In what is becoming a popular investment vehicle for its Canadian operations, San Jose, CA-based Calpine Corp. announced recently that it is pricing an initial sale of 18.4 million trust units at C$10/unit as part of a sale of the Calpine Natural Gas Trust (CNG Trust), which will acquire selected Calpine Canadian oil/gas properties. It is expected to close Wednesday and make its first cash distribution Dec. 15.

In play are perhaps the equivalent of 28 MMcf/day of Canadian natural gas reserves, or 83 Bcf, based on June 30, 2003 Calpine estimates. An executive team independent of Calpine will manage the CNG Trust and four of the seven trust directors will be independent of Calpine.

Gross proceeds will be C$184.5 million, but a combination of the net proceeds along with C$61.5 million of proceeds from the concurrent issuance of units to Calpine and C$40 million of bank debt will be used to buy “mature natural gas and oil properties in Alberta, Canada,” said Calpine, which will retain 25% of the outstanding trust units for CNG Trust.

“Calpine will have the option to purchase up to 100% of CNG Trust’s ongoing production for use in its North American power generation assets,” the company said in a prepared announcement.

“Calpine’s participation in the CNG Trust will allow it to increase its competitiveness in the acquisition and development of additional natural gas reserves in Canada to fuel its power generation portfolio in North America,” the company said. “The proceeds generated by Calpine from the sale of the natural gas and oil properties will be used for general corporate purposes.”

As it is doing with other trusts, cash distributions to unit-holders (shareholders) will be made monthly. The first is expected to be about 15 cents/unit, Calpine said. Scotia Capital Inc. is the lead underwriter for the offering.

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