Wells Fargo Securities 9 th Annual Pipeline and MLP Symposium December 7, 2010

Transcription

1 Wells Fargo Securities 9 th Annual Pipeline and MLP Symposium December 7, 2010

2 Forward Looking Statements NYSE: NRGY Except for the historical information contained herein, the matters discussed in this presentation (e.g., our growth outlook and forecasted economics) are forward-looking statements that involve risks and uncertainties. These risks and uncertainties include, among other things, market conditions, weather risks and other factors discussed in the Company s filings with the Securities and Exchange Commission including Forms 10- K, 10-Q, and 8-K. Furthermore, any forward-looking statements presented are expressed in good faith and are believed to have a reasonable basis as of the date of this presentation. Inergy assumes no responsibility to update this information and it may be superseded by later information. Forward-looking statements are not guarantees of future performance or an assurance that our current assumptions and projections are valid. Actual results may differ materially from those projected. 2

3 Inergy Overview 3

4 Investment Highlights Income Diversified Operating Model The Largest Independent Natural Gas Storage Provider in the U.S. A Leading National Propane Franchise Strong Financial Performance Record Growth Midstream Energy Storage Platform Becoming a Larger Component of Business Pipeline of High-Return Midstream Expansion Projects Underway Record of Consistent EBITDA & Distributable Cash Flow Growth Disciplined Consolidator of Retail Propane Industry Safety Underlying Businesses Characterized by Recession Resistant Stable Cash Flows Balance Sheet well-positioned for future opportunities 4

5 Inergy Snapshot Inergy, L.P. is a geographically diverse retail propane and midstream energy business ~$6.5 billion partnership enterprise value with ~$326 million FY 2010 Adj. EBITDA (a) Propane Midstream 4th largest retail propane distributor serving over 700,000 customers in 33 states Footprint located in quality markets with an intense focus on delivering financial and operational performance Supported by experienced supply, transportation, and logistics group based in KC Propane ~57% Diversified Business Model (b)(c) 80 Bcf high-deliverability natural gas storage operations located in New York & Texas with planned expansion to ~100 Bcf (b) Leading provider of underground LPG storage in the Northeastern U.S. Industry-leading solution mining and salt production company in upstate New York NGL fractionation, storage, and terminalling operation strategically located on the West Coast Midstream ~43% (a) FY 2010 Adjusted EBITDA as of 9/30/2010. Enterprise value as of 12/2/10. (b) Pro Forma Seneca Lake acquisition. (c) Forecast 2011 Adjusted EBITDA. 5

6 Recent Events: Continued Steady, Predictable Performance Tres Palacios Natural Gas Storage 38.4 Bcf of working gas capacity with planned expansion to 47.9 Bcf High-deliverability salt dome storage asset located near Houston and San Antonio metro areas and connected to 10 interstate and intrastate pipelines serving multiple U.S. demand markets Acquisition positions Inergy as the largest independent natural gas storage operator in the U.S. Establishes a new gas storage platform for future growth Transaction closed in October 2010 Inergy raised ~$400 million in upsized equity offering and placed $600 million of Senior Unsecured Notes due 2018 to fund the Tres Palacios acquisition and repay borrowings under revolving credit facility Seneca Lake Natural Gas Storage Additional 2.0 Bcf natural gas storage capacity located on property at US Salt Attractive capital efficiencies existing compression and pipelines available for US Salt Gas Storage expansion Accelerates natural gas storage and transportation hub in Northeastern U.S. Expected to be 100% fee-based at close under long-term contracts FERC approval received; awaiting NYPSC expected to close fiscal Q Inergy continues to lead the propane industry consolidation with the acquisitions of Liberty Propane, MGS and Pennington Gas Service this year NRGY & NRGP complete simplification transaction Creates single, streamlined enterprise positioned for future growth Inergy s corporate family credit rating upgraded to Ba2 by Moody s 6

7 Simplification Transaction Benefits Inergy GP, LLC Managing General Partner (Board of Directors) Current Ownership Structure (a) Public Unitholders 76.8% Limited Partner Interest Non-Economic Mgmt Rights Management & Directors 13.6% Limited Partner Interest Inergy, L.P. NYSE Symbol : NRGY 100% Ownership Operating & Other Subsidiaries Units Outstanding as of 11/15/10 (000 s) Inergy, L.P. Common Units 109,334 Inergy, L.P. Class B (PIK Units) 11,568 (b) Class B Units (PIK Units) 9.6% Limited Partner Interest Transaction Benefits Cancellation of IDRs and purchase of GP economic interest results in Lower cost of capital 100% of economic return from capital expansion projects and acquisitions being paid to NRGY unitholders Enhances NRGY s competitive position for acquisition opportunities and organic growth projects Equity transaction maintains NRGY s balance sheet flexibility and liquidity Attracts a broader investor base to a single, larger entity with increased public float and liquidity (a) (b) Simplified. Class B (PIK) units are not entitled to receive cash distributions until converted to common units. The Class B units convert to common units on a one-for-one basis over a two year period 7

8 Inergy Strategy Deliver Operational Excellence Premier Service Provider in Core Midstream Markets Midstream operations primarily fee-based; long-term contract-driven cash flow Dual energy storage hubs in the Northeast and Texas with access to multiple major long-haul pipelines serving premium demand markets Further Enhance the Operation of an Outstanding Propane Franchise Maintain flexible operating model in attractive markets Deliberate focus on residential customer base with high tank control Disciplined Capital Investment Continue Growth Through Capital Expansion Projects & Acquisitions Midstream - Execute capital expansion projects around existing asset base Pursue and evaluate complementary midstream opportunities Seek to further strengthen the long-term growth profile with stable, fee-based cash flow streams Propane - Expand existing retail footprint and establish new footprints with top regional businesses 8

9 Distinguished Distribution Performance Simplification transaction and expansion projects position company to continue growing long-term $1.91 $2.14 $ Quarterly Distribution Increases ~10% Distribution Growth CAGR (a) $2.44 $2.60 $2.79 $2.82 $1.45 $1.60 $1.18 Fiscal 2002 Fiscal 2003 Fiscal 2004 Fiscal 2005 Fiscal 2006 Fiscal 2007 Fiscal 2008 Fiscal 2009 Fiscal 2010 Current Rate Run Rate (a) Annualized paid distributions. 9

10 Midstream Operations 10

11 Midstream Business Stable Fee-Based Cash Flows Stable, fee-based cash flow profile with little commodity price exposure Natural gas storage assets over 95% contracted with firm storage agreements (a) Growing business representing an increasing percentage of Inergy s runrate EBITDA High Quality Assets Newly constructed core energy infrastructure in the Northeast and Texas in the heart of the Marcellus Shale and adjacent to the Eagle Ford Shale Natural gas and LPG storage assets uniquely positioned with a first-mover advantage in the infrastructure development of the Marcellus Shale Tres Palacios situated near 26 gigawatts of Texas gas-fired power generation and the Houston and San Antonio demand markets with unparalleled flexibility and connectivity High Return Capital Expansion Opportunities (a) Pro Forma Tres Palacios Caverns 1 & 2 and Seneca Lake acquisition. Assets have attractive capital expansion opportunities which further enhance financial returns Well-positioned to seek additional midstream growth via acquisition 11

12 Integrated Storage and Transportation Platform Two premier gas storage platforms located between major shale plays and premium demand markets Planned expansion to ~100 Bcf of fee-based, highly flexible gas storage capacity near demand markets (a) Marc I and North-South projects in Northeast add deliverability and flexibility to storage platform Stagecoach/NE Storage 42 Bcf storage capacity (a) Situated near largest demand market in U.S. Expansion opportunities available Tres Palacios 38 Bcf storage capacity Highly liquid storage point with 10 interconnects Expansion opportunities available (a) Pro forma for pending Seneca Lake acquisition. 12

13 Northeast Natural Gas Storage Hub Potential for 52 Bcf natural gas storage capacity within 200 miles of New York City Canada Dominion Northeast Storage & Transportation Hub uniquely positioned with access to multiple gas supply sources and pipeline interconnects into premium demand markets Rockies Gulf Coast Marcellus Millennium TGP Asset location, contract tenor, and attractive customer mix helps insulate business from short-term pressure on storage fundamentals Transco Platform consists of high quality assets integrated together to buffer supply and demand imbalances in natural gas markets 13

14 Tres Palacios Overview Located ~100 miles southwest of Houston in Matagorda County, TX 38.4 Bcf of working gas capacity with planned expansion to 47.9 Bcf Situated near Eagle Ford Shale and near one of the largest gasfired power generation markets in the U.S. Connected to 10 intrastate and interstate pipelines serving multiple U.S. demand markets Establishes new midstream market platform with additional growth opportunities Up to five potential additional interconnects Rights to develop caverns leached by Texas Brine on Markham salt dome Creates additional commercial opportunities with Inergy s Northeast storage assets in the Northeast via common connections and customer overlap Significantly expands natural gas storage operations Creates largest independent natural gas storage operator in the U.S. with ~80 Bcf of working gas storage capacity with planned expansion to ~100 Bcf Bcf Tres Palacios Working Gas Capacity Current (Caverns 1-3) Expected 2014 (with additional Cavern 4 capacity) 14

15 Leading Independent Storage Provider Abundant pipeline interconnections available close to storage assets Northeast - Millennium, Tennessee Gas Pipeline, National Fuel, Empire, Transco, Dominion Tres Palacios 10 interstate and intrastate connections including common interconnects to Northeast assets Inergy is playing a major role in the development of storage and transportation infrastructure in the Marcellus and Eagle Ford Shale plays Top 5 U.S. Independent Natural Gas Storage Providers Legend Rank Company Location 5 Alinda Capital (Nortex Gas Storage) Texas 35 (a) Pro forma for pending Seneca Lake acquisition. 15 (a) Working Capacity (bcf) 1 Inergy (Stagecoach, Steuben, Thomas Corners, Seneca Lake, Tres Palacios) New York, Pennsylvania, Texas 80 2 Iberdrola (Caledonia, Freebird, Katy, Waha Hub) Mississippi, Alabama, New Mexico, Texas 50 3 PAA Natural Gas Storage, L.P. (Bluewater, Pine Prarie) Michigan, Louisiana 50 4 Niska-Riverstone (Wild Goose, Salt Plains) California, Oklahoma 42

16 Manageable Expansion Projects High-return midstream expansion projects generate substantial diversification of cash flow Projects are manageable size and leverage Inergy s existing asset base and expertise in the Northeast Current expansion projects supported by long-term contracts Planned Expansion Projects (a) Expected In-Service Projects Future Projects Tres Palacios Cavern 3 Finger Lakes LPG Expansion North-South Project / Marc I Hub Line Seneca Lake Gas Storage Expansion Spring 2011 (b) Spring 2011 (c) Winter 2011 / Summer 2012 TBD Tres Palacios Cavern Total expected capital investment of ~$600 million (a) These figures regarding growth potential are based on various forward-looking assumptions made by the management. While Inergy believes that these assumptions are reasonable, it can give no assurance that such results will materialize. (b) Cavern 3 is currently in limited service while the cavern undergoes the dewatering process. Full commercial service is expected to commence in Spring (c) Approximately $23 million remaining capital expenditures required for Finger Lakes LPG expansion. 16

17 Premier Storage Footprint Inergy s gas storage infrastructure is connected to major U.S. natural gas pipelines and offer unparalleled deliverability and flexibility helping customers meet supply - demand imbalances in the U.S. natural gas market. Stagecoach/NE Storage 42 Bcf storage capacity (a) Situated near largest demand market in U.S. Expansion opportunities available Tres Palacios 38 Bcf storage capacity Highly liquid storage point with 10 interconnects Expansion opportunities available (a) Pro forma for pending Seneca Lake acquisition. 17

18 Propane Operations 18

19 Propane Value Chain Fundamental Supply Inergy Fundamental Demand Propane represents about 4% of household energy consumption in the US. Propane is a basic necessity to many consumers Propane is clean burning and generally characterized by a stable demand base Propane is transported to customers beyond the natural gas distribution network Customers use propane to heat homes, cook food, heat water and run appliances Typically propane has a comfort and/or economic advantage to electricity Inergy competes in the storage, transportation, and distribution areas of the value chain 19

20 Propane Operations A leading national retail business Quality geographic footprint profitable markets 4 th largest national retailer Consistent financial performance Residential customer focus ~70% 90% tank control Cost + margin service provider with little commodity price exposure Successful integration of 82 propane acquisitions Centralized supply, transportation, & logistics business Consolidates buying power & leverages across North American infrastructure Lowers retail cost, protects margins, reduces risk 200+ transport fleet facilitates linking inefficiencies in nationwide markets Superior profitability within peer group 20

21 Superior Operating Performance Business model and intense focus on retail margin lends itself to better pricing and operational decision-making = Key Profit Driver Acquisition integration & elimination of cost redundancies have driven significant value to cash flow line over last 4 years Strong transportation, supply and procurement business protects margins & creates material 3rd party cash flow $0.75 $0.60 $0.45 $0.30 $0.15 $0.00 $1.20 $1.05 $0.90 $0.75 EBITDA/Retail Propane Gallon (a) Inergy (b) (b) (c) Peer Average (c) Gross Profit/Retail Propane Gallon (a) (a) Source: most recent 10-K & 10-Q filings. Data includes gross profit & EBITDA from propane operations. (b) Inergy s EBITDA and gross profit exclude i) non-cash gains or losses on derivative contracts associated with fixed price sales to retail propane customers, ii) non-cash compensation expenses, and iii) gains or losses on the disposal of assets as disclosed in SEC filings. (c) Peer average includes: APU, ETP, FGP, and SPH. 21 $0.60 $0.45 Inergy (b) Peer Average (c)

22 Propane Industry Fragmentation Domestic Retail Market for LPG is Approximately 10.0 Billion Gallons (a) United Propane Gas 0.7% MFA Oil Co. (c) 0.8% Cenex (c) 2.1% Growmark (c) 2.9% Southern States (c) 0.7% Independent Retailers 62.0% Suburban Propane 3.5% Inergy, L.P. 3.8% Energy Transfer 5.8% Ferrellgas 8.4% (a) (b) (c) Top 10 Propane Retailers Control ~38% of Market Share (b) Source: December 2009 American Petroleum Institute Report. Source: February 2010 LPGas Magazine. Cooperatives. Amerigas 9.3% 22

23 Financial Overview 23

24 Demonstrated Financial Discipline Balanced funding objectives Long-term targeted debt-to-ebitda of approximately 3.5 to 4.0x Proven access to debt and equity capital markets Diverse balance sheet: Bank facility represents only secured debt on balance sheet $1.65 billion of senior unsecured notes maturities Corporate family credit ratings S&P: BB- (Stable Outlook) Moody s: Ba2 (Stable Outlook) Rigorous capital investment review process All acquisitions & expansion projects must be accretive to Distributable Cash Flow per LP unit Conservative approach to risk management Cost-plus service provider in propane and primarily fee-based in midstream No speculative commodity positions taken 24

25 Financial Performance Total Gross Profit ($ millions) $800.0 $700.0 $600.0 $500.0 $400.0 $300.0 $200.0 $100.0 $0.0 $457 Total Gross Profit $502 $574 $620 $734-$772 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 Guidance DCF ($ millions) $300.0 $250.0 $200.0 $150.0 $100.0 $156 EBITDA ($ millions) $500.0 $400.0 $300.0 $200.0 $100.0 $0.0 $211 22% Distributable Cash Flow $174 $222 $230 Adjusted EBITDA (a) $239 32% $297 28% $326 34% $410-$435 43% FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 Guidance % Midstream EBITDA Contribution $273-$286 (a) $50.0 $0.0 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 Guidance Adjusted EBITDA represents EBITDA excluding the gain or loss on derivative contracts associated with retail propane fixed price sales contracts, the gain or loss on the disposal of fixed assets and long-term incentive and equity compensation expenses. Item 6 to the Partnership s Annual Report on Form 10-K provides a historical reconciliation of net income to EBITDA and Adjusted EBITDA. 25

26 Strong Balance Sheet As of September 30, 2010 ($ in millions) Actual As Adjusted Cash & Restricted Cash $ $ 7.4 (a) Revolving working capital facility $ - $ 34.9 Revolving general partnership credit facility (a) 6 7/8% senior unsecured notes due /4% senior unsecured notes due /4% senior unsecured notes due % senior unsecured notes due Bond & swap premium/(discount) (5.6) (5.4) ASC credit agreement - - Other debt Total Debt $ 1,666.2 $ 1,821.1 Total Inergy, LP Partners Capital $ 1,189.3 $ 1,160.1 Total Capitalization $ 2,855.5 $ 2,981.2 FY 2011 Adjusted EBITDA Guidance Range $410 - $435 Long-term Debt / Midpoint FY 2011 Adjusted EBITDA Guidance 4.2x (b) (a) Reflects the purchase of Tres Palacios, Pennington Gas Service and Schenck Gas Services. These acquisitions were funded with excess cash on our balance sheet as of September 30, 2010, restricted cash of $588 million from the proceeds from the issuance of our senior unsecured notes due 2018, and additional borrowings on our general partnership credit facility. (b) Reflects the seasonal working capital borrowings drawn on our revolving working capital facility through November 30,

27 Successfully Executing Diversified Business Model (a) Financial Performance Track Record, Mix of Business, and Disciplined Balance Sheet Management = Attractive Investment 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% EBITDA MIX BY SEGMENT E 2012E 2013E 2014E 2015E Midstream Run rate assumes Finger Lakes LPG, Marc I/NS and Tres Palacios Cavern 4 midstream projects are implemented. Includes pending Seneca Lake acquisitions. 27 Visibility of ~50% Adjusted EBITDA growth from FY2010 to FY2012 Propane Run Rate (a)

28 Investment Highlights Income Diversified Operating Model The Largest Independent Natural Gas Storage Provider in the U.S. A Leading National Propane Franchise Strong Financial Performance Record Growth Midstream Energy Storage Platform Becoming a Larger Component of Business Pipeline of High-Return Midstream Expansion Projects Underway Record of Consistent EBITDA & Distributable Cash Flow Growth Disciplined Consolidator of Retail Propane Industry Safety Underlying Businesses Characterized by Recession Resistant Stable Cash Flows Balance Sheet well-positioned for future opportunities 28

29 Appendix 29

30 FY 2011 Guidance Forecast Range Fiscal Year Ended September 30, 2011 ($ in Millions) Low High Net Income (a) $ 85 $ 88 Interest Expense (a)(b) Depreciation and amortization (a)(c) Income Taxes (a) 1 1 Adjusted EBITDA (a) $ 410 $ 435 Maintenance Capital Expenditures $ 8 $ 10 Common Units Outstanding (d) (a) (b) (c) (d) Earnings guidance is based upon various forward-looking assumptions made by the management of Inergy. While Inergy believes that these assumptions are reasonable, it can give no assurance that such results will materialize. Estimates exclude any one-time or non-recurring charges that may occur. Adjusted EBITDA is defined as income (loss) before taxes, plus net interest expense and depreciation and amortization and excludes (i) non-cash gains or losses on derivatives associated with fixed price sales to retail propane customers, (ii) long-term incentive and equity compensation charges, (iii) gains or losses on disposals of assets, and (iv) transaction costs, as disclosed in Inergy, L.P. s SEC filings. Estimate includes approximately $6.5 million of non-cash amortization of deferred financing costs and is based upon our outstanding indebtedness including the indebtedness from all acquisitions to date. Depreciation and amortization are based upon certain preliminary purchase price allocations and may be subject to change. Excludes 11.6 million of Class B limited partner units which are not entitled to receive cash distributions until converted to common units (payment in kind units). The Class B units convert to common units on a one-for-one basis over a two year period. 30

31 Historical Financial Overview & Non-GAAP Reconciliations (in MMs) (audited) (audited) (audited) (audited) Retail propane gallons Statement of Operations Data: Revenues 1, , , ,786.0 Cost of product sold (b) 1, , ,165.9 Gross profit (a) (a) (a) Expenses: Operating and administrative (b) Depreciation and amortization Loss on disposal of assets Operating income Other income (expense): Interest expense, net (52.0) (60.9) (69.7) (91.0) Other income Income before income taxes Provision for income taxes (0.7) (0.7) (0.7) (0.1) Net income Net income attributable to non-controlling partners in ASC's consolidated net income - (1.4) (1.4) (0.7) Net income attributable to partners (a) Includes a ($0.6) million, a $0.1 million, a $1.4 million and a ($1.0) non-cash FAS 133 charge/(gain) associated with fixed-price propane sales contracts to retail customers in FY2007, FY2008, FY2009 and FY2010, respectively. (b) The financials reflect a reclassification of transportation costs of $4.4 million for the year ended FY2007 from a component of operating and administrative expense to other cost of product sold. 31 (a)

32 Historical Financial Overview & Non-GAAP Reconciliations, (cont.) (in MMs) (audited) (audited) (audited) (audited) EBITDA Reconciliation: Net income attributable to partners Interest of non-controlling partners in ASC's consolidated ITDA (b) - (0.8) (0.5) (0.2) Interest expense, net Provision for income taxes Depreciation and amortization EBITDA Non-cash (gain) loss on derivative contracts (0.6) (1.0) Loss on disposal of assets Long-term incentive and equity compensation expense Transaction costs Adjusted EBITDA (a) Balance Sheet Data (end of period): Cash and cash equivalents Restricted Cash Working capital facility General partnership facility Senior unsecured notes , ,650.0 Fair value hedge adj. on sr. unsecured notes (2.6) Swap premium Net bond premium/(discount) (16.4) (13.2) ASC credit agreement Other debt Total debt , , ,666.2 Net debt , , Total partners' capital ,189.3 Total assets (c) 1, , , ,097.1 (a) Adjusted EBITDA excludes i) non-cash gains or losses on derivative contracts associated with fixed price sales to retail propane customers, ii) long-term incentive and equity compensation expense, iii) gains or losses on the disposal of assets, and iv) transaction costs, as disclosed in Inergy, L.P. s SEC filings. (b) ITDA Interest, taxes, depreciation and amortization. (c) These amounts differ from those previously presented as a result of our adoption of FASB Accounting Standards Codification Subtopic on October 1, In conjunction with the adoption of this standard, we elected to change our accounting policy for derivative instruments executed with the same counterparty under a master netting agreement. This change in accounting policy has been presented retroactively. 32

33 Northeast Gas Storage Facility Overview Stagecoach Located ~150 miles northwest of New York City Closest storage facility to NYC market Working gas = Bcf High performance, multi-cycle gas storage (2-3x avg.) 100% contracted with WAVG contracts through September 2014; primarily investment grade companies Connected to TGP s 300 Line and Millennium Pipeline Enhanced deliverability at Stagecoach with wheeling opportunities between TGP and Millennium Thomas Corners Located ~40 miles from Stagecoach in Steuben County, NY Working gas = 7.0 Bcf Connections to TGP, Millennium, and Corning Natural Gas pipelines 100% contracted with 5 year term agreements Placed into service; full commercial operations began Nov-2009 Construction completed under budget & 5 months ahead of schedule 33 Steuben Gas Storage Located ~40 miles from Stagecoach in Steuben County, NY Working gas = 6.2 Bcf Facility-owned 12.5 mile pipeline connected to Dominion s Woodhull line 100% contracted through 2011 with investment grade counterparties Opportunity exists to expand connectivity to Thomas Corners, TGP & Millennium Cost of service rate structure Seneca Lake Gas Storage Located ~40 miles from Stagecoach in Schuyler County, NY Working gas = 2.0 Bcf Facility-owned 20-mile West Pipeline and 38-mile East Pipeline Connections to Dominion Pipeline with potential connections to the Millennium and Empire connector pipelines and to Inergy s Stagecoach North lateral pipeline Facility expected to be fully-contracted with investment grade counterparties Transaction expected to close in fiscal Q2 2011; Subject to regulatory approval

34 Tres Palacios Asset Overview Asset Characteristics 27.1 Bcf working gas capacity currently in service (Cavern 1 and 2) Cavern 3 provides additional 11.4 Bcf of working gas capacity Cavern 3 in interim service and is undergoing the dewatering process; full commercial service expected to begin April 2011 Cavern 4 provides additional 9.5 Bcf (expected in-service by or before 2014) Capital required to complete build-out invested at attractive investment returns High deliverability characteristics (6+ turns) Maximum withdrawal capacity 2.5 Bcf/day; maximum injection capacity 1 Bcf/day Compression - 24,000 HP existing (48,000 HP permitted) 40 mile, 24 bi-directional header system is connected to 10 intrastate and interstate pipelines serving Texas markets as well as U.S. markets in the Northeast, Midwest, Southeast, Mid-Atlantic and Mexico Future Growth Opportunities Rights to develop all caverns leached by Texas Brine on Markham salt dome Up to five potential future additional interconnects Trunkline, Crosstex, Gulf South, Dow Pipeline and KM Texas 34

35 Tres Palacios Facilities Map 35

36 Consistent Margin Performance (a) (b) (c) Management has demonstrated its ability to achieve consistent margin performance in distinctly different operating environments Intense focus on proactively monitoring key performance metrics Propane operations consistently deliver stable, predictable cash flow $1.80 $1.60 $1.40 $1.20 $1.00 $0.80 $0.60 $0.40 $0.20 $ ( 6% Colder (a) ) ( 9% Warmer (a) ) ( 6% Warmer (a) ) ( 10 % Warmer (a) )( 7 % Warmer (a) ) (7% Warmer (a) ) (0% Colder (a) ) (5% Warmer (a) ) Gross Margin / Gallon (b) Based on NRGY service territory. Retail propane gross profit divided by retail propane gallons. Excludes non-cash gains/losses on derivative contracts. Quarterly average Mt. Belvieu price. 36 Mt. Belvieu Propane Cost / Gallon (c)

37 Committed to Generating Industry-Leading Returns to Our Investors 37