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Press release from Marketwire

First Asset PowerGen Fund and Sprott Power Corp. Agree to Merge

Monday, December 13, 2010

First Asset PowerGen Fund and Sprott Power Corp. Agree to Merge14:55 EST Monday, December 13, 2010TORONTO, ONTARIO--(Marketwire - Dec. 13, 2010) - First Asset PowerGen Fund (TSX:PGT.UN) (the "Fund") and Sprott Power Corp. ("Sprott Power") announced today that they have entered into a definitive agreement (the "Arrangement Agreement") dated December 13, 2010 that provides for a merger of the Fund and Sprott Power by way of a statutory plan of arrangement (the "Arrangement"). The Arrangement and the Arrangement Agreement have been approved by First Asset Investment Management Inc. ("First Asset"), the manager, trustee and investment advisor of the Fund and unanimously approved by the Board of Directors of Sprott Power. Concurrent with entering into the Arrangement Agreement, Sprott Power announced today that it has entered into a share purchase agreement dated December 10, 2010 with Sky Generation Inc. ("Sky Gen") to acquire all of the common shares of Sky Gen. The Arrangement would create a combined company, also to be named Sprott Power Corp. ("New Sprott Power"), which will be well capitalized, have strong growth prospects and be strategically well positioned in the renewable energy industry. New Sprott Power is expected to be an attractive partner in the consolidation of the independent power producer market, as evidenced by the Sky Gen transaction. With Sky Gen, New Sprott Power will have 45.7 MW of operational wind assets, 67.0 MW of capacity accepted for long-term power purchase agreements ("PPAs"), and 223.6 MW in its development portfolio and a coast-to-coast development portfolio of wind and hydro assets with total net potential capacity exceeding 1500 MW. Following completion of the Arrangement, New Sprott Power will be publicly listed on the Toronto Stock Exchange (the "TSX"), provided conditional listing conditions are met. Subject to receipt of all necessary approvals, including approval of the unitholders of the Fund ("Fund Unitholders") and securityholders of Sprott Power ("SPC Securityholders"), completion of the Arrangement is expected to occur in January 2011, and in any event no later than February 28, 2011, unless extended by mutual agreement between the Fund and Sprott Power in accordance with the Arrangement Agreement.Barry Gordon, President and CEO of First Asset, the Manager of the Fund, noted that "The Arrangement represents the culmination of the Fund's work to try to maximize the value of the Fund's assets to Fund Unitholders, a strategic process that commenced in 2009. First Asset believes Sprott Power will become a major participant in the energy sector and represents the best opportunity to realize on the current and future value of the Fund's assets, including in particular, its Confederation Power Inc. holding."Jeff Jenner, President and CEO of Sprott Power, commented that "The Arrangement with the Fund and the acquisition of Sky Gen creates a growth oriented renewable power producer. New Sprott Power will have the cash and operating cash flow to realize on its near-term development pipeline and will consider initiating a dividend payment program for shareholders."Full details of the Arrangement and certain other matters will be included in the joint information circular of the Fund and Sprott Power (the "Joint Circular") which provides prospectus level disclosure of New Sprott Power to be filed with the regulatory authorities and mailed to Fund Unitholders and SPC Securityholders in accordance with applicable securities laws. Special meetings of Fund Unitholders and SPC Securityholders are expected to be held on or about January 13, 2011 to approve the proposed Arrangement.As previously disclosed, the Fund will cease payment of any further monthly distributions and will suspend the annual redemption in January 2011, both pending the outcome of the special meeting of Fund Unitholders.New Sprott PowerNew Sprott Power will combine the resources and prospects of Sprott Power and the Fund to form a new renewable energy business that is uniquely positioned for rapid and stable growth in North America.New Sprott Power will:have a senior management team with an average of 18 years experience in the energy industry including nine years dedicated to the development of renewable energy projects have management experience in all phases of renewable energy including development, construction and operations; have operations in five provinces and capacity to expand to others if business conditions warrant; combine the existing and to be acquired assets of Sprott Power and the Fund to provide additional scale, greater operating efficiency, increased geographical, regulatory and wind-source diversification and a high quality development pipeline; and as a larger more diversified enterprise, have increased access to capital both in public and private financial markets. With the foregoing advantages, New Sprott Power will provide investors with the opportunity to participate in the development, construction and operation of long-term renewable energy power generation assets in North America. New Sprott Power expects to generate low risk yield for shareholders by utilizing the best available renewable technologies and proven construction methods. New Sprott Power anticipates providing investors with predictable and sustainable distributions and grow its distributable cash over time by making attractive and accretive investments in the North American renewable power sector. New Sprott Power will sell most of its power generation under long-term PPAs to highly-rated public utilities. These government-backed PPAs provide price assurance and enhance New Sprott Power's ability to obtain project and other financing. The PPAs provide predictably in estimated cash flows so as to determine distributions payable to investors and support development activities.The Arrangement AgreementThe following description of the Arrangement Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Arrangement Agreement which will be attached to the Joint Circular and filed by the Fund on SEDAR.Exchange Consideration Pursuant to the terms of the Arrangement Agreement, Fund Unitholders will receive 5.3396703 New Sprott Power common shares ("New SPC Shares") for each unit of the Fund ("Fund Unit") held, subject to adjustment, and Sprott Power shareholders ("SPC Shareholders") will receive one New SPC Share for each Sprott Power share ("SPC Share") held. All warrants of Sprott Power will be exchanged for warrants of New Sprott Power and all options of Sprott Power will be exchanged for options of New Sprott Power, on the same basis as the SPC Shares. Upon completion of the Arrangement, Fund Unitholders are currently expected to hold approximately 50.5% of New Sprott Power. If Sprott Power completes the acquisition of Sky Gen, immediately following the Arrangement, Fund Unitholders are expected to hold approximately 48.0% of New Sprott Power.Mutual Covenants Regarding Non-Solicitation, Termination Payments and Fees and ExpensesUnder the terms of the Arrangement Agreement, each of the Fund and Sprott Power has agreed that it will not solicit or initiate discussions regarding any Acquisition Proposal (as defined in the Arrangement Agreement) and has granted the other party a right to match any Superior Proposal (as defined in the Arrangement Agreement). The Fund and Sprott Power have also agreed to mutual termination fees in the amount of $1.0 million, which will be payable to the other party in certain circumstances, in particular where the Arrangement is not completed due to a Superior Proposal being accepted, recommended, approved or an agreement to implement such Superior Proposal is entered into. The Fund and Sprott Power have also agreed to mutual payments for reimbursement of the fees and expenses, which are payable to the terminating party in certain circumstances, in particular where the Arrangement Agreement is terminated because the other party has failed to receive the requisite vote of securityholders for approval of the Arrangement at the applicable meeting (or any adjournment or postponement thereof), and the approval of the Arrangement has been approved at the meeting (or any adjournment or postponement thereof) of the terminating party.Key Attributes of the Arrangement for Fund Unitholders In evaluating and approving the Arrangement and in making its determination and recommendation, First Asset had regard for and gave careful consideration to a number of factors including, among other things: the consideration to be received by Fund Unitholders pursuant to the Arrangement, which implies a value of the Fund of approximately $39.3 million; the business, operations, assets and prospects of Sprott Power, including the long-term expectations regarding Sprott Power's operating performance; the increase in size of the public float available to Fund Unitholders; the increasing capital required to effectively execute a successful business in the renewable power space and the prospects for funding Confederation Power Inc.'s ("Confed") costs through the Fund; the synergies realized by creating a well capitalized strategic participant in the renewable power space with a national footprint; that New Sprott Power will benefit from improved asset diversification with over 20MW of operational wind assets, another 37 MW of capacity accepted for long-term PPAs, and a coast-to-coast development portfolio of wind and hydro assets with a total net potential capacity exceeding 1,500 MW. With Sky Gen, New Sprott Power will have 45.7 MW of operational wind assets, 67.0 MW of capacity accepted for long-term PPAs, and 223.6 MW in its development portfolio; that the Arrangement has been structured so as to permit Fund Unitholders to retain their exposure to Confed's business; First Asset's consideration of potential alternative courses of action available to the Fund for the sale of Confed in the context of the current economic, political and industry conditions; the Sprott Power management team being comprised of proven, successful veterans of the energy industry; the ability to complete the Arrangement on a basis to preserve the Fund's capital and non-capital losses to shelter future income and capital gains; the requirement that the Arrangement must be approved by not less than two-thirds of the votes of Fund Unitholders cast in respect thereof; and the terms of the Arrangement which provides among other things that Fund Unitholders who properly exercise their right to do so, may exercise dissent rights and, if ultimately successful, be entitled to receive fair value for their Fund Units. Key Attributes of Arrangement for Sprott ShareholdersIn the course of their evaluation of the transaction contemplated by the Arrangement Agreement, the Board of Directors of Sprott Power consulted with senior management and legal counsel, reviewed a significant amount of public information, and considered a number of factors including, among others, the followingNew Sprott Power will be of significantly larger scale with increased financial strength and is expected to have greater financial and business resources in an industry in which economies of scale are increasingly important; New Sprott Power will benefit from improved asset diversification with over 20MW of operational wind assets, another 37 MW of capacity accepted for long-term PPAs, and a coast-to-coast development portfolio of wind and hydro assets with a total net potential capacity exceeding 1,500 MW. With Sky Gen, New Sprott Power will have 45.7 MW of operational wind assets, 37.0 MW of capacity accepted for long-term PPAs, and 223.6 MW in its development portfolio; New Sprott Power will have operating assets that will be generating revenue and cash flow from operations; New Sprott Power will be publicly listed on the TSX following completion of the Arrangement, provided certain listing conditions are met; SPC Shareholders who oppose the Arrangement may, upon compliance with certain conditions, exercise their dissent rights and receive the fair value of their SPC Shares in accordance with the Arrangement; and the requirement that the Arrangement be approved by (i) two-thirds of the votes cast on the Sprott Power Resolution (as defined in the Arrangement Agreement) by SPC Shareholders, and (ii) two-thirds of the votes cast on the Sprott Power Resolution by SPC Securityholders, voting as a single class, in each case, present in person or by proxy at the Sprott Power special meeting (or any adjournment or postponement thereof). Board of Directors and Management of New Sprott PowerFollowing completion of the Arrangement the board of directors of New Sprott Power will consist of Mr. John Varghese as Chairman, Mr. Jeffrey Jenner, Mr. Michael Ross, Mr. Glenn Estill and Mr. F. David Rounthwaite. Mr. Jenner will be the President and Chief Executive Officer, Mr. Martin Lim will be the Chief Financial Officer, Mr. Donald J. Bartlett will be the Chief Operating Officer and Mr. Hugh Campbell will be Vice President, Technology and Procurement of New Sprott Power.Approvals The Arrangement is subject to a number of approvals which must be obtained prior to implementation, as well as the satisfaction of customary closing conditions. The Arrangement will be implemented by way of a Court-approved statutory plan of arrangement under the Canada Business Corporations Act and is subject to approval by not less than: (i) two-thirds of Fund Unitholders, (ii) two-thirds of SPC Shareholders and (iii) two-thirds of SPC Securityholders, voting as a single class, in each case, present in person or by proxy, at special meetings of Fund Unitholders and SPC Securityholders, as applicable, to be held on or about January 13, 2011. The Joint Circular will be mailed to Fund Unitholders and SPC Securityholders in connection with the special meetings. The TSX has granted conditional approval for the listing of the New SPC Shares issuable pursuant to the Arrangement, subject to satisfaction of certain conditions.Advisors Blake, Cassels & Graydon LLP is acting as legal counsel to the Fund. Cassels Brock & Blackwell LLP is acting as legal counsel to Sprott Power.Additional Information and Availability of Documents A summary of the Arrangement Agreement, the Plan of Arrangement, a description of the various factors considered by First Asset and the Board of Directors of Sprott Power in their respective decisions to approve the Arrangement as well as other relevant background information will be included in the Joint Circular to be mailed to Fund Unitholders and SPC Securityholders in advance of the special meetings to vote on the Arrangement. Copies of the Joint Circular, the Arrangement Agreement, the Plan of Arrangement and certain related documents will be available on SEDAR (www.SEDAR.com) as part of the public filings of the Fund. INVESTORS ARE URGED TO READ THE JOINT CIRCULAR WHEN IT BECOMES AVAILABLE BECAUSE IT WILL CONTAIN IMPORTANT INFORMATION. The Joint Circular will also be available on First Asset's and Sprott Power's respective websites. About First Asset PowerGen Fund The Fund is an actively managed fund that provides Fund Unitholders with exposure to both power related assets listed on the TSX and power related assets that are not listed on the TSX, through direct and indirect ownership of such assets. The portfolio of the Fund consists of power related assets, defined as power generation assets involved in the generation and sale of electricity including hydro-electric, gas fired, coal fired, wind, biomass and biogas, among others and related energy infrastructure assets which include construction, fuel reclamation, pipeline, trucking and other related services to the power generation industry.About Sprott Power Corp.Sprott Power is a privately-held Canadian-based company dedicated to the development and financing of renewable energy projects. Through acquisitions, partnerships and joint ventures, Sprott Power seeks to provide its shareholders with exposure to the power generation sector. Sprott Power is managed by Sprott Power Consulting LP, of which Sprott Consulting LP, a business unit of Sprott Inc. (TSX:SII), is the sole limited partner.Forward-Looking Statements This release contains "forward-looking statements" which reflect the current expectations of the Fund and Sprott Power. These statements reflect First Asset's and Sprott Power management's current beliefs with respect to future events and are based on information currently available to management. Forward-looking statements in this press release include, but are not limited to, statements with respect to the value of Fund Units and SPC Shares, the anticipated closing of the Arrangement, the timing for such closing, the anticipated benefits from the Arrangement including the future financial position, power production, development capacity and growth prospects of New Sprott Power following the completion Arrangement, the completion of the acquisition of Sky Gen, having increased access to capital to obtain project and other financing, and statements with respect to the consideration of a dividend payment program, and the timing of payment of such distributions and dividends, if any. Forward-looking statements involve significant known and unknown risks, uncertainties and assumptions, including with respect to the anticipated completion of the Arrangement, the value of Fund Units and SPC Shares, the closing of the Arrangement, the timing and receipt of all applicable regulatory approvals and securityholder consents, the anticipated benefits from the Arrangement including the future financial position, power production, development capacity and growth prospects of New Sprott Power following the completion Arrangement, the satisfaction of other conditions to the completion of the Arrangement, the completion of the acquisition of Sky Gen, having increased access to capital to obtain project and other financing, and statements with respect to the consideration of a dividend payment program, and the timing of payment of such distributions and dividends, if any. Many factors could cause actual results, performance or achievements to be materially different from any future results, performance or achievements that may be expressed or implied by such forward-looking statements including, without limitation, risks listed under the heading "Risk Factors" in the Fund's annual information form dated March 31, 2010 and under the heading "Risk Factors" in the Joint Circular; the closing of the Arrangement could be delayed if necessary regulatory approvals and securityholder consents are not obtained on the timelines planned or the transaction may not be completed if such approvals and consents are not obtained; or any other conditions to closing are not satisfied. Should one or more of these risks or uncertainties materialize, or should assumptions underlying the forward-looking statements prove incorrect, actual results, performance or achievements could vary materially from those expressed or implied by the forward-looking statements contained in this release. Although the forward-looking statements contained in this release are based upon what the Fund and Sprott Power believe to be reasonable assumptions, management cannot assure investors that actual results, performance or achievements will be consistent with these forward-looking statements. These forward-looking statements are made as of the date of this release and the Fund and Sprott Power do not assume any obligation to update or revise them to reflect new events or circumstances, except as required by law.FOR FURTHER INFORMATION PLEASE CONTACT: Jeff JennerSprott Powerjjenner@sprottpower.comwww.sprottpower.comOR416-642-1289 or 1-877-642-1289First Assetwww.firstasset.com