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Leading analyst, two experts and and top management from seventeen sector firms examine the natural gas sector in this special 71-page Natural Gas issue from The Wall Street Transcript, available at (212/952-7433) or http://www.twst.com/info/info543.htm.

TWST: How about Kinder Morgan Inc. (NYSE:KMI)?

Mr. Barone: Rich Kinder, CEO of Kinder Morgan, is also an exceptionally well-respected, hands-on manager and a “rain-maker.” The company has minimal commodity exposure, and is asset-intensive. Kinder Morgan, Inc., owns a natural gas pipeline that serves the Midwestern markets and retail gas distribution assets in the Rockies. The company also operates power plants along its natural gas system. Of major importance, however, is the company’s general partner interest, as well as its ownership of limited partnership units in Kinder Morgan Energy Partners (NYSE:KMP). This master limited partnership has been extremely successful in making cash flow accretive acquisitions. Since master limited partnerships do not pay income taxes, MLPs have a financing advantage over traditional corporations in bidding for assets. As these acquisitions have been cash flow accretive, Kinder Morgan Energy Partners has been able to increase its cash distributions significantly. Over the time period from July 1999, to March 2002, investors earned a 62% compound annual rate of return in Kinder Morgan, Inc., and a 44% total compound annual rate of return in Kinder Morgan Energy Partners. It is reassuring to both analysts and investors that Rich Kinder holds a very large ownership position in Kinder Morgan, Inc.

TWST: What risks do investors need to keep in mind when they’re looking at these stocks?

Mr. Barone: Obviously, there is economic risk. If the US does not pull out of the sluggish economic environment, the demand for power and natural gas will remain depressed. In turn, that will affect wellhead prices, pipeline throughput, spark spreads and, ultimately, earnings. There is also the weather risk of cool summers and warm winters. There is also regulatory risk. In my opinion, however, the current Federal Energy Regulatory Commission is a constructive regulatory body. Other hazards include political risks (such as the California situation) and international risks, as several companies have diversified into the international arena.

TWST: What does the future of the natural gas industry look like?

Mr. Barone: I think the future looks very promising, considering the industry appears to be getting over a major hurdle (that hurdle was distress and investor doubt as a result of the events of 2001). The United States economy is short on energy, and it is particularly short on clean energy. Natural gas is clean energy, and around 99% of it is produced in North America, so it is also secure. Provided prices remain in a reasonable range, gas consumption could grow by 2.5%-3.0% per year. The economy and the market will not endure gas prices of $6, $7 or $8. That was evident in 2001. As long as gas prices are in a range that is attractive for producers to explore and drill for gas — by that I mean something in the $3 plus range — then there is a very attractive future for natural gas. In my opinion, no new nuclear power plants will be built in the US for at least the next 10 years. The US is importing around 60% of our oil needs. As is evident by recent events in the Middle East, and to a lesser extent, Venezuela, there is a large risk of being so dependent on foreign sources. The US has abundant supplies of coal, but coal power plants are more expensive to build than natural gas power plants, have a longer construction lead time and many more environmental ramifications. There are no more major hydro sites to be developed. Clearly, natural gas should play a major role in the US’s energy future.

This special issue includes:

1) Outlook for Natural Gas - In an in-depth (6,700 words) Expert Interview, David N. Fleischer, Managing Director with Goldman, Sachs & Company and Curt Launer, Managing Director in the Equity Research Department of Credit Suisse First Boston, both examine the outlook for the sector.

2) Outlook for Natural Gas - In an in-depth (2,700 words) Analyst Interview, Ronald J. Barone, Managing Director in the Energy Group of UBS Warburg Equity Research, examines the outlook for the sector and shares specific stock recommendations.

3) CEO interviews (average 2,500 words). Top management of seventeen sector firms examine the outlook for their firm and the sector.