Fitch Places Sithe Independence Partners on Rating Watch Negative.

CHICAGO -- Fitch Ratings has placed the 'BB' rating of Sithe/Independence Funding Corporation's secured notes and bonds (the securities) on Rating Watch Negative. The rating action follows the recent announcement by Dynegy Inc. (rated 'CCC+', Outlook Positive by Fitch) of the acquisition of Sithe Energies, the indirect owner of the Sithe/Independence project, from Exelon Corp. (rated 'BBB+' by Fitch). Concurrent with the acquisition, Exelon will purchase the remaining ownership interests in Sithe Energies, giving Dynegy 100% ownership of the Sithe/Independence project.

Fitch downgraded the securities from 'BBB-' to 'BB' in July 2002 due to the diminished credit quality of Dynegy Holdings Inc., (rated 'CCC+', Outlook Positive by Fitch) the guarantor of contracts representing approximately 35% of Sithe/Independence's revenues. That rating action incorporated the concern of a heightened risk of contractual default with the absence of alternate offtake arrangements with pricing that would support debt service with sufficient cushion to justify the former rating level.

Fitch believes it unlikely that the current contracts guaranteed by Dynegy Holdings will be modified as a result of the acquisition. The Rating Watch Negative action reflects the new concerns that could result from the Sithe/Independence project being wholly owned by an entity of speculative credit quality. Provisions under the project documents, as well as the organization structure and actions of Sithe Energies and the Sithe/Independence project, provide certain protections to holders of the securities. The Rating Watch will be resolved once Fitch has completed its review of these protections and the potential effect from the change in ownership.