Kinder Morgan, Inc. · NYSE:KMI
Kinder Morgan — Wachovia 2006 Pipeline / MLP Conference
24 slides from Kinder Morgan's conference presentation, September 2002
Slide 1: Real Assets, Real Earnings, Real Cash
Real Assets, Real Earnings, Real Cash September 2002
Slide 2: Forward Looking Statements
Forward Looking Statements Forward looking statements are not guarantees of performance. They involve risks, uncertainties and assumptions. The future results and securities values of Kinder Morgan Inc., Kinder Morgan Energy Partners, L.P. and Kinder Morgan Management, LLC (collectively known as “Ki
Slide 3: Kinder Morgan: Two Companies, Three Securities
Kinder Morgan: Two Companies, Three Securities Kinder Morgan Energy Partners Kinder Morgan, Inc Market Equity (a) $5.8 Incentive Market Equity (b) $5.2 Debt 3.5 Distribution Debt 3.3 Enterprise Value $9.3 Enterprise Value $8.5 2002E EBITDA $960 mm 2002E EBITDA $850 mm 2002E Dist. CF $710 mm 2002E Di
Slide 4: Kinder Morgan System Map
Kinder Morgan System Map 2 PACIFIC COCHIN 2 KMIGT 2 PACIFIC 2 3 NORTH CALNEV 3 KMP 4 PACIFIC NGPL KMCO 2 CO2 Pipelines Terminals KM TEJAS PLANTATION (2,3,10) Indicates # of Facilities in area 10 Products Pipelines KMI 2 Products Pipeline Terminals KMTP 2 CFPL Transmix Facilities Gas-Fired Power Plan
Slide 5: Solid Asset Base Generates Stable Cash Flows
Solid Asset Base Generates Stable Cash Flows(a) Terminals Products Pipelines KMP Largest independent terminal Largest independent refined operator in U.S. products pipeline system in U.S. 64% Liquids, 36% Bulk Refinery hub to population Geographic and product Terminals center strategy diversity 18%
Slide 6: Solid Asset Base Generates Stable Earnings
Solid Asset Base Generates Stable Earnings (b) Retail KMI Power and Other Natural gas distribution service Preferred interest in two 550 Serve Colorado, Wyoming and megawatt plants Power Nebraska Common equity interest in three Retail 6% 240,000 customers 7% small Colorado plants (380 megawatts tota
Slide 7: 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 8: Management Philosophy
Management Philosophy Low Cost Asset Operator Senior management limited to $200,000 per year in salary No planes, sports tickets, etc. Attention to Detail Weekly operations and financial assessment Monthly earnings and accounts receivable review Quarterly strategic review Risk Management
Slide 9: Consistent Track Record
Consistent Track Record KMP Distribution / Unit (a) Total Distributions (GP + LP) ($mm) $2.50 Expected $800 $711 2.50 $2.20 700 6% Current R=2 $1.90 CAG $2.44 600 % 2.00 86 $546 Net Income $1.45 = 500 GR $1.30 CA $/LP Unit 1.50 $1.13 400 $333 1.00 $0.63 300 $198 200 $153 0.50 100 $30 $17 0.00 0 1996
Slide 10: Stability Results in Strong Credit and Liquidity
Stability Results in Strong Credit and Liquidity Seven Largest MLPs Credit Statistics: KMP KMI A1/A+ A2/A Ratings: BBB+ BBB Baa1 Baa2 A3/A- Baa1/BBB+ Net Debt / Total Capital 50% 49% Baa2/BBB Debt / 2002E EBITDA 3.6x 3.9X 2002E EBITDA / Interest 5.3x 5.2X Baa3/BBB- Liquidity: Ba1/BB+ CP Capacity / T
Slide 11: Historical Internal Growth
Historical Internal Growth 2001 vs. 2000 Business Segments Assets Operated in Both Periods 2001(a) Growth Products (b) Pacific, North System, Cypress, $276 7% Plantation, Transmix (East and Colton) Natural Gas KMIGT, Trailblazer, Painter, Red 147 8% Cedar CO2 (c) 111 9% Terminals KMBT, OLPC, Dakota,
Slide 12: Targeted KMP Internal Growth
Targeted KMP Internal Growth Expected 2003–2005 2001 Change in Annual Business Segments Actual 2002 Target Growth Drivers Products Pipelines $347.8 $39.6 $30-35 Demographics in West and Southeast U.S. Natural Gas Pipelines 218.4 113.4 20-25 Expansions and extensions CO2 Pipelines 108.4 1.9 20-25 SAC
Slide 13: Modest Top Line Growth Leads to Significant Bottom Line Growth
Modest Top Line Growth Leads to Significant Bottom Line Growth Illustrative Year 1 Year 2 Growth Comments Gross Margin $100 $104 4% Price and volume Operating Expenses 50 50 Efficiency savings compensate for small increase in variable cost Operating Income $50 $54 8% G&A 6 6 No increase associated w
Slide 14: Excess Capacity Allows Growth
Excess Capacity Allows Growth Business Segments Pipeline Systems Utilization Rates (Approximate) Products Pipelines Pacific System 70% Plantation Pipeline 80% Central Florida Pipeline 65% Natural Gas Pipelines Texas - Intrastate 80% Rocky Mountain – Interstate 100% CO2 Pipelines Cortez Pipeline 80%
Slide 15: Internal Expansions Add Additional Growth
Internal Expansions Add Additional Growth Number of Capital Completion Business Segments Projects Committed Date Expansion Projects Product Pipelines 1 $58 2004 Knoxville Natural Gas Pipelines 2 $117 2003-2004 Cheyenne, Monterrey CO2 Pipelines 1 $160 2003 SACROC Terminals 4 $46 2002-2003 Houston, Ca
Slide 16: Stable Platform, Exceptional Growth Potential
Stable Platform, Exceptional Growth Potential KMP KMI (a) Stable Cash Flow 7.5% yield Low yield Strong Balance Sheet 40% debt/cap target Excess cash used for share buyback, dividends and debt repayment 50% debt/cap target Add: Internal Growth 8-10% 18-20% - Over $500 million in expansions currently
Slide 17: Structure offers Two Risk Reward Profiles
Structure offers Two Risk Reward Profiles Limited Partner General Partner KMP/KMR KMI Yield Approx. 7.5% Approx. 1.0% Distributions Share in all distributions from Only entitled to incentive Available Cash distribution on Cash from Operations Current Split of 60% 40% Cash Distributions Upside/Downsi
Slide 18: KMP/KMR is Attractive Compared to 10-yr UST
KMP/KMR is Attractive Compared to 10-yr UST(a) 10 KMP 9 US 10Yr Treasury 8 Yield (%) 7 6 5 4 3 Feb-1997 Nov-1997 Aug-1998 May-1999 Feb-2000 Dec-2000 Sep-2001 Jun-2002 Daily from 01-Feb-1997 to 23-Aug-2002 (a) From February 1, 1997 to August 23, 2002. 18
Slide 19: KMP/KMR is Attractive Compared to Peers
KMP/KMR is Attractive Compared to Peers Organic Total Total Annual Investment Current Growth Projected Return (c) Alternatives Yield (a) Rate (b) Return 12/96 – 8/23/02 Tax Treatment KMP/KMR 7.6% 8-10% 17% 41% (d) Deferred/ Capital Gains Pipeline MLP Composite (e) 7.9% 4-6% 13% 14% Deferred S&P Util
Slide 20: KMR is Economically Equivalent to KMP
KMR is Economically Equivalent to KMP KMR KMP Distributions Shares Cash Yield 7.6% 7.5% Voting Rights In Parity with KMP Limited Mandatory Purchase Assures value in liquidation (a) No Optional Purchase Yes Yes Tax Considerations Allocated Taxable Income No Yes Non-Qualifying Income No Yes UBTI No Ye
Slide 21: KMI with Internal Growth Only
KMI with Internal Growth Only Hypothetical KMI Four Year Internal EPS Growth (2001-2005) (a) KMI Other Asset Growth (b) 2% 4% 6% 8% KMP 6% 15% 16% 17% 19% Internal DPU 8% 17% 18% 19% 20% Growth 10% 19% 20% 21% 22% 12% 21% 22% 23% 24% (a) Assumes 50% of cash flow after tax is used to pay down debt an
Slide 22: Disciplined Acquisition Growth
Disciplined Acquisition Growth Demonstrated acquisition growth accompanied by disciplined equity issuance leads to consistent distribution increase Number of App. Value Equity Year Deals ($mm) Issued ($mm) 1997 1 20 13 1998 5 1,700 1,278 1999 4 950 421 2000 10 911 343 2001 11 1,810 1,047 2002YTD 6 8
Slide 23: A Unique Investment Opportunity
A Unique Investment Opportunity Premier assets with stable fee-based cash flows Strong management team that delivers on its promises and has its interests aligned with unit holders Committed to growing distributions driven by organic growth Acquisition upside potential Two ways of investing in uniqu
Slide 24: Real Assets, Real Earnings, Real Cash
Real Assets, Real Earnings, Real Cash
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