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Fitch Ratings, New York, has assigned an A- rating to Energy Northwest's $68 million wind project revenue bonds, series 2006, and has also affirmed the A- rating on the outstanding 2001, 2003 and 2005 wind project revenue bonds. Proceeds of the 2006 bonds will be used to fund the construction of Phase III of the Nine Canyon Wind Project.

Nine Canyon is a separate system of Energy Northwest created to sell energy to various public utility districts in the state of Washington. The project is currently divided into two phases: Phase I, which consists of 37 wind turbines with an aggregate generating capacity of approximately 48 MW, and Phase II, made up of 12 wind turbines with a generating capacity of approximately 16 MW.

Phase I became commercially operable in September 2002, and Phase II began operation in December 2003. The third phase will consist of 14 wind turbines totaling 32 MW of capacity and is expected to become fully operational in early 2008.

Each wind project phase has separate groups of power purchasers and separately issued debt, Fitch says, and certain utilities are involved in more than one phase. Each phase has a separate group of power purchasers who are only legally committed for the debt service of the phase or phases in which they are involved. Operating costs for all phases are spread across all purchasers based upon their output of the project.

The bonds are secured by net revenues of the wind project system, which consists of all three phases. The rating on the 2006 bonds reflects the sound security provisions of its long-term power sale contracts, the creditworthiness of the contractually obligated purchasers and the increasing value of renewable energy sources in the region.

Credit concerns, according to Fitch, focus on the purchasers' credit profiles and financial strength, which are significantly dependent on hydro conditions in the Northwest.

Bondholders of the 2006 bonds are secured primarily by the purchase obligations of the five participants in Phase III through long-term contracts that extend through the life of the bonds. The power purchasers and their respective shares of the Phase III Wind System project are as follows: Grays Harbor County PUD No. 1 (37.52%); Franklin County PUD (25%), Benton PUD (18.63%); Lewis County PUD No. 1 (15.71%); and Mason County PUD No. 3 (3.14%).

Fitch says it recognizes that the creditworthiness of Phase I and Phase II purchasers has some impact on the credit profile of the 2006 bonds. A default by Phase I or Phase II purchasers involving more than 20% of the respective phase's debt service could cause a deficiency in funds available to pay debt service and require draws on the debt service reserve fund.

In aggregate, Fitch believes the purchasers associated with the wind system are a diverse and good quality mix of utilities. The power purchasers and their respective shares of the wind system projects in aggregate are as follows: Grays Harbor County PUD No. 1 (20.89%); Okanogan County PUD No. 1 (16.61%); Grant County PUD No. 2 (12.54%); Franklin County PUD No. 1 (10.49%); Douglas County PUD No. 1 (10.23%); Benton PUD No. 1 (9.39%); Chelan County PUD No. 1 (8.3%); Lewis County PUD No. 1 (6.32%); Mason County PUD No. 3 (3.14%); and Cowlitz PUD No. 1 (2.09%).

Fitch recognizes that the recently passed renewable portfolio standard in the state of Washington enhances the value of the wind project to the purchasers. In addition, the cost of the energy to the purchasers has been near past projections, although Fitch notes that lower-than-expected operating costs have compensated for lower-than-expected federal energy credits and wind conditions.


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