CAJUN COOPERATIVES WANT COURT TO DECLARE POWER CONTRACTS NULL OR NOT ASSIGNABLE.

BATON ROUGE, La.--(BUSINESS WIRE)--July 15, 1996--Ten Louisiana electric cooperatives are asking a federal bankruptcy court to declare that their wholesale power supply contracts are null or, if valid, not assignable to another party without the cooperatives' permission. The move is part of the cooperatives' efforts to protect their customers from excessively high electric rates which would result from the court-appointed trustee's plan to bring Cajun Electric Power Cooperative, Inc., out of bankruptcy.

The motion for a declaratory judgment was filed July 15 in the U.S. District Court, Middle District of Louisiana, by the Cajun Electric Members Committee against Ralph R. Mabey, trustee for Cajun in the Chapter 11 bankruptcy case (Civil Action No. 94-2763-B2, Bankruptcy Case No. 94-11474).

The legal status of the contracts lies at the heart of the Cajun bankruptcy case, said David Kleiman, an attorney for the Members Committee. "Bidders are making offers for the non-nuclear assets and the market represented by the all-requirements power supply contracts of the 12 cooperatives which comprise Cajun. Ultimately these offers would be paid for through whatever wholesale rates are established. Our legal standing under these contracts is the key to protecting 1 million people across the state from being saddled with excessively high electricity costs for decades to come."

The Members' filing approaches the issue on several fronts, such as: (1) the contracts are null and void because they were not approved by the Louisiana Public Service Commission, (2) even if valid, the contracts cannot be assigned to anyone else without the permission of the member cooperatives, and (3) the trustee's plan is a poorly disguised attempt to create a new company -- on paper only -- which would illegally assume the contracts and strip the Members of their rights under the contracts and the Cajun Electric bylaws.

The Members Committee informed the trustee in January that the contracts are not assignable and explained that any prospective bidder who wants to supply power to the Members would have to negotiate new power supply agreements, Kleiman said. "This is an issue that has been pending for some time, but the trustee's action -- and that of any other party wishing to acquire the contracts -- makes it important to push for a ruling at this stage in the bankruptcy process," Kleiman said. "We have strong precedent in the litigation of a similar case to show that the contracts cannot be assigned to anyone else without the cooperatives' permission."

To date, four reorganization plans have been filed with the bankruptcy court. The Members Committee has joined with Southwestern Electric Power Company and Entergy Gulf States (formerly Gulf States Utilities Company) to file one of the plans, which provides significant value to the estate while proposing more competitive wholesale rates to the member cooperatives than the competing plans. The Members Committee includes 10 of the 12 Cajun cooperatives: Beauregard Electric Cooperative, Inc., Concordia Electric Cooperative, Inc., Dixie Electric Membership Corp., Jefferson Davis Electric Cooperative, Inc., Northeast Louisiana Power Cooperative, Inc., Pointe Coupee Electric Membership Corp., South Louisiana Electric Cooperative Association, Southwest Louisiana Electric Membership Corp., Valley Electric Membership Corp. and Washington-St. Tammany Electric Cooperative, Inc.

Cajun Electric is a generating and transmission cooperative. In 1976, the 12 member cooperatives which comprise Cajun entered into wholesale power supply contracts, agreeing to purchase their power requirements from Cajun until 2021. In 1990, nine of the cooperatives extended their contracts to 2026.

CONTACT: Dann Pecar Newman & Kleiman, Professional Corp.

David H. Kleiman or James P. Moloy, 317/632-3232