New York, October 01, 2012 -- Moody's Investors Service has assigned a B2 rating to Astoria Generating Company Acquisitions, L.L.C.'s (AGC) proposed $450 million of first priority senior secured credit facilities, which include a $425 million term loan (maturing in 2018) and a $25 million working capital facility (expiring in 2017). The rating outlook is stable.

RATINGS RATIONALE

The B2 rating reflects the relatively high business and operating risks associated with older, in-city generating assets along with the level of leverage which capitalizes the project. The rating recognizes the location of the assets within the transmission constrained New York City Zone J market and the continuing value that AGC receives from operating the assets. Capacity revenues represent the largest component of AGC's cash flow, which exhibited substantial volatility during 2011. AGC's cash flows are considered highly merchant by Moody's. In addition to the volatility in cash flow are the numerous operational issues that have occurred at AGC in recent times and the continued challenges that we believe remains for maintaining availability and performance when operating an older and less efficient generation fleet.

The B2 rating represents a higher rating level than the ratings assigned to the existing debt reflecting in large part regulatory orders from the Federal Energy Regulatory Commission (FERC), which we believe improve the business prospects for AGC. Specifically, on June 22nd, FERC issued an order requiring the New York Independent System Operator (NYISO) to increase overall transparency, implement consistent methodologies for "buyer-side" mitigation, and make mitigation decisions public. Moreover, on September 10th, FERC issued a decision requiring the NYISO to recalculate its mitigation exemption tests on two new entrant plants, the Astoria Energy II plant (unrelated to AGC), and the Bayonne Energy Center, which entered the market in June 2012. In the order, FERC requires the NYISO to recalculate the tests of these two projects incorporating their full capital costs, among other things. This order could potentially reverse the exemption determination and require one or both of the competing plants to bid into the market at a price that is not below the offer floor. An additional factor in today's rating assignment is our observation that capacity prices in Zone J have largely recovered from their low levels that occurred during the summer of 2011 due to an increase in the Locational Capacity Requirement (LCR) for "in-city" generation sources to 83% from 81% in 2012 (may increase further in 2013 to 85.4%) and the removal from the market of a number of generation sources.

While two recent FERC decisions, the higher LCR component, and the removal of generation have collectively stabilized the capacity market in Zone J, the B2 rating assignment recognizes the extreme deterioration that occurred for NYISO Zone J capacity market auction prices during the summer of 2011. Even though actions by AGC (as well as others) ended up being successful in arguing that the dramatic drop in capacity prices was caused by NYISO failing to implement buyer-side mitigation on new entrants to the market and the addition of the Astoria Energy II plant bidding its capacity at uneconomic prices, such events highlight the unpredictable nature of the NYISO Zone J market, including our belief that such events could resurface at some point in the future.

The B2 rating reflects project finance features, including a six-month debt service reserve, and a 100% excess cash flow sweep, allowing for significant deleveraging of the portfolio prior to the debt's maturity in 2018 under the Moody's base case. Proceeds will be used to refinance existing debt at AGC, which is made up of a 1st lien term loan with about $99 million currently outstanding ($430 million original balance), a 1st lien working capital facility that has about $57 million currently outstanding and a $300 million 2nd lien term loan (with the $300 million original balance still outstanding) all of which mature in 2013. These facilities, which are currently rated B3 on the 1st lien facilities and Caa2 on the 2nd lien term loan, will be withdrawn once the refinancing closes.

The stable outlook on the proposed refinancing facilities reflects the near term visibility following recent FERC decisions, implementation of the higher LCR component, and the removal of generation which collectively is expected to stabilize capacity auctions and related project cash flow.

Ratings could be upgraded if greater consistency emerged around the implementation of regulatory rules around capacity auctions within Zone J leading to AGC successfully achieving the expected capacity and energy revenues and financial metrics over a sustainable period.

Ratings could be downgraded if there is a sharp drop in capacity prices such that it adversely impacts AGC's cash flows and metrics. In addition, the rating could come under pressure if there were to be another series of operational incidents at AGC's plants that significantly reduce capacity and increase repair and operational costs.

For further information on AGC, please refer to our credit opinion, which can be found on Moodys.com.

Astoria Generating Company Acquisitions, LLC (AGC) is a 1,732 MW power generation portfolio in New York City, excluding 567 MW of the mothballed Astoria Units 2 and 4. The largest plant is the 773 MW Astoria facility, which has both intermediate and peaking units. Peaking units located in Brooklyn, at Gowanus (593 MW) and at the Narrows (308 MW) make up the balance of the portfolio. Astoria is a subsidiary of US Power Generating Company (US PowerGen), which was formed in 2007.

The latest rating action on AGC occurred on August 3, 2011, when the project was downgraded to its current ratings level.

The principal methodology used in this rating was Power Generation Projects published in Decemeber 2008. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

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Richard E. Donner VP - Senior Credit Officer Infrastructure Finance Group Moody'sInvestors Service, Inc.250 Greenwich StreetNew York, NY 10007 U.S.A. JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653A.J. Sabatelle Senior Vice President Infrastructure Finance Group JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653 Releasing Office: Moody's Investors Service, Inc.250 Greenwich StreetNew York, NY 10007 U.S.A. JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653(C) 2012 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

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