Algonquin Power Income Fund Announces Its Intention to Make an Offer to Acquire KMS Power Income Fund and Enters Into a Credit Agreement With KMS Power Income Fund.

Business Editors

TORONTO--(BUSINESS WIRE)--Nov. 27, 2001

Algonquin Power Income Fund ("Algonquin") announced today that it intends to make offers to acquire all of the outstanding trust units and the 10% convertible debentures of KMS Power Income Fund (TSE:KMS.UN.) ("KMS").

The offer for the KMS trust units will be made by way of take- over bid through the issuance of 0.8192 trust units of Algonquin for each KMS trust unit (representing an equivalent price of $8.25 per KMS trust unit as at the date of this press release, a premium of 19% over the average 5 day trailing closing price of the KMS trust units on November 22, 2001 of $6.92.) For the outstanding 10% convertible debentures issued June 15, 1999 by KMS, the offer is expected to be for the exchange of 10.545 Algonquin trust units for each $100 of debenture principal (representing an equivalent price of $106.50 per $100 of debenture principal as at the date hereof, a premium of 2.4% over the average 5 day trailing closing price of the KMS convertible debentures on November 22, 2001 of $104.05). The offers value the outstanding trust units and convertible debentures of KMS at approximately $59.7 million and $32.0 million, respectively. Algonquin believes that the offer for KMS will advance its previously announced diversification initiative and KMS and Algonquin expect that the combined asset portfolio will be well positioned to provide stable and growing cash flows in an increasingly de-regulated North American electricity marketplace.

In addition, Algonquin and KMS jointly announced today that they have entered into a credit agreement pursuant to which Algonquin will provide KMS with up to $35.0 million in debt financing. Such credit agreement stipulates that the facility will bear interest at a floating rate equal to approximately 4% above the prime rate of interest. Payments by KMS under the credit facility will consist of interest only prior to the maturity date, which is 36 months after the advance of the loan proceeds by Algonquin. The maturity date is subject to acceleration to a date 12 months after notice is given at the option of Algonquin if a support agreement between Algonquin and KMS is not executed prior to January 31, 2002 or the offer for the trust units of KMS is not successfully completed.

Algonquin Management Inc. ("AMI"), the manager of Algonquin, has announced today that it has entered into a strategic alliance agreement with KMS Energy, Inc. ("KEI"), the manager of KMS, pursuant to which AMI and KEI will jointly pursue the future acquisition by Algonquin of cogeneration, energy from waste and landfill biogas fired generating facilities. If the offer is successfully completed, KEI and Algonquin intend to negotiate a termination fee to be paid to KEI in an amount which will be accretive to Algonquin as consideration for the early termination of the KMS management and administration agreements. Under the strategic alliance agreement, KEI will continue to provide operations services for the existing KMS assets and future acquired thermal generating facilities.

The offers for the KMS trust units and convertible debentures are anticipated to be mailed to holders of such securities on or prior to the 21st day after the execution of the support agreement, which is currently being finalized between Algonquin and KMS. Both offers are expected to be open for acceptance for a period of 35 days unless withdrawn or extended.

The support agreement is anticipated to provide for the payment of a break fee by KMS in the event the board of trustees of KMS withdraws their support for either of the offers and/or a superior competing transaction is completed within six months of the date of the support agreement. In addition, the support agreement is expected to provide for the payment by Algonquin of the costs and expenses of KMS in respect of the preparation of the offers in the event Algonquin fails to mail and complete the offers as contemplated.

The offer in respect of the trust units will be conditional upon, among other things, at least 66 2/3% of the outstanding KMS trust units (other than trust units held at the date of the offer by or on behalf of Algonquin or its affiliates) being validly deposited under the offer and there not occurring any material adverse change in the business, facilities (on a facility by facility basis), operations, assets or liabilities of KMS and/or any of its subsidiaries or affiliated entities. It is anticipated that the offer in respect of the convertible debentures will not be conditional upon any minimum percentage of the debentures being validly tendered. In the event all of the trust units of KMS are acquired by Algonquin and less than all of the convertible debentures are acquired by Algonquin, Algonquin is expected to cause KMS to remain a reporting issuer until the conversion of the convertible debentures into trust units of KMS.

KMS' trust units and convertible debentures are listed and posted for trading on The Toronto Stock Exchange under the symbols "KMS.UN" and "KMS.DB", respectively. KMS is an income fund with four power generation facilities; the largest being a 500 tonnes per day energy from waste facility located in Ontario (12 MW), two natural gas fired cogeneration facilities located in New Jersey (7MW) and Illinois (1.6 MW) and a landfill biogas fired facility located in Illinois (1.6MW).

Algonquin's trust units are listed and posted for trading on The Toronto Stock Exchange under the symbol "APF.UN". Algonquin currently holds direct and indirect equity interests in 47 hydroelectric generating facilities located in Ontario (5), Quebec (12), Newfoundland (1), Alberta (1), New York State (12), New Hampshire (13), New Jersey (1) and Vermont (2) representing aggregate installed generating capacity of approximately 140MW. In addition, the Fund owns partnership, share and debt interests in three bio-mass fired generating facilities with combined installed capacity of approximately 70MW located in Alberta, Quebec and Nova Scotia. Algonquin holds minority term investments in two natural gas/wood waste fired generating facilities with joint installed capacity of approximately 140MW located in northern Ontario and one 150MW natural gas powered combined cycle cogeneration plant located in south-eastern Ontario. In addition to its electricity generating assets, Algonquin owns two wastewater treatment facilities located near Phoenix, Arizona.

KMS Power is an open-ended trust, operating independent power projects in Canada and the United States. Prior news releases and/or general information can be accessed through the KMS web site (www.kmsenergy.com).

Certain statements in this press release constitute forward-looking statements. By their nature, such statements are subject to risks and uncertainties that may cause actual results to differ materially from those expressed or implied. Forward-looking statements are subject to known and unknown risks and uncertainties, and other factors which may cause actual results, levels of activity and achievements to differ materially from those expressed or implied by such statements. The impact of any one factor on a particular forward-looking statement is not determinable with certainty, as such factors are interdependent upon other factors, and KEI's course of action would depend upon its assessment of the future, considering all information available. Although KEI believes that the expectations conveyed by the forward-looking statements are reasonable based on the information available to it, no assurances can be given as to future results, levels of activity, and/or their achievement.