1. IPAA Private Capital Conference January 18, 2007 Kayne Anderson Capital Advisors

2. 2 Who is Kayne Anderson?  Kayne Anderson is an LA-based investment firm with a 22 year track record  Kayne Anderson manages $6.7 billion in assets  55 employees in Los Angeles and Houston – 30+ investment professionals  Strong focus in the energy sector – 80% of assets are in upstream and midstream companies – $5.4 billion invested in public and private securities of energy companies

3. 3 Strong Energy Focus  Energy private equity – First fund raised in 1998 – Raised four funds totaling $1.9 billion – Headquartered in Houston; 8 professionals – Focus on equity investments in private and public upstream companies  Midstream energy investments – Largest player in MLP space – $3.2 billion held through 3 publicly traded closed end funds – $500 million of midstream assets held in private funds – Represents over 5% of total sector float – Completed 23 PIPE transactions for over $1.1 billion

4. 4 Public Funds  Kayne Anderson MLP Investment Company (NYSE: KYN) – IPO in September 2004 – Raised approximately $830 million in IPO – Raised over $475 million in subsequent debt and equity offerings – Currently manage $1.9 billion in assets – 100% MLP focus – High concentration of PIPE transactions  Kayne Anderson Total Return Fund (NYSE: KYE) – IPO in June 2005 – Raised approximately $800 million in IPO – Currently manage $1.1 billion – Broader energy income focus MLPs Canadian trusts Marine transportation Term B debt for E&P companies

5. 5 Public Funds (Cont’d)  Kayne Anderson Energy Development Company (NYSE: KED) – IPO in September 2006 – Raised $250 million in IPO – Structured as a business development company or BDC – Focus on private midstream energy companies – Target portfolio 60% private midstream companies 30% public midstream companies (“MLPs”) 10% term B loans – Preferred structure for private companies is “private MLP” – Will invest in other mezzanine structures as appropriate

6. 6 Private MLPs  Strategic rationale – Relatively few options are available to finance private midstream companies Return expectations of private equity are very high Typically require ceding control Liquidity requirements over some fixed period of time  Target companies – Not yet of the size to go public – Additional requirements of a public company are unattractive – Experiencing rapid growth that public markets wouldn’t fully monetize

7. 7 Private MLPs  Benefits – Valuation at or near public company valuations Yield is 150 to 200 bps above public company comps Depending on business, yield is 8.5% – 9.5% – Disproportionate share of upside Deferred Partnership Units Incentive Distribution Rights or “High Splits” – No public reporting requirements No Sarbanes-Oxley – Non-controlling interest May have one board seat or observation rights – Permanent vehicle with no liquidity requirements KED is a permanent capital fund

8. 8 Private MLP – Millennium Midstream Partners  Millennium was formed in December of 2002 by John O’Shea and Kevin Coxon – Gas gathering, treating and processing assets in Texas, Louisiana and Gulf of Mexico – Not yet large enough to access public markets  Formed a private MLP with Kayne Anderson as lead investor – Kayne Anderson invested $47.5 million for a 39% limited partnership interest – Co-investors included Tortoise Capital and Wells Fargo  Capitalization was consistent with a public MLP – Approximately 60% of LP interests are common units owned by new investors – Approximately 40% of LP interests are subordinated units retained by management and other existing equity – 2% general partner interest is retained by management – $35 million term loan and $25 million revolver ($10 million drawn)

9. 9 Private MLP – Millennium Midstream Partners (Cont’d)  New capital used to – Repay existing debt – Provide cash dividend to shareholders  Conservative leverage position provides capital for future growth – Pro forma Debt / EBITDA ratio of 3.2x based on run rate – Pro forma Debt / EBITDA ratio of 2.4x based on 2007E  Attractive valuation metrics – Total Enterprise Value / Run Rate EBITDA = 12.0x – Total Enterprise Value / Projected EBITDA = 9.0x

10. 10 Private MLP – Millennium Midstream Partners (Cont’d)  Significant upside retained by management – Approximately 1.5 million Deferred Participation Units were issued to management Conversion into subordinated units upon liquidity event (IPO or sale) Value converted based on outside investors’ appreciation – Substantial majority of IDRs (high splits) upon an IPO Provides GP the right to up to 50% of marginal cash flows  Upside potential can be substantial – Assumptions EBITDA increases to $25 million in 2008 IPO yield of 7.5% Valuation of management’s partnership interests and DPUs increases by over $25 million, or 48%

11. 11 Other Targeted Investments  Joint Venture MLPs – Target public and private E&P companies with midstream assets – Form private MLP to hold midstream assets – GP is wholly owned subsidiary of an E&P company, which operates and controls the assets – Disproportionate share of upside is retained by the sponsor company Traditional “high splits” retained by sponsor Gives 50% of cash flows to GP above certain levels  Benefits of a Joint Venture MLP – Valuation substantially higher than valuation of E&P assets – Avoids public company filing and disclosure requirements – Transaction provides capital to grow core E&P business – Joint Venture can be self financing to grow midstream assets – Disproportionate upside

12. 12 Conclusion  Private MLP can offer an attractive vehicle for monetize and asset or creating a vehicle for growth  Can be used as a pre-IPO financing or in a permanent vehicle that is never designed to go public  Valuation near public company multiples  Disproportionate upside while retaining control of company  Structure more suited to relatively low risk of midstream assets

13. 13 Contact Information Jim Baker Managing Director (713) 655-7371 jbaker@kaynecapital.com Jody Meraz Associate (713) 493-2039 jmeraz@kaynecapital.com Kevin McCarthy President and CEO (713) 655-7357 kmccarthy@kaynecapital.com Ron Logan Managing Director (713) 493-2031 rlogan@kaynecapital.com Ryan Scott Associate (713) 655-0122 rscott@kaynecapital.com