Fitch Rates Indiana Municipal Power Agency $160MM Series 2006A 'A+'.

NEW YORK -- Fitch Ratings assigns an 'A+' rating to Indiana Municipal Power Agency's (IMPA) $160 million power supply system revenue bonds, series 2006A. Fitch also affirms the 'A+' rating on IMPA's $433 million of outstanding power supply system revenue bonds. Proceeds from the series 2006A bonds will fund IMPA's 12.88% ownership interest in a new 750 mw super-critical pulverized coal-fired generating facility (Trimble County Unit 2) and interest during construction. Trimble County Unit 2 will be operated by Louisville Gas and Electric (LG&E) and will be located at the existing Trimble County site in Kentucky. IMPA currently owns a 12.88% share in Trimble County Unit 1 (a sub-critical coal-fired plant). The series 2006A bonds are scheduled to price in early April 2006 with Citigroup as senior manager. The Rating Outlook is Stable.

Positive support for IMPA's 'A+' rating is derived from the agency's reasonable and prudent resource plan, solid mix of low-cost power resources (including a very favorable 20-year 150 mw power purchase agreement with AEP-Indiana Michigan Power beginning in 2007), below-average retail rates at the member level, and stable financial profile. Financial results for 2005 provided debt service coverage of 1.36 times (x), equity to total capitalization of 22%, and cash on hand sufficient to cover 115 days of operations. As of July 1, 2005, the average residential electric bill charged by IMPA's members was $72.27/kwh, about 12% below the average for Indiana investor-owned utilities, even as Indiana as a whole is a very low-cost state. Fitch also recognizes and views favorably IMPA's forward-thinking management policies and practices.

IMPA is in the process of replacing several expiring long-term purchase power contracts with new, base-load, owned generation. IMPA's primary credit concerns center on construction risks associated with this effort. In addition to Trimble County Unit 2, IMPA also anticipates investing in a 200 mw share of a mine-mouth plant under development by Peabody Energy, the Prairie State Energy Center, which will be located at a green-field site in Southern Illinois. IMPA's share will be financed with approximately $400 million additional debt, funded in two series, later this year. Both Trimble County Unit 2 and Prairie State are expected to be brought into commercial operation in the 2010 timeframe. Constructively, Fitch notes that both Trimble County Unit 2 and Prairie State will be built under fixed-price EPC contracts, which incorporate solid guarantees and performance warrantees.

While Trimble County Unit 2 has received all permits for construction, the Sierra Club and two local environmental organizations have filed an administrative action challenging the permit. Although a credit factor, this concern is somewhat mitigated in Fitch's view, given that the unit will employ state of the art emission control technology and is designed to comply with all emissions regulations and permit conditions, including the recently enacted federal mercury regulations.

Fitch believes IMPA's resource plan will maintain an economic and stable power supply for the foreseeable future. By investing in multiple projects, IMPA has mitigated single-unit outage risk. In addition, the projects provide some fuel diversity (including a mix of both eastern and western-sourced coal). Looking forward, management also expects to utilize midterm (two- to three- year) purchase power contracts to further optimize operating flexibility, and does not expect to materially participate in the spot and day-ahead MISO power markets. Because debt service associated with the coal-fired capacity additions replaces the cost of long-term purchases, IMPA's wholesale rates are expected to stay level through 2015 (cost to members were 4.63 cents/kwh in 2005), and should remain competitive with those of its neighboring utilities.

IMPA is a joint-action agency that provides wholesale electricity to 40 members, pursuant to take-and-pay full-requirements contracts that expire on April 1, 2032. The member utilities are located throughout the state of Indiana and serve a combined population of 280,000 people. While concentration of industrial customers within certain member system service territories should be noted, economic indicators within the state are stable. The six largest members, which account for 57% of total revenues, each have healthy financial positions and growing service territories.

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.