S&P Affirms Express Pipeline 'A-' Rating.

Business Editors

NEW YORK--(BUSINESS WIRE)--Standard & Poor's

Oct. 18,2001-- Standard & Poor's today affirmed its single-'A'-minus ratings on Express Pipeline Limited Partnership (issuer), the Express Pipeline LLC (issuer), and Platte Pipe Line Co.'s (guarantor), collectively the project, $139.1 million outstanding senior secured notes and removed their ratings from CreditWatch with negative implications where they were placed on Jan. 10, 2000. The outlook is now negative. Standard & Poor's also affirmed its triple-'B'-minus rating on Express Pipeline's $249.3 million subordinated notes. The outlook on these notes is also negative.

The project is a 1,717-mile-long pipeline that runs from Hardisty, Alberta to Wood River, Ill. The project is 100% owned by Alberta Energy Co. Inc. (triple-'B'-plus/Positive/--). The removal of the senior debt rating from CreditWatch stems from changes made to the ownership structure, which allow for insulation of Express Pipeline from its lower rated parent. Specifically, these measures include the provision for an independent director, whose vote is necessary to change the bylaws or to voluntarily file the issuers or the guarantor for bankruptcy.

The ratings on the senior and subordinated notes reflect the project's ability to support at an adequate level the debt service payments of both the subordinated and senior debt issuances by the cash flow derived from the contractual transportation-service agreements (TSAs) through 2002 without having to rely on the market for any unsubscribed revenues. Thereafter, Standard & Poor's believes that improved supply and demand dynamics within the Petroleum Administration for Defense District (PADD) IV, together with residual contractual revenues, will continue to support both ratings at an adequate level.

The negative outlook on the senior and subordinated notes reflects thinner projected debt service coverage through 2002, due to softer demand buildup in PADD IV and greater competition from other pipelines in the PADD II, such as the integrated network of Enbridge Pipe Lines Inc. (single-'A'/Stable/--) and Lakehead Pipe Line Co. L.P. (single-'A'/Stable/--), collectively the "Enbridge/Lakehead" system. Throughput has improved in 2001, but the project experienced extremely low debt service coverage of 1.09 times (x) in the first quarter of 2001 due primarily to high power costs at two Montana pump stations. The project has mitigated this risk by entering into long-term power purchase contracts. The contract mitigates the risk associated with the volatility of Western power prices. Coverage improved to 1.40x in the second quarter of 2001.

Approximately 30,000 barrels per day (bpd) of the 146,000 bpd are under contracts that expire in April 2002. These contracts come up for renewal this month, and all contract shippers have requested renewal negotiations. There remains some uncertainty regarding renewal terms. A key credit issue remains the terms and conditions under which any proposed Express system expansion is financed, particularly given the project's relatively weak additional debt covenant. The project and Alberta Energy understand this credit concern and have represented that they will act prudently.