Fitch Rates Northern California Power's $88.5MM Hydro Revs 'A'/Underlying; Outlook Stable

NEW YORK--(BUSINESS WIRE)--Fitch assigns an underlying rating of 'A' to Northern California Power Agency's (NCPA) Hydroelectric Project Number One revenue bonds $85.2 million of 2008 refunding series A (variable rate demand bonds) and $3.3 million 2008 taxable refunding series B (taxable variable rate demand bonds). Fitch also affirms its underlying rating of 'A' on NCPA's $476 million outstanding hydroelectric project number one bonds, and $52.3 million of outstanding geothermal project number three bonds. The Rating Outlook for NCPA is Stable.

Bond proceeds, together with other available money, will refund a portion of NCPA's outstanding Hydroelectric Project Number One Revenue Bonds, 1998 Refunding Series A, and pay costs of issuance of the 2008 bonds. Fitch anticipates the delivery of irrevocable direct pay letters of credit to support both series of bonds from Dexia Credit Local, for which Fitch will assign ratings on the structure nearer to closing. The bonds are expected to close on April 2, 2008.

The ratings reflect the underlying credit quality of the project participants, the provisions of the unconditional take-or-pay power purchase agreements with 25% step-up provisions, consistently strong project operations and competitive project economics, and the favorable positioning of the project participants within California's changing regulatory framework. The rating additionally incorporates NCPA's experienced management team, a broad array of services that meet the operational and planning needs of its smallest members and NCPA's proactive legislative and regulatory efforts that benefit all of its members. These system-like qualities at the NCPA level have resulted in Fitch's analysis of the projects as a utility system as opposed to separate project financings and provide greater stability and security to the credit ratings.

Credit concerns include the need for additional generation and associated financing, specifically for renewable generation, by many of the members. The incremental costs of new generation combined with the costs of compliance with the state's developing regulatory focus on reducing carbon emissions are likely to place cost pressure on all utilities in the state, including NCPA members. Rate competitiveness of the members and political will for raising rates varies across member systems.

For more information please see the report dated Sep 27, 2007 on our web site at www.fitchratings.com

NCPA is a joint power agency that provides 15 members and 2 associate members in Northern California, with a portion of their energy requirements through a mix of hydroelectric, geothermal, and natural gas-fired projects, as well as purchased power. In addition to generation, NCPA provides marketing, legislative/regulatory, and administrative ancillary services.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. 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.