Clean Power Income Fund Announces 2006 Results



    TORONTO, March 28 /CNW/ - Clean Power Income Fund (CLE.UN:TSX) (the
"Fund") today announced its consolidated financial results for the year ended
December 31, 2006. During 2006, the Fund initiated commercial operations at
its 99MW Erie Shores Wind Farm in Ontario, and discontinued operations at Gas
Recovery Systems, LLC ("GRS") through the sale of its interests in the
company. Therefore, the 2006 financials results are presented on a continuing
operations basis.
    For the year ended December 31, 2006 the Fund generated operating cash
flow after changes in working capital from continuing operations of
$10.0 million ($0.282 per Trust Unit) versus $9.7 million ($0.273 per Trust
Unit) in the same period in 2005. Cash flow was affected by costs associated
with the completion and commissioning of Erie Shores. The Fund's biomass
facilities and U.S. Wind Loan generated cash flow near or in excess of
expectations. However, the Ontario hydro assets were negatively impacted by
low rainfall levels in 2006 and the Erie Shores wind farm was impacted by
one-time start-up items.
    Revenue from continuing operations, increased to $40.7 million for the
year ended December 31, 2006, compared to $31.2 million for the previous year.
The improvement is primarily due to the addition of power sales from Erie
Shores. Revenues from the US wind loan and the biomass facilities were
consistent with 2005; however revenue from the hydro assets declined in 2006
due to the aforementioned rainfall levels. Operating expenses increased from
$20.6 million in 2005 to $29.3 million in 2006 due to costs relating to the
operations at Erie Shores. Interest expense on long-term debt for 2006
increased to $11.8 million, from $5.9 million in 2005 and reflects the impact
of the interest on debt associated Erie Shores. Net loss from continuing
operations for the year ended December 31, 2006 was $1.4 million ($(0.040) per
unit), compared to net income of $2.3 million ($0.065 per unit) in 2005.
    For the year ended December 31, 2006, cash available for distribution
totaled $13.7 million or $0.386 per unit versus $18.1 million or $0.511 per
unit in the same period in 2005. Distributions to unitholders in 2006 totaled
$24.8 million or $0.70 per unit and were supported by the Reserve Account and
non-Reserve Account cash. As at December 31, 2006, the Fund had $7.9 million
in cash and cash equivalents and the balance in the Reserve Account was
$4.7 million. Long-term debt totaled $195.9 million or 49 percent of assets.
The amount includes $117.2 million in debt and project finance for Erie
Shores, and $55 million in convertible debentures.
    "Overall, 2006 showed the benefits of the diversity in the Fund's
assets," stated Stephen Probyn President and CEO of Clean Power Income Fund.
"The performance from Erie Shores and our biomass facilities effectively
mitigated the impact of below average performance of our hydro assets due to
record low precipitation in Northern Ontario. All of the Fund's assets at
year-end are high quality facilities that demonstrate the viability of
renewable resources."

    Discontinued Operations

    Discontinued operations relate to the Fund's former interests in GRS.
Operating cash flow after changes in working capital was $7.2 million for
2006, compared to $15.3 million in 2005. This decrease is the result of only
9 months of contributions from GRS as it was sold by the Fund in September of
2006 for net proceeds of US$82.7 million, after final closing adjustments. The
Fund utilized approximately US$69.7 million of the proceeds to pay down debt,
including fully repaying and cancelling the Fund's bank debt, except for the
ongoing working capital credit facility.

    Subsequent Event

    On February 26, 2007, the Fund and Algonquin Power Income Fund
("Algonquin") announced that they had entered into an agreement whereby
Algonquin would acquire all of the outstanding units of the Fund by way of a
take-over bid.
    The Board of Trustees of the Fund has, upon the recommendation from its
Special Committee and after consultation with its financial and legal
advisors, determined that the offer by Algonquin is in the best interests of
the Fund's unitholders. The Take-Over Bid and Board Circular outlining the
details of the offer have been mailed to the Fund's unitholders.

    SUMMARY OF FOURTH QUARTER RESULTS

    For the three months ended December 31, 2006, the Fund generated cash
available for distributions of $5.4 million and cash distributions declared
were $6.2 million, which represents a payout ratio of 115%.
    Results for the fourth quarter 2006 as compared to the same period 2005
are largely impacted by the fact that the results reflect the power sales,
operating expenses, depreciation and interest expense related to Erie Shores
commencing June 1, 2006. Fund revenues during the fourth quarter were
$14.0 million, an increase of $4.6 million over the same period in 2005. The
increase is a result of revenues from Erie Shores in 2006, offset by a
decrease in revenues from the waterpower facilities. Revenues from the
waterpower facilities suffered during the fourth quarter 2006 as a result of
an extended period of extremely dry conditions in northern Ontario. The
inclusion of Erie Shores' results in 2006 and the slight improvement in the
Whitecourt facility, offset somewhat by the revenues from the waterpower
facilities, resulted in gross operating income from continuing operations to
increase by $2.3 million compared to the same period in 2005.
    Operating expenses, including administration and depreciation expenses,
of $9.5 million in the fourth quarter of 2006 were $4.5 million higher than
operating expenses during the same period in 2005. This also is a result of
operating and maintenance expenses and depreciation expense related to Erie
Shores in 2006. Operating income for the three months ended December 31, 2006
of $4.5 million increased by approximately $0.1 million over the same period
in 2005.
    The net income from continuing operations for the 2006 fourth quarter was
$2.0 million and included a $1.1 million foreign exchange gain on the Fund's
U.S. Wind Loan, as compared to a net income of $1.7 million for the fourth
quarter of 2005. The increase of $0.2 million is a result of the foreign
exchange gain in 2006 versus a loss for the same period in 2005 offsetting the
increase of $1.8 million in interest expense. Operating cash flow after
changes in working capital for the 2006 fourth quarter was nil compared to
$3.6 million for the same period in 2005 as a result of an increase in working
capital of $5.0 million during the fourth quarter 2006.

    OPERATING RESULTS

    Results for 2006 as compared to 2005 are largely impacted by the fact
that the results reflect the power sales, operating expenses, depreciation and
interest expense related to Erie Shores commencing June 1, 2006.
    The Fund generated operating cash flow after changes in working capital
from continuing operations for the year ended December 31, 2006 of
$10.0 million ($0.279 per Trust Unit), an increase of $0.3 million from
$9.7 million ($0.273 per Trust Unit) in 2005. The increase in 2006 from 2005
was primarily due to $3.1 million provided by Erie Shores, offset by a
decrease in operating cash flow from the waterpower facilities resulting from
poor hydrology in northern Ontario. The biomass operations and the U.S. Wind
Loan generated cash flow at or in excess of expectations while Erie Shores and
the waterpower facilities generated cash flows below expectations in 2006.
Performance of the individual investments is discussed later in this report.
Performance of the discontinued operations is discussed separately below under
"Discontinued Operations - Landfill Gas Operating Results".
    Revenues from continuing operations increased to $40.7 million for the
year ended December 31, 2006, compared to $31.2 million for the fiscal year
2005. The increase of $9.5 million is due to the impact of power sales from
Erie Shores and an increase of $0.5 million from the biomass facilities being
offset by a decrease of $1.8 million in power sales from the waterpower
facilities and a decrease of $0.5 million in income earned on the Reserve
Account. These impacts also resulted in an increase of $5.9 million in the
gross operating income from continuing operations, from $21.6 million in 2005
to $27.5 million in 2006. Total expenses increased by $8.7 million, from
$20.6 million in 2005 to $29.3 million in 2006. For 2006 these including
operating and maintenance expenses and depreciation expense relating to Erie
Shores in an amount of $7.9 million. Also, the Fund's administrative costs
increased by $0.8 million from 2005 primarily due to $1.5 million one-time
costs associated with the unitholder value enhancement process, the Review
Committee activities and retention bonuses paid to key employees, offset by a
reduction in ongoing administrative expenses.
    Interest expense on long-term debt, not including interest on
Levelization amounts, for 2006 increased by $5.9 million, from $5.9 million in
2005 to $11.8 million in 2006 due to interest on debt associated with Erie
Shores included in the statements of loss commencing June 1, 2006.
    A foreign exchange loss of $0.3 million was recorded for the year ended
December 31, 2006, compared to a foreign exchange loss of $1.1 million for
2005. These accounting translation losses were due to the revaluation of the
loan associated with the Fund's U.S. dollar-denominated investment in
windpower. They were caused by a strengthening Canadian dollar against the
U.S. dollar and had no effect on the Fund's cash flows for the period.
    The net loss from continuing operations for the year ended December 31,
2006 was $1.4 million ($(0.040) per Trust Unit), compared to net income of
$2.3 million ($0.065 per Trust Unit) in 2005.
    During the year, minority interest recovery incurred on the Exchangeable
Class B Shares was $0.1 million (2005 - nil).
    For 2006, total Cash Available for Distributions was $13.7 million (see
calculation on following page). This consists of Cash Flow Available for
Distributions from continuing operations of $12.4 million ($0.350 per Trust
Unit) and Cash Flow Available for Distributions from discontinued operations
of $1.3 million ($0.037 per Trust Unit). The total Cash Flow Available for
Distributions in 2006 was $11.1 million ($0.314 per Trust Unit) less than the
$24.8 million ($0.700 per Trust Unit) in distributions declared to
unitholders. The difference is due to:

    
    -   a planned drawdown of $2.5 million from the Reserve Account, net of
        Reserve Account investment income;

    -   Cash Flow Available for Distributions from discontinued operations
        was $7.3 million below expectations; and

    -   Cash Flow Available for Distributions from waterpower operations
        being below expectations and other items totaling $1.4 million.
    

    The Reserve Account was established when the Fund began operations on
November 14, 2001 and will be utilized for working capital and distribution
support on an as-needed basis. A drawdown of approximately $2.5 million from
the Reserve Account was planned for 2006 to cover an expected shortfall in
operating cash flow. The actual Reserve Account drawdown was $4.1 million
(2004 - $1.4 million). In addition, $7.1 million from the Fund's non-Reserve
Account cash accounts and credit facilities were utilized to support
distributions and the increase in working capital.

    
    All Operations
    -------------------------------------------------------------------------
    (in thousands of Canadian
     dollars except per           Three months ended              Year ended
     Trust Unit amounts)                 December 31             December 31
    -------------------------------------------------------------------------
                                    2006        2005        2006        2005
    -------------------------------------------------------------------------
    Revenues                  $   14,007  $    9,415  $   40,716  $   31,184
    Operating and Maintenance
     expenses                     (4,582)     (2,326)    (13,156)     (9,547)
    -------------------------------------------------------------------------
    Gross operating income(1)      9,425       7,089      27,560      21,637
    -------------------------------------------------------------------------
    Other expense                 (4,890)     (2,680)    (16,187)    (11,046)
    -------------------------------------------------------------------------
    Operating income               4,535       4,409      11,373      10,591
    Interest expense              (3,639)     (1,825)    (13,671)     (7,396)
    Foreign exchange gain
     (loss)                        1,079        (830)       (289)     (1,070)
    Future income tax recovery        31           -       1,041         164
    Minority interest recovery
     (expense)                         4         (20)        132          26
    -------------------------------------------------------------------------
    Net income (loss) from
     continuing operations         2,010       1,734      (1,414)      2,315
    -------------------------------------------------------------------------
    Net loss from discontinued
     operations                   (2,257)       (167)     (7,953)     (5,734)
    -------------------------------------------------------------------------
    Total net income (loss)         (247)      1,567      (9,367)     (3,419)
    Per Trust Unit - basic
     and diluted                  (0.007)      0.044      (0.265)     (0.097)
    -------------------------------------------------------------------------
    Continuing Operations
    Operating cash flow
     after changes in
     working capital                 (20)      3,574       9,969       9,668
    Changes in working capital     4,996         778       1,075       1,292
    Cash flow from
     investments(2)                  483        (162)      1,325         976
    Minority interest (expense)
     recovery                         (4)        (20)        132          26
    Non-expansion capital
     expenditures                    (33)        (24)       (123)       (216)
    -------------------------------------------------------------------------
    Cash available for
     distribution from
     continuing operations         5,422       4,146      12,378      11,746
    -------------------------------------------------------------------------
    Discontinued Operations
    Operating cash flow
     after changes in
     working capital                   -       2,802       7,200      15,296
    Changes in working capital         -         972      (1,983)     (1,820)
    Non-expansion capital
     expenditures                      -      (1,947)     (3,932)     (7,130)
    -------------------------------------------------------------------------
    Cash available for
     distribution from
     discontinued operations           -       1,827       1,285       6,346
    -------------------------------------------------------------------------
    Total cash available for
     distribution(3)               5,422       5,973      13,663      18,092
    -------------------------------------------------------------------------
    Per Trust Unit                 0.153       0.169       0.386       0.511
    -------------------------------------------------------------------------
    Cash Distributions
     declared                      6,190       6,190      24,759      24,759
    Per Trust Unit                 0.175       0.175       0.700       0.700
    -------------------------------------------------------------------------
    Distributions supported
     by reserves or other
     non-operational cash(4)         768         217      11,096       6,667
    -------------------------------------------------------------------------
    Weighted average number
     of Trust Units
     outstanding - basic and
     diluted                  35,368,597  35,368,597  35,368,597  35,368,597
    -------------------------------------------------------------------------
    (1) "Gross operating income" is a measure of the Fund's generating
        facilities profitability before management, interest and other
        expenses; however, it is not defined under GAAP and it should not be
        considered an alternative to, or more meaningful than, net income or
        cash flow as determined in accordance with GAAP as an indicator of
        the Fund's performance or liquidity. Gross operating income is
        defined as revenues less operating and maintenance expenses
        (excluding depreciation and amortization).

    (2) Consists of waterpower levelization payments and biomass principal
        repayments.

    (3) "Cash available for distribution" is a measure of the Fund's ability
        to make distributions to unitholders based on operating results;
        however, it is not defined under GAAP and it should not be considered
        an alternative to, or more meaningful than, net income or cash flow
        as determined in accordance with GAAP as an indicator of the Fund's
        performance or liquidity. Cash available for distribution is defined
        as: operating cash flow after changes in working capital, plus
        (minus) increase (decrease) in working capital, plus (minus) cash
        flow from investments, plus (minus) minority interest recovery
        (expense), less non-expansion capital expenditures.

    (4) "Distributions supported by reserves or other non-operational cash"
        is a measure of the Fund's ability to make distributions to
        unitholders based on operating results; however it is not defined
        under GAAP and should not be considered an alternative to, or more
        meaningful than, net income or cash flow as determined in accordance
        with GAAP as an indicator of the Fund's performance or liquidity.
        Distributions supported by reserves or other non-operational cash is
        defined as: cash distributions declared less cash available for
        distribution. This amount does not include cash to finance working
        capital.
    

    CONTINUING OPERATIONS

    Wind Operating Results

    Erie Shores Wind Farm

    During the second quarter of 2006, the Erie Shores Wind Farm started
generating revenues and achieved commercial operation under the PPA with the
Ontario Power Authority on May 24, 2006. The agreement with General Electric
Company ("GE") provides the project with four-year revenue reimbursement and
performance guarantees. Under the fixed-price service and maintenance
agreement, General Electric Canada ("GE Canada") provides operating and
management services to the project for the first four years commencing
July 26, 2006.
    The results of the operation of the project are reflected in the income
statement commencing June 1, 2006. The results reflect the power sales,
operating expenses, depreciation and interest expense on the related debt.
    The project operated at an average availability of 95.3% for the period
from July 26, 2006 to year-end and 96.6% for the fourth quarter. This is
slightly lower than the long-term expected availability and is due to the
delivery of parts from GE continuing to take longer than anticipated. This
situation has been improving and we continue to work with GE to ensure they
meet the minimum 97%.
    Production for the period from June 1 to year-end was 120,889 MWh, which
was lower than anticipated. This is due to a number of contributing factors.
GE Canada and GE carried out testing of the turbines during the month of June
to ensure reliability and their warranty status. During the months of June and
July, prior to the commencement of the warranty period, availability was well
below expectations. One-time testing was also carried out in November to
confirm validation of the equipment for the transmission owner and the system
operator. This testing resulted in the estimated lost production of 4,596 MWh,
or approximately 4% of anticipated production for this period. The final
factor was lower wind speeds experienced in Ontario in the months of August
and November, offset somewhat by better than anticipated wind in October and
December. The operating results to date, with one-time testing now being
completed and slighter lower availability are not indicative of future
performance.
    For the period commencing June 1, 2006, revenues were $11.5 million and
operating expenses were $3.6 million. Revenues were lower than anticipated due
to lower than expected production. Expenses were approximately $0.7 million
higher than expected due to a number of one-time costs associated with the
start-up of the facility, including the testing noted above, and costs
associated with complying with the market rules applicable in Ontario. The
system operator is currently carrying out a stakeholder process that includes
seeking suggestions on wind power forecasting options or alternatives. This
may result in changes to the market rules during 2007, which in turn will
relieve wind power generators in Ontario of some of the costs associated with
the current requirements.
    The interest expense for the year consisted of $4.0 million related to
the non-recourse project debt and $0.8 million related to the credit facility
provided by the banks and the subordinated debt associated with the financing
of the project. Upon the conversion of the project debt from construction loan
on July 31, 2006, the interest relating to the amounts outstanding under the
credit facility and the subordinated debt were no longer charged to Erie
Shores.
    On August 1, 2006, one of the farmers hosting a number of the turbines
exercised an option to purchase one of the turbines on his land. No other such
option exists. The purchase price of $2.8 million represents one sixty-sixth
of the total cost of the project, except financing fees. No gain or loss was
realized on the exercise of the option. The proceeds of $2.8 million were used
to repay $2.8 million of the non-recourse project debt associated with the
project (see Note 13(a)(iv)). Erie Shores continues to maintain operations and
managerial control of the turbine. On an annual basis, the farmer is entitled
to receive the revenue generated by his turbine less one sixty-sixth of all
the operating and maintenance expenses of the project, not including property
taxes, land leases and interest expense.

    
    Erie Shores Production (MWh)
    -------------------------------------------------------------------------
                                                            2006        2005
    -------------------------------------------------------------------------
    Production                                           120,889           -
    -------------------------------------------------------------------------

    Erie Shores Operations
    -------------------------------------------------------------------------
    (in thousands of Canadian dollars)                      2006        2005
    -------------------------------------------------------------------------
    Power sales                                       $   11,452    $      -
    Depreciation and amortization                          4,284           -
    Operating income                                       3,617           -
    Interest expense                                       4,815           -
    -------------------------------------------------------------------------
    

    U.S. Wind Loan Receivable

    In 2006, the Fund received its revenue in this segment solely in the form
of loan interest payments from its debt investment in the six wind facilities
in the United States.
    For the year ended December 31, 2006, the Fund received all scheduled
U.S. Wind Loan interest payments. Interest income of $2.3 million is
$0.2 million lower than 2005 due to the continued strengthening of the
Canadian dollar relative to the U.S. dollar during 2006. The Fund had entered
into put and call options so that this decrease in revenue had no impact on
the operating cash flows of the Fund.
    For 2006, total production volumes were 315,484 MWh or 96% of the
expected long-term average. This significant overall improvement over 2005 is
due to the higher wind speeds and availability at the larger projects, except
for Foote Creek IV. The steps taken by the owner to improve availability at
Texas Big Spring began to show immediate results during the second half of
2006, with availability ranging from 95% to 99% during this period. At Foote
Creek IV, a retrofit and repair program to deal with the stress on the torque
arm stands has now been extended into 2007. The owner continues to work with
the turbine manufacturer to remedy the problems under warranty. In addition to
the decrease in revenues resulting from lower availability, operating expenses
have been higher than budget due to repair costs associated with fixing the
causes of downtime. As a result, the owner of the facilities was granted
consent to withdraw US $0.6 million from the US $2.1 million reserve account
to support the payment made on September 30, 2006. The balance in the account
at year-end was approximately US $1.5 million. Under the subordinated loan
documents, the owner is required to replenish the reserve account to its
original amount over the subsequent 12 months. As at year-end, using actual
results for the fourth quarter and the budget for the nine months to
September 30, 2007, it appears that the owner will be successful in
replenishing the account as required.
    Operating performance has a significant influence on the ability of the
wind projects to service their debt obligations, but it is not the only
contributing factor. The subordinated loan structure associated with the
Fund's wind investment protects the Fund from some variation in production, as
does the debt service reserve. Additional protection is afforded by insurance
and equipment manufacturer warranties for availability, parts and labour as
well as revenue reimbursement. As a result, the impact of any warranty
expirations should not affect the Fund's interest payments.
    Remaining revenue loss warranties expired in December 2006 at Peetz
Table. For Foote Creek IV, all manufacturer, operator and revenue loss
warranties are in effect until September 2015.

    
    U.S. Windpower Production (MWh)
    -------------------------------------------------------------------------
                                                        2006 % of
                                             Long-term  long-term
    Facility           Location       2006     average    average       2005
    -------------------------------------------------------------------------
    Foote Creek II     Wyoming       6,187       6,600         94      5,475
    Foote Creek III    Wyoming      73,888      79,700         93     71,087
    Foote Creek IV     Wyoming      54,140      62,400         87     54,666
    Peetz Table        Colorado     82,438      72,700        113     76,245
    Big Spring         Texas        92,277     100,200         92     83,597
    Chandler           Minnesota     6,554       6,900         95      5,850
    -------------------------------------------------------------------------
    Total                          315,484     328,500         96    296,920
    -------------------------------------------------------------------------

    U.S. Windpower Operations
    -------------------------------------------------------------------------
    (in thousands of Canadian dollars)                      2006        2005
    -------------------------------------------------------------------------
    Interest earned on wind investments               $    2,328  $    2,503
    -------------------------------------------------------------------------
    

    Waterpower Operating Results

    The Fund derives its revenue in this segment in the form of cash flow
generated by operations of the four waterpower facilities where the Fund has
100% equity interest.
    The waterpower facilities operated at an average availability of 98% for
the year ended December 31, 2006 which is marginally lower than the
availability achieved in the corresponding period in 2005. This is due to
utility transmission line outages during the first three quarters of the year.
    Aggregate production in 2006 was 138,889 MWh, which is the lowest level
since the Fund acquired the waterpower assets in 2001. This production level
is approximately 79% of the long-term average and 16% below 2005. All the
facilities were below the long-term average for 2006 and the production levels
of 2005, except for Hluey Lakes. This is largely due to the extended extremely
dry conditions experienced in northern Ontario since June 2006, which also
resulted in the reservoirs at Dryden having been exhausted by the end of the
summer. Also, lower than anticipated precipitation was experienced at Sechelt
in the months of August, September and October.
    For the year of 2006, revenues were $10.7 million; $1.7 million lower
than in 2005 due to the decreased production and a "catchup" payment of
approximately $0.4 million under the Hluey Lakes PPA that was recorded in
2005. Operating expenses for the period were $0.4 million higher than for
2005. However, in 2005 the Fund received a repayment of water rentals and
property taxes relating to the Wawatay and Dryden facilities for prior years
of $0.4 million that was netted against the expenses. Therefore, on a gross
basis, operating expenses were consistent with 2005 and there were no material
unscheduled outages.

    
    Waterpower Production (MWh)
    -------------------------------------------------------------------------
                                                         2006 % of
                                              Long-term  long-term
    Facility      Location             2006     average    average      2005
    -------------------------------------------------------------------------
    Sechelt       British Columbia   82,602      90,300         91    85,359
    Wawatay       Ontario            34,895      59,013         59    49,852
    Dryden
     (3 plants)   Ontario            14,594      20,568         71    24,198
    Hluey Lakes   British Columbia    6,798       6,782        100     6,304
    -------------------------------------------------------------------------
    Total                           138,889     176,663         79   165,713
    -------------------------------------------------------------------------

    Waterpower Operations
    -------------------------------------------------------------------------
    (in thousands of Canadian dollars)                      2006        2005
    -------------------------------------------------------------------------
    Power sales                                       $   10,688  $   12,443
    Depreciation and amortization                          3,208       3,129
    Operating income                                       4,718       6,961
    Interest on levelization amounts(1)                    1,839       1,529
    -------------------------------------------------------------------------
    

    Biomass Operating Results

    The Fund derives revenue from this segment in the form of cash flow
generated by the operations of two biomass facilities where the Fund has the
following interests: a 100% equity interest in the Whitecourt facility in
Alberta and a debt and 31.3% equity interest in the Chapais facility in
Québec.
    In 2006, the Whitecourt facility and the Chapais facility operated at an
average availability of 97% and 92%, respectively.
    For the year ended December 31, 2006, Whitecourt production of
203,682 MWh represented 102% of the long-term average and a marginal
improvement over 2005. Whitecourt's revenue for 2006 exceeded 2005's revenue
by $0.3 million, due to higher production and a higher average Power Pool
price. Approximately 3.3 MW of Whitecourt's 28 MW gross capacity is not
contracted and is sold at the Alberta Power Pool spot price. The actual
average Power Pool price for 2006 was $81 per MWh, compared to $70 per MWh for
2005. Operations and maintenance costs for 2006 were consistent with 2005.
Operating income for the year ended December 31, 2006 was $4.7 million
compared to $4.2 million for 2005.
    For the year ended December 31, 2006, Chapais production of 219,961 MWh
marginally exceeded forecast expectations. The Chapais power contract with
Hydro Québec is structured to produce approximately 50% of Chapais' annual
revenue in the four-month period December to March. The contract also has an
annual maximum production target of 218,912 MWh, beyond which power pricing is
reduced to a level that does not justify operating. As a result, Chapais
operates at full production capacity for the four-month winter period and will
balance production throughout the remaining period to achieve, but not
materially exceed, the maximum production target. Chapais' cash payments to
the Fund are structured to deliver almost equal monthly payments. For the year
ended December 31, 2006, Chapais' operating costs were consistent with 2005.
The Québec legislation limiting non-native tree-cutting rights first impacted
the Chapais in 2005. However, the facility secured additional long-term fuel
supply contracts which have increased the average prices of fuel since 2005.
This has resulted in the temporary suspension through to 2007 of $0.1 million
in semi-annual interest payments scheduled to have been paid in July 2005,
January and July 2006 and January 2007. The operator is assessing
opportunities to reduce other expenses to offset the fuel cost increase.
Interest and other investment income was $1.3 million for 2006 and principal
repayments were $0.5 million, compared to $1.2 million and $0.5 million,
respectively, for 2005.

    
    Production (MWh)
    -------------------------------------------------------------------------
                                                        2006 % of
                                            Long-term   long-term
    Facility        Location        2006      average     average       2005
    -------------------------------------------------------------------------
    Whitecourt      Alberta      203,682      200,000         102    202,565
    Chapais         Québec       219,961      219,000         100    219,994
    -------------------------------------------------------------------------
    Total                        423,823      419,000         101    422,559
    -------------------------------------------------------------------------

    Whitecourt Biomass Facility, Alberta Operations
    -------------------------------------------------------------------------
    (in thousands of Canadian dollars)                      2006        2005
    -------------------------------------------------------------------------
    Power sales                                       $   14,208  $   13,928
    Depreciation and amortization                          2,710       2,807
    Operating Income                                       4,743       4,193
    -------------------------------------------------------------------------

    Chapais Biomass Facility, Quebec
    -------------------------------------------------------------------------
    (in thousands of Canadian dollars)                      2006        2005
    -------------------------------------------------------------------------
    Interest and other investment income              $    1,353  $    1,190
    -------------------------------------------------------------------------



    Consolidated Balance Sheets (unaudited)
    -------------------------------------------------------------------------
    As at December 31 (in thousands of Canadian dollars)    2006        2005
    -------------------------------------------------------------------------
    ASSETS
    Current
    Cash and cash equivalents                         $    7,914  $    4,838
    Cash in escrow                                           429      23,019
    Accounts receivable                                    6,589       3,529
    Other receivables                                         65       3,062
    Accrued interest on loans receivable                   1,014         854
    Chapais loan receivable                                  575         517
    Material and supplies inventories                        857         854
    Prepaid expenses                                         702       1,155
    Cash in escrow of discontinued operations              8,485           -
    Current assets of discontinued operations                 43      13,920
    -------------------------------------------------------------------------
                                                          26,673      51,748
    U.S. Wind Loan receivable                             21,440      21,434
    Chapais loans receivable                              13,873      14,448
    Other long-term investment                             1,812       1,540
    Erie Shores construction and project costs                 -     116,640
    Reserve Account                                        4,709       8,823
    Capital assets                                       316,931     146,922
    Goodwill                                               8,885       8,885
    Other assets                                           6,184       5,108
    Long-term assets of discontinued operations                -     115,239
    -------------------------------------------------------------------------
                                                      $  400,507  $  490,787
    -------------------------------------------------------------------------
    LIABILITIES AND UNITHOLDERS' EQUITY
    Current
    Accounts payable and accrued liabilities          $    3,221  $   14,945
    Distributions payable                                  2,089       2,089
    Interest payable                                       1,887         244
    Current portion of long-term debt                     11,093       1,200
    Current portion of capital lease obligations             131          68
    Accounts payable and accrued liabilities of
     discontinued operations                              10,838       6,527
    -------------------------------------------------------------------------
                                                          29,259      25,073
    Convertible debentures                                55,000      55,000
    Long-term debt                                       140,900     168,139
    Levelization amounts                                  18,831      16,277
    Future income tax liability                            6,157       7,197
    Capital lease obligations                                181          63
    Minority interest                                      1,887       2,336
    Other long-term liabilities                              575           -
    Long-term liabilities of discontinued operations           -      33,904
    -------------------------------------------------------------------------
                                                         252,790     307,989
    -------------------------------------------------------------------------
    Trust Units issued                                   332,849     332,849
    Cumulative translation adjustment                        358       1,313
    Deficit                                             (185,490)   (151,364)
    -------------------------------------------------------------------------
    Total unitholders' equity                            147,717     182,798
    -------------------------------------------------------------------------
                                                      $  400,507  $  490,787
    -------------------------------------------------------------------------



    Consolidated Statements of Loss (unaudited)
    -------------------------------------------------------------------------
    For the year ended December 31 (in thousands of
     Canadian dollars except per Trust Unit amounts)        2006        2005
    -------------------------------------------------------------------------
    REVENUES
    Power sales                                       $   36,348  $   26,371
    Interest earned on U.S. Wind Loan receivable           2,328       2,503
    Other investment income                                1,952       2,205
    Other income                                              88         105
    -------------------------------------------------------------------------
                                                          40,716      31,184
    -------------------------------------------------------------------------
    COSTS AND OPERATING EXPENSES
    Operating and maintenance                             13,156       9,547
    Management and administration                          5,522       4,696
    Depreciation and amortization                         10,665       6,350
    -------------------------------------------------------------------------
                                                          29,343      20,593
    -------------------------------------------------------------------------
    Operating income                                      11,373      10,591
    Interest expense on long-term debt                    11,832       5,867
    Interest on levelization amounts                       1,839       1,529
    Foreign exchange loss                                    289       1,070
    -------------------------------------------------------------------------
    Income (loss) for the year before future income
     tax recovery and minority interest recovery      $   (2,587) $    2,125
    Future income tax recovery                            (1,041)       (164)
    Minority interest recovery                              (132)        (26)
    -------------------------------------------------------------------------
    Net income (loss) for the year from continuing
     operations                                       $   (1,414) $    2,315
    Net loss for the year from Discontinued
     Operations                                       $   (7,953) $   (5,734)
    -------------------------------------------------------------------------
    Net loss for the year                             $   (9,367) $   (3,419)
    -------------------------------------------------------------------------
    Net income (loss) per Trust Unit - basic and
     diluted - Continuing Operations                  $   (0.040) $    0.065
    -------------------------------------------------------------------------
    Net loss per Trust Unit - basic and diluted
     - Discontinued Operations                        $   (0.225) $   (0.162)
    -------------------------------------------------------------------------
    Net loss per Trust Unit - basic and diluted       $   (0.265) $   (0.097)
    -------------------------------------------------------------------------
    Weighted average number of Trust Units
     outstanding - basic and diluted                  35,368,597  35,368,597
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Consolidated Statements of Deficit
    For the year ended December 31 (in thousands of
     Canadian dollars)                                      2006        2005
    -------------------------------------------------------------------------
    Deficit, beginning of year                          (151,364)   (123,186)
    Net loss for the year                                 (9,367)     (3,419)
    Distributions declared to unitholders                (24,759)    (24,759)
    -------------------------------------------------------------------------
    Deficit, end of year                              $ (185,490) $ (151,364)
    -------------------------------------------------------------------------



    Consolidated Statements of Cash Flows
    -------------------------------------------------------------------------
    For the year ended December 31 (in thousands of
     Canadian dollars)                                      2006        2005
    -------------------------------------------------------------------------
    OPERATING ACTIVITIES
    Net income (loss) from continuing operations      $   (1,414) $    2,315
    Add (deduct) items not affecting cash
      Minority interest recovery                            (132)        (26)
      (Gain) Loss on disposal of fixed assets                (88)         36
      Future income tax recovery                          (1,041)       (164)
      Depreciation and amortization                       10,665       6,350
      Unpaid interest on levelization amounts              1,745       1,154
      Unrealized foreign exchange loss and other           2,021       2,099
      Equity income in excess of distributions received     (272)        (27)
      Investment income on Reserve Account                  (440)       (777)
    -------------------------------------------------------------------------
                                                          11,044      10,960
    Increase in operating working capital                 (1,075)     (1,292)
    -------------------------------------------------------------------------
    Cash provided by operating activities of
     continuing operations                                 9,969       9,668
    -------------------------------------------------------------------------
    INVESTING ACTIVITIES
    Additional investment in Reserve Account              (4,596)          -
    Release from Reserve Account                           9,150       2,150
    Release from (Deposit-into) cash in escrow            22,590     (23,019)
    Receipt of advance to Western Wind                         -         400
    Repayment of other long-term investments                 516         464
    Investment in Erie Shores construction and
     project costs                                       (74,930)   (106,746)
    Purchases and construction of property and
     equipment                                              (649)       (216)
    -------------------------------------------------------------------------
    Cash used in investing activities of continuing
     operations                                          (47,919)   (126,967)
    -------------------------------------------------------------------------
    FINANCING ACTIVITIES
    Distributions to unitholders                         (24,759)    (24,759)
    Distributions to minority interest holders              (316)       (316)
    Proceeds from long-term debt                          53,696     132,305
    Repayment of long term debt                          (12,770)          -
    Deferred financing fees                                    -      (1,539)
    Proceeds from credit facility                          8,515       9,245
    Repayment of credit facility                         (67,646)          -
    Proceeds from levelization amounts                       809         512
    Addition to (repayment of) capital lease
     obligations                                             181         (56)
    Advances on Net Profits Interest                         (25)        (25)
    -------------------------------------------------------------------------
    Cash provided by (used in) financing activities
     of continuing operations                            (42,315)    115,367
    -------------------------------------------------------------------------
    Net decrease in cash and cash equivalents from
     continuing operations                               (80,265)     (1,932)
    Net increase in cash and cash equivalents from
     discontinued operations                              83,341       2,457
    Cash and cash equivalents, beginning of period         4,838       4,313
    -------------------------------------------------------------------------
    Cash and cash equivalents, end of period          $    7,914  $    4,838
    -------------------------------------------------------------------------
    Cash and cash equivalents are comprised of:
    Cash                                                   6,511       4,047
    Short-term investments                                 1,403         791
    -------------------------------------------------------------------------
                                                      $    7,914  $    4,838
    -------------------------------------------------------------------------
    Interest paid during the year                     $   13,518  $    7,763
    -------------------------------------------------------------------------
    Income taxes paid during the year                 $        -  $        -
    -------------------------------------------------------------------------
    

    This press release may contain forward-looking information or
forward-looking statements within the meaning of applicable securities
legislation ("forward-looking statements"). Any statements that express or
involved discussions with respect to the Fund's predictions, expectations,
beliefs, plans, projections, objectives, assumptions, potentials, estimates,
intentions, future events or performance (often but not always using words or
phrases such as "believes", "expects" or "does not expect", "is expected",
"anticipates" or "does not anticipate", or "intends" or stating that certain
actions, events or results "may", "could", "would", "might" or "will" be taken
or achieved) are not statements or historical fact, but are forward-looking
statements. Such forward-looking statements, by their nature, necessarily
involve known and unknown risks, assumptions, achievements, or developments in
our business or in our industry, to differ materially from the anticipated
results, performance or achievements or developments expressed or implied by
such forward-looking statements. Forward-looking statements may include, but
are not limited to the unitholder value enhancement process. Investors and
others should not place undue reliance on these forward-looking statements as
actual results could differ materially from the forward-looking statements in
this press release based on risks associated with: the unitholder value
enhancement opportunities involving third parties and other factors over which
the Fund has no control. The foregoing list of risks is not exhaustive. The
forward-looking statements in this press release are based on the material
factors and assumptions that the Fund considered reasonable at the time they
are prepared and that the Special Committee and the manager of CPOT can
successfully work on unitholder value enhancement opportunities. It is
important to note that: unless otherwise indicated, forward-looking statements
in this press release describe our views and expectations as of the date of
this press release; we caution readers not to place undue reliance on these
statements as our actual results may differ materially from our expectations
if known and unknown risks or uncertainties affect our business, or if our
estimates or assumptions prove inaccurate, and therefore, we cannot provide
any assurance that forward-looking statements will materialize; that while it
is anticipated that subsequent events and developments could cause our views
and expectations to change, the Fund does not undertake or assume any
obligation to publicly update or revise any forward-looking statement, whether
as a result of new information, future events or any other reason; and all
forward-looking statements contained in this press release are expressly
qualified by this cautionary statement.





For further information:

For further information: Rob A. Roberti, Chief Financial Officer, Clean
Power Operating Trust, (416) 777-2800 ext. 224, info@cleanpowerincomefund.com,
Website: www.cleanpowerincomefund.com

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CLEAN POWER INCOME FUND

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