Kinder Morgan 101: Knowing Which Kinder Morgan Company is Right for You

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An easy guide to understanding which of Kinder Morgan’s family of companies - Kinder Morgan, Inc., Kinder Morgan Energy Partners, Kinder Morgan Management or El Paso Pipeline Partners – to invest in.

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  • http://www.kindermorgan.com/news/KMEPpressrelease.pdf
  • http://www.kindermorgan.com/news/KMEPpressrelease.pdf
  • http://www.kindermorgan.com/investor/epb_overview.cfm and http://phx.corporate-ir.net/phoenix.zhtml?c=119776&p=irol-newsArticleEPB&ID=1923089&highlight=
  • http://www.kindermorgan.com/investor/epb_overview.cfm and http://phx.corporate-ir.net/phoenix.zhtml?c=119776&p=irol-newsArticleEPB&ID=1923089&highlight=
  • http://www.kindermorgan.com/investor/epb_overview.cfm and http://phx.corporate-ir.net/phoenix.zhtml?c=119776&p=irol-newsArticleEPB&ID=1923089&highlight=
  • http://www.kindermorgan.com/news/KMEPpressrelease.pdf
  • http://www.kindermorgan.com/news/KMEPpressrelease.pdf
  • http://www.kindermorgan.com/news/KMEPpressrelease.pdf
  • http://www.kindermorgan.com/news/KMEPpressrelease.pdf
  • http://www.kindermorgan.com/news/KMEPpressrelease.pdf
  • http://www.kindermorgan.com/news/KMEPpressrelease.pdf
  • http://www.kindermorgan.com/news/KMEPpressrelease.pdf
  • http://www.kindermorgan.com/investor/presentations/2014_Analysts_Conf_01_Overview.pdf
  • http://www.kindermorgan.com/news/KMEPpressrelease.pdf
  • http://www.kindermorgan.com/news/KMEPpressrelease.pdf
  • http://www.kindermorgan.com/news/KMEPpressrelease.pdf
  • http://www.kindermorgan.com/news/KMEPpressrelease.pdf
  • http://www.kindermorgan.com/news/KMEPpressrelease.pdf
  • http://www.kindermorgan.com/news/KMEPpressrelease.pdf
  • Kinder Morgan 101: Knowing Which Kinder Morgan Company is Right for You

    1. 1. Kinder Morgan 101: Knowing Which Kinder Morgan Company is Right For You Photo credit: Kinder Morgan
    2. 2. Kinder Morgan 101:  Kinder Morgan’s family of companies offers investors four ways to invest under three different corporate structures:  Kinder Morgan, Inc. (NYSE: KMI) is a corporation.  Kinder Morgan Energy Partners (NYSE: KMP) and El Paso Pipeline Partners (NYSE: EPB) are Master Limited Partnerships.  Kinder Morgan Management (NYSE: KMR) is a limited liability company.
    3. 3. Kinder Morgan 101:  Each entity has a specific purpose as well as its own risk/reward profile.  Not only that but some entities require more paperwork for taxes and aren’t best suited to be owned in a retirement account.  As a whole this creates a rather complex looking corporate structure that causes some investors to avoid the opportunity altogether.
    4. 4. Kinder Morgan 101:
    5. 5. Kinder Morgan 101: To help you better understand each entity we need to take the company apart and rebuild it from the ground up.
    6. 6. El Paso Pipeline Partners (NYSE: EPB)  Let’s start with El Paso Pipeline Partners –  El Paso Pipeline Partners is an MLP that Kinder Morgan acquired when it bought El Paso Corporation in 2011.  100% of El Paso Pipeline Partners’ business is natural gas pipelines.
    7. 7. El Paso Pipeline Partners (NYSE: EPB)  Key considerations:  El Paso Pipeline Partners’ growth comes from asset dropdowns from Kinder Morgan Inc as well as organic expansion opportunities.  Currently the company’s distribution growth is on hold as it integrates recent dropdowns and completes major growth projects.  Distribution growth is expected to resume in 2017.
    8. 8. El Paso Pipeline Partners (NYSE: EPB)  Key assets:  El Paso Pipeline Partners owns 13,000 miles of pipelines and 100 billion cubic feet of storage capacity.  In April it announced it will be acquiring $2 billion in additional pipeline and storage assets from Kinder Morgan Inc.  It is also pursing LNG export projects in Georgia and Mississippi.
    9. 9. El Paso Pipeline Partners (NYSE: EPB)  Key Assets:  El Paso Pipeline Partners owns 13,000 of pipelines and 100 billion cubic feet of storage capacity.  In April it announced it will be acquiring $2 billion in additional pipeline and storage assets from Kinder Morgan.  Pursing a LNG export projects in Georgia and Mississippi.
    10. 10. El Paso Pipeline Partners (NYSE: EPB)  Why you’d invest in El Paso Pipeline Partners:  Not afraid of MLPs and the extra paperwork associated with owning one.  Desire to make a direct investment on natural gas.  Looking for upside to natural gas exports.  Seeking a stable distribution – currently yields 7.59%, but will begin to grow starting in 2017.
    11. 11. Kinder Morgan Energy Partners (NYSE: KMP)  Next up is Kinder Morgan Energy Partners –  Kinder Morgan Energy Partners is the main income generator for the Kinder Morgan family of companies.  The MLP owns a bulk of the assets and its business is diversified into natural gas pipelines, carbon dioxide, products pipelines, terminals and Kinder Morgan Canada.
    12. 12.  Key considerations:  Kinder Morgan Energy Partners’ growth comes from acquisitions and from $16.4 billion in identified organic growth projects.  Company has a three year target to grow the distribution by a compound annual growth rate of 5%. Kinder Morgan Energy Partners (NYSE: KMP)
    13. 13.  Key assets:  Kinder Morgan Energy Partners own 54,000 miles of pipelines and 180 terminals.  Is the leading transporter and marketer of carbon dioxide in North America as well as a leading producer of oil via enhanced oil recovery.  Proposing to spend $5.4 billion to triple the capacity of its Trans Mountain pipeline in Canada to meet growing demand for oil sands takeaway capacity. Kinder Morgan Energy Partners (NYSE: KMP)
    14. 14. Kinder Morgan Energy Partners (NYSE: KMP)
    15. 15.  Why you’d invest in KMP:  Not afraid of the extra paperwork associated with owning an MLP.  Seeking a diversified “workhorse” as a core energy holding.  Looking for a strong yield (currently 7%) along with consistent distribution growth. Kinder Morgan Energy Partners (NYSE: KMP)
    16. 16. Kinder Morgan Management (NYSE: KMR)  Now let’s tackle Kinder Morgan Management –  Kinder Morgan Management a limited liability company.  It is akin to investing in Kinder Morgan Energy Partners as its only assets are units of Kinder Morgan Energy Partners.  Like an MLP it is tax efficient, but it comes with simplified tax reporting as there are no K-1s or UBTI.
    17. 17. Kinder Morgan Management (NYSE: KMR)  Key considerations:  It pays a dividend that’s equal to KMP’s cash distribution.  However, the dividend is in additional shares of KMR.  Basically, it’s a dividend reinvestment program.
    18. 18. Kinder Morgan Management (NYSE: KMR)
    19. 19.  Why you’d invest in Kinder Morgan Management:  Want to invest in the growth of Kinder Morgan Energy Partners but don’t want the extra paperwork.  Not seeking current income as your plan was to reinvest the income anyway.  Looking to hold in a tax advantaged retirement account to enjoy the compounding effect of this business to create a nice nest egg for retirement. Kinder Morgan Management (NYSE: KMR)
    20. 20. Kinder Morgan Inc. (NYSE: KMI)  Finally, let’s wrap it up with Kinder Morgan Inc  Kinder Morgan Inc is a corporation.  It’s working towards becoming a pure-play General Partner.  It owns stakes in both of its MLPs as well as some additional assets.
    21. 21. Kinder Morgan Inc. (NYSE: KMI)  Key considerations  On a consolidated basis Kinder Morgan is…  The third largest energy company in North America with an enterprise value of $110 billion.  The largest natural gas network in North America representing a third of U.S. market demand.  Largest independent transporter of petroleum products in North America.  Largest transporter of carbon dioxide in North America.  Largest independent terminal operator in North America.
    22. 22. Kinder Morgan Inc. (NYSE: KMI)  Key assets  Owns the General Partner of KMP as well as 27 million units or 9% of the company.  Owns the General Partner of EPB as well as 90 million units or 41% of the company.  Owns 16 million shares or 13% of KMR.  Owns 20% of the Natural Gas Pipeline Company of America.  Working to drop down three assets to EPB as it sheds itself of legacy assets acquired in the El Paso Corporation deal.
    23. 23. Kinder Morgan Inc. (NYSE: KMI)  Key considerations  On a consolidated basis Kinder Morgan is…  The third largest energy company in North America with an enterprise value of $110 billion.  The largest natural gas network in North America representing a third of U.S. market demand.  Largest independent transporter of petroleum products in North America.  Largest transporter of carbon dioxide in North America.  Largest independent terminal operator in North America.
    24. 24. Kinder Morgan Inc. (NYSE: KMI)  Why you’d invest in Kinder Morgan Inc.  You’re simply wanting to invest in the future of the Kinder Morgan business.  Plan to hold it in a tax advantaged account like an IRA.  You are willing to trade a lower yield ( currently 4.8%) for a faster growing payout.  KMI’s dividend is expected to grow 8% annually.  Meanwhile, KMP/KMR payout is to grow 5% annually and EPB offers no growth until 2017.
    25. 25. Investor takeaway Kinder Morgan might seem complex but each of its four ways to invest serves a specific purpose. If you find your purpose, you can find the investment that suits you the best.
    26. 26. Do you know this energy tax “loophole”?

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