Kinder Morgan, Inc. · NYSE:KMI
Kinder Morgan — First Union Equity Conference 2001
24 slides from Kinder Morgan's conference presentation, June 2001
Slide 1: First Union Equity Conference
First Union Equity Conference June 2001
Slide 2: Unique Financial Structure
Unique Financial Structure KMP drives growth at KMI Management Management Public Public – At current rates, will pay over $250 million of 25% 25% 75% 75% distributions to KMI for 2001 – Represents approximately 34% of KMI’s segment KMI (a) income in 2001 (Corporation) – Fastest growing business segm
Slide 3: Kinder Morgan Management, LLC
Kinder Morgan Management, LLC Provides KMP access to the institutional KMI KMI (a) (a) market, allowing KMP to accelerate its 100% growth strategy GP GP (b) Manages and controls the operations (b) of KMP 1 voting share Owns a new class of KMP limited 14.875 million partnership interests (“i-units”)
Slide 4: KMR is KMP
KMR is KMP KMR KMP Distributions Shares Cash Yield 6.0% 6.0% Exchangeability KMP Common Units None Voting Rights In Parity with KMP Limited Optional Purchase Yes Yes Mandatory Purchase Yes No Tax Considerations Allocated Taxable Income No Yes Non-Qualifying Income No Yes UBTI No Yes K-1s No Yes Stat
Slide 5: Business Strategy
Business Strategy Since the formation of Kinder Morgan, management has: Focused on stable, fee-based assets which are core to the energy infrastructure of growing markets Increased utilization of assets while controlling costs – Classic fixed cost businesses with little variable costs – Improve prod
Slide 6: Kinder Morgan Energy Partners
Kinder Morgan Energy Partners Premier Pipeline MLP Market Position Financial Profile (a) Largest pipeline MLP Cash Distribution: $ 4.20 Largest independent refined products Distribution Yield: 6.2% pipeline system 4 Year Distribution CAGR (b) 33% Largest CO2 transporter 4 Year Total Return (6/01/200
Slide 7: Product Pipelines
Product Pipelines Accounts for 43% of KMP’s 2001 expected earnings – Classic fixed cost businesses with fee-based revenues and little variable costs – Benign regulatory environment Cochin P/L – Excess capacity plus favorable demographics in SW and SE drive growth Pacific Operations Chicago Pipeline
Slide 8: Natural Gas Pipelines
Natural Gas Pipelines Accounts for 24% of 2001 expected earnings – Serves various producing regions with long- term contracts – Excess capacity positioned to profit from growth in gas demand KMIGT – Regulated asset base with long-term rate moratorium Pipeline Assets Trailblazer – Approximately 10,00
Slide 9: CO2 Pipelines
CO2 Pipelines Accounts for 13% of 2001 expected earnings – Major player in attractive niche business – Extremely low variable cost produces Utah Colorado consistent results in a variety of commodity price environments McElmo Dome Kansas – New contracts with Oxy and Marathon Bravo Dome Corez Pipeline
Slide 10: Bulk Terminals
Bulk Terminals Accounts for 10% of 2001 expected earnings – Geographic and product diversity with long-term contracts – Like pipelines, a fee-based, fixed cost business – Growth in low-sulfur coal, petroleum coke and cement 29 owned or operated bulk terminals – Handle over 40 million tons annually:
Slide 11: Liquids Terminals
Liquids Terminals Accounts for 10% of 2001 expected – KMP is second largest independent in the U.S. in – Petroleum storage New York – Chemical storage Philadelphia Chicago – Focus on fee-based opportunities not subject to commodity futures markets 5 Liquids Terminals Houston – Storage capacity of 26
Slide 12: Kinder Morgan Inc.
Kinder Morgan Inc. Segment Overview Market Position Market Performance One of the largest midstream 325% Total Return under energy companies in U.S. current management (b) 30,000 miles of natural gas and products pipelines 2001 Estimated Earnings Contribution Retail 8% Power & Other 9% NGPL 49% KMP
Slide 13: Natural Gas Pipeline of America (NGPL)
Natural Gas Pipeline of America (NGPL) 49% of of 2001 expected earnings Transport natural gas to Chicago and other Midwest markets Over 10,000 miles of pipe and 200 bcf of storage with peak deliverability of 5.7 bcf/day Recent 3-5 year contract extensions with largest LDC customers NGPL 3rd party co
Slide 14: Power
Power 9% of 2001 expected earnings Plan to develop power generating plants along gas pipelines Orion configuration - Innovative plant design that can be ramped up or down quickly Power – Little Rock, AK project with Southern Company (under construction) – Six additional sites to be developed with Wi
Slide 15: Retail
Retail 8% of 2001 expected earnings Provides natural gas to approximately 225,000 residential, commercial, industrial and agricultural customers in Nebraska, Colorado and Wyoming Retail Promote choice gas, which un- bundles supplier of gas from transporter 6-8% load growth on western slope of Colora
Slide 16: Acquisition Track Record
Acquisition Track Record Acquisitions Approximate ApproximateValue Value ($mm) ($mm) 6 Deals in 1997-1998 $ 1,720 4 Deals in 1999 950 Milwaukee / Dakota 25 80% Shell CO2 212 CRC CO2 Pipeline / SACROC 53 Buckeye Transmix 38 Cochin Pipeline (32.5%) 118 Delta Terminals 114 Duke Transmix 11 Marathon JV
Slide 17: Substantial Acquisition Potential in Current Environment
Substantial Acquisition Potential in Current Environment Petroleum pipelines represent a large opportunity – Rationalization by Major Oil Companies – Pipelines perceived to be a capital intensive, regulated business with modest growth – Internal restructuring to reallocate midstream capital into cor
Slide 18: Substantial Acquisition Potential in Current Environment (continued)
Substantial Acquisition Potential in Current Environment (continued) Liquids Terminals from Majors and Independents – Disaggregated industry – Focused on physical logistics rather than marketing-dependent facilities Continued Restructuring in Natural Gas Industry – Industry has seen more consolidati
Slide 19: KMP Acquisition Matrix
KMP Acquisition Matrix Accretion per LP Unit ($) (a) Hypothetical Value of Multiple of Distributable Cash Flow Acquisitions 5.0 X 6.5 X 8.0 X $1,250M $ 0.76 $ 0.45 $ 0.26 1,000M 0.62 0.37 0.21 750M 0.48 0.28 0.16 500M 0.33 0.19 0.11 Target $0.20 - 0.30 (a) Assumes acquisition financed 60% equity / 4
Slide 20: KMI Acquisition Matrix
KMI Acquisition Matrix Accretion per Common Share ($) (a) Hypothetical Value of Multiple of Distributable Cash Flow Acquisitions 5.0 X 6.5 X 8.0 X $1,250M $ 0.57 $ 0.40 $ 0.29 1,000M 0.46 0.32 0.23 750M 0.35 0.24 0.17 500M 0.23 0.16 0.12 Target $0.20 - 0.30 (a) Assumes acquisition financed 60% equit
Slide 21: KMI 3 Year Growth Targets
KMI KMI 3 Year Growth Targets KMP KMI EPS is expected to grow at a 21%CAGR over the next 3 years without additional acquisitions $0.75 $3.00 $0.16 ($0.10) $2.25 $0.05 $0.09 $0.24 KMTP $0.53 Return Retail on NGPL excess Power cash $1.28 KMP 33% Total 21% EPS EPS CAGR CAGR without acquisitions 2000 EP
Slide 22: KMP 3 Year Growth Targets
KMI KMP 3 Year Growth Targets KMP KMP distribution per unit is expected to grow at an 11%CAGR over the next 3 years without additional acquisitions $0.75 $5.40 $0.06 $0.17 $4.65 $0.18 $0.30 Liquids CO2 $0.51 Bulk Terminals $3.43 Nat Gas Products 16% Total DPU CAGR 11% DPU CAGR without acquisitions 2
Slide 23: A Unique Investment Opportunity
A Unique Investment Opportunity Unique combination of growth and yield Premier assets with stable, fee-based cash flows Committed to growing distributions driven by organic growth and acquisitions Strong management team aligned with unitholders KMR eliminates difficulties with holding partnership eq
Slide 24: Kinder Morgan
KINDER” MORGAN June 2001