Fitch Rates NWP's Senior Notes 'BB-'; Williams Remains On Rating Watch Evolving.

Business Editors

NEW YORK--(BUSINESS WIRE)--Feb. 25, 2003

Fitch Ratings expects to assign a 'BB-' rating to Northwest Pipeline Corp.'s (NWP) proposed $150 million issuance of 144A senior notes, due 2010. The rating is currently on Rating Watch Evolving, as are the outstanding $360 million 'BB-' senior unsecured notes of NWP. NWP is one of three Federal Regulatory Energy Commission (FERC) regulated interstate gas pipelines wholly owned by The Williams Companies, Inc. (WMB), senior unsecured rated 'B-', Rating Watch Evolving. Proceeds from the proposed senior note issuance will be used for general corporate purposes at NWP, including the funding of expansion related capital expenditures.

The ratings for NWP incorporate its strong individual operating and financial profile, offset by the structural and functional ties between NWP and its financially stressed parent WMB. NWP is a participant in WMB's daily cash management program under which NWP makes periodic advances to WMB. Under a pending Notice of Proposed Rule Making at FERC, restrictions would be placed on an interstate pipeline's ability to participate in cash management or money pool arrangements based on certain credit criteria. Fitch believes NWP would be able to adequately fund its operations if it were prohibited from participating in WMB's cash management program. In addition, NWP's debt agreements, including proposed terms for the pending note issuance, provide limited restrictions on NWP's ability to make upstream cash dividends and/or inter-company advances to NWP.

NWP owns and operates a 4,000 mile long-line system linking major gas producing basins in western Canada, Wyoming and New Mexico to markets in the Pacific Northwest. Operating characteristics are favorable and reflective of NWP's strong competitive position. Firm capacity utilization has exceeded 90% for the past several years. In addition, NWP benefits from a high percentage of long-term transportation contracts with an average remaining term of approximately nine years. NWP's standalone credit measures have thus far not been impacted by WMB's weakened credit profile and remain consistent with investment grade. For the 12 month period ended Sept. 30, 2002, EBITDA to interest and total debt to EBITDA at NWP approximated 7.3 times (x) and 1.9x, respectively.

Fitch continues to maintain a Rating Watch Evolving status for both NWP and WMB. Although WMB has made progress in boosting its liquidity position over the past several months, the company's ongoing business, credit, and cash flow profile continues to evolve. Further asset divestitures have been announced as part of WMB's ongoing restructuring program, including the planned sale of the Texas Gas Transmission pipeline system and WMB's general partner and limited partner investment interest in Williams Energy Partners, L.P. Fitch expects NWP to remain a core holding within the downsized WMB asset portfolio.

WMB also remains engaged in active dialogue to sell, monetize, or joint ventures all or parts of its energy marketing and risk management portfolio. In addition to consuming approximately $1 billion of permanent working capital in 2002, the performance of this business will likely be constrained for the foreseeable future due to WMB's inability to hedge its long-dated contractual exposures in the current market environment. Therefore, in Fitch's view, any potential transaction or arrangement that would assume WMB's contractual obligations under long-term tolling agreements could have positive credit implications.