Kinder Morgan, Inc. · NYSE:KMI
Kinder Morgan — Investor Presentation (August 2021)
50 slides from Kinder Morgan's investor presentation, August 2021
Slide 1: Investor Presentation August 2021
INVESTOR PRESENTATION August 2021
Slide 2: Disclosure
Disclosure Forward-looking statements / non-GAAP financial measures / industry & market data General – The information contained in this presentation does not purport to be all‐inclusive or to contain all information that prospective investors may require. Prospective investors are encouraged to con
Slide 3: Acquiring RNG Developer Kinetrex Energy for $310 million
Acquiring RNG Developer Kinetrex Energy for $310 million Growing producer & supplier of RNG to transportation market | Leading supplier of LNG in the Midwest ATTRACTIVE EXPECTED RETURN WITH <6x 2023 EBITDA — Based on $310mm purchase price and $135mm development capex — Conservative RINs assumptions
Slide 4: Strong Growth Outlook for RNG
Strong Growth Outlook for RNG North American demand could grow to 3.5 bcfd by 2040, from 160 mmcfd today IEA NORTH AMERICA RNG DEMAND KINETREX – COMPELLING INVESTMENT OPPORTUNITY bcfd Stated Policies Scenario Sustainable Development Scenario ‒ Landfill source expected to produce low-cost, predictabl
Slide 5: Demand Markets Provide Diversification
Demand Markets Provide Diversification Plan to mitigate exposure to RIN volatility through fixed price contracts in the voluntary market REVENUE EXAMPLE $ per mmbtu D3 RINs can also satisfy D5 & D6 obligations (a) RIN value revenues must meet or exceed $37.06 traditional hurdle rates $13 – $17 2021
Slide 6: $1,225 million Acquisition of Northeast Transport & Storage Assets
$1,225 million Acquisition of Northeast Transport & Storage Assets Enhancing our service to Northeast customers with complementary assets connected to TGP KMI to acquire Stagecoach Gas Services — ~10x 2020 EBITDA before synergies — Immediately accretive, primarily paid with cash on hand — Transactio
Slide 7: Leader in North American Energy Infrastructure
Leader in North American Energy Infrastructure Unparalleled & irreplaceable asset footprint built over decades Connecting major U.S. natural gas resource plays to key demand centers Largest natural gas transmission network Move ~40% of U.S. natural gas consumption & exports — ~70,000 miles of natura
Slide 8: KMI: a Core Holding in Any Portfolio
KMI: a Core Holding in Any Portfolio Generating significant cash flow & returning significant value to shareholders >$35 billion market capitalization One of the 10 largest energy companies in the S&P500 ~13% owned by management Highly-aligned management with significant equity interests ~6% current
Slide 9: 2021 Forecast as of July 2021
2021 Forecast as of July 2021 Committed to maintaining a strong balance sheet & returning value to shareholders Key metrics 2021 Forecast Variance to 2021 Budget Due primarily to 2Q $1.6 billion S Texas G&P Net income $1.7 billion -$0.4 billion impairment, partially offset by 1Q $1.1 billion Uri ben
Slide 10: Strategy
Strategy Maximize the value of our assets on behalf of shareholders Disciplined Enhance Stable, fee- Invest in a low Financial capital shareholder based assets carbon future flexibility allocation value Core energy Newly formed 4.0x 2021 expected Conservative Maintain strong infrastructure Energy Tr
Slide 11: Highly-Contracted Cash Flows
Highly-Contracted Cash Flows Stable cash flows with ~72% take-or-pay or hedged earnings(a) Contract type Payment feature Example assets CONTRACT MIX(a) Jones Act tankers 100% Natural gas interstate / LNG 93% Natural gas intrastate (b) 83% Entitled to payment regardless of throughput 68% Take-or-pay
Slide 12: Customers Are Primarily End-Users of the Products We Handle
Customers Are Primarily End-Users of the Products We Handle Net revenues underpinned by investment grade counterparties & credit support | Ratings as of July 15, 2021 CUSTOMER TYPE CREDIT RATING End-user IG or substantial credit support Producer - IG or substantial credit support BB+ to B Producer -
Slide 13: Self-Funding Capex & Dividends Since 2016
Self-Funding Capex & Dividends Since 2016 Opportunistic asset monetization and free cash flow generation enabled meaningful debt reduction Generated $1.9 billion of free cash flow after dividends over last 5 years Borrowing, net Cash from BS Debt repayment Cash from BS Buybacks Asset sales, Cash to
Slide 14: Our Business is Resilient throughout an Energy Transition
Our Business is Resilient throughout an Energy Transition what we do today… is valuable & will be needed for a long time helps meet environmental goals “energy transitions take decades” infrastructure supporting the - Vaclav Smil, Distinguished Professor Emeritus displacement of higher emissions ene
Slide 15: Newly-Formed Energy Transition Ventures (ETV) Group
Newly-Formed Energy Transition Ventures (ETV) Group The group will evaluate commercial opportunities Opportunities for ETV group are outside emerging from the low-carbon energy transition of our existing asset base Business segments will continue to pursue their own energy transition opportunities o
Slide 16: All Available Sources Required to Meet Demand Outlook
All Available Sources Required to Meet Demand Outlook Even as the energy mix gradually shifts, hydrocarbons projected to remain essential to meeting demand GLOBAL PRIMARY ENERGY DEMAND BY FUEL billions tons oil equivalent (btoe) | 2019, 2030, 2040 total demand & % mix 5 3% Overall energy demand 5% e
Slide 17: Substantial Growth Projected for U.S. Natural Gas
Substantial Growth Projected for U.S. Natural Gas KEY BASINS DRIVING U.S. GROWTH 2020 to 2030 growth in bcfd Additional 23 bcfd 11 expected from three areas 7 5 Permian Haynesville Northeast DEMAND in bcfd Exports & industrial driving majority of growth 2020 32 0 21 5 31 6 96 >80% of forecast demand
Slide 18: Our Infrastructure is Important to Fueling the Future
Our Infrastructure is Important to Fueling the Future Leveraging our long-term investment in the substantial assets & expertise required to responsibly deliver energy BENEFITS OF NATURAL GAS LOW EMISSIONS ABUNDANT & LOW COST Natural gas is the cleanest burning fossil fuel with Cost-effective generat
Slide 19: Responsibly Sourced Natural Gas
Responsibly Sourced Natural Gas Conventional natural gas produced by companies whose operations meet certain ESG standards methane water community Standards typically focus on management practices for emissions usage relations 15 ONE Future members have committed to responsibly 0.28% of production b
Slide 20: U.S. CO2 Emissions Declined Since 2007 while GDP grew ~50%
U.S. CO2 Emissions Declined Since 2007 while GDP grew ~50% Primarily due to converting coal power generation to natural gas generation U.S. ELECTRICITY GENERATION MIX U.S. CO2 EMISSIONS % of total generation billion metric tons U.S. emissions declined ~14% or ~860 million metric tons 6.0 6.0 6.0 5.9
Slide 21: Well-Positioned to Move Potential Fuels of the Future
Well-Positioned to Move Potential Fuels of the Future RNG & hydrogen can utilize much of the existing natural gas infrastructure network RNG is a pipeline-quality gas Hydrogen could be shipped Hydrogen is energy dense & Pipelines can transport that is interchangeable with on natural gas pipelines in
Slide 22: Opportunity for Natural Gas Infrastructure
Opportunity for Natural Gas Infrastructure Renewable alternatives are small in scale today, but could grow to meet ~20% of 2020 U.S. demand as costs decline U.S. SUPPLY COST ESTIMATES bcfd, 2020 & 2050 potential $ per Dth | 2020, 2030, & 2050 $33.44 120 $29.00 100 $25.50 80 $22.00 $21.55 60 $18.58 $
Slide 23: Attractive Potential for Liquid Biofuels
Attractive Potential for Liquid Biofuels Policy support & efficient infrastructure important to increasing adoption of ethanol, biodiesel & other low-carbon fuels GLOBAL BIOFUELS DEMAND OUTLOOK million barrels per day 6 Stated policies scenario projects: ~75% or 1.5 mmbbld increase by 2030 ~150% or
Slide 24: Substantial Existing Capabilities at Our Terminals & Products Assets
Substantial Existing Capabilities at Our Terminals & Products Assets Includes substantial blending, pipeline, terminaling & export capabilities for ethanol & other biofuels Ethanol Biodiesel Renewable Diesel Our existing assets Fuel-grade ethanol breakout (e.g., Biodiesel services include Services i
Slide 25: West Coast Renewable Fuels Projects
West Coast Renewable Fuels Projects Developing infrastructure to secure renewable fuels Market drivers — Renewable Diesel (RD) has been driven by California subsidies — RIN credits (federal) — Low Carbon Fuel Standard (LCFS) credits — Blender’s Tax Credit — Currently averaging >$4.00/gal for total c
Slide 26: Point Sources are Geographically Diverse
Point Sources are Geographically Diverse Captured carbon may be sequestered or used in EOR production Within 30 miles of our existing CO2 pipe, we estimate carbon capture opportunities of: from natural gas ~200-300 mmcfd processing/treating ~500 mmcfd from natural gas power ~700 mmcfd from coal powe
Slide 27: Opportunity to Capture Carbon from Stationary Sources
Opportunity to Capture Carbon from Stationary Sources US GHG EMISSIONS US GHG EMISSIONS FROM POINT SOURCES mmtpa mmtpa Ethanol Nat Gas Processing Ammonia Manufacturing ~70% of point source emissions from point Hydrogen Production are higher sources potential 2,622 Cement Production other 3,936 candi
Slide 28: CCUS Economics are Improving but Remain Challenged
CCUS Economics are Improving but Remain Challenged CURRENT ESTIMATED U.S. CARBON CAPTURE COST $/tonne 45Q TAX CREDITS $140 ‒ Capturer controls the tax credit Additional technological advancements ‒ Industry still contemplating economics across the value $120 & government policy could advance chain C
Slide 29: Our Multi-Faceted ESG Approach
Our Multi-Faceted ESG Approach Recognized as an industry leader & for ongoing improvements Sustainalytics ESG risk rating(a) INVEST integrity management & maintenance programs – Safety-focused – Outperform industry averages in most safety & release related categories #1 #1 – Projects to minimize our
Slide 30: Long-Standing Commitment to Reducing Emissions
Long-Standing Commitment to Reducing Emissions 25+ year track record Evaluate new opportunities SUCCESSFUL METHANE EMISSIONS REDUCTIONS(a) – Work with organizations like DOE, EPA, & PRCI on studies & technology bcf, cumulative across our operations reported to EPA Natural Gas STAR & evaluations Meth
Slide 31: Compelling Investment Opportunity
Compelling Investment Opportunity Strategically-positioned assets generating substantial cash flow with attractive investment opportunities Stable cash flows with ~72% take-or-pay or hedged earnings(a) ~6% current yield & healthy dividend coverage Top 10 dividend yield in S&P500 Dividends & capex fu
Slide 32: Appendix
APPENDIX
Slide 33: Energy Toll Road
Energy Toll Road Cash flow security with >90% from take-or-pay & other fee-based contracts Natural Gas Products Terminals CO2 2021B EBDA %(a) 62% 16% 15% 7% Refined Liquids Jones Act CO2 & Interstate / LNG Intrastate G&P products Crude terminals tankers Bulk terminals EOR Oil & Gas Transport 4% & 1%
Slide 34: $1.3 Billion Project Backlog as of 6/30/2021
$1.3 Billion Project Backlog as of 6/30/2021 Primarily focused on contracted natural gas opportunities DEMAND SUPPLY CAPITAL ESTIMATED PIPELINE PULL PUSH ($ billion) IN-SERVICE CAPACITY Supply for U.S. power & LDC demand (TGP, FGT, TX intra, SNG) $ 0.4 Q3 2021 – 2023 1.0 bcfd Supply for LNG export
Slide 35: Valuable Texas Natural Gas Systems
Valuable Texas Natural Gas Systems Winter Storm Uri emphasized the importance of our Texas Natural Gas network — Texas Intrastates system represents ~10% of total Adjusted Segment EBDA(a) – Heavily contracted with >80% take-or-pay(a) – Average transportation contract tenor >5 years — 7,000 mile pipe
Slide 36: Supporting the Buildout of U.S. LNG Exports
Supporting the Buildout of U.S. LNG Exports Serving significant liquefaction capacity & well-positioned to capture more Kinder Morgan network advantages Natural gas transportation leader ~70,000 miles of natural gas pipelines Move ~40% of U.S. natural gas consumption & exports Supply diversity Conne
Slide 37: Manageable Natural Gas Re-Contracting Exposure
Manageable Natural Gas Re-Contracting Exposure Analysis of existing contracts that renew during next two years KMI ADJUSTED EBITDA $ billions Expiring contracts are assessed for volumetric & Adjusted EBITDA Natural Gas re-contracting rate risk based on November 2020 market $8 assumptions (time of bu
Slide 38: Gathering & Processing Assets Across Multiple Key Basins
Gathering & Processing Assets Across Multiple Key Basins Represents ~7% of KMI EBDA with ~6% in Natural Gas & ~1% in Products (primarily Bakken) SHORT-TERM DRY GAS PRODUCTION OUTLOOK bcfd, 2020 – 2022 ~17% Other 14 Multiple systems in Uinta, Oklahoma, San Juan & other areas +22% 12 Our primary areas
Slide 39: Volume Recovery Still Playing Out
Volume Recovery Still Playing Out KINDER MORGAN REFINED PRODUCTS VOLUMES KINDER MORGAN NATURAL GAS G&P VOLUMES mbbld mmcfd Diesel Gasoline Jet fuel 1,200 4,000 1,000 3,000 800 600 2,000 400 1,000 200 - - 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 2
Slide 40: Products Segment Overview
Products Segment Overview Supplying a diverse mix of feedstock & finished products critical to refining & transportation sectors 2021B volumes Volume by 2021B DELIVERY VOLUMES(a) mbbld region(b) West 74% — Budget averages 2% below 2019 gasoline Gasoline 1,054 volumes & reaches 2019 level by Q4 2021
Slide 41: Our Integrated Terminal Network on Houston Ship Channel
Our Integrated Terminal Network on Houston Ship Channel Refined products focused with an irreplaceable collection of assets, capabilities & market-making connectivity Our unmatched scale & flexibility: KM terminals & assets refined products terminals Colonial local refineries & processing Explorer 4
Slide 42: CO2 Segment Consistently Generates Free Cash Flow
CO2 Segment Consistently Generates Free Cash Flow Low cash cost structure yields healthy margins through multiple commodity price cycles OIL & GAS CASH OPERATING COSTS & AVG. PRICE CO2 SEGMENT FREE CASH FLOW $ millions $ per net barrel Cash costs Avg. realized oil price FCF Capex Acquisitions Adj. S
Slide 43: Joint Venture Treatment in Key Metrics
Joint Venture Treatment in Key Metrics KM does not control nor consolidate KM controls & fully consolidates KM portion referred to as equity investments in third party portion referred to as noncontrolling interests in financial statements financial statements SNG (50%), NGPL (37.5%), GCX (26.7%) Ex
Slide 44: Non-GAAP Financial Measures & Reconciliations
Non-GAAP Financial Measures & Reconciliations Defined Terms Reconciliations for the historical periods 44
Slide 45: Use of Non-GAAP Financial Measures
Use of Non-GAAP Financial Measures We use the non-GAAP financial measures of Adjusted Earnings and Distributable Cash Flow (or DCF), both in the aggregate and per share for each; Adjusted Segment EBDA; Adjusted EBITDA; Net Debt; Net Debt to Adjusted EBITDA; Project EBITDA; Free Cash Flow; and CO2 Se
Slide 46: Use of Non-GAAP Financial Measures (Continued)
Use of Non-GAAP Financial Measures (Continued) Adjusted Segment EBDA is calculated by adjusting segment earnings before DD&A and amortization of excess cost of equity investments (Segment EBDA) for Certain Items attributable to the segment. Adjusted Segment EBDA is used by management in its analysis
Slide 47: GAAP Reconciliations
GAAP Reconciliations in millions 2021 2021 Projected 2020 Projected 2020 Guidance Actual Guidance Actual Net income attributable to Kinder Morgan, Inc. (GAAP) $ 1,700 $ 119 Net income attributable to Kinder Morgan, Inc. (GAAP) $ 1,700 $ 119 Total Certain Items 1,200 1,892 Total Certain Items 1,200 1
Slide 48: GAAP Reconciliations
GAAP Reconciliations $ in millions 2020 Certain Items in Segment Adjusted Adjusted EBDA Segment Segment Reconciliation of Adjusted Segment EBDA (GAAP) EBDA EBDA Certain Items 2020 Natural Gas Pipelines $3,483 $983 $4,466 Fair value amortization $ (21) Products Pipelines 977 50 1,027 Legal, environme
Slide 49: GAAP Reconciliations
GAAP Reconciliations $ in millions Reconciliation of DD&A and amortization of excess cost of equity investments for DCF 2020 Reconciliation of income tax expense for DCF 2020 Depreciation, depletion and amortization (GAAP) ($2,164) Income tax expense (GAAP) $ (481) Amortization of excess cost of equ
Slide 50: Reconciliations of KMI FCF & CO2 Segment FCF
Reconciliations of KMI FCF & CO2 Segment FCF $ in millions a) Includes dividends paid for the preferred shares for the years ended 2016, 2017, and 2018. b) Includes sustaining and expansion capital expenditures. 50