Fitch Rates Kinder Morgan Energy Partners' $1B Debt 'BBB+'; Watch Negative.

NEW YORK -- Fitch Ratings has assigned a 'BBB+' rating to Kinder Morgan Energy Partners, L.P.'s (KMP) $600 million 6% senior notes due 2017 and $400 million 6.5% senior notes due 2037. The notes are on Rating Watch Negative. Note proceeds will be used to repay short-term commercial paper debt. KMP's outstanding unsecured long-term debt and 'BBB+' Issuer Default Rating (IDR) were initially placed on Rating Watch Negative on May 30, 2006, following the announcement of a proposed management led leveraged buyout (LBO) of Kinder Morgan, Inc. (KMI, IDR rated 'BBB' by Fitch), the general partner of KMP. KMP's 'F2' short-term ratings are not on Rating Watch.

Fitch expects to finalize KMI and KMP's ratings after receipt of requisite approvals and ahead of the actual close of the LBO which is expected to occur in the first half of 2007. The Rating Watch Negative status for KMP primarily reflects its affiliation with its sponsor and general partner, KMI. While there are no direct financial consequences to KMP from the KMI buyout, KMP remains an important source of cash flows to service KMI's debt. KMI as the general partner has significant management control and discretion over KMP's business affairs including its investments and distribution policies. In addition, there continues to be strong functional and operating ties between the two companies. At the same time, KMP is already facing a large capital expenditure cycle with over $6.5 billion of projects earmarked for the next four years. The significant internal growth initiatives will place temporary pressure on credit measures as incremental cash flows lag investment expenditures. The company expects debt-to-EBITDA to end 2007 at 3.6 times (x) compared with 2006 debt-to-EBITDA of 3.2x. However, on balance Fitch does not view KMP's growth unfavorably given the strong contractual support underpinning its major projects and the company's positive track record in developing and operating energy infrastructure assets.

Based on its high post-LBO debt leverage, Fitch expects KMI's senior unsecured debt (to be equally secured with the buyout debt) to fall in the 'BB' rating category. However, since KMI has numerous investments outside of KMP, Fitch, to a large degree, views KMP as a standalone credit and KMP's long-term rating is not expected to drop below 'BBB'.

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.