Fitch Affirms Northern Natural Gas Co.'s IDR at 'A'; Outlook Stable

CHICAGO--(Business Wire)--
Fitch Ratings has affirmed the 'A' Issuer Default Rating (IDR) and
'A' senior unsecured rating of Northern Natural Gas Co. (NNG). The
Rating Outlook is Stable. Approximately $952 million of debt is
affected.

The ratings reflect the strong standalone credit profile of NNG,
which benefits from solid credit protection measures, favorable
operating characteristics and low regulatory risk. NNG also has a
solid competitive position, with flexible access to five major supply
basins and a customer base that is primarily composed of local
distribution companies (LDCs). Favorably, approximately 90% of market
area capacity is contracted beyond 2009, 45% beyond 2015. Fitch notes
that NNG has been generally successful in renegotiating contracts with
its customers over the past several years, albeit with moderate rate
discounting.

NNG's credit metrics are consistent with the 'A' rating category.
Fitch forecasts the ratio of EBITDA-to-interest and the funds flow
coverage to be consistently above 6 times (x) over the next five
years. Additionally, leverage, as measured by the ratio of
debt-to-EBITDA, is projected to remain at or below 2.6x over the same
time period.

Rating concerns facing the company relate primarily to the
competitive conditions in the Midwest pipeline sector. However, Fitch
believes that NNG's market position is relatively secure, given its
customer base and geographical location. The Kinder Morgan-sponsored
Rockies Express Pipeline ((REX) IDR rated 'BBB', Stable Outlook by
Fitch) which transports natural gas from the Rocky Mountains to the
Eastern markets, began to intersect with NNG in early 2008. As a
result, there may be a modest drop off from NNG's field area services;
however, the company's more significant market area should be
minimally affected. NNG's capital expenditures has been at elevated
levels for the past few years, and will continue to remain lofty
through 2009 as NNG works on its Northern Lights expansion projects
and storage expansion. Capital spending is forecasted to decline
starting in 2010. Financing for capital projects is expected to be met
through a mix of internally generated cash flows and debt issuances.

The Stable Rating Outlook for the company reflects Fitch's
expectation that NNG will continue to post strong financial results,
maintain a moderate leverage position, and will not require a rate
case over the next several years. If the emergence of other pipelines
in the Midwest market results in a decline in NNG's competitive
position and a commensurate deterioration in credit fundamentals, the
ratings of the pipeline could be negatively affected.

NNG, a subsidiary of MidAmerican Energy Holdings Co., is an
interstate gas pipeline system that runs 15,900 miles and transports
natural gas from the Permian Basin in Texas to the upper Midwest.

Fitch's rating definitions and the terms of use of such ratings
are available on the agency's public site, www.fitchratings.com.
Published ratings, criteria and methodologies are available from this
site, at all times. Fitch's code of conduct, confidentiality,
conflicts of interest, affiliate firewall, compliance and other
relevant policies and procedures are also available from the 'Code of
Conduct' section of this site.

Fitch Ratings
Karen Anderson, 312-368-3165 (Chicago)
Philip Symth, CFA, 212-908-0531 (New York)
Media Relations:
Sandro Scenga, 212-908-0278 (New York)

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