Kinder Morgan, Inc. · NYSE:KMI
Kinder Morgan — Wachovia 2006 Pipeline / MLP Conference
21 slides from Kinder Morgan's conference presentation, Dec 5, 2006
Slide 1: Real Assets, Real Earnings, Real Cash
Real Assets, Real Earnings, Real Cash Forward looking statements are not guarantees of performance. They involve risks, uncertainties and assumptions. The future results and securities values of Kinder Morgan Inc., Kinder Morgan Energy Partners, L.P. and Kinder Morgan Management, LLC (collectively k
Slide 2: The Kinder Morgan Structure
1 The Kinder Morgan Structure Mgmt Mgmt Public Public 23% 23% 77% 77% KMI (a) Market Equity $6.0 B Debt 3.2 Enterprise Value $9.2 B 02 EBITDA $850 mm 02 After Tax CF $420 mm GP Interest 19% of total units KMP/KMR (b) Market Equity $5.5 B Debt 3.5 Enterprise Value $9.0 B 02 EBITDA $960 mm 02 DCF $710
Slide 3: Kinder Morgan System Map
2 Kinder Morgan System Map 2 PACIFIC COCHIN 2 KMIGT 2 PACIFIC 2 3 NORTH CALNEV 3 4 PACIFIC NGPL KMCO2 NGPL NGPL Storage KM TEJAS PLANTATION Retail Natural Gas Division Products Pipelines 10 Products Pipeline Terminals 2 KMTP 2 Transmix Facilities Gas-Fired Power Plants CFPL Natural Gas Pipelines CO2
Slide 4: The Kinder Morgan Strategy
3 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 dro
Slide 5: Management Philosophy
4 Management Philosophy Low Cost Asset Operator – Senior management limited to $200,000/year in salary – No planes, sports tickets, etc. Attention to Detail – Weekly operations and financial assessment – Monthly earnings and accounts receivable review – Quarterly strategic review Risk Management – A
Slide 6: Exceptional Investor Returns
5 Exceptional Investor Returns Price Total Time Frame (a) CAGR CAGR (b) KMI 7/99 –3/02 61% 62% KMP 1/97 – 3/02 35% 44% (a) Time frames shown reflect period for which current management in place: KMP early 1997 and KMI mid 1999. (b) Yield plus price appreciation.
Slide 7: Strong Historical Growth
6 Strong Historical Growth KMP DPU KMI EPS $3.00 $3.00 2.50 2.55-2.65 2.20 $2.25 1.90 $2.25 1.96 1.45 $1.50 1.30 1.29 1.13 $1.50 0.63 0.74 $0.75 $0.75 $0.00 $0.00 '96 '97 '98 '99 '00 '01 '02E '99 '00 '01 '02E 26% CAGR (b) 52% CAGR (b) (a) KMP DPU reflects year end run rate (i.e. 4Q X 4) (b) Time fra
Slide 8: 2002 Sources of Cash Flow and Growth
7 2002 Sources of Cash Flow and Growth (a) Maturation of Increased refinery utilization, on-shore oil product specifications, use of low basins sulfur coals Power & Retail Other Terminals 7% 6% 18% Products CO2 Pipelines KMP Pipelines 38% 46% 11% Natural NGPL Gas 41% Pipelines 33% 80%+ in areas 50%
Slide 9: MLP Structure is Common and Public
8 MLP Structure is Common and Public Partnership – 10 years old Similar to approximately 25 other publicly traded MLPs Widely disclosed and publicly documented Widely followed by analysts Majority of independent board members MLPs have outperformed the S&P 500 over the last one and five years MLP is
Slide 10: Structure is Focused on Cash
9 Structure is Focused on Cash KMP Total Cash Distributions KMI GP Interest (a) $282 $711 L.P. Share G.P. Share $206.6 $546.2 $333.3 Cash $113.4 $198.3 40% $152.9 38% $58.4 $38.0 $30.1 34% $16.8 29% $4.5 15% 25% $0.4 2% 1996 1997 1998 1999 2000 2001 2002E 1996 1997 1998 1999 2000 2001 2002E (a) Incl
Slide 11: Structure offers Two Risk Reward Profiles
10 Structure offers Two Risk Reward Profiles Limited Partner General Partner KMP/KMR KMI Yield Attractive yield of approximately 7% Low yield of less than 1% Distributions Share in distributions from Available Only entitled to incentive distribution Cash on Cash from Operations Current Split of 60%
Slide 12: Modest Top Line Growth = Significant Bottom Line Growth
11 Modest Top Line Growth = Significant Bottom Line Growth Illustrative Year 1 Year 2 Growth Comments Gross Margin $100 $104 4% Price and volume Operating Expenses 50 50 Efficiency savings compensate for small increase in variable cost. Operating Income $50 $54 8% G&A 6 6 No increase associated with
Slide 13: Excess Capacity Available for Growth
12 Excess Capacity Available for Growth KMP/KMR Products Pacific: approximately 70% utilization on average Plantation: approximately 80%; 5-8 years of excess capacity CFPL: approximately 65% Natural Gas Texas systems (which compose approximately 50% of total natural gas pipelines) have 25% excess ca
Slide 14: Internal Expansions add Additional Growth
13 Internal Expansions add Additional Growth Number 2001 Announced of Capital Completion Expansions Projects Committed Date Comments Products Pipelines 1 $9 2002 CALNEV Natural Gas Pipelines 5 $200 2002-2003 Trailblazer, FPC, Horizon, St. Louis CO2 Pipelines 1 $29 2002 SACROC Terminals 4 $80 2002-20
Slide 15: Targeted KMP Internal Growth
14 Targeted KMP Internal Growth Total Annual Actual Change Internal 2001 2001-2002 Target Variance Comments Products $347.8 $39.6 $30-35 CALNEV partial period Natural Gas 218.4 113.4 20-25 Tejas, Occidental partial period CO2 108.4 1.9 20-25 SACROC growth in 2003 Terminals 144.6 33.3 10-15 Partial p
Slide 16: Internal Growth Only
15 Internal Growth Only Hypothetical KMI Four Year Internal EPS Growth (2001-2005) (a) KMI Other Asset Growth (b) 2% 4% 6% 8% 6% 15% 16% 17% 19% KMP Internal 8% 17% 18% 19% 20% DPU Growth 10% 19% 20% 21% 22% 12% 21% 22% 23% 24% (a) Assumes 50% of cash flow after tax is used to pay down debt and 50%
Slide 17: Augment Internal Growth with Acquisitions
16 Augment Internal Growth with Acquisitions Disciplined Strategy Purchase DCF Target Segment Price DCF Multiple Multiples Comments Natural Gas Pipelines $1,178 $137 8.6 6-8X Oxy lease effect, Tejas Products Pipelines $19 4 4.3 6-8X Cochin, Transmix CO2 Pipelines $12 3 4.4 5-7X SACROC Terminals $202
Slide 18: Substantial Acquisition Opportunities
17 Substantial Acquisition Opportunities Industry Kinder KM Pct. Capacity Morgan Share Comments Products Pipelines (a) 154,400 10,200 7% Approximately 35% owned by majors, 58% others Natural Gas Pipelines (b) - Interstate 206,000 16,500 8% Enron, Merchants - Intrastate 73,000 5,900 8% Terminals (c)
Slide 19: KMI Long Term Outlook
18 KMI Long Term Outlook Hypothetical KMI: Four Year Compounded Annual Growth Rate (2001-2005) Acquisitions Per Year @ KMP $0 $500 $1,000 $1,500 KMP 6% 16% 21% 25% 28% Internal DPU 8% 18% 22% 26% 30% Growth 10% 20% 24% 28% 31% 12% 22% 26% 30% 33% Assumptions: (i) NGPL, retail and power grow at 4%, (
Slide 20: Appendix: KMI Growth Assumptions (2001 to 2005)
19 Appendix: KMI Growth Assumptions (2001 to 2005) KMP LP distribution per unit grows by 8-10% per year (internal sources only) NGPL Grows 4% ’01-’05 Retail Grows 5% in ’02 and 4% thereafter Power Declines 21% in ’02; grows 4% thereafter G&A Increases 3% per year over ’02 budget Other 50% of free ca
Slide 21: Real Assets, Real Earnings, Real Cash
Real Assets, Real Earnings, Real Cash
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