ALLEGHENY ENERGY TO ACQUIRE
MERRILL LYNCH'S GLOBAL ENERGY MARKETS UNIT
ACQUISITION CONTINUES ALLEGHENY'S TRANSFORMATION INTO
A LEADING NATIONAL ENERGY MERCHANT
Hagerstown, Md., January 8, 2001 - Allegheny Energy, Inc. (NYSE: AYE)
announced today that it has signed a definitive agreement to acquire Global
Energy Markets (GEM), Merrill Lynch's energy commodity marketing and trading
unit. Under the agreement, Allegheny Energy's generation subsidiary, Allegheny
Energy Supply Company, LLC, will acquire GEM for $490 million plus a two percent
equity interest in Allegheny Energy Supply. The transaction will be accounted
for as a purchase and is expected to be accretive to Allegheny Energy's earnings
per share in the first year after closing.
Alan J. Noia, Chairman, President, and Chief Executive Officer of Allegheny
Energy, said, "GEM will create significant value for shareholders as we
transform Allegheny Energy into a major national player in the energy
marketplace. The changes in our industry are creating exciting growth
opportunities for companies with a comprehensive understanding of energy
marketing and trading and an asset base to continue to capitalize on market
opportunities. The GEM team brings us the sophisticated skills and market
presence to capture more of these opportunities. It will complement our existing
skills and help to extract maximum value from our low-cost generating fleet."
Noia continued, "Our generating fleet is one of our most valuable assets,
and this acquisition is a significant step toward unlocking its full value.
Growth is expected from both in-house marketing activities and from a referral
agreement that Allegheny Energy Supply has with Merrill Lynch. We expect that
the acquisition will support our efforts to grow Allegheny Energy's earnings by
more than 10 percent a year. This transaction represents yet another positive
step for us as our corporate strategy unfolds. We are committed to becoming a
national energy merchant, and the combination of our powerful generating fleet
with GEM's experience will drive growth and shareholder value."
According to G. Kelly Martin, Senior Vice President and head of Global Debt
Markets at Merrill Lynch, "Allegheny Energy is a tremendous company and a leader
in providing energy services. This transaction enables us to offer broader
energy risk-management, structuring, and advisory services to clients, including
access to Allegheny's integrated trading and generation operation."
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Daniel L. Gordon, head of GEM and newly appointed President of Allegheny
Energy Supply's Trading Division, said, "My team and I look forward to becoming
a part of the Allegheny Energy family. This transaction is a unique opportunity
to combine a disciplined and established trading and risk-management enterprise
with one of the best power generation portfolios in North America. My entire
team is very excited about our future with Allegheny Energy, and we are
committed to building Allegheny Energy Supply into one of the leading merchant
energy companies in the world."
In his new position, Gordon will have responsibility for all commodity risk
management activities within Allegheny Energy Supply.
With GEM, Allegheny Energy Supply will have a world-class trading and
marketing operation and a national platform from which to sell its wholesale
generation. After only two years of operations, GEM is ranked in the top 20 in
the nation in terms of electric volumes traded as of the third quarter of 2000.
It is expected that the combined volumes of trades will place Allegheny Energy
Supply in the top 10 of all power marketers in the nation, based on volume of
trades.
The acquisition of GEM includes support infrastructure necessary to conduct
business immediately upon completion of the transaction. Additionally, under the
agreement, Merrill Lynch will refer its clients with energy trading needs to
Allegheny Energy Supply. GEM will continue to operate out of New York, NY.
The acquisition is conditioned upon customary regulatory approvals,
including approvals of the Federal Energy Regulatory Commission and the
Department of Justice/Federal Trade Commission. Allegheny Energy expects that
the transaction can be completed in the first quarter of 2001.
Salomon Smith Barney acted as financial advisor and Sullivan & Cromwell
acted as legal counsel to Allegheny Energy.
Allegheny Energy Supply operates and markets competitive retail and
wholesale generation in markets throughout the United States and operates
regulated generation for its affiliates. With its recently announced
acquisitions and expansion plans, Allegheny Energy Supply will have generating
capacity of nearly 13,000 megawatts, with assets strategically located
throughout the United States.
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ABOUT MERRILL LYNCH
Merrill Lynch is one of the world's leading financial management and
advisory companies with offices in 44 countries and total client assets of about
$1.8 trillion. As an investment bank, it is the top global underwriter and
market maker of debt and equity securities and a leading strategic advisor to
corporations, governments, institutions, and individuals worldwide. Further
information about Merrill Lynch is available at www.ml.com.
ABOUT ALLEGHENY ENERGY
An S&P 500 company, Allegheny Energy, Inc. is a diversified energy company
headquartered in Hagerstown, Md. The Allegheny Energy family includes ALLEGHENY
POWER, which delivers electric energy and natural gas to about three million
people in parts of Maryland, Ohio, Pennsylvania, Virginia, and West Virginia;
ALLEGHENY ENERGY SUPPLY COMPANY, LLC, which operates and markets competitive
retail and wholesale electric generation and operates regulated electric
generation for its affiliates; and ALLEGHENY VENTURES, which actively invests in
and develops telecommunications and energy-related projects. For more
information, visit our web site at www.alleghenyenergy.com.
PRIVATE SECURITIES LITIGATION REFORM ACT SAFE HARBOR STATEMENT
Certain statements above constitute forward-looking statements with respect
to Allegheny Energy, Inc. Such forward-looking statements involve known and
unknown risks, uncertainties, and other factors that may cause the actual
results, performance, or achievements of Allegheny Energy to be materially
different from any future results, performance, or achievements expressed or
implied by such forward-looking statements. Such factors may affect Allegheny
Energy's operations, markets, products, services, and prices. Such factors
include, among others, the following: general and economic and business
conditions; changes in the price of electricity; industry capacity; changes in
technology; changes in political, social, and economic conditions; regulatory
matters; integration of the operations of Allegheny Energy; regulatory
conditions applicable to the transaction; the loss of any significant customers;
and changes in business strategy or business plans.
FINANCIAL ANALYST MEETING, TELECONFERENCE, AND WEBCAST:
Allegheny Energy will host a financial analyst meeting today at 11:00 a.m.
(EST) to discuss the transaction. Investors, the news media, and others may
listen to a live internet broadcast of the meeting at www.alleghenyenergy.com,
www.dealinfo.com/allegheny, or www.streetevents.com by clicking on an available
audio link. The call will also be archived on the Company's web site for replay
purposes for 10 working days after the live broadcast. Real Network's Real
Player or Microsoft Media Player is required to access the webcast. They can be
downloaded from www.real.com or www.microsoft.com.
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CONTACT INFORMATION:
CONTACTS FOR ALLEGHENY CONTACTS FOR MERRILL LYNCH
INVESTORS: INVESTORS:
Gregory L. Fries, Martin R. Wise,
Manager, Investor Relations Managing Director, Investor Relations
301-665-2713 212-449-7119
[email protected] [email protected]
MEDIA: MEDIA:
Cynthia A. Shoop, Dan Alfaro,
Vice President, Corporate Communications Vice President, Media Relations
301-665-2718 212-449-6468
[email protected] [email protected]
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