KMP Cash Distribution Math Kimberly Allen

Transcription

1 KMP Cash Distribution Math Kimberly Allen 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 ) may differ materially from those expressed in the forward-looking statements contained throughout this presentation. 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; 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; and other uncertainties. You are cautioned not to put undue reliance on any forward-looking statement.

2 1 Overview MLPs required to distribute Available Cash Calculation of Available Cash: All Cash Receipts Minus: All Cash Disbursements Plus/Minus: Net Change in Reserves Expect over $710 million available in 2002 Cash from Operations GP eligible for incentive distributions Cumulative test with cushion Cash from Interim Capital Transactions Not anticipated Split 2% GP / 98% LP

3 2 Sources of Cash KMP/KMR Approximate Operating Income (a) Add/Subtract: $608 Terminals DD&A Sustaining Capital (74) Products CO2 Distributable Cash before Promote $ Natural Gas (a) 2002 operating income from segments less G&A, Interest, and Minority Interest

4 3 Sharing of Cash Flow Distributable Cash Flow before Promote = $711 million =$3.97/unit General Partner =$281 or 40% Limited Partner =$430 or 60% =$2.40/unit

5 4 Sharing of Cash Flow - Historical 1999 % 2000 % 2001 % 2002E % Total $ % $ % $ % $ % Growth 68% 64% 30% Limited Partner: Total $ % $ % $ % $430 60% Growth 57% 54% 27% Per Unit $1.43 $1.71 $2.15 $2.40 General Partner: Total $ % $ % $ % $281 40% Growth 94% 82% 36%

6 5 Incentive Distribution Tiers KMP Distribution Per LP Unit (a) General Partner Limited Partner Tier I $0.00 to $ % 98% Tier II $0.605 to $ % 85% Tier III $0.715 to $ % 75% Tier IV > $ % 50% (a) Annual calculation. Actual calculations are made quarterly at 25% of distribution target shown.

7 6 Example Step 1: Calculate Distributable Cash Per Share Scenario 1 Scenario 2 Scenario 3 Current Total Distributable Cash ($mm) $102 $124 $155 $711 Units Outstanding Total DCF/Unit $0.62 $0.75 $1.04 $3.97 Comments Meets first tier criteria only Meets first and second tier criteria Meets first, second, and third tier criteria Based on 2002 plan; in 50% splits LP DPU $0.61 $0.72 $0.94 $2.40

8 7 Example Step 2: Calculate General Partner share DCF/Unit $0.62 Tier I: $0.00 to $0.605 General Partner 2% $0.01 Limited Partner 98% $0.61 Tier II: $0.605 to $0.715 General Partner 15% Limited Partner 85% Tier III: $0.715 to $0.935 General Partner 25% Limited Partner 75% Tier IV: > $0.935 General Partner 50% Limited Partner 50% Total General Partner $0.01 (2%) Limited Partner $0.61 (98%)

9 8 Example Step 2: Calculate General Partner share DCF/Unit $0.62 Tier I: $0.00 to $0.605 General Partner 2% $0.01 Limited Partner 98% $0.61 Tier II: $0.605 to $0.715 General Partner 15% Limited Partner 85% Tier III: $0.715 to $0.935 General Partner 25% Limited Partner 75% Tier IV: > $0.935 General Partner 50% Limited Partner 50% Total General Partner $0.01 (2%) Limited Partner $0.61 (98%) $0.75 $0.01 $0.61 $0.02 $0.11 $0.03 (4%) $0.72 (96%)

10 9 Example Step 2: Calculate General Partner share DCF/Unit $0.62 Tier I: $0.00 to $0.605 General Partner 2% $0.01 Limited Partner 98% $0.61 Tier II: $0.605 to $0.715 General Partner 15% Limited Partner 85% Tier III: $0.715 to $0.935 General Partner 25% Limited Partner 75% Tier IV: > $0.935 General Partner 50% Limited Partner 50% Total General Partner $0.01 (2%) Limited Partner $0.61 (98%) $0.75 $0.01 $0.61 $0.02 $0.11 $0.03 (4%) $0.72 (96%) $1.04 $0.01 $0.61 $0.02 $0.11 $0.07 $0.22 $0.11 (10%) $0.94 (90%)

11 10 Example Step 2: Calculate General Partner share DCF/Unit $0.62 $0.75 $1.04 $3.97 Tier I: $0.00 to $0.605 General Partner 2% $0.01 $0.01 $0.01 $0.01 Limited Partner 98% $0.61 $0.61 $0.61 $0.61 Tier II: $0.605 to $0.715 General Partner 15% $0.02 $0.02 $0.02 Limited Partner 85% $0.11 $0.11 $0.11 Tier III: $0.715 to $0.935 General Partner 25% $0.07 $0.07 Limited Partner 75% $0.22 $0.22 Tier IV: > $0.935 General Partner 50% $1.46 Limited Partner 50% $1.46 Total General Partner $0.01 (2%) $0.03 (4%) $0.11 (10%) $1.57 (40%) Limited Partner $0.61 (98%) $0.72 (96%) $0.94 (90%) $2.40 (60%)

12 Other Assets Mike Morgan 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 ) may differ materially from those expressed in the forward-looking statements contained throughout this presentation. 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; 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; and other uncertainties. You are cautioned not to put undue reliance on any forward-looking statement.

13 12 Overview of Other Segments Retail 7% Power & Other 6% CO2 Pipelines 11% Terminals 18% Products Pipelines 38% KMP 46% Natural Gas Pipelines 33% NGPL 41% KMP/KMR KMI (a) 2002 segment earnings (KMI) and DCF (KMP/KMR) before allocation of G&A and interest.

14 13 W Y O M I N G Retail Division Kirk Ranch Storage Bunker Hill Oil Springs N E B R A S K A Huntsman Wolf Creek Storage C O L O R A D O L E G E N D Northern Gas Company Rocky Mountain Natural Gas Retail Distribution KMIGT Town served by NGC Town served by RMNG Town served by Retail Dist. Gas Storage

15 14 W Y O M I N G 29% of Meters Kirk Ranch 24% Bunker Hill Storage of Income Oil Springs Huntsman Retail Division N E B R A S K A 42% of Meters 37% of Income Wolf Creek Storage C O L O R A D O 29% of Meters 39% of Income Retail Totals 239,136 Meters $60.3mm 02 Plan Income

16 KMI Retail Segment Key Drivers Full year benefit of Citizens CO acquisition CO meter growth Hedging strategy minimizes weather-related margin fluctuations Automated schedule/dispatch system full year benefit (MDSI) Complete WY Choice Gas program to 66,000 customers

17 16 KMI Retail Segment Operating Forecast for 2001 and E Revenues $ $ $ COS $ $ $ Gross Margin $ $ $ Ops Exp $ 39.2 $ 42.3 $ 48.8 EBITDA $ 61.5 $ 69.7 $ 74.1 DDA $ 11.8 $ 12.3 $ 13.8 Operating Income $ 49.7 $ 57.4 $ 60.3

18 Western Slope of CO Driving Internal Growth Over Next 3 Years 17

19 18 Power & Other Strategy: Focused on fee based operations Fee-based developer of new plants (no new plants in 2002 budget) Retail 7% Power & Other 6% NGPL 41% KMP 46%

20 19 Overview of Colorado Operations Gas-fueled cogeneration power plants Net plant capacity Ft. Lupton 136 of 272 MW Monfort 32 MW UNC 25 of 76 MW Power purchase agreements with Public Service Company of CO WYOMING COLORADO Ft. Collins Ft. Lupton Greeley Ft. Lupton Denver Monfort UNC DIA NEBRASKA

21 20 Wrightsville, AR Project Percent completed 82% Estimated COD June 2002 Total cost $330 million

22 21 Jackson, MI Project Percent completed 70% Estimated COD June 2002 Total cost $360 million

23 22 Structure Common Equity Preferred Equity Debt Gas Supply Obligation Power Offtake Operator KM Performance Guarantees Wrightsville, AK Mirant KMI Mirant Mirant Marketed by Mirant Mirant Heat Rate / Capacity Jackson, MI CIT (Tyco) / Investors KMI Citigroup / CIT / Pvt. Placement Williams Williams 16 yr Toll KMI Heat Rate / Capacity / Availability / Ops. Budget

24 23 Power & Other Segment Income (millions) $63.3 ($17.8) ($4.5) $8.8 $49.8 Lost Income From Sold Gathering Assets / Telecomm Reduction In Plant Development Fees Increase in Income From Operating Plants Plan

25 24 Long Term Power Outlook KMI power outlook impacted by industry downturn Additional plants delayed until at least 2004 in service Orion technology still attractive Will continue to evaluate opportunities consistent with our approach of minimizing commodity price risk GE turbines status: 1 set ordered 1 set suspended Options on 2 additional sets Will benefit in 2003 due to full year of Jackson/Wrightsville operations Additional development fees in 2003 dependent on Williams/market

26 25 What is CO 2 Flooding? CO 2 is injected into mature oil fields to increase production and reserves

27 26 Typical CO2 Flood Economics Cost/Bbl. Capital $0.80 CO 2 Purchases $3.00 Operating Expenses $ % 25% 20% 15% Projected IRRs (CO 2 Cost 60 cents Mcf) Subtotal: $6.40 EOR Tax Credit: (0.38) Total: $ % 5% 0% Projects typically have attractive IRRs with oil in the mid to high teens Projects typically have year life Marginal cost to produce incremental barrel of oil is extremely low Proj. 1 Proj. 2 $10 $12 $14 $16 $18 $20

28 27 Kinder Morgan CO2 Company, L.P. Operations CO2 Supply Assets Utah Arizona McElmo Dome New Mexico Colorado Kansas Bravo Dome Cortez Pipeline Bravo Dome Pipeline SACROC Kinder Morgan CO2 Company. L.P. Assets Oklahoma Texas Ft/In McElmo Dome Bravo Dome CO2 Transportation Assets Cortez PL Bravo PL Central Basin PL CRC PL Oil Producing CO2 Flood Assets SACROC Unit MKM-Yates Unit Associated Gas Processing Plants

29 28 CO2 Overview KMP 2002 Distributable Cash Estimated breakout of CO Distributable Cash CO2 Pipelines 11% Terminals 18% Natural Gas Pipelines 33% Products Pipelines 38% Plants & Other 12% MKM - Yates Unit 5% SACROC Unit 32% CO2 Pipelines 44% CO2 Supply 7%

30 29 CO2 and MLP Attributes CO2 Transport typical MLP pipeline business CO2 Sales long-term contracts CO2 Flooding Investment Characteristics: Asset Heavy - Pipelines, Compression Equipment, Wells Operating Cost Structure: Predictable Driven by fluid handling, purchased power Revenue Stream: CO2 Floods are typically very long-term projects Production is usually stable and predictable Hedging mitigates price uncertainty

31 30 KMP Has Unique Opportunity to Develop SACROC KMP CO2 employees are the leading experts in the industry McElmo Dome is Industry s lowest cost and most prolific source. SACROC Unit has many attractive features: 1. Reservoir thickness reduces well investment 2. Prolific reservoir permeability accelerates returns 3. Second largest unit in Permian Basin 2.8 Billion OOIP 4. Field is under-developed relative to its peers (only 2,300 of 20,000 acres currently under CO2 development) 5. Centerline Project has exceeded expectations

32 31 SACROC Centerline CO 2 Flood Response Oil Production, BOPD 1000 Waterflood Decline CO 2 Incremental

33 32 SACROC Growth Will Shift Mix Over Time Estimated 02 DCF = $110mm Targeted 03 DCF = $130+mm Plants & Other 12% MKM - Yates Unit 5% Plants & Other 15% MKM - Yates CO2 Pipelines Unit 44% 3% CO2 Pipelines 37% SACROC Unit 32% CO2 Supply 7% SACROC Unit 39% CO2 Supply 6%

34 33 Long-Term Outlook / Goals Domestic oil reserve replacement costs are increasing CO 2 flooding provides an attractive cost and a proven track record to add new reserves Kinder Morgan will leverage infrastructure in Permian Basin Lowest cost supply, largest pipeline network and largest CO 2 reserves Maintain leadership in emerging U.S. CO 2 market as a third party provider Maximize SACROC opportunity as a niche producer

35 Corporate Development Update Mike Morgan 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 ) may differ materially from those expressed in the forward-looking statements contained throughout this presentation. 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; 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; and other uncertainties. You are cautioned not to put undue reliance on any forward-looking statement.

36 35 KMP Acquisition Strategy Acquire fee-based pipelines and terminals in high growth markets Evaluate based on conservative assumptions Long-term growth assumptions consistent with demographic and macroeconomic trends Typically focus on overhead cost reductions vs. field operations Must create value for KMP Immediately accretive to cash distribution IRR in excess of weighted cost of capital

37 36 KMP s Cost of Capital Debt 50% Fixed 7.5% 50% Floating 4.5% Pretax Avg. Debt Cost 6.0% Equity Current Yield 5.8% GP Gross-Up (40%) 3.9% Pretax Equity Cost 9.7% 40% 60% Average Pretax Cost of Capital = 8.2% - Several hundred basis point cost advantage vs. typical corporation - Targeted returns significantly higher than cost of capital (growth premium)

38 37 Example Acquisition Economics (a) ($ millions) KMP KMI Purchase Price $1, % on New Equity $23.2 Pre-Tax Cash 7X GP Share of Excess % 6% (24.0) $0.17 on 31 mm LP units % 9.7% (58.2) Cost of Capital on 2% (1.0) Excess Cash 60.7 Pre-Tax Income 57.8 GP Share (30.3) After-Tax Income 34.7 Cash for LPs $30.3 EPS $0.28 Accretion Per LP Unit $0.17 (a) Assumes 166 million LP units outstanding (181.8 post acquisition); $2.20 distribution/unit; $38 unit price; million KMI shares outstanding.

39 38 KMP Acquisition Advantages KMP Typical Corporate Competitor Typical MLP Competitor Cost of Equity Capital 9-10% pretax 12-15% after-tax 6-10% pretax Debt Ratings A- / Baa1 mid BBB avg. mid BBB avg. Access to Institutional Equity Yes Yes Limited Ability to Complete $1+bn Acquisitions Yes Yes Limited Post-Enron Reduction of CAPEX Budget No Significant Reductions Some Reductions Likely Likely Viewed as a Competitor No Yes Yes

40 39 Optimistic Outlook Over Next Months Liquids Pipelines Industry Consolidation Upstream E&P Focus Ordered Divestitures Balance Sheet Sales Industry KM % Miles of Pipeline (thousands) % Throughput (annual bbls delivered) % Revenues % Source: AOPL, EAI, Oil and Gas Journal

41 40 Optimistic Outlook Over Next Months Bulk Terminals Leading player Small percent of total market Liquids Terminals Largest independent player 16% of independent market share Greater opportunities in natural gas pipelines Asset sales / restructuring by others in industry Reduction in competitor s capital budgets

42 Financial Review Park Shaper 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 ) may differ materially from those expressed in the forward-looking statements contained throughout this presentation. 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; 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; and other uncertainties. You are cautioned not to put undue reliance on any forward-looking statement.

43 42 Agenda Real earnings, real cash 2002 Budget Balance Sheet Credit Issues KMR Update

44 43 Financial Overview KMP Total distributions grew more than 25% in 2001 $2.15 distribution for 2001 vs. $1.71 for 2000 Annual distribution rate now $2.20 Project year-end rate of $2.50 Earnings expected to be $ % debt to total capital target KMI 52% growth in EPS in 2001 to $1.96 Expect over 30% growth in 02 ($2.58) Long-term growth rate of 20-30% 50% debt to total capital; 47% currently

45 44 KMP Distributable Cash E Growth Rate Net Income $278,348 $442,343 $601,917 DD&A 90, , ,331 Sustaining Capex (35,051) (56,122) (73,838) Total Distributable Cash Flow 334, , ,410 31% General Partner's Interest (109,470) (202,095) (276,183) Distributable Cash Flow $224,652 $335,214 $428,227 28% Net Income - $/unit $1.34 $1.56 $ % DD&A - $/unit Sustaining capex - $/unit (0.28) (0.36) (0.41) Distributable cashflow - $/unit $1.78 $2.18 $ % Total distribution - $/unit $1.71 $2.15 $ %

46 45 KMI Cash Per Share Growth Rate Recurring Earnings $146,735 $237,232 $324,502 Diluted EPS $1.28 $1.96 $ % Add: DD&A 108, , ,153 Less: Sustaining Capital Spending (85,654) (79,000) (85,000) Add: Book Cash Taxes 88, ,798 79,422 Free Cash Flow $257,361 $385,276 $423,077 Average Shares Outstanding 115, , ,586 Free Cash Flow/Share $2.24 $3.18 $3.37 6%

47 46 KMP 2002 Budget Income Change % Change Segment Earnings before DD&A Product Pipelines 413, % 380, % 33, % Natural Gas Pipelines 262, % 226, % 35, % CO2 Pipelines 112, % 111, % 1, % Terminals 196, % 157, % 39, % Acquisitions Tejas assets 85, % 85,000 Total Segment Earnings before DD&A 1,070, % 875, % 194, % DD&A (176,331) (151,088) (25,243) 16.7% G&A (100,000) (99,009) (991) 1.0% Interest (180,627) (171,457) (9,170) 5.3% Minority Interest (11,329) (11,440) 111 (1.0%) Net Income 601, , , % GP Share (276,183) (202,095) (74,088) 36.7% Limited Partners' Net Income 325, ,248 85, % Units Outstanding (avg) 178, ,110 24, % Per unit % DD&A per unit % Sustaining Capex per unit (0.41) (0.36) (0.05) 13.7% Distributable Cash Flow % Total distributions %

48 47 KMI 2002 Budget Income Change % Change KMP 403, % 251, % 151, % NGPL 359, % 346, % 13, % Retail 60, % 57, % 3, % Power and other 49, % 63, % (13,551) (21.4%) Total Segment Income 873, % 719, % 154, % Equity income 1,950 (5,052) 7,002 G&A (69,207) (65,370) (3,837) 5.9% Interest (179,472) (216,991) 37,519 (17.3%) Minority interest (60,442) (36,300) (24,142) 66.5% Other (148) 9,704 (9,852) Pre-tax income 566, , , % Income Tax (242,022) (167,768) (74,254) 44.3% 42.48% 41.44% Net Income 324, ,232 87, % Shares Outstanding (avg) 125, ,326 4, % Per unit %

49 48 Quarterly Earnings and Distributions Q1 Q2 Q3 Q4 Total KMI Earnings 25-30% 20-25% 20-25% 25-30% 2.58 KMP Earnings 25-30% 20-25% 25-30% 25-30% 1.83

50 49 KMI Growth Drivers 2002 KMP (46% of expected 02 segment earnings) Strong internal growth Detail in KMP section NGPL (41%) Contract renewals ensure stability Horizon and St. Louis expansions come on-line Additional demand power plants, storage projects, Permian expansion

51 50 KMI Growth Drivers (Cont) Retail (7%) Stability ensured through weather hedges Citizens acquisition Full year of cost savings from capital projects Longer term growth of 3-4% Power and Other (6%) Includes only two projects currently under development Michigan and Arkansas Development fees roll off as projects completed (mid to late 02) Operations fees, return on preferred equity begin

52 51 KMI Growth Drivers (Cont) Equity income Better performance from TransColorado Paid down TransColorado debt G&A Up slightly in 02 Interest Expense Lower debt balances reduce expense Minority Interest KMR drives growth full year, more outstanding TRUPS - $22mm each year

53 52 KMP Growth Drivers Product Pipelines (39%) Pacific volume growth, tariff increases; full year Calnev Plantation volume growth, tariff increases CFPL - volume growth, tariff increases North System volume growth, tariff increases, Citgo Transmix Colton expansion, full year of Duke deal Cochin volume growth, tariff increases Natural Gas Pipelines (32%) KMIGT Down slightly KMTP full year of Occidental lease buy-out; storage, Calpine, Equistar Trailblazer half year of expanded capacity Upstream volume growth at Red Cedar and Thundercreek

54 53 KMP Growth Drivers (Cont) CO2 Pipelines (11%) Volume increases offset by pricing and expenses Terminals (18%) Bulk: Full year of acquisitions: Pinney, Vopak, etc. Volume growth, tariff increases Liquids: Full year of acquisitions: Stoltz, Boswell Expansions Additional acquisitions

55 54 KMP Growth Drivers (Cont) G&A Primarily a function of acquisition growth Growth slower than growth in revenues and margins Net Debt Cost Target 40% debt to capital Lower rates provide some additional benefit Generally target 50% floating, 50% fixed Minority Interest Trailblazer (until close acquisition) KMGP interest function of earnings

56 55 KMP Preliminary Balance Sheet December 31, Cash and cash equivalents $ 62,802 $ 59,319 Other Current Assets 317, ,942 Property, Plant and Equipment, net 5,082,612 3,306,305 Investments 440, ,045 Other Assets 819, ,599 Total Assets $ 6,722,463 $ 4,625,210 Accounts and notes payable $ 124,088 $ 301,523 Current portion of long-term debt 314, ,949 Other Current Liabilities 162, , ,572 1,098,956 Long-term debt 2,474,586 1,255,453 Other Long-term Liabilities 423,035 95,565 Minority Interest 65,236 58,169 Partners' Capital 3,159,034 2,117,067 Total Liabilities and Partners' Capital $ 6,722,463 $ 4,625,210

57 56 KMI Preliminary Balance Sheet 12/31/ /31/2000 Cash $ 16,134 $ 141,923 Other Current Assets 344, ,719 Property, Plant and Equipment, Net 5,703,952 5,667,991 Investment in Kinder Morgan Energy Partners 2,806,615 1,819,281 Other Assets 667, ,075 Total Assets $ 9,538,769 $ 8,386,989 Current Maturities of Long-term Debt $ 6,267 $ 808,167 Notes Payable 623, ,000 Other Current Liabilities 487, ,708 Total Current Liabilities 1,117,207 1,354,875 Deferred Income Taxes 2,430,732 2,273,177 Other Deferred Credits 231, ,420 Minority Interests in Equity of Subsidiaries 817,982 4,910 Long-term Debt 2,404,967 2,478,983 Trust Preferred Securities 275, ,000 Common Stockholders' Equity 2,261,291 1,777,624 Total Equity 2,536,291 2,052,624 Total Liabilities and Equity $ 9,538,769 $ 8,386,989

58 57 Balance Sheet Ratios KMI Debt to Capital 45.6% 47.4% 62.2% 66.7% Debt/EBITDA EBITDA/Interest KMP Debt to Capital 40.6% 46.1% 46.7% 39.7% Debt/EBITDA EBITDA/Interest

59 58 Off Balance Sheet Debt $Millions Entity Asset Ownership Interest Debt at 100% (a) Comments KMI Jackson Power Plant Preferred interest, plant operator $250 Obligations related to plant performance and operation KMI Ft. Lupton Power Plant 50%, AEP owns remainder $149 Non-recourse KMI Igasamex 21%, various other partners $5 Pro-rata guarantee KMP Cortez Pipeline 50% Exxon and Cortez Vickers own remainder $282 Supported by T&D agreement, rated A1/P1 KMP Plantation Pipe Line 51.19%, Exxon owns remainder $175 $10MM jointly guaranteed by owners, rated A1/P2 KMP Red Cedar 49%, Southern Utes own remainder $55 Jointly guaranteed KMP Nassau Terminal 100% $29 Guarantee port revenue bonds (a) Debt balances represent 100%, not Kinder Morgan share.

60 59 Prior Off-Balance Sheet Debt (October 1999) $Millions Entity Asset Ownership Interest Debt at 100% (a) Comments KMI /KMP KMTP 100% $360 Purchased assets from Occidental in August 2001 KMI TransColorado 50%, Questar owns remainder $200 Paid off in October 2001 KMI Bushton Lease 100% $200 Sold to OneOK in March 2000 KMI AR Securitization 100% $150 Paid off in March/April 2000 KMI Meridian Lease 100% $67 Paid off and sold to OneOK in March 2000 KMI Wattenberg Lease 100% $40 Sold to HS Resources/Kerr McGee in December 1999/2001 KMI /KMP Coyote Gulch 50%, El Paso owns remainder $34 Paid off in June 2001 KMI /KMP Douglas Lease 100% $24 Paid off in December 2000 (a) Debt balances represent 100%, not Kinder Morgan share.

61 60 Liquidity Year-end CP balance Commercial Paper capacity Remaining capacity Current CP rates KMI % KMP 591 1, % 02 Maturities March October Credit Facilities - October Spreads 5-Yr 10-Yr 30-Yr

62 61 Expected Financings KMP $Millions Commercial paper balance 591 Tejas acquisition 750 Debt issue maturing in March 200 Trailblazer acquisition 68 Cochin acquisition 29 1,638 KMI Generate >$400mm of free cash flow Maintain 50% debt to capital Pay down debt Debt offering 500 Repurchase equity KMR equity offering 700 1,200 Remaining commercial paper 438 Commercial paper capacity 1,050 Remaining capacity 612 KMP debt to capital 41%

63 62 Other Credit Issues Limited ratings triggers ISDA s for commodities only use to hedge limited commodity exposure Contingent liabilities Operate Jackson plant, some financial support post-16 year tolling period (KMI) KMR exchanges (KMI) KMP creditwatch negative at S&P Equity offering Linkage with KMI Average debt to capital vs target

64 63 KMR is KMP KMR KMP Distributions Shares Cash Yield 5.8% 5.8% Exchangeability KMP Common Units None Voting Rights In Parity with KMP Limited Optional Purchase Yes Yes Mandatory Purchase Yes No Tax Considerations Allocated Taxable Income No Yes Non-Qualifying Income No Yes UBTI No Yes K-1s No Yes State Filing Obligations No Yes

65 64 KMR Trades with KMP KMP 36 Price KMR /15/2001 Date 12/31/2001

66 65 KMR Share Performance KMR has traded on average, within 1% of KMP price Consistently closed above KMP in 2002 Total exchanges into KMP have been small to date Low short interest levels in KMP and KMR Trading volume has been reasonably liquid. Expect additional liquidity via additional offerings Structure confirmed by leading investors and potential new offerings

67 66 Financial Summary KMP 12% growth in DCF/unit to $2.40/unit before acquisitions $2.50 year end run rate (no acquisitions) 40% debt to total capital Will distribute $700mm KMI 32% growth in EPS to $ % debt to total capital Long term growth 20-30% annually Generating tremendous free cash flow

68