Fitch Upgrades Platte River Power Authority To 'AA'; Rates $35.6MM FF Revs 'AA'.

Business Editors

NEW YORK--(BUSINESS WIRE)--Jan. 21, 2003

Platte River Power Authority's (PRPA) $35.6 million (2003) series FF, power revenue bonds are rated 'AA' by Fitch Ratings. The series FF bonds rank on parity with first lien, $301 million outstanding power revenue bonds, which are upgraded to 'AA' from 'AA-' by Fitch. In addition, Fitch upgrades $77 million adjustable-rate subordinate bonds to 'AA-' from 'A+'. The Rating Outlook is Stable. Proceeds from the series FF issuance will current refund outstanding series BB and series CC bonds. The fixed-rate series FF bonds, with a final maturity of June 1, 2008, are secured by a pledge of PRPA's net revenues. The bonds are scheduled to price Jan. 23, 2003 via negotiation, with Salomon Smith Barney as lead underwriter.

PRPA's (the authority) upgrade to 'AA' follows several years of strengthening financial performance despite high volatility in the electricity market, its low-cost coal and hydro-based generating resources, competitive wholesale rates, and robust sales growth reflecting vibrancy of the authority's four member cities. Senior management's conservative fiscal nature has served the authority well, with financial coverage of senior and subordinate lien debt service ranging from 1.47 times (x) to 2.45x since 1997. PRPA has built up sizeable cash reserves, totaling approximately $240 million, as of Dec. 31, 2002, the majority of which is unrestricted. The reserves are equivalent to more than two year's operating expenses, providing ample liquidity. PRPA's equity position is very strong at 47%, above average for municipal wholesale systems in the 'AA' category.

From a power supply perspective, PRPA's average 'all-in' cost of power has remained at roughly 2.5 cents per kwh for the past five years - among the lower cost power providers in the Rocky Mountain region. With the roll-off of PRPA's remaining power sales to Public Service Company of Colorado in March 2004, the authority's member cities should be in relative load balance through 2007, with average power supply costs in the 2.5 - 2.7 cents per kwh range. Given PRPA's conservative projections, the authority anticipates just one rate increase (4%-6% in 2004) over the next five years - adequate to maintain healthy cash reserves and total debt service coverage in excess of 1.50x, as well as help fund capital improvements. Additionally, PRPA's credit rating is supported by court-validated, all requirements contracts with its members to 2040, financially solid member retail systems with competitive rates, and no movement toward electric deregulation in the state of Colorado.

Credit concerns center on the introduction of natural gas commodity exposure, large commercial and industrial load, and signs of economic slowdown in the state. Last year, PRPA installed three gas-fired peaking units (195 MW in aggregate) to mitigate electricity market exposure during peak periods. The plants were constructed on-time and under budget, and represent PRPA's only gas-fired resource (26% of 2003 summer capacity). While the gas volatility is an issue, the risk appears to be sufficiently mitigated by PRPA's proximity to a Cheyenne natural gas hub, with ample supply and pipeline capacity, and the units' expected modest use - during peak summer months when natural gas prices tend to be seasonally lower. The large commercial and industrial concentration is significant, accounting for 54% of the retail members' energy sales for 2001. However, the industrial base is well-diversified by business sector and size, with no single user representing more than 4% of retail members' energy sales. Lastly, wealth and unemployment indicators for the member cities began to show signs of weakening in 2002, albeit slightly. PRPA has lowered its projected member sales growth versus historical patterns to account for economic slowdown.