Kinder Morgan, Inc. · NYSE:KMI
Kinder Morgan — Wachovia 2006 Pipeline / MLP Conference
27 slides from Kinder Morgan's conference presentation, Dec 5, 2006
Slide 1: Kinder Morgan: Stable Platforms – Exceptional Growth
Kinder Morgan Stable Platforms – Exceptional Growth F o r w a r d lo o k in g s ta te m e n ts a r e n o t g u a r a n te e s o f p e r fo r m a n c e . T h e y in v o lv e r is k s , u n c e r ta in tie s a n d a s s u m p tio n s . T h e fu tu r e r e s u lts a n d s e c u r itie s v a lu e s o f
Slide 2: History
History 1997 - Rich Kinder, Bill Morgan & partners bought the general partner of a small Master Limited Partnership (MLP) and changed the name to Kinder Morgan Energy Partners (KMP). KMP had enterprise value of $300million. Strategy was to create first growth MLP in America. 1998 – Acquired Santa Fe
Slide 3: Historical Performance
Historical Performance Management has delivered superior returns to all shareholders KMP Total Return since formation 650% (01/01/97 – 10/31/01) KMI Total Return since merger announcement 286% (07/01/99 – 10/31/01) KMR Total Return since IPO 9% (05/14/01 – 10/31/01) 2
Slide 4: Different Strategy
Different Strategy Kinder Morgan has a different strategy than other midstream companies: Focused on stable, fee-based assets No trading business Avoid commodity exposure Unique financial structure Large management ownership 3
Slide 5: Unique Financial Structure
Unique Financial Structure Senior Management Management Management Public Public – Owns 25% of KMI 25% 25% 75% 75% – Rich Kinder (Chairman & CEO) and Bill Morgan (Vice Chairman) have $1/year salaries, no bonus, KMI (a) no options (Corporation) – Recently announced $300mm share repurchase Market Equi
Slide 6: How KMP Impacts KMI
How KMP Impacts KMI The combination of growth in both KMP’s total cash flow and KMI’s share of that total has produced dramatic cash flow growth for KMI’s GP interest KMP Total Cash Distributions KMI’s 2% G.P. Interest (a) $547M (b) L.P. Share $208M (b) G.P. Share $333.3M $113.4M $198.3M $58.4M $152
Slide 7: KMP: Exceptional Distribution Growth
KMP: Exceptional Distribution Growth(a) Management targets 15% distribution growth annually Greater than 1 $2.50 00 19 96-2 $2.20 R CAG 28 % $1.90 $1.45 $1.30 $1.13 $0.63 1996 1997 1998 1999 2000 2001(e) 2002(e) (a) Historical and projected year-end run rate for KMP distribution per unit ( equal to
Slide 8: KMI: Exceptional EPS Growth
KMI: Exceptional EPS Growth(a) Management targets 20 – 30% EPS growth annually $ 2.40 - 2.50 $ 1.90 $ 1.28 $ 0.73 1999 2000 2001(e) 2002 (e) (a) Recurring Diluted EPS 7
Slide 9: Kinder Morgan System Map
Kinder Morgan System Map Premier Midstream Assets Co c hin Su per ior Pacific Hu ro n r io Onta Trailblazer Michigan KMIGT ie Er North Pacific Natural Gas Operations Pipelines (3) CALNEV Storage CO2 NGPL Processing Plants Pacific Retail Division Plantation Products Operations Houston Pipelines (11)
Slide 10: Market Position
Kinder Morgan Market Position Largest pipeline MLP Largest independent refined products pipeline system Largest CO2 transporter Largest independent bulk terminal operator Largest liquids terminal operator Major natural gas transporter 9
Slide 11: Kinder Morgan Energy Partners Segment Overview
Kinder Morgan Energy Partners Segment Overview 2001 Estimated Earnings Contribution Terminals 20% CO2 Product Pipelines Pipelines 43% 13% Natural Gas Pipelines 24% 10
Slide 12: Kinder Morgan Inc. Segment Overview
Kinder Morgan Inc. Segment Overview 2001 Estimated Pretax Earnings Contribution(a) Retail 4% Power & Other 5% NGPL KMP 28% 63% (a) Allocates interest expense and G&A pro-rata to 3 operating segments, before extraordinary items 11
Slide 13: Kinder Morgan Grows Through:
Kinder Morgan Grows Through: Internal Growth – Favorable demographics – Excess capacity Expansion projects – Significant infrastructure needs – Superior returns on capital Acquisitions – Excellent track record – Significant competitive advantages 12
Slide 14: Internal Growth Summary
Internal Growth Summary KMP Primary Internal Growth Driver Products Pipes • Demographic movements to West and South East U.S. Nat. Gas Pipes • Increased production in Rockies and growth in gas – fired generation CO2 Pipes • Maturation of on-shore oil basins in United States Terminals • Increased ref
Slide 15: Internal Growth Case Study: Pacific System
Internal Growth Case Study: Pacific System Transports gasoline, diesel and jet fuel to some of the fastest growing markets in U.S. (i.e. Las Vegas, Phoenix, San Diego) Demographic growth drives volume growth Excess capacity for next 8-10 years without significant capital Virtually all revenue growth
Slide 16: Announced Expansion Projects
Announced Expansion Projects Segment Project Capital In Service Date KMP – Gas pipelines Trailblazer expansion $ 40 million June 2002 KMP – Gas Pipelines KMTP for Calpine $ 15 million Q3 2002 KMP – Gas Pipelines Hinshaw Pipeline $ 70 million Spring 2003 Product Pipelines CALNEV Expansion $ 9 million
Slide 17: Acquisition Track Record
Acquisition Track Record Acquisitions Approximate ApproximateValue Value ($mm) ($mm) 6 Deals in 1997-1998 $ 1,720 4 Deals in 1999 950 Milwaukee / Dakota Terminal 25 80% Shell CO2 212 CRC CO2 Pipeline / SACROC 53 Buckeye Transmix 38 Cochin Pipeline (34.8%) 126 Delta Terminals 114 Duke Transmix 11 Pha
Slide 18: Kinder Morgan Advantages as Acquirer
Kinder Morgan Advantages as Acquirer Pretax MLP Structure – Significant cost of capital advantage vs. traditional C Corporations – Significant scale and cost of capital advantage vs. other MLP’s Track record of eliminating overhead Focus on Asset Operation – Not viewed as a competitor (i.e. no marke
Slide 19: Business Strategy
Business Strategy Since the formation of Kinder Morgan, management has: Focused on stable, fee-based assets which are core to the energy infrastructure of growing markets – Virtually no commodity price risk – No marketing and trading business Increased utilization of assets while controlling costs –
Slide 20: Unique Investment Opportunity
Unique Investment Opportunity Kinder Morgan generates growth from stable, fee-based businesses while avoiding commodity price risk KMP/KMR – High current yield of 5.8% – Low-risk internal growth from favorable demographic trends – Significant upside potential by extending acquisition track record –
Slide 21: Appendix
KINDER” MORGAN Appendix
Slide 22: KMP Acquisition Matrix
KMP Acquisition Matrix Accretion per KMP Unit ($) (a) Hypothetical Value of Multiple of Distributable Cash Flow Acquisitions 5.0 X 6.5 X 8.0 X $1,250M $ 0.40 $ 0.24 $ 0.14 1,000M 0.32 0.20 0.12 750M 0.25 0.15 0.09 500M 0.17 0.10 0.06 Target $0.15 - 0.20 (a) Assumes acquisition financed 60% equity /
Slide 23: KMI Acquisition Matrix
KMI Acquisition Matrix Accretion per KMI Common Share ($) (a) Hypothetical Value of Multiple of Distributable Cash Flow Acquisitions 5.0 X 6.5 X 8.0 X $1,250M $ 0.54 $ 0.37 $ 0.27 1,000M 0.43 0.30 0.22 750M 0.33 0.23 0.16 500M 0.22 0.15 0.11 Target $0.25 - 0.30 (a) Assumes acquisition financed 60% e
Slide 24: KMR Offering Summary (Post Split)
KMR Offering Summary (Post Split) Issuer: Kinder Morgan Management, LLC Size: 29.75 million shares (originally filed 17 million) Price: $35.205 (indication on original filing was $29.875) Gross Proceeds(a): $1,047 million (indication original filing was $508) which returned KMP to 40% debt target Di
Slide 25: Kinder Morgan Management, LLC
Kinder Morgan Management, LLC Provides KMP access to the institutional KMI KMI (a) (a) market, allowing KMP to accelerate its 100% growth strategy GP GP (b) Manages and controls the operations (b) of KMP 1 voting share Owns a new class of KMP limited 29.75 million partnership interests (“i-units”) K
Slide 26: KMR is KMP
KMR is KMP KMR KMP Distributions Shares Cash Yield 5.8% 5.8% Exchangeability KMP Common Units None Voting Rights In Parity with KMP Limited Optional Purchase Yes Yes Mandatory Purchase Yes No Tax Considerations Allocated Taxable Income No Yes Non-Qualifying Income No Yes UBTI No Yes K-1s No Yes Stat
Slide 27: November 2001
KINDER” MORGAN November 2001
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