Kinder Morgan at Bernstein Conference: Natural Gas Demand Drives Strategy

On Wednesday, 28 May 2025, Kinder Morgan (NYSE:KMI) presented its strategic vision at the Bernstein 41st Annual Strategic Decisions Conference. CEO Kimberly Dang highlighted the company’s bullish outlook on natural gas demand growth, alongside a substantial project backlog. While optimistic about regulatory improvements, Kinder Morgan remains cautious in capital allocation, balancing growth with financial discipline.

Key Takeaways

• Kinder Morgan forecasts a 28 BCF per day increase in natural gas demand over the next 4 years.
• The company has an $8.8 billion backlog, with 90% related to natural gas projects.
• Kinder Morgan prioritizes projects with long-term take-or-pay contracts.
• The company maintains a focus on stable cash flow and modest dividend growth.
• Recent acquisitions include assets in the Bakken and Texas, totaling over $2.4 billion.

Financial Results

• Backlog and Business Composition

- $8.8 billion backlog, 90% natural gas-related.

- 65% of overall business is natural gas.

- $7.5 billion backlog backed by take-or-pay or fee-for-service contracts.

• EBITDA Breakdown

- 64% from take-or-pay contracts.

- 26% from fee-for-service business.

- 5% with commodity exposure, hedged over multiple years.

• Capital Allocation

- Maintenance CapEx: $1 billion.

- Growth CapEx: $2.5 billion annually.

- Targets less than 6x EBITDA multiple on contracted backlog.

• M&A Activity

- Bakken acquisition: Over $600 million.

- Texas intrastate pipeline: $800 million.

- Northeast natural gas storage facility: Over $1 billion.

Operational Updates

• Natural Gas Demand

- Expected growth of 22-28 BCF per day.

- LNG exports are a key driver, contributing 15-18 BCF per day.

• Power Demand and CO2 Business

- 50% of the backlog linked to power projects.

- CO2 business stable, representing 9% of overall operations.

Future Outlook

• Growth Opportunities

- Anticipates adding to the backlog with rising natural gas demand.

• Regulatory Environment

- Optimistic about improvements in federal permitting processes.

• Capital Management

- Aims to maintain a net debt to EBITDA ratio of 3.5 to 4.5x.

- Open to high-return projects within balance sheet capacity.

Q&A Highlights

• M&A Strategy

- Focuses on stable, fee-based energy infrastructure assets.

• Technology

- Exploring AI for operational improvements.

• Dividend Policy

- Committed to maintaining and modestly growing dividends.

• Rate and Pricing Trends

- Expects rising rates on natural gas contract renewals.

For a complete understanding of Kinder Morgan’s strategic insights, readers are encouraged to refer to the full conference transcript.

Full transcript - Bernstein 41st Annual Strategic Decisions Conference:

Bob Brackett, Bernstein’s Head of America’s Energy and Transition, Bernstein: no obvious reason for me to stand, but I’ll stand anyway. Good morning. This is the forty first annual strategic decision conference. My name is Bob Brackett, Bernstein’s head of America’s energy and transition. We are not expecting a fire drill today.

So if the alarms ring for any reason, please take it seriously. The primary route of exit, luckily, is straight out the door to the back of the room to the right, and you’ll descend an inside stairway a few flights and exit, to the north. If for any reason that exit is blocked, you will go out the door to the left back towards the lobbies, and there is three or four internal staircases that will bring you down. This is your conversation. This is your fireside chat on the screens around you.

You’ll see it rotate through. It’ll show a QR code for you to enter your questions into Pigeonhole. They will show up on my screen up here, and I’ll launch into that conversation. While we’re waiting for you to drive the conversation, I will start by introducing Kimberly Dang, the CEO of Kinder Morgan. My conversation will start in the shape of a pyramid.

We’ll start with the macro questions. We’ll move down into strategic questions, financial questions, and then operational questions. With that, thank you, Kim, for joining us. Thank you, Bob. And, we’ll launch in on on my favorite topic of the year, which is natural gas.

You all have a forecast for gas demand growth of plus 28 BCF a day. For the audience, US gas demand is roughly a 20. So we’re looking at a 25% growth, and something that’s hard to keep flat, over the next four ish years. That’s well ahead of consensus. It’s a smidgen behind our forecast.

And, frankly, every time we refresh our forecast, it goes up. Talk to your enthusiasm around natural gas.

Kimberly Dang, CEO, Kinder Morgan: Oh, sure. I mean, it is a, it’s a very exciting time to be in the industry. And I’ve been at Kinder Morgan now for for twenty four years, and this is some of the best opportunities, we’ve ever seen in this space. So, you know, as you said, our forecast for gas growth is 28 BCF a day. I think, WoodMac’s most recent forecast they just came out with, is 22 BCF a day.

So, you know, significant growth in the market, driven primarily by export LNG. You know, call it 15 to 18 or, BCF a day of that, 22 to 28 is associated with export LNG. And then you’ve got incremental power demand. You’ve got incremental industrial demand, some rescom, and some exports to Mexico. So, you know, really seeing some some nice growth across the board.

You know, what that’s done, first of all, that’s, you know, that’s ’22 to ’28 going forward. If you look what we’ve seen since 2015, we’ve seen over 30 BCF a day of growth since 2015, and that’s really filled up the existing pipeline system and, highly storage is highly utilized at this point. You know, you’ve seen some price increase significant price increases over the last few years in storage services. And so, you know, the the pipeline systems are full, and so, you know, the incremental demand is driving, growth. You know, we’ve got an $8,800,000,000 backlog of projects.

90% of that is is natural gas. Natural gas is about 65% of, Kinder Morgan’s overall business. And, you know, that $8,800,000,000, you know, is largely backed by take or pay contracts. So if you look at it, you know, seven and a half of the 8.8, is largely associated either with take or pay or fee for service businesses. And the balance is, EOR, which is our, c o two business, and our gathering business gathering business in primarily natural gas, a little bit in crude.

So those projects are you know, we’ve got locked in contracts. They’re approved by the board and moving forward. And then, obviously, a big opportunity in front of us in terms of the growth.

Bob Brackett, Bernstein’s Head of America’s Energy and Transition, Bernstein: If we talk about the big demand drivers for natural gas, we can start with LNG. We know LNG is export. We know with high certainty it’s gonna sit on the Gulf Coast, then we know there’s not enough gas on the Gulf Coast, to feed that. So someone needs to connect that gas. Talk to your role in connecting, into LNG export.

Kimberly Dang, CEO, Kinder Morgan: Sure. So it’s interesting when you start looking at LNG export, and this is something we’ve seen evolve over time. You know, generally, for the export facility to get get its financing done, it it signs up for, pipeline capacity. Usually, they they build it. It’s a header going from, you know, a liquid point to the, to the facility.

But as they progress further, towards construction and, further towards in service, you know, they start looking at, oh, well, you know, where I’m buying that gas. It’s it’s very competitive price, and I’d sure like to get, you know, some some cheaper gas. And so then they start looking back upstream to expand back, you know, closer, not to the wellhead, but, you know, back upstream to get a more attractive price point. And then a lot of times, they also, you know, are looking to diversify supply and or pipeline, capacity. And so, you know, they’re not it’s not a one for one in terms of the the capacity they sign up.

Know, they want some insurance, so they may sign up for a 20% of their needs or a 30% of their needs. So every LNG project brings, multiple opportunities.

Bob Brackett, Bernstein’s Head of America’s Energy and Transition, Bernstein: And then we move to power demand. One of the things I’ve been arguing is a lot of people shortcut power demand growth as they call it AI growth or they call it AI data center growth or whatnot. But clearly, it is something around data centers matter, that commercial demand matters. That, we don’t know where it’s going to be placed. And so there is a competition perhaps between data centers being built in areas that already produce natural gas, you could imagine the Permian, you could imagine Appalachia, versus data centers being built in Louisiana, which have been sanctioned, where you have to bring the gas from somewhere.

How how does that tension evolve, and how do you compete with siting of data centers? Sure. So let

Kimberly Dang, CEO, Kinder Morgan: me start on the on your your point about, you know, power demand is broader than just data centers because, if you look at our our backlog right now, 50% of our backlog is associated with power, which most people would think, oh, LNG is the big driver. You know, 25% of our backlog is associated with LNG, but 50% is associated with power. And so we’re seeing multiple drivers of that power growth and that power demand. One is you’ve seen population migration to places like Georgia and Alabama and Texas and Louisiana and Arizona, and that population comes with a need, you know, for more power. You’ve seen businesses migrate, and then you’ve seen an onshoring, and that is ongoing, I would say, of, of industrial capacity, manufacturing capacity.

So think about things like auto production in Alabama or, chip or battery facilities out in in Arizona. So a lot of industrial and and and business demand, incremental in, you know, the Southern United States along with the along with the population growth. You also are seeing you’ll be seeing coal retirements, And so those coal plants are are being replaced with natural gas facilities a lot of times at the same location, so your coal conversions, if you will. And then you have, data center demand, and that that’s also, a driver of the of the power. And so you start looking at all those.

And, you know, typically, on the population and the industrial growth, that’s gonna happen near the population centers, and and coal conversions at, a lot of times, at existing sites or all the conversions are at existing sites. So that’s happening around population centers because, you know, it’s very expensive to build transmission. And so the power plants are going in and around the population centers. The industrial’s going around population centers because they need workers. You know, the data centers are interesting because they have some more flexibility as to where they as to where they locate, because you can site the data center and the power plant together, and then build the fiber to fiber to the market.

Now if you build the fiber over too long a a distance, my understanding is that, you know, you do get some latency. And so I don’t you know, they’re they don’t wanna locate too far away from from the market areas. But, you know, they’re really looking, I think, at speed to market. And so where we see right now, the the most near term opportunities, you know, is really around where the regulated utilities are building power plants. Plants.

And so and, you know, that’s in places like Arkansas, Louisiana, Mississippi, in Georgia, in South Carolina. Those are where we see the more near term opportunities. And, look, I mean, that is also where we have the infrastructure, so that’s where we’re going to see more opportunities because a lot of our infrastructure is in, you know, the Southern United States. And quite frankly, our infrastructure is in the area where we expect most of the natural gas demand growth overall. 85% of the natural gas demand growth that’s expected is coming, you know, in the Southern And Southeastern United States.

So good to have a position where the growth a nice asset position where the growth is occurring.

Bob Brackett, Bernstein’s Head of America’s Energy and Transition, Bernstein: Everyone’s moving south. The electrons are moving south. The methane’s moving south. The, if I think about some of the companies we’ll have here this week, a $1 move in Henry Hub or a $10 move in oil can move their cash flows 40%. Those CEOs wake up and they look at their relevant commodity price.

You’ve got something like a 1% sensitivity to changes of that magnitude. When we talk about the gas opportunity, do you care about gas price, or is it just gas demand and gas volumes?

Kimberly Dang, CEO, Kinder Morgan: So we care more about gas demand. You know? But in the long term, you know, what impacts our customers impacts us. So you’re right. Our direct commodity exposure is pretty modest.

If you look at, our EBITDA and break it down, you know, 64% is coming from take or pay contracts. You know, 26% is coming for fee for service business, so no, no price exposure. There you have, some volumetric exposure. 5% has commodity exposure, but we have a a multiyear hedging program. And then 5% has the commodity exposure, most of which is crude, but some of which is gas.

And that’s, you know, that’s where you get the, the relatively small sensitivity to to commodity prices. So the when we go out and we sign up long term contracts to back these projects that are in our backlog, you know, we’re getting generally long term take or pay contracts from people. So, you know, we’re not as concerned about what what the, you know, price is day to day of of natural gas. And, you know, before they go on our backlog, generally, we have to have long term contracts underpinning those. So I think the the $8,800,000,000, 7 and a half of it, that’s not the EOR and the the g GMP, you know, those we have locked in contracts.

So that growth is is gonna come. And then, you know, beyond that, what you want is prices to stay in a somewhat reasonable range. You know, we what you know, I think when you start impacting demand or you start impacting supply is when you get prices on the extreme ends. And so, you know, that’s you know, we prefer things, like Goldilocks kinda just right in the middle. And I think look.

I think with, the the discipline, that we’ve seen from the producers, their ability to to put ducts in inventory, their ability to do TILs, you know, hopefully, you know, we can avoid some of those extremes that we’ve seen in the past.

Bob Brackett, Bernstein’s Head of America’s Energy and Transition, Bernstein: And clearly, 2024, we’re sitting at $2 gas, the cheapest hydrocarbon near a demand center on Earth, and clearly that wasn’t sufficient for the industry. Even the lowest cost producers, supply fell. That’s the bottom of the Goldilocks. What gas price do you think is the top of the Goldilocks cycle? Too high for demand destruction?

Kimberly Dang, CEO, Kinder Morgan: So that’s hard. I mean, we clearly saw some demand destruction when prices were at 8 and and 9, and and, you know, people were hesitant to to sign long term contracts. So I would say when you get to that level, there is you know, that’s when you start impacting things. You know, it’s harder to say if you were at six or seven because we went to eight or nine, and then, you know, we we quickly dropped, back down. So hard to say exactly where that point is, but I think when you get to eight or nine, you clearly are there.

Bob Brackett, Bernstein’s Head of America’s Energy and Transition, Bernstein: Yeah. I I like that range. I’ll take that. I could argue that the 8 or nine is a discounted price into your Asia and Europe pay more than that today. They’d smile at that price.

But moving to the regulatory environment, what do you see there today? People have talked about the ability of the oil and gas industry to permit projects, permit pipelines. I’ve always had a philosophy that there’s more than one person that decides to put a pipeline in place, and there is a federal process, and there is a state process, and there is a local process, and there is a community process, and there is a a board process. Clearly, the federal, scope has changed. What do you see there?

What would you like more clarity in?

Kimberly Dang, CEO, Kinder Morgan: Sure. So the federal process is getting better. And, you know, both from, you know, regulatory burden, and cost. And so, you know, the the first couple of things that we saw, by the current administration was, you know, they took back, the clean power plan that helps us indirectly in terms of power demand. They, they took back the, the good neighbor plan, which was gonna cost us significant dollars of spending.

And, oh, and the greenhouse gas reporting, which, you know, was a was a burden, not as significant as the good neighbor plan, but still an an added incremental burden. So they you know, they did did those things off the bat. And then, you know, we have seen, many of the different core offices announce new regulatory guidance, which expedites permits coming out of the Army Corps of Engineers. That’s been good to see, you know, as we’ve been working with the BLM, so the Bureau of Land Management, as we’ve been working with FISH on some projects, we’ve seen, them much more responsive and, much quicker to get decisions. So that’s been good.

We filed, through INGAA, through the trade association. INGAA filed with FERC, some actions that could help FERC speed up permitting. Specifically, one is called order eight seventy one where the FERC has five months from the time they issue our permit until they grant us a notice to proceed to allow for any any rehearing request. You know, they put that in, in in effect without notice and comment. So we’ve asked them to take it, you know, take it back without notice and comment.

And, you know, the Energy Dominance Council has filed a a letter in in support of, Inga’s filing, to do that. So that would be, you know, that would be a, you know, a a big, you know, a dent into some of the, the time and permitting. So, you know, we are seeing, some good changes. And then, you know, where we’re building on the state front, you know, most of our projects, again, are in the South, Southeast. And so there, you know, generally, we have pretty supportive, regulatory bodies from a state or local perspective.

And so, you know, don’t haven’t needed much change in in those areas. And, generally, their time frames were well inside any of the the federal time frames, so we can generally get those things done, in the time frame it takes to get the federal permit even if you shave off time from from the federal permit. You know, where it’d be nice to see some more changes is really on the judiciary, and people’s ability to challenge permits. And there is some language in the, the current reconciliation bill, the the one big beautiful bill, I guess they call it, that, basically limits the people that can, file, challenges to to these, permits to people that are, you know, directly harmed and the harm is imminent, and to organizations where every member has to be, you know, directly harmed. And they’ve increased the the the dam the standard, for finding that permit is invalid.

So, you know, if something like that got done, now I think that’s probably gonna get challenged in terms of being part of the reconciliation, in the senate. So not clear to me that that that’s gonna pass. But, you know, the things that, on the regulatory side, I think, do, do help even currently. You know, we have been successful on some of our court cases. The most recent one, we prevailed, on a lateral we were building for the TVA to one of their converted, coal plants, and, we prevailed on on that court case.

And then, you know, I think the decision in North Dakota with respect to the damages assessed, against one of the NGOs, you know, that’s gonna give them some perspective about, you know, which things they choose to fight. I think the defunding, you know, to the government, some of the NGOs could also help, on, you know, on the on the judiciary side. So we are seeing some things that help. You know, it’d be great to get more if you could get something like the the language that’s in this bill. I’m not sure it’s gonna pass, through the reconciliation, but maybe down the road, we could see something there.

Bob Brackett, Bernstein’s Head of America’s Energy and Transition, Bernstein: I’m gonna try I’m gonna weave that into how you think about capital allocation. If we think about maintenance capital running about a billion dollars and not impacted, I should assume, by regulatory, issues, 2 and a half ish billion dollars of growth CapEx against an almost $9,000,000,000 backlog. So you got lots of things to do. Where does that regulatory burden come in? Does it cost you time?

Does it cost you cost? Does it cost you deliverability?

Kimberly Dang, CEO, Kinder Morgan: Generally, the the regulatory cost us in sustaining cap in in terms of the regulatory burden, on an ongoing basis, that’s gonna sit in your billion dollars of sustaining, or it’s gonna sit in your OpEx. So, you know, if we were having to comply with something like the Good Neighbor Plan, which was proposed to be an added regulation, that’s where you would see that. In terms of and then, you know, if we’re doing a new project, obviously, we would put that in a new project in the o and m and in the sustaining. And so it would also have an impact on, you know, our ability and our willingness to move forward with projects. So we would take it into account, you know, both both places.

And so I think, you know, that would just make rates on pipes more expensive.

Bob Brackett, Bernstein’s Head of America’s Energy and Transition, Bernstein: Effectively pass nine. And if we if we stay on that theme of the capital, you you have one hurdle rate you talked about, less than 6x, EBITDA, or 6x greater than 6x EBITDA for CapEx. What else governs capital allocation?

Kimberly Dang, CEO, Kinder Morgan: Sure. So, and Bob’s referring to on our on our backlog, you know, we publish a multiple that we expect to earn on those, and it’s, you know, less than 6x EBITDA multiple on the on the $7,500,000,000 and that’s where we estimate it for people because there’s where we have the contracts. And, you know, I think the multiple is less telling when you have a GMP project because it you have a high front end multiple, but that comes down over time. So, it’s not as indicative of the of the ongoing cash flow. So, less than 6x, but that’s not how we look at it internally.

It that’s just something that we provide externally to give investors an idea about the types of returns we’re earning on these projects. You know, when we’re thinking about things internally, we’re looking at, you know, a unlevered IRR. You know, we have a threshold set for that, and then we vary that threshold based on the risk of a project. And so if you have something that has commodity exposure, then you’re gonna have to you know, it needs to be higher than that threshold. You know, if you have something that has thirty year take or pay contracts from an a credit, right, then you can come down from that threshold a little bit.

But that’s how we, you know, we guide our, our development teams. So they have a a pretty good idea of the type of projects that we’re looking for and, you know, and what we wanna do. And then we tell them, you know, projects are on the margin. If you think something’s on the margin, come in and let’s talk about it. Let’s see if we can get there, you know, on it or not.

But at least, you know, the ones that they know, you know, might get done, we wanna have a conversation about.

Bob Brackett, Bernstein’s Head of America’s Energy and Transition, Bernstein: And, in terms of capital allocation, what in a previous life, as a strategist, one of my definitions of strategy is tell me what you won’t do. What won’t Kinder Morgan do?

Kimberly Dang, CEO, Kinder Morgan: So a lot of people have been asking us about would we build power plants lately? Because there’s a lot of demand, for for power plants. And, you know, that’s just that’s not what we do. And so that’s not something that we’re interested in doing. You know, we build pipelines, and, we can build storage facilities, and, and that’s what we’re good at.

We’re gonna stay in our lane on that. And so, you know, we have, stepped out at various times over my career at Kinder Morgan. And, you know, generally, the first model of something’s, you know, not, not a great experience. Just like the first time you do something, you know, it’s probably, it’s not probably not your a product. And so we’ve had experience actually with building power plants in the early two thousands when we had the last big natural gas, power plant build.

And, you know, it was they were late, and there were cost overruns. And so, we’re just gonna stick to our knitting.

Bob Brackett, Bernstein’s Head of America’s Energy and Transition, Bernstein: One of the questions I used to ask in funding projects was, ask the engineer on the team, hey. What’s cool about this project? And if the engineer says three things that are cool about the project, discard the project. It’s the big boring ones that make money. In terms of, again, what you might or might not do, we have a question, from Pigeonel.

How do you think about the role of M and A in your capital allocation strategy?

Kimberly Dang, CEO, Kinder Morgan: So I think we are always, looking at m and a, and so we always have a strong appetite. And then it’s a question of does the opportunity meet the criteria that we’ve set out? And so we have three primary criteria. You know, one, it has to fit our strategy to to the discussion we just have. Is it stable fee based asset for the energy infrastructure?

You know, the second is, you know, is it got a decent return? So we’re looking at unlevered IRRs. We’re looking at accretion, and dilution on a on a per share basis. And so that and then can we do it within our bal can we accomplish it within our balance sheet metrics? And so we have three and a half to four and a half times debt to EBITDA range that we’ve set is where, we like to operate.

And so we look at whether we that can be done within that threshold. If you look at, you know, what we’ve done in recent years, this year earlier this year, we did an acquisition in the Bakken, you know, a little over $600,000,000 to add to, some very integral with some of our existing, gathering, and processing assets that we have up there. In, early twenty four, I think we closed at the last week of twenty three, you know, we did, some bought some pipeline assets in the Texas intrastates, you know, a big system that goes in from Texas down to the to the border. And so, you know, that was 800 ish million. And then prior to that, we did an acquisition of a natural gas storage facility in the Northeast, which was, you know, a billion ish, over a billion dollars.

So those are the the type of, things that we found recently. But, you know, we built this company on acquisitions. We know how to to integrate things. And, and so we’ve done some big ones in the past, but it’s, you know, it’s a function of can you find things that meet our criteria.

Bob Brackett, Bernstein’s Head of America’s Energy and Transition, Bernstein: And another question coming in on Pigeonhole. How does Kinder plan to grow its business beyond traditional infrastructure? What new technologies are you exploring?

Kimberly Dang, CEO, Kinder Morgan: So, you know, we are, like every other company in America, you know, we look, for opportunities to deploy AI. You know, we are finding opportunities within our business to help us make better decisions, using AI. You know, I give a couple examples. And, you know, one is with respect to, when we introduced drag reducing agent into the pipeline. So on products pipelines, you know, they’re you’re running booster stations.

We’re batching the product through the line. And so when power prices get really expensive, you know, it’s cheaper to stop using some of that power and introduce drag reducing agent into the pipeline to sort of slick it up and make the make the, the barrels flow more freely. So, you know, we have, introduced AI. It, you know, predicts when power prices are going to stay high for long enough that it makes sense to to introduce the drag reducing agent. You know, we are using AI to help us, you know, decide, and, you know, when we can sell, transport capacity and when we shouldn’t be selling some of that transport capacity.

So we’ve got a number of different applications, and we’re also using it to effectively create an enterprise wide system so it can pull all of our data into what we call a digital twin, and then we can access that data using a large language model. Because you you know, we’ve got different types of businesses. We’ve got, you know, products pipelines. We’ve got, refined products terminals. We’ve got natural gas.

And so, you know, bringing all that system all those desperate systems into one digital twin, you know, I think will, allow us to make better, quick, more real time decisions.

Bob Brackett, Bernstein’s Head of America’s Energy and Transition, Bernstein: You you mentioned the refined product, part of the market. Gas is two thirds of what you do. Refined products come in at about a quarter, let’s say. I have high conviction that gas demand is rising, and and I hear that you do too. I have no conviction that refined product demand in The US is rising.

Like, OECD in general is past peak oil demand. US is in that camp. What is the longevity, and what is the focus of what you’re doing in refined products? Sure.

Kimberly Dang, CEO, Kinder Morgan: So it it’s interesting. You know, we’ve we’ve had multiple different projections over the last four years. You know? And, I think they’re getting a little bit more realistic now because I think it in the introduction of the EV, you know, people were thinking, oh, the EV is going to overtake all the ice demand. And, you know, what we’ve seen is that, you know, it it had a very, strong growth trajectory at first, but now it’s sort of leveling off.

And, you know, depending on how you classify the different vehicles, I think, you know, it’s about eight or 9% of the market right now. And it and it it was there last year, and it is in that same range same range this year. And so, you know, I don’t you know, before, we thought, you know, maybe it may be about a 1% impact on on long term demand. That’s 1% decline in long term demand per year. You know, more recently, I think our projections are below half a percent.

You know, on on most of you know, well, on our refined products pipelines, you know, we have a tariff, inflation escalator. So every year, we inflate at CPI, PPI, plus or minus a FERC adjustment. And so right now, that adjustment’s plus point seven eight, and they’re gonna reset that at some point. But you know? So just think about, you know, you probably get over the long term two to 3% price increase on those pipes.

You have less than a 1% volume decline. You know, I think, you will see those those they’ll produce stable cash flow. You’ll get a little bit of growth. We’ll have, you know, some small expansion opportunities from time to time based on shifts in the market. But largely, that cash flow will go over the next four or five years to fund all the growth that we have in natural gas.

Bob Brackett, Bernstein’s Head of America’s Energy and Transition, Bernstein: And the third business that we haven’t talked about, if we think about Landman, the Paramount series, season two is gonna be about shale. Right? Season one was actually about the old stuff. CO two is an old stuff business in the Permian. It’s much more season one.

Talk it’s not when people hear CO two from oil and gas companies, they often think sequestration. They think future facing. Less so for you. It’s an existing business. Talk about that business and put it in context.

Kimberly Dang, CEO, Kinder Morgan: Sure. So I’ll give I’ll give the layman’s explanation of our c o two business because that’s what it it took me to understand it. So, you know, primary production, you go out, you poke a hole in the ground, here comes the oil. Over time, the pressure in the reservoir subsides. And so, generally, what people do is they push, they push water down into the reservoir to force force the oil out.

You know, that’s secondary production. That’s kind of a brute force method. You know, tertiary methods involve some other medium other than water. We, primary one that’s used is is c o two, but there are others. C o two acts like, you know, turpentine on your paintbrush.

That’s how it you know, with oil in the reservoir. So kinda slicks up that oil, moves it out, and then you follow with the with the water, to move it into the the production wells. And so it’s more of what we call a finesse method of of getting the oil out of the ground. And, really, what you’re doing when you get to that level is, you know, the oil fields have gone through their huge peak of primary production, have come way down the decline curve. And so all you’re doing is trying to extend that, you know, decline curve out, for, you know, for a few more years.

And so we’ve been doing we’ve been in this business since, you know, 02/2000 early two thousands. And we’ve got two primary fields out there where we, inject oil and produce c o two. So that is roughly 5% of our overall overall business. And then 2% of our c o two business is really, selling the c o two to third parties who use it to flood their own fields, you know, like Oxy or Exxon or, some of the other majors who, who flood using CO two. And, you know, generally, these CO two floods, especially where you have existing infrastructure, are gonna make sense down to, you know, less than $40 or less, on a price basis.

In fact, know, I think our cost out there on some of the stuff is maybe $20, at some of our higher fields and, you know, low teens, in terms of some of our others, even including the cost, of c o two on a marginal basis. So, you know, it makes sense to produce those, well below the prices where we are today. And then the other 2% of that business is just, primarily RNG, renewable natural gas, capturing natural gas off a a landfill. So that’s all, you know, embodied within our c o two segment, which is 9% overall.

Bob Brackett, Bernstein’s Head of America’s Energy and Transition, Bernstein: We have a question. Can you talk to the renewal rates and pricing trends for existing contracts?

Kimberly Dang, CEO, Kinder Morgan: Sure. So it depends on, you know, the the the segment that you’re looking at. But if you look at, like, natural gas, and you look at the the large diameter pipes there, you know, I think our average contract length is probably gonna be years in that in that range. And so, you know, if you do that, you’re rolling off one seventh of the capacity every year. So I talked about earlier the 30 plus BCF a day of growth that we’ve seen in the natural gas market has really filled pipelines up.

And so, you know, that generally bodes for increasing rates when you’re renewing, those contracts. Now that being said, you know, we do have our interstate pipelines are regulated by the FERC, and those are rate regulated. And so there is a cap on what you can charge on those, on our unregulated pipes, and those are primarily in the Texas intrastate market. You know, you don’t have that same cap. Storage facilities, you’ve got the same split.

You’ve got and storage has, you know, has been is highly utilized. So when you’re renewing that to the extent that you’re in an unregulated market and you can get a price uplift, you know, to the extent that you’re already at max rate, then it’s generally you’re getting longer term, because there is an ability to to increase price.

Bob Brackett, Bernstein’s Head of America’s Energy and Transition, Bernstein: And we have a question. If we come back to your CapEx backlog, that almost $9,000,000,000 number, three of the biggest projects in there are gas pipe South Southeast gas pipelines. Do you have any big gas pipeline projects, on the horizon? So maybe talk to those three, and then talk to any bigger ones you’re ready to announce today.

Kimberly Dang, CEO, Kinder Morgan: I think so. Okay. So the the the three big ones, one is in the Texas intrastate market, and it is taking, gas from around the Houston area back up and around over into Port Arthur. It’s primarily serving export LNG. And so, you know, that is a a billion 8 in capital roughly.

We’ve also got a pipe, Mississippi Crossing. We come up with very original names, that goes across the state of Mississippi and feeds into an expansion that and that’s a greenfield pipe, and it feeds into an expansion that we’re doing on, South System 4, which is our pipeline system that goes through Alabama and Georgia. Those that those two pipes are largely driven by, incremental power demand, and then partially by, some LDC demand, so just pure natural gas. A recent project that we announced, is our bridge project. That’s about a $400,000,000 project, that is going into the state of South Carolina backed, and it is core data center related, and that’s backed by the, the Carolina LDC’s power companies.

So, a lot of great projects. You know, it’s you know, those projects, 5 and a half billion dollars of of cost to our share, you know, over 5 BCF a day. So that’s a, you know, that’s a those projects are a huge portion, of of the existing backlog. And, you know, they’re very exciting projects. The Texas projects will get done sooner because they’re in an unregulated market.

You don’t you know, we don’t need the same perm we don’t have the same permitting requirement to go through FERC. And then on the FERC pipelines, I’m, you know, optimistic that, you know, we’re gonna get the things, permitted more quickly than what we’ve seen in the recent past based on, you know, some of the things the administration is doing. So, and then, you know, we are out there locking in cost, you know, locking in the cost of our pipe, locking in the cost of our compression, make sure we bring those things in on time and on budget. And

Bob Brackett, Bernstein’s Head of America’s Energy and Transition, Bernstein: if we talk about financial strategy a bit, maintenance CapEx claims a billion dollars. They’re at the front of the bus. Dividend claims 2 and a half to $3,000,000,000 or so. Talk to the sanctity of the dividend and the growth of the dividend. So

Kimberly Dang, CEO, Kinder Morgan: the, the dividend is very important, and we think we have it set at the at the at a level where we can maintain it, as well grow it, very modestly consistent with what we’ve done over the last, of the last few years. And we think that’s important. We’ve got a lot of dividend investors in the stock, and we think it’s important to show some growth. That being said, we, haven’t been growing it at the rate that the company’s been growing, and that’s because of all the expansion opportunities that we have there. And so we wanna preserve that capital to invest in these in these high, return projects.

So when you think about our cash flow post, you know, post, sustaining CapEx, I mean, you can think of about roughly half goes to the dividend and roughly half is going to expansion CapEx.

Bob Brackett, Bernstein’s Head of America’s Energy and Transition, Bernstein: The the part you left out was, the balance sheet. Net debt to EBITDA stands at four x. Your triple b, sounds like that’s the right level?

Kimberly Dang, CEO, Kinder Morgan: Yeah. We think that’s the right level, you know, given the the size and the scale, and the diversity of our assets. You know, we’ve got 80,000 miles of pipe, you know, 65% gas, but 25% roughly is is refined products, and then we’ve talked about the other 9% being c o two. So you’ve got diversity and scale and scope. And so we think three and a half to four and a half times, is is the right level.

You know, we run a lot of economic analysis to look at whether, you know, paying down debt, and, and, you know, reducing leverage would be the right thing, and that is not, you know, an economic proposition. And so, we feel like, this is the right level. Personally, I think we are underrated by the rating agencies if you map out based on their criteria. And recently, S and P has put us on positive, outlook. We’re triple b flat right now, and they put us on on positive outlook.

But we’ve been at or below four times for the for the last, several years, You know, just depending on on the level of CapEx, depends on where in that range, we we end up on any given year. But I think, you know, our goal is to stay within that range as these projects come online. You know, the EBITDA from these projects, I mean, that will strengthen strengthen the balance sheet if, if we’re fully funding with internally generated cash.

Bob Brackett, Bernstein’s Head of America’s Energy and Transition, Bernstein: And then how do you, handle that tension of, of an exciting backlog that I would expect gets even more exciting and larger and working through a 2 and a half billion a year on a $9,000,000,000 backlog. What’s the desire to raise, you know, go half a turn up on net debt to EBITDA and pull some of those projects forward? So how do you find that tension?

Kimberly Dang, CEO, Kinder Morgan: So I think, we do we, you know, show an in service by year. Right now, I think 2 and a half billion is kind of the right number. But, I mean, some years, it’s gonna be three, and other years, you know, it could be a little less than the 2 and half. It you know, just depending on exactly when you get your approvals on some of these pipes. So it’s not, you know, it’s not gonna be perfectly smooth.

But I think because, you know, we’re sitting below four times, and the top end of our target range is four and a half times, you know, to the extent that you have a year where you’re gonna spend a little more, you know, you’re gonna be fine because the next year, you’ll spend a little less, and you’ll you’ll come back into line. To the extent that, you know, we have more opportunities than, you know, what we can do sort of living within cash flow during the next few years, you know, I I think that’ll be great. You know, we do have some balance sheet capacity. These are, you know, long you know, these backed by long term take or pay contracts, so you know the cash flow is gonna be there when you get them done. So, you know, taking up the balance sheet a little bit while staying in, you know, our three and a half to four and a half times range, I think with the, with the right returns on those projects, which I think, you know, we have the right targets set, you know, I think, is, is reasonable.

The other thing I’d say is, you know, there’s plenty of private capital out there for these opportunities. And so, you know, I think that if we ever got concerned that we were gonna get to a higher level than we wanted to get, you know, we could go get partners on some of these projects and still pursue the project. So I think there’s, you know, a lot of different ways, to be able to manage it and still go after the the growth projects that have the right returns.

Bob Brackett, Bernstein’s Head of America’s Energy and Transition, Bernstein: And a a question. Do you see any future opportunities for cost savings aside from the regulatory easing that you’d previously mentioned?

Kimberly Dang, CEO, Kinder Morgan: I I think the primary place where you’re gonna see cost saving is on on the regulatory front. You know, other than that, I’d say we are in expansion mode. Now we we manage head headcount very tightly. And so, you know, I don’t I don’t expect some big, jump in terms of G and A cost in in our in our headcount, but, know, there’ll be some marginal costs here and there associated with these expansion projects. But we bake that all into the economics.

So if, you know, we’re gonna need, you know, new pipeline controllers because of these new pipeline projects, that’s gonna be baked into the to the project economics. So it’s a it’s a cost that we’re expecting to come. But, you know, other than that, generally, you know, we try to hold cost, you know, at, at less than inflation is what we challenge our teams to do, and we go through the budget process every year to challenge them to do that. And, you know, especially in our, in our products pipelines, if you can get two or three, you know, percent growth on the top line and you hold your cost flat because it is largely fixed cost business, you can you can get some nice growth on the bottom line. And so that, you know, we, you know, we manage to margin, and, that’s that’s an important very important aspect of our business and especially on the products pipeline side.

Bob Brackett, Bernstein’s Head of America’s Energy and Transition, Bernstein: And maybe in our last, few minutes, what’s the value proposition for owning KMI stock?

Kimberly Dang, CEO, Kinder Morgan: Yeah. So I think we produce, very stable cash flow backed by you know, a lot of it backed by long term take or pay contracts with good creditworthy, counterparties that, allows us to pay out an attractive dividend, which has you know, we expect we’ll have some some modest growth to it. And then we’ve got a huge backlog of projects, $8,800,000,000. You know, that’s you know, seven and a half of that’s coming at, less than 6x multiple. That other capital in terms of an initial multiple will be less than the 6x because of the the shape of the curve on that.

But, so very attractive returns on that backlog of projects, which should drive nice growth for for the company. And I think, you know, with the 22 to 28 Bcf a day of growth, that is still coming in the natural gas space, we will have opportunities to add to that backlog for further growth.

Bob Brackett, Bernstein’s Head of America’s Energy and Transition, Bernstein: Fantastic. With that, I I thank you, Kim, for joining me, and I thank you in the audience for attending.

Kimberly Dang, CEO, Kinder Morgan: Thank you. Thank you, Bob.

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