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OTTER TAIL POWER FIRST MORTGAGE AFFIRMED; PREFERRED LOWERED BY FITCH -- FITCH FINANCIAL WIRE --

 NEW YORK, April 2 /PRNewswire/ -- Fitch affirms Otter Tail Power Co.'s (OTP) $104.1 million first mortgage bonds and $42.9 million secured pollution control bonds rating at `AA.' The company's $38.2 million of preferred stock, however, is lowered to `AA-' from `AA,' reflecting the comparatively high percentage of capitalization (currently around 10 percent) that preferred stock represents, and the expected maintenance of this level over the next five years. The credit trend is stable.
 The company, based in Fergus Falls, Minn., is capitalized conservatively, and cash flow and interest protection measures are strong. No base load capacity additions are expected for some time due to modest growth expectations and a strategy of relying on power purchases and conservation to meet load requirements.
 Construction spending of $122 million over the next five years, compared to $108 million for the previous five years, is easily manageable. Internal cash flow should fully fund projected capital outlays, and meaningful rate relief will not be required in the near future. OTP has effectively controlled expenses in recent years and should be able to continue this pattern.
 For the year ended Dec. 31, OTP earned a 15.0 percent ROE and recorded pretax interest coverage, including allowance for funds used during construction (AFUDC), of 4.06 times (x). The quality of earnings was exceptional with AFUDC representing less than 1 percent of net income. Capitalization ratios at Dec. 31 were 45.3 percent long-term debt, 10.4 percent preferred stock, and 44.3 percent common equity. No short-term debt was outstanding at that time. The capital structure remains strong despite a common stock buyback program that reduced common equity from 51.7 percent at year-end 1989.
 Lack of external financing stress and low Clean Air Act (CAA) exposure should permit interest coverage and capital ratios to remain relatively strong. Accordingly, ratings stability is anticipated.
 In the future, a larger share of OTP's earnings are likely to come from non-regulated activities. While these operations increase risk, Fitch believes management's conservative approach, as well as the company's use of non-recourse financing to support non-regulated operations, all serve to limit downside risk.
 -0- 4/2/93
 /CONTACT: Ed King of Fitch, 212-908-0574/
 (OTTR)


CO: Otter Tail Power Co. ST: Minnesota IN: SU: RTG

CK -- NY052 -- 2561 04/02/93 13:46 EST
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Publication:PR Newswire
Date:Apr 2, 1993
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