Kinder Morgan, Inc. · NYSE:KMI
Kinder Morgan — Investor Presentation (March 2020)
52 slides from Kinder Morgan's investor presentation, Mar 4, 2020
Slide 1: Investor Presentation March 2020
Investor Presentation March 2020
Slide 2: Disclosure
Disclosure Forward looking statements / non-GAAP financial measures General – The information contained in this presentation does not purport to be all‐inclusive or to contain all information that prospective investors may require. Prospective investors are encouraged to conduct their own analysis a
Slide 3: Kinder Morgan: Leader in North American Energy Infrastructure
Kinder Morgan: Leader in North American Energy Infrastructure Unparalleled & irreplaceable asset footprint built over decades CO2 & transport Largest natural gas transmission network CO2 EOR oil & gas production Natural gas 6% 4% pipelines ~70,000 miles of natural gas pipelines Terminals 13% 659
Slide 4: A Core Energy Infrastructure Holding
A Core Energy Infrastructure Holding Generating significant cash flow & returning significant value to shareholders ~$50 billion market capitalization One of the 10 largest energy companies in the S&P 500 15% owned by management Highly aligned management with significant equity interest ~5% current
Slide 5: Key Milestones Reached in 2019
Key Milestones Reached in 2019 Sold KML & U.S. Cochin pipeline for ~$2.5 billion Created ~$1.2 billion balance sheet flexibility by beating leverage target Placed major projects in service – GCX & Elba(a) Demonstrated capital discipline by eliminating 1/3 of budgeted CO segment investments with 2 up
Slide 6: 2020 Guidance
2020 Guidance Published budget change ADJUSTED EBITDA $ billions Key Metrics 2020 Budget over 2019 $7.6 $7.6 $7.6 After normalizing for sold assets, Adjusted EBITDA $7.6 billion 0% Adjusted EBITDA has grown Distributable Cash Flow $5.1 billion 2% Growth from 2019 despite sale of U.S. Cochin & KML DC
Slide 7: Incremental 2020B Cash Flow Returned to Shareholders
Incremental 2020B Cash Flow Returned to Shareholders Multiple attractive capital allocation opportunities $2.7 billion excess cash flow $5.1 billion of DCF less $2.4 billion of discretionary capital less 25% increase planned for 2020 $2.7 billion dividend paid dividend paid entirely out of cas
Slide 8: Significant & Stable Cash Flow Generation
Significant & Stable Cash Flow Generation Opportunistic asset monetization enabled meaningful debt reduction Self-funded all capex & all dividends with >$19 billion of cash flow from operations since 2016 Borrowing, net Cash from BS Debt repayment Cash from BS Share buybacks Asset sales, Cash to BS
Slide 9: Stable, Fee-Based Cash Flow from High Quality Customers
Stable, Fee-Based Cash Flow from High Quality Customers Underpinned by multi-year contracts with diversified customer base STABLE CASH FLOWS(a) HIGH QUALITY CUSTOMERS(b) Not rated 4% 5% 12% 3% B- or below BB+ to B 27% 78% Customers 7% $7.8bn investment grade rated or >$5mm substantial credit support
Slide 10: Hydrocarbons Required to Meet Long-Term Global Demand
Hydrocarbons Required to Meet Long-Term Global Demand U.S. energy infrastructure will be critical for decades GLOBAL PRIMARY ENERGY DEMAND BY FUEL Broad-based natural gas demand growth across all billion tons oil equivalent sectors leads to growing share of total energy demand 18 forecast Led by g
Slide 11: Developing Economies Drive Energy Demand Growth
Developing Economies Drive Energy Demand Growth Energy consumption much more than just power & electric vehicles rest of world non-OECD other industry only 2% of expected growth such as India, China, Sub- agricultural, asphalt, lubricants manufacturing & construction, Saharan Africa, Indonesia, & ot
Slide 12: Substantial Growth Projected for U.S. Natural Gas Supply
Substantial Growth Projected for U.S. Natural Gas Supply Our network connects key supply basins to multiple demand points along the Gulf Coast KEY BASINS DRIVING U.S. GROWTH 2019 to 2030 growth in bcfd 12 Additional 32 bcfd expected from four areas 10 Northeast 7 Permian Haynesville 3 Eagle Ford Per
Slide 13: U.S. Natural Gas Demand Growth Driven by Exports
U.S. Natural Gas Demand Growth Driven by Exports 83% of forecasted demand growth 2019 – 2030 is in the Gulf Coast, where we have significant assets in place Other regions Gulf Coast 17% 83% 28 Bcfd demand growth GULF COAST DEMAND GROWTH bcfd, 2019 – 2030 +15.2 LNG exports +2.7 Net Mexico exports +2.
Slide 14: $3.6bn of Commercially-Secured Capital Projects Underway
$3.6bn of Commercially-Secured Capital Projects Underway ~$1.3 billion added in 2019 Demand Pull / KMI Capital Estimated (as of 12/31/2019) Supply Push ($ billion) In-Service Date Capacity Natural Gas Permian takeaway projects (PHP, TX Intrastates, EPNG, NGPL) $ 0.9 2020 – Q1 2021 4.4 bcfd Supply fo
Slide 15: Successfully Achieving Attractive Build Multiples
Successfully Achieving Attractive Build Multiples Established track record of leveraging our footprint & project management expertise Competitive advantages: INVESTMENT MULTIPLES: PROJECTS COMPLETED 2015-2019 Capital invested / year 2 Project EBITDA(a) Expansive asset base ― ability to leverage or
Slide 16: Leading the Way Out of the Permian
Leading the Way Out of the Permian Successfully completed GCX on time & budget | PHP well underway Leveraging existing footprint into new takeaway capacity that reaches Natural Gas Pipelines across Texas & the Desert/Southwest (DSW), connecting into major demand Under Construction markets Our adva
Slide 17: Supporting the Buildout of U.S. LNG Exports
Supporting the Buildout of U.S. LNG Exports Serving significant liquefaction capacity & well-positioned to capture more Kinder Morgan network advantages: Natural gas transportation leader ~70,000 miles of natural gas pipelines Move ~40% of U.S. natural gas consumption & exports Supply diversity Conn
Slide 18: Beyond the Backlog
Beyond the Backlog Strong long-term fundamentals to drive additional opportunities Northeast natural Storage to support Infrastructure to gas demand & renewable power Natural gas for Organic growth support U.S. long-term supply generation & LNG power generation in G&P energy exports needs exports Ma
Slide 19: Prioritizing Environmental, Social & Governance (ESG)
Prioritizing Environmental, Social & Governance (ESG) Protecting the public, our employees & the environment Invest millions of dollars each year on integrity SUSTAINALYTICS ESG RISK RATING(a) management & maintenance programs to operate our assets safely #2 out of 184 Refiners & Pipelines (Indust
Slide 20: Contributing to a Lower-Carbon Future with Natural Gas
Contributing to a Lower-Carbon Future with Natural Gas Long-standing commitment to reducing methane emissions | Ongoing enhancements to ESG disclosures 25+ years of commitment to reducing methane emissions, SUCCESSFUL METHANE EMISSIONS REDUCTIONS(a) including ONE Future & EPA’s Natural Gas STAR pr
Slide 21: Compelling Investment Opportunity
Compelling Investment Opportunity Strategically-positioned assets generating substantial cash flow with attractive investment opportunities ► >90% take-or-pay or fee-based earnings(a) ► ~$7.6 billion 2020B Adjusted EBITDA(b) ► ~5% current dividend yield ► 25% budgeted dividend increase in 2020 ► Hig
Slide 22: Appendix
KINDER MORGAN Appendix
Slide 23: U.S. Greenhouse Gas Emissions are Declining
U.S. Greenhouse Gas Emissions are Declining Meaningful progress led by natural gas replacing coal-fired power generation U.S. GREENHOUSE GAS EMISSIONS BY ECONOMIC SECTOR billion metric tons of CO2 equivalent Since 1990: 2007 peak 8 Total U.S. emissions are about flat U.S. territories – despite 16%
Slide 24: Natural Gas is a Critical Partner to Renewable Energy
Natural Gas is a Critical Partner to Renewable Energy Evidence shows natural gas is preferred backup for renewables 7 DAYS OF ELECTRICITY GENERATION IN TEXAS (megawatt-hours by source) Natural gas works hand-in-hand with 30,000 nuclear coal natural gas wind solar hydro other renewables like wind &
Slide 25: Replacing Coal is Critical to Global Emission Reductions
Replacing Coal is Critical to Global Emission Reductions Power sector contributes ~40% of energy-related CO2 emissions globally Natural gas is a more efficient & lower carbon ELECTRIC POWER SECTOR GENERATION MIX % based on terawatt-hours (2018) fuel for power generation 4% 4% Burning natural gas i
Slide 26: Full Cycle Emissions in Electric Power Generation
Full Cycle Emissions in Electric Power Generation U.S. LNG is one of the lowest emissions fuels for electricity in Asia & Europe ESTIMATED GREENHOUSE GAS EMISSIONS kg of CO2-equivalent emissions per megawatt-hour based on 100-year global warming potential low to high estimate 1,500 1,250 1,000 U.S.
Slide 27: Prioritizing ESG
Prioritizing ESG Multi-faceted approach to good corporate governance | Ongoing enhancements to disclosures ESG RESOURCES CORPORATE GOVERNANCE Disclosure: 13 independent out of 16 board members - 2018 ESG Report - 2⁰C scenario analysis included in report 2 female board members - Annual Meeting Proxy
Slide 28: Joint Venture Treatment in Key Metrics
Joint Venture Treatment in Key Metrics KM controls & fully consolidates KM does not control or consolidate third party portion referred to as noncontrolling interests in financial statements KM portion referred to as equity investments in financial statements Example JVs Elba Liquefaction (51%), BOS
Slide 29: 2020B Assumptions & Highlights
2020B Assumptions & Highlights YoY EBDA(a) KEY DEVELOPMENTS FROM 2019 — Full year contribution from Elba Liquefaction, GCX & Bakken G&P expansions — TX Intrastates growth projects & increased margin — Sale of Cochin Natural Gas Pipelines +2% — Unfavorable recontracting impacts (MEP, Ruby) — Lower dr
Slide 30: 2020 Budget Sensitivities
2020 Budget Sensitivities Limited overall commodity exposure 2020B assumptions Change 2020B DCF impact (full year) CO2 Natural Gas Products Total company $55/bbl WTI $1/bbl WTI $0.8 million NGL $0.8 million $1.2 million ~$5 million $0.6 million CO2 $1.3 million crude $2.7 million total $2.50/mmbtu $
Slide 31: Energy Toll Road
Energy Toll Road Cash flow security with >90% from take-or-pay & other fee-based contracts Natural Gas Pipelines Products Pipelines Terminals CO2 2020B EBDA %(a) 61% 16% 13% 10% Refined Liquids Jones Act CO2 & Interstate / LNG Intrastate G&P products Crude terminals tankers Bulk terminals O&G Transp
Slide 32: Natural Gas Segment Overview
Natural Gas Segment Overview Connecting key natural gas resources with major demand centers Asset Summary Natural gas pipelines: ~70,000 miles NGL pipelines: ~1,200 miles Natural gas transported ~40% (U.S. consumption & exports) Working gas storage capacity: 659 bcf 2020B EBDA(a): $4.7 billion Proje
Slide 33: Manageable Natural Gas Re-Contracting Exposure
Manageable Natural Gas Re-Contracting Exposure Analysis of existing contracts that renew during next two years EXPECTED ANNUAL NET RE-CONTRACTING EXPOSURE (KM SHARE): % of $7.8bn 2020B KMI Total Segment EBDA(a) Expiring contracts are assessed for volumetric & rate 2021 2022 risk based on November
Slide 34: LNG Contract Overview
LNG Contract Overview Contracted capacity (online / to come) & Elba Liquefaction Remaining Contract KM Asset Contracted Capacity (mDthd) KM Capital ($mm) Term (yrs) TGP 1,250 $281 KMLP 1,545 $278 NGPL 1,975 $236 Intrastate 740 $114 Elba Express 436 $84 Transport subtotal: 5,946 $992 17 Elba liquefac
Slide 35: Key Market: Exports to Mexico
Key Market: Exports to Mexico Expect to maintain market share of growing Mexico market | ~55%(a) in 2019 Our extensive footprint delivers diverse supply to multiple interconnections Including 12 direct & 4 indirect connections to Mexico U.S. natural gas exports to Mexico are expected to grow by 33%
Slide 36: Products Segment Overview
Products Segment Overview Strategic footprint with significant cash flow generation Asset Summary Pipelines(a): ~9,500 miles 2019 throughput(a) ~2.4 mmbbld Terminals: 65 terminals Terminals tank capacity ~39 mmbbls Pipeline tank capacity ~16 mmbbls Condensate processing capacity 100 mbbld Transmix 5
Slide 37: Products Segment Overview
Products Segment Overview Supplying a diverse mix of feedstock & finished products critical to refining & transportation sectors 2019 DELIVERY VOLUMES(a) Robust economy & consumer preference supports Gasoline demand growth partially offset by improving fuel efficiency Volume by region(b): Southe
Slide 38: Consumer Preferences Suggest Product Demand Growth
Consumer Preferences Suggest Product Demand Growth Both U.S & global demand trending higher EV MARKET SHARE SUV MARKET SHARE U.S. TRANSPORTATION DEMAND GLOBAL AIR TRAVEL 2018 global car sales by manufacturer % of sales in key car markets million barrels per day trillion revenue-passenger-miles EVs a
Slide 39: Refined Products Assets Generate Stable Cash Flows
Refined Products Assets Generate Stable Cash Flows Steadily growing volumes complemented by indexed tariff structure REFINED PRODUCTS EBDA BY REGION(a) $ millions Volume growth translates to earnings growth $792 $800 $771 $743 Potential for market share gains in key growth areas $710 $723 $690 $70
Slide 40: Terminals Segment Overview
Terminals Segment Overview Diversified terminaling network connected to key refining centers & market hubs # of capacity Asset Summary terminals (mmbbls) Terminals Segment – Bulk 32 Terminals Segment – Liquids 50 79 Products Pipelines Segment 65 55 Total 147 134 Jones Act: 16 tankers 2020B EBDA(a):
Slide 41: Integrated Terminaling Network Focused on Refined Products
Integrated Terminaling Network Focused on Refined Products Irreplaceable collection of assets, capabilities & market-making connectivity Our unmatched scale & flexibility on the Houston Ship Channel: KM terminals & assets refined products terminals Colonial local refineries & processing Explorer 43
Slide 42: Leading Exporter of U.S. Gasoline & Distillates
Leading Exporter of U.S. Gasoline & Distillates Our Houston Ship Channel exports have grown faster than the broader U.S. market over the last several years U.S. EXPORTS KM EXPORTS FROM HOUSTON SHIP CHANNEL Millions of barrels per day Thousands of barrels per day 3.5 400 3.0 350 300 2.5 250 2.0 200 1
Slide 43: CO2 Segment Overview
CO2 Segment Overview World class, fully-integrated assets | CO2 source to crude oil production & takeaway in the Permian Basin KMI Est. OGIP CO2 Reserves Interest NRI Location (tcf) McElmo Dome 45% 37% SW Colorado 22.0 Doe Canyon 87% 68% SW Colorado 3.0 Bravo Dome(a) 11% 8% NE New Mexico 12.0 KMI Es
Slide 44: Enhanced Oil Recovery Process
Enhanced Oil Recovery Process Specializing in the gas injection method of enhanced oil recovery Three phases of oil & gas production PRIMARY SECONDARY TERTIARY RECOVERY RECOVERY (ENHANCED) RECOVERY Reinject CO2 10% 20-40% 30-60% OOIP recovered OOIP recovered OOIP recovered Natural pressure Gas injec
Slide 45: CO2 Free Cash Flow & Attractive Returns
CO2 Free Cash Flow & Attractive Returns Long history of generating high returns & significant CO2 free cash flow with minimal acquisitions CO2 IRR% 2000-2019 SIGNIFICANT CO2 FREE CASH FLOW $ millions $1,458 Oil & Gas 18% $1,326 $1,432 $286 $1,141 $1,094 Total CO2 Segment (incl. CO2 & transport) 28%
Slide 46: Non-GAAP Financial Measures & Reconciliations
Non-GAAP Financial Measures & Reconciliations Defined Terms Reconciliations for the historical periods 46
Slide 47: Use of Non-GAAP Financial Measures
Use of Non-GAAP Financial Measures The non-GAAP financial measures of Adjusted Earnings and distributable cash flow (DCF), each in the aggregate and per share; segment earnings before depreciation, depletion, amortization (DD&A) and amortization of excess cost of equity investments and Certain Items
Slide 48: Use of Non-GAAP Financial Measures (Continued)
Use of Non-GAAP Financial Measures (Continued) Adjusted Segment EBDA is calculated by adjusting segment earnings before DD&A and amortization of excess cost of equity investments (Segment EBDA) for Certain Items attributable to the segment. Adjusted Segment EBDA is used by management in its analysis
Slide 49: GAAP Reconciliations
GAAP Reconciliations $ in millions Reconciliation of DCF 2019 Reconciliation of Adjusted EBITDA 2019 Net income available to common stockholders (GAAP) $ 2,190 Net income (GAAP) $ 2,239 Total Certain Items (29) Total Certain Items (29) Adjusted Earnings (a) 2,161 DD&A and amortization of excess cost
Slide 50: GAAP Reconciliations
GAAP Reconciliations $ in millions Reconciliation of Adjusted Segment EBDA 2019 Reconciliation of interest, net 2019 Natural Gas Pipelines (GAAP) $ 4,661 Interest, net (GAAP) $ (1,801) Certain Items (51) Certain Items (15) Natural Gas Pipelines Adjusted Segment EBDA 4,610 Interest, net (a) $ (1,816)
Slide 51: Reconciliation of CO2 Free Cash Flow
Reconciliation of CO2 Free Cash Flow $ in millions Reconciliation of CO2 Free Cash Flow 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Segment EBDA $ 965 $ 1,099 $ 1,322 $ 1,435 $ 1,240 $ 657 $ 827 $ 847 $ 759 $ 681 Certain items: Non-cash impairments and project write-offs - - - - 243 622 29 - 7
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