Fitch Rates NPPD's $94MM General Revenue Bonds 'A+'.

Business Editors

NEW YORK--(BUSINESS WIRE)--Oct. 3, 2002

Fitch Ratings assigns an 'A+' rating to Nebraska Public Power District's (NPPD) $94 million of general revenue bonds, 2002 series B. Fitch affirms the 'A+' rating on NPPD's $1.1 billion outstanding general revenue bonds. The Rating Outlook is Negative. Proceeds from the 2002 series B bonds are being issued to refund taxable commercial paper notes and to reimburse the settlement payment as contained in the MidAmerican Energy Company Settlement Agreement (relating to the Cooper Nuclear Plant). The bonds are expected to be insured and price the week of Oct. 7 with Goldman Sachs & Co. as manager.

On July 31, 2002, NPPD executed separate settlement agreements with MidAmerican Energy Co. and Lincoln Electric System (LES), which provide for the settlement of all litigation between the respective parties related to Cooper Nuclear Station (Cooper). The rating takes into account recent constructive events including the pay off of the nuclear facility revenue bonds and the settlement between NPPD and MidAmerican and LES regarding the funding of decommissioning costs (see below for more detail) and operating the plant beyond the original contract dates. The Negative Outlook remains in place due to concerns about the future economic viability of the Cooper Nuclear Station, and uncertainty regarding NPPD's power resource plan beyond 2004, it's ability to profitably sell the excess power from Cooper into the mid-western power market, and the possible need for NPPD to finance and develop alternative generating resources.

Underpinning NPPD's rating are low cost power resources, competitive retail and wholesale rates, and stable financial performance. Financial results for 2001 provided debt service coverage of about 1.25 times (x), unrestricted cash sufficient to cover 81 days of operations, and. rapid debt retirement. In addition, the ongoing transition to new wholesale power contracts with members, allowing NPPD to provide cost-based rates and retain additional surplus net revenues, provides added support. Through its membership, with The Energy Authority (a public power energy marketing and resource management organization), NPPD continues to benefit from improved resource utilization and economic market purchases.

The Nuclear Regulatory Commission (NRC) has identified four longstanding performance issues that need to be addressed at Cooper. These include: a corrective action program, human performance, equipment reliability and management stability. NPPD expects to work aggressively over the next 24 to 36 months to turn-a-round these issues. NPPD is developing an improvement plan to address regulatory, cost and operating performance, and unit availability of Cooper. As part of this plan, NPPD is negotiating an operating agreement with the Nuclear Management Company ('NMC', an experienced nuclear plant operator) to transfer to NMC the operating authority for the Cooper Nuclear Station, while still retaining the ultimate authority and ownership over the plant. This action is expected, over time, to result in improved operating performance and less NRC oversight.

However, the facility is currently under close review by the NRC due to concerns about their emergency preparedness at Cooper, which moved the plant into the Repetitive Degraded cornerstone column of the NRC's oversight action matrix. This action requires substantially more oversight by the NRC. As a result, questions remain regarding NPPD's future decision of whether to operate the Cooper facility after 2004, compared with the operating license through 2014, given the unit's above average historical operating cost. Thus, it remains unclear how Cooper will eventually fit into NPPD's portfolio of low cost coal-fired power resources, and if NPPD will need to develop alternative sources of generation.

The settlement agreements with MidAmerican and LES allow NPPD to retain all decommissioning funds under prior dispute (approximately $308 million) and all other funds on deposit under the Nuclear Resolution, totaling about $171.5 million. However, NPPD is required to make a settlement payment to MidAmerican of about $39 million (to be paid from bond proceeds). The settlement agreements also releases all claims of any kind with respect to Cooper Nuclear Station, with an agreement by NPPD to hold harmless and indemnify MidAmerican and Lincoln from all costs and expenses that the NPPD has with respect to the facility, including decommissioning costs, spent fuel costs, employee retention costs, and post-retirement medical benefits. Pursuant to the settlement agreement, NPPD is also contractually obligated to provide the two utilities with firm power over the next few years at fixed costs. While Fitch views the settlement as favorable, helping to mitigate risks associated with the lawsuit, it is too early to assess how Cooper will fit into NPPD's power resource mix into the future and what impact it will have financially on the district. As more information is available, a decision on the negative rating outlook will be made.