DTE Energy today announced it has signed a definitive agreement to sell its transmission business subsidiary, International Transmission Co. (ITC), to affiliates of Kohlberg Kravis Roberts & Co. (KKR) and Trimaran Capital Partners L.L.C. for approximately $610 million in cash.

"The current regulatory environment requires us to give up operational control of our transmission assets," said Anthony F. Earley Jr., DTE Energy chairman and chief executive officer. "Because we generate the greatest value for our shareholders and customers from assets we own and operate, transmission is no longer strategic to DTE Energy or a driver of future growth. In addition, we believe this transaction further enhances our financial flexibility and solid balance sheet position."

ITC owns DTE Energy's system of nearly 3,000 miles of high-voltage electric transmission lines and associated facilities and easements. These transmission assets were formerly owned and operated by Detroit Edison, DTE Energy's electric utility subsidiary.

"We believe the sale of our transmission assets is consistent with federal regulatory policy and Michigan law, which promotes the independent operation of the electric transmission grid," Earley said. "When transfer of ownership is completed, Michigan will be the first state to have virtually all electric utility customers served by a completely independent electric transmission system, demonstrating DTE Energy's continued commitment to electric restructuring."

Under the terms of the pending agreement, ITC will seek Federal Energy Regulatory Commission (FERC) approval to cap the transmission rates charged to Detroit Edison's customers at the current levels until Dec. 31, 2005; thereafter, such rates will be subject to adjustment by the FERC. Detroit Edison customers should see no change in service because the electric transmission system will continue to be operated by the Midwest Independent System Operator. Under FERC regulations, Detroit Edison will continue to have fair and open access to Michigan's electric transmission network. In addition, KKR and Trimaran intend to invest in ITC, allowing it to capitalize on opportunities to best serve its customers.

"FERC and the Michigan Public Service Commission have shown great foresight in creating a regulatory structure that supports a more competitive and efficient U.S. power industry, which should result in lower electricity bills for consumers over the long term," said Scott M. Stuart, a KKR partner. "Based on the policies they have established, utilities with forward thinking management, like DTE Energy, are capitalizing on the opportunity to convert their non-core transmission assets into cash. Due to the stability and predictable cash flows typical of transmission systems and the long-term investment potential, KKR finds this to be an attractive sector of the energy market and expects that ITC will be the first of several transmission investments."

Dean Kehler, a Trimaran founder and managing partner, said, "For the past five years, Trimaran professionals have been pursuing the goal of building a world-class American transmission company. With KKR as our partner, ITC as the first acquisition and substantial additional capital to invest in the sector, we are well on our way to achieving this goal. We look forward to pursuing additional transmission opportunities as other utilities follow DTE Energy's lead."

The transaction is under review by the Michigan Public Service Commission and requires the approval of FERC. The sale is expected to close during the first quarter of 2003.