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Capstone Advises Homeserve on its Acquisition of FirstEnergy Service Contracts

August 2006

Boston, MA - Capstone Partners LLC, a leading national investment banking advisory firm, announced that it has advised Homeserve plc (LSE: HSV.L) on its recent acquisition of certain home service contracts of FirstEnergy Corp. (NYSE: FE), a leading investor-owned electric utility.  Capstone Partners served as the exclusive financial advisor to Homeserve on this transaction.

Homeserve announced a step change in the development of its US operation, with the signing of a five year marketing agreement with FirstEnergy Corp. to market home emergency policies to 3.4m electricity households in its Ohio and Pennsylvania service areas.

Homeserve’s US business, based in Miami, Florida, currently has 153,000 policies and the signing of the marketing agreement with FirstEnergy significantly increases the number of US households to which Homeserve can market from 1.4m to 4.8m. By way of comparison Homeserve’s UK policy business, Homeserve GB, currently has access to a market of 21.9m households. 

FirstEnergy is a diversified energy services company based in Akron, Ohio.  Its seven electric utility operating companies comprise the USA’s fifth largest investor-owned electricity system, based on 3.4m households in Ohio and Pennsylvania and a further 1.1m in New Jersey. Its subsidiaries and affiliates are involved in the generation, transmission and distribution of electricity, as well as energy management and other energy-related services.

As part of the transaction, Homeserve has acquired 20,000 existing electrical wiring, gas supply pipe, water line and sewer line policies from FirstEnergy, together with a network of service contractors from Allied Utility Network Inc, which currently services FirstEnergy’s policies.

The transaction is expected to be marginally earnings dilutive in the current financial year but to be earnings-enhancing from 2007/8, albeit not material to overall Group earnings. The value of the gross assets acquired as a result of this transaction is US$nil.

Richard Harpin, Chief Executive, commented; “This deal is great news for our development in the US, capturing over 3m households with a major power utility. It proves our stated strategy to target electricity and gas companies in the US as well as water utilities.”