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 year ended December 31, 2014. We have the following types of VIEs consolidated in our financial statements:

Subsidiaries with Project Debt — All of our subsidiaries with project debt not guaranteed by Calpine have PPAs that provide financial support and are thus considered VIEs. We retain ownership and absorb the full risk of loss and potential for reward once the project debt is paid in full. Actions by the lender to assume control of collateral can occur only under limited circumstances such as upon the occurrence of an event of default, which we have determined to be unlikely. See Note 6 for further information regarding our project debt and Note 2 for information regarding our restricted cash balances.

Subsidiaries with PPAs — Certain of our majority owned subsidiaries have PPAs that limit the risk and reward of our ownership and thus constitute a VIE.

VIE with a Purchase Option — OMEC has an agreement that provides a third party a fixed price option to purchase power plant assets exercisable in the year 2019. This purchase option limits the risk and reward of our ownership and, thus, constitutes a VIE.

Consolidation of VIEs

We consolidate our VIEs where we determine that we have both the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance and the obligation to absorb losses or receive benefits from the VIE. We have determined that we hold the obligation to absorb losses and receive benefits in all of our VIEs where we hold the majority equity interest. Therefore, our determination of whether to consolidate is based upon which variable interest holder has the power to direct the most significant activities of the VIE (the primary beneficiary). Our analysis includes consideration of the following primary activities which we believe to have a significant impact on a power plant’s financial performance: operations and maintenance, plant dispatch, and fuel strategy as well as our ability to control or influence contracting and overall plant strategy. Our approach to determining which entity holds the powers and rights is based on powers held as of the balance sheet date. Contractual terms that may change the powers held in future periods, such as a purchase or sale option, are not considered in our analysis. Based on our analysis, we believe that we hold the power and rights to direct the most significant activities of all our majority-owned VIEs.

Under our consolidation policy and under U.S. GAAP we also:


•	perform an ongoing reassessment each reporting period of whether we are the primary beneficiary of our VIEs; and

•

evaluate if an entity is a VIE and whether we are the primary beneficiary whenever any changes in facts and circumstances occur such that the holders of the equity investment at risk, as a group, lose the power from voting rights or similar rights of those investments to direct the activities of a VIE that most significantly impact the VIE’s economic performance or when there are other changes in the powers held by individual variable interest holders.

Noncontrolling Interest — We own a 75% interest in Russell City Energy Company, LLC, one of our VIEs, which is also 25% owned by a third party. We fully consolidate this entity in our Consolidated Financial Statements and account for the third party ownership interest as a noncontrolling interest.

VIE Disclosures

Our consolidated VIEs include natural gas-fired power plants with an aggregate capacity of 10,365 MW and 9,427 MW, at December 31, 2014 and 2013, 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 $47 million, nil and $20 million for the years ended December 31, 2014, 2013 and 2012, respectively.

U.S. GAAP requires separate disclosure on the face of our Consolidated Balance Sheets of the significant assets of a consolidated VIE that can be used only to settle obligations of the consolidated VIE and the significant liabilities of a consolidated VIE for which creditors (or beneficial interest holders) do not have recourse to the general credit of the primary beneficiary. In determining which assets of our VIEs meet the separate disclosure criteria, we consider that this separate disclosure requirement is met where Calpine Corporation is substantially limited or prohibited from access to assets (primarily cash and cash equivalents, restricted cash and property, plant and equipment), and where our VIEs had project financing that prohibits the VIE from providing guarantees on the debt of others. In determining which liabilities of our VIEs meet the separate disclosure criteria, we consider that this separate disclosure requirement is met where there are agreements that prohibit the debt holders of the VIEs from recourse to the general credit of Calpine Corporation and where the amounts were material to our financial statements.

Unconsolidated VIEs and Investments in Power Plants

We have a 50% partnership interest in Greenfield LP and in Whitby. Greenfield LP and Whitby are also 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.

We account for these entities under the equity method of accounting and include our net equity interest in investments in power plants on our Consolidated Balance Sheets. At December 31, 2014 and 2013, our equity method investments included on our Consolidated Balance Sheets were comprised of the following (in millions):



	Ownership Interest as of December 31, 2014	2014		2013
Greenfield LP	50%	$	78	$	76
Whitby	50%	17		17
Total investments in power plants		$	95	$	93

Our risk of loss related to our unconsolidated VIEs 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 Balance Sheets. At December 31, 2014 and 2013, equity method investee debt was approximately $342 million and $395 million, respectively, and based on our pro rata share of each of the investments, our share of such debt would be approximately $171 million and $198 million at December 31, 2014 and 2013, respectively.

Our equity interest in the net income from Greenfield LP and Whitby for the years ended December 31, 2014, 2013 and 2012, is recorded in (income) from unconsolidated investments in power plants. The following table sets forth details of our (income) from unconsolidated investments in power plants and distributions for the years indicated (in millions):



	(Income) from Unconsolidated Investments in Power Plants									Distributions
	2014			2013			2012			2014		2013		2012
Greenfield LP	$	(10	)	$	(16	)	$	(17	)	$	—	$	18	$	22
Whitby	(15		)	(14		)	(11		)	13		9		7
Total	$	(25	)	$	(30	)	$	(28	)	$	13	$	27	$	29

Inland Empire Energy Center Put and Call Options — We hold a call option to purchase the Inland Empire Energy Center (a 775 MW natural gas-fired power plant located in California) from GE that may be exercised between years 2017 and 2024. GE holds a put option whereby they can require us to purchase the power plant, if certain plant performance criteria are met by 2025. We determined that we are not the primary beneficiary of the Inland Empire power plant, and we do not consolidate it due to the fact that GE directs the most significant activities of the power plant including operations and maintenance.

Significant Unconsolidated Subsidiaries — Greenfield LP and Whitby met the criteria of significant unconsolidated subsidiaries for the years ended December 31, 2013 and 2012, based upon the relationship of our equity income from our investment in these subsidiaries, when combined, to our consolidated net income before taxes. Aggregated summarized financial data for our unconsolidated subsidiaries is set forth below (in millions):

Condensed Combined Balance Sheets

of Our Unconsolidated Subsidiaries

December 31, 2014 and 2013



	2014		2013
Assets:
Cash and cash equivalents	$	58	$	57
Current assets	28		25
Property, plant and equipment, net	532		588
Other assets	2		2
Total assets	$	620	$	672
Liabilities:
Current maturities of long-term debt	$	21	$	23
Current liabilities	28		44
Long-term debt	321		372
Long-term derivative liabilities	51		35
Total liabilities	421		474
Member's interest	199		198
Total liabilities and member's interest	$	620	$	672

Condensed Combined Statements of Operations

of Our Unconsolidated Subsidiaries

For the Years Ended December 31, 2014, 2013 and 2012



	2014		2013			2012
Revenues	$	239	$	207		$	247
Operating expenses	168		128			171
Income from operations	71		79			76
Interest expense, net of interest income	23		24			27
Other (income) expense, net	—		(3		)	(2		)
Net income	$	48	$	58		$	51