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1 Reported as net income (loss) attributable to Calpine on our Consolidated Statements of Operations.

2 Refer to Table 1 for further detail of Net Income, As Adjusted.

3 Includes generation from power plants owned but not operated by Calpine and our share of generation from unconsolidated power plants.

4 Increase in plant operating expense excludes changes in major maintenance expense, stock-based compensation expense, non-cash loss on disposition of assets and other costs. See the table titled “Consolidated Adjusted EBITDA Reconciliation” for the actual amounts of these items for the three months and years ended December 31, 2011 and 2012.

5 Includes fees associated with a five-year consulting agreement with the buyer of Broad River Energy Center.

6 Based upon shares outstanding (including shares held in reserve) as of June 30, 2011, immediately prior to announcement of program.

SUMMARY OF FINANCIAL PERFORMANCE

Fourth Quarter Results

Adjusted EBITDA for the fourth quarter of 2012 was $315 million, compared to $379 million in the prior year period. The year-over-year decrease in Adjusted EBITDA was primarily due to a $38 million decrease in Commodity Margin and a $20 million increase in plant operating expense 4. The decrease in Commodity Margin was primarily due to:
              lower contribution from hedges and
expiration of contracts, particularly in our West and Southeast segments, some of which have since been recontracted, partially offset by
+ higher regulatory capacity revenue.

The increase in plant operating expense 4 was primarily due to reimbursements for insurance claims from prior periods that disproportionately reduced our plant operating expense in the fourth quarter of 2011.

Net Income 1 was $100 million for the fourth quarter of 2012, compared to a Net Loss 1 of $13 million in the prior year period. As detailed in Table 1, Net Loss, As Adjusted 2, was $86 million in the fourth quarter of 2012 compared to $43 million in the prior year period. The year-over-year decline was driven largely by:
              lower Commodity Margin, as previously discussed and
higher plant operating expense, as previously discussed, partially offset by
+ an income tax benefit primarily due to a decrease in state income taxes and a reduction in income tax expense related to the application of non-cash intraperiod tax allocations.

Full Year Results

Adjusted EBITDA in 2012 was $1,749 million compared to $1,726 million in 2011. The year-over-year increase in Adjusted EBITDA was primarily due to a $64 million increase in Commodity Margin, partially offset by a $26 million increase in plant operating expense 4 and a $14 million increase in sales, general and administrative expense 7. The increase in Commodity Margin was primarily due to:
            +   higher contribution from hedges
+ higher generation in our Texas and North segments due to lower natural gas prices and higher generation in our West segment due to improved market conditions, less hydroelectric generation and a nuclear power plant outage in California during 2012 and
+ an extreme cold weather event in Texas that occurred in 2011 that resulted in unplanned outages at some of our power plants, negatively impacting our revenue in 2011, which did not reoccur in 2012, partially offset by
lower regulatory capacity revenue and
expiration of contracts, some of which have since been recontracted.

The increase in plant operating expense 4 was primarily due to prior period insurance reimbursements that benefited 2011 compared to 2012, as previously discussed.

Net Income 1 was $199 million in 2012, compared to a Net Loss 1 of $190 million in 2011. As detailed in Table 1, Net Income, As Adjusted 2, was $78 million in 2012, compared to Net Loss, As Adjusted 2, of $13 million in 2011. The year-over-year improvement was driven largely by:
            +   higher Commodity Margin, as previously discussed
+ lower interest expense, primarily resulting from a decrease in our annual effective interest rate and
+ lower income tax expense related to the application of intraperiod tax allocation and a decrease in various state and federal jurisdiction income taxes, partially offset by
modestly higher plant operating expenses, as previously discussed.

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