Mobile Energy Services files reorganization proposal

MOBILE, Ala. – Mobile Energy Services Company LLC, its parent Mobile Energy Services Holdings Inc. and a committee of secured bondholders have jointly filed a proposed plan of reorganization in U.S. Bankruptcy Court that would, upon approval, restructure Mobile Energy Services’ secured bond debt. The plan also would allow for the development of a new pulp mill on the mill site idled by Kimberly Clark Tissue Company in September 1999.

The proposed plan would restructure the existing secured bond debt, with the consent of the bondholders, significantly reducing Mobile Energy Services’ long-term debt obligations. Additionally, the equity ownership of Mobile Energy Services Holdings would be transferred from Southern Company and its affiliates to the bondholders.

As part of the plan filed Aug. 4, Mobile Energy Services would continue to provide energy services to the Kimberly Clark Tissue Company and Sappi facilities at the site, as well as to the new pulp mill. Negotiations with a potential third-party owner and operator of the new pulp mill are underway.

The new pulp mill would use property and equipment from Kimberly-Clark Tissue Company. Mobile Energy Services obtained the right to purchase the equipment in return for market-priced steam and electricity and as part of a settlement of claims the companies filed against each other. Under the proposed plan Mobile Energy Services would transfer the rights to the pulp mill property and equipment to the owners of the new pulp mill.

Mobile Energy Services is the owner and operator of a facility that generates electricity, produces steam and, until the shutdown of the pulp mill, processed black liquor as part of a pulp and paper complex in Mobile, Ala. Mobile Energy Services and Mobile Energy Services Holdings Inc. filed for Chapter 11 bankruptcy protection in January 1999.

The proposed plan also furthers the construction of a new cogeneration facility, which would use natural gas to manufacture additional steam for the site and electricity for sale to the wholesale power market. The development of the cogeneration project was approved by the U. S. Bankruptcy Court in January of this year.

The plan also provides for payment in full to non-insider creditors of Mobile Energy Services other than the bondholders whose claims are allowed by the Bankruptcy Court, as well as payment in full of allowed administrative claims.

The U.S. Bankruptcy Court for the Southern District of Alabama must review and approve the joint plan of reorganization after it is voted on by creditors. The transactions envisioned under the plan are also subject to review by the U.S. Securities and Exchange Commission. This press release is not a solicitation for any party’s vote on the plan.

Caution regarding forward-looking statements:

The information presented above includes forward-looking statements, in addition to historical information. Mobile Energy Services cautions that there can be no assurance that such indicative results will be realized and that there are various important factors that could cause actual results to differ materially from those indicated in the forward-looking statements, such as, but not limited to (i) changes in government regulations (including environmental regulations) and anticipated deregulation of the electric energy industry; (ii) additional competition in Mobile Energy Services’ markets; (iii) potential business strategies, including acquisitions or dispositions of assets that Mobile Energy Services may pursue; (iv) political, legal and economic conditions and developments in Mobile Energy Services’ markets; (v) financial market conditions and the results of financing efforts; (vi) changes in commodity prices and interest rates; (vii) weather and other natural phenomena; (viii) the performance of Mobile Energy Services projects and investments and the success of efforts to develop new opportunities; and (ix) other factors, whether discussed above or in filings made by Mobile Energy Services, Southern Energy and Southern Company (and its subsidiaries) with the Securities and Exchange Commission.

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