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KGen Power Purchases Electricity Generation Assets Totaling 1,859 Megawatts of Capacity

Posted on: Tuesday, 19 June 2007, 09:00 CDT

KGen Power Corporation, a Houston-based electricity generation company, announced today it has executed a purchase-and-sale agreement to acquire Complete Energy Holdings' 1,859-megawatt (MW) portfolio for $1.336 billion, plus working capital adjustments. KGen has executed a commitment letter with Morgan Stanley that provides debt financing for the acquisition, although the company said it will continue to evaluate optimal financing structures. Closing is subject to certain regulatory approval and other conditions.

Upon closing of the transaction, KGen would acquire two major combined cycle facilities located in California and Mississippi. KGen currently owns five power generation facilities in the Southeast with a total capacity of 3,030 MW.

"Not only does this acquisition increase KGen's total generating capacity by more than 60 percent, but the addition of these assets perfectly align with our focus on continuing to develop a top-quality portfolio of power generation facilities that meet our investment criteria and provide potential for asset value, cash flow and earnings growth," said KGen Chairman and CEO Gerald Lindner.

"Furthermore, the purchase of the California assets represents a significant first step in our strategy to move into other select power markets," he added.

The acquisition includes:

The La Paloma Generating Facility, a 1,022-MW gas-fired combined cycle plant located in McKittrick, Calif., with access to markets in both northern and southern California. KGen also assumes long-term tolling agreements with investment-grade counterparties for 75 percent of the electricity generation capacity through 2012. The company noted that realizations for the remaining merchant capacity should benefit from the continued improvement in the California market.

The Batesville Electric Generating Facility, a 837 MW, gas-fired combined cycle plant located in Batesville, Miss. The facility is strategically located with access to both the TVA and Entergy power markets, and is interconnected to three gas pipelines. KGen assumes tolling agreements whereby the entire capacity at Batesville is sold under two long-term (to 2013 and 2015, respectively) Power Purchase Agreements (PPAs) to investment-grade counterparties.

The company noted that both La Paloma and Batesville plants include options for future expansion.

KGen Power Corporation was founded in December 2006 when the company completed a private equity placement. Those funds were used to purchase 100 percent of the outstanding interests in a portfolio of power plants in the Southeast, which include the Hinds, Hot Spring, Murray I & II and Sandersville facilities.

About KGen Power Corporation

Headquartered in Houston, KGen Power Corporation sells power and related products to wholesale purchasers, such as retail electric providers, power marketers, municipal utilities, electric power cooperatives and other power generation companies. Including this announced transaction, KGen's portfolio would comprise of seven power facilities in the southeastern U.S. and California with a combined, flexible capacity of 4,889 megawatts. [Website currently under construction.]

Source: Business Wire

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