Fitch Affs CMS Panhandle Eastern Pipe Line Company at `BBB'

    NEW YORK--Oct. 19, 2001--Fitch has affirmed the senior unsecured debt rating of CMS Panhandle Eastern Pipe Line Company (PEPL) at `BBB'. The Rating Outlook for the company is Stable.
    PEPL's business and financial-risk profile and asset quality support a stable `BBB' credit profile. The company benefits from adequate credit protection measures, stable cash flow from its pipeline delivery operations, long-term service agreements with local distribution companies and a favorable tariff structure. Utilization capacity at Panhandle Eastern and Trunkline pipelines averages approximately 86%, and the remaining capacity is used for short-term and seasonal services. Diverse supply behind the pipelines, flexible pipeline operations, and storage capabilities enhance the value of PEPL's transportation services and keep utilization high. PEPL's Trunkline LNG facility continues to perform well with year over year increases in margins and throughput. In 1999, the complex handled 27 shipments, 55 in 2000. By Sept. 30, 2001, the facility received a total of 57 shipments, with an expected total of 60 by year-end. Future cash flow from this LNG terminal is now assured by long-term contracts, as discussed below.
    PEPL's credit protection measures are consistent with the rating category, with EBIT/interest and EBITDA/interest of 2.3 times (x) and 3.1x respectively as of twelve months ended June 30, 2001. Leverage is 50% of total capitalization and it is anticipated to remain near the 50% level going forward. Although a dividend restriction covenant insulates PEPL's credit somewhat from that of its parent CMS Energy (senior unsecured `BB+', Rating Outlook Negative), PEPL is not independent of its parent. CMS has high leverage and low liquidity and exercises a high degree of control over its subsidiary. PEPL's current rating would be sensitive in the event of any future downgrade of parent CMS.
    Earlier this year, the Trunkline LNG facility entered into a 22-year contract, beginning in January 2002, with BG Group of the UK for all the current uncommitted capacity at the LNG facility (approximately 5.1 bcf). The contract capacity increases to 6.3 billion cubic feet after an existing contract expires August 2005. With this transaction and other contractual commitments in place, management estimates it has firmed up present value revenues totaling approximately $450 million from the facility. PEPL and Sempra Energy recently announced a joint effort to develop a new LNG receiving terminal to bring in supplies from northwestern Mexico and southern California. The plant will have a send-out capacity of approximately 1 billion cubic feet per day of natural gas, with commercial operation scheduled to begin in late 2005.
    PEPL, a wholly owned subsidiary of CMS Gas Transmission, is primarily engaged in the interstate transportation and storage of natural gas. Its principle subsidiaries are comprised of CMS Trunkline, CMS Trunkline LNG and Sea Robin pipelines. The Panhandle companies operate almost 11,000 miles of pipeline extending from the Gulf of Mexico to the Midwest and Canada. The Panhandle companies can deliver 3.2 Bcf/d of natural gas throughput, have access to 88 bcf of underground storage facilities and 6.3 bcf of above ground storage facilities.