Colonial Gas' Rtgs on S&PWatch Pos;Boston Gas' Afrmd.

NEW YORK--(BUSINESS WIRE)--Standard & Poor's CreditWire 10/20/98--Standard & Poor's today placed its ratings of Colonial Gas Co. on CreditWatch with positive implications (see list of ratings below).

In addition, the outlook of Boston Gas Co., a wholly owned subsidiary of Eastern Enterprises, was revised to stable from positive. The ratings for Boston Gas were affirmed (see list). The ratings for Eastern Enterprises' unregulated subsidiary, Midland Enterprises Inc., also were affirmed (see list). The outlook for Midland remains stable.

These rating actions follow the announcement of a definitive merger agreement between Eastern Enterprises and Colonial Gas, a local gas distributor based in Lowell, Mass. Upon completion of the merger, Colonial Gas will become a wholly owned subsidiary of Eastern Enterprises, but most of its operations are expected to be functionally combined with the prospective parent company's other utility subsidiaries, Boston Gas and Essex County Gas Co. Colonial Gas will benefit from enhanced financial flexibility and operational synergies as part of the larger, financially stronger Eastern Enterprises. Because of the equity-financed structure of the transaction, the acquisition is not expected to have a negative effect on Eastern Enterprises' consolidated credit strength. However, Colonial Gas has a somewhat weaker financial profile than Boston Gas, which limits the upside rating potential of Boston Gas in the near term.

Colonial Gas serves over 150,000 customers located northwest of Boston and on Cape Cod. A number of the communities served by Colonial Gas are contiguous to Boston Gas' service territory, and Colonial Gas is one of the fastest-growing gas distributors in New England, with customer growth of over 3% annually in the last five years. Including Colonial Gas, the combined gas operations at Eastern Enterprises benefit from a growing customer base of over 725,000 in Massachusetts, improving operational efficiency, and supportive regulation that has previously allowed for the recovery of acquisition premiums. The increased size and scope of the utility operations should better position the company for further industry consolidation in New England, and the transition to a more competitive environment.

The companies expect that the transaction will be completed by mid-1999, subject to approval by the shareholders of both companies and various regulatory agencies. A proposed merger and rate plan for Colonial Gas is expected to be filed with the Massachusetts Department of Telecommunications and Energy by December 1998.

The CreditWatch listing for the Colonial Gas ratings is expected to be resolved upon the completion of the proposed merger transaction.--CreditWire -0-

RATINGS PLACED ON CREDITWATCH WITH POSITIVE IMPLICATIONS

Colonial Gas Co.
  Corp credit rtg                  A-
  Sr secd debt                     A

RATINGS AFFIRMED

Boston Gas Co.
  Long-term corp credit rtg        A
  Short-term corp credit rtg       A-1
  Sr unsecd debt                   A
  Pfd stk                          A-
  CP                               A-1
Midland Enterprises Inc.
  Corp credit rtg                  A-
  Sr secd debt                     A-