Kinder Morgan, Inc. · NYSE:KMI
Kinder Morgan — Kinder Morgan Energy Partners — 2010 KMP Analyst Conference
45 slides from Kinder Morgan's conference presentation, Jan 28, 2010
Slide 1: Size Does Matter
ENERGY PARTNERS, L.P. Size Does Matter January 28, 2010
Slide 2: Forward Looking Statements
ENERGY PARTNERS, L.P. Forward Looking Statements This presentation contains forward looking statements. These forward-looking statements are identified as any statement that does not relate strictly to historical or current facts. In particular, statements, express or implied, concerning future acti
Slide 3: Use of Non-GAAP Financial Measures
ENERGY PARTNERS, L.P. Use of Non-GAAP Financial Measures The non-generally accepted accounting principles ("non-GAAP") financial measures of distributable cash flow before certain items (both in the aggregate and per unit), segment earnings before depreciation, depletion, amortization and amortizati
Slide 4: Use of Non-GAAP Financial Measures – Cont'd
ENERGY PARTNERS, L.P. Use of Non-GAAP Financial Measures – Cont’d "Certain items" are items that are required by GAAP to be reflected in net income, but typically either (1) do not have a cash impact, for example, goodwill impairments, allocated compensation for which we will never be responsible, a
Slide 5: Corporate Overview Agenda
ENERGY PARTNERS, L.P. Corporate Overview Agenda Vision – Rich Kinder Financial Excellence – Park Shaper Operational Excellence – Steve Kean 5
Slide 6: Vision
ENERGY PARTNERS, L.P. Vision Rich Kinder Chief Executive Officer
Slide 7: Size Does Matter
ENERGY PARTNERS, L.P. Size Does Matter Growth opportunities Since 1997, ~$20 billion in growth capital invested ~$11 billion in organic expansion / greenfield projects ~$9 billion in acquisitions Access to capital Successfully raised capital, in good times and bad ~$9 billion in public
Slide 8: The Kinder Morgan Strategy
ENERGY PARTNERS, L.P. The Kinder Morgan Strategy Same Strategy Since Inception Focus on stable, fee-based assets which are core to the energy infrastructure of growing markets Increase utilization of assets while controlling costs Classic fixed cost businesses with little variable costs Impr
Slide 9: Delivering 13 Years of Consistent Growth
ENERGY PARTNERS, L.P. Delivering 13 Years of Consistent Growth Total Distributions (GP + LP) ($MM) Annual LP Distribution Per Unit (b) $2,500 $2,416 $4.40 $4.50 $4.20 GP (a) 15% $2,132 $4.02 3% $4.00 = $2,000 LP =4 $1,854 A GR $3.26 $3.48 R $3.50 0 C $3.13 CAG $1,469 $3.00 6- 201 $2.87 199 $2.63 0 2
Slide 10: Significant Historical Returns
ENERGY PARTNERS, L.P. Significant Historical Returns (a) KMP: 27% CAGR Since ‘96 (b) KMR: 13% CAGR Since ‘01 (c) Dollars Dollars AMZ (d) $2,250 $320 = $308 KMP = $2,210 $2,000 $290 KMR = $294 $1,750 $260 $1,500 $230 $1,250 $200 $1,000 $170 $750 AMZ (d) = $665 $140 $500 $110 $100 $250 $80 $100 S&P 50
Slide 11: Promises Made, Promises Kept
ENERGY PARTNERS, L.P. Promises Made, Promises Kept Promises Made Promises Kept Budgeted Actual 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 2005: $3.13 2005: $3.13 2006: $3.28 20
Slide 12: Asset Footprint and Management Expertise Have Led to Growth Opportunities
ENERGY PARTNERS, L.P. Asset Footprint and Management Expertise Have Led to Growth Opportunities Industry Launch Led to: Led to: Rank (a) Pad Acquisitions (b) Internal Growth (b) – CFPL, CALNEV, Charter Triad, – Carson terminal, East Line & Northline Products st Cochin 1 – SFPP expansions Pipelines
Slide 13: 2009: Navigating The Storm
ENERGY PARTNERS, L.P. 2009: Navigating The Storm Entering 2009: Budgeted $4.20 distribution (4.5% growth) Budgeted $2.8 billion growth capital Headwinds: How we got there: Operational: Economy / energy markets reeling Operational: Asset diversification / mgmt focus Crude oil prices Crude pro
Slide 14: Current Capital Structure
ENERGY PARTNERS, L.P. Current Capital Structure Kinder Morgan Energy Partners, L.P. Market Equity (a) $18.3B Debt (b) 10.4B Enterprise Value $28.7B 2010E EBITDA (c) $3.2B 2010E DCF (d) $2.4B Additional Cash Incentive Shares Distribution Distribution KMR (NYSE) KMP (NYSE) (LLC) (Partnership) i-units
Slide 15: Unmatched Footprint
ENERGY PARTNERS, L.P. Unmatched Jet Trans Fuel Mountain Pipeline Footprint 2 Cochin Largest independent transporter of petroleum products in the U.S. Pacific Express Transport ~1.9 million barrels per day (Bbl/d) 2nd largest transporter of natural gas in U.S. (a) 2 Trailblazer Own an interes
Slide 16: As Important as Size, Location
ENERGY PARTNERS, L.P. As Important as Size, Location Products Pipelines: well-located with origin in refinery/port hubs and terminus in population centers Natural Gas Pipelines: well-positioned in Rockies, Shales, Texas CO2: own and operate best source of CO2 for enhanced oil recovery Termin
Slide 17: Stable Asset Base
ENERGY PARTNERS, L.P. Stable Asset Base Natural Gas Products Kinder Morgan CO2 Terminals Pipelines Pipelines Canada – Interstate: virtually all – Liquids: take or pay take or pay – S&T: minimum – Bulk: minimum Volume Security – volume based – No volume risk – Intrastate: ~78% volume guarantee volu
Slide 18: Well-diversified Asset Base
ENERGY PARTNERS, L.P. Well-diversified Asset Base KMP 2010E CO2 Segment DCF Natural Gas Pipelines 28% CO2 transport and sales Profile (b) 59% Interstate (c) 72% oil production related 41% Texas Intrastate Production hedged (a): 2010=73% ($57/Bbl) 2011=60% ($63) 30% 28% 2012=32% ($82) 2013=
Slide 19: $1.5 Billion in Growth Expenditures Planned for 2010
ENERGY PARTNERS, L.P. $1.5 Billion in Growth Expenditures Planned for 2010 (millions) 2010 Budgeted Growth Expenditures CO2 Natural Gas Pipelines (a) 28% 22% 7% Products Pipelines 0.2% KM Canada 13% 11% Terminals 19% Identified Acquisitions Announced Acquisitions (b) __________________________ (a) I
Slide 20: 2010 Partnership Goals
ENERGY PARTNERS, L.P. 2010 Partnership Goals Distribution Target $4.40 per unit (4.8% growth) Excess coverage of ~$32 million Maintain Solid Balance Sheet Year-end 2010 Debt / EBITDA of 3.6x Expansions / acquisitions financed 50% equity, 50% debt Operate all of our assets in a safe, co
Slide 21: We Benefit from Green Energy
ENERGY PARTNERS, L.P. We Benefit from Green Energy Well-positioned, diverse business segments and footprint provide for opportunities Renewable Fuels – Expect to handle ~250 MBbl/d – Continue to utilize and expand of renewable fuels in 2010 (a) refined products pipelines and (25-30% of U.S. market
Slide 22: Future Opportunities Abound
ENERGY PARTNERS, L.P. Future Opportunities Abound Growth Drivers KM Opportunity – Leverage Footprint – Cheap, abundant, domestic energy source – Full-year impact of REX, MEP, KMLA – Shifting supply from multiple basins – Completion of construction of FEP in 2010 – U.S. demand for natural gas expecte
Slide 23: Attractive Value Proposition
ENERGY PARTNERS, L.P. Attractive Value Proposition Unparalleled asset footprint Established track record Industry leader in all business segments Experienced management team Supportive general partner Transparency to investors Attractive returns driven by combination of yield plus grow
Slide 24: Financial Excellence
ENERGY PARTNERS, L.P. Financial Excellence Park Shaper President
Slide 25: ~$20 Billion in Capital Invested 1998-2009
ENERGY PARTNERS, L.P. ~$20 Billion in Capital Invested 1998-2009 (a,b) (billions) Total Invested by Type (a,b) Total Invested by Year (a) $12 $2.4 $9 $3.5 $3.3 JV Contributions $6 Expansion $3.0 $2.9 $8.7 $8.8 Acquisition $2.7 $3 $2.5 $0 Expansions Acquisitions $2.0 $1.9 $1.6 Total Invested by Segme
Slide 26: How We Have Done: Returns on Capital
ENERGY PARTNERS, L.P. How We Have Done: Returns on Capital 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Segment ROI (a): Products Pipelines 11.9% 11.8% 12.8% 12.9% 12.4% 11.6% 11.8% 13.2% 12.5% 13.4% Natural Gas Pipelines 13.3 15.5 12.9 13.5 14.0 15.5 16.7 17.5 16.9 14.0 CO2 27.5 24.6 22.0 21.9
Slide 27: Cost of Capital
ENERGY PARTNERS, L.P. Cost of Capital Cost of capital varies over time Current ~8.8% (a) 2009 analyst conf 9.8% 2008 analyst conf 9.0% 2004 analyst conf 8.3% 2003 analyst conf 9.1% 2002 analyst conf 8.2% Long-term cost of capital ~9% Targeted unlevered returns typically 12-15% for pipelines (h
Slide 28: Access to Capital
ENERGY PARTNERS, L.P. Access to Capital Issued ~$20 billion (a) of capital at KMP in the public markets since inception (b) and ~$2 billion at JVs (c) ~$9.2 billion in equity raised (a) ~$11.1 billion in KMP long-term debt (~$10.2B net of refinancing) ~$2.2 billion in JV debt ($2.1B net) (c)
Slide 29: KMR: The Basics
ENERGY PARTNERS, L.P. KMR: The Basics KMR is KMP… KMR shares Pari passu with KMP unitholders; represent limited liability interests in Kinder Morgan Management LLC, whose only investment is i-units of KMP IPO in May-2001; trades on NYSE under symbol KMR Market value = $4.8 billion (~1/4 of t
Slide 30: KMR: Compelling Investment Proposition
ENERGY PARTNERS, L.P. KMR: Compelling Investment Proposition (a) KMR has generated strong returns for KMR Discount to KMP 10% investors… (b) 7% avg discount 50% total return in 2009 5% since 2001 IPO (a) 0% 13.2% compound annual total return since 2001 IPO vs. 14.4% for KMP, -5% 13.8% for the
Slide 31: Insiders Prefer KMR
ENERGY PARTNERS, L.P. Insiders Prefer KMR Management Purchases of KMR & KMP (a) (millions) $10 $8 $6 $4 $8.0 $2 $4.5 $0 KMR KMP __________________________ (a) Purchase of KMR shares and KMP units by directors and officers of KMR/KMP since the KMR IPO in 2001, as reported in SEC Form 4 filings 26
Slide 32: CO2 Crude Production Hedge Profile
ENERGY PARTNERS, L.P. CO2 Crude Production Hedge Profile SACROC & Yates Crude Oil Production (a) Avg Hedge Px WTI & WTS $56.59 $62.54 $82.13 $88.62 $85.33 ($/Bbl) (b) 50 Net Equity Production 40 (MMboe/d) 30 73% 20 60% 10 32% 14% 5% 0 2010 2011 2012 2013 2014 Swaps Puts Unhedged % Hedged ___________
Slide 33: Risks
ENERGY PARTNERS, L.P. Risks Regulatory Pacific Products Pipeline FERC/CPUC case Periodic rate reviews Unexpected policy changes Crude Oil Production Volumes Crude Oil Prices Budget assumes $84/Bbl realized price on unhedged barrels 2010 Sensitivity is ~$6 million DCF per $1/Bbl chang
Slide 34: Focused on Distribution Growth
ENERGY PARTNERS, L.P. Focused on Distribution Growth History of Delivering Annual LP Distribution Per Unit (b) Distribution Growth (a) $4.40 $4.50 $4.20 15% $4.02 1-year growth = 4.5% $4.00 G R = $3.48 $3.50 E CA $3.13 $3.26 0 3-year growth = 8.8% $3.00 6- 201 $2.87 $2.63 199 $2.44 $2.50 $2.15
Slide 35: ENERGY PARTNERS, L.P.
ENERGY PARTNERS, L.P. KINDER/MORGAN
Slide 36: Operational Excellence
ENERGY PARTNERS, L.P. Operational Excellence Steve Kean Chief Operating Officer
Slide 37: Operations Goals – Safe, Reliable, Efficient Operations
ENERGY PARTNERS, L.P. Operations Goals – Safe, Reliable, Efficient Operations Continuous reduction in risk to the public, employees, contractors and the environment Continuous improvement in the efficiency and productivity of existing operations Well-executed expansions and effective integrati
Slide 38: Implementation Plan
ENERGY PARTNERS, L.P. Implementation Plan Systems-making Immediate Risk Reduction Compliance Routine Continuous Improvement ROW protection programs Addressing operations performance Systems Improvement and (complete) in existing processes— processes—Operations Updating Liquids Pipeline O&M r
Slide 39: Compliance – Total KMP
ENERGY PARTNERS, L.P. Compliance – Total KMP Total KM 2009 Compliance Report 70,000 5.0% 4.5% 60,000 4.0% 50,000 3.5% 3.0% 40,000 2.5% 30,000 2.0% 20,000 1.5% 1.0% 10,000 0.5% 0 0.0% January February March April May June July August September October November December Total Compliance Action Items %
Slide 40: Incidents & Releases: Liquids Pipeline ROW
ENERGY PARTNERS, L.P. Incidents & Releases: Liquids Pipeline ROW Liquids Pipeline Incidents per 1,000 Miles (a) Liquids Pipeline Release Rate (a) 1.0 35 Bbl per billion barrel miles Incidents per 1,000 miles 0.8 30 25 0.6 0.45 20 15.5 0.4 0.29 15 0.21 10 0.2 6.0 5 2.5 0 0 0.0 0 2006 2007 2008 2009 2
Slide 41: Incidents & Releases: Natural Gas Pipeline ROW
ENERGY PARTNERS, L.P. Incidents & Releases: Natural Gas Pipeline ROW Natural Gas Pipeline Incident Rate (a) 0.5 Incidents per 1,000 miles 0.4 0.32 0.30 0.3 0.27 0.27 0.2 0.1 0.0 2006 2007 2008 2009 __________________________ (a) An Incident means any of the following events: (1) An event that involv
Slide 42: Safety Performance – KM 1 year vs. Industry
ENERGY PARTNERS, L.P. Safety Performance – KM 1 year vs. Industry Recordable Injuries (a) Lost Time Injuries (a) Vehicle Accidents (b) Business Unit KM 12- 12-mo Industry KM 12- 12-mo Industry KM 12- 12-mo Industry Natural Gas Pipelines 1.50 2.0 0.82 0.9 0.47 1.48 CO2 1.84 1.7 1.01 1.2 0.20 1.48 Pro
Slide 43: Safety Performance – KM 1 year vs. KM 3 year
ENERGY PARTNERS, L.P. Safety Performance – KM 1 year vs. KM 3 year Recordable Injuries (a) Lost Time Injuries (a) Vehicle Accidents (b) Business Unit KM 12- 12-mo KM 3- 3-yr KM 12- 12-mo KM 3- 3-yr KM 12- 12-mo KM 3- 3-yr Natural Gas Pipelines 1.50 1.22 0.82 0.51 0.47 0.75 CO2 1.84 0.78 1.01 0.46 0.
Slide 44: Contractor Safety
ENERGY PARTNERS, L.P. Contractor Safety Recordable Injuries (a) Lost Time Injuries (a) Business Unit KM 12- 12-mo Industry KM 12- 12-mo Industry Natural Gas Pipelines 2.12 2.60 0.19 1.10 CO2 1.61 4.20 0.59 1.53 Products Pipelines 2.14 2.60 0.00 1.10 Terminals 1.46 3.28 0.49 1.20 Kinder Morgan Canada
Slide 45: 2010 Plans
ENERGY PARTNERS, L.P. 2010 Plans Extension of Compliance Systems exception reporting to more subject areas Close remaining compliance gaps PSM/RMP (CO2) DOT (Terminals) – multi-year plan Terminals O&M revision and implementation (Q1 2010) Renewed focus on employee safety – continuous imp
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