Calpine Power Income Fund
TSX : CF.UN

Calpine Power Income Fund

January 04, 2007 02:00 ET

Calpine Power Income Fund Announces Recent Commercial Developments

CALGARY, ALBERTA--(CCNMatthews - Jan. 4, 2007) - Calpine Power Income Fund (the "Fund") (TSX:CF.UN), announces the following recent commercial developments with respect to the Fund.

Calgary Energy Centre Tolling Agreement

The Fund has previously disclosed that it has entered into a 20 year tolling agreement with ENMAX Energy Corporation with respect to Calgary Energy Centre. The conditions to commencement of this agreement have been satisfied and the agreement commenced January 1, 2007, as scheduled.

King City Facility Developments

A subsidiary of the Fund (the "Lessor") is the lessor of the King City Facility to an affiliate of the Manager (the "Lessee"). The Lessor has also incurred a project finance loan (the "Loan") secured by its interest in the King City Facility.

Representatives of the Fund have been engaged in discussions with the lender of the Loan (the "Lender") and the Lessee, and the following developments have occurred:

1. The Lender has agreed to the extension of forbearance agreements with the Lessor until January 1, 2008. The need for this forbearance agreement arises because (a) the insolvency filing by Calpine Corporation (an affiliate of Calpine Canada Power Ltd. (the "Manager"), the manager of the Fund), as operator, is an event of default under the lease of the King City Facility (the "Lease") that is also an event of default under the Loan; and (b) the failure to resolve the operational issues with respect to the water distillation facility as referred to in paragraph 5 below, could also give rise to an event of default under the Lease and the Loan. The forbearance agreement provides for forbearance by the Lender from taking enforcement action under the Lease and Loan, as applicable, in relation to the matters specified above. Continuing forbearance by the Lender is subject to conditions specified therein, including the requirement that there be no defaults, other than those specified above, by applicable parties to King City project finance documents, other than the Lender.

2. The Fund has been advised that the Lender has also extended the forbearance agreement previously entered into with the Lessee.

3. No funds will currently be released from the depositary accounts established under the Loan pending resolution of the issues arising out of the aforementioned insolvency filing.

4. Among the funds being retained in depository accounts is the aggregate amount of approximately US $20 million of funds allocated to the Lessee that is being held on account of the insolvency filing by Calpine Corporation, an affiliate of the Lessee and the Manager. This amount is expected to ultimately be made available to satisfy the subordinated guarantee by the Lessee of the obligations of the Manager under its loan to Calpine Commercial Trust, if the loan is not otherwise satisfied, subject to some or all of this amount being utilized in the interim for other permitted purposes under the depositary agreements. However, this amount is unlikely to be released for this purpose until January 2008 at the earliest, and the release will be subject to compliance with requirements in applicable agreements.

5. The Lessee is currently dealing with operational issues with respect to the water distillation facility to be utilized as an alternative source of thermal energy by the King City steam host (the "Steam Host"). The water distillation facility is to provide an alternative steam use to retain "Qualifying Facility" ("QF") status for the King City Facility, in the event that the current food processing use is discontinued. Such status is critical to the power purchase agreement between the Lessee and the Pacific Gas and Electric Company, and the continued subsistence of the Lease and the Loan.

The Lessee is currently working with the Steam Host to make the water distillation facility operational. In any event, the Steam Host is contractually obligated to to take sufficient thermal energy from the King City Facility to permit the Facility to retain QF status.

Calpine Power Income Fund is an unincorporated open-ended trust that invests in electrical power assets. Calpine Power Income Fund indirectly owns interests in power generating facilities in British Columbia, Alberta and California, as well as a participating loan interest in a power plaint in Ontario and a promissory note issued by Calpine Canada Power Ltd.

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.

Forward-Looking Information Disclaimer

This news release may contain forward-looking information as defined under applicable Canadian securities laws, including information regarding possible events, conditions or results with respect to Calpine Power Income Fund. This information is subject to a number of assumptions and risks that may cause actual results to differ materially from the forward-looking information. Some of the factors that could cause such differences include the outcome of the voluntary reorganization filings by Calpine Corporation and applicable subsidiaries, including the Companies' Creditors Arrangement Act (Canada) proceedings of Calpine Canada Power Ltd. and certain of its affiliates, performance or non-performance by Calpine Corporation and applicable subsidiaries (including the Lessee) of contracts with Calpine Power Income Fund and its applicable subsidiaries or investees (including the Lessor), legislative or regulatory developments, competition, general economic conditions and other assumptions and risks identified in the management discussion and analysis of Calpine Power Income Fund for the fiscal year ended December 31, 2005 and the fiscal quarters ended March 31, 2006, June 30, 2006 and September 30, 2006, and the annual information form dated April 19, 2006, each of which is available on www.SEDAR.com and the Fund's website at www.calpinepif.com.

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