Credit Suisse 2006 Energy Summit. February 1, 2006

Transcription

1 Credit Suisse 2006 Energy Summit February 1, 2006

2 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 of performance. They involve risks, uncertainties and assumptions. The future results and securities values of Kinder Morgan Inc., Kinder Morgan Energy Partners, L.P. and Kinder Morgan Management, LLC (collectively known as Kinder Morgan ) may differ materially from those expressed in the forward-looking statements contained throughout this presentation and in documents filed with the SEC. Many of the factors that will determine these results and values are beyond Kinder Morgan's ability to control or predict. These statements are necessarily based upon various assumptions involving judgments with respect to the future, including, among others, the ability to achieve synergies and revenue growth; national, international, regional and local economic, competitive and regulatory conditions and developments; technological developments; capital markets conditions; inflation rates; interest rates; the political and economic stability of oil producing nations; energy markets; weather conditions; environmental conditions; business and regulatory or legal decisions; the pace of deregulation of retail natural gas and electricity and certain agricultural products; the timing and success of business development efforts; terrorism; and other uncertainties. You are cautioned not to put undue reliance on any forward-looking statement. 2

3 Kinder Morgan Assets 2 2 Pacific Trans Mountain Northern TransColorado CALNEV 2 Pacific 3 Corridor Express KMCO2 3 Wink KMIGT Trailblazer SACROC Claytonville KMTejas Cypress Yates 8 7 KMTP Cochin NGPL North 2 Platte Plantation Central Florida NGPL (KMI) NGPL GAS STORAGE (KMI) RETAIL GAS DISTRIBUTION (KMI) GAS-FIRED POWER PLANTS (KMI) PRODUCTS PIPELINES () PRODUCTS PIPELINES TERMINALS () TRANSMIX FACILITIES () NATURAL GAS PIPELINES (KMI-) NATURAL GAS STORAGE (KMI-) NATURAL GAS PROCESSING (KMI-) CO 2 PIPELINES () CO 2 OIL FIELDS () CRUDE OIL PIPELINES () TERMINALS () TERASEN GAS (KMI) PETROLEUM PIPELINES (KMI) PETROLEUM PIPELINES TERMINALS (KMI) (2,3,8) INDICATES NUMBER OF FACILITIES IN AREA KM HEADQUARTERS 3

4 Kinder Morgan: Three Securities Kinder Morgan Energy Partners Market Equity (a) $10.8 Debt (a) 5.2 Enterprise Value $16.0 B Incentive Distribution Kinder Morgan, Inc. Market Equity (b) $13.4 Debt (b) 7.1 Enterprise Value $20.5 B 2006E EBITDA 2006E Dist. CF Additional Shares KMR (LLC) 58 million i-units (a) $1,802 mm $1,290 mm Cash Distribution (Partnership) 163 million units (a,c) 2006E EBITDA 2006E FCF KMI (Inc) 135 million shares $1,739 mm $760 mm 10 mm 48 mm 143 mm 20 mm 107 mm 28 mm KMI Public Float KMI Public Float Mgmt Note: All amounts in U.S. dollars unless otherwise noted. (a) market cap based on 163 million common units at a price of $49.63 and 58 million KMR i-units at a price of $45.99 as of January 27, Debt balance as of December 31, 2005, excludes the fair value of interest rate swaps, net of cash. (b) KMI market cap based on 135 million shares at a price of $96.53 as of January 27, Market equity also includes $391 million of preferred securities. Debt balance as of December 31, 2005, excludes the fair value of interest rate swaps and preferred securities, net of cash. (c) Includes 5.3 million Class B units owned by KMI. Class B units are unlisted common units. 4

5 Consistent Track Record Total Distributions (GP + LP) ($mm) Distribution Per Unit (b) $1,400 $1,200 $1,000 $800 $600 $400 $200 $0 GP (a) LP $17 $30 $153 $198 $333 CAGR = 54% $548 $701 $827 $978 $1,281 $1, E $4.00 $3.00 $2.00 $1.00 $0.00 $0.63 $1.13 $1.30 $1.45 $3.32-$3.36 $3.20 $2.96 $2.72 $2.50 $2.20 $1.90 CAGR = 18% E $6.00 $5.00 $4.00 $3.00 $2.00 $1.00 $0.74 KMI Earnings Per Share (c) $1.28 $1.96 CAGR = 31% $2.84 $3.33 $3.81 $4.31 $ % 80% 60% 40% 20% Net Debt to Total Capital (d) KMI 67% 61% 56% 56% 47% 51% 54% 52% 52% 53% 49% 46% 46% 48% 43% 39% 38% 31% $0.00 0% E E Note: All amounts in U.S. dollars unless otherwise noted. (a) Includes 2% GP interest. (b) Declared 4Q distribution annualized (i.e. multiplied by four) (c) Excludes certain items and loss on early extinguishment of debt. KMI 2005 EPS excludes the December 2005 impact of Terasen. (d) Excludes loss/gains in Other Comprehensive Income related to hedges; debt excludes preferred securities (KMI). 5

6 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 productivity to drop all top-line growth to bottom line Leverage economies of scale from incremental acquisitions and expansions Reduce needless overhead Apply best practices to core operations Maximize benefit of a unique financial structure which fits with strategy MLP avoids double taxation, increasing distributions from high cash flow businesses Strong balance sheet allows flexibility when raising capital for acquisitions / expansions 6

7 : Solid Asset Base Generates Stable Fee Income CO 2 30% CO 2 transport and sales 70% oil production related Expected production hedged (b): 2006=88% 2007=75% 2008=54% 2006 DCF (a) CO 2 29% Products Pipelines 27% Products Pipelines Refinery hub to population center strategy 68% Pipelines 27% Associated Terminals (c) 5% Transmix No commodity price risk Terminals 47% Liquids, 53% Bulk Geographic and product diversity 3-4 year average contract life Terminals 19% Natural Gas Pipelines 25% Natural Gas Pipelines 51% Texas Intrastate 49% Rockies Little incidental commodity risk (a) Budgeted 2006 distributable cash flow before G&A and interest (b) Net equity production, approved plus identified potential projects. Includes heavier NGL components (C4+). (c) Terminals are not FERC regulated except portion of CalNev. 7

8 KMI: Solid Asset Base Generates Stable Fee Income Investment in (b) General partner interest earns incentive distributions Owns 13% of total limited partner units KM Canada Three major systems connected to Canadian Oilsands Existing capacity substantially committed under long-term contracts 39% KM Canada 7% KMI 2006 Segment Income (a) Other 1% NGPL 30% Retail Gas Distribution 23% NGPL FERC regulated with 3-year average contract life Primary customers are Chicago local distribution companies Little incidental commodity risk Retail Natural gas distribution service Serve ~ 890,000 customers in British Columbia Serve ~ 245,000 customers in Colorado, Wyoming and Nebraska (a) Budgeted 2006 segment earnings before G&A and interest. (b) Includes: (i) general partner interest, (ii) earnings from ~ 20 million units and (iii) earnings from ~ 10 million KMR shares. 8

9 Vision: Where We re Going Growing Rockies Natural Gas Production Increased Supply of LNG on Gulf Coast Canadian Oilsands Trend Increased Use of Heavy Crude Growing Coal Imports High Oil Prices Leading to Demand for Enhanced Oil Recovery Natural Gas Price Volatility Demographic Growth in West and Southeast U.S. Increased Petroleum Products Imports Increased Ethanol Demand KM Opportunity Rockies Express, Entrega Kinder Morgan Louisiana Pipeline Trans Mountain, Corridor expansions Spirit condensate line, Edmonton terminal Petcoke handling Gulf Coast, Canada Pier 9, Shipyard River terminal expansions McElmo Dome, Cortez expansion Sayre, North Lansing, Dayton storage expansions East Line, CALNEV expansions New York, Houston terminal expansions Storage expansions at Houston, Philadelphia Natural gas supply to ethanol plants thru KMIGT, NGPL, Retail 9

10 Rocky Mountain Natural Gas: Basis Spreads Support Need for New Infrastructure Basis Spread (a) ($1.04) ($1.42) $1.16 $1.88 ($0.42) ($0.64) ($0.43) ($0.72) $0.46 $0.54 (a) Basis differential versus Henry Hub. Sources: Historical Prices GasDat, Forward Prices Sempra Oct 05 Curve. 10

11 Rocky Mountain Natural Gas: Expected Production Growth Supports Need for New Infrastructure Rocky Mountain natural gas production is growing, but takeaway capacity is limited Rockies Exports 0.4 Bcf/d Rockies Production Growth (a) Production (Bcf/d) Bcf/d Utah Wyoming Colorado 2.5 Bcf/d (a) Source: CERA Wet Gas Capacity Outlook 2.0 Bcf/d 1.0 Bcf/d Current takeaway capacity ~ 6.5 Bcf/d 11

12 Rockies Express Provides a long-term solution for addressing capacity constraints out of the Rockies Rockies Express Pipeline Entrega Pipeline Opal to Wamsutter EnCana & Entrega Support 500,000 Dth/d firm long haul commitment Kinder & Sempra Joint Development Kinder 2/3 equity, Sempra 1/3 equity Sempra Affiliate committing to 200,000 Dth/d of FT Wyoming Natural Gas Pipeline Authority up to 200,000 Dth/d of FT Overthrust Pipeline Company OPC binding MOU for up to 1,500,000 Dth/d of capacity Direct link to Opal 12

13 LNG: Increased Supply on Gulf Coast Gulf Coast LNG Projects Under Construction ~8-11 Bcf/d of terminal capacity under construction with committed contracts Louisiana Pipeline to ") serve 2.6 Bcf/d at Cheniere Sabine Pass ") ")!! ") kj Katy ") &- ") ") ExxonMobil Golden Pass 1-2 ") Bcf/d, projected in-svc #* ") kj Freeport LNG Quintana Island 1.5 Bcf/d, projected in-svc 2007 ConocoPhillips 1 Bcf/d Dow 0.5 Bcf/d, 20-yr! ") kj #* ") ") ") ")!!! ") Sempra Cameron LNG!! Bcf/d, est in-svc Tractabel Bcf/d, 20-yr ENI 0.6 Bcf/d, 20-yr Cheniere Sabine Pass Bcf/d, projected in-svc 2009 Chevron 1 Bcf/d, 20-yr Total 1 Bcf/d, 20-yr Southern Union Trunkline LNG (0.6 Bcf/d existing) Phase I-II expansions add combined 1.2 Bcf/d projected in-svc 2006/07 BG 1.2 Bcf/d through 2023 ") Henry &- Source: company websites 13

14 ( ( (! ( ( ( ( ( ( ( ( ( ( ( Kinder Morgan Louisiana Pipeline LLC Provides key link between Sabine 340 Pass LNG Terminal to interstate pipeline grid Texas Louisiana CGT Delivery Point Transco Delivery Point TETCO Delivery Point ANR Delivery Point Texas Gas Delivery Point FGT Delivery Point Cypress Delivery Point miles 42 2,130,000 Dth/d Chevron and Total subscribed to 100% of capacity Houston 20 year contracts In-service April 1, 2009 Texas City Galveston 343 Lake Charles LNG Southern Union Co. Beaumont Southwest Loop Delivery Point Golden Pass ExxonMobil Energy Port Arthur Sempra Energy Sabine Pass Cheniere LNG, Inc.!!!! Cameron LNG Sempra Energy NGPL Delivery Point 342 Sabine Pass LNG Terminal Leg 1 Receipt Point Leg 2 Receipt Point Lake Charles Sabine Delivery Point Creole Trail Cheniere LNG, Inc. Southwest Loop-Johnson's Bayou Del. Pt. Bridgeline Delivery Point Trunkline Delivery Point Tennessee Delivery Point 346 Lafayette Henry Hub Proposed Kinder Morgan Louisiana Pipeline Leased Capacity on NGPL Proposed Interconnects LNG Terminal Location Natural Gas Pipeline Company of America NGPL Compressor Station 14

15 Canadian Oilsands: Supply (MBbl/d) 4,000 3,500 3,000 2,500 2,000 1,500 1, Canadian Crude Production by Type (a) Oilsands Pentanes/Condensate Conventional Heavy Conventional Light/Med Production Costs: Mining (c) Total Operating & Upgrade: Oilsands ~10% CAGR MMBbl/d Oilsands-only Cdn $22-26/Bbl US $19-22/Bbl Price = 30-40% below WTI 2.7 MMBbl/d Mining Upgrading Refining (reserves (billions of barrels) All amounts in U.S. dollars unless otherwise noted. (a) Source: CAAP Moderate Case, July 2005 Crude Production and Supply Forecast (b) Source: NEB 2003 study Canada s Energy Future, Scenarios for Supply and Demand to Note: Total discovered recoverable reserves of crude and bitumen (Saudi values are proven reserves, implying higher degree of certainty). (c) Source: DBRS October 2005 industry study The Canadian Oil Sands World Oil & Bitumen Reserves Top 10 (b) Venezuela Canada Saudi Arabia Peace River 130 Russia Trans Mountain Pipeline Iraq Alberta Corridor Pipeline EDMONTON Bitumen Oil UAE Express Pipeline CALGARY Kuwait Iran Oilsands Production Areas (c) HARDISTY USA FT McMURRAY Athabasca Cold Lake Libya 15

16 Canadian Oilsands: PADDs II and IV Have the Most Access to Canada California by water Asia? Major Canadian Oilsands Takeaway into the U.S. Vancouver Anacortes PADD V TRANS MOUNTAIN (225 MBbl/d) Edmonton Calgary Salt Lake City San Francisco Los Angeles RANGELAND (85 MBbl/d) CORRIDOR (220 MBbl/d) BOWRIVER- CENEX PACIFIC Billings PADD IV (118 MBbl/d) Casper Fort McMurray Cold Lake Hardisty EXPRESS (280 MBbl/d) EASTERN CORRIDOR Guernsey Denver PADD III El Paso Regina ENBRIDGE (1,832 MBbl/d) St. Paul PADD II PLATTE (166 MBbl/d) Midland SPEARHEAD SOUTHERN ACCESS Cushing (MMBbl/d) PADD II PADD IV PADD V Total Wood River Detroit Chicago Toledo Patoka Trunkline Capacity in to U.S Note: Pipeline paths not drawn according to precise geographic location, but by general regional direction. Houston Freeport Corpus Christi 16

17 Canadian Oilsands: U.S. a Significant Importer of Crude U.S. Crude Refinery Inputs by PADD 2004 (a) Alaskan North Slope Production Declining (b) (MBbl/d) PADD I (E. Coast) PADD II (Midwest) PADD III (G. Coast) PADD IV (Rockies) PADD V (W. Coast) Total Total Refinery Inputs 1,597 3,288 7, ,596 15,475 % Imports 97% 89% 59% 46% 36% 65% Canadian Imports as % of Total Imports 13% 36% % 9% 16% ANS Crude Oil Production (MBbl/d) 2,000 1,500 1, E 2005E 2007E 2009E Every PADD uses significant imports: PADD IV uses a very high percentage of Canadian PADD II and V are opportunities (a) Source: EIA Petroleum Supply Annual (b) Source: CIBC Jan-2006 industry report Oil Pipeline Expansion: Refiners in Traditional Markets Girding for Expanded Diet of Canadian Heavy. (c) Washington state crude oil refinery capacity. Sources: DBRS Oct-2005 industry report The Canadian Oilsands, Company reports. Washington State Refinery Capacity (c) Other 85% (521 MBbl/d) Canadian crude through Trans Mountain 15% (92 MBbl/d) 17

18 Trans Mountain Expansion 400 MBbl/d 700 MBbl/d 1,100 MBbl/d TMX1 C$595 million additional 75 MBbl/d Pump Station Expansion, C$230 million, 35 MBbl/d, in-svc by April 2007 Anchor Loop, C$365 million, 40 MBbl/d, in-svc at end of 2008 TMX2 Loop between Valemont & Kamloops and back to Edmonton, C$900 million, 100 MBbl/d by 2010 TMX3 Loop between Kamloops & Lower Mainland, C$900 million, 300 MBbl/d by 2011 TMX North Line between Valemont & Kitimat, C$2.0 billion, 400 MBbl/d 18

19 Identified Future Growth Opportunities Approximately $8 billion in identified growth opportunities over next 5 years Entity KMI KMI Project Louisiana Pipeline (LNG) Entrega Rockies Express CO 2 East Line expansion Spirit Trans Mountain expansion Corridor expansion Other identified expansions (e) Total All amounts in U.S. dollars unless otherwise noted. (a) Assumes 2/3 Kinder Morgan ownership. Entrega includes the purchase of Phase I. (b) (c) Phase I and phase II. (d) Assumes 50% Kinder Morgan ownership. (e) Shipyard River Terminal, Pier 9, Edmonton terminal, CALNEV and Dayton. Estimated Total Project Cost ($B) $ (a) 2.3 (a) 1.1 (b) 0.3 (c) 0.4 (d) $8.0 Expected Completion

20 $10 Billion in Capital Invested at ($ billions) $2.0 $1.6 $1.2 $0.8 $0.4 $1.6 Total Invested by Year $1.1 $1.0 $1.9 $1.3 Expansion Acquisition $0.9 $1.3 $1.1 $8.0 $6.0 $4.0 $2.0 $0.0 $4.0 $3.0 Total Invested by Type $7.5 $2.7 Acquisitions Expansions Total Invested by Segment $3.5 $3.1 $ $2.0 $1.8 $1.8 $1.0 Note: All amounts in U.S. dollars unless otherwise noted. See Appendix for details on calculations. $0.0 Products Natural Gas CO2 Terminals 20

21 Attractive Return on Capital Return on Investment (a): Products Pipelines 11.9% 11.8% 12.8% 12.9% 12.4% 11.3% Natural Gas Pipelines CO Terminals Return on Investment 12.3% 12.7% 12.6% 13.1% 13.6% 14.2% Return on Equity 17.4% 19.0% 21.9% 23.2% 25.2% 26.6% Note: Please see Appendix for details on calculations. (a) G&A is deducted in calculating the return on investment for, but is not allocated to the segments and therefore not deducted in calculating the segment information. 21

22 Attractive Return on Capital KMI Return on Investment (a,b,c): Investment in 11.2% 16.9% 21.4% 25.0% 29.6% 37.9% NGPL Retail Power KMI Return on Investment 10.5% 11.7% 12.4% 13.3% 14.8% 17.0% KMI Return on Equity 16.6% 19.0% 18.5% 21.3% 23.2% 22.3% Note: Please see Appendix for details on calculations. (a) G&A is deducted in calculating return on investment, but is not allocated to the segments and therefore not deducted in calculating the segment information. (b) Totals include all assets owned in given year, even if subsequently divested. (c) 2005 excludes impact of Terasen. 22

23 KMI & Have Solid Balance Sheets ($ millions) Credit Summary L-T Debt Rating Baa1/BBB+ Net Debt / Total Capital (b,c) 52% 2006 Budget Estimates: Debt / EBITDA 3.1x EBITDA / Interest 5.6x (a) KMI Baa2/BBB 56% 4.2x 4.0x CP Capacity (c) Long-term Debt Maturities (c) Total Bank Credit Outstanding CP TGVI Drawn Letters of Credit Excess Capacity $1, $462 KMI $1, $ $45 $255 $5 $250 $250 KMI $346 $220 $639 $85 $129 Note: All amounts in U.S. dollars unless otherwise noted. (a) Without additional/potential expansions outlined in Financial Review. For impact with potential expansions, see Financial Review. (b) Debt excludes preferred securities (KMI) and fair value of interest rate swaps and is net of cash. Capital includes preferred securities (KMI) and excludes loss/gain from other comprehensive income. (c) At December 31,

24 Has Returned Nearly $5 Billion in Cash to Partners, ($ millions) $1,400 $1,200 $1,000 $800 $600 $400 $200 $0 GP (a) LP $17 $30 $548 $701 $278 $208 $333 $113 $153 $198 $423 $38 $58 $340 $220 $115 $140 $827 $336 $491 $978 $406 $1,281 $1,162 $492 $546 $572 $670 $ E Note: All amounts in U.S. dollars unless otherwise noted. (a) Includes 2% general partner interest. 24

25 KMI Has Returned Over $3 Billion in Cash to Investors, ($ millions) $4,000 $3,500 $3,000 $2, E KMI $3,566 $473 $2,000 $1,500 $1,000 $1,324 $473 $873 $1,369 $3,093 $500 $851 $0 Dividends Share Repurchase Change in Net Debt Total Note: All amounts in U.S. dollars unless otherwise noted. 25

26 Risks Regulatory Pacific Products Pipeline FERC/CPUC case Periodic rate reviews Unexpected FERC, NEB, BCUC policy changes Environmental Terrorism Interest Rates 50% of debt is floating rate Budget assumes an increase based on the forward curve The full-year impact of a 100-bp increase in rates equates to an approximate $28 million increase in expense at and $28 million at KMI Note: All amounts in U.S. dollars unless otherwise noted. 26

27 Summary Stable Cash Flow Own assets core to energy infrastructure Internal Growth Opportunities Critical Mass Well-located assets/favorable demographics Fixed Cost Business Drop growth to bottom line Unique Structure Tax Efficient Incentive Fee Management Philosophy Low-Cost Operator Focused on cash Disciplined Investment /KMR: 6-7% Yield and 8% Long-Term Growth KMI: 3.6% Yield and 10% Long-Term Growth 27

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