Kayne Anderson Energy Development Company Announces Intention to Change Tax Status

HOUSTON, TX, Jan 22 (MARKET WIRE) --
(NYSE: KED) Kayne Anderson Energy Development Company (the "Company") today
announced that it no longer intends to be treated as a regulated investment
company ("RIC") under the U.S. Internal Revenue Code of 1986. As a result of
this
change, the Company will be taxed as a corporation for its fiscal year ended
November 30, 2008 and for future fiscal years, paying federal and applicable
state corporate taxes on its taxable income and capital gains. The Company
will continue to be regulated as a business development company ("BDC")
under the Investment Company Act of 1940. As described below, the Company
believes
that this election is in the best interest of its shareholders.

Presentation to Discuss Election

The Company will give a presentation discussing the election at its 2008
Analyst/Investor Meeting, which will begin at 12:00 p.m., Eastern time, on
Wednesday, January 23, 2008. This presentation will be available on the
Company's website, www.kaynefunds.com, immediately prior to the start of the
Analyst/Investor Meeting. You can access a live audio webcast of this meeting
through the Company's website or by dialing (888) 713-4216 and using the
passcode "31101458." For convenience, an archived replay of the meeting will
also be available on the Company's website.

Prior Constraints on the Company's Investment Activity

The Company continues to see many attractive investment opportunities,
especially in the
form of private MLPs. The opportunities to invest in private MLPs are much
more abundant than had been anticipated at the Company's IPO, with nine
private MLPs raising approximately $500 million of capital in the last
twelve months. The Company believes private MLPs present the most attractive
investment opportunity for the Company and offer attractive risk-adjusted
total returns for the Company and its shareholders. Prior to this election,
however, compliance with certain requirements necessary to qualify as a RIC
("RIC
Tests") previously limited the Company's ability to invest in additional private
MLPs.

For example, RIC Tests required that 90% of the Company's gross income
mustcome from qualified sources. Equity securities of private partnerships,
however, do
not generate qualified income for the Company, thus forcing the creation of
taxable subsidiaries for these investments. Because such taxable subsidiaries
were owned 100% by the Company, these investments were not considered
diversified investments for purposes of the "RIC Diversification Test," which
requires at least 50% of total assets to consist of (a) investments that
each constitute less than 5% of total assets and (b) investments for which the
Company has less than 10% of voting rights in such investment.

Additionally, compliance with RIC Tests would have become increasingly
difficult as
private MLPs in the Company's portfolio are successful and go public, as RIC
Tests limit investments in public MLPs to 25% of total assets ("25% MLP Test").

After giving effect to the Company's election, the Company's resulting
structure is
similar to that of Kayne Anderson MLP Investment Company and other MLP
focused closed-end funds as well as the only other BDC focused on private
MLPs.

Impact of the Election on the Company's Portfolio Composition

Based on the pro forma portfolio after giving effect to the election, the
Company expects to increase the number of investments in private MLPs and
decrease its holdings in 2nd lien debt investments. While the Company
willno longer be constrained by the 25% MLP Test -- it continues to expect
thisallocation will decline over time as the Company has more flexibility
underthe RIC Diversification Test.

The Company will no longer be subject to the RIC Diversification Test and,
as
such, it is possible that the Company's portfolio will become more
concentrated. The following chart summarizes hypothetical changes to the
Company's portfolio over the next several quarters. Actual portfolio
composition
will be dependent on the investment opportunities that become
available.

($ in millions)

Actual Pro Forma Change
----------- ----------- ----------
Portfolio Composition:
Public MLPs and i-shares $ 93 $55 - $80 $(13)-$(38)
Private MLP Equity 138 145 7
Other Private Equity 0 60 - 85 60 - 85
Fixed Income 96 42 (54)
----------- ----------- ----------
Total Portfolio $327 $327 $0
=========== =========== ==========
Note: Based on portfolio holdings as of November 30, 2007

Impact of the Election on the Company's Net Asset Value and
DistributableCash Flow

The decision to no longer be treated as a RIC is retroactive to the
beginning
of the Company's fiscal tax year, which began on December 1, 2007. For the
quarter ended February 28, 2008, the Company will record a deferred tax
liability for its unrealized gains, which currently total approximately $11.3
million, and the Company's net asset value will be reduced by the deferred
tax liability. At a 37% tax rate, the Company estimates that the current impact
to net asset value of its election is approximately $0.42 per share, or
1.7%, as of January 10, 2008.

The Company does not anticipate that the election will have any immediate
impact on
distributable cash flow or on dividends to shareholders. The Company expects
that distributable cash flow will increase and will grow at a faster rate as
the Company's portfolio gains additional exposure to the higher potential
total returns of private MLPs compared to its existing 2nd lien debt
investments.

The Company does not anticipate paying cash taxes on its investment income
for
the foreseeable future (next five years) because (a) most distributions received
from
private MLPs are treated as a return of capital, which is not subject to
taxation in the year received but instead is treated as a decrease in the
cost basis of the investment and (b) interest expense paid by the company on
its debt and other expenses will further reduce taxable investment income.

Status as a Business Development Company

While the Company no longer intends to be treated as a RIC under the U.S.
Internal Revenue Code of 1986, it intends to maintain its status as a BDC. By
electing to be treated as a BDC, the Company is subject to provisions of the
1940 Act, including the requirement that it must have at least 70% of
assets in "eligible portfolio companies," generally defined as private companies
with a principal place of business in the United States.

Certain Tax Information

Previously, dividends by the Company were generally taxable to
stockholdersas capital gains, ordinary income or return of capital. After
giving effect to
the election, stockholders of the Company will no longer recognize an allocable
share of the Company's capital gains or ordinary income. Instead, the component
of the Company's dividend that comes from the Company's current or accumulated
earnings and profits will be taxable to a stockholder as corporate dividend
income. This income will be treated as qualified dividends for federal income
tax purposes, subject to favorable 15% maximum tax rates. The special tax
treatment for qualified dividends is scheduled to expire on December 31, 2010.
Distributions that exceed the Company's current or accumulated earnings and
profits will continue to be treated as a tax-deferred return of capital to the
extent of a stockholder's basis. The Company expects that a significant
portion of future dividends to shareholders will constitute a tax-deferred
return of capital.

About the Company

The Company is a non-diversified, closed-end investment company that elected
to be treated as a business development company under the Investment Company
Act of 1940. The Company's investment objective is to generate both current
income and capital appreciation primarily through equity and debt investments.
The Company will seek to achieve this objective by investing at least 80% of
its net assets together with the proceeds of any borrowings (its "total
assets") in securities of companies that derive the majority of their revenue
from
activities in the energy industry, including: (a) Midstream Energy Companies,
which are businesses that operate assets used to gather, transport, process,
treat,
terminal and store natural gas, natural gas liquids, propane, crude oil or
refinedpetroleum products; (b) Upstream Energy Companies, which are businesses
engaged in
the exploration, extraction and production of natural resources, including
natural
gas, natural gas liquids and crude oil, from onshore and offshore geological
reservoirs; and (c) Other Energy Companies, which are businesses engaged in
owning, leasing, managing, producing, processing and sale of coal and coal
reserves; the marine transportation of crude oil, refined petroleum products,
liquefied natural gas, as well as other energy-related natural resources using
tank vessels and bulk carriers; and refining, marketing and distributing
refined energy products, such as motor gasoline and propane to retail customers
and industrial end-users.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS: This press release
contains
"forward-looking statements" as defined under the U.S. federal securities laws.
Generally, the words "believe," "expect," "intend," "estimate," "anticipate,"
"project," "will" and similar expressions identify forward-looking statements,
which
generally are not historical in nature. Forward-looking statements are
subject to certain risks and

uncertainties that could cause actual results to materially differ from
theCompany's historical experience and its present expectations or
projectionsindicated in any forward-looking statement. These risks include, but
are not
limited to, changes in economic and political conditions; regulatory and legal
changes; energy industry risk; commodity pricing risk; leverage risk; valuation
risk; non-diversification risk; interest rate risk; tax risk; and other risks
discussed in the Company's filings with the SEC. You should not place undue
reliance on forward-looking statements, which speak only as of the date they
are made. The Company undertakes no obligation to publicly update or revise
any forward-looking statements made herein. There is no assurance that the
Company's investment objectives will be attained.

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