Fitch Rates NYPA's $200MM Senior Revenue Bonds `AA'.

Business Editors

NEW YORK--(BUSINESS WIRE)--Sept. 7, 2001

The New York Power Authority's (NYPA) $200 million series 2001A senior revenue bonds (tax- exempt) are rated `AA' by Fitch. In addition, NYPA's outstanding debt ratings are affirmed as follows: $1.2 billion senior revenue bonds at `AA'; $294 million subordinate revenue bonds (variable-rate debt, series 1 and 5-8) at `AA-/F1+'; $367 million subordinate revenue bonds (auction rate securities, series 2-4 and 9-13) at `AAA', reflecting the insurer financial strength of the bond insurer (FSA); the auction rate securities' underlying rating is `AA-`; and commercial paper at `F1+'. The Rating Outlook remains Stable.

Proceeds from the 2001A bonds will economically refund a portion of the taxable series 1998B senior revenue bonds. The bonds, with a final maturity of Feb. 15, 2008, are scheduled to price the week of Oct. 8, 2001, via a syndicate led by J.P. Morgan, Goldman, Sachs & Co., and UBS PaineWebber, Inc.

NYPA's high credit quality is supported by solid financial performance, an aggressive debt paydown strategy, and a low-cost power supply, highlighted by some of the nation's most inexpensive hydroelectric facilities. The ratings are further strengthened by the completed sale of NYPA's nuclear generating stations - Indian Point 3 and James A. Fitzpatrick facilities - to Entergy, Inc., in the fourth quarter of last year. The nuclear plants were sold at a favorable price and under terms that allowed NYPA to meet customer contracts while eliminating nuclear operating and decommissioning risks. Additional credit strengths include low wholesale rates, and long-term contracts for the sale of over 90% of owned capacity. NYPA has considerably reduced long-term debt, particularly generation-related debt, from $3.1 billion in 1995 to $2.1 billion, as of Dec. 31, 2001, and plans to continue its accelerated debt paydown through 2004.

Credit concerns include the potential for state political interference, the need to federally re-license the hydroelectric generating facilities in 2003 (St. Lawrence-FDR project) and 2007 (Niagara), increasing merchant and gas supply exposure, and an expiring contract with a large customer load in southeastern New York (SENY) in 2004. State legislation was enacted this year, which authorized NYPA to make contributions to the state's general fund, up to an aggregate of $125 million, for the period 2002-2006. While this legislative authorization provides for only a limited and `voluntary' contribution, the potential for further legislative interference remains an ongoing credit concern for NYPA. The increasing merchant and gas commodity exposure stems from NYPA's recent construction of ten, 47 MW natural gas-fired, peaking units around New York City and Long Island (NY), and the planned addition of a second-generation unit (500 MW) at the Authority's Poletti site in 2004. Offsetting this risk is the need for additional power resources to meet NYPA's native load requirements by 2004, the severe capacity shortages affecting the NYC and LI service territories, and NYPA's plan to hedge gas commodity exposure via long-term supply arrangements for the second Poletti plant. Loss of the SENY load is a concern, although largely mitigated by NYPA's position as the low cost power provider in the state.