Fitch Affirms Northern Border Companies; Outlook to Stable.

NEW YORK -- Fitch Ratings has affirmed the 'BBB+' senior debt rating for Northern Border Partners, L.P. (NBP) and the 'A-' senior debt rating for its primary regulated pipeline affiliate Northern Border Pipeline Co. (NBPL). The Rating Outlook for both companies has been changed to Stable from Negative.

NBP is a publicly traded master limited partnership (MLP). NBP's 2% general partner (GP) interest is owned by Northern Plains Natural Gas Company (1%) and Pan Border Gas Company (0.65%), both subsidiaries of ONEOK Inc. and Northwest Border Pipeline Company (0.35%), a subsidiary of TransCanada PipeLines Limited. ONEOK purchased its GP interest on Nov. 17, 2004 for $175 million as part of a transaction by which Enron Corp. sold all its remaining domestic pipeline operations. NBP and NBPL's prior Negative Rating Outlook reflected Enron's majority GP ownership interest and the risks resulting from Enron's financial meltdown and bankruptcy, including the uncertainty of who would ultimately own the GP. The sale to ONEOK eliminates these risks.

NBP's primary holding is a 70% interest in NBPL, a 1,249-mile FERC regulated interstate pipeline transporting natural gas from the Canadian border to the upper Midwest. TC PipeLines LP, a subsidiary of TransCanada PipeLines owns the remaining 30%. In addition, NBP owns the 350-mile Midwestern Gas Transmission system, the 577-mile Viking Gas Transmission Co., and has a 33% interest in Guardian Pipeline. In total, interstate natural gas pipelines accounted for approximately 81% of 12 months ended Sept. 30, 2004 consolidated earnings before interest, taxes, depreciation and amortization (EBITDA). The partnership also has gathering systems and processing plants in the Powder River, Wind River, and Williston Basins in the U.S., together accounting for about 17% of EBITDA and transports coal slurry via a pipeline in the Southwestern U.S. generating 2% of EBITDA.

Ratings affirmations for NBP and NBPL are based on a recent review of operating results, updated business plans, and financial forecasts. Credit measures for 2004 for both companies are expected to meet the prior year's estimates and anticipated results for 2005 and 2006 should remain consistent with current ratings. As a result of executing cash calls with its owners, NBPL's debt was reduced by nearly $200 million in 2004, resulting in improved credit measures. NBPL should generate EBITDA-to-Interest of over 6.0 times (x) and debt-to-EBITDA under 2.5x, over the next two years. Credit ratios at NBP on a consolidated basis are not as strong as NBPL's but they have exhibited modest improvement over the past few years. Prospectively, EBITDA-to-interest should exceed 4.0x and Debt-to-EBITDA should be under 3.75x, over the next two years. In addition, cash distributed to NBP from its operating units that is available for partnership debt service is expected to be more than 5.0x the interest expense on NBP's direct debt.

NBPL continues to exhibit strong competitive market, operating, and financial characteristics that are consistent with its current 'A-' rating. The company is a low-cost transporter of Canadian gas into the Midwest, with a cost per hundred miles of less than 4 cents per dekatherm. The December 2000 completion of the Alliance Pipeline that runs parallel to NBPL into Chicago and the impact of volatile commodity prices and varying winter weather conditions have had minimal negative financial impact on NBPL. System capacity utilization has ranged between 93% and 99% over the past five years. Moreover, under non-volume sensitive straight fixed variable rates, 98% of revenues are collected through the demand charge. All existing contracts are at maximum rates and the shipper credit profile is sound. While the average length of shipper contracts which run from seasonal to 10 years has been getting shorter, ongoing renewal of contracts is likely to be successful given favorable competitive factors. A long term consideration is the status of NBPL's transportation rates. A FERC rate filing is required by Nov. 1, 2005 and new rates should be placed into effect subject to refund by the spring of 2006. Fitch does not expect NBPL's credit profile to materially change as a result of the FERC proceedings. NBP's other interstate pipelines should continue to be stable cash generators for the next several years. They exhibit generally favorable competitive positions in the markets they serve and have limited capacity turnback risk. In addition, committed expansion spending for the pipelines is modest and should provide marginal benefits.

Results from non-regulated operations are less predictable. Wyoming coal bed methane production experienced a drop off in production during 2003 following several years of growth. NBP has negotiated volume minimums and demand charge rates on new system hookups and renegotiated gathering rates for existing systems, as part of efforts to strengthen performance from the Powder River. Furthermore, regional operating results have stabilized. Gathering and processing results outside the Powder River have been at or above expectations. Processing contracts are primarily percentage-of-proceeds, which Fitch considers to be of medium risk. Financial results under POP contracts are directly related to the price of natural gas and liquids. To lessen volatility, NBP has an active hedging program with 75% of gas and 50% of liquids output from the Williston Basin hedged for the first quarter of 2005.

An ongoing concern is ratings triggers contained in the indentures for NBP's $475 million outstanding senior notes. NBP would be obligated to offer to repurchase the notes should it cease to be rated investment grade. In addition, the exercise by a noteholder of the ratings put option is an event of default under NBP's $275 million revolving credit agreement. The occurrence of a trigger event could have a material negative impact on NBP and NBPL. It should also be noted that as an active acquirer NBP assumes an above-average level of event risk. However, NBP is committed to financing future acquisitions, including potential asset drop downs from ONEOK, with 50% equity which would minimize the balance sheet impact.