NBU NEWS RELEASE

FOR IMMEDIATE RELEASE: January 12, 2006
Contact: Gretchen Reuwer, NBU Communications Manager, (830) 629-8486

S&P reaffirms NBU bond rating

NEW BRAUNFELS—Wall Street has delivered some good news to New Braunfels. Standard & Poor (S&P), a leading provider of financial market intelligence and one of the world’s foremost sources of credit ratings, indices, investment research, risk evaluation and data, has reaffirmed the “A+” rating of New Braunfels Utilities’ bond status. The rating reflects NBU’s stable financial performance with strong liquidity and adequate debt service coverage, the availability of low-cost electricity from LCRA under a favorable take-and-pay contract that runs to June 25, 2016, and manageable future capital requirements. According to the S&P analysis, the limited—but growing—
economic and employment base of NBU’s immediate service area moderates these strengths.

“Bond ratings are similar to credit ratings,” NBU CEO Paula DiFonzo explains. “When the ratings are good, they can lead to lower interest rates. They serve as a report card on the fiscal health of a borrower. They are especially important in the municipal securities market, where it is hard to keep track of the hundreds of agencies (cities, counties, school districts, authorities) trying to borrow money. A high bond rating, such as the A+ given to NBU, indicates a strong ability to repay debts. Bond purchasers will typically accept lower interest rates in return for higher ratings.”

The S&P analysis noted that NBU rates were very low in comparison to the average rate in the state. NBU’s average system-wide revenue for fiscal 2005 was about 6.9 cents per kWh, including separately collected fuel and transmission cost pass-through payments. The Texas electric systems average rate was 9.14 cents per kWh, well above New Braunfels rate. In addition, S&P pointed out that NBU has ample water supply and wastewater treatment capacity, allowing overall operating and capital costs to remain manageable and rates to remain competitive across all utilities.

S&P believes that the stable outlook reflects the expectation that favorable, long-term purchased-power contracts and ample water supply should allow NBU to keep operating costs low and maintain a strong financial position with good debt service coverage.

“This report once again acknowledges and confirms the commitment of NBU to provide a strong, stable utility system for its utility customers,” Duane Westerman of SAMCO Capital Markets says. SAMCO serves as a financial advisor to NBU. “This is shown through the planning, forethought, and results from NBU year in and year out. This rating will continue to allow NBU to access the credit markets with very attractive rates and lower costs when it finds it necessary to do so. We congratulate NBU on being able to achieve these financial results while maintaining low rates and ample capacity in the electric, water, and wastewater systems. It is a credit to a long history of good management.”