Fitch Rates Energy Northwest's Wind Project Bonds 'A-'.

Business Editors

SAN FRANCISCO--(BUSINESS WIRE)--April 25, 2003

Fitch Ratings has assigned Energy Northwest's $21,780,000 wind project revenue bonds, Series 2003 a rating of 'A-'. In addition, the outstanding parity $50,410,000 Series 2001A and $20,265,000 Series 2001B bonds are upgraded to 'A-' from 'BBB+'. The Rating Outlook is Stable. The 2003 bonds will be priced in early May by lead manager, Prager, Sealy & Co., LLC.

The upgrade of the $70,675,000 Series 2001A and 2001B bonds reflects the good quality of the Phase I power purchasers, and the commercial operation of the Phase I wind facility, which effectively obligates the Phase I power purchasers to pay, on a monthly basis, their respective shares of project costs, whether or not the project is operating or capable of operating. The obligations of each purchaser are payable from the available income of the specific utility enterprise, to be paid as an operating expense. A 25% step-up provision, in the event a power purchaser were to default, provides additional protection.

Phase II is an expansion of the Phase I facility, but has a separate group of power purchasers. The combined Phase I and II facilities are known as the Wind Project System (System). Bonds for the two phases are on parity and are payable from and secured by net revenues of the System. Importantly, commencement of payment of the Series 2003 bonds, by the Phase II purchasers, is not contingent on construction and completion of the Phase II wind facility, as was the case with Phase I.

With regard to security features for the Phase I and II bonds, it should be noted that the Phase I and II purchasers are obligated to pay a percentage share of the total System annual operating and maintenance costs. However, with regard to principal and interest payments on the Series 2001 and 2003 bonds, the purchasers are only responsible for their percentage of the fixed costs associated with the respective Phase I and Phase II facilities in which they are participants, i.e. there is no direct cross-subsidization of payment obligations between Phases. Gross revenue of the System is derived from revenues received by Energy Northwest for the sale of power from the System, including amounts due Energy Northwest from purchasers under the purchase power agreements. With the successful completion of Phase I and the elimination of certain associated project-finance provisions, the security package for both the Series 2001 and 2003 bonds are now along more traditional municipal standards.

The 'A-' rating reflects the Nine Canyon Wind Project's diverse and good quality mix of power purchasers, the take-or-pay power sales agreements with local utility systems, the growing demand for a green-renewable resource in the region, and the reasonable estimated cost of System power. At a power cost estimated at about 3.3 cents per kilowatt-hour (kWh) in 2004 rising to 3.8 cents in 2009 (includes certain renewable energy credits), the price of power is likely to compare well with those of other energy supply alternatives in the Northwest. Even without Department of Energy Renewable Energy Production Incentive (REPI) payments, which currently approximate 1.8 cents per kilo-watt hour (kwh), the cost of power at about 5.2 cents per kwh appears to be competitive within the region.

The primary risks are an extended outage of the wind project and uncertainties related to the continuation of the Federal REPI program and annual Congressional appropriation needed for the disbursement of these funds. REPI is typically included within a larger DOE annual budget item. While Phase I is operational and has qualified for current REPI payments, Phase II must have at least one wind turbine operational by September 30, 2003 in order for it to qualify for the REPI program. Energy Northwest expects that Phase II of the Project will commence operation by December 2003 (with at least one turbine operational by 9/30/03 in order to qualify for the REPI). However, it's important to point out that regardless of REPI, the purchasers are legally obligated to pay operating expenses and debt service on the bonds.

The power purchasers and their respective shares of the Phase I and II projects output are as follows: Okanogan County PUD No. 1 (25%); Grant County PUD No. 2 (19%); Douglas County PUD No. 1 (15%); Chelan County PUD No. 1 (12%); Grays Harbor County PUD No. 1 (12%); Energy Northwest (Columbia Generating Station; 6%); Benton PUD (5%); Mason County PUD No. 3 (3%); Lewis County PUD No. 1 (2%). In aggregate, Fitch estimates that the average debt rating of the participants appears to be at least 'A'.

Energy Northwest owns and operates the Columbia Generating Station and the Packwood Lake Hydroelectric Project. The power from these plants is sold under contract to the Bonneville Power Administration. Energy Northwest plans to develop new projects (including the wind project system) that will be secured and accounted for as separate utility systems. The first wind project (Phase I) which commenced commercial operation in September, 2002, consists of 37 wind turbines with an aggregate generating capacity of approximately 48 megawatts, with power sold to local utilities under long-term purchase power agreements. The Project is located in the Horse Heaven Hills area southwest of Kennewick, Washington (approximately 185 miles southeast of Seattle, Washington). Phase II of the Project is located on property adjacent to Phase I and will consist of an additional 12 wind turbines with an aggregate generating capacity of approximately 15.6 MW and will share the existing transmission structure.