Fitch Affirms & Removes Northeast Utilities from Watch Negative.

NEW YORK -- Fitch Ratings has removed the Rating Watch Negative status for Northeast Utilities (NU) and affirmed the 'BBB' senior unsecured rating. The Rating Outlook is Negative. Fitch has also revised Connecticut Light & Power Co.'s (CL&P) Rating Outlook to Negative from Stable and affirmed the 'A-' senior secured, 'BBB+' senior unsecured, and 'BBB' preferred stock ratings. In addition, Fitch has removed the Rating Watch Negative status and affirmed the 'BBB' rating of Northeast Generation Company LLC's (NGC) $120 million ($37.5 million remains outstanding) senior secured bonds due 2005 (series A) and affirmed the 'BBB-' rating on NGC's $320 million senior secured bonds due 2026 (series B).

NU's Negative Rating Outlook reflects the expectation of reduced earnings and cash flow from Northeast Utilities' competitive businesses in the near term and uncertainty related to the long-term profitability or strategic direction of this segment. NU's current ratings incorporate anticipated performance improvement at NU Enterprises, Inc. (NUEI) and considerable dividends from these operations over the next several years to help fund NU's substantial utility capital buildout. A material reduction in dividends from the competitive businesses significantly increases the company's need for external funding to finance these capital expenditures. NU's largest subsidiary, CL&P, recently announced that it was increasing the estimated cost of a major transmission project (the Middletown to Norwalk line) by up to $300 million. Because CL&P will assume 80% of the project's costs (with United Illuminating responsible for the remaining 20%), the project will likely require additional debt financing.

Fitch's Outlook revision for CL&P to Negative from Stable reflects CL&P's substantial capital spending plan, the moderate lag in regulatory recovery of these transmission expenditures, and the resulting weakening of credit measures. CL&P's cash flow will also be negatively affected during 2005 by mandated refunds of previous competitive transition adjustment charge overcollections. CL&P's leverage (in terms of debt to cash from operations) is expected to remain high for the 'BBB' rating category over the next several years until the company completes its major capital projects and begins recovering its investments from customers.

At NU, a negative rating action could result if losses at Select are more significant or extended than is currently expected or if NU funds expansion of its utility system without sufficient new equity. Conversely, a positive rating action could result from a significant reduction in parent level debt or a sustained improvement in Select Energy's profitability.

At CL&P, inadequate equity funding of its capital build-out or significant delays in the regulatory recovery of these costs could lead to a negative rating action. A positive rating action could result from sufficient parent equity infusions that keep debt to cash flow ratios consistent with the rating category or expeditious recovery of invested capital from ratepayers.