New York, June 28, 2012 --

Moody's Investors Service has affirmed the A2 rating to the Unified Government of Wyandotte County/Kansas City, KS, Board of Public Utilities' ("BPU") Senior Lien Utility System Revenue Bonds, affecting approximately $205 million of parity rated senior lien debt outstanding. The outlook remains negative.

RATING RATIONALE

The A2 rating reflects BPU's relatively diverse customer base with a modestly improving regional economy experiencing modest growth in industrial and commercial load demand, which offsets the continued residential decline related to decades of population loss. Regional unemployment rates remain above state and national levels and resident income levels remain below state/national averages, yet the area economy continues to recover on pace with the nation. The A2 rating further reflects a slightly improved cost recovery framework as the BPU approved a new Environmental Surcharge that eases the rate raising process to fund future environmental compliance costs. This is key as significant additional debt is expected to be issued as BPU complies with environmental mandates and diversifies its power supply mix to include more gas fired generation and less coal. The rating also incorporates management's demonstrated willingness to annually raise base rates for the last three years to finance needed system upgrades while ensuring its financial metrics were maintained, yet liquidity and coverage levels are less than the typical A-rated public power utility. Despite these rate increases, BPU's retail rates are competitive and lower than those of the regional investor owned utilities, which is key for BPU's future growth prospects.

STRENGTHS:

o Diverse demand profile with a solid mix of commercial, industrial, residential, and wholesale power sales

o Independent local rate-setting authority with a demonstrated willingness to annually increase both electric and water rates since 2010 in order to recover rising costs

o Implemented a new Environmental Surcharge (ESC) in 2010 to recover growing environmental compliance costs and continued use of the Energy Rate Component (ERC) to recover fluctuating fuel and purchased power costs

o Competitive retail rates provide headroom to absorb projected rate increases while remaining competitive with regional investor owned utilities

o Solid long term resource planning requires annual affirmation of five year capital and integrated resource plans, thus increasing lead time for larger capital investments

o Declining debt service payment schedule starting in 2022 helps minimize rate impact of expected new debt

CHALLENGES:

o More debt and higher leverage expected in the near term to finance the purchase of new generation assets as well as capital investments at BPU's existing facilities to comply with environmental regulations

o Majority owner of Dogwood gas plant has highly speculative grade characteristics and may expose the BPU and the other municipal minority owners to increased costs should the majority owner be unable to cover its share of the plant's costs

o PILOT payment agreement with Unified Government of Wyandotte County/Kansas City, KS, is set annually and can vary from 5% to 15% of revenues and recent local government budgetary pressures lead to an increase in the PILOT that is now at 10%, well above the national average of 7%

o Weak overall liquidity position given low days cash on hand at Baa levels and the lack of a debt service reserve fund due to the weak springing debt service reserve fund indenture requirement

o Residential customers have very low income levels that are well below both state and national averages, indicating affordability pressure as annual rate increases are projected to continue in the near term

o Pending Sierra Club and EPA litigation could have higher than expected cost implications long-term

o Rate raising process takes longer than other public power utilities

OUTLOOK

The negative outlook reflects BPU's expected exposure to the credit risk of the majority merchant owner of the Dogwood Generating Facility that BPU is expected to buy into this fall. The current majority owner has highly speculative grade characteristics and BPU could be indirectly affected by deterioration in the majority owner's credit profile. The credit quality of future owners of the facility is also uncertain given the contractual structure that allows for additional asset sales to owners of similar credit quality. The negative outlook also incorporates the weaker financial position of the Unified Government as a whole as evidenced in the lower debt service coverage and liquidity than is typical of public power enterprises rated in the A category. These financial performance metrics may be further negatively pressured by the increased leverage expected from new debt to be issued for environmental compliance and long-term resource procurement.

What could change the rating - UP:

The rating is unlikely to move up in the medium term given the expectation of additional leverage, coupled with a narrow liquidity profile. The outlook could return to stable if the credit quality of the majority Dogwood owner improves, likely achieved through the sale of ownership shares to other credit worthy utility systems. The outlook could also be changed to stable if BPU's total post transfer net revenue debt service coverage remains above 1.5 times and liquidity increases to at least the targeted 60 days cash on hand.

What could change the rating - DOWN:

The rating could be downgraded if the majority merchant owner is unable to meet its share of the Dogwood facility costs, resulting in subsidies from the other owners, and/or if the ownership profile of the Dogwood plant is not further diversified and improved with creditworthy entities. The rating could also be downgraded if the cost of service study indicates a need for greater than anticipated investments to comply with both environmental regulations and future power supply needs. The rating would also face downward pressure if BPU's financial metrics narrow to levels below those experienced in 2011.

The principal methodology used in this rating was U.S. Public Power Electric Utilities With Generation Ownership Exposure published in November 2011. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

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John Medina Analyst Public Finance Group Moody'sInvestors Service, Inc.250 Greenwich StreetNew York, NY 10007 U.S.A. JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653Chee Mee Hu MD - Project Finance Public 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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