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MLGW News Release
 
Bond ratings agencies base strong credit ratings on MLGW's "stable outlook."
June 23, 2008
Memphis Light, Gas and Water Division's strong financial fundamentals were recently reaffirmed by Standard & Poor's Rating Services and Fitch Ratings. Citing a stable outlook, S&P upgraded its rating for two MLGW electric system bonds.

S&P raised its standard long-term rating on MLGW's $16.9 million of senior-lien electric system revenue bonds to 'AA+' from 'AA,' and its standard long-term and underlying rating (SPUR) on MLGW's $1.1 billion of junior-lien electric system revenue bonds to 'AA+' from 'AA-.' Fitch, which also views MLGW's outlook as stable, maintained its rating of 'AA' on both of those bond series.

S&P also assigned its 'AA+' standard long-term rating to MLGW's $92.4 million subordinate-lien electric system revenue and refunding bonds; Fitch assigned a rating of 'AA' rating to this bond series as well.

The opinions of S&P and Fitch are signs of MLGW's financial capability to meet all of its obligations. Credit ratings are used by investors as an indication of the likelihood of receiving their money back in accordance with the terms on which they invested.

"We believe that MLGW will continue to generate sufficient revenues to meet all of its obligations," said S&P credit analyst Theodore Chapman.

According to Fitch, the 'AA' rating reflects MLGW's stability, including its diverse customer base and retail rates that are comparable to other municipal rates in the area.

MLGW's water division is one of the few utilities in the world to hold “AAA” bond ratings from both S&P and Moody's Investor Services.

"We are very proud of the credit ratings that MLGW has received over the years," said MLGW President and Chief Executive Officer Jerry R. Collins, Jr.

Background on the bonds:

MLGW is the largest three-service public power utility in the United States.

As both agencies noted, MLGW purchases its entire power supply from the Tennessee Valley Authority, under a long-term, all requirements contract; therefore it has no power supply responsibility.

In order to lock in low-cost base-load power at a discount for a 15-year period, in 2003 MLGW entered into an electric prepay contract with TVA. Under the contract terms, MLGW receives a fixed credit on its monthly TVA bill, providing annual savings to the electric system of about $13 million. In order to finance this prepayment, Fitch noted, MLGW issued $1.5 billion of debt.

"The electric pre-payment bond issuance has saved MLGW customers tens of millions of dollars and will continue to do so for some years into the future," Collins said.

Also, Fitch noted, that because of that pre-payment bond issuance, "MLGW's balance sheet debt level appears high (the only other outstanding debt totals less than $17 million); however, this will be paid down by 2018 and there are no additional debt plans currently anticipated."

Considering the prepay transaction, S&P notes that the Electric Division's financial positions remains strong. Compared to other utilities across the nation, Collins said MLGW has very little debt associated with infrastructure improvement.

MLGW's electric utility is among the largest distribution systems in the United States, both in terms of customers served and electric revenues. The service area encompasses approximately 755 square miles. In 2007, the municipal electric utility provided service to 429,227 customers in its service area which encompasses Memphis and Shelby County. In 2007, approximately 86 percent of customers were classified as residential; however, in terms of kWh sales, residential customers accounted for 39 percent of total kWh's sold.