Fitch Assigns 'BBB' to Kinder Morgan Energy Partners' $1B Notes; Outlook Stable

  Fitch Assigns 'BBB' to Kinder Morgan Energy Partners' $1B Notes; Outlook
  Stable

Business Wire

NEW YORK -- February 21, 2013

Fitch Ratings has assigned a 'BBB' rating to Kinder Morgan Energy Partners,
L.P.'s (KMP) $1 billion of 10-year and 30-year notes. The Rating Outlook is
Stable. Note proceeds will be used to repay commercial paper and for general
corporate purposes, potentially including for acquisitions.

Kinder Morgan, Inc. (KMI; IDR 'BB+', Outlook Stable by Fitch) is the owner of
the 2% general partner and approximately 10% limited partner interests in KMP.
KMI acquired El Paso Corporation (EP) in a $38 billion transaction that closed
on May 24, 2012.

KEY RATING DRIVERS

KMP remains an active acquirer. On Aug. 1, 2012, Tennessee Gas Pipeline Co.
(TGP) and 50% El Paso Natural Gas Co. (EPNG) were dropped down to KMP from KMI
in a transaction valued at $6.22 billion, including about $1.8 billion in
assumed debt at TGP and $560 million in proportional debt at EPNG. The
remaining 50% interests in EPNG and EL Paso Midstream Investment Co. that KMP
doesn't already own are expected to be dropped down to KMP in the coming
months. On Jan. 29, 2013, KMP announced an agreement to purchase Copano
Energy, L.L.C. (CPNO) for a total purchase price of approximately $5 billion,
including assumed debt. The transaction will be a 100% unit for unit
transaction and is expected to close in the third quarter of 2013. CPNO is a
midstream natural gas company with operations primarily located in Texas,
Oklahoma, and Wyoming. KMI has agreed to forego a portion of its incentive
distributions related to the transactions.

RATING RATIONALE:

KMP's rating and Stable Outlook reflect the significant and growing scale and
scope of operations; geographic and functional diversity of assets; successful
track record in acquiring, expanding, financing and operating energy
operations; predictable earnings and cash flow generated from natural gas and
refined products pipelines; and expectations for stable credit metrics in 2013
with adjusted Debt to EBITDA to approximate 4.0 times (x) or below for the
year. Moreover, recent and pending acquisitions are funded in a credit-neutral
manor. TGP and EPNG generate stable cash flows and, along with CPNO midstream
operations, will be good fits with KMP's MLP structure.

Other considerations and credit concerns include KMP's relationship with KMI,
exposure to interest rates on approximately $6.2 billion of variable rate
debt, modestly negative effects in weak economies on asset utilization,
aggressive expansion spending, and exposure to changes in NGL and oil prices
and volumes for its CO2 and midstream business segments.

Liquidity Is Adequate: KMP has a $2.2 billion unsecured revolving credit
facility that matures in July 2016. KMP issues 'F2' rated commercial paper
under a $2.2 billion CP program backstopped by its revolver. At Dec. 31, 2012,
KMP had $518 million of cash and $1.359 billion of borrowing capacity. CP
borrowings were $1.374 billion at Feb. 19, 2013. Net proceeds of approximately
$335 million from common unit financing launched today will be used to reduce
debt. The revolver has a maximum debt to EBITDA ratio of 5.0 to 1.0; no
greater than 5.5 to 1.0 during an acquisition period. KMP is also party to a
reserve-based hedging facility for purposes of hedging crude oil that does not
require the posting of margin.

RATING SENSITIVITIES:

Positive: Future developments that may, individually or collectively, lead to
positive rating action include:

--A lessening of consolidated business risk as the company acquires and
expands pipeline and fixed-fee businesses; and

--A material improvement in credit metrics with sustained leverage at 3.5x or
below.

Negative: Future developments that may, individually or collectively, lead to
a negative rating action include:

--Increasing leverage to support organic growth and acquisitions;

--Weakening operating performance; and

--Sustained debt/EBITDA above approximately 4.25x.

Additional information is available at 'www.fitchratings.com'. The ratings
above were solicited by, or on behalf of, the issuer, and therefore, Fitch has
been compensated for the provision of the ratings.

Applicable Criteria and Related Research:

--'Corporate Rating Methodology' Aug. 8, 2012;

--'The Top Ten Differences Between MLP and Corporate Issuers' Feb. 19, 2013;

--'2013 Outlook: Natural Gas Pipelines and MLPs' Nov. 29, 2012;

--'2013 Outlook: Midstream Services and MLPs' Nov. 29, 2012;

--'2013 Outlook: Crude Oil and Refined Products Pipelines' Nov. 29, 2012;

--Eagle Ford Shale Report - Economics Driving Growth' Oct. 15, 2012;

--'Marcellus Shale Report: Midstream and Pipeline Sector Challenges and
Opportunities' June 10, 2012;

--'Top Ten Questions Asked by Pipeline, Midstream, and MLP Investors' May 1,
2012; and

--'Master Limited Partnerships 101' Nov. 1, 2011.

Applicable Criteria and Related Research:

Eagle Ford Shale Report (Midstream and Pipeline Sector ¬タヤ Economics Driving
Growth)

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=690640

Marcellus Shale Report: Midstream and Pipeline Sector --
Challenges/Opportunities

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=682755

Top Ten Questions Asked by Pipeline, Midstream and MLP Investors

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=679549

Master Limited Partnerships 101

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=654538

Corporate Rating Methodology

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=684460

The Top Ten Differences Between MLP and Corporate Issuers

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=701812

2013 Outlook: Natural Gas Pipelines & MLPs

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=695939

2013 Outlook: Midstream Services and MLPs

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=695530

2013 Outlook: Crude Oil and Refined Products Pipelines

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=696183

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Contact:

Fitch Ratings
Primary Analyst
Ralph Pellecchia
Senior Director
+1-212-908-0586
Fitch Ratings, Inc.
One State Street Plaza
New York, NY 10004
or
Secondary Analyst
Peter Molica
Director
+1-212-908-0288
or
Committee Chairperson
Philip Smyth
Senior Director
+1-212-908-0531
or
Media Relations
Brian Bertsch, +1 212-908-0549
New York
brian.bertsch@fitchratings.com
 
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