Wisconsin Elec $150 Million Debs Rated ``AA-'' by Fitch IBCA

Business Wire, Nov 30, 1999

NEW YORK--(BUSINESS WIRE)--Nov. 30, 1999--

Wisconsin Electric Power Co.'s (WE) $150 million 6.625 percent debenture, due Dec. 1, 2002, is rated "AA-" by Fitch IBCA. In addition, WE's outstanding first mortgage bonds are affirmed at "AA," and debentures and preferred stock at "AA-."

WE is the principal subsidiary of Wisconsin Energy Corp. (WEP).

WE's ratings reflect the company's low-cost electric operations, competitive rates, attractive gas distribution business, supportive regulation and healthy service territory.

In addition, WE's credit ratings recognize continued improvement in credit protection measures resulting from improved operating performance at the Point Beach nuclear plant and a $180 million rate increase (approximately $160 million electric and $20 million gas) implemented in May 1998.

As a result, WE's credit protection measures have returned to near historical levels consistent with the rating category. The improvement is most evident in cash interest coverage measures, while debt leverage continue to be above historical norms.

EBITDA interest coverage reached a healthy 6.27 times (x) for the 12 months ended Sept. 30, 1999 and CFO interest coverage 5.17x. The debt ratio of 52.5 percent and debt/EBITDA of 3.4x are both weaker than historical levels. Expectations are for further improvement, primarily through continued strong operations at Point Beach, and proposed rate increases.

In September, WE filed with the Wisconsin PSC seeking a 3.1 percent ($46 million) electric rate increase and a 2.3 percent ($8 million) gas rate increase to be effective Jan. 1, 2000. WE also requested that a second-step $29 million electric increase become effective Jan. 1, 2001.

The rate increases would support spending for improvements in fossil plants, system reliability and safety. WE also requested performance based rate making.

WEP's announced merger with WICOR Inc. is not expected to impact WE's credit quality due to a proposed corporate structure that adequately insulates WE from the operations of its affiliates, and also the relatively low business risk of Wisconsin Gas Co., which is a local gas distribution company.

After the acquisition, WICOR, the parent of Wisconsin Gas and various water pump manufacturing businesses, will become a wholly owned subsidiary of Wisconsin Energy Corp., as will WE.

The $1.3 billion acquisition will be funded with a combination of stock and cash. About 60 percent of the consideration will be paid in cash and 40 percent in WEP common stock. The cash portion will be funded with parent company debt and should have no impact on WE's capital structure. Closing is expected in the second quarter of 2000.

In July, a Wisconsin state court jury found in favor of two plaintiffs in a suit filed against WE in 1996 that alleged WE was responsible for contaminating property owned by the two plaintiffs. The jury awarded the plaintiffs $4.5 million for cleanup expenses and damages, and an additional $100 million in punitive damages. WE is appealing the decision.

In a worst-case scenario, financing the $104.5 million would have a modestly negative impact on WE's credit quality measures and should not affect ratings.