PGL Peoples Energy Corp

Peoples Energy (NYSE:PGL) today announced that it has finalized an agreement with Exelon Generation (NYSE:EXC) to sell its approximate thirty percent interest in the Southeast Chicago Energy Project (SCEP) for $50 million, subject to certain closing adjustments. SCEP is a 350-megawatt, natural gas-fired "peaker" electric power plant located on Chicago's southeast side. It began operation as a joint venture between Peoples Energy and Exelon in the summer of 2002. The purchase by Exelon requires Federal Energy Regulatory Commission (FERC) approval, which is expected this summer. The closing will take place shortly after receipt of FERC approval, at which time the Company expects to record a slight gain on the sale in line with expectations. Cash proceeds will be used to reduce short-term borrowing at Peoples Energy Corporation. Peoples Energy will remain as fuel supplier to the plant. "While our power investments have provided solid earnings and cash flow, the power market has changed dramatically over the past several years and we are not well positioned to compete in that market long-term," said Thomas M. Patrick, chairman, president and CEO, Peoples Energy. "The sale of power assets allows us to narrow our focus to three primary lines of business -- gas distribution, oil and gas production and energy marketing." SCEP currently sells 100% of its output to Exelon Generation under an existing long-term power purchase agreement. Neither the Power Purchase Agreement nor the operations will be impacted by the transaction. This sale will be the first transaction following the Company's announcement of its intent to divest its power assets. Pending final negotiations, due diligence and regulatory approvals, the Company expects to close on the sales of its remaining power assets, Elwood Energy and a development site in Oregon, at a sizable gain, later in fiscal 2006. Peoples Energy, a member of the S&P 500, is a diversified energy company comprised of three primary business segments: Gas Delivery, Oil and Gas Production and Energy Marketing. The Gas Delivery business serves about one million retail customers in Chicago and northeastern Illinois. Visit the Peoples Energy web site at PeoplesEnergy.com. Forward-Looking Information. This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, such as the expected gain on the company's sale of its interest in Southeast Chicago Energy Project. Generally, the words "may", "could", "project", "believe", "anticipate", "estimate", "plan", "forecast", "will be", and similar words identify forward-looking statements. Actual results could differ materially from such expectations because of many uncertainties, including, but not limited to, the timing of the closing of the sales transactions, approval of the transactions by governmental agencies, effectiveness of the Company's risk management policies and the creditworthiness of customers and counterparties; regulatory developments in the United States, Illinois and other states where the Company does business; changes in the nature of the Company's competition resulting from industry consolidation, legislative change, regulatory change and other factors, as well as action taken by particular competitors; operational factors affecting the Company's gas distribution, power generation and oil and gas production segments; Aquila Inc.'s financial ability to perform under its power sales agreements with Elwood Energy LLC; weather related energy demand; and terrorist activities. Some of the uncertainties that may affect future results are discussed in more detail in Peoples Energy's most recent Form 10-K filed with the SEC under Item 1 - Business and Item 7 - Management's Discussion and Analysis, as such information may be updated by subsequent filings under the Securities Exchange Act of 1934. All forward-looking statements included in this press release are based upon information presently available, and Peoples Energy assumes no obligation to update any forward-looking statements.