Fitch Affirms PGE's Ratings; Remains On Watch Negative.

Business Editors

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

Fitch Ratings has affirmed the ratings of Portland General Electric's (PGE's) debt securities. The securities remain on Rating Watch Negative, where they were placed on November 29, 2001. Portland General's ratings are as follows: senior secured 'BB+'; senior unsecured 'BB-'; and, preferred 'B'.

The rating affirmation reflects the company's recently improved near-term liquidity position but also the continuing uncertainty pending resolution of Enron Corp.'s (ENE's) efforts to sell PGE. The ratings also consider the negative overhang from the ENE bankruptcy, contingent liability issues, and exposure to ongoing investigations into the manipulation of western energy prices. Favorable considerations include PGE's strong stand alone credit profile, constructive regulatory relations, and certain ring-fence provisions that insulate the company from involuntary consolidation. In addition, the company has a 48% minimum common equity requirement by the Oregon Public Utility Commission.

On October 10, 2002, PGE issued $150 million of 8 1/8% First Mortgage Bonds, maturing in February 2010. The bonds were issued in a private placement led by Lehman Bros. On October 28, 2002, PGE issued $100 million of 5.6675% FMBs, maturing October 2012, with an insurance guarantee. The insurance wrap will add 150 basis points to the annual interest costs. Proceeds from the issuance will be used to repay short-term revolving bank debt and current maturities of long term debt. The company currently has cash of about $60 million and borrowing capacity of $190 million. Although PGE's liquidity appears adequate through May 2003, when $142 million of Pollution Control Revenue Bonds become putable to the company, PGE's ability to refinance $222 million of secured revolving credit facilities, which mature in June ($72 million one-year revolver) and July of 2003 ($150 million three-year revolver), and $40 million of FMBs, which mature in August 2003, is a significant concern given the bankruptcy overhang and a difficult industry financing environment.

Fitch Ratings will continue to monitor ongoing efforts by Enron to sell its ownership interest in PGE, along with eleven other of its solvent businesses. The auction process is underway and final offers are expected to be announced late this year or early in 2003. If an agreement to sell PGE is negotiated, regulatory approvals would be required from the Oregon Public Utility Commission, FERC, the SEC, and others in order to complete any proposed sale. If an agreement can be struck to sell the company to a strong buyer or if the company's plan to transfer PGE to a SPE insulated from the bankruptcy is approved by the bankruptcy court and implemented timely, a change in Rating Watch and/or an upgrade to investment grade creditworthiness is possible. The potential economic impact of the ongoing investigations into manipulation of western energy markets remains a concern. Moreover, Enron-related contingent liability issues stemming from pensions, health care, and taxes may not be remedied by a sale or transfer to a SPE, reducing traction for future upgrades.