Fitch Affirms SA Energy Acquisition PFC $681.3MM Gas Supply Revs at 'AA-'.

SAN FRANCISCO -- Fitch Ratings affirms its rating on the SA Energy Acquisition Public Facility Corporation (PFC) $681.3 million gas supply revenue bonds, series 2007 at 'AA-'. The Rating Outlook is Stable.

PFC is a non-profit corporation formed by the City of San Antonio to assist the city's electric and gas utility (CPS Energy) in the acquisition of fuel supply and electricity. The 2007 bond proceeds were used by PFC to acquire a fixed, 20-year supply of natural gas to be delivered by J Aron & Company (J Aron). PFC will resell the full 20-year supply to CPS Energy (rated 'AA+' with a Stable Outlook by Fitch) for a market index price minus a fixed discount.

Given the structured nature of the transaction, the 'AA-' rating reflects the lowest rating of: the guarantor of J Aron's obligations as the gas supplier - Goldman Sachs Group, Inc. (GSG; rated 'AA-' with a Stable Outlook); the guarantor of the commodity swap counterparty, whose role is further explained below (Royal Bank of Canada, rated 'AA' with a Stable Outlook); and the debt service reserve account and working capital account surety bond provider (XL Capital, rated 'AAA' with a Stable Outlook). The performance of CPS Energy is not a material factor in the rating given support provided by reserves that sufficiently covers a default by CPS Energy until the gas is available to be remarketed by J Aron for the benefit of bondholders.

One change to the transaction made since the time the bonds were sold is the replacement of the investment agreement, in which the debt service reserve fund and working capital account are invested, with a collateralized repurchase agreement, dated August 15, 2007. The repurchase agreement provides PFC with a first priority security interest in U. S. Treasuries posted by DEPFA BANK (the agreement provider), with weekly valuation required. The change was required due to a downgrade of the investment provider, DEPFA BANK, by another rating agency. The investment agreement required collateral posting in the event any of the entity's ratings dropped below 'AA-/Aa3'. The impact to bondholders is full collateralization of DEPFA's obligation in the transaction. As long as the collateral is in place, Fitch does not view the credit quality of the investment provider as a key credit driver. However, it should be noted that upon an upgrade of DEPFA BANK to 'AA-' in the future such that all its ratings are once again above 'AA-/Aa3', the collateral will be withdrawn and the terms of the original uncollateralized investment agreement will again become effective. In that event, the credit quality of the investment provider would become a material credit driver in Fitch's rating on the bonds.

Surveillance update: Performance has been as expected since transaction inception:

--Gas deliveries began on July 1, 2007, as scheduled;

--J. Aron has delivered the required volumes of natural gas to PFC;

--PFC has delivered the required volumes of natural gas to CPS Energy, who has paid PFC upon delivery on a timely basis;

--The surety policies for the debt service reserve fund and working capital account have not been tapped;

--There has not been any remarketing of natural gas by J. Aron.

For additional details regarding the S. A. Energy Acquisition PFC gas supply revenue bonds, please see the report dated May 31, 2007, titled 'S.A. Energy Acquisition Public Facility Corporation, Texas', available on Fitch's website at www.fitchratings.com.

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.