Fitch Affirms Great River Energy at 'A-' After Consolidation of Trading Operation.

NEW YORK -- Fitch affirms Great River Energy Cooperative (MN)'s (GRE) implied senior secured rating at 'A-'. The Rating Outlook is Stable. GRE has approximately $1.1 billion of outstanding debt (primarily through Federal Financing Bank obligations).

This rating action stems from an announcement by GRE on Nov. 10, 2006 indicating that the energy trading operations at its power trading subsidiary, Split Rock Energy (SRE), had ceased and its operations would be consolidated into GRE. While not anticipated, Fitch does not view this change as having a material impact on GRE's overall credit profile given that the new combined operation should continue to support GRE's basic utility business and that GRE's financial forecasts were very conservative with relation to SRE. For more information on GRE, please see the Fitch report dated July 21, 2006 on the Fitch Ratings web site at www.fitchratings.com.

Fitch upgraded GRE to 'A-' from 'BBB+' on June 23, 2006. This reflected, in part, an evolution of Fitch's view of SRE in recent years, from a credit concern to a neutral to slightly positive credit factor. This view was based on SRE's recent positive performance and solid net income over the past three years, its experienced management, and Fitch's belief that it followed a prudent risk management strategy. In addition, Fitch believes that the asset optimization and transmission expertise contained within SRE was instrumental in GRE's successful integration into the Midwest Independent Transmission System Operator (MISO) market and served as a competitive advantage in the market.

Conversations with GRE management indicate that many of SRE's employees will be hired by GRE to continue managing GRE's generation and transmission assets within the MISO market. Fitch believes that this transition will not affect GRE's ability to operate successfully within this market.

Additionally, Fitch does not anticipate a meaningful impact on GRE's overall financial condition as a result of the ceasing of SRE's trading operations. Over the last three years SRE contributed, in aggregate, 39% of GRE's total margins of $60.8 million. While GRE has used additional margins from SRE to help fund capital expenditures, management does not count on these margins in their projections. As a result, Fitch's rating is reflective of GRE's core business operations without giving credit for prospective SRE profits.

Other credit factors reflected in GRE's rating include:

--A strong and diverse service territory;

--Low-cost baseload generating resources that continue to be among the most efficient in the region (Coal Creek Station in particular);

--Contracts that were extended to 2045 with all 28 member cooperatives;

--A very strong and experienced management team;

--The benefits of an automatic monthly Power Cost Adjustment clause;

--Acceptable financial performance, with debt service coverage (DSC) as calculated by Fitch (which excludes margins from SRE) of 1.10 times (x) in 2005;

--A large capital plan ($3.5 billion through 2016) that will primarily fund new generation capacity;

--A projected rise in wholesale rates from 4.5 cents/kWh (kilowatt hour) currently to over 7.0 cents/kWh in 2016.

GRE is a generating and transmission (G&T) cooperative providing wholesale electric energy and related services to 28 member distribution cooperatives, serving over 614,000 customers. GRE is the fourth largest G&T cooperative in the United States and is the second largest wholesale power provider in Minnesota. In 2005 GRE had total electric revenue of $691 million (consisting of residential [67.3%] and commercial/irrigation [32.7%]) and total energy sales of 11,150,000 Mwh.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.