Kinder Morgan, Inc. · NYSE:KMI
Kinder Morgan — Investor Day (January 2001)
133 slides from Kinder Morgan's investor day presentation, Jan 24, 2001
Slide 1: Stable Platforms / Exceptional Growth
Stable Platforms / Exceptional Growth January 24, 2001 Forward looking statements are not guarantees of performance. They involve risks, uncertainties and assumptions. The future results and securities values of Kinder Morgan Inc. and Kinder Morgan Energy Partners, L.P. (collectively known as “Kinde
Slide 2: The Agenda
1 The Agenda I. Introduction and Company Overview (1:00 - 1:25) – Rich Kinder - Chairman & CEO II. Product Pipelines Segment Overview (1:25 - 1:50) – Mary Morgan - Vice President, Product Pipelines III. CO2 Segment Overview (1:50 - 2:15) – Tim Bradley - President, CO2 IV. NGPL Segment Overview (2:15
Slide 3: Elements of Kinder Morgan's Strategy
2 Elements of Kinder Morgan’s 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 Increased utilization of assets while controlling costs – Classic fixed cost businesses with little variable
Slide 4: Unique Financial Structure
3 Unique Financial Structure KMI owns 100% of the General Partner KMI (a) (Corporation) of KMP Market Equity $5.6bn For a given KMP acquisition, KMI Debt 3.2 Enterprise Value $8.8bn contributes 2% of the equity capital for 36% of the cash flow and 50% of the 100% upside (c) General Partner KMP gener
Slide 5: GP Incentive Distribution Calculation
4 KMI GP Incentive Distribution Calculation KMP Under KMP’s unique structure, as unitholder distributions are increased, the General Partner gets an increasingly larger share of the upside LP Distribution/Unit LP% GP% LP Share (a) GP Share (a) Tier 1 $0.00 to $1.21 98% 2% $81.7 $ 1.7 Tier 2 1.21 to
Slide 6: KMI Benefits from KMP Internal Growth
5 KMI KMI Benefits from KMP Internal Growth KMP KMP KMI Modest Revenue Growth Exceptional Growth in G.P.’s distribution - Fixed cost business 90%+ to bottom line - Productivity Improvements - GP is large % of KMI - No tax leakage 50% - No additional Capex required Attractive Bottom-line Growth 50% G
Slide 7: KMI Benefits from KMP Acquisitions
6 KMI KMI Benefits from KMP Acquisitions KMP KMP Acquisitions @ 7.0X Dist Cash Flow * KMI Impact* Purchase Price $ 1,000 M GP Dist. on New Units $ 22.1 M Debt Issued @ 7.5% $ 400 M GP Share of Excess $ 25.8 M Units Issued @ $58 10.3 M GP Accretion on Units Owned (b) $ 4.6 M Pretax Cash Flow $ 143 M
Slide 8: How KMP Impacts KMI
7 KMI How KMP Impacts KMI KMP As the per-unit KMP distributions have increased, the GP’s percentage of total cash flow has grown dramatically KMP Distribution/Unit KMI % of KMP Cash Flow (a) $3.90 36% 34% $3.43 29% $2.85 25% $2.47 $1.88 15% $1.26 2% 1996 1997 1998 1999 2000 2001(e) 1996 1997 1998 19
Slide 9: How KMP Impacts KMI
8 KMI How KMP Impacts KMI KMP 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) L.P. Share $530M (b) $193M (b) G.P. Share $333.3M $113.4M $198.3M $
Slide 10: How KMP Assets Fit the Strategy
9 KMI How KMP Assets Fit the Strategy KMP KMP Assets provide stability along with strong growth potential Product Pipelines – Classic fixed cost businesses with fee-based revenues and little variable costs – Benign regulatory environment – Excess capacity plus favorable demographics in SW and SE dri
Slide 11: How KMI Assets Fit the Strategy
10 KMI How KMI Assets Fit the Strategy KMP KMI businesses are low-risk with significant upside NGPL – Recent recontracting success has stabilized business – Recontracted top 3 LDCs for 3-5 years – Little sensitivity to weather due to contract structure – Classic fixed cost business with little varia
Slide 12: Year 2000: Promises Made - Promises Kept
11 KMI Year 2000: Promises Made - Promises Kept KMP Upon the completion of the KN merger in 1999, management made several promises Promises Made Promises Kept Increase Utilization of Major NGPL signed 3 largest LDC customers and others Assets to multi-year contracts; sold out through ’00-’01 winter
Slide 13: Promises Made - Promises Kept (Contd.)
12 KMI Promises Made - Promises Kept (Contd.) KMP Promises Made Promises Kept Make $1billion of acquisitions at Over $2bn of acquisitions announced in 8x cash flow 2000 at approximately 7x cash flow $1.10 KMI EPS vs. $0.70 in 1999 $1.28 EPS $3.20 KMP DPU vs. $2.85 in 1999 $3.43 DPU (ending the year
Slide 14: Management Planning Focus
13 KMI Management Planning Focus KMP Focused on very long-term trends and aggressive pursuit of near-term goals 6 - 18 Months 5 Years 10+ Years Plan Execution Deliver Near-Term Find Tsunamis to ride Promises for long-term growth - Deliver Numbers Don’t waste - Demographics - Continuously improve pro
Slide 15: KMP - 2001 Goals
14 KMI KMP - 2001 Goals KMP KMP goals for 2001: Year - end distributions in the $4.00 - $4.20 range (approx. $3.90 avg. for year) Average distributions over $3.90 v.s. $3.43 in 2000 – Approximately $0.20 - $0.30 internal growth – Approximately $0.20 - $0.30 acquisition growth Earnings growth of $0.1
Slide 16: KMI - 2001 Goals
15 KMI KMI - 2001 Goals KMP KMI Goals for 2001 EPS Growth of 30% - 40% ($1.66 - $1.79) – Low end of range assumes no additional KMP acquisitions – High end of range assumes modest KMP acquisitions – Change in seasonality resulting from sales/transfers should produce 25% of annual EPS in 1st quarter
Slide 17: Long-Term Goals
16 KMI Long - Term Goals KMP KMI EPS Growth of 20 - 30% in for the long term – Current KMP assets positioned to produce significant growth via GP incentive – KMP acquisition opportunities expected to continue – Power expected to grow very rapidly over the next 2-3 years, but represents long-term opp
Slide 18: KMP v.s. S&P 500 & Other Pipeline MLP's
17 KMI KMP v.s. S&P 500 & Other Pipeline MLP’s KMP KMP v.s. S&P 500 & other pipeline MLP’s from 01/01/1997 - 12/29/00
Slide 19: KMP - Peer Group Valuation
18 KMI KMP - Peer Group Valuation KMP KMP’s peer group - as of 1/19/01 Distribution CAGR Company Ticker Distribution (a) Price Yield Since 4Q 96 (b) KMP KMP 3.80 59 11/16 6.37% 32.0% TEPCO TPP 2.10 25 7/8 8.12% 9.4% El Paso Energy Partners EPN 2.20 27 3/8 8.04% 8.9%(c) Northern Border NBP 2.80 32 15
Slide 20: KMI v.s. S&P 500
19 KMI KMI v.s. S&P 500 KMP KMI v.s. S&P 500 from 7/01/1999 - 12/29/00
Slide 21: KMI - Peer Group Valuation
20 KMI KMI - Peer Group Valuation (a) KMP KMI’s peer group - as of 1/19/01 Consensus Consensus 5Yr 01 'P/E P/E Growth MKT Company Ticker 01' Earnings Growth Rate Price Multiple Ratio Cap (in $Billion) KMI KMI 1.75 25% 48 3/4 28 1.11 5.66 Dynegy DYN 1.79 20% 47 3/16 26 1.32 11.22 Enron ENE 1.66 15% 7
Slide 22: Management's Stake in the Game
21 KMI Management’s Stake in the Game KMP Rich Kinder and Bill Morgan have Management Public Shareholders largest equity stake in energy industry 25% 75% – $1/yr in salary – no bonus, no options KMI (a) Sr. Management is limited to (Corporation) $200K/year in salary Market Equity $5.6bn Debt 3.2 – M
Slide 23: CEO Ownership - Leading Midstream Companies
22 CEO Ownership - Leading Midstream KMI Companies KMP Stock owned by CEO ($ in million) (a) Salary + Bonus of CEO (b) $1,400 $6,000,000 $1,200 $5,000,000 $1,000 $4,000,000 $800 $3,000,000 $600 $2,000,000 $400 $200 $1,000,000 $0 $0 Williams Williams Morgan Enron El Paso Dynegy Morgan Enron El Paso D
Slide 24: Mary Morgan, Vice President, Marketing - Product Pipelines
KMI KMP Mary Morgan Vice President, Marketing - Product Pipelines Forward looking statements are not guarantees of performance. They involve risks, uncertainties and assumptions. The future results and securities values of Kinder Morgan Inc. and Kinder Morgan Energy Partners, L.P. (collectively know
Slide 25: KMP in the Petroleum Value Chain
24 KMI KMP in the Petroleum Value Chain KMP The KMP portfolio of assets includes pipelines and terminals that store/transport both petroleum and petroleum products Gasoline Crude Crude Gathering/ Gasoline Gasoline Gasoline Production Gathering Refining Storage Transmission Storage Distribution Input
Slide 26: Product Pipelines Overview
25 KMI Product Pipelines Overview KMP Pipeline Transportation – Over 10,000 mile pipeline system, largest pipeline MLP in the U.S. – Refined petroleum products: gasoline, diesel, jet fuel – NGL’s for refinery and petrochemical feedstocks – Transports over 2MM barrels of products a day – Serves the h
Slide 27: Product Pipelines Map
26 KMI Product Pipelines Map KMP Cochin P/L Mid-Continent Chicago Pacific Operations CalNev Pipe Line Orange County Plantation Cypress Pipe Line Houston Pipe Line Products Operations Pipelines CFPL Pipe Line Transmix Facilities
Slide 28: 2001 Estimated Earnings Contribution
27 KMI 2001 Estimated Earnings Contribution KMP Product Pipeline Contribution to 2001 Estimated Breakout of Product Pipeline Earnings Earnings Plantation Cochin Other Liquid 5% 6% 4% Bulk Terminals Terminals 10% 10% North Product Pipelines 7% CO2 43% 13% Pacific Calnev/ 61% CFPL 17% Natural Gas Pipe
Slide 29: Pacific Operations
28 KMI Pacific Operations KMP 3,900 mile refined products pipeline system and 22 terminals Predominant market share, transporting bulk of refined products used in CA, AZ and NV Transports over 1 million barrels per day Rapid population growth driving consumption of refined petroleum products in regi
Slide 30: Plantation Pipe Line/CFPL
29 KMI Plantation Pipe Line/CFPL KMP Asset Overview – 3,300 mile refined products pipeline system; transports over 680,000 bbls/day – Serves fast-growing Southeast and Florida markets (Atlanta, Charlotte, D.C., Orlando) – 51% ownership of Plantation; Exxon is remaining 49% partner – MLP has right of
Slide 31: The North System
30 KMI The North System KMP 1,600 mile NGL and refined products pipeline system with significant storage in Kansas and Chicago Major transporter of products between central Kansas and Chicago refineries Includes 8 company owned truck loading propane terminals through-out Midwest Expanded Heartland t
Slide 32: Cochin Pipe Line
31 KMI Cochin Pipe Line KMP 1,938 mile NGL pipeline system from Alberta, CN through 7 US states and terminates in Ontario, CN Transports 90,000 bbls/day 32.5% ownership in Cochin: Ft Saskatchewan – BP 32.8% – NOVA 20.2% – Conoco 10.0% Sarnia – Shell 4.5% Chicago KMP has right of 1st refusal Purchase
Slide 33: Stable Platform
32 KMI Stable Platform KMP Refinery hub to population center strategy Focus on assets core to physical logistics in U.S. Serve all major refinery hubs in the U.S. – Los Angeles (Pacific, GATX) – San Francisco Bay area (Pacific) – Seattle area (Pacific, GATX) – Houston (GATX) – Gulf Coast – Louisiana
Slide 34: Growing Demand
33 KMI Growing Demand KMP Predominant market share in West / high barriers to entry Serving highest demographic growth markets in U.S. Fastest Growing States 1995 - 2025 (1) Approximately 1 automobile is added CA 56 % to a given market for every 1.6 people NM 55 % AZ 52 % NV 51 % ID 50 % UT 48 % FL
Slide 35: Favorable Regulatory Environment
34 KMI Favorable Regulatory Environment KMP Energy Policy Act of 1992 – “Grandfathered” rates for liquid pipelines – Established indexing for grandfathered rates – PPI-FG minus 1% – Provide flexibility for alternative methods – Negotiated Rates – Market-Based Rates – Cost of service
Slide 36: Unregulated Fee-Based Business
35 KMI Unregulated Fee-Based Business KMP Unregulated, fee based businesses are attractive extensions of Kinder Morgan’s service Liquid Terminals – Refined products distribution terminals – multi-terminal contracts with customers – acquisition opportunities – NGL distribution terminals – Market Hub
Slide 37: Internal Growth Strategy
36 KMI Internal Growth Strategy KMP Have significant underutilized capacity to capture demand growth – Southern California expansions – Northern California debottlenecking – Plantation HP-5 expansion Upside of fixed cost economics – Incremental throughput grows with the population – Fuel is primary
Slide 38: Cost Reduction Strategies
37 KMI Cost Reduction Strategies KMP Plantation Operating Agreement Superior regulatory compliance Reduced pipeline releases through focus on pipeline and tank integrity programs Enhanced safety and efficiency through employee training
Slide 39: 2000 Performance
38 KMI 2000 Performance KMP EBITDA increased over $16 million Plantation volumes up 5.5% Pacific volumes up 3.9% Increased market share in terminals
Slide 40: 2001 Goals
39 KMI 2001 Goals KMP Plantation volumes up over 4% Pacific volumes up 3% Segment earnings up over $75 million Expansion Projects – Phase 2 and 3 of Plantation HP5 – Plantation Knoxville pipeline expansion – Terminal expansions to increase market share Transmix marketing agreements to further reduce
Slide 41: Long Term Growth Outlook
40 KMI Long Term Growth Outlook KMP Stay ahead of demographic growth in major markets – Continue to develop attractive expansion projects – Improve customer service to increase market share Expand fee-based services to existing and new markets – Leverage increasing product diversity – “One stop” log
Slide 42: Tim Bradley, President - Kinder Morgan CO2 Company, L.P.
KMI KMP Tim Bradley President - Kinder Morgan CO2 Company, L.P. Forward looking statements are not guarantees of performance. They involve risks, uncertainties and assumptions. The future results and securities values of Kinder Morgan Inc. and Kinder Morgan Energy Partners, L.P. (collectively known
Slide 43: What is CO2 Flooding?
42 KMI What is CO2 Flooding ? KMP CO2 is injected into mature oil fields to increase production and reserves
Slide 44: History of the Industry
43 KMI History of the Industry KMP CO2 emerged as a large scale proven technology in the early 80’s with construction of the Cortez Pipeline into the Permian Basin Permian Basin Oil Production Percent % Attributable to CO2 Flooding 20 18 16 14 The Basin produced 18% 12 of 2000 U.S. production 10 (ex
Slide 45: Typical CO2 Flood Economics
44 KMI Typical CO2 Flood Economics KMP Cost/Bbl. Projected IRRs (CO2 Cost 60 cents Mcf) Capital 30% $0.80 25% CO2 Purchases $3.00 Operating 20% Expenses $2.60 15% 10% Subtotal: $6.40 EOR Tax Credit: (0.38) 5% Proj. 1 Total: $6.02 Proj. 2 0% – Projects typically have attractive IRRs with oil in the m
Slide 46: CO2 Flood Historical Finding, Developing, and Producing Costs
45 Historical Finding, Developing, and Producing Costs KMI 1995 - 1999 KMP $/BOE 20 Opex 16 Dev. 12 8 Expl. 4 CO2 cost 0 CO2 Flood 1995 1996 1997 1998 1999 5 YR Source: JS Herold 2000 RRC Analysis
Slide 47: Kinder Morgan CO2 Operations
46 KMI Kinder Morgan CO2 Operations KMP Utah CO2 Company Remaining Colorado Reserves Ownership Location Deliverability Operator McElmo Dome 45% SW Colorado 40+ years Kinder Morgan McElmo Dome Kansas Bravo Dome 11% NE New Mexico 14 years Oxy Bravo Dome Cortez Pipeline Oklahoma Arizona Company Deliver
Slide 48: 2001 Estimated Earnings Contribution
47 KMI 2001 Estimated Earnings Contribution KMP CO2 Contribution to 2001 KMP Segment Estimated breakout of CO2 earnings Earnings Natural Gas Other CO2 Assets Pipelines 14% 24% Participation in CO2 Flood Projects CO2 36% 13% Cortez Pipeline 24% Bulk Product Pipelines Terminals 10% McElmo Dome 43% Liq
Slide 49: Kinder Morgan Market Share
48 KMI Kinder Morgan Market Share KMP Kinder Morgan CO2 is the leading supplier McElmo Dome is the premier source 2000 Market Share in Permian Basin Sources of Supply(a) Other Other 4% 9% Sheep KM CO2 Mountain BP Amoco 37% 24% 7% McElmo Dome 62% Bravo Dome 27% Exxon Mobil 30% Total 2000 Supply: (a)
Slide 50: CO2 Source Fields
49 KMI CO2 Source Fields KMP “Recoverable” Reserves (Tcf) Average Well Rate (MMcf/d) 13.9 24 23 15 10 16 5 8 5 2.0 0.3 1 0 0 McElmo Dome Bravo Dome Sheep Mountain McElmo Dome Bravo Dome Sheep Mountain Operating Costs Unit Development Costs McElmo Dome Bravo Dome Sheep Mountain McElmo Dome Bravo Dome
Slide 51: Historical CO2 Demand and WTI Prices
50 KMI Historical CO2 Demand and WTI Prices KMP CO2 Demand - BCFD WTI Oil Price - $/B 1.6 40 1.4 35 1.2 30 1.0 25 0.8 20 0.6 15 0.4 10 0.2 5 0 0.0 1985 1987 1989 1991 1993 1995 1997 1999 Jan-89 Jan-93 Jan-85 Jan-00 Jan-97
Slide 52: Historical Permian Basin Supply
51 KMI Historical Permian Basin Supply KMP McElmo Dome market share has steadily increased over the long term MMcf/d 1600 1400 1200 1000 800 600 400 200 0 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 20 McElmo Dome Bravo Dome Sheep Mtn. Val Verde
Slide 53: National Growth Opportunities
52 KMI National Growth Opportunities KMP Utah S.W. Central Kansas Kansas California Legend CO2 Source San Juan Existing Markets Basin CBM Emerging Markets Permian Each O equals 200 miles. Basin
Slide 54: Growth Opportunities in Permian Basin
53 KMI Growth Opportunities in Permian Basin KMP About 40 CO2 Floods Production of 150,000 B/D Estimated 50 more economic fields - 0.5-1.0 Billion Barrels of Oil Remaining CO2 supply and demand extends 25+ years
Slide 55: Potential Demand by Reservoir
54 KMI Potential Demand by Reservoir KMP Purchase CO2 Demand – Bcf Total potential demand: 18.8 8,000 Tcf DOE Model: 17 Tcf 6,000 Existing Projects – 9.0 Tcf – 6.5 Tcf injected to date 4,000 – 2.5 Tcf remaining New projects 2,000 – 9.8 Tcf 0 Remaining Demand San Gray- – Existing 2.5 Tcf burg-San Can
Slide 56: 2000 Achievements
55 KMI 2000 Achievements KMP 80% of Shell CO2 – Significantly exceeded acquisition plan – Successfully integrated into Kinder Morgan Secured significant cost improvements – McElmo Dome unit costs down 18% – Assumed Cortez Pipeline operations – Overhead Down 36% SACROC Acquisition - Devon, Texaco – S
Slide 57: Marathon Yates Acquisition
56 KMI Marathon Yates Acquisition KMP Joint Venture - Marathon 85% / Kinder Morgan 15% – 49.9% Yates – 12.75% SACROC Kinder Morgan Consideration – Cash – 12.75% SACROC – 30 Bcf of CO2 Economics – KMP 5 year average cash accretion - $.04 / unit – KMI 5 year average earnings accretion - $.02 / share
Slide 58: 2001 Goals
57 KMI 2001 Goals KMP 20% + Growth in segment EBITDA New CO2 Sales – Cogdell, HT Boyd - 80 Bcf – Goldsmith, Hobbs SACROC expansion – Expand CO2 project – Lower costs
Slide 59: Long-Term Outlook / Goals
58 KMI Long-Term Outlook / Goals KMP Domestic oil reserve replacement costs are increasing – CO2 flooding provides an attractive cost structure and a proven track record to add new reserves Kinder Morgan will leverage infrastructure in Permian Basin – Lowest cost supply – Largest reserves – Innovati
Slide 60: Deborah Macdonald, President - NGPL
KMI KMP Deborah Macdonald President - NGPL Forward looking statements are not guarantees of performance. They involve risks, uncertainties and assumptions. The future results and securities values of Kinder Morgan Inc. and Kinder Morgan Energy Partners, L.P. (collectively known as “Kinder Morgan”) m
Slide 61: NGPL - Asset Overview
60 KMI NGPL - Asset Overview KMP Powder River Basin Amarillo Amarillo NGPL System Greater Green Line Line • Over 10,000 Miles of Pipe River Basin Denver Julesburg Basin • 61 Compressor Units with 1.0 Million HP Joint Gulf Gulf Coast Coast Peak Day Bcf/d Joint Anadarko Deliverability - Market Venture
Slide 62: 2001 Estimated Earnings Contribution
61 KMI 2001 Estimated Earnings Contribution KMP NGPL Contribution to 2001 KMI Segment Earnings Retail 8% Power & Other 9% NGPL 49% KMP 34%(a) (a) Does not include amortization of excess investment of approximately $28M
Slide 63: Competitive Advantages
62 KMI Competitive Advantages KMP Largest Transporter to Chicago Market Premier Storage Assets Scope of Delivery Infrastructure to LDC’s Supply Diversity Operational Flexibility New Services Portfolio
Slide 64: NGPL Market Storage
63 KMI NGPL Market Storage KMP Keota, Aquifer Working Gas 2.3 Bcf Del. .055 Bcf/d 116 Chicago Herscher, Aquifers Working Gas 22 Bcf 205 199 113 Del 1.25 Bcf/d 110 201 202 109 198 108 107 204 Cooks Mill, Depleted Gas 311 Cairo, Aquifer Working Gas 2.3 Bcf Working Gas 36.7 Bcf Del. .11 Bcf/d 203 Del.
Slide 65: NGPL Field Storage
64 KMI NGPL Field Storage KMP 103 102 159 158 308 111 154 156 DP370-307 169 184 801 812 168 306 167 Sayre 802 305 143 Depleted Gas 155 Working Gas 37.4 Bcf 388 139 Del .40 Bcf/d 304 N. Lansing Depleted Gas 303 Working Gas 69 Bcf Del 1.1 Bcf/d 302 Houston 343 342 346 301 300 341
Slide 66: Stable Earnings Platform
65 KMI Stable Earnings Platform KMP Transportation and Storage Contract Rollover Success Strong Counterparties SFV Rate Design/Negotiated Rate Option No Requirement for Periodic Rate Review
Slide 67: NGPL: Contract Rollover Success
66 KMI NGPL: Contract Rollover Success KMP 2001 Firm Service Revenue Big 3 Rollover By Year 2001 <1% 8% Unexpired 2002 Contracts 38% Other Recent 2003 66% Rollovers* 20% Big 3 Customers 42% 2004 21% 2005 5% *Non-Big 3 Contracts started or renewed in past 12 months.
Slide 68: Market Response to Alliance Pipeline
67 KMI Market Response to Alliance Pipeline KMP Alliance deliveries averaged 1.5 Btu (wet) per day in December NGPL still experienced record withdrawals from storage Gulf Coast line ran at near capacity through December Amarillo line throughput down slightly-line pack available for peaking Between D
Slide 69: Exceptional Platform for Internal Growth
68 KMI Exceptional Platform for Internal Growth KMP Gas-Fired Generation Market and Supply Pipeline Expansions Hub America & New Services
Slide 70: Gas Fired Power Generation
69 KMI Gas Fired Power Generation KMP Natural continues to see strong interest in Gas Fired Generation... Accomplishments to date… – Entered into contracts to connect eleven power plants, capable of generating approximately 5,500 megawatts – Five of the eleven plants are in service, generating 1,900
Slide 71: Gas Fired Power Generation
70 KMI Gas Fired Power Generation KMP Plants Connected in 2000... Plant State Plant Type In-Service NGPL Tie Ameren Gibson City IL 270 MW peaker July ‘00 direct Ameren Pinckneyville IL 430 MW peaker July ‘00 direct SWEPCO IL 40 MW peaker June ‘00 direct Lamar Power Partners TX 1,000 MW peaker June ‘
Slide 72: Gas Fired Power Generation
71 KMI Gas Fired Power Generation KMP Plants under construction for connection in 2001... Plant State Plant Type In-Service NGPL Tie Ameren Kinundy IL 270 MW peaker April ‘01 direct Ameren Grand Tower IL 520 MW baseload April ‘01 direct Duke Lee IL 640 MW peaker June ‘01 direct Arkansas Elec Coop AR
Slide 73: Power Plants Connected to NGPL (Illinois map)
LEGEND Power Plant In-Service or Under Construction NGPL Pipeline Proposed Horizon Pipeline KENOSHA GREEN ROCK WALWORTH WISCONSIN NGPL Compression ILLINOIS Zion NGPL Storage Directly Connected Plants STEPHENSON WINNEBAGO BOONE Lake MC HENRY 2. Lee County (Duke) Rockford 3. Aurora (Reliant) 1 LAKE Mi
Slide 74: Gas Fired Power Generation
73 KMI Gas Fired Power Generation KMP Future connections... NGPL is pursuing discussions with multiple power plant developers and tollers across the pipeline system for approximately 3,000 megawatts per year in 2002 and 2003… A few examples are... Plant State Plant Type In-Service NGPL Tie Tractebel
Slide 75: St. Louis Pipeline Extension
74 KMI St. Louis Pipeline Extension KMP A new extension of Natural’s existing Gulf Coast pipeline that will originate near Centrailia, Illinois, and extend to a new interconnect with Illinois Power Company in the east St. Louis market. – 24-inch, 47-mile pipeline – 1000 MAOP pipeline Initial design
Slide 76: NGPL Lateral Project map
KINDER?MORGAN NATURAL GAS PIPELINE COMPANY OF AMERICA Lateral Project Lich Sed VA MACOUPIN >—|4 Ramey Loudon moO fo MERY | rl | Id AYVETTE LINCOLN s \ondole a ST. CHARLES River == Proposed NGPL Lateral lllincis Power RANDOLPH StJLouis Nendiestr a ae ST. Oe LOUIS ie] FRANKLIN j Cedor Hi 4 Stir i EFFE
Slide 77: St. Louis Pipeline Extension
76 KMI St. Louis Pipeline Extension KMP Shipper Commitments… – Dynegy has entered into several long-term firm contracts – Ten year firm transport agreement, effective 6/01/02, for 90,000 Dth per day – Ten year firm storage agreement, effective 6/01/02, for 10,000 Dth per day – Various five year firm
Slide 78: Horizon Pipeline
77 KMI Horizon Pipeline KMP A new natural gas pipeline that will originate at the Chicago supply hub near Joliet, Ill. and extend to Northern Illinois – 36-inch, 70-mile pipeline (including leased portion) – 46 miles of capacity lease from Natural Gas Pipeline Company – New 9,000 horsepower at exist
Slide 79: Horizon Pipeline and Natural's Chicago Market Pipelines
Horizon Pipeline and Natural’s Chicago Market Pipelines KENOSHA GREEN ROCK WALWORTH WISCONSIN ILLINOIS Zion STEPHENSON WINNEBAGO BOONE MC HENRY Lake LEGEND Rockford LAKE Michigan NGPL Pipeline Natural Interconnect Nicor Interconnect Proposed Horizon Pipeline Station NGPL Compression OGLE 116 NGPL St
Slide 80: Horizon Pipeline
79 KMI Horizon Pipeline KMP Status – FERC Preliminary Determination Received, Final Approval expected in Spring 2001 – In-service Spring 2002 – Shippers – Nicor Gas binding contract for 300,000 per day (Nicor has received Illinois Commerce Commission approval for the contract) – Finalizing negotiati
Slide 81: Hub America and New Services
80 KMI Hub America and New Services KMP Hub America – Leverages supply diversity on NGPL – Firm backhaul services from Alliance – Interruptible day trading of capacity – 2000 success into California market – 2000 success in connecting gas-fired generation
Slide 82: New Services Aimed at Gas-fired Generation
81 KMI New Services Aimed at Gas-fired Generation KMP IBS – Interruptible balancing service to manage swings – 3-day payback period – Pay on nominations – Ancillary to Firm and Interruptible transportation FRSS – Firm Storage Service – 10 or 20 day service – No-notice delivery – “Insurance Policy” f
Slide 83: 2001 Goals
82 KMI 2001 Goals KMP Further expansion of Horizon – Waukegan area – Zion area/Northern Indiana – Wisconsin Northern Texas – Wise County – North Dallas Arkansas – potential for power development Increase commitments to St. Louis expansion Additional new services for gas-fired generation – 2nd genera
Slide 84: Long-Term Outlook
83 KMI Long-Term Outlook KMP Goal to connect in excess of 3,000 megawatts generation per year Increased generation creates increased demand for storage, balancing and transportation services LDC unbundling offset by gas-fired generation Construction of pipeline infrastructure to move Canadian gas fu
Slide 85: Anthony Lannie, President - Kinder Morgan Power
KMI KMP Anthony Lannie President - Kinder Morgan Power Forward looking statements are not guarantees of performance. They involve risks, uncertainties and assumptions. The future results and securities values of Kinder Morgan Inc. and Kinder Morgan Energy Partners, L.P. (collectively known as “Kinde
Slide 86: Industry Overview
85 KINDER, MORGAN Industry Overview KINDER JMORGAN onion POWER PROJECT
Slide 87: What is Kinder Morgan Power Company?
86 KMI What is Kinder Morgan Power Company? KMP Power project developer with a focus on: – Optimization of Kinder Morgan pipeline assets – Exploitation of Kinder Morgan advantages – Technological - unique Orion configuration – Contractual - favorable GE turbine contracts Independent Power Producer (
Slide 88: Who are Our Prospective Customers?
87 KMI Who are Our Prospective Customers? KMP Power marketers… – Enron, Williams, Duke, Coral (Shell), etc. Genco’s… – Southern* (now Mirant Corp.), NRG, Calpine, etc. Utilities… – Public Service Company of Colorado (Xcel)*, Cinergy, AEP, FPL, etc. (*) Denotes current customer
Slide 89: Who are Our Competitors?
88 KMI Who are Our Competitors? KMP Other developers… – Tenaska – Panda – AES – Skygen (Calpine) – Sithe (PECO)
Slide 90: Announced Non-Regulated Generation Plans
89 Announced Non-Regulated KMI Generation Plans KMP Company Current Generation* Targeted Generation Mirant (Southern) 14,000 MW 30,000 MW Williams 8,900 40,000 NRG 15,000 35,000 FPL-Entergy 4,800 30,000 Calpine 23,000 50,900 Total 65,700 185,900 * Current U.S. generation includes operating plants an
Slide 91: Asset Overview
90 KMI Asset Overview KMP Plant Description Gross Net Ft. Lupton, CO 272 MW 136 MW Greeley, CO 32 32 University of Northern Colorado 76 25 Wrightsville, AR 550 270 Jackson, MI 539 539 Total Megawatts 1,469 1,002
Slide 92: Operating Plants & Development Projects
Operating Plants & Development Projects KMI As of December 31, 2000 KMP Operating Plants Plants under construction Projects being permitted Projects under development
Slide 93: 2001 Estimated Earnings Contribution
92 KMI 2001 Estimated Earnings Contribution KMP Power Contribution to 2001 KMI Segment Earnings Retail 8% Power & Other 9% NGPL 49% KMP 34%(a) (a) Does not include amortization of excess investment of approximately $28M
Slide 94: Stable Platform
93 KMI Stable Platform KMP COD Operating under toll / Development fees Preferred Return Merchant period No or minimal Fee-based commodity risk 2 yrs. 17 yrs. 50 yrs. Limited commodity risk – Gas tolling contracts with strong credits – Preferential revenue streams – Limited merchant risk and upside C
Slide 95: Exceptional Internal Growth
94 KMI Exceptional Internal Growth KMP In-the-money turbine contracts (early mover) – Contract priced June of 1998 – Turbine prices have continued to escalate Efficient development team – 7 developers – 22 support and operations personnel
Slide 96: Exceptional Internal Growth
95 KMI Exceptional Internal Growth KMP Orion technology – Patent pending – Standardized plant design – Mid-merit hybrid plant using peaking turbines in combined cycle – Multiple turbines increase responsiveness and reliability
Slide 97: Orion Power Plant Configuration - 550 MW
ORION POWER PLANT CONFIGURATION – 550 MW GEN GEN GEN GEN GEN 2 - GE ST/G’s (200 MW) STEAM STEAM TURB TURB Boiler Boiler Boiler Boiler Common Steam Header Boiler Boiler Boiler 6 - GE LM6000 PC Sprint (270 MW) 1 - GE 7EA GEN GEN GEN (80 MW) GEN
Slide 98: Achievements in 2000
97 KMI Achievements in 2000 KMP Early mover advantages – 1,100 MW under construction – 2,200 MW under development Increased throughput on NGPL pipelines
Slide 99: Goals for 2001
98 KMI Goals for 2001 KMP Sell output from Jackson, MI plant Sell output from 2 additional plants Complete construction of plants on time and on budget Double year 2000 earnings
Slide 100: Long Term Outlook
99 KMI Long Term Outlook KMP Develop additional sites utilizing Orion technology Develop sites for other power generating technologies – Baseload plants utilizing frame technology – Distributed generation projects/technology Optimize power generation portfolio
Slide 101: Mike Morgan, V.P. Strategy & Investor Relations
KMI KMP Mike Morgan V.P. Strategy & Investor Relations Forward looking statements are not guarantees of performance. They involve risks, uncertainties and assumptions. The future results and securities values of Kinder Morgan Inc. and Kinder Morgan Energy Partners, L.P. (collectively known as “Kinde
Slide 102: Acquisition Strategy
101 KMI Acquisition Strategy KMP Acquisitions are key to the success of KMI/KMP Acquire fee-based pipelines and terminals in high growth markets Make decisions based on conservative assumptions Must be immediately accretive to both KMP and KMI KMP is very competitive in the acquisition arena – KMP v
Slide 103: Acquisition Track Record
102 KMI Acquisition Track Record KMP Acquisition Approximate Value $mm 5 Deals in 1998 $1,720 4 Deals in 1999 950 Milwaukee / Dakota 25 80% Shell CO2 212 CRC CO2 Pipeline / SACROC 53 Buckeye Transmix 38 Cochin Pipeline (32.5%) 118 Delta Terminals 114 Duke Transmix 11 Marathon JV 40 Phase II Dropdown
Slide 104: GATX Case Study - Overview
103 KMI GATX Case Study - Overview KMP On November 30, 2000, KMP agreed to acquire the domestic pipelines and terminals of GATX Corp. Purchase price was approximately $1.15 bn in cash and assumed debt: – CALNEV Pipeline – Central Florida Pipeline – 12 Petroleum products and chemical terminals Transa
Slide 105: GATX Case Study
104 KMI GATX Case Study (a) KMP Purchase Price $1,150.0M GP Dist. on New Units $ 25.5M Implied Debt @ 7.5% $ 460.0M GP Share of Excess $ 13.9M Implied Equity @ $58 11.9M GP Accretion on Units Owned (a) $ 2.5M Pretax Cash Flow $ 133.0M Less: Less: Cost of Capital on 2% Contribution ($ 1.0M) Interest
Slide 106: Acquisition Matrix - KMP
105 KMI Acquisition Matrix - KMP KMP For a given dollar amount of acquisitions, KMP unitholders realize a significant amount of cash accretion per unit (a) * Value of Acquisitions 5.0X 6.5X 8.0X 9.5X $1250M $ 0.84 $ 0.48 $ 0.26 $ 0.11 $1000M $ 0.70 $ 0.40 $ 0.22 $ 0.09 $750M $ 0.54 $ 0.31 $ 0.17 $ 0
Slide 107: Acquisition Matrix - KMI
106 KMI Acquisition Matrix - KMI KMP For acquisitions completed at KMP, KMI stockholders receive a significant EPS contribution (a) * Value of Acquisitions 5.0X 6.5X 8.0X 9.5X $1250M $ 0.55 $ 0.37 $ 0.26 $ 0.19 $1000M $ 0.44 $ 0.30 $ 0.21 $ 0.16 $750M $ 0.33 $ 0.23 $ 0.16 $ 0.11 $500M $ 0.22 $ 0.15
Slide 108: Acquisition Strategy - Petroleum Pipelines
107 KMI Acquisition Strategy - Petroleum Pipelines KMP Petroleum pipelines represent a huge market opportunity for KMP Industry KMP KMP % Miles of pipeline (thousands) 154.4 10.2 7% Annual Bbls delivered (billions) 13.3 0.75 6% Annual revenues ($ billions) 7.0 0.55 8% * Source: Association of Oil Pi
Slide 109: U.S. Crude Oil Pipelines
108 KINDER’ MORGAN U.S. Crude Oil Pipelines MAJOR CRUDE OIL PIPELINES
Slide 110: U.S. Product Pipelines
109 KINDER’ MORGAN U.S. Product Pipelines MAJOR REFINED PIPE LINES « RENINTRY COC ATIONS
Slide 111: Acquisition Strategy - Product Pipelines
110 KMI Acquisition Strategy - Product Pipelines KMP Why are there asset sales? – Rationalization by the majors – Pipeline operation is perceived to be a capital intensive, regulated business with modest growth – Majors will eventually reallocate midstream capital into core businesses that produce h
Slide 112: Acquisition Strategy - Product Pipelines
111 KMI Acquisition Strategy - Product Pipelines KMP Miles of Domestic Domestic Oil Oil Pipelines Pipeline Revenue Kinder Morgan 7% Kinder Morgan 8% (10,200 miles) ($0.55bn) 5 most likely majors 33%(a) (50,500 miles) 5 most likely majors 34%(a) The remaining market 60% The remaining market 58% (93,7
Slide 113: Acquisition Strategy - Bulk Terminals
112 KMI Acquisition Strategy - Bulk Terminals KMP Average cash flow multiples lower than pipelines Target approximately $200m / yr in acquisitions Coal represents largest opportunity – KMP handled about 2% of 1.1bn ton domestic coal market in 2000 – Likely sellers of assets – Utilities (81% of marke
Slide 114: Acquisition Strategy - Liquids Terminals
113 KMI Acquisition Strategy - Liquids Terminals KMP Upon closing GATX, KM will be a major operator of terminals – 2nd largest independent in U.S. petroleum storage – 2nd largest independent in U.S. chemicals storage However, significant opportunities remain for acquisitions – Major oil companies –
Slide 115: Acquisition Strategy - Gas Pipelines
114 KMI Acquisition Strategy - Gas Pipelines KMP Kinder Morgan assets transport approximately 2.6 Tcf of natural gas Industry has seen more consolidation than product pipelines However, there is a significant opportunity to expand our ownership as gas market grows to 30Tcf Transaction drivers in the
Slide 116: Acquisition Strategy - CO2
115 KMI Acquisition Strategy - CO2 KMP Explore additional opportunities around U.S. – Acquire and convert to CO2 use – Partnering with major customers to develop new basins Continue “Shooting fish in the Permian Basin barrel”
Slide 117: 2001 Goals
116 KMI 2001 Goals KMP $0.20 - $0.30 growth in KMP distributions per unit for 2002 $0.20 - $0.30 growth in KMI EPS for 2002
Slide 118: Transforming Transaction - KMI
117 KMI Transforming Transaction - KMI KMP A transforming transaction at KMI must satisfy several stringent criteria – Maintain focus on midstream energy assets – Generate near-term EPS and cash flow accretion per share – Improve KMI’s long-term growth rate – overcome dilution of general partner – s
Slide 119: Park Shaper, Chief Financial Officer
KMI KMP Park Shaper Chief Financial Officer Forward looking statements are not guarantees of performance. They involve risks, uncertainties and assumptions. The future results and securities values of Kinder Morgan Inc. and Kinder Morgan Energy Partners, L.P. (collectively known as “Kinder Morgan”)
Slide 120: Financial Overview
119 KMI Financial Overview KMP KMI – 75% growth in EPS in 2000 to $1.28 – Expect 30-40% growth in 01 ($1.65 - $1.79) – Long-term growth rate of 20-30% KMP – Total distributions grew more than 20% in 2000 – $3.425 distribution for 2000 vs. $2.85 for 99 – Annual distribution rate now $3.80 – Project y
Slide 121: KMI Recurring Earnings
120 KMI KMI Recurring Earnings KMP Expected Growth Rate 1999 2000 2000 - 2001 Kinder Morgan Energy Partners: Equity in Earnings 15,733 140,913 60 - 80% Amortization of Excess Investment (7,335) (28,317) Segment Earnings: NGPL 306,507 342,887 0 - 5% KMIGT 53,924 - Retail 20,104 49,732 5 - 10% KMTP 16
Slide 122: KMP Recurring Earnings
121 KMI KMP Recurring Earnings KMP Expected Growth 1999 2000 2000 - 2001 Segment Earnings Contribution: Product Pipelines $ 212,248 $ 221,168 35 - 45% Natural Gas Pipelines 2,714 112,917 25 - 35% CO 2 Pipelines 15,215 67,970 15 - 25% Bulk Terminals 35,767 37,629 40 - 50% General and Administrative (
Slide 123: KMP Volumes
122 KMI KMP Volumes KMP Volume Information 1999 2000 Product Pipelines Pacific - Mainline Delivery Volumes (MBbl) 375,663 386,611 Other Delivery Volumes (MBbl) 10,025 14,243 Plantation - Delivery Volumes (MBbl) 214,900 226,795 North System/Cypress - Delivery Volumes (MBbl) 50,124 51,111 Natural Gas
Slide 124: KMI Growth Drivers
123 KMI KMI Growth Drivers KMP KMP (34% of expected 01 segment earnings) – Strong internal growth – Modest amount of acquisitions to get to 40% growth – Detail in KMP section NGPL (49%) – Contract renewals ensure stability – Little growth expected until 2nd half of 02 – Power plant demand
Slide 125: KMI Growth Drivers (Cont)
124 KMI KMI Growth Drivers (Cont) KMP Retail (8%) – Stability ensured through weather hedges – Stronger than normal growth in 01 – Cost efficiencies – Longer term growth of 3-4% Power and Other (9%) – Power group should double earnings in 01 – Wrightsville and Jackson plants – Opportunities to devel
Slide 126: KMI Growth Drivers (Cont)
125 KMI KMI Growth Drivers (Cont) KMP G&A – Expect to be up in 01 Interest Expense – Lower short term debt balances reduce expense – Much of debt is long term, fixed at low rates – Declining rates could provide additional benefit Other, Net – Primarily TRUPS - $22mm – Interest income, other equity e
Slide 127: KMP Growth Drivers
126 KMI KMP Growth Drivers KMP Product Pipelines (43%) – Pacific – 3% volume growth, 1.5% tariff increase (avg. for year) – All growth to bottom line – Plantation – strong growth in 01 due to assumption of operations – Transmix – growth from assets added in 00 – Cochin – 2 months realized in 00, ful
Slide 128: KMP Growth Drivers (Cont)
127 KMI KMP Growth Drivers (Cont) KMP CO2 Pipelines (13%) – Full year of acquisitions made in 00 – Cost efficiencies, especially in assumption of Cortez operations – Seek additional tuck in opportunities Bulk Terminals (10%) – Delta acquisition – Nice volume growth in existing assets – Additional te
Slide 129: KMP Growth Drivers (Cont)
128 KMI KMP Growth Drivers (Cont) KMP Additional acquisitions – Modest level to get 40% growth at KMI – Spread throughout year – Conservative assumptions around: – Cash flow multiple – Capital structure – Unit price – Cost of debt – Can’t determine effect on individual segments
Slide 130: KMP Growth Drivers (Cont)
129 KMI KMP Growth Drivers (Cont) KMP G&A – Grows as function of acquisitions / not allocated to segments – Growth slower than growth in revenues and margins Net Debt Cost – Grows as function of acquisitions – Still target 40% debt to capital – Lower rates help to offset growth in total debt outstan
Slide 131: Expected Financings
130 KMI Expected Financings KMP KMI – Reps will be refinanced in March ($400MM) – Peps will convert to equity in November ($460MM, 13MM shares) – No equity financings – End year at close to 50% debt to capital KMP – Interim facility to fund GATX acquisition – Term up debt – Complete institutional eq
Slide 132: Sources of Expected EPS Growth at KMI
131 KMI Sources of Expected EPS Growth at KMI KMP $0.13 $1.79 $1.66 $0.07 $0.31 $1.28 2000 EPS KMP Internal 2001 Additional 2001 growth & KMI Internal Expected acquisitions expected announced Growth before at KMP EPS with acquisitions additional additional acquisitions acquisitions at KMP at KMP (a)
Slide 133: Financial Summary
132 KMI Financial Summary KMP KMI – 40% growth in EPS in 01 with modest acquisition at KMP – 30% growth without acquisitions – Less seasonality – Expected quarterly EPS distribution Q1 Q2 Q3 Q4 25% 20% 25% 30% – Long term growth 20-30% annually KMP – Target growth in distribution to $4 - $4.20 annua