Kinder Morgan, Inc. · NYSE:KMI
Kinder Morgan — Kinder Morgan Energy Partners — 2009 KMP Analyst Conference
44 slides from Kinder Morgan's conference presentation, Jan 29, 2009
Slide 1: The Time of the Hedgehog
ENERGY PARTNERS, L.P. The Time of the Hedgehog January 29, 2009 “The fox knows many things; the hedgehog one great thing.” – Archilochus
Slide 2: Forward Looking Statements
ENERGY PARTNERS, L.P. Forward Looking Statements This presentation contains forward looking statements. These forward-looking statements are identified as any statement that does not relate strictly to historical or current facts. In particular, statements, express or implied, concerning future acti
Slide 3: Use of Non-GAAP Financial Measures
ENERGY PARTNERS, L.P. Use of Non-GAAP Financial Measures The non-generally accepted accounting principles ("non-GAAP") financial measures of distributable cash flow before certain items (both in the aggregate and per unit), segment earnings before depreciation, depletion, amortization and amortizati
Slide 4: Corporate Overview Agenda
ENERGY PARTNERS, L.P. Corporate Overview Agenda Vision – Rich Kinder Financial Excellence – Park Shaper Operational Excellence – Steve Kean 4
Slide 5: Vision
ENERGY PARTNERS, L.P. Vision Rich Kinder Chief Executive Officer
Slide 6: The Time of the Hedgehog…
ENERGY PARTNERS, L.P. The Time of the Hedgehog… "The fox knows many things; the hedgehog one great thing.“ – Archilochus KMP’s model works in uncertain times Secure cash flows from existing assets Demonstrated access to capital Available growth opportunities At attractive returns With less
Slide 7: Questions You Should Ask a Hedgehog
ENERGY PARTNERS, L.P. Questions You Should Ask a Hedgehog What is the impact of lower commodity prices on midstream infrastructure? Will Kinder Morgan distribute $4.20/unit as budgeted? Will Kinder Morgan be able to fund its capital requirements in this challenging economic environment? What
Slide 8: Capital Structure
ENERGY PARTNERS, L.P. Capital Structure Kinder Morgan Energy Partners, L.P. Market Equity (a) $11.7B Debt (b) 8.4B Enterprise Value $20.1B 2009E EBITDA (c) $2.7B 2009E DCF (d) $2.1B Additional Cash Incentive Shares Distribution Distribution KMR KMP (LLC) (Partnership) 78 million i- i-units (a) 188 m
Slide 9: The Kinder Morgan Strategy
ENERGY PARTNERS, L.P. The Kinder Morgan Strategy Same Strategy Since Inception Focus on stable, fee-based assets which are core to the energy infrastructure of growing markets Increase utilization of assets while controlling costs Classic fixed cost businesses with little variable costs Impr
Slide 10: Unmatched Footprint
ENERGY PARTNERS, L.P. Unmatched Trans Jet Mountain Fuel Footprint Pipeline 2 Cochin Largest independent transporter of petroleum products in the U.S. Express Pacific Transport nearly 2 million barrels per day (Bbl/d) 2 2nd largest transporter of natural Trailblazer gas in U.S. (a) REX 4 2 KMIG
Slide 11: Location, Location, Location
ENERGY PARTNERS, L.P. But More Important Than Size – Location, Location, Location Products Pipelines: well-located with origin in refinery/port hubs and terminus in population centers Natural Gas Pipelines: well-positioned in Rockies, Shales, Texas CO2: own and operate best source of CO2 for e
Slide 12: Well-diversified Asset Base
ENERGY PARTNERS, L.P. Well-diversified Asset Base KMP CO2 2009 DCF Natural Gas Pipelines 32% CO2 transport and sales Profile (b) 58% Interstate (c) 68% oil production related 42% Texas Intrastate Production hedged (a): 2009=73% ($49/Bbl) CO2 Natural Gas 2010=63% ($56) 27% Pipelines 2011=57
Slide 13: Stable Asset Base
ENERGY PARTNERS, L.P. Stable Asset Base Natural Gas Products Kinder Morgan CO2 Terminals Pipelines Pipelines Canada – Interstate: virtually all – Liquids: take or pay take or pay – S&T: minimum Volume Security – volume based – Bulk: minimum – take or pay – Intrastate: ~75% volume guarantee volume
Slide 14: Twelve Years of Consistent Growth
ENERGY PARTNERS, L.P. Twelve Years of Consistent Growth Total Distributions (GP + LP) ($MM) Annual LP Distribution Per Unit (b) $2,250 $2,112 $4.50 $4.20 GP (a) $4.02 $2,000 $1,854 $4.00 16% LP 5% R= $3.48 $1,750 =4 $3.50 CA G $3.13 $3.26 GR 9 $1,469 $1,500 A 20 0 $2.87 C $1,265 $3.00 6- $2.63 $1,25
Slide 15: Significant Historical Returns
ENERGY PARTNERS, L.P. Significant Historical Returns (a) KMP: 25% CAGR (b) KMR: 9% CAGR (c) Dollars Dollars $2,000 $300 KMP = $1,469 $1,750 $270 $1,500 $240 KMR $1,250 $210 = $191 $1,000 $180 $750 $150 Alerian = $170 Alerian = $367 $500 $120 $250 $90 S&P 500 = $149 S&P 500 = $83 $0 $60 14-May-2001 D
Slide 16: Promises Made, Promises Kept
ENERGY PARTNERS, L.P. Promises Made, Promises Kept Promises Made Promises Kept Budgeted Actual Distribution per unit: Distribution per unit: 2000: $1.60 2000: $1.71 2001: $1.95 2001: $2.15 2002: $2.40 2002: $2.435 2003: $2.63 2003: $2.63 2004: $2.84 2004: $2.87 2005: $3.13 2005: $3.13 2006: $3.28 20
Slide 17: 2009 Partnership Goals
ENERGY PARTNERS, L.P. 2009 Partnership Goals Distribution Target $4.20 per unit (4.5% growth) Excess coverage of ~$14 million Maintain Solid Balance Sheet Expansions / acquisitions financed 50% equity, 50% debt Deliver Projects on Current Schedule and Cost Forecast 13
Slide 18: Recent Trends
ENERGY PARTNERS, L.P. Recent Trends Impact Offset / Response Decline in product demand – Impacts volumes on product pipelines – Annual PPI adjustment – Ethanol Lower oil prices – Impacts unhedged crude oil and NGL – Lower cost environment; e.g. drilling, volumes in CO2 segment equipment, capital
Slide 19: Continued Growth Opportunities
ENERGY PARTNERS, L.P. Continued Growth Opportunities Current Projects (2009-2011) Additional Opportunities Shifting Natural Gas Supply Sources — Rockies – Rockies Express pipeline – Expansions, extensions and added service on current projects and — Shale Plays – Midcontinent Express pipeline exist
Slide 20: Shifting Natural Gas Supply Sources
ENERGY PARTNERS, L.P. Shifting Natural Gas Supply Sources Natural Gas Supply (a) % Production Volumes (Bcf/d) 2008E 2013 Change Change Rockies 8.9 10.9 2.0 22% Barnett Shale 3.9 5.5 1.6 41% Fayetteville Shale 0.7 2.9 2.2 314% Rockies Haynesville Shale 0.1 3.7 3.6 n/m production Gulf Coast LNG Import
Slide 21: Newbuild Natural Gas Pipelines
ENERGY PARTNERS, L.P. Newbuild Natural Gas Pipelines Wyoming Nebraska Illinois Indiana Ohio Colorado Kansas Missouri ROCKIES EXPRESS PIPELINE Oklahoma IN-SERVICE ROCKIES EXPRESS PIPELINE Arkansas Mississippi FAYETTEVILLE EXPRESS PIPELINE Alabama Texas MIDCONTINENT EXPRESS PIPELINE Louisiana KM LOUIS
Slide 22: Increased Use of Renewable Fuels
ENERGY PARTNERS, L.P. Increased Use of Renewable Fuels EPA guidelines require significant Renewable Fuels Standard (RFS) (a) ethanol/biodiesel blending in 2009 40 Incremental Impact R 36.0 and beyond 35 of EISA - 2007 % CAG 10.4 22 30 EPACT - 2005 8-20 Leverage Existing Assets to be Most Efficient,
Slide 23: Increased Production and Use of Heavy Crude
ENERGY PARTNERS, L.P. Increased Production and Use of Heavy Crude North American Petcoke Production (a) Despite drop in crude price, oil slate still getting heavier – 1.4MMbbl/d of incremental heavy ‘1 GR 75 69 refining capacity forecast to be added by 2015 (c) 8- A Rest of N. America ‘0 C 5 7% U.S.
Slide 24: Current Major Projects
ENERGY PARTNERS, L.P. Current Major Projects $5.8 Billion In Current Projects 2009-2011 (a) Estimated Remaining Project Cost Project Cost KM-Share KM-Share Expected Project ($MM) ($MM) Completion Rockies Express East $1,825 (a,b) $845 (a,b) 2009 (c) Midcontinent Express 971 (a,d) 552 (a,d) 2009-2010
Slide 25: The Time of the Hedgehog…
ENERGY PARTNERS, L.P. The Time of the Hedgehog… "The fox knows many things; the hedgehog one great thing.“ – Archilochus KMP’s model works in uncertain times Secure cash flows from existing assets Demonstrated access to capital Available growth opportunities At attractive returns With less
Slide 26: ENERGY PARTNERS, L.P.
KINDER/MORGAN ENERGY PARTNERS, L.P.
Slide 27: Financial Excellence
ENERGY PARTNERS, L.P. Financial Excellence Park Shaper President
Slide 28: ~$17 Billion in Capital Invested To Date
ENERGY PARTNERS, L.P. ~$17 Billion in Capital Invested To Date (a,b) (billions) Total Invested by Type (a,b) Total Invested by Year (a) $9 $0.5 $3.0 $2.9 $6 JV Contributions $2.8 $2.7 $8.4 Expansion $7.7 Acquisition $3 $2.5 $0 $2.0 $1.9 Expansions Acquisitions $1.6 $1.5 $1.3 Total Invested by Segmen
Slide 29: How We Have Done: Returns on Capital
ENERGY PARTNERS, L.P. How We Have Done: Returns on Capital 2000 2001 2002 2003 2004 2005 2006 2007 2008 Segment ROI (a): Products Pipelines 11.9% 11.8% 12.8% 12.9% 12.4% 11.6% 11.8% 13.2% 12.5% Natural Gas Pipelines 13.3 15.5 12.9 13.5 14.0 15.5 16.7 17.6 16.9 CO2 27.5 24.6 22.0 21.9 23.8 25.7 23.1
Slide 30: Cost of Capital
ENERGY PARTNERS, L.P. Cost of Capital Cost of capital varies over time Current ~9.75% 2008 analyst conf 9.0% 2004 analyst conf 8.3% 2003 analyst conf 9.1% 2002 analyst conf 8.2% Long-term cost of capital ~9% Targeted unlevered returns typically 12-15% for pipelines (higher for terminals, CO2)
Slide 31: Will We Distribute $4.20 in 2009?
ENERGY PARTNERS, L.P. Will We Distribute $4.20 in 2009? Vast majority of $2.1 billion DCF is very secure Impact of oil price at $50/Bbl (vs. $68 in budget) = ~$100 million 4.7% of total DCF Sensitivity is ~$6 million per $1/Bbl change in crude price Potential offsetting factors Lower CO2
Slide 32: Do Not Require Access to Capital Markets in 2009
ENERGY PARTNERS, L.P. Do Not Require Access to Capital Markets in 2009 (millions) Uses – Budget Sources Sources – Alternative Growth Expenditures: Sources: Already Secured: Expansion Capex $1,188 Dec‘08 Debt Issue $500 Cash on Hand @ 12/31/08 $63 Contributions to JVs 1,472 (a) Dec‘08/Jan‘09 Swap Unw
Slide 33: Access to Capital
ENERGY PARTNERS, L.P. Access to Capital Inception (1997) to date $7.6 billion in equity raised (a) $11 billion in debt (b) Accessed in difficult markets Sep’01 to Sep’02 – issued ~$430 million in equity (a) – issued ~$1.5 billion in debt Aug’07 to Dec’08 – raised ~$1.4 billion in equity
Slide 34: CO2 Crude Production Hedge Profile
ENERGY PARTNERS, L.P. CO2 Crude Production Hedge Profile SACROC & Yates Crude Oil Production (a) Avg Hedge Px WTI & WTS $49.38 $55.72 $62.54 $83.45 $106.75 ($/Bbl) 50 Net Equity Production 40 (MMboe/d) 30 73% 63% 20 57% 10 35% 5% 0 2009 2010 2011 2012 2013 Swaps Collars Unhedged % Hedged ___________
Slide 35: 2010 Expect LP distribution of over $4.40/unit
ENERGY PARTNERS, L.P. 2010 Expect LP distribution of over $4.40/unit at flat crude oil price (relative to ‘09 budget) of $68/Bbl Results in 8% CAGR in distributions/unit from 2007-2010 9
Slide 36: Risks
ENERGY PARTNERS, L.P. Risks Regulatory Pacific Products Pipeline FERC/CPUC case Periodic rate reviews Unexpected policy changes Crude Oil Production Volumes Crude Oil Prices Budget assumes $68/Bbl realized price on unhedged barrels 2009 Sensitivity is ~$6 million DCF per $1/Bbl chang
Slide 37: Operational Excellence
ENERGY PARTNERS, L.P. Operational Excellence Steve Kean Chief Operating Officer
Slide 38: Operations Goals – Safe, Reliable, Efficient Operations
ENERGY PARTNERS, L.P. Operations Goals – Safe, Reliable, Efficient Operations Continuous reduction in risk to the public, employees, contractors and the environment Continuous improvement in the efficiency and productivity of existing operations Well-executed expansions and effective integrati
Slide 39: Operations Performance
ENERGY PARTNERS, L.P. Operations Performance Immediate Risk Reduction Systems-making compliance routine Continuous Improvement Acceleration of pipeline integrity Addressing operations performance in Systems Improvement work (2008 – 09) our existing processes— processes—Operations Measuring,
Slide 40: Compliance – Total KMP
ENERGY PARTNERS, L.P. Compliance – Total KMP Total KMP 2008 Compliance Report 40,000 5.0% 35,000 4.4% 30,000 3.8% 25,000 3.1% 20,000 2.5% 15,000 1.9% 10,000 1.3% 5,000 0.6% 0 0.0% Jan- Feb- Mar- Apr- May- Jun- Jul- Aug- Sep- Oct- Nov- Dec- 08 08 08 08 08 08 08 08 08 08 08 08 Total Compliance Action
Slide 41: Compliance – Terminals
ENERGY PARTNERS, L.P. Compliance – Terminals Terminals 2008 Compliance Report 15,000 2.5% 12,000 2.0% 9,000 1.5% 6,000 1.0% 3,000 0.5% 0 0.0% Jan- Feb- Mar- Apr- May- Jun- Jul- Aug- Sep- Oct- Nov- Dec- 08 08 08 08 08 08 08 08 08 08 08 08 Total Compliance Action Items % Open 5
Slide 42: Compliance – Product Pipelines
ENERGY PARTNERS, L.P. Compliance – Product Pipelines Pacific Product Pipelines 2008 Compliance Report 12,000 9.0% 10,000 7.5% 8,000 6.0% 6,000 4.5% 4,000 3.0% 2,000 1.5% 0 0.0% Jan- Feb- Mar- Apr- May- Jun- Jul- Aug- Sep- Oct- Nov- Dec- 08 08 08 08 08 08 08 08 08 08 08 08 Total Compliance Action Ite
Slide 43: 2008 Progress; 2009 Plans
ENERGY PARTNERS, L.P. 2008 Progress; 2009 Plans Completed rollout of compliance systems to all KM US assets (and good compliance results so far). Implemented enhanced ROW protection programs Ensuring compliance with PSM/RMP requirements Other Risk Reduction Activities accelerated integrity
Slide 44: ENERGY PARTNERS, L.P.
KINDER/MORGAN ENERGY PARTNERS, L.P.
Kinder Morgan Energy Partners — 2009 KMP Analyst Conference on 6ix