Calpine Power Income Fund

Calpine Power Income Fund

January 29, 2007 06:01 ET

Calpine Power Income Fund Accepts Increased Offer From Harbinger Capital Partners

CALGARY, ALBERTA--(CCNMatthews - Jan. 29, 2007) - The Board of Trustees of Calpine Commercial Trust, on behalf of Calpine Power Income Fund (TSX:CF.UN), and HCP Acquisition Inc. ("Harbinger"), a subsidiary of Harbinger Capital Partners, today announced that they have entered into a definitive support agreement under which Harbinger has agreed, subject to certain conditions, to amend the terms of its previously announced take-over bid to, among other things, increase the offer price to $13.00 in cash per trust unit of the Fund (the "Revised Harbinger Offer").

Under the agreement, the Board of Trustees recommends that unitholders accept the Revised Harbinger Offer. The increased offer price of $13.00 per trust unit represents a premium of 24.4% compared with the closing price of $10.45 for the Fund's trust units on December 19, 2006, the day prior to the initial Harbinger bid, and an increase of 6.1% compared with the initial Harbinger bid of $12.25.

Following an extensive review of strategic alternatives, the Board of Trustees has determined that the Revised Harbinger Offer is fair to unitholders of the Fund and in the best interests of the Fund and its unitholders, and is recommending that the Fund's unitholders accept the Revised Harbinger Offer. The Trustees' financial advisor, BMO Capital Markets, has provided an opinion that the consideration to be received under the Revised Harbinger Offer is fair, from a financial point of view, to unitholders other than Harbinger.

Harbinger's obligation to make the Revised Harbinger Offer is conditional upon approval by the Court of either a Fund supported bid made by Harbinger, or a bid by the Fund, to purchase the contracts to manage the Fund and operate certain of its facilities that are currently held by Calpine Canada Power Ltd. ("CCPL'), a subsidiary of insolvent Calpine Corporation ("Calpine") of San Jose, California. Separate unsupported bids have been made by Harbinger previously and by a third party, which bids remain outstanding.

Court approval is required as part of the insolvency and reorganization proceedings involving certain of Calpine's Canadian affiliates, including CCPL. The bids for the management agreements also include, among other things, offers to purchase from CCPL its 30% subordinated ownership interest in Calpine Power, L.P. ("CLP"), a limited partnership in which the Fund has a 70% priority ownership interest. There can be no assurance that the required approval by the Court of a Fund supported bid will be obtained and Harbinger will have no obligation to make the Revised Harbinger Offer unless approval of such a Fund supported bid is obtained.

Harbinger has agreed to file and mail a Notice of Change amending the offer, and the Board of Trustees expects to file and mail an amended Trustees' Circular to unitholders recommending that unitholders accept the Revised Harbinger Offer, as soon as possible following receipt of the above-described court approval (which court approval will be sought by application and is scheduled to be heard on Tuesday, January 30, 2007). The Revised Harbinger Offer will be open for acceptance for at least 10 days following the mailing of the Notice of Change, and specific details concerning the expiry time of the Revised Harbinger Offer will be contained in the Notice of Change.

Completion of the Revised Harbinger Offer is subject to certain conditions, including, among other things, a sufficient number of the Fund's trust units being tendered to the offer such that Harbinger would own at least 66 2/3% of the outstanding trust units, receipt of all necessary regulatory approvals and no material adverse changes concerning the Fund. Under the terms of the support agreement, the Fund has agreed to defer the separation time of the rights issued under the Fund's unitholder rights plan in respect of the Revised Harbinger Offer and to waive, suspend the operation of or otherwise render the rights plan inoperative against the Revised Harbinger Offer.

The support agreement provides that Harbinger has the right to match any offer made by another bidder and also provides for the payment of a fee to Harbinger by the Fund of $23.3 million under certain circumstances if the Revised Harbinger Offer is not completed.

About Calpine Power Income Fund

Calpine Power Income Fund is an unincorporated open-ended trust that invests in electrical power assets. The Fund indirectly owns interests in power generating facilities in British Columbia, Alberta and California. In addition, the Fund owns a participating loan interest in a power plant in Ontario and has made a loan to Calpine Canada Power Ltd. The Fund is managed by Calpine Canada Power Ltd., which is headquartered in Calgary, Alberta. The Fund has 61,742,288 Trust Units outstanding.

BMO Capital Markets is acting as financial advisor to the Fund and Blake, Cassels & Graydon LLP is acting as legal counsel to the Board of Trustees for the purposes of this transaction.

The Calpine Power Income Fund units are listed on the Toronto Stock Exchange under the symbol CF.UN. For further information on the Fund, please visit its website at or see contacts below.

About Harbinger

HCP Acquisition Inc. is an indirect wholly-owned subsidiary of Harbinger Capital Partners Master Fund I, Ltd. and Harbinger Capital Partners Special Situations Fund, L.P. (together, with HCP Acquisition Inc. "Harbinger Capital Partners").

Credit Suisse is acting as financial advisor to Harbinger Capital Partners and Stikeman Elliott LLP is acting as legal counsel to Harbinger Capital Partners for the purposes of this transaction.

Forward-Looking Information Disclaimer

This news release may contain forward-looking information or forward-looking statements as defined under applicable securities laws. Such information and statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking information or statements. Such forward-looking information and statements are based on the Fund's current internal expectations, estimates, projections, assumptions and beliefs and the Fund believes the expectations reflected in such forward-looking information and statements are reasonable. However, no assurance can be given that these expectations will prove to be correct and the forward-looking information or statements included in this news release should not be unduly relied upon. Such forward-looking information and statements speak only as of the date of this news release and none of the Fund, the trustees of Calpine Commercial Trust or CCPL undertakes any obligation to publicly update or revise any forward looking information or statements contained in this news release, except as required by applicable laws.

In particular, among other matters, this news release may contain forward-looking information and statements with respect to certain conditions that must be satisfied as a condition of Harbinger making or completing the amended offer. The actual results and outcomes of such matters could differ materially from those anticipated in the forward-looking information and statements contained in this news release as a result of both known and unknown risks, including risks that the required court, regulatory and third party approvals necessary to complete the amended Harbinger offer may not be obtained or that the other conditions to Harbinger's offer may not be satisfied.

Additional risk factors regarding the forward-looking information set forth above, the business and affairs of the Fund and its subsidiaries and an investment in the Trust Units are contained in the Fund's Trustees' Circular dated January 4, 2007, the Fund's annual information form dated April 19, 2006, the Fund's management's discussion and analysis for both the year ended December 31, 2005 and the fiscal quarters ended March 31, 2006, June 30, 2006 and September 30, 2006, and the material change report of the Fund dated November 14, 2006, copies of which are available through the internet on the Fund's SEDAR profile at Readers are also referred to the risk factors contained in other documents the Fund files from time to time with securities regulatory authorities, copies of which are also available through the internet on the Fund's SEDAR profile at

The forward-looking information contained herein is expressly qualified in its entirety by this cautionary statement.


This announcement does not constitute or form part of any offer or invitation to purchase, otherwise acquire, subscribe for, sell, otherwise dispose of or issue, or any solicitation of any offer to sell, otherwise dispose of, issue, purchase, otherwise acquire or subscribe for, any security. The release, publication or distribution of this announcement in certain jurisdictions may be restricted by law and therefore persons in such jurisdictions into which this announcement is released, published or distributed should inform themselves about and observe such restrictions. Neither the Harbinger Offer nor the Revised Harbinger Offer is being made to, nor will deposits be accepted from, or on behalf of, unitholders in any jurisdiction in which the making or acceptance of the Offer would not be in compliance with the laws of such jurisdiction. However, Harbinger or its agents may, in the sole discretion of Harbinger, take such action as Harbinger may deem necessary to extend the Harbinger Offer or the Revised Harbinger Offer to unitholders in any such jurisdiction. This announcement contains certain information relating to the Fund and its subsidiary entities, such information is information of and has been provided by the Fund and is not information of or been provided by Harbinger Capital Partners.

Contact Information

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    Alan Bayless
    Longview Communications Inc.
    (604) 694-6035
    David Ryan
    Longview Communications Inc.
    (604) 694-6031
    Toll Free: (866) 568-7438