Fitch Rates Municipal Electric Authority of Georgia Project One Sub Bnds, Series 2008B 'AAA/F1+'

Business Wire, August 19, 2008

NEW YORK -- Fitch Ratings assigns a rating of 'AAA/F1 ' to the $148,065,000 Municipal Electric Authority of Georgia's (MEAG) Project One subordinated bonds, series 2008B (the bonds). The long-term 'AA ' rating is based jointly on the long-term 'A ' rating assigned by Fitch to MEAG and the support provided by an irrevocable, direct-pay letter of credit (LOC) issued by Dexia Credit Local, acting through its New York Branch (the bank), rated 'AA /F1 ', securing the bonds. The short-term 'F1 ' rating is based solely on the LOC. The bank is obligated to make payments of principal, interest and purchase price when due. For more information on the underlying credit, please refer to the press release published on August 15, 2008 available on the Fitch web site at www.fitchratings.com.

The long-term 'AAA' rating is based on Fitch's methodology, which considers the joint probability of the failure of both a rated obligor and a bank LOC provider. The methodology results in a rating that is up to two notches higher than the stronger of the two credits if the following conditions are met: (1) both entities have a rating of 'A' or higher; (2) the transaction is structured such that payments from both the municipal issuer and the bank are in the flow of funds and both entities would have to fail to perform before the bonds defaulted; and (3) the credit of the bank and the rated obligor have no more than a medium degree of correlation. Fitch has determined a low degree of correlation which results in a rating of 'AAA'. If either MEAG or the bank were downgraded to 'A-' or lower, the joint probability could no longer be applied and the long-term rating would then reflect the higher of the two ratings.

The bank is obligated to make payments of principal of and interest on the bonds upon maturity and redemption, as well as the purchase price for tendered bonds. The LOC provides full coverage of principal plus an amount equal to 61 days' interest at a maximum rate of 15% based on a year of 365 days and purchase price for tendered bonds. The ratings will expire upon the earliest of: Aug. 20, 2013, the initial stated expiration date of the LOC, unless such date is extended; upon any prior termination of the LOC; or upon defeasance of the bonds. The underwriter for the bonds is Goldman, Sachs & Co.

The bonds will initially bear interest at the weekly rate but may be converted to a daily, auction, term, fixed or flexible mode. While the bonds bear interest in the weekly mode, interest payments will be made on the first business day of each month, commencing Sept. 2, 2008. Holders may tender their bonds on any business day with the requisite prior notice of the purchase.

The bonds are subject to mandatory tender: 1) upon conversion of an interest rate mode, on each rate adjustment date while the bonds are in a flexible mode or a term mode; 2) at MEAG's option in the term mode; 3) at the authority's option to enable any Supplemental Resolution amending this Thirty-First Supplemental Resolution or the Subordinated Bond Resolution to take effect; and 4) upon expiration, substitution, or termination of the LOC. Optional and mandatory redemption provisions also apply to the bonds.

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.