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March 9, 2015

Fitch: Prairie State Energy Campus Exhibits Solid Long-Term Fundamentals Despite Recent Challenges

The following press release was published on March 9, 2015 by Fitch Ratings. Click here for a link to the release.

NEW YORK, Mar 09, 2015 (BUSINESS WIRE) -- Despite operational challenges, construction cost overruns, and heightened public scrutiny, rating actions related to six Prairie State Energy Campus's (PSEC) owner-participants have been limited reflecting strong contractual obligations that support participant debt obligations and long-term fundamentals, according to a new Fitch Ratings report.

'The Stable Rating Outlook on five of the six owner-participants rated by Fitch reflects the expectation that rate setting practices will continue to preserve credit quality. However, any failure to maintain financial metrics in the wake of higher project costs could result in negative rating pressure,' said Hugh Welton, Director.

Many ultimate end-users of PSEC power are openly expressing concern over commitments to buy long-term power at a cost that is now substantially higher than short-term wholesale market prices.

Although PSEC prices compare unfavorably to current and projected day ahead market prices, Fitch views this comparison as short-sighted and one that ignores the favorable long-term fundamentals of PSEC and characteristics of long-term power sales agreements.

Fitch's view of the PSEC project largely reflects three considerations.

First, PSEC represents a valuable long-term baseload resource. PSEC ranks among the cleanest, most efficient coal plants operating in the U.S. and is at the forefront of compliance with all existing and pending environmental regulations.

Second, the take-or-pay contracts between the PSEC owners and their participating member systems represent binding obligations irrespective of plant performance, and are either court validated or permissible under state enabling legislation.

Finally, for some PSEC owners, particularly the all-requirements energy suppliers, PSEC represents only one component of an overall supply portfolio and has, in many instances, reduced reliance on the historically volatile purchased power market.

For more information, a special report titled 'Prairie State Energy Campus - Post Completion Update' is available on the Fitch Ratings web site at ''.

Additional information is available at ''.