Fitch Affirms Northern Natural Gas' IDR at 'A-'.

NEW YORK -- Fitch Ratings has affirmed Northern Natural Gas Company's (NNG) senior unsecured debt and Issuer Default Ratings (IDR) at 'A-'. The Rating Outlook is Stable. Approximately $800 million of outstanding debt is affected. NNG is an interstate natural gas pipeline company which has been owned and operated by MidAmerican Energy Holdings Company (MEHC) since Aug. 16, 2002, when it was purchased from Dynegy Inc. MEHC (rated 'BBB+' with a Stable Outlook by Fitch) is a privately owned provider of energy services whose holdings include the 1,678-mile Kern River Gas Transmission system..

NNG's rating reflects its favorable operating characteristics, strong standalone credit fundamentals, and limited regulatory risk. Also considered in NNG's rating is its structural relationship with MEHC.

NNG is a 15,700-mile pipeline extending from the Permian Basin in Texas to the upper Midwest. It has a market area delivery capacity of 4.4 Bcf per day and has 59 Bcf of natural gas storage capacity. While the Midwest region is served by several competing pipelines NNG's market is relatively secure. Its customer base is primarily composed of local natural gas utilities, which have a large seasonal demand for natural gas and whose customers have limited options for alternative fuel. Contract length for pipelines serving the Midwest is typically short-to-intermediate term. However, in late 2004 and 2005 NNG renegotiated and extended its contracts with CenterPoint Energy Minnesota Gas, Northern States Power, and Metropolitan Utilities District which together represent approximately 37% of market area deliveries, with terms that expire between 2016 and 2019.

On a standalone basis, NNG currently exhibits a strong financial profile. Future capital spending, including anticipated pipeline safety spending, is manageable. NNG is expected to generate adequate free cash flow and scheduled upcoming debt maturities are relatively modest.

Considered favorably is the Federal Energy Regulatory Commission's (FERC) June 2005 approval of a rate case settlement that had been agreed to by 100% of NNG's shippers. Fitch believes resolution of the FERC rate case minimizes regulatory risk for the next several years and supports prospective credit measures during that time period which are consistent with its 'A-' rating.

MEHC's ownership of NNG is through a special purpose, intermediate limited liability company, NNGC Acquisition, LLC (Holdco) which has been structured to separate, to a greater extent than is typical for natural gas pipelines, the credit profile of NNG from that of MEHC. Holdco and NNG are operated independently from MEHC with separate books, financial records, employees, and no commingling of assets. An independent director assent is required to place Holdco or NNG into bankruptcy. Furthermore, distributions by NNG are not permitted unless certain financial covenants are met. The strong structural protections lessen bankruptcy risk through credit contagion derived from parent MEHC and loosen rating linkage between it and MEHC.

MEHC provides electric and gas service to nearly seven million end users worldwide through its retail subsidiaries, MidAmerican Energy Company (MEC) and Kern River in the U.S. and Northern Electric Distribution Limited and Yorkshire Electricity Distribution plc in the UK. MEHC also owns a 50% interest in CE Generation LLC, a power project holding company with U.S. geothermal and gas-fired power projects. International investments include the company's Philippine power production facilities. Fitch's rating analysis for MEHC takes into account the considerable implicit and explicit support provided by its principal shareholder, Berkshire Hathaway Inc. (BRK, senior unsecured debt rated 'AAA' with a Negative Outlook).

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.