KMP KMR Kinder Morgan Energy Partners Feb 2010 Presentation

8/14/2019 KMP KMR Kinder Morgan Energy Partners Feb 2010 Presentation

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ENERGY PARTNERS, L.P.

Credit Suisse Energy SummitCredit Suisse Energy Summit

Park Shaper, PresidentPark Shaper, President

February 2, 2010February 2, 2010


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ENERGY PARTNERS, L .P.

22

Forward Looking StatementsForward Looking Statements

This presentation contains forward looking statements. These forward-looking statements are identifiedas any statement that does not relate strictly to historical or current facts. In particular, statements,

express or implied, concerning future actions, conditions or events, future operating results or the ability togenerate revenues, income or cash flow or to make distributions are forward-looking statements. Forwardlooking statements are not guarantees of performance. They involve risks, uncertainties andassumptions. Future actions, conditions or events and future results of operations of Kinder MorganEnergy Partners, L.P. and Kinder Morgan Management, LLC may differ materially from those expressed inthese forward-looking statements. Many of the factors that will determine these results are beyond KinderMorgan's ability to control or predict. These statements are necessarily based upon various assumptionsinvolving judgments with respect to the future, including, among others, the ability to achieve synergiesand revenue growth; national, international, regional and local economic, competitive and regulatoryconditions and developments; technological developments; capital and credit markets conditions; inflationrates; interest rates; the political and economic stability of oil producing nations; energy markets; weatherconditions; environmental conditions; business and regulatory or legal decisions; the pace of deregulationof retail natural gas and electricity and certain agricultural products; the timing and success of business

development efforts; terrorism; and other uncertainties. There is no assurance that any of the actions,events or results of the forward-looking statements will occur, or if any of them do, what impact they willhave on our results of operations or financial condition. Because of these uncertainties, you are cautionednot to put undue reliance on any forward-looking statement.


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Size Does MatterSize Does Matter

Growth opportunitiesGrowth opportunities

Access to capi talAccess to capi tal

Stable cash flowStable cash flow

Since 1997, ~$20 bill ion in growthSince 1997, ~$20 bill ion in growthcapital investedcapital invested

~$11 billion in organic expansion /~$11 billion in organic expansion /greenfield projectsgreenfield projects

~$9 billion in acquisitions~$9 billion in acquisitions

Successful ly raised capital, in goodSuccessful ly raised capital, in good

times and badtimes and bad

~$9 billion in public equity~$9 billion in public equity (a)(a)

~$11 billion in public long~$11 billion in public long--term debtterm debt(~$10B net of refinancing)(~$10B net of refinancing)

Five diverse business segmentsFive diverse business segments Reduced exposure to sectorReduced exposure to sector-- specificspecific

risksrisks

Majority of cash flow not sensitive toMajority of cash flow not sensitive tocommodity pricescommodity prices

__________________________(a) Includes KMR share dividends


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Delivering 13 Years Of Consistent GrowthDelivering 13 Years Of Consistent Growth

$0.63$0.94

$1.24$1.43

$1.71

$2.15$2.44

$2.63$2.87

$3.13$3.26$3.48

$4.40$4.20

$4.02

$0.00

$0.50

$1.00

$1.50

$2.00

$2.50

$3.00

$3.50$4.00

$4.50

19 9 6 19 9 7 19 9 8 19 9 9 2 0 00 2 0 01 2 0 02 2 0 03 2 0 04 2 0 05 2 0 0 6 2 0 07 2 0 08 2 0 09 2 0 10 E

$17 $30

$153$198$333

$548$701

$827$978

$1,162$1,265

$1,469

$1,854

$2,132

$2,416

$0

$500

$1,000

$1,500

$2,000

$2,500

1996 1997 1998 1999 2 000 2001 20 02 2003 2004 2005 2006 2007 2008 2009 20 10E

GP (a)

LP

1996-2

010CA

GR=15%

Total Distributions (GP + LP) ($MM)Total Distributions (GP + LP) ($MM)

1996-2

010C

AGR=

43%

3.5x3.2x

3.9x 3.9x

3.5x 3.7x 3.8x

3.5x3.2x 3.3x

3.4x 3.4x

3.8x3.6x

0.0x

0.5x

1.0x

1.5x

2.0x

2.5x

3.0x

3.5x

4.0x

4.5x

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010E

__________________________(a) Includes 2% GP interest(b) Annual LP distribution, rounded to 2 decimals where applicable(c) Debt is net of cash and excludes fair value of interest rate swaps

Net Debt to EBITDANet Debt to EBITDA (c)(c)

Annual LP Distribution Per UnitAnnual LP Distribution Per Unit (b)(b)


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Significant Historical ReturnsSignificant Historical Returns (a)(a)

$0

$250

$500

$750

$1,000

$1,250

$1,500

$1,750

$2,000

$2,250

Dec-96 Dec-98 Dec-00 Dec-02 Dec-04 Dec-06 Dec-08

KMP: 27% CAGR SinceKMP: 27% CAGR Since 9696 (b)(b) KMR: 13% CAGR SinceKMR: 13% CAGR Since 0101 (c)(c)

$50

$80

$110

$140

$170

$200

$230

$260

$290

$320

Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09

AMZ (d) = $662

KMP = $2,181KMR

= $291

Dollars Dollars

S&P 500 = $184 S&P 500 = $102

$100

AMZ (d)

= $306

__________________________Source: Bloomberg(a) All returns calculated on daily basis through 28-Jan-2010 except the 2009 return, which is through 31-Dec-2009; assume dividends/distributions reinvested in index/stock/unit(b) Start date 31-Dec-1996(c) Start date 14-May-2001; KMR Initial public offering; KMP CAGR over same period is 14%(d) Alerian MLP index(e) Start dates for 2-year, 3-year and 5-year return calculations are 31-Dec-2007, 29-Dec-2006 and 31-Dec-2004, respectively

$100

-1%72%98%

100%5-year(e)

Total Return 2009 2-year(e)

3-year(e)

KMP 45% 35% 62%KMR 50% 24% 53%

AMZ (d) 76% 14% 28%S&P 500 26% -22% -18%

14-May-2001


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Promises Made, Promises KeptPromises Made, Promises Kept

BudgetedBudgeted

Distribution per unit:Distribution per unit :

2000: $1.60

2001: $1.95

2002: $2.402003: $2.63

2004: $2.84

2005: $3.13

2006: $3.28

2007: $3.44

2008: $4.022009: $4.202010E: $4.40

Promises MadePromises Made Promises KeptPromises Kept

ActualActual

Distribution per unit :Distribution per unit:

2000: $1.71

2001: $2.15

2002: $2.4352003: $2.63

2004: $2.87

2005: $3.13

2006: $3.26

2007: $3.48

2008: $4.022009: $4.20

Missed LP distribution target 1 time in past 10 years


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1010

Terasen

Hall Buck

Shell CO2

KN Energy

SFPP

LaunchLaunch

PadPadIndustryIndustry

RankRank (a)(a)Led to:Led to:

Acquis it ionsAcquis it ions (b)(b)Led to:Led to:

Internal GrowthInternal Growth (b)(b)

ProductsPipelines

1st CFPL, CALNEV, Charter Triad,Cochin

multiple terminal acquisitions frommajors

Carson terminal, East Line & Northlineexpansions

Ethanol buildout in Southeast/Westcoast

Natural GasPipelines

2nd

Rockies and Texas intrastatedropdowns, Tejas, TransColoradodropdown, Dayton storage,

Crosstex treating, GMX

REX, MEP, KMLA & FEP greenfieldprojects

Texas Intrastate storage expansions

Trailblazer & TransColorado expansions

CO2 1st SACROC, Yates, Claytonville &

Katz fields, Wink pipeline

SACROC & Yates development

Southwest Colorado expansion

Katz EOR greenfield project

Terminals 1st

GATX, TGS, Vancouver Wharves,US Development, Slay

on average, acquired ~$125MM peryear over last 5 years

Pasadena, Galena Park, Perth Amboy,Carteret, Pier IX & Geismer expansions

Edmonton North 40 greenfield project

Kinder MorganCanada

TMPL dropdown 75MBbl/d expansion of TMPL

On average, KMP has invested ~$1.5 billion inOn average, KMP has invested ~$1.5 billion ingrowth capital per year in i ts business segmentsgrowth capital per year in i ts business segments (c)(c)

__________________________(a) See slide 12 for explanation of basis for industry rankings(b) Not an exhaustive list of acquisitions or internal growth projects(c) Since the beginning of 1997

Asset Footprint And Management ExpertiseAsset Footprint And Management Expertise

Have Led To Growth OpportunitiesHave Led To Growth Opportunities


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Green Energy Creates OpportunitiesGreen Energy Creates Opportunities

Renewable Fuels Expect to handle ~250 MBbl/d

of renewable fuels in 2010(a)

(25-30% of U.S. market)

Continue to utilize and expand

refined products pipelines andterminals to handle ethanol,biofuels and changing / increasingfuel specifications

Natural Gas ~5 Tcf of natural gastransported in 2009 over 24,000

miles of pipeline (b)(~20% of U.S. market)

Pipeline system directly connectsto over 20 producing basins

Continue to utilize and expandfootprint

Carbon Sequestration(Clean Coal)

Transport ~1.3 Bcf/d of CO2 Industry leader in CO2 handling

Continue to look for the rightopportunities

Wind and Solar Power ~5 Tcf of natural gastransported in 2009 over 24,000miles of pipeline (b)

(~20% of U.S. market)

Natural gas-fired power plantsbackstop renewable power

__________________________(a) Expected total volumes handled including the recently announced terminal acquisition from USD(b) Includes NGPL


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Sources of Future GrowthSources of Future GrowthGrowth DriversGrowth Drivers KM OpportunityKM Opportunity Leverage FootprintLeverage Footprint

Natural Gas Pipelines

Cheap, abundant, domestic energy source

Shifting supply from multiple basins

U.S. demand for natural gas expected toincrease by ~17 Bcf/d 2009-2030 (a)

Over $100 billion of new pipeline infrastructureestimated between 2010 and 2030 (b)

Natural gas is the logical fuel of choice foreconomical clean burning electricity

Full-year impact of REX, MEP, KMLA

Completion of construction of FEP in 2010 Leverage KMs pipeline connectivity and

expertise into pipeline/storage expansionsand acquisitions in current and new basins

Expand services to customers (i.e. Treating,G&P, etc)

Products Pipelines /Terminals Segments

Diversity of product specs RFS requires a nearly two-fold increase in use of

renewable fuels through 2022 (c)

Customers desire for optionality at terminallocations (export and import capabilities andmultiple modes of inbound and outboundtransportation, e.g. water, rail, truck access)

Committed ~$500MM to handle renewable

fuels to date and continue to expand acrossour asset base

Location of facilities and ability to provideflexibility to customers keeps customers atterminals and provides for expansions

Consolidate mom and pop bulk terminals

Look for acquisitions from the majors

CO2

Billions of barrels of domestic oil still in place

Continuing technology improvements

Development of new basins

Fragmented ownership of oilfields

Continue buildout of SACROC and Yates

Katz expansion project

Utilize CO2 expertise to evaluate oilfieldacquisitions and new pipeline projects

Kinder Morgan Canada Continued need to move Canadian crude and

refined products to Westcoast Flexibility for staged expansions or one

large expansion to Westcoast__________________________

(a) Source: Wood Mackenzie long-term outlook, Dec-2009(b) Source: INGAA natural gas infrastructure study, Oct-2009(c) RFS (U.S. Renewable Fuels Standard) requires increase from 13 Bgal/yr in 2010 to 36 Bgal/yr in 2022)


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~$20 Billion in Capital Invested 1998~$20 Billion in Capital Invested 1998--20092009 (a,b)(a,b)

__________________________(a) For joint-ventures, reflects our equity contributions(b) 1998 2009, does not include 2010 budget

(billions)(billions)

Total Invested by YearTotal Invested by Year (a)(a)

Total Invested by TypeTotal Invested by Type (a,b)(a,b)

Total Invested by SegmentTotal Invested by Segment (a,b)(a,b)

$5.0 $4.3 $3.5 $3.4

$1.3

$2.4

$0

$2

$4

$6

$8

Natural Gas

Pipelines

Products

Pipelines

CO2 Terminals Kinder

Morgan

Canada

$8.7 $8.8

$2.4

$0

$3

$6

$9

$12

Expansions Acquisitions

$3.3

$2.9$2.7

$0.9

$1.2$1.3

$0.9

$1.3

$1.9

$0.8

$1.1

$1.6$1.5

$0.0

$0.5

$1.0

$1.5

$2.0

$2.5

$3.0

$3.5

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010E

JV Contributions

Expansion

Acquisition


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$1.5 Billion in Growth Expenditures Planned for 2010$1.5 Billion in Growth Expenditures Planned for 2010

(millions)(millions)

__________________________(a) Includes equity contributions to joint ventures(b) $195 million ethanol terminal acquisition from U.S. Development Group (USD) and $95 million Slay bulk terminal acquisition

2010 Budgeted Growth Expenditures2010 Budgeted Growth Expenditures

Products Pipelines

KM Canada

Natural GasPipelines (a)

CO2

IdentifiedAcquisitions

Terminals

AnnouncedAcquisitions (b)

22%

7%0.2%

11%

19%

13%

28%


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2020

Balance Sheet Has Remained SolidBalance Sheet Has Remained Solid (a)(a)

$501$50120142014$507$50720132013

(f)(f)$957$95720122012

$707$70720112011$262$262NovNov--20102010

(283)(283)Letters of CreditLetters of Credit

Less:Less:

(300)(300)BorrowingsBorrowings

$1,204$1,204

$1,787$1,787

LiquidityLiquidity

Total Bank CreditTotal Bank Credit

Baa2/BBBBaa2/BBBLL--T Debt RatingT Debt Rating

BudgetedBudgetedYrYr--end 2010end 2010FY 2009FY 2009

Credit MetricsCredit Metrics

6.1x6.1x3.6x3.6x3.8x3.8xDebt / EBITDADebt / EBITDA ((b,cb,c ))

6.4x6.4xEBITDA / InterestEBITDA / Interest (c)(c)

Credit SummaryCredit Summary

Revolver LiquidityRevolver Liquidity (d)(d) LongLong--term Debt Maturit iesterm Debt Maturit ies (e)(e)

__________________________(a) Figures as of 31-Dec-2009, except where noted(b) Debt balance excludes fair value of interest rate swaps and is net of cash(c) EBITDA and interest are trailing 12 months, includes our proportionate share of REX/MEP DD&A

(d) Existing KMP revolver matures Aug-2010(e) Maturities of long-term debt; excludes borrowings under its revolving credit facility(f) Excludes 10-yr bond with optional 3-yr put (stated maturity 2019)

(millions)(millions)


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2010 Partnership Goals2010 Partnership Goals

Distribution TargetDistr ibution Target

$4.40 per unit (4.8% growth)$4.40 per unit (4.8% growth)

Excess coverage of ~$32 millionExcess coverage of ~$32 million

Maintain Solid Balance SheetMaintain Solid Balance Sheet

YearYear--end 2010 Debt / EBITDA of 3.6xend 2010 Debt / EBITDA of 3.6x Expansions / acquisitionsExpansions / acquisitions

financed 50% equity, 50% debtfinanced 50% equity, 50% debt

Operate all of our assets in a safe, compliantOperate all of our assets in a safe, compliantand environmentally sound mannerand environmentally sound manner


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KMR: The BasicsKMR: The Basics

__________________________(a) KMR market equity based on 86 million KMR shares outstanding at 31-Dec-2009 and share price of $55.50 as of 28-Jan-2010

(b) Calculation of share dividend: KMP quarterly cash distribution per unit KMR 10-day avg price prior to x-date = fractional share paid for every KMR share owned, e.g.$1.05 $46.315 = 0.021292; example reflects actual KMR share dividend calculated for 3Q 2009, paid on 13-Nov-2009; refer to third quarter 10-Q

(c) Can be held directly; in-kind dividends not subject to ECI rules and branch profits withholdings, no FIRPTA issues

KMR is KMPKMR is KMP

KMR sharesKMR shares

Pari passu with KMP unitholders; represent limited liability intPari passu with KMP unitholders; represent limited liability interests in Kinder Morganerests in Kinder MorganManagement LLC, whose only investment is iManagement LLC, whose only investment is i--units of KMPunits of KMP

IPO in MayIPO in May--2001; trades on NYSE under symbol KMR2001; trades on NYSE under symbol KMR

Market value = $4.7 billion (~1/4 of total KMP capitalization)Market value = $4.7 billion (~1/4 of total KMP capitalization) (a)(a)

KMR dividend equal to KMP cash distribution, but paid in additioKMR dividend equal to KMP cash distribution, but paid in additional shares (innal shares (in--kind)kind) (b)(b)

Effectively a dividend reinvestment programEffectively a dividend reinvestment program

Share dividend reduces KMPShare dividend reduces KMPs external capital funding needss external capital funding needs

KMP generates the cash flow to pay cash dividend, but pays in adKMP generates the cash flow to pay cash dividend, but pays in additional shares andditional shares andreinvests that cash into new growth projectsreinvests that cash into new growth projects

but simplified (institutional investorbut simplified (institutional investor--friendly)friendly)

Relative to MLP units, KMR shares are tax efficient and with simRelative to MLP units, KMR shares are tax efficient and with simplif ied tax reportingplif ied tax reporting

Capital gains treatmentCapital gains treatment No KNo K--1 (1099 if you sell shares, otherwise no tax documents)1 (1099 if you sell shares, otherwise no tax documents)

IRAIRA--friendlyfriendly -- no UBTI or state tax filingsno UBTI or state tax filings

Offshore investors can more easily ownOffshore investors can more easily own (c)(c)


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KMR: Compelling Investment PropositionKMR: Compelling Investment Proposition (a)(a)

KMR Discount to KMP

-20%

-15%

-10%

-5%

0%

5%

10%

Dec-

00

Dec-

01

Dec-

02

Dec-

03

Dec-

04

Dec-

05

Dec-

06

Dec-

07

Dec-

08

Dec-

09

7% avg discount

since 2001 IPO (a)

12.3% avg discountsince Nov08 (a)

KMR has generated strong returns forKMR has generated strong returns forinvestorsinvestors (b)(b)

50% total return in 200950% total return in 2009

13.0% compound annual total return13.0% compound annual total returnsince 2001 IPO vs. 14.1% for KMP,since 2001 IPO vs. 14.1% for KMP,13.7% for the Alerian MLP index and13.7% for the Alerian MLP index and0.3% for the S&P 5000.3% for the S&P 500

and trades at a significant discount to KMPand trades at a significant discount to KMP Historical 7% discount since IPOHistorical 7% discount since IPO

Currently at ~11% discountCurrently at ~11% discount

Discount increased during 4QDiscount increased during 4Q 08 and08 andhas not returned to prior levelshas not returned to prior levels

__________________________(a) All figures through / as of 28-Jan-2010, except 2009 total return which is through 31-Dec-2009

(b) See footnotes on slide 8 for explanation of total return calculations(c) See preceding slide for calculation of market cap(d) 2009 average dollar volume traded

Market cap of $4.7 bill ionMarket cap of $4.7 bill ion (c)(c) and liquidity ofand liquidity of$15 mil lion per day$15 mil lion per day (d)(d) (360k shares per day)(360k shares per day)

14-May-2001


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2424__________________________(a) Purchase of KMR shares and KMP units by directors and officers of KMR/KMP since the KMR IPO in 2001, as reported in SEC Form 4 filings

Management PurchasesManagement Purchasesof KMR & KMPof KMR & KMP (a)(a)

$8.0

$4.5

$0

$2

$4

$6

$8

$10

KMR KMP

(millions)

Insiders Prefer KMRInsiders Prefer KMR


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RisksRisks

RegulatoryRegulatory

Pacific Products Pipeline FERC/CPUC casePacific Products Pipeline FERC/CPUC case

Periodic rate reviewsPeriodic rate reviews

Unexpected policy changesUnexpected policy changes

Crude Oil Production VolumesCrude Oil Production Volumes

Crude Oil PricesCrude Oil Prices

Budget assumes $84/Bbl realized price on unhedged barrelsBudget assumes $84/Bbl realized price on unhedged barrels

2010 Sensitivity is ~$6 million DCF per $1/Bbl change in crude o2010 Sensitivity is ~$6 million DCF per $1/Bbl change in crude oil pricesil prices

Economically Sensitive Businesses (e.g., steel terminals)Economically Sensitive Businesses (e.g., steel terminals)

EnvironmentalEnvironmental

TerrorismTerrorism

Interest RatesInterest Rates

~50% floating rate debt~50% floating rate debt

The fullThe full--year impact of a 100year impact of a 100--bp increase in rates equates to an approximate $55 millionbp increase in rates equates to an approximate $55 millionincrease in interest expenseincrease in interest expense


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Attractive Value PropositionAttractive Value Proposition

Unparalleled asset footprintUnparalleled asset footprint

Established track recordEstablished track record Industry leader in all business segmentsIndustry leader in all business segments

Experienced management teamExperienced management team

Supportive general partnerSupportive general partner

Transparency to investorsTransparency to investors

Attractive returns driven by combination of yield plus growthAttractive returns driven by combination of yield plus growth


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KMP KMR Kinder Morgan Energy Partners Feb 2010 Presentation