Fitch Affirms Laclede Gas' FMBs At 'A+'; Outlook Revised to Negative.

Business Editors

NEW YORK--(BUSINESS WIRE)--Oct. 8, 2002

Laclede Gas Co.'s (LGC) outstanding $180 million first mortgage bonds are affirmed at 'A+' by Fitch Ratings. In addition, Fitch assigns an 'A-' indicative senior unsecured debt rating to The Laclede Group, Inc. (LGI) and an expected 'BBB+' rating to Laclede Capital Trust I's proposed issuance of up to $45 million trust originated preferred securities. Laclede Capital Trust is a statutory business trust established by The Laclede Group, Inc. (LGI) for the sole purpose of issuing securities and lending the proceeds to LGI. The Rating Outlook is revised to Negative from Stable.

Proceeds from the trust preferred securities will be used to purchase a like amount of LGI's junior subordinated debentures. LGI in turn will use these funds to retire a bank bridge loan incurred to fund the January 2002 acquisition of SM&P Utility Resources, Inc. Interest and principal payments on the underlying LGI subordinated debentures will be the sole funding source for the trust preferred dividend payments and redemption of principal. LGI has the right to defer payment of interest on the junior subordinated debentures for up to 20 consecutive quarters, in which case, preferred dividends may also be deferred by the trust. Fitch views the trust preferred securities as having significant equity-like flexibility to LGI's capital base due to their long maturity and optional dividend deferral.

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 80% 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 recently acquired SM&P Resources, an underground locating and marketing services business, as well as gas marketing, insurance services and real estate development. Even after factoring in the addition of SM&P, nonutility activities are not expected to materially impact LGI's credit profile as LGC is expected to contribute in excess of 85% of consolidated operating income for the foreseeable future.

The negative outlook reflects the recent deterioration in consolidated credit measures to levels which are weak for LGI/LGC's current rating levels. While adverse operating conditions including significantly warmer than normal weather during the 2001-2002 heating season have had an adverse impact on consolidated earnings and cash flow, the impact was more severe than in prior periods of warm winter weather. For the 12 month period ended 6/30/02 consolidated cash interest coverage dropped to approximately 2.6x versus a historical range of about 4.0x. Fitch notes that a recent settlement agreement reached with the Missouri Public Service Commission (MoPSC) should ease the ongoing impact of warm weather on LGI/LGC's credit profile. Specifically, the MoPSC approved a new rate design that enables LGC to recover a greater portion of its distribution costs through the fixed rather than volumetric component of its distribution tariff.