Fitch Comments on MDU Resources Agreement to Purchase Cascade Natural Gas.

NEW YORK -- MDU Resources, Inc.'s (MDU) execution of an agreement to acquire Cascade Natural Gas Corporation (Cascade) for approximately $475 million, including cash consideration of $26.50 per share and the assumption of indebtedness, ($174 million as of March 31, 2006), is not currently anticipated to have an effect on MDU's ratings or Stable Rating Outlook. The Issuer Default Rating of MDU is 'A-'. E[acute accent]Fitch expects MDU to issue common equity to the extent necessary to capitalize the Cascade acquisition with approximately 50% equity and 50% debt, consistent with the targeted capitalization structure of its existing utility operations. MDU's consolidated ratio of debt to capitalization is anticipated to remain at 40% or less after finalizing the financing for the acquisition. MDU's FFO interest coverage ratio should remain above rating category targets following closure of the acquisition and was 9.4 times for the twelve months ended March 31, 2006. E[acute accent]The closing of the acquisition is subject to various state regulatory and other approvals, with completion currently anticipated for mid-2007. The addition of Cascade will nearly double the size of MDU's regulated utility operations and demonstrates MDU's continuing commitment to relatively lower risk regulated utilities. MDU intends to hold Cascade in a separate subsidiary of the parent company. E[acute accent]Cascade is a local gas distribution company that serves approximately 235,000 customers in 91 cities and towns in Washington and Oregon. Customer growth has exceeded 4% for the last several years. Cascade filed a request with the Washington Utilities and Transportation Commission for an increase in base rates of 4.47%, which represents an $11.7 million annual revenue increase. There is a statutory deadline of mid-January 2007 for the base rate request and on-going settlement discussions. An unfavorable outcome in the rate filing, in itself, would not constitute a material adverse event under the merger agreement. This is the first general rate filing by Cascade in the state of Washington in approximately 10 years. E[acute accent]If the merger is consummated, MDU's utility operations will still comprise a minority of consolidated operations. Non-utility operations consist of natural gas and oil production, construction materials and mining, independent power production, natural gas pipelines, and energy and construction services. E[acute accent]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.