Fitch Rates Northern States Power-Minnesota's $300MM First Mortgage Bonds 'A+'

The ratings for NSPM take into consideration the company's historically strong and consistent cash flows, constructive regulatory environments, and projected growth resulting from investments in rate base. Fitch projects NSPM's credit metrics will remain strong relative to both peers and its rating category over the next several years, with FFO interest coverage of approximately 5.2 times (x) to 5.6x, and FFO leverage of approximately 25%-28%. Of some concern is the company's large capital spending program, approximately $4.1 billion through 2012; however, this is somewhat mitigated by supportive rider mechanisms that will help maintain NSPM's credit profile during this period of growth. This strategy should limit the risk or rate shock by causing only incremental increases in customers' rates, thereby increasing the probability of Commission support. Fitch estimates NSPM to fund 50%-60% of its capital needs after dividends to Xcel Energy Inc. (XEL, Issuer Default Rating 'BBB+' with a Stable Outlook), with internally generated cash; the remaining cash needs will be satisfied by a combination of first mortgage bond offerings at NSPM and equity infusions from XEL.

NSPM's capital spending program consists primarily of Minnesota Public Utilities Commission (MPUC)-approved investments in generation, transmission, and renewable wind projects as well as significant spending to extend the lives of and expand capacity at NSPM's Monticello and Prairie Island nuclear plants. As part of the company's recent rate order, the MPUC approved a 10-year life extension of the Prairie Island nuclear plant for purposes of determining depreciation and decommissioning expenses, effective Jan. 1, 2009.

In September 2009, NSPM received approval for an electric rate increase of approximately $91.4 million, and a 10.88% return on equity (ROE). This concludes the company's initial rate request of $156 million, later modified to $136 million in November 2008. In June 2009, NSPM filed for a $18.6 million rate increase request in South Dakota electric, premised on a requested ROE of 11.25 percent, and an electric rate base of $282 million. Rates are expected to be effective in January 2010, based on statutory requirements in South Dakota.

NSPM, a wholly-owned subsidiary of Xcel, is a regulated integrated utility serving approximately 1.4 million electric customers in Minnesota, North Dakota and South Dakota, and 500,000 natural gas customers in Minnesota and North Dakota.

Additional information is available at 'www.fitchratings.com'.

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE '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.

Fitch Ratings
Cindy Stoller, +1-212-908-0526 (New York)
cindy.stoller@fitchratings.com
Karen Anderson, +1-312-368-3165 (Chicago)
Sharon Bonelli, +1-212-908-0581 (New York)