Chugach Electric Association, AK Placed on S&PWatch.

NEW YORK--(BUSINESS WIRE)--Standard & Poor's CreditWire 11/2/98-- Standard & Poor's today placed its single-'A' rating on Chugach Electric Association, Alaska's bond series 1991A on CreditWatch with developing implications, meaning the rating may be raised, lowered, or affirmed.

The CreditWatch placement follows Matanuska Electric Association's announcement that it intends to acquire Chugach. Should Matanuska succeed in its acquisition effort, the company's plan is to create an independent generating and transmission company from Chugach's generation and transmission plant and add Chugach's retail customers to its own distributino system. Matanuska has indicated that it has a financing commitment of $400 million that will be used in part to defease $246 million of Chugach series A bonds. The CreditWatch listing also reflects that the fact that the long-term implications on Chugach's operations and finances are unknown. The rating was placed on CreditWatch due to uncertainty over whether Matanuska will be successful in its bid to acquire Chugach.

Although the acquisition offer is hostile, Chugach's management and board have said it will seriously consider and evaluate Matanuska's offer to determine if it will benefit Chugach members. To initiate the acquisition on their own, Matanuska must collect signatures of 10% Chugach's members in order to call a membership meeting. If a majority of the members present at the meeting vote to establish a referendum on the acquisition, and 10% of the members vote in favor of the acquisition, then Chugach's board will have to seriously consider the offer. Chugach management expects that Matanuska will take this approach, and that these events will occur by early 1999.

Standard & Poor's will continue to monitor events associated with the proposed acquisition and their effect on Chugach's credit quality as well as the implications of these events on the future of public power in Alaska.

Factors in maintaining the single-'A' rating include:

-- A business profile of "3" out of "10" (with "1" being the highest)

that reflects the cooperative's strong management,

-- Concentrated, but well-operated generating base,

-- Competitive rates, and

-- An extensive transmission system.

The cooperative's overall cost of power remains competitive at about 4.0 cents per KWh. Historic financial performance remains solid with fixed charge coverage ranging from 1. 3 times (x) in 1992 to 1.44x in 1997. Although unrestricted liquidity was low at fiscal year end 1997, about 21 days' expenses, a $50 million credit line with National Rural Utilities Cooperative Finance Corp. provides ready short-term capital, Standard & Poor's said.---CreditWire