Calpine Power Income Fund Announces Strong Third Quarter Results
for 2003 CALGARY, Alberta, Oct. 29 /PRNewswire-FirstCall/ --
Calpine Power Income Fund (TSX: CF.UN) today announced its results
for the quarter ending September 30, 2003. Based on financial
results this past quarter, the Calpine Power Income Fund reported
$13.3 million of distributable cash, or $0.2555 per Trust Unit.
"Our plants have continued to achieve outstanding performance and
operational availability providing highly reliable generation to
help meet energy demands in British Columbia, Alberta and Ontario,"
said Rohn Crabtree, President and CEO of Calpine Canada Power Ltd.,
Manager of the Calpine Power Income Fund. "We are pleased that
these results exceeded our forecast allowing us to fully pay our
regular distributions and to pay a special distribution to our
unitholders on September 19, 2003." MANAGEMENT'S DISCUSSION AND
ANALYSIS The following discussion and analysis as provided by
Management should be read in conjunction with the accompanying
unaudited consolidated financial statements of Calpine Power Income
Fund (the "Fund") and Calpine Power, L.P. (the "Partnership") for
the quarter ended September 30, 2003 (the "Quarter") and the notes
thereto as well as the audited consolidated financial statements
and the related management discussion and analysis (the "Annual
MD&A") contained in the 2002 Annual Report. The risk factors
discussed in the Annual MD&A have remained substantially
unchanged unless indicated otherwise. All dollar amounts are shown
in Canadian dollars unless otherwise specified. The Fund began
operations on August 29, 2002. The commentary that follows
describes the Fund's performance for the three and nine months
ended September 30, 2003. Management's expectations for the period
in relation to the 2003 fiscal year forecast are included in the
Fund's February 4, 2003 Prospectus. THIRD QUARTER HIGHLIGHTS -- All
three plants achieved strong operating results in the quarter,
operating above forecasted availability. -- For the three months
ended September 30, 2003, the Calgary Energy Facility operated at
98% availability and generated 310,978 MWh. -- For the three months
ended September 30, 2003, the Island Cogen Facility operated at 95%
availability and generated 442,697 MWh. -- For the three months
ended September 30, 2003, the Whitby Cogen Facility operated at 83%
availability. -- The Fund continued to pay cash distributions on a
monthly basis at $0.0785 per Trust Unit per month. -- Due to
operating results exceeding forecast, the Fund declared a special
distribution of $0.02 per Trust Unit that was paid September 19,
2003. -- The Fund successfully negotiated a term credit facility of
$120 million obtained October 6, 2003. This facility will allow the
Fund flexibility for future acquisitions and general corporate
requirements. -- BC Hydro has withdrawn a claim of force majeure
made earlier under the electricity purchase agreement between
Calpine Island Cogeneration Limited Partnership and British
Columbia Hydro and Power Authority, that had been disclosed in
prior public offering documents. The Fund is an unincorporated
open-ended trust established under the laws of Alberta. The Fund
indirectly owns interests in the Island Cogen Facility located in
British Columbia and in the Calgary Energy Facility located in
Alberta ("the Facilities"). The Fund also indirectly owns an
economic interest in the Whitby Cogen Facility located in Ontario
through a participating loan (the "Whitby Loan") that mirrors the
cash flow from the facility. These three facilities are modern and
environmentally preferred, powered by high- efficiency natural
gas-fired turbines and all of the facilities have long-term energy
sales agreements. The Fund and the Partnership are administered and
managed by the Manager, Calpine Canada Power Ltd., an indirect
wholly-owned subsidiary of Calpine Corporation ("Calpine"). RESULTS
OF OPERATIONS Comparative periods represent 33-days of operations
in 2002. Consequently, all operational results in 2003 exceed the
2002 results due to the increased operational period and
commencement of the Calgary Energy Facility operations on March 31,
2003. The Fund reported net earnings of $10.2 million and $27.0
million for the three and nine months ended September 30, 2003,
respectively. This amounts to $0.1961 and $0.5190 per Trust Unit
for the three and nine month periods ended September 30, 2003,
primarily representing the Fund's 70% share of the Partnership's
net earnings for the periods. Management and administrative
expenses were $1.2 million and $1.9 million for the three and nine
month periods ended September 30, 2003, respectively, including $38
thousand and $115 thousand for the three and nine month periods for
fees payable to the Manager to manage and administer the Fund, in
accordance with applicable agreements, and $520 thousand for the
three and nine month periods relating to the management incentive
fee. The Partnership reported cash flow from operating activities
of $18.6 million for the three months ended September 30, 2003, and
$49.5 million for the nine month period ended September 30, 2003.
Net earnings were $16.2 million and $41.3 million, respectively,
for the three and nine month periods ended September 30, 2003.
Revenues were $25.0 million and $63.8 million for the three and
nine month periods ended September 30, 2003. Revenues were
comprised of Island Cogen Facility electricity generation revenue
of $8.9 million for the three months ended and $27.7 million for
the nine months ended September 30, 2003. Electricity generation
revenues at the Calgary Energy Facility were $12.8 million for the
three months ended and $25.4 million for the nine months ended
September 30, 2003 due to the commencement of commercial operation
at the Calgary Energy Facility on March 31, 2003. Revenues also
include $2.2 million for the three months ended and $7.2 million
for the nine months ended September 30, 2003 from steam generation
in relation to the Island Cogen Facility, and interest of $1.1
million for the three months ended and $3.6 million for the nine
months ended September 30, 2003 earned on the Whitby Loan and other
cash balances. Under the Island Cogeneration Facility Construction
Contract with Alstom Canada Inc. ("Alstom"), there exist certain
performance guarantees regarding plant availability during the
first six years of operation. As a result of an extended
maintenance period and plant shutdown in the first quarter of 2003,
the actual plant availability for the first year of operations was
below the guaranteed availability. Due to this guarantee, Alstom
was contractually obligated to pay liquidating damages of $5.0
million, which the Partnership received in May 2003 and which were
included as electricity and thermal revenue in the first quarter of
2003. The Island Cogen Facility resumed operations March 28, 2003.
Operating and maintenance expense attributable to the Island Cogen
Facility was $2.1 million for the three months ended and $7.1
million for the nine months ended and depreciation expense was $3.1
million for the three months ended and $8.4 million for the nine
months ended September 30, 2003. Operating and maintenance expense
attributable to the Calgary Energy Facility was $1.5 million for
the three months ended and $2.9 million for the nine months ended
and depreciation expense was $2.1 million for the three months
ended and $4.2 million for the nine months ended September 30,
2003. The 225 MW Island Cogen Facility is a combined cycle
cogeneration plant located at Duncan Bay, near Campbell River, on
Vancouver Island, British Columbia. The Island Cogen Facility
operated at 95% and 76% availability and generated 442,697 MWh and
1,031,745 MWh for the three and nine months ended September 30,
2003, respectively. Pursuant to a settlement agreement with Alstom
related to the Island Cogen Facility performance targets, the
Partnership receives capital and operating expense services at no
cash cost to the Partnership. As a result, electricity revenues of
$0.9 million and $4.3 million, operating expenses of $0.3 million
and $1.4 million and maintenance capital of $0.6 million and $2.9
million have been recognized in the consolidated financial
statements of the Partnership for the three and nine month periods
ended September 30, 2003, respectively. Steam produced at the
Island Cogen Facility is sold to Norske Skog Canada Limited,
("Norske Skog"), a global supplier of newsprint and magazine
printing papers. For the three and nine month periods ended
September 30, 2003, the Island Cogen Facility produced 358,671 GJ
and 1,089,848 GJ of steam resulting in revenue of $2.2 million and
$7.2 million, respectively. The Calgary Energy Facility declared
its Commercial Operations Date ("COD") on March 31, 2003. As a
result, recognition of operations of the Calgary Energy Facility
commenced during the Second Quarter. The Calgary Energy Facility is
a natural gas-fired combined cycle plant located in Calgary,
Alberta. The Calgary Energy Facility has a capacity of 300 MW,
consisting of 250 MW of base capacity plus 50 MW of peaking
capacity. The Calgary Energy Facility generated 310,978 MWh and
447,378 MWh for the three and nine months ended September 30, 2003,
respectively, and operated at 98% availability in each period.
LIQUIDITY AND CAPITAL RESOURCES Capital expenditures relating to
the Calgary Energy Facility for the three and nine month periods
ended September 30, 2003, were $1.0 million and $22.2 million,
respectively. A cash reserve of $111 million was established in the
Partnership on August 29, 2002 to cover the construction costs to
complete the Calgary Energy Facility. During the third quarter, in
accordance with the applicable agreements, $18.2 million of the
construction reserve balance was returned to the Manager as a
special distribution. As at September 30, 2003, the remaining
construction reserve balance was $2.2 million. Management believes
that the remaining construction reserve is sufficient to cover any
outstanding construction completion costs. On October 6, 2003, the
Fund, through their wholly-owned subsidiary, Calpine Commercial
Trust, obtained a $120 million extendible revolving term credit
facility. The term credit facility has a three year term, comprised
of a two year revolving period followed by a one year term period
and is split into two tranches. One tranche of $90 million is
available only to finance strategic acquisitions and the second
tranche of $30 million is available for acquisitions as well as for
general corporate purposes. 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 limited
partnerships or income funds. Distributable Cash generated by the
Fund totaled $13.3 million or $0.2555 per Trust Unit for the three
months ended September 30, 2003 and $37.8 million or $0.7265 per
Trust Unit for the nine months ended September 30, 2003. The Fund
pays monthly cash distributions to Unitholders on or about the 20th
day of each month following the record date. One hundred percent of
Distributable Cash of the Fund is distributed in respect of each
year. The Fund, as the holder of Class A Priority Units in the
Partnership, must be paid before Calpine receives distributions on
its Class B Subordinated Units. The Class B Subordinated Units
represent a 30% economic interest in the Facilities and their
entitlement to distributions is subordinated to that of Class A
Priority Unitholders until 2022. The initial annual distribution
level of $0.935 per Class A Priority Unit set the target
distribution level. This target distribution increases annually by
1%, resulting in a targeted per Trust Unit distribution of $0.938
per Trust Unit for calendar year 2003. Any excess cash above the
target is split equally between the Partnership Class A Priority
Units and Class B Subordinated Units, after deducting the
management incentive fee. The management incentive fee is equal to
20% of the excess cash. During the quarter, the Fund announced a
one-time, special distribution of excess cash flow to unitholders
as a result of strong operational performance. This special
distribution of $1.0 million or $0.02 per Trust Unit was paid on
September 19, 2003. Under the Calgary Energy Tolling Agreement, as
pre-payment for the provision of future tolling services of the
Calgary Energy Facility, Calpine Energy Services Canada Partnership
("CESCP"), a wholly-owned partnership of Calpine, had been required
to pay to the Calgary Energy Centre Limited Partnership a monthly
amount equivalent to the fixed charge component of the monthly
tolling fee until COD of the Calgary Energy Facility. Payments
under this agreement for the nine months ended September 30, 2003,
totaled $9.5 million and were included as Distributable Cash. As a
result of the Calgary Energy Facility declaring COD on March 31,
2003, no further payments will be received pursuant to this
pre-tolling arrangement, and the tolling agreement is now in
effect. The Calgary Energy Tolling Agreement is a 20-year contract,
similar in terms to the Island Electricity Purchase Agreement and
under which CESCP is required to deliver all fuel required to
operate the facility and is, in turn, obligated to pay for all
electricity generated or deemed to have been made available. The
Fund declared a cash distribution of $4.1 million or $0.0785 per
Trust Unit for the period from September 1 to September 30, 2003.
The cash distribution was paid October 20, 2003, to Unitholders of
record on September 30, 2003. The Fund also declared a cash
distribution of $4.1 million or $0.0785 per Trust Unit for the
period October 1 to October 31, 2003. This cash distribution will
be paid on November 20, 2003 to Unitholders of record on October
31, 2003. Tax Treatment of Distributions For Canadian tax purposes,
the taxable amount of distributions to the Fund's Unitholders in
2002 was 1.89%. The remaining amount of the distributions reduced
the adjusted cost base on the Trust Units, thereby providing a
significant tax deferral for the Unitholders. The tax deferral
arose primarily due to the ability of the Partnership to shelter
its taxable income with capital cost allowance claims on the
Facilities. As a result, distributions from the Partnership to the
Fund were a return of capital rather than an allocation of income.
Distributions in 2003 are expected to have similar characteristics
to those in 2002, with taxable distributions estimated to be less
than 5%. Any 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. Cash Reserves Several cash reserves were
established in the Partnership to fund significant expenditures and
limit potential business risks of the Partnership. A cash reserve
of $111 million was established in a segregated account of the
Partnership at August 29, 2002 to meet the remaining construction
costs of the Calgary Energy Facility. This amount is used to
reimburse expenditures incurred by the Manager in connection with
the completion of the Calgary Energy Facility. During the three and
nine months ended September 30, 2003 the cash reserve was reduced
by construction expenditures of $10.2 million and $46.3 million,
respectively. Due to the fact that the construction was completed
for less than the amount reserved, the unused balance was required
to be paid to the Manager as a special distribution on its Class B
Subordinated Units. In September 2003, surplus construction reserve
of $18.2 million was paid to the Manager as a special distribution.
At September 30, 2003, the unused construction reserve balance was
$2.2 million for outstanding items. An unsegregated cash reserve of
$7.9 million has also been accumulated to partially fund future
maintenance costs. FORECASTS Forecasts of the Fund and Partnership
for the calendar year ending December 31, 2003 were prepared and
included in the secondary offering prospectus. The financial
results of the Fund and the Partnership for the three months ended
September 30, 2003, compare favorably to these forecasts and no
significant changes have occurred. OUTLOOK The Fund is focused on
growing distributions to Unitholders by optimizing the operations
of its plants and by pursuing accretive acquisitions. Distributable
cash of the Partnership in 2003 is forecasted to be $72.7 million
of which $50.8 million or $0.9778 per unit is forecasted to be
distributed to the Class A Priority Unitholders and $21.9 million
to the Class B Subordinated Units. FORWARD-LOOKING INFORMATION
Certain information in this Management's Discussion and Analysis is
forward-looking and subject to risks and uncertainties. The results
or events predicted in this information 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 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. 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. 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 two power plants in British Columbia and Alberta and
has a loan interest in a power plant in Ontario. The Fund is
managed by Calpine Canada Power Ltd., which is headquartered in
Calgary, Alberta. The Calpine Power Income Fund units are listed on
the Toronto Stock Exchange under the symbol CF.UN. The Fund also
has warrants that trade under the symbol CF.WT. The audited
financial statements of the Fund and the Partnership, the
Management Discussion and Analysis and Notes to the financial
statements can also be accessed on the Fund's website at
http://www.calpinepif.com/ and on http://www.sedar.com/. CALPINE
POWER INCOME FUND CONSOLIDATED BALANCE SHEETS (thousands) As at As
at Sept. 30, Dec. 31, 2003 2002 (unaudited) (audited)
-------------------------------------------------------------------------
ASSETS Current Assets Cash and Cash Equivalents $23 $10
Distributions Receivable 5,483 5,369 Accounts Receivable 5 --
Prepaids 296 -- --------- ---------- 5,807 5,379 Deferred Financing
Costs (Note 6) 305 -- Investment in Calpine Power, L.P. (Note 2)
485,888 496,567 --------- ---------- $492,000 $501,946 =========
========== LIABILITIES AND UNITHOLDERS' EQUITY Current Liabilities
Distributions Payable $4,082 $4,940 Accounts Payable 2,184 483
--------- ---------- 6,266 5,423 Unitholders' Equity (Note 3)
485,734 496,523 --------- ---------- $492,000 $501,946 =========
========== See accompanying notes to the consolidated financial
statements CALPINE POWER INCOME FUND CONSOLIDATED STATEMENTS OF
EARNINGS AND UNITHOLDERS' EQUITY (thousands, except for per Trust
Unit amounts) (unaudited) Three months Nine months ended Inception
to ended Inception to Sept. 30, Sept. 30, Sept. 30, Sept. 30, 2003
2002 2003 2002
--------------------------------------------------------------------------
REVENUES Equity earnings from Calpine Power, L.P. $11,347 $2,307
$28,912 $2,307 Interest Income 6 7 6 7 11,353 2,314 28,918 2,314
---------- ---------- ---------- ---------- EXPENSES Management and
administrative 1,153 14 1,929 14 ---------- ---------- ----------
---------- NET EARNINGS 10,200 2,300 26,989 2,300 UNITHOLDERS'
EQUITY, BEGINNING OF PERIOD 488,820 -- 496,523 -- Units issued, net
of transaction fees -- 505,048 -- 505,048 Distributions (13,286)
(4,394) (37,778) (4,394) ---------- ---------- ----------
---------- UNITHOLDERS' EQUITY, END OF PERIOD $485,734 $502,954
$485,734 $502,954 ========== ========== ========== ========== Net
earnings per Trust Unit (Note 3) $0.1961 $0.0442 $0.5190 $0.0442
========== ========== ========== ========== Distributable Cash and
Distributable Cash Per Trust Unit - See Note 4 See accompanying
notes to the consolidated financial statements CALPINE POWER INCOME
FUND CONSOLIDATED STATEMENTS OF CASH FLOWS (thousands) (unaudited)
Three months Nine months ended Inception to ended Inception to
Sept. 30, Sept. 30, Sept. 30, Sept. 30, 2003 2002 2003 2002
--------------------------------------------------------------------------
OPERATING ACTIVITIES Net earnings $10,200 $2,300 $26,989 $2,300
Adjustment for non-cash item: Equity earnings from Calpine Power,
L.P. (11,347) (2,307) (28,912) (2,307) Distributions received from
Calpine Power, L.P. 13,634 -- 39,477 -- Change in non-cash working
capital 1,003 14 1,400 14 ---------- ---------- ----------
---------- Net cash provided by operating activities 13,490 7
38,954 7 ---------- ---------- ---------- ---------- INVESTING
ACTIVITIES Acquisition of interest in Calpine Power, L.P. --
(215,034) -- (215,034) ---------- ---------- ---------- ----------
Net cash used in investing activities -- (215,034) -- (215,034)
---------- ---------- ---------- ---------- FINANCING ACTIVITIES
Issuance of Trust Units, net of transaction fees -- 215,034 --
215,034 Distributions paid (13,286) -- (38,636) -- Financing costs
(305) -- (305) -- Change in non-cash working capital -- 591 -- 591
---------- ---------- ---------- ---------- Net cash provided by
(used in) financing activities (13,591) 215,625 (38,941) 215,625
---------- ---------- ---------- ---------- INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS $(101) $598 $13 $598 Cash and Cash
Equivalents, beginning of period 124 -- 10 -- ---------- ----------
---------- ---------- Cash and Cash Equivalents, end of period $23
$598 $23 $598 ========== ========== ========== ==========
Represented by: Cash and Cash Equivalents at September 30 $23 $598
$23 $598 ========== ========== ========== ========== SUPPLEMENTARY
CASH FLOW INFORMATION Interest received $6 $7 $6 $7 ==========
========== ========== ========== See accompanying notes to the
consolidated financial statements CALPINE POWER INCOME FUND NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIOD ENDED
SEPTEMBER 30, 2003 (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" or "Calpine") 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 period ended
December 31, 2002. These consolidated financial statements for the
nine months ended September 30, 2003 do not include all disclosures
required in the annual financial statements and should be read in
conjunction with the annual financial statements included in the
Fund's 2002 Annual Report. The Fund commenced operations on August
29, 2002 and, accordingly, comparative financial information has
been presented for the 33-day period ended September 30, 2002. 2.
INVESTMENT IN CALPINE POWER, L.P. Amount
---------------------------------------------------------------------
As at December 31, 2002 $496,567 Equity earnings from Calpine
Power, L.P. 28,912 Distributions received and receivable from
Calpine Power, L.P. (39,591) --------- As at September 30, 2003
$485,888 ========= 3. UNITHOLDERS' EQUITY The Fund Trust Indenture
provides that an unlimited number of Trust Units may be authorized
and issued. Each Trust Unit is transferable, carries the right to
one vote and represents an equal undivided beneficial interest in
any distributions from the Fund and in the net assets of the Fund
in the event of termination or winding-up of the Fund. All Trust
Units are of the same class with equal rights and privileges.
Number of Units Amount
-----------------------------------------------------------------------
TRUST UNITS As at December 31, 2002 52,001,352 $496,523 Net
earnings 26,989 Distributions declared (37,778) Trust Units
purchased and cancelled (8,517,118) (78,357) Trust Units issued on
exercise of Warrants 5,813,093 53,481 ------------ ----------- As
at September 30, 2003 49,297,327 $460,858 ============ ===========
WARRANTS Issued on Trust Units purchased and cancelled 8,517,117
$1,703 Exercise of Warrants (5,813,093) (1,162) ------------
----------- As at September 30, 2003 2,704,024 $541 ============
=========== PROMISSORY NOTE Issued on Trust Units purchased and
cancelled 78,357 Repayment on issue of Warrants (1,703) Repayment
on exercise of Warrants (52,319) --------- As at September 30, 2003
$24,335 --------- TOTAL UNITHOLDERS' EQUITY $485,734 ========= 3.
UNITHOLDERS' EQUITY (continued) On February 13, 2003, the Fund and
Calpine Energy Holdings Ltd. ("CEHL"), formerly Calpine Canada
Power Holdings Ltd., completed a secondary offering of 17,034,234
Warranted Units of the Fund for gross proceeds of $153.3 million to
CEHL. Each Warranted Unit consists of one Trust Unit and one-half
of one Trust Unit purchase warrant ("Warrant"). Each Warrant
entitles the holder to purchase one Trust Unit at a price of $9.00
at any time prior to December 31, 2003, after which time the
Warrant will be null and void. Assuming the exercise in full of the
Warrants, Calpine Corporation will not own or control any of the
outstanding Trust Units. However, Calpine Corporation will retain
its 30% subordinated interest through its ownership of Class B
Subordinated Units of Calpine Power, L.P. and will continue to
operate and manage the Fund and the Fund assets. On closing of the
Secondary Offering, CEHL sold 17,034,234 Trust Units as part of the
Warranted Units, and sold 8,517,118 Trust Units to the Fund. The
Fund issued an interest bearing promissory note (the "Fund
Promissory Note") to CEHL in consideration for the Trust Units
purchased by the Fund. The Fund cancelled the Trust Units it
purchased, and will, prior to December 31, 2003, issue up to
8,517,117 Trust Units to satisfy its obligations in respect of
Warrants and apply the exercise proceeds to repay any outstanding
amount under the Fund Promissory Note. If any Warrants are not
exercised prior to December 31, 2003, they will be null and void
and the Fund will extinguish any outstanding amount of the Fund
Promissory Note by issuing additional Trust Units to CEHL. Given
the terms of the Fund Promissory Note that requires mandatory
conversion to equity prior to December 31, 2003, the Note balance
has been included as a component of Unitholders' Equity. Total
Warrants exercised were 2,073,971 and 5,813,093 for the three and
nine month periods ended September 30, 2003. Net earnings and
Distributable Cash per Trust Unit for 2003 have been calculated
based on a weighted average of 52,001,351 Trust Units outstanding
for the period, consisting of 49,297,327 Trust Units outstanding
and after giving effect to the exercise of the 2,704,024
outstanding Warrants that will be converted to Trust Units prior to
December 31, 2003 (52,001,352 weighted average Trust Units for the
period from inception to September 30, 2002). There are no other
dilutive elements. 4. DISTRIBUTABLE CASH 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 limited partnerships or income funds.
Distributable Cash for the three and nine months ended September
30, 2003 includes interest of $0.8 million and $3.7 million under
the Promissory Note, which is equal to the cash distributions that
would have otherwise been payable had the Warrants been fully
exercised and are accounted for as distributions. Three months Nine
months ended Inception to ended Inception to Sept. 30, Sept. 30,
Sept. 30, Sept. 30, 2003 2002 2003 2002
--------------------------------------------------------------------------
NET EARNINGS $10,200 $2,300 $26,989 $2,300 Add: Distributions
received and receivable from Calpine Power, L.P. 15,022 4,394
39,591 4,394 Working capital (589) 7 110 7 Less: Equity earnings
from Calpine Power, L.P. (11,347) (2,307) (28,912) (2,307)
--------- --------- --------- --------- DISTRIBUTABLE CASH $13,286
$4,394 $37,778 $4,394 ========= ========= ========= =========
Distributable Cash per Trust Unit $0.2555 $0.0845 $0.7265 $0.0845
========= ========= ========= ========= 4. DISTRIBUTABLE CASH
(continued) During the quarter, the Fund announced a one-time,
special distribution of excess cash flow to unitholders as a result
of strong operational performance. This special distribution of
$1.0 million or $0.02 per Trust Unit was paid on September 19,
2003. 5. RELATED PARTY TRANSACTIONS As at September 30, 2003, the
Fund had the following balances receivable from (payable to)
related parties in the normal course of business: Amount
------------------------------------------------------------------------
Distributions receivable from Calpine Power, L.P. $5,483
Distributions payable to Calpine Energy Holdings Ltd. (212)
Accounts payable to Calpine Power, L.P. (965) Accounts payable to
Calpine (629)
------------------------------------------------------------------------
During the three and nine month periods ended September 30, 2003,
the total amount of $38 thousand and $115 thousand, respectively,
was due to the Manager for administrative fees under the
administration and management agreements. As a result of the
special distribution declared during the quarter, a management
incentive fee of $520 thousand is included in the accounts payable
to Calpine. Distributions declared include $0.8 million and $5.7
million to Calpine for the three and nine month periods ended
September 30, 2003. The balances disclosed above do not include
amounts owing to Calpine with respect to the Promissory Note as
disclosed in Note 3. 6. SUBSEQUENT EVENTS On October 6, 2003, the
Fund, through their wholly-owned subsidiary, Calpine Commercial
Trust, obtained a $120 million extendible revolving term credit
facility. The term credit facility has a three year term, comprised
of a two year revolving period followed by a one year term period
and is split into two tranches. One tranche of $90 million is
available only to finance strategic acquisitions and the second
tranche of $30 million is available for acquisitions as well as for
general corporate purposes. Deferred financing costs totaled $305
thousand at September 30, 2003 with total fees associated with the
credit facility estimated at $3.2 million. These costs will be
amortized over the three year term of the credit facility
commencing in October 2003. On October 21, 2003, the Fund announced
cash distributions for October 2003 had been set at $0.0785 per
Trust Unit. The cash distribution for this period will be paid on
November 20, 2003 to Unitholders of record on October 31, 2003.
CALPINE POWER, L.P. CONSOLIDATED BALANCE SHEETS (thousands) As at
As at Sept. 30, 2003 Dec. 31, 2002 (unaudited) (audited)
--------------------------------------------------------------------------
ASSETS Current Assets Cash and Cash Equivalents (Note 2) $16,475
$14,587 Restricted Cash (Note 2) 2,190 83,873 Accounts Receivable
9,253 4,750 Interest Receivable - Whitby Loan (Note 3) -- 1,112
Prepaids 694 513 ------------ ----------- 28,612 104,835
------------ ----------- Deferred Charge - Calgary Energy Tolling
Agreement (Note 4) -- 14,789 Loan to Calpine Canada Whitby Holdings
Company (Note 3) 37,404 35,790 Capital Assets (Note 5) 596,496
578,183 ----------- ----------- $662,512 $733,597 ===========
=========== LIABILITIES AND PARTNERS' EQUITY Current Liabilities
Accounts Payable - Trade $638 $799 - Accrued Capital 1,473 23,237 -
Other 6,078 5,124 Distributions Payable 8,272 7,977 Deposits
Payable (Note 2) -- 17,152 ----------- ------------ 16,461 54,289
Partners' Equity (Note 6) 646,051 679,308 ----------- ------------
$662,512 $733,597 =========== ============ 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
Nine months ended Inception to ended Inception to Sept. 30, Sept.
30, Sept. 30, Sept. 30, 2003 2002 2003 2002
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REVENUES Electricity and thermal (Note 7) $23,828 $4,592 $60,291
$4,592 Interest - Whitby 859 293 2,502 293 - Other 288 390 1,055
390 --------- --------- --------- --------- 24,975 5,275 63,848
5,275 --------- --------- --------- --------- EXPENSES Operating
and maintenance 3,587 1,471 9,910 1,471 Depreciation 5,130 481
12,561 481 General and administrative 48 28 74 28 ---------
--------- --------- --------- 8,765 1,980 22,545 1,980 ---------
--------- --------- --------- NET EARNINGS 16,210 3,295 41,303
3,295 PARTNERS' EQUITY, BEGINNING OF PERIOD 669,338 -- 679,308 --
Units issued -- 725,191 -- 725,191 Distributions (39,497) (39,759)
(74,560) (39,759) --------- --------- --------- --------- PARTNERS'
EQUITY, END OF PERIOD $646,051 $688,727 $646,051 $688,727 =========
========= ========= ========= Net earnings per Unit (Note 6): Class
A Priority Unit $0.2182 $0.0443 $0.5560 $0.0443 ========= =========
========= ========= Class B Subordinated Unit $0.2182 $0.0443
$0.5560 $0.0443 ========= ========= ========= =========
Distributable Cash and Distributable Cash per Unit - see Note 8 See
accompanying notes to the consolidated financial statements CALPINE
POWER, L.P. CONSOLIDATED STATEMENTS OF CASH FLOWS (thousands)
(unaudited) Three months Nine months ended Inception to ended
Inception to Sept. 30, Sept. 30, Sept. 30, Sept. 30, 2003 2002 2003
2002
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OPERATING ACTIVITIES Net earnings $16,210 $3,295 $41,303 $3,295
Adjustment for non-cash item: Depreciation 5,130 481 12,561 481
Change in non-cash working capital (2,726) (3,694) (4,393) (3,694)
---------- ---------- ---------- ---------- Net cash provided by
operating activities 18,614 82 49,471 82 ---------- ----------
---------- ---------- INVESTING ACTIVITIES Loan to Calpine Canada
Whitby Holdings Ltd. -- (35,790) -- (35,790) Capital expenditures
(1,769) (36,856) (25,633) (36,856) Receipts under Calgary Energy
Tolling Agreement -- 3,473 9,548 3,473 Payments under Calgary
Energy Tolling Agreement -- (27,762) -- (27,762) Change in non-cash
working capital (8,386) 46,500 (21,764) 46,500 ----------
---------- ---------- ---------- Net cash used in investing
activities (10,155) (50,435) (37,849) (50,435) ----------
---------- ---------- ---------- FINANCING ACTIVITIES Distributions
paid (38,819) (33,482) (74,265) (33,482) Issuance of Partnership
Units -- 215,034 -- 215,034 Security deposits received from Calpine
-- 50,931 -- 50,931 Security deposit returned (Note 2) -- --
(17,269) -- Change in non-cash working capital -- -- 117 --
---------- ---------- ---------- ---------- Net cash provided by
(used in) financing activities (38,819) 232,483 (91,417) 232,483
---------- ---------- ---------- ---------- INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS $(30,360) $182,130 $(79,795) $182,130
Cash and Cash Equivalents, beginning of period 49,025 -- 98,460 --
---------- ---------- ---------- ---------- Cash and Cash
Equivalents, end of period $18,665 $182,130 $18,665 $182,130
========== ========== ========== ========== Represented by: Cash
and Cash Equivalents $16,475 $13,199 $16,475 $13,199 Restricted
Cash (Note 2) 2,190 168,931 2,190 168,931 ---------- ----------
---------- ---------- Balance as at September 30 $18,665 $182,130
$18,665 $182,130 ========== ========== ========== ==========
SUPPLEMENTARY CASH FLOW INFORMATION Interest received $2,288 $390
$3,055 $390 ========== ========== ========== ========== See
accompanying notes to the consolidated financial statements CALPINE
POWER, L.P. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE
PERIOD ENDED SEPTEMBER 30, 2003 (Tabular amounts are in thousands
except for per Unit amounts) (unaudited) 1. SIGNIFICANT ACCOUNTING
POLICIES The consolidated financial statements of Calpine Power,
L.P. ("CLP" or the "Partnership") have been prepared by Calpine
Canada Power Ltd. (the "Manager" or "Calpine") in accordance with
Canadian generally accepted accounting principles. The accounting
policies applied are consistent with those outlined in CLP's annual
financial statements for the period ended December 31, 2002. These
consolidated financial statements for the nine months ended
September 30, 2003, do not include all disclosures required in the
annual financial statements and should be read in conjunction with
the annual financial statements included in the 2002 Calpine Power
Income Fund (the "Fund") Annual Report. The Partnership commenced
operations on August 29, 2002 and, accordingly, comparative
financial information has been presented for the 33-day period
ended September 30, 2002. 2. RESTRICTED CASH AND MAINTENANCE
RESERVE Restricted Cash Several cash reserves were established in
the Partnership to fund significant expenditures and limit
potential business risks of CLP. A cash reserve of $111.0 million
was established in a segregated account to meet the remaining
construction requirements of the Calgary Energy Facility. During
the third quarter, in accordance with the applicable agreements,
$18.2 million of the construction reserve balance was returned to
the Manager as a special distribution. As at September 30, 2003 the
remaining construction reserve balance was $2.2 million. The
remaining funds in the construction reserve account will be used to
cover outstanding items. A cash deposit of $17.0 million was
received from Calpine Energy Services Canada Partnership ("CESCP")
as security to satisfy its payment obligations under the Calgary
Energy Tolling Agreement. This cash deposit and associated interest
was returned to CESCP after March 31, 2003 when the Calgary Energy
Facility declared its Commercial Operations Date ("COD"). As at As
at Sept. 30, 2003 Dec. 31, 2002
-------------------------------------------------------------------------
Construction Reserve $2,190 $66,721 Security Deposit from CESCP --
17,152 ---------- ---------- $2,190 $83,873 ========== ==========
Maintenance Reserve A maintenance reserve of $7.9 million (December
31, 2002 - $7.0 million) has been accumulated within cash and cash
equivalents to partially fund future maintenance costs and to
levelize such costs, as required. 3. WHITBY LOAN Interest
receivable under the Whitby Loan in the amount of $2.2 million has
been reclassified as a component of the loan balance outstanding
and interest on this balance is accrued at 9.07% per annum. Cash
received in the amount of $2.0 million associated with the Whitby
loan has been applied to the loan balance outstanding and accrued
interest receivable consistent with the terms of the loan
agreement. 4. DEFERRED CHARGE On August 29, 2002, Calgary Energy
Centre Limited Partnership ("CECLP") and CESCP entered into the
Calgary Energy Tolling Agreement which governs the sale of
electricity from the Calgary Energy Facility and under which a
payment of $27.7 million was made to CESCP. Under the Calgary
Energy Tolling Agreement, as pre-payment for the provision of
future tolling services, CESCP was required to pay to CECLP a
monthly amount equal to the fixed charge component of the monthly
tolling fee until the COD of the Calgary Energy Facility, which was
declared March 31, 2003. As a result, no further receipts are due
with respect to the deferred charge and the remaining balance of
$5.2 million was capitalized as part of capital assets during the
period ended March 31, 2003. 5. CAPITAL ASSETS As at September 30,
2003
-----------------------------------------------------------------------
Accumulated Net Book Cost Depreciation Value
-----------------------------------------------------------------------
Land $334 $-- $334 Power generation plants and equipment 611,473
15,311 596,162
-----------------------------------------------------------------------
$611,807 $15,311 $596,496 =================================== 6.
PARTNERS' EQUITY CLP is authorized to issue an unlimited number of
Class A Priority Units and an unlimited number of Class B
Subordinated Units. The holders of Class A Priority Units are
entitled to receive the first $0.078 of Distributable Cash per
Class A Priority Unit per month on a cumulative basis in priority
to any payments on the Class B Subordinated Units. The holders of
Class B Subordinated Units are entitled to receive up to $0.078 of
Distributable Cash per Class B Subordinated Unit per month which
amounts cumulate 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 holders
of Class A Priority Units. Following these payments, holders of
Class A Priority Units and holders of Class B Subordinated Units
are entitled to share Distributable Cash in excess of their prior
entitlements equally on a class basis, in any fiscal year, after
deducting the management incentive fee. Class A Units Class B Units
Total
----------------------------------------------------------------------
As at December 31, 2002 $496,567 $182,741 $679,308 Net earnings
28,912 12,391 41,303 Distributions declared (39,591) (16,781)
(56,372) Special distribution - Construction reserve -- (18,188)
(18,188) --------- --------- --------- As at September 30, 2003
$485,888 $160,163 $646,051 ========= ========= ========= At
September 30, 2003, CLP had issued and outstanding a total of
52,001,352 Class A Priority Units and 22,286,294 Class B
Subordinated Units. For the period ended August 29, 2003, excess
distributable cash was calculated to be $2.6 million and the
Partnership declared a special distribution of $1.0 million or
$0.02 per Class A Priority Unit. The remaining excess distributable
cash of $1.6 million has been classified as distributions payable
and represents the Class B Subordinated Units and the management
incentive fee. On September 19, 2003, a special distribution of
$18.2 million was paid to the Manager representing a portion of the
construction reserve cash surplus. 7. LIQUIDATING DAMAGES Under the
Island Cogeneration Facility Construction Contract with Alstom
Canada Inc. ("Alstom"), there exists certain performance guarantees
regarding plant availability during the first six years of
operation. As a result of an extended maintenance period and plant
shutdown in the first quarter of 2003, the actual plant
availability for the first year of operations was below the
guaranteed availability. As a result of this guarantee, CLP
received liquidating damages of $5.0 million in May 2003 that was
included as a component of electricity and thermal revenue in the
first quarter of 2003. 8. DISTRIBUTABLE CASH 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 limited partnerships or income
funds. Three months Nine months ended Inception to ended Inception
to Sept. 30, Sept. 30, Sept. 30, Sept. 30, 2003 2002 2003 2002
--------------------------------------------------------------------------
NET EARNINGS $16,210 $3,295 $41,303 $3,295 Add: Depreciation 5,130
481 12,561 481 Receipts with respect to Calgary Energy Tolling
Agreement -- 3,473 9,548 3,473 Less: Maintenance capital - Island
Cogen Facility (349) -- (3,006) -- Maintenance capital - Calgary
Energy Facility (495) -- (990) -- Working capital 813 (972) (3,044)
(972) --------- --------- --------- --------- DISTRIBUTABLE CASH
$21,309 $ 6,277 $56,372 $6,277 ========= ========= =========
========= Allocation of Distributable Cash (Note 6) Class A
Priority Units $15,022 $4,394 $39,591 $4,394 Class B Subordinated
Units 6,287 1,883 16,781 1,883 --------- --------- ---------
--------- $21,309 $6,277 $56,372 $6,277 ========= =========
========= ========= Per Unit allocation of Distributable Cash (Note
6) Class A Priority Units $0.2889 $0.0845 $0.7614 $0.0845 =========
========= ========= ========= Class B Subordinated Units $0.2821
$0.0845 $0.7530 $0.0845 ========= ========= ========= ========= 9.
RELATED PARTY TRANSACTIONS For the three and nine month periods
ended September 30, 2003, the Partnership recognized revenues of
$12.8 million and $25.4 million, respectively, from CESCP related
to the Calgary Energy Tolling Agreement. As at September 30, 2003,
the Partnership had the following balances receivable from (payable
to) related parties in the normal course of business: Amount
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Loan and interest receivable from Calpine Canada Whitby Holdings
Company $37,404 Distributions payable to Calpine (2,789)
Distributions payable to Calpine Commercial Trust (5,483) Accounts
receivable from the Fund 965 Accounts receivable from Calpine 4,670
Accounts payable to Calpine (406)
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DATASOURCE: Calpine Power Income Fund CONTACT: Darlice Albers,
Investor and Media Relations, 403-781-3148, or , or John W.
Nearing, Vice President and Chief Financial Officer, 403-781-5814
Web site: http://www.calpinepif.com/
Copyright