National Energy & Gas Transmission Inc. (NEGT) last Tuesday unveiled a definitive agreement for Denali Power LLC, a company formed by affiliates of ArcLight Capital Partners LLC and Caithness Energy LLC, to acquire NEGT’s equity interests in 12 power plants and an ownership stake in the Iroquois Gas Transmission System for approximately $558 million, subject to certain post-closing adjustments as specified in the definitive agreement.

The power plants are located throughout the country and have a combined generating capacity of more than 2,500 MW.

The sale involves the Carneys Point and Logan Generating plants in New Jersey; the Selkirk and Madison Wind Generating plants in New York; the Scrubgrass, Northampton and Panther Creek Generating plants in Pennsylvania; the Cedar Bay and Indiantown plants in Florida; the Hermiston plant in Oregon; the MASSPOWER plant in Massachusetts, and the Plains End Generating plant in Colorado.

The plants are fueled primarily by natural gas and coal and most of the electricity they generate is sold under long term contracts.

In addition to selling its interests in these facilities, NEGT is selling its ownership stake in the Iroquois Gas Transmission System, a 375-mile interstate pipeline, which provides gas transportation service to local gas distribution companies, electric utilities and electric power generators, directly or indirectly through exchanges and interconnecting pipelines in New York and Connecticut.

NEGT voluntarily filed for protection under Chapter 11 of the U.S. Bankruptcy Code in July 2003. As a result, the sale of equity interests described above will be subject to bankruptcy court approval, and will include a court-sanctioned auction process in accordance with customary bidding procedures approved by the bankruptcy court.

Under a court-sanctioned auction, NEGT will seek offers that are higher or otherwise better than the one negotiated with Denali Power.

As part of its agreement, Denali Power is granted certain protections, subject to court approval, most notably a break-up fee and expense reimbursement if another bid is accepted. Denali Power also retains the right to amend its offer should NEGT receive an offer that is superior to its existing agreement with Denali Power. The transaction is expected to close in the first quarter of 2005 and is subject to regulatory and third party approvals.

Lazard served as exclusive financial advisor to NEGT in connection with this transaction.

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