TEXT-Fitch on Northern States Power-Minnesota

(The following statement was released by the rating agency)

March 11 - Fitch Ratings has assigned an 'A+' rating to the new $400
million-$500 million issue of first mortgage bonds due March 2018, of Northern
States Power Company - Minnesota (NSPM). The proceeds will be used for general
corporate purposes and to repay short-term debt, including outstanding
commercial paper. The Outlook is Stable.
The current ratings and outlook for NSPM reflect the company's strong credit
metrics and supportive regulatory environments. The ratings and outlook also
consider NSPM's linkage to its parent, Xcel Energy, Inc. (XEL) (senior
unsecured 'BBB+'; Outlook Stable), and to Northern States Power Company (WI)
(senior unsecured 'A'; Outlook Stable) through an integrated generation and
transmission system.
The Stable Outlook reflects Fitch's expectation that planned capital spending
of approximately $4.3 billion through 2010, may place mild pressure on credit
metrics. However, over the long-term, credit is supported by a constructive
regulatory environment and enhanced recovery mechanisms that should apply to
over a third of NSPM's capital program through 2010. The current legislative
and regulatory environment allows NSPM to earn a cash return on its
construction work-in-progress, and recover costs of investments in
transmission, renewables and environmental upgrades to existing plants.
Enhanced recovery is expected on NSPM's Metro Emission Reduction Project, which
is the conversion of existing coal plants to gas and the installation of
pollution control equipment as well as several wind, nuclear and transmission
projects. Fitch expects operating cash flows net of dividends will cover
approximately 60% of capital expenditures, and that NSPM will fund the
shortfall through the new first mortgage bonds and equity contributions from
XEL. For 2008, Fitch projects that the company's credit metrics will remain
strong relative to both peers and its rating category, with funds from
operations interest coverage in the range of approximately 5.0 times (x) to
5.5x, and total debt to cash flow from operations in the approximately 3.5x to
3.7x range.
NSPM is a regulated integrated utility serving approximately 1.3 million
electric customers in MN, ND and SD, and 457,000 natural gas customers in MN
and ND. The company is a wholly-owned subsidiary of Xcel Energy, Inc. (XEL.N: Quote, Profile, Research).
(New York Ratings Team)