Kinder Morgan 2021 Investor Day Agenda & presenters TIME DISCUSSION PRESENTER 8:00 8:20 Our Vision Rich Kinder Executive Chairman 8:20 9:00 Our Future Steve Kean CEO 9:00 9:40 Strategy & Business Review Kim Dang President 9:40…
OUR VISION
Kinder Morgan Overview LEADER IN U.S. ENERGY INFRASTRUCTURE Energy infrastructure, especially natural gas pipelines & storage, has a decades-long time horizon WHERE GOVERNANCE MATTERS Managed for shareholders by shareholders…
Managed for shareholders by shareholders Highly-aligned leadership with a long-term focus & disciplined stewardship of capital 13% ownership equity-based comp discipline by management & board a core part of executive compensation…
Quality of Life Differences Persist Around the World Even by 2030, IEA estimates 660 million people remain without electricity & 2.4 billion rely on traditional biomass for cooking 70,000 Population size U.S. 60,000 wealth &…
Asia & Africa Contribute Over 90% of Energy Demand Growth Demand expected to be relatively stable in the rest of world as energy usage is central to everyday life GLOBAL PRIMARY ENERGY DEMAND in billion tons oil equivalent GROWTH BY…
All Available Sources Required to Meet Demand Outlook Even as the energy mix gradually shifts, hydrocarbons projected to remain essential to meeting demand GLOBAL PRIMARY ENERGY DEMAND BY FUEL billions tons oil equivalent (btoe) 2019,…
Natural Gas Demand Enables Industrial Development Global natural gas demand growth by sector from 2019 to 2030 (bcfd) 40% power 45 Industrial demand for natural gas is most important growth driver over next 10 years 40 2019 demand…
Growth in Global Oil Demand Expected through 2040 Efficiency efforts & EVs not enough to offset global increases in mobility & petrochemical demand GLOBAL OIL DEMAND million barrels per day 120 Total oil demand Over the next…
U.S. Helps Meet Increasing Global Demand Reliable trade partner with competitive & more responsibly produced supply versus many global alternatives U.S. OIL & LIQUIDS in million barrels per day U.S. NATURAL GAS in billion cubic feet per…
KMI: a Core Holding in Any Portfolio Generating significant cash flow & returning significant value to shareholders 35 billion market capitalization One of the 10 largest energy companies in the S&P500 13% owned by management…
OUR FUTURE 14
Doing Business the Right Way Every Day For our shareholders, employees, customers & neighbors vision mission values Delivering energy to improve Provide energy transportation & Integrity, accountability, safety lives & create a better…
Our Business is Resilient throughout an Energy Transition what we do today is valuable & will be needed for a long time helps meet environmental goals energy transitions take decades infrastructure supporting the - Vaclav Smil,…
Leader in North American Energy Infrastructure Unparalleled & irreplaceable asset footprint built over decades Connecting major U.S. natural gas resource plays to key demand centers Largest natural gas transmission network Move 40% of…
Business Mix Leading infrastructure provider across multiple critical energy products Note: Business mix based on 2021 budgeted Adjusted Segment EBDA. See Non-GAAP Financial Measures & Reconciliations. 18
Substantial Growth Projected for U.S. Natural Gas KEY BASINS DRIVING U.S. GROWTH 2020 to 2030 growth in bcfd Additional 24 bcfd expected from three areas 9 9 6 Haynesville Permian Northeast DEMAND in bcfd Exports &…
U.S. is a Responsible Producer of Critical Energy Products One of the lowest emissions intensity producers in the world & at unmatched scale 7x higher in Iraq average upstream emission intensity of top 10 global producers (relative to…
Growing U.S. Industrial Demand for Natural Gas Primarily used for process heat U.S. NATURAL GAS INDUSTRIAL DEMAND BY SECTOR in bcfd Bulk chemicals sector drives U.S. industrial demand 2019 2050 16 for natural gas Use for heat &…
Our Infrastructure is Important to Fueling the Future Leveraging our long-term investment in the substantial assets & expertise required to responsibly deliver energy BENEFITS OF NATURAL GAS LOW EMISSIONS ABUNDANT & LOW COST Natural…
U.S. CO2 Emissions Declined Since 2007 while GDP grew 50% Primarily due to converting coal power generation to natural gas generation U.S. ELECTRICITY GENERATION MIX U.S. CO2 EMISSIONS % of total generation billion metric tons U.S.…
Replacing Coal Power Could Accelerate Emissions Reductions Goals Power sector contributes 40% of energy-related CO2 emissions globally POWER GENERATION MIX & POPULATION IN 2040 % based on terawatt-hours Coal Natural gas Renewables…
Natural Gas Steps In when Renewables Drop Out Renewable generation can be inadequate at inopportune times during highest demand points in day or even full week SOLID LINES: AVERAGE DAY DURING CA HEAT WAVE August 13-16, 2020 AVERAGE…
Renewable Growth Requires Operational Flexibility Proper coordination between grid & pipeline operators required to make sure power demand is met baseload generation solar generation load following generation delivered consistently &…
Enhanced Natural Gas Deliverability Optimizes Flexible Grids With proper coordination, gas-fired generation can be dispatched optimally to meet multiple important objectives Key components to supporting an electric grid with increasing…
Natural Gas Infrastructure Offers A Ready-Made Storage Solution Underground storage functions as a large capacity, highly effective battery today PROVIDING A BETTER BATTERY: UNDERGROUND STORAGE terawatt hours of power Incredibly large…
Infrastructure Planning Considerations Multi-faceted analysis needed to balance cost, readiness & environmental impact GLOBAL ANNUAL POWER GRID INVESTMENT Studies indicate that electricity supply Increasing from 60% to 80% & 100% cost…
Well-Positioned to Move Potential Fuels of the Future RNG & hydrogen can utilize much of the existing natural gas infrastructure network RNG is a pipeline-quality gas Hydrogen could be shipped Hydrogen is energy dense & Pipelines can…
Opportunity for Natural Gas Infrastructure Renewable alternatives are small in scale today, but could grow to meet nearly 20% of current U.S. demand as costs decline U.S. SUPPLY COST ESTIMATES bcfd, 2020 & 2050 potential per Dth 2020,…
Responsibly Sourced Natural Gas Conventional natural gas produced by companies whose operations have been independently verified as meeting certain ESG standards Standards typically focus on management practices for METHANE WATER…
Carbon Capture Utilization & Storage (CCUS) Positioned to leverage our existing expertise & capabilities to provide CCUS services in the future Our experience & current operations cover the CCUS value chain CURRENT ESTIMATED U.S. CARBON…
Attractive Potential for Liquid Biofuels Policy support & efficient infrastructure important to increasing adoption of ethanol, biodiesel & other low-carbon fuels GLOBAL BIOFUELS DEMAND OUTLOOK million barrels per day Stated policies…
Substantial Existing Capabilities at Our Terminals & Products Assets Includes substantial blending, pipeline, terminaling & export capabilities for ethanol & other biofuels Ethanol Biodiesel Renewable Diesel Our existing assets…
Our Multi-Faceted ESG Approach Recognized as an industry leader & for ongoing improvements INVEST integrity management & maintenance programs Sustainalytics ESG risk rating(a) Safety-focused Outperform industry averages in almost all…
Long-Standing Commitment to Reducing Emissions 25+ year track record Evaluate new opportunities SUCCESSFUL METHANE EMISSIONS REDUCTIONS(a) Work with organizations like DOE, EPA, & PRCI on studies & technology bcf, cumulative across our…
Building a Diverse, Inclusive & Respectful Workplace Investing in our people & communities where we operate Talent 45% female or minority Annual training required Leadership programs representation in Executive Leadership helps…
Positioned for the Future of Energy Our vast network of strategically-located energy infrastructure will continue delivering energy for decades to come Moving fuels of today & the future U.S. exports help meet global demand from…
STRATEGY & BUSINESS REVIEW
2020: a Remarkable Year in Energy In the last century, only World Wars & the Great Depression have produced larger declines in global energy demand U.S. RIG COUNT DECLINE EVENTS SINCE 1975 Globally, its estimated that in 2020: 0%…
We Weathered the 2020 Storm while Improving Shareholder Value Committed to being disciplined stewards of capital 700 million 30% reduction in discretionary capital compared to budget 190 million saved in operating costs & sustaining…
Strategy Maximize the value of our assets on behalf of shareholders Disciplined Enhance Stable, fee- Invest in a low Financial capital shareholder based assets carbon future flexibility allocation value Core energy 1.5 billion…
Efficiency Project Resulted in Annual Savings of 100 million Our already efficient & lean organization is always looking for ways to improve In July, appointed James Holland to new COO role for enhanced focus on operations & ESG Also…
Self-Funding Capex & Dividends Since 2016 Opportunistic asset monetization enabled meaningful debt reduction Generated 1.9 billion of free cash flow after dividends over last 5 years Borrowing, net Cash from BS Debt repayment…
Highly-Contracted Cash Flows Stable cash flows with 72% take-or-pay or hedged earnings(a) Contract type Payment feature Example assets CONTRACT MIX(a) Jones Act tankers 100% Natural gas interstate / LNG 93% Entitled to payment…
Customers Are Primarily End-Users of the Products We Handle Net revenues underpinned by investment grade counterparties & credit support Ratings as of January 11, 2021 CUSTOMER TYPE CREDIT RATING End-user IG or substantial credit…
Successfully Achieving Attractive Build Multiples Established track record of leveraging our footprint & project management expertise COMPETITIVE ADVANTAGES INVESTMENT MULTIPLES: PROJECTS COMPLETED 2018 2020 Capital invested / year 2…
Natural Gas Segment Overview Connecting key natural gas resources with major demand centers ASSET SUMMARY Natural gas pipelines: 70,000 miles NGL pipelines: 1,200 miles Natural gas transported 40% (U.S. consumption & exports) Working gas…
Leading the Way Out of the Permian Excellent execution in face of global pandemic & substantial opposition Leveraging existing footprint into new takeaway capacity Reaches across Texas & the Desert Southwest, connecting into major…
Supporting the Buildout of U.S. LNG Exports Serving significant liquefaction capacity & well-positioned to capture more Kinder Morgan network advantages Natural gas transportation leader 70,000 miles of natural gas pipelines Move 40% of…
Long-Term Growth Drivers: Natural Gas Segment Opportunity for our unique last-mile pipeline connectivity, capitalizing on industry trends LNG exports: pipeline & storage infrastructure supporting existing & new LNG development Exports…
Products Segment Overview Strategic footprint with significant cash flow generation ASSET SUMMARY Pipelines: 9,500 miles 2021 budgeted throughput(a) 2.3 mmbbld Terminals: 65 terminals Terminals tank capacity 39 mmbbls Pipeline tank…
Products Segment Overview Supplying a diverse mix of feedstock & finished products critical to refining & transportation sectors 2021B volumes Volume by 2021B DELIVERY VOLUMES(a) mbbld region(b) West 74% Budget averages 2% below 2019…
West Coast Renewable Fuels Projects Developing infrastructure to secure renewable fuels Market drivers Renewable Diesel (RD) has been driven by California subsidies RIN credits Low Carbon Fuel Standard (LCFS) credits Blenders Tax…
Terminals Segment Overview National terminaling network connecting our customers with domestic & international markets of capacity ASSET SUMMARY terminals (mmbbls) Terminals segment Bulk 29 Terminals segment Liquids 50 80 Products…
Our Integrated Terminal Network on Houston Ship Channel Refined products focused with an irreplaceable collection of assets, capabilities & market-making connectivity Our unmatched scale & flexibility: KM terminals & assets refined…
Our Integrated Terminal Network on Houston Ship Channel Industry leading capabilities in the worlds most competitive refining & petrochemical center Unmatched inbound connectivity Value-added services Outbound market access Truck rack…
Leading Exporter of U.S. Gasoline & Diesel COVID recovery & prospective long-term growth in USGC product exports US GULF EXPORTS(a) OUR HOUSTON SHIP CHANNEL EXPORTS(b) thousand barrels per day thousand barrels per day Diesel 400 2020…
CO2 Segment Overview World class, fully-integrated assets CO2 source to crude oil production & takeaway in the Permian Basin KMI Est. OGIP CO2 Reserves Interest NRI Location tcf McElmo Dome 45% 37% SW Colorado 22.0 Doe Canyon 87%…
CO2 Segment Consistently Generates Free Cash Flow Low cash cost structure yields healthy margins through multiple commodity price cycles OIL & GAS CASH OPERATING COSTS & AVG. PRICE CO2 SEGMENT FREE CASH FLOW millions per net barrel Cash…
PANEL WITH COO & BUSINESS UNIT PRESIDENTS 63
2021 BUDGET
2021 Budget Committed to maintaining a strong balance sheet & returning value to shareholders Variance to Key metrics 2021 Budget 2020 Net income 2.1 billion 2 billion Increase due primarily to impairments taken during 2020 Lower…
Stable Foundation of Cash Flows through Commodity Cycles Diversified footprint of essential assets limits downside, even in extreme downturn events billions 0.3 0.2 0.1 0.2 0.1 0.1 0.2 0.3 0.1 0.2 7.6 0.2 0.3 0.1 7.0 6.8…
2021 Budget Assumptions & highlights SEGMENT YoY EBDA(a) KEY DEVELOPMENTS FROM 2020 Full year contribution from PHP & other expansions Natural Gas -1% TX Intrastates growth projects & increased margin Unfavorable re-contracting…
2021B Net Income & Distributable Cash Flow (DCF) in millions, except per share 2021 2020 Change Budget Actual % Net income attributable to Kinder Morgan, Inc. (GAAP) 2,109 119 1,990 NM Total Certain Items (11) 1,892 (1,903) (101%)…
2021B Adjusted Segment EBDA & Adjusted EBITDA in millions 2021 2020 Change Budget Actual % Natural Gas Pipelines 4,419 4,466 (47) (1%) Products Pipelines 1,157 1,027 130 13% Terminals 1,032 990 42 4% CO2 504 652 (148) (23%)…
2021B Capital Expenditures in millions 2021 2020 Sustaining Capital Budget Actual Change Natural Gas Pipelines 424 341 83 Products Pipelines 79 79 (0) Terminals 251 207 44 CO2 14 9 5 Corporate / other 24 22 2 Total sustaining…
2021B DCF Self-Funding in millions 2021 2020 Change Budget Actual % DCF 4,445 4,597 (152) (3%) Discretionary capital (794) (1,692) 898 53% Declared dividends (2,461) (2,390) (71) (3%) Share repurchases (a) - (50) 50 100% DCF self…
2021B Cash Flow from Operations (CFFO) & Free Cash Flow (FCF) in millions 2021 2020 Change Budget Actual % Net income attributable to Kinder Morgan, Inc. (GAAP) 2,109 119 1,990 NM Net income attributable to noncontrolling interests…
2021B Sources & Uses(a) in millions 2021 SOURCES & USES in billions Sources Budget 6.5 CFFO 4,596 Cash balance as of 12/31/2020 1,184 6.0 Revolver Borrowing/Debt Issuances 302 Cash from BS 5.5 Distributions from equity…
Leverage & Liquidity(a) in millions 2021 KMI LONG-TERM DEBT MATURITIES(d) Budget 6,000 Debt maturities Weighted average interest rate 8% 7.6% Net Debt (Year End) 31,244 7% Adjusted EBITDA 6,8295,000 Net Debt(b) to Adjusted EBITDA…
2021B Quarterly Profile in millions, except per share Adjusted Segment EBDA Q1 Q2 Q3 Q4 Total 2021 Budget 26% 24% 24% 26% 7,112 2020 Actual 26% 23% 25% 26% 7,135 Adjusted EBITDA 2021 Budget 26% 24% 24% 26% 6,829 2020 Actual 26%…
2021B Cash Tax Calculation Detail in millions 2021 Budget Adjusted Segment EBDA 7,112 Net income attributable to NCI (69) JV earnings from C corps (350) JV distributions from C corps (net of 65% dividend received deduction) 138…
2021 Budget Sensitivities Limited overall commodity exposure 2021B assumptions Change Potential Impact to Adjusted EBITDA & DCF (full year) Natural Gas Products Terminals CO2 Total Natural gas G&P volumes 2.864 bcfd +/- 5% 28 million…
Financial Highlights Enhanced financial strength despite significant demand & price disruptions 2020 2021 BUDGET Weathering market EBITDA down only 8% from budget despite Demand disruptions remain, but expect disruptions significant…
Q&A 79
Natural Gas Segment Presentation 80
Natural Gas Segment Overview Connecting key natural gas resources with major demand centers ASSET SUMMARY Natural gas pipelines: 70,000 miles NGL pipelines: 1,200 miles Natural gas transported 40% (U.S. consumption & exports) Working gas…
Natural Gas Segment is Predominantly Transport Pipelines Over 80% take-or-pay Fee-based gathering & processing assets focused in the Bakken, Eagle Ford & Haynesville BUSINESS MIX NATURAL GAS SEGMENT VOLUMES based on Adjusted Segment EBDA…
Natural Gas: Interstate Pipelines Key statistics Rate Capacity Storage Avg. Remaining Effective Date of Moratorium Ownership Miles (bcfd) (bcf) Contract Term (yrs) Next Rate Case Through Date 100% KMI-owned: TGP Tennessee Gas Pipeline…
Gathering & Processing Assets Across Multiple Key Basins Represents 7% of KMI EBDA with 6% in Natural Gas & 1% in Products (primarily Bakken) SHORT-TERM DRY GAS PRODUCTION OUTLOOK bcfd, 2020 2022 17% Other 14 Multiple systems in…
Natural Gas: Intrastate, G&P and NGL Assets Key statistics Avg. Remaining Ownership Miles Capacity Contract Term (yrs) Storage Treating Processing (bcfd) (bcf) (GPM) (bcfd) 100% KMI-owned natural gas pipelines: KMTP / Tejas 100%…
Long-Term Growth Drivers: Natural Gas Segment Opportunity for our unique last-mile pipeline connectivity, capitalizing on industry trends LNG exports: pipeline & storage infrastructure supporting existing & new LNG development Exports…
Leading the Way Out of the Permian Excellent execution in face of global pandemic & substantial opposition Leveraging existing footprint into new takeaway capacity Reaches across Texas & the Desert Southwest, connecting into major…
Supporting the Buildout of U.S. LNG Exports Serving significant liquefaction capacity & well-positioned to capture more Kinder Morgan network advantages Natural gas transportation leader 70,000 miles of natural gas pipelines Move 40% of…
Key Market: Exports to Mexico Expect to maintain market share of growing Mexico market 57%(a) in 2020 Extensive footprint offers diverse supply options to multiple Mexico interconnections 12 direct & 4 indirect U.S. natural gas exports…
Supporting Increasing Variable Demand Opportunities for short notice, high deliverability services & gas storage Renewable generation Export demand Non-dispatchable, intermittent wind & solar generation requires Interruptions to LNG…
We Serve Regions with Meaningful Renewable Power Today Our tailored deliverability services better support the needs of flexible grids in these areas SOLAR & WIND POWER GENERATION FACILITIES Sized by generation capacity as of 2019 Solar…
Renewables Require Hourly Flexibility & Associated Non-Ratable Services Currently serving this dynamic in Western markets trend developing in Central & Eastern markets Our service offerings reflect dedicated use of infrastructure…
Opportunities from Energy in Transition Multiple strategies to participate with our substantial natural gas assets Near-Term Strategies Opportunities Next-Steps Position base business to further Monetize deliverability & unutilized…
Manageable Natural Gas Re-Contracting Exposure Analysis of existing contracts that renew during next two years KMI ADJUSTED SEGMENT EBDA millions Expiring contracts are assessed for volumetric & Adjusted Segment EBDA Interstate…
Projects Placed Into Service During 2020 New natural gas projects expected to generate 297 million of annual EBITDA In-service date: 2020 Capacity KM share (mm) Asset Project Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec (mDthd)…
Project Backlog Natural Gas KM share (mm) Capacity Asset Project Capital EBITDA (mDthd) In-service Date Project Status East 300 Upgrade 246 115 11/2022 Under Development TGP Line 261 Upgrade (Eversource) 72 121 11/2021 Under…
LNG Contract Overview Contracted capacity (online / to come) & Elba Liquefaction Contracted capacity KM share (mm) Remaining KM Asset (mDthd) Capital EBITDA contract term TGP 1,250 281 KMLP 1,545 278 NGPL 1,975 223 EPNG 95 23 Intrastate…
Products Segment Presentation 98
Products Segment Overview Strategic footprint with significant cash flow generation ASSET SUMMARY Pipelines: 9,500 miles 2021 budgeted throughput(a) 2.3 mmbbld Terminals: 65 terminals Terminals tank capacity 39 mmbbls Pipeline tank…
Products Segment Volume Mix Supplying a diverse mix of feedstock & finished products critical to refining & transportation sectors 2021B volumes Volume by 2021B DELIVERY VOLUMES(a) mbbld region(b) West 74% Budget averages 2% below…
Refined Products Pipes Historically A Steady Contributor Fee-based with stable volumes over the long-term REFINED PRODUCTS VOLUMES(a) 2021 BUDGETED VOLUMES VS 2019 ACTUAL VOLUMES mmbbld mmbbld KM Refined Product (left) Domestic Refined…
Refined Products Assets Generate Stable Cash Flows Earnings recovery & growth opportunities REFINED PRODUCTS EBDA BY REGION(a) millions West Coast Southeast 771 772 743 665 690 710 723 Renewable fuels provide opportunity to sell…
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