Calpine Power Income Fund
TSX : CF.UN

Calpine Power Income Fund

May 11, 2006 18:38 ET

Calpine Power Income Fund Announces First Quarter 2006 Results and Cash Distributions for May 2006

CALGARY, ALBERTA--(CCNMatthews - May 11, 2006) - Calpine Power Income Fund (TSX:CF.UN) today announced its first quarter results for the year ended March 31, 2006. Based upon current forecast, cash distributions for May, 2006 is estimated at $0.0818 per trust unit.



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Ex-Distribution Distribution Distribution
Record Date Date Date per Unit
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May 31, 2006 May 29, 2006 June 20, 2006 $0.0818
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The above reflects distributions expected to be paid, however,
distributions are subject to change based upon actual conditions.
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"We are pleased to announce another quarter of solid operational results from all of our facilities," says Toby Austin, President and Chief Executive Officer of Calpine Canada Power Ltd., manager of the Calpine Power Income Fund. The Calgary Energy Centre has operated very well since putting in place our short term Tolling Agreement with Epcor. We have also had continued strong performance from Island Cogen and our other facilities."

MANAGEMENT'S DISCUSSION AND ANALYSIS

FORWARD-LOOKING INFORMATION

Certain information in this Management's Discussion and Analysis ("MD&A") is forward-looking and subject to risks and uncertainties. All the forward-looking statements are based upon the Manager's belief and assumptions based on information available at the time of assumption was made. By its nature, such forward-looking statements are subject to various risks and uncertainties. The results or events predicted in the forward-looking statements may differ from actual results or events. Factors which could cause actual results or events to differ materially from current expectations include, among other things, the ability of the Fund and the Partnership to successfully implement the Fund's strategic initiatives and whether such strategic initiatives will yield the expected benefits, the availability and price of energy commodities, regulatory decisions, competitive factors in the power industry, and the prevailing economic conditions in North America. Additionally, actual results or events predicted in the forward-looking statements will be affected by the outcome of the voluntary reorganization filings in Canada and the United States by Calpine and certain of its subsidiaries having contracts with the Fund and its subsidiaries or investees, as well as other factors identified herein. Certain material assumptions in making these forward-looking statements are disclosed in this MD&A, as well as in the MD&A prepared in connection with the Fund's and Partnership's 2005 financial statements ("the 2005 MD&A"), in particular under the headings "Outlook" and "Business Risks". The 2005 MD&A is contained in the Fund's 2005 Annual Report. Readers are cautioned not to place undue reliance on these forward-looking statements. The Fund and the Partnership each disclaim any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

The Calpine Power Income Fund (the "Fund") is an unincorporated open-ended trust established under the laws of Alberta. Through its 70% ownership interest in Calpine Power, L.P. (the "Partnership"), the Fund indirectly owns interests in power generating facilities in British Columbia, Alberta and an economic interest in a power plant in Ontario. In addition, the Fund owns a power generating facility in California and holds a promissory note issued by Calpine Canada Power Ltd. ("the Manager"). The power generation facilities owned by the Fund and the Partnership are all modern and environmentally preferred, natural gas fired plants. The Fund and the Partnership are managed and administrated by the Manager.

The Fund's objective is to provide, on a per Trust Unit basis, a stable and sustainable flow of Distributable Cash of the Fund. To achieve this objective, the Manager seeks to maximize the efficiency and profitability of the facilities and acquire or develop future facilities in accordance with established acquisition and investment guidelines.

The following discussion and analysis as provided by Management should be read in conjunction with the unaudited consolidated financial statements and the notes thereto of the Fund and the Partnership for the three months ended March 31, 2006 and 2005, which have been prepared in accordance with Canadian generally accepted accounting principles, and is based on information to May 11, 2006. The following discussion and analysis as provided by Management should also be read in conjunction with the audited consolidated financial statements and the notes thereto of the Fund and the Partnership for the years ended December 31, 2005 and 2004, which have been prepared in accordance with Canadian generally accepted accounting principles, and are based on information to April 19, 2006. All dollar amounts are shown in Canadian dollars unless otherwise specified. The financial statements noted above and additional information concerning the Fund is available at www.calpinepif.com or on SEDAR at www.sedar.com.

FIRST QUARTER HIGHLIGHTS

- The Fund's declared distributions of $0.2454 per Trust Unit to Unitholders during the first quarter of 2006, consistent with $0.2454 declared distributions per Trust Unit in the first quarter of 2005.

- Revenue from January 1, 2006 to January 16, 2006 of $2.4 million was earned through a long-term tolling arrangement with Calpine Energy Services Canada Partnership ("CESCP"), a wholly-owned partnership of Calpine. On January 16, 2006 CESCP repudiated the contract and no revenue was received for the period from January 17, 2006 to February 15, 2006. On February 16, 2006, the Partnership commenced a short-term agreement with EPCOR Merchant and Capital L.P. ("EPCOR"), to toll the capacity of the Calgary Energy Centre until June 30, 2006.

- Efforts to toll the long-term capacity of the Calgary Energy Centre are ongoing. Management expects to commence a competitive bid process shortly and anticipates the toll to be in place within 90 to 120 days. The Manager is further contemplating an additional short-term toll agreement to cause the capacity of the plant to be fully contracted until the implementation of a long-term tolling agreement.

- The Fund's and Partnership's power generation facilities continued their strong and reliable operating performance in the first quarter of 2006 as demonstrated below.



Availability Generation (MWh)
------------------ ---------------------
Q1 2006 Q1 2005 Q1 2006 Q1 2005
------------------ ---------------------

Calgary Energy Centre 98% 97% 80,565 118,619
Island Cogeneration Facility 99% 100% 513,665 522,855
Whitby Cogeneration Facility 96% 95% 85,571 102,825
King City Facility 68%(i) 87% 131,724(i) 221,188
(i) Reflects impact of planned maintenance from February 28 to March
27, 2006.
This outage, however, does not affect the lease payments made to
the Fund under the terms of the King City Lease


At March 31, 2006, the Fund had 61,742,288 Trust Units outstanding which units trade on the Toronto Stock Exchange. Calpine Corporation ("Calpine"), does not own, directly or indirectly, any Trust Units.

SIGNIFICANT EVENTS

Calpine Credit Event

On December 20, 2005 Calpine and certain subsidiaries and affiliates filed for voluntary reorganization under Chapter 11 of the US Bankruptcy Code ("Chapter 11") and certain subsidiaries and affiliates of Calpine in Canada filed for voluntary reorganization under the Companies' Creditors Arrangement Act ("CCAA") in Canada. Additional information on these proceedings is provided in the 2005 MD&A contained in the Fund's 2005 Annual Report as well as the Fund's Annual Information Form dated April 19, 2006.

On April 10, 2006, the Court extended the stay of proceedings, granted earlier in respect of the Manager and certain of its affiliates, until July 20, 2006. The Court further ordered that a claims resolution process be commenced in relation to the affected Calpine subsidiaries in CCAA proceedings. The Partnership will submit a claim with respect to the Calgary Energy Centre as a consequence of the repudiation on January 16, 2006 by a subsidiary of Calpine of the original tolling agreement. The Fund and Partnership are assessing other possible claims to submit with respect to obligations owed to them by Calpine or its subsidiaries.

Scheduled principal and interest payments due on the Fund's loan to the Manager (the "Manager Loan") for April 2006 were not received by May 3, 2006 which is an event of default under the Manager Loan. This loan was already in default as a result of the CCAA filing by the Manager. However, the Manager had continued to meet its payment obligation under the Manager Loan until May 3, 2006. Management estimates the loan to be fully collectible based upon the guarantee and security in place (as described further in the 2005 MD&A), subject to lifting of the stay of proceedings against the Manager, currently in effect until July 20, 2006.



RESULTS OF OPERATIONS

CALPINE POWER INCOME FUND

Selected Quarterly Information Three months Three months
(in 000's, other than Trust ended ended
Unit information) March 31, 2006 March 31, 2005
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Equity earnings from Calpine
Power, L.P. $ 10,095 $ 14,008
Finance income 4,460 4,649
Interest and other income 1,631 2,160
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Total Revenue 16,186 20,817
Net Earnings 10,013 15,897
Net Earnings Per Trust Unit 0.1622 0.2575

Weighted Average Number of
Trust Units Outstanding 61,742,288 61,742,288

Total Assets 658,317 692,150
Total Long-term Liabilities 80,462 90,238
Distributions Declared Per Trust Unit 0.2454 0.2454


Total Revenue

Total revenue for the three months ended March 31, 2006 was less than the three months ended March 31, 2005 due to lower equity earnings from the Partnership. Equity earnings from the Partnership declined as no revenue was earned by the Calgary Energy Centre for the period from January 17, 2006 to February 15, 2006 following the repudiation of the original tolling agreement by CESCP. Beginning on February 16, 2006 the Calgary Energy Centre earned tolling revenue from the short-term toll with EPCOR, which was significantly lower then the tolling revenue from the original tolling agreement with CESCP. A detailed discussion of the Partnership's operating results can be found in the Calpine Power, L.P. section of this MD&A.

Finance income generated by the long-term lease (the "King City Lease") of the King City Facility to a subsidiary of Calpine ("Calpine King City") totaled $4.5 million for the three months ended March 31, 2006, consistent with finance income of $4.6 million for the same period of 2005.

Interest and other income relates mainly to interest earned, net of amortization of the discount, on the Manager Loan. The decrease of $0.6 million from the three months ended March 31, 2006 compared to the three months ended March 31, 2005 is due to the impact of interest earned on a lower outstanding loan balance as a result of scheduled principal repayments. As at March 31, 2006, all scheduled payments on the Manager Loan were received.

Net Earnings

Net earnings for the three months ended March 31, 2006 decreased from the three months ended March 31, 2005 due to lower equity earnings from the Partnership as well as increased management and administrative expenses. The increase in those expenses was due mainly to additional legal and advisory costs incurred as a result of the Calpine CCAA and Chapter 11 proceedings.



Selected Quarterly Information
(in 000's) Three months Three months
ended ended
March 31, 2006 March 31, 2005
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Management and administrative
expenses $ 2,645 $ 999
Amortization 101 311
Interest on long-term debt 2,576 3,125
Interest 51 196
Future Income Taxes 781 427


Management and Administrative Expenses

Management and administrative expenses were $2.6 million for the three months ended March 31, 2006 compared to $1.0 million for the same period in 2005. Management and administrative expenses were up $1.6 million due mainly to additional legal and advisory costs incurred as a result of the Calpine CCAA and Chapter 11 proceedings. The Fund is working with independent legal counsel, financial advisors and other consultants to assess and advise on all possible implications of these proceedings to the Fund.

Amortization

Amortization expenses attributable to the deferred financing costs of the Fund's credit facility (the "Credit Facility") and the King City project finance loan ("King City Loan") were $0.1 million for the three months ended March 31, 2006. Deferred financing costs were lower in the first quarter of 2006 due to the cancellation of the $90 million acquisition tranche of the Fund's Credit Facility and expensing of related unamortized deferred financing costs in December 2005.

Interest Expense

Interest on long-term debt of $2.6 million for the three months ended March 31, 2006 relates to interest accrued on the King City Loan, compared to $3.1 million for the three months ended March 31, 2005. The decrease of $0.5 million from the comparative period is due to the impact of interest accrued on a lower outstanding loan balance as a result of scheduled principal repayments.

Interest expense of $51 thousand for the three months ended March 31, 2006 relates to standby charges on the undrawn balance of the Fund's Credit Facility. No amounts were drawn on the facility in the quarter.

Future Income Taxes

The Fund recorded future tax expense of $0.8 million on its income from the King City Facility for the three months ended March 31, 2006, representing an effective tax rate of 40.75%. Quarter over quarter future tax expenses increased $0.4 million as a result of higher taxable income from the King City Facility in the current period. No cash taxes are expected to be paid in 2006 in the US due to US tax depreciation on the King City Facility being in excess of income from operations.



Selected Balance Sheet Information
of Calpine Power Income Fund As at As at
(in 000's) March 31, 2006 December 31, 2005
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Cash and cash equivalents $ 18,442 $ 16,797
Loan to Calpine Canada Power Ltd. 29,851 32,188
Net Investment in Lease 137,358 152,555
Accrued interest on long-term debt 2,606 11,937
Long-term debt 81,366 93,257
Future income tax 7,216 6,445


The unrestricted cash balance of $18.4 million in the Fund at March 31, 2006 has increased $1.6 million over the balance at December 31, 2005. The main reason for this increase is the collection of scheduled principal repayments on the Manager Loan in excess of distribution requirements.

The Manager Loan balance has decreased by $2.3 million due to the collection of scheduled principal repayments in the first quarter of 2006. No payments are expected to be received from the Manager after March 31, 2006. Management expects the loan to be fully collectible based upon the guarantee and security in place (as described further in the 2005 MD&A), subject to the lifting of the stay of proceedings against the Manager, currently in effect until July 20, 2006.

The net investment in lease which relates to the King City Lease decreased by $15.2 million reflecting $19.4 million King City Lease receipts scheduled to be received on December 31, 2005 that actually were received on January 3, 2006, offset by finance income of $4.5 million accrued in the first quarter of 2006 and foreign exchange impacts.

Accrued interest of $11.9 million and principal repayments of $11.7 million relating to the King City Loan, scheduled for payment on December 31, 2005 were paid on January 3, 2006 in conjunction with the King City Lease receipts. The balance of $2.6 million at March 31, 2006 relates to accrued interest on the King City Loan for the quarter.

Long-term debt decreased by $11.9 million due to the principal repayments on the King City Loan made on January 3, 2006 as well as to the impact of foreign exchange. Foreign exchange impacts on long-term debt are largely offset by foreign exchange impacts on the net investment in lease.

The future income tax liability has increased $0.8 million since year end due to the future tax expense on the Fund's income from the King City Lease. No cash taxes were paid in the first quarter of 2006.



CALPINE POWER, L.P.

Selected Quarterly Information
(in 000's, Three months Three months
except per Unit amounts) ended ended
March 31, 2006 March 31, 2005
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Electricity, capacity and
thermal revenue $ 21,159 $ 28,775
Interest 1,005 964
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Total Revenue 22,164 29,739

Net Earnings 11,863 19,657

Net Earnings Per Class A
Priority Unit 0.1941 0.2694
Net Earnings Per Class B
Subordinated Unit 0.0793 0.2535

Total Assets 632,264 665,602

Total Long-term Liabilities 2,624 2,419
Distributions Declared
Per Class A Priority Unit 0.2571 0.2584
Per Class B Subordinated Unit 0.1124 0.2394


Total Revenue

Revenues for the three months ended March 31, 2006 were down $7.6 million from the same period in 2005. This decrease was due to the non payment of the tolling revenue for the Calgary Energy Centre for the period from January 16, 2006 to February 15, 2006, following the repudiation of the original tolling agreement by CESCP, as well as the impact of reduced tolling revenue from the short-term toll with EPCOR, such revenue being significantly lower than the tolling revenue from the original tolling agreement with CESCP, for the same period in 2005.

Interest earned on the loan to Calpine Canada Whitby Holdings Company (the "Whitby Loan") and other cash balances was $1.0 million for the three months ended March 31, 2006 and for the three months ended March 31, 2005.

Net Earnings

Net earnings for the three months ended March 31, 2006 decreased 40% compared to the same period last year due to the non-payment of tolling revenue for the Calgary Energy Centre for the period January 16, 2006 to February 15, 2006 following the repudiation of the Tolling Agreement by CESCP, as well as lower tolling revenue from EPCOR.



Island Facility

Selected Quarterly Information
Three months Three months
ended ended
March 31, 2006 March 31, 2005
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Availability 99% 100%
Electricity generated (MWh) 513,665 522,855
Steam generated (GJ) 476,302 502,577

Summary of Financial Results
(in '000s)
Revenues $ 15,072 $ 14,966
Operating and maintenance expense 2,585 2,254
Depreciation and accretion 3,002 3,078
Interest expense - 127
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Net earnings $ 9,485 $ 9,507
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The Island Facility is a 240 MW combined cycle cogeneration plant located at Duncan Bay, near Campbell River, on Vancouver Island, British Columbia. Availability at the facility in the three months ended March 31, 2006 remained strong at 99% and was consistent with the three months ended March 31, 2005.

Revenues

Electricity generation revenue was $10.4 million for the three months ended March 31, 2006, compared to $11.2 million for the three months ended March 31, 2005. Electricity generation revenue is net of the heat rate penalty of $2.1 million payable to BC Hydro under the Electricity Purchase Agreement. Although the facility ran at similar heat rate efficiencies for the same period last year, higher prices for natural gas resulted in a higher heat rate penalty for the three months ended March 31, 2006 over the same period last year.

Revenue from steam sold to Catalyst Paper Corporation ("Catalyst") was $4.7 million for the three months ended March 31, 2006 compared to $3.8 million in the three months ended March 31, 2005. The increase in revenue is a result of higher natural gas prices resulting in higher steam prices received in the first quarter 2006 over first quarter 2005.

Expenses

Operating and maintenance expense attributable to the Island Facility was $2.6 million for the three months ended March 31, 2006, compared to $2.3 million for the three months ended March 31, 2005. The increase is due to higher property taxes over the prior year as well as additional maintenance and repair costs that were incurred in the first quarter of 2006.

Depreciation expense attributable to the Island Facility was $3.0 million for the three months ended March 31, 2006, consistent with the $3.1 million for the three months ended March 31, 2005.



Calgary Energy Centre

Selected Quarterly Information
Three months Three months
ended ended
March 31, 2006 March 31, 2005
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Availability 98% 97%
Electricity generated (MWh) 80,565 118,619

Summary of Financial Results
(in '000s)
Revenues $ 6,087 $13,809
Operating and maintenance expense 2,212 2,082
Depreciation and accretion 2,233 2,374
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Net earnings $ 1,642 $ 9,353
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The Calgary Energy Centre is a natural gas-fired combined cycle plant located in Calgary, Alberta, which commenced operations on March 31, 2003. The Calgary Energy Centre has a capacity of 300 MW, consisting of 250 MW of base capacity plus 50 MW of peaking capacity.

Plant availability for the three months ended March 31, 2006 remained strong at 98% and was consistent with availability for the three months ended March 31, 2005.

Revenues

Electricity revenues at the Calgary Energy Centre were $6.1 million for the three months ended March 31, 2006, compared to revenues for the three months ended March 31, 2005 of $13.8 million. Revenue from January 1, 2006 to January 16, 2006 of $2.4 million was earned through the original tolling arrangement with CESCP, a wholly-owned partnership of Calpine. On January 16, 2006 CESCP repudiated the contract and no revenue was received for the period from January 17, 2006 to February 15, 2006. On February 16, 2006 the Partnership entered into a short-term tolling agreement with EPCOR to toll the capacity of the Calgary Energy Centre until the end of June 2006 at prices significantly lower than the tolling agreement with CESCP, reflecting current Alberta market conditions. Efforts to toll the long-term capacity of the plant are ongoing. Management expects to commence a competitive bid process shortly and anticipates the long-term toll to be in place within 90 to 120 days. The Manager is further contemplating an additional short-term toll agreement to cause the capacity of the plant to be fully contracted until the implementation of a long-term tolling agreement.

Expenses

Operating and maintenance expense attributable to the Calgary Energy Centre for the three months ended March 31, 2006 was $2.2 million consistent with $2.1 million for the three months ended March 31, 2005.

Depreciation expense attributable to the Calgary Energy Centre was $2.2 million for the three months ended March 31, 2006 compared to $2.4 million for the three months ended March 31, 2005. The decrease over the prior year is due to a reassessment of the useful life of certain spare parts in 2005 and a resulting decrease in depreciation expense.



Selected Balance Sheet
Information of Calpine As at As at
Power, L.P. (in 000's) March 31, 2006 December 31, 2005
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Cash and cash equivalents $ 25,770 $ 27,903
Accounts receivable 9,577 6,426
Prepaid expenses 6,948 6,465
Capital assets 564,772 569,923
Accounts payable and accrued
liabilities 12,994 10,807


Cash and cash equivalents decreased by $2.1 million to $25.8 million due to reduced cash flow from operations caused by no revenue being earned from the Calgary Energy Centre for the period from January 16, 2006 to February 15, 2006 and the reduced short-term toll with EPCOR.

The accounts receivable balance at March 31, 2006 was higher than the balance at December 31, 2005. The March 2006 balance includes a full month of invoiced revenue for the Calgary Energy Centre whereas the December 2005 balance only includes invoiced revenue for 10 days from December 21 to December 31, 2005.

Prepaid expenses related mainly to amounts paid in accordance with Long Term Service Agreements (LTSA). The amounts will be recognized when scheduled major maintenance events occur at the plants. There were no major maintenance events for either plant in the first quarter of 2006.

Capital assets decreased over the balance at December 31, 2005 due to depreciation in the first quarter of 2006 of $5.2 million.

The increase in accounts payable and accrued liabilities at March 31, 2006 over the balance at December 31, 2005 was mainly due to the increase in the heat rate penalty accrual relating to the Island Facility that is payable annually in April.



LIQUIDITY AND CAPITAL RESOURCES

Calpine Power Income Fund

Selected Quarterly Information
(in 000's) Three months Three months
ended ended
March 31, 2006 March 31, 2005
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Cash provided by operating
activities $ 21,274 $ 12,849
Cash provided by (used in)
investing activities 2,672 863
Cash provided by (used in)
financing activities (26,811) (19,102)
Cash and cash equivalents 18,442 2,919
Restricted cash 1,079 5,679



Cash provided by operating activities was $21.3 million for the three months ended March 31, 2006 compared to $12.8 million for the same period in 2005, an increase of $8.5 million. The increase was due mainly to the timing of the King City Lease receipts and related interest payments on the King City Loan. The 2005 King City Lease receipts of $19.5 million were received on January 3, 2006 and in combination with restricted cash of $4.1 million were used to fund principal payments of $11.7 million and interest payments of $11.9 million on the King City Loan on January 3, 2006. Excluding the effect of the King City Lease receipts and interest payments in 2006, cash provided by operating activities was $13.7 million.

For the three months ended March 31, 2006, cash provided by investing activities totaled $2.7 million, reflecting the Fund's receipt of scheduled principal repayments on the Manager Loan of $2.7 million.

Cash used in financing activities of the Fund for the three months ended March 31, 2006 totaled $26.8 million, comprised of distributions paid of $15.2 million and $11.7 million used to fund principal payments on the King City Loan on January 3, 2006. For the same period in 2005, cash provided by financing activities totaled $19.1 million, including $4.0 million issued as a note payable to Calpine Power, L.P. and $15.1 million in distributions paid to Unitholders.

The Fund has the Credit Facility, a $30 million extendible revolving term credit facility that expires October 3, 2006. At March 31, 2006, no amounts were drawn on the facility.

As part of the King City Transaction completed in 2004, the Fund deposited US$4.6 million of the funds received from the transaction as restricted cash into a segregated account as required under the terms of the King City Loan. The funds were used to purchase government and high quality investments with maturities that coincide with certain annual payments due on the King City Loan. On January 3, 2006 US$3.9 million of these restricted cash reserves were used to pay principal and interest on the King City Loan.



Calpine Power L.P.

Selected Quarterly Information
(in 000's) Three months Three months
ended ended
March 31, 2006 March 31, 2005
---------------------------------------------------------------------
Cash provided by operating
activities $ 14,739 $ 26,281
Cash provided by (used in)
investing activities (30) (98)
Cash provided by (used in)
financing activities (16,842) (16,109)
Cash and cash equivalents 25,770 23,811


The Partnership had cash and cash equivalents $25.8 million at March 31, 2006, up $2.0 million from March 31, 2005. Included in cash and cash equivalents is an unsegregated cash reserve of $18.9 million at March 31, 2006 (March 31, 2005 - $12.4 million) that is intended to be used to fund future maintenance costs of the Partnership. The next major maintenance for the Island Facility is expected to occur in the third quarter of 2006. A planned major maintenance outage for the Calgary Energy Centre commenced on May 6, 2006, with an expected duration of 10 days.

Cash generated by operating activities in the first quarter of 2006 was $11.5 million less than the same period in 2005. This was due to no revenue being earned from the Calgary Energy Centre for the period from January 17, 2006 to February 15, 2006 as well as reduced toll revenue in the quarter from the short-term toll with EPCOR.

Cash used in financing activities of the Partnership for the three months ended March 31, 2006 increased by $0.7 million compared to the same period in 2005. Distributions to Unitholders in the first quarter of 2006 decreased by approximately $1.1 million from the first quarter of 2005 primarily due to the reduction in the Class B Subordinated Unit distributions commencing December 2005. In the first quarter of 2005, the Partnership received $1.8 million in net financing from the Fund with respect to the capital upgrade at the Island Facility.

Future Obligations

Neither the Fund nor the Partnership have entered into any off-balance sheet arrangements.

DISTRIBUTABLE CASH AND DISTRIBUTIONS

Distributable Cash is not a measure under Canadian generally accepted accounting principles and there is no standardized measure of Distributable Cash. Distributable Cash, as presented, may not be comparable to similar measures presented by other companies. Distributable cash has been presented to assist readers in determining possible future cash distributions. Distributable cash cannot be assured and may vary.



Calpine Power Income Fund


Three months Three months
ended ended
March 31, 2006 March 31, 2005
---------------------------------------------------------------------
FUNDS FROM OPERATIONS BEFORE
WORKING CAPITAL CHANGES $ 28,525 $ 9,999
(in 000's)
Add (Deduct):
Change in working capital (7,592) 4,016
Levelization reserve (1,270) (1,534)
Payment of principal on long
term debt, net of restricted
cash used (7,183) -
Receipt of principal on
Calpine Canada Power Ltd. loan 2,672 2,671
----------------------------------

DISTRIBUTABLE CASH $ 15,152 $ 15,152
----------------------------------
----------------------------------
Weighted average number of Trust
Units outstanding 61,742,288 61,742,288
----------------------------------
----------------------------------
Distributable Cash per Trust
Unit(1) $ 0.2454 $ 0.2454
----------------------------------
(1) calculated as sum of monthly per unit distributions


The amount of Distributable Cash of the Fund to be distributed monthly to Unitholders is, as defined in the Fund Trust Indenture, based generally on the amount by which the Fund's cash on hand exceeds: (i) administration expenses of the Fund; (ii) amounts required for the business and operations including fees payable to the Manager under the Administration and Management Agreements; and (iii) any cash reserve which the Manager in its discretion determines is necessary to satisfy the Fund's current and anticipated obligations. The Fund pays monthly cash distributions to Unitholders on or about the 20th day of each month following the record date, which is the last business day of the preceding month.

Distributable Cash generated by the Fund totaled $15.2 million or $0.2454 Trust Unit for the three months ended March 31, 2006, compared to $15.2 million or $0.2454 per unit for the three months ended March 31, 2005.

Change in Working Capital

The change in working capital amount of $7.6 million for the three months ended March 31, 2006 includes $2.6 million of accrued interest payable on the King City Loan less interest paid on January 3, 2006 of $11.9 million as well as timing of payments relating to management and administrative expenses.



Levelization Reserve


Levelization Reserve
---------------------------------------------------------------------
Balance at December 31, 2005 $ 15,071
Contributions 1,193
Income reinvested 77
---------------------------------------------------------------------
Balance at March 31, 2006 $ 16,341
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As at March 31, 2006 and December 31, 2005, the Levelization Reserve was invested entirely in guaranteed investment certificates. The Manager is not subject to any mandatory requirements with respect to the timing or manner of utilization of the Levelization Reserve. If needed, the funds in the Levelization Reserve could be applied by the Fund for other purposes.




Three months Three months
ended ended
Calpine Power, L.P. March 31, 2006 March 31, 2005
---------------------------------------------------------------------
FUNDS FROM OPERATIONS BEFORE
WORKING CAPITAL CHANGES $ 17,098 $ 25,087
Add (Deduct):
(in '000s)
Capital expenditures (30) (54)
Maintenance reserve increase (1,667) (1,457)
Loan payable - 1,808
Change in working capital and
management reserves 474 (6,610)
----------------------------------
DISTRIBUTABLE CASH $ 15,875 $ 18,774
----------------------------------
----------------------------------

Allocation of Distributable Cash
Class A Priority Units $ 13,370 $ 13,439
Class B Subordinated Units 2,505 5,335
----------------------------------
$ 15,875 $ 18,774
----------------------------------
----------------------------------

Per Unit allocation of
Distributable Cash
Class A Priority Units $ 0.2571 $ 0.2584
----------------------------------
----------------------------------

Class B Subordinated Units $ 0.1124 $ 0.2394
----------------------------------
----------------------------------


The amount of Distributable Cash, as defined in the Calpine Power, L.P. Partnership Agreement, is to be distributed monthly and is based generally on the amount by which the Partnership's cash on hand exceeds: (i) management and administration expenses of the Partnership; (ii) amounts required for the business and operations of the Partnership and its facilities (including expenses payable to the Manager under the operating and maintenance agreements); and (iii) any cash reserve which the Manager in its discretion has determined is necessary to satisfy the Partnership's current and anticipated obligations, including a reserve for the estimated major maintenance expenditures. The Partnership distributes Distributable Cash of the Partnership in respect of each month to the partners of record on the last day of each month based on the priority rights of the partnership units. Payments are made on or about the 20th day after each record date. The target distribution per Class A Priority Unit and Class B Subordinated Unit increases annually by 1%.

The Partnership makes monthly cash distributions to both the Class A Priority Unitholders and Class B Subordinated Unitholders. The Fund, as the holder of Class A Priority Units in the Partnership, must be paid its target distribution before the Manager receives distributions on its Class B Subordinated Units. In addition, the Partnership makes a special distribution to the Class A Priority Unitholders equivalent to the amount of certain general and administrative expense of the Fund. The Class B Subordinated Units represent a 30% economic interest in the Island Facility, the Calgary Energy Centre and the Whitby Loan and their entitlement to distributions is subordinated to that of Class A Priority Unitholders until 2022. In light of the Manager's CCAA proceedings, distributions declared on the Class B Subordinated Units for December 2005 through February 2006 were reduced to match the required monthly principal and interest payment required on the Manager Loan. No Class B Subordinated Unit distributions were declared for March 2006. It is not currently anticipated that further distributions will be paid to the Manager on its Class B Subordinated Units based upon existing circumstances.

Maintenance Reserve

The Partnership has established a maintenance reserve, the purpose of which is to substantially fund future maintenance costs. The annual increase/decrease in the maintenance reserve is deducted from/added to cash available for distribution. The Manager is not subject to any mandatory requirements with respect to the timing or manner of utilization of the Maintenance reserve. If needed, the funds in the Maintenance reserve could be applied by the Partnership for other purposes.



Maintenance Reserve
---------------------------------------------------------------------
Balance at December 31, 2005 $ 17,253
Contributions 1,578
Income reinvested 89
---------------------------------------------------------------------
Balance at March 31, 2006 $ 18,920
---------------------------------------------------------------------


Change in Working Capital and Management Reserves

Cash used to fund working capital for the three months ended March 31, 2006 is lower than the three months ended March 31, 2005 as cash reserves from 2005 have been used to support distributions in the first quarter of 2006. Cash generated from operations was lower in the first quarter of 2006 as no tolling revenue was earned at the Calgary Energy Centre from January 17 to February 15, 2006.

TAX TREATMENT OF DISTRIBUTIONS

For Canadian tax purposes, the Manager anticipates that the taxable amounts of distributions to the Fund's Unitholders is anticipated to be approximately 30% for 2006. The remaining amount of the distributions reduce the adjusted cost base of the Trust Units, thereby providing a significant tax deferral for the Unitholders. The tax deferral arises primarily due to the ability of the Partnership to shelter its taxable income with capital cost allowance claims on the Facilities. In 2005, the taxable amount was 20%. The Manager anticipates that a higher proportion of cash distributions made by the Fund in the future will be included in the income of the Unitholders for income tax purposes. Further Fund acquisitions could serve to extend or reduce the tax-deferred horizon. The Fund recommends that Unitholders consult their tax advisors regarding the tax implications of their investment in Trust Units.

CRITICAL ACCOUNTING ESTIMATES

Preparation of both the Fund and Partnership's financial statements in conformity with Canadian generally accepted accounting principles requires Management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and revenues and expenses for the period then ended. Additional information on critical accounting estimates may be found in the Fund's 2005 MD&A.

OUTLOOK

On May 6, 2006, the Calgary Energy Centre commenced a planned major maintenance outage, which is expected to last 10 days. Under the terms of the short-term toll with EPCOR, the outage is not expected to have an impact on revenues earned. Major maintenance costs associated with the outage of approximately $3.0 million are expected to be fully funded by the Partnership's maintenance reserve.

As at May 11, 2006, efforts to market the long-term capacity of the Calgary Energy Centre are ongoing. Management expect to commence a competitive process shortly and anticipates that a long-term toll will be in place within 90 to 120 days. The Manager is contemplating an additional short-term toll agreement to cause the capacity of the plant to be fully contracted until the implementation of a long-term tolling agreement.

As indicated, the stay in the CCAA proceedings has been extended to July 20, 2006. As part of any voluntary reorganization transaction implemented by the Manager under the CCAA proceedings, the Manager may dispose of its assets, including its interest in the Administration Agreement, the Management Agreement, the applicable Operating and Maintenance agreements to which it is a party and its Class B Subordinated Units of the Partnership. Additionally, it is possible that creditors of Calpine subsidiaries who are applicants in the CCAA proceedings (including the Manager and CESCP) could apply to the Court to terminate the CCAA proceedings and seek to have the CCAA applicants petitioned into bankruptcy under the Bankruptcy Act (Canada), which would involve a liquidation of the applicants. Alternatively, it is possible that the Court could permit a liquidation of the CCAA applicants pursuant to CCAA proceedings.

BUSINESS RISKS

The Fund and the Partnership are exposed to a variety of business risks and continues to monitor these risks. Additional information on business risks may be found in the Fund's 2005 MD&A.

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 our website at www.calpinepif.com.



SUMMARY OF QUARTERLY RESULTS

Calpine Power Income Fund

(unaudited) 2006 2005
(in 000's) Q1 Q4 Q3 Q2
---------------------------------------------------------------------

Revenue (3)
Equity earnings from Calpine
Power, L.P. $ 10,095 $ 1,594 $ 13,649 $ 12,766
Finance income(2) 4,460 4,543 4,613 4,714
Interest and other income 1,631 1,799 1,921 2,052
------------------------------------
16,186 7,936 20,183 19,532
------------------------------------


Expenses
Management and administrative 2,645 1,501 523 637
Amortization 101 937 311 311
Accretion 28 27 27 28
Interest on long-term debt 2,576 2,998 3,069 3,171
Interest 51 107 140 160
Foreign exchange (9) (64) (205) 86
Future income taxes 781 633 1,595 362
------------------------------------
6,173 6,139 5,460 4,755
------------------------------------

Net earnings $ 10,013 $ 1,797 $ 14,723 $ 14,777
------------------------------------
------------------------------------

Net earnings per Trust Unit $ 0.1622 $0.0291 $ 0.2385 $ 0.2393
------------------------------------
------------------------------------

(unaudited) 2005 2004
(in 000's) Q1 Q4 Q3 Q2
---------------------------------------------------------------------

Revenue
Equity earnings from Calpine
Power, L.P. $ 14,008 $ 13,292 $ 13,802 $ 5,378
Finance income(2) 4,649 4,843 5,076 6,577
Interest and other income 2,160 2,198 2,290 1,607
------------------------------------
20,817 20,333 21,168 13,562
------------------------------------


Expenses
Management and administrative 999 1,620 661 357
Amortization 311 311 311 311
Accretion 19 27 28 20
Interest on long-term debt 3,125 3,132 3,433 1,671
Interest 196 237 218 170
Initial lease cost - - - 4,191
Foreign exchange (157) 20 53 11
Future income taxes 427 1,666 1,743 400
------------------------------------
4,920 7,013 6,447 7,131
------------------------------------

Net earnings $ 15,897 $ 13,320 $ 14,721 $ 6,431
------------------------------------
------------------------------------

Net earnings per Trust Unit $ 0.2575 $ 0.2157 $ 0.2384 $0.1138
------------------------------------
------------------------------------
(1) Operations for the three months ended June 30, 2004 include
revenues and expenses as a result of the King City transaction,
which closed in May 2004.

(2) Finance income is earned from the lease of the King City Facility
to Calpine King City.

(3) Reflects impact of the $16.0 million allowance for potential
impairment of the Whitby Loan on the Fund's share of Partnership
earnings.


Calpine Power, L.P
(unaudited) 2006 2005
(in 000's) Q1 Q4 Q3 Q2
---------------------------------------------------------------------

Revenue
Electricity, capacity and
thermal $ 21,159 $ 27,146 $28,554 $ 27,598
Interest - Whitby 792 817 837 846
Interest - Other 213 213 178 171
------------------------------------
22,164 28,176 29,569 28,615
------------------------------------

Expenses
Operating and maintenance 4,797 5,110 4,638 4,733
Allowance for impairment of
loan to Calpine Canada
Whitby Holdings Company (1) - 16,000 - -
Depreciation 5,181 5,424 5,422 5,471
Accretion 54 51 50 50
General and administrative 267 43 137 163
Interest 2 119 148 158
Foreign Exchange - 7 (50) (13)
------------------------------------
10,301 26,754 10,345 10,562
------------------------------------

Net earnings $ 11,863 $ 1,422 $19,224 $ 18,053
------------------------------------
------------------------------------

Net earnings per Unit
Class A Priority Unit $ 0.1941 $ 0.0307 $0.2625 $ 0.2455
Class B Subordinated Unit $ 0.0793 $(0.0077) $0.2502 $ 0.2372

(unaudited) 2005 2004
(in 000's) Q1 Q4 Q3 Q2
---------------------------------------------------------------------

Revenue
Electricity, capacity and
thermal $ 28,775 $ 28,467 $ 27,827 $ 18,490
Interest - Whitby 837 846 855 846
Interest - Other 127 143 129 72
------------------------------------
29,739 29,456 28,811 19,408
------------------------------------

Expenses
Operating and maintenance 4,336 4,836 3,573 6,417
Depreciation 5,402 5,104 5,504 4,777
Accretion 50 46 47 47
General and administrative 152 604 82 10
Interest 164 107 88 47
Foreign Exchange (22) 157 194 (209)
------------------------------------
10,082 10,854 9,488 11,089
------------------------------------

Net earnings $ 19,657 $ 18,602 $ 19,323 $ 8,319
------------------------------------
------------------------------------

Net earnings per Unit
Class A Priority Unit $ 0.2694 $ 0.2556 $ 0.2654 $0.1034
Class B Subordinated Unit $ 0.2535 $ 0.2383 $ 0.2477 $0.1320

(1) Reflects impact of the $16.0 million allowance for potential
impairment of the Whitby Loan on the Fund's share of Partnership
earnings.


The Partnership's revenues are subject to seasonality from its Island Facility, which earns more revenue during winter months due to increased requested output from contract counterparties.



CALPINE POWER INCOME FUND

CONSOLIDATED BALANCE SHEETS
(thousands)

As at As at
March 31, 2006 December 31, 2005
---------------------------------------------------------------------
(unaudited)

ASSETS
Current Assets
Cash and cash equivalents $ 18,442 $ 16,797
Restricted cash, current portion 1,079 5,597
Distributions receivable 4,818 4,519
Accounts receivable 435 271
Loan to Calpine Canada Power Ltd.,
current portion (Note 2) - 2,337
Net investment in lease,
current portion 1,248 20,712
Prepaid expenses 163 221
----------------------------------
26,185 50,454

Investment in Calpine
Power, L.P. (Note 3) 462,352 465,627
Net investment in lease,
less current portion 136,110 131,843
Loan to Calpine Canada Power Ltd.,
less current portion (Note 2) 29,851 29,851
Land 1,870 1,870
Deferred financing costs 1,949 2,052
----------------------------------
$ 658,317 $ 681,697
----------------------------------
----------------------------------

LIABILITIES AND UNITHOLDERS' EQUITY
Current Liabilities
Distributions payable $ 5,051 $ 5,051
Accounts payable and accrued
liabilities 3,853 1,669
Accrued interest on long-term debt 2,606 11,937
Long-term debt, current portion 9,504 21,216
----------------------------------
21,014 39,873
Future income tax 7,216 6,445
Asset retirement liability 1,384 1,358
Long-term debt, less current
portion 71,862 72,041
----------------------------------
101,476 119,717
Unitholders' equity 556,841 561,980
----------------------------------
$ 658,317 $ 681,697
----------------------------------
----------------------------------

See accompanying notes to the consolidated financial statements



CALPINE POWER INCOME FUND
CONSOLIDATED STATEMENTS OF EARNINGS AND UNITHOLDERS' EQUITY
(thousands, except for Trust Units and per Trust Unit amounts)
(unaudited)

Three months ended Three months ended
March 31, 2006 March 31, 2005
---------------------------------------------------------------------

REVENUES
Equity earnings from
Calpine Power, L.P. $ 10,095 $ 14,008
Finance income 4,460 4,649
Interest and other income 1,631 2,160
----------------------------------
16,186 20,817
----------------------------------

EXPENSES
Management and administrative 2,645 999
Amortization 101 311
Accretion 28 19
Interest on long-term debt 2,576 3,125
Interest 51 196
Foreign exchange gain (9) (157)
----------------------------------
5,392 4,493
----------------------------------

EARNINGS BEFORE FUTURE INCOME TAXES 10,794 16,324
----------------------------------
Future income taxes 781 427
----------------------------------

NET EARNINGS 10,013 15,897

UNITHOLDERS' EQUITY, BEGINNING
OF PERIOD 561,980 575,392

Distributions (15,152) (15,152)
----------------------------------

UNITHOLDERS' EQUITY, END OF PERIOD $ 556,841 $ 576,137
----------------------------------
----------------------------------

Weighted average number of Trust
Units outstanding 61,742,288 61,742,288
----------------------------------
----------------------------------
Net earnings per Trust Unit $ 0.1622 $ 0.2575
----------------------------------
----------------------------------

See accompanying notes to the consolidated financial statements



CALPINE POWER INCOME FUND CONSOLIDATED STATEMENTS OF CASH FLOWS
(thousands)
(unaudited)

Three months ended Three months ended
March 31, 2006 March 31, 2005
---------------------------------------------------------------------
OPERATING ACTIVITIES
Net earnings $ 10,013 $ 15,897
Adjustments for non-cash items:
Equity earnings from
Calpine Power, L.P. (10,095) (14,008)
Finance income (4,460) (4,649)
Amortization 101 311
Amortization of discount
on loan to Calpine Canada
Power Ltd. (335) (440)
Accretion 28 19
Foreign exchange loss (gain) (9) (157)
Future income taxes 781 427
Lease receipts 19,431 -
Distributions received from
Calpine Power, L.P. 13,070 12,599
----------------------------------
Cash from operations before
working capital 28,525 9,999
Change in non-cash working
capital (Note 4) (7,251) 2,850
----------------------------------
Net cash provided by operating
activities 21,274 12,849
----------------------------------
INVESTING ACTIVITIES
Receipt of principal on loan to
Calpine Canada Power Ltd. 2,672 2,671
Loan to Calpine Power, L.P. - (4,007)
Loan to Calpine Canada Power Ltd. - 2,199
----------------------------------
Net cash provided by investing
activities 2,672 863
----------------------------------

FINANCING ACTIVITIES
Distributions paid (15,152) (15,102)
Repayment on Credit Facility - (4,000)
Payment of principal on
long-term debt (11,659) -
----------------------------------
Net cash used in financing
activities (26,811) (19,102)
----------------------------------
Foreign exchange gain (loss) on
cash held in a foreign currency (8) 246
----------------------------------

DECREASE IN CASH AND CASH EQUIVALENTS (2,873) (5,144)
Cash and cash equivalents,
beginning of period 22,394 13,742
----------------------------------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 19,521 $ 8,598
----------------------------------
----------------------------------
Represented by:
Cash and cash equivalents $ 18,442 $ 2,919
Restricted cash, current portion 1,079 4,547
Restricted cash, less current portion - 1,132
----------------------------------
$ 19,521 $ 8,598
----------------------------------
----------------------------------
SUPPLEMENTARY CASH FLOW INFORMATION
Taxes paid $ - $ -
Interest received $ 1,245 $ 1,837
Interest paid $ 11,930 $ 196

See accompanying notes to the consolidated financial statements



CALPINE POWER INCOME FUND
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2006 AND 2005
(Tabular amounts are in thousands except for Trust Units and per
Trust Unit amounts)
(unaudited)


1. SIGNIFICANT ACCOUNTING POLICIES

The consolidated financial statements of the Calpine Power Income Fund (the "Fund") have been prepared by Calpine Canada Power Ltd. (the "Manager") in accordance with Canadian generally accepted accounting principles. The accounting policies applied are consistent with those outlined in the Fund's annual financial statements for the year ended December 31, 2005. These consolidated financial statements for the three months ended March 31, 2006 do not include all disclosures required in the annual consolidated financial statements in the Fund's 2005 Annual Report.

The Fund is not subject to any seasonality in its earnings except as may be derived from its investment in Calpine Power, L.P. (the "Partnership"), which earns more revenue during winter months due to increased requested output from contract counterparties.

2. LOAN TO CALPINE CANADA POWER LTD.

The loan (the "Manager Loan") is a full recourse obligation of the Manager and is secured by a pledge of the Manager's limited partnership interest in the Partnership, including the Manager's right to receive distributions under the Class B Subordinated Units of Calpine Power, L.P. In addition, the Manager affiliate that is the lessee of the King City Facility has provided the Fund with a limited recourse guarantee of the Manager's obligations under the loan and granted the Fund a subordinated security interest in its annual cash from operations. On December 20, 2005, the Manager filed for voluntary reorganization under the Canadian Companies' Creditors Arrangement Act ("CCAA"). As a result of these reorganization proceedings an event of default has occurred under the terms of the loan. Management estimates the loan to be fully collectible based upon the guarantee and security in place subject to the lifting of the stay of proceedings against the Manager, currently in effect until July 20, 2006. As at March 31, 2006, all scheduled principal and interest payments had been received. Amounts due and collected up to March 31, 2006 have been classified as current at December 31, 2005 with the remaining balance classified as long-term.

3. INVESTMENT IN CALPINE POWER, L.P.

On August 29, 2002, the Fund purchased 52,001,351 Class A Priority Units of the Partnership representing a 70% partnership interest.

As at March 31, 2006 and December 31, 2005, the equity investment in Calpine Power, L.P. was comprised as follows:



---------------------------------------------------------------------
Investment in Calpine Power, L.P. at December 31, 2005 $ 465,627
Equity Earnings from Calpine Power, L.P. 10,095
Distributions received and receivable from Calpine
Power, L.P. (13,370)
---------------------------------------------------------------------
As at March 31, 2006 $ 462,352
-----------
-----------

4. CHANGE IN NON-CASH WORKING CAPITAL

Three months Three months
ended ended
Change in non-cash working capital March 31, 2006 March 31, 2005
---------------------------------------------------------------------
Operating Activities
Accounts receivable $ (164) $ 138
Prepaid expenses 58 107
Interest payable on long-term debt (9,329) -
Accounts payable 2,184 2,605
--------------------------------
$ (7,251) $ 2,850
--------------------------------
--------------------------------


5. SEGMENTED INFORMATION
Three months Three months
ended ended
March 31, 2006 March 31, 2005
---------------------------------------------------------------------
Revenue
Canada $ 11,697 $ 16,110
United States 4,489 4,707
--------------------------------
$ 16,186 $ 20,817
--------------------------------

As at As at
March 31, 2006 December 31,2005
---------------------------------------------------------------------
Total Assets
Canada $ 515,950 $ 519,833
United States 142,367 161,864
--------------------------------
$ 658,317 $ 681,697
--------------------------------


6. SUBSEQUENT EVENTS

On April 10, 2006, the Court extended the stay of proceedings against the Manager and certain of its affiliates in the CCAA proceedings until July 20, 2006.

On April 10, 2006, the Court also ordered that a claims resolution process be commenced in relation to the affected Calpine Corporation subsidiaries in CCAA proceedings. The Partnership will submit a claim as a consequence of the repudiation on January 16, 2006 by a subsidiary of Calpine of the Tolling Agreement with respect to the Calgary Energy Centre.

Scheduled principal and interest payments due on the Manager Loan for April 2006 were not received by May 3, 2006 and an event of default by the Manager has occurred. Management estimates the loan to be fully collectible based upon the guarantee and security in place subject to the lifting of the stay of proceedings against the Manager, currently in effect until July 20, 2006.



CALPINE POWER, L.P.
CONSOLIDATED BALANCE SHEETS
(thousands)
As at As at
March 31, 2006 December 31, 2005
---------------------------------------------------------------------
ASSETS (unaudited)

Current Assets
Cash and cash equivalents $ 25,770 $ 27,903
Accounts receivable 9,577 6,426
Interest receivable 3,013 2,221
Inventory 2,770 2,650
Prepaid expenses 6,948 6,465
--------------------------------------
48,078 45,665

Loan to Calpine Canada Whitby
Holdings Company 19,414 19,414

Capital assets 564,772 569,923
--------------------------------------

$ 632,264 $ 635,002
--------------------------------------
--------------------------------------

LIABILITIES AND PARTNERS' EQUITY

Current Liabilities

Distributions payable $ 4,818 $ 5,785
Accounts payable and accrued
liabilities 12,994 10,807
--------------------------------------
17,812 16,592
Asset retirement liability 2,624 2,570
--------------------------------------
20,436 19,162
Partners' equity (Note 3) 611,828 615,840
--------------------------------------
$ 632,264 $ 635,002
--------------------------------------
--------------------------------------

See accompanying notes to the consolidated financial statements



CALPINE POWER, L.P.
CONSOLIDATED STATEMENTS OF EARNINGS AND PARTNERS' EQUITY
(thousands, except for per Unit amounts)
(unaudited)

Three months ended Three months ended
March 31, 2006 March 31, 2005
---------------------------------------------------------------------
REVENUES

Electricity, capacity and
thermal $ 21,159 $ 28,775
Interest-Whitby 792 837
-Other Income 213 127
------------------------------------------
22,164 29,739
------------------------------------------

EXPENSES

Operating and maintenance 4,797 4,336
Depreciation 5,181 5,402
Accretion 54 50
Interest 2 164
General and administrative 267 152
Foreign exchange gain - (22)
------------------------------------------
10,301 10,082
------------------------------------------

NET EARNINGS 11,863 19,657

PARTNERS' EQUITY, BEGINNING
OF PERIOD 615,840 631,353

Distributions (15,875) (18,774)
------------------------------------------

PARTNERS' EQUITY, END OF
PERIOD $ 611,828 $ 632,236
------------------------------------------
------------------------------------------



Net earnings per Unit
(Note 3):
Class A Priority Unit $ 0.1941 $ 0.2694
------------------------------------------
------------------------------------------
Class B Subordinated Unit $ 0.0793 $ 0.2535
------------------------------------------
------------------------------------------

See accompanying notes to the consolidated financial statements



CALPINE POWER, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(thousands)
(unaudited)

Three months ended Three months ended
March 31, 2006 March 31, 2005
---------------------------------------------------------------------
OPERATING ACTIVITIES
Net earnings $ 11,863 $ 19,657
Adjustments for non-cash
items:
Depreciation 5,181 5,402
Accretion 54 50
Foreign exchange gain - (22)
------------------------------------------


Cash from operations
before working capital
changes 17,098 25,087

Change in non-cash working
capital relating to
operating activities
(Note 2) (2,359) 1,194
------------------------------------------

Net cash provided by
operating activities 14,739 26,281
------------------------------------------
INVESTING ACTIVITIES

Capital expenditures (30) (54)
Change in non-cash working
capital relating to
investing activities
(Note 2) - (44)
------------------------------------------

Net cash used in investing
activities (30) (98)
------------------------------------------

FINANCING ACTIVITIES
Distributions (16,842) (17,917)
Loan payable - 4,007
Payment of principal on
loan payable - (2,199)
------------------------------------------

Net cash used in financing
activities (16,842) (16,109)
------------------------------------------

Foreign exchange gain on
cash held in foreign
currency - 22
------------------------------------------

INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (2,133) 10,096

Cash and cash equivalents,
beginning of period 27,903 13,715
------------------------------------------

CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 25,770 $ 23,811
------------------------------------------
------------------------------------------


SUPPLEMENTARY CASH FLOW
INFORMATION
Interest received $ 213 $ 2,627
Interest paid $ - $ 349


See accompanying notes to the consolidated financial statements



CALPINE POWER, L.P.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2006 and 2005
(Tabular amounts are in thousands except for per Unit amounts)
(unaudited)


1. SIGNIFICANT ACCOUNTING POLICIES

The consolidated financial statements of the Calpine Power, L.P. (the "Partnership") have been prepared by Calpine Canada Power Ltd. (the "Manager") in accordance with Canadian generally accepted accounting principles. The accounting policies applied are consistent with those outlined in the Partnership's annual financial statements for the year ended December 31, 2005. These consolidated financial statements for the three months ended March 31, 2006 do not include all disclosures required in the annual consolidated financial statements of the Partnership in the 2005 Calpine Power Income Fund (the "Fund") Annual Report.

The Partnership's earnings are subject to seasonality from its Island Facility, which earns more revenue during winter months due to increased requested output from contract counterparties.



2. CHANGE IN NON-CASH WORKING CAPITAL

Three months Three months
Change in non-cash ended ended
working capital March 31, 2006 March 31, 2005
---------------------------------------------------------------------
Operating activities:
Accounts receivable $ (3,151) $ (1,177)
Interest receivable (792) 1,664
Prepaid expenses (483) (1,088)
Accounts payable and accrued liabilities 2,187 2,004
Interest payable - (185)
Inventory (120) (24)
-------------------------
$ (2,359) $ 1,194
-------------------------
-------------------------

Investing activities:
Accounts payable - accrued capital $ - $ (44)
-------------------------
-------------------------


3. PARTNERS' EQUITY

The Partnership is authorized to issue an unlimited number of Class A Priority Units and an unlimited number of Class B Subordinated Units. For the three months ended March 31, 2006, the Fund subsidiary that is the holder of Class A Priority Units, Calpine Commercial Trust, received the first $0.0806 of Distributable Cash per Class A Priority Unit per month (in addition to certain management and administrative expenses incurred by the Fund) on a cumulative basis in priority to any payments on the Class B Subordinated Units. For the three months ended March 31, 2006, the holder of Class B Subordinated Units, the Manager, was entitled to receive up to $0.0806 of Distributable Cash per Class B Subordinated Unit per month which amounts accumulate for a fiscal year (and if unpaid at the end of a fiscal year, this entitlement terminates for such fiscal year) following the priority payment of Distributable Cash to the holder of Class A Priority Units. Each year until 2022, the Distributable Cash target entitlements increase at an annual rate of 1%. Holders of Class A Priority Units and Class B Subordinated Units are entitled to share equally, on a class basis, any Distributable Cash in excess of their target entitlements in any calendar year.



Class A Units Class B Units Total

---------------------------------------------------------------------
As at December 31, 2005 $ 465,627 $ 150,213 $ 615,840
Net earnings 10,095 1,768 11,863
Distributions declared (13,370) (2,505) (15,875)
------------------------------------------
As at March 31, 2006 $ 462,352 $ 149,476 $ 611,828
------------------------------------------
------------------------------------------


Net earnings per Class A Priority Unit and Class B Subordinated Unit for the three months ended March 31, 2006 have been calculated based on a weighted average of 52,001,352 Class A Priority Units (March 31, 2005 - 52,001,352) and 22,286,294 Class B Subordinated Units (March 31, 2005 - 22,286,294).

4. SUBSEQUENT EVENTS

On April 10, 2006, the Court extended the stay of proceedings against the Manager and certain of its affiliates in proceedings under the Canadian Companies' Creditors Arrangement Act ("CCAA") until July 20, 2006.

On April 10, 2006, the Court ordered that a claims resolution process be commenced in relation to the affected Calpine Corporation subsidiaries in CCAA proceedings. The Partnership will to submit a claim as a consequence of the repudiation on January 16, 2006 by a subsidiary of Calpine of the tolling agreement with respect to the Calgary Energy Centre.

Contact Information

  • Calpine Power Income Fund
    Toby Austin
    President and Chief Executive Officer
    (403) 750-3303
    Email: ir@calpinecanada.com