Kinder Morgan, Inc. · NYSE:KMI
Kinder Morgan — 2005 Analyst Conference
32 slides from Kinder Morgan's conference presentation, Jan 25, 2005
Slide 1: The Magic of Disciplined Investing
The Magic of Disciplined Investing January 25, 2005
Slide 2: Company Overview
Company Overview Rich Kinder
Slide 3: 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 4: 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 KMI KM TEJAS Products Pipelines 8 Products Pipeline Terminals NGPL 2 KMTP 2 2 Transmix Facilities NGPL Storage 4 CFPL Natural Gas Pipelines Nat
Slide 5: Kinder Morgan: Three Securities
Kinder Morgan: Three Securities Kinder Morgan Energy Partners Kinder Morgan, Inc Market Equity (a) $9.0 Incentive Market Equity (b) $9.4 Debt (a) 4.7 Distribution Debt (b) 2.7 Enterprise Value $13.7 Enterprise Value $12.1 2005E EBITDA $1,581 mm 2005E EBITDA $1,142 mm 2005E Dist. CF $1,178 mm 2005E D
Slide 6: Promises Made, Promises Kept
Promises Made, Promises Kept Promises Made Promises Kept KMP/KMR KMP/KMR Distribution per unit: Distribution per unit: 2000: $1.60 2000: $1.71 2001: $1.95 2001: $2.15 2002: $2.40 2002: $2.435 2003: $2.63 2003: $2.63 2004: $2.84 2004: $2.87 KMI KMI Earnings Per Share (a): Earnings Per Share (a): 2000
Slide 7: 2005 Corporate Goals
2005 Corporate Goals KMP/KMR KMI Distribution Target (without acquisitions) EPS Target (without acquisitions) $3.13 per unit (9% growth) $4.22 per share (11% growth) Excess coverage of $39 million Maintain strong balance sheet Strengthen balance sheet Return cash to investors Budge
Slide 8: Distributions: Consistent Track Record
Consistent Track Record Total Distributions (GP + LP) ($mm) KMP Distribution / Unit (a) $1,200 $1,139 $3.20 GP % $2.96 $978 = 20 $2.72 60% $1,000 $3.00 R LP = $827 CAG $2.50 G R $2.20 $800 CA Distributions $701 $/LP Unit $1.90 $2.00 $600 $548 $1.45 $1.30 $1.13 $400 $333 $1.00 $198 $0.63 $200 $153 $1
Slide 9: Significant Historical Returns
Significant Historical Returns KMP: 35% annual return Total Return (a,c) 1200 990% 1000 KMI: 41% annual return KMP 800 Total Return (a,b) 600 700 341% 554% 400 600 MLP Index KMI 200 85% 500 S&P 500 400 0 300 Dec- Dec- Dec- Dec- Dec- Dec- Dec- Dec- Dec- 96 97 98 99 00 01 02 03 04 200 UTY Index 47% 10
Slide 10: 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 dr
Slide 11: 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 and quarterly earnings Quarterly strategic review Disciplined Capital All
Slide 12: Management Philosophy (continued)
Management Philosophy (continued) Transparency Publish budget, compare to actual quarterly results on conference calls Publish detailed information for analyst conference Cash is King Get the cash! - monthly accounts receivable meetings Return cash to investors; let investor make reinves
Slide 13: Kinder Morgan Energy Partners
Kinder Morgan Energy Partners KMP and KMR
Slide 14: Solid Asset Base Generates Stable Fee Income
Solid Asset Base Generates Stable Fee Income Terminals Products Pipelines KMP 55% Liquids, 45% Bulk 2005 DCF (a) Refinery hub to population Geographic and product center strategy diversity 64% Pipelines 3-4 year average contract life Terminals 31% Associated Terminals (b) 16% Product 5
Slide 15: Long-Term Growth Drivers
Long-Term Growth Drivers Business Segment Growth Drivers Products Pipelines Gasoline demand tracks demographic growth Serve 8 of 10 fastest growing metropolitan areas Price escalator = PPI Advantage to existing assets Natural Gas Pipelines Natural gas demand growth = 1.5%/year (a) US is
Slide 16: Approximately $9 Billion in Capital Invested at KMP
Approximately $9 Billion in Capital Invested at KMP ($ millions) $8,000 Total Invested by Type Total Invested by Year $6,000 $1,893 Expansion $2,000 Acquisition $4,000 $1,618 $6,976 $1,600 $1,261 $2,000 $1,232 $1,986 $1,065 $1,020 $0 $1,200 $873 Acquisitions Expansions $800 Total Invested by Segment
Slide 17: 2005 Expansion
2005 Expansion KMP 2005 Expansion Capital Budget 2005 Budget Business Segment ($mm) Major Projects Product Pipelines $185 East Line, Carson Natural Gas Pipelines $130 Dallas, Rancho, Markham, TransColorado CO2 $238 SACROC and Yates Terminals $53 Pasadena, Carteret, Tampaplex Total $606 17
Slide 18: Disciplined Investment Process and Accountability
Illustrative Disciplined Investment Process and Accountability Decision Accountability Acquisition Model Segment Budget EBITDA $60 2004 DCF $400 Sustaining Capital (10) Add: Acquisition/Expansion 50 Distributable CF 50 2005 DCF $450 Purchase Price 400 Multiple 8X IRR (a) 17% Board Review 2005 Acquis
Slide 19: Leads to Attractive Return on Capital
Leads to Attractive Return on Capital Return on Investment: 2000 2001 2002 2003 2004 Products Pipelines 11.9% 11.8% 12.8% 12.9% 12.6% Natural Gas Pipelines 13.3 15.5 12.9 13.5 14.0 CO2 27.5 24.6 22.0 21.9 23.8 Terminals 19.1 18.2 17.7 18.4 18.0 KMP Return on Investment 12.3% 12.7% 12.6% 13.1% 13.7%
Slide 20: KMP is Conservatively Capitalized
KMP is Conservatively Capitalized Credit Summary CP Capacity (c) Rating Baa1/BBB+ Total Revolver $1,250 Current Net Debt / Total Capital (a) 52% Outstanding CP 417 2005 Budget Estimates: Debt / EBITDA 3.0x Excess Capacity $833 EBITDA / Interest 6.3x Comparative Credit Ratings (b) Long-Term Debt Matu
Slide 21: KMP is Growing Equity Distribution Coverage
KMP is Growing Equity Distribution Coverage Published Budget vs. Actual Coverage Internally Generated Cash Flow 1.10 Budgeted Actual 1.08 Available for Reinvestment ($ mm) 1.06 1.04 1.05 1.02 $250 KMR Distributions 1.00 1.00 $215 1.00 Coverage $200 $194 $150 $136 0.90 2002 2003 2004 2005E $108 $100
Slide 22: Kinder Morgan Inc.
Kinder Morgan Inc.
Slide 23: Solid Asset Base Generates Stable Fee Income
Solid Asset Base Generates Stable Fee Income Investment in KMP (a) KMI NGPL 2005 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
Slide 24: KMI is Conservatively Capitalized
KMI is Conservatively Capitalized Credit Summary CP Capacity (c) Rating Baa2/BBB Total Revolver $800 Current Net Debt / Total Capital (a) 39% Outstanding CP 0 2005 Budget Estimates: Cash 177 Debt / EBITDA 2.4x EBITDA / Interest 7.5x Excess Capacity $977 Comparative Credit Ratings (b) Long-Term Debt
Slide 25: Targeted KMI Internal Growth
Targeted KMI Internal Growth Three Assumptions: 1. Investment in KMP 15% growth results from 8-10% LP distribution growth 2. NGPL / Other Assets 3 - 5% segment earnings growth 3. Use of Free Cash Flow $104 million in share repurchase Consistent with 10-12% earnings growth 4. Use of Free Cash Flow $2
Slide 26: Limited Reinvestment Required for Growth
Limited Reinvestment Required for Growth (a) 20% S&P 500 Energy Index Change in CF 1998-2003 KMI 15% KMI (2) (b) S&P 500 – All Energy (c) 10% S&P 500 5% S&P 500 Utility Index 0% -10% -5% 0% 5% 10% 15% 20% -5% Change in Assets 1998-2003 -10% (a) Comparison does not include any firms with a negative C
Slide 27: Tremendous Historical Incremental Returns
Tremendous Historical Incremental Returns Return on Investment: 2000 2001 2002 2003 2004 Investment in KMP 11.2% 16.9% 21.4% 25.0% 29.6% NGPL 11.4 11.1 10.9 11.4 12.1 Retail 13.0 11.7 15.0 14.5 13.1 Power 14.3 20.2 9.7 5.6 4.7 KMI Return on Investment (a,c) a,c) 10.5% 11.7% 12.4% 13.3% 14.8% KMI Ret
Slide 28: Over $2.7 billion returned to investors 2000-2005
Over $2.7 billion returned to investors 2000-2005 $2,766 $2,800 $565 $2,300 2000-2004 2005 $1,800 $1,149 $1,300 $839 $778 $2,201 $800 $343 $222 $300 $496 $556 -$200 Dividends Share Change in Net Total Repurchase Debt (a) 2005E numbers include $118 million in share repurchase from TransColorado sale.
Slide 29: 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 ba
Slide 30: Our Commitment to Safety and our Assets
Our Commitment to Safety and our Assets $226 million in 2005 sustaining capital spending Approximately $160 million additional maintenance in O&M Most business units safer than industry averages Benchmark against both industry and internal Goal is for all business units to be better than i
Slide 31: Summary
Summary Stable Cash Flow Own assets core to energy infrastructure KMP/KMR: Internal Growth Opportunities 6-7% Yield and Critical Mass 8-10% Well-located assets/favorable demographics Long-Term Fixed Cost Business Growth Drop growth to bottom line Unique Structure Tax Efficient KMI:
Slide 32: Kinder Morgan
KINDER’ MORGAN