Cedar Brakes I & II Downgraded To 'BB+' By Fitch; Rtg Watch Negative.

Business Editors

CHICAGO--(BUSINESS WIRE)--Feb. 14, 2003

Cedar Brakes I LLC's $310.6 million senior secured bonds and Cedar Brakes II LLC's $431.4 million senior secured bonds have been downgraded to 'B' from 'BB+' by Fitch Ratings. The ratings remain on Rating Watch Negative where they were originally placed on October 2, 2002.

The Cedar Brakes transactions are part of El Paso Corp.'s (EP) Qualifying Facility contract restructuring program. Cedar Brakes I and II purchase energy from El Paso Merchant Energy (EPM) and resell that energy to Public Service Electric & Gas Co. (currently rated 'A-' by Fitch) under long term contracts. Although Cedar Brakes I and II are bankruptcy-remote, indirect subsidiaries of EP, their ratings are constrained by the underlying credit quality of EP due to EP's guarantee of EPM's performance under the supply contracts.

The downgrades reflect continued erosion in EP's credit quality, including its heightened debt leverage, weakening credit protection measures, and the ultimate financial implications and cash impact of EP's ongoing wind down of energy marketing and trading activities. Fitch is particularly concerned with the greater than expected deterioration in EP's cash position since the company last reported net liquidity on December 19, 2002. Given this information, EP's ability to meet upcoming debt maturities in 2003 and 2004 could become increasingly dependent on successful execution of EP's planned $2.9 billion asset sale program. Fitch notes that a successful renegotiation of terms under EP's $4.5 billion bank credit facilities could ease these refinancing pressures. The continued Rating Watch Negative status incorporates the uncertainty surrounding the ultimate outcome of the pending Federal Energy Regulatory Commission (FERC) ruling involving EP subsidiaries' natural gas pipeline availability to California.