Fitch Rates AMP $479.17MM Prairie State Project Revenue Bonds 'A'; Outlook Stable

NEW YORK-(Business Wire)-September 28, 2009 - Fitch Ratings assigns a rating of 'A' to the $479.17 million American Municipal Power (AMP, formerly AMP-Ohio), Prairie State Energy Campus (PSEC) project revenue bonds series 2009B, 2009C, and 2009D. This transaction will serve to substantially complete financing for AMP's 368 megawatt (MW) share of the Prairie State Energy Campus 1682MW coal-fired plant. Bond proceeds will also be used to deposit funds to the debt service reserve account (known as the Parity Common Reserve Account) and pay the cost of issuance.

The three series of bonds include:

—2009B, taxable $81.17 million 'A';

—2009C Build America Bonds $398.072 million 'A'; and

—2009D, tax-exempt $0 (amount will depend upon market conditions) 'A'.

Fitch also affirms the following outstanding AMP ratings:

—Prairie State Energy Campus Project bonds at 'A';

—Hydroelectric Project bond anticipation notes series 2009A at 'F1', implied long-term at 'A';

—Ohio Municipal Electric Generation Agency (AMP) Joint Venture 5 (JV5) project bonds 'A';

—Joint Venture 2 (JV2) project bonds 'A-'.

The Rating Outlook is Stable.

As the PSEC benefits from favorable economics of the plant's projected power costs, all of AMP's projects benefit from the following strengths:

—strong long-term, take-or-pay power purchase contracts with the projects' participants;

—the contracts' 25% step-up provision to mitigate individual participant default (although the 'A-' rating for the JV2 project is a reflection that the 25% step-up is insufficient to cover a potential default by the largest participant, Hamilton);

—ongoing financial stability and diversity of the projects' participants; and

—AMP's management team with a solid history of managing the power needs of a large, diverse membership, which includes 128 members.

Credit concerns continue to be:

—construction risks associated with the development of large coal-fired generators;

—Ohio's weakening economy and its potential long-term impact on participants' financial performance.

—AMP's maintenance of sufficient liquidity to support bridge financing for a $5.9 billion capital plan, which includes the simultaneous development of three generation projects (see below for further information).

Fitch also notes concerns with the financial performance of the City of Niles, OH electric utility, Although the utility failed to meet its debt service coverage requirement of 1.10 times for the JV5 project in 2006, 2005, and 2004, AMP reports that the utility met the requirement in 2007 but that 2008 data is unavailable. Fitch notes that the magnitude of operating loss for the Niles electric utility is declining and the utility's self liquidity allows it to make timely payments on its obligations to the JV5 project. Added comfort is derived from the 25% step-up requirement by the other project participants, which is sufficient to cover a potential but unlikely default by the City of Niles.

Fitch will monitor the city's progress in maintaining required debt service coverage, timely cost recovery and bringing revenues and expenditures into balance for the electric utility. Fitch will also monitor AMP's flexibility and ability to resolve this member issue. If these challenges persist, it could lead to a negative rating action.

AMP is a non-profit wholesale power and services provider for a mix of 128 all-requirement and partial- requirement member municipal electric systems - 82 in Ohio, 29 in Pennsylvania, seven in Michigan, five in Virginia, two in West Virginia, and three in Kentucky - serving over 570,000 customers. AMP also acts as project manager for groups of member electric systems participating in separately secured joint ventures that share ownership of power generation and transmission assets.

Over the next 10 years, AMP expects to decrease market purchases to approximately 10% from the current 60%, with the addition of three new generation projects: Prairie State coal plant (368 MW), hydro plants along the Ohio River (208 MW in Phase I; 223MW in Phases II and III), and the American Municipal Power Generation Station (AMPGS) coal plant (940 MW). Thus, by 2017 AMP's resource mix would be fairly diverse and include coal (43%), gas (23%), diesel (6%), hydro (18%), wind (0.17%), and purchase power (10%). While the capital plan is large at $5.9 billion, the planned generation projects are not meeting new load growth but will come on line to replace AMP's purchase power contracts.

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.

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE '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.

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