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KMI to Acquire KMP KMR and EPB – KINDER MORGAN ENERGY PARTNERS, L.P.

KINDER MORGAN ENERGY PARTNERS, L.P. · Sep 25, 2014 · 38 slides

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Slides

  1. KMI to Acquire KMP KMR and EPB – KINDER MORGAN ENERGY PARTNERS, L.P. – slide 1
    Run By Shareholders, For Shareholders KMI to Acquire KMP, KMR and EPB September 25, 2014
  2. KMI to Acquire KMP KMR and EPB – KINDER MORGAN ENERGY PARTNERS, L.P. – slide 2
    KMI Acquisition of KMP, KMR & EPB Transaction Overview Consolidating All Kinder Morgan Assets Under One Public Company KMI will acquire all of the outstanding common units of KMP and EPB and all outstanding shares of KMR KMP KMR…
  3. KMI to Acquire KMP KMR and EPB – KINDER MORGAN ENERGY PARTNERS, L.P. – slide 3
    Value Enhancing Combination Significant Upfront 2015E KMI dividend per share expected to be 2.00 with significant coverage Dividend Increase 16% dividend increase from 2014 guidance of 1.72 Enhances Future 10% annual growth rate…
  4. KMI to Acquire KMP KMR and EPB – KINDER MORGAN ENERGY PARTNERS, L.P. – slide 4
    Simplified Organizational Structure Current Public Structure Simplified Public Structure Kinder Morgan, Inc. (NYSE: KMI) 13% Listed Shares BB / Ba2 / BB+ 100% Voting Shares One publicly traded company vs. four results in: Kinder…
  5. KMI to Acquire KMP KMR and EPB – KINDER MORGAN ENERGY PARTNERS, L.P. – slide 5
    Unparalleled Asset Footprint Largest Energy Infrastructure Company in North America 3rd largest energy company in North America with estimated combined pro forma enterprise value of 140 billion(a) 17 billion of currently identified…
  6. KMI to Acquire KMP KMR and EPB – KINDER MORGAN ENERGY PARTNERS, L.P. – slide 6
    Benefits of a C-corp Simplifies structure; creates one public equity class Lowers cost of capital and creates a more competitive acquisition currency Significant income tax savings from the acquisition amounting to 20 billion over…
  7. KMI to Acquire KMP KMR and EPB – KINDER MORGAN ENERGY PARTNERS, L.P. – slide 7
    How the Math Works Primary 2015-2020 Asset Level Assumptions(b) Status Quo Expected Pro-Forma Expected Dividend / Distribution 9% average annual EBITDA growth Dividend Growth Rate(a,b) 3.6B/yr average growth capex (excl. TMX) Growth…
  8. KMI to Acquire KMP KMR and EPB – KINDER MORGAN ENERGY PARTNERS, L.P. – slide 8
    Significantly Lower Hurdle for Growth Same Level of Capex Generates Double the Growth at Pro Forma KMI vs Status Quo KMP ( in millions, except per unit / share) Status Quo Pro Forma KMP KMI Hypothetical New Project Capex 1,000…
  9. KMI to Acquire KMP KMR and EPB – KINDER MORGAN ENERGY PARTNERS, L.P. – slide 9
    Substantial Pre-Tax Value Uplift for KMP Unitholders KMP Pre-Tax Benefit per Unit Post Transaction 9/19/2014 Implied Prices Prices 2015E 2016E 2017E 2018E 2019E 2020E KMP Pro Forma (Value) KMP Expected Distributions 5.83 6.18 6.46…
  10. KMI to Acquire KMP KMR and EPB – KINDER MORGAN ENERGY PARTNERS, L.P. – slide 10
    After-Tax Value Uplift to Average KMP Unitholder KMP Status Quo - Hold KMP Unit (no conversion to KMI) 2014 2015 2016 2017 2018 2019 2020 KMP Value Creation(a) KMP Distribution 5.83 6.18 6.46 6.96 7.09 7.30 Taxes on Distr. with Zero…
  11. KMI to Acquire KMP KMR and EPB – KINDER MORGAN ENERGY PARTNERS, L.P. – slide 11
    After-Tax Value Uplift to Average KMP Unitholder (Contd) KMP per Unit Value Creation(a) We conducted two sensitivities on the present value after-tax KMP analysis: First, we sensitized KMIs price at close and its impact on the…
  12. KMI to Acquire KMP KMR and EPB – KINDER MORGAN ENERGY PARTNERS, L.P. – slide 12
    Substantial Value Uplift for KMR Shareholders KMR Benefit per Share Post Tax-free Transaction 9/19/2014 Implied Prices Prices 2015E 2016E 2017E 2018E 2019E 2020E KMR Pro Forma (Value) KMR Expected Distributions 5.83 6.18 6.46 6.96…
  13. KMI to Acquire KMP KMR and EPB – KINDER MORGAN ENERGY PARTNERS, L.P. – slide 13
    Substantial Value Uplift for EPB Unitholders EPB Pre-Tax Benefit per Unit Post Transaction 9/19/2014 Implied Prices Prices 2015E 2016E 2017E 2018E 2019E 2020E EPB Pro Forma (Value) EPB Expected Distributions 2.60 2.60 2.73 2.78 2.87…
  14. KMI to Acquire KMP KMR and EPB – KINDER MORGAN ENERGY PARTNERS, L.P. – slide 14
    After-Tax Value Uplift to Average EPB Unitholder EPB Status Quo - Hold EPB Unit (no conversion to KMI) 2014 2015 2016 2017 2018 2019 2020 EPB Value Creation(a) EPB Distribution 2.60 2.60 2.73 2.78 2.87 2.96 Taxes on Distr. with Zero…
  15. KMI to Acquire KMP KMR and EPB – KINDER MORGAN ENERGY PARTNERS, L.P. – slide 15
    After-Tax Value Uplift to Average EPB Unitholder (Contd) EPB per Unit Value Creation We conducted two sensitivities on the present value after-tax EPB analysis: First, we sensitized KMIs price at close and its impact on the…
  16. KMI to Acquire KMP KMR and EPB – KINDER MORGAN ENERGY PARTNERS, L.P. – slide 16
    Investor Total Returns(a) KMP: 24% CATR Since 96(b) KMI: 11% CATR Since Inception(e) 5,000 175 Dollars KMP = 4,302 Dollars 4,000 140 3,000 105 S&P 500 = 164 UTY = 147 KMI = 146 2,000 70 AMZ(d) = 1,594 RMZ = 145 1,000 35…
  17. KMI to Acquire KMP KMR and EPB – KINDER MORGAN ENERGY PARTNERS, L.P. – slide 17
    Strategy Remains the Same Same Strategy Since Inception Focus on stable fee-based assets that are core to North American energy infrastructure Market leader in each of our business segments Control costs Its the investors money,…
  18. KMI to Acquire KMP KMR and EPB – KINDER MORGAN ENERGY PARTNERS, L.P. – slide 18
    Additional Transaction Information Summary Timeline Expect KMI and KMR shareholder meetings and unitholder meetings for KMP and EPB in 4Q 2014 Preliminary proxy filed 8/27/2014 HSR early termination received 8/25/2014 [No other…
  19. KMI to Acquire KMP KMR and EPB – KINDER MORGAN ENERGY PARTNERS, L.P. – slide 19
    Business Risks Regulatory (KMP/EPB/KMI) Products Pipeline FERC / CPUC cases Natural Gas FERC rate cases Legislative and regulatory changes Crude oil production volumes (KMP) Commodity prices (KMP) CO2 oil production 2014 budget…
  20. KMI to Acquire KMP KMR and EPB – KINDER MORGAN ENERGY PARTNERS, L.P. – slide 20
    Summary Attractive Value Proposition Unparalleled asset footprint Diversified midstream energy platform provides stable, fee-based cash flow Continued focus on strong balance sheet and de-levering at KMI Highly visible, attractive…
  21. KMI to Acquire KMP KMR and EPB – KINDER MORGAN ENERGY PARTNERS, L.P. – slide 21
    Appendix
  22. KMI to Acquire KMP KMR and EPB – KINDER MORGAN ENERGY PARTNERS, L.P. – slide 22
    KMI Pro Forma Compares Favorably to its Midstream Energy Peers and S&P 500 High-dividend Companies LQA Dividend Dividend Growth Company Name Industry Market Cap Yield Rates PF KMI(a) Oil & Gas Pipelines 100,000 10.0% 2015-2020…
  23. KMI to Acquire KMP KMR and EPB – KINDER MORGAN ENERGY PARTNERS, L.P. – slide 23
    Cross-guarantees Overview KMI will consolidate its subsidiaries under a single C-corp as follows: Acquire public shares of KMR and public units of KMP and EPB EPB is acquired by KMP Execute cross guarantees among KMI, KMP and…
  24. KMI to Acquire KMP KMR and EPB – KINDER MORGAN ENERGY PARTNERS, L.P. – slide 24
    18 Years of Growth at KMP Strategy Has Led to Consistent, Growing Results KMP Total Distributions (GP + LP) (MM) KMP Annual LP Distribution per Unit(c) 5.58 (a) 5,000 6.00 5.33 (a) 4,499 4,500 GP LP 4.98 4,017 5.00 4.61 4,000…
  25. KMI to Acquire KMP KMR and EPB – KINDER MORGAN ENERGY PARTNERS, L.P. – slide 25
    Financial Rigor Promises Made, Promises Kept Promises Made Promises Kept KMI Budgeted KMI Actual Dividend: Dividend: KMI has exceeded 2011: 1.16(a) 2011: 1.20(a) its dividend target 2012: 1.35 2012: 1.40 in each of past 3 yrs.…
  26. KMI to Acquire KMP KMR and EPB – KINDER MORGAN ENERGY PARTNERS, L.P. – slide 26
    5-year Project Backlog(a) 17 Billion of Currently Identified Organic Growth Projects Tremendous footprint provides 17B of currently identified growth projects over next 5 years 5-year Growth Capex Backlog (B) 2H 2014 2015 2016…
  27. KMI to Acquire KMP KMR and EPB – KINDER MORGAN ENERGY PARTNERS, L.P. – slide 27
    Natural Gas Megatrend Tremendous Natural Gas Footprint & Market Opportunity Set U.S. Natural Gas Projected Supply & Demand(a) (Bcf/d) Demand 2014 2019 2024 KM Natural Gas Asset Footprint LNG exports -0.3 4.7 9.8 Mexican net exports…
  28. KMI to Acquire KMP KMR and EPB – KINDER MORGAN ENERGY PARTNERS, L.P. – slide 28
    Natural Gas Megatrend Generating Real-time, Long-term Benefits 641B of investment in midstream energy infrastructure needed through 2035, implying 29B per year annual spend(a) compared to 18B annual spend by MLPs(b) over past five…
  29. KMI to Acquire KMP KMR and EPB – KINDER MORGAN ENERGY PARTNERS, L.P. – slide 29
    KMP Returns on Invested Capital 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Segment ROI(a): Natural Gas Pipelines 13.3% 15.5% 12.9% 13.5% 14.0% 15.5% 16.7% 17.5% 16.9% 14.0% 11.9% 11.9% 11.9% 11.6%(b)…
  30. KMI to Acquire KMP KMR and EPB – KINDER MORGAN ENERGY PARTNERS, L.P. – slide 30
    KMP Capital Investment 46.5B Invested Since Inception(a,b) ( in billions) Total Invested by Type(a,b) Total Invested by Year 25 11 20 Expansion 10.0 10 Acquisition 15 22.0 24.5 9 10 8 5 7 6.6 (b) - Expansions Acquisitions…
  31. KMI to Acquire KMP KMR and EPB – KINDER MORGAN ENERGY PARTNERS, L.P. – slide 31
    Natural Gas Pipelines Segment Outlook Well-positioned connecting key natural gas resource plays with major demand centers Project Backlog: 4.6 billion of identified growth projects over next seven years(a), including: LNG…
  32. KMI to Acquire KMP KMR and EPB – KINDER MORGAN ENERGY PARTNERS, L.P. – slide 32
    Products Pipelines Segment Outlook Opportunities for growth from increased liquids production Project Backlog: 1.0 billion of identified growth projects over next two years(a), including: Cochin reversal / conversion Eagle Ford…
  33. KMI to Acquire KMP KMR and EPB – KINDER MORGAN ENERGY PARTNERS, L.P. – slide 33
    Terminals Segment Outlook Well-located in refinery / port hubs and inland waterways Project Backlog: 2.2 billion of identified growth projects over next five years(a), including: Liquids BOSTCO Phases 2, & 3 Alberta crude by rail…
  34. KMI to Acquire KMP KMR and EPB – KINDER MORGAN ENERGY PARTNERS, L.P. – slide 34
    CO2 Segment Outlook Own and operate best source of CO2 for EOR(a) Project Backlog: Identified growth projects totaling 1.8 billion and 2.0 billion in S&T and EOR, respectively, over next five years(b), including: S&T Southwest…
  35. KMI to Acquire KMP KMR and EPB – KINDER MORGAN ENERGY PARTNERS, L.P. – slide 35
    Kinder Morgan Canada Segment Outlook Sole oil pipeline from Oilsands to West Coast / export markets Project Backlog: 5.4 billion expansion of Trans Mountain Pipeline Long-term Growth Drivers: Expand Oilsands export capacity to…
  36. KMI to Acquire KMP KMR and EPB – KINDER MORGAN ENERGY PARTNERS, L.P. – slide 36
    Energy Toll Road Diversified, Fee-based Business Model Natural Gas Products Kinder Morgan Terminals CO2 Pipelines Pipelines Canada (KMP) (KMP) (KMP/EPB/KMI) (KMP) (KMP) Interstate & LNG: take or pay Take or pay, minimum S&T:…
  37. KMI to Acquire KMP KMR and EPB – KINDER MORGAN ENERGY PARTNERS, L.P. – slide 37
    After-Tax Analysis for KMP and EPB Unitholders KMP and EPB After-Tax Analysis Assumptions After tax calculations for illustrative purposes only. These represent approximate calculations for an average unitholder assuming a sale as of…
  38. KMI to Acquire KMP KMR and EPB – KINDER MORGAN ENERGY PARTNERS, L.P. – slide 38

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