Kinder Morgan, Inc. · NYSE:KMI
Kinder Morgan — Barclays Energy CEO Conference 2014
34 slides from Kinder Morgan's conference presentation, Sep 3, 2014
Slide 1: Run By Shareholders, For Shareholders
Run By Shareholders, For Shareholders Steve Kean President & Chief Operating Officer September 3, 2014
Slide 2: Forward-Looking Statements / Non-GAAP Financial Measures
Forward-Looking Statements / Non-GAAP Financial Measures IMPORTANT INFORMATION AND WHERE TO FIND IT This communication may be deemed to be solicitation material in respect of the proposed acquisition by Kinder Morgan, Inc. (“KMI”) of each of Kinder Morgan Energy Partners, L.P. (“KMP”), Kinder Morgan
Slide 3: Transaction Overview
Transaction Overview Consolidating All Kinder Morgan Assets Under One Public Company KMI will acquire all of the outstanding common units of KMP and EPB and all outstanding shares of KMR KMP KMR EPB (a) Acquisition Consideration KMI Shares to Each Unit or Share 2.1931x 2.4849x 0.9451x Cash to Each
Slide 4: Value Enhancing Combination
Value Enhancing Combination Significant Upfront 2015E KMI dividend per share expected to be $2.00 with significant coverage Dividend Increase 16% dividend increase from 2014 guidance of $1.72 Enhances Future 10% annual growth rate expected for at least the next 5 years thereafter (2015-2020) D
Slide 5: Simplified Organizational Structure
Simplified Organizational Structure Current Public Structure Simplified Public Structure Kinder Morgan, Inc. (NYSE: KMI) 13% Listed Shares BB / Ba2 / BB+ 100% Voting Shares One publicly traded company vs. four results in: Kinder Morgan Kinder Morgan, Inc. One equity holder base Management, LLC (NY
Slide 6: Summary Transaction Timeline
Summary Transaction Timeline Expect KMI and KMR shareholder meetings and unitholder meetings for KMP and EPB in 4Q 2014 — Preliminary proxy filed 8/27/2014 Subject to customary regulatory approvals — HSR early termination received 8/25/2014 — No regulatory delays expected Expect closing in 4Q
Slide 7: Unparalleled Asset Footprint
Unparalleled Asset Footprint Largest Energy Infrastructure Company in North America 3rd largest energy company in North America with estimated combined pro forma enterprise value of ~$140 billion(a) $17 billion of currently identified organic growth projects Largest natural gas network in Nort
Slide 8: Strategy
Strategy Remains the Same Same Strategy Since Inception Focus on stable fee-based assets that are core to North American energy infrastructure — Market leader in each of our business segments Control costs – It’s the investors’ money, not management’s – treat it that way — Dividend policy to rem
Slide 9: 18 Years of Growth at KMP
18 Years of Growth at KMP Strategy Has Led to Consistent, Growing Results KMP Total Distributions (GP + LP) ($MM) KMP Annual LP Distribution per Unit(c) (a) $5,000 (a) $6.00 $5.58 $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 $3.1
Slide 10: Financial Rigor
Financial Rigor 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 D
Slide 11: Tremendous Natural Gas Footprint and Market Opportunity Set
Tremendous Natural Gas Footprint and Market Opportunity Set… U.S. Natural Gas Projected Supply & Demand(a) (Bcf/d) Demand 2014 2019 2024 KM Natural Gas Infrastructure Footprint LNG exports -0.3 4.7 9.8 Mexican net exports 2.1 3.8 4.6 Power 21.3 23.9 28.5 Industrial 21.0 23.9 24.8 Other 29.6 29.9 32.
Slide 12: … Generate Real-time, Long-term Benefits
… Generate Real-time, Long-term Benefits $641B of investment in midstream energy infrastructure needed through 2035, implying $29B per year annual spend(a) compared to $18B annual spend by MLPs(b) over past five years Kinder Morgan’s unparalleled natural gas footprint is well-positioned to address
Slide 13: 5-year Project Backlog
5-year Project Backlog(a) $17 Billion of Currently Identified Organic Growth Projects Tremendous footprint provides $17B of currently identified growth projects over next 5 years 5-year Growth Capex Backlog ($B) 2H 2014 2015 2016 2017+ Total Natural Gas Pipelines $0.6 $0.4 $1.0 $2.6 $4.6 Products Pi
Slide 14: Business Risks
Business Risks Regulatory (KMP/EPB/KMI) — Products Pipeline FERC / CPUC cases — Natural Gas FERC rate cases — 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 •
Slide 15: Summary
Summary KMI, KMP, KMR & EPB: Attractive Value Proposition Unparalleled asset footprint Diversified midstream energy platform provides stable, fee-based cash flow Continued focus on strong balance sheet and de-levering at KMI Highly visible, attractive growth project backlog Established tra
Slide 16: Appendix
KINDER/MORGAN Appendix
Slide 17: KMI Pro Forma Compares Favorably to its Midstream Energy Peers
KMI Pro Forma Compares Favorably to its Midstream Energy Peers and S&P 500 High-dividend Companies LQA Dividend Dividend Growth Company Name Industry Market Cap Yield Rates PF KMI(a) Oil & Gas Pipelines ~$100,000 10.0% 2015-2020 Large Cap US Midstream (2015 – 2017 Growth Rates) Williams Companies, I
Slide 18: Benefits of a C-corp
Benefits of a C-corp Simplifies structure; creates one public equity class Lowers cost of capital and creates a more competitive acquisition currency Significant income tax savings from the acquisition amounting to ~$20 billion over ~14 years Over half of combined KMP and EPB cash flows are
Slide 19: How the Math Works
How the Math Works Primary 2015-2020 Asset Level Assumptions(b) Status Quo Expected Pro-Forma Expected Dividend / Distribution 9% average annual EBITDA growth Dividend Growth Rate(a,b) ~$3.6B/yr average growth capex (excl. TMX) Growth Rate(b) $5.2B for Trans Mountain(c) 2013- 2015- EBITDA gr
Slide 20: Significantly Lower Hurdle for Growth
Significantly Lower Hurdle for Growth Same Level of Capex Generates Double the Growth at Pro Forma KMI vs Status Quo KMP ($ in millions, except per unit / share) Status Quo Pro Forma KMP KMI Hypothetical New Project Capex $1,000 $1,000 Project Cash Flows(a) 120 120 Project Taxes(b) 0 (19) Cost of Ne
Slide 21: Substantial Value Uplift for KMP Unitholders
Substantial Value Uplift for KMP Unitholders KMP Pre-Tax Benefit per Unit Post Transaction 8/29/2014 Implied Prices Prices 2015E 2016E 2017E 2018E 2019E 2020E KMP Pro Forma (Value) KMP Expected Distributions $5.83 $6.18 $6.46 $6.96 $7.09 $7.30 Assumed Yield(a) 6.95% 6.95% 6.95% 6.95% 6.95% 6.95% Imp
Slide 22: Substantial Value Uplift for KMR Shareholders
Substantial Value Uplift for KMR Shareholders KMR Benefit per Share Post Tax-free Transaction 8/29/2014 Implied Prices Prices 2015E 2016E 2017E 2018E 2019E 2020E KMR Pro Forma (Value) KMR Expected Distributions $5.83 $6.18 $6.46 $6.96 $7.09 $7.30 Assumed Yield(a) 7.24% 7.24% 7.24% 7.24% 7.24% 7.24%
Slide 23: Substantial Value Uplift for EPB Unitholders
Substantial Value Uplift for EPB Unitholders EPB Pre-Tax Benefit per Unit Post Transaction 8/29/2014 Implied Prices Prices 2015E 2016E 2017E 2018E 2019E 2020E EPB Pro Forma (Value) EPB Expected Distributions $2.60 $2.60 $2.73 $2.78 $2.87 $2.96 Assumed Yield(a) 7.74% 7.74% 7.74% 7.74% 7.74% 7.74% Imp
Slide 24: Cross-guarantees Overview
Cross-guarantees Overview KMI will consolidate its subsidiaries under a single C-corp as follows: — Acquire public shares of KMR and public units of KMP and EPB — EPB is acquired by KMP — Execute cross guarantees among KMI, KMP and substantially all wholly owned operating subsidiaries and subsidia
Slide 25: Investor Total Returns
Investor Total Returns Significant Historical Returns Since Inception(a) KMP: 24% CATR Since ‘96(b) KMI: 13% CATR Since Inception(e) $5,000 $175 Dollars ━ KMP = $4,499 Dollars $4,000 $140 $3,000 $105 ━ S&P 500 = $164 ━ KMI = $155 ━ RMZ = $152 $2,000 $70 ━ AMZ(d) = $1,601 ━ UTY = $148 $1,000 $35 IP
Slide 26: KMP Capital Investment
KMP Capital Investment ~$46.5B Invested Since Inception(a,b) ($ in billions) Total Invested by Type(a,b) Total Invested by Year $25 $11 $20 Expansion $10.0 $10 Acquisition $15 $22.0 $24.5 $9 $10 $8 $5 $7 $6.6 (b) $- Expansions Acquisitions $6 $5 $4.9 Total Invested by Segment(a,b) $4 $3.3 $2.9 $24 $
Slide 27: KMP Returns on Invested Capital
KMP Returns on Invested 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 12.5 13.4 13.7
Slide 28: Toll Road-like, Fee-based Business Model
Toll Road-like, Fee-based Business Model Natural Gas Products Kinder Morgan Terminals CO2 Pipelines Pipelines Canada (KMP) (KMP) (KMP/EPB/KMI) (KMP) (KMP) – Interstate & LNG: take or pay – Take or pay, minimum – S&T: primarily minimum – Intrastate: ~75% take or pay(a) – Essentially no Volume Secur
Slide 29: Natural Gas Pipelines
Natural Gas Pipelines Segment Outlook Well-positioned connecting key natural gas resource plays with major demand centers Project Backlog: $4.6 billion of identified growth projects over next seven years(a), including: — LNG liquefaction (FTA at Elba Island) — Pipe projects supporting LNG liquefac
Slide 30: Products Pipelines
Products Pipelines Segment Outlook Opportunities for growth from increased liquids production Project Backlog: $1.0 billion of identified growth projects over next two years(a), including: — Cochin reversal / conversion — Eagle Ford condensate processing — KMCC extensions — KMCC-Double Eagle inter
Slide 31: Terminals
Terminals Segment Outlook Well-located in refinery / port hubs and inland waterways Project Backlog: $2.2 billion of identified growth projects over next five years(a), including: — Liquids • BOSTCO Phases 2, & 3 • Alberta crude by rail projects • Chemical terminal development • SCT Jones Act tank
Slide 32: 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 $2.0 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 Lob
Slide 33: 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 Trans Mountain Pipeline Long-term Growth Drivers: Expand Oilsands export capacity to West Coast and Asia TMEP $5.4 Billion Expansion — Following successf
Slide 34: KINDER/MORGAN
KINDER/MORGAN