March 2011 Letter to Unitholders

Overall, 2010 was a good year at Kinder Morgan Energy Partners. We hit our distribution per unit target of $4.40 for the year, and we generated cash in excess of that distribution, although we did fall a bit short of our annual budget in terms of distributable cash flow. The $4.40 per unit represented a 4.8 percent increase over the 2009 distribution of $4.20 per unit. More importantly to you, KMP's units generated a 23 percent return for 2010.

While we had our share of challenges in 2010, including a sputtering economy that continued to impact various market sectors during the year, our diversified portfolio of assets continued to successfully generate tremendous amounts of stable cash flow. Once again, all five of our business segments produced stronger results than in the prior year. Including joint ventures, total segment earnings before DD&A were $3.5 billion for 2010, up 14 percent from 2009. This increase was driven by solid asset performance and contributions from various investment initiatives.

Highlights in 2010 included acquiring assets and forming joint ventures to participate in exciting opportunities in the Haynesville and Eagle Ford natural gas shale plays, acquiring 14 terminals that store refined petroleum products, ethanol and bulk materials, and completing the Fayetteville Express natural gas pipeline. In total, we invested approximately $2.5 billion in 2010 to further grow the company.

We strive for operational excellence, and in 2010 we again outperformed the industry averages in virtually all safety and release categories. We spend hundreds of millions of dollars each year on integrity management programs and maintenance to operate our assets safely, as we are dedicated to protecting the public, our employees, contractors and the environment.

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