Kinder Morgan, Inc. · NYSE:KMI
Kinder Morgan — 2005 Analyst Conference
20 slides from Kinder Morgan's conference presentation, 2005
Slide 1: Other Segments and Financial Review
Other Segments and Financial Review Park Shaper
Slide 2: Agenda
Agenda Retail and Power Segments Acquisitions 2005 Cash Flow 2005 Budget Sustaining Capital Shift Options Expense Impact SFPP Impact KMR Sales Quarterly Earnings Distribution Balance Sheet Analysis Summary 2
Slide 3: KMI Retail and Power Segments
KMI Retail and Power Segments 2005 Budget (a) NGPL 39% Retail 7% KMP 53% Power 1% (a) 2005 budgeted segment earnings before G&A and interest expense. KMP includes: (i) general partner interest, (ii) earnings from 20 million KMP units and (iii) earnings from 15 million KMR units. 3
Slide 4: Retail
Retail WYOMING 29% of Meters Totals 35% of Income 243,029 Meters $70.7mm 05E Income Kirk Ranch Bunker Hill NEBRASKA Oil Springs 39% of Meters Huntsman 27% of Income COLORADO 32% of Meters 2003 2004 2005E Wolf Creek 38% of Income EBITDA $81.7 $86.4 $88.5 Montrose Op Income $65.5 $69.3 $70.7 Ouray La
Slide 5: Small Power Portfolio, 1% of KMI
Small Power Portfolio, 1% of KMI 2005E Capacity Owner- Type of Counter- Contract Earnings Plant (Mw) ship Contract Party Expiration ($mm) Notes Equity Interest: Ft. Lupton 272 50% Toll PSCo 2009, 2019 (a) Greeley 32 100% PPA PSCo 2011 (b) Sithe 72 33.5% Toll PSCo 2013 (c) Total Colorado 376 $9.8 Pre
Slide 6: KMP 2004 Acquisitions
KMP 2004 Acquisitions Estimated Purchase Annual Price (a) DCF (b) Acquisition Date ($mm) ($mm) Multiple 1. Southeast terminals Feb, Nov-04 $129.0 $19.9 6.5 2. Kaston Pipeline Aug-04 111.0 17.5 6.3 3. Global Materials Oct-04 80.0 12.0 6.7 4. TransColorado Nov-04 275.0 35.0 7.9 5. Cochin Nov-04 11.8 1
Slide 7: TransColorado Acquisition
TransColorado Acquisition Stable Asset KMP Purchase Price Dth/d ($mm) 450,000 Not 400,000 Contracted Price $275 Extension 350,000 Under 2005E DCF $35 300,000 Negotiation (a) DCF Multiple 7.9X 250,000 200,000 150,000 Contracted 100,000 KMI Use of Proceeds 50,000 0 ($mm) 2005 2006 2007 2008 2009 2010
Slide 8: KMP Distributable Cash Per Unit
KMP Distributable Cash Per Unit (thousands, except per unit) Growth Rate 2003 (a) 2004 2005E 04-05E Net Income $693,872 $831,578 $947,411 DD&A 224,607 294,201 356,288 Sustaining Capex (92,837) (119,244) (125,777) Total Distributable Cash Flow 825,642 1,006,535 1,177,922 17% General Partner's Interes
Slide 9: KMI Cash Per Share
KMI Cash Per Share (thousands, except per share) Growth Rate 2003 2004 2005E 04-05E Recurring Earnings $411,941 $475,781 $520,094 Diluted EPS $3.33 $3.81 $4.22 11% Add: DD&A 117,528 118,742 120,329 Less: Sustaining Capital (83,469) (82,233) (100,562) Add: Book –Cash Taxes (a) 112,031 99,945 82,763 F
Slide 10: KMP 2005 Budget
KMP 2005 Budget (thousands) Change 2005E 2004 04 – 05E % Change Segment Earnings before DD&A Products Pipelines $535,168 $475,476 $59,692 12.6% Natural Gas Pipelines 439,409 410,659 28,750 7.0% CO2 473,927 353,510 120,417 34.1% Terminals 288,168 263,167 25,001 9.5% Total Segment Earnings b/f DD&A 1,
Slide 11: KMP 2005 Budget Per Unit
KMP 2005 Budget Per Unit (thousands except per unit) Change 2005E 2004 04 – 05E % Change Limited Partners’ Net Income $471,519 $436,486 $35,033 8.0% Units Outstanding (avg) 211,802 197,038 14,764 7.5% Income Per Unit $2.23 $2.22 $.01 .5% DD&A Per Unit 1.68 1.49 .19 12.8% Sustaining Capex Per Unit (0
Slide 12: KMI 2005 Budget
KMI 2005 Budget (thousands except per share) Change 2005E 2004 04-05E % Change Segment Income KMP $654,371 $558,078 $96,293 17.3% NGPL 413,125 392,806 20,319 5.2% TransColorado 0 20,255 (20,255) (100%) Retail 70,659 69,264 1,395 2.0% Power 14,555 15,255 (700) (4.6%) Total Segment Income 1,152,710 1,
Slide 13: Option Expense
Option Expense Options required to be expensed beginning July 1, 2005 - Q3 Methodology: Expense Valuation Method Unvested options as of July 1, 2005 Same method as used for existing disclosure New options issued New standard: calculate fair value under one of several methods Last options grant
Slide 14: Sustaining Capital Shift
Sustaining Capital Shift Two factors driving shift: 2005: FERC proposed policy change − Costs of integrity testing are expensed − Historically, testing was expensed if less than 100 ft of pipe replaced 2004: KM anomaly rate lower than historical KMP – No impact on cash for distribution KMI
Slide 15: SFPP Rate Case Potential Impact
SFPP Rate Case Potential Impact KMP KMI Potential Earnings Impact (Per Unit) (Per Share) Rate Reduction/Recurring Impact: Full Year $.15 $.18 2005 Potential Impact $.06 $.08 One-Time Reparations $.26 - .$42 $.32 - $.47 Notes (a) Calculated based on estimates of amounts sought by shippers as disclose
Slide 16: KMI: Sales of KMR
KMI: Sales of KMR KMI has carryover capital losses which expire in 2005 and 2006 Approximately $52 million in 2005, $2 million in 2006 Associated with asset sales transactions during restructure To use must generate capital gains Unless another transaction materializes, sales of KMR shares
Slide 17: Quarterly Earnings Distribution
Quarterly Earnings Distribution Q1 Q2 Q3 Q4 Total KMI Earnings (a,b) 2005E >25% <25% <25% >25% $4.22/sh 2004 27% 22% 24% 27% $3.81/sh 2003 27% 23% 23% 27% $3.33/sh 2002 26% 21% 24% 29% $2.84/sh KMP Earnings (c) 2005E >25% ~25% <25% ~25% $2.23/u 2004 23% 23% 27% 27% $2.22/u 2003 25% 24% 25% 26% $1.98
Slide 18: Balance Sheet Ratios
Balance Sheet Ratios 2005E 2004 2003 2002 2001 2000 1999 KMP Debt to Capital (a) 51% 52% 54% 51% 46% 46% 39% Debt/EBITDA 3.0x 3.5x 3.8x 3.7x 3.5x 3.9x 3.9x EBITDA/Interest Exp. 6.3x 6.9x 6.2x 5.5x 4.6x 5.1x 5.6x KMI Debt to Capital (a) 39% 38% (b) 43% 48% 47% 61% 67% Debt/EBITDA 2.4x 2.5x 3.1x 3.8x
Slide 19: Financial Summary
Financial Summary KMP 7% growth in DCF/unit to $3.31/unit before acquisitions 9% growth in budgeted declared distribution to $3.13/unit before acquisitions $39 million in excess coverage Finance expansion budget 85% equity and 15% debt Finance new acquisitions 60% equity and 40% debt Dis
Slide 20: Kinder Morgan
KINDER’ MORGAN