Calpine fund rejects hostile bid

Calpine Power Income Fund, which owns a natural gas-fired power plant in Calgary and was spun off from bankrupt California-based Calpine, has spurned a hostile takeover offer of C$831 million.

The offer from New York-based Harbinger Capital Partners was deemed “financially inadequate” by BMO Nesbitt Burns, said Bob Hodgins, chairman of Calpine Commercial Trust, which oversees the fund.

He said the Harbinger bid did not reflect the quality of the fund’s assets or the cash flow that is being generated.

Hodgins accused Harbinger, which invests in high-yield debt and distressed assets, of making “self-serving and exaggerated” claims on the risks faced by Calpine Power unit holders from claims against insolvent Calpine after it abandoned a long-term contract to buy power from the Calgary plant.

He said an affiliate 70 percent owned by Calpine Power plans to lower its court claim for repudiation to C$280 million from an earlier C$769 million now that the Calgary municipal utility has agreed to buy power from the plant for 20 years.

Calpine Power also owns a cogeneration plant in British Columbia and a King City plant in California.

Hodgins said several bidders have shown interest in Calpine Power and a number have reviewed the fund’s financial information.

“Potentially superior offers may emerge,” he said. “We’re encouraged by the interest that we’re seeing.”

—Gary Park