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Allegheny seeks to sell Calif. contract

August 24, 2003

Allegheny Energy Inc. announced Saturday in a news release that it and subsidiary Allegheny Energy Supply Co. LLC are seeking approval from lenders for the sale of Allegheny Energy Supply's energy supply contract with the California Department of Water Resources and certain related hedges.

As part of the request, waivers and amendments to their existing credit facilities are being sought which would also allow the company to place proceeds from the California contract sale, less costs associated with the elimination of related tolling agreements and other hedges, into a pledged account. This account would be held in the name of the collateral agent until Dec. 31 or until the credit facilities are repaid or refinanced, according to the company's news release.

Allegheny Energy Supply's current financing agreements require the company to use 75 percent of the California net sale proceeds to prepay Allegheny Energy Supply debt. In addition, Allegheny Energy and Allegheny Energy Supply are requesting waivers of their financial covenants with respect to the third quarter of 2003.

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These requests, if approved, would allow Allegheny to complete an important transaction and give the company greater flexibility to improve its liquidity position and facilitate a possible refinancing of the company's credit facilities.

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