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MIDWEST POWER SYS. $750 MIL. SHELF MTGE. BONDS RATED 'A' BY FITCH -- FITCH FINANCIAL WIRE --

 NEW YORK, Jan. 19 /PRNewswire/ -- Midwest Power Systems Inc.'s $750 million shelf registration of mortgage bonds is rated A' by Fitch. Ratings are affirmed for the company's A' first mortgage bonds and preferred stock and F-1' commercial paper. The credit trend is changed to declining from stable. Midwest Power was formed in July 1992 by the merger of Iowa Power Inc. and Iowa Public Service Co.
 The ratings reflect aggressive leverage, including short-term debt and a $142 million long term nuclear power purchase contract, as well as Midwest Power's favorable service territory, expected merger savings, a positive regulatory climate, and conservative management. Although the capital structure and pretax interest coverage are weak for the A' category, the rating anticipates earnings stability from 1993 to 1995 with internal cash generation approximating 80 percent of total funds required for construction and demand side management (DSM) programs.
 Although the new series of mortgage bonds are junior to the existing first mortgage bonds, the A' rating reflects Midwest's covenant that no additional first mortgage debt will be issued while new junior bonds are outstanding. Additionally, Midwest is issuing significant amounts of the mortgage debt in 1993 and will use the proceeds to retire a substantial portion of the outstanding first mortgage bonds.
 Prospectively, the capital structure with 55 percent debt will remain highly leveraged for the A' category. Pretax interest coverage is expected to recover from 1992's depressed level, caused by adverse weather, and should range between 2.8 times(x) and 2.9x. This assumes Midwest Power will systematically and successfully achieve new ratemaking necessary to cover increased costs, including nuclear operations and DSM programs.
 Challenges include receiving adequate new electric and gas base rates to sustain pretax coverage at 2.8x. In addition, Midwest Power is responsible for 50 percent of costs at the Cooper Nuclear Station in Nebraska, leading potentially to unpredictable and large operating expenses. At present, Cooper operates well with no unusual problems, but the plant is almost 20 years old. Finally, since no revenue decoupling mechanism protects earnings in non-normal weather years, financial results remain vulnerable to seasonal heating and cooling factors.
 Several factors limit the likelihood of deteriorating credit protection. The Iowa Utilities Board is well regarded and forward thinking on critical issues such as nuclear costs, DSM recovery and incentive ratemaking. Midwest Power's rates are competitive making industrial bypass risk low. The company has no clean air problems and has no generating plants under construction.
 -0- 1/19/93
 /CONTACT: John N. Watt of Fitch, 212-908-0523/


CO: Midwest Power System Inc. ST: Iowa IN: UTI SU: RTG

TM -- NY093 -- 6566 01/19/93 16:56 EST
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Date:Jan 19, 1993
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