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Economic and dam related articles

Fitch Rates Energy Northwest's
$667.2MM 2008 Bonds 'AA-'

by Staff
Business Wire, March 7, 2008

NEW YORK--Fitch Ratings assigns an 'AA-' rating to the following 2008 Energy Northwest's (ENW) issuances:

In addition, Fitch affirms the outstanding 'AA-' ratings on all series of the outstanding Energy Northwest debt: $2.327 billion Columbia Generating Station bonds; $1.939 billion Nuclear Project No. 1 bonds; and $1.909 billion Nuclear Project No. 3 bonds.

The Rating Outlook is Positive.

The 2008 A, B and C financings consist of tax-exempt and taxable bonds and involve three nuclear projects. The 2008 bonds are payable on a subordinated basis to outstanding Energy Northwest prior lien bonds. The prior-lien resolution was previously closed. Bonneville Power Administration (BPA) is obligated to pay debt service on Energy Northwest's Project 1, Columbia Generating Station (CGS) and Project 3 bonds ahead of U.S. Treasury repayments.

Providing solid support for the rating and the Positive Rating Outlook is BPA's position as a leading provider of electricity and transmission in the Pacific Northwest and its highly competitive wholesale power rates, which have recently approximated $27/MWh to preference customers. BPA continues to work to put in place more certain contractual and pricing arrangements with its diverse customer base, that could help support an upgrade in the rating to 'AA' from 'AA-' in the near term.

Financial results have improved in recent years, helped by reasonable hydro conditions, and going forward should benefit from BPA's renewed focus on meeting its customer power requirements from existing, lower cost hydro and nuclear dedicated generating resources, while working to firm up longer-term power sales agreements with its major customers, which should add to rate stability.

Credit concerns include the risk inherent in a hydro-based system where available energy and wholesale costs are dependent upon weather conditions (precipitation and water flow), and ongoing capital expenditures related to fish management issues.

Fitch also recognizes that despite the accelerated pay-down of current obligations to the U.S. Treasury, BPA is expected to reach its borrowing cap (established by Congress) in the next nine-ten years. Over the long term, an essential component of BPA's credit will be its continued ability to fund the increasing capital needs for transmission, conservation, renewable resources and to maintain the existing system.

Key Rating Drivers

ENW has 19 members, consisting of 16 public utility districts and the cities of Richland, Seattle and Tacoma, WA. ENW owns and operates a 1,153 mw nuclear generating station, CGS. ENW also owns and operates other projects that are separately secured and not related to BPA and include the Packwood Lake Hydroelectric Project and the Nine Canyon Wind Project ('A-').

BPA utilizes the energy from CGS as part of its overall power supply portfolio (12% of capacity) and is obligated to pay debt service on the Energy Northwest CGS related bonds. BPA is the largest of the regional federal power marketing agencies within the DOE. BPA was created by Congress in 1937 to market electric power from the Bonneville Dam. Congress has since designated BPA to market power from all of the federally owned hydro projects (31) in the Pacific Northwest. BPA sells electric power sold in a 300,000 square-mile service area and accounts for approximately 35% of the electric power consumed in the region. Total population served approximates 11 million.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.

Fitch Rates Energy Northwest's $667.2MM 2008 Bonds 'AA-'
Business Wire, March 7, 2008

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