Fitch Rates Public Service Of Colorado's $600MM CTBs 'BBB+'.

Business Editors

NEW YORK--(BUSINESS WIRE)--Sept. 20, 2002

Fitch Ratings has assigned a 'BBB+' rating to Public Service Company of Colorado's (PSCO) new issuance of $600 million of first collateral trust bonds. Fitch has also affirmed PSCO's ratings as follows: first mortgage, collateral trust, and secured pollution control revenue bonds 'BBB+'; senior unsecured debt and unsecured pollution control revenue bonds 'BBB'; trust preferred stock 'BBB-'; and commercial paper 'F2'. The Rating Outlook remains Negative.

The new issue will be secured with a like amount of first mortgage bonds (FMBs) of PSCO, and thus will rank equally with all outstanding FMBs and collateral trust bonds (CTBs). The CTBs, issued under a 1993 indenture, will become the FMBs of PSCO after all remaining bonds issued under the company's 1939 indenture, aside from those held by the trustee on behalf of the collateral trust bondholders, are retired (expected to occur in 2004.) The proceeds of the new issue will be used to repay short-term indebtedness.

PSCO's ratings reflect the company's individual credit quality as an integrated utility operating company as well as the credit linkage to a lower rated parent, Xcel Energy (Xcel, senior unsecured debt rated 'BB+' by Fitch). Xcel's low rating reflects the illiquidity and financial distress of its unregulated subsidiary, NRG Energy. Xcel's likelihood of being driven into insolvency in the event of a bankruptcy filing by NRG has been reduced materially as a result of the absence or elimination of cross-defaults from all Xcel credit agreements. Furthermore, Fitch believes that PSCO is extremely unlikely to be involved in an involuntary or voluntary bankruptcy due to the financial straits of its affiliate NRG, and considers the possibility of substantive consolidation of PSCO in a bankruptcy proceeding of its affiliate to be exceedingly remote. However, Fitch recognizes that PSCO may be adversely affected as a result of reduced access to equity capital, reputational issues, and liability relating to participation in a consolidated tax filing group or pension plan with its parent and affiliates. The Negative Rating Outlook recognizes these factors as well as the exposure to further rating reduction for PSCO debt if ratings of Xcel were downgraded further.

PSCO's stand-alone credit quality is supported by adequate credit ratios, stable cash flow, and a large and stable service territory. PSCO operates as an integrated electric and gas utility, subject to regulated tariffs, and there is no plan under way at present in Colorado to deregulate or restructure electric utilities. PSCO is generally able to recover some or all of the increase in commodity costs via several rate adjustment mechanisms. In the first six months of 2002, PSCO's operating cash flow, EBITDA, and credit ratios declined from the comparable period in 2001, reflecting reduced profits from wholesale marketing activities. Also, PSCO faces higher capital expenditure requirements due to customer growth and expenditures to comply with environmental standards. PSCO's credit ratios are consistent with the current credit ratings, assuming no further increase in PSCO's debt leverage. Future operating profitability will be influenced by the results of rate increase applications filed with the Colorado Public Utility Commission, expected to be resolved during the first half of 2003.

PSCO has adequate access to funding for its working capital needs under a $530 million bank credit facility. However, recently PSCO was required to provide $530 million of secured bonds as collateral to the banks. Thus, outstanding loans under the credit facility will be secured ratably along with outstanding FMBs and CTBs.

PSCO, a wholly owned subsidiary of Xcel Energy Inc., is an operating utility engaged principally in the generation, purchase, transmission, distribution and sale of electricity and the purchase, transportation, distribution and sale of natural gas. It provides electric power service to approximately 1.3 million customers and 1.1 million natural gas customers in Colorado. It has total generation capacity of approximately 3,900 MW.