Avoca Natural Gas storage selects Union Bank; signs long-term agreement with Pennsylvania Gas & Water.

BOSTON--(BUSINESS WIRE)--Dec. 1, 1995--The sponsors of the Avoca Natural Gas Storage Project (Avoca) announced today that they have selected Union Bank as the agent bank to complete the financing of the facility, now under preliminary construction in Avoca, N.Y.

The Avoca Project, which represents an estimated capital investment of $155 million, has also signed a long-term agreement with Pennsylvania Gas & Water Co., bringing to eight the number of wholesale customers under contract to receive firm natural gas service.

Project Manager Jim Driscoll said, "The Avoca Partnership is delighted to have Union Bank on board to arrange the financing for the project. The Union Bank people have extensive experience in both energy and natural gas financings, and we think their expertise will solidify the strong business and technical fundamentals that Avoca Natural Gas Storage already possesses."

Grant K. Ahearn, senior vice president for Union Bank, said, "The number of blue-chip partners and customers associated with the Avoca Project makes it an attractive financial offering for any lending institution. Union Bank is pleased to add Avoca to its client list, and we look forward to a mutually productive and rewarding financial closing."

Driscoll said that the Avoca Partnership has executed a term sheet with Union Bank for a fully underwritten construction and term financing of the gas storage project, and that both parties intend to complete the financing by year-end. He noted that Union Bank has completed more than $5 billion of energy infrastructure financings in the past few years, including the Hattiesburg Gas Storage financing in 1990.

"Our new contract with Pennsylvania Gas & Water Co. is equally gratifying," Driscoll said. He noted that Pennsylvania Gas & Water (PG&W), a subsidiary of Pennsylvania Enterprises Inc., has signed a long term agreement with Avoca for firm storage service, beginning in 1997.

PG&W serves 135,000 natural gas customers in northeastern Pennsylvania, including the cities of Wilkes-Barre, Scranton, and Williamsport. PG&W receives its natural gas through connections with Transcontinental Gas Pipeline and Tennessee Gas Pipeline. It joins a customer roster that includes Orange & Rockland Utilities, CNG Energy Services, National Fuel Gas Distribution Corp., as well as the Project sponsors.

Avoca Natural Gas Storage will place into service approximately five billion cubic feet (Bcf) of high-deliverability storage in three phases -- October 1997, October 1998 and October 1999. The Project is located on the Tennessee Gas Pipeline 400 (H-C) line and will also have access to the Leidy Hub through interconnections with CNG Transmission and National Fuel Gas Supply. Preliminary construction has already begun in order to place the first phase, amounting to 1.4 Bcf, into operation by October 1997.

Driscoll noted that, in addition to its multiple market access capability, Avoca will provide customers flexible services that include unprecedented withdrawal and reinjection rates (10 and 20 days maximum), respectively. "Avoca also offers its customers balancing, peaking and price arbitrage benefits that were previously available only in storage areas near gas-producing fields," Driscoll said.

Partners in Avoca Natural Gas Storage include diverse interests: JMC Avoca Inc., an affiliate of U.S. Generating Co., the project's developer and manager; ET Storage Inc., a wholly owned subsidiary of Equitrans Inc., the interstate pipeline subsidiary of Equitable Resources Inc., which provides a full range of pipeline services to a nine-state market; NGC Storage Inc., a wholly owned subsidiary of Natural Gas Clearinghouse, the nation's largest independent gas marketer, and owner/operator of numerous gas gathering and processing facilities; and Trillium Gas Storage Inc., an affiliate of Union Gas Limited, an integrated natural gas company in Southwestern Ontario, providing storage, distribution and transmission services.

CONTACT: U.S. Generating Company

Jim Driscoll/Bill Daniels, 617/227-8080