2005 ANNUAL REPORT

500 Dallas, Suite 1000Houston, Texas 77002(713) 369-9000

www.kindermorgan.com

2

7 5Texas

In

trast

ate

North

Tex

as

CO2

Wink

Monterrey

Pacific

Cypress

Tran

sCol

orad

oEn

treg

a

North

Cochin

KMIGT

Trailblazer

Paci

fic

CALNEV

SACROC

Claytonville

Yates

2

2

2

PRODUCTS PIPELINES

Largest independent owner/operator in the U.S. Transportover 2 million barrels/day of gasoline, jet fuel, diesel andnatural gas liquids through more than 10,000 miles of pipe-lines. About 60 terminals have a storage capacity of over 29 million barrels. Also have five transmix facilities.

NATURAL GAS PIPELINES

Major transporter of natural gas in Texas, Rocky Mountainand Midwest areas. Approximately 15,000 miles of pipelineswith transportation capacity of about 9 billion cubic feet/dayand working gas storage capacity of 35 billion cubic feet. Alsoown/operate gathering, treating and processing facilities.

OFFICE OF THE CHAIRMAN

Richard D. KinderChairman and Chief Executive Officer

C. Park ShaperPresident

Steven J. KeanExecutive Vice President and Chief Operating Officer

OPERATING OFFICERS

Jeffrey R. ArmstrongPresident, Terminals

Thomas A. BanniganPresident, Products Pipelines

R. Tim BradleyPresident, CO2

Scott ParkerPresident, Natural Gas Pipelines

CORPORATE OFFICERS

Richard L. BullockVice President and Chief Tax Officer

Kimberly Allen DangChief Financial Officer and Vice President, Investor Relations

W. Garner DotsonVice President, Internal Audit

David D. KinderVice President, Corporate Development and Treasurer

Joseph ListengartVice President, General Counsel and Secretary

Henry W. NeumannVice President and Chief Information Officer

Larry S. PierceVice President, Corporate Communications

James E. StreetVice President, Human Resources

Debra M. WitgesVice President and Controller

BOARD OF DIRECTORS

Richard D. KinderChairman and Chief Executive Officer Kinder Morgan G.P., Inc.

C. Park ShaperPresidentKinder Morgan G.P., Inc.

Edward O. Gaylord (2)

PresidentGaylord Interests LLC

Gary Hultquist (2), (3)

Managing DirectorHultquist Capital, LLC

Perry M. Waughtal (1)

Limited Partner and ChairmanSongy Partners Limited

Kinder Morgan Energy Partners, L.P. does not have officers ordirectors. Listed are the officers and directors of the GeneralPartner, Kinder Morgan G.P., Inc. and Kinder MorganManagement, LLC (the delegate of Kinder Morgan G.P., Inc.).

(1) Chairman, Audit Committee(2) Member, Audit Committee(3) Lead Director

UNITHOLDER INFORMATION

Headquarters:500 Dallas, Suite 1000Houston, TX 77002(713) 369-9000

Exchange Listing:New York Stock Exchange Ticker Symbol: KMP

Transfer Agent, Registrar and Cash Distributions:Computershare Trust Company, N.A. (formerly EquiServe)PO Box 43069Providence, RI 02940-3069 (800) 847-4351www.computershare.com/equiserve

K-1 Tax Reports:For questions or corrections, please call (800) 232-1627

All other inquiries:Investor Relations (800) 324-2900 or (713) 369-9490E-mail: kmp_ir@kindermorgan.comPlease visit our web site at

www.kindermorgan.comfor investor information

3

2

2

2

2

2

4

5 45

2

ress

Plan

tation

Central

Florida

2

2

2

2

4

3

Products Pipelines

Products Pipelines Terminals

Transmix Facilities

Natural Gas Pipelines

Natural Gas Storage

Natural Gas Processing/Treating Plants

CO2 Pipelines

CO2 Oil Fields

Crude Oil Pipelines

Terminals

Indicates number of facilities in area

Kinder Morgan Headquarters

(2, 3, 5)

CO2

Largest transporter and marketer of carbon dioxide forenhanced oil recovery projects in the U.S. Transport over 1 billion cubic feet/day of CO2 through more than 1,300 miles of pipelines. Second largest oil producer inTexas with significant interests in two major oil fields and acrude oil pipeline in the Permian Basin.

TERMINALS

Largest independent owner/operator in the U.S. More than85 terminals nationwide handle over 80 million tons annuallyof coal, petcoke and other materials. Also have a liquidsstorage capacity of over 40 million barrels for petroleumproducts and chemicals and about 55 transload facilities.

LETTER TO UNITHOLDERS

Those of you who have followed Kinder Morgan EnergyPartners, L.P. (NYSE: KMP) know that I often use sportsmetaphors when talking about our business. I’ve notedmany times that this is a game of singles and doubles, not swinging for the fences. And while I dislike overlyflowery letters to unitholders, when you look at what weaccomplished in 2005 to position KMP for future growth, I truly believe we hit a home run. Among our achievements,we laid the groundwork to build the Rockies ExpressPipeline, which will be one of the largest projects of its kind ever constructed in the United States; we securedcommitments to build a pipeline in Louisiana that will move regasified liquefied natural gas from LNG terminalsalong the Gulf Coast into the country’s pipeline network;and, we purchased a large petroleum coke terminal networkin Texas that makes us the largest independent handler ofpetcoke in America.

Our 2005 financial performance was pretty good, too.We announced an increase in KMP’s quarterly cash distri-bution per common unit for the 13th consecutive quarter to $0.80 ($3.20 annualized), up 8 percent over the 2004fourth quarter cash distribution per unit of $0.74. In total,KMP declared cash distributions of $3.13 per unit, up 9 percent from $2.87 per unit for 2004 and on target withour published budget. Net income before certain items was$982.3 million, up 18 percent from 2004.

As I say every year, we are not without challenges.Regulatory matters, such as final resolution of the ongoingSFPP rate case at KMP, potential environmental issuesrelated to owning or operating approximately 27,000 milesof pipelines and 145 terminals, the threat of terrorism andincreasing interest rates are among the risks that we mustmanage effectively. We also had to overcome the impact oftwo major hurricanes that affected many of our businessoperations along the Gulf Coast during 2005. I am veryproud of the way our employees responded to protect our

assets and serve ourcustomers, particularly inspite of the fact that many ofthem experienced personallosses from the storms.

Our strategy is verysimple and unchanged fromprior years: 1) we own andoperate quality midstreamenergy assets, primarilypipelines and terminals, thatproduce consistent fee-based cash flow and earnings; 2) we run these assets in the most efficient, cost-effectiveway possible with a commitment to public safety andprotection of the environment; 3) we grow our businessthrough a combination of expansions, acquisitions andinternal growth in both volumes and tariffs; and, 4) wemaximize the benefit of the master limited partnershipstructure, which is the most tax-advantaged method ofowning these types of assets.

A key part of our strategy has always been to identifytrends in the energy industry and to invest capital to exploitthose trends. In executing our strategy, we allocate capital ina disciplined way, we work hard to be a low-cost operator byeliminating perks and needless corporate overhead, and werelentlessly pursue operational excellence.

We also work hard to align the interests of managementwith unitholders. My salary is $1 per year with no bonuses,stock option grants or restricted stock. We continue to capbase salaries of senior management, as much of their cashcompensation comes in the form of bonuses that are payableonly if we meet specific financial targets established at thebeginning of each year.

It’s as exciting a time to be in the energy industry as I can ever remember. The Rockies Express Pipeline willtransport about 1.8 billion cubic feet per day (Bcf/d) ofnatural gas from the prolific supply basins in Wyoming and Colorado to eastern Ohio. We have secured bindinglong-term commitments from shippers for all of the capacity on the 1,323-mile pipeline, which we are buildingwith our partner Sempra Energy. We will operate RockiesExpress and own between one-half and two-thirds of theproject, depending on whether certain shippers exercise their ownership options. The over $4 billion project (whichincludes the acquisition of the Entrega Pipeline) is expectedto be substantially accretive to cash distributions beginningin January 2008 when the first segment commences service,and the entire project is projected to be completed by June 2009.

Another key growth project is the Kinder MorganLouisiana Pipeline. We entered into 20-year, fixed-rateagreements with Chevron and Total to support thisapproximately $500 million project. The pipeline willprovide 3.2 Bcf/d of takeaway capacity from the CheniereSabine Pass LNG plant. The first segment of the project isprojected to commence service in October 2008 and theentire project is expected to be completed by April 2009.

$2.87

2.06

$3.13

2.32

DECLARED DISTRIBUTIONS ($ per unit)

In 2005, we made 10 acquisitions totalingapproximately $470 million(including expansion up-grades and environmentalliabilities), most of whichwere in the Terminalssegment. Our largestpurchase was a $247 millionpetroleum coke terminalnetwork in Texas. Petcoke is

a carbonaceous solid residual by-product of the oil refiningcoking process and is used primarily in the cement andpower generation industries. We believerefineries will process more heavy crude in the future, which would generate morepetcoke and enable us to continue toexpand this business across the country.

As I’ve said many times, we don’tbuild or expand assets, or makeacquisitions, just to get bigger. We only undertake such projects when we have satisfactory commitments in place to ensure an adequate return on our investment.

BUSINESS SEGMENTS

Our assets generated approximately $1.2 billion indistributable cash flow in 2005, with all four businesssegments reporting increased earnings before depreciation,depletion and amortization (DD&A) compared to 2004.Our success was attributable to both internal growth andcontributions from acquisitions.

The Products Pipelines segment delivered 2005earnings before DD&A of $508.3 million, a 7 percentincrease over 2004 earnings, but short of our publishedbudget. The segment was impacted by hurricanes Katrinaand Rita and lower than expected revenues from the WestCoast terminals, the North System and the Cochin Pipeline.Total refined products volumes increased by 2.5 percent forthe year, excluding Plantation Pipeline which was impactedby the hurricanes and related refinery disruptions.

Our Products Pipelines segment serves eight of the 10 fastest growing markets in the United States andcontinues to offer various growth opportunities in the Westand Southeast. For example, we expect to complete our $210 million East Line expansion by May 2006, which willsignificantly increase pipeline transportation capacity forgasoline, jet fuel and diesel between El Paso, Texas, andPhoenix, Ariz. Additionally, we built and placed into servicefour new tanks that increased the storage capacity of ourCarson liquids terminal in southern California, and weacquired three storage tanks and a truck loading rack in San Diego that added capacity to our Mission Valleyterminal. We also are expanding our CALNEV and CentralFlorida pipeline systems in Nevada and Florida, respectively,

implementing activities to capitalize on ethanol blendingopportunities at our Southeast terminals and obtainingpermits for an additional $145 million expansion of the East Line.

The Natural Gas Pipelines segment produced 2005earnings before DD&A of $500.2 million, up 22 percentfrom 2004 and significantly ahead of our published budget of 7 percent growth. Growth in this segment was driven byoutstanding performances by our Texas Intrastate PipelineGroup and the Red Cedar gas gathering system, along withcontributions from the acquired TransColorado Pipeline.

In 2005, we expanded our intrastate pipeline systemwest of Austin, Texas, to the Permian Basin by converting

the remaining 254 miles of a previouslyacquired crude oil pipeline to naturalgas. In early 2006, we completed anexpansion of TransColorado, increasingthe transportation capacity available onthe northern part of the pipeline. As I noted previously, we have securedbinding shipper commitments and aremoving forward on both the KinderMorgan Louisiana and Rockies Expresspipelines. KMP and Sempra Energy alsoacquired the Entrega Pipeline fromEnCana in February 2006, which we will operate. This 330-mile pipeline willconnect to and extend the reach of the

Rockies Express Pipeline. Our next goal is to build storagealong the Rockies Express project to provide additionalgrowth opportunities for our shippers and investors.

The CO2 segment delivered 2005 earnings beforeDD&A of $471.2 million, up 33 percent from 2004 and ontarget with our published budget. The substantial growth inthis segment was driven by increased oil production at boththe SACROC and Yates fields, which together have over 5 billion barrels remaining in place. Record productionvolumes from the McElmo Dome source field, strongnatural gas liquids sales and the completion of a power plant

2006 BUDGETED DISTRIBUTABLE CASH FLOW

KMP: 32% ANNUAL RETURN

Returns calculated on a daily basis through Dec. 30, 2005, assuming dividends/distributions re-invested in index/stock/unit, except MLP Index calculated on a monthly basis. Start date 12/31/1996.

Natural GasPipel ines

25%

Terminals19%

ProductsPipel ines

27%CO229%

$1,253

$459

$194

Total Return

that is providing a significant portion of our electricity at SACROC also contributed to this segment’s results.

Combined, we produced over 56,000 barrels per day at SACROC and Yates in 2005, as SACROC fell short of its target and Yates exceeded its goal. We try to avoidcommodity price risk as much as possible at KMP, but whenwe encounter such risk (as in oil production), we use a long-term hedging strategy designed to mitigate the risk andgenerate more stable realized prices.

We plan to invest more than $350 million in CO2expansions in 2006, the majority of which will occur atSACROC, where we are continuing to add wells andinfrastructure to further ramp up production. While we willinvest less at Yates than SACROC, we are confident that wecan sustain solid production at Yates. We also plan to pursuegrowth opportunities in the United States related toincreasing third-party demand for CO2, and we are pursuingCO2 injection and sequestration opportunities in Canada.

The Terminals segment reported 2005 earnings beforeDD&A of $318.1 million, up 21 percent from 2004 andsignificantly exceeding our published budget of 10 percentgrowth. Most of the growth in this segment came fromacquisitions. Our financial results in this business unit would have been even stronger without the effects of twoGulf Coast hurricanes.

We see a number of growth opportunities for ourTerminals business, as demand for more infrastructure tostore and handle various energy products continues toincrease. Along the Houston Ship Channel, we acquired anetwork of petroleum coke handling facilities and we areexpanding liquids storage capacity at our Pasadena andGalena Park terminals complex. On the East Coast, wepurchased the Port Mobil liquids terminal in New YorkHarbor, which has almost 3 million barrels of storage forpetroleum products, and we are expanding capacity at ourPerth Amboy liquids terminal in New Jersey. In theSoutheast, we plan to make significant expansions at certain facilities to capitalize on increasing coal imports,

and we are working withcustomers to buildincremental storage forethanol, ultra-low sulfurdiesel and bio-diesel toaccommodate changes in the marketplace. We are also pursuing terminalopportunities in Canada tosupport increasing oilsandsproduction in Alberta.

OUTLOOK

We expect to declare cash distributions of $3.28 per unit for2006, notwithstanding the impact of the SFPP rate case.While we expect to grow our distribution per unit about 5 percent in 2006, below our long-term expectations ofabout 8 percent per year growth, our business units areexpected to show strong growth of about $200 million indistributable cash flow compared to their 2005 performance.We expect to be able to achieve this operational growthdespite a significant projected increase in sustaining capitalexpenditures. Total projected distributable cash flow will benegatively impacted by higher interest rates and increasinghealth care costs and insurance premiums, but we still expectto have excess distributable cash flow over distributions ofabout $10 million.

When we look beyond 2006, particularly in the 2008 to 2010 timeframe, we expect to realize significant growthfrom the major projects that we are currently pursuing,along with continued growth from our existing assets. In2006 alone, our budget calls for capital expansions of morethan $670 million and that doesn’t include the RockiesExpress project. This gives us comfort that longer term wewill be able to generate 8 percent or more annual growth in distributions per unit. Additionally, we are optimistic that we will continue to be successful in making futureacquisitions, which would be incremental to our projectedfinancial results.

As part of our commitment to transparency, we onceagain posted the KMP annual budget on our web site(www.kindermorgan.com), and we will track our progresseach quarter during our analyst telephone calls which are webcast.

I would like to thank all of our employees for a job welldone in 2005. We believe the company is well positioned forfuture growth, and we will continue to invest your moneywisely. Our primary objectives are to operate our assets safelyand efficiently, meet our customers’ needs and deliverongoing value to all of our unitholders. I’m optimistic thatthe best is yet to come!

Richard D. KinderChairman and CEO

$1,618

$1,065 $1,020

$1,893

$1,261

$873

$1,343

$1,143

1998 1999 2000 2001 2002 2003 2004 2005

EXPANSIONS

ACQUISITIONS

$10 BILLION IN CAPITAL INVESTED ( in mi l l ions)

2

7 5Texas

In

trast

ate

North

Tex

as

CO2

Wink

Monterrey

Pacific

Cypress

Tran

sCol

orad

oEn

treg

a

North

Cochin

KMIGT

Trailblazer

Paci

fic

CALNEV

SACROC

Claytonville

Yates

2

2

2

PRODUCTS PIPELINES

Largest independent owner/operator in the U.S. Transportover 2 million barrels/day of gasoline, jet fuel, diesel andnatural gas liquids through more than 10,000 miles of pipe-lines. About 60 terminals have a storage capacity of over 29 million barrels. Also have five transmix facilities.

NATURAL GAS PIPELINES

Major transporter of natural gas in Texas, Rocky Mountainand Midwest areas. Approximately 15,000 miles of pipelineswith transportation capacity of about 9 billion cubic feet/dayand working gas storage capacity of 35 billion cubic feet. Alsoown/operate gathering, treating and processing facilities.

OFFICE OF THE CHAIRMAN

Richard D. KinderChairman and Chief Executive Officer

C. Park ShaperPresident

Steven J. KeanExecutive Vice President and Chief Operating Officer

OPERATING OFFICERS

Jeffrey R. ArmstrongPresident, Terminals

Thomas A. BanniganPresident, Products Pipelines

R. Tim BradleyPresident, CO2

Scott ParkerPresident, Natural Gas Pipelines

CORPORATE OFFICERS

Richard L. BullockVice President and Chief Tax Officer

Kimberly Allen DangChief Financial Officer and Vice President, Investor Relations

W. Garner DotsonVice President, Internal Audit

David D. KinderVice President, Corporate Development and Treasurer

Joseph ListengartVice President, General Counsel and Secretary

Henry W. NeumannVice President and Chief Information Officer

Larry S. PierceVice President, Corporate Communications

James E. StreetVice President, Human Resources

Debra M. WitgesVice President and Controller

BOARD OF DIRECTORS

Richard D. KinderChairman and Chief Executive Officer Kinder Morgan G.P., Inc.

C. Park ShaperPresidentKinder Morgan G.P., Inc.

Edward O. Gaylord (2)

PresidentGaylord Interests LLC

Gary Hultquist (2), (3)

Managing DirectorHultquist Capital, LLC

Perry M. Waughtal (1)

Limited Partner and ChairmanSongy Partners Limited

Kinder Morgan Energy Partners, L.P. does not have officers ordirectors. Listed are the officers and directors of the GeneralPartner, Kinder Morgan G.P., Inc. and Kinder MorganManagement, LLC (the delegate of Kinder Morgan G.P., Inc.).

(1) Chairman, Audit Committee(2) Member, Audit Committee(3) Lead Director

UNITHOLDER INFORMATION

Headquarters:500 Dallas, Suite 1000Houston, TX 77002(713) 369-9000

Exchange Listing:New York Stock Exchange Ticker Symbol: KMP

Transfer Agent, Registrar and Cash Distributions:Computershare Trust Company, N.A. (formerly EquiServe)PO Box 43069Providence, RI 02940-3069 (800) 847-4351www.computershare.com/equiserve

K-1 Tax Reports:For questions or corrections, please call (800) 232-1627

All other inquiries:Investor Relations (800) 324-2900 or (713) 369-9490E-mail: kmp_ir@kindermorgan.comPlease visit our web site at

www.kindermorgan.comfor investor information

2005 ANNUAL REPORT

500 Dallas, Suite 1000Houston, Texas 77002(713) 369-9000

www.kindermorgan.com