Kinder Morgan, Inc. · NYSE:KMI
Kinder Morgan — Kinder Morgan Energy Partners — 2007 KMP Analyst Conference
56 slides from Kinder Morgan's conference presentation, Jan 23, 2007
Slide 1: Vision, Financial Excellence, Operational Excellence
ENERGY PARTNERS, L.P. Vision, Financial Excellence, Operational Excellence January 23, 2007
Slide 2: Vision
ENERGY PARTNERS, L.P. Vision Rich Kinder
Slide 3: Forward Looking Statements
ENERGY PARTNERS, L.P. Forward Looking Statements This presentation contains forward looking statements, including these, within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act of 1934, as amended. Forward looking statements are not guarantees
Slide 4: Agenda
ENERGY PARTNERS, L.P. Agenda Vision – Rich Kinder Financial Excellence – Park Shaper Operational Excellence – Steve Kean 4
Slide 5: The KMP Story: Years of Remarkable Growth
ENERGY PARTNERS, L.P. The KMP Story: 10 Years of Remarkable Growth $11B of Disciplined Capital Investment… …Leads to Sustained Growth $2.0 $1.9 Expansion $3.50 $3.20 $3.32 $2.96 LP Distribution per Unit (b) Acquisition $3.00 7% $1.6 R = 1 $2.50 $2.72 G $1.5 $1.3 $1.3 $2.50 CA $2.20 $1.2 $1.90 $1.1 $
Slide 6: System Map
ENERGY PARTNERS, L.P. System Map PRODUCTS PIPELINES (KMP) PRODUCTS PIPELINES TERMINALS (KMP) TRANSMIX FACILITIES (KMP) NATURAL GAS PIPELINES (KMP) 2 NATURAL GAS STORAGE Pacific (KMP) Cochin NATURAL GAS PROCESSING (KMP) ROCKIES EXPRESS PIPELINE IN-SERVICE (KMP) 2 ROCKIES EXPRESS PIPELINE Trailblazer
Slide 7: Capital Structure
ENERGY PARTNERS, L.P. Capital Structure (billions except where noted) Kinder Morgan Energy Partners (a,c) Market Equity $10.9 Debt 5.7 Enterprise Value $16.6 2007E EBITDA (d) $2.0 2007E DCF (d) $1.4 Additional Cash Incentive Shares Distribution Distribution KMR KMP (LLC) (Partnership) 62 million i-u
Slide 8: Promises Made, Promises Kept
ENERGY PARTNERS, L.P. Promises Made, Promises Kept Promises Made Promises Kept KMP/KMR KMP/KMR Distribution per unit: Distribution per unit: 2000: $1.60 2000: $1.71 2001: $1.95 2001: $2.15 2002: $2.40 2002: $2.435 2003: $2.63 2003: $2.63 2004: $2.84 2004: $2.87 2005: $3.13 2005: $3.13 2006: $3.28 20
Slide 9: 2006 in Review
ENERGY PARTNERS, L.P. 2006 in Review (millions) DCF– 2006 Budget (a) $1,280 Variances Natural Gas Pipelines $58 Terminals 13 CO2 – SACROC (53) Products Pipelines – Rate Case, Environmental (43) Other (3) Total Variances (28) DCF - 2006 Actual (a) $1,252 __________________________ (a) After 1% GP min
Slide 10: 2007 Partnership Goals
ENERGY PARTNERS, L.P. 2007 Partnership Goals Distribution Target (a) $3.44 per unit (6% growth) Excess coverage of ~ $5 million Maintain Solid Balance Sheet Expansions / acquisitions financed 50% equity, 50% debt Deliver Projects on Time and on Budget __________________________ (a) Without uni
Slide 11: Consistent Track Record
ENERGY PARTNERS, L.P. Consistent Track Record Total Distributions (GP + LP) ($mm) LP Distribution Per Unit (b) $1,600 $1,436 $4.00 $3.60-$3.68 GP (a) $3.32 $1,400 $1,256 $3.50 $3.20 LP $1,162 = 17% $2.96 $1,200 % $3.00 GR $2.72 = 50 $978 CA $2.50 $1,000 G R $827 $2.50 $2.20 $800 CA $701 $2.00 $1.90
Slide 12: Significant Historical Returns
ENERGY PARTNERS, L.P. Significant Historical Returns (a) KMP: 30% annual return (b) KMR: 12% annual return (c) Dollars Dollars $1,500 $250 $239 $1,346 KMP Alerian $1,200 MLP Index $190 $200 $900 KMR $150 $600 $125 $515 Alerian MLP Index $100 $300 $225 S&P 500 S&P 500 $0 $50 12-96 12-97 12-98 12-99 1
Slide 13: The Kinder Morgan Strategy
ENERGY PARTNERS, L.P. 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
Slide 14: Solid Asset Base Generates Stable Fee Income
ENERGY PARTNERS, L.P. Solid Asset Base Generates Stable Fee Income 2007 DCF CO2 Profile (b) Products Pipelines 28% CO2 transport and sales Refinery hub to population 72% oil production related center strategy Products 68% Pipelines Production hedged (a): CO2 Pipelines 2007=85% ($35/Bbl) 28% 27% Asso
Slide 15: Growth Opportunities
ENERGY PARTNERS, L.P. Growth Opportunities Current Projects (2007-2010) Additional Opportunities Shifting Natural Gas Supply Sources — Rockies Rockies Express pipeline Storage, further pipeline expansions, — LNG KM Louisiana pipeline extensions, incremental shipper services — Barnett Shale Midcontin
Slide 16: Advantage of Huge Asset Position
ENERGY PARTNERS, L.P. Advantage of Huge Asset Position Demographics: products pipelines serve 7 of 10 fastest growing markets in U.S. (a) Shifting Natural Gas Supply Sources: pipes well-positioned in Rockies and TX High Crude Oil Prices: own and operate best source of CO2 for enhanced oil recovery I
Slide 17: Shifting Natural Gas Supply Sources
ENERGY PARTNERS, L.P. Shifting Natural Gas Supply Sources Natural Gas Supply % Production Volumes (a) 2006 2010 Change Change Rockies Rockies Natural Gas 7.7 9.6 1.9 25% production Barnett Shale Natural Gas 1.5 2.0 0.5 33% expected to Gulf Coast LNG Imports 0.3 3.1 2.8 933% increase 25% 2006-2010 (a
Slide 18: Newbuild Natural Gas Pipelines
ENERGY PARTNERS, L.P. Newbuild Natural Gas Pipelines Wyoming Nebraska Indiana Ohio Illinois Colorado Kansas Missouri Oklahoma ROCKIES EXPRESS PIPELINE IN-SERVICE Mississippi ROCKIES EXPRESS PIPELINE Alabama MIDCONTINENT EXPRESS PIPELINE Texas Louisiana Texas KM LOUISIANA PIPELINE KM HEADQUARTERS Roc
Slide 19: Growing Production from Canadian Oilsands
ENERGY PARTNERS, L.P. Growing Production from Canadian Oilsands WCSB Crude Production by Type (a) Heavy/Light Crude Differential (b) WTI vs. Mayan Crude Spot Price 4 $20 Oilsands ‘15 3.5 Condensate CAG R ‘06- % Conventional Heavy ds ~11 3 Conventional Light Oilsan $15 Oilsands - LC (MBbl/d) 2.5 Oils
Slide 20: Increased Use of Heavy Crude
ENERGY PARTNERS, L.P. Increased Use of Heavy Crude North American Petcoke Production (a) 100 Rest of N. America 87 ‘1 R Crude supply is heavier, 5- G ‘0 C A (mm dry short tons) U.S. Gulf Coast 5 80 % more sour ~5 57 60 51 52 51 49 43 45 Heavier, sour crude 40 produces more residue 20 — Petcoke 0 200
Slide 21: Increased Use of Renewable Fuels: Ethanol
ENERGY PARTNERS, L.P. Increased Use of Renewable Fuels: Ethanol Renewable Fuels Standard (a) Opportunity 14 New congress Ethanol production facilities require natural gas 12 expected to increase Large proportion of U.S. production capacity (billion Gal/yr) 10 further 7.4 7.5 located in Colorado, Kan
Slide 22: Increased Use of Renewable Fuels: Biodiesel
ENERGY PARTNERS, L.P. Increased Use of Renewable Fuels: Biodiesel Renewable Fuels Standard (a) Biodiesel: The Basics 14 New congress Clean burning alternative fuel 12 expected to increase Produced from fats or oils such as soybean, (billion Gal/yr) 10 further 7.4 7.5 canola or palm 8 6.8 6.1 5.4 6 4
Slide 23: Growing Coal Imports
ENERGY PARTNERS, L.P. Growing Coal Imports U.S. Coal Imports (a) Rationale for Imports 2006 Import 50 Country of Origin AG R 45 High BTU, low sulfur, competitive price Other Canada % C Indonesia Venezuela 2.4 6-‘15 Avg. Delivery 40 36 ‘0 Colombia Major BTU Price (millions of tons) 31 Sources Content
Slide 24: High Oil Prices Mean Opportunities for Enhanced Oil Recovery
ENERGY PARTNERS, L.P. High Oil Prices Mean Opportunities for Enhanced Oil Recovery (MMcf/d) CO2 Deliveries McElmo Dome 1,500 — Premiere Source of CO2 in US Other — ~30 years remaining deliverability 1,000 — 45% KM working interest (34% net Sheep Mtn revenue interest) Bravo Dome — 9 Tcf of reserves (
Slide 25: Increased Petroleum Imports
ENERGY PARTNERS, L.P. Increased Petroleum Imports Petroleum Product Imports 5.0 R G 4.5 CA 0 1 .4% 6-‘ 4.0 5 ‘ 0 3.5 3.0 (MMBbl/d) 2.5 2.0 1.5 1.0 0.5 0.0 1975 1980 1985 1990 1995 2000 2005 2010 __________________________ Sources: Baker & O’Brien, Inc. 25
Slide 26: Current Projects
ENERGY PARTNERS, L.P. Current Projects $6.5 Billion In Projects Over Next 4 Years Estimated Project Expected Project Cost ($mm) Completion Rockies Express $2,200 (a) 2007-2009 Midcontinent Express 625 (a) 2009 KM Louisiana Pipeline 500 2009 CALNEV expansion 388 2010 East Line expansion 145 2007 Tran
Slide 27: Future Opportunities
ENERGY PARTNERS, L.P. Future Opportunities Natural Gas: Shifting Supply Basins and Gas Price Volatility — Storage, Extensions, Expansions, Incremental Services Canadian Oilsands — TMX2, TMX3, TMX North, CO2, Terminals Increased Use of Heavy Crude and Increased Coal Imports, Renewable Fuels, Imported
Slide 28: What Does KMI Going Private Mean for KMP?
ENERGY PARTNERS, L.P. What Does KMI Going Private Mean for KMP? GP was privately owned 1997-1999 Business as usual; same procedures, processes, focus, management — Manage KMP for the long-term Trans Mountain acquisition opportunity Hedging facility for CO2 oil production No change to splits — in hig
Slide 29: ENERGY PARTNERS, L.P.
KINDER’ “MORGAN ENERGY PARTNERS, L.P.
Slide 30: Financial Excellence
ENERGY PARTNERS, L.P. Financial Excellence Park Shaper
Slide 31: $11 Billion in Capital Invested
ENERGY PARTNERS, L.P. $11 Billion in Capital Invested ($ billions) Total Invested by Type $10.0 Total Invested by Year $7.5 $7.5 $2.0 $1.9 Expansion $5.0 $3.5 Acquisition $1.6 $1.1 $2.5 $1.5 $1.3 $1.3 $0.0 $1.2 Acquisitions Expansions $1.0 $0.9 $0.9 $0.8 Total Invested by Segment $4.0 $3.7 $0.5 $3.0
Slide 32: How We Have Done: Acquisitions
ENERGY PARTNERS, L.P. How We Have Done: Acquisitions (millions) Acquisition Performance First-year DCF 2006 DCF (b) Acq. Acq. Acq. Acquisition Price (a) Actual Model Variance Actual Model Variance First Dropdown -- 1999 (c) $736 $119.6 $88.2 $31.4 $143.3 $84.1 $59.2 Second Dropdown -- 2000 (d) 708 8
Slide 33: How We Have Done: Major Pipeline Expansions
ENERGY PARTNERS, L.P. How We Have Done: Major Pipeline Expansions (millions) Expansion Capital Analysis In-Service Date Project Cost Variance Major Pipeline Expansions Budget Actual Budget Actual $ % Trailblazer Sep-2002 May-2002 $58.7 $47.3 $11.3 19% North Texas Dec-2002 Jan-2003 72.3 65.9 6.4 9% M
Slide 34: Attractive Returns on Capital
ENERGY PARTNERS, L.P. Attractive Returns on Capital 2000 2001 2002 2003 2004 2005 2006 Segment ROI (a): Products Pipelines 11.9% 11.8% 12.8% 12.9% 12.4% 11.6% 11.8% Natural Gas Pipelines 13.3 15.5 12.9 13.5 14.0 15.5 16.5 CO2 27.5 24.6 22.0 21.9 23.8 25.7 23.1 Terminals 19.1 18.2 17.7 18.4 17.8 16.9
Slide 35: How We Will Grow Over the Long-term
ENERGY PARTNERS, L.P. How We Will Grow Over the Long-term: Expansion projects plus Trans Mountain dropdown total more than $6 billion in capital over next four years Significant increase in CO2 crude oil hedge prices; modest increase in production volumes Approximately 4% growth in base business Fut
Slide 36: CO2 Crude Production Hedge Profile
ENERGY PARTNERS, L.P. CO2 Crude Production Hedge Profile SACROC & Yates Crude Oil Production (a) Avg Hedge Px WTI & WTS $35.12 $44.09 $49.48 $55.72 $62.54 ($/Bbl) (b) 50 Net equity Production 40 (MBboe/d) 30 20 85% 83% 71% 72% 76% 10 0 2007 2008 2009 2010 2011 Swaps Puts Unhedged % Hedged __________
Slide 37: Subset of $6.5 Billion in Current Projects Secures 8% Growth
ENERGY PARTNERS, L.P. Subset of $6.5 Billion in Current Projects Secures 8% Growth 8% growth achievable with three components: 1. Increase in average CO2 hedge price from $35 in 2007 to $56 in 2010 2. $3.3 billion in natural gas pipeline projects Rockies Express, Midcontinent Express, and KM Louisia
Slide 38: Subset of Projects Secures 8% Growth
ENERGY PARTNERS, L.P. Subset of Projects Secures 8% Growth (millions except 2008 2009 2010 Total where noted) Expansion Capital (a) Natural Gas Pipeline Projects $699 $2,274 --- $2,973 CO2 230 198 209 637 Illustrative Total $929 $2,472 $209 $3,610 Incremental Unlevered Cash Flow Natural Gas Pipeline
Slide 39: Ability to Raise Capital to Fund Capex
ENERGY PARTNERS, L.P. Ability to Raise Capital to Fund Capex Equity: KMP has raised almost $6 billion of equity since 1998 KMP to raise equity when growth is delivered; timed with completion of projects KMR distribution in-kind ~$200 million per year (assuming no new issuance) KMR accesses instituti
Slide 40: Solid Balance Sheet
ENERGY PARTNERS, L.P. Solid Balance Sheet ($ millions) Credit Summary L-T Debt Rating Baa1/BBB Current Net Debt / Total Capital (a,b) 53.8% 2007 Budget Estimates: Debt / EBITDA 3.6x EBITDA / Interest 5.1x CP Capacity (b) Long-term Debt Maturities (b) Total Bank Credit $1,850 2007 $255 Less: 2008 $5
Slide 41: Risks
ENERGY PARTNERS, L.P. Risks Regulatory Pacific Products Pipeline FERC/CPUC case Periodic rate reviews Unexpected policy changes CO2 Crude Oil Production Volumes Construction Cost Overruns Environmental Terrorism Interest Rates Approximately 50% floating rate debt Budget assumes flat rates
Slide 42: Operational Excellence
ENERGY PARTNERS, L.P. Operational Excellence Steve Kean
Slide 43: Operations Goals – Safe, Reliable, Efficient Operations
ENERGY PARTNERS, L.P. Operations Goals – Safe, Reliable, Efficient Operations Continuous reduction in risk to the public, employees, contractors and the environment Pipeline integrity Hazardous chemical handling Heavy equipment operation Continuous improvement in the efficiency and productivit
Slide 44: Operations Goals – Elements
ENERGY PARTNERS, L.P. Operations Goals – Elements Risk Reduction Expansion Safe and environmentally sound Meet or exceed AFE economics on new operations construction Comprehensive and effective asset Meet customer need integrity programs for high- Acquisitions – safe and effective integrat
Slide 45: Progress / Next Steps
ENERGY PARTNERS, L.P. Progress / Next Steps Risk Reduction Bottoms-up budget process “Find and fix” initiatives Identification and action plan for Incident reviews at weekly and high-consequence assets and quarterly meetings operations – updated at quarterly Empowered operations VPs busine
Slide 46: Progress / Next Steps
ENERGY PARTNERS, L.P. Progress / Next Steps Efficiency and Productivity of Existing Assets Annual budget process QBR updates incorporates cost savings and “Swat team” to rollout KM procedures at efficiency gain opportunities acquired facilities Weekly review includes review of Culture of Exc
Slide 47: Safety Performance: OSHA Recordable Incidents
ENERGY PARTNERS, L.P. Results – Safety Performance: OSHA Recordable Incidents OSHA Recordable Incidents per 200,000 Hours Worked 8.0 7.0 6.4 6.0 5.0 4.4 4.0 3.1 3.1 3.1 3.0 2.0 2.0 1.7 1.3 1.1 1.2 1.1 1.0 0.7 0.0 Natural U.S. Retail CO2 Products Terminals KM Terasen Gas Pipelines Canada Gas Pipeline
Slide 48: Safety Performance: OSHA Lost Time Cases
ENERGY PARTNERS, L.P. Results – Safety Performance: OSHA Lost Time Cases 4.5 4.0 Lost Time per 200,000 Hours Worked 3.4 3.5 3.0 2.5 2.0 1.8 1.4 1.5 1.2 1.2 0.9 1.0 1.0 0.8 0.7 0.7 0.6 0.5 0.2 0.3 0.0 Natural U.S. Retail CO2 Products Terminals KM Terasen Gas Pipelines Canada Gas Pipelines 2005 KM 200
Slide 49: Safety Performance: Avoidable Vehicle Incidents
ENERGY PARTNERS, L.P. Results – Safety Performance: Avoidable Vehicle Incidents 4.0 Avoidable Vehicle Incidents per Million Miles 3.5 3.0 2.5 2.0 1.5 2.4 1.0 1.8 1.8 1.3 1.2 0.5 0.9 0.8 0.9 0.6 0.7 0.3 0.3 0.0 Natural U.S. Retail CO2 Products Terminals KM Terasen Gas Pipelines Canada Gas Pipelines 2
Slide 50: Incidents and Releases: Liquids Pipeline ROW
ENERGY PARTNERS, L.P. Results – Incidents and Releases: Liquids Pipeline ROW Liquids Pipeline Incidents per Mile (a) Liquids Pipeline Release Rate (a) 1.2 40 34 0.96 35 Bbl per billion barrel miles Incidents per 1,000 miles 1.0 30 0.8 25 0.6 20 0.45 15 0.4 10 6 0.2 5 0.0 0 2005 KM (a) 2006 KM 2005 K
Slide 51: Incidents and Releases: Natural Gas Pipeline ROW
ENERGY PARTNERS, L.P. Results – Incidents and Releases: Natural Gas Pipeline ROW Natural Gas Pipeline Incident Rate (a) 0.6 0.5 Incidents per 1,000 miles 0.4 0.35 0.37 0.3 0.2 0.1 0.0 2005 KM 2006 KM __________________________ (a) An Incident means any of the following events: (1) An event that invo
Slide 52: Expansion Challenges
ENERGY PARTNERS, L.P. Expansion Challenges High demand for pipeline construction spreads Other material/equipment issues: steel and pipe mill capability, drilling rigs, compressor and pump stations, valves and metering equipment Lengthening lead times Nontraditional sources Workforce availabilit
Slide 53: Managing Expansion Risks
ENERGY PARTNERS, L.P. Managing Expansion Risks Disciplined project approval process Costs, contingency, required returns and schedule Customer commitments underlying expansions Risk management Properly allocate risk between Kinder Morgan and customers Lock costs in where appropriate Experien
Slide 54: Major Projects Review
ENERGY PARTNERS, L.P. Major Projects Review Cost, schedule, EBITDA and IRR updates; timing of spend; issue updates Still early in the process for most of the capital spend Summary (major expansion projects for KMP only; capex numbers are life-of-project) Capex ($MM) Projects Business Segment Natural
Slide 55: Conclusion
ENERGY PARTNERS, L.P. Conclusion Good progress on existing operations, but more to be done Actively managing execution risks on major expansion projects 55
Slide 56: ENERGY PARTNERS, L.P.
KINDER’ “MORGAN ENERGY PARTNERS, L.P.
Kinder Morgan Energy Partners — 2007 KMP Analyst Conference on 6ix