Fitch Ratings Affirms Nstar Corp & Subsidiaries; Rating Outlook Stable.

Business Editors

NEW YORK--(BUSINESS WIRE)--Aug. 12, 2002

Fitch Ratings affirms the credit ratings of Nstar Corp (Nstar) and its subsidiaries, Boston Edison Company (Boston Edison), Commonwealth Electric Company (ComElectric), Cambridge Electric Light Company Cambridge Electric) and Nstar Gas. The Rating Outlook for all four companies is Stable.

The ratings affirmations are based on a recent review of Nstar and its subsidiaries operating results and updated business plan. The ratings are as follows:

Nstar Corp

-- Senior unsecured 'AA-';

-- Preferred stock 'A+';

-- Commercial paper 'F1+'.

Boston Edison

-- Senior unsecured 'AA-';

-- Preferred stock 'A+';

-- Commercial paper 'F1+'.

ComElectric

-- Senior unsecured 'A'.

Cambridge Electric

-- Senior unsecured 'A'.

Nstar Gas

-- Senior secured 'A'.

Nstar's parent rating reflects the company's stable cash flows derived primarily from regulated electricity transmission and distribution businesses, accounting for 94% of net revenues (gross revenues less purchase power and fuel costs), offsetting an above-average consolidated leverage ratio of 60% of total capital (the remaining cash flow comes from unregulated operations including telecommunications, district heating and cooling operations, and liquefied natural gas service). The ratings also take into account a favorable regulatory environment, full stranded cost recovery and good mechanisms to recover power supply costs, stable financial performance, and a service territory that benefits from a diverse economy. Looking forward, management's conservative business plan focuses on expanding its customer base through the electric and gas distribution networks of its subsidiaries. Furthermore, management does not anticipate the need for new debt financing, since system improvements will be funded from operating cash flow.

Parent debt relies on dividends from the subsidiaries, in particular Boston Edison (83%). The ratings of Boston Edison, ComElectric, Cambridge Electric, and Nstar Gas take into account operating synergies that continue to provide cost savings through lower labor costs, expense reductions, and system efficiencies. The 'AA-' rating assigned to Boston Edison takes into account stronger credit protection measures at this subsidiary (after reflecting the write down of $174 million in 2001, and $28 million as of June 30, 2002 for the impairment of Nstar's investment in RCN Corporation) and a clear financial separation from the other subsidiaries. Three smaller affiliates, ComElectric, Cambridge Electric, and Nstar Gas, share a common bank line, and participate in a money pool (an arrangement whereby short-term cash surpluses are used to meet short-term needs), which is reflected in the three companies 'A' ratings.

While NSTAR retains provider of last resort (POLR) responsibility, the power procurement auction process approved by the Massachusetts Department of Telecommunications and Energy (MDTE) significantly mitigates risks associated with power supply volatility. Nstar conducts an auction periodically (every 6 months) soliciting default service power contracts. The power costs are then approved by the MDTE through an accelerated review process and recovered from customers on a fully reconciling basis. Fitch believes that this process substantially removes the supply, volume, and price risk associated with energy delivery away from Nstar allowing it to operate solely as an energy delivery business. In addition, the MDTE has demonstrated both the willingness and ability to raise standard offer service rates to address power market price spikes and rising fuel costs, in effect minimizing the potential for large deferrals during the transition period which extends to Dec. 31, 2004. Furthermore, the region's large reserve margin of over 30% in 2002 helps to limit the probability of severe price spikes in the New England power market. Other credit factors include an acceleration of capital improvements brought on by network outages during the summer of 2001. System improvement costs are estimated at $65 million for 2002 and will be internally funded.

NSTAR is an exempt public utility holding company created through the merger of BEC Energy (BEC) and Commonwealth Energy System on Aug. 25, 1999. Nstar's retail utility subsidiaries are Boston Edison Company (Boston Edison), Commonwealth Electric Company (ComElectric), Cambridge Electric Light Company (Cambridge Electric) and NSTAR Gas Company (NSTAR Gas) and its wholesale electric subsidiary is Canal Electric Company (Canal Electric). While Nstar's three retail electric companies operate under the brand name 'NSTAR Electric', they remain legally and financially separate subsidiaries with different rate agreements.