Fitch Ratings Upgrades Northern Natural Gas To 'BBB+'.

Business Editors

NEW YORK--(BUSINESS WIRE)--Sept. 24, 2002

Fitch Ratings has upgraded the senior unsecured debt of Northern Natural Gas Company (NNG) to 'BBB+' from 'B'. The debt is removed from Rating Watch Positive and has been assigned a Stable Rating Outlook. NNG is owned and operated by MidAmerican Energy Holdings Company (MEHC) which purchased it from Dynegy Inc. (DYN) on Aug. 16, 2002. MEHC is a privately owned provider of energy services whose holdings include the 926-mile Kern River Gas Transmission system. MEHC is rated 'BBB', with a Stable Outlook.

The rating action follows a review by Fitch of MEHC's plans to finance and operate NNG and assumes the repayment of an outstanding $450 million secured credit facility through a combination of new unsecured debt and equity. Also considered in NNG's rating is its historical and prospective standalone credit profile and its structural relationship with MEHC.

On a standalone basis NNG historically has demonstrated a strong financial profile and solid market position. The pipeline continues to benefit from consistent cash flow derived from firm contracts with a customer base primarily composed of local utilities as well as favorable Federal Energy Regulatory Commission (FERC) regulation. NNG currently generates about $250 million of annual EBITDA. Annual interest associated with its outstanding $500 million of senior unsecured debt is approximately $34.5 million. Fitch assumes a prospective capital structure for NNG of approximately 50% debt and 50% common equity. Funds from operations coverage of interest was approximately 4.0 times (x) in 2001 and should continue near that level under current rates. Future capital spending, including compliance with anticipated stricter federal pipeline safety standards and planned information technology and logistical upgrades, is manageable.

NNG transports natural gas 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 utilities, which have a large demand for natural gas with limited options for alternative fuel. Approximately 49% of its capacity contracts extend beyond 2005.

MEHC, a subsidiary of Berkshire Hathaway, provides electric and gas service to more than 5 million customers worldwide through its retail subsidiaries, MidAmerican Energy Company (MEC) 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.