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Outlook stable for Nuon says S & P

3 February 2004 – Standard & Poor’s Rating Services has affirmed its ‘A+’ long-term and ‘A-1’ short-term corporate credit ratings on Netherlands-based energy utility N.V. Nuon. At the same time, Standard & Poor’s raised its long-term corporate credit rating on Nuon’s newly acquired subsidiary, Nuon Power Generation B.V. (formerly Reliant Energy Power Generation Benelux B.V.) to ‘A+’ from ‘B+’, equalizing it with that of its parent.

Standard & Poor’s said that all the long-term ratings for Nuon have been removed from CreditWatch and the outlook is stable.

Both companies were placed on CreditWatch after Nuon’s bid of about €1 bn ($1,34bn) to acquire the European generation assets of Reliant Resources Inc. (B/Negative/–). The transaction obtained regulatory approval at the end of November 2003, conditional on Nuon’s commitment to auction its 800 MW contracted capacity from the Intergen power plant for the next five years.

The affirmation of the ratings on NUON reflects the group’s stronger, now vertically integrated, structure, which is a positive credit feature given the rising and increasingly volatile wholesale prices in the Netherlands, in particular, bearing in mind the group’s large supply position of about 27 TWh, equal to a national market share of about 30%. Financial flexibility at the rating level is now exhausted.. Consequently, no further medium or large acquisitions are factored in.

The ratings on Nuon Power Generation reflect full ownership by Nuon, the company’s strategic importance to Nuon’s supply activities, planned deep integration with existing operations in the short term, and expected funding through the parent.

“The stable outlook reflects Nuon’s predictable cash flows and relatively conservative financial policy. Financial headroom at the rating level has now been exhausted and we have factored in a reduction in net debt and an improvement in credit metrics by year-end 2004,” said Standard & Poor’s Infrastructure Finance credit analyst Amrit Gescher. “We will also need to monitor the prices obtained by Nuon from the auction of its Intergen contract in mid 2004.”