Kinder Morgan, Inc. · NYSE:KMI
Kinder Morgan — Investor Day (January 2013)
55 slides from Kinder Morgan's investor day presentation, Jan 30, 2013
Slide 1: “Excellence is a Habit” - Aristotle
“Excellence is a Habit” - Aristotle January 30, 2013
Slide 2: Forward-Looking Statements / Non-GAAP Financial Measures
Forward-Looking Statements / Non-GAAP Financial Measures 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 fut
Slide 3: Kinder Morgan 2013 Investor Conference Agenda
Kinder Morgan 2013 Investor Conference Agenda 8:00 - 8:45 Corporate Overview: Vision – Rich Kinder 8:45 - 9:00 Corporate Overview: Financial Excellence – Park Shaper 9:00 - 9:15 Corporate Overview: Operational Excellence – Steve Kean 9:15 - 9:30 Break 9:30 - 10:15 Natural Gas Pipelines – Tom Martin
Slide 4: Vision
Vision Rich Kinder Chief Executive Officer
Slide 5: Our Strategy – Stay the Course
Our Strategy – Stay the Course Same Strategy Since Inception Focus on stable fee-based assets that are core to North American energy infrastructure — Market leader in each of our business segments Control costs — It’s the investors’ money, not management’s – treat it that way Leverage asset fo
Slide 6: EP Acquisition: Our Strategy at Work
EP Acquisition: Our Strategy at Work Initial management guidance: Commitment achieved: Close EP acquisition in 2Q 2012 Acquisition completed 5/25/2012 Identified and implemented year-one cost savings Targeted cost savings of $350 million of more than $400 million Completed sale of EP E&P business as
Slide 7: Strategy Has Proven Effective
Strategy Has Proven Effective ($MM, except where noted) Inception Current (1996) (a) (2013) KM Combined Enterprise Value (b) $349 $105,528 (c) KM Consolidated Segment EBDA (b,d) $36 $7,053 (e) KMP Total Distributions $17 $3,791 (e) KMP Distribution per Unit $0.63 $5.28 (e) Total Assets $304 $68,520
Slide 8: Unparalleled Asset Footprint
Unparalleled Asset Footprint 3rd largest energy company in North America with combined enterprise value of approximately $100 billion (a) Largest natural gas network in U.S. — Own an interest in / operate approximately 62,000 miles of natural gas pipeline — Connected to every important U.S. natu
Slide 9: Kinder Morgan – Four Ways to Invest: KMI, KMP, KMR & EPB
Kinder Morgan – Four Ways to Invest: KMI, KMP, KMR & EPB 666MM Public Kinder Morgan, Inc. (64%) Float Market Equity $40.6B (a) Cash Debt 11.4B (b) dividends to KMI 301MM (d) Management/ shareholders (C-corp) (29%) Original S/H Enterprise Value $52.0B 1,036 MM shares (a) 2013E Dividend per Share $1.5
Slide 10: 17 Years of Consistent Growth at KMP
17 Years of Consistent Growth at KMP KMP Total Distributions (GP + LP) ($MM) KMP Annual LP Distribution per Unit (b) $4,000 $3,791 $6.00 $5.28 GP LP $4.98 $3,500 $3,230 $4.61 $5.00 $4.40 $3,000 $2,737 $4.20 $4.02 $2,450 (a) $4.00 $3.48 $2,500 $2,171 $3.13$3.26 $1,877 $2.87 $2,000 $3.00 $2.63 $2.44 $
Slide 11: Significant Historical Returns
Significant Historical Returns (a) KMP: 24% CATR Since ‘96 (b) KMI: 13% CATR Since Inception (e) $4,000 $140 KMI = $126 Dollars KMP = $3,327 Dollars RMZ = $122 $3,500 $120 $3,000 $100 $2,500 UTY= $116 $80 S&P 500 = $112 $2,000 $60 $1,500 AMZ (d) = $1,046 $40 $1,000 $500 $20 ⇐ IPO 2/10/2011 S&P 500 =
Slide 12: Promises Made, Promises Kept
Promises Made, Promises Kept Promises Made Promises Kept KMI Budgeted KMI Actual Dividend: Dividend: 2011: $1.16 (a) 2011: $1.20 (a) 2012: $1.35 2012: $1.40 KMP Budgeted KMP Actual LP Distribution: LP Distribution: 2000: $1.60 2000: $1.71 KMP achieved 2001: $1.95 2001: $2.15 LP distribution 2002: $2
Slide 13: 2013 Budget Guidance
2013 Budget Guidance Supported by Diversified Cash Flow CO2 S&T CO2 Oil Production 6% KMI Budget: Natural Gas 14% Pipelines KMI 2013 dividend: $1.57/sh (12.1% growth) Terminals 12% 54% Fully-consolidated year-end 2013 debt / EBITDA = 5.0x (a) 11% B KM Canada 3% Products U Pipelines S I CO2 S&T K
Slide 14: 2013 Business Segment Growth Drivers
2013 Business Segment Growth Drivers Natural Gas Pipelines Terminals Full-year of EP acquisition Expansion projects: coal, Edmonton Expansions Canadian crude tankage, BOSTCO, BP Whiting Dropdowns Increase in contracted rates on Cost savings existing business Full-year of 2012 acquisiti
Slide 15: Over $12 Billion Backlog of Growth Projects
Over $12 Billion Backlog of Growth Projects Tremendous footprint provides over $12B of growth opportunities over next 5 years (a) Approximate Growth Capex (a) ($B) Natural Gas Pipelines $2.7 Products Pipelines 0.7 Terminals 1.4 CO2 – S&T 1.5 CO2 – EOR (b) Oil Production 0.9 Kinder Morgan Canada 5.4
Slide 16: Long-term Growth Rates
Long-term Growth Rates 2011 – 2015 Expected CAGRs KMP = ~7% EPB = ~9% KMI = ~12% (a) Next 3 to 5 Years (2012+) KMP = ~5-6% EPB = ~5-6% KMI = ~9-10% __________________________ Note: growth rates based on distribution per unit / dividend per share. (a) KMI 2011-2015 CAGR based off of 2011
Slide 17: KMP / KMR
KINDER/MORGAN KINDER MORGAN ENERGY PARTNERS, L.P. KMP /KMR
Slide 18: KMP’s Diversified Cash Flow
KMP’s Diversified Cash Flow Natural Gas Pipelines 2013E KMP Segment 62% interstate pipelines Earnings before DD&A 19% intrastate pipelines & storage = $5.4 billion (a) 19% gathering, processing & treating Products Pipelines CO2 S&T 55% pipelines 45% associated terminals & transmix Natural
Slide 19: KMP 2013 Growth Expenditure Budget
KMP 2013 Growth Expenditure Budget Without dropdowns With dropdowns = $2.9 billion (a,c,d) = $4.5 billion (b,c,d) CO2 Oil CO2 S&T CO2 S&T Production Natural Gas Natural Gas CO2 Oil Pipelines 6% Pipelines Production 9% 8% 13% 33% Terminals 15% 25% 58% Terminals 20% 13% Products Products Pipelines (b)
Slide 20: EPB
KINDER/MORGAN EL PASO PIPELINE PARTNERS j EPB
Slide 21: EPB Focused on Natural Gas Pipelines
EPB Focused on Natural Gas Pipelines 2013E EPB Segment Natural Gas Earnings before DD&A Highly stable cash flow stream = $1.2 billion (a) — 89% interstate pipelines • Average contract life = ~7 years — 11% LNG • Average contract life = ~19 years (b) — Minimal throughput and commodity exposure Natu
Slide 22: KMI
KINDER/MORGAN INC. KINDER MORGAN KMI
Slide 23: KMI Overview
KMI Overview KMI pays regular c-corp dividend with attractive combination of yield plus growth KMI Investments / Assets: — Investment in MLPs • KMP: – General Partner (GP) interest receives incentive distributions from KMP – KMI owns ~11% of total limited partner (LP) interests • EPB: – GP inter
Slide 24: KMI, KMP, KMR & EPB: Attractive Value Proposition
KMI, KMP, KMR & EPB: Attractive Value Proposition Unparalleled asset footprint Highly visible, attractive dropdown inventory Significant, identified growth opportunities Attractive returns driven by combination of yield plus growth Established track record Industry leader in all business
Slide 25: Financial Excellence
Financial Excellence Park Shaper President
Slide 26: $30B of Growth Capital Invested at KMP
$30B of Growth Capital Invested at KMP (a,b,c) ($ in billions) Total Invested by Type (a,b,c) Total Invested by Year (a) $16 $5.5 $3.3 JV Contributions $5.1 (c) $12 $5.0 Expansion $4.5(d) $8 $15.0 $4.5 Acquisition $11.8 $4.0 $4 $3.5 $3.3 $- Expansions Acquisitions $3.0 $2.8 $2.5 $2.6 $2.5 $2.4 Total
Slide 27: How We Have Done: KMP Returns on Capital
How We Have Done: KMP Returns on Capital 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Segment ROI (a): Natural Gas Pipelines 13.3% 15.5% 12.9% 13.5% 14.0% 15.5% 16.7% 17.5% 16.9% 14.0% 11.9% 11.9% 11.9% Products Pipelines 11.9 11.8 12.8 12.9 12.4 11.6 11.8 13.2 12.5 13.4 13.7 12.
Slide 28: KMP Cost of Capital
KMP Cost of Capital Operated in “50/50 splits” since 1997 Cost of capital varies over time: — Current ~7.3% (a) — 2012 analyst conf 7.2% — 2011 analyst conf 7.8% — 2010 analyst conf 8.8% — 2009 analyst conf 9.8% — 2008 analyst conf 9.0% Long-term cost of capital ~9% Targeted unlevered return
Slide 29: KMP Access to Capital
KMP Access to Capital Issued ~$30.9 billion of capital at KMP in public markets since inception in 1997 (a) — ~$14.8 billion in equity raised (a) — ~$16.1 billion in KMP long-term debt (~$13.3B net of refinancing) Accessed in difficult markets — Sep’01 to Sep’02 ~$1.9 billion in equity and debt
Slide 30: KMR 101
KMR 101 Discount Has Narrowed (Again), But Still Wide KMR is KMP KMR Discount to KMP (b) — KMR shares are pari passu with KMP units 10% — KMR dividend equal to KMP cash distribution, but paid in additional shares; effectively a dividend reinvestment 5% program (a) 0% — Like KMP units, KMR shares a
Slide 31: Net Equity Production
KMP CO2 Oil Production Hedge Profile Avoid businesses with direct Net Oil Production commodity exposure Avg Hedge Px WTI & WTS $94.70 $94.03 $93.82 $89.08 ($/Bbl) (a) Hedge CO2 BOE equivalent 40 — Targeted minimum Net Equity Production hedge amounts: 30 80% (Mboe/d) (b) Current Year: 70% Year 2:
Slide 32: KMI Warrants
KMI Warrants ~505 million warrants issued as part of the El Paso acquisition — $40 strike price — 5-year maturity (May-2017) Board approved $250 million repurchase program — Repurchased $156 million during 2012 — ~440 million warrants outstanding as of 12/31/2012 — No expiration to program (~$94
Slide 33: Risks
Risks Regulatory (KMP/EPB/KMI) — Pacific Products Pipeline FERC / CPUC cases — Periodic rate reviews — Unexpected policy changes Crude oil production volumes (KMP) Crude oil prices (KMP) — 2013 budget assumes $91.68/Bbl realized price on unhedged barrels — 2013 sensitivity is ~$5.9 million DCF
Slide 34: Financial Excellence is a Habit
Financial Excellence is a Habit Disciplined capital allocation Maintaining strong balance sheet Attention to detail Transparency to investors Delivering results “However beautiful the strategy, you should look at the results” – Winston Churchill 35
Slide 35: Operational Excellence
Operational Excellence Steve Kean Chief Operating Officer
Slide 36: Overview
Overview Segment Outlooks EP Integration Operations 37
Slide 37: Natural Gas Pipelines Segment Outlook
Natural Gas Pipelines Segment Outlook Well-positioned connecting key natural gas resource plays with major demand centers Project Backlog: $2.7 billion of identified growth projects over next five years (a), including: — TGP Northeast upgrade — LNG liquefaction (FTA @ Gulf & Elba Island) — SNG / E
Slide 38: Products Pipelines Segment Outlook
Products Pipelines Segment Outlook Opportunities for growth from increased liquids production Project Backlog: $0.7 billion of identified growth projects over next two years (a), including: — Cochin reversal & diluent conversion — Condensate processing — Sweeney lateral — Parkway Long-term Growth
Slide 39: Terminals Segment Outlook
Terminals Segment Outlook Well-located in refinery / port hubs and inland waterways Project Backlog: $1.4 billion of identified growth projects over next three years (a), including: — Liquids • Edmonton Phase I / II expansions • BOSTCO project • Houston terminal network expansion — Bulk • Deepwate
Slide 40: CO2 Segment Outlook
CO2 Segment Outlook Own and operate best source of CO2 for EOR (a) Project Backlog: Identified growth projects totaling $1.5 billion and $0.9 billion in S&T and EOR (a), respectively, over next five years (b), including: — S&T • McElmo / Doe Canyon expansion • St. Johns build-out — Oil Production
Slide 41: Kinder Morgan Canada Segment Outlook
Kinder Morgan Canada Segment Outlook Sole oil pipeline from Oilsands to West Coast / export markets Project Backlog: $5.4 billion expansion of TMPL Long-term Growth Drivers: Expand Oilsands export capacity to West Coast and Asia — Following successful open season, major expansion plans under way
Slide 42: El Paso Integration Timeline
El Paso Integration Timeline Pre-close Day-1 Remainder of 2012 2013 & Beyond Implemented weekly Combined organization Conversion to common Conversion to common update process specified (including financial and accounting gas pipeline scheduling Implemented monthly transition workforce) sys
Slide 43: Operations Goals – Safe, Reliable, Efficient Operations
Operations Goals – Safe, Reliable, Efficient Operations Continuous reduction in risk to the public, employees, contractors, assets and the environment Continuous improvement in the efficiency and productivity of existing operations Well-executed expansions and effective integration of acquired
Slide 44: Efficiency
Efficiency Part of weekly asset review — Throughput — Operating costs (including energy use and L&U) — Sustaining capex updates Detailed, “bottoms up” budget process for operating expenses and sustaining capex — Separately identify safety and compliance needs; separately track spending on those
Slide 45: Risk Reduction
Risk Reduction Operational Excellence is a Habit Systems-making Immediate Risk Reduction Compliance Routine Continuous Improvement ROW protection programs Addressing operations Systems Improvement and performance in our existing extension Liquids pipeline O&M re-write processes — Operations
Slide 46: Compliance Summary
Compliance Summary Making Compliance a Habit Key elements: 1. Clear statement of requirement, assignment of responsibility and deadline for completion, and 2. Exception reporting to management Performance: — OpsInfo expanded to nearly 370,000 compliance actions per year • Timely compliance: 99.6
Slide 47: Compliance Summary – Cont’d
Compliance Summary – Cont’d Env. Permits Business Hazardous Waste / DOT & DOT Damage Unit Transport SPCC (a) Safety PSM / RMP (b) Maintenance Security Contractors Prevention OpsInfo, OpsInfo, Natural Gas OpsInfo & OpsInfo & OpsInfo & INFOR EAM, INFOR EAM, ISNetworld Petris Pipelines Maximo Maximo Ma
Slide 48: Incidents per 1,000 Miles
Incidents & Releases: Liquids Pipeline ROW Liquids Pipeline Incidents per 1,000 Miles (a) Liquids Pipeline Release Rate (a) 1.0 50 Barrels per billion barrel miles 0.8 40 Incidents per 1,000 Miles 0.6 30 0.45 0.39 0.4 20 15.5 0.29 0.21 13.1 0.2 10 6.0 0.08 0.08 2.5 - - 0.01 0.1 - - 2006 2007 2008 20
Slide 49: Incidents per 1,000 Miles
Incidents & Releases: Natural Gas Pipeline ROW Natural Gas Pipeline Incidents Rate (a) 1.0 0.8 Incidents per 1,000 Miles 0.6 0.4 0.32 0.30 0.27 0.27 0.2 0.13 0.13 0.04 - 2006 2007 2008 2009 2010 2011 2012 KM Incidents Current Industry Avg 2005 Industry Avg KM/EP Combined 3-yr Avg ___________________
Slide 50: Lost-time injuries per 200k hours worked
KM Lost-time Incident Rate (DART) 5 Lost-time injuries per 200k hours worked 4.10 4 3 2 1.10 1.10 1 0.80 0.79 1.20 0.78 0.68 0.29 0.75 0.65 0.72 0.26 0.62 0.18 - Natural Gas CO2 Products Pipelines Terminals KM Canada Pipelines KM Rate (3-yr Avg) KM Rate (12-mo) Industry Avg 51
Slide 51: OSHA Recordable Incidents per 200k Hours Worked
OSHA Recordable Incident Rate 7 6.35 6 OSHA Recordable Incidents per 5.80 5 200k Hours Worked 4 3 2.90 2.60 2.50 2.50 2.50 2 1.50 1 2.32 1.34 1.40 1.59 1.20 1.19 1.15 1.04 0.14 0.77 - Natural Gas CO2 Products Pipelines Terminals KM Canada Pipelines KM Rate (3-yr Avg) KM Rate (12-mo) Industry Current
Slide 52: Recordable Vehicle Accidents
Vehicle Incident Rate 5 Recordable Vehicle Accidents 4 per 1MM miles 3 1.90 1.90 2 1.28 1.28 1 1.27 0.42 0.50 0.69 0.52 0.69 0.44 0.70 0.57 0.44 - Natural Gas CO2 Products Pipelines Terminals (a) KM Canada Pipelines KM Rate (3-yr Avg) KM Rate (12-mo) Industry Avg __________________________ (a) Indus
Slide 53: 2013 Objectives
2013 Objectives Incident rates: better than industry average and better than the Kinder Morgan 3-year average; zero significant incidents Continued special emphasis on high consequence assets and operations 54
Slide 54: Great Moments in Operations…
Great Moments in Operations… 55
Slide 55: KINDER/MORGAN
KINDER/MORGAN