Calpine to Sell Canadian Gas Assets for $625 Million

Calpine Corporation has entered into an agreement to sell all of its Canadian natural gas reserves and petroleum assets to PrimeWest Energy Trust (PrimeWest) for a total purchase price of $Cdn825 million, or approximately $US625 million, less adjustments to reflect a July 1, 2004, effective date. These assets currently represent approximately 221 billion cubic feet equivalent (bcfe) of proved reserves, producing approximately 61 million cubic feet equivalent of net gas per day (mmcfed). Also included in this sale is Calpine's 25 percent interest in approximately 80 bcfe of proved reserves (net of royalties) and 32 net mmcfed owned by the Calpine Natural Gas Trust. Calpine expects to close the sale in early September 2004, pending regulatory approval and other conditions of closing.

"This is an excellent opportunity for Calpine to capture significant value for our natural gas assets during attractive market conditions," stated Calpine Chief Financial Officer Bob Kelly. "And it puts us well on our way toward achieving our goal of having $3 billion of cash and liquidity on hand by year-end."

Net proceeds from this sale will be used to repay the amount outstanding under the existing $500 million first lien indebtedness, with remaining proceeds to be used in accordance with the asset sale provisions of Calpine's existing bond indentures. Following the repayment of its existing first lien indebtedness, Calpine expects to issue up to approximately $700 million of new first lien debt. Calpine retained Waterous & Co. as its advisor for the sale.