Fitch Affirms Laclede Gas; Outlook Revised to Stable.

Business Editors

NEW YORK--(BUSINESS WIRE)--June 4, 2004

Laclede Gas Co.'s (LGC) outstanding $410 million first mortgage bonds are affirmed at 'A+' by Fitch Ratings. In addition, The Laclede Group, Inc.'s (LGI) indicative senior unsecured rating is affirmed at 'A-' and its outstanding $45 million trust originated preferred securities (issued by Laclede Capital Trust I) at 'BBB+'. The Rating Outlook for both LGC and LGI is revised to Stable from Negative.

The revised Rating Outlook reflects the de-leveraging impact of LGI's recent sale of $46 million of new common stock -- proceeds of which have been downstreamed to LGC to be used for short-term debt repayment. (LGC has also announced the redemption on June 15, 2004 of $50 million of callable first mortgage bonds.) The stabilization of LGI/LGC's credit profile also reflects the financial benefits resulting from a modified rate design approved by the Missouri Public Service Commission (MPSC) in November 2002. Under the new rate mechanism, LGC effectively recovers a greater portion of its distribution costs through the fixed component of its distribution tariff thus significantly reducing ongoing weather related earnings volatility. As a result of these factors, Fitch expects consolidated credit measures to strengthen through 2004 and more importantly remain consistent with parameters for the current ratings going forward.

LGI is a utility holding company whose credit strength is derived from wholly owned LGC, a regulated natural gas utility serving approximately 630,000 customers in the St. Louis, MO metropolitan area. LGC's operating profile is favorable. In particular LGC's firm residential, commercial, and industrial customer base, representing approximately 90% of system throughput, is not subject to significant competitive risk as natural gas space heating rates remain below comparable electric rates in LGC's service territory. Nonutility businesses include SM&P Utility Resources, an underground facilities locating and marking services business, as well as gas marketing, insurance services and real estate development. Overall these activities do not materially impact LGI's credit profile as LGC is expected to represent the vast majority of consolidated operating income for the foreseeable future.

A moderate credit concern is LGC's above average reliance on short-term working capital borrowings during the winter heating season to fund natural gas and propane peaking inventories. Specifically, short-term borrowings during the 2003-2004 heating season rose to record levels due to higher natural gas commodity prices. However, the aforementioned equity issue as well as Laclede Gas Company's issuance in April 2004 of $150 million of first mortgage bonds significantly reduced the level of short term borrowings. Additionally, in mitigation, LGC is permitted by the MPSC to automatically pass through prudently incurred gas costs, including carrying costs, and is authorized to adjust rates four times annually to reflect current wholesale gas prices. In addition, short-term borrowings are supported by physical inventories and/or customer accounts receivables and are routinely liquidated by the conversion of these assets to cash in the spring and summer months. Based on these factors, Fitch anticipates LGC's short-term debt balance to revert to historical levels by mid-year 2004.