Key Financial Issues : Rating for ENW bonds

1. KeyFinancialIssues: Rating for ENW bonds • On the eve of a major Energy Northwest Refinancing, three major bond rating houses issued new ratings for Energy Northwest bonds backed by BPA. • Standard & Poors reaffirmed its existing AA- rating, but added a “negative” outlook. • Fitch Ratings downgraded Energy Northwest bonds backed by BPA from AA to AA-, but changed from credit watch negative to credit watch stable. • Moody’s Investors Service affirmed its existing bond rating of Aa1 for BPA-backed bonds. • S&P indicated that a ratings downgrade could be prompted by: • The use of any debt restructuring savings to offset current operating expenses, which would constitute a deferral of the cost recovery needed into future years; • Failure to implement an adequate SN CRAC, which is needed at 16% absent any additional cost cuts, to keep reserves at a minimum operating level; or • Any "restructuring" of federal Treasury obligations, although Bonneville does have the legal flexibility to "restructure" its federal obligations at any time with minimal financial penalties. DOE – March, 03

2. Key Financial Issues (continued) Fish Mediation – Four meetings scheduled through May 22. Parties will then decide whether to continue negotiations. No formal agreement on 2002 actions, but will now begin discussion of longer-term issues. Bond Rating – In March, when we refinanced Energy Northwest bonds, Moody’s, Fitch, and Standard & Poor’s affirmed our ratings of Aa1, AA, and AA- Customer Proposal – IOUs and publicly-owned utilities presented to BPA a proposal on how to distribute FCRPS benefits among IOUs and publics after FY 2006. BPA will be analyzing the proposal over the next several weeks. IOUs and publics will be sharing the proposal with the DSIs and Northwest conservation and environmental groups. DOE – April, 02