Fitch Rates Nebraska Public Power District's $205MM General Revs 'A+'.

Business Editors

NEW YORK--(BUSINESS WIRE)--Sept. 2, 2003

Fitch rates Nebraska Public Power District's (NPPD) $205 million general revenue bonds, 2003 series A,'A+'. The ratings on NPPD's $1.2 billion of outstanding general revenue bonds are also affirmed at 'A+' by Fitch. The Rating Outlook remains Negative (see below). Proceeds from the issuance will refinance NPPD's construction note issued last year, and fund $125 million of acquisition and construction costs of the Beatrice Power Station, a 229 mw combined cycle generating unit. The 2003 series A bonds are scheduled to price the week of Sept. 8, 2003, with Bear Stearns as lead manager.

NPPD's credit rating is reflective of its low cost generating resources and strong financial position. Approximately 60% of NPPD's energy comes from the Gerald Gentleman Station and the Sheldon Station. These coal units are among the lowest cost steam electric plants in the country and compare favorably with regional Mid-Continent Area Power Pool average embedded costs.

NPPD has recently executed or is negotiating new contracts with its wholesale and retail customers. Fitch views this as a positive development and indicative of customer support of NPPD. The new 20-year wholesale contracts are cost based and improve NPPD's ability to recover changing costs in a timely manner, and provide rate mechanisms for funding new generation. Thus far, 72 of NPPD's 77 wholesale customers (86% of wholesale revenues) have signed the new contracts. NPPD is also negotiating new 25-year contracts with the 75 leased municipal utility systems whose retail customers it serves. NPPD has successfully executed eleven new retail agreements.

Further supporting NPPD's rating is its financial strength that includes debt service coverage of 1.36 times (x) and equity to capitalization of 37% for the year 2002. An important component of NPPD's financial strength is its liquidity, which includes over $200 million of unrestricted cash (154 days cash on hand) and over $50 million in available capacity in its commercial paper program.

Fitch's Rating Outlook was changed to Negative from Stable on March 11, 2002 as a result of concerns regarding the economic viability of the 788 mw Cooper Nuclear Station (CNS) in NPPD's power resource plan beyond 2004, and the need for NPPD to develop alternative generating resources if NPPD chose not to operate the nuclear facility after 2004. Outside of the issues related to CNS and potential environmental issues related to its coal units, Fitch does not see additional material credit risks for NPPD.

In the past, NPPD has utilized approximately 37.5% of CNS' capacity and energy for its power supply portfolio (providing 20% of NPPD's energy in 2002), and sold the remaining capacity through long-term contractual arrangements. These off-system contracts are ending over the next 16 months. Historically, CNS' below average operations have placed pressure on NPPD's credit strength. CNS' operating costs have been above industry averages and the plant operations and procedures have received below average assessments from the Nuclear Regulatory Commission (NRC). As a result of numerous findings by the NRC, in 2002 the NRC placed CNS into the Repetitive Degraded cornerstone column of the NRC's oversight action matrix, citing concern regarding CNS' emergency preparedness. Since then, the NRC has maintained substantial oversight of CNS.

Over the past year, NPPD has made significant progress resolving CNS' operational and regulatory issues. Following a comprehensive analysis by NPPD management of its options with regards to the future existence, operation and management of CNS, in July 2003, the NPPD Board announced its decision to maintain ownership of CNS citing the benefits of fuel diversity, CNS costs relative to alternative power supply, and the cost benefits from continued operating performance improvements and from the debt related to CNS being fully paid. In addition, the NPPD Board approved NPPD management's recommendation to seek a long-term agreement for management services with Energy Nuclear, Inc (Entergy). The NPPD Board also directed management to evaluate an extension of its nuclear license beyond 2014, an expansion of CNS capacity and an extension of its refueling cycle. NPPD is also in the final stages of negotiating new long term off-system sales for excess capacity and energy from CNS.

Fitch believes that a management arrangement with Entergy is a positive development as Entergy currently operates multiple nuclear plants and is recognized as a leader in this area. While the NRC continues to find areas for improvement for CNS during its quarterly inspections, the NRC has cited CNS' progress to satisfy the NRC's performance and safety standards. NPPD management believes that it will complete the steps necessary to be placed in the first column of the oversight action matrix (Licensee Response Column) where most of the nuclear plants in the country are classified by the first quarter of 2004.

Fitch's Rating Outlook remains Negative pending continued safe and cost effective operations at CNS, successful completion of negotiations with Entergy, and finalizing favorable contract terms for the sale of CNS excess capacity and energy. Fitch will closely monitor NPPD's progress in these areas and expects many of these issues to be clarified in the next year. If resolved favorably, a change in the Rating Outlook to Stable is likely.

NPPD is a public corporation that serves most of rural Nebraska on both a retail and wholesale basis. NPPD's revenues consist of 27% retail sales, 43% wholesale sales and 24% off-system and contracted sales.