solicit or induce any employee, customer or supplier of Calpine or any of its subsidiaries to terminate his, her or its employment or arrangement with Calpine or such subsidiary, or otherwise change his, her or its relationship with Calpine or such subsidiary, or (ii) hire, or cause to be hired, any person who was employed by the Calpine or any of its subsidiaries at any time during the 12-month period immediately prior to the Date of Termination or who thereafter becomes employed by Calpine or any of its Subsidiaries.

(c) Additional Class B Partner Confidentiality Obligations . Except as such Class B Partner reasonably and in good faith determines to be required in the faithful performance of such Class B Partner’s duties to the Partnership or in accordance with Section 6.10(e) , such Class B Partner shall, for so long as such Class B Partner is employed by or provides services to the Partnership and thereafter, maintain in confidence and shall not directly or indirectly use, disseminate, disclose or publish, for such Class B Partner’s benefit or the benefit of any other Person, any Proprietary Information (as defined below), or deliver to any Person, any document, record, notebook, computer program or similar repository of or containing any such Proprietary Information. Unless otherwise defined in any employment agreement, “ Proprietary Information ” means any confidential or proprietary information or trade secrets of or relating to the Partnership, including, without limitation, information with respect to the Partnership’s operations, processes, protocols, products, inventions, business practices, finances, principals, vendors, suppliers, customers, potential customers, marketing methods, costs, prices, contractual relationships, regulatory status, strategic business plans, technology, designs, compensation paid to employees or other terms of employment. Notwithstanding the foregoing, “Proprietary Information” shall not include (A) information that is or becomes generally available to the public other than as a result of a Person’s improper disclosure (including any disclosure by such Class B Partner or his, her or its representatives) or (B) information made available to the Class B Partner on a non-confidential basis from a person that to the best of the Class B Partner’s knowledge (after reasonable inquiry), was not otherwise prohibited from disclosing such information. Such Class B Partner’s obligation to maintain and not use, disseminate, disclose or publish, or use for such Class B Partner’s benefit or the benefit of any other Person, any Proprietary Information will survive the Date of Termination. The parties hereby stipulate and agree that as between them, the Proprietary Information identified herein is important, material and affects the successful conduct of the businesses of the Partnership (and any successor or assignee of the Partnership).

(d) Return of Materials . Upon termination of such Class B Partner’s employment or other service relationship with the Partnership for any reason, such Class B Partner will promptly deliver to the Partnership (i) all correspondence, drawings, manuals, letters, notes, notebooks, reports, programs, plans, proposals, financial documents, or any other documents that are Proprietary Information, including all physical and digital copies thereof,

and (ii) all other Partnership property (including, without limitation, any personal computer or wireless device and related accessories, keys, credit cards and other similar items) which is in his or her possession, custody or control.

(e) Legal Process; Exceptions . Such Class B Partner may respond to a lawful and valid subpoena or other legal process but shall give the Partnership the earliest possible notice thereof, and shall, as much in advance of the return date as possible, make available to the Partnership and its counsel the documents and other information sought, and shall assist such counsel in resisting or otherwise responding to such process. In addition, nothing herein shall prevent any Class B Partner from reporting possible violations of federal law or regulation to, otherwise communicating with or participating in any investigation or proceeding that may be conducted by, or providing documents and other information, without notice to the Partnership, to, any governmental agency or entity (including the Department of Justice, the Securities and Exchange Commission, Congress, and any agency Inspector General), including in accordance with the provisions of and rules promulgated under Section 21F of the Exchange Act or Section 806 of the Sarbanes-Oxley Act of 2002, as each may have been amended from time to time, or any other whistleblower protection provisions of state or federal law or regulation.

(f) Non-Disparagement . Such Class B Partner agrees not to (i) make any negative, unflattering, accusatory, or derogatory remarks about the Partnership, any of the Partnership’s products or practices, or any of the Partnership’s directors, officers, agents, representatives, partners, members, equity holders or Affiliates, either orally or in writing, at any time, or (ii) take any action that might reasonably be expected to cause damage or harm (reputational or otherwise) to the Partnership or any of its Affiliates; provided that such Class B Partner may confer in confidence with such Class B Partner’s legal representatives and make truthful statements as required by law.

(g) Transitions . Prior to accepting other employment or any other service relationship during the Restricted Period, such Class B Partner shall provide a copy of this Section 6.10 to any recruiter who assists such Class B Partner in obtaining other employment or any other service relationship and to any employer or other Person with which such Class B Partner discusses potential employment or any other service relationship.

(h) Interpretation . In the event the terms of this Section 6.10 shall be determined by any court of competent jurisdiction to be unenforceable by reason of its extending for too great a period of time or over too great a geographical area or by reason of its being too extensive in any other respect, it will be interpreted to extend only over the maximum period of time for which it may be enforceable, over the maximum geographical area as to which it may be enforceable, or to the maximum extent in all other respects as to which it may be enforceable, all as determined by such court in such action. Any breach or violation by such Class B Partner of the provisions of this Section 6.10 shall toll the running of any time periods set forth in this Section 6.10 for the duration of any such breach or violation.

(i) Certain Terms . As used in this Section 6.10 , the term “ the Partnership ” shall include the Partnership, the General Partner, Parent, Calpine and their respective subsidiaries and Affiliates.

(j) Injunctive Relief . Such Class B Partner recognizes and acknowledges that a breach of the covenants contained in this Section 6.10 will cause irreparable damage to the Partnership and its goodwill, the exact amount of which will be difficult or impossible to ascertain, and that the remedies at law for any such breach will be inadequate. Accordingly,

such Class B Partner agrees that in the event of a breach of any of the covenants contained in this Section 6.10 , in addition to any other remedy which may be available at law or in equity (including, without limitation, pursuant to Section 6.05(e) ), the Partnership will be entitled to specific performance and injunctive relief.

6.11 Parent Distribution . Notwithstanding anything to the contrary in this Agreement, it is expressly understood and agreed that Parent or any of its Affiliates or any direct or indirect partner, member or other equity participant of any of the foregoing may, with the consent of the General Partner, distribute all or any portion of the Interests or Calpine Shares held directly or indirectly by it to its respective direct or indirect partners, members or other equity participants (any such distribution, a “ Parent Distribution ”). Any such partners, members or other equity participants (a) who receive Interests pursuant to a Parent Distribution, shall agree to be bound by the terms of this Agreement by executing and delivering a joinder to this Agreement in the form attached hereto as Exhibit B , and make the representations and warranties set forth in Section 3.03 as of the date of such Person’s admission as a Partner of the Partnership, in each case in accordance with Section 3.02 , and (b) who receive Calpine Shares pursuant to a Parent Distribution, shall agree to be bound by the terms of the Stockholders Agreement by executing and delivering a joinder to the Stockholders Agreement. Notwithstanding anything to the contrary contained in this Agreement, a Parent Distribution shall not constitute a “Transfer” for any purpose under this Agreement and shall, except as expressly provided in this Section 6.11 , be exempt in all respects from the terms and conditions of this Agreement. As an example, and without limiting the generality of the foregoing, it is expressly understood and agreed that a Parent Distribution shall not constitute a Tag-Along Sale. Any such partners, members or other equity participants (a) who receive Interests pursuant to a Parent Distribution, shall have the same rights and restrictions as applicable to Parent under this Agreement and (b) who receive Calpine Shares pursuant to a Parent Distribution, shall have the same rights and restrictions as applicable to Parent under the Stockholders Agreement.

ARTICLE VII.

MANAGEMENT

7.01 Management . Except as otherwise provided in this Agreement or by applicable law, the power and authority to manage, direct and control the Partnership will be vested in the General Partner. The General Partner will have full, complete and exclusive authority to manage, direct and control the business, affairs and properties of the Partnership, and to perform any and all other acts or activities customary or incident to the management of the Partnership’s activities. Unless expressly authorized to do so by the provisions hereof or by action of the General Partner, no Partner may claim or exercise any authority to act, or to enter into any contract or agreement, on behalf of the Partnership. The General Partner shall be removed as general partner of the Partnership immediately upon the removal of the General Partner as general partner of Parent in accordance with the Parent LPA and the Person appointed as the successor general partner of Parent shall be appointed the successor General Partner of the Partnership. For the avoidance of doubt, notwithstanding anything to the contrary in this Agreement, in no event shall the Partnership take any action set forth in Section 6.8.1 of the Parent LPA without the consent of “Two-Thirds in Interest” of the “Limited Partners” of Parent (each as defined in the Parent LPA), if such action would, pursuant to Section 6.8.1 of the Parent LPA, require such consent.

7.02 Limitation of Duties . No Partner (in its capacity as such) shall have any duties (including fiduciary duties) or liabilities relating thereto to the Partnership or the Partners, except for the implied covenant of good faith and fair dealing and except as may be specifically provided herein or required by any provisions of the Act or other applicable law that cannot be waived. Moreover, except as expressly provided herein, each Partner and each of their respective Affiliates shall be free to engage or invest in, and devote his or its and their time to, any other business venture or activity of any nature and description, whether or not such activities are considered competitive with the Partnership, and neither the Partnership nor any other Person will have any right by virtue of this Agreement or the relationship created hereby in or to such other venture or activity of any Person (or to the income or proceeds derived therefrom), and the pursuit of such other venture or activity will not be deemed wrongful or improper. No notice, approval or other sharing of any such other opportunity or activity will be required. The legal doctrines of “corporate opportunity,” “business opportunity” and similar doctrines will not be applied to any such competitive venture or activity to the fullest extent permitted by applicable law.

7.03 Transactions with Affiliates . To the extent permitted by applicable law, each Partner, whether acting for itself or on behalf of the Partnership, is, subject to Section 7.02 , hereby authorized to purchase property from, sell property to, or otherwise deal with any other Partner, the Partnership, or any of their respective Affiliates.

7.04 Officers; Partners .

(a) Officers . The General Partner may, from time to time, designate one or more Persons to be Officers of the Partnership, with such titles as the General Partner may assign to such Persons. No Officer need be a Partner or a resident of the State of Delaware. Officers so designated will have such authority and perform such duties as the General Partner may, from time to time, delegate to them and, unless otherwise specified by the General Partner, will have the authority and responsibilities generally held by officers of a Delaware corporation holding the same titles. Any number of offices may be held by the same Person. The salaries or other compensation, if any, of the Officers and agents of the Partnership will be fixed from time to time by the General Partner. Any Officer may resign as such at any time. Such resignation will be made in writing and will take effect at the time specified therein, or if no time be specified, at the time of its receipt by the General Partner. Any Officer may be removed as such, either with or without cause, by the General Partner, in its sole discretion. Any vacancy occurring in any office of the Partnership may be filled by the General Partner. The Officers of the Partnership, and their respective titles, as of the Effective Date are set forth on Exhibit C .

(b) Separate Interests . The General Partner, in performing its obligations under this Agreement, may act or omit to act at the direction of Parent, considering only such factors, including the separate interests of Parent and its Affiliates (which interests may differ from, and be given priority over, the interests of the Partnership or any other Partner), as the General Partner or Parent chooses to consider, and any action of the General Partner or failure to act, taken or omitted in good faith reliance on this Section 7.04(b) will not constitute a breach of any duty (including any fiduciary duty) on the part of the General Partner or Parent to the Partnership or any other Partner. The provisions of this Agreement,

to the extent that they modify or eliminate the duties and liabilities of the General Partner or any Partner otherwise existing at law or in equity, are agreed by the Partners to modify or eliminate to that extent such other duties and liabilities of the General Partner or such Partner to the fullest extent permitted by applicable law.

7.05 Indemnification; Limitation of Liability .

(a) Indemnification . Except as limited by applicable law and subject to the provisions of this Section 7.05 , the Officers and each Partner of the Partnership (each, an “ Indemnitee ”) will not be liable for, and will be indemnified and held harmless by the Partnership against, any and all losses, liabilities and reasonable expenses, including attorneys’ fees, arising from proceedings in which such Indemnitee may be involved, as a party or otherwise, by reason of its being a Partner or Officer of the Partnership, or by reason of its involvement in the management of the affairs of the Partnership, whether or not it continues to be such at the time any such loss, liability or expense is paid or incurred. Notwithstanding the foregoing, no Indemnitee will be held harmless or indemnified under this Section 7.05 for any losses, liabilities or expenses arising out of the fraud, intentional misconduct, or knowing or reckless breach of Indemnitee’s obligations under this Agreement, or bad faith of such Indemnitee. The rights of indemnification provided in this Section 7.05 are in addition to any rights to which an Indemnitee may otherwise be entitled by contract or as a matter of law. Without limiting the foregoing, an Indemnitee will be entitled to indemnification by the Partnership against reasonable expenses (as incurred), including attorneys’ fees, incurred by the Indemnitee in connection with the defense of any action to which the Indemnitee may be made a party (without regard to the success of such defense), to the fullest extent permitted under the provisions of the Act or any other applicable statute.

(b) Payments Prior to Final Disposition . Except as limited by applicable law, expenses incurred by an Indemnitee in defending any proceeding (except a proceeding by or in the right of the Partnership or a majority in interest of the Partners against such Indemnitee), will be paid by the Partnership in advance of the final disposition of the proceeding, upon receipt of a written undertaking by or on behalf of such Indemnitee to repay such amount if such Indemnitee is determined pursuant to this Section 7.05 or adjudicated to be ineligible for indemnification, which undertaking will be an unlimited general obligation of the Indemnitee but need not be secured unless so determined by the General Partner.

(c) Heirs and Representatives . The indemnification provided by this Section 7.05 will inure to the benefit of the heirs and personal representatives of each Indemnitee.

(d) Officers and Agents . The Partnership may, at the direction of the General Partner, indemnify and advance expenses to any other Officer, employee or agent of the Partnership to the same extent and subject to the same conditions under which it may indemnify and advance expenses under Sections 7.05(a) and (b) .

(e) Not Exclusive . The right to indemnification and the advancement and payment of expenses conferred in this Section 7.05 shall not be exclusive of any other right that a Partner or other Person indemnified pursuant to this Section 7.05 may have or hereafter acquire under any law (common or statutory) or provision of this Agreement.

(f) No Partner Personal Liability for Indemnification . Any indemnification pursuant to this Section 7.05 will be made only out of the assets of the Partnership and will in no event cause any Partner to incur any personal liability nor will it result in any liability of the Partners to any third party.

(g) Priority . The Partnership hereby acknowledges that each Indemnitee that is a Parent-Related Partner or heir or representative of any Parent-Related Partner (each, a “ Parent-Related Indemnitee ”), may have certain rights to indemnification, advancement of expenses and/or insurance provided by or on behalf of the Parent-Related Partners and/or their Affiliates (collectively, the “ Parent-Related Indemnitors ”). Notwithstanding anything to the contrary in this Agreement or otherwise: (i) the Partnership is the indemnitor of first resort (i.e., the Partnership’s obligations to each Parent-Related Indemnitee are primary and any obligation of the Parent-Related Indemnitors to advance expenses or to provide indemnification for the same expenses or liabilities incurred by each Parent-Related Indemnitee are secondary), (ii) the Partnership will be required to advance the full amount of expenses incurred by each Parent-Related Indemnitee and will be liable for the full amount of all liabilities, expenses, judgments, penalties, fines and amounts paid in settlement to the extent legally permitted and as required by this Section 7.05 , without regard to any rights each Parent-Related Indemnitee may have against the Parent-Related Indemnitors, and (iii) the Partnership and the Partners irrevocably waive, relinquish and release the Parent-Related Indemnitors from any and all claims against the Parent-Related Indemnitors for contribution, subrogation or any other recovery of any kind in respect thereof. Notwithstanding anything to the contrary in this Agreement or otherwise, no advancement or payment by the Parent-Related Indemnitors on behalf of a Parent-Related Indemnitee with respect to any claim for which such Parent-Related Indemnitee has sought indemnification or advancement of expenses from the Partnership will affect the foregoing and the Parent-Related Indemnitors will have a right of contribution and/or be subrogated to the extent of such advancement or payment to all of the rights of recovery of such Parent-Related Indemnitee against the Partnership. The Parent-Related Indemnitors are express third party beneficiaries of the terms of this Section 7.05(g) .

7.06 Officers’ Insurance . The Partnership shall purchase and maintain officer liability insurance in the amount approved by the General Partner on behalf of any Person who is or was a Partner or Officer of the Partnership against any liability asserted against such Person or incurred by such Person in any capacity identified in Section 7.05 or arising out of such Person’s status as an Indemnitee, whether or not the Partnership would have the power to indemnify such Person against that liability under Section 7.05 .

ARTICLE VIII.
OTHER RIGHTS AND OBLIGATIONS OF PARTNERS

8.01 Books and Records . The Partnership shall maintain or cause to be maintained at the principal office of the Partnership appropriate books and records with respect to the Partnership’s business. The books of the Partnership shall be maintained, for financial reporting purposes, on an accrual basis in accordance with GAAP. All decisions as to accounting matters, except as specifically provided to the contrary herein, shall be made by the General Partner.

8.02 Schedule K-1 Information . No later than 90 days after the end of each Fiscal Year, the Partnership shall use its reasonable efforts to provide an estimated Schedule K-1 to each Partner, and, no later than June 30 following the end of each Fiscal Year, the Partnership shall use its reasonable efforts to (i) provide to each Partner a final Schedule K-1 and (ii) provide to any Partner such other information reasonably requested by such Partner in order for such Partner to fulfill its federal, state and local tax reporting obligations.

8.03 Confidentiality . Each Partner agrees that the provisions of this Agreement, all understandings, agreements and other arrangements between and among the Partners, and all other non-public information received from or otherwise relating to the Partnership or its business will be confidential, and will not be disclosed or otherwise released to any other Person (other than another party hereto), without the prior approval of the General Partner. The obligations of the Partners hereunder will not apply to the extent that the disclosure of information otherwise determined to be confidential is required by applicable law; provided , that prior to disclosing such confidential information, to the extent practicable a Partner must notify the Partnership thereof, which notice will include the basis upon which such Partner believes the information is required to be disclosed.

ARTICLE IX.
TAXES

9.01 Tax Returns . The General Partner will cause to be prepared and timely filed all necessary federal, state and local income tax returns for the Partnership. Each Partner will furnish to the General Partner all pertinent information in its possession relating to Partnership operations that is necessary to enable the Partnership’s tax returns to be prepared and timely filed.

9.02 Tax Classification . It is the intent of the Partners that the Partnership be treated as a partnership (for so long as any Class B Interests have been issued and are outstanding) or as a disregarded entity (if no Class B Interests are then outstanding), in each case, for federal income tax purposes and, to the extent permitted by applicable law, for state and local franchise and income tax purposes. Neither the Partnership nor any Partner may make an election for the Partnership to be excluded from the application of the provisions of subchapter K of chapter 1 of subtitle A of the Code or any similar provisions of applicable state or local law or to be treated as a corporation for federal income tax purposes (other than as determined by the General Partner in connection with the consummation of an IPO pursuant to Section 6.07 of this Agreement), and no provision of this Agreement will be construed to sanction or approve such an election.

9.03 Partnership Representative . The General Partner is hereby designated as the Partnership’s “partnership representative” within the meaning of Code Section 6223, unless and until another Person is designated as such from time to time by the General Partner.

9.04 Section 409A . No Award is intended to constitute or provide for “nonqualified deferred compensation” within the meaning of Section 409A. To the extent that the General Partner determines that any Award granted under this Agreement is subject to Section 409A, the Award Agreement evidencing such Award shall incorporate the terms and conditions required by Section 409A. Notwithstanding any provision of this Agreement to the contrary, in the event that following the effective date hereof, the General Partner determines that any Award may be subject to Section 409A, the General Partner reserves the right to (without any obligation to do so or to indemnify the holder of such Award for failure to do so), in its sole discretion, adopt such amendments to this Agreement and the applicable Award Agreement or adopt such other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions, that the General Partner determines to be necessary or appropriate (i) to preserve the intended tax treatment of the benefits provided with respect to the Award, to preserve the economic benefits with respect to the Award, or to avoid less favorable accounting or tax consequences for the Partnership and/or (ii) to exempt the Award from Section 409A or to comply with the requirements of Section 409A and thereby avoid the application of penalty taxes thereunder.

ARTICLE X

CERTIFICATION OF INTERESTS; REPORTS; BANK ACCOUNTS

10.01 Certification of Interests . If the General Partner so elects at any time, (i) each Partner will enter into an amendment to this Agreement which provides that this Section 10.01 will be amended and restated substantially as set forth in Exhibit D hereto and (ii) the Partnership will cause the Interests in the Partnership to be evidenced by certificates in the form of Exhibit E hereto. The Partnership will maintain books for the purpose of registering the transfer of Interests.

10.02 Reports . The Partnership will cause to be prepared or delivered such reports as the General Partner may require. The Partnership will bear the costs of such reports.

10.03 Bank Accounts . The General Partner will cause the Partnership to establish and maintain one or more separate bank or investment accounts for Partnership funds in the Partnership’s name with such financial institutions and firms as the General Partner may select and with such signatories thereon as the General Partner may designate.

ARTICLE XI.
DISSOLUTION, LIQUIDATION, TERMINATION AND CONVERSION

11.01 Dissolution . The Partnership will dissolve and its affairs will be wound up upon the first to occur of any of the following:

(a) the consent of the General Partner; or

(b) the occurrence of any other event causing dissolution of the Partnership under the Act;

provided that, upon dissolution pursuant to clause (b) of this Section 11.01 , any or all of the remaining Partners may elect to continue the business of the Partnership within 90 days after the occurrence of the event causing such dissolution. The death, resignation, withdrawal, bankruptcy, insolvency or expulsion of any Partner will not dissolve the Partnership.

11.02 Liquidation and Termination . On dissolution of the Partnership, the General Partner may appoint one or more other Persons as liquidator(s). The liquidator will proceed diligently to wind up the affairs of the Partnership and make final distributions as provided herein. The costs of liquidation will be borne as a Partnership expense. Until final distribution, the liquidator will continue to operate the Partnership properties with all of the power and authority of the Partners. The steps to be accomplished by the liquidator are as follows:

(a) Accounting . As promptly as possible after dissolution and again after final liquidation, the liquidator will cause a proper accounting to be made by a recognized firm of certified public accountants of the Partnership’s assets, liabilities, and operations through the last day of the calendar month in which the dissolution occurs or the final liquidation is completed, as applicable;

(b) Payments . The liquidator will pay from Partnership funds all of the debts and liabilities of the Partnership (including all expenses incurred in liquidation) or otherwise make adequate provision therefor (including the establishment of a cash escrow fund for contingent liabilities in such amount and for such term as the liquidator may reasonably determine); and

(i) the liquidator may sell any or all Partnership property, and any resulting gain or loss from each sale will be computed and allocated to the Partners pursuant to Article V ;

(ii) with respect to all Partnership property that has not been sold, the fair market value of that property will be determined and the Capital Accounts of the Partners will be adjusted to reflect the manner in which the unrealized income, gain, loss, and deduction inherent in property that has not been reflected in the Capital Accounts previously would be allocated among the Partners if there were a taxable Transfer of that property for the fair market value of that property on the date of distribution;

(iii) thereafter, Partnership property will be distributed among the Partners in accordance with Section 5.01 , taking into account prior distributions under Section 5.03 but subject to Section 5.02 .

(iv) Distributions . All distributions in kind to the Partners will be made subject to the liability of each distributee for its allocable share of costs, expenses and liabilities theretofore incurred or for which the Partnership has committed prior to the date of termination and those costs, expenses and liabilities will be allocated to the distributee pursuant to this Section 11.02 .

11.03 Cancellation of Filing . On completion of the distribution of Partnership assets as provided herein, the Partnership will be terminated, and the General Partner (or such other Person or Persons as may be required) will cause the cancellation of any other filings made as provided in Section 2.07 and will take such other actions as may be necessary to terminate the Partnership.

ARTICLE XII.
GENERAL PROVISIONS

12.01 Changes in Interests; Disposition of Assets . In the event that the General Partner determines that any dividend or other distribution (whether in the form of cash, Interests, other equity securities or other property), Capital Contribution, recapitalization, reclassification, reorganization, change to corporate form, merger, consolidation, split-up, spin-off, combination, repurchase, liquidation, dissolution, or sale, transfer, exchange or other disposition of all or substantially all of the assets of the Partnership, or exchange of Interests or other equity securities of the Partnership, or other similar corporate transaction or event, affects the Interests such that an adjustment is determined by the General Partner in good faith to be appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under this Agreement or with respect to an Award, or if the events described in clause (i) of the definition of Drag-Along Sale occur, then the General Partner shall, in such manner as it may deem equitable, adjust any or all of:

(a) The number of Interests or the number and kind of equity securities of the Partnership with respect to which Awards may be granted under this Agreement;

(b) The number of Interests or the number and kind of equity securities of the Partnership subject to outstanding Awards, including the cancellation of outstanding Awards for an amount of cash, securities, or other property equal to the amount, if any, that could have been attained upon the realization of the Partner’s rights had such Award (or portion thereof) been fully vested immediately prior to the occurrence of such transaction or event;

(d) The Benchmark Amount, Benchmark Component or any financial or other “targets” specified in this Agreement or in any Award Agreement for determining the vesting of any Award.

12.02 Offset . Whenever the Partnership is to pay any sum to any Partner, any amounts such Partner owes the Partnership may be deducted from that sum before payment.

12.03 Notices . All notices, requests or consents provided for or permitted to be given under this Agreement will be in writing and will be given either by depositing such writing in the United States mail, addressed to the recipient, postage paid and certified with return receipt requested, or by depositing such writing with a reputable overnight courier for next day delivery, or by delivering such writing to the recipient in person, by courier or by facsimile transmission. A notice, request or consent given under this Agreement will be effective on receipt by the Person to receive it. All notices, requests and consents to be sent to a Partner or other party hereto will be sent to or made

at the addresses given for that Person on the list attached hereto as Exhibit A or such other address as such Person may specify by notice to the other Persons party hereto. Any notice, request or consent to the Partnership made by a Partner will be given to each other Partner.

12.04 Entire Agreement; Supersedure . This Agreement (together with the Exhibits hereto), and the agreements entered into in connection herewith, constitute the entire agreement of the Partners relating to the Partnership and supersede all prior contracts or agreements with respect to the Partnership, whether oral or written.

12.05 Effect of Waiver or Consent . A waiver or consent, express or implied, to or of any breach or default by any Person in the performance by that Person of its obligations with respect to the Partnership will not constitute a consent or waiver to or of any other breach or default in the performance by that Person of the same or any other obligations of that Person with respect to the Partnership. Failure on the part of a Person to complain of any act of any Person or to declare any Person in default with respect to the Partnership, irrespective of how long such failure continues, will not constitute a waiver by that Person of its rights with respect to that default until the applicable limitations period has expired.

12.06 Amendment or Modification .

(a) Except as otherwise provided herein, this Agreement may be amended or modified from time to time only by a written instrument that is adopted by the General Partner; provided that without the consent of any Partner to be adversely affected thereby, this Agreement may not be amended so as to (i) modify the limited liability of any Partner, (ii) disproportionately and adversely affect the interest of such Partner in any Profits, Losses or distributions or (iii) require any Partner to make any additional Capital Contribution to the Partnership without that Partner’s prior written consent; provided , further , that any amendment which impairs the rights of the Class B Partners arising under this Agreement in a manner that has a disproportionate negative impact on the Class B Partners shall also require the consent of the holders of a majority of the Class B Interests.

(b) Notwithstanding the foregoing or anything to the contrary herein, in addition to other amendments authorized herein, amendments may be made to this Agreement from time to time by the General Partner without the consent of any Partner to (i) amend Exhibit A in accordance with Section 3.01 , (ii) correct any typographical or similar ministerial errors, (iii) delete or add any provision of this Agreement required to be so deleted or added by, or for compliance with, applicable law, (iv) amend any provisions of this Agreement as the General Partner reasonably deems necessary or appropriate in furtherance of any Transfer to, or admission of, any Affiliate of Parent and/or (v) cure any mistake or ambiguity, to correct or supplement any provision herein which may be inconsistent with any other provision herein, or to make any other provisions with respect to matters or questions arising under this Agreement in each such case in a manner that is not inconsistent with the provisions of this Agreement.

12.07 Binding Effect . Subject to the restrictions on Transfer set forth in this Agreement, this Agreement will be binding on and inure to the benefit of the Partners and their respective heirs, legal representatives, successors, and assigns.

12.08 Governing Law; Severability . This Agreement, and all rights and remedies in connection therewith, will be governed by, and construed under, the laws of the State of Delaware, without regard to otherwise governing principles of conflicts of law (whether of the State of Delaware or otherwise) that would result in the application of the laws of any other jurisdiction. If any provision of this Agreement or its application to any Person or circumstance is held invalid or unenforceable to any extent, the remainder of this Agreement and the application of such provision to other Persons or circumstances will not be affected thereby, and such provision will be enforced to the greatest extent permitted by law.

12.09 Further Assurances . In connection with this Agreement and the transactions contemplated thereby, each Partner will execute and deliver any additional documents and instruments and perform any additional acts that may be necessary or appropriate to effectuate and perform the provisions of this Agreement and such transactions.

12.10 Consent to Jurisdiction; Service of Process; Waiver of Jury Trial . EACH PARTY TO THIS AGREEMENT HEREBY CONSENTS TO THE JURISDICTION OF ANY UNITED STATES DISTRICT COURT OR DELAWARE STATE CHANCERY COURT LOCATED IN WILMINGTON, DELAWARE AND IRREVOCABLY AGREES THAT ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER SUCH ACTIONS OR PROCEEDINGS ARE BASED IN STATUTE, TORT, CONTRACT OR OTHERWISE), SHALL BE LITIGATED IN SUCH COURTS. EACH PARTY (A) CONSENTS TO SUBMIT ITSELF TO THE PERSONAL JURISDICTION OF SUCH COURTS FOR SUCH ACTIONS OR PROCEEDINGS, (B) AGREES THAT IT WILL NOT ATTEMPT TO DENY OR DEFEAT SUCH PERSONAL JURISDICTION BY MOTION OR OTHER REQUEST FOR LEAVE FROM ANY SUCH COURT, AND (C) AGREES THAT IT WILL NOT BRING ANY SUCH ACTION OR PROCEEDING IN ANY COURT OTHER THAN SUCH COURTS. EACH PARTY ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE EXCLUSIVE AND IRREVOCABLE JURISDICTION AND VENUE OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY NON-APPEALABLE JUDGMENT RENDERED THEREBY IN CONNECTION WITH SUCH ACTIONS OR PROCEEDINGS. A COPY OF ANY SERVICE OF PROCESS SERVED UPON THE PARTIES SHALL BE MAILED BY REGISTERED MAIL TO THE RESPECTIVE PARTY EXCEPT THAT, UNLESS OTHERWISE PROVIDED BY APPLICABLE LAW, ANY FAILURE TO MAIL SUCH COPY SHALL NOT AFFECT THE VALIDITY OF SERVICE OF PROCESS. IF ANY AGENT APPOINTED BY A PARTY REFUSES TO ACCEPT SERVICE, EACH PARTY AGREES THAT SERVICE UPON THE APPROPRIATE PARTY BY REGISTERED MAIL SHALL CONSTITUTE SUFFICIENT SERVICE. NOTHING HEREIN SHALL AFFECT THE RIGHT OF A PARTY TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT.

12.11 Waiver of Certain Rights . To the maximum extent permitted by applicable law, each Partner irrevocably waives any right it might have to maintain any action for dissolution of the Partnership, or to maintain any action for partition of the property of the Partnership

12.12 Counterparts . This Agreement may be executed in any number of counterparts, any of which may be delivered via facsimile or PDF, each of which will be deemed to be an original and all of which will constitute one agreement, binding on all parties hereto.

[ Signature pages follow ]

IN WITNESS THEREOF, the undersigned Partners have executed this Agreement effective as of the Effective Date.

GENERAL PARTNER

VOLT PARENT GP, LLC

By: Energy Capital Partners III, LLC,

its managing member

By: ECP ControlCo, LLC,

its managing member

By: /s/ Tyler Reeder

Name: Tyler Reeder

Title: Managing Member

LIMITED PARTNERS

VOLT PARENT, LP

By: Volt Parent GP, LLC,

its general partner

By: Energy Capital Partners III, LLC,

its managing member

By: ECP ControlCo, LLC,

its managing member

By: /s/ Tyler Reeder

Name: Tyler Reeder

Title: Managing Member

[ Signature Page to Amended and Restated Limited Partnership Agreement of CPN Management, LP ]

EXHIBIT A

Partners, Capital Contributions, and Interests

Dated as of: March 8, 2018



Partner Name and Address	Type of Interest	Capital Contribution	Unreturned Capital	Percentage Interest ⁽²⁾	Benchmark Component
General Partner ⁽¹⁾ Volt Parent GP, LLC 51 JFK Parkway Suite 200 Short Hills, NJ 07078 Attn: President and CEO Fax: (973) 671-6101	General Partner
Parent ⁽¹⁾ Volt Parent, LP 51 JFK Parkway Suite 200 Short Hills, NJ 07078 Attn: President and CEO Fax: (973) 671-6101	Class A	$5,452,205,757.50	$5,452,205,757.50	100.0000%	None

A-1



Partner Name and Address	Date of Issuance	Type of Interest	Percentage Interest ⁽³⁾	Benchmark Components
[ l ] [ l ] [ l ] Fax: [ l ]	[ l ], 2018	Class B Interest	[ l ]%	$[ l ]
[ l ] [ l ] [ l ] Fax: [ l ]	[ l ], 2018	Class B Interest	[ l ]%	$[ l ]


(1)	All notices shall be sent with a copy concurrently to Latham & Watkins LLP, 885 Third Avenue, New York, NY 10022-4834, Facsimile No.: (212) 751-4864, Attn: David Kurzweil.


(2)	Not adjusted for Benchmark Amount.


(3)	Reflects the Awards granted to such Class B Partner, whether vested or unvested. Awards are subject to vesting as set forth in the applicable Award Agreement.

A-2

EXHIBIT B

FORM OF JOINDER

AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT

CPN MANAGEMENT, LP

The undersigned hereby joins in the execution and delivery of that certain Amended and Restated Limited Partnership Agreement, dated as of March 8, 2018 (as may hereafter be amended from time to time, the “ Partnership Agreement ”), of CPN Management, LP, a Delaware limited partnership (the “ Partnership ”), and agrees to be bound in all respects by the terms and conditions specified in the Partnership Agreement as a limited partner of the Partnership. If the undersigned is married, the undersigned has further caused his or her spouse to execute the Spousal Consent set forth below.

Dated: _________ ___, 20__

__________________________

Name:

Address:

_______________________

FEIN/SSN:

SPOUSAL CONSENT

The undersigned is the spouse of _______________________. The undersigned acknowledges that he or she has read the Partnership Agreement (as defined above) and clearly understands its provisions. The undersigned is aware that, by the provisions of the Partnership Agreement, he or she has agreed to sell or transfer all of his or her interest in the Partnership (as defined above), including any community property interest, in accordance with the terms and provisions of the Partnership Agreement. The undersigned hereby expressly approves of and agrees to be bound by the provisions of the Partnership Agreement in its entirety, including, but not limited to, those provisions relating to the sales and transfers of interests in the Partnership.

Dated: _________ ___, 20__

__________________________

Name:

B-1

EXHIBIT C

Officers



Name	Title
Tyler Reeder	President and Chief Executive Officer
Andrew Singer	General Counsel and Secretary
Andrew Gilbert	Vice President and Treasurer

C-1

EXHIBIT D

Certificated Securities and Article 8 Opt-in Provision

Section 10.01. Certification of Interests; Article 8 Opt-in.

(a) Certification of Interests . The Interests in the Partnership will be evidenced by certificates in the form of Exhibit E hereto. The Partnership will maintain books for the purpose of registering the Transfer of Interests. In connection with a transfer in accordance with this Agreement of any Interests in the Partnership, the certificate(s) evidencing the Interests will be delivered to the Partnership for cancellation, and the Partnership will thereupon issue a new certificate to the transferee evidencing the Interests that were Transferred and, if applicable, the Partnership will issue a new certificate to the transferor evidencing any Interests registered in the name of the transferor that were not Transferred.

(b) Article 8 Opt-in . The Partnership hereby irrevocably elects that all Interests in the Partnership will be securities governed by Article 8 of the Uniform Commercial Code as in effect in the State of Delaware and each other applicable jurisdiction. Each certificate evidencing Interests in the Partnership will bear the following legend: “This certificate evidences an interest in CPN Management, LP and will be a security governed by Article 8 of the Uniform Commercial Code as in effect in the State of Delaware and, to the extent permitted by applicable law, Article 8 of the Uniform Commercial Code of each other applicable jurisdiction.” This provision will not be amended, and any purported amendment to this provision will not take effect, until all outstanding certificates have been surrendered for cancellation.

D-1

EXHIBIT E

Form of Interest Certificate

CERTIFICATE OF INTEREST

Certificate Number: [___]

CPN Management, LP

Formed under the Delaware Revised Uniform Limited Partnership Act

The transfer of interest represented by this certificate is subject to the restrictions set forth on the reverse side

This certifies that [_____________] holds an interest in:

CPN Management, LP

a Delaware Limited Partnership

This Certificate is transferable only on the books of CPN Management, LP by the holder hereof in accordance with the Amended and Restated Limited Partnership Agreement of CPN Management, LP, as amended from time to time (the “ Partnership Agreement ”).

This Certificate evidences an interest CPN Management, LP and will be a security governed by Article 8 of the Uniform Commercial Code as in effect in the State of Delaware and, to the extent permitted by applicable law, Article 8 of the Uniform Commercial Code of each other applicable jurisdiction.

In Witness Whereof, the undersigned has executed this Certificate on behalf of CPN Management, LP this __ day of _________, _____.

_____________________________

Name: [_________]

Title: [_________]

E-1

THE INTEREST REPRESENTED BY THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY STATE SECURITIES OR BLUE SKY LAWS (“BLUE SKY LAW”). THE INTEREST MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF WITHOUT REGISTRATION UNDER THE ACT AND UNDER APPLICABLE BLUE SKY LAW OR UNLESS SUCH OFFER, SALE, TRANSFER, PLEDGE OR OTHER DISPOSITION IS EXEMPT FROM REGISTRATION THEREUNDER AND IS MADE IN ACCORDANCE WITH THE TERMS, CONDITIONS AND RESTRICTIONS IN THE PARTNERSHIP AGREEMENT.

E-2

Exhibit 10.2



CPN MANAGEMENT, LP 717 TEXAS AVENUE SUITE 100 HOUSTON, TEXAS 77002

[____], 2018

[Employee address]


Re:	Award of Class B Interest in CPN Management, LP

Dear Sir/Madam:

Reference is made to that certain Amended and Restated Limited Partnership Agreement of CPN Management, LP, a Delaware limited partnership (“ CPN Management ”), dated and effective as of March 8, 2018 (as it may be amended, modified or supplemented from time to time, the “ CPN Management LP Agreement ”), a copy of which is attached as Exhibit A hereto. Capitalized terms used but not otherwise defined in this letter agreement (this “ Award Agreement ”) shall have the meanings set forth in the CPN Management LP Agreement (unless otherwise stated herein).

This Award Agreement sets forth the understanding between CPN Management and [______] (the “ Employee ”), an employee of Calpine Corporation, a Delaware corporation and a wholly owned subsidiary of CPN Management (“ Calpine ”), or one of its subsidiaries, regarding the terms and conditions under which CPN Management shall grant the Employee an award of a Class B Interest. Such Class B Interest shall entitle the Employee to share in the profits, losses and distributions of CPN Management to the extent set forth in the CPN Management LP Agreement. The Employee shall be entitled to such other rights, and shall be subject to such obligations, associated with such Class B Interest as are provided in the CPN Management LP Agreement.

1. Award of Class B Interest to the Employee .

(a) As of the date hereof (the “ Date of Grant ”), CPN Management hereby awards a Class B Interest to the Employee as set forth in the following table with a Benchmark Component of $[•] (the “ Class B Interest ”). The Award shall be subject to the terms and conditions of the CPN Management LP Agreement and this Award Agreement. Subject to the Employee’s continuous provision of services to Calpine or any of its subsidiaries through each applicable vesting date, the Award shall vest in accordance with the vesting schedule set forth in the following table.



Total Class B Interest subject to vesting (as of the Date of Grant)	Incremental Vesting of Award (as of annual vesting dates)
March 8, 2018: [ ]%	March 8, 2019: 20% March 8, 2020: 20% March 8, 2021: 20% March 8, 2022: 20% March 8, 2023: 20%

(b) As a condition to receiving the Award, the Employee must duly execute and deliver this Award Agreement and a joinder to the CPN Management LP Agreement (a form of which is attached as Exhibit B hereto).

2. Change in Control; Termination of Employment .

(a) In the event of a Change in Control, the Award shall vest in full, to the extent not already then vested.

(b) On a Date of Termination that occurs due to the Employee’s death or Disability, the Award shall vest in full, to the extent not already then vested.

(c) On a Date of Termination that occurs for any reason other than as described in Section 2(b) above, the Employee shall forfeit any then unvested portion of the Award without payment therefor.

(d) Following a Change in Control, a Drag-Along Sale, a Tag-Along Sale or a Date of Termination that occurs for any reason, any portion of the Award that is not forfeited in accordance with the terms hereof shall continue to be subject to the terms and conditions of the CPN Management LP Agreement, including, without limitation, the provisions of Section 6.05 ( Repurchase Rights ) and all other provisions of Article VI of the CPN Management LP Agreement.

3. Award Agreement Definitions .

For purposes of this Award Agreement, the following terms shall have the meanings set forth below:

(a) “ Cause ” shall, if the Employee is party to an Employment Agreement that includes such term, have the meaning ascribed to such term in such Employment Agreement. If the Employee is not a party to such an Employment Agreement, “Cause” shall mean (i) the Employee’s willful failure to substantially perform the Employee’s duties (other than any such failure resulting from the Employee’s Disability); (ii) the Employee’s willful failure to carry out, or comply with, in any material respect any lawful directive of Calpine; (iii) the Employee’s commission at any time of any act or omission that results in, or may reasonably be expected to result in, a conviction, plea of no contest, plea of nolo contendere , or imposition of unadjudicated probation for any felony or crime involving moral turpitude; (iv) the Employee’s unlawful use (including being under the influence) or possession of illegal drugs on Calpine’s premises or while performing the Employee’s duties and responsibilities; (v) the Employee’s commission at any time of any act of fraud, embezzlement, misappropriation, material misconduct, conversion of assets of Calpine, or breach of fiduciary duty against Calpine; or (vi) the Employee’s material breach of this Award Agreement, the CPN Management LP Agreement or any Employment Agreement or other agreement with Calpine or CPN Management or any of their respective Affiliates (including, without limitation, any breach of the restrictive covenants of any such agreement); and which, in the case of clauses (i), (ii) and (vi), continues beyond thirty (30) days after Calpine or CPN Management, as applicable, has provided the Employee written notice of such failure or breach (to the extent that, in the reasonable judgment of Calpine or CPN Management, as applicable, such failure or breach can be cured by the Employee).

(b) “ Change in Control ” shall mean (i) a change in beneficial ownership (within the meaning of Rule 13d-3 of the Exchange Act) of Calpine, CPN Management or Volt Parent LP, a

Delaware limited partnership (“ Volt Parent ”), effected through a transaction or series of transactions (including, without limitation, any merger, consolidation or other business combination, or sale of assets or equity interests) whereby any “person” or related “group” of “persons” (as such terms are used in Sections 13(d) and 14(d)(2) of the Exchange Act) other than (A) Calpine, CPN Management, Volt Parent or any of their respective Affiliates, (B) any limited partner of Volt Parent as of March 8, 2018 or any Affiliate of any such limited partner, or (C) any employee benefit plan maintained by Calpine or any of its subsidiaries (x) directly or indirectly acquires beneficial ownership of securities of Calpine possessing more than 50% of the total combined voting power of the securities of Calpine outstanding immediately after such acquisition or (y) acquires all or substantially all of the assets of Calpine, CPN Management or Volt Parent, whether by liquidation, dissolution, merger, consolidation or sale, or (ii) any “person” or related “group” of “persons” (as such terms are used in Sections 13(d) and 14(d)(2) of the Exchange Act) other than (1) ECP, Calpine, CPN Management, Volt Parent or any of their respective Affiliates or (2) any employee benefit plan maintained by Calpine or any of its subsidiaries directly or indirectly acquires beneficial ownership from ECP of (I) more than 75% of ECP’s aggregate interest in Volt Parent as of March 8, 2018 or (II) interests in Volt Parent such that, following such acquisition, ECP (directly or indirectly) is no longer the largest holder of interests in Volt Parent; provided that, notwithstanding the foregoing, an offering of securities of Calpine or any successor entity to the general public through a registration statement filed with the Securities and Exchange Commission under the Securities Act shall not, on its own, constitute a Change in Control.

(d) “ Date of Termination ” shall mean the date on which the Employee’s employment with Calpine or any of its subsidiaries terminates for any reason.

(e) “ Disability ” shall, if the Employee is party to an Employment Agreement that includes such term, have the meaning ascribed to such term in such Employment Agreement, and if the Employee is not a party to such an Employment Agreement that includes such term, mean the Employee’s inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or that can be expected to last for a continuous period of not less than twelve (12) months, as determined by an accredited physician jointly selected by the Employee and Calpine.

(f) “ Employment Agreement ” shall mean a written employment agreement with Calpine or any of its subsidiaries.

(g) “ Exchange Act ” shall mean the Securities Exchange Act of 1934, as amended.

(h) “ Noncompete Agreement ” shall mean any written agreement with Calpine or any of its subsidiaries, other than the agreement in Section 6.10(a) (“ Non-Competition ”) of the CPN Management LP Agreement, that restricts or prohibits the Employee from competing with the business of Calpine or any of its subsidiaries.

(i) “ Noncompete Option ” shall mean the option of Calpine or the applicable employing subsidiary, in its sole discretion, if the Employee is not a party to a Noncompete Agreement as of the Date of Termination, to extend the Restricted Period (as defined below) for purposes of Section 6.10(a) (“ Non-Competition ”) of the CPN Management LP Agreement to a date on or prior to (i) in the case of an Employee who is a Vice President or below at the Date of Termination, three (3)

months following the Date of Termination, and (ii) in the case of an Employee who is a Senior Vice President or above at the Date of Termination, six (6) months following the Date of Termination, in each case upon written notice to the Employee no later than thirty (30) days after the Date of Termination and subject to Section 5.

(j) “ Noncompete Option Payment ” shall mean an amount equal to (a) the Employee’s annual base salary as of the Date of Termination, multiplied by (b) a fraction, the numerator of which is equal to the number of days from the Date of Termination through the expiration date of the Restricted Period (as elected by Calpine or the applicable employing subsidiary pursuant to its Noncompete Option), and the denominator of which is 365.

(k) “ Section 409A ” shall mean Section 409A of the Code and the Department of Treasury regulations and other interpretive guidance issued thereunder, including without limitation any such regulations or other guidance that may be issued after the date hereof.

4. CPN Management LP Agreement Definitions . For purposes of the CPN Management LP Agreement (solely with respect to the Award being awarded hereunder), the following terms shall have the meanings set forth below:

(a) “ Repurchase Price ” shall mean (i) in the event of a Date of Termination that occurs due to termination by Calpine for Cause or the Employee’s purported “Transfer” in violation of the provisions of Article VI of the CPN Management LP Agreement, $0.00, and (ii) in the event of a Date of Termination that occurs for any other reason, an amount equal to the Fair Market Value of the Class B Interest subject to the Award.

(b) “ Restricted Period ”, for purposes of Section 6.10(b) (“ Non-Solicitation ”) of the CPN Management LP Agreement, shall mean the period from the Date of Grant through the first anniversary of the Date of Termination. For purposes of Section 6.10(a) (“ Non-Competition ”) of the CPN Management LP Agreement, “ Restricted Period ” shall mean (i) if the Employee is a party to a Noncompete Agreement as of the Date of Termination, the period from the Date of Grant through the date as may be set forth as the expiration date of any applicable non-competition covenant provided for in such Noncompete Agreement and (ii) if the Employee is not a party to a Noncompete Agreement as of the Date of Termination, the period from the Date of Grant through (A) in the event that Calpine or the applicable employing subsidiary does not exercise its Noncompete Option, the Date of Termination or (B) in the event that Calpine or the applicable employing subsidiary exercises its Noncompete Option, the date elected by such entity thereunder.

5. Noncompete Option Payment . If Calpine or the applicable employing subsidiary exercises its Noncompete Option, then the Employee will be entitled to a payment equal the excess of (y) the amount of the Noncompete Option Payment over (z) the amount of cash severance, if any, to which the Employee is entitled under any severance agreement with or plan or policy of Calpine or any of its subsidiaries as a result of the Employee’s termination of employment. Notwithstanding anything herein to the contrary, (i) no portion of the Noncompete Option Payment shall be paid unless, on or prior to the 30th day following the Date of Termination, the Employee timely executes a general waiver and release of claims agreement acceptable to Calpine or the applicable employing subsidiary, and such release shall not have been revoked by the Employee prior to the expiration of the period (if any) during which any portion of such release is revocable under applicable law, and (ii) as of the first date on which the Employee violates any covenant contained in Section 6.10 (“ Non-Competition ; Non-Solicitation ; Non-Disparagement ”) of the CPN Management LP

Agreement, any remaining unpaid portion of the Noncompete Option Payment shall thereupon be forfeited. The Noncompete Option Payment shall be paid in equal installments during the period beginning on the Date of Termination and ending on the expiration date of the Restricted Period (as elected by Calpine or the applicable employing subsidiary pursuant to its Noncompete Option), in accordance with the normal payroll policies of the applicable employer as in effect on the Date of Termination; provided that any installment that would otherwise have been paid prior to the first normal payroll payment date that occurs on or after the 30th day following the Date of Termination (such payroll date, the “ First Payment Date ”) shall instead be paid on the First Payment Date.

6. Section 409A . The parties hereto acknowledge and agree that, to the extent applicable, this Award Agreement shall be interpreted in accordance with, and incorporate the terms and conditions required by, Section 409A. Notwithstanding anything herein to the contrary, (a) to the extent that the Noncompete Option Payment is deemed to constitute “nonqualified deferred compensation” within the meaning of Section 409A, for purposes of Section 409A (including, without limitation, for purposes of Section 1.409A-2(b)(2)(iii) of the Department of Treasury regulations), the Employee’s right to receive the Noncompete Option Payment in the form of installment payments (the “ Installment Payments ”) shall be treated as a right to receive a series of separate payments and, accordingly, each Installment Payment shall at all times be considered a separate and distinct payment; (b) the Noncompete Option Payment shall not be payable unless the Employee’s termination of employment constitutes a “separation from service” within the meaning of Section 1.409A-1(h) of the Department of Treasury regulations; (c) if the Employee is deemed at the time of the Employee’s separation from service to be a “specified employee” for purposes of Section 409A(a)(2)(B)(i) of the Code, to the extent delayed commencement of any portion of the Noncompete Option Payment (after taking into account all applicable exclusions under Section 409A) is required in order to avoid a prohibited distribution under Section 409A(a)(2)(B)(i) of the Code, such portion of the Noncompete Option Payment shall not be provided to the Employee prior to the earlier of (i) the expiration of the six (6)-month period measured from the date of the Employee’s “separation from service” and (ii) the date of the Employee’s death; provided that, upon the earlier of such dates, any portion of the Noncompete Option Payment deferred pursuant to this Section 6 shall be paid in a lump sum to the Employee, and any remaining portion shall be provided as otherwise specified herein; and (d) the determination of whether the Employee is a “specified employee” for purposes of Section 409A(a)(2)(B)(i) of the Code as of the time of the Employee’s separation from service shall be made by Calpine in accordance with the terms of Section 409A (including, without limitation, Section 1.409A-1(i) of the Department of Treasury regulations and any successor provision thereto).

7. Section 83(b) Election .

(a) Calpine and CPN Management have encouraged the Employee to review the tax consequences of the transactions contemplated by this Award Agreement and the CPN Management LP Agreement with the Employee’s own personal tax or financial advisor. The Employee understands that he or she, and not Calpine, CPN Management or any of their respective Affiliates, will be responsible for the Employee’s own tax liability that may arise as a result of the transactions contemplated by this Award Agreement and the CPN Management LP Agreement.

(b) The Employee is required to file a protective election under Section 83(b) of the Code with the Internal Revenue Service within thirty (30) days following the Date of Grant, with the effect that the income tax event with respect to the grant of the Award will occur on the Date of Grant.

(c) The Employee acknowledges that it is his or her responsibility, and not the responsibility of Calpine, CPN Management or any of their respective Affiliates, to timely file a protective election under Section 83(b) of the Code, even if the Employee requests that Calpine, CPN Management or any of their respective Affiliates or representatives make such filing on the Employee’s behalf. The Employee further acknowledges that nothing in this Award Agreement or CPN Management LP Agreement constitutes tax advice.

8. Profits Interest . The Class B Interest awarded pursuant to this Award Agreement is intended to be treated as a “profits interest” for U.S. federal income tax purposes.

9. Securities Laws . The Employee and CPN Management acknowledge that the Class B Interest has been awarded and issued in reliance on applicable exemptions from registration, including without limitation Section 4(a)(2) of the Securities Act and/or the provisions of Regulation D and/or Rule 701 promulgated by the Securities and Exchange Commission, and upon an exemption from registration under any applicable state “blue sky” laws

10. Conflicts . Except to the extent explicitly provided herein, if this Award Agreement contains any provision that conflicts with the CPN Management LP Agreement, the applicable provision of the CPN Management LP shall prevail and control and the conflicting provision of this Award Agreement (and only such provision) shall be of no force or effect.

* * * * *

CPN MANAGEMENT, LP

By: Volt Parent GP, LLC, its general partner

By:__________________________

Name:

Title:

[2018 Award Agreement between CPN Management, LP and the Employee]

THE EMPLOYEE

__________________________________________

[2018 Award Agreement between CPN Management, LP and the Employee]

Exhibit A

CPN Management, LP Amended and Restated Limited Partnership Agreement

See exhibit 10.1 contained in this filing

A-1

Exhibit B

Form of Joinder to the CPN Management, LP Amended and Restated Limited Partnership Agreement

See exhibit 10.1 contained in this filing

B-1

EXHIBIT 31.1

CERTIFICATIONS

I, John B. (Thad) Hill III, certify that:


1.	I have reviewed this quarterly report on Form 10-Q of Calpine Corporation (the “registrant”);


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):


a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and


b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 10, 2018

/s/ JOHN B. (THAD) HILL III

John B. (Thad) Hill III

President, Chief Executive Officer and Director

Calpine Corporation

EXHIBIT 31.2

CERTIFICATIONS

I, Zamir Rauf, certify that:


1.	I have reviewed this quarterly report on Form 10-Q of Calpine Corporation (the “registrant”);


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):


a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and


b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 10, 2018

/s/ ZAMIR RAUF

Zamir Rauf

Executive Vice President and

Chief Financial Officer

Calpine Corporation

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Calpine Corporation (the “Company”) on Form 10-Q for the period ended March 31, 2018, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned does hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his or her knowledge, based upon a review of the Report:


(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and


(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.




	/s/ JOHN B. (THAD) HILL III				/s/ ZAMIR RAUF
	John B. (Thad) Hill III				Zamir Rauf
	President,				Executive Vice President and
	Chief Executive Officer and Director				Chief Financial Officer
	Calpine Corporation				Calpine Corporation

Dated: May 10, 2018

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