Fitch Rates MEAG Power's -Georgia- Combined Cycle Project Revs 'A+'.

Business Editors

NEW YORK--(BUSINESS WIRE)--Sept. 22, 2003

Fitch rates the Municipal Electric Authority of Georgia's (MEAG Power) $80 million of combined cycle project (CC Project) revenue bonds, series 2003A 'A+'. The Rating Outlook is Stable. Proceeds will finance the final costs of the 503 mw natural gas-fired combined cycle facility that is expected to become operational in 2004. The bonds are scheduled to price the week of Sept. 22, 2003, with Bear, Stearns & Co. Inc. as senior manager.

MEAG Power is a joint action agency supplying wholesale power to 49 municipal distribution systems in Georgia through its Project One and General Resolution Projects.

To meet the growing power needs of its participants, MEAG Power began the development of a new generation project, originally named the combustion turbine project or CT Project, and entered into power sales contracts with 34 of MEAG Power's 49 member systems. The CT Project was comprised of two separate generating units consisting of a 300 mw portion of a 503 mw combined cycle facility and a 150 mw simple cycle facility. In 2002, MEAG Power financed their share of the original project's cost from its $258.5 million (2002A) and $86.2 million (2002B) bond offerings. Due to changing market conditions, earlier this year MEAG Power canceled the simple cycle unit portion of the project, renamed the project the CC Project, and reconfigured the obligations of the Project.

The CC Project now includes the entire 503 mw of capacity of the CC Project, and is secured by the CC Project's take-or-pay court validated power sales contracts, the Participants' ability to assess and collect an ad valorem tax sufficient to meet their outstanding obligations, and a debt cash funded debt service reserve fund equal to the maximum annual debt service that is separated into sub accounts for each Participant.

The CC Project is separate from and its costs are not obligations of MEAG Power's Project One, General Resolution Projects or Telecommunications Project. Nevertheless, the CC Project has a similar participant and cost obligation mix (on an aggregate basis) and security structure with MEAG's Project One, General Resolution and Telecommunication Projects.

Credit strengths reflect the CC Project's participant base and takes into account the current and potential CC Project's cost obligations for debt and non-debt related costs and the lack of step-up requirement in the power sale contracts. It should be noted that as a result of MEAG Power changing the Participants' share in the CC Project after it issued the 2002A bonds and 2002B bonds and the Participants selecting different payment options for their portion of the 2003 debt service costs (to better match their particular financial goals), the City of Marietta, has a significant share (approximately 60%) of the debt service obligation of the 2003 Bonds for the first 20 years, compared to its 2% share of its debt service obligations for the 2002A and 2002B bonds and its 14% share of non-debt service related CC Project costs.

In addition, for the final five years of the 2002 bonds, the cities of Cartersville (35%), Covington (18%), La Grange (35%) and Thomasville (25%) collectively have 100% of the debt service responsibilities. Fitch does not believe the variance and resultant reduction in revenue diversity materially affect the credit quality of the bonds.

Credit risks center on the concentration of the Participants' share of debt service obligations on the 2003 bonds (mentioned above), the Participants' high fixed costs related to its nuclear exposure, as well as management's continued need to plan for the member systems' growing and disproportional power supply needs. In addition, the CC Project Participants have the ability to defease their portion of the 2002 bond's debt service and alter the current participant share of the remaining debt service obligations.

In addition, while MEAG Power does not have much experience operating natural gas fired generation, this concern should be mitigated by MEAG Power's partnering with Coelectric Partners, Inc. and The Energy Authority to help development and manage the facility and provide fuel management services.

Support for the rating also include the project's favorable economics and the slow movement of retail competition in the State. MEAG and all its Participants have substantial liquidity held in MEAG Power's Municipal Competitive Trust Account (MCTA) on behalf of its members to help maintain competitive wholesale rates when retail access begins. As of Sept. 19, 2003, the MCTA balance was approximately $610 million. The MCTA is expected to exceed management's original $770 million target. The original target balance would allow MEAG Power to reduce its annual costs in order to provide wholesale rates around 3.5 cents per kWh which would compete favorably with natural gas fired units paying a low natural gas fuel price of $2.30 per mmBtu.

Further supporting the CC Project's credit is the fuel diversity the project adds to MEAG Power's and its participants' generation resources. Currently MEAG Power's energy supply is derived from 39% coal-fired generation, 6% hydro generation, 54% nuclear generation and 1% from natural gas. With the addition of the CC Project, MEAG Power's use of natural gas is expected to increase to 12% of its energy supply primarily reducing the proportion of nuclear based energy to 42% from 54%.