Harbinger Capital Partners

December 20, 2006 09:28 ET

Harbinger Commences Offer to Buy Calpine Power Income Fund for Cdn.$12.25 per Unit

CALGARY, ALBERTA--(CCNMatthews - Dec. 20, 2006) -


Harbinger Capital Partners announced today it has formally commenced its take-over bid (the "Offer") to acquire all of the outstanding trust units ("Units") of Calpine Power Income Fund (the "Fund")(TSX:CF.UN) at a price of Cdn.$12.25 cash per Unit. The acquisition cost, including assumed debt of the Fund, will be approximately Cdn.$831 million. The Offer has been made through HCP Acquisition Inc. (the "Offeror"), an indirect wholly-owned subsidiary of Harbinger Capital Partners Special Situations Fund, L.P. and Harbinger Capital Partners Master Fund I, Ltd. (collectively, "Harbinger Capital Partners"). As at the date hereof, Harbinger Capital Partners beneficially own 3,327,900 Units, representing approximately 5.4% of the outstanding Units.

The Offer price per Unit represents a premium of approximately 17.2% over yesterday's $10.45 closing price of the Units on the Toronto Stock Exchange (being the last trading day prior to the announcement by Harbinger Capital Partners of its intention to make the Offer), and a premium of approximately 17.6% over the volume weighted average trading price of the Units for the previous 60 calendar days.

As stated when announcing their intention to make the Offer, Howard Kagan, a Managing Director of Harbinger Capital Partners, said, "Our offer represents an opportunity for substantial near-term value creation for the unitholders of the Fund given the uncertainty surrounding the Fund's underlying businesses. The proceedings involving Calpine Corp., including those involving the manager of the Fund, under Chapter 11 of the US Bankruptcy Code and under the Companies' Creditors Arrangement Act represent a serious risk to the underlying stability of the Fund. The Fund's announcement yesterday regarding its repudiation claim in the Calpine insolvency proceeding exemplifies the complexities associated with the Fund's current situation. It highlights why we believe the Fund is not suitable for individual investors who may depend on a predictable income stream from their investment in the Fund. The Offer represents an excellent exit strategy for unitholders who have endured a deterioration in the Fund's underlying fundamentals for over a year, with only the hope that eventually the proceedings will be positively resolved and the business will recover."

On December 15, 2006, Harbinger Capital Partners advised the Fund of its desire to acquire the Fund and to enter into discussions with the intention of negotiating a fair and efficient transaction that would create substantial near-term value for its unitholders and establish an appropriate ownership structure for the Fund's assets. After the close of business on December 19, 2006, the Fund advised Harbinger Capital Partners that it did not wish to pursue such negotiations with respect to Harbinger Capital Partners' proposal at this time. Accordingly, Harbinger Capital Partners decided to make its offer directly to the unitholders of the Fund.

The Offer documents have been delivered to the registered unitholder of the Fund and filed on the System for Electronic Document Analysis and Retrieval (SEDAR) at www.sedar.com. The Offeror also intends to send the Offer documents to the Fund's beneficial unitholders promptly following receipt from the Fund of its list of such unitholders. The Offer is open for acceptance until 9:00 p.m. (Calgary time) on January 25, 2007, unless withdrawn, varied or extended.

The Offer is fully financed by Harbinger Capital Partners from its cash currently on hand and committed credit facilities.

Harbinger Capital Partners has retained Credit Suisse as financial advisor and Stikeman Elliott LLP as legal counsel in connection with the Offer. Credit Suisse is also providing, and acting as sole lead arranger and sole bookrunner in connection with, the financing commitment in connection with the Offer.

The Offer is conditional on and subject to certain specified conditions, including among other things: (a) the valid deposit under the Offer and non-withdrawal of (together with any Units beneficially owned by the Offeror, Harbinger Capital Partners and any of their affiliates) at least 66 2/3% of the Units, on a fully-diluted basis; and (b) there having been obtained, on terms satisfactory to the Offeror, all regulatory and third-party approvals that, in the Offeror's sole judgment, are necessary or desirable to complete the Offer and any second step transaction thereafter. Harbinger Capital Partners and the Offeror expect that the Fund will not take any action (or fail to take any action), directly or indirectly through one or more of its subsidiary entities, that would preclude the Offeror from completing its Offer and any second step transaction as contemplated and thereby deprive the Fund's unitholders of the opportunity to receive the benefits of the Offer as contemplated.

Cautionary Statements

This news release contains forward-looking statements, which reflect the Offeror's and Harbinger Capital Partners' current beliefs and expectations. These forward-looking statements are subject to risks and uncertainties. Many factors could cause actual results to differ materially from the results discussed in the forward-looking statements. Undue reliance should not be placed on forward-looking statements.

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. The Offer is not 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, the Offeror or its agents may, in the sole discretion of the Offeror, take such action as the Offeror may deem necessary to extend the Offer to unitholders in any such jurisdiction.

This announcement contains certain information relating to the Fund and its subsidiary entities. Neither the Offeror nor Harbinger Capital Partners have had any due diligence access to the Fund or its subsidiary entities. The information in this announcement relating to the Fund and its subsidiary entities (other than in relation to the trading prices of the Units of the Fund on the Toronto Stock Exchange, which is sourced from Bloomberg Financial) has been compiled from information included in public documents filed by the Fund only and has not been commented on or verified by the Fund, its trustees, or Harbinger Capital Partners or Offeror. The Offeror and Harbinger Capital Partners believe that they are not in possession of any material non-public financial or other information in respect of the Fund or its subsidiary entities.

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