ITC Holdings Corp. has signed a definitive agreement to acquire all of the outstanding equity interests in Michigan Electric Transmission Co. (METC), a privately held company and the neighboring transmission system to ITCTransmission, a wholly owned operating subsidiary of ITC Holdings, in a transaction valued at approximately US$866 million.

Under the terms of the agreement, METC’s selling shareholders—Trans-Elect Inc., a GFI Energy Ventures portfolio company, affiliates of Evercore Capital Partners, Macquarie Essential Assets Partnership and other private investors—will receive $486 million in cash and approximately $70 million in shares of ITC Holdings common stock. In addition, ITC Holdings will assume, or refinance at METC, approximately $311 million of METC debt.

ITCTransmission owns, manages and maintains the high-voltage, electric transmission system in southeastern Michigan and is the first fully independent transmission company in the country. METC owns and manages the high-voltage electricity transmission system in the western portion of Michigan’s Lower Peninsula. Upon completion of the acquisition, ITC Holdings’ subsidiaries will own and operate the transmission system for almost the entire Lower Peninsula of Michigan and together will own and operate the largest independent transmission system in the United States.

“Welcoming METC to the ITC Holdings family is an important step toward furthering the Federal Energy Regulatory Commission’s goals for independent transmission companies and realizing our goal of being a best-in-class transmission provider for the benefit of all of our stakeholders,” said Joseph L. Welch, president and CEO of ITC Holdings. “Through our independence, we are singularly focused on transmission and are able to promote electric reliability and continually enhance the service we provide our customers.”

Since 2003, ITCTransmission has invested almost $300 million in transmission property, plant and equipment, and maintenance targeted at improving the reliability and performance of the electric infrastructure in southeastern Michigan. Likewise, METC has invested approximately $137 million in that same time period to enhance transmission system reliability in its service area. “This transaction will increase ITC Holdings’ size and scale and provides us with incremental opportunities to deploy capital going forward,” said Welch. “We are committed to providing METC with the capital it needs to invest in its system to achieve similar goals to that of ITCTransmission, namely to improve reliability, reduce congestion and lower the overall cost of delivered energy to customers.”

“The true beneficiaries are ITCTransmission and METC’s transmission customers. The combination of our companies will result in operational efficiencies from simplified, joint operations and provide us with the ability to jointly identify, coordinate and plan system needs, projects and construction,” said METC Executive Vice President and COO Julie Couillard. “Our joint coordination in regional system planning will ultimately lead toward a robust transmission grid that will facilitate the demands of the customer and energy marketplace.”

“ITC Holdings expects that this transaction will be break-even to accretive to GAAP reported EPS in 2007 and 2008 and accretive thereafter, resulting in a significant increase in EPS growth over the next five to seven years,” said Edward M. Rahill, senior vice president and CFO of ITC Holdings. “ITC Holdings is committed to maintaining its investment grade ratings and, as such, intends to finance this transaction with a combination of both debt and equity.”

The transaction is subject to customary closing conditions and regulatory approvals, including approval from the FERC and antitrust review under the Hart-Scott-Rodino Act. The approval of ITC Holdings’s shareholders is not required. ITC Holdings expects the transaction to close in the second half of 2006.