June 2003

Freeport Power Plant 2 Project Receives Permits from New York State Department of Environmental Conservation: LIPA-Selected Vendor Begins Site Lease Negotiations with Village and Village Approves Additional Bonding for Joint Infrastructure Construction

(Freeport, New York, June 2, 2003) - Significant milestones mark progress in the Power Plant 2 Generation Projects, from State permit approvals, progress on the LIPA merchant generator and additional bonding to interim finance construction of joint infrastructure to support the Village and LIPA facilities.

The Village of Freeport Electric Department has received all required environmental approvals from the New York State Department of Environmental Conservation required to start construction of the Village Power Plant 2 Generation Project, including air quality approvals, storm water SPDES (State Pollution Discharge Elimination System), and wetlands permits. The project previously received required federal approvals from the U.S. Corps of Engineers in October 2002.

"Freeport Electric is pleased that the proposed generation projects at Power Plant 2 continue to progress through the environmental permitting processes. These NYSDEC approvals were the final milestone to schedule start of construction of the Village combustion turbine. We expect to break ground this month so that our new generation facility may be on line early this winter to serve the electric needs of the Village," stated Hubert Bianco, Superintendent of Electric Utilities.

LIPA has selected ASH Energy as its preferred vendor to develop the second generator at the PP2 site, replacing PPL who withdrew from the project late last year. Draft contracts have been exchanged between the Village and ASH for the site lease and various agreements required to develop the project. ASH will also proceed with additional environmental analyses to support its permit applications to NYSDEC, and to confirm that the project is consistent with the parameters used to assess the cumulative development of the Village and LIPA projects. "We are hopeful that negotiations with ASH will be completed mid-summer," said Mr. Bianco, "so that construction of the project to provide electricity to the LIPA service region will be operational by spring of 2004."

The Village has approved $22 million in additional Bond Anticipation Notes for interim financing to ensure the electric and gas transmission lines, acoustic wall, substation and other facilities that will be shared between the Village and LIPA generators are constructed to support the Village's schedule. The Village and ASH will share the development costs of those joint facilities. "PPL's withdrawal last year, pushed the LIPA project schedule approximately 6 months behind the Village's," explained Superintendent Bianco. "Regardless, the Village needs this shared infrastructure in place to operate our combustion turbine this year. And their share of development and construction costs will be recouped from the LIPA developer." "The Village waited to finance this portion of the project until we were ready to proceed. It didn't make sense to incur finance charges and interest until required to maintain the project schedule," Mr. Bianco added. "With facility permits in hand, we are ready to start construction of the joint infrastructure on the PP2 site."

The Village is in process of securing the last required approvals from the NYS Public Service Commission for the electric and gas transmission lines to interconnect the new PP2 facilities with the LIPA distribution system, and the gas distribution line required to feed the project with its primary fuel, natural gas. "We anticipate receiving the NYSPSC approvals to allow construction of the gas and electric lines in August. This schedule will support operation of the new combustion turbine in December of this year", explained Mr. Bianco. "Once the new Village facility has completed start up testing and shakedown, the Village can permanently decommission the old diesel generators at Power Plant 2," he reiterated.

"These most recent approvals from the State continue to demonstrate the environmental integrity of the new generation facilities to be developed at the Power Plant 2 site," remarked Mr. Bianco. "We are proud of the technology and operational practices we are instituting as we develop new cost effective generation capacity to serve the growing needs of the Village residents and businesses."