Slide 1: Kinder Morgan Update August 2001
Kinder Morgan Update August 2001 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 K in d e r M o r g
Slide 2: Unique Financial Structure
Unique Financial Structure KMP drives growth at KMI Management Management Public Public – Over $250 million of distributions to KMI for 2001 25% 25% 75% 75% – Represents approximately 34% of KMI’s segment income in 2001 KMI (a) – Fastest growing business segment of KMI (Corporation) Market Equity $6
Slide 3: 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 – Increased use of weather hedges Increased utilization of assets while controlling costs – C
Slide 4: KMI Guidance – 2001 EPS up over 40%
KMI Guidance – 2001 EPS up over 40% Expect approximately $.96 in Q’s 3&4 and approximately $1.84 for the year $ 0.47 $ 0.41 $ 0.43 $ 0.40 $ 0.23 $ 0.21 2000 2001 2000 2001 2000 2001 2000 2001 Q1 Q2 Q3 Q4 3
Slide 5: KMI Guidance - Segment Income Contribution
KMI Guidance - Segment Income Contribution (a) KMP - Should almost double in 2nd half of 2001 vs 2000 Power & Other – Expect approximately 80% increase in 2nd half 2001 vs 2000 Retail – Expect 10% growth in 2001 KMTP – moved to MLP NGPL – Should be relatively flat in 2001 2000 2001 2000 2001 2000 20
Slide 6: KMI Guidance - 2002
KMI Guidance - 2002 $ 2.40 - $2.50 $ 2.20 - $2.35 Acquisitions at $ 0.96 $ 1.84 KMP NGPL Retail Interest Power* Savings SFAS 142 KMP $ 1.28 $ 0.88 20- 20-28% EPS Growth without acquisitions 2000 EPS 2001 YTD Estimated Estimated Estimated 2002 Estimated (Quarters 2001 2001 EPS EPS assuming 2002 EPS w
Slide 7: KMP Year End Distribution
KMP Year End Distribution (a) Greater than 0 01 $5.00 9 6- 2 $4.40 9 AG R1 $3.80 % C 28 $2.90 $2.60 $2.25 $1.26 1996 1997 1998 1999 2000 2001(e) 2002(e) (a) Historical and projected year-end run rate for KMP distribution per unit ( equal to Q4 distribution x4) 6
Slide 8: KMP Guidance - 2002
KMP Guidance - 2002 $ 4.85 - $4.95 $ 4.70 - $4.80 CO2 Acquisitions $ 4.25 Terminals Nat Gas Products $3.43 Expect mid teens growth in distribution plus 6% yield $2.00 2000 DPU Estimated Estimated 2002 Estimated 2001 DPU DPU assuming 2002 DPU with no additional acquisitions acquisitions 7
Slide 9: Vopak Acquisition
Vopak Acquisition Acquired 4 terminals for $44 million in cash at approximately 6.5x distributable cash flow Three terminals in Florida – Port Sutton and Manatee terminal in Tampa – primarily fertilizers and ammonia sulfate – Nassau Terminals in San Fernandina Beach – break bulk primarily paper and
Slide 10: Oxy Acquisition
Oxy Acquisition Acquired the partnership that owns a major part of the Kinder Morgan Texas Pipeline 2600 miles of gas pipeline that transports gas from south Texas to Houston KMP signed a 5 year agreement to supply approximately 90 Bcf of gas to Oxy Chemical plants in Houston area Paid $360mm or app
Slide 11: KMP Acquisition Matrix
KMP Acquisition Matrix Accretion per LP Unit ($) (a) Hypothetical Value of Multiple of Distributable Cash Flow Acquisitions 5.0 X 6.5 X 8.0 X $1,250M $ 0.77 $ 0.46 $ 0.27 1,000M 0.63 0.38 0.22 750M 0.49 0.29 0.17 500M 0.33 0.20 0.12 Target $0.25 - 0.35 (a) Assumes acquisition financed 60% equity / 4
Slide 12: KMI Acquisition Matrix
KMI Acquisition Matrix Accretion per Common Share ($) (a) Hypothetical Value of Multiple of Distributable Cash Flow Acquisitions 5.0 X 6.5 X 8.0 X $1,250M $ 0.57 $ 0.39 $ 0.29 1,000M 0.46 0.32 0.23 750M 0.34 0.24 0.17 500M 0.23 0.16 0.11 Target $0.25 - 0.30 (a) Assumes acquisition financed 60% equit
Slide 13: Other Developments
Other Developments FERC 497 FERC considering re-examining relationships between pipelines & marketing affiliates Kinder Morgan has no marketing & trading Could lead to acquisition opportunities if major marketers are forced to divest pipes KMP/ KMR 2:1 Split Effective August 31 KMP numbers will need
Slide 14: KMR Offering Summary
KMR Offering Summary Issuer: Kinder Morgan Management, LLC Size: 14.875 million shares (originally filed 8.5 million) Price: $70.41 (indication on original filing was $59.75) Gross Proceeds(a): $1,047 million (indication original filing was $508) which returns KMP to 40% debt target Distribution/Yie
Slide 15: 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 14.875 million partnership interests (“i-units”)
Slide 16: KMR is KMP
KMR is KMP KMR KMP Distributions Shares Cash Yield 5.9% 5.9% 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 17: Other Developments – KMR IPO Update
Other Developments – KMR IPO Update 74 73 72 71 70 KMR Price 69 KMP 68 67 66 65 64 Date 5/14/01 7/20/01 16
Slide 18: Accounting Appendix
KINDER” MORGAN Accounting Appendix
Slide 19: KMR – Income Statement & Cash Flow
KMR – Income Statement & Cash Flow Three Months Ended Equates to $0.72 * 14.875m shares * ½ Consolidated Statement of Income June 30, 2001 period Equity in Earnings of KMP (approx 18% of KMP LP equity) $ 5,215 $(2,086) Permanent Provision for Income Taxes (at 40%) “temporary”difference/ Net Income $
Slide 20: KMR – Cash Flow Statement
KMR – Cash Flow Statement Three Months Ended Consolidated Statement of Cash Flow June 30, 2001 Net Income $ 3,129 Adjustments to reconcile Net Income to Net Cash Flow Recurring Deferred Taxes $ 2,086 Entries Equity in Earnings of KMP (approx 18% of KMP LP equity) $ (5,215) Net Cash Flows provided by
Slide 21: KMR – Accounting Summary
KMR – Accounting Summary KMI – KMI owns 10% of KMR but also has control - thus consolidates – KMI records 100% of KMR’s pretax earnings but backs out a 90% minority interest KMR – Value of KMR is derived from KMP distribution – Owns I-units which represent approximately 18% of the LP interest in KMP
Slide 22: KMR – KMI Income Statement
KMR – KMI Income Statement Three Months Ended KMI Income Statement (000) June 30, 2001 Operating Income $ 80,825 KMI Records 100% of KMR’s KMP Equity Earnings $ 67,058 pretax earnings ($5,215 for Q2) Amortization of Excess Investment $ (6,591) Equity in Losses of Other Equity Investments $ (724) Int
Slide 23: KMR – KMI Balance Sheet
KMR – KMI Balance Sheet As of KMI Balance Sheet (000) June 30, 2001 Assets Increase in assets $ 991,900 Liabilities Net improves debt to } $ 99,200 Increase in St Debt cap to 52% (45% post Increase in minority interest $ 892,700 PEPS conversion) 22
Slide 24: KMI Historicals
KMI Historicals First Quarter Second Quarter Third Quarter Fourth Quarter Total Year KMI SEGMENT EARNINGS / P&L Actual Actual Plan Actual Actual Actual Plan Actual 2001 2000 2001 2000 2001 2000 2001 2000 2001 2000 Investment in Kinder Morgan Energy Partners: Equity in Earnings 55,037 29,583 67,058 3
Slide 25: KMP Historicals
KMP Historicals First Quarter Second Quarter Third Quarter Fourth Quarter Total Year KMP SEGMENT EARNINGS / P&L Actual Actual Actual Actual Actual Actual Actual 2001 2000 2001 2000 2001 2000 2000 2000 Segment Earnings Before DD&A Product Pipelines 85,793 64,761 101,788 64,969 64,461 73,703 268,396 N
Slide 26: August 2001
KINDER” MORGAN August 2001