Kinder Morgan, Inc. · NYSE:KMI
Kinder Morgan — Q2 2004 Earnings Presentation
25 slides from Kinder Morgan's earnings presentation, August 2004
Slide 1: Second Quarter Results August 2004
Second Quarter Results August 2004
Slide 2: Forward Looking Statements
Forward Looking Statements This presentation contains forward looking statements, including these, within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Exchange Act of 1934, as amended. Forward looking statements are not guarantees of performance. They i
Slide 3: Kinder Morgan System Map
Kinder Morgan System Map 2 PACIFIC COCHIN 2 2 NORTH 2 KMIGT 2 2 PACIFIC 2 3 CALNEV 2 KMP 2 4 PACIFIC NGPL CO2 Pipelines KMCO2 CO2 Field PLANTATION Terminals Products Pipelines KM TEJAS KMI 8 Products Pipeline Terminals NGPL 2 KMTP 2 Transmix Facilities NGPL Storage 2 CFPL 4 Natural Gas Pipelines Nat
Slide 4: Kinder Morgan: Three Securities
Kinder Morgan: Three Securities Kinder Morgan Energy Partners Kinder Morgan, Inc Market Equity (a) $7.8 Incentive Market Equity (b) $7.6 Debt 4.3 Distribution Debt 2.9 Enterprise Value $12.1 Enterprise Value $10.5 2004E EBITDA $1,307 mm 2004E EBITDA $1,033 mm 2004E Dist. CF $968 mm 2004E Dist. CF $5
Slide 5: Consistent Track Record
Consistent Track Record Total Distributions (GP + LP) ($mm) KMP Distribution / Unit (a) $2.90 - $1,000 $940 = 21% $2.94 GP $827 CAGR $2.72 $800 $3.00 $2.50 LP 5% $701 =6 $2.20 Net Income GR $2.50 CA $548 $1.90 $600 $2.00 $/LP Unit $1.45 $1.30 $400 $333 $1.50 $1.13 $198 $1.00 $0.63 $200 $153 $30 $0.5
Slide 6: KMP Q2 Results Driven by Internal Growth
KMP Q2 Results Driven by Internal Growth Three Months Ended, Jun 30 YTD – % % of 2004 2003 Change Budget Comments Products Pipelines 119.3 $110.5 8% 48% Products demand & terminals Natural Gas 95.4 88.9 7% 52% Texas Intra-states Pipelines CO2 Pipelines 76.0 47.2 61% 48% SACROC, Yates & CO2 vol Termi
Slide 7: KMI Q2 Driven by KMP, NGPL
KMI Q2 Driven by KMP, NGPL Three Months Ended, Jun 30 % YTD – % of 2004 2003 Change Budget Comments KMP $132.8 $113.7 17% 49% Internal growth NGPL 93.4 84.3 11% 51% Re-contracting TransColorado 5.4 5.3 2% 42% Long-term contracts Retail 5.0 6.3 (21%) 56% Choice Gas / irrigation load Power and Other 3
Slide 8: The Kinder Morgan Strategy
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 drop a
Slide 9: Management Philosophy
Management Philosophy Low Cost Asset Operator Senior management limited to $200,000 per year in base salary No planes, sports tickets, etc. Attention to Detail Weekly operations and financial assessment Monthly earnings and accounts receivable review Quarterly strategic review Risk Managem
Slide 10: Kinder Morgan Energy Partners
Kinder Morgan Energy Partners KMP and KMR
Slide 11: Solid Asset Base Generates Stable Fee Income
Solid Asset Base Generates Stable Fee Income Terminals Products Pipelines KMP 59% Liquids, 41% Bulk 2004 DCF (a) Refinery hub to population Geographic and product center strategy diversity 74% Pipelines (b) 3-4 year average contract life Terminals 22% Associated Terminals (b) 17% Product 4% Transmix
Slide 12: KMP is Conservatively Capitalized
KMP is Conservatively Capitalized Credit Summary CP Capacity Rating Baa1/BBB+ Total Revolver (a) $1,050 Current Net Debt / Total Capital 54% Outstanding CP 488 2004 Budget Estimates: Excess Capacity $562 Debt / EBITDA 3.5x EBITDA / Interest 6.5x Comparative Credit Ratings Long-Term Debt Maturities (
Slide 13: Growing KMP/KMR Distribution Coverage
Growing KMP/KMR Distribution Coverage Published Budget vs. Actual Coverage Internally Generated Cash Flow Budgeted Coverage Actual Coverage Available for Reinvestment ($ millions) 1.10 1.04 1.05 Coverage KMR Distributions 1.02 $17 1.00 1.00 1.00 2 $136 $150 0.90 2002 2003 2004E $108 $100 Approximate
Slide 14: KMP 2004 Segment Goals
KMP 2004 Segment Goals Growth in Earnings Top before DD&A Strategic Business Segment ($millions / %) Priority Products Pipelines $41 / 9% SFPP rate case East Line expansion Natural Gas Pipelines $10 / 3% Expand: i) Takeaway capacity from Rockies ii) Texas footprint CO2 $119 / 58% Deliver infrastruct
Slide 15: KMP: Leading Position in Each Major Business
KMP: Leading Position in Each Major Business Products Pipelines (based on barrels per day) (a) Natural Gas Pipelines (based on pipeline miles) 1. Kinder Morgan (1.9 million bpd) 1. El Paso (54,900 miles) 2. Buckeye Pipeline (1.5 million bpd) 2. Kinder Morgan (25,600 miles) 3. Magellan Midstream (.6
Slide 16: High Return Internal Expansions Add Growth
High Return Internal Expansions Add Growth KMP 2004 Expansion Capital Budget 2004 Completion Business Segment Budget Major Projects Date Product Pipelines $159 North and East Line, Carson 2004-2006 Natural Gas Pipelines $76 CMC, Austin 2004 CO2 $310 SACROC/Yates 2004 Terminals $64 Carteret, Delta 20
Slide 17: Kinder Morgan Inc.
Kinder Morgan Inc.
Slide 18: Solid Asset Base Generates Stable Fee Income
Solid Asset Base Generates Stable Fee Income Investment in KMP (a) KMI NGPL 2004 Segment Income (b) General partner interest earns FERC regulated with 3 year incentive distributions average contract life Owns 17% of total limited Primary customers are Chicago partner units local distribution compani
Slide 19: KMI is Conservatively Capitalized
KMI is Conservatively Capitalized Credit Summary CP Capacity Rating Total Revolver $800 Baa2/BBB Outstanding CP 66 Current Net Debt / Total Capital 42% Excess Capacity $734 2004 Budget Estimates: Debt / EBITDA 2.8x EBITDA / Interest 7.7x Comparative Credit Ratings Long-Term Debt Maturities (a) $ (in
Slide 20: Targeted KMI Internal Growth
Targeted KMI Internal Growth Assumptions: 1. Investment in KMP 15% results from 8-10% LP distribution growth 2. NGPL / Other Assets 3 - 5% segment earnings growth 3. Use of Free Cash Flow $100 million in debt reduction $60 million in share repurchase Consistent with 10-12% earnings growth 4. Use of
Slide 21: Over $2 billion Returned to Investors 2000-2004
Over $2 billion Returned to Investors 2000- 2004 $2,019 $2,100 $1,800 $1,500 $1,200 $900 $511 $637 $556 $440 $600 $300 ($125) $0 -$300 2000 2001 2002 2003 2004E Total Dividends 23 23 37 135 280 497 Share Repurchase 0 266 149 38 60 513 Change in Net Debt 488 348 (311) 383 100 1,009 21
Slide 22: Risks
Risks Regulatory Pacific Products Pipeline FERC/CPUC case Periodic rate reviews Unexpected FERC policy changes Environmental Terrorism Interest Rates 50% of debt is floating rate Budget assumes approximately 100 bps increase in floating rates over the year A full year of a 100 basis poin
Slide 23: Future Opportunities Beyond 2004
Future Opportunities Beyond 2004 Natural Gas Pipeline Expansions Refined Products Pipeline & Terminal TransColorado Expansions Advantage East Line Greasewood to Cheyenne New York Harbor West Texas Houston Silver Canyon Los Angeles Natural Gas Storage SACROC/Yates Opportunities Acqu
Slide 24: Unique Structure, Stable Assets and Attractive Growth
Unique Structure, Stable Assets and Attractive Growth Unique Structure Stable Assets, Attractive Growth KMP Stable cash flow from essential Tax efficient entity infrastructure Pay-out 100% of available cash Low cost discipline Structure creates discipline Conservative capital structure KMR Man
Slide 25: Kinder Morgan
KINDER’ MORGAN