Calpine Power Income Fund Updates Claim in Calpine Corp. Insolvency Proceedings

Market Wire, December, 2006

The Trustees of Calpine Power Income Fund (TSX: CF.UN) today provided new information on the Repudiation Claim against insolvent Calpine Corporation ("Calpine Corp.") of San Jose, CA and its subsidiaries including Calpine Energy Services Canada Partnership ("CESCA") of Calgary.

The Repudiation Claim mainly involves a previously disclosed repudiation by CESCA in January 2006 of a tolling agreement under which CESCA was obliged to purchase electricity for 20 years from the 300 megawatt Calgary Energy Centre. The Fund has an indirect 70% ownership interest in the Calgary Energy Centre and therefore has an indirect interest in the Repudiation Claim. Third parties have recently expressed interest in acquiring the Repudiation Claim and consideration is being given as to whether such a transaction may provide extra value to a subsidiary of the Fund.

Repudiation Claim Mitigation

Calpine Power LP. Ltd. ("CLPGP") is the general partner of the Fund's subsidiary Calpine Power, LP ("CLP"), which is the direct owner of the Calgary Energy Centre. CLPGP is currently calculating the mitigated amount of CLP's Repudiation Claim against CESCA. CLPGP is able to complete that calculation because a new long term purchase contract is about to commence for the electricity from CLP's Calgary Energy Centre. As previously disclosed, the new purchaser is Calgary-based ENMAX Energy Corporation. It agreed in October 2006 to a long term tolling agreement under which it will purchase all of the Calgary Energy Centre's electricity output for 20 years.

CLP's current claims relating to the repudiation of the tolling agreement against CESCA and Calpine Corp. are in the amount of Cdn.$769 million, before giving effect to mitigation of the claims through short-term and long-term re-tolling of Calgary Energy Centre and discounting to provide for the net present value of the claims. The mitigation and discounting are expected to reduce the claims by an amount that is currently being calculated and that is expected to be substantial.

CLPGP will amend the amount of CLP's Repudiation Claim shortly after the calculation is completed and the new tolling agreement becomes effective. Commencement of the new tolling agreement is scheduled to occur on January 1, 2007.

Realizing on the Repudiation Claim

The Repudiation Claim remains a material but non-core asset of CLP and therefore CLPGP is currently considering the best opportunities to maximize value of the Repudiation Claim to the owners of CLP. The Fund owns 70% of CLP. Calpine Canada Power Ltd., a Calpine subsidiary that is the manager and administrator of the Fund (the "Manager"), owns the remaining 30% of CLP. The directors of CLPGP are authorized and responsible for the resolution and disposition of the Repudiation Claim against CESCA and Calpine Corp., which guaranteed CESCA's obligation.

In its quarterly report for the period ending September 30, 2006, Calpine Corp. disclosed that it recorded as a reorganization item for its first quarter of 2006, a non-cash charge of US$232.5 million representing Calpine Corp.'s estimate of its exposure under its guarantee. CLPGP has not agreed with the amount of US$232.5 million disclosed by Calpine Corp. as its estimate of the mitigated and discounted claim, and Calpine Corp.'s estimated claim amount may be out of date as it was estimated prior to CLP entering into the new tolling agreement with ENMAX Energy Corporation.

Robert Hodgins, Chairman of the Board of Trustees of the Fund and a Director of CLPGP, said "We are working diligently to confirm our current best estimate of the potential value of the claims against CESCA. While work remains to be done before a final calculation can be made, we continue to believe these claims are of significant value to the Fund and that we have recourse to recover these amounts under US and Canadian insolvency proceedings. Third parties have recognized the value of these claims and have expressed interest in acquiring them. The Board of CLPGP and its advisors are evaluating a range of possible outcomes in this regard and will act in the best interests of CLP."

CLP's claim against Calpine Corp. under its guarantee of the repudiated tolling agreement is an unsecured claim made in Calpine Corp.'s proceedings under Chapter 11 of the US Bankruptcy Code (the "Chapter 11 Proceedings"). Publicly traded unsecured notes whose only recourse is an unsecured claim against Calpine Corp. have been actively traded in U.S. markets. The indicated price on December 18, 2006 of Calpine Corp.'s US$658 million 8.5% notes maturing in 2011, was approximately US 81 cents on the dollar.

In addition to CLP's unsecured claim against Calpine Corp., CLP is pursuing recovery of its repudiation claim from CESCA and its partners that have filed for voluntary reorganization under the Companies' Creditors Arrangement Act in Canada (the "CCAA Proceedings"). One of CESCA's partners, Calpine Canada Resources Company, has substantial assets, and CESCA itself has significant cash and receivables.