USGen New England Inc. and an affiliate of TransCanada Corp. have signed an asset purchase agreement for TransCanada to purchase hydroelectric generation assets with a total generating capacity of 567 MW for U.S. $505 million in cash.

The assets include generating systems on two rivers in New England: the 484 MW Connecticut River system in New Hampshire and Vermont and the 83 MW Deerfield River system in Massachusetts and Vermont. The systems include 13 dams with 41 hydroelectric generating units. On a ten-year average, the generating systems produced approximately 1.4 million MWh of electricity annually. The output is not subject to long-term contracts.

USGen New England voluntarily filed for protection under Chapter 11 of the U.S. Bankruptcy Code in July 2003 and therefore the sale will be subject to bankruptcy court approval. Through a court-sanctioned auction process in accordance with customary bidding procedures, USGen New England will seek offers that are higher or otherwise better than the TransCanada agreement.

As part of its agreement, TransCanada is granted certain protections, subject to court approval, most notably a break fee and expense reimbursement if another bid is accepted. TransCanada also retains the right to amend its offer should USGen New England receive an offer which is superior to its existing agreement with TransCanada.

The agreement contemplates that final bankruptcy court approval of the sale will be obtained about 75 days after signing of the agreement. The sale is also subject to U.S. anti-trust and other regulatory reviews.

The deal marks the second USGen New England generation asset sale deal to be announced in recent months. Dominion recently reached an agreement to acquire three electric power generation facilities from USGen New England for $536 million in cash, plus an adjustment for inventory and reimbursement of certain capital expenditures incurred prior to closing (see NGI, Sept. 13).

Headquartered in Bethesda, MD, USGen New England is a subsidiary of National Energy & Gas Transmission Inc. (NEGT), which is in a separately administered Chapter 11. TransCanada also has an agreement with NEGT to purchase Gas Transmission Northwest Corp.

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