Table of Contents

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**FORM 10-Q**
SECURITIES AND EXCHANGE COMMISSIONWashington, DC 20549
[X]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE    SECURITIES    EXCHANGE ACT OF 1934
    For the quarterly period ended  **September 30, 2002
or
[   ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE    SECURITIES    EXCHANGE ACT OF 1934
For the transition period from ______to______Commission File Number 1-6446KINDER MORGAN, INC.(Exact name of registrant as specified in its charter)  

Kansas
48-0290000
(State or other jurisdiction    of incorporation or organization)
(I.R.S. Employer    Identification No.)  
500 Dallas Street, Suite 1000, Houston, Texas 77002
(Address of principal    executive offices, including zip code)  
(713)    369-9000
Registrant's telephone number, including area code  
   
(Former name, former address and former    fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reportsrequired to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 duringthe preceding 12 months (or for such shorter period that the registrant was required tofile such reports), and (2) has been subject to such filing requirements for the past 90days.

Yes X    No___

The number of shares outstanding of the registrant's common stock, $5par value, as of October 31, 2002 was: 121,714,412 shares.

KINDER MORGAN, INC. AND SUBSIDIARIESFORM 10-QQUARTER ENDED SEPTEMBER 30, 2002Contents
PART I.FINANCIAL    INFORMATION  PageItem 1.Financial    Statements (Unaudited)
Number     Consolidated    Balance Sheets
3-4   Consolidated Statements of Income
5   Consolidated Statements of Cash Flows
6   Notes to Consolidated Financial    Statements
7-21  Item 2.Management's Discussion    and Analysis of Financial   Condition and Results of    Operations
22-35  Item    3.Quantitative    and Qualitative Disclosures About Market Risk
35-36  Item    4.Controls    and Procedures
36  PART II.OTHER INFORMATION  Item 1.Legal    Proceedings
36  Item 2.Changes in    Securities and Use of Proceeds
36  Item 3.Defaults Upon Senior    Securities
36  Item 4.Submission    of Matters to a Vote of Security Holders
36  Item 5.Other    Information
36-37  Item 6.Exhibits and Reports on Form    8-K
37-39  SIGNATURE
40  OFFICER CERTIFICATIONS
41-42
2
**PART I. - FINANCIAL INFORMATION*Item 1.  FinancialStatements.*CONSOLIDATED BALANCE SHEETS (Unaudited)Kinder Morgan, Inc. and Subsidiaries ******September 30,**December 31,**2002**2001
(In    thousands)**ASSETS:****Current Assets:**Cash and Cash Equivalents
$   103,623
$   16,134 Restricted Deposits
     19,875
    15,010 Notes Receivable:   Related Party
          -
    22,576    Other
          -
    18,890 Accounts Receivable, Net:   Trade
     53,931
   161,926    Related Parties
      1,821
    29,502 Inventories
     71,282
    61,959 Gas Imbalances
     36,466
    33,452 Other
     41,786
    45,299 
    328,784
   404,748    **Investments:**Kinder Morgan Energy Partners
  2,982,689
 2,828,617 Other
    633,403
   449,056 
  3,616,092
 3,277,673    **Property, Plant and Equipment**
  6,196,239
 6,078,834 **Less Accumulated Depreciation and    Amortization**
    440,455
   374,882 
  5,755,784
 5,703,952    **Deferred Charges and Other Assets**
    348,375
   173,927   **Total Assets**
$10,049,035
$9,560,300 
===========
===========   
The accompanying notes are an integral part of these statements.

3
**CONSOLIDATED BALANCE SHEETS (Unaudited)Kinder Morgan, Inc. and Subsidiaries
**September 30,**December 31,**2002**2001
(In thousands)**LIABILITIES AND STOCKHOLDERS' EQUITY:****Current Liabilities:**Current Maturities of Long-term Debt
$   708,017 
$   206,267 Notes Payable
          - 
    423,785 Accounts Payable:   Trade
     82,446 
    160,309    Related Parties
     16,530 
     70,606 Accrued Interest
     41,883 
     76,606 Accrued Taxes
     62,270 
     16,348 Gas Imbalances:   Third Parties
     50,468 
     40,943    Related Parties
      7,298 
      7,690 Other
     78,261 
    107,701 
  1,047,173 
  1,110,255 **  ****Other Liabilities and Deferred Credits:**Deferred Income Taxes
  2,473,145 
  2,432,088 Other
    207,879 
    243,008 
  2,681,024 
  2,675,096   **Long-term Debt:**Outstanding
  2,631,334 
  2,409,798 Market Value of Interest Rate Swaps
    125,720 
     (4,831)
  2,757,054 
  2,404,967   **Kinder Morgan-Obligated Mandatorily    Redeemable Preferred****  Capital Trust Securities of    Subsidiary Trusts Holding****  Solely Debentures of Kinder    Morgan**
    275,000 
    275,000   **Minority Interests in Equity of    Subsidiaries**
    955,311 
    827,487   **Stockholders' Equity:**Common Stock-  Authorized - 150,000,000 Shares,    Par Value $5 Per Share  Outstanding - 129,783,963 and    129,092,689 Shares, Respectively,    Before Deducting    8,064,884 and 5,165,911 Shares Held in Treasury
    648,920 
    645,463 Additional Paid-in Capital
  1,679,327 
  1,652,846 Retained Earnings
    436,750 
    219,995 Treasury Stock
   (404,590)
   (263,967)Other
    (26,934)
     13,158 Total Stockholders' Equity
  2,333,473 
  2,267,495   **Total Liabilities and Stockholders' Equity**
$10,049,035 
$ 9,560,300 
=========== 
=========== **  **
The accompanying notes are an integral part of these statements.

4
**CONSOLIDATED STATEMENTS OF INCOME(Unaudited)Kinder Morgan, Inc. and Subsidiaries
**Three Months Ended    September 30,**Nine Months Ended    September 30,**2002**2001**2002**2001
(In thousands    except per share amounts)**Operating Revenues:**Natural Gas Transportation and Storage
$155,191 
$161,197 
$452,007 
$478,439 Natural Gas Sales
  51,118 
  36,037 
 226,185 
 205,854 Other
  18,802 
  29,791 
  52,054 
  86,798     Total Operating    Revenues
 225,111 
 227,025 
 730,246 
 771,091   **Operating Costs and Expenses:**Gas Purchases and Other Costs of Sales
  57,291 
  53,484 
 211,848 
 246,078 Operations and Maintenance
  32,704 
  32,965 
  95,009 
  93,009 General and Administrative
  16,693 
  16,618 
  53,351 
  49,098 Depreciation and Amortization
  26,398 
  26,049 
  78,396 
  78,869 Taxes, Other Than Income Taxes
   7,359 
   6,513 
  21,750 
  19,394     Total Operating    Costs and Expenses
 140,445 
 135,629 
 460,354 
 486,448   **Operating Income**
  84,666 
  91,396 
 269,892 
 284,643   **Other Income and (Expenses):**Investment in Kinder Morgan Energy    Partners:    Equity in Earnings
 101,542 
  76,249 
 285,027 
 198,344     Amortization of    Equity-method Goodwill
       - 
  (5,907)
       - 
 (19,449)Equity in Earnings (Losses) of Other Equity    Investments
   6,623 
   2,091 
  13,051 
  (3,512)Interest Expense, Net
 (40,925)
 (53,175)
(120,283)
(167,700)Minority Interests 
 (13,948)
 (10,865)
 (39,549)
 (25,038)Other, Net
   1,035 
   3,325 
   6,085 
  15,580     Total Other Income    and (Expenses)
  54,327 
  11,718 
 144,331 
  (1,775)  **Income Before Income Taxes and    Extraordinary Item**
 138,993 
 103,114 
 414,223 
 282,868 Income Taxes
  58,170 
  43,443 
 172,560 
 116,495 **Income Before Extraordinary Item**
  80,823 
  59,671 
 241,663 
 166,373   Extraordinary Item - Loss on Early    Extinguishment of Debt,    Net of Income Tax    Benefits of $275, $964, $275 and $9,044
    (420)
  (1,446)
    (420)
 (13,565)  **Net Income**
$ 80,403 
$ 58,225 
$241,243 
$152,808 
======== 
======== 
======== 
========   **Basic Earnings (Loss) Per Common Share:**Income Before Extraordinary Item
$   0.66 
$   0.52 
$   1.97 
$   1.45 Extraordinary Item - Loss on Early    Extinguishment of Debt
       - 
   (0.01)
       - 
   (0.12)Total Basic Earnings Per Common Share
$   0.66 
$   0.51 
$   1.97 
$   1.33 
======== 
======== 
======== 
========   Number of Shares Used in Computing Basic    Earnings Per Common    Share (Thousands)
 121,736 
 114,980 
 122,352 
 115,027 
======== 
======== 
======== 
========   **Diluted Earnings (Loss) Per Common    Share:**Income Before Extraordinary Item
$   0.66 
$   0.49 
$   1.95 
$   1.37 Extraordinary Item - Loss on Early    Extinguishment of Debt
       - 
   (0.01)
       - 
   (0.11)Total Diluted Earnings Per Common Share
$   0.66 
$   0.48 
$   1.95 
$   1.26 
======== 
======== 
======== 
========   Number of Shares Used in Computing Diluted    Earnings Per Common    Share (Thousands)
 122,743 
 121,446 
 123,615 
 121,717 
======== 
======== 
======== 
========   **Dividends Per Common Share**
$   0.10 
$   0.05 
$   0.20 
$   0.15 
======== 
======== 
======== 
========   
The accompanying notes are an integral part of these statements.

5
**CONSOLIDATED STATEMENTS OF CASH FLOWS(Unaudited)Kinder Morgan, Inc. and SubsidiariesIncrease (Decrease) in Cash and Cash Equivalents
**Nine Months Ended September 30,**2002**2001
(In    thousands)**Cash Flows From Operating Activities:**Net Income
$   241,243 
$   152,808 Adjustments to Reconcile Net Income to Net    Cash Flows from Operating Activities:    Extraordinary Loss    on Early Extinguishment of Debt
        695 
     22,609     Depreciation and    Amortization
     78,396 
     78,869     Deferred Income    Taxes
     51,921 
     91,908     Equity in Earnings    of Kinder Morgan Energy Partners
   (285,027)
   (178,895)    Distributions from    Kinder Morgan Energy Partners
    226,703 
    168,379     Equity in    (Earnings) Losses of Other Investments
    (13,051)
      3,512     Minority Interests    in Income of Consolidated Subsidiaries
     23,115 
      8,604     Deferred Purchased    Gas Costs
     (9,441)
     20,939     Net Gains on Sales    of Facilities
     (2,567)
     (6,183)    Litigation    Settlement and Escrow Deposit
    (22,050)
          -     Pension    Contribution in Excess of Expense
    (18,735)
          -     Changes in Gas in    Underground Storage
     (6,595)
    (75,074)    Changes in Other    Working Capital Items
     11,099 
     (2,516)    Changes in Deferred    Revenues
    (13,894)
     (3,282)    Other, Net
     (6,721)
     (2,433)  Net Cash Flows Provided by    Continuing Operations
    255,091 
    279,245   Net Cash Flows Used in    Discontinued Operations
     (5,326)
     (5,577)**Net Cash Flows Provided by Operating    Activities**
    249,765 
    273,668   **Cash Flows From Investing Activities:**Capital Expenditures
   (128,882)
    (64,154)Acquisitions
       (826)
    (15,000)Investment in Kinder Morgan Energy Partners
   (331,912)
  (1,003,585)Exchange of Kinder Morgan Management Shares
        (69)
           - Other Investments
   (172,775)
    (210,537)Proceeds from Sales of Assets
      4,007 
      5,074 Net Cash Flows Used in Continuing Investing    Activities
   (630,457)
 (1,288,202)Net Cash Flows Provided by Discontinued    Investing Activities
          - 
     25,742 **Net Cash Flows Used in Investing    Activities**
   (630,457)
 (1,262,460)  **Cash Flows From Financing Activities:**Short-term Debt, Net
   (423,785)
    603,220 Long-term Debt Issued
    750,000 
          - Long-term Debt Retired
    (24,975)
   (466,848)Premiums Paid on Early Extinguishment of    Debt
          - 
    (30,694)Issuance of Shares by Kinder Morgan    Management
    343,170 
    942,614 Common Stock Issued
     14,250 
     26,085 Other Financing, Net
      1,381 
          - Treasury Stock Issued
          - 
      2,464 Treasury Stock Acquired
   (145,453)
   (133,916)Cash Dividends, Common Stock
    (24,496)
    (17,269)Minority Interests, Net
       (295)
       (199)Premium Equity Participating Securities    Contract Fee
          - 
     (5,449)Debt Issuance Costs
     (7,005)
          - Securities Issuance Costs
    (14,611)
    (54,480)**Net Cash Flows Provided by Financing    Activities**
    468,181 
    865,528   Net Increase (Decrease) in Cash and Cash    Equivalents
     87,489 
   (123,264)Cash and Cash Equivalents at Beginning of    Period
     16,134 
    141,923 Cash and Cash Equivalents at End of Period
$   103,623 
$    18,659 
=========== 
=========== 
For supplemental cash flow information, see Note 5.The accompanying notes are an integral part of these statements.

6
**NOTES TO CONSOLIDATED FINANCIALSTATEMENTS (Unaudited)**
1.     General
We are a provider of energy and related services and have operations inthe Rocky Mountain and mid-continent regions of the United States, with principaloperations in Arkansas, Colorado, Illinois, Iowa, Kansas, Nebraska, Oklahoma, Texas andWyoming. Services we offer include: (i) storing, transporting and selling natural gas,(ii) providing retail natural gas distribution services and (iii) designing, developing,constructing and operating electric generation facilities. We have both regulated andnonregulated operations. Our common stock is traded on the New York Stock Exchange underthe symbol "KMI." As a result of our October 1999 acquisition of Kinder Morgan(Delaware), Inc., we own the general partner interest, as well as significant limitedpartner interests, in Kinder Morgan Energy Partners, L.P., a publicly traded pipelinemaster limited partnership, referred to in these Notes as "Kinder Morgan EnergyPartners," and receive a substantial portion of our earnings from returns on theseinvestments.

We have prepared the accompanying unaudited interim consolidatedfinancial statements under the rules and regulations of the Securities and ExchangeCommission. Under such rules and regulations, we have condensed or omitted certaininformation and notes normally included in financial statements prepared in conformitywith accounting principles generally accepted in the United States of America. We believe,however, that our disclosures are adequate to make the information presented notmisleading. The consolidated financial statements reflect all adjustments that are, in theopinion of management, necessary for a fair presentation of our financial results for theinterim periods presented. You should read these interim consolidated financial statementsin conjunction with our consolidated financial statements and related notes included inour 2001 Form 10-K. Certain prior period amounts have been reclassified to conform to thecurrent presentation. Unless the context requires otherwise, references to "we,""us," "our," or the "Company" are intended to mean KinderMorgan, Inc. and its consolidated subsidiaries.

2.     Kinder Morgan Management, LLC
In conjunction with its initial public offering in May 2001, KinderMorgan Management, one of our subsidiaries, became a partner in Kinder Morgan EnergyPartners and was delegated by Kinder Morgan Energy Partners' general partner theresponsibility to manage and control the business and affairs of Kinder Morgan EnergyPartners, subject to the general partner's right to approve specified actions. By approvalof Kinder Morgan Management shareholders other than us, effective at the close of businesson July 23, 2002, we no longer have an obligation to, upon presentation by the holderthereof, exchange publicly held Kinder Morgan Management shares for either Kinder MorganEnergy Partners' common units that we own or, at our election, cash. Prior to theelimination of the exchange feature, approximately 5.9 million and 6.8 million KinderMorgan Management shares were exchanged in the three months and nine months endedSeptember 30, 2002, respectively. A total of approximately 9.7 million Kinder MorganManagement shares had been exchanged for Kinder Morgan Energy Partners' common units orcash as of July 23, 2002.

On August 6, 2002, Kinder Morgan Management closed the issuance andsale of 12,478,900 limited liability shares in an underwritten public offering. The netproceeds of approximately $328.6 million from the offering were used by Kinder MorganManagement to buy i-units from Kinder Morgan Energy Partners. We did not purchase any ofthe offered shares. At September 30, 2002, we owned approximately 13.2 million (29.6%) ofKinder Morgan Management's outstanding shares, including the only two voting shares. Theissuance of i-units by Kinder Morgan Energy Partners decreased our percentage ownership ofKinder Morgan Energy Partners from approximately 20.4 percent to approximately 19.1percent. As discussed in our 2001 Form 10-K, we have elected to treat transactions such asthis as "capital" transactions and, accordingly, no gain or loss was recorded.Instead, the impact of the difference between sales proceeds and our underlying book basishad the effect of 

7

increasing our investment in the net assets of Kinder Morgan EnergyPartners by $17.5 million and decreasing (i) our equity-method goodwill in Kinder MorganEnergy Partners by $64.9 million, (ii) associated deferred income taxes by $19.0 millionand (iii) paid-in capital by $28.4 million.

On August 14, 2002, Kinder Morgan Management paid a share distributionof 619,585 of its shares to shareholders of record as of July 31, 2002, based on the $0.61per common unit distribution declared by Kinder Morgan Energy Partners. On November 14,2002, Kinder Morgan Management will make a distribution totaling 937,658 of its shares toshareholders of record as of October 31, 2002, based on the $0.61 per common unitdistribution declared by Kinder Morgan Energy Partners. These distributions are paid inthe form of additional shares or fractions thereof based on the average market price of ashare determined for a ten-trading day period ending on the trading day immediately priorto the ex-dividend date for the shares. Kinder Morgan Management has paid sharedistributions totaling 1,601,127 shares in the nine months ended September 30, 2002.

On July 18, 2001, Kinder Morgan Energy Partners announced a two-for-onesplit of its common units. The common unit split, in the form of a one-common-unitdistribution for each common unit outstanding, occurred on August 31, 2001. This splitresulted in Kinder Morgan, Inc. receiving one additional common unit for each common unitit owned and Kinder Morgan Management receiving one additional i-unit for each i-unit itowned. Also on July 18, 2001, Kinder Morgan Management announced a two-for-one split ofits shares. This share split, in the form of a one-share distribution for each shareoutstanding, occurred on August 31, 2001. All references to amounts of these securities inthese Notes reflect the impact of these splits.

3.     Investments and Sales
Effective July 1, 2002, construction and testing of the Jackson,Michigan 550-megawatt power generation facility were completed and commercial operationscommenced. Concurrently with commencement of commercial operations, (i) Kinder MorganPower Company, our wholly owned subsidiary, made a preferred investment in Triton PowerCompany LLC valued at $119.0 million; (ii) Triton Power Company LLC, through its whollyowned affiliate, Triton Power Michigan LLC, entered into a 40-year lease of the Jacksonpower facility from the plant owner, AlphaGen Power, LLC, and (iii) we received fullpayment of our $104.4 million construction note receivable. Our preferred equity interesthas no management or voting rights, but does retain certain protective rights, and isentitled to a cumulative return, compounded monthly, of 9.0 percent per annum. We accountfor this investment under the cost method.

Also effective July 1, 2002, construction and testing of the550-megawatt Wrightsville, Arkansas power generation facility were completed andcommercial operations commenced. Mirant Corporation operates and maintains theWrightsville power facility and manages the natural gas supply and electricity sales forthe project company that owns the power plant. Kinder Morgan Power Company will have apreferred investment of approximately $74.8 million in the project company, whichrepresents approximately 21 percent of the total estimated facility capitalization of $350million. In addition, Kinder Morgan Power Company expects to advance approximately $16.7million to the electricity transmission carrier and the project company, which will berepaid with interest over the next several years. Our preferred equity interest has nomanagement or voting rights, but does retain certain protective rights, and is entitled toa cumulative preferred dividend return that escalates over time from 6.3 percent to 8.8percent. We account for this investment under the cost method.

4.     Earnings Per Share
Basic earnings per common share is computed based on theweighted-average number of common shares outstanding during each period. In recentperiods, we have repurchased a significant number of our outstanding shares, see Note 8.Diluted earnings per common share is computed based on the weighted-average number of 

8

common shares outstanding during each period, increased by the assumedexercise or conversion of securities (stock options and, prior to their November 2001maturity, Premium Equity Participating Security Units) convertible into common stock, forwhich the effect of conversion or exercise using the treasury stock method would bedilutive.
**Three Months Ended    September 30,**Nine Months Ended    September 30,**2002**2001**2002**2001
(In    thousands)Weighted-average Common Shares Outstanding
 121,736
 114,980
 122,352
 115,027Dilutive Common Stock Options
   1,007
   1,722
   1,263
   1,824Dilutive Premium Equity Participating    Security Units
       -
   4,744
       -
   4,866Shares Used to Compute Diluted Earnings Per    Common Share
 122,743
 121,446
 123,615
 121,717
========
========
========
========  
There were approximately 2,542,000 and 2,535,000 weighted-average stockoptions outstanding during the three months and nine months ended September 30, 2002,respectively, that were excluded from the diluted earnings per share calculations becausethe effect of including them would have been antidilutive. There were approximately 11,000weighted-average stock options outstanding during the three months ended September 30,2001 that were excluded from the diluted earnings per share calculations because theeffect of including them would have been antidilutive. All stock options outstandingduring the nine months ended September 30, 2001 were dilutive.

5.     Supplemental Cash Flow Information
We consider all highly liquid investments purchased with an originalmaturity of three months or less to be cash equivalents.
**Changes in Other Working    Capital Items,      Net of Effects of Acquisitions and Sales    Increase (Decrease) in Cash and Cash Equivalents**
**Nine Months Ended    September 30,**
**2002**
**2001**
(In    thousands) Accounts Receivable
$  72,922 
  
$  40,083 Materials and Supplies Inventory
    5,402 
   (1,497)Other Current Assets
   (3,946)
   (1,022)Accounts Payable
  (65,544)
  (37,888)Other Current Liabilities
    2,265 
   (2,192)
$  11,099 
$  (2,516)
========= 
=========   **Supplemental Disclosures of Cash Flow    Information:****  ****Cash Paid During the Period for:**Interest, Net of Amount Capitalized
$ 140,905 
$ 193,226 
========= 
========= Distribution on Preferred Capital Trust    Securities
$  10,956 
$  10,956 
========= 
========= Income Taxes Paid
$  76,333 
$  23,878 
========= 
=========   
As discussed in Note 2, Kinder Morgan, Inc. exchanged approximately 6.8million common units of Kinder Morgan Energy Partners for Kinder Morgan Management sharesduring the first nine months of 2002 in non-cash transactions. Distributions received byour Kinder Morgan Management subsidiary from its investment in i-units of Kinder MorganEnergy Partners are in the form of additional i-units, while distributions made by KinderMorgan Management to its shareholders are in the form of additional shares, see Note 2.

9

6.     Business Segments
In accordance with the manner in which we currently manage ourbusinesses, including the allocation of capital and evaluation of business unitperformance, our principal business segments are: (1) Natural Gas Pipeline Company ofAmerica (NGPL) and affiliated companies, a major interstate natural gas pipeline andstorage system, (2) Kinder Morgan Retail, the regulated seller of natural gas toresidential, commercial and industrial customers and non-utility seller of natural gas tocertain utility customers under the Choice Gas Program, a program that allows utilitycustomers to choose their natural gas provider and (3) Power and Other, the constructionand operation of natural gas-fired electric generation facilities. Prior to 2002, Powerand Other also included various other activities not constituting separately managed orreportable business segments.

The accounting policies we apply in the generation of business segmentinformation are generally the same as those described in Note 1 of Notes to ConsolidatedFinancial Statements included in our 2001 Form 10-K, except that certain items below the"Operating Income" line are either not allocated to business segments or are notconsidered by management in its evaluation of business unit performance. Exceptions tothis are that (i) Kinder Morgan Power, which routinely conducts its business activities inthe form of joint operations with other parties that are accounted for under the equitymethod of accounting, includes its equity in earnings of these investees in its operatingresults and (ii) Natural Gas Pipeline Company of America's results include equity earningsattributable to its investment in Horizon Pipeline Company, L.L.C. These equity methodearnings are included in "Other Income and (Expenses)" in the accompanyinginterim Consolidated Statements of Income. In addition, (i) certain items included inoperating income (such as general and administrative expenses) are not allocated toindividual business segments and (ii) gains and losses from incidental sales of assets areincluded in segment earnings. With adjustment for these items, we currently evaluatebusiness segment performance primarily based on operating income in relation to the amountof capital employed. We account for intersegment sales at market prices, while we accountfor asset transfers at either market value or, in some instances, book value. As necessaryfor comparative purposes, we have reclassified prior period results and balances toconform to the current presentation.

10

BUSINESS SEGMENT INFORMATION

**Three Months Ended September 30, 2002****Income****Revenues From    External    Customers****Intersegment    Revenues****Depreciation    And    Amortization****Capital    Expenditures****Segment    Assets    at 9/30/02**(In thousands)Natural Gas Pipeline    Company of America
$   88,697 
$  167,097
$        -
$   21,782
$   44,596
$ 5,617,246 Kinder Morgan Retail
     7,577 
    46,419
         -
     3,846
     6,509
    380,619 Power and Other
     6,986 
    11,595
         -
       770
        57
  4,051,1701  Consolidated
   103,260 
$  225,111
$        -
$   26,398
$   51,162
$10,049,035 
==========
==========
==========
==========
=========== General and    Administrative Expenses
   (16,693)Other Income and    (Expenses)
    52,426 Income Before Income    Taxes and   Extraordinary    Item
$  138,993 
========== 1
Principally our investment    in Kinder Morgan Energy Partners, investments in power plant facilities and corporate cash    and receivables. Earnings attributable to our investment in Kinder Morgan Energy Partners    are included with "Other Income and (Expenses)."**Three Months Ended September 30, 2001**Income**Revenues From    External    Customers**Intersegment    Revenues**Depreciation    And    Amortization**Capital    Expenditures
(In thousands)Natural Gas Pipeline    Company of America
$   83,612 
$  145,152
$        -
$   21,015 
$   23,372Kinder Morgan Retail
     5,708 
    48,359
         -
     3,219 
     7,295Power and Other
    21,205 
    33,514
         -
     1,815 
       104  Consolidated
   110,525 
$  227,025
$        -
$   26,049 
$   30,771
==========
==========
========== 
==========General and    Administrative Expenses
   (16,618)Other Income and    (Expenses)
     9,207 Income Before Income    Taxes and   Extraordinary    Item
$  103,114 
========== 
11

BUSINESS SEGMENT INFORMATION (Continued)
  **Nine Months    Ended September 30, 2002  **Income**Revenues From    External    Customers**Intersegment    Revenues**Depreciation    And    Amortization**Capital    Expenditures  
(In    thousands)Natural Gas Pipeline    Company of America
$  268,299 
$  507,717
$        -
$   65,183
$   94,448Kinder Morgan Retail
    38,532 
   190,588
         -
    10,899
    17,278Power and Other
    22,650 
    31,941
         -
     2,314
    17,156  Consolidated
   329,481 
$  730,246
$        -
$   78,396
$  128,882
==========
==========
==========
==========General and    Administrative Expenses
   (53,351)Other Income and    (Expenses)
   138,093 Income Before Income    Taxes and   Extraordinary    Item
$  414,223 
========== **Nine Months Ended September 30, 2001**Income**Revenues From    External    Customers**Intersegment    Revenues**Depreciation    And    Amortization**Capital    Expenditures
(In thousands)Natural Gas Pipeline    Company of America
$  257,788 
$  455,562
$        -
$   64,098
$   41,636Kinder Morgan Retail
    33,447 
   221,084
        44
     9,342
    22,202Power and Other
    50,240 
    94,445
     2,032
     5,429
       316  Consolidated
   341,475 
$  771,091
$    2,076
$   78,869
$   64,154
==========
==========
==========
==========General and    Administrative Expenses
   (49,098)Other Income and    (Expenses)
    (9,509)Income Before Income    Taxes and   Extraordinary    Item
$  282,868 
========== 
GEOGRAPHIC INFORMATION

All but an insignificant amount of our assets and operations arelocated in the continental United States of America.

7.     Financing
We have available a $421.3 million 364-day credit facility datedOctober 15, 2002, and a $337.0 million three-year revolving credit agreement dated October15, 2002. These bank facilities replace a $500 million 364-day credit facility and a $400million five-year revolving credit agreement, and contain covenants and terms similar tothose in the agreements they replace, which are described in our 2001 Form 10-K. Thesebank facilities can be used for general corporate purposes, including backup for ourcommercial paper program. Under these bank facilities, we are required to pay a facilityfee based on the total commitment, whether used or unused, at a rate that varies based onour senior debt rating. We had no borrowings under our bank facilities at September 30,2002.

The commercial paper we issue, which is supported by the creditfacilities described above, is comprised of unsecured short-term notes with maturities notto exceed 270 days from the date of issue. No commercial paper was outstanding atSeptember 30, 2002. Average short-term borrowings outstanding during the third quarter of2002 were $355.4 million and the weighted-average interest rate was 2.10 percent. Averageshort-term borrowings outstanding during the first nine months of 2002 were $498.7 millionand the weighted-average interest rate was 2.16 percent.

12

On November 1, 2002, we retired the full $35 million of our 8.35%sinking fund debentures due September 15, 2022 at a premium of 104.175% of the face amountof the debentures. We expect to record an extraordinary loss of $1.0 million (net ofassociated tax benefit of $0.7 million) in connection with this early extinguishment ofdebt in the fourth quarter of 2002.

On October 10, 2002, we retired our $200 million of Floating Rate Notesdue October 10, 2002, utilizing a combination of cash and incremental short-term debt.

Effective September 1, 2002, we retired our $24 million of 7.85%debentures due September 1, 2022 at par. We recorded an extraordinary loss of $420thousand (net of associated tax benefit of $275 thousand) in conjunction with this earlyextinguishment of debt, consisting of the unamortized debt expense associated with thesedebentures.

On August 27, 2002, we issued $750 million of our 6.50% Senior Notesdue September 1, 2012, in an offering made pursuant to Rule 144A of the regulations of theSecurities and Exchange Commission, with registration rights. The proceeds were used toretire our short-term notes payable then outstanding, with the balance invested inshort-term commercial paper and money market funds. On October 18, 2002, we commenced anexchange offer to exchange these notes for our 6.50% Senior Notes due September 1, 2012,which have been registered under the Securities Act of 1933. These new notes have the sameform and terms and evidence the same debt as the original notes, and were offered forexchange to satisfy our obligation to exchange the original notes for registered notes.

On September 10, 2001, we retired our $45 million of 9.625% SinkingFund Debentures due March 1, 2021, utilizing incremental short-term borrowings. In March2001, we retired (i) our $400 million of Reset Put Securities due March 1, 2021 and (ii)our $20 million of 9.95% Sinking Fund Debentures due 2020, utilizing a combination of cashand incremental short-term debt. In conjunction with these early extinguishments of debt,we recorded an extraordinary loss of $13.6 million (net of associated tax benefit of $9.0million), presented as a separate line item in the accompanying interim ConsolidatedStatement of Income for the nine months ended September 30, 2001.

On July 17, 2002, our Board of Directors approved a cash dividend of$0.10 per common share payable on August 14, 2002 to shareholders of record as of July 31,2002. On October 16, 2002, our Board of Directors approved a cash dividend of $0.10 percommon share payable on November 14, 2002 to shareholders of record as of October 31,2002.

8.     Common Stock Repurchase Plan
On August 14, 2001, we announced a program to repurchase up to $300million of our outstanding common stock, which program was increased to $400 million and$450 million at February 5, 2002 and July 17, 2002, respectively. As of September 30,2002, we had repurchased a total of approximately $411.1 million (8,211,600 shares) of ouroutstanding common stock under the program, of which $5.6 million (136,100 shares) and$140.7 million (2,916,800 shares) were repurchased in the three months and nine monthsended September 30, 2002, respectively.

9.     Regulatory Matters
On July 17, 2000, Natural Gas Pipeline Company of America filed itscompliance plan, including pro forma tariff sheets, pursuant to the FERC's Order Nos. 637and 637-A. The FERC directed all interstate pipelines to file pro forma tariff sheets tocomply with new regulatory requirements in the Orders regarding scheduling procedures,capacity segmentation, imbalance management services and penalty credits, or in thealternative, to 

13

explain why no changes to existing tariff provisions are necessary. Atechnical conference was held on July 10, 2001 to discuss Natural Gas Pipeline Company ofAmerica's Order 637 filing. Parties have filed comments on Natural Gas Pipeline Company ofAmerica's filing and all parties are awaiting the FERC's decision.

On April 5, 2002, the D.C. Circuit issued an order largely affirmingOrder Nos. 637, et seq. The D.C. Circuit did remand the FERC's decision to impose a 5-yearcap on bids the existing shipper would have to match in the right of first refusalprocess. The D.C. Circuit also remanded the FERC's decision to allow forward-hauls andbackhauls to the same point. Finally, the D.C. Circuit held that several aspects of theFERC's segmentation policy and its policy on discounting at alternate points were not ripefor review. Numerous parties, including Natural Gas Pipeline Company of America, havefiled comments on the remanded issues.

On October 31, 2002, the FERC issued an order in response to the D.C.Circuit's remand of certain Order 637 issues. The order: (i) eliminated the requirement ofa 5-year cap on bid terms that an existing shipper would have to match in the right offirst refusal process, and found that no term matching cap at all is necessary givenexisting regulatory controls; (ii) affirmed the FERC's policy that a segmented transactionconsisting of both a forward-haul up to contract demand and a backhaul up to contractdemand to the same point is permissible, and accordingly required, under Section 5 of theNatural Gas Act, pipelines that the FERC had previously found must permit segmentation ontheir systems to file tariff revisions within 30 days to permit such segmentedforward-haul and backhaul transactions to the same point.

The FERC, in a Notice of Proposed Rulemaking in RM01-10-000, hasproposed standards of conduct to govern interactions between interstate natural gaspipelines and electric transmission utilities and their energy affiliates. These standardswould entirely replace the current standards of conduct related to affiliate interaction.Numerous parties, including Natural Gas Pipeline Company of America, have filed commentson the proposed rulemaking, which is awaiting further action by the FERC.

The FERC, in a Notice of Proposed Rulemaking in RM02-14-000, hasproposed new regulation of cash management practices, including establishing limits on theamount of funds that can be swept from a regulated subsidiary to a non-regulated parentcompany. Natural Gas Pipeline Company of America filed comments on August 28, 2002.

As a part of the settlement of litigation styled*, Jack J. Grynberg,individually and as general partner for the Greater Green River Basin Drilling Program:72-73 v. Rocky Mountain Natural Gas Company and K N Energy, Inc.,* Case No. 90-CV-3686,in early 2002, Mr. Grynberg received $16.825 million from us (including forgiveness of a$10.4 million obligation owing from Mr. Grynberg) and an additional $15.625 million waspaid into escrow. Rocky Mountain Natural Gas Company agreed to seek to recover theseamounts from its customers/rate payers in a proceeding before the Public UtilitiesCommission for the State of Colorado. Rocky Mountain Natural Gas Company and KinderMorgan, Inc. made regulatory filings with the Public Utilities Commission for the State ofColorado on September 30, 2002, proposing recovery of these amounts as part of theirannual Gas Cost Adjustment filing process. We proposed to collect these litigated gascosts, including associated carrying charges, over a 15-year amortization period. OnOctober 30, 2002, the Public Utilities Commission for the State of Colorado decided, inopen meeting, to allow us to place rates in effect and begin recovery of these costseffective November 1, 2002, subject to refund pending a final determination as to ourability to recover these costs in our rates. Mr. Grynberg will receive the money in escrowonly to the extent rates allowing us to collect this gas cost are finally approved.

Currently, there are no material proceedings challenging the rates onany of our pipeline systems. Nonetheless, shippers on our pipelines do have rights tochallenge the rates we charge under certain circumstances prescribed by applicablestatutes and regulations. There can be no assurance that we will not face challenges tothe rates we receive for services on our pipeline systems in the future. In addition,since many of our assets are subject to 

14

regulation, we are subject to potential future changes in applicablerules and regulations that may have an adverse effect on our business, financial positionor results of operations.
10.     Comprehensive Income

Our comprehensive income for the three months and nine months endedSeptember 30, 2002 and 2001 is as follows:
**Three Months Ended    September 30, **Nine Months Ended    September 30, **2002**2001**2002**2001
(In    Thousands)**Net Income:**
$  80,403 
$  58,225 
$ 241,243 
$ 152,808 **Other Comprehensive Income, Net of Tax:**  Change in Fair Value of    Derivatives Utilized    for Hedging    Purposes
   (9,699)
   18,125 
  (22,231)
   26,975   Reclassification of Change in    Fair Value of    Derivatives to Net    Income
      (65)
   (5,364)
    2,021 
    2,021   Equity in Other Comprehensive    Income of    Equity Method    Investees
   (2,589)
   15,136 
  (22,552)
   14,204   Minority Interest in Other    Comprehensive    Income of Equity    Method Investees
    1,129 
   (6,445)
    9,440 
   (6,283)**Other Comprehensive Income**
  (11,224)
   21,452 
  (33,322)
   36,917 **  ****Comprehensive Income**
$  69,179 
$  79,677 
$ 207,921 
$ 189,725 
========= 
========= 
========= 
========= 
11.    Accounting for Derivative Instruments andHedging Activities
Our normal business activities expose us to risks associated withchanges in the market price of natural gas and associated transportation. We engage inderivative transactions for the purpose of mitigating these risks, which transactions areaccounted for in accordance with Statement of Financial Accounting Standards("SFAS") No. 133, *Accounting for Derivative Instruments and HedgingActivities* and associated amendments. During the three months and nine months endedSeptember 30, 2002 and 2001, our derivative activities relating to the mitigation of theserisks were designated and qualified as cash flow hedges, and the impact of hedgeineffectiveness, while included in our net income, was immaterial. As the hedged sales andpurchases take place and we record them into earnings, we also reclassify the gains andlosses included in accumulated other comprehensive income into earnings. We expect toreclassify into earnings, during the next twelve months, substantially all of ouraccumulated other comprehensive loss balance of $16.0 million, representing unrecognizednet losses on derivative activities at September 30, 2002. During the three months andnine months ended September 30, 2002 and 2001, we reclassified no gains or losses intoearnings as a result of the discontinuance of cash flow hedges due to a determination thatthe forecasted transactions would no longer occur by the end of the originally specifiedtime period.

We have outstanding fixed-to-floating interest rate swap agreementswith a notional principal amount of $1.75 billion. These agreements effectively convertthe interest expense associated with our 6.65% senior notes due in 2005, our 7.25%debentures due in 2028 and our 6.50% Senior Notes due in 2012 from fixed rates to floatingrates based on the three-month London Interbank Offered Rate ("LIBOR") plus acredit spread. These swaps have been designated as fair value hedges, accounted forutilizing the "shortcut" method prescribed for qualifying fair value hedges.Accordingly, at each reporting date, the carrying value of the swap is adjusted to itsfair value, and an offsetting entry is made to adjust the carrying value of the debtsecurities whose fair value is being hedged. The fair value of the swaps at September 30,2002 was $125.7 million (included in the caption "Deferred Charges and OtherAssets" of the accompanying Consolidated Balance Sheet as of September 30,

15

2002). We record interest expense equal to the floating rate payments,which is accrued monthly and paid semi-annually.
12.    Interest Expense, Net

"Interest Expense, Net" as presented in the accompanyinginterim Consolidated Statements of Income is net of the debt component of the allowancefor funds used during construction, which was $0.6 million and $1.8 million for the threemonths ended September 30, 2002 and 2001, respectively and $1.4 million and $4.5 millionfor the nine months ended September 30, 2002 and 2001, respectively.

13.    Summarized Income Statement Informationfor Kinder Morgan Energy Partners, L.P.
Following is summarized income statement information for Kinder MorganEnergy Partners, a publicly traded master limited partnership in which we own the generalpartner interest. In addition, we own limited partner interests in the form of KinderMorgan Energy Partners common units, i-units (indirectly through Kinder Morgan Management)and Class B limited partner units. This investment, which is accounted for under theequity method of accounting, is described in more detail in our 2001 Form 10-K. Additionalinformation on Kinder Morgan Energy Partners' results of operations and financial positionare contained in its Form 10-Q for the quarter ended September 30, 2002 and in its 2001Form 10-K.
**Three Months Ended    September 30,**Nine Months Ended    September 30,**2002**2001**2002**2001
(In    thousands)Operating Revenues
$ 1,121,320
$   638,544
$ 3,015,321
$ 2,402,944Operating Expenses
    931,917
    493,652
  2,487,715
  1,981,105Operating Income
$   189,403
$   144,892
$   527,606
$   421,839
===========
===========
===========
===========  Net Income
$   158,180
$   115,792
$   444,130
$   321,685
===========
===========
===========
===========
14.    Environmental and Legal Matters
(A)    Environmental Matters

We are subject to a variety of federal, state and local laws thatregulate permitted activities relating to air and water quality, waste disposal, and otherenvironmental matters. Additionally, we have established reserves to address knownenvironmental remediation sites. After consideration of reserves established, we believethat costs for environmental remediation and ongoing compliance with these regulationswill not have a material adverse effect on our cash flows, financial position or resultsof operations or diminish our ability to operate our businesses. However, there can be noassurances that future events, such as changes in existing laws, the promulgation of newlaws, or the development of new facts or conditions will not cause us to incur significantcosts.

See Note 10(A) of Notes to Consolidated Financial Statements and"Litigation and Environmental" included in Management's Discussion and Analysisof Financial Condition and Results of Operations in our 2001 Form 10-K for additionalinformation regarding environmental matters.

(B)    Litigation Matters
*K N TransColorado, Inc. v. TransColorado Gas Transmission Company, et.al, Case No. 00-CV-129, District Court, County of Garfield, State of Colorado. On June15, 2000, K N TransColorado filed suit against Questar 

16

TransColorado, its parent Questar Pipeline Company, and otheraffiliated Questar entities, asserting claims for breach of fiduciary duties, breach ofcontract, constructive trust, rescission of the partnership agreement, breach of goodfaith and fair dealing, tortious concealment, misrepresentation, aiding and abetting abreach of fiduciary duty, dissolution of the TransColorado partnership, and seeking adeclaratory judgment, among other claims. The TransColorado partnership has been made adefendant for purposes of an accounting. The lawsuit alleges, among other things, Questarbreached its fiduciary duties as a partner. K N TransColorado seeks to recover damages inexcess of $152 million due to Questar's breaches and, in addition, seeks punitive damages.In response to the complaint, on July 28, 2000, the Questar entities filed a counterclaimand third party claims against Kinder Morgan and certain of its affiliates for claimsarising out of the construction and operation of the TransColorado pipeline project. Theclaims allege, among other things, that the Kinder Morgan entities interfered with anddelayed construction of the pipeline and made misrepresentations about marketing ofcapacity. The Questar entities seek to recover damages in excess of $185 million for analleged breach of fiduciary duty and other claims. The parties agreed to stay the exerciseof a contractual provision purportedly requiring K N TransColorado to purchase Questar'sinterest in the pipeline and to investigate the appointment of an independent operator forthe pipeline during the litigation. The Court dismissed Questar's counterclaims for breachof duty of good faith and fair dealing and for indemnity and contribution and dismissedQuestar's Third Party Complaint. On July 19, 2001, the Court granted K N TransColorado'smotion for summary judgment that: a) fiduciary duties existed between the partners; b)these fiduciary duties were not modified or waived; and c) the affiliates and directors ofQuestar Pipeline Company and Questar TransColorado acting in their dual capacity hadfiduciary obligations which required those individuals to disclose, to the partnership andthe partners, information that affected the fundamental business purpose of thepartnership. On August 14, 2001, the Court granted leave to Questar to file its FirstAmended Answer and Counterclaim, once again naming Kinder Morgan, Inc. as a counterclaimdefendant, and making similar allegations against us as set forth above. Trial of thematter concluded on May 3, 2002. On August 26, 2002, the Court entered its Judgment in thematter. The parties have settled the matter. Under the terms of the settlement, we willpurchase an indirect 50 percent interest in TransColorado Gas Transmission Company from anaffiliate of Questar Corp. We will pay $105.5 million for the stock of the Questaraffiliate that owns the 50 percent interest. On October 23, 2002, the $105.5 millionpurchase price was placed in escrow pending anti-trust clearance pursuant to aHart-Scott-Rodino filing made on October 25, 2002. The agreement settles all outstandinglitigation between Questar and us relating to TransColorado and provides for an effectivedate of October 1, 2002. In addition to its pipeline assets, TransColorado currently hasapproximately $12 million in cash which will be distributed to KMI following the close ofthe transaction. The transaction is subject to Hart-Scott-Rodino approval and is expectedto close before year-end. Following completion of the transaction, we will own 100 percentof the TransColorado Pipeline.
*United States of America, ex rel., Jack J. Grynberg v. K N Energy, CivilAction No. 97-D-1233, filed in the U.S. District Court, District of Colorado. This actionwas filed on June 9, 1997 pursuant to the federal False Claim Act and involves allegationsof mismeasurement of natural gas produced from federal and Indian lands. The Department ofJustice has decided not to intervene in support of the action. The complaint is part of alarger series of similar complaints filed by Mr. Grynberg against 77 natural gas pipelines(approximately 330 other defendants). An earlier single action making substantiallysimilar allegations against the pipeline industry was dismissed by Judge Hogan of the U.S.District Court for the District of Columbia on grounds of improper joinder and lack ofjurisdiction. As a result, Mr. Grynberg filed individual complaints in various courtsthroughout the country. In 1999, these cases were consolidated by the Judicial Panel forMultidistrict Litigation, and transferred to the District of Wyoming. The MDL case iscalled *In Re Natural Gas Royalties Qui Tam Litigation*, Docket No. 1293. Motions toDismiss were filed and an oral argument on the Motion to Dismiss occurred on March 17,2000. On July 20, 2000 the United States of America filed a motion to dismiss those claimsby Grynberg that deal with the manner in which defendants valued gas produced from federalleases. Judge Downes denied the defendant's motion to dismiss on May 18, 2001. Pretrialproceedings are underway.

17
*Will Price, et al. v. Gas Pipelines, et al., (f/k/a *QuinqueOperating Company**et al. v. Gas Pipelines, et al.*), Stevens County, KansasDistrict Court, Case No. 99 C 30. In May 1999, three plaintiffs, Quinque OperatingCompany, Tom Boles and Robert Ditto, filed a purported nationwide class action in theStevens County, Kansas District Court against some 250 natural gas pipelines and many oftheir affiliates. The District Court is located in Hugoton, Kansas. The Petition (recentlyamended) alleges a conspiracy to underpay royalties, taxes and producer payments by thedefendants' undermeasurement of the volume and heating content of natural gas producedfrom nonfederal lands for more than twenty-five years. The named plaintiffs purport toadequately represent the interests of unnamed plaintiffs in this action who are comprisedof the nation's gas producers, State taxing agencies and royalty, working and overridingowners. The plaintiffs seek compensatory damages, along with statutory penalties, trebledamages, interest, costs and fees from the defendants, jointly and severally. This actionwas originally filed on May 28, 1999 in Kansas State Court in Stevens County, Kansas as aclass action against approximately 245 pipeline companies and their affiliates, includingcertain Kinder Morgan entities. Subsequently, one of the defendants removed the action toKansas Federal District Court and the case was styled as *Quinque Operating Company, etal. v. Gas Pipelines, et al.,* Case No. 99-1390-CM, United States District Court forthe District of Kansas. Thereafter, we filed a motion with the Judicial Panel forMultidistrict Litigation to consolidate this action for pretrial purposes with theGrynberg False Claim Act cases referred to above, because of common factual questions. OnApril 10, 2000, the MDL Panel ordered that this case be consolidated with the Grynbergfederal False Claims Act cases. On January 12, 2001, the Federal District Court of Wyomingissued an oral ruling remanding the case back to the State Court in Stevens County,Kansas. The Court in Kansas has issued a case management order addressing the initialphasing of the case. In this initial phase, the court will rule on motions to dismiss(jurisdiction and sufficiency of pleadings), and if the action is not dismissed, on classcertification. Merits discovery has been stayed. The defendants filed a motion to dismisson grounds other than personal jurisdiction, which was denied by the Court in August 2002.The Motion to Dismiss for lack of Personal Jurisdiction of the nonresident defendants hasbeen briefed and is awaiting decision. The current Named plaintiffs are Will Price, TomBoles, Cooper Clark Foundation and Stixon Petroleum, Inc. Quinque Operating Company hasbeen dropped from the action as a Named Plaintiff.
*K N Energy, Inc., et al. v. James P. Rode and Patrick R. McDonald,Case No. 99CV1239, filed in the District Court, Jefferson County, Division 8, Colorado.The case was filed on May 21, 1999. Defendants counterclaimed and filed third party claimsagainst several of our former officers and/or directors. Messrs. Rode and McDonald areformer principal shareholders of Interenergy Corporation. We acquired Interenergy onDecember 19, 1997 pursuant to a Merger Agreement dated August 25, 1997. Rode and McDonaldallege that K N Energy committed securities fraud, common law fraud and negligentmisrepresentation as well as breach of contract. Rode and McDonald are seeking anunspecified amount of compensatory damages, greater than $2 million, plus unspecifiedexemplary or punitive damages, attorney's fees and their costs. We filed a motion todismiss, and on April 21, 2000, the Jefferson County District Court Judge dismissed thecase against the individuals and us with prejudice. On April 6, 2001, the Colorado Courtof Appeals affirmed the dismissal. Rode and McDonald also filed a federal securities fraudaction in the United States District Court for the District of Colorado on January 27,2000 titled: *James P. Rode and Patrick R. McDonald v. K N Energy, Inc., et al*.,Civil Action No. 00-N-190. This case initially raised the identical state law claimscontained in the counterclaim and third party complaint in state court. Rode and McDonaldfiled an amended Complaint, which dropped the state-law claims. On June 20, 2000, thefederal district court dismissed this Complaint with prejudice. The district court'sdismissal was subsequently affirmed by the Tenth Circuit Court of Appeals on April 23,2002. A third related class action case styled, *Adams vs. Kinder Morgan, Inc., et al*.,Civil Action No. 00-M-516, in the United States District Court for the District ofColorado was served on us on April 10, 2000. As of this date no class has been certified.On February 23, 2001, the federal district court dismissed several claims raised by theplaintiff, with prejudice, and dismissed the remaining claims, without prejudice. On April27, 2001, the Adams plaintiffs filed their second amended complaint. On March 29, 2002,the court dismissed the Adams plaintiffs' second amended complaint with prejudice. On May2, 2002, the Adams plaintiffs appealed the dismissal. Briefing at the Tenth Circuit Courtof Appeals is complete.

18

We believe that we have meritorious defenses to all lawsuits and legalproceedings in which we are defendants and will vigorously defend against them. Based onour evaluation of the above matters, and after consideration of reserves established, webelieve that the resolution of such matters will not have a material adverse effect on ourbusinesses, cash flows, financial position or results of operations.

In addition, we are a defendant in various lawsuits arising from theday-to-day operations of our businesses. Although no assurance can be given, we believe,based on our experiences to date, that the ultimate resolution of such items will not havea material adverse impact on our business, financial position or results of operations.

15.    Discontinued Operations
During 1999, we adopted and implemented a plan to discontinue a numberof lines of business. During 2000, we essentially completed the disposition of thesediscontinued operations. The cash flows attributable to discontinued operations includedin the accompanying interim Statements of Consolidated Cash Flows under the caption"Net Cash Flows Used in Discontinued Operations" result from cash activityattributable to retained liabilities associated with these discontinued operations. Thecaption "Net Cash Flows Provided By Discontinued Investing Activities," for thenine months ended September 30, 2001, includes cash received for discontinued operationssold during 2000. Note 7 of Notes to Consolidated Financial Statements of our 2001 Form10-K contains additional information on these matters.

16.    Goodwill - Adoption of Statement 142
In June 2001, the Financial Accounting Standards Board("FASB") issued SFAS No. 142, *Goodwill and Other Intangible Assets*,referred to in the following discussion as "SFAS 142." SFAS 142, whichsuperceded Accounting Principles Board Opinion No. 17, *Intangible Assets*, addressesfinancial accounting and reporting for (i) intangible assets acquired individually or witha group of other assets (but not those acquired in a business combination) at acquisitionand (ii) goodwill and other intangible assets subsequent to their acquisition. SFAS 142was required to be applied in fiscal years beginning after December 15, 2001 and weadopted it on January 1, 2002. 

SFAS 142 provides that goodwill in each reporting unit must be testedfor impairment at the beginning of the fiscal year in which this statement is initiallyapplied in its entirety, and further provides that an entity has six months from the dateof initial application to complete the first step of that transitional goodwill impairmenttest. If the carrying value of the net assets of a reporting unit (including goodwill)exceeds the fair value of that reporting unit, the second step of that transitionalgoodwill impairment test must be completed as soon as possible, but no later than the endof the year of initial application. Any impairment loss recognized as a result of atransitional goodwill impairment test will be recognized as the effect of a change inaccounting principle. 

The only goodwill we currently have recorded (approximately $23million) relates to our third-quarter 1998 acquisition of interests in three independentpower plants from the Denver-based Thermo Companies. We have completed the transitionalgoodwill impairment test and found that no impairment of this goodwill existed as ofDecember 31, 2001. We will continue to test this goodwill for impairment on an annualbasis or more frequently in certain circumstances as required by SFAS 142. The powergeneration market has been volatile in recent periods, so the possibility exists that awrite-down could be required in the future.

In addition to the goodwill discussed above, we also have "equitymethod goodwill" (approximately $1.03 billion as of December 31, 2001) as a result ofour third-quarter 1999 acquisition of Kinder Morgan Delaware, the indirect owner of thegeneral partner of and certain limited partner interests in Kinder Morgan Energy Partners.This equity method goodwill, while subject to the provisions of SFAS 142 requiring thatamortization 

19

no longer be recorded, is not subject to the impairment provisions ofSFAS 142 but, instead, continues to be subject to the impairment provisions of AccountingPrinciples Board Opinion No. 18, *The Equity Method of Accounting for Investments inCommon Stock*, which provides that an impairment be recognized when there is a loss inthe value of an investment that is other than a temporary decline. 

Had SFAS 142 been in effect prior to January 1, 2002, our reported netincome and earnings per share would have been as follows:
**Three Months Ended    September 30,**Nine Months Ended    September 30,**2002**2001**2002**2001
(In thousands    except per share amounts)Reported Net Income
$ 80,403
$ 58,225
$241,243
$152,808Add Back: Goodwill Amortization, Net of Tax
       -
   3,666
       -
  12,035Adjusted Net Income
$ 80,403
$ 61,891
$241,243
$164,843
========
========
========
========  Basic Earnings Per Share:  Reported Net Income
$   0.66
$   0.51
$   1.97
$   1.33  Goodwill Amortization
       -
    0.03
       -
    0.10  Adjusted Net Income
$   0.66
$   0.54
$   1.97
$   1.43
========
========
========
========  Diluted Earnings Per Share:  Reported Net Income
$   0.66
$   0.48
$   1.95
$   1.26  Goodwill Amortization
       -
    0.03
       -
    0.09  Adjusted Net Income
$   0.66
$   0.51
$   1.95
$   1.35
========
========
========
========
17.    Recent Accounting Pronouncements
In June 2001, the FASB issued SFAS No. 143, *Accounting for AssetRetirement Obligations*. This Statement addresses financial accounting and reportingfor obligations associated with the retirement of tangible long-lived assets and theassociated asset retirement costs. This Statement requires that the fair value of aliability for an asset retirement obligation be recognized in the period in which it isincurred if a reasonable estimate of fair value can be made. The associated assetretirement costs are capitalized as part of the carrying amount of the long-lived asset.This Statement contains disclosure requirements that provide descriptions of assetretirement obligations and reconciliations of changes in the components of thoseobligations. This Statement is effective for financial statements issued for fiscal yearsbeginning after June 15, 2002. Earlier applications are encouraged. We have not yetquantified the impacts of adopting this Statement on our financial position or results ofoperations.

On April 30, 2002, the FASB issued SFAS No. 145*, Rescission of FASBStatements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and TechnicalCorrections*. This Statement rescinds SFAS No. 4, *Reporting Gains and Losses fromExtinguishment of Debt* and SFAS No. 64, *Extinguishments of Debt Made to SatisfySinking-Fund Requirements*, as well as SFAS No. 44, *Accounting for Intangible Assetsof Motor Carriers*. It also amends SFAS No. 13, *Accounting for Leases*, toeliminate an inconsistency between the required accounting for sale-leaseback transactionsand the required accounting for certain lease modifications that have economic effectsthat are similar to sale-leaseback transactions. This Statement also amends other existingauthoritative pronouncements to make various technical corrections, clarify meanings, ordescribe their applicability under changed conditions. The provisions of this Statementrelated to the rescission of SFAS No. 4 shall be applied in fiscal years beginning afterMay 15, 2002. The provisions related to the amendment to SFAS No. 13 shall be effectivefor transactions occurring after May 15, 2002. All other provisions in this Statementshall be effective for financial statements issued on or after May 15, 2002. Earlyapplication of the provisions of this Statement is encouraged, and may be as of thebeginning of the fiscal year or as of the beginning of the interim period in which thisStatement is issued.

20

As a result of the rescission of SFAS No. 4, gains and losses fromextinguishment of debt should be classified as extraordinary items only if they meet thecriteria in Accounting Principles Board Opinion No. 30, *Reporting the Results ofOperations- Reporting the Effects of Disposal of a Segment of a Business, andExtraordinary, Unusual and Infrequently Occurring Events and Transactions*. Applyingthe provisions of Accounting Principles Board Opinion No. 30 will distinguish transactionsthat are part of an entity's recurring operations from those that are unusual orinfrequent or that meet the criteria for classification as an extraordinary item. Theprovisions of SFAS No. 145 related to the rescission of SFAS No. 4 will require us, whenthe provisions are applied, to reclassify, in income statements that include the first andthird quarters of 2001, as well as the third and fourth quarters of 2002, the losses onextinguishment of debt that have been classified as an extraordinary item.

In June 2002, the FASB issued SFAS No. 146, *Accounting for CostsAssociated with Exit or Disposal Activities*, which addresses financial accounting andreporting for costs associated with exit or disposal activities and nullifies EmergingIssues Task Force (EITF) Issue No. 94-3, *Liability Recognition for Certain EmployeeTermination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurredin a Restructuring).* This Statement requires that a liability for a cost associatedwith an exit or disposal activity be recognized when the liability is incurred. Under EITFIssue 94-3, a liability for an exit activity as defined in EITF Issue 94-3 was recognizedat the date of an entity's commitment to an exit plan. This Statement eliminates thedefinition and requirements for recognition of exit costs in EITF Issue 94-3 andestablishes that fair value is the objective for initial measurement of the liability. Theprovisions of this Statement are effective for exit or disposal activities that areinitiated after December 31, 2002, with early application encouraged.

18.    Commitments and Contingent Liabilities
Note 18 of Notes to Consolidated Financial Statements included in our2001 Form 10-K contains a discussion of our commitments and contingent liabilities as ofDecember 31, 2001. The contingent obligation discussed in Note 18(E) of our 2001 Form10-K, the potential requirement to assume a $250 million note in conjunction with a powerplant facility, no longer exists due to the closing of long-term, third-party financing bythe owner of the facility in May 2002. In addition, our expected investments in powerplant facilities have been completed as anticipated and our purchase of the remaininginterest in a joint venture pipeline is expected to be completed during the fourth quarteras discussed in Note 14.
***21

***Item2.  Management's Discussion and Analysis of Financial Condition and Resultsof Operations.*******
General**
The following discussion should be read in conjunction with (i) theaccompanying interim Consolidated Financial Statements and related Notes and (ii) theConsolidated Financial Statements, related Notes and Management's Discussion and Analysisof Financial Condition and Results of Operations included in our 2001 Form 10-K. Due tothe seasonal variation in energy demand, among other factors, the following interimresults may not be indicative of the results to be expected over the course of an entireyear. In this report Kinder Morgan Energy Partners, L.P., a publicly traded pipelinemaster limited partnership in which we own the general partner interest and significantlimited partner interests, is referred to as "Kinder Morgan Energy Partners."
**Consolidated Financial Results****Three Months Ended September 30,**Nine Months Ended September 30,**Increase**Increase**2002**2001**(Decrease)**2002**2001**(Decrease)
(In    thousands except per share amounts)Operating Revenues
$  225,111 
$  227,025 
$   (1,914)
$  730,246 
$  771,091 
$  (40,845)
========== 
========== 
========== 
========== 
========== 
========== Gross Margin
$  167,820 
$  173,541 
$   (5,721)
$  518,398 
$  525,013 
$   (6,615)
========== 
========== 
========== 
========== 
========== 
========== General and Administrative Expenses
$   16,693 
$   16,618 
$       75 
$   53,351 
$   49,098 
$    4,253 
========== 
========== 
========== 
========== 
========== 
========== Operating Income
$   84,666 
$   91,396 
$   (6,730)
$  269,892 
$  284,643 
$  (14,751)Other Income and (Expenses)
    54,327 
    11,718 
    42,609 
   144,331 
    (1,775)
   146,106 Income Taxes
    58,170 
    43,443 
    14,727 
   172,560 
   116,495 
    56,065 Income before Extraordinary Item
    80,823 
    59,671 
    21,152 
   241,663 
   166,373 
    75,290 Extraordinary Item - Loss on Early    Extinguishment of    Debt, Net of Tax
      (420)
    (1,446)
     1,026 
      (420)
   (13,565)
    13,145 Net Income
$   80,403 
$   58,225 
$   22,178 
$  241,243 
$  152,808 
$   88,435 
========== 
========== 
========== 
========== 
========== 
==========   Diluted Earnings (Loss) Per Common Share:Income Before Extraordinary Item
$     0.66 
$     0.49 
$     0.17 
$     1.95 
$     1.37 
$     0.58 Extraordinary Item - Loss on Early    Extinguishment of    Debt
         - 
     (0.01)
      0.01 
         - 
     (0.11)
      0.11 Total Diluted Earnings Per Common Share
$     0.66 
$     0.48 
$     0.18 
$     1.95 
$     1.26 
$     0.69 
========== 
========== 
========== 
========== 
========== 
========== 
Total diluted earnings per common share increased from $0.48 in thethird quarter of 2001 to $0.66 in the third quarter of 2002, an increase of $0.18 (38%).Excluding the effects of extraordinary after-tax losses of $0.4 million (less than $0.01per diluted common share) in 2002 and $1.4 million ($0.01 per diluted common share) in2001, diluted earnings per common share increased from $0.49 in the third quarter of 2001to $0.66 in the third quarter of 2002, an increase of $0.17 (35%). Income before theextraordinary item was positively affected in the third quarter of 2002, relative to 2001,primarily by (i) increased equity in earnings of Kinder Morgan Energy Partners due, inpart, to the strong performance from the assets held by Kinder Morgan Energy Partners andthe cessation of amortization of equity-method goodwill (amortization of $3.5 million and$11.7 million after taxes was included in the results of operations for the third quarterand first nine months of 2001, respectively) related to this investment due to theadoption of SFAS No. 142 as discussed in Note 16 of the accompanying Notes to ConsolidatedFinancial Statements, (ii) decreased interest expense, (iii) increased earnings from ourNatural Gas Pipeline Company of America and Kinder Morgan Retail business segments and(iv) increased earnings from our equity investment in the TransColorado joint venture,which we have recently agreed to become 100% owner of as discussed in "Net Cash Flowsfrom Investing Activities" following and Note 14 of the accompanying Notes toConsolidated Financial Statements. These positive impacts were partially offset by (i)increased income tax expense and (ii) decreased earnings from our Power and Other businesssegment. Please refer to the individual headings under "Results of Operations"following for additional 
***22

details regarding these matters. The number of shares used to calculatediluted earnings per common share was approximately 1.3 million (1.1%) higher for thethird quarter of 2002 than the third quarter of 2001. The number of shares used tocalculate diluted earnings per common share was affected by, among other things, theNovember 2001 issuance of 13.4 million common shares upon the maturity of our PremiumEquity Participating Security Units. This increase in common shares was partially offsetby shares acquired under our share repurchase program, totaling 5.3 million shares in 2001and an additional 2.9 million shares in the first nine months of 2002. In addition,fluctuations in the market price of our stock affect the dilutive impact of ouroutstanding common stock options.

Total diluted earnings per common share increased from $1.26 in thefirst nine months of 2001 to $1.95 in the first nine months of 2002, an increase of $0.69(55%). Excluding the effects of extraordinary after-tax losses of $0.4 million (less than$0.01 per diluted common share) in 2002 and $13.6 million ($0.11 per diluted common share)in 2001, diluted earnings per common share increased from $1.37 in the first nine monthsof 2001 to $1.95 in the first nine months of 2002, an increase of $0.58 (42%). Incomebefore the extraordinary item for the first nine months of 2002 was affected, relative to2001, largely by the same factors as discussed previously with respect to third quarterresults, and by higher general and administrative expenses in 2002 due to higher costs for(i) insurance and (ii) employee compensation and benefits. The number of shares used tocalculate diluted earnings per common share was approximately 1.9 million (1.6%) higherfor the first nine months of 2002 than the first nine months of 2001 due to the samefactors that affected the quarter-to-quarter comparison.
**Results of Operations**
The following comparative discussion of our results of operations is bysegment for factors affecting segment earnings, and on a consolidated basis for otherfactors.

We manage our various businesses by, among other things, allocatingcapital and monitoring operating performance. This management process includes dividingthe company into discrete business segments so that performance can be effectivelymonitored and reported. Currently, we manage and report our operations in the followingsegments:
**Business Segment****Business Conducted****  ****Referred to As**  Natural Gas Pipeline Company of       America and certain affiliates      The ownership and operation of a major interstate natural gas    pipeline and storage systemNatural Gas Pipeline Company of America  Retail Natural Gas Distribution      The regulated transportation, distribution and sale of    natural gas to residential, commercial and industrial customers and the non-regulated sale    of natural gas to certain utility customersKinder Morgan Retail  Power and OtherThe construction and operation of natural gas-fired electric    generation facilities, together with various other activities not constituting separately    managed or reportable business segmentsPower and Other
23

The accounting policies we apply in the generation of business segmentinformation are generally the same as those described in Note 1 of Notes to ConsolidatedFinancial Statements included in our 2001 Form 10-K, except that certain items below the"Operating Income" line are either not allocated to business segments or are notconsidered by management in its evaluation of business segment performance. An exceptionto this is that certain business activities in the form of joint operations with otherparties that are accounted for under the equity method of accounting are included insegment results. Earnings of equity method investees included in segment results are (i)equity method investees of Kinder Morgan Power, which routinely conducts its businessactivities in the form of joint operations with other parties and (ii) Horizon PipelineCompany, whose pipeline system is directly connected to Natural Gas Pipeline Company ofAmerica's pipeline system. These equity method earnings, however, are included in"Other Income and (Expenses)" in our Consolidated Statements of Income. Inaddition, (i) certain items included in operating income (such as general andadministrative expenses) are not allocated to individual business segments and (ii) gainsand losses from incidental sales of assets are included in segment earnings. Withadjustment for these items, we currently evaluate business segment performance primarilybased on operating income in relation to the level of capital employed. We account forintersegment sales at market prices, while we account for asset transfers at either marketvalue or, in some instances, book value. As necessary for comparative purposes, we havereclassified prior period results and balances to conform to the current presentation.

Following are operating results by individual business segment (beforeintersegment eliminations), including explanations of significant variances between theperiods presented.
**Natural Gas Pipeline Company of America****Three Months Ended September 30,**Nine Months Ended September 30,**2002**2001**Increase**2002**2001**Increase
(In    thousands except systems throughput)Operating Revenues
$167,097 
$145,152 
$ 21,945 
$507,717 
$455,562 
$ 52,155 
======== 
======== 
======== 
======== 
======== 
========   Gross Margin
$133,392 
$127,190 
$  6,202 
$403,677 
$381,644 
$ 22,033 
======== 
======== 
======== 
======== 
======== 
========   Segment Earnings
$ 88,697 
$ 83,612 
$  5,085 
$268,299 
$257,788 
$ 10,511 
======== 
======== 
======== 
======== 
======== 
========     Systems Throughput (Trillion Btus)
   341.3 
   309.4 
    31.9 
 1,092.3 
 1,016.6 
    75.7 
======== 
======== 
======== 
======== 
======== 
======== 
Natural Gas Pipeline Company of America's segment earnings increased by$5.1 million, or 6.1%, from the third quarter of 2001 to the third quarter of 2002.Operating results for the third quarter of 2002 were positively affected, relative to thecorresponding period in 2001, by (i) increased margins from natural gas transportation andstorage services, including operational sales and (ii) the inclusion, in third-quarter2002 results, of earnings from our equity investment in Horizon Pipeline Company, whichwas placed in service during the second quarter of 2002. These positive impacts werepartially offset by increased expenses in 2002 for property taxes. Although systemsthroughput increased in 2002, this increase did not have a significant impact on revenuesor segment earnings due to the fact that transportation revenues are derived primarilyfrom "demand" contracts in which shippers pay a fee to reserve a set amount ofsystem capacity for their use.

Natural Gas Pipeline Company of America's segment earnings increased by$10.5 million, or 4.1%, from the first nine months of 2001 to the first nine months of2002. Operating results for the first nine months of 2002 were affected, relative to thesame period in 2001, by the same factors as discussed previously regarding third quarterresults. In addition, year-to-date 2001 results included $6.1 million of pre-tax gainsfrom incidental asset sales, while year-to-date 2002 results included higher operationsand maintenance expenses related to right of way costs, system compression costs, andstorage well and transmission mains expenses.

24

During the third and fourth quarters of 2002, Natural Gas PipelineCompany of America announced extensions to its long-term firm-transportation and storagecontracts with several of its largest customers - Northern Indiana Public Service,Northern Illinois Gas Company, We Energies, formerly Wisconsin Electric Power Co., andMidAmerican Energy Company. These contract renewals represent approximately 45 percent ofNatural Gas Pipeline Company of America's firm capacity to the Chicago market area.

Two major expansion projects have been completed and are expected tocontribute additional segment earnings for Natural Gas Pipeline Company of America on agoing-forward basis. The Horizon Pipeline project in Northern Illinois was completed andplaced into service in May 2002. The extension of Natural Gas Pipeline Company ofAmerica's system to East St. Louis, Illinois, via 51 miles of newly constructed 24-inchdiameter pipeline, was completed and placed into service in August 2002. Please refer toour 2001 Form 10-K for additional information regarding Natural Gas Pipeline Company ofAmerica.
**Kinder Morgan Retail****Three Months Ended September 30, **Nine Months Ended September 30,**Increase**Increase**2002**2001**(Decrease)**2002**2001**(Decrease)
(In    thousands except systems throughput)Operating Revenues
$ 46,419 
$ 48,359 
$ (1,940)
$190,588 
$221,128 
$(30,540)
======== 
======== 
======== 
======== 
======== 
========   Gross Margin
$ 23,617 
$ 19,976 
$  3,641 
$ 85,688 
$ 76,590 
$  9,098 
======== 
======== 
======== 
======== 
======== 
========   Segment Earnings
$  7,577 
$  5,708 
$  1,869 
$ 38,532 
$ 33,447 
$  5,085 
======== 
======== 
======== 
======== 
======== 
========     Systems Throughput (Trillion Btus)1
    10.3 
     8.4 
     1.9 
    30.4 
    28.6 
     1.8 
======== 
======== 
======== 
======== 
======== 
======== 
1 Excludes transport volumes of intrastate pipelines.

Kinder Morgan Retail's segment earnings increased by $1.9 million, or32.7%, from the third quarter of 2001 to the third quarter of 2002. Operating results forthe third quarter of 2002 were positively affected, relative to the corresponding periodin 2001, by (i) margins derived as a result of the fourth quarter 2001 acquisition ofnatural gas distribution facilities from Citizens Communications Company, as describedfollowing, (ii) the addition of new customers in our existing service territories and(iii) a $1.6 million ad valorem tax refund from an affiliated shipper.

Kinder Morgan Retail's segment earnings increased by $5.1 million, or15.2%, from the first nine months of 2001 to the first nine months of 2002. Operatingresults for the first nine months of 2002 were affected, relative to the same period in2001, largely by the same factors as discussed previously regarding third quarter results.The decrease in operating revenues was principally due to lower natural gas prices (acomponent of the overall sales rate) in 2002 than in 2001 and was offset by lower costsfor natural gas purchases. The increase in gross margins was partially offset by higheroperations, maintenance and depreciation expenses principally attributable to the newlyacquired facilities.

During the fourth quarter of 2001, Kinder Morgan Retail successfullycompleted the acquisition of natural gas distribution facilities from CitizensCommunications Company (NYSE: CZN, CZB) for approximately $11 million in cash and assumedliabilities. The natural gas distribution assets serve approximately 13,400 residential,commercial and agricultural customers in Bent, Crowley, Otero, Archuleta, La Plata andMineral 

25
**Counties in Colorado. Please refer to our 2001 Form 10-K foradditional information regarding Kinder Morgan Retail.****
**Power and Other**
**Three Months Ended September 30,**Nine Months Ended September 30,**2002**2001**(Decrease)**2002**2001**(Decrease)
(In    thousands)Operating Revenues
$ 11,595 
$ 33,514 
$(21,919)
$ 31,941 
$ 96,477 
$(64,536)
======== 
======== 
======== 
======== 
======== 
========   Gross Margin
$ 10,811 
$ 26,375 
$(15,564)
$ 29,033 
$ 66,779 
$(37,746)
======== 
======== 
======== 
======== 
======== 
========   Segment Earnings
$  6,986 
$ 21,205 
$(14,219)
$ 22,650 
$ 50,240 
$(27,590)
======== 
======== 
======== 
======== 
======== 
======== 
Results for this segment in 2002 include only the results of our Powerbusiness unit. Excluding the operating results of the Wattenberg facilities that were soldin 2001 as discussed below, segment revenues and gross margin decreased by $5.9 million,or 33.8% and 35.2%, respectively, and segment earnings decreased by $9.2 million, or56.8%, from the third quarter of 2001 to the third quarter of 2002. Power's reduced thirdquarter 2002 earnings reflect, as expected, lower 2002 power plant development fees. Thereduction in 2002 development fees was partially offset by (i) increased fees received foroperating power plants and (ii) decreased 2002 amortization charges as a result of newlyadopted rules regarding amortization of goodwill (see Note 16 of the accompanying Notes toConsolidated Financial Statements). Operating results of the Power and Other segment forthe third quarter of 2001 included $16.0 million of revenue, $9.7 million of gross marginand $5.0 million of segment earnings resulting from our operating agreement withKerr-McGee Gathering LLC (formerly HS Resources, Inc.), which agreement concluded upon thesale of our Wattenberg natural gas facilities to Kerr-McGee effective December 28, 2001.

Operating results of the Power and Other segment for the first ninemonths of 2001 include $52.2 million of revenue, $25.6 million of gross margin and $15.7million of segment earnings resulting from the Wattenberg facilities, which were sold atyear-end 2001 as discussed previously. Excluding the 2001 results from the Wattenbergfacilities, segment revenue decreased by $12.4 million, or 27.9%, gross margin decreasedby $12.2 million, or 29.5%, and segment earnings decreased by $11.8 million, or 34.3%,from the first nine months of 2001 to the first nine months of 2002. Power's earnings forthe first nine months of 2002 were impacted, relative to the first nine months of 2001,largely by the same factors as discussed previously regarding third quarter results.

Effective July 1, 2002, construction and testing of the Jackson,Michigan 550-megawatt power generation facility were completed and commercial operationscommenced. Concurrently with commencement of commercial operations, (i) Kinder MorganPower Company, our wholly owned subsidiary, made a preferred investment in Triton PowerCompany LLC valued at $119.0 million; (ii) Triton Power Company LLC, through its whollyowned affiliate, Triton Power Michigan LLC, entered into a 40-year lease of the Jacksonpower facility from the plant owner, AlphaGen Power, LLC, and (iii) we received fullpayment of our $104.4 million construction note receivable. Our preferred equity interesthas no management or voting rights, but does retain certain protective rights, and isentitled to a cumulative return, compounded monthly, of 9.0% per annum. We account forthis investment under the cost method.

Also effective July 1, 2002, construction and testing of the550-megawatt Wrightsville, Arkansas power generation facility were completed andcommercial operations commenced. Mirant Corporation operates and maintains theWrightsville power facility and manages the natural gas supply and electricity sales forthe project company that owns the power plant. Kinder Morgan Power Company will have apreferred investment of 

26

approximately $74.8 million in the project company, which representsapproximately 21% of the total estimated facility capitalization of $350 million. Inaddition, Kinder Morgan Power Company expects to advance approximately $16.7 million tothe electricity transmission carrier and the project company, which will be repaid withinterest over the next several years. Our preferred equity interest has no management orvoting rights, but does retain certain protective rights, and is entitled to a cumulativepreferred dividend return that escalates over time from 6.3% to 8.8%. We account for thisinvestment under the cost method.

Given (i) the lengthy development phase, including the lengthy anduncertain permitting process that precedes actual construction of a power generationfacility and (ii) the impact that projections of future electrical demand and pricing canhave on the desirability, timing and locations for new power plant development, we are notforecasting the development of any additional power plants in 2002. In addition, a numberof factors have negatively affected Power's business environment and certain of itscurrent operations. These factors, which are currently expected to continue in the near tointermediate term, include (i) volatile and generally declining prices for wholesaleelectric power in certain markets, (ii) cancellation and/or postponement of theconstruction of a number of new power generation facilities, (iii) difficulty in obtainingair permits with acceptable operating conditions and constraints and (iv) a markeddeterioration in the financial condition of a number of participants in the powergenerating and marketing business, including participants in the two newly constructedpower plants in Jackson, Michigan and Wrightsville, Arkansas. During the fourth quarter of2002, we will be evaluating these and other factors to determine their impact on theprospects for this business in the future. While this analysis could result in therecognition of material charges to income to reduce the carrying value of our existinginvestments in development costs, power plants and turbines, the market conditions remaindynamic and our analysis is in its preliminary stages.
**Other Income and (Expenses)****Three Months Ended September 30,**Nine Months Ended September 30,**Earnings Increase**Earnings Increase**2002**2001**(Decrease)**2002**2001**(Decrease)
(In    thousands)Interest Expense, Net
$(40,925)
$(53,175)
$ 12,250 
$(120,283)
$(167,700)
$ 47,417 Equity in Earnings of Kinder Morgan Energy    Partners:    General Partner    Interest
  72,008 
  56,062 
  15,946 
  201,943 
  150,384 
  51,559     Limited Partner    Units (KMP)
   9,779 
   9,453 
     326 
   33,717 
   31,900 
   1,817     Limited Partner    i-units (KMR)
  19,755 
  10,734 
   9,021 
   49,367 
   16,060 
  33,307     Amortization of    Equity-method Goodwill
       - 
  (5,907)
   5,907 
        - 
  (19,449)
  19,449 Equity in Earnings of Power Segment
   1,359 
   2,511 
  (1,152)
    5,281 
    1,551 
   3,730 Equity in Earnings of Horizon Pipeline    Company
     542 
       - 
     542 
      957 
       - 
     957 Other Equity in Earnings (Losses)
   4,722 
    (420)
   5,142 
    6,813 
   (5,063)
  11,876 Minority Interests:    Trust Preferred    Securities
  (5,478)
  (5,478)
       - 
  (16,434)
  (16,434)
       -     Other
  (8,470)
  (5,387)
  (3,083)
  (23,115)
   (8,604)
 (14,511)Other, Net
   1,035 
   3,325 
  (2,290)
    6,085 
   15,580 
  (9,495)    
$ 54,327 
$ 11,718 
$ 42,609 
$ 144,331 
$  (1,775)
$146,106 
======== 
======== 
======== 
========= 
========= 
======== 
"Other Income and (Expenses)" was a net increase to earningsof $54.3 million and $11.7 million in the third quarter of 2002 and 2001, respectively.This positive variance of $42.6 million is principally due to (i) an increase of $25.3million in equity in earnings of Kinder Morgan Energy Partners before amortization ofequity-method goodwill (see Note 13 of the accompanying Notes to Consolidated FinancialStatements), (ii) an increase of $5.9 million due to the elimination, as of January 1,2002, of amortization related to the equity-method goodwill in Kinder Morgan EnergyPartners (see Note 16 of the accompanying Notes to Consolidated Financial Statements),(iii) a decrease of $12.3 million in net interest expense in the third quarter of 2002, 

27

reflecting reduced interest rates and reduced debt outstanding and (iv)an increase of $4.5 million from equity in earnings of other equity method investees,principally TransColorado Gas Transmission Company and Horizon Pipeline Company (note thatwe also include results from Horizon Pipeline Company in our Natural Gas Pipeline Companyof America segment). We have recently announced our intention to acquire the 50% ofTransColorado Gas Transmission Company owned by an affiliate of Questar Corporation, seeNote 14 of the accompanying Notes to Consolidated Financial Statements. These favorableimpacts were partially offset by an increase of $3.1 million in expense due to minorityinterest in the third quarter of 2002, due principally to inclusion of the minorityinterest in Kinder Morgan Management, LLC (see Note 2 of the accompanying Notes toConsolidated Financial Statements).

"Other Income and (Expenses)" was a net increase to earningsof $144.3 million in the first nine months of 2002 and a net decrease to earnings of $1.8million in the first nine months of 2001. This positive variance of $146.1 million isprincipally due to (i) an increase of $86.7 million in equity in earnings of Kinder MorganEnergy Partners before amortization of equity-method goodwill, (ii) an increase of $19.4million due to the elimination, as of January 1, 2002, of amortization related to theequity-method goodwill in Kinder Morgan Energy Partners, (iii) a decrease of $47.4 millionin net interest expense in the first nine months of 2002, reflecting reduced interestrates and reduced debt outstanding and (iv) an increase of $16.6 million from equity inearnings of other equity method investees, principally TransColorado Gas TransmissionCompany, Horizon Pipeline Company and Thermo Cogeneration Partnership (note that we alsoinclude results from Thermo Cogeneration Partnership in our Power and Other segment).These favorable impacts were partially offset by (i) an increase of $14.5 million inexpense due to minority interest in the first nine months of 2002, due principally to theinclusion of the minority interest in Kinder Morgan Management and (ii) a reduction of$4.4 million of net pre-tax gains from sales of certain assets (note that approximately$6.1 million of pre-tax gains from asset sales are also included in the results of ourNatural Gas Pipeline Company of America segment for the first nine months of 2001).
**Income Taxes**
The increase of $14.7 million in the income tax provision for the thirdquarter of 2002, relative to 2001, consisted of an increase of $15.5 million resultingfrom an increase in pretax income, partially offset by a decrease of $0.8 millionreflecting a reduction in the provision for state income taxes. The increase of $56.1million in the income tax provision for the first nine months of 2002, relative to 2001,consisted of an increase of $58.2 million resulting from an increase in pretax income,partially offset by a decrease of $2.1 million reflecting a reduction in the provision forstate income taxes.
**Discontinued Operations**
During 1999, we adopted and implemented a plan to discontinue a numberof lines of business. During 2000, we essentially completed the disposition of thesediscontinued operations. The cash flow impacts associated with discontinued operations arediscussed under "Cash Flows" following. Note 15 of the accompanying Notes toConsolidated Financial Statements contains additional information on these matters.
**Liquidity and Capital Resources**
The following table gives the sources of our invested capital. Thebalances at December 31, 2000 and thereafter reflect the transfer of certain assets toKinder Morgan Energy Partners effective as of that date, while the balances at December31, 2001 reflect the May 2001 sale of shares of Kinder Morgan Management, LLC in itsinitial public offering. The balances at September 30, 2002 also reflect the impact ofKinder Morgan Management's August 2002 public sale of its shares. In addition to ourresults of operations, which affect the amount of cash we generate internally, financingactivities such as (i) retirement of debt securities, (ii) the 

28

November 2001 maturity of our premium equity participating securityunits and (iii) reacquisition of our common stock under our stock repurchase programimpact these balances in various periods. Additional information on these matters iscontained under "Cash Flows" following and in Notes 2 and 7 of the accompanyingNotes to Consolidated Financial Statements. 

The discussion under the heading "Liquidity and CapitalResources" in Management's Discussion and Analysis of Financial Condition and Resultsof Operations included in our 2001 Form 10-K includes a comprehensive discussion of (i)our investments in and obligations to unconsolidated entities, (ii) our contractualobligations and (iii) our contingent liabilities. These disclosures, which reflectedbalances and contractual arrangements existing as of December 31, 2001, also reflectcurrent balances and contractual arrangements except as follows. With respect to ourunconsolidated investees, in addition to changes in balances resulting from the recurringoperations of these entities, Horizon Pipeline Company was completed for approximately theexpected investment and we have announced that we expect to purchase the remaining 50% ofTransColorado Gas Transmission Company. With respect to our contractual obligations, therehas been no material change in our obligations under operating leases or our Capital TrustSecurities. Changes in our long-term debt and commercial paper are discussed under"Net Cash Flows from Financing Activities" following and in Note 7 of theaccompanying Notes to Consolidated Financial Statements. We completed our incrementalinvestment in power plants approximately as expected. With respect to our contingentliabilities, we are no longer contingently liable for assumption of the $250 million powerplant note.
**September 30,**December 31,**2002**2001**2000**1999
(Dollars in    thousands)Long-term Debt:    Outstanding
$ 2,631,334 
$ 2,409,798 
$ 2,478,983 
$ 3,293,326     Market Value of    Interest Rate Swaps1
    125,720 
     (4,831)
          - 
          - 
  2,757,054 
  2,404,967 
  2,478,983 
  3,293,326 Minority Interests
    955,311 
    827,487 
      4,910 
      9,523 Common Equity
  2,333,473 
  2,267,495 
  1,777,624 
  1,649,615 Capital Trust Securities
    275,000 
    275,000 
    275,000 
    275,000 
  6,320,838 
  5,774,949 
  4,536,517 
  5,227,464 Less Market Value of Interest Rate Swaps
   (125,720)
      4,831 
          - 
          -     Capitalization
  6,195,118 
  5,779,780 
  4,536,517 
  5,227,464 Short-term Debt, Less Cash and Cash    Equivalents2
    604,394 
    613,918 
    766,244 
    555,189     Invested Capital
$ 6,799,512 
$ 6,393,698 
$ 5,302,761 
$ 5,782,653 
=========== 
=========== 
=========== 
===========   Capitalization:    Long-term Debt
42.5%
41.7%
54.6%
63.0%    Minority Interests
15.4%
14.3%
 0.1%
 0.2%    Common Equity
37.7%
39.2%
39.2%
31.5%    Capital Trust    Securities
 4.4%
 4.8%
 6.1%
 5.3%  Invested Capital:    Total Debt
47.6%
47.3%
61.2%
66.6%    Equity and Minority    Investments,      Including    Capital Trust Securities
52.4%
52.7%
38.8%
33.4%1
    See Note 11 of the accompanying Notes to Consolidated Financial Statements.2
Cash and cash    equivalents netted against short-term debt were $103,623, $16,134, $141,923 and $26,378    for September 30, 2002 and December 31, 2001, 2000 and 1999, respectively.
A number of our customers are experiencing severe financial problemsthat have had a significant impact on their creditworthiness. We are working to implement,to the extent allowable under applicable laws and 

29

regulations, prepayments and other security requirements such asletters of credit to enhance our credit position relating to amounts owed from thesecustomers. We cannot assure that one or more of our financially distressed customers willnot default on their obligations to us or that such a default or defaults will not have amaterial adverse effect on our business.

On August 14, 2001, we announced a program to repurchase $300 millionof our outstanding common stock. Our Board of Directors approved expanding the program toa total of $400 million and $450 million in February 2002 and July 2002, respectively. Asof September 30, 2002, we had repurchased a total of approximately $411.1 million(8,211,600 shares) of our outstanding common stock under the program, of which $5.6million (136,100 shares) and $140.7 million (2,916,800 shares) were repurchased in thethree months and nine months ended September 30, 2002, respectively.

In conjunction with its initial public offering in May 2001, KinderMorgan Management, one of our subsidiaries, became a partner in Kinder Morgan EnergyPartners and was delegated by Kinder Morgan Energy Partners' general partner theresponsibility to manage and control the business and affairs of Kinder Morgan EnergyPartners, subject to the general partner's right to approve specified actions. By approvalof Kinder Morgan Management shareholders other than us, effective at the close of businesson July 23, 2002, we no longer have an obligation to, upon presentation by the holderthereof, exchange publicly held Kinder Morgan Management shares for either Kinder MorganEnergy Partners' common units that we own or, at our election, cash. Prior to theelimination of the exchange feature, approximately 5.9 million and 6.8 million KinderMorgan Management shares were exchanged in the three months and nine months endedSeptember 30, 2002, respectively. A total of approximately 9.7 million Kinder MorganManagement shares had been exchanged for Kinder Morgan Energy Partners' common units orcash as of July 23, 2002.

On August 6, 2002, Kinder Morgan Management closed the issuance andsale of 12,478,900 limited liability shares in an underwritten public offering. The netproceeds of approximately $328.6 million from the offering were used by Kinder MorganManagement to buy i-units from Kinder Morgan Energy Partners. We did not purchase any ofthe offered shares. At September 30, 2002, we owned approximately 13.2 million (29.6%)percent of Kinder Morgan Management's outstanding shares, including the only two votingshares.

On August 14, 2002, Kinder Morgan Management paid a share distributionof 619,585 of its shares to shareholders of record as of July 31, 2002, based on the $0.61per common unit distribution declared by Kinder Morgan Energy Partners. On November 14,2002, Kinder Morgan Management will make a distribution totaling 937,658 of its shares toshareholders of record as of October 31, 2002, based on the $0.61 per common unitdistribution declared by Kinder Morgan Energy Partners. These distributions are paid inthe form of additional shares or fractions thereof based on the average market price of ashare determined for a ten-trading day period ending on the trading day immediately priorto the ex-dividend date for the shares. Kinder Morgan Management has paid sharedistributions totaling 1,601,127 shares in the nine months ended September 30, 2002.

On July 18, 2001, Kinder Morgan Energy Partners announced a two-for-onesplit of its common units. The common unit split, in the form of a one-common-unitdistribution for each common unit outstanding, occurred on August 31, 2001. This splitresulted in Kinder Morgan, Inc. receiving one additional common unit for each common unitit owned and Kinder Morgan Management receiving one additional i-unit for each i-unit itowned. Also on July 18, 2001, Kinder Morgan Management announced a two-for-one split ofits shares. This share split, in the form of a one-share distribution for each shareoutstanding, occurred on August 31, 2001. All references to amounts of these securities inthese Notes reflect the impact of these splits.

30

CASH FLOWS

The following discussion of cash flows should be read in conjunctionwith the accompanying interim Consolidated Statements of Cash Flows and relatedsupplemental disclosures, and the Statements of Consolidated Cash Flows and relatedsupplemental disclosures included in our 2001 Form 10-K.

Net Cash Flows from Operating Activities

"Net Cash Flows Provided by Operating Activities" decreasedfrom $273.7 million for the nine months ended September 30, 2001 to $249.8 million for thenine months ended September 30, 2002, a decrease of $23.9 million (8.8%). This negativevariance principally reflects the impacts of several non-recurring cash payments and cashflow timing issues including (i) a second-quarter 2002 $22.1 million payment and escrowdeposit in settlement of certain litigation involving Jack L. Grynberg, (ii) an $18.7million payment in 2002 for pension contributions in excess of book expense and (iii) adecrease of $30.4 million in 2002 cash attributable to deferred purchased gas costs. The$20 million pension contribution made in April 2002 was deductible under Internal RevenueService regulations but was not required to be made under ERISA minimum contributionguidelines. These negative impacts were partially offset by a decrease of $68.5 million incash outflows for gas in underground storage during 2002. Significant year-to-yearvariations in cash used or generated from gas in storage transactions are due to changesin injection and withdrawal volumes as well as fluctuations in natural gas prices.

Net Cash Flows from Investing Activities

"Net Cash Flows Used in Investing Activities" decreased from$1.3 billion for the nine months ended September 30, 2001 to $630.5 million for the ninemonths ended September 30, 2002, a decrease of $632.0 million. This decreased use of cashis principally due to (i) the fact that the nine months ended September 30, 2001 includeda $1.0 billion cash outflow versus a $331.9 cash outflow during the nine months endedSeptember 30, 2002 for investments in i-units of Kinder Morgan Energy Partners, (ii) adecrease of $46.4 million of 2002 cash outflows for power plant development investmentsand (iii) the fact that the nine months ended September 30, 2001 included a $15 millioncash outflow for acquisitions. These factors were partially offset by (i) an increase of$64.7 million in capital expenditures in 2002, principally for the Natural Gas PipelineCompany of America pipeline extension to East St. Louis, Illinois, (ii) a $16.5 million2002 cash outflow for an investment in Horizon Pipeline Company and (iii) the fact thatthe nine months ended September 30, 2001 included $25.7 million of proceeds fromdiscontinued operations sold during 2000.

On October 23, 2002, we placed in escrow the $105.5 million purchaseprice we expect to pay Questar Corp. for the stock of the Questar affiliate that owns a50% interest in TransColorado Gas Transmission Company pending anti-trust clearancepursuant to a Hart-Scott-Rodino filing made on October 25, 2002. This purchase is part ofan agreement that settles all outstanding litigation between Questar and us relating toTransColorado. See Note 14 of the accompanying Notes to Consolidated Financial Statementsfor additional information.

Net Cash Flows from Financing Activities

"Net Cash Flows Provided by Financing Activities" decreasedfrom $865.5 million for the nine months ended September 30, 2001 to $468.2 million for thenine months ended September 30, 2002, a decrease of $397.3 million. This decrease isprincipally due to (i) the fact that the nine months ended September 30, 2001 and 2002included proceeds, net of issuance costs, of $888.1 million and $328.6, respectively, fromthe issuance of Kinder Morgan Management shares, (ii) a $1.0 billion decrease during 2002in net short-term borrowing, and (iii) $24.0 million of cash used for the early retirementof our 7.85% debentures due September 1, 2022 (see Note 7 of the accompanying Notes toConsolidated Financial Statements). Partially offsetting these factors were 

31

$743.0 million of net proceeds received in 2002 from the issuance ofour 6.50% Senior Notes due September 1, 2012 and the fact that the nine months endedSeptember 30, 2001 included a $495.7 million cash outflow for the early extinguishment ofthree series of debt securities (see Note 7 of the accompanying Notes to ConsolidatedFinancial Statements).

Our principal sources of short-term liquidity are the commercial papermarket and our $758.3 million of revolving bank facilities, which replaced $900 million ofrevolving bank facilities on October 15, 2002, with additional commitments possible in thefourth quarter. At September 30, 2002, we had no commercial paper (which is backed by thebank facilities) issued and outstanding. At October 31, 2002, we had $296.6 million ofcommercial paper issued and outstanding. After inclusion of applicable letters of credit,the remaining available borrowing capacity under the bank facilities was $869.4 millionand $429.2 million at September 30, 2002 and October 31, 2002, respectively. The increasein the amount of commercial paper issued and outstanding subsequent to September 30, 2002reflects the retirement of the $200 million of floating rate notes (see following and Note7 of the accompanying Notes to Consolidated Financial Statements) and the placement of$105.5 million in escrow relating to the purchase of the 50 percent interest inTransColorado Gas Transmission Company that we don't already own, as discussed under"Net Cash Flows from Investing Activities" preceding and Note 14 of theaccompanying Notes to Consolidated Financial Statements. For additional information onutilization of these facilities, see Note 7 of the accompanying Notes to ConsolidatedFinancial Statements.

Apart from our current maturities of long-term debt, our currentliabilities exceeded our current assets by approximately $10.4 million at September 30,2002. Our current maturities of long-term debt of $708.0 million at September 30, 2002principally consisted of the $500 million of our 6.45% Series Senior Notes due in March of2003, the $200 million of our Floating Rate Notes due in October 2002 (retired on October10, 2002, see below) and the $5 million of our 7.27% Series Senior Notes due in Decemberof 2002. We currently expect that funding for the remainder of these obligations will beprovided by cash generated from operations and incremental short-term borrowings. Apartfrom the remaining current maturities of long-term debt just described, we have nosignificant long-term debt maturities until March 2005.

On October 10, 2002, we retired our $200 million of Floating Rate Notesdue October 10, 2002, utilizing a combination of cash and incremental short-term debt. OnNovember 1, 2002, we retired the full $35 million of our 8.35% sinking fund debentures dueSeptember 15, 2022 at a premium of 104.175% of the face amount of the debentures. Weexpect to record an extraordinary loss of $1.0 million (net of associated tax benefit of$0.7 million) in connection with this early extinguishment of debt in the fourth quarterof 2002. Effective September 1, 2002, we retired our $24.0 million of 7.85% debentures dueSeptember 1, 2022 at par. We recorded an extraordinary loss of $420 thousand (net ofassociated tax benefit of $275 thousand) in conjunction with this early extinguishment ofdebt, consisting of the unamortized debt expense associated with these debentures.

On August 27, 2002, we issued $750 million of our 6.50% Senior Notesdue September 1, 2012, in an offering made pursuant to Rule 144A of the regulations of theSecurities and Exchange Commission, with registration rights. The proceeds were used toretire our short-term notes payable then outstanding, with the balance invested inshort-term commercial paper and money market funds. On October 18, 2002, we commenced anexchange offer to exchange these notes for our 6.50% Senior Notes due September 1, 2012,which have been registered under the Securities Act. These new notes have the same formand terms and evidence the same debt as the original notes, and are being offered forexchange to satisfy our obligation to exchange the original notes for registered notes.

On September 10, 2001, we retired our $45 million of 9.625% SeriesSinking Fund Debentures due March 1, 2021, utilizing incremental short-term borrowings. InMarch 2001, we retired (i) our $400 million of Reset Put Securities due March 1, 2021 and(ii) our $20 million of 9.95% Series Sinking Fund Debentures due 2020, utilizing acombination of cash and incremental short-term debt. In conjunction with these early 

32

extinguishments of debt, we recorded an extraordinary loss of $13.6million (net of associated tax benefit of $9.0 million), presented as a separate line itemin the accompanying interim Consolidated Statement of Income for the nine months endedSeptember 30, 2001.

As further described in Note 11 of the accompanying Notes toConsolidated Financial Statements, we have outstanding fixed-to-floating interest rateswap agreements with a notional principal amount of $1.75 billion and a fair market valueof approximately $125.7 million at September 30, 2002. These swaps are accounted for ashedges under Statement of Financial Accounting Standards ("SFAS") No. 133, *Accountingfor Derivative Instruments and Hedging Activities*.
**Recently Issued Accounting Standards**
In June 2001, the Financial Accounting Standards Board("FASB") issued SFAS No. 143, *Accounting for Asset Retirement Obligations*.This Statement addresses financial accounting and reporting for obligations associatedwith the retirement of tangible long-lived assets and the associated asset retirementcosts. This Statement requires that the fair value of a liability for an asset retirementobligation be recognized in the period in which it is incurred if a reasonable estimate offair value can be made. The associated asset retirement costs are capitalized as part ofthe carrying amount of the long-lived asset. This Statement contains disclosurerequirements that provide descriptions of asset retirement obligations and reconciliationsof changes in the components of those obligations. This Statement is effective forfinancial statements issued for fiscal years beginning after June 15, 2002. Earlierapplications are encouraged. We have not yet quantified the impacts of adopting thisStatement on our financial position or results of operations.

On April 30, 2002, the FASB issued SFAS No. 145*, Rescission of FASBStatements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and TechnicalCorrections*. This Statement rescinds SFAS No. 4, *Reporting Gains and Losses fromExtinguishment of Debt* and SFAS No. 64, *Extinguishments of Debt Made to SatisfySinking-Fund Requirements*, as well as SFAS No. 44, *Accounting for Intangible Assetsof Motor Carriers*. It also amends SFAS No. 13, *Accounting for Leases*, toeliminate an inconsistency between the required accounting for sale-leaseback transactionsand the required accounting for certain lease modifications that have economic effectsthat are similar to sale-leaseback transactions. This Statement also amends other existingauthoritative pronouncements to make various technical corrections, clarify meanings, ordescribe their applicability under changed conditions. The provisions of this Statementrelated to the rescission of SFAS No. 4 shall be applied in fiscal years beginning afterMay 15, 2002. The provisions related to the amendment to SFAS No. 13 shall be effectivefor transactions occurring after May 15, 2002. All other provisions in this Statementshall be effective for financial statements issued on or after May 15, 2002. Earlyapplication of the provisions of this Statement is encouraged, and may be as of thebeginning of the fiscal year or as of the beginning of the interim period in which thisStatement is issued.

As a result of the rescission of SFAS No. 4, gains and losses fromextinguishment of debt should be classified as extraordinary items only if they meet thecriteria in Accounting Principles Board Opinion No. 30, *Reporting the Results ofOperations- Reporting the Effects of Disposal of a Segment of a Business, andExtraordinary, Unusual and Infrequently Occurring Events and Transactions*. Applyingthe provisions of Accounting Principles Board Opinion No. 30 will distinguish transactionsthat are part of an entity's recurring operations from those that are unusual orinfrequent or that meet the criteria for classification as an extraordinary item. Theprovisions of SFAS No. 145 related to the rescission of SFAS No. 4 will require us, whenthe provisions are applied, to reclassify, in income statements that include the first andthird quarters of 2001 as well as the third and fourth quarters of 2002, the losses onextinguishment of debt that have been classified as an extraordinary item.

33
**In June 2002, the FASB issued SFAS No. 146, *Accounting for Costs Associatedwith Exit or Disposal Activities*, which addresses financial accounting and reportingfor costs associated with exit or disposal activities and nullifies Emerging Issues TaskForce (EITF) Issue No. 94-3, *Liability Recognition for Certain Employee TerminationBenefits and Other Costs to Exit an Activity (including Certain Costs Incurred in aRestructuring).* This Statement requires that a liability for a cost associated with anexit or disposal activity be recognized when the liability is incurred. Under EITF Issue94-3, a liability for an exit activity as defined in EITF Issue 94-3 was recognized at thedate of an entity's commitment to an exit plan. This Statement eliminates the definitionand requirements for recognition of exit costs in EITF Issue 94-3 and establishes thatfair value is the objective for initial measurement of the liability. The provisions ofthis Statement are effective for exit or disposal activities that are initiated afterDecember 31, 2002, with early application encouraged.****
**Information Regarding Forward-looking Statements**

This filing includes forward-looking statements within the meaning ofSection 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Actof 1934. These forward-looking statements are identified as any statement that does notrelate strictly to historical or current facts. They use words such as"anticipate," "believe," "intend," "plan,""projection," "forecast," "strategy," "position,""continue," "estimate," "expect," "may,""will," or the negative of those terms or other variations of them or bycomparable terminology. In particular, statements, express or implied, concerning futureoperating results or the ability to generate sales, income or cash flow areforward-looking statements. Forward-looking statements are not guarantees of performance.They involve risks, uncertainties and assumptions. The future results of our operationsmay differ materially from those expressed in these forward-looking statements. Many ofthe factors that will determine these results are beyond our ability to control orpredict. Specific factors that could cause actual results to differ from those in theforward-looking statements include but are not limited to the following:
  •
price trends and overall demand for    natural gas liquids, refined petroleum products, oil, carbon dioxide, natural gas, coal    and other bulk materials in the United States; economic activity, weather, alternative    energy sources, conservation and technological advances may affect price trends and    demand;
  •
changes in our tariff rates or those of    Kinder Morgan Energy Partners implemented by the Federal Energy Regulatory Commission or    another regulatory agency or, with respect to Kinder Morgan Energy Partners, the    California Public Utilities Commission;
  •
Kinder Morgan Energy Partner's ability to    integrate any acquired operations into its existing operations;
  •
Kinder Morgan Energy Partner's ability and    our ability to acquire new businesses and assets and to make expansions to our respective    facilities;
  •
difficulties or delays experienced by    railroads, barges, trucks, ships or pipelines in delivering products to Kinder Morgan    Energy Partners' bulk terminals;
  •
Kinder Morgan Energy Partners' ability and    our ability to successfully identify and close acquisitions and make cost-saving changes    in operations;
  •
shut-downs or cutbacks at major    refineries, petrochemical or chemical plants, utilities, military bases or other    businesses that use or supply our services;
34
•
      changes in laws or regulations, third party relations and approvals, decisions of courts,    regulators and governmental bodies may adversely affect our business or our ability to    compete;
  •
our ability to offer and sell equity    securities and debt securities or obtain debt financing in sufficient amounts to implement    that portion of our business plan that contemplates growth through acquisitions of    operating businesses and assets and expansions of our facilities;
  •
our indebtedness could make us vulnerable    to general adverse economic and industry conditions, limit our ability to borrow    additional funds, place us at competitive disadvantages compared to our competitors that    have less debt or have other adverse consequences;    •
interruptions of electric power supply to    facilities due to natural disasters, power shortages, strikes, riots, terrorism, war or    other causes;
  
•
acts of sabotage, terrorism or other    similar acts causing damage greater than our insurance coverage limits;
  •
the condition of the capital markets and    equity markets in the United States;
  •
the political and economic stability of    the oil producing nations of the world;
  •
national, international, regional and    local economic, competitive and regulatory conditions and developments;
  •
the ability to achieve cost savings and    revenue growth;
  •
rates of inflation;
  •
interest rates;
  •
the pace of deregulation of retail natural    gas and electricity;
  •
the timing and extent of changes in    commodity prices for oil, natural gas, electricity and certain agricultural products; and
  •
the timing and success of business    development efforts.
You should not put an undue reliance on forward-looking statements.

See the "Risk Factors" section of Items 1. and 2. Businessand Properties contained in our 2001 Form 10-K for a more detailed description of theseand other factors that may affect the forward-looking statements. When consideringforward-looking statements, one should keep in mind the risk factors described in our 2001Form 10-K report. The risk factors could cause our actual results to differ materiallyfrom those contained in any forward-looking statement.
***Item3.  Quantitative and Qualitative Disclosures about Market Risk.***
There have been no material changes in market risk exposures that wouldaffect the quantitative and qualitative disclosures presented as of December 31, 2001, inthe "Risk Management" section of Management's Discussion 
**35

and Analysis of Financial Condition and Results of Operations containedin our 2001 Form 10-K. See also Note 11 of the accompanying Notes to ConsolidatedFinancial Statements.
***Item4.  Controls and Procedures.***
Within the 90-day period prior to the filing of this report, we carriedout an evaluation under the supervision and with the participation of our management,including our Chief Executive Officer and Chief Financial Officer, of the effectiveness ofthe design and operation of our disclosure controls and procedures pursuant to Rule13a-14(c) under the Securities Exchange Act of 1934. Based upon that evaluation, our ChiefExecutive Officer and Chief Financial Officer concluded that the design and operation ofour disclosure controls and procedures were effective. No significant changes were made inour internal controls or in other factors that could significantly affect these controlssubsequent to the date of their evaluation.

**PART II - OTHER INFORMATION*********Item 1.  Legal Proceedings.*****The reader is directed to Note 14 of the accompanying Notes to ConsolidatedFinancial Statements in Part I, Item 1, which is incorporated herein by reference. 
***Item2.  Changes in Securities and Use of Proceeds.***
The exchange feature issued by us and attached to Kinder MorganManagement, LLC shares was eliminated effective at the close of business on July 23, 2002.See Note 2 of the accompanying Notes to Consolidated Financial Statements.

During the quarter ended September 30, 2002, we did not sell any equitysecurities that were not registered under the Securities Act of 1933, as amended.
***Item3.  Defaults Upon Senior Securities.***
None.
***Item4.  Submission of Matters to a Vote of Security Holders.***
None.
***Item 5.  Other Information.***
Risk Factors

Set forth below are two updated risk factors relating to our business. For additionalrisk factors about us, see our 2001 Form 10-K filed with the Securities and ExchangeCommission.
**The distressed financial condition of some of our customers could havean adverse impact on us in the event these customers are unable to pay us for the serviceswe provide. Some of our customers are experiencing severe financial problems. Thebankruptcy of one or more of them, or some other similar proceeding or liquidityconstraint might make it unlikely that we would be able to collect all or a significantportion of amounts owed by the distressed entity or entities.
**36
**Increased regulatory requirements relating to the integrity of ourpipelines will require us to spend additional money to comply with these requirements.Through our regulated pipeline businesses, we are subject to extensive laws andregulations related to pipeline integrity. Compliance with existing regulations requiressignificant expenditures. Additional laws and regulations that may be enacted in thefuture could significantly increase the amount of these expenditures.
***Item6.  Exhibits and Reports on Form 8-K.*****  ****(A)     Exhibits.****  **       4.1*
    Form of Indenture dated August 27, 2002 between Kinder Morgan, Inc. and Wachovia Bank,    National Association, as Trustee (incorporated by reference from Exhibit 4.1 of Kinder    Morgan, Inc.'s Registration Statement on Form S-4 (Registration No. 333-100338) filed with    the Securities and Exchange Commission on October 4, 2002).**  **       4.2*
    Form of 6.50% Note (contained in the Indenture filed as Exhibit 4.1).**  **     4.3*
    Form of Registration Rights Agreement dated August 27, 2002 among Kinder Morgan, Inc.,    Salomon Smith Barney Inc., Wachovia Securities, Inc., Commerzbank Capital Markets Corp.,    Scotia Capital (USA) Inc., BMO Nesbitt Burns Corp., J.P. Morgan Securities Inc., RBC    Dominion Securities Corporation, SunTrust Capital Markets, Inc., Banc One Capital Markets,    Inc., and Credit Lyonnais Securities (USA)Inc. (incorporated by reference from Exhibit 4.3    of Kinder Morgan, Inc.'s Registration Statement on Form S-4 (Registration No. 333-100338)    filed with the Securities and Exchange Commission on October 4, 2002).**  **       4.4
    Certain instruments with respect to long-term debt of Kinder Morgan, Inc. and its    consolidated subsidiaries which relate to debt that does not exceed 10% of the total    assets of Kinder Morgan, Inc. and its consolidated subsidiaries are omitted pursuant to    Item 601(b) (4) (iii) (A) of Regulation S-K, 17 C.F.R. ss.229.601. Kinder Morgan, Inc.    hereby agrees to furnish supplementally to the Securities and Exchange Commission a copy    of each such instrument upon request.**  **    99.1    99.2           Certification of Chief Executive Officer          Certification of Chief Financial Officer
*   Asterisk    indicates exhibits incorporated by reference as indicated; all other exhibits are filed    herewith.**  ****      (B)     Reports on Form 8-K.****  ****  ****  **(1)**Current Report on Form 8-K dated July    8, 2002 was filed on July 8, 2002 pursuant to Item 9. and Item 7. of that form.**  **  **  **  
Pursuant to Item 9. of that    form, in Item 7. Kinder Morgan, Inc. filed an exhibit containing press releases dated July    8, 2002 in which Kinder Morgan, Inc. and Kinder Morgan Energy Partners, L.P. announced    that they expect to exceed consensus earnings estimates for the second quarter of 2002.
37
**  **(2)**      Current Report on Form 8-K dated July 23, 2002 was filed on July 23, 2002 pursuant to Item    5. and Item 7. of that form.**  **  **  **  
Pursuant to Item 5. of that    form, Kinder Morgan, Inc. made two disclosures. First, Kinder Morgan, Inc. disclosed that    on July 23, 2002, Kinder Morgan, Inc. issued a press release announcing that (i) at a    special meeting of shareholders of Kinder Morgan Management, LLC held on July 23, 2002,    Kinder Morgan Management, LLC shareholders approved an amendment to Kinder Morgan    Management, LLC's limited liability agreement eliminating the exchange feature of Kinder    Morgan Management, LLC's shares, and (ii) Kinder Morgan, Inc. will issue to each Kinder    Morgan Management, LLC shareholder .09853 shares of Kinder Morgan, Inc. common stock for    each 100 Kinder Morgan Management, LLC shares held of record by such shareholder at the    close of business on July 23, 2002, with cash in lieu of fractional shares. Second, Kinder    Morgan, Inc. disclosed that David G. Dehaemers, Jr., Vice President–Corporate    Development, announced his intention to leave Kinder Morgan, Inc. to pursue personal and    family interests effective April 2003.

Pursuant to Item 7. of that form, Kinder Morgan, Inc. filed the press    release of the Company issued July 23, 2002 as an exhibit.**  
  **  **(3)**Current Report on Form 8-K dated August    8, 2002 was filed on August 9, 2002 pursuant to Item 7. and Item 9. of that form.**  **  **  **  
Pursuant to Item 9. of that    form, Kinder Morgan, Inc. disclosed that on August 8, 2002 the Chairman and Chief    Executive Officer and Vice President and Chief Financial Officer of Kinder Morgan, Inc.    executed certifications in connection with the Form 10-Q of Kinder Morgan, Inc. for the    period ended June 30, 2002 pursuant to the Sarbanes-Oxley Act of 2002.

Pursuant to Item 7. of that form, Kinder Morgan, Inc. filed copies of    such certifications as an exhibit.**  ****  **(4)**Current Report on Form 8-K dated August    14, 2002 was filed on August 14, 2002 pursuant to Item 9. of that form.**  **  **  
Pursuant to Item 9. of that    form, Kinder Morgan, Inc. announced its intention to make presentations on August 14, 2002    at the UBS Warburg Equity Investor Tour to investors, analysts and others to address    various strategic and financial issues relating to the business plans and objectives of    Kinder Morgan, Inc., Kinder Morgan Energy Partners, L.P. and Kinder Morgan Management,    LLC, and the availability of materials to be presented at the meetings on Kinder Morgan,    Inc.'s website.**  **(5)**Current Report on Form 8-K dated August    26, 2002 was filed on August 27, 2002 pursuant to Item 5. and Item 7. of that form.**  
Pursuant to Item 5. of that    form, Kinder Morgan, Inc. disclosed that on August 26, 2002 it issued a press release.

Pursuant to Item 7. of that form, Kinder Morgan, Inc. filed the press    release of the company issued August 26, 2002 as an exhibit.
38
**  **(6)**      Current Report on Form 8-K dated September 4, 2002 was filed on September 4, 2002 pursuant    to Item 9. of that form.**  **  
Pursuant to Item 9. of that    form, Kinder Morgan, Inc. announced its intention to make presentations on September 4,    2002 at the Lehman Brothers' 2002 CEO Energy/Power Conference to investors, analysts and    others to address various strategic and financial issues relating to the business plans    and objectives of Kinder Morgan, Inc., Kinder Morgan Energy Partners, L.P. and Kinder    Morgan Management, LLC, the availability of materials to be presented at the meetings on    Kinder Morgan, Inc.'s website and the ability of interested parties to access the    presentations by audio webcast, both live and on-demand.**  
  **  **(7)**Current Report on Form 8-K dated    September 17, 2002 was filed on September 18, 2002 pursuant to Item 9. of that form.**  **  **  
Pursuant to Item 9. of that    form, Kinder Morgan, Inc. announced its intention to make presentations on September 19,    2002 at the Global Power & Gas Leaders Conference to investors, analysts and others to    address various strategic and financial issues relating to the business plans and    objectives of Kinder Morgan, Inc., Kinder Morgan Energy Partners, L.P. and Kinder Morgan    Management, LLC, the availability of materials to be presented at the meetings on Kinder    Morgan, Inc.'s website and the ability of interested parties to access the presentations    by audio webcast, both live and on-demand.
39

**SIGNATURE**

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant hasduly caused this report to be signed on its behalf by the undersigned thereunto dulyauthorized.  
KINDER MORGAN, INC.    (Registrant)November 13, 2002/s/ C.    Park ShaperC. Park Shaper    Vice President and Chief Financial Officer    (Principal Financial and Accounting Officer)
 

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**CERTIFICATIONS**I, Richard D. Kinder, certify    that:  1.I have reviewed this quarterly    report on Form 10-Q of Kinder Morgan, Inc.;  2.
Based on my    knowledge, this quarterly report does not contain any untrue statement of a material fact    or omit to state a material fact necessary to make the statements made, in light of the    circumstances under which such statements were made, not misleading with respect to the    period covered by this quarterly report;  3.
Based on my    knowledge, the financial statements, and other financial information included in this    quarterly report, fairly present in all material respects the financial condition, results    of operations and cash flows of the registrant as of, and for, the periods presented in    this quarterly report;  4.
The    registrant's other certifying officers and I are responsible for establishing and    maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14    and 15d-14) for the registrant and we have:  a)
designed such disclosure    controls and procedures to ensure that material information relating to the registrant,    including its consolidated subsidiaries, is made known to us by others within those    entities, particularly during the period in which this quarterly report is being prepared;  b)
evaluated the effectiveness    of the registrant's disclosure controls and procedures as of a date within 90 days prior    to the filing date of this quarterly report (the "Evaluation Date"); and  c)
presented in this quarterly    report our conclusions about the effectiveness of the disclosure controls and procedures    based on our evaluation as of the Evaluation Date;  5.
The    registrant's other certifying officers and I have disclosed, based on our most recent    evaluation, to the registrant's auditors and the audit committee of registrant's board of    directors (or persons performing the equivalent function):  a)
all significant    deficiencies in the design or operation of internal controls which could adversely affect    the registrant's ability to record, process, summarize and report financial data and have    identified for the registrant's auditors any material weaknesses in internal controls; and  b)
any fraud, whether or not    material, that involves management or other employees who have a significant role in the    registrant's internal controls; and  6.
The    registrant's other certifying officers and I have indicated in this quarterly report    whether or not there were significant changes in internal controls or in other factors    that could significantly affect internal controls subsequent to the date of our most    recent evaluation, including any corrective actions with regard to significant    deficiencies and material weaknesses.  /s/    Richard D. KinderRichard D. KinderChairman and Chief Executive Officer  Date: November 13, 2002
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I, C. Park Shaper, certify that:  1.I have reviewed this quarterly    report on Form 10-Q of Kinder Morgan , Inc.;  2.
Based on my    knowledge, this quarterly report does not contain any untrue statement of a material fact    or omit to state a material fact necessary to make the statements made, in light of the    circumstances under which such statements were made, not misleading with respect to the    period covered by this quarterly report;  3.
Based on my    knowledge, the financial statements, and other financial information included in this    quarterly report, fairly present in all material respects the financial condition, results    of operations and cash flows of the registrant as of, and for, the periods presented in    this quarterly report;  4.
The    registrant's other certifying officers and I are responsible for establishing and    maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14    and 15d-14) for the registrant and we have:  a)
designed such disclosure    controls and procedures to ensure that material information relating to the registrant,    including its consolidated subsidiaries, is made known to us by others within those    entities, particularly during the period in which this quarterly report is being prepared;  b)
evaluated the effectiveness    of the registrant's disclosure controls and procedures as of a date within 90 days prior    to the filing date of this quarterly report (the "Evaluation Date"); and  c)
presented in this quarterly    report our conclusions about the effectiveness of the disclosure controls and procedures    based on our evaluation as of the Evaluation Date;  5.
The    registrant's other certifying officers and I have disclosed, based on our most recent    evaluation, to the registrant's auditors and the audit committee of registrant's board of    directors (or persons performing the equivalent function):  a)
all significant    deficiencies in the design or operation of internal controls which could adversely affect    the registrant's ability to record, process, summarize and report financial data and have    identified for the registrant's auditors any material weaknesses in internal controls; and  b)
any fraud, whether or not    material, that involves management or other employees who have a significant role in the    registrant's internal controls; and  6.
The    registrant's other certifying officers and I have indicated in this quarterly report    whether or not there were significant changes in internal controls or in other factors    that could significantly affect internal controls subsequent to the date of our most    recent evaluation, including any corrective actions with regard to significant    deficiencies and material weaknesses.    /s/ C. Park ShaperC. Park ShaperVice President, Treasurer and Chief Financial    Officer  Date: November 13, 2002
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