Fitch Rates Public Utility Dist.#1 Chelan County, Washington's $92MM Revs 'AA/F1+'    

NEW YORK--(BUSINESS WIRE)--Fitch Ratings assigns an 'AA' long-term rating and a 'F1+' short-term rating to $92,880,000 Public Utility District No. 1 of Chelan County (the district), Washington consolidated system revenue bonds, refunding series 2008B. The 'F1+' rating is based on the liquidity support of the standby bond purchase agreement (SBPA) provided by U.S. Bank, National Association. The proceeds of the bonds will be used to purchase and hold in trust the issuer's outstanding $93,750,000 refunding series 2007A consolidated system revenue bonds. The long-term rating of the series 2007A bonds, which will be converted from an auction rate to a fixed rate mode is affirmed at 'AA', with a Positive Rating Outlook.

The district will retain for the series 2008B bonds the floating to fixed interest rate swap it executed in conjunction with the series 2007A bonds to continue the synthetic fixed rate nature of those bonds. The District will have the option in the future to cancel the 2007A bonds, or remarket them with the pre-existing bond insurance policy.

The SBPA provides for the payment of the principal component of purchase price and up to 36 days of interest calculated at a maximum rate of 10% per annum based on a year of 365 days. The SBPA will expire on March 7, 2013, unless extended or earlier terminated pursuant to its terms. The remarketing agent for the bonds is Lehman Brothers. The bonds are expected to be delivered on or about March 7, 2008.

The bonds initially bear interest in the weekly rate mode, but may be converted to bear interest at the daily, commercial paper, fixed, or auction rate modes. While the bonds bear interest at the weekly rate mode, interest is payable on the first Wednesday of each month, commencing April 2, 2008. Holders of bonds bearing interest at a daily or weekly rate mode may tender their bonds for purchase with prior notice. The SBPA covers the bonds while they are in the daily or weekly rate mode.

The bonds are subject to a mandatory tender upon conversion of the interest rate modes, upon the expiration or substitution of the SBPA, and upon the occurrence of certain events of default under the SBPA. The bonds are also subject to optional and mandatory sinking fund redemption.

The district's 'AA' long term credit quality stems from its very low cost hydroelectric power resources, competitive retail rates, solid financial performance, with ample cash reserves, and successful federal operating relicensing of two of their three hydro projects thus far. The revised Rating Outlook to Positive from Stable, centers on the anticipated 2008 federal relicensing of Chelan's final hydroelectric project (Rocky Reach), management's development of a comprehensive strategic plan to address the district's considerable surplus offsystem sales, and more favorable contract terms in the recently negotiated long-term power sales agreement with Puget Sound Energy. Additionally, assuming electricity market prices are likely to face greater upward than downward price pressure going forward, the district's projected financial position post 2011 should strengthen as their allocation of hydropower - available for native load requirements and surplus sales- increases. Credit risks are few and manageable and aside from obtaining final approval of the new federal operating license for the Rocky Reach hydroelectric project, include: exposure to varying hydrological conditions in the northwest and its impact on the district's significant net surplus power sales.

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