S&P Revises CSW Energy Inc.'s Outlook to Neg.

NEW YORK--(BUSINESS WIRE)--July 28, 1999--

Standard & Poor's today affirmed its triple-'B'-plus rating on CSW Energy, Inc.'s (CSWE) $200 million senior unsecured debt. CSWE is a wholly owned subsidiary of Central & South West Corp.(CSW--/--/'A-2'). The outlook is changed to negative from stable.

CSWE develops, acquires, constructs, owns and operates power production facilities in the U.S. Currently, operating projects represent 978MW with a net ownership of 522MW. CSWE also has 940MW under construction. CSWE's rating depends on the creditworthiness of CSW International (CSWI), its guarantor, and ultimately on SEEBOARD PLC (single-'A'-minus/Negative/'A-2'), a regulated electric distribution company in the U.K., which provides CSWI with its major source of cash flow. The rating reflects the following risks:

-- That an increase in leverage at CSWI or any intermediate holding

company, including SEEBOARD PLC may have a detrimental effect on

CSWE.; -- The mid speculative grade characteristics of the U.S. based

independent power producer project portfolio; -- Lack of operating history. The portfolio of projects is fairly

new; and while some projects reached commercial operation in

1994-1995, they contribute minimal amounts to overall cash flow.

The major cash contributors have only just reached commercial

operation or are still in the development phase; -- Highly leveraged capital structure. As of Dec. 31, 1998, for CSWE

alone, debt to total capitalization was 76%; and -- The portfolio is not well diversified. For example, two projects

contribute about 55% of total portfolio cash flow. Ft. Lupton,

contributes 5% of combined (CSWE and CSWI) 10-year average cash

flow and 20% of the U.S. 10 year average cash flow and SEEBOARD

contributes 50% of total combined 10 year average cash flow and

58% of CSWI 10-year average cash flow.

However, the triple-'B'-plus rating is supported by the following strengths:

-- A guarantee from CSWI, which derives its credit strength from

subsidiary SEEBOARD PLC, the UK regional electric distribution

company acquired by CSW in 1996; -- Implied support from the ultimate parent company, which will

continue to lend funds to both CSWE and CSWI to finance the

start-up phase of projects or provide bridge financing on smaller

acquisitions; -- Support provided in the form of an expense support agreement

between CSW and CSWE whereby CSW has committed to provide up to

$136 million over the next five years for development expenses;

and -- Strong combined interest coverage ratios which average 5 times

(x)over the term of the notes under CSWE's pro forma financial

statements.

CSWE lent the entire proceeds from the note issuance to CSWI in order for it to make an $80 million equity investment in Vale, which owns distribution assets in Brazil and a $113 million investment in a generation company located in Chile. Through the use of an inter-company loan, CSWE is able to repatriate funds in the form of interest payments without tax consequences.

OUTLOOK: Negative

Larger than expected price reductions and increased regulatory risk in the electricity distribution sector in the U.K. indicate a negative outlook on SEEBOARD. As a result, because of the CSWI guarantee of CSWE, the outlook on CSWE is also negative. In addition, any downward movement in the ratings on CSW due to its merger with AEP may have a negative impact of the ratings for CSWE. A decline in the ratings for SEEBOARD or CSW Investments or any additional debt incurred at CSWI or any of its subsidiaries will likely have a negative impact on the rating of CSWE. Limited cash flow diversity will limit ratings upgrades even if SEEBOARD's debt rating were upgraded, Standard & Poor's said. ---CreditWire