Correction: Fitch Ratings Affirms Kern River Funding At 'A-'.

Business Editors

NEW YORK--(BUSINESS WIRE)--March 7, 2002

(This is an amended version of a release from earlier today, containing revised transaction information in paragraph 2)

Kern River Funding Corp.'s (KRFC) outstanding $510 million amortizing senior notes due 2016 are affirmed at 'A-' by Fitch Ratings. The Rating Outlook is Stable. KRFC is a special purpose financing vehicle for Kern River Gas Transmission Co. (KRGT), a 926-mile natural gas interstate pipeline delivering primarily Rocky Mountain natural gas to markets in California, Utah, and Nevada. KRFC's obligations under the senior notes are unconditionally guaranteed by KRGT.

The rating action follows today's announcement that The Williams Companies, Inc. (WMB; 'BBB' senior unsecured debt, Negative Rating Outlook by Fitch) has entered into a definitive agreement to sell its 100% ownership interest in KRGT to Mid American Energy Holdings Co. (MEHC; 'BBB' senior unsecured debt) in a transaction valued at approximately $960 million, which includes the assumption of KRFC's outstanding senior notes. The transaction, which remains subject to bank consents and Hart-Scott-Rodino review, is expected to close by March 31, 2002.

The affirmation of KRFC/KRGT's rating reflects Fitch's expectation that the specific legal and financial structuring of KRFC's debt obligations will remain unchanged following the sale to MEHC. Fitch has historically rated KRFC/KRGT separate from WMB due to these factors as well as the strong operating fundamentals of KRGT. KRGT's underlying credit quality benefits from a portfolio of binding long-term transportation contracts with financially sound shippers, a competitive market position, and access to abundant natural gas supplies.

Approximately 84% of KRGT's shipper agreements have remaining terms of 15 years, thus limiting capacity turnback risk over the term of the senior notes. KRGT continues to generate predictable cash flows and debt service coverage measures due to its levelized rate structure, which increases depreciation as interest expense declines. Debt service coverage over the last several years has approximated 1.8 times (x), slightly ahead of project base case estimates. Moreover, KRFC's indenture contains a series of structural protections benefiting noteholders including a moratorium on cash distributions to WMB (MEHC post sale) if debt to capital at KRGT exceeds 75% and/or debt service coverage drops below 1.25x and a six months' debt service reserve account.