Fitch Rates Northern Illinois Muni Power's $250MM Project Revs 'A-'; Outlook Stable.

NEW YORK -- Fitch Ratings has assigned an 'A-' rating to the following issues for the Northern Illinois Municipal Power Agency (NIMPA):

--$240 million series 2007A prairie state project revenue bonds;

--$10 million series 2007B prairie state project revenue bonds.

The Rating Outlook is Stable. Proceeds will fund a portion of NIMPA's costs associated with the acquisition and construction of the Prairie State generating project (the 'project'), a 1600 MW coal-fired plant being built in Washington County, Illinois. NIMPA expects to fund the remaining portion of its cost of the Prairie State project (up to approximately $75 million) in 2010. The 2007 bonds are secured by purchased power payment obligations of NIMPA's three member city electric distribution systems, pursuant to their power purchase agreements with NIMPA. The bonds are scheduled to price the week of Aug. 13, 2007, with Citigroup as lead underwriter. The 2007 bonds are expected to be insured.

NIMPA's rating takes into account various credit factors including: Fitch's assessment of the plant developer (PSGC; a subsidiary of Peabody), the units' projected cost of power (including fixed and variable costs), NIMPA member system composition, the strength of the members' power purchase agreements with NIMPA, and the construction risk associated with the development of this traditional coal-fired facility and coal mine.

NIMPA's revenues are derived from its three member electric distribution systems - the cities of Batavia (rated 'A-' with a Stable Outlook by Fitch), Geneva, and Rochelle, Illinois. The members have entered into long-term, take-or-pay purchase power contracts with NIMPA, which obligate the members to pay for NIMPA's wholesale cost of power, whether or not the Prairie State project is operable. Fitch views the probability of a sequence of events occurring that could materially affect the payment of debt service on the bonds as fairly remote. Over the next few years, should the project development substantially proceed on-time and within budget, the project's cost of power maintain its competitive position, and the members maintain their solid financial strength, NIMPA and Batavia's credit ratings are poised for possible positive rating action by Fitch.

Below is a list of key credit strengths and weaknesses factored into the rating. A full report further discussing these credit factors will be published shortly.

Credit strengths include:

--Solid, long-term, take-or-pay power purchase contracts;

--Members' stable financial history and steadily growing customer base;

--Strong project economics, with transmission intertie to MISO/PJM, and mine-mouth coal supply.

--Projected competitive cost of power ($45/mwh avg. wholesale cost to members);

--Experienced, well-established project developer and EPC contractor;

--Well regarded, experienced management team.

Credit concerns include:

--Risks associated with project construction and on-time completion of the unit;

--Single project risk to the member cities,

--Member cities are relatively small in size (less than 11,000 customers in each city), debt burden associated with this project is sizable for each member.

--Somewhat liberal bond covenants.

--NIMPA is a relatively new joint action agency, with no measurable track record to date, entering the generation business for the first time.

NIMPA is a joint action agency created in May 2004 for the purpose of effecting the joint development of electric energy resources for NIMPA's three Illinois member cities, Batavia, Geneva, and Rochelle. The Prairie State project is the only asset that NIMPA currently has under development and ownership. The member systems collectively provide electric distribution service to approximately 28,000 users, of which residential users accounted for 27% of the project participant's total electric revenues for fiscal year 2006. In aggregate, the participants' peak demand for 2006 is 230 MW.

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.