Kinder Morgan, Inc. · NYSE:KMI
Kinder Morgan — Wells Fargo Pipeline, MLP and Utility Symposium 2017
60 slides from Kinder Morgan's conference presentation, Dec 6, 2017
Slide 1: Run for Shareholders, By Shareholders
Run for Shareholders, By Shareholders Steve Kean Chief Executive Officer December 6, 2017
Slide 2: Forward-Looking Statements / Non-GAAP Financial Measures
Forward-Looking Statements / Non-GAAP Financial Measures This presentation includes forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 and Section 21E of the Securities and Exchange Act of 1934. Forward-looking statements include any statement
Slide 3: 2018 Guidance: Published Budget
2018 Guidance: Published Budget Supported by Diversified, Fee-based Cash Flow KMI KML 2018 ∆ from 2018 ∆ from Budget 2017 Budget 2017 Adjusted EBITDA(a) $7.5 billion 4% Adjusted EBITDA(a) C$474 million 23% Distributable Cash Flow(a) $4.6 billion 3% Distributable Cash Flow(a) C$349 million 10% DCF pe
Slide 4: Dividend Policy Expectations
Dividend Policy Expectations KMI has reduced its net debt by ~$5.9 billion since the end of 3Q 2015 — Continue to strengthen the balance sheet by funding all growth capital needs at KMI out of internally generated cash flow — Expect to end 2017 at 5.1-5.2x net debt/Adjusted EBITDA; longer term tar
Slide 5: Unparalleled Asset Footprint
Unparalleled Asset Footprint One of the Largest Energy Infrastructure Companies in North America Largest natural gas transmission network in North America — Own or operate ~70,000 miles of natural gas pipeline — Connected to every important natural gas resource play in the U.S. Largest independe
Slide 6: KMI Overview
KMI Overview Management Aligned with Investors; 14% Stake in KMI Management & Public Public Directors(a) Float Float ~321MM (14%) ~1,921MM (86%) ~103MM (30%) Kinder Morgan, Inc. (C-corp, NYSE: KMI) Kinder Morgan Canada Limited (C-corp, TSX: KML) Market Equity $41.2B(b) Net Debt 36.6B(c) Market Equit
Slide 7: KMI: Compelling Investment Thesis
KMI: Compelling Investment Thesis Attractive Relative Value, Best-in-Class Coverage Attractive Relative Value(a) Best-in-Class Coverage(b) PRICE / 2017E DCFPS 2017E DIVIDEND COVERAGE 4.0x 17.5x Med: 14.9x 16.0x 15.0x 14.9x 13.1x 11.8x 10.4x 8.6x 1.7x Med: 1.2x 1.5x 1.5x 1.2x 1.2x 1.1x 0.8x ETE WMB T
Slide 8: Our Strategy
Our Strategy Focus on stable fee-based assets that are core to North American energy infrastructure — Market leader in each of our business segments — Fees largely independent of underlying commodity prices and substantially secured by take- or-pay contracts Maintain a strong balance sheet — Our
Slide 9: Capital Invested
Capital Invested ~$59 Billion of Asset Investment & Acquisitions Since Inception(a,c) ($ in billions) Total Invested by Type(a,c) Total Invested by Year(b,c) $35 $11 $30 Expansion $10.1 $25 $10 Acquisition $20 $9 $15 $31.4 $8.4 $27.3 $10 $8 $5 $7 $6.6 $- Expansions Acquisitions $6 $5.8 $5 Total Inve
Slide 10: Returns on Invested Capital
Returns on Invested Capital Segment ROI(a): 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Natural Gas Pipes 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% 10.9%(b) 10.9%(b) 10.3%(b,c) 9.9%(b,c) Products Pipelines 11.9 11.8 12.8 12
Slide 11: Segment Overview
Segment Overview 93% Pipelines & Terminals Natural Gas Pipelines 73% interstate pipelines 2017 Budgeted Segment 9% intrastate pipelines & storage EBDA = $7.7 billion(a) 18% gathering, processing & treating — 88% fixed-fee (~27% of which is take-or-pay) CO2 KM Products Pipelines S&T Canada CO2
Slide 12: KMI's High Quality Cash Flow
KMI’s High Quality Cash Flow Not all “fee-based” cash flow is created equal 2017 Budgeted Segment Composition of 91% EBDA = $7.7 billion(a) Fee-based Cash Flow CO2 S&T $0.2 3% Commodity- /Other 6% Hedged based <1% $0.5 Terminals Cash Flow 6% 25% Fee- Products Pipelines 10% Other 72% based Cash $1.9
Slide 13: Market Update
Market Update Strong Demand Natural Gas Refined Products Continued steady, modest volume growth Multiple trends driving increased demand for U.S. natural gas Annual inflation-based tariff adjustment mechanism 2014 2015 2016 2017E 2018E 16 Power Nat gas-share 28% 33% 34% 31% 32% U.S. Refined Pr
Slide 14: Natural Gas Transportation & Storage
Natural Gas Transportation & Storage 55% of 2017 Budgeted Segment EBDA before Certain Items(a) Natural gas transport & storage is KMI’s largest business U.S. natural gas demand(b) expected to rise by 32% through 2026(c) U.S. Natural Gas — KM moves about 40% of natural gas consumed in the U.S. Supp
Slide 15: 5-year Growth Project Backlog
5-year Growth Project Backlog(a) ~$12 Billion of Attractive, Fee-based Projects World class asset footprint has driven attractive growth opportunities, secured by long-term, fee-based contracts with creditworthy counterparties — ~85% of backlog is for fee-based pipelines, terminals and associated
Slide 16: Business Risks
Business Risks Regulatory — FERC rate cases (Products pipelines and Natural Gas pipelines) — Legislative and regulatory changes CO2 crude oil production volumes Throughput on our volume-based assets Commodity prices — 2017 budget price assumptions: $53/Bbl average strip price for crude, and
Slide 17: The Best is Yet to Come
The Best is Yet to Come Positioned to Succeed for the Long-Term World class set of midstream assets Secure and growing fee-based cash flows Disciplined allocator of capital Investment grade balance sheet and substantial liquidity Balanced dividend policy to optimize flexibility while retur
Slide 18: Appendix – KMI
KINDERMORGAN Appendix — KMI
Slide 19: Energy Toll Road
Energy Toll Road Security of Cash Natural Gas Products Kinder Morgan Terminals CO2 Pipelines Pipelines Canada – Interstate & LNG: take-or-pay – Liquids & Jones Act: – Refined products: – S&T: primarily – Intrastate: ~77% take-or-pay(a,b) primarily take-or-pay Volume primarily volume-based minimum
Slide 20: Capacity Utilization
KMI Overview by Product Served(a) Natural Gas is our Largest Market Stability of Cash Flows Natural gas: ~80% take-or-pay cash flow 2017 Budgeted Segment Refined products: competitively advantaged connection EBDA = $7.7 billion(a) between refineries and end markets — SFPP, Plantation, etc., ~61%
Slide 21: 2017 Growth Capital Forecast
2017 Growth Capital Forecast (millions) KMI’s 2017 forecast growth capital fully funded by internally generated cash flow, with no requirement to access capital markets 2017 2016 (a) (b) KMI growth capital Forecast Actual Natural Gas Pipelines $ 1,627 $ 1,304 CO2 - S&T 22 (2) CO2 - EOR 415 265 Pro
Slide 22: KMI Credit Ratios and Liquidity
KMI Credit Ratios and Liquidity(a) ($ in millions) 2017 Leverage metric 2013 2014 2015 2016 Forecast (b) Net debt to Adjusted EBITDA 5.0x 5.5x 5.6x 5.3x 5.1-5.2x (c) (d) Revolver capacity Long-term debt maturities Committed revolving credit facility $ 5,000 2017 $ 500 Less: 2018 2,310 CP / Revolver
Slide 23: KMI Counterparty Exposure
KMI Counterparty Exposure Strong Customer Credit, Valuable Services Limit KMI’s Risk(a) High-Quality, Diversified Customer Base Top 25 Customers(b) To date, KMI’s budgeted 2017 DCF has had a $0 impact due to bankruptcies KMI’s 2016 DCF was impacted by less than $10 A- Rated or BBB Rated Better o
Slide 24: Asset Integrity and Safety are Top Priorities
Asset Integrity and Safety are Top Priorities Consistent, Better-than-industry Performance Across our Businesses Safe operation of our assets is mission critical to our long-term success Continuous reduction in risk to the public, employees, contractors, assets and the environment We strive fo
Slide 25: Incidents & Releases
Incidents & Releases Pipeline Right-of-way Liquids Pipelines Natural Gas Pipelines 1.0 1.0 KM Incidents Industry 3-yr Avg(b) Industry 2011 Avg KM Incidents Industry 3-yr Avg(b) 2005 Industry Avg Incidents per 1,000 Incidents per 1,000 0.8 0.8 0.57 0.56 Miles(a) Miles(c) 0.6 0.6 0.45 0.45 0.39 0.37 0
Slide 26: Employee Safety Statistics
Employee Safety Statistics(a) KM Lost-time Incident Rate (DART) OSHA Recordable Incident Rate 4 7 6.4 Lost-time injuries per 200k hours OSHA Recordable Incidents per 3.6 6 6.0 200k Hours Worked 3 5 worked 4 2 3 2.6 2.6 2.5 2.5 2 1.8 1 0.9 0.6 1.3 1.3 0.5 0.5 1.1 0.8 0.9 1 0.8 0.4 0.4 0.6 0.4 0.6 0.7
Slide 27: Natural Gas Pipelines Segment Outlook
Natural Gas Pipelines Segment Outlook Well-positioned connecting key natural gas resources with major demand centers Long-term Growth Drivers: LNG exports — Liquefaction facilities — Pipeline infrastructure Exports to Mexico Gas demand for power generation — Coal plant retirements — Regional g
Slide 28: Drivers of Future Growth: LNG Exports
Natural Gas Pipelines Segment Drivers of Future Growth LNG Exports U.S. LNG Export Opportunity(a) Contracted KM Project/Transportation Capacity In-Service KM Capital — 18.5 Bcf/d of FERC approved projects KM Asset (Terminal) (MDth/d) Date ($MM) — 9.7 Bcf/d of projects under construction NGPL Firm
Slide 29: Liquefaction at Elba Island
Natural Gas Pipelines Segment Liquefaction at Elba Island Elba Liquefaction Company (ELC)(a) / SLNG Capacity: — LNG output capacity equivalent to 350 MMcf/d Capital (100%)(b): — ELC: ~$1.4 billion(a) — SLNG: ~$0.4 billion Phased In-service: Mid 2018 through mid 2019 Project Scope: — Faciliti
Slide 30: Drivers of Future Growth: Exports to Mexico
Natural Gas Pipelines Segment Drivers of Future Growth Kinder Morgan Delivers ~75% of U.S. Exports to Mexico Exports to Mexico are forecasted to increase by 1.9 Bcf/d Contracted KM to 5.6 Bcf/d by 2021(a) KM Project / Transportation Capacity Capital KM Asset (Shipper) (MDth/d) In-Service Date ($MM
Slide 31: Drivers of Future Growth: Other
Natural Gas Pipelines Segment Drivers of Future Growth Other New opportunities in growing export markets — Storage and ancillary services in support of LNG liquefaction and exports to Mexico Industrial growth markets — Well positioned to serve ~$185 billion announced U.S. natural-gas related pet
Slide 32: Contracted Capacity and Term by Region
Natural Gas Pipelines Segment Contracted Capacity and Term by Region Contracted Average Term Region Capacity Remaining Storage 355 Bcf 3 yr, 1 mo North Transport 19.7 Bcf/d 6 yr, 2 mo Storage 52 Bcf 1 yr, 8 mo Interstate South Transport 13.5 Bcf/d 7 yr, 8 mo Transport Contracts LNG 18 Bcf 15 yr, 5 m
Slide 33: Products Pipelines Segment Outlook
Products Pipelines Segment Outlook Stable, Strategic Assets Long-term Growth Drivers: Miles of Pipe: ~9,760 Transmix: 5 facilities Increased demand for refined products Terminals: 67 Condensate Processing: volumes Tank Capacity: Capability of 100 MBbl/d Terminal ~42 MMBbls 2016 Throughput: Devel
Slide 34: Products Pipelines: Stability and Growth
Products Pipelines Segment Stability and Growth(a) Refined Products(b): U.S. Refined Product Consumption(c) 2016: — Refined products volumes 1,651 MBbl/d, up 0.3% vs. 2015 10 Motor Gasoline Distillate Fuel Oil Jet Fuel — Gasoline up 1.2%, diesel down 3.5%, jet fuel up 1.7% 9 2017: 8 — 1,676 MBbl
Slide 35: Utopia Pipeline Project
Products Pipelines Segment Utopia Pipeline Project Project Scope — 50/50 JV with Riverstone Holdings closed on June 28, 2016 — 215 mile new build and existing 67 mile 12” pipeline — Will transport ethane and ethane-propane mix from points in Harrison County, Ohio to Windsor, Ontario, Canada — Supp
Slide 36: Terminals Segment Outlook
Terminals Segment Outlook Diversified terminaling system in key refinery / market hubs KM Terminal Facilities Long-term Growth Drivers Bulk 37 Terminals Refined product supply and demand Liquids 51 Terminals growth Total KMT 88 Terminals KMPP 67 Liquid Terminals Gulf Coast liquids exports Total
Slide 37: Stable Fee-Based Business
Terminals Segment Stable Fee-Based Business ~2/3 of KMT’s 2017 budgeted EBDA is supported by take-or-pay contracts 100% 90% Liquids Other Fee- 73% Take-or-pay based - fixed monthly lease 80% 27% payments (MWC) - minimum throughput Take-or- 70% guarantees Pay - Jones Act tanker charters Liquids 73%
Slide 38: Diversified Revenues
Terminals Segment Diversified Revenues Diversified revenues across liquids and bulk KMT Product Revenues $ millions 2017 Budget(a) ($ millions) (percent) $0 $100 $200 $300 $400 $500 $600 Liquids $1,426 74% Gasoline Crude Bulk $500 26% Diesel / Jet Total Revenue $1,926 100% Chemicals Petcoke Top-10
Slide 39: KMT Presence in Liquids Hubs
Terminals Segment KMT Presence in Liquids Hubs North 40 Edmonton South Alberta Crude Terminal Rail Edmonton South Rail Terminal KMT Liquids 90 million Bbls of capacity Van Wharves Edmonton ~1.0 billion Bbls throughput Alberta 97.5% utilization(a) $1.43 billion revenues $957 million EBDA Ta
Slide 40: High Demand Liquids Hubs
Terminals Segment High Demand Liquids Hubs Critical infrastructure to industry and our customers, 100% contracted Houston Ship Channel – largest integrated refined product terminaling system in the world New York Harbor – global refined product clearing hub with liquid, transparent markets Edm
Slide 41: Tankers – APT Jones Act Fleet
Terminals Segment Tankers – APT Jones Act Fleet All of APT’s available vessels are sailing under time-charter with limited exposure in 2017 and 2018 Average term contract length of 3.4 KM Fleet Charter Status years across 16-vessels 2017 2018 2019 2020 2021 2022 4 new vessels delivered in ‘17 Pa
Slide 42: CO2 Segment Outlook
CO2 Segment Outlook(a) Own and operate best source of CO2 for EOR Long-term Growth Drivers: Demand for scarce supply of CO2 drives volume and price Expect to maintain current CO2 production levels with minimal incremental investment Billions of barrels of domestic oil still in place to be reco
Slide 43: KM CO2 Current Outlook
CO2 Segment KM CO2 Current Outlook $4.7 Billion Cumulative Free Cash Flow Generated Since Inception(a) Development Plans 2017-2026 SACROC Total Business IRR (2000-2026): 28.2% — Continue platform development/redevelopment Net BOE(b) KM Share — Expand Bypass Pay/Infill programs 2017-2026 (MMBOE)
Slide 44: 2017 Projects – Price Sensitivity
CO2 Segment 2017 Projects – Price Sensitivity AT IRR % vs Oil Price $50 $53 $60 Forward $/Bbl flat flat flat Curve(a) SACROC-Bypass (Long Lateral) 27% 32% 44% 37% SACROC-Bypass (Sidetrack Lateral) 41% 47% 61% 50% SACROC Hawaii 14% 19% 30% 22% Yates Horizontal Drain Hole Program 65% 73% 96% 75% Tall
Slide 45: Kinder Morgan Canada Segment Outlook
Kinder Morgan Canada Segment Outlook Sole oil pipeline from Oilsands to West Coast / export markets Long-term Growth Drivers: Expand Oilsands access to the West Coast and offshore markets — The Trans Mountain Pipeline Expansion Project (TMEP) Trans Mountain Expansion Project expected to more than
Slide 46: Trans Mountain Expansion Project (TMEP)
KM Canada Segment Trans Mountain Expansion Project (TMEP) Only Crude Oil Pipeline Serving Canadian West Coast Expansion to 890 MBbl/d from 300 MBbl/d today Western Canada Supply vs Takeaway Capacity (MMBbl/d)(b) — 615 miles new pipe; 12 new pump stations — 630 MBbl/d tanker export capacity; 3 new
Slide 47: Use of Non-GAAP Financial Measures
Use of Non-GAAP Financial Measures The non-generally accepted accounting principles (non-GAAP) financial measures of distributable cash flow (DCF), both in the aggregate and per share, segment earnings before depreciation, depletion, amortization and amortization of excess cost of equity investments
Slide 48: GAAP Reconciliation
GAAP Reconciliation ($ in millions) Yr. Ended Yr. Ended Reconciliation of DCF 12/31/16 Reconciliation of Adjusted EBITDA 12/31/16 Net Income $ 721 Net Income $ 721 Certain Items 933 Certain Items 933 Net Income before Certain Items (Adjusted Earnings) 1,654 Net Income before Certain Items (Adjusted
Slide 49: Appendix – KML
KINDER MORGAN CANADA LIMITED j Appendix — KML
Slide 50: KML Notice to Investors
KML Notice to Investors In this Appendix – KML (“appendix”) all references to “C$” are to Canadian dollars and unless otherwise indicated, all dollar amounts are expressed in Canadian dollars. United States Matters KML’s securities have not been and will not be registered under the United States Sec
Slide 51: KML at a Glance
KML at a Glance ($ in millions) Legend General Information Trans Mountain Pipeline Trans Mountain Expansion Cochin Pipeline Puget Sound KMI Ownership ~70% Terminal Refinery 2017F Adjusted EBITDA C$380 - 390 million Meter Station 2017F DCF C$315 - 320 million Equity Value C$6.1 billion(a) Fort Saskat
Slide 52: KML Investment Highlights
KML Investment Highlights Canada's only crude and refined products pipeline connected to the West Coast, including B.C. tidewater access Portfolio of Strategically Leading integrated network of crude tank storage and rail terminals in Western Canada Located Assets The largest mineral concentra
Slide 53: KML's Portfolio of Strategically Located Assets
KML’s Portfolio of Strategically Located Assets Premier Western Canadian Midstream Asset Portfolio TMPL Legend Cochin Pipeline (Canada) Transportation capacity of ~300 Trans Mountain Pipeline Transportation capacity of ~110 Trans Mountain Expansion MBbl/d for crude oil and refined Cochin Pipelin
Slide 54: TMEP
TMEP Marquee Growth Project of National Importance TMEP | ~C$7.4 Billion Growth Project(a) British Limited construction activities began in September 2017, with targeted in- service schedule of December 31, 2019 Columbia Alberta — Slower than expected receipt of permits and approvals could result
Slide 55: KML Has Significant Potential Growth Beyond TMEP
KML Has Significant Potential Growth Beyond TMEP TMPL System Base Line Terminal • Puget Sound pipeline • Total expected cost of capacity is capable of being ~C$724 million (~C$374MM expanded to ~500 MBbl/d net to KML) from 240 MBbl/d today • Base Line is expected to • Capacity of TMEP could be have
Slide 56: KML Governance & Organizational Structure
KML Governance & Organizational Structure Governance Overview Organizational Structure Structure following IPO Kinder Morgan, Inc. KML owns an approximate 30% interest in its Canadian Public Shareholders ("KMI") assets (Delaware) Remaining approximate 70% interest indirectly held by KMI(a) ~30%
Slide 57: TMEP Capital Cost Risk Sharing
TMEP Capital Cost Risk Sharing Capital costs associated with TMEP are classified into 2 segments: (i) capped costs, and (ii) uncapped costs Uncapped costs are structured as follows: — Costs above or below the uncapped cost amount will be reflected in higher or lower tolls for shippers – neutral
Slide 58: Use of Non-GAAP Measures
Use of Non-GAAP Measures Non-GAAP Measures and AFUDC The supplementary measures “distributable cash flow” and "Adjusted EBITDA" do not have any standardized meaning as prescribed under U.S. GAAP and, therefore, are considered to be non-GAAP measures. “DCF” is net income of the Business before DD&A a
Slide 59: KML Non-GAAP Measures
KML Non-GAAP Measures Reconciliation to Net Income Reconciliation of Net Income (Loss) to Adjusted EBITDA(a) C$MM 2014 2015 2016 Net Income (Loss)(b) $19.5 ($22.9) $201.8 DD&A $88.7 $123.5 $137.2 Unrealized FX (gain) loss on KMI Loans $76.0 $175.8 ($29.7) Income Tax Expense $26.5 $62.1 $56.4 Interes
Slide 60: Kinder Morgan
KINDER/MORGAN
Kinder Morgan — Wells Fargo Pipeline, MLP and Utility Symposium 2017 on 6ix