The Consumers' Waterheater Income Fund
TSX : CWI.UN

The Consumers' Waterheater Income Fund

January 31, 2007 07:00 ET

The Consumers' Waterheater Income Fund Enters into an Agreement to Acquire Toronto Hydro's Water Heater Rental Business

TORONTO, ONTARIO--(CCNMatthews - Jan. 31, 2007) -

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The Consumers' Waterheater Income Fund (the "Fund") (TSX:CWI.UN) today announced it has entered into an agreement to acquire the water heater rental business of Toronto Hydro Energy Services Inc. ("TH Energy") for approximately $40.9 million, subject to adjustment. The acquisition will be funded from available cash and drawing from a secured line of credit.

Acquisition Highlights

- Approximately 85,000 water heaters and associated rental contracts, bringing total rental portfolio to over 1.4 million units

- Accretive to distributable cash

- Consistent with the Fund's previously announced growth strategy

"The Fund welcomes TH Energy water heater customers and is committed to providing these customers with the same level of service that our existing customers enjoy" said John Macdonald, President and CEO, The Consumers' Waterheater Income Fund. "This acquisition fits in well with the Fund's plan to grow our business and enhance unitholder value."

The assets of TH Energy include approximately 85,000 water heaters and associated rental contracts in the Greater Toronto Area. Upon closing of the transaction, the Fund's installed water heater and other rental asset base will total over 1.4 million units.

This transaction is expected to be accretive to distributable cash in 2007 based on the planned financing. Accretion to distributable cash is expected to increase in 2008 as this portfolio performs more consistently with the Fund's existing assets.

The Fund also acquired the water heater rental business of PowerStream Inc. in December 2006 and appointed John Macdonald as President and CEO in November 2006.

In connection with this acquisition, the Fund has received a definitive commitment, subject to customary closing conditions, from its current Canadian chartered bank lender to increase its line of credit from $15 million to $35 million. In addition to funding a portion of the purchase price for this acquisition, the facility will be used to finance ordinary course working capital requirements, including funding the purchase of additional water heaters. Outstanding draws on the facility are secured by the assets of the Fund, pari passu with the Fund's existing $500 million of Secured Notes. The revolving facility matures in January 2008.

Under the terms of the purchase agreement, the transfer of assets will take place on February 8, 2007, subject to customary closing conditions. However, TH Energy will continue to provide customer services until March 10, 2007 on behalf of the Fund pursuant to a transitional services agreement to be entered into concurrently with closing. After that date, Direct Energy Marketing Limited ("Direct Energy") will service this portfolio pursuant to a new services agreement for these assets between Direct Energy and the Fund to be entered into concurrently with closing on a fee for service basis. Until March 10, 2007 customer inquiries should be directed to TH Energy's customer service number (416-382-6540), after March 10, 2007, customer inquiries should be directed to Direct Energy's toll free customer service number (1-800-266-3939).

Direct Energy currently supports the Fund with a roster of 500 service technicians and 150 installation and replacement crews that are made available to the Fund's customers 24 hours a day, seven days a week and all year round.

About The Consumers' Waterheater Income Fund

The Consumers' Waterheater Income Fund owns a portfolio of over 1.3 million installed water heaters and other assets, leased primarily to residential customers in Ontario. The asset base has been generating stable and growing cash flows since its inception in the late 1950s.

Forward-Looking Statements

This press release contains forward-looking statements relating to expected future events which reflect management's expectation regarding the Fund's growth, financial results and operating performance. Such forward-looking statements reflect management's current beliefs and are based on information available to them. Many factors could cause results to differ from the results discussed or implied in the forward-looking statements and these differences may be material. Although the forward-looking statements are based on what management believes to be reasonable assumptions, there are many risks and uncertainties that could effect the results discussed or implied in the forward looking statements. The Fund therefore cannot assure investors that actual results will be consistent with these forward-looking statements. The assumptions include but are not limited to: terminations, replacements, rental rates and service costs. These risks and uncertainties include, but are not limited to: billing arrangements, social or technical changes, regulatory changes, product faults, geographic concentration, competition, lack of written contracts, Income tax matters and reliance on Direct Energy, A summary of these risks and uncertainties can be found in the Fund's most recently filed management's discussion and analysis and current annual information form, both of which can be found on SEDAR at www.sedar.com. The Fund is under no obligation (and expressly disclaims any such obligation) to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise.

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