Fitch Rates NYPA's $760MM Senior Revenue Bonds 'AA'.

Business Editors

NEW YORK--(BUSINESS WIRE)--Sept. 11, 2002

The New York Power Authority's (NYPA) proposed $530 million, series 2002A and $230 million, series 2002B senior revenue bonds are rated 'AA' by Fitch Ratings. In addition, Fitch affirms NYPA's outstanding ratings as follows: $1.1 billion senior revenue bonds at 'AA'; $95 million subordinate revenue bonds (variable-rate securities, series 1 and 5-8) at 'AA-/F1+'; $337 million subordinate revenue bonds (auction-rate securities, series 2-4 and 9-13) at 'AAA', reflecting the financial strength of the bond insurer (FSA); the auction rate securities' underlying rating at 'AA-'; and commercial paper at 'F1+'. The Rating Outlook is Stable.

The 2002A bonds will fund the construction of a 500-megawatt generating unit at NYPA's existing Poletti station. The 2002B bonds will refund 1998B taxable senior revenue bonds and series 3 commercial paper notes. The 2002A and B bonds are fixed-rate, tax exempt securities with a final maturity of May 15, 2022 and 2013, respectively. The 2002A and B bonds are scheduled to price the second week of October 2002, with Salomon Smith Barney as lead underwriter.

NYPA's high credit quality reflects the wholesaler's solid financial performance, considerable generation debt retirement, and a low-cost power supply (average of 2.5 cents per kwh), highlighted by some of the nation's most inexpensive hydroelectric facilities. The ratings are further strengthened by the sale of NYPA's nuclear generating stations -- Indian Point 3 and James A. Fitzpatrick facilities -- to Entergy, Inc., in the fourth quarter of 2000. The nuclear plants were sold at a favorable price and under terms that allowed NYPA to meet customer contracts while mitigating nuclear operating and decommissioning risks. Additional credit strengths are the long-term contracts for the sale of over 90% of NYPA's owned capacity. NYPA has reduced long-term debt approximately 35% since 1995, from $3.1 billion in 1995 to $2.1 billion currently, and plans to continue its accelerated debt paydown through at least 2007. Debt service coverage, including senior and subordinate debt, is projected to remain at or above 2.0 times (x) through 2007.

Credit concerns include the potential for state political intervention, the need to federally re-license the hydroelectric generating facilities in 2003 (St. Lawrence- FDR project) and 2007 (Niagara project), increasing merchant and gas supply exposure, and an expiring contract with large customer loads in southeastern New York (SENY) in 2004. State legislation was enacted in 2001, 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 eleven, 47 MW natural gas-fired, peaking units around New York City and Long Island (NY), and the planned addition of the second-generation unit (500 MW) at the Authority's Poletti site in Jan. 2005. Offsetting this risk is the need for additional power resources to meet NYPA's native load requirements at that time, the ongoing 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.