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Investment Fund Taking Hard Look at NorthWestern Muni Buyout Bid

Harbert Distressed Investment Master Fund Ltd., the largest stockholder of NorthWestern Corp., has hired Lehman Brothers and the law firm of Milbank, Tweed, Hadley & McCloy LLP to advise it on the feasibility of a proposal by a coalition of municipal entities called Montana Public Power Inc. (MPPI) to buy NorthWestern.

Harbert and the funds and accounts managed by it collectively own an aggregate of 8,862,270 shares of common stock of NorthWestern. That total includes shares of common stock issuable upon exercise of warrants, Harbert said in a filing made at the Securities and Exchange Commission (SEC).

The filing seeks an SEC order exempting Harbert from all sections of the Public Utility Holding Co. Act (PUHCA), with the exception of one section of the law, which is set to be repealed under a new energy law recently signed by President Bush.

In late June 2005, MPPI made a formal bid to purchase all of the common stock of NorthWestern in cash for a purchase price of $32.50 per share. The board of directors of NorthWestern has rejected the MPPI bid for a variety of reasons.

Harbert has engaged Lehman and Milbank to advise it on the feasibility of the MPPI proposal. Such a transaction would require approvals from the Federal Energy Regulatory Commission, certain other federal agencies and certain state regulatory commissions, which typically have taken 12 to 18 months to obtain, the investment fund noted.

"The efforts of Harbert to move with deliberate speed to analyze the possibility of selling directly into the market and the economic viability of the MPPI bid and other reasonable offers for its holdings in NorthWestern further demonstrates" its intent to be a temporary holding company, Harbert said.

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