[GRAPHIC OMITTED][GRAPHIC OMITTED][GRAPHIC OMITTED][GRAPHIC OMITTED]
Media Company Company
Angeline Protogere Bernard J. Zahren Goran Mornhed
(317) 838-1338 President & CEO President
(860) 678-7537 (914)304-4016
Media
Harry Zlokower
(212) 447-9292
Investors
George Strauss
(212) 766-1113
FOR IMMEDIATE RELEASE
U.S. ENERGY SYSTEMS AND CINERGY SOLUTIONS
ACQUIRE ZAPCO IN $98 MILLION TRANSACTION
New York, Cincinnati and Avon, Conn. (Nov. 28, 2000)...U.S. Energy Systems, Inc.
(Nasdaq:USEY), an independent power producer, and its joint venture partner,
Cinergy Solutions, Inc., an affiliate of Cincinnati-based Cinergy Corp.
(NYSE:CIN), one of the nation's leading diversified energy companies, today
announced a definitive merger agreement to acquire Zahren Alternative Power
Corporation (ZAPCO), a leading Connecticut-based developer and operator of
renewable energy projects around the country.
The transaction, valued at approximately $98 million, includes $10
million in U.S. Energy Systems common stock, valued at $6 a share, and $3
million in convertible preferred stock; $12.8 million in cash; and approximately
$72 million in assumed (more)
<PAGE>
subsidiary debt. The merger, which is subject to among other things the approval
of the shareholders of ZAPCO and U.S. Energy Systems, is expected to close in
early 2001.
ZAPCO currently owns and operates 24 landfill gas-to-energy (LFG)
projects and one natural gas cogeneration plant. Presently ZAPCO has more than
40 megawatts of electrical production capacity primarily under long-term
contracts and additional direct sales of LFG.
"Competitive power markets, rising fuel prices and environmental
commitments are generating significant interest in renewable energy sources,"
said Steve Harkness, President and Chief Operating Officer of Cinergy Solutions.
"Customer demand for green power is increasing, and this acquisition expands our
renewable energy assets and generates additional growth opportunities."
"ZAPCO has created the standard for developing and producing renewable
energy in America today," said Goran Mornhed, President and COO of U.S. Energy
Systems. "ZAPCO's mission fits well with our growth strategy and focus on
providing clean, efficient energy for our customers everywhere."
"We are excited to join a growth team and an organization with a
compatible mission of creating value by providing green power and renewable
energy to our customers thus improving the environment and reducing the negative
effects of global warming and pollution," said Bernard Zahren, Chairman and CEO
of ZAPCO. "Working with our partners at Cinergy Solutions I see a tremendous
opportunity to grow U.S. Energy Systems into one of the leading producers of
clean energy."
ZAPCO will become a subsidiary of U.S. Energy Systems and Cinergy
Solutions. According to the agreement, Bernard Zahren, Chairman and CEO of
ZAPCO, (more) will become CEO of U.S. Energy Systems, joining the management
2
<PAGE>
team of Goran Mornhed, President and COO, and Lawrence Schneider, the previous
CEO, who will remain as Chairman.
Zahren will also become a director of U.S. Energy Systems as will Mark
Strauch, Executive Vice President and Treasurer of AJG Financial Services, Inc.,
a business unit of Arthur J. Gallagher & Co. (NYSE:AJG), an international
insurance brokerage and risk management services firm where Strauch also serves
as Treasurer. AJG Financial Services, Inc. and the Environmental Opportunities
Fund, LP are major shareholders of ZAPCO and will become shareholders of U.S.
Energy Systems.
Cinergy Solutions, which last month invested $3.5 million in exchange for
a stake in U.S. Energy Systems, will acquire approximately a 46 percent interest
in the ZAPCO subsidiary with a two-year option to convert its ownership into
U.S. Energy Systems stock. U.S. Energy Systems will have an option during the
same period to acquire Cinergy Solutions' ownership interest.
As a renewable energy developer and operator, ZAPCO will benefit from
emission reduction allowance programs. As the market for greenhouse gas
reduction allowances develops, projected reductions from the collection and
combustion of methane at ZAPCO's existing projects will be equivalent to the
removal of approximately 50 million tons of carbon dioxide from the environment.
3
<PAGE>
ZAPCO recently signed an agreement for the world's largest-to-date
cross-border trade of emission reduction credits to a major Canadian utility.
The credits were (more) generated through ZAPCO's collection and combustion of
methane from its LFG projects. The emission reductions from this trade are
equivalent to removing approximately 500,000 automobiles from the road for one
full year. About U.S. Energy Systems, Inc.
U.S. Energy Systems, Inc. (Nasdaq:USEY) is an independent power
producer that generates clean, efficient energy for the growing energy markets.
The company develops, owns, and operates cogeneration power plants and renewable
energy plants in the U.S. and offers a variety of environmental services. U.S.
Energy Systems' competitive edge is maximizing the value of customized scope and
services for its customers.
About Cinergy Corp.
Cinergy Corp. (NYSE:CIN) is one of the nation's leading diversified
energy companies with a total enterprise value of $8.5 billion and assets of $10
billion. Cinergy owns or operates nearly 20,000 megawatts of electrical and
combined heat plant generation that is either operational or under development
domestically and internationally. It also has 55,000 miles of electric and
gas transmission lines in the U.S. and abroad, and approximately 9,000 employees
in nine countries. Cinergy's Midwestern power grid gives the company access to
37% of total U.S. energy consumption.
Cinergy Solutions, Inc., an affiliate of Cinergy Corp., focuses
primarily on cogeneration and energy outsourcing for large industrial customers,
such as Kodak, General Motors and Millennium Chemicals
(www.cinergy-solutions.com).
About ZAPCO
4
<PAGE>
Founded in 1994, ZAPCO is one of the largest developers and operators
of (more) landfill gas collection systems and alternative energy projects in the
United States. The company currently operates 25 projects and has additional LFG
projects under
development.
ZAPCO has been recognized for its efforts to reduce air emissions by
the Environmental Protection Agency (EPA), the Department of Energy, the Solid
Waste Association of North America and the Landfill Methane Outreach Program (a
division of the EPA).
Certain matters discussed in this press release are forward-looking statements,
and certain important factors may affect each company's (the company's) actual
results and could cause actual results to differ materially from any
forward-looking statements made in this release, or which are otherwise made by
or on behalf of the companies (company). Such factors include, but are not
limited to, changes in market conditions, the inability to commence planned
projects in a timely manner, the impact of competition, the ability to complete
acquisitions, risks associated with acquisitions, as well as other risks
detailed from time to time in each company's Securities and Exchange Commission
filings.
U.S. Energy Systems--ZAPCO merger
5