Fitch Ratings Affirms FPL & Constellation; Outlook Stable

Business Wire, Dec 19, 2005

NEW YORK -- Fitch Ratings has affirmed the ratings of FPL Group, Inc. (FPL) and subsidiaries Florida Power & Light Company and FPL Group Capital following the announcement of a merger agreement between FPL and Constellation Energy Group (Constellation). Fitch has also affirmed the ratings of Constellation and subsidiary Baltimore Gas and Electric Company (BGE) as outlined below. The Rating Outlook for all companies is Stable. E[acute accent]In Fitch's view, the transaction structure as a stock-for-stock exchange avoids added debt leverage and thus allows the combined entity to emerge with a sound credit profile. Moreover, the two companies' nonregulated businesses are highly complementary. Constellation is one of the most active industry participants in serving wholesale and retail load around the country. However, in many cases, Constellation owns relatively little generation in regions where it serves load, most notably in NEPOOL and ERCOT. Conversely, FPL owns considerable amounts of nonregulated generation in those regions while serving relatively little supply under load serving contracts. There are also opportunities for Constellation to apply its marketing and commercialization capability to the FPL asset portfolio. E[acute accent]In addition to the complementary nature of the companies' nonregulated businesses, the merger is expected to generate pretax synergies that management estimates will rise to at least $250 million annually by the third year following closing. Though detailed disclosures on these synergies have not yet been made, much of the expected savings are anticipated to come from the nonregulated operations. Also, the combined entity will also benefit from a large portfolio of low cost coal and nuclear generation. E[acute accent]Fitch estimates the combined entity will have a debt ratio in the 40% range and a ratio of debt to FFO of less than 4.8 times (x). Approximately 45% of projected earnings before interest but after taxes (to take into account the sizable production tax credits generated by FPL's wind portfolio) is expected to come from regulated utility operations. E[acute accent]Fitch expects that the FPL corporate structure and capitalization will remain intact as a group under the new merged holding company. However, there remains uncertainty related to potential subsequent decisions by management involving inter-affiliate transactions, consolidation of the competitive businesses, asset transfers, or changes in capitalization. Fitch will continue to review and reassess the business plans and financial plans as these develop, both prior to and after the merger. E[acute accent]The merger is conditioned on a number of state and federal agencies and is expected to take 12 to 15 months to complete. These include the Maryland Public Service Commission, the Federal Energy Regulatory Commission (FERC), the Nuclear Regulatory Commission, the Securities Exchange Commission, the Department of Justice, and the Federal Trade Commission.

E[acute accent]Fitch affirms the following ratings with a Stable Rating Outlook:

E[acute accent]FPL Group Inc.

E[acute accent]--Issuer default rating at 'A'.

E[acute accent]Florida Power & Light Company

E[acute accent]--Issuer default rating at 'A';

E[acute accent]--First-mortgage bonds at 'AA-';

E[acute accent]--Unsecured pollution control revenue bonds at 'A ';

E[acute accent]--Preferred stock at 'A';

E[acute accent]--Commercial paper at 'F1'.

E[acute accent]FPL Group Capital

E[acute accent]--Issuer default rating at 'A';

E[acute accent]--Senior unsecured notes at 'A';

E[acute accent]--Commercial paper at 'F1'.

E[acute accent]FPL Group Capital Trust I

E[acute accent]--Trust-preferred securities at 'A-'.

E[acute accent]Constellation Energy Group

E[acute accent]--Issuer default rating at 'A-';

E[acute accent]--Senior unsecured notes at 'A-';

E[acute accent]--Commercial paper at 'F2'.

E[acute accent]Baltimore Gas and Electric Company

E[acute accent]--Issuer default rating at 'A-';

E[acute accent]--First-mortgage bonds at 'A ';

E[acute accent]--Medium-term notes at 'A';

E[acute accent]--Unsecured pollution control revenue bonds at 'A';

E[acute accent]--Preferred stock at 'A-';

E[acute accent]--Commercial paper at 'F1'.

E[acute accent]Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria, and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance, and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.