Calpine Corporation today reported a Net Loss of $29 million, or $0.08 per diluted share, for the second quarter of 2016 compared to Net Income of $19 million, or $0.05 per diluted share, in the prior year period. Net Loss for the first half of 2016 was $227 million, or $0.64 per diluted share, compared to Net Income of $9 million, or $0.02 per diluted share, in the prior year period. The increase in Net Loss during the second quarter and first half of 2016 was primarily due to net mark-to-market losses driven by increases in forward power and natural gas prices.

Adjusted EBITDA for the second quarter was $452 million, roughly consistent with $457 million in the prior year period. Adjusted Free Cash Flow was $158 million compared to $144 million in the prior year period. The increase in Adjusted Free Cash Flow was primarily driven by a decrease in major maintenance expense and capital expenditures. Net Income, As Adjusted, for the second quarter of 2016 was $22 million compared to $33 million in the prior year period. The decrease in Net Income, As Adjusted,was primarily due to a decrease in commodity revenue, net of commodity expense, partially offset by an increase in income tax benefit associated with an increase in pre-tax losses.

Adjusted EBITDA in the first half of 2016 was $826 million, compared to $795 million in the prior year period, and Adjusted Free Cash Flow was $260 million compared to $169 million in the prior year period. The increase in Adjusted EBITDA was largely due to higher Commodity Margin driven primarily by a gas transportation credit and portfolio changes, partially offset by higher plant operating expenses, largely driven by portfolio changes. The increase in Adjusted Free Cash Flow was primarily driven by higher Commodity Margin, as discussed, and a decrease in major maintenance expense and capital expenditures. Net Loss, As Adjusted, for the first half of 2016 was $82 million compared to $29 million in the prior year period. The increase in Net Loss, As Adjusted,was primarily due to an increase in depreciation and amortization expense and an increase in estimated income tax expense in state jurisdictions where we do not have net operating losses.

“I am proud to report solid second quarter results as our business continues to perform well on all fronts,” said Thad Hill, Calpine’s President and Chief Executive Officer. “Supported by strong operational performance, our second quarter Adjusted EBITDA of $452 million was in line with last year, and we delivered 10% growth in Adjusted Free Cash Flow. These results demonstrate the benefits of our strategic portfolio changes, as well as the strength of our assets and our team.

“With this performance, we’ve had a very strong first half of the year, which combined with a good hedging program, has enabled us to remain within our original guidance range, despite weak summer liquidations. Today, we are narrowing our guidance range for this year to $1.8 billion to $1.9 billion of Adjusted EBITDA and $710 million to $810 million of Adjusted Free Cash Flow.

“Longer term, our portfolio of reliable, flexible assets and, as importantly, our people are responding to the secular trends of our industry. Baseload resources continue to be threatened by a combination of lower gas prices, increasingly stringent environmental regulations and further penetration of renewables. Our flexible assets are rising to the challenge of meeting our customers’ needs for reliable, clean energy in an evolving landscape. In Texas, our fleet achieved a record second quarter capacity factor, and in California, our peaker fleet set a second quarter record for number of starts. Our assets clearly continue to be critical for reliability of the grid. We are also taking steps to enhance value over the long term by evolving our portfolio, leveraging our customer relationships, actively advocating to be fairly compensated and maintaining best-in-class operations.”2020 First Lien Term Loans.

Growth and Portfolio Management

East:

York 2 Energy Center: York 2 Energy Center is a 760 MW dual-fuel, combined-cycle project that will be co-located with our York Energy Center in Peach Bottom Township, Pennsylvania. Once complete, the power plant will feature two combustion turbines, two heat recovery steam generators and one steam turbine. The project’s capacity cleared PJM’s last three base residual auctions. The project is now under construction, and we are targeting COD during the third quarter of 2017. PJM has completed the interconnection study process for an additional 68 MW of planned capacity at the York 2 Energy Center. This incremental 68 MW of planned capacity cleared the last two base residual auctions and we expect to receive the final air permit in the third quarter of 2016.

Mankato Power Plant Expansion: By order dated February 5, 2015, the Minnesota Public Utilities Commission concluded a competitive resource acquisition proceeding and selected a 345 MW expansion of our Mankato Power Plant, authorizing execution of a 20-year PPA between Calpine and Xcel Energy. The PPA was executed in April 2015 and satisfied final regulatory approval requirements in March 2016. Commercial operation of the expanded capacity is expected by June 1, 2019.

PJM and ISO-NE Development Opportunities: We continue to evaluate development projects in the PJM and ISO-NE market areas that feature cost-advantages, such as existing infrastructure and favorable transmission queue positions. These projects continue to advance entitlements (such as permits, zoning and transmission) for potential future development when/if economic as compared to purchasing existing power plants in the region.

Osprey Energy Center: We executed an asset sale agreement in the fourth quarter of 2014 for the sale of our Osprey Energy Center to Duke Energy Florida, Inc. for approximately $166 million, excluding working capital and other adjustments, which will be consummated in January 2017 upon the conclusion of a PPA with a term of 27 months. The sale has received FERC and state regulatory approvals and represents a strategic disposition of a power plant in a wholesale power market dominated by regulated utilities.

Texas:

Clear Lake Power Plant: We plan to file with ERCOT to retire our 400-MW Clear Lake Power Plant. Built in 1985, Clear Lake is an older technology. Due to growing maintenance costs and lack of adequate compensation in Texas, we have chosen to retire the power plant. We are working together with the facility's bilateral counterparties to mutually agree on a date to cease commercial operations, which will take place no later than the summer of 2018.

Guadalupe Peaking Energy Center: In April 2015, we executed an agreement with Guadalupe Valley Electric Cooperative (“GVEC”) that will facilitate the construction of a 418 MW natural gas-fired peaking power plant to be co-located with our Guadalupe Energy Center. Under the terms of the agreement, construction of the Guadalupe Peaking Energy Center (“GPEC”) may commence at our discretion, so long as the power plant reaches commercial operation by June 1, 2019. When the power plant begins commercial operation, GVEC will purchase a 50% ownership interest in GPEC. Once built, GPEC will feature two fast-ramping combustion turbines capable of responding to peaks in power demand. This project represents a mutually beneficial response to our customer’s desire to have direct access to peaking generation resources, as it leverages the benefits of our existing site and development rights and our construction and operating expertise, as well as our customer’s ability to fund its investment at attractive rates, all while affording us the flexibility of timing the plant’s construction in response to market pricing signals.

West:

South Point Energy Center: On April 1, 2016, we entered into an asset sale agreement for the sale of substantially all of the assets comprising our South Point Energy Center to Nevada Power Company d/b/a NV Energy for approximately $76 million plus the assumption by the purchaser of existing transmission capacity contracts with a future net present value payment obligation of approximately $112 million, approximately $9 million in remaining tribal lease costs and approximately $21 million in near-term repairs, maintenance and capital improvements to restore the power plant to full capacity. The sale is subject to certain conditions precedent, as well as federal and state regulatory approvals, and is expected to close no later than the first quarter of 2017. The natural gas-fired, combined-cycle plant is located on the Fort Mojave Indian Reservation in Mohave Valley, Arizona, and features a summer peak capacity of 504 MW. This transaction supports our effort to divest non-core assets outside our strategic concentration.

Calpine Corporation is America’s largest generator of electricity from natural gas and geothermal resources. Our fleet of 84 power plants in operation or under construction represents more than 27,000 megawatts of generation capacity. Through wholesale power operations and our retail business, Champion Energy, we serve customers in 21 states and Canada. We specialize in developing, constructing, owning and operating natural gas-fired and renewable geothermal power plants that use advanced technologies to generate power in a low-carbon and environmentally responsible manner. Our clean, efficient, modern and flexible fleet is uniquely positioned to benefit from the secular trends affecting our industry, including the abundant and affordable supply of clean natural gas, stricter environmental regulation, aging power generation infrastructure and the increasing need for dispatchable power plants to successfully integrate intermittent renewables into the grid. In addition to disclosing financial results in accordance with U.S. GAAP, the accompanying second quarter 2016 earnings release contains non-GAAP financial measures. Net Income (Loss), As Adjusted, Commodity Margin, Adjusted EBITDA and Adjusted Free Cash Flow are non-GAAP financial measures that we use as measures of our performance. These non-GAAP measures should be viewed as a supplement to and not a substitute for our U.S. GAAP measures of performance and the financial results calculated in accordance with U.S. GAAP and reconciliations from these results should be carefully evaluated.