Kinder Morgan, Inc. · NYSE:KMI
Kinder Morgan — Kinder Morgan 2014 Analysts Conference
44 slides from Kinder Morgan's conference presentation, Jan 29, 2014
Slide 1: Opportunity Knocks
Opportunity Knocks January 29, 2014
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 2014 Investor Conference
Kinder Morgan 2014 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
Slide 4: (slide intentionally left blank)
(slide intentionally left blank) 4
Slide 5: Vision
Vision Rich Kinder Chief Executive Officer
Slide 6: 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 the investors’ money, not management’s – treat it that way Leverage asset foot
Slide 7: Strategy Has Proven Effective
Strategy Has Proven Effective Strategy has produced a large, diversified platform 3rd largest North American energy company as measured by enterprise value (EV) — Grown from ~$350MM EV at inception to combined EV today of ~$110B (a) ~80,000 miles of natural gas, liquids and CO2 pipelines, and ap
Slide 8: Unparalleled Asset Footprint
Kinder Morgan Unparalleled Asset Footprint 3rd largest energy company in North America with combined enterprise value of approximately $110 billion (a) Largest natural gas network in North America — Own an interest in / operate ~68,000 miles of natural gas pipeline — Connected to every important
Slide 9: The Value of the Platform
The Value of the Platform Original Asset Kinder Morgan Crude & Condensate Pipeline (KMCC) May 2011 – Kinder Morgan announced a $220 million investment to convert 113 miles of an existing under-utilized natural gas pipeline and build 65 miles of new pipe to move Eagle Ford product to the KMTP (a) H
Slide 10: Four Ways to Invest: KMI, KMP, KMR & EPB
Kinder Morgan Four Ways to Invest: KMI, KMP, KMR & EPB 668 MM Public Kinder Morgan, Inc. (64%) Float Market Equity $38.8B (a) Cash Debt 9.8B (b) dividends to KMI 300 MM (d) Management/ shareholders (C-corp) (29%) Original S/H Enterprise Value $48.6B 1,037 MM shares (a) 2014E Dividend per Share $1.72
Slide 11: 18 Years of Consistent Growth at KMP
18 Years of Consistent Growth at KMP KMP Total Distributions (GP + LP) ($MM) KMP Annual LP Distribution per Unit (c) (a) $5.58 (a) $5,000 $6.00 $4,499 $5.33 $4,500 GP LP $4.98 $4,017 $5.00 $4.61 $4,000 $4.40 $4.20 $3,500 $3,230 $4.02 $4.00 $3.48 $3,000 $2,737 $3.13$3.26 $2,450(b) $2.87 $2,500 $2,171
Slide 12: Promises Made, Promises Kept
Guidance Promises Made, Promises Kept Promises Made Promises Kept KMI Budgeted KMI Actual Dividend: Dividend: KMI has exceeded 2011: $1.16 (a) 2011: $1.20 (a) its dividend target 2012: $1.35 2012: $1.40 in each of past 3 yrs. 2013: $1.57 2013: $1.60 KMP Budgeted KMP Actual LP Distribution: LP Distri
Slide 13: Significant Historical Returns
Significant Historical Returns (a) KMP: 23% CATR Since ‘96 (b) KMI: 10% CATR Since Inception (e) $4,000 ━ KMP = $3,574 $150 Dollars Dollars $3,500 $125 $3,000 ━ S&P 500 = $149 $100 ━ KMI = $133 $2,500 ━ UTY = $129 $2,000 $75 ━ RMZ = $125 $1,500 ━ AMZ (d) = $1,319 $50 $1,000 $25 $500 ⇐ IPO 2/10/2011
Slide 14: 2013 Highlights
2013 Highlights Achieved or exceeded financial targets — KMI 2013 dividend of $1.60/sh exceeded budget of $1.57/sh (14% growth from 2012) — KMP 2013 distribution of $5.33/unit exceeded budget of $5.28/unit (7% growth from 2012) — EPB 2013 distribution of $2.55/unit met budget (13% growth from 2012
Slide 15: KMP Acquires Jones Act Tankers for $962 Million
KMP Acquires Jones Act Tankers for $962 Million Transaction Overview On 1/17/2014, KMP closed its acquisition of American Petroleum Tankers (APT) and State Class Tankers (SCT) $962 million in cash Immediate and long-term accretion to cash available to KMP unitholders KMI intends to forego in
Slide 16: 2014 Guidance
2014 Guidance Supported by Diversified Cash Flow CO2 S&T CO2 Oil Production 6% KMI Budget: Natural Gas 14% Pipelines KMI 2014 dividend: $1.72/sh (8% growth over 2013) Terminals 12% 54% Fully-consolidated year-end 2014 debt / EBITDA = 4.9x B KM Canada 2% 12% Products U Pipelines S CO2 S&T I 7% KM
Slide 17: KMP's Diversified Cash Flow
KMP’s Diversified Cash Flow Natural Gas Pipelines 2014E KMP Segment 53% interstate pipelines Earnings before DD&A 34% gathering, processing & treating = $6.4 billion (a) 13% intrastate pipelines & storage Products Pipelines CO2 S&T 58% pipelines 42% associated terminals & transmix Natural
Slide 18: EPB Focused on Natural Gas Pipelines
EPB Focused on Natural Gas Pipelines 2014E EPB Segment Natural Gas Earnings before DD&A Highly stable cash flow stream = $1.3 billion (a) — 85% interstate pipelines • Average contract life = ~8 years (b) — 15% LNG • Average contract life = ~18 years (b) Natural Gas — Minimal throughput and commodi
Slide 19: KMI Overview
KMI Overview KMI pays a 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 ~10% of total limited partner (LP) interests • EPB: – GP int
Slide 20: Vast Opportunity Set
Vast Opportunity Set Leverages Diverse Energy Themes Pipeline / terminal expansions for Oilsands export to Asia Cochin conversion/ Canadian reversal for natural gas Oilsands diluent demand Northeast power demand growth to be fueled by natural gas Pipeline conversion / CO2 source / handling for Termi
Slide 21: Long-term Growth Targets
Long-term Growth Targets Growth Targets Key Assumptions KMI – 3-year targeted dividend/share 2013 actual results as base year CAGR of about 8% (2013-2016) Growth varies by year KMP / KMR – 3-year targeted LP No major acquisitions assumed distribution/unit CAGR of about 5% (2013-2016) EPB
Slide 22: KM Securities: Opportunity Knocks
KM Securities: Opportunity Knocks KMI: Compelling Total Return Current Indicated Dividend Yield Expected 3-year Dividend Growth Rate 10% 8% ~8% ~7% ~7% 6% 4.6% 4.2% ~4% 3.6% 4% 2.7% 2% 0% Diversified REIT Utility Diversified REIT Utility Nat Gas Comps (b) Comps (c) KMI Nat Gas Comps (b) Comps (c) KM
Slide 23: KMI, KMP, KMR & EPB: Attractive Value Proposition
KMI, KMP, KMR & EPB: Attractive Value Proposition Unparalleled asset footprint Highly visible, attractive growth project backlog Significant, additional identified growth opportunities Attractive investor returns from combination of yield plus growth Established track record Industry lea
Slide 24: Operational Excellence
Operational Excellence Steve Kean President and Chief Operating Officer
Slide 25: 5-year Project Backlog
5-year Project Backlog (a) ~$14.8 Billion of Currently Identified Organic Growth Projects Tremendous footprint provides ~$14.8B of currently identified growth projects over next 5 years 5-year Growth Capex Backlog ($B) 2014 2015 2016 2017+ Total Natural Gas Pipelines $0.9 $0.2 $1.1 $0.5 $2.7 Product
Slide 26: Natural Gas Pipelines
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: — LNG liquefaction (FTA @ Elba Island) — Pipe projects supporting LNG liquefacti
Slide 27: Products Pipelines
Products Pipelines Segment Outlook Opportunities for growth from increased liquids production Project Backlog: $1.1 billion of identified growth projects over next two years (a), including: — Cochin reversal / conversion — Eagle Ford condensate processing — KMCC Sweeney lateral — KMCC extensions —
Slide 28: Terminals
Terminals Segment Outlook Well-located in refinery / port hubs and inland waterways Project Backlog: $2.3 billion of identified growth projects over next four years (a), including: — Liquids • Edmonton Phase 1 & 2 expansions • BOSTCO Phases 1, 2, & 3 • Alberta crude by rail projects • Chemical ter
Slide 29: 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 $1.5 billion in S&T and EOR (a), respectively, over next five years (b), including: — S&T • Southwest Colorado CO2 production • St. Johns build-out • Cortez and
Slide 30: Kinder Morgan Canada
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 TMX $5.4 Billion Expansion and Asia — Following successful open season, majo
Slide 31: Risks
Risks Regulatory (KMP/EPB/KMI) — Pacific Products Pipeline FERC / CPUC cases — Periodic rate reviews — Legislative and regulatory changes Crude oil production volumes (KMP) Commodity prices (KMP) — CO2 oil production • 2014 budget assumes $96.15/Bbl realized price on unhedged barrels • 2014 co
Slide 32: A bad place to excavate…
A bad place to excavate… Call 811 before you dig! 32
Slide 33: Financial Excellence
Financial Excellence Kimberly Dang Chief Financial Officer
Slide 34: ~$42B of Growth Capital Invested at KMP
~$42B of Growth Capital Invested at KMP (a,b) ($ in billions) Total Invested by Type (a,b) Total Invested by Year $24 $11 $20 Expansion $10.0 $16 $10 Acquisition $12 $23.3 $9 $18.3 $8 $8 $4 $7 $6.6 (b) $- Expansions Acquisitions $6 $5 $4.6 $1.0 Total Invested by Segment (a,b) $4 APT acq. $3.3 $2.9 $
Slide 35: 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 2013 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% 11.6% (b) Products Pipelines 11.9 11.8 12.8 12.9 12.4 11.6 11.8 13.2 12.
Slide 36: KMP Cost of Capital
KMP Cost of Capital Operated in “50/50 splits” since 1997 Cost of capital varies over time: — Current ~8.1% (a) — 2013 analyst conf 7.3% — 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%
Slide 37: KMP 2014 Growth Expenditure Budget
KMP 2014 Growth Expenditure Budget 2014E Growth Capital Budget = $3.6 billion CO2 S&T Natural Gas Pipelines 15% CO2 Oil 28% Production 15% 18% 22% Terminals Products 2% Pipelines KM Canada __________________________ Notes: Includes equity contributions to joint ventures of $353 million and acquisiti
Slide 38: KMP Access to Capital
KMP Access to Capital Issued ~$39.7 billion of capital at KMP in public markets since inception in 1997 (a) — ~$20.8 billion in equity raised (a) — ~$18.9 billion in KMP long-term debt (~$15.6 billion net of refinancing) Accessed in difficult markets — Sep‘01 to Sep‘02 ~$1.9 billion in equity an
Slide 39: KMR 101
KMR 101 Discount Has Narrowed (Again), But Still Wide KMR is KMP KMR Discount to KMP — 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 are t
Slide 40: Net Equity Production / CO2 Oil Production Hedge Profile
KMP CO2 Oil Production Hedge Profile Avoid businesses with direct Net Oil Production commodity exposure Avg Hedge Px WTI & WTS $93.72 $89.41 $81.73 $76.56 ($/Bbl) (a) Hedge CO2 BOE equivalent 45 40 — Targeted minimum Net Equity Production 35 hedge amounts: 30 (Mboe/d) (b) 71% Current Year: 70% 2
Slide 41: EPB Financial Excellence
EPB Financial Excellence Cost of Capital Access to Capital Current cost of capital: Issued ~$7.9 billion of capital at EPB — Equity = 7.2% (1 - 28%) x 50% = 5.0% since 2007 IPO • Yield of 7.2%, GP share of 28% — ~$5.4 billion in equity raised — Debt = 5.0% x 50% = 2.5% — ~$2.5 billion in long-te
Slide 42: KMI Warrant / Share Repurchase Program
KMI Warrant / Share Repurchase Program ~505 million warrants originally issued as part of the El Paso acquisition — $40 strike price — 5-year maturity (May-2017) — Expectation for net-settlement upon exercise, which will minimize dilutive impact — Impact included in long-term projections Board-a
Slide 43: Financial Excellence
Financial Excellence Invested significant capital, opportunities to invest significantly more Disciplined capital allocation Hedge direct commodity exposure Maintaining strong balance sheet Strong return on investments Transparency to investors 43
Slide 44: Kinder Morgan
KINDER/MORGAN
Kinder Morgan — Kinder Morgan 2014 Analysts Conference on 6ix