Fitch affirms Berkshire Wind Power Cooperative, Mass. revs 

Nov 21 – Fitch Ratings has affirmed the ‘A’ rating on Berkshire Wind Power
Cooperative Corporation’s (BWPCC, or the cooperative) $62.5 million of
outstanding wind project revenue bonds, Berkshire series 1. The Rating Outlook
is Stable.

SECURITY

The bonds are secured by BWPCC revenues, which consist primarily of payments
made by Massachusetts Municipal Wholesale Electric Company (MMWEC, power supply
project revenue bonds rated ‘A+’ by Fitch) pursuant to a power sales contract
(PSC).

MMWEC’s obligation to make payments to the cooperative is limited to the
revenues it receives from 14 project participants under separate but identical
power purchase agreements (PPAs). Each participant has covenanted to maintain
rates sufficient to meet its obligations pursuant to its PPA.

KEY RATING DRIVERS

MMWEC CONSTRUCT: MMWEC and 14 Massachusetts municipal light departments formed
BWPCC to own the 15MW Berkshire Wind Energy Project (BWEP, or the project),
which became operational in May 2011.

STRONG SERVICE TERRITORY: The participants, all of which are MMWEC members,
serve a relatively stable, residential customer base with strong income and
employment indicators.

GOOD PARTICIPANT FINANCIALS: Good participant financials include an aggregate
equity ratio equaling nearly 100% of capitalization, given limited debt levels,
and healthy coverage of full obligations averaging near 1.4x (2011).

SOUND CONTRACT PROVISIONS: Unconditional, take-or-pay PPAs with the participants
provide good bondholder protection. The PPAs cover all project costs, including
110% of the bond fund requirement, and excess amounts are transferred to a
reserve and contingency fund.

STEP-UP PROVISION ADDS PROTECTION: The PPAs require a 125% step-up of the
participants’ original entitlement shares. The step-up is sufficient to cover a
default by any single participant, which limits bondholder exposure.

HIGH COST OF POWER: At nearly 11 cents/kWh (before capacity revenues), the
project cost of power is high relative to MMWEC’s other generating projects.
However, the project is aligned with the commonwealth’s emphasis on developing
renewable sources of energy.

IMPROVING PROJECT PERFORMANCE: Project operating statistics trail management’s
2010 forecasts but are expected to meet expectations by the end of this year.

CREDIT PROFILE

STRONG PARTICIPANTS

MMWEC and 14 Massachusetts municipal light departments created BWPCC to finance,
own, and operate the project. The 14 participants are located in central and
eastern Massachusetts and serve a typically small, residential customer base
totaling 107,100. Participant wealth indicators are strong and unemployment
rates are low. In addition, the participants’ financial metrics appear healthy,
which should help ensure that all financial commitments are met.

The participants’ aggregate equity ratio equals nearly 100% of capitalization,
as a consequence of limited debt levels. Coverage of full obligations is healthy
at approximately 1.4x (2011). In addition, retail rates are slightly below the
state average, which provides the participants with revenue-raising flexibility.

However, at nearly 11 cents/kWh (before capacity revenues), the project cost of
power is high relative to MMWEC’s five other generating projects. In addition,
MMWEC’s only outstanding debt for its nuclear projects fully matures in 2019.
The BWEP bonds mature in 2030.

IMPROVING PROJECT PERFORMANCE

The BWEP, which is located on a 1,000-acre site along the ridgeline of Brodie
Mountain, consists of 10 1.5MW General Electric-manufactured wind turbines. The
project became fully operational in May 2011 after some delay, and performance
measures are modestly short of 2010 forecasts.

Year-to-date generation is trending below the 52,560 MWh forecast. Component
failures (since rectified) and a storm that knocked the project substation
offline for 13 days in August limited production. However, management expects
the typically windier weather in the final months of the year to bring total
generation nearer the forecast level.

The 2012 capacity factor averaged 34.5% through October, which is roughly in
line with industry standards. However, it underperforms the cooperative’s
full-year projection of 40%.

SOUND CONTRACT PROVISIONS

MMWEC, acting as the agent for the cooperative, purchased the BWEP and assigned
its purchase rights to the cooperative in June 2008. The cooperative owns the
project.

MMWEC purchases 100% of the capacity and energy output of the project, pursuant
to a take-or-pay PSC between MMWEC and the cooperative. In addition, MMWEC
agrees to pay all of the cooperative’s related costs, including 110% of annual
debt service requirements. MMWEC’s obligation to make such payments is absolute
and unconditional and extends the life of the bonds.

MMWEC and each of the 14 participants have entered into separate take-or-pay,
court-validated PPAs that obligate each participant to pay 100% of their
allocated project share; the PPAs likewise extend the life of the bonds.
Participants’ payments are made in monthly installments, as part of annual
operating expenses. The obligations are several, not joint. However, a 125%
step-up provision provides additional bondholder protection. The step-up is
sufficient to cover a default by any single participant.

A $25 million line of credit from MMWEC provides a backstop for settlements of
working capital. In addition, a debt service reserve is fully funded to maximum
annual debt service ($5.4 million).

Additional information is available at ‘www.fitchratings.com’. The ratings above
were solicited by, or on behalf of, the issuer, and therefore, Fitch has been
compensated for the provision of the ratings.

This rating action was informed by the sources of information identified in
Fitch’s Revenue-Supported Rating Criteria and U.S. Public Power Rating Criteria.

Applicable Criteria and Related Research:
–‘Revenue-Supported Rating Criteria’, June 12, 2012;
–‘U.S. Public Power Rating Criteria’, Jan. 11, 2012;
–‘Berkshire Wind Power Cooperative Corp.’, Nov. 29, 2010.

Applicable Criteria and Related Research:
U.S. Public Power Rating Criteria
Revenue-Supported Rating Criteria