Fitch Rates FMPA's Stanton II $59.5MM Rfdg Bonds 'A+'; Affirms Outstanding Ratings.

NEW YORK -- Fitch Ratings has assigned an 'A+' underlying rating to Florida Municipal Power Agency's (FMPA) $59.5 million of Stanton II Project refunding revenue bonds, series 2004 (auction-rate securities). Pricing is expected to take place the week of Aug. 2, 2004, with UBS Financial Services Inc. as underwriter. Proceeds will be used to refund certain outstanding series 1993 bonds. In addition, Fitch has affirmed the 'A+' ratings on the outstanding debt of the All-Requirements Project (ARP), Stanton, Stanton II and Tri-City projects, and has affirmed the 'A-' rating on the outstanding debt of the St. Lucie Project (St. Lucie). The Rating Outlook is Stable for all ratings.

The common 'A+' rating on the ARP, Stanton, Stanton II and Tri-City projects reflect the strong crossover in member participation and integration between ARP and the three coal-fired projects -- Stanton, Stanton II and Tri-City. This increased integration was due to the addition of Kissimmee Utility Authority and Lake Worth Utilities into ARP in the fall of 2002, and resulted in a high percentage of entitlement capacity in the three coal-fired projects largely becoming a dedicated resource of the ARP. Additional support for the ratings is derived from the favorable ARP contracts, which obligate all ARP members to share the full cost of ARP dedicated capacity associated with each project. The 'A-' rating on St. Lucie Project bonds takes into account the unit's strong operating record, solid participant base, and very high fixed costs associated the nuclear project.

Ratings for all of FMPA projects reflect the following credit characteristics:

-- Historically stable financial performance;

-- Court-validated power supply contracts;

-- Florida's very slow transition to deregulation; and,

-- A solid management team.

A favorable customer base of primarily residential customers at the member level provides further credit support. This, together with management's plan to manage variable-rate debt exposure and improved risk management efforts, are common credit strengths for each project. Financial performance for fiscal-year 2003 reflects adequate debt service coverage (per Fitch's calculation) of about 1.06 times (x) for All-Requirements; Stanton II, 1.00x; Stanton, 2.35x; Tri-City, 1.10x; and St. Lucie, 3.20x (interest coverage, there are no schedule principal payments). All projects are in compliance with there debt service covenant per their resolutions. Per the resolution debt service coverage for each project was 1.06x, 1.48x, 2.38x, 1.2x, 3.38x, respectively.

While FMPA's wholesale rates are competitive within the state, they are influenced by natural gas prices that are currently at high levels, resulting in member system retail rates that are slightly above average. The members' above average rates are also due in part to low capacity factors associated with a highly residential and small commercial customer base and high general fund transfers. If not addressed, these higher retail rates could adversely affect FMPA in a more competitive environment, which is not likely over the near term. In response to natural gas price volatility, FMPA implemented several measures to hedge their natural gas exposure, including increased managerial oversight of risk management, more stringent risk management procedures, and a relationship with Calyon Financial, who executes trades on the New York Mercantile Exchange, in various energy derivative products for FMPA as part of its hedging strategy. This effort has resulted in gas costs that are below current market prices.

FMPA is a nonprofit, joint-action agency with five separate power supply projects and one pooled financing project. While FMPA's 29 member municipal electric systems may join more than one project, each project is independent from the others and revenues from one project may not be used to pay the costs of another.

All-Requirements Project:

Comprised of fifteen participants, the project was originally designed for non-generating systems, however FMPA has expanded the project to include systems that own generation. This allows participants to pool their resources and utilize generation more efficiently. The latest debt issuance is part of FMPA's strategy to provide for the consolidation of the three coal-fired projects into ARP. Although two member cities, Homestead and St. Cloud have not expressed a desire to join the All-Requirements Project, and contribute their share of their coal-fired plants to the All-Requirements Project, management believes that consolidation can still occur without modifying these cities' current contractual arrangements. The 'A+' rating reflects the project's diverse resource mix of 20% owned generation and 80% purchased power (including member-owned generation), a competitive wholesale rate of 6.05 cents/kwh (including transmission), and strong demand growth.

Stanton Project:

The Stanton Project serves six municipal electric systems, five of which are members of both Stanton II and the ARP. The Stanton Project has a 14.8% (63.3 mw) ownership interest in Stanton Unit 1, a 425-mw coal-fired generating facility operated by the Orlando Utilities Commission (OUC). The wholesale rate is competitive at about 4.14 cents/kwh (including transmission). Project-specific concerns include a reliance on one generating unit and a need to reduce fixed costs. Exposure to interest rate risk related to variable-rate debt is at a manageable level of 19.5% of total debt.

Stanton II Project:

Seven municipal electric systems participate in the Stanton II Project, which has a 23.2% (99.6 mw) ownership interest in Stanton Unit 2, a 429-mw coal-fired generating facility operated by OUC. Five of the project's members also participate in the ARP. The rating reflects a competitive wholesale rate of 4.30 cents/kwh (including transmission) and the unit's above-average performance record. The project benefits from strong participants with historically sound financial performance and good customer mix. Exposure to interest-rate risk related to variable-rate debt is at a manageable level of 20.8% of total debt (including this issuance). Project-specific concerns include risks associated with a single generating unit and above-average fixed costs.

Tri-City Project:

The three Tri-City participants (two also participate in Stanton, Stanton II and ARP) have a 5.3% (22.5 mw) ownership interest in Stanton 1. Tri-City's credit strengths include a competitive wholesale rate of 5.03cents/kwh (including transmission), solid operating performance, and financially sound participants. Concerns center on the project's above-average fixed costs and a small participant base.

St. Lucie Project:

The St. Lucie project consists of an 8.8% ownership interest in the St. Lucie Unit 2, an 838 mw nuclear generating facility operated by Florida Power & Light Co. The project's rating reflects the unit's strong operating performance with a lifetime capacity factor of 82.1%, a favorable participant base (fifteen members, twelve of which participate in other FMPA projects) with revenues derived mostly from residential customers and very low energy costs. Concerns center on the project's high fixed costs, uncertainties associated with future capital costs, and above average wholesale rates (5.66 cents/kwh in 2003). Recently, management entered into a forward purchase agreement with a guaranteed rate of return with Merrill Lynch that is projected, together with other available funds, to be sufficient to pay off all the St. Lucie bonds at an anticipated final maturity in 2026. The current outstanding bonds are due Oct. 1, 2021. With plant license extension granted by the NRC for another twenty years, FMPA anticipates extending the final maturity of existing debt to 2026 in order to provide greater certainty of limited rate changes over the coming years.