Kinder Morgan, Inc. · NYSE:KMI
Kinder Morgan — Kinder Morgan 2012 Analyst Conference
60 slides from Kinder Morgan's conference presentation, Jan 25, 2012
Slide 1: Stable Platforms, Exceptional Growth
Stable Platforms, Exceptional Growth January 25, 2012
Slide 2: Important Additional Information Will Be Filed With the SEC
IMPORTANT ADDITIONAL INFORMATION WILL BE FILED WITH THE SEC Kinder Morgan, Inc. (“KMI”) has filed with the SEC a Registration Statement on Form S-4 in connection with the merger agreement providing for the proposed acquisition of El Paso Corporation (“EP”), including a preliminary Information Statem
Slide 3: Use of Non-GAAP Financial Measures
Use of Non-GAAP Financial Measures KMP 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 amortization of excess cost
Slide 4: Use of Non-GAAP Financial Measures – Cont'd
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, and results from assets
Slide 5: Use of Non-GAAP Financial Measures – Cont'd
Use of Non-GAAP Financial Measures – Cont’d KMI The non-generally accepted accounting principles, or non-GAAP, financial measure of cash available to pay dividends is presented in this news release. This non-GAAP financial measure should not be considered as an alternative to a GAAP measure such as
Slide 6: Kinder Morgan 2012 Investor Conference Agenda
Kinder Morgan 2012 Investor Conference Agenda 8:00 – 8:45 Corporate Overview: Vision – Rich Kinder 8:45 – 9:00 Corporate Overview: Financial Excellence – Park Shaper 9:00 – 9:15 Corporate Overview: Operational Excellence – Steve Kean 9:15 – 9:30 Break 9:30 – 10:15 Natural Gas Pipelines – Tom Martin
Slide 7: Vision
Vision Rich Kinder Chief Executive Officer
Slide 8: Then and Now: Stable Platforms, Exceptional Growth
Then (first analyst conference-2001) and Now: Stable Platforms, Exceptional Growth Then (a) Now (b) (excluding El Paso) Enterprise value of $14B (c) Enterprise value of $63B (c) KMP Total distributions of $333MM KMP Total distributions of $3.1B KMP LP distribution of $1.71/unit (d) KMP L
Slide 9: Stayed the Course
Stayed the Course Focus on stable fee-based assets that are core to North American energy infrastructure — Market leader in each of our business segments Control costs — It’s the investors’ money, not management’s – treat it that way Leverage asset footprint to seek attractive capital investme
Slide 10: Kinder Morgan Asset Footprint
Kinder Morgan Trans Mountain Asset Footprint 2 Cochin Puget Sound Largest independent transporter of petroleum products in the U.S. — Transport ~1.9 MMBbl/d (a) Pacific Express 2nd largest transporter of natural gas in the U.S. — Own an interest in / operate over Horizon 25,000 miles of natural
Slide 11: Kinder Morgan: Three Ways to Invest
Kinder Morgan: Three Ways to Invest Kinder Morgan Energy Partners, L.P. Kinder Morgan, Inc. Market Equity $28.0B (a) LP & GP Market Equity $22.8B (d) Debt 12.4B (b) Distributions Debt 3.2B (e) Enterprise Value $40.4B $1.6B (c) Enterprise Value $26.0B 2012E LP Distribution per Unit $4.98 (c) 2012E Di
Slide 12: Delivering Consistent Growth
Delivering Consistent Growth Total Distributions (GP + LP) ($MM) KMP Annual LP Distribution per Unit (b) $4.98 $3,500 $5.00 $4.61 $3,118 $4.40 GP LP $4.50 $4.20 $3,000 $2,737 $4.02 $4.00 $2,450(a) $3.48 $2,500 $2,171 $3.50 $3.13 $3.26 $2.87 $1,877 $3.00 $2.63 $2,000 $2.44 $1,469 $2.50 $2.15 $1,500 $
Slide 13: Significant Historical Returns
Significant Historical Returns (a) KMP: 26% CAGR Since ‘96 (b) KMI: 11.4% Initial Annualized Return (e) $3,500 $140 Dollars KMP = $3,362 Dollars UTY = $117 KMI = $110 $3,000 $120 $2,500 $100 $2,000 $80 MSCI = $104 S&P 500 = $97 $1,500 $60 AMZ (d) = $1,003 $1,000 $40 $500 $20 ⇐ IPO 2/10/2011 S&P 500
Slide 14: Promises Made, Promises Kept
Promises Made, Promises Kept Promises Made Promises Kept KMP Budgeted KMP Actual LP Distribution: LP Distribution: 2000: $1.60 2000: $1.71 2001: $1.95 2001: $2.15 2002: $2.40 2002: $2.435 2003: $2.63 2003: $2.63 KMP achieved 2004: $2.84 2004: $2.87 LP distribution 2005: $3.13 2005: $3.13 target in 1
Slide 15: Kinder Morgan 2012 Goals (Excludes El Paso)
Kinder Morgan 2012 Goals (Excludes El Paso) KMP (a) KMI (a,b) Distribution Target Dividend Target (declared) — $4.98 per unit (8.0% growth) — $1.35 per share (12.5% growth) — Excess coverage of $71MM — $985MM in cash available for dividends Maintain Solid Balance Sheet Maintain Solid Balance
Slide 16: KMP
KINDER/MORGAN KMP
Slide 17: Well-Diversified Cash Flow
(KMP) Well-Diversified Cash Flow 2012E KMP Segment Earnings before DD&A CO2 = $4.4 billion (a,d) Natural Gas Pipelines $1,381MM segment EBDA $1,303MM segment EBDA (d) — 26% CO2 transport and sales — 41% Interstate — 74% oil production related — 59% Intrastate (e) — Production hedged (b): 31% 30%
Slide 18: Stable Asset Base
(KMP) Stable Asset Base Natural Gas Products Kinder Morgan CO2 Terminals Pipelines Pipelines Canada – Interstate: virtually all – Take or pay, – S&T: primarily take or pay minimum volume – Essentially no Volume Security – Volume based minimum volume – Intrastate: ~75% guarantees, or volume risk gu
Slide 19: 2-3% Annual Distribution Growth without Investment
(KMP) 2-3% Annual Distribution Growth without Investment Current Current Environment Environment Products Pipelines CO2 PPI escalator + Higher price on oil hedges + Renewables handling + Higher overall oil / NGL prices + Volumes ~ Recontracting CO2 supply + Oil / NGL volumes ~ Terminal
Slide 20: 2012 Growth Expenditures
(KMP) 2012 Growth Expenditures 2012E Total KMP Growth Expenditures = $1.7 billion (a,b,c) Natural Gas CO2 Oil Pipelines (a) Production 17% 15% CO2 S&T 9% Products 19% Pipelines (a,b) 40% Terminals (a,b,c) __________________________ Note: excludes any impact from the proposed acquisition of El Paso b
Slide 21: Natural Gas Pipelines Growth Drivers
(KMP) Natural Gas Pipelines Growth Drivers Well-positioned in the Rockies, shales and in Texas 2012 Growth Drivers: Growth and full year contribution on Kinder Hawk Full year contribution from Eagle Hawk and SouthTex Trailblazer Eagle Ford shale development (on REX standalone basis, and under
Slide 22: Products Pipelines Growth Drivers
(KMP) Products Pipelines Growth Drivers Well-located with origin in refinery / port hubs and terminus in population centers 2012 Growth Drivers: PPI tariff escalator Modest organic volume growth Cochin Initial year of Crude and Condensate operations, Cochin E/P project, and terminal projects i
Slide 23: Terminals Growth Drivers
(KMP) Terminals Growth Drivers Well-located in refinery / port hubs and inland waterways 2012 Growth Drivers: Increase in rates on existing contracts Higher coal throughput Full year of 2011 acquisitions (Cushing, Total, Watco) and expansion projects (Carteret, Cushing, Deer Park, Port of Hous
Slide 24: CO2 Growth Drivers
(KMP) CO2 Growth Drivers Own and operate best source of CO2 for EOR 2012 Growth Drivers: Higher overall oil / NGL prices CO2 S&T price increases Relatively flat oil production Longer-term Growth Drivers: Strong demand for CO2 KMCO2 Katz — Expansion of CO2 source fields SACROC and pipelines E
Slide 25: Kinder Morgan Canada Growth Drivers
(KMP) Kinder Morgan Canada Growth Drivers Sole oil pipeline from Oilsands to West Coast / export markets Trans 2012: Mountain Extending new toll settlement on Trans Mountain pipeline (TMPL); results in 2 relatively flat financial performance between 2011 and 2012 Puget Express Longer-term Growth D
Slide 26: KMI
KINDER/MORGAN KMI
Slide 27: Overview – 99% of Cash Comes from KMP
(KMI) Overview – 99% of Cash Comes from KMP 2012E KMI Total Cash Receipts Limited capital expenditures at KMI = $1.6 billion (a) Stock ownership: — Public – 16% GP Interest — Rich Kinder, other management 88% and original stockholders – 39% — Sponsors – 45% LP In 2012: Interest — KMI expects t
Slide 28: Growth in KMP Distributions Leads to KMI Growth
(KMI) Growth in KMP Distributions Leads to KMI Growth Growth in KMP Distributions Received by KMI $1,585 $1,600 $64 $1,380 Total Distributions to KMI ($MM) $1,400 LP Interests $1,200 GP Interest $1,000 GP Distribution on $1,340 Additional 16MM KMP Units $800 $1,217 $600 $400 $200 $163 $181 Budgeted
Slide 29: El Paso Update
KINDER/MORGAN El] Paso Update
Slide 30: Strong Asset Base
Strong Asset Base (a) Trans EL PASO PIPELINES Mountain NGPL (KMI) NGPL GAS STORAGE (KMI) 2 Cochin PRODUCTS PIPELINES (KMP) Puget Sound PRODUCTS PIPELINES TERMINALS (KMP) TRANSMIX FACILITIES (KMP) NATURAL GAS PIPELINES (KMP) Pacific Express NATURAL GAS STORAGE (KMP) NATURAL GAS PROCESSING (KMP) Horiz
Slide 31: El Paso Transaction Timeline
El Paso Transaction Timeline El Paso E&P sale process under way — Targeting closing all or a material portion of E&P asset portfolio around time of closing of El Paso acquisition Integration plan being developed – targeting $350 million of synergies Expect Q1 2012 shareholder meetings HSR re
Slide 32: Dividend and Distribution Growth Targets
Dividend and Distribution Growth Targets KMI KMP Current targets excluding El Paso Current targets excluding El Paso Declare budgeted 2012 dividends of $1.35 Declare budgeted 2012 LP distributions of per share (12.5% growth) $4.98 per unit (8.0% growth) Targeted 10% long-term dividend growth
Slide 33: KMI, KMP & KMR: Attractive Value Proposition
KMI, KMP & KMR: 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 growth 27
Slide 34: Financial Excellence
Financial Excellence Park Shaper President
Slide 35: ~$25B of Growth Capital Invested at KMP
~$25B of Growth Capital Invested at KMP (a,b) ($ in billions) Total Invested by Type (a,b) Total Invested by Year (a) $15 $12 $3.1 $3.5 $3.3 JV Contributions $9 Expansion $3.0 $6 $11.7 Acquisition $2.8 $10.2 $2.6 $3 $2.5 $2.5 $2.4 $- Expansions Acquisitions $2.0 $2.0 $1.7 $1.6 $1.5 Total Invested by
Slide 36: How We Have Done: KMP Returns on Capital
How We Have Done: KMP Returns on Capital 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 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% 13.7% 12.9% Natural Gas Pipelines 13.3 15.5 12.9 13.5 14.0 15.5 16.7 17.5 16.9 14.0 11.9 11.9 CO2 27.5
Slide 37: KMP Cost of Capital
KMP Cost of Capital Operated in “50/50 splits” since 1997 Cost of capital varies over time: — Current ~7.2% (a) — 2011 analyst conf 7.8% — 2010 analyst conf 8.8% — 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-te
Slide 38: KMP Access to Capital
KMP Access to Capital Issued ~$25.8 billion of capital at KMP in the public markets since inception (a) — ~$11.9 billion in equity raised (a) — ~$13.9 billion in KMP long-term debt (~$12.1B net of refinancing) Accessed in difficult markets — Sep’01 to Sep’02 ~$1.9 billion in equity and debt issu
Slide 39: KMR 101
KMR 101 (a) Discount Has Narrowed, But Still Wide KMR is KMP KMR Discount to KMP KMR shares are pari passu with KMP units 10% KMR dividend equal to KMP cash distribution, but paid in additional shares; effectively a dividend reinvestment 5% program (b) Like KMP units, KMR shares are tax effici
Slide 40: Net Equity Production and Hedge Profile
KMP CO2 Oil Production Hedge Profile Avoid businesses with direct Net Oil Production commodity exposure Avg Hedge Px WTI & WTS $90.64 $92.23 $93.40 $98.11 ($/Bbl) (a) Hedge CO2 BOE equivalent 40 — Targeted minimum Net Equity Production hedge amounts: 30 77% (Mboe/d) (b) Current Year: 70% Year 2:
Slide 41: KMP Risks
KMP Risks Regulatory — Pacific Products Pipeline FERC / CPUC cases — Periodic rate reviews — Unexpected policy changes Crude Oil Production Volumes Crude Oil Prices — 2012 budget assumes $93.75/Bbl realized price on unhedged barrels — 2012 sensitivity is ~$5.8 million DCF per $1/Bbl change in
Slide 42: KMP Focused on Distribution Growth
KMP Focused on Distribution Growth Annual LP Distribution Per Unit (b) History of Delivering $4.98 $4.61 Distribution Growth (a): $4.20 $4.40 $4.02 — 1-year growth = 4.8% $3.48 $3.26 $3.13 — 3-year growth = 4.7% $2.87 $2.63 $2.44 — 5-year growth = 7.2% $2.15 $1.71 $1.42 $1.24 $0.94 $0.63 1996 1997
Slide 43: KMP Drives KMI Growth
KMP Drives KMI Growth KMP Cash Distributions Received by KMI Substantial cash flow $1,585 GP Interest Minimal capital expenditures LP Units Owned $1,381 at KMI level $1,239 $1,107 Strong balance sheet $957 Growing distributions and $1,404 $739 $1,218 investment at KMP drive KMI $592 $625 $96
Slide 44: Operational Excellence
Operational Excellence Steve Kean Chief Operating Officer
Slide 45: Operations Goals – Safe, Reliable, Efficient Operations
Operations Goals – Safe, Reliable, Efficient Operations Continuous reduction in risk to the public, employees, contractors, assets and the environment Continuous improvement in the efficiency and productivity of existing operations Well-executed expansions and effective integration of acquired
Slide 46: Efficiency
Efficiency Part of weekly asset review — Throughput — Operating costs (including energy use and L&U) — Sustaining capex updates Detailed, “bottoms up” budget process for operating expenses and sustaining capex — Separately identify safety and compliance needs; separately track spending on those
Slide 47: KM Operating Efficiency
KM Operating Efficiency G&A per MMDth Natural Gas Received O&M per MMDth Natural Gas Received $0.10 $0.50 $0.09 $0.45 $0.08 $0.40 $0.07 $0.35 $0.06 $0.30 $0.05 $0.25 $0.04 $0.20 $0.03 $0.15 $0.02 $0.10 $0.01 $0.05 $- $- Company Company Company Company Company Company Company Company KM- Company Comp
Slide 48: Implementation Plan
Implementation Plan Systems-making Immediate Risk Reduction Compliance Routine Continuous Improvement ROW protection programs Addressing operations performance Systems Improvement and in our existing processes — Operations Management System extension Liquids pipeline O&M re-write — Annual bu
Slide 49: Compliance Summary
Compliance Summary Key elements: 1. Clear statement of requirement, assignment of responsibility and deadline for completion, and 2. Exception reporting to management Performance: — OpsInfo expanded to nearly 114,000 compliance actions per year • Timely compliance: 99.5% in 2011 Other items tr
Slide 50: Compliance Summary – Cont'd
Compliance Summary – Cont’d Env. Permits Hazardous DOT and Business Waste / Transport DOT Damage Unit SPCC (a) Safety PSM / RMP (b) Maintenance Security Contractors Prevention Natural Gas OpsInfo INFOR EAM OpsInfo INFOR EAM OpsInfo ISNetworld Petris Pipelines Products OpsInfo OpsInfo OpsInfo OpsInfo
Slide 51: Incidents per 1,000 Miles
Incidents & Releases: Liquids Pipeline ROW Liquids Pipeline Incidents per 1,000 Miles (a) Liquids Pipeline Release Rate (a) 1.0 35 30 Barrels per billion barrel miles 0.8 Incidents per 1,000 Miles 25 0.6 20 0.45 0.39 15.5 0.4 15 13.1 0.29 0.21 10 6.0 0.2 0.08 5 2.5 - - 0.01 - - 2006 2007 2008 2009 2
Slide 52: Number of Releases
Product Pipelines 10-year Release Trend 12,000 60 10,000 50 Number of Releases 8,000 40 Barrels 6,000 30 4,000 20 2,000 10 0 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Total Barrels Released Cochin Release Total Number of Incidents Number of Pacific Only Releases ______________________
Slide 53: Incidents per 1,000 Miles
Incidents & Releases: Natural Gas Pipeline ROW Natural Gas Pipeline Incidents Rate (a) 1.0 Incidents per 1,000 Miles 0.8 0.6 0.4 0.32 0.30 0.27 0.27 0.2 0.13 0.04 - 2006 2007 2008 2009 2010 2011 KM Incidents Current Industry Avg 2005 Industry Avg __________________________ Note: KM totals exclude no
Slide 54: Lost-time injuries per 200k hours worked
KM Lost-time Incident Rate (DART) 5 Lost-time injuries per 200k hours worked 4 3.90 3 2 1 0.90 0.85 0.70 0.70 1.37 1.23 0.77 0.80 0.76 0.95 0.54 0.49 0.53 - - Natural Gas CO2 Products Terminals KM Canada Pipelines Pipelines KM Rate (3-yr Avg) KM Rate (12-mo) Industry Avg 48
Slide 55: Lost-time injuries per 200k hours worked
Contractor Lost-time Incident Rate (DART) Lost-time injuries per 200k hours worked 5 4 3 2 1.84 1.00 1.00 1.10 1.00 1 1.23 0.44 0.71 - - - Natural Gas CO2 Products Terminals KM Canada Pipelines Pipelines KM Contractor Rate (12-mo) Industry Avg 49
Slide 56: OSHA Recordable Incident Rate
OSHA Recordable Incident Rate 7 6.35 OSHA Recordable Incidents per 6 5.90 200k Hours Worked 5 4 3 2.60 2.50 2.50 2.50 2.30 1.90 1.90 2 1.67 2.78 1 2.27 1.40 1.30 1.52 1.02 1.06 0.74 1.05 0.52 - Natural Gas CO2 Products Terminals KM Canada Pipelines Pipelines KM Rate (3-yr Avg) KM Rate (12-mo) Indust
Slide 57: Recordable Vehicle Accidents
Vehicle Incident Rate 5 Recordable Vehicle Accidents 4 per 1MM miles 3 2.41 2.41 2 1.40 1.40 1 1.86 0.26 0.69 0.70 0.68 0.79 0.59 0.57 0.50 0.42 - Natural Gas CO2 Products Terminals (a) KM Canada Pipelines Pipelines KM Rate (3-yr Avg) KM Rate (12-mo) Industry Avg __________________________ (a) Indus
Slide 58: 2012 Objectives
2012 Objectives Incident rates: better than industry average and better than the Kinder Morgan 3-year average; zero significant incidents Terminals SQE program Continued special emphasis on high consequence assets and operations 52
Slide 59: Kinder Morgan
KINDER MORGAN if as |
Slide 60: Kinder Morgan
KINDER/MORGAN
Kinder Morgan — Kinder Morgan 2012 Analyst Conference on 6ix