Fitch Affirms Kinder Morgan's Ratings; Outlook to Negative.

NEW YORK -- Kinder Morgan, Inc.'s (KMI) outstanding debt securities have been affirmed by Fitch Ratings as follows:

-- Notes, debentures, and debt shelf registration at 'BBB';

-- Capital trust securities (issued by KN Capital Trust) at 'BBB-';

-- Short-term commercial paper at 'F2'.

KMI's Rating Outlook has been revised to Negative from Positive. Fitch does not expect the transaction to affect the ratings or Outlook for affiliated Kinder Morgan Energy Partners, L.P. (KMP); senior unsecured debt 'BBB+' and short-term debt 'F2', Rating Outlook Stable, by Fitch.

The rating action follows yesterday's announcement that KMI has agreed to acquire Terasen Inc. Terasen is a Canadian based pipeline and utility company. The transaction is expected to close in the fourth quarter of 2005 and will require several Canadian regulatory approvals and a Terasen shareholder vote. The total purchase price is approximately $5.6 billion, including the assumption of $2.5 billion of debt. In addition, the cash portion of the purchase will be financed with $2.0 billion of new low-cost debt, ultimately to be issued at a Canadian subsidiary of a KMI. The company indicates that post-transaction debt leverage will approximate 56%, and debt-to-EBITDA will approximate 4.0 times (x). These ratios reflect a significant change in KMI's consolidated capital structure. At June 30, 2005, debt at KMI, including deferrable interest debentures, was approximately 43% of total capitalization and debt-to-EBITDA for the 12-month period was approximately 2.7x. KMI's pretransaction ratios are strong for its current 'BBB' rating while the projected ratios are consistent with the lower range for the 'BBB' category.

The Outlook Negative status primarily reflects the significantly higher consolidated debt leverage at KMI, the execution risk associated with completing the transaction as contemplated, and the long-term uncertainty associated with an aggressive internal growth strategy. It is likely that debt levels at KMI will not decrease significantly over the next several years given substantial anticipated spending to fund expansion projects, particularly in Canada, and an increasing common dividend payout. Long-term strengthening in credit ratios will primarily result from increased contributions from expansion projects and distributions from KMP. Financing strategies continue to be refined, and bridge bank funding is a consideration until a permanent debt structure is put in place.

Favorable rating considerations include the anticipated strong cash flow to be generated by KMI's assets, including its KMP ownership interest, the predictability in performance from Terasen's regulated operations, the benefits of increased scale and diversity of operations, the long-term benefits to pipeline operators from increasing Canadian oils and production, and KMI's record as an operator of energy/utility assets.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.