Fitch Rates Nebraska Public Power District's 2004 Series B Bonds 'A+'; Outlook Stable.

NEW YORK -- Fitch Ratings assigns a rating of 'A+' to Nebraska Public Power District's (NPPD) proposed sale of $138 million of general revenue bonds, 2004 series B. The Rating Outlook is Stable. Fitch also affirms the 'A+' rating on NPPD's outstanding $1.4 billion of general revenue bonds. Proceeds from the 2004 bonds will be used to refund selected 1998 general revenue bonds. The bonds are being issued as fixed-rate bonds and are scheduled to price Nov. 2, 2004 with UBS Financial Services Inc. as senior manager.

NPPD's 'A+' rating stems from its low cost generating resources, strong financial position and flexible wholesale and retail contracts. In 2003, 66% of NPPD energy came from NPPD's Gerald Gentleman Station and Sheldon Station, both of which are among the lowest cost steam electric plants in the country and are fueled by low sulfur and highly abundant coal from the Powder River Basin.

NPPD also owns the Cooper Nuclear Station (CNS), which is a 758 mw nuclear generating facility. NPPD's strategy has been to keep approximately 360 mw of CNS' capacity and sell the rest through various off-system intermediate-term contracts. In the past, NPPD has experienced operational and compliance problems with CNS. These issues (including the Nuclear Regulatory Commission (NRC) placing CNS in the Repetitive Degraded cornerstone column as a result of CNS consistently receiving below average assessments) resulted in Fitch revising NPPD's Rating Outlook to Negative in March of 2002. Following a consistent trend of improvement as well as other developments, such as bringing in Entergy Nuclear Inc., to manage the operations at CNS, Fitch revised the Rating Outlook to Stable. For additional information, see Fitch Press release dated April 12, 2004 at 'www.fitchratings.com'. Those positive developments have continued and Fitch believes CNS compliments NPPD's coal-based generating units and contributes to the value of its generating portfolio (e.g. low costs, fuel diversity, additional capacity flexibility).

NPPD's financial performance has been consistent with 2003 results reporting debt service coverage of 1.34 times (x). Interim financials through Sept. 30, 2004 show similar coverage levels and approximately $200 million of cash reserves (or five months of operating expenses). Although NPPD expects to draw down its cash over the next two years to approximately $130 million or three months of operating expenses, Fitch believes the forecasted liquidity is sufficient for NPPD given its stable operating environment and non-gas based power supply portfolio. NPPD's financial profile is also supported by $66 million in available capacity in its commercial paper program and a fully funded reserve fund of $83 million. Fitch also recognizes the cash flow benefits of NPPD's new wholesale and retail rate structure that adjusts for changing costs and that allows for the build up of cash for funding future capital expenditures.

The largest components of NPPD's capital improvement plan includes approximately $200 million for 142 mw from participating in Omaha Public Power District's Nebraska City no. 2 coal unit project, which is expected to be in service in 2009, and $85 million for NPPD's proposed 60 mw wind generation project, which is expected to be in service in 2005. NPPD will sell approximately 45% of the wind generation project's capacity to other municipalities.

Credit concerns include NPPD's revenue structure where approximately one-fourth of its revenues derive from contracted off-system sales of CNS energy. Partially mitigating this concern is that NPPD recently executed three off-system sale contracts maturing in 2009 and 2014 that account for approximately 83% of CNS' future capacity and energy (beyond NPPD's 379 mw take). Fitch also has concerns with NPPD's market exposure including an excess 75 mw of CNS capacity that still needs to be sold, the structure of the current contracts that do not fully cover all of CNS costs, and the replacement power obligation required (for its own load and its contractual requirements) if CNS were to be shut down. Fitch believes NPPD's power supply portfolio, financial strength and expected wholesale market should provide sufficient protection to mitigate those concerns.

In addition, CNS remains under substantial scrutiny of the NRC. While NPPD has made substantial progress in its compliance efforts, NPPD must continue to satisfy the NRC's heightened requirements. Fitch recognizes that the likelihood of a forced shutdown by the NRC has been drastically reduced over the past two years. Moreover, management believes CNS will likely complete the necessary compliance remediation steps from its prior non-compliance by early 2005. Other credit concerns revolve around the below average growth and wealth indicators for much of NPPD customers' rural service territory, and the continued population and employment migration toward metropolitan areas.

NPPD is a public corporation that serves most of rural Nebraska on a retail and wholesale basis. In 2003, NPPD's revenues consist of 27% retail sales, 43% wholesale sales and 27% off-system contracted sales and 3% other sales.