Kinder Morgan Inc. (KMI) and Williams signed one of the largesttolling agreements to date, a deal covering 3,300 MW of combinedcycle peaking capacity Kinder Morgan is building in theMidcontinent and the Southeast regions of the U.S. Williams willprovide the fuel to the six gas-fired plants and market the entirecapacity under a 16-year agreement. Financial terms of the tollingagreement were not disclosed.

The plants will be built and operated by Kinder Morgan Power Co.over the next four years. Each of the facilities will produce 550MW of electricity. The first of the six is currently underconstruction in Jackson, MI, and is expected to come online duringthe second quarter of 2002. Construction of the second and thirdfacilities, which will be built along Kinder Morgan’s Natural GasPipeline Co. of America, is planned for completion by secondquarter of 2003 and the final three by the second quarter of 2004.

“The 3,300 MW capacity addition is consistent with our strategicplan to expand, diversify and integrate our national portfolio toapproximately 40,000 MW by 2005,” said Steve Malcolm, CEO ofWilliams Energy Services. Williams also has a large tollingarrangement with AES, covering 3,956 MW of generation inCalifornia.

The Kinder Morgan plants will utilize KMI’s proprietary Oriontechnology, an innovative combined-cycle design that includes bothaero-derivative and industrial gas turbines. General Electric willprovide the turbines. The Orion design enables rapid start-upresponse to meet peak demand and rapid ramping, KMI said.

“This agreement will enable us to rapidly accelerate our powerdevelopment program, while retaining our strategy of focusing onfee-based or tolling projects,” said Richard D. Kinder, CEO ofKinder Morgan Inc. “The partnership with Williams is a great fit asit will allow us to do what we do best — build gas-fired plantsusing our proprietary Orion technology — while utilizing thestrength that Williams can provide in the power marketing arena.Fee-based earnings from these new plants are expected to drivesignificant growth in our power segment in 2002 and beyond.”

Kinder said the plants and tolling deal would yield “a highreturn [for KMI] with no merchant power risk. We are not interestin becoming a merchant power player. There are plenty of those andWilliams is certainly one of the best. We are interested on gettingpaid on a fee basis for putting asset packages together and forowning and operating those assets.”

Kinder also said during a conference call that the deal fitswell into KMI’s expectations to producing earnings per share growthof between 18% and 30% per year on a compound basis. The company isexpecting 30-40% EPS growth this year and had more than 70% growthin 2000.

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