NEW YORK (Standard & Poor's) Feb. 23, 2007--Standard & Poor's Ratings Services

affirmed its 'BBB+' underlying rating (SPUR) on Puerto Rico Electric Power Authority's (PREPA) various revenue bonds and removed the rating from CreditWatch with negative implications, where it had been placed Jan. 11. The rating outlook is stable.

The CreditWatch placement was due to future financial uncertainties following two fires at PREPA's Palo Seco plant. PREPA has since provided additional information regarding the adequacy of generating capacity during the time the Palo Seco units will be out of service. With all other units operating, the reserve margin at the time of peak demand (usually September) would be about 28%, which is adequate and provides some room for unplanned outages. Maintenance work is planned prior to this summer at PREPA's largest plant, the 450-MW Aguirre Unit 1, as well as at other smaller plants, totaling a combined 125 MW. Peak demand is generally about 350 MW lower during that time. Remaining capacity should provide a still-healthy reserve margin of around 19%.

Standard & Poor's other concern related to the potential for higher costs attributable to the possible need for PREPA to depend on less-efficient peaking units to meet base load requirements. However, if fuel costs increase because PREPA is obliged to run peaking units for longer periods of time, PREPA's insurance policy includes business interruption coverage, which would assure reimbursement of those costs.

The stable outlook reflects Standard & Poor's view that the Palo Seco outage will not have a negative effect on PREPA's financial performance, and that fixed-charge coverage will continue to hover around 1.3x. Available bank lines should provide adequate liquidity to bridge any time gap between the incurrence of higher costs and reimbursement by the insurance company. The rating actions affect roughly $4.9 billion of revenue bond debt.

Complete ratings information is available to subscribers of RatingsDirect, the real-time Web-based source for Standard & Poor's credit ratings, research, and risk analysis, at www.ratingsdirect.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com; under Credit Ratings in the left navigation bar, select Find a Rating, then Credit Ratings Search.