Fitch Rates Nebraska Power District $254MM Revs 2007B 'A+'; Outlook Stable.

NEW YORK -- Fitch Ratings assigns an 'A+' rating to Nebraska Public Power District's (NPPD) $254 million general revenue bonds 2007 series B. In addition, Fitch has affirmed NPPD's $1.49 billion of general revenue bonds at 'A+' and the outstanding commercial paper notes at 'F1+'. The Rating Outlook is Stable. Proceeds from this transaction will fund certain generation and transmission capital additions to the district's system and to refund certain outstanding general bonds. The bonds are expected to be insured and are scheduled to price September 10, 2007 with UBS Investment Bank as senior underwriter.

Underlying support for the 'A+' rating comes from NPPD's low-cost and well balanced mix of generating resources, stable finances and long-term power sale contracts. During the period 2002-2006, NPPD's energy was derived primarily from a stable mix of coal (62%), nuclear (21%), purchased power (13%) and other (4%). 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 May 2009.

NPPD's financials compare favorably with wholesale systems in the 'A+' rating category. Financial statements for 2006 show debt-service coverage in the 1.60x area. NPPD's financial profile for 2006 also includes approximately $180 million of monies in the revenue fund and other available funds, equal to about 118 days cash. 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 $150 million in available capacity in its commercial paper program (as of June 30, 2007) and a fully funded debt-service reserve fund.

Credit concerns include the operational performance of Cooper Nuclear Station (CNS), the impact of environmental compliance costs on NPPD's coal units, and other capital needs. For the period 2008-2013, NPPD estimates general system total capital requirements of about $1.6 billion. Major projects include transmission and sub transmission line upgrades, a major new 345kv line from Hoskins to Lincoln, multi pollutant controls at CGS, expanded wind facilities and other necessary system upgrades and improvements. Future bond proceeds could exceed $1.1 billion. Fitch also continues to monitor the effect that water flow regulation priorities and a continued regional drought could have on NPPD's cost. Fitch believes this risk has not been meaningful although it creates uncertainty for NPPD's power supply availability and costs each year. Aging assets will require regular maintenance and, together with higher fuel costs, will result in ongoing rate increases, and higher wholesale and retail rates.

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 incident to compromise its operations and costs.

NPPD was negatively impacted in 2006 by winter storm damage which required repair and replacement to the transmission lines as well as the purchase of replacement power. Fitch believes NPPD's financial strength and cost recovery plan are sufficient to mitigate the consequences of these unexpected events. To hedge a portion of replacement power costs, NPPD purchased natural gas to fuel its Beatrice combined cycle unit.

NPPD is a public corporation that serves most of rural Nebraska on a retail and wholesale basis. The district serves about 88,225 retail customers, and the average revenue per kwh to retail customers in 2006 was 6.03 cents, with an average of 3.61 cents for industrial customers, 6.71 cents for commercial users and 9.23 cents for residential customers. Some 52 municipalities and 24 public power districts and cooperatives are provided with wholesale service, with prices ranging between 3.69 cents to 3.93 cents per kwh. In 2006, NPPD's revenues consisted of 25% retail and 40% wholesale, and 35% contracted and other sales and revenues.

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