Fitch Affirms Juniper Generation's Senior Secured Notes.

CHICAGO -- Fitch Ratings has affirmed its rating of 'BBB-' on Juniper Generation LLC's (Juniper) $206 million senior secured notes due 2014. In 2005, financial performance was slightly favorable compared to original projections, allowing Juniper to achieve a debt service coverage ratio of 1.5 times (x). The rating reflects Juniper's expected financial performance and the underlying portfolio asset mix over the term of the notes. Fitch has evaluated Juniper's credit quality on a stand-alone basis, independent of the credit quality of its owners.

On a portfolio-wide basis, operational performance has been consistent with original expectations. While project-specific operating data is unavailable, management has indicated that facility availability in 2005 was sufficient for each project to earn the maximum capacity payment under its respective power purchase agreement (PPA). Furthermore, none of the facilities have encountered any material operating difficulties.

Fitch does not anticipate that the short-run avoided cost (SRAC) formula for Pacific Gas & Electric (PG&E), the PPA counterparty for eight of the projects, will be modified to create a material discrepancy between PPA energy payments and Juniper's natural gas costs. Under the current SRAC formula, which has not changed over the past 10 years, the gross margin Juniper earns on electricity sales varies little as natural gas prices fluctuate. Thus, expected financial performance is based on the receipt of contractual revenues, which are driven by facility availability, rather than the price of natural gas.

In the event that the fixed energy price period is extended beyond July 2006, Fitch will evaluate the effect on Juniper's financial performance going forward. It is important to note that Juniper is primarily dependent upon the cash flows of a single facility after 2011. To the extent that this facility's cash flows remain unfixed, it is unlikely that Juniper's credit quality would benefit from the potential extension of the fixed energy price period.

Juniper, a special-purpose holding company indirectly owned by ArcLight Capital Partners, LLC (90%) and Delta Power Company, LLC (10%), holds ownership interests equivalent to 298 MW of net capacity in a portfolio of nine gas-fired cogeneration plants. The facilities, located in southern California, sell energy and capacity to PG&E (long-term issuer default rating of 'BBB' by Fitch) and Southern California Edison Co. (long-term issuer default rating of 'BBB-' by Fitch) under PPAs expiring between 2009 and 2016. Juniper's bondholders rely solely on the equity distributions from the portfolio and the fees earned by two wholly owned service companies. The service companies have contracted with Juniper to perform operations and maintenance services and fuel procurement.

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.