Calpine Power Income Fund
TSX : CF.UN

Calpine Power Income Fund

January 04, 2007 06:30 ET

Calpine Power Income Fund Board of Trustees Unanimously Recommends Unitholders Reject Harbinger's Hostile Takeover Bid

Conference Call & Webcast Scheduled for 10:30 a.m. EDT

CALGARY, ALBERTA--(CCNMatthews - Jan. 4, 2007) - The Board of Trustees of Calpine Commercial Trust, on behalf of Calpine Power Income Fund (TSX:CF.UN), has unanimously recommended that unitholders reject the unsolicited offer from Harbinger Capital Partners and not tender their units into the offer.

The Board's recommendation, as well as a discussion of its reasons for rejecting the Harbinger offer, is contained in a Trustees' Circular to be filed today with Canadian securities regulators. Unitholders are urged to read the Trustees' Circular in its entirety. A copy of the Circular will be available on SEDAR at www.sedar.com. In addition, copies of the Circular are being mailed to the Fund's unitholders.

In making its recommendation, the Board considered many factors including the written opinion of its financial advisor, BMO Capital Markets. This opinion states that the consideration offered by Harbinger is inadequate, from a financial point of view, to the Fund's unitholders other than Harbinger. The full text of the BMO Capital Markets opinion is included in the Trustees' Circular.

Chairman's Comment

"We believe Harbinger's offer is financially inadequate, opportunistic and fails to recognize the full value of the Fund," said Robert Hodgins, Chairman of the Board of Trustees. "We are advising unitholders to reject the Harbinger offer and not to tender their units. The Board has received strong interest from a number of third parties regarding potential alternative transactions that may offer superior value to unitholders. We are actively pursuing those discussions. We also believe recent developments in Calpine Corporation's insolvency proceedings, including an initiative by Calpine Corporation yesterday to enter into global settlement discussions with its U.S. and Canadian creditors, bode well for unitholders of the Fund."

"We dispute Harbinger's self-serving and exaggerated claims regarding the risks and uncertainties facing the Fund as a result of Calpine Corporation's insolvency proceedings," said Mr. Hodgins. "The fact is that Calpine Power Income Fund owns high-quality, modern, geographically diversified and energy-efficient power generating assets that deliver stable cash flow and are underpinned by long-term contracts with financially strong counterparties. These assets have delivered significant value to unitholders over the past year. The trust units, over the year prior to the Harbinger bid, have increased in value by approximately 32% and regular monthly distributions have been maintained. The value is reflected in the strong interest we have received from potential acquirers in recent weeks."

Reasons for the Recommendation

The Board has carefully reviewed the Harbinger offer and believes that the offer fails to provide full value for the Fund and is an attempt by Harbinger to acquire the Fund without offering adequate consideration to its unitholders. The principal factors considered by the Board in concluding to recommend that unitholders reject the Harbinger offer and not tender their units include the following:

- The Harbinger offer is inadequate, from a financial point of view, to the Fund's unitholders.

- The Harbinger offer does not reflect the quality of the Fund's assets, cash flows, long-term contracts and contractual counterparties, or the value of the priority that the Fund's Trust Units have over Calpine Corporation's subordinated interest in certain of the Fund's assets.

- The Harbinger offer does not reflect the substantial value of the unresolved claims the Fund and its subsidiaries have against Calpine Corporation.

- Superior proposals delivering greater value to unitholders may emerge.

- The Harbinger offer is opportunistic, in that it is timed to attempt to take advantage of unique information and knowledge acquired by Harbinger as a result of its role in the insolvency and reorganization proceedings relating to Calpine Corporation.

- The Harbinger offer overstates the risks and uncertainties relating to the Fund from Calpine Corporation's insolvency and reorganization proceedings.

- The Harbinger offer is not a "permitted bid" under the Fund's Unitholder Rights Plan.

- The timing of the Harbinger offer is prejudicial in that it is open for only 35 days, including the eight days between Christmas and the New Year holiday, when it was a challenge to efficiently conduct a process that would best serve the interests of unitholders.

- The Harbinger offer is highly conditional and not a firm offer.

A complete list of the reasons for the Board's recommendation as well as a full discussion of each is provided in the Trustees' Circular. The Board encourages unitholders to read the reasons in their entirety.

Exploration of Strategic Alternatives to Maximize Shareholder Value

Although the Board was not considering a sale of Calpine Power Income Fund prior to receiving Harbinger's bid, it feels compelled, in light of the inadequate Harbinger offer, to explore other strategic alternatives, including obtaining competing bids, that may provide greater unitholder value.

Accordingly, the Board and BMO Capital Markets are actively soliciting competing bids that may provide greater unitholder value. The Fund has established a data room for the purposes of providing confidential information to third parties. Several third parties have entered into confidentiality agreements with the Fund in order to access such confidential information.

The Board cautions unitholders that tendering into the Harbinger offer before the Board and its advisor have had an opportunity to obtain competing bids may preclude the possibility of financially superior competing offers emerging.

Unitholder Rights Plan

The Fund has called a meeting of unitholders to approve the adoption and continuation of the unitholder rights plan dated August 12, 2006. The meeting is scheduled for February 9, 2007. The Board of Trustees has determined that the Separation Time under the rights plan shall be deferred until January 24, 2007 or such later date as may be determined by the Trustees.

Investment Community Conference Call

The Board of Trustees will host a conference call for the investment community on January 4th, 2007 at 10:30 am EDT. To participate in the call, please dial (416) 695-5259 or toll-free 1-877-888-7019 approximately 10 minutes prior to the start time. The call is open for all to listen, but in the interest of time, questions will be limited to analysts and institutional investors.

The call will be web cast and can be accessed via the Fund's web site at www.calpinepif.com or directly at www.vcall.com/IC/CEPage.asp?ID=112739. Shortly after the conclusion of the conference call, audio replays will be available on the web or by telephone at (416) 695-5275 or toll-free 1-888-509-0081; enter passcode 638216.

How to Withdraw Shares from the Harbinger Offer

Unitholders who have questions or who may have already tendered their units to the Harbinger offer and wish to withdraw them, may do so by contacting Georgeson, the information agent retained by the Board of Trustees, toll free at:

Canada or the United States toll-free: 1-866-568-7438

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.

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 www.calpinepif.com.

Forward-Looking Information Disclaimer

This news release may contain forward-looking information as defined under applicable Canadian securities laws. This information involves 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. Such forward-looking information is 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 are reasonable. However, no assurance can be given that these expectations will prove to be correct and the forward-looking information included in this news release should not be unduly relied upon. Such forward-looking information speaks only as of the date of this (news release) and none of the Fund, the Trustees or the Manager undertakes any obligation to publicly update or revise any forward looking information contained in this news release, except as required by applicable laws.

In particular, among other forward-looking information, this news release may contain forward-looking information pertaining to the following:

- future cash flows generated by the Fund and its subsidiaries from their contracts and other assets and operations and the related amount of future cash distributions made by the Fund to unitholders of the Fund ("Unitholders");

- the value of the claims that the Fund and its subsidiaries have against Calpine Corporation and its affiliates in connection with Calpine Corporation's insolvency and reorganization proceedings and the amount that the Fund and its subsidiaries may collect under such claims or the sale of such claims;

- the future trading prices of the trust units of the Fund ("Trust Units");

- potential alternative transactions involving the Fund and/or its subsidiaries that may produce superior value to Unitholders;

- future levels of power production capacity, availability and utilization of such capacity and actual production by the Fund's indirectly owned facilities and assets; and

- the continued operation and performance by counterparties under the means the power and steam off-take agreements or tolling agreements for the Fund's indirectly-owned power generation facilities ("PPAs") and the creditworthiness of such counterparties.

The actual results and outcomes of such matters could differ materially from those anticipated in the forward-looking information contained in this news release as a result of both known and unknown risks, including the risk factors set forth below:

- volatility in market prices for electricity, power and natural gas;

- changes or fluctuations in power production capacity, availability and utilization of such capacity and actual production levels;

- changes in capital and other expenditure requirements and debt service requirements;

- breach or non-performance by the counterparties to the PPAs relating to the business of the Fund's subsidiaries;

- changes in financial markets, foreign currency exchange rates and interest rates and changes in general economic, market and business conditions in Canada, North America and worldwide;

- the timing of the resolution, and the actual outcome, of the insolvency and reorganization proceedings involving Calpine Corporation, including the amount of funds ultimately available to satisfy the claims of the Fund and its subsidiaries against Calpine Corporation;

- the inability of the Fund to negotiate and conclude an alternative transaction to the Harbinger Offer that provides superior value to Unitholders; and

- actions by governmental or regulatory authorities including changes in income tax laws (including those relating to mutual fund trusts or investment eligibility).

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 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 www.sedar.com. 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 www.sedar.com.

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

Contact Information

  • Media
    Longview Communications Inc.
    Alan Bayless
    (604) 694-6035
    or
    Longview Communications Inc.
    David Ryan
    (604) 694-6031
    or
    Investors
    Georgeson
    Toll free: (866) 568-7438