Kinder Morgan, Inc. · NYSE:KMI
Kinder Morgan — Investor Day (January 2015)
47 slides from Kinder Morgan's investor day presentation, Jan 28, 2015
Slide 1: With Change Comes Opportunity
With Change Comes Opportunity January 28, 2015
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 Investor Conference
Kinder Morgan Investor Conference 8:00 - 8:30 Corporate Overview: Vision – Rich Kinder 8:30 - 9:00 Corporate Overview: Operational Excellence – Steve Kean 9:00 - 9:15 Corporate Overview: Financial Excellence – Kimberly Dang 9:15 - 9:30 Break 9:30 - 10:15 Natural Gas Pipelines – Tom Martin 10:15 - 10
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Slide 5: Vision
Vision Rich Kinder Chief Executive Officer
Slide 6: KMI: The One and Only
KMI: The One and Only Whole New Ball Game Exciting new opportunity New company provides unique investment proposition with strong combination of yield and growth Expect $2.00 per share dividend in 2015 and 10% growth through 2020 with substantial coverage Substantial coverage above declared
Slide 7: Thoughts on Lower Commodity Prices
Thoughts on Lower Commodity Prices Major shift in power — OPEC no longer in charge of oil pricing — Free market approach in future Impossible to predict when or at what price oil will reach its bottom Price to sustain supply to match future demand is significantly higher than today’s prices an
Slide 8: Set to Weather the Storm
Set to Weather the Storm Low commodity price sensitivity — 2015 budgeted EBDA is ~85% fee-based, ~94% fee-based or hedged — $1/Bbl change in oil price = $10 million DCF impact; 10¢/MMBtu change in natural gas price = $3 million DCF impact Existing backlog largely insulated from oil price fluctua
Slide 9: Weathering the High Seas
Weathering the High Seas Oil last closed above $90/Bbl on 10/6/2014 Oil prices significantly lower today, down 50% Safe harbor: KMI has demonstrated strong relative stock performance since 10/6/2014 Stock Price Performance Since $90 Oil (10/6/2014–1/23/2015) 10% 9% 4% 0% -10% -12% -13% -15% -2
Slide 10: Then (Inception) and Now: Stable Platforms, Exceptional Growth
Then (Inception) and Now: Stable Platforms, Exceptional Growth ($ in millions) Inception (1996)(a) Current (2015) Enterprise Value $349 $132,111(b) Consolidated Segment EBDA(c) $36 $8,197(d) Total Distributions $17 $4,351(d) Total Assets $304 $83,242(e) Employees 176 11,535(e) S&P 500 Index Ranking
Slide 11: Our Strategy
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 investors’ money, not management’s – treat it that way Leverage asset footprin
Slide 12: Strategy Proven Effective
Strategy Proven Effective Creating large, diversified, midstream-focused energy platform 3rd largest energy company, single largest in midstream energy, in North America(a) Market cap of ~$91 billion and enterprise value of ~$132 billion ~80,000 miles of natural gas, liquids and CO2 pipelines, a
Slide 13: KMI Acquisition of KMP, KMR & EPB
KMI Acquisition of KMP, KMR & EPB Simplicity is Bliss Value enhancing combination paves way for significant growth, simplifies structure $77 billion transaction closed 11/26/2014 Greater dividend growth and visibility — 2015 budgeted dividend of $2.00 (15% growth over 2014) — 10% annual growth e
Slide 14: Unparalleled Asset Footprint
Unparalleled Asset Footprint Largest Energy Infrastructure Company in North America 3rd largest energy company in North America with an enterprise value of more than $130 billion Nearly $18 billion of currently identified organic growth projects Largest natural gas network in North America — O
Slide 15: 18 Years of Growth
18 Years of Growth Strategy Has Led to Consistent, Growing Results KMP Annual LP Distribution per Unit(a) KMI Annual Dividend per Share(c) $6.00 $5.58 $2.50 $5.33 $4.98 $2.00 $5.00 $4.61 $2.00 $4.40 $4.20 $1.74 $4.02 $1.60 $4.00 $3.48 $3.26 $1.50 $1.40 $3.13 $2.87 $1.20 $3.00 $2.44 $2.63 $2.15 $1.00
Slide 16: Returns to Investors
Returns to Investors Tremendous Total Returns Spanning 18 Years KMI: 14% CATR (2/10/2011-12/31/2014) $175 Dollars Total Return 2014 2-yr 3-yr 5-yr 10-yr $140 KMI 23% 31% 49% n/a n/a KMP 35%(b) 45%(b) 45%(b) 129%(b) 344%(b) $105 KMR 48%(b) 58%(b) 62%(b) 168%(b) 422%(b) ━ S&P 500 = $169 EPB 32%(b) 36%
Slide 17: Financial Rigor
Financial Rigor 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 KMI has exceeded its dividend target 2013: $1.57 2013: $1.60 in each of past 4 yrs. 2014: $1.72 2014: $1.74 KMP Budgeted KMP Actu
Slide 18: 2014 Highlights
2014 Highlights Another Great Year, Capped by Simplifying Transaction Exceeded dividend budget, grew backlog by nearly $3 billion KMI 2014 dividend of $1.74 per share exceeded $1.72 budget (9% growth from 2013) Invested $4.8 billion in expansions (including JV contributions) and acquisitions 5
Slide 19: 2015 Budget Guidance
2015 Budget Guidance Supported by Diversified, Fee-based Cash Flow 2015 Budget Commodity Price Sensitivity KMI 2015 budgeted dividend of $2.00 per share 2015 budgeted coverage over declared dividend of $654 million (assumes — 15% growth over 2014 $70/Bbl oil price and $3.80/MMBtu — Excess covera
Slide 20: Natural Gas Megatrend
Natural Gas Megatrend Strong Natural Gas Footprint & Market Opportunity Set… U.S. Natural Gas Projected Supply & Demand(a) …Generates Real-time, Demand (Bcf/d) 2015 2020 2025 KM Natural Gas Asset Footprint Long-term Benefits LNG exports 0.0 7.3 10.8 Mexican net exports 2.4 4.0 4.6 $641B of investm
Slide 21: KMI: Attractive Value Proposition
KMI: Attractive Value Proposition Unparalleled asset footprint Diversified energy infrastructure platform with stable, fee-based cash flow Industry leader in all business segments Highly visible, attractive growth project backlog Continued focus on strong balance sheet Established track
Slide 22: Operational Excellence
Operational Excellence Steve Kean President and Chief Operating Officer
Slide 23: 2015 Budgeted Segment Profile
2015 Budgeted Segment Profile 2015 Budgeted Segment Natural Gas Pipelines EBDA = $8.2 billion(a) 71% interstate pipelines 21% gathering, processing & treating 8% intrastate pipelines & storage CO2 S&T Products Pipelines CO2 Oil 61% pipelines Production 5% 39% associated terminals & transmi
Slide 24: 5-year Project Backlog
5-year Project Backlog(a) Nearly $18 Billion of Currently Identified Organic Growth Projects Tremendous footprint provides $17.6B of currently identified growth projects over next 5 years 5-year Growth Capex Backlog ($B) 2015 2016 2017 2017+ Total Natural Gas Pipelines $0.6 $0.5 $1.9 $1.6 $4.6 Produ
Slide 25: KMI to Acquire Hiland Partners for ~$3 Billion
KMI to Acquire Hiland Partners for ~$3 Billion Transaction Announced 1/21/2015 KMI announced a definitive agreement to acquire Hiland Partners — KMI to acquire Hiland from its founder, Harold Hamm and certain Hamm family trusts — ~$3 billion purchase price, including assumption of ~$975 million of
Slide 26: Hiland Acquisition: Strategic Acquisition of Premier Midstream Position in the Bakken
Hiland Acquisition: Strategic Acquisition of Premier Midstream Position in the Bakken Strategic Acquisition: Establishes premier midstream platform in the core of the Williston, ND Tioga, ND Bakken, one of the most prolific oil producing basins in North America Systems overlay some of the most att
Slide 27: Natural Gas Pipelines Segment Outlook
Natural Gas Pipelines Segment Outlook Well-positioned connecting key natural gas resource plays with major demand centers Project Backlog: $4.6 billion of identified growth projects over next seven years(a), including: — LNG liquefaction (Elba Island) — Pipe projects supporting LNG liquefaction pr
Slide 28: Products Pipelines Segment Outlook
Products Pipelines Segment Outlook Opportunities for growth from increased liquids production Project Backlog: $1.9 billion of identified growth projects over next two years(a), including: — UTOPIA — Eagle Ford condensate processing — KMCC extensions — KMCC-Double Eagle interconnect — Palmetto Lon
Slide 29: Terminals Segment Outlook
Terminals Segment Outlook Well-located in refinery / port hubs and inland waterways Project Backlog: $2.1 billion of identified growth projects over next five years(a), including: — BOSTCO Phase 3 — Alberta crude by rail projects — Chemical terminal development — Jones Act tanker builds — Houston
Slide 30: CO2 Segment Outlook
CO2 Segment Outlook Own and operate best source of CO2 for EOR(a) Project Backlog: Identified growth projects totaling $1.8 billion and $1.8 billion in S&T and EOR, respectively, over next five years(b), including: — S&T • Southwest Colorado CO2 production • St. Johns build-out • Cortez and Lobos
Slide 31: 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 Trans Mountain Pipeline (TMEP) Long-term Growth Drivers: Expand Oilsands export capacity to West Coast and Asia — Following successful open season, major
Slide 32: Asset Integrity and Safety are Top Priorities
Asset Integrity and Safety are Top Priorities Consistently Better-than-industry Performance Across our Businesses Safe operation of our assets is mission critical to our long-term success Continuous reduction in risk to the public, employees, contractors, assets and the environment We strive f
Slide 33: How We Do It: The Management Process
How We Do It The Management Process Annual Quarterly Monthly Weekly Vision Budget Process Quarterly Business Weekly asset Review meeting Financial Budget Process Quarterly Business Earnings meetings Weekly asset Excellence Investor Reviews Accounts meeting Conference Quarterly ea
Slide 34: Incidents per 1,000 Miles
Incidents & Releases Natural Gas Pipeline Right-of-way Natural Gas Pipeline Incidents – Onshore Ruptures-only(a) 0.20 0.16(b) Incidents per 1,000 Miles 0.15 0.10 0.05 0.04 0.02 0.02 0.0 - 2011 2012 2013 2014 LTM KM Incidents Industry 3-yr Avg __________________________ (a) Rupture defined as a break
Slide 35: Spending on What Matters, and Not What Doesn’t
Spending on What Matters, and Not What Doesn’t Hand-crank 35
Slide 36: Focusing on What Matters: KMAP Technology
Focusing on What Matters: KMAP Technology Circumferential MFL Data Comparison “C” Scan Normal Presentation KMAP Presentation for Metal Loss Optimizes Graphic for Seam Weld Defects 36
Slide 37: Business Risks
Business Risks Regulatory — Products Pipeline FERC rate cases — Natural Gas FERC rate cases — Legislative and regulatory changes Crude oil production volumes Commodity prices Project cost overruns / in-service delays Economically sensitive businesses (e.g., steel terminals) Environmental
Slide 38: Financial Excellence
Financial Excellence Kimberly Dang Chief Financial Officer
Slide 39: Capital Invested
Capital Invested ~$48 Billion of Asset Investment & Acquisitions Since Inception(a,b) ($ in billions) Total Invested by Type Total Invested by Year $30 $11 $25 Expansion $10.1 $20 $10 Acquisition $15 $9 $25.7 $10 $21.8 $8 $5 $7 $6.6 (b) $- Expansions Acquisitions $6 $5.8 $5 $4.4(c) Total Invested by
Slide 40: Returns on Invested Capital
Returns on Invested Capital Consistent Returns Demonstrate Asset Performance, Management Discipline 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Segment ROI(a): Natural Gas Pipes–KMP 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% 11.6%(b)
Slide 41: Cost of Capital
Cost of Capital A whole new ballgame No more incentive distribution rights Prior long-term hurdle rate for accretion (at KMP) = ~9% pre-tax New long-term hurdle rate for accretion = ~4% after-tax — Current hurdle rate: 50% equity(a) x 4.1% yield(b) + 50% debt(a) x 2.4%(c) cost of debt = 3.3% h
Slide 42: 2015 Growth Expenditure Budget
2015 Growth Expenditure Budget 2015E Growth Capital Budget = $4.4 billion CO2 S&T Natural Gas Pipelines 16% CO2 Oil Production 12% 46% 17% 7% Terminals 2% KM Products Canada Pipelines __________________________ Note: Includes equity contributions to joint ventures of $251 million and acquisitions of
Slide 43: Access to Capital
Access to Capital Issued ~$45.6 billion of capital in public markets since inception in 1997(a) — ~$23.4 billion in equity raised(a) — ~$22.2 billion in long-term debt (~$41.6 billion net of refinancing)(a) Accessed in difficult markets — Sep‘01 to Sep‘02 ~$1.9 billion in equity and debt issued(
Slide 44: Insulated from Market Headwinds
Insulated from Market Headwinds Best-in-class scale and diversified cash flow — ~$8.2 billion in EBDA budgeted for 2015 (including KM share of JV DD&A) — 2015 budgeted EBDA is ~85% fee-based, ~94% fee-based or hedged — Significant positions across multiple energy infrastructure industries with div
Slide 45: Net Equity Production
CO2 Oil Production Hedge Profile Avoid businesses with direct Net Oil Production commodity exposure Avg Hedge Px WTI & WTS $79.79 $78.76 $78.70 $81.36 ($/Bbl)(a) Hedge CO2 BOE equivalent 50 — Targeted minimum Net Equity Production 40 hedge amounts: 79% (MBoe/d)(b) Current Year: 70% 30 Year 2: 50
Slide 46: Financial Excellence
Financial Excellence Invested significant capital, opportunities to invest significantly more Disciplined capital allocation Hedge direct commodity exposure Maintain strong balance sheet Strong return on investments Transparency to investors 46
Slide 47: Kinder Morgan
KINDERJMORGAN