Summary of Current Proposal Situation Overview Project Franklin 1Original Proposal On May 28, 2006, Richard D. Kinder, Chairman and CEO of the Company (“Kite”), along with a group of investors led primarily by Goldman Sachs (“GS Capital Partners”) sent a letter to the Board of Directors of Kite indicating its willingness to purchase all of the outstanding shares of common stock of Kite at a cash purchase price of $100 per share (the “Proposal”) Other investors in the deal include senior management of Kite, co-founder Bill Morgan, Board members Fayez Sarofim and Mike Morgan, AIG, The Carlyle Group and Riverstone Holdings LLC Proposed bid structure includes $2.8 billion of equity roll-over from management and participating Board members, $4.5 billion of equity from financial sponsors and approximately $14.5 billion of total debt (based on estimated 12/31/06 cash and debt balances) Current Proposal On August 22, 2006, Richard Kinder and the group of investors indicated that they were prepared to revise their proposal to $107.50 per share

Summary of Current Proposal Situation Overview (cont’d) Project Franklin 2Morgan Stanley and The Blackstone Group discussed structure and valuation alternatives with the Special Committee regularly throughout the transaction process Morgan Stanley and The Blackstone Group had periodic conversations with various other parties regarding potential interest in a competing bid for Kite 28-May-06 28-May-06 Richard D. Kinder and a group of investors led primarily by GS Capital Partners offered to purchase all of the outstanding shares of common stock of Kite at a cash purchase price of $100 per share13-Jun-06 11-Jul-06 14-Aug-06 21-Aug-06 Morgan Stanley and The Blackstone Group performed due diligence and spoke with energy industry participants and private equity investors who may be interested in acquiring Kite13-Jun-06 Kite announced that the Special Committee had retained Morgan Stanley and The Blackstone Group as its financial advisors and Skadden, Arps, Slate, Meagher & Flom LLP as its legal advisor to review and evaluate alternative proposals11-Jul-06 Morgan Stanley and The Blackstone Group met with the Special Committee and formally presented their evaluation of the Proposal and other potential alternatives Multiple discussions with the buying group about the Proposal 14-Aug-06 Morgan Stanley and The Blackstone Group met with the Special Committee and other Independent Directors and formally presented their evaluation of the Proposal and other potential alternatives21-Aug-06 Morgan Stanley and The Blackstone Group met with Special Committee to discuss valuation

Summary of Current Proposal Scope of Morgan Stanley and Blackstone's Work Project Franklin 3For purposes of the opinion set forth, Morgan Stanley and Blackstone have: Reviewed certain publicly available financial statements and other business and financial information of Kite and Key, the general partner of which Kite owns and in which Kite owns a significant limited partner interest Reviewed certain internal financial statements and other financial and operating data concerning Kite prepared by the managements of Kite and Key, respectively Reviewed certain financial projections prepared by the managements of Kite and Key, respectively Discussed the past and current operations and financial condition and the prospects of Kite with senior executives of Kite and discussed the risks related thereto with the management of Kite Discussed with the management of Kite potential restructuring plans for Kite prepared and presented by the management of Kite Reviewed the reported prices and trading activity of Kite Common Stock and the common stock of Key Compared the financial performance of Kite and the prices and trading activity of Kite Common Stock with that of certain other comparable publicly-traded companies and their securities Reviewed the financial terms, to the extent publicly available, of certain comparable acquisition transactions Participated in discussions and negotiations among representatives of Kite, Parent and their financial and legal advisors Reviewed a draft of the Merger Agreement, dated August 25, 2006, the draft Rollover Commitments and the draft Financing Commitments of Parent and Merger Sub (as defined in the Merger Agreement), and certain related documents Performed such other analyses and considered such other materials and factors as we have deemed appropriate

Summary of Current Proposal Scope of Morgan Stanley and Blackstone's Work (cont’d) Project Franklin 4We have assumed and relied upon, without independent verification: The accuracy and completeness of the information made available to us by Kite for the purposes of this opinion That the financial projections have been reasonably prepared on bases reflecting the best currently available estimates and judgments of the future financial performance of Kite and Key That the Merger will be consummated in accordance with the terms set forth in the Merger Agreement without any waiver, amendment or delay of any terms or conditions, including, among other things, that (i) Parent will obtain financing for the Merger in accordance with the terms set forth in the Financing Commitments, and (ii) the transactions contemplated by the Rollover Commitments will be consummated in accordance with their terms That there will be no delay in connection with the receipt of all the necessary governmental, regulatory or other approvals and consents required for the Merger, that no delays, limitations, conditions or restrictions will be imposed that would have a material adverse effect on the contemplated benefits expected to be derived in the Merger

Summary of Current Proposal Third Party Discussions Project Franklin 5Source Capital IQ Morgan Stanley and The Blackstone Group held discussions with various third parties, none of whom was willing to make a competing proposal for the company at this time Equity/AggregateValue$BnCreditRatingGeneral IndustrialsGE351 / 697Aaa / AAAMajors (Domestic)ExxonMobil417 / 389Aaa / AAAChevron146 / 146Aa2/AAConocoPhillips111 / 141A- / A1Majors (International)BP235 / 249Aa1 / AA+Royal Dutch Shell230 / 241Aa1 / AAEncana45 / 51Baa2 / A-BG Group46 / 46A2 / A-Fund Size orEquity/AggregateValue$BnCreditRatingFinancial SponsorsBlackstone15.6-Cerberus15.0-TPG13.0-KKR 12.5-Perry Capital10.2-Apollo10.1-Borealis InfrastructureUp to 10.0-Warburg Pincus8.0-First Reserve7.0-Macquarie6.0-Och-Ziff5.8-Sponsor PartnersEnterprise11 / 16Baa3 / BB+Energy Transfer4 / 7-Equity/AggregateValue$BnCreditRatingPipelines / Utilities / R&M (Domestic)Valero39 / 43Baa3 / BBB-Duke38 / 59Baa2 / BBBDominion28 / 47Baa2 / BBBWilliams15 / 22Ba2 / BB-AES14 / 31Ba3 / BB-El Paso10 / 25B2 / B+KochNA / NA-MidAmerican / Berkshire HathawayNA / NAAaa / AAAPipelines / Utilities / R&M (International)E.ON84 / 88Aa3 / AA-Suez54 / 70A2 / A-National Grid32 / 52Baa1 / ACentrica20 / 19A3 / ATransCanada15 / 28A3 / NREnbridge11 / 20A3 / A-

Project Franklin Summary of Current Proposal Transaction Overview 6Offer Overview The offer, as most recently communicated, contemplates Kite borrowing approximately $7Bn and issuing more than $5Bn in new equity to the consortium of financial sponsors These funds would be used to repurchase 100% of the common stock of Kite not owned by Kimberly Dang, Steven Kean, David Kinder, Richard Kinder, Joe Listengart, Bill Morgan, Mike Morgan, Fayez Sarofim, Park Shaper and James Street Notes As of 06/30/06 Excludes a $1.0Bn contingent equity commitment that investors will provide to the entity if it fails to achieve a determined interest coverage test (2) Illustrative Sources and Uses of Cash in Proposal (1)$BnSourcesUsesPrivate Equity Consortium Investment5.1Acquisition Non-Management Equity11.6Kite Management Equity3.0Kite Management Equity3.0Existing & New Debt14.1Existing Debt7.2Fees0.4Total Sources22.2Total Uses22.2

Summary of Current Proposal Transaction Overview (cont’d) Project Franklin 7Notes Based on 135.7MM fully diluted shares outstanding; based on Treasury method for all in-the-money options Based on 6/30/06 cash balance of $168MM, total debt of $7.4Bn and excludes minority interest of $1.3Bn Based on adjusted 6/30/06 cash balance of $168MM and total debt of $5.6Bn (pro forma for sale of Retail, TransMountain and 75% of Corridor) Assumes EBITDA projections of $1,732 and $1,721 and EPS estimates of $5.00 and $5.44 for 2006 and 2007, respectively, provided by management (which include other income and exclude minority interest as does aggregate value) Summary Description and Key Terms and ConditionsDescription: Management led consortium acquires 100% of non-management owned common stock of KiteConsideration: $107.50/shareEquity Value: $14.6Bn(1)Aggregate Value: $21.8Bn(2)AV / EBITDA(4)P / E(4)2006(2)2007(3)20062007Transaction Multiples:12.6x11.7x21.5x19.8x30 Day Trailing Average $86.4060 Day Trailing Average$88.371 Year Trailing Average$90.535 Year Trailing Average$61.83LTM High$101.44LTM Low$76.40PremiumsPaid:24.4%21.6%18.7%73.9%6.0%40.7%

Summary of Current Proposal

Transaction Overview (cont'd)

Summary Description of Key Terms and Conditions

Acquiror • Merger Sub, an acquisition vehicle and wholly owned subsidiary of an LLC set up by the

bidding group (“Parent”), will merge with and into the Company, with the Company

subsequently becoming a wholly owned subsidiary of Parent

Closing Conditions /

Termination Provisions

• Company stockholder approval of 2/3 of shares outstanding

• Expiration of antitrust waiting period and regulatory approvals

• Representations and warranties bringdown subject to material adverse change (in the

event of a breach, 30 day period to cure)

• No material adverse change to the Company has occurred and is continuing at the close

Deal Protection • “No shop” provision (with standard fiduciary out)

• Termination Fee from Company to Parent: $220 million, or 1.5% of equity value

• Termination Fee from Parent to Company: $220 million, or 1.5% of equity value

(sponsors are guaranteeing termination fee)

Other Key Provisions • Standard representations and warranties for Company and Parent

• Standard covenants related to the conduct of business

• No financing contingency 8

Summary of Current Proposal Equity Market Performance – Since Announcement As of August 22, 2006 Project Franklin 9Source FactSet Notes Midstream Index includes Enbridge, El Paso ONEOK, Southern Union, TransCanada, Williams MLP Index includes Boardwalk Pipeline Partners, Copano Energy, DCP Midstream, Enbridge Energy Partners, Enterprise Products Partners, Energy Transfer Partners, Genesis Energy, Holly Energy, Hiland Partners, Magellan Midstream, MarkWest Energy, ONEOK Partners, Plains All American, Regency Energy Partners, Sunoco Logistics, TC Pipelines, Valero L.P, Williams Partners, Crosstex Energy Kite vs Key, MLP Index and Midstream Index (1) (2) $ +20.5% +8.0% -0.9% Kite Midstream Key MLP Since the consortium announced its proposal, Kite has traded in-line with the proposed offer, the S&P 500 has increased 1.5%, the Midstream Index (1) has increased 9.3% and the MLP Index (2) has increased 8.0%+9.3%

Summary of Current Proposal Kite Valuation Matrix As of August 22, 2006 Project Franklin 10Notes Median IBES estimates for peer valuations; management estimates for Kite Multiples adjusted for sale of TransMountain, 75% sale of Corridor, and sale of Retail Valuation Matrix($MM, except per share values)Premium/ImpliedImpliedPremium(Discount) toPremium toEquityAggregatePrice / Earnings (1)(2)Agg. Value / EBITDA (2)Priceto UnaffectedLTM HighLTM LowValueValue2006E2007E2006E2007EStatistic$84.41$101.44$76.40$11,425$18,638$5.00$5.44$1,732$1,72184.410.0%(16.8%)10.5%11,42518,63816.9x15.5x10.8x9.9x100.0018.5%(1.4%)30.9%13,56120,77420.0x18.4x12.0x11.1x105.0024.4%3.5%37.4%14,24621,45921.0x19.3x12.4x11.5x107.5027.4%6.0%40.7%14,58821,80121.5x19.8x12.6x11.7x110.0030.3%8.4%44.0%14,93122,14422.0x20.2x12.8x11.9x115.0036.2%13.4%50.5%15,61622,82923.0x21.1x13.2x12.3xMean Midstream Peers18.3x16.4x9.9x9.4xMean MLP Peers11.3x9.8xMean LDC Peers17.2x16.2x8.4x7.9xMean C-Corp Peers18.8x16.5x10.2x9.6x

Summary of Current Proposal Selected Wall Street Perspectives on Proposal Project Franklin 11Selected Wall Street Perspectiveson ProposalAnalystCarl KirstRonald J. BaroneRichard GrossJohn K. TysselandScott SolerPrice TargetPre-Announcement$110$106$100$105$105Post-Announcement$100$100$100$105$105Transaction Commentary“… investors will generally see the $100 proposal as fair given both the upside involved as well as recognition that interest rate fears…have eaten into the stock’s valuation.”“… we see no feasible/hostile M&A suitors that put Kite into play.”“… fundamentally driven by Key’s GP valuation and free cash characteristics rather than from the undervalued nature of its pipelines and utilities.”“We would be surprised to see a competing higher bid.”“We believe this underscores the value of infrastructure assets such as pipelines.”“… this transaction will cause investors to raise the valuation matrix that were applied to pipelines and other energy infrastructure assets.”“ We feel [the potential offer increase] could fall in the $105-$108 per share range.”“The offer probably has some room for improvement but we don’t see a bidding war.”“We believe management is critical to success of deal. As a result, don’t expect bids from other operating companies.”“Given strong consortium of existing group, would need very strong alternate private equity group to displace current bid.”“… the proposed transactions increase the value of Kite’s general partnership interest in Key, yet attempt to take advantage of recent stock price weakness.”“We believe investors have more to gain in the long-run by not accepting the offer of $100 per share.”“… a higher multiple could be attributed to Kite’s GP interest and thus a takeout price of $100 per share would be low.”“… there is value in a conservatively financed publicly traded GP as opposed to a leveraged privately held GP.”“… the stock should be worth at least $120/share by 2010 given…expansion opportunities and the undervalued GP…Obviously management agrees; thus the buyout offer.”“… this factor [the undervalued GP stake] combined with the company’s significant long-term, potential EPS power of >=$9.00 and free cash flow power of >=$8.00 drove the buyout offer.”

Equity Market Environment Kite Annotated Stock Price Performance (1) Last Twelve Months Project Franklin Note As of August 22, 2006 12Kite – Price Volume Performance $ Volume (‘000s) Source FactSet, Bloomberg 19-Oct-05 Q3 Earnings release; profits increased 12% to $1.01 a share on net income of $124.8MM 13-Dec-05 Provides Earnings Guidance for FY2006; Expects EPS to rise 18% to $5.00; reiterated plans to raise dividend to $3.50 18-Jan-06 Reports record earnings for 2005 and raised its quarterly dividend 17% to $0.81 ($3.24 annualized) 15-Feb-06 Conference Call to address FY 2005 and outlook for FY 2006; reiterates expectation of $5.00 EPS 19-Apr-06 Q1 Earnings release; profits increased 29% to $1.44 a share on income from continuing operations of $194.5MM 29-May-06 Management announces Consortium proposal $101.75 19-July-06 Q2 Earnings release; profits increased by 18% to $1.17 a share on net income of $157.2MM 30-Nov-05 Acquisition of Terasen completed - $5.6Bn final consideration 27-July-06 Increased dividend to $0.875 ($3.50 annualized)

Equity Market Environment Key Annotated Stock Price Performance (1)Last Twelve Months Project Franklin Note As of August 22, 2006 13Key – Price Volume Performance $ Volume (‘000s) Source FactSet 19-Oct-05 Q3 Earnings release; net income rose 13% to 245.4MM or $0.57 per unit; above expectations 18-Jan-06 Q4 Earnings release; Increase quarterly cash distribution 8% to $0.80 ($3.20 annualized) 23-Feb-06 Completed the joint acquisition (66.7%) with Sempra of Entrega Gas Pipeline from EnCana for $240MM $44.62 29-May-06 Kite Management announces Consortium proposal 19-Jul-06 Q2 Earnings release; net income rose 8% to $242.2 or $0.50 per unit. 17-Apr-06 Acquires A&L Trucking, DPRT LLC., and Lomita Rail Terminal LLC for combined $63MM 9-Aug-06 Follow-on Equity Offering of $224MM completed selling 5MM units at $44.80 27-Jul-06 Declares 4% increase in cash distribution to $0.81 per unit compared to $0.78 in Q205

Equity Market Environment Equity Market Performance – Since January 2001 Project Franklin 14Kite vs Midstream Index (1)$ Source FactSet Key vs MLP Index (2)$ Source FactSet +108% (32)% +61% +113% Unaffected +72% Kite vs Spot WTI vs Spot Natural Gas % Source FactSet Key vs Spot WTI vs Spot Natural Gas % Source FactSet +160% +108% (31)% Unaffected +72% +160% +61% (31)% Notes Midstream Index includes Enbridge, El Paso, ONEOK, Southern Union, TransCanada, Williams MLP Index includes Boardwalk Pipeline Partners, Copano Energy, DCP Midstream, Enbridge Energy Partners, Enterprise Products Partners, Energy Transfer Partners, Genesis Energy, Holly Energy, Hiland Partners, Magellan Midstream, MarkWest Energy, ONEOK Partners, Plains All American, Regency Energy Partners, Sunoco Logistics, TCLP, Valero L.P, Williams Partners, Crosstex Energy Since 2001, Kite has substantially outperformed its peer group, while Key has tracked the MLP index closely

Equity Market Environment Midstream Equity Markets Activity Project Franklin The midstream equity markets have seen increasing volume since 2000, with GPs representing a large portion of the recent new issue activity Despite the increased activity, the market’s flexibility to receive larger deals is somewhat limited by the retail nature of the MLP investor universe 15Source Company filings Source Company filings MLP Equity Issuance $MM Source SDC MLP Equity Issuance Source SDC Recent MLP IPOsAt IPOIssueAmountImpliedOfferingCurrentCompanyDate($mm)Equity ValueYieldYieldRegency Energy Partners1/31/06275.07647.0%5.9%DCP Midstream12/2/05193.53766.5%5.3%Boardwalk Pipeline Partners11/9/05292.51,9767.2%5.4%Global Partners9/29/05107.82487.5%8.0%Williams Partners8/18/05107.53016.5%4.8%TransMontaigne Partners5/25/0585.01567.5%5.6%Teekay LNG Partners5/6/05132.06487.5%6.0%

Project Franklin Equity Market Environment Midstream Equity Markets GP Valuation Considerations While the market has clearly demonstrated an appreciation for the growth associated with a GP ownership stake, it has not yet begun to differentiate among the various alternatives 17Total Return % Source Company Filings, FactSet, Equity Research Leverage to growth 2.3x Leverage to growth 2.9x Leverage to growth 1.8x Leverage to growth 1.7x Leverage to growth 2.0x Note Cash flow = net income + D&A – maintenance capex Source Company Filings, FactSet MLP / GP Yields % Source Company Filings, FactSet (1) (1) 2007 Price / Cash Flow x C-Corp(1) LPs GPs 5.3 9.3 12.9 7.8 13.2 16.9 19.8 21.1 22.9 LegendCompanyTickerEnterprise Products PartnersEPDEnterprise GP HoldingsEPEEnergy Transfer PartnersETPEnergy Transfer EquityETEMagellan Midstream PartnersMMPMagellan Midstream HoldingsMGGValero LPVLIValero GP HoldingsVEHBuckeye PartnersBPLBuckeye GP HoldingsBGH

Midstream Transaction Environment Midstream Transaction Environment 2002 – Current 2002 – 2003 Era of the Distressed Sale 2004 – 2005 Era of Growth through Acquisition 2006 and Forward Organic Growth / GP Focus Buyers and Sellers • Convergence companies were the primary sellers during this period, specifically Williams, El Paso and Duke - Represented 13 of 24 transactions in 2003 • Financial sponsors represented a large part of the buyers universe - Notable new entrants included AIG, Berkshire Hathaway, Loews, Riverstone, Charlesbank and Natural Gas Partners • Sellers included Utilities and Majors keen to taking advantage of an increasingly attractive sellers market - Shell, ChevronTexaco, ExxonMobil, BP, ConocoPhillips - AEP, TXU, Texas Genco, OG&E, ONEOK • Also among active sellers were Sponsors looking to monetize investments at relatively attractive multiples: - Anschutz, Charlesbank, Koch, AIG Highstar, Natural Gas Partners • Buyers included MLPs, Sponsors and, increasingly, Corporates • Sponsors and MLPs represent the majority of buyers, year to date Commentary • 2002 saw the bottom of the transaction market with an average LTM multiple of 7.7x • 2003 realized a slight recovery with LTM multiples increasing to 8.2x • Transaction multiples continued to increase (10.2x in 2004 and 11.5x in 2005), driven in part by low interest rates and also by steady Sponsor interest • MLPs continued to execute a growth-through-acquisition strategy, although were increasingly outbid by Corporates for some of the larger assets • 2006 has seen continued evolution of the GP market with three MLP GP's electing to monetize a portion of their stake in the public markets • PAA's acquisition of PPX and Kite's MBO have further highlighted the GP value • MLP's meanwhile, have returned their focus to organic opportunities, seeking to avoid high multiples in the acquisition market Notable Transactions • The creation of Energy Transfer through the reverse merger with Heritage Propane • Enterprise’s acquisition of Gulfterra • Vulcan's acquisition of PAA's GP • Kite's acquisition of Terasen • EPCO's acquisition of TPP’s GP • Targa's acquisition of Dynegy Midstream • SUG’s acquisition of Sid Richardson midstream • Plains All American's acquisition of Pacific Energy Partners • Kite's proposed MBO • ONEOK's restructuring with Northern Border

Kite Financial Overview Kite Overview Project Franklin 22Kite100% GP 9% LP Units 17% KMR Shares Key Source Management Projections including G&A allocations for Kite; above figures do not include $7.3MM unallocated G&A and $8.8MM of equity income for Customer Works; Key figures exclude corporate expenses Second largest transporter of crude oil and petroleum products in Canada. The company has a total transportation capacity of about 960,000 barrels/day through approximately 2,800 miles of pipelines in Canada and the U.S. It also has five terminals with about 5 million barrels of capacity. 2006E EBITDA: $135MM Includes: - TransMountain - Corridor - Express - Platt Largest local distribution company in British Columbia and third largest in Canada. It provides natural gas distribution and related services to almost 900,000 customers. 2006E EBITDA: $325MM Develops natural gas-fired power plants. The company built and holds a preferred interest in a 550-megawatt natural gas-fired power plant in Jackson, MI. It also owns an interest in three plants in Colorado. 2006E EBITDA: $21MM Natural gas utility for approx. 240,000 residential, agricultural, commercial and industrial customers in rural Colorado, Wyoming and Nebraska. 2006E EBITDA: $66MM Largest transporter of natural gas into the high-demand Chicago market. The system has approx. 10,000 miles of pipeline, 239 Bcf of working gas storage and peak day deliverability of 5.8 Bcf/day. 2006E EBITDA: $522MM Kite owns the general partner of and has a significant limited partner interest in Key. 2006E EBITDA: $660MM Kite Canada (1) Terasen Gas Power Retail Natural Gas (2) NGPL Key Stake Largest transporter and marketer of CO2 for enhanced oil recovery projects in the U.S. Transports over 1 Bcf/day through 1,300 miles of pipelines. Significant interests in 3 oil fields and a crude oil pipeline in the Permian Basin. 2006E EBITDA: $548MM Major transporter of natural gas in TX, Rocky Mtn., and the Midwest. Approx. 15,000 miles of pipelines with transportation capacity of 9 Bcf/day and working gas storage capacity of 35 Bcf. Also owns and operates gathering, treating and processing facilities. 2006E EBITDA: $503MM Largest independent transporter of petroleum products in the U.S. The company transports over 2 million barrels/day of gasoline, jet fuel, diesel and natural gas liquids through more than 10,000 miles of pipelines. 2006E EBITDA: $592MM Largest independent terminal operator in the U.S. Approx. 85 terminals handle more than 80 million tons annually of coal, petcoke and other materials. Liquids storage capacity of 40 million barrels for petroleum products & chemicals, and about 55 transload facilities. 2006E EBITDA: $393MM Key, Sempra Pipelines & Storage, and ConocoPhillips are jointly pursuing the development of a natural gas pipeline to link producing areas in the Rocky Mountain region to the upper Midwest and Eastern United States. The pipeline will have a capacity of up to 2 Bcf/day. 2006E EBITDA: $0 CO2 Natural Gas Pipelines Products Pipelines Terminals REX Notes 1. Management plan assumes TransMountain and 75% of Corridor sold as of 1/1/07 2. Pending expected close of sale to GE in January 2007

Project Franklin Kite Financial Overview NGPL 24Opportunities Strong customer base (7 of top 10 are LDCs) with little concentration Long term contracts with recent major rollover success Substantial volume of cushion gas that can be released (15 Bcf) Low cost pipeline vs. the competition Over $200M of near term expansion opportunities with long term fixed rate negotiated contracts in place Risks Potential for an adverse rate case Competition in Chicago market area Potential for movements in the supply basins Note 1. Excludes G&A allocations (1) NGPL Historical and Projected Results$MMFiscal Year Ending Dec. 31,2005A2006E2007E2008E2009E2010ERevenues949.2856.1911.4932.8956.0982.4% Growth-(9.8%)6.5%2.3%2.5%2.8%EBITDA534.7570.6625.6646.7669.6695.6% Growth-6.7%9.6%3.4%3.5%3.9%% Margin56.3%66.7%68.6%69.3%70.0%70.8%EBIT435.1464.5518.4538.4560.3585.1% Growth-6.7%11.6%3.9%4.1%4.4%% Margin45.8%54.3%56.9%57.7%58.6%59.6%

Project Franklin Kite Financial Overview Terasen Gas 25Opportunities 3rd largest gas utility in Canada, with over C$3.0Bn rate base Strong operational performance as Terasen continues to earn incentive returns above allowed rate of return for operational cost savings Stable cash flow Good organic growth opportunities through LNG storage and the Inland Pacific Connector Risks Regulation puts a cap on earnings potential Natural gas commodity price risk as industrial customers can switch to alternative energy sources Potential for future regulatory/political sentiment changes Note 1. Excludes G&A allocations Terasen Gas Historical and Projected Results(1)$MM2006E2007E2008E2009E2010ERevenues1,621.61,631.61,639.61,648.61,658.6% Growth-0.6%0.5%0.5%0.6%EBITDA324.5331.1336.5342.8350.0% Growth-2.0%1.6%1.9%2.1%% Margin20.0%20.3%20.5%20.8%21.1%EBIT238.0242.0244.3247.3251.1% Growth-1.7%1.0%1.2%1.5%% Margin14.7%14.8%14.9%15.0%15.1%Fiscal Year Ending Dec. 31,

Project Franklin Kite Financial Overview Kite Canada 26Opportunities Favorable demographic trends in the western US and Canada Good position to benefit from emerging opportunities in Canadian oil sands Blue chip list of shippers Significant capital expansion opportunities through TMX1, TMX2 and TMX3 ($3Bn+ opportunity) Good asset fit and investment potential for MLP structure of Key Risks Impact of declining oil prices on oil sands opportunity Execution risks on expansion projects (raw material prices, availability of labor, etc.) Management projections assume TransMountain is sold to Key on 1/1/07 Also assume the sale of 75% of Corridor for $225MM Therefore, Kite Canada’s remaining investments are deconsolidated in 2007 Note Inclusive of equity in partnerships (1) (1) Kite Canada Historical and Projected Results$MMFiscal Years Ending December 31,2006E2007E2008E2009E2010ERevenues198.1----% Growth-EBITDA134.8----% Growth-% Margin68.0%EBIT98.4----% Growth-% Margin49.7%Equity in Partnerships17.621.121.627.227.7

Kite Financial Overview Key Growth Drivers Project Franklin 29Notes 1. Includes acquisition capex of $50MM a year from 2007 to 2010 2. 2006 includes $94MM for Journey acquisition 3. Includes acquisition capex of $100MM a year from 2007 to 2010 4. Includes $479MM and $308MM in acquisitions in 2004 and 2005, respectively (4) (4) Expansion Capital Expenditures2006-20102004200520062007200820092010AverageProducts Pipeline (1) 122.8164.2123.5200.0150.0150.0150.0154.7TransMountain ---95.6607.3816.6-506.5Natural Gas Pipelines / REX--624.5874.2668.545.7-553.2Natural Gas Pipelines / LA Line---113.7292.272.6-159.5Natural Gas Pipelines / All Other54.256.724.2100.0100.0100.0100.084.8CO2 (2) 275.7267.5422.4206.3184.2167.8142.6224.7Terminals (3) 64.7121.6121.2300.0250.0200.0200.0214.2OH/IT/Other83.473.455.7----NMTotal1,079.6991.21,371.51,889.72,252.11,552.7592.61,532.0

Project Franklin Kite Financial Overview Key 30Opportunities Strong backlog of expansion projects, notably REX which is fully subscribed with 10 year contracts Movement of natural gas supply basins to Rockies creates opportunities/needs for new infrastructure Nationwide footprint with little competition in many niches/geographies (i.e., CO2) Scale allows capability for sizable expansion projects most of the competition could not take on Strong customer base with little concentration Risks Environment for acquisitions is difficult, given valuation multiples and where Key is in the splits Execution risk on expansion projects Financing risks/interest rate risks Regulatory requirements Recontracting risk at REX after initial 10 year period expires Commodity price risk in CO2 and Terminals business Note 1. Includes GP interest, IDRs and LP unit distributions (1) Key Historical and Projected Results$MM, unless otherwise notedFiscal Years Ending December 31,2005A2006E2007E2008E2009E2010ERevenues9,71812,41913,11713,99214,67815,317% Growth27.8%5.6%6.7%4.9%4.4%EBITDA1,6211,8062,1212,7003,0713,373% Growth11.4%17.4%27.3%13.7%9.8%% Margin16.7%14.5%16.2%19.3%20.9%22.0%EBIT1,2651,4221,6942,2242,5302,800% Growth12.3%19.1%31.3%13.7%10.7%% Margin13.0%11.5%12.9%15.9%17.2%18.3%GP IDR4745306298479911,093Total Cash Flow to KMI5315996908891,0781,193Distribution Per Unit Target ($)3.133.283.514.084.464.66

Kite Financial Overview Illustrative Risks and Opportunities EBITDA Variability Project Franklin “Risks to be Considered” per Goldman Sachs and Management: 5-year plan methodology: high-level projections, not bottom-up budget Executing on unidentified opportunities underlying growth expectations Oil production and prices Project overruns and delays Capital markets: access, cost, rates Sustaining capex needs Securing customer commitments for expansions 31Effect of Specifically Identified Events on 2010 EBITDA: Status Quo 2010 EBITDA = $2,353mm $2,353mm

Valuation of Kite Kite Summary Valuation Project Franklin 32Notes Price targets discounted back six months at Kite’s estimated cost of equity of 9% Valuation assumes $7.2Bn in net debt Valuation assumes $5.4Bn in net debt Assumes 2010 EPS discounted back 3.5 years at Kite’s estimated cost of equity of 9% (valuation includes cumulative dividends discounted annually at Kite’s estimated cost of equity of 9%) Assuming a November 30th close, shareholders in Kite will receive $107.50 in cash at close and $0.875 per share as a dividend payment in November. To put this on a 6/30/06 basis, this would represent a present value of approximately $106 per share 52 Week Trading Range (Pre-Announcement) Statistic ($MM) P/E 2006 (17.0x–21.0x) $5.00 P/E 2007 (15.0x–18.0x) $5.44 Agg Value / EBITDA 2006 (10.0x–12.0x) (2) $1,732 Public Market Trading Comps Agg Value / EBITDA 2007 (9.0x–12.0x) (3) $1,721 Transaction Comps Analyst Price Targets (1)Discounted Equity Value 2009 EPS (15.0x-18.0x) (4) $8.30 Agg Value / FY1 EBITDA (9.0x-12.0x) (3) $1,721 Discounted Cash FlowLBO Premia Paid (20%-30%)$84.41 Sum of Parts $107.50/share (5) 7.5-8.5% Discount Rate; 9.5-11.5x Terminal EBITDA Multiple Cash Flow Analysis Public Restructuring

Valuation of Kite Kite and Key Stock Price Performance Project Franklin 33Source FactSet +108% CAGR: 14% +61% CAGR: 9% Unaffected +72% CAGR: 10% Price Performance Since 2001 – Rebased to Kite $ +1% CAGR: 0% Premium fromOfferPricePriceOffer107.50Unaffected Price84.4127.4%Current Trading Value101.755.7%52 Week High101.446.0%52 Week Low76.4040.7%5 Year High101.446.0%5 Year Low32.15234.4%30 day Trailing Average86.4024.4%60 day Trailing Average88.3721.6%1 year Trailing Average90.5318.7%3 year Trailing Average71.8949.5%5 year Trailing Average61.8373.9%

Valuation of Kite Selected Wall Street View of Kite Prior to Announcement of Proposal Project Franklin 35Other Equity Research analysts price targets: $108.00 – Banc of America (01/25/06) $105.00 – Wachovia Securities (04/19/06) $105.00 – Price Target Research (05/14/06) $112.00 – RBC Capital Markets (04/20/06) Wall Street View of KitePrior to Announcementof ProposalReport DateStock PricePrice Target4/21/06$90.70$105.004/20/06$90.70$106.004/26/06$89.53$100.004/19/06$91.29$110.005/1/06$88.02$105.00Competitive Strengths Organic growth opportunities gained through the acquisition of Terasen Keysegments on target for solid performance (excluding CO2) Strong volumes on TransMountain(KiteCanada) Strong cash flow growth from Key New growth opportunities with Terasen acquisition NGPL results continue to benefit from successful contract renegotiations Positive impact of FERC rate decision Keystrong contributor and growth driver Two large segments now with Terasen acquisition Increased Keyearnings from TX pipelines NGPLsignificant amount of capacity sold under contract Advanced several major projects in $8Bnbacklog (45% now firm) Blended TMX2/TMX3 expansion opportunity Strength in its underlying growth prospects Growth stemming from ~$8 to $12 billion of internal expansion projects Does not carry as much direct commodity exposure as peers Shareholder-driven managementThreats / Issues Increased dependence on Keyfor earnings growth Expected shortfall in the CO2 segment Keyto generate lower than previously expected earnings and pay slightly lower cash distributions in 2006-07 “Slight slip-up” in CO2 segment Environmental expenses and low demand for propane due to warm winter hurt Products Pipelines segment No assurance that Keywill be able to acquire assets or investin various projects on economically acceptable terms Yield affected by recent increase in interest rates Reduction in CO2 producing volumes of ~3MBbl/d at SACROC Keyis experiencing increased G&A and interest costs which have offset EBIT increases Ongoingchallenge at SACROC unit Earnings uncertainty associated with SACROC unit could temporarily cap Kite’s upside Key’s distribution growth rate over the next five years likely much lower than past five years MLP will require a substantial amount of capital in near term Very tight cash distribution coverage ratio Large size and diverse mix of asset base is “a lot to manage”

Valuation of Kite Midstream Public Market Comparables As of August 22, 2006 Project Franklin 362006E P/E x Source FactSet and Kite management estimates Source FactSet and Kite management estimates Source FactSet and Kite management estimates Source FactSet and Kite management estimates 2007E P/E x 2006E AV/EBITDA x 2007E AV/EBITDA x PEG: 1.96 2.85 9.57 1.35 2.02 2.08 1.80Unaffected Unaffected Unaffected Unaffected PEG: 2.72 1.50 8.97 1.97 1.97 1.94 1.47Current Offer: 21.5x Current Offer: 19.8x Current Offer: 12.6x Current Offer: 11.7x Mean(1): 18.3x Mean(1): 16.4x Mean(1): 9.9x Mean(1): 9.4x Note Mean excludes Kite Unaffacted LegendEl PasoEPEnbridgeENBONEOK OKESouthern UnionSUGTransCanadaTRPWilliams WMB

Valuation of Kite Next Twelve Months P/E Chart – Last Five Years As of August 22, 2006 Project Franklin Note Includes TransCanada, Williams, El Paso, Enbridge, ONEOK and Southern Union 37Next Twelve Months P/E Forward Estimates x Source FactSet Over the past five years, Kite’s peers have consistently traded from 15-19x Next Twelve Months P/E Traded within this range over 80% of last three years Its peer group since 2004 has averaged a P/E of 18x Kite has also averaged an 18x P/E since January 2004 Average Next Twelve Months P/E1 Year2 Year3 YearKite19.4x18.7x17.8xPeers (1)17.6x17.6x17.9x

Valuation of Kite Discounted Equity Value Project Franklin 38Notes Based on forward EPS; Includes value of cumulative dividends and assumes 9% discount rate Based on forward EPS; Includes value of cumulative dividends and assumes 10.5% discount rate Undiscounted FY1 EPS20062007200820092010EPS5.005.446.697.588.30Stock price at15.0x82100114124-16.0x87107121133-17.0x92114129141-18.0x98120136149-Present Value of Pro Forma Share Price Discounted at 10.5% Cost of Equity (2)200620072008200915.0x79.2691.4096.8699.3516.0x84.4397.16102.77105.2017.0x89.61102.93108.67111.0518.0x94.78108.69114.58116.90Forward P/E Multiple

Valuation of Kite

Selected Midstream Transactions

Project Franklin

Selected Midstream Transaction Comps – AV / FY1 EBITDA

Acquiror Plains All American Pipeline Gaz de France National Grid Kite Duke Energy Valero Atmos Energy Southern Union/GE Enterprise Products MidAmerican Energy Duke Energy

Target Pacific Energy Partners Suez KeySpan Terasen Cinergy Kaneb Pipeline TXU Gas CrossCountry GulfTerra Energy Northern Natural Gas Westcoast Energy

Total Agg.

Value ($MM) 2,390 70,260 11,658 5,703 14,400 2,621 1,925 2,450 4,733 1,878 8,500

Date Ann. 6/23/06 2/25/06 2/25/06 8/1/05 5/9/05 11/1/04 6/17/04 6/2/04 12/15/03 7/29/02 9/20/01

Median 9.7

Mean 10.2

Valuation of Kite

Premia Paid (1)(2)

Selected Transactions

Project Franklin

Notes

Includes announced bids for U.S. public targets with an aggregate value of $100MM or more. Excludes terminated transactions

Annual amounts based on mean of percentage premiums paid over unaffected stock price, which is defined as stock price 4 weeks prior to the earliest of the deal announcement, announcement of a competing bid, and market rumors

Cash Transactions Above $10 Bn

Energy Transactions Above $1 Bn

All Cash Transactions

Current Offer: 27%

Valuation of Kite Discounted Cash Flow Analysis Kite Project Franklin 41 Note Includes 50% of 2006E cash flows and includes after-tax proceeds of $579MM for announced sale of Retail Kite Discounted Cash Flow Discount Rate 7.5% 8.0% 8.5% FY 2010 EBITDA Multiple 9.5x 10.5x 11.5x 9.5x 10.5x 11.5x 9.5x 10.5x 11.5x Year 4 EBITDA 2,353 2,353 2,353 2,353 2,353 2,353 2,353 2,353 2,353 Terminal Value 22,349 24,702 27,054 22,349 24,702 27,054 22,349 24,702 27,054 PV of Terminal Value @ 6/30/06 16,141 17,840 19,539 15,807 17,471 19,135 15,482 17,112 18,741 PV of Free Cash Flow @ 6/30/06 (1) 4,470 4,470 4,470 4,428 4,428 4,428 4,386 4,386 4,386 Estimated Aggregate Value 20,611 22,310 24,009 20,235 21,899 23,563 19,868 21,498 23,128 Less: Total Debt (7,381) (7,381) (7,381) (7,381) (7,381) (7,381) (7,381) (7,381) (7,381) Plus: Cash 169 169 169 169 169 169 169 169 169 Equity Value 13,398 15,097 16,796 13,022 14,686 16,350 12,656 14,285 15,915 Shares Outstanding 136 136 136 136 136 136 136 136 136 Equity Value Per Share 98.84 $ 111.22 $ 123.62 $ 96.07 $ 108.21 $ 120.36 $ 93.39 $ 105.29 $ 117.18 $ Implied Perpetuity Growth Rate 2.5% 2.9% 3.3% 2.9% 3.4% 3.8% 3.4% 3.9% 4.3%

Valuation of Kite LBO Analysis Project Franklin Assumptions: Valuation as of 6/30/06 Assumes net debt of $7,213 million refinanced in transaction Sponsor equity based on expected balance sheet at 12/31/06 Operating assumptions based on management estimates Assumes management incentive payments granted at a time of realization (2010) $0 granted at 9x exit multiple $316MM granted at 11x exit multiple 42Pro Forma CapitalizationInterestRateOpening2H 20062007200820092010 Term Loan B & C L + 163bps 5,600.0 5,600.0 5,544.0 5,488.0 5,432.0 5,376.0 Term Loan D L + 138bps 2,000.0 2,000.0 2,000.0 2,000.0 2,000.0 2,000.0 Existing Debt 6.6% 6,496.8 6,732.9 5,272.6 5,045.2 4,631.0 4,113.3 14,096.8 14,332.9 12,816.6 12,533.2 12,063.0 11,489.3 Total Debt / EBITDA8.1x8.3x7.5x6.3x5.5x4.9x% of Total Debt Repaid0.0%(1.7%)9.1%11.1%14.4%18.5%Sources$MM Insider Rolled Equity 3,010.0 Equity from Sponsor 5,057.8 Total Debt 14,096.8 Total Sources22,164.6

Valuation of Kite LBO Analysis Project Franklin 43Table illustrates the equity returns by varying the initial purchase price per share and exit multiple (1) Note Excludes a $1.0Bn contingent equity commitment that investors will provide to the entity if it fails to achieve a determined interest coverage test Equity Returns Analysis (1)2010E LTM Exit Multiple9.5x10.0x10.5x11.0x11.5x80.00 21.0% 23.4% 25.7% 28.0% 30.0% 85.00 17.3% 19.9% 22.1% 24.3% 26.2% 90.00 14.8% 16.7% 19.0% 21.2% 23.0% 95.00 12.1% 14.6% 16.2% 18.3% 20.3% 100.00 9.6% 12.1% 14.4% 15.8% 17.8% 105.00 7.8% 9.9% 12.1% 14.2% 15.5% 107.50 6.8% 9.3% 11.1% 13.2% 15.1% 110.00 5.8% 8.3% 10.1% 12.2% 14.1% Purchase Price Per Share ($)

Valuation of Kite Sum of Parts Project Franklin 45Notes Represents estimated after-tax proceeds from anticipated sale Assumes that $579MM of after-tax proceeds from sale of Retail used to pay down debt Different FD share count applied due to the exercising of options (1) Sum-of-the-Parts Valuation Range ($ Millions, except where noted) Asset Valuation Range Description of Assets Low Mid High Investments in Key GP Stake in Key $8,000 $10,000 $12,000 Kite's LP units in Key 746 878 1,009 Kite's "I" units in Key Management 369 434 499 Value of Stake in Key and Key Management$9,115$11,312$13,508Other Operating Business Segments NGPL $5,000 $5,400 $5,800 Terasen Gas 2,300 2,650 3,000 Kite Canada 1,500 1,535 1,570 Power & Other 155 165 175 Total Agg Value$18,070$21,062$24,053Less: (Estimates as of 6/30/06) Total Debt (2) $6,803 $6,803 $6,803 Cash (169) (169) (169) Equity Value$11,436$14,427$17,419 Kite Diluted Shares Outstanding (3) 135.4 135.7 135.9 Implied Equity Value / Share$84.49$106.33$128.16

Strategic Alternatives Continuum of Strategic Alternatives Project Franklin 46Remain Independent Sale of Company Achievability of operating plan Execute on management’s long-term plan Status Quo Amount of desired leverage Achievability of operating plan Increase leverage on business, using proceeds to repurchase Kite common/pay special dividend to shareholders Alternatives include relatively modest to highly levered share repurchase Execute on management’s long-term plan Leveraged Share Repurchase Amount of desired leverage Achievability of operating plan Determining which assets to sell Leverage can be augmented or replaced by asset sales Increase leverage on business, using proceeds to repurchase Kite common/pay special dividend to shareholders Execute on management’s long-term plan Leveraged Share Repurchase with Asset Dispositions Timing/complexity Tax consequences / accounting “noise” Market reaction Using a variety of strategic alternatives, find most value enhancing alternative for each property owned by Kite Restructuring
(i.e., 5/13/06 management plan) Tax consequences Depth of market for certain assets In order to achieve the highest price for each piece, auction pieces of Kite separately Auction Pieces of Kite Separately Alternative Description Issues to Consider Depth of market Sell Kite Sell Kite

Kite Discounted Equity Value at 9% Discount Rate– Pro Forma Share Price (1) $ Strategic Alternatives Illustrative Value of Management's Plan Project Franklin 47Source Management projections 79.80 104.01 110.15 85.01 90.22 116.28 122.42 95.43 Source Management projections Kite Discounted Equity Value at 10.5% Discount Rate– Pro Forma Share Price (1) $ 84.43 89.61 94.78 79.26 99.35 111.05 116.90 105.20 Forward P/E Multiples Forward P/E Multiples Note Includes cumulative dividends Undiscounted FY1 EPS20062007200820092010EPS5.005.446.697.588.30Stock price at15.0x82100114124-16.0x87107121133-17.0x92114129141-18.0x98120136149-

Strategic Alternatives

Illustrative Risks and Opportunities (cont’d)

Discounted Equity Value Variability

Project Franklin

Effect of Specially Identified Events on Discounted Equity Value:

Status Quo Discounted Equity Value = $108.13

Note

Assumes a forward multiple of 16.5x (midpoint of the previously illustrated range) and a discount rate of 10.5%

$108.13 (1)

Strategic Alternatives Overview of the Leveraged Repurchase Impact of Share Repurchase Project Franklin Kite has a substantial opportunity to repurchase a meaningful amount of stock by using the proceeds from its asset sales and issuing incremental debt Maintains investment grade rating It will be important to express strong commitment to investment grade rating to credit agencies Costs of going below investment grade involve more complexity and expense in issuing debt if current bonds remained outstanding 49 Currently, Kite has $7.4Bn of debt (4.3x 2006 EBITDA) and a BBB / Baa2 credit rating In order to maintain the investment grade rating, it will be important to maintain total debt of less than $10Bn Kite expects $767MM of after-tax proceeds (and the removal of $377MM of debt) from the drop-down of TransMountain and the sale of 75% of Corridor Kite also expects to receive after-tax proceeds of $787MM from the sale of Power and Retail A $4Bn share repurchase should maintain the investment grade rating However, this is the edge of investment grade, it brings debt to EBITDA to 6.4x, and could create risk of non-investment grade outcomes A share repurchase of $3Bn would likely result in a downgrade to BBB- / Baa3, but is unlikely to result in Kite dropping below investment grade (represents 5.8x EBITDA) Sources$MM After-tax Proceeds of Power 208 After-tax Proceeds of Retail 579 3Yr FRN (6.1%) 640 5 Yr Fixed / FRN (6.6%) 953 10Yr Fixed (6.9%) 640 Total 3,020

Project Franklin Strategic Alternatives Impact on Credit Statistics 50Leveraged Recapitalization Additional Assumptions $3Bn Share Repurchase $105 per share Repurchase Price Interest Rates on New Debt: 3 Yr FRN (6.1%), 5 Yr Fixed / FRN (6.6%), 10 Yr Fixed (6.9%) Sale of Retail for $710MM Sale of Power for $175MM Management Plan Assumptions Existing Debt currently has a weighted average cost of approximately 6.5% Sale of TransMountain for $700MM to Key Sale of 75% of Corridor for $225MM to income trust From a financial perspective, the share repurchase Increases Kite EPS during the 2006-2010 period Also increases overall Kite leverage, however marginally increases free cash flow as reduced dividend payments offset increased interest expense (1) Note 1. Operating Cash Flow – Capital Expenditures & JV Investments - Dividends (1) Financial Summary - Leveraged Recapitalization$MM2006E2007E2008E2009E2010E Key Statistics EBITDA ($MM) 1,520 1,700 1,987 2,180 2,333 EPS ($) 5.67 7.29 8.42 9.36 Free Cash Flow ($MM) (589) (86) 45 60 Fully Diluted Shares (MM) 105.4 103.6 103.3 102.7 Debt / EBITDA (x) 5.8 5.4 4.7 4.3 3.9 EBITDA / Interest (x) 2.6 2.9 3.3 3.6 3.9 Accretion / Dilution Analysis20062007200820092010 Mgmt. EPS ($) 5.00 5.44 6.69 7.58 8.30 @ $100 Pro Forma 5.75 7.40 8.55 9.50 Acc. / Dil. 6%11%13%14%@ $105 Pro Forma 5.67 7.29 8.42 9.36 Acc. / Dil. 4%9%11%13%Financial Summary - Management Plan$MM2006E2007E2008E2009E2010E Key Statistics EBITDA ($MM) 1,732 1,721 2,008 2,200 2,353 EPS ($) 5.00 5.44 6.69 7.58 8.30 Free Cash Flow ($MM) (197) (566) (77) 39 37 Fully Diluted Shares (MM) 135.3 134.0 132.2 131.9 131.2 Debt / EBITDA (x) 4.5 3.7 3.2 2.9 2.7 EBITDA / Interest (x) 3.8 4.3 4.8 5.3 5.7

Strategic Alternatives Discounted Equity Value Repurchase Shares @ $100 Project Franklin 51P/E P/E Discounted Equity Value$BaseShare %BaseShare %BaseShare %BaseShare %CaseRepurchaseChangeCaseRepurchaseChangeCaseRepurchaseChangeCaseRepurchaseChange9.0% Cost of Equity 15x 79.80 84.31 5.7% 93.27 102.60 10.0% 100.14 111.85 11.7% 104.01 117.38 12.9% 16x 85.01 89.82 5.7% 99.15 109.10 10.0% 106.25 118.74 11.8% 110.15 124.41 12.9% 17x 90.22 95.33 5.7% 105.03 115.61 10.1% 112.36 125.63 11.8% 116.28 131.43 13.0% 18x 95.43 100.84 5.7% 110.92 122.11 10.1% 118.47 132.52 11.9% 122.42 138.46 13.1% 10.5% Cost of Equity 15x 79.26 83.74 5.7% 91.40 100.54 10.0% 96.86 108.18 11.7% 99.35 112.10 12.8% 16x 84.43 89.21 5.7% 97.16 106.91 10.0% 102.77 114.84 11.7% 105.20 118.80 12.9% 17x 89.61 94.68 5.7% 102.93 113.28 10.1% 108.67 121.50 11.8% 111.05 125.50 13.0% 18x 94.78 100.16 5.7% 108.69 119.65 10.1% 114.58 128.16 11.9% 116.90 132.20 13.1% 2006200720082009

Strategic Alternatives Discounted Equity Value Repurchase Shares @ $105 Project Franklin 52P/E P/E Discounted Equity Value$BaseShare %BaseShare %BaseShare %BaseShare %CaseRepurchaseChangeCaseRepurchaseChangeCaseRepurchaseChangeCaseRepurchaseChange9.0% Cost of Equity 15x 79.80 83.18 4.2% 93.27 101.21 8.5% 100.14 110.34 10.2% 104.01 115.81 11.3% 16x 85.01 88.61 4.2% 99.15 107.62 8.5% 106.25 117.13 10.2% 110.15 122.73 11.4% 17x 90.22 94.05 4.2% 105.03 114.03 8.6% 112.36 123.93 10.3% 116.28 129.65 11.5% 18x 95.43 99.48 4.2% 110.92 120.44 8.6% 118.47 130.72 10.3% 122.42 136.57 11.6% 10.5% Cost of Equity 15x 79.26 82.61 4.2% 91.40 99.18 8.5% 96.86 106.73 10.2% 99.35 110.60 11.3% 16x 84.43 88.01 4.2% 97.16 105.46 8.5% 102.77 113.29 10.2% 105.20 117.20 11.4% 17x 89.61 93.41 4.2% 102.93 111.74 8.6% 108.67 119.85 10.3% 111.05 123.80 11.5% 18x 94.78 98.80 4.2% 108.69 118.02 8.6% 114.58 126.41 10.3% 116.90 130.40 11.5% 2006200720082009

Strategic Alternatives Public Restructuring Plan Project Franklin 54Kite 100% GP 9% LP Units 17% KMR Shares Key Second largest transporter of crude oil and petroleum products in Canada. The company has a total transportation capacity of about 960,000 barrels/day through approximately 2,800 miles of pipelines in Canada and the U.S. It also has five terminals with about 5 million barrels of capacity. 2006E EBITDA: $135MM Includes: - Transmountain - Corridor - Express - Platt Largest local distribution company in British Columbia and third largest in Canada. It provides natural gas distribution and related services to almost 900,000 customers. 2006E EBITDA: $325MM Develops natural gas-fired power plants. The company built and holds a preferred interest in a 550-megawatt natural gas-fired power plant in Jackson, MI. It also owns an interest in three plants in Colorado. 2006E EBITDA: $21MM Natural gas utility for approx. 240,000 residential, agricultural, commercial and industrial customers in rural Colorado, Wyoming and Nebraska. 2006E EBITDA: $66MM Largest transporter of natural gas into the high-demand Chicago market. The system has approx. 10,000 miles of pipeline, 239 Bcf of working gas storage and peak day deliverability of 5.8 Bcf/day. 2006E EBITDA: $522MM Kite owns the general partner of and has a significant limited partner interest in Key. 2006E EBITDA: $660MM Kite Canada Terasen Gas Power Retail Natural Gas NGPL Key Stake Largest transporter and marketer of CO2 for enhanced oil recovery projects in the U.S. Transports over 1 Bcf/day through 1300 miles of pipelines. Significant interests in three oil fields and a crude oil pipeline in the Permian Basin. 2006E EBITDA: $548MM Major transporter of natural gas in TX, Rocky Mtn., and the Midwest. Approx. 15,000 miles of pipelines with transportation capacity of 9 Bcf/day and working gas storage capacity of 35 Bcf. Also owns and operates gathering, treating and processing facilities. 2006E EBITDA: $503MM Largest independent transporter of petroleum products in the U.S. The company transports over 2 million barrels/day of gasoline, jet fuel, diesel and natural gas liquids through more than 10,000 miles of pipelines. 2006E EBITDA: $592MM Largest independent terminal operator in the U.S. Approx. 85 terminals handle more than 80 million tons annually of coal, petcoke and other materials. Liquids storage capacity of 40 million barrels for petroleum products & chemicals, and about 55 transload facilities. 2006E EBITDA: $393MM Key, Sempra Pipelines & Storage and ConocoPhillips are jointly pursuing the development of a natural gas pipeline to link producing areas in the Rocky Mountain region to the upper Midwest and Eastern United States. The pipeline will have a capacity of up to 2 Bcf/day. 2006E EBITDA: $0 CO2 Natural Gas Pipelines Products Pipelines Terminals REX Sale for $175MM Sale for $710MM (1) 20% IPO $700MM Sale of 75% for $225MM plus removal of $377MM in debt Asset considered part of restructuring plan Source Management Projections including G&A allocations for Kite; above figures do not include $7.3MM unallocated G&A and $8.8MM of equity income for Customer Works; Key figures exclude corporate expenses Note Expected to close in January 2007

Strategic Alternatives Public Restructuring Plan Project Franklin 55Notes Assumes a 10% discount rate Assumes a SpinCo LTM multiple of 9.5x EBITDA Present Value of Pro Forma 2010 Combined Share Price (1)HoldCo Trading Yield3.5%4.5%5.5%8.5x 137.82 114.86 100.24 9.0x 139.87 116.90 102.29 9.5x 141.91 118.95 104.34 10.0x 143.96 121.00 106.39 10.5x 146.01 123.05 108.43 SpinCo LTM EBITDA MultiplePremium to Offer Price of $107.50 (1)HoldCo Trading Yield3.5%4.5%5.5%8.5x 28.2% 6.8% (6.8%) 9.0x 30.1% 8.7% (4.8%) 9.5x 32.0% 10.7% (2.9%) 10.0x 33.9% 12.6% (1.0%) 10.5x 35.8% 14.5% 0.9% SpinCo LTM EBITDA MultiplePresent Value of Pro Forma 2010 Combined Share Price (2)HoldCo Trading Yield3.5%4.5%5.5%9.0% 147.00 123.18 108.03 10.0% 141.91 118.95 104.34 11.0% 137.05 114.90 100.81 12.0% 132.40 111.03 97.44 Discount Rate

Valuation of Key General Partnership

Kite / Key Relationship Overview

Project Franklin

100% GP Stake

10MM Key Management Shares (17%)

20MM Key Units (9%)

Key Stake

2006 Cash Flow: $660MM

Kite Shareholders

Kite

2006 Tax Effected Cash Flow: $415MM

Valuation of Key General Partnership GP Valuation Public Comparable Summary Project Franklin 58(2)Notes 1. Adjusted to normalize the coverage ratio 2. BPL is unique among energy MLPs regarding its high-split and incentive cut (1)GP Valuation AnalysisKeyEnterpriseEnergy TransferMagellanValeroBuckeyeGP Valuation GP Unit Price (8/22/06) 36.80 25.95 22.42 20.80 15.40 Units Outstanding 89 124 63 43 28 Equity Value 3,271 3,227 1,405 884 436 Net Debt (GP Level) 147 380 - - - Aggregate Value3,417 3,607 1,405 884 436 Current Yield 3.4% 3.7% 3.9% 5.8% 5.3% Implied Disaggregated GP Cash Flow Multiple (x) 28.9 25.2 26.2 20.9 16.1 GP Asset Mix General Partner (% stake) 2.0 2.0 2.0 2.0 0.6 IDRs (% ownership) 100 50 100 100 100 Common Units (MM) 13.50 36.40 0.00 10.23 0.08 GP Cash Flow Contribution General Partner (%) 12.0% 5.0% 6.0% 7.0% 8.0% IDRs (%) 69.0% 36.0% 94.0% 26.0% 91.0% Common Units (%) 20.0% 59.0% 0.0% 67.0% 1.0% 2006E Total Distributions Paid $1,279.5 $872.1 $538.4 $208.1 $183.3 $151.4 % to GP 42.2% 12.1% 28.7% 27.0% 9.6% 19.2% % to LP 57.8% 87.9% 71.3% 73.0% 90.4% 80.8% High Split 25.0% 50.0% 50.0% 25.0% 45.0% Leverage Factor - Structure 2.3x 1.8x 2.9x 1.7x 2.0x "Pure" Leverage Factor 1.3x 2.4x 2.5x 2.7x 2.8x 1.9x

Valuation of Key General Partnership GP Transaction Comps Project Franklin (1) Note Forward multiple used as proxy for LTM 61 GP Transaction CompsDisaggregatedImpliedAggregate ValueEmbeddedAdjusted GPGP ValueAggregateLTM1 Yr FwdEquity PurchaseGP LTMDateValueEBITDAEBITDAValuePriceEBITDAAcquiror / TargetAnnounced($MM)(x)(x)($MM)($MM)(x) Plains All American Pipeline, LP / Pacific Energy Partners, LP 6/12/2006 2,390.0 NA 13.0 333.7 2,056.3 12.8 EPCO Inc. / TEPPCO GP 2/24/2005 1,100.0 16.2 NA NA 1,100.0 16.2 Valero LP / Kaneb Pipe Line Partners 11/1/2004 2,621.0 13.3 12.3 307.3 217.7 29.0 ONEOK, Inc. / Northern Plains Natural Gas Co 9/16/2004 175.0 16.2 NA 20.5 154.5 16.8 Enterprise Products Partners / GulfTerra Energy Partners 12/15/2003 4,733.3 10.9 9.7 2,891.9 1,841.4 8.0 Carlyle/Riverstone & Madison Dearborn / Williams Energy Partners 4/21/2003 823.2 8.8 8.5 569.4 253.8 4.9

62Valuation of Key General Partnership GP Valuation Project Franklin In an MLP structure, the growth rate of the cash flow to the GP is determined by three factors The core growth rate of the existing asset base The “leverage factor” and The ability to issue additional LP units to fund growth capex projects and acquisitions. % of Total DCFImplied Leverageto GPFactor 25.0% 3.0x 27.5% 2.6x 30.0% 2.3x 32.5% 2.1x 35.0% 1.9x 37.5% 1.7x 40.0% 1.5x 42.5% 1.4x 45.0% 1.2x 47.5% 1.1x Core Growth Leverage Factor New Unit Issuance Description Core growth of the overall distributable cash flow of the MLP available to both the LPs and the GP from the existing asset base The multiplier on top of the LP per unit growth due to the sp lit mechanism; the lower in the split structure the higher the multiple Extra growth in overall distributable cash flow through the ability to finance projects and acquisitions partially through the issuance of new units Impact on LP Cash flow available p er LP unit will grow less than the overall DCF due to the unequal sharing of incremental cash flow through the splits N/A Will increase the per LP unit growth rate if the projects or acquisitions produce a higher equity return than the “break - even” return. Break - even equity return is the yield of LP unit divided by the percentage of the overall DCF going to the LPs Impact on GP Cash flow available to the GP will grow faster than the overall DCF due to the unequal sharing of incremental cash flow through th e splits Increases the GP cash flow even if the projects or acquisitions produce an equity return lower than “break - even” for the LPs. Break - even equity returns increase as LP unit yield and percentage of total DCF to the GP increase

Project Franklin Valuation of Key General Partnership GP Valuation (cont’d) Note Excludes market value of interest rate swaps 63Key Assumptions 20 year discounted cash flow model Management projections and capital plan through 2010 3% growth in Base EBITDA from 2011–2026 (before EBITDA from acquisitions/expansion; excludes equity in partnership earnings); 100% payout starting in 2011 Annual capital investments based on percentage of previous year total capitalization at 13% re-investment rate ($795MM investment/$103.4MM EBITDA) Expansions/acquisitions funded with 40% debt (@ 6.6% interest rate) and 60% equity (7% yield) Maintenance capital expenditures of 1.1% of previous year total capitalization Income taxes of 1.7% of Base EBITDA 37% tax rate Terminal value calculated as perpetuity assuming 3% growth in after-tax cash flows to the GP Management Assumptions$MM20062007200820092010 Total Distributable Cash Flows 1,279.5 1,500.9 2,001.0 2,299.6 2,535.7 GP Interest 535.5 635.7 855.2 1,000.8 1,103.1 Distributable Cash Flow to Common Units 744.0 865.2 1,145.8 1,298.8 1,432.6 Capitalization Net Debt (1) 6,193.8 7,772.9 8,497.1 9,390.7 9,000.3 Shareholders' Equity 3,832.7 4,676.2 5,960.6 6,290.5 6,904.2 Total Capitalization 10,026.5 12,449.1 14,457.8 15,681.2 15,904.5 Expansion Projects/Acquisitions 1,391.8 2,639.7 2,252.1 1,552.7 592.6 % of Previous Year Capitalization 15.8% 26.3% 18.1% 10.7% 3.8%

Valuation of NGPL NGPL Valuation Summary Project Franklin 66 Valuation Summary Aggregate Value ($Bn) Statistic($MM) Agg Value / EBITDA 2006 (8.5x–10.5x) Public Market Trading Comps Agg Value / EBITDA 2007 (8.0x–10.0x) Transaction Comps Agg Value / LTM EBITDA (7.5x-10.5x) Agg Value / FY1 EBITDA (8.0x-10.0x) Discounted Cash Flow $522 $571 $502 $547 (2) (1) Notes Average of 2005 and 2006 EBITDA as management LTM not available Average of 2006 and 2007 EBITDA as management 1 year forward not available 7-9% Discount Rate; 8.5-10.5x Terminal EBITDA Multiple Indicative Range (5.0-5.8)

Valuation of NGPL Pipeline Transaction Comps Project Franklin 68NGPLOfferTotalTotal Aggregate Value /forAggregateLTM1 Yr FwdDateEquityValueEBITDAEBITDAAcquiror / TargetAnnounced($mm)($mm)(x)(x)Asset Description Northern Border Pipeline Company / ONEOK Inc 2/15/2006 3,000 3,000 9.2 8.2 ONEOK's entire G&P, NGL and T&S segments Loews Holding Company / Gulf South Pipeline 11/22/2004 1,136 1,136 15.2 11.0 8,000mi interstate natural gas pipeline in southern United States from Entergy-Koch LP CCE Holdings LLC (Southern Union and GE) / CrossCountry Energy LLC 6/2/2004 1,989 2,450 8.9 8.0 Transwestern Pipeline Co., Citrus Corp (50% in Florida Gas Transmission), and Northern Plains Natural Gas, Co. TransCanada Corp. / Gas Transmission Northwest Corp. 2/24/2004 1,203 1,703 8.7 8.5 1,350mi Idaho/British Columbia border to Malin, OR natural gas pipeline from National Energy & Gas Transmission Loews Corp / Texas Gas Transmission 4/14/2003 795 1,045 7.5 na 5,800mi natural gas pipeline from E.TX and LA Gulf Coast to the south & midwest from The Williams Cos. Southern Union Co. / CMS Panhandle Companies 12/22/2002 624 1,790 6.7 na 10,900mi natural gas pipeline extending from the GoM to the Midwest and Canada and related storage MidAmerican Energy Co (Berkshire Hathaway Inc) / Northern Natural Gas Co. 7/29/2002 928 1,878 7.5 8.9 16,600mi natural gas pipeline extending from Permian Basin to Midwest from Dynegy Inc. Duke Energy Corporation / Westcoast Energy 9/20/2001 3,426 8,500 9.8 9.1 6,900mi natural gas pipelines, natural gas storage & processing and natural gas distribution utilities Mean9.29.0Median8.88.7High15.211.0Low6.78.0

Valuation of NGPL NGPL Discounted Cash Flow (1) Project Franklin 69Note Excludes allocation of corporate debt and corporate interest expense NGPL Discounted Cash FlowDiscount Rate7.0%8.0%9.0%FY 2010 EBITDA Multiple8.5x9.5x10.5x8.5x9.5x10.5x8.5x9.5x10.5x Year 4 EBITDA 628 628 628 628 628 628 628 628 628 Terminal Value 5,342 5,970 6,599 5,342 5,970 6,599 5,342 5,970 6,599 PV of Terminal Value @ 6/30/06 3,940 4,403 4,867 3,778 4,223 4,667 3,625 4,051 4,477 PV of Free Cash Flow @ 6/30/06 (1) 862 862 862 845 845 845 828 828 828 Estimated Aggregate Value 4,802 5,265 5,729 4,623 5,067 5,512 4,452 4,879 5,305 Implied Perpetuity Growth Rate 2.3% 2.8% 3.2% 3.3% 3.8% 4.1% 4.2% 4.7% 5.1%

Valuation of Terasen Gas

Terasen Gas Valuation Summary

Project Franklin

Valuation Summary

Aggregate Value ($Bn)

Statistic ($MM)

Agg Value / EBITDA 2006 (7.5x–9.5x)

Public Market Trading Comps

Agg Value / EBITDA 2007 (7.0x–9.0x)

Transaction Comps

Agg Value / EBITDA 2006 (9.0x-11.5x)

Agg Value / EBITDA 2007 (8.5x-10.5x)

Discounted Cash Flow

$326

$331

$326

$331

7-9% Discount Rate; 8.0-10.0x Terminal EBITDA Multiple

Indicative Range (2.3-3.0)

Valuation of Terasen Gas

LDC Public Market Comparables

As of August 22, 2006

Project Franklin

LDC Aggregate Value / EBITDA

Source FactSet and IBES estimates

2006 Mean: 8.4

2007 Mean: 7.9

Valuation of Terasen Gas LDC Transaction Comps Project Franklin 72EquityNet UtiltyLTMFY1LTM NetCFY NetDateValueTotal AggregatePlantEBITDAEBITDAIncomeIncomeBook ValueAcquiror / TargetAnnounced($MM)Value ($MM)(x)(x)(x)(x)(x)(x) GE Energy Financial Services / Kinder Morgan Retail Gas Operations 08/14/06 710 710 NA 10.5 9.0 14.7 12.2 1.3 WPS Resources / People's Energy Corp 07/10/06 1,592 2,675 1.3 9.1 8.3 18.3 17.4 1.9 Equitable Resources / Dominion Hope / Peoples 03/02/06 970 970 1.5 10.9 NA NA 17.3 2.4 National Grid / KeySpan 02/25/06 7,418 11,658 1.6 9.1 8.8 18.0 18.1 1.7 National Grid / Southern Union Rhode Island 02/16/06 498 577 NA 10.0 NA NA NA NA UGI / PG Energy Services 01/26/06 580 580 1.7 10.6 10.4 NA NA NA AGL Resources / NUI 07/15/04 219 682 1.1 12.1 8.5 NM 18.2 1.0 Atmos Energy / TXU Gas 06/17/04 963 1,925 1.8 10.4 8.8 17.5 16.0 2.1 AGL Resources / Virginia Natural Gas 05/08/00 200 500 NA NA NA 33.4 20.0 NA NiSource / Columbia Energy 02/28/00 6,569 8,855 2.0 10.1 8.7 18.5 17.1 1.0 KeySpan / Eastern Enterprises 11/04/99 1,764 2,329 1.8 13.6 11.8 37.9 22.6 3.2 DTE Energy / MCN Energy 10/05/99 2,114 3,844 1.8 9.8 11.0 25.7 17.7 2.4 Energy East / CTG Resources 06/29/99 356 544 1.6 8.7 8.6 23.4 20.6 2.6 Wisconsin Energy / WICOR 06/28/99 1,215 1,444 3.3 9.9 NA 25.5 18.0 2.9 Northeast Utilities / Yankee Energy 06/14/99 481 642 1.7 11.3 NA 34.2 24.2 2.7 Energy East / Connecticut Energy 04/23/99 436 586 2.1 10.1 NA 22.9 21.1 2.2 Dominion Resources / Consolidated Natural Gas 02/22/99 6,161 7,822 1.9 8.8 8.1 20.2 18.3 2.6 SCANA / Public Service of North Carolina 02/16/99 691 955 1.8 12.2 NA 35.6 20.6 3.1 NIPSCO Industries / Bay State Gas 12/18/97 550 838 1.6 10.3 NA 24.9 NA 2.3 Min1.18.78.114.716.01.0Mean1.810.49.324.719.12.2Median1.810.28.823.418.22.3Max3.313.611.837.924.23.2Total Aggregate Value /Equity Value /

Valuation of Terasen Gas Terasen Gas Discounted Cash Flow (1) Project Franklin 73Note Includes 50% of 2006E cash flow Terasen Gas Discounted Cash FlowDiscount Rate7.0%8.0%9.0%FY 2010 EBITDA Multiple8.0x9.0x10.0x8.0x9.0x10.0x8.0x9.0x10.0x Year 4 EBITDA 350 350 350 350 350 350 350 350 350 Terminal Value 2,800 3,150 3,500 2,800 3,150 3,500 2,800 3,150 3,500 PV of Terminal Value @ 6/30/06 2,065 2,323 2,581 1,980 2,228 2,475 1,900 2,137 2,375 PV of Free Cash Flow @ 6/30/06 (1) 461 461 461 452 452 452 443 443 443 Estimated Aggregate Value 2,526 2,784 3,042 2,432 2,680 2,927 2,343 2,580 2,818 Implied Perpetuity Growth Rate 2.4% 2.9% 3.3% 3.3% 3.8% 4.2% 4.3% 4.8% 5.2%

Valuation of Kite Canada

Kite Canada Public Market Comparables

As of August 22, 2006

Project Franklin

Source FactSet and IBES estimates

Price to Earnings

2006 Mean: 20.3

2007 Mean: 19.9

2006

2007

Selected Ranges

2006 P/E

18.5x - 22.5x

2007 P/E

17.0x - 20.5x

Valuation of Key

Key Valuation Summary

Project Franklin

Valuation Summary

Aggregate Value ($Bn)

Statistic ($MM)

Current Yield (6.0-7.0%)

Public Market Trading Comps

Transaction Comps

Discounted Cash Flow

Discounted Equity Value

$3.23

$1,819

52 Week High / Low

1.4Bn Market Value

Agg Value / FY1 EBITDA (8.5x-11.5x)

Indicative Range (1.3-1.7)

Valuation of Key MLP Transaction Comps Project Franklin 78Key UnitsOfferTotalTotal Enterprise Value /forAggregateLTM1 Yr FwdDateEquityValueEBITDAEBITDAAcquiror / TargetAnnounced($mm)($mm)(x)(x)Asset Description Kinder Morgan, Inc. / Terasen Inc. 8/1/2005 3,129.4 5,703.3 13.1 11.4 Gas LDC and pipelines business in Canada Valero LP / Kaneb Pipe Line Partners 11/1/2004 1,956.8 2,621.0 13.3 12.3 Merger of VLI and KPP to become largest terminal operator and 2nd largest petroleum liquids pipeline operator in US Enterprise Products Partners / GulfTerra Energy Partners 12/15/2003 3,772.3 4,733.3 10.9 9.7 Steps 1 and 2 of Enterprise/GulfTerra MLP merger MidAmerican Energy Co (Berkshire Hathaway Inc) / Northern Natural Gas Co. 7/29/2002 928.0 1,878.0 7.5 8.9 16,600mi natural gas pipeline extending from Permian Basin to Midwest from Dynegy Inc. Kinder Morgan Energy Partners, L.P. / Tejas Gas LLC 12/17/2001 750.0 750.0 na 7.9 3,400-mile natural gas intrastate pipeline system in TX and LA from InterGen, Inc. Duke Energy Corporation / Westcoast Energy 9/20/2001 3,425.9 8,500.0 9.8 9.1 6,900mi natural gas pipelines, natural gas storage & processing and natural gas distribution utilities Mean10.99.9Median10.99.4High13.312.3Low7.57.9