Calpine joins burgeoning Canadian trust funds

Gary Park, Petroleum News Calgary correspondent

Ambitious U.S. power giant Calpine has fattened the ranks of Canadian income trusts by announcing plans to create CNG Trust.

If the deal goes through, the trust will acquire some Calpine-owned natural gas and crude oil properties, along with major gas and oil fields in Alberta, that currently produce 28 million cubic feet of gas equivalent per day from proven reserves of 83 billion cubic feet of gas equivalent.

Calpine said it plans to hold 25 percent of the outstanding trust units and will have the option to purchase up to 100 percent of CNG Trust’s production to fuel its North American power generation assets.

Calpine said the transaction will enable it to play a more competitive role in the acquisition and development of additional gas reserves in Canada.

Since making its first major splash in Canada in early 2001, when it bought Encal Energy for C$1.8 billion to lock up 1 trillion cubic feet equivalent of proved and probable gas reserves, Calpine has led investors a merry chase.

By mid-2001 it established Canadian headquarters in Calgary after breaking ground on a 50-megawatt power plant in Calgary and adding 275 megawatts through two plant acquisitions.

A year ago the cash-hungry San Jose, Calif.-based company unloaded 2,545 producing wells and net proved reserves of 60 billion cubic feet of gas equivalent to NAL Oil and Gas Trust for C$125 million, describing the fields as “non-strategic.”

Also a year ago, Calpine raised about C$230 million in an initial public offering for trust funds to hold stakes in its three Canadian electricity-generating plants. The company had put the potential value of the IPO at C$520 million, but was forced to admit the trust fund market was likely saturated.