Kinder Morgan, Inc. · NYSE:KMI
Kinder Morgan — Morgan Stanley Conference March 2004
25 slides from Kinder Morgan's conference presentation, March 2004
Slide 1: Companies Run By Shareholders For Shareholders
Companies Run By Shareholders For Shareholders Morgan Stanley Conference March 2004
Slide 2: Forward Looking Statements
Forward Looking Statements This presentation contains forward looking statements, including these, within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Exchange Act of 1934, as amended. Forward looking statements are not guarantees of performance. They i
Slide 3: Kinder Morgan System Map
Kinder Morgan System Map 2 PACIFIC COCHIN 2 2 NORTH 2 KMIGT 2 2 PACIFIC 2 3 CALNEV 2 KMP 2 4 PACIFIC NGPL CO2 Pipelines KMCO2 Oil Production Field PLANTATION Terminals Products Pipelines KM TEJAS KMI 8 Products Pipeline Terminals NGPL 2 KMTP 2 Transmix Facilities NGPL Storage 2 CFPL 4 Natural Gas Pi
Slide 4: Kinder Morgan: Three Securities
Kinder Morgan: Three Securities Kinder Morgan Energy Partners Kinder Morgan, Inc Market Equity (a) $8.6 Incentive Market Equity (b) $8.2 Debt 4.1 Distribution Debt 3.0 Enterprise Value $12.7 Enterprise Value $11.2 2004E EBITDA $1,307 mm 2004E EBITDA $1,033 mm 2004E Dist. CF $968 mm 2004E Dist. CF $5
Slide 5: Consistent Track Record
Consistent Track Record Total Distributions (GP + LP) ($mm) KMP Distribution / Unit (a) $2.90 - $1,000 $940 = 21% $2.94 $827 CAGR $2.72 $800 $3.00 $2.50 5% $701 =6 $2.20 Net Income GR $2.50 CA $548 $1.90 $600 $2.00 $/LP Unit $1.45 $1.30 $400 $333 $1.50 $1.13 $198 $1.00 $0.63 $200 $153 $30 $0.50 $17
Slide 6: Growing KMP/KMR Distribution Coverage
Growing KMP/KMR Distribution Coverage Published Budget vs. Actual Coverage Internally Generated Cash Flow Budgeted Coverage Actual Coverage Available for Reinvestment ($ millions) 1.10 1.04 1.05 Coverage KMR Distributions 1.02 $17 1.00 1.00 1.00 2 $136 $150 0.90 2002 2003 2004E $108 $100 Approximate
Slide 7: The Kinder Morgan Strategy
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 Improve productivity to drop a
Slide 8: Management Philosophy
Management Philosophy Low Cost Asset Operator Senior management limited to $200,000 per year in base salary No planes, sports tickets, etc. Attention to Detail Weekly operations and financial assessment Monthly earnings and accounts receivable review Quarterly strategic review Risk Managem
Slide 9: Attractive Value Proposition
Attractive Value Proposition KMP/KMR KMI Distribution/Dividend $2.72 $2.25 Yield ~ 6.0% / 6.6% ~ 3.5% yield yield Internal Growth Target 8-10% 10-12% 9
Slide 10: Kinder Morgan Energy Partners
Kinder Morgan Energy Partners KMP and KMR
Slide 11: Solid Asset Base Generates Stable Fee Income
Solid Asset Base Generates Stable Fee Income Terminals Products Pipelines KMP 59% Liquids, 41% Bulk 2004 DCF (a) Refinery hub to population Geographic and product center strategy diversity 74% Pipelines (b) 3-4 year average contract life Terminals 22% Associated Terminals (b) 17% Product 4% Transmix
Slide 12: KMP 2004 Segment Goals
KMP 2004 Segment Goals Growth in Earning before Top DD&A Strategic Business Segment ($millions / %) Priority Products Pipelines $41 / 9% SFPP rate case East Line expansion Natural Gas Pipelines $10 / 3% Contract Advantage and West Texas Pipelines CO2 $119 / 58% Deliver infrastructure on time and on
Slide 13: KMP: Leading Position in Each Major Business
KMP: Leading Position in Each Major Business Products Pipelines (based on barrels per day) (a) Natural Gas Pipelines (based on pipeline miles) 1. Kinder Morgan (1.9 million bpd) 1. El Paso (54,900 miles) 2. Buckeye Pipeline (1.5 million bpd) 2. Kinder Morgan (25,600 miles) 3. Magellan Midstream (.6
Slide 14: High Return Internal Expansions Add Growth
High Return Internal Expansions Add Growth KMP 2004 Expansion Capital Budget 2004 Completion Business Segment Budget Major Projects Date Product Pipelines $159 North and East Line, Carson 2004-2006 Natural Gas Pipelines $76 CMC, Austin 2004 CO2 $310 SACROC/Yates 2004 Terminals $64 Carteret, Delta 20
Slide 15: KMP is conservatively capitalized
KMP is conservatively capitalized Rating CP Capacity: Baa1/BBB+ Total Revolver $1,050 Current Net Debt / Total Capital (b) 52% Outstanding CP (b) 188 2004 Budget Estimates: Debt / EBITDA 3.5x Excess Capacity $862 EBITDA / Interest 6.5x Enterprise Value and Credit Ratings (a): Maturities: $ (in milli
Slide 16: KMR is a Tax Efficient Way to Own KMP
KMR is a Tax Efficient Way to Own KMP Higher Current Yield When KMR Trades at a Discount KMP Cash Distribution / KMR Price (10 days prior to ex-dividend) Same or Better Terminal Value guarantee upon mandatory purchase events of higher of KMP or KMR value Same Voting Rights as KMP Taxes Share d
Slide 17: Kinder Morgan Inc.
Kinder Morgan Inc.
Slide 18: Solid Asset Base Generates Stable Fee Income
Solid Asset Base Generates Stable Fee Income Investment in KMP (a) KMI NGPL 2004 Segment Income (b) General partner interest earns FERC regulated with 3 year incentive distributions average contract life Owns 17% of total limited Primary customers are Chicago partner units local distribution compani
Slide 19: Targeted KMI Internal Growth
Targeted KMI Internal Growth Assumptions: 1. Investment in KMP 15% results from 8-10% LP distribution growth 2. NGPL / Other Assets 3 - 5% segment earnings growth 3. Use of Free Cash Flow $100 million in debt reduction $60 million in share repurchase Consistent with 10-12% earnings growth 4. Use of
Slide 20: Over $2 billion Returned to Investors through 2004
Over $2 billion Returned to Investors through 2004 $2,019 $2,100 $1,800 $1,500 $1,200 $900 $511 $637 $556 $440 $600 $300 ($125) $0 -$300 2000 2001 2002 2003 2004E Total Dividends 23 23 37 135 280 497 Share Repurchase 0 266 149 38 60 513 Change in Net Debt 488 348 (311) 383 100 1,009 20
Slide 21: KMI vs. SPX: Higher Return, Lower Risk, Trading at a Discount
KMI vs. SPX: Higher Return, Lower Risk, Trading at a Discount Total Long-Term Current Projected 2004 Projected Dividend Return EPS (Column 1+2) Growth (a) Yield (b) Beta (c) Multiple (d) KMI 10-12% 3.5% 14-16% .64 17X SPX 7.0% 1.5% 8.5% 1.0 18X (a) Source: KMI = Company Estimates; SPX = First Call C
Slide 22: Risks
Risks Regulatory Pacific Products Pipeline FERC/CPUC case Periodic rate reviews Unexpected FERC policy changes Environmental Terrorism Interest Rates 50% of debt is floating rate Budget assumes approximately 100 bps increase in floating rates over the year A full year of a 100 basis poin
Slide 23: Future Opportunities Beyond 2004
Future Opportunities Beyond 2004 Natural Gas Pipeline Expansions Refined Products Expansions TransColorado East Line Advantage New York Harbor Greasewood to Cheyenne Houston West Texas Los Angeles Silver Canyon SACROC/Yates Natural Gas Storage Opportunities Acquisitions LNG Inter
Slide 24: Unique Structure, Stable Assets and Attractive Growth
Unique Structure, Stable Assets and Attractive Growth Unique Structure Stable Assets, Attractive Growth KMP Stable cash flow from essential Tax efficient entity infrastructure Pay-out 100% of available cash Low cost discipline Structure creates discipline Conservative capital structure KMR Man
Slide 25: Kinder Morgan
KINDER’ MORGAN