New York, NY – December 14, 2011 – Astoria Generating Company, L.P. (” Astoria Generating”) announced today that it is exploring the sale of two floating power barges and up to three fuel barges. The units are currently located at Astoria Generating’s Gowanus Station in Brooklyn, New York.  The sale process is being launched in response to actions taken by the New York Independent System Operator (“NYISO”) which have resulted in dramatically lower market clearing prices for generating units in New York City. 

Astoria Generating, along with TransCanada Corporation, filed a complaint with the Federal Energy Regulatory Commission (“FERC”) in July 2011 seeking to overturn NYISO’s decision allowing a government subsidized generating project to be exempt from rules governing uneconomic entry into the market place.  

“NYISO has created a situation where these barges will have significantly greater value in another location.  As a result, it is incumbent upon the company to explore a sale process to improve our financial position,” said Mark Sudbey, CEO of US Power Generating Company, Astoria Generating’s parent.  “These are unique and valuable assets. They are highly mobile generating resources and there is a global market for a rapidly deployable instant supply of power generation.” 

The two barges for sale consist of 16 oil-fired generating units with a total generating capacity of 309 MW. The potential sale could also include up to three fuel barges that each have capacity to store 930,000 gallons (3,520,000 liters) of fuel oil.

In order to implement this sales process, Astoria Generating has made the requisite filings at the New York Public Service Commission to facilitate the removal of the Barges, as well as to take Unit 20, a 180 MW gas fired steam unit in Astoria Queens out of service. This was done because the actions taken by the NYISO make it impossible for Unit 20 to recover its operating costs.

In addition to the sales process, which is being managed by Steven Walsh of Tier One Capital Management LLC, on September 2, 2011, Astoria Generating announced that it retained financial advisory firm Perella Weinberg Partners and the law firm of Kirkland & Ellis, LLP to provide guidance on a potential restructuring.

About Astoria Generating Company, L.P. Astoria Generating Company, L.P. owns and operates power generation facilities with a total capacity of over 2,100MW in New York City. It sells energy and capacity into the NYISO deregulated market, representing generation sufficient to serve approximately 20% of the overall load in New York. Astoria Generating Company, L.P. is a wholly owned subsidiary of US Power Generating Company. More information regarding USPowerGen can also be found at www.uspowergen.com.

Media Contact:

John Reese, Senior Vice President

Phone: 212-792-0897

Email: jreese@uspowergen.com

or

Josh Hochberg, Sloane & Company

Phone: 212-446-1892

Email: jhochberg@sloanepr.com

Investors Contact:

Ted Babcock, Vice President, Investor Relations and Treasurer

Phone: 212-792-0828

Email: tbabcock@uspowergen.com

Capacity pricing in July, August and September dropped approximately 50 percent from the spot auction results in June as a result of a government subsidized generating project being allowed to artificially depress prices. Unless these actions are reversed capacity prices would drop to near zero for the upcoming fall and winter months.

“NYISO’s actions have resulted in a fundamental failure of the marketplace,” said Mark Sudbey CEO of US Power Generating Company, Astoria Generating’s parent. “Generators rely on capacity pricing for the vast majority of their revenue and at these prices, even with no debt, we and other power generators will be forced to suffer significant and ongoing operating losses. The irony is that over the course of this summer and through recent heat waves we reliably provided nearly twenty percent of New York City’s electric supply when it was needed the most, while at the same time the NYISO has taken actions that will not allow us to cover our basic operating costs.”

Astoria Generating Company and other market participants have filed complaints with the Federal Energy Regulatory Commission (“FERC”) seeking immediate relief and ensuring that the NYISO has in place transparent and consistent policies and market mechanisms to support competitive power markets by reducing the ability of any generator or load side market participant to exercise market power.

If FERC does not act and the NYISO does not begin to apply the rules as they were intended, capacity pricing in New York City will continue to deteriorate to a point where by year-end Astoria Generating cash flow will be insufficient to cover operating expenses, including property taxes, maintenance and capital expenditures. This outcome would leave the company with no choice but to consider a financial restructuring in the bankruptcy courts. Recently, Standard & Poor’s downgraded Astoria Generating’s debt to the CCC+/CCC- level from its prior ratings of BB-/B+.

Perella Weinberg Partners is an independent, privately-owned financial services firm that provides corporate advisory and asset management services to clients around the world. Kirkland & Ellis LLP is a 1,500-attorney law firm representing clients in complex corporate and tax, restructuring, litigation and dispute resolution/arbitration, and intellectual property and technology matters.

About Astoria Generating Company, L.P. Astoria Generating Company, L.P. owns and operates power generation facilities with a total capacity of over 2,100MW in New York City. This subsidiary sells energy and capacity into the NYISO deregulated market, representing generation sufficient to serve approximately 20% of the overall load in New York. Astoria Generating Company, L.P. is a wholly owned subsidiary of US Power Generating Company. More information regarding USPowerGen can also be found at www.uspowergen.com.

Media Contact:
John Reese, Senior Vice President
Phone: 212-792-0897
Email: jreese@uspowergen.com
or
Josh Hochberg, Sloane & Company
Phone: 212-446-1892
Email: jhochberg@sloanepr.com

Investors Contact:
Ted Babcock, Vice President, Investor Relations and Treasurer
Phone: 212-792-0828
Email: tbabcock@uspowergen.com

The unit will remain out of service for an undetermined amount of time, however, Astoria Generating Company staff and contractors have already begun to assess conditions at Unit 4 in order to develop the scope of work necessary to restore service.

Unit 4 is one of the four Astoria Generating Station units and this incident had no effect on the remaining three steam units 2, 3 and 5. Units 3 and 5 were also operating at the time of the incident and have continued to operate without interruption. The incident poses no threat to continued electric supply from the remaining units at the Station.

Astoria Generating Station Unit 4 underwent asbestos abatement in the 1990s when under ConEd ownership. Regardless, precautionary air sampling is being undertaken to confirm no airborne asbestos is present.

The unit will remain out of service for an undetermined amount of time, however, Astoria Generating Company staff and contractors have already begun to assess conditions at Unit 4 in order to develop the scope of work necessary to restore service.

Unit 4 is one of the four Astoria Generating Station units and this incident had no effect on the remaining three units 2, 3 and 5.  Units 3 and 5 were also operating at the time of the incident and have continued to operate without interruption. The incident poses no threat to continued electric supply from the remaining units at the Station.

“The pending New York Independent System Operator demand curve reset process will have an immediate impact on the value of our assets, creating certainty in the market for our operations,” said USPowerGen Chief Executive Officer, Mark Sudbey. “This reset is part of the normal course of business which occurs every three years in an effort to determine a fair pricing structure for power generation in New York. As this process unfolds, we want to allow for a certain and favorable resolution before completing the strategic review process for Astoria Generating”.

USPowerGen has retained Goldman, Sachs & Co. to act as its exclusive financial advisor in connection with the strategic review process for Astoria Generating.

About USPowerGen

USPowerGen, through its subsidiary Astoria Generating Company Holdings, L.L.C. owns and operates power generation facilities with a total capacity of over 2,300MW. This subsidiary sells energy and capacity into the NYISO deregulated market, representing generation sufficient to serve approximately 20% of the overall load in New York. More information regarding USPowerGen can also be found at www.uspowergen.com.

Media Contact:

John Reese, Senior Vice President

Phone: 212-792-0897

Email: jreese@uspowergen.com

or

Erica Bartsch, Sloane & Company

Phone: 212-446-1875

Email: ebartsch@sloanepr.com

Investors Contact:

Ted Babcock, Vice President, Investor Relations and Treasurer

Phone: 212-792-0828

Email: tbabcock@uspowergen.com