Fitch Rates Nebraska Power Dist $94MM Revs 2007A 'A+'; Stable Outlook.

NEW YORK -- Fitch Ratings assigns an 'A+' to Nebraska Public Power District's (NPPD) $94 million general revenue bonds 2007 Series A (taxable). Fitch also affirms the 'A+' rating on NPPD's $1.4 billion of general revenue bonds. The Rating Outlook is Stable. Proceeds from this transaction will fund upgrades and maintenance projects at NPPD's Cooper Nuclear Station (CNS). The bonds will be issued as auction rate notes and are scheduled to price Feb. 20, 2007 with Bear Stearns as senior underwriter and broker-dealer.

Fitch recently affirmed NPPD's ratings at 'A+' in September 2006. NPPD's credit fundamentals remain the same, although NPPD's transmission system experienced substantial damage from a recent ice storm that has also caused NPPD to have limited use of one of its base-load resources for the next few months. Fitch does not believe there will be meaningful long-term issues arising from the recent storm damages (see below).

Underlying support for the 'A+' rating comes from NPPD's low-cost and well-diversified mix of generating resources, stable finances, and long-term power sale contracts. In 2005, NPPD's energy sales derived primarily from a stable mix of coal (60%) and nuclear (24%) fueled generation. To meet future base-load needs, NPPD is taking a 23.67% (approximately 157 megawatt [mw]) interest in Nebraska City 2, a 663 mw coal-fired unit being constructed by Omaha Public Power district (rated 'AA' by Fitch) that is expected to become operational in 2009.

NPPD's financials compare favorably with wholesale systems in the 'A+' rating category. Financial statements for 2005 and interim statements for 2006 show debt-service coverages between 1.3 times (x) and 1.4x. These ratios include lease payments which are technically subordinate to debt service. Subordinating those payments increases debt service coverage by approximately 0.1x. NPPD's financial profile for 2005 also includes approximately $190 million of cash reserves (equal to four months of operating expenses). Although NPPD expects to reduce its cash to approximately $130 million, Fitch believes the forecasted liquidity is sufficient for NPPD, given its stable operating environment and non-gas-based power supply portfolio. NPPD's liquidity is bolstered by $90 million in available capacity in its commercial paper program and a fully funded debt-service reserve fund of $83 million.

Credit concerns include the operational performance of Cooper Nuclear Station (CNS), and the impact of environmental compliance costs on NPPD's coal units, estimated at over $600 million over the next five years. Fitch also continues to monitor the effect that water flow regulation priorities and a continued regional drought could have on NPPD's costs. Fitch believes this risk has not been meaningful although it creates uncertainty for NPPD's power supply availability and costs each year.

Regarding CNS, Fitch recognizes that NPPD has achieved a consistent trend of improvements at CNS following years of compliance and operational issues. Fitch continues to believe that CNS operational consistency and regulatory compliance are an essential component of NPPD's credit profile. Fitch notes that as a result of recent regulatory findings, CNS' compliance standing with the NRC may be downgraded. Fitch does not expect CNS' potential compliance status from this recent finding to compromise its operations and costs.

Storm Damages: NPPD estimates that total costs for repair and replacement to the transmission lines as well as the purchase of replacement power could total up to $200 million. Fitch believes NPPD's financial strength and cost recovery plans (which includes a combination of tax-exempt borrowing and reimbursement from the federal government to fund the line repairs and higher rates to pay for replacement power) are sufficient to mitigate the consequences of these unexpected events. To hedge a portion of replacement power costs, NPPD has purchased natural gas to fuel its Beatrice combined cycle unit. The primary risk for NPPD is if the cost and timeliness of repair to the transmission lines are greater than expected, the cost to replace power through May is higher than expected, or the outage lasts beyond the expected start-up dates and into the warmer summer months where the cost for replacement power can be substantially higher.

NPPD is a public corporation that serves most of rural Nebraska on a retail and wholesale basis. In 2005, NPPD's revenues consisted of 28% retail and 72% wholesale, divided between member wholesale sales (44%) and off-system contracted sales (28%).

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.