Con Ed on RatingAlert-Neg; NU, Subs on Alert-Pos.

NEW YORK--(BUSINESS WIRE)--Oct. 13, 1999--

Fitch IBCA places Con Edison Inc.'s (CEI; "A+" implied senior unsecured debt) on RatingAlert-negative following the announcement of a definitive merger agreement with Northeast Utilities Inc. (NU).

The rating for Consolidated Edison Company of New York (CENY), an operating subsidiary of CEI, is affirmed at "AA-."

NU subsidiaries' senior ratings -- Public Service New Hampshire ("BB"), North Atlantic Energy Corp. ("BB-"), Western Massachusetts Electric Co. ("BBB-") and Connecticut Light and Power Co. ("BBB-") -- are all placed on RatingAlert-positive. The NU holding company's senior unsecured rating of `BB-' is affirmed and remains on RatingAlert-positive.

The RatingAlert-negative for CEI stems from the additional debt ($1.5 billion) needed to finance the acquisition of NU, coupled with historically slimmer cash flows and margins at NU's operating subsidiaries.

However, ratings of CEI's current operating subsidiaries CENY and Orange & Rockland Utilities (O&R) are not affected by the announced merger due to the anticipated corporate structure whereby CENY, O&R and the NU holding company will be separate subsidiaries of the CEI holding company.

This corporate structure helps to insulate CENY and O&R from the operations of the lower-rated NU subsidiaries. Additionally, the New York regulators will likely keep close watch to ensure that CEI's out- of-state activities do not negatively impact CENY.

The RatingAlert-positive on NU and its subsidiaries reflects positive developments at the NU operating companies and the merger with a financially stronger parent. The positive developments unrelated to the merger include:

--   Pending closure on the sale of the remaining fossil and hydro
     generating units of CL&P and WMECO, expected to be completed
     about year-end;
--   NU's recent announcement that it intends to auction its nuclear
     power plants and exit the nuclear generation business; and
--   Progress being made by the New Hampshire Public Utilities
     Commission on its restructuring settlement proposal.

Fitch IBCA views the business combination favorably. CEI and NU share very similar competitive strategies, namely to exit the unregulated and riskier generation business and focus on core strengths in the area of electric and gas distribution.

Additional positive business factors include synergistic cost savings ($1.5 billion over 10 years) due to the proximity of the utilities, the more diversified customer base, and the expanded `footprint' in the northeastern corridor (5 million electric and 1.4 million gas consumers) with which to market other energy products and services.

CEI will acquire all the common stock of NU for $3.5 billion, to be financed roughly equally in cash and stock.

The companies estimate that the transaction will take approximately 12-18 months to consummate, with the merger conditioned upon several approvals, including: the shareholders of CEI and NU; the utility regulatory commissions in New Hampshire, Connecticut and Massachusetts; the Securities and Exchange Commission; the Nuclear Regulatory Commission; and the Federal Energy Regulatory Commission (FERC).

In order to implement the merger plan, the utilities will need to reach a reasonable cost savings sharing arrangement with the regulatory bodies in several states in which the companies operate.