Press Release

PUC Reconsiders Purchase of a Water/Wastewater Company by Equitable Buyers

Published on 3/16/2006

Filed under: Water and Wastewater

HARRISBURG – The Pennsylvania Public Utility Commission today voted to reconsider the sale of a water/wastewater company to equitable buyers.

“I am concerned that the only purpose of these kinds of transactions may be to attempt to realize a quick profit by ‘flipping’ the acquired company,” said Commission Chairman Wendell F. Holland in statement. “I worry that these equity investors may have little, if any, utility managerial experience; as a result there could be dire consequences for the quality of utility service for ratepayers in the short and long run.”

On Feb. 28, 2006, a stock transfer from Nuon Global Solutions USA Inc. to Hydro Star, LLC became effective after no objections were filed with the Commission to a settlement, which was reached between the parties including the buyer, seller and the Office of Consumer Advocate. Nuon Global owns Penn Estates Utilities Inc., Utilities Inc of Pennsylvania and Utilities Inc. – Westgate, all of whom provide water and/or wastewater utility service in the state. Hydro Star is a subsidiary of the American International Group (AIG) Highstar Capitol II, LP, which is a member of the AIG Global Investment Group, an affiliate of AIG.

The Commission voted 3-2 to reopen the proceeding between Nuon Global and AIG and reconsider the settlement pending further review of the merits of the case. Commissioners Terrance Fitzpatrick and Kim Pizzingrilli voted against the action, saying they would rather allow the settlement move forward and see the Commission begin a general investigation of the issue.

Chairman Holland’s motion ordered that the issues under examination in the investigation will include:

• Capital to be allocated to ongoing operating and maintenance expenses;
• Corporate governance/Sarbanes Oxley compliance;
• The expected term of ownership;
• The buyer’s experience operating  water and wastewater utilities;
• Community presence; and
• The complex nature and objectives of affiliated relationships.

Penn Estates Utilities Inc. provides water and wastewater service for more than 1,275 consumers in Stroud and Pocono townships, Monroe County. Utilities Inc. of Pennsylvania provides wastewater service to about 940 consumers and two elementary schools in West Bradford Township, Chester County. Utilities Inc. – Westgate provides water service for about 670 consumers near Bethlehem, Pa. AIG is a multinational insurance and financial services conglomerate operating in about 130 counties with a market cap of about $160 billion.

The Pennsylvania Public Utility Commission ensures safe, reliable and reasonably priced electric, natural gas, water, telephone and transportation service for Pennsylvania consumers, by regulating public utilities and by serving as responsible stewards of competition. For recent news releases, or more information about the PUC, visit our Internet homepage www.puc.state.pa.us.

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Docket No:      A-210072F0003

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