Kinder Morgan, Inc. · NYSE:KMI
Kinder Morgan — Conference Presentation (September 2001)
27 slides from Kinder Morgan's conference presentation, September 2001
Slide 1: Kinder Morgan Update
Kinder Morgan Update September 2001 F o r w a r d lo o k in g s ta te m e n ts a r e n o t g u a r a n te e s o f p e r fo r m a n c e . T h e y in v o lv e r is k s , u n c e r ta in tie s a n d a s s u m p tio n s . T h e fu tu r e r e s u lts a n d s e c u r itie s v a lu e s o f K in d e r M o r
Slide 2: Unique Financial Structure
Unique Financial Structure Senior Management Management Management Public Public – Owns 25% of KMI 25% 25% 75% 75% – Rich Kinder (Chairman & CEO) and Bill Morgan (Vice Chairman) have $1/year salaries, no bonus, KMI (a) no options (Corporation) – Recently announced $300mm share repurchase Market Equi
Slide 3: How KMP Impacts KMI
How KMP Impacts KMI The combination of growth in both KMP’s total cash flow and KMI’s share of that total has produced dramatic cash flow growth for KMI’s GP interest KMP Total Cash Distributions KMI’s 2% G.P. Interest (a) $540M (b) L.P. Share $204M (b) G.P. Share $333.3M $113.4M $198.3M $58.4M $152
Slide 4: Investment Opportunities for Institutions
Investment Opportunities for Institutions $ 2.40 - 2.50 KMI EPS(a) KMI: Exceptional Growth Potential $ 1.84 – G.P. incentive structure passes 50% of incremental $ 1.28 cash flow growth to G.P. $ 0.73 – G.P. benefits tremendously from accretive acquisitions by the partnership – Trading at 23x ’02 ear
Slide 5: Kinder Morgan System Map
Kinder Morgan System Map Premier Midstream Assets Co c hin Su per ior Pacific Hu ro n r io Onta Trailblazer Michigan KMIGT ie Er North Pacific Natural Gas Operations Pipelines (3) CALNEV Storage CO2 NGPL Processing Plants Pacific Retail Division Plantation Products Operations Houston Pipelines (11)
Slide 6: 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 – Virtually no commodity price risk – No marketing and trading business Increased utilization of assets while controlling costs –
Slide 7: Kinder Morgan Energy Partners
Kinder Morgan Energy Partners Premier Pipeline MLP Market Position Financial Profile (a) Largest pipeline MLP Cash Distribution: $ 2.10 Largest independent refined products Distribution Yield: 5.7% pipeline systems 4 Year Distribution CAGR (b) 31% Largest CO2 transporter 4 Year Total Return (8/31/20
Slide 8: Kinder Morgan Inc.
Kinder Morgan Inc. Segment Overview Market Position Market Performance One of the largest midstream Approximately 332% Total energy companies in U.S. Return under current 30,000 miles of natural gas and management (7/01/99 – 8/31/01) products pipelines 2001 Estimated Earnings Contribution Retail 8%
Slide 9: KMI Benefits from KMP Internal Growth
KMI Benefits from KMP Internal Growth KMP KMI Modest Revenue Growth Exceptional Growth in G.P.’s distribution - Fixed cost business 90%+ to bottom line - Productivity Improvements 50% - GP is large % of KMI - No tax leakage - No additional Capex required Attractive Bottom-line Growth 50% Growth in K
Slide 10: Internal Growth Case Study: Pacific System
Internal Growth Case Study: Pacific System Transports gasoline, diesel and jet fuel to some of the fastest growing markets in U.S. (i.e. Las Vegas, Phoenix, San Diego) Demographic growth drives volume growth Excess capacity for next 8-10 years without significant capital Virtually all revenue growth
Slide 11: Internal Growth Summary
Internal Growth Summary KMP Primary Internal Growth Driver Products Pipes • Demographic movements to West and South East U.S. Nat. Gas Pipes • Increased production in Rockies and growth in gas – fired generation CO2 Pipes • Maturation of on-shore oil basins in United States Terminals • Increased ref
Slide 12: Expansion Opportunities are Increasing
Expansion Opportunities are Increasing KMP Primary Internal Growth Driver Products Pipes • Extending to new markets in Tennessee, Florida, and San Diego Nat. Gas Pipes • Significant new infrastructure needed for 30Tcf market (new plants/new markets) CO2 Pipes • Extension of existing pipeline system
Slide 13: Announced Expansion Projects
Announced Expansion Projects Segment Project Capital In Service Date KMP – Gas pipelines Trailblazer expansion $ 40 million June 2002 KMP – Gas Pipelines KMTP for Calpine $ 15 million Q3 2002 Product Pipelines CALNEV Expansion $ 9 million Q2 2002 Terminals Shipyard River $ 18 million Q1 2001 Termina
Slide 14: Acquisition Opportunities
Acquisition Opportunities Product Pipelines – Kinder Morgan has only 7% of the U.S. petroleum pipeline market – Rationalization by the majors – FTC - mandated divestitures resulting from mergers – Elimination of inefficient joint-venture structures (e.g. Plantation) Natural Gas Pipelines – Industry
Slide 15: Acquisition Opportunities - Continued
Acquisition Opportunities - Continued Terminals – Average cash flow multiples lower than pipelines – Target over $200m / yr in acquisitions – Significant opportunities remain for liquids terminal acquisitions – Kinder Morgan’s market share of top 10 independent volume is less than 15% – Restructurin
Slide 16: Kinder Morgan Advantages as Acquirer
Kinder Morgan Advantages as Acquirer Pretax MLP Structure – Significant cost of capital advantage vs. traditional Corps. – Significant scale and cost of capital advantage vs. other MLP’s Track record of eliminating overhead Focus on Asset Operation – Not viewed as a competitor (i.e. no marketing and
Slide 17: Acquisition Track Record
Acquisition Track Record Acquisitions Approximate ApproximateValue Value ($mm) ($mm) 6 Deals in 1997-1998 $ 1,720 4 Deals in 1999 950 Milwaukee / Dakota Terminal 25 80% Shell CO2 212 CRC CO2 Pipeline / SACROC 53 Buckeye Transmix 38 Cochin Pipeline (34.8%) 126 Delta Terminals 114 Duke Transmix 11 Pha
Slide 18: KMP Acquisition Matrix
KMP Acquisition Matrix Accretion per KMP Unit ($) (a) Hypothetical Value of Multiple of Distributable Cash Flow Acquisitions 5.0 X 6.5 X 8.0 X $1,250M $ 0.40 $ 0.24 $ 0.14 1,000M 0.32 0.20 0.12 750M 0.25 0.15 0.09 500M 0.17 0.10 0.06 Target $0.15 - 0.20 (a) Assumes acquisition financed 60% equity /
Slide 19: KMI Acquisition Matrix
KMI Acquisition Matrix Accretion per KMI Common Share ($) (a) Hypothetical Value of Multiple of Distributable Cash Flow Acquisitions 5.0 X 6.5 X 8.0 X $1,250M $ 0.58 $ 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 $0.25 - 0.30 (a) Assumes acquisition financed 60% e
Slide 20: KMI Guidance - 2002
KMI Guidance - 2002 $ 2.40 - $2.50 $ 2.20 - $2.35 Acquisitions at $ 0.96 $ 1.84 KMP Retail Power* Interest NGPL Savings SFAS 142 KMP $ 1.28 $ 0.88 20- 20-28% EPS Growth without acquisitions 2000 EPS 2001 YTD Estimated Estimated Estimated 2002 Estimated (Quarters 2001 2001 EPS EPS assuming 2002 EPS w
Slide 21: KMP/KMR Guidance - 2002
KMP/KMR Guidance - 2002 $ 2.43 - $2.48 $ 2.35 - $2.40 CO2 Acquisitions $ 2.13 Terminals Nat Gas Products $1.72 Expect mid teens growth in distribution plus 6% yield $1.00 2000 DPU Estimated Estimated 2002 Estimated 2001 DPU DPU assuming 2002 DPU with no additional acquisitions acquisitions 20
Slide 22: Unique Investment Opportunity
Unique Investment Opportunity Kinder Morgan generates growth from stable, fee-based businesses while avoiding commodity price risk KMP/KMR – High current yield of 5.7% – Low-risk internal growth from favorable demographic trends – Significant upside potential by extending acquisition track record –
Slide 23: Appendix
KINDER” MORGAN Appendix
Slide 24: KMR Offering Summary (Post Split)
KMR Offering Summary (Post Split) Issuer: Kinder Morgan Management, LLC Size: 29.75 million shares (originally filed 17 million) Price: $35.205 (indication on original filing was $29.875) Gross Proceeds(a): $1,047 million (indication original filing was $508) which returns KMP to 40% debt target Dis
Slide 25: 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 29.75 million partnership interests (“i-units”) K
Slide 26: KMR is KMP
KMR is KMP KMR KMP Distributions Shares Cash Yield 5.7% 5.7% 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 27: August 2001
KINDER” MORGAN August 2001
Kinder Morgan — Conference Presentation (September 2001) on 6ix