Fitch Ratings Upgrades Allegheny & Utility Subs; Placed On Rating Watch Evolving

Business Wire, June 17, 2003

Business Editors

NEW YORK--(BUSINESS WIRE)--June 17, 2003

Fitch Ratings has upgraded the senior unsecured ratings of Allegheny Energy Inc. (AYE) and its utility subsidiaries as follows: AYE to 'BB' from 'B '; West Penn Power Company (WPP) to 'BBB-' from 'BB ', Potomac Edison Company (PE) to 'BBB-' from 'BB'; and Monongahela Power Company (MP) to 'BBB-' from 'BB'. Fitch has also assigned a 'BB' rating to AYE's $330 million unsecured bank facility maturing 2005. The ratings are also placed on Rating Watch Evolving. A list of the affected ratings is listed below.

AYE's ratings are supported by stable dividend stream from its regulated subsidiaries MP, WPP and PE. AYE has low parent leverage and has suspended dividend payments to its common shareholders. As a result, AYE's standalone liquidity is adequately supported by dividend distributions received from its regulated subsidiaries. AYE's ratings also reflect the company's exposure to its unregulated subsidiary Allegheny Energy Supply Company LLC (AE Supply, senior secured debt rated 'BB' by Fitch), which is currently facing financial stress. (For more details on Fitch's latest rating actions on AE Supply and affiliates, please refer to today's press release, 'Fitch Rates AE Supply Secured Bank Facilities; Affirms Senior At 'B'', available on the Fitch Ratings web site at 'www.fitchratings.com'.)

The upgrade of AYE's senior unsecured debt is triggered by a thorough analysis of the recovery prospects of the company based on the strong net equity value of its three regulated utilities. Fitch estimates that the net equity value of AYE's utilities covers AYE's current debt and potential exposure to AE Supply sufficiently. Currently AYE has issued about $200 million of guarantees on behalf of Allegheny.

The upgrade of AYE permits the corresponding upgrade of its regulated utilities, whose ratings are currently constrained by those of its parent. WPP, PE, and MP all have substantially better standalone credit profiles than indicated by their current constrained ratings. The rating constraint of the utilities by AYE's rating reflects the utilities' moderate degree of insulation from the parent. Since WPP, PE, and MP are not entirely insulated from the credit risk of their parent, their senior unsecured ratings are two notches above AYE's senior unsecured ratings.

The Rating Watch Evolving status reflects the current status of AE Supply, whose ratings are contingent upon the outcome of several upcoming events. The AYE group has yet to complete its restatements of quarterly financial results for 2002 and issue its 2002 financial statements, without which the AYE or AE Supply cannot access the public markets, sell certain assets, or obtain approval from the SEC to issue additional secured debts. Secondly, AE Supply is making progress towards monetizing its CDWR Contract with the recent settlement with CDWR. While execution risk exists, the timely monetization of the CDWR Contract at a reasonable price would provide not only the proceeds to meet the 2003 amortization schedule but also free up cash used to post collaterals for hedges. Lastly, external funding by AYE or AE Supply before year end 2003, either in the public or private placement markets, will help to achieve liquidity at AE Supply.

The ratings affected are listed below:

Allegheny Energy, Inc.

-- Senior unsecured debt upgraded to 'BB' from 'B ';

-- Bank credit facility maturing in 2005 rated 'BB'.

West Penn Power Company

-- Medium-term notes upgraded to 'BBB-' from 'BB '.

Potomac Edison Company

-- First mortgage bonds upgraded to 'BBB' from 'BBB-';

-- Senior unsecured notes upgraded to 'BBB-' from 'BB'.

Monongahela Power Company

-- First mortgage bonds upgraded to 'BBB' from 'BBB-';

-- Medium-term notes/pollution control revenue bonds (unsecured) upgraded to 'BBB-' from 'BB';

-- Preferred stock upgraded to 'BB ' from 'BB-'.

Ratings of AYE's other affiliates are as follows:

Allegheny Energy Supply Company LLC

-- Secured bank credit facilities with first priority lien rated 'BB-';

-- Secured bank credit facilities with a second priority lien rated 'B ';

-- Unsecured bank credit facilities rated 'B';

-- Senior unsecured notes rated 'B'.

Allegheny Generating Company

-- Senior unsecured debentures rated 'B'.

Allegheny Energy Statutory Trust 2001-A Notes

-- Senior secured notes rated 'B '.

West Penn Funding LLC

-- Transition bonds rated 'AAA'.

Allegheny Energy Supply Company LLC

-- Pollution control bonds (MBIA-Insured) rated 'AAA'.

Allegheny Energy Inc. is a registered utility holding company, which owns three regulated utilities, Monongahela Power, Potomac Edison and West Penn Power and two non-utility subsidiaries. The utilities deliver electric and gas service to 1.5 million customers in parts of Maryland, Ohio, Pennsylvania, Virginia, and West Virginia and 230,000 customers in West Virginia, respectively. AYE's non-utility subsidiaries consist of AE Supply Co. LLC, which develops, acquires, owns and operates generating plants and is a marketer of electricity and other energy products and Allegheny Ventures which is involved in telecommunications and energy related projects.