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Press release from Business Wire

Octavian Requisitions a Special Meeting of EnerCare Shareholders to Add Four New Directors

<p class='bwalignc'> <b>Expresses Serious Concern About EnerCare's Poor Governance and Board's Refusal to Engage With Its Shareholders</b> </p> <p class='bwalignc'> </p>

Monday, December 12, 2011

Octavian Requisitions a Special Meeting of EnerCare Shareholders to Add Four New Directors08:15 EST Monday, December 12, 2011 NEW YORK (Business Wire) -- Octavian Advisors, LP, the largest shareholder of EnerCare Inc. (TSX: ECI), which exercises control or direction over securities representing approximately 13% of EnerCare's outstanding common shares, today sent a letter to EnerCare's Board of Directors criticizing EnerCare's poor governance and delivered a requisition for a Special Meeting of Shareholders. The meeting has been requisitioned for the purpose of expanding EnerCare's Board to ten and adding four highly qualified and independent nominees nominated by Octavian. Octavian, a significant EnerCare shareholder since 2009, withheld its votes for the non-management nominees to the Board of Directors at the company's 2011 Annual Meeting of Shareholders in April. “Octavian has been repeatedly rebuffed for nearly two years in its attempts to engage EnerCare's Board in a constructive dialogue about the company's strategic direction and the significant mispricing of its shares in the marketplace,” said Richard Hurowitz, Chairman and Chief Executive Officer of Octavian. “The current Board's abysmal corporate governance as well as a string of strategic missteps causes us to seriously question its ability or willingness to increase value for all EnerCare shareholders. We believe EnerCare shareholders deserve better representatives committed to enhancing the value of their investment in EnerCare.” Mr. Hurowitz continued, “Given the Board's failure to address EnerCare's long-term material underperformance and track record of value destruction and missed opportunities, as well as our concerns about its commitment to acting in the best interests of the company and its shareholders, we intend to seek the support of our fellow shareholders at a Special Meeting to expand EnerCare's Board to ten and to add four independent directors to EnerCare's Board. These highly qualified nominees have the best interests of all of EnerCare's shareholders as their first priority and will support the thorough exploration of all value-creation opportunities.” The full text of the letter Octavian sent today to the Board of EnerCare and the names and backgrounds of the four new proposed directors to the EnerCare Board follows: December 12, 2011 Mr. Jim PantelidisChairman of the Board of DirectorsEnerCare Inc.2 East Beaver Creek Road, Building 2Richmond Hill, Ontario L4B 2N3Canada Dear Jim: As we have stated to you numerous times for nearly two years, Octavian believes that EnerCare shares are significantly undervalued and that the company's Board has repeatedly failed to address this material mispricing and, on multiple occasions, has not acted in the best interests of EnerCare shareholders. While our preference has always been and continues to be to work constructively with the Board, our prior correspondence and our meetings with you on May 16 and November 4 have unfortunately only exacerbated our lack of confidence in the Board's willingness and ability to look after shareholders and the enterprise under your leadership, or even to engage in a constructive dialogue with us, EnerCare's largest shareholder. Your disingenuous response to our good faith request to add independent directors to the Board has brought us to this point. As such, we will be seeking the support of our fellow shareholders at a Special Meeting requisitioned by way of this letter and the enclosed meeting requisition to expand EnerCare's Board to ten and to add four highly qualified, independent director nominees proposed by Octavian (see attached biographies) to EnerCare's Board to ensure that the true owners of EnerCare – the company's shareholders – are appropriately represented and that all potential value-creation opportunities are properly explored. Despite the fact that during the past year EnerCare management has succeeded in reducing customer churn in the water heater rental business and restarting its sub-metering business, EnerCare's stock remains significantly undervalued. In fact, whether measured over a period of five years (which you have repeatedly indicated is the minimum time frame that is worth examining) or since inception, EnerCare has performed poorly. Five years ago, EnerCare stock traded at $16 per share, almost double today's share price. Since EnerCare's IPO nine years ago, the stock is down 12% versus an increase of 83% for the Toronto Stock Exchange. We believe your blithe dismissal of the company's underperformance with the excuse that “all the income trusts are down” is unacceptable and inaccurate. Not all income trusts have been money-losing investments. In many cases, the difference is to be found in leadership at the Board level. In fact, many income trusts opted to go private at high valuations following the change in tax policy announced on October 31, 2006. This group of income trusts included the company's closest comparable, UE Waterheater Income Fund, which was sold for a valuation in excess of 11 times EBITDA. Had EnerCare's Board elected to run an active process to sell the company at that time, a similar valuation might have been achieved for EnerCare – which equates to approximately triple the current share price. You have indicated, however, that a sale of the company was not something the Board actively pursued at the time. In fact, we seriously question the commitment of the current Board to undertaking any value-creating initiatives – then or now. As you readily acknowledged in our May 16 meeting, it is highly unlikely that potential buyers would approach EnerCare at this time, given the Board's well-known opposition to a sale of the company. Your statement in that same meeting that a “sale of the company would be value-destructive” (apparently, in your view, irrespective of price) was stunning but very telling of the Board's position. Although you have told us that you believe a 30% premium would not be a compelling offer, we suspect many of our fellow shareholders would disagree. Most importantly, we are also very concerned about the Board's judgment on corporate finance. For example, despite our shared view that the company's shares are dramatically undervalued, EnerCare inexplicably issued shares last year with no apparent corporate purpose at a price of $4.95 per share, a highly dilutive transaction that damaged all shareholders without any benefit. We are at a loss as to why this was ever contemplated. This sale not only diluted existing shareholders but was structured in such a manner that shareholders like Octavian were unable to participate. This was an appalling corporate finance decision considering the company's investment grade balance sheet and the low price at which this transaction occurred. We were also extremely disappointed by how the company handled its acquisition of Stratacon, a submetering business it purchased for approximately $30 million. Shortly after this acquisition closed in March 2009, the Compliance Office of the Ontario Energy Board voided all existing submetering contracts and blocked companies from signing up any new customers. As a result, the business was completely shut down until recently when the Government of Ontario allowed submetering customers to be signed again. It is clear that the Board completely failed to take into account regulatory risks and trends by not asking the proper questions or choosing to ignore the warning signs, a result that is even more shocking given the company's history with unfavorable regulatory issues that should have heightened its concern. Despite the recent improvement in this business, the company was forced to write down its investment and impaired shareholder value. We were disappointed by your strong and unequivocal assertion that under no circumstances should shareholders, and in particular our firm, be represented on the Board. The current Board, according to EnerCare's recent annual report and management information circular, owns less than 0.5% of EnerCare shares but receives close to $600,000 in fees every year. This issue is made alarming by your statements to us that some directors “live off of those fees” and, further, that shareholders should not have Board representation because the “Board knows better than the shareholders.” These views and the financial dependency of some of EnerCare's Board members on their director fees is clearly inconsistent with good corporate governance and causes us to question the Board's ability to act in the best interests of EnerCare's shareholders. Looking ahead, in the post-income trust world, we believe EnerCare's long-term cash flows would be highly attractive to a pension fund or infrastructure investor, which could apply a lower discount rate in a more tax-efficient structure and thereby could offer a far higher price than that afforded by the public markets. This is a basic structural difference that allows for value maximization not available in the public markets. Such a transaction may also be better for EnerCare's customers and employees since a more efficient capital structure and well-capitalized owners may be more willing and better able to finance capital expenditures and other necessary investments. It is our understanding, however, that many such potential buyers have been rebuffed by the current Board in the past or are aware of its reputation and won't waste their time unless specifically invited to participate in a formal process involving independent financial advisors. It is therefore vital that EnerCare's Board be reconstituted with independent directors who will ensure that all strategic alternatives available to the company are explored, including thoroughly testing the market in order to realize the best possible value for EnerCare's shares if necessary. In addition to a sale of the company, other corporate initiatives that could potentially unlock significant value might include a recapitalization, a further increase in dividends, a share buyback or a spinoff of certain assets. All of these options would be thoroughly explored and weighed by a Board that includes directors with appropriate experience, expertise and independence to bring a fresh focus on maximizing shareholder value. Of course, there is little risk to adding a minority of such directors to the Board other than bringing a fresh perspective and sophistication to the Board. We believe that your desire to prevent different voices that may differ from your own is at the core of your resistance to this proposal. Your position is untenable and we do not see how EnerCare's shareholders are not better off with our additional nominees. We believe EnerCare's shareholders deserve better, and we will now move ahead to give our fellow shareholders a voice in determining EnerCare's future. We also enclose herewith a requisition (the “Requisition”) pursuant to the provisions of the Canada Business Corporations Act of a meeting to expand EnerCare's Board to ten and to add to the Board the four individuals specified in the Requisition (also see attached biographies). The Requisition has been executed by us on behalf of investment funds which hold more than the number of EnerCare's outstanding common shares required to make the Requisition (the identity and holdings of such investment funds are set forth in the letters enclosed herewith). We request and expect that the Requisition be dealt with as expeditiously as possible. In light of the Requisition, we believe that no further actions involving any material change to the business, assets or financial position of EnerCare should be taken without the consent of its shareholders until such time as the requisitioned meeting has been held and any such matter has been given due consideration by the new Board of Directors. We will vigorously pursue our interests in this regard. Please contact the undersigned or Stephen Pincus of Goodmans LLP at (416) 597-4104 to further discuss these matters. We look forward to your prompt response. Sincerely, Richard HurowitzChief Executive Officer cc: Board of Directors Octavian will propose the following nominees for EnerCare's Board: T. Richard Turner, 55, is Director, President, and CEO of TitanStar Properties Inc. and President and CEO of TitanStar Investment Group Inc. He previously served as President and CEO of International Aviation Terminals, a position he held for seven years. Mr. Turner has held leadership positions on a number of boards, including the Vancouver Fraser Port Authority, Pure Industrial Real Estate Investment Trust (Chair), WesternOne Equity Income Fund, WesternOne Equity GP Inc. (Chair), and TG Residential Value Properties Ltd. In addition to serving as Chair of the Audit Committee and a member of the Sustainability, Human Resources and Compensation Committee for the 2010 Vancouver Olympic Games, Mr. Turner also serves as Honorary Consul for the Hashemite Kingdom of Jordan in British Columbia posted in Vancouver. As a highly respected member of the Vancouver community, he has received a number of prestigious awards, including the HRH Queen Elizabeth's Golden Jubilee Award for Public Service in Canada, the Vancouver Board of Trade's Leaders of Tomorrow Visionary Award, and the Richmond Chamber of Commerce Executive of the Year Award. He received a BCom in Finance from the University of British Columbia and a Diploma from the Canadian Securities Institute. Beth S. Horowitz, 54, is a highly respected executive with vast senior management and board experience. Ms. Horowitz spent over 20 years at American Express, holding a number of senior positions of increasing responsibility, including Chair, President, and CEO of Amex Bank of Canada, and President and General Manager of Amex Canada, Inc. At one point, Ms. Horowitz was the highest ranking officer of American Express in Canada. Following her roles at American Express, Ms. Horowitz acted as a Senior Advisor at the McEwen Centre for Regenerative Medicine in Toronto. She currently serves on the Boards of HSBC Bank Canada, Harvard Business School Club of Toronto, and Art Gallery of Ontario, and she also serves on the Advisory Boards of the Schulich School of Business and Catalyst Canada. Ms. Horowitz received an MBA from Harvard University's Graduate School of Business Administration and a BA from Cornell University where she was elected to Phi Beta Kappa. Graham Senst, 53, is President of the Advisory Board at Kingsett Capital Canadian Real Estate Income Fund. Mr. Senst previously served as a Managing Director of the Fund. Prior to joining Kingsett Capital, he held executive positions at Bentall Capital and Ontario Municipal Employees Retirement System Pension Fund (OMERS). Mr. Senst has worked in the Canadian finance and real estate fields for over 25 years, with significant experience in direct property transactions. He has served on the boards of several public companies, including Residential Equities REIT2002 and Oxford Properties Group, and he also serves on the Advisory Boards at Soros Real Estate Fund, Morgan Stanley Real Estate Fund IV, PenRetail I and II, and Europa Capital Partners. Mr. Senst received an MBA and HBA from Ivey School of Business. Richard A. Hurowitz, 37, is the Chairman and CEO of Octavian Advisors, a global investment firm with offices in New York and London which manages approximately $1 billion. Mr. Hurowitz has invested in over fifty countries around the world, and has made numerous investments in Canada. Prior to founding Octavian, Mr. Hurowitz was a Partner and Managing Principal at Halcyon Asset Management LLC, a multi-strategy investment firm. He previously served on the supervisory board of Head NV, the publicly listed sporting goods company. Mr. Hurowitz received a JD from Columbia University Law School, where he was a Harlan Fiske Stone Scholar, and a BA in History from Yale University, where he graduated magna cum laudeand was elected to Phi Beta Kappa. Octavian, as investment manager of certain investment funds, exercises control or direction over an aggregate of 6,731,100 EnerCare common shares, representing approximately 12.04% of EnerCare's outstanding common shares. Including a cash-settled total return equity swap, Octavian exercises control or direction over securities representing approximately 13% of EnerCare's outstanding common shares. Octavian acquired the common shares of EnerCare for investment purposes and may, from time to time on an individual or joint basis, acquire additional securities of EnerCare, dispose of some or all of the existing or additional securities it holds or will hold, or may continue to hold its current position. Subject to applicable law, Octavian may from time to time have discussions with other shareholders of EnerCare and its board of directors and management regarding EnerCare, its prospects and potential means for enhancing shareholder value, including without limitation, with respect to potential changes in the business, strategy or board composition of EnerCare. Octavian may also from time to time initiate or participate in such other actions as it considers necessary to seek to enhance shareholder value at EnerCare, including without limitation, actions intended to cause changes to the business, strategy or board composition of EnerCare. In connection with this news release, Octavian will file an early warning report pursuant to National Instrument 62-103 – The Early Warning System and Related Take-Over Bid and Insider Reporting Issues, which requires a report to be filed on SEDAR (www.sedar.com ) containing additional information with respect to certain of the foregoing matters. Further information (including a copy of the early warning report to be filed with Canadian securities regulators in connection with this press release) can be obtained by contacting: Richard HurowitzOctavian Advisors, LP745 Fifth AvenueNew York, NY, United States 10022(212) 224-9501 About Octavian Advisors, LP Octavian Advisors, LP is a global investment firm with offices in New York and London. The firm focuses on special situations and distressed investments in international markets, and has successfully invested in over 40 countries on six continents. Octavian currently manages $1 billion for leading endowments, foundations, pension funds, family offices and institutions. Investor Contacts:Mackenzie Partners, Inc.Larry Dennedy, (212) 929-5239ldennedy@mackenziepartners.comorCharlie Koons, (212) 929-5708ckoons@mackenziepartners.comorMedia Contacts:Sard Verbinnen & CoDenise DesChenes/Jonathan Doorley(212) 687-8080jdoorley@sardverb.com