Kinder Morgan Management, LLC (NYSE: KMR) is a limited partner in and manages and controls the business and affairs of Kinder Morgan Energy Partners (NYSE: KMP), one of the largest publicly traded pipeline limited partnerships in the United States. KMP is an energy transportation and storage company and owns an investment in or operates approximately 46,000 miles of pipelines and 180 terminals in North America.
Kinder Morgan pipelines transport natural gas, gasoline, crude oil, CO2 and other products, and KM terminals store petroleum products and chemicals and handle such products as ethanol, coal, petroleum coke and steel.   
Kinder Morgan Management LLC is a limited liability company whose shares trade on the NYSE under the symbol "KMR." Since its formation, “to facilitate institutional ownership of KMP equity," in 2001.  KMR has delivered an average annual return to shareholders of 15%. Higher if bought when trading at a discount.  The underlying KMP has delivered average annual returns to unitholders of 24% since 1996 (assumes that distributions are reinvested).   Over the past 15 years, KMP has increased quarterly distributions 42 times. 
The company plans to capitalize on growth in domestic natural-gas production from shale to increase dividends to its shareholders. Kinder believes there are exceptional growth opportunities, as there is a need to build additional midstream infrastructure to move or store oil, gas and liquids from the prolific shale plays in the United States and the oilsands in Alberta, along with increasing demand for export coal and CO2.  
KMR has no properties of its own, and its success is dependent upon its operation and management of KMP and KMP's resulting performance.  KMR does not pay distributions on its shares in cash but instead makes distributions on its shares in additional shares or fractions of shares.  
Distributions to KMR shareholders, which are paid in the form of additional shares, are based on the amount of the cash distributions paid to KMP unitholders. Because distributions of additional KMR shares are made proportionately to all of KMR shareholders, distributions are not included in the gross income of KMR shareholders for federal income tax purposes, and no Form 1099 will be issued.  
The retained capital from KMR distributions gives KMP the potential to become self-funding, with KMR share buybacks if quarterly dividends exceed equity funding needs.  Over $625 million of the equity required this year is expected to be funded by KMR dividends. 
Kinder Morgan accumulates positive cash flow projects that will be accretive to dividends. That is, each project increases the pay out to shareholders. The more they spend, the more they pay out. They buy things that will last a long time, sell the capacity, and pay it off in a short time. Then they resell the capacity, over and over again. It is a take, or pay business to customers.
Organic growth that does not require any investment
Expansion projects ~ Eleven billion dollars over the next five years
Acquisitions ~ Drop downs from KMI and new opportunities
Richard Kinder, Chairman of the Board and Chief Executive Officer takes a salary of $1 a year and accepts no stock options. “Our goal is getting everybody to think, how would I spend the money if it was my money?' ... Whatever I do, if it is good for shareholders, it is good for me, and vice verse.” 
Kinder Morgan is the third largest energy company in North America. The four Kinder Morgan companies Kinder Morgan incorporated KMI, Kinder Morgan Partners (KMP), The Kinder Morgan management company KMR, and El Paso Pipeline Partners EPB, have a combined value of approximately $100 billion. They own an interest in or operate approximately 75,000 miles of pipelines and 180 terminals.
Kinders's large, diversified portfolio of assets operates like a giant toll road on energy. KM primarily receives fees for transporting, storing and handling various energy products such as natural gas, refined petroleum products, crude oil, ethanol, biodiesel, coal, steel, petroleum coke and CO2. KM customers include producers, shippers, oil companies, utilities and more with limited exposure to commodity prices.  
The only cash flow that the management company KMR, gets is from its ownership of Kinder partners KMP i-shares. Investors in KMR, do not receive cash distributions, but receive additional shares proportional to the ownership interest they have in the stock. The cash distributions for KMP and KMR, are equal; the only difference is that KMR distributions are paid in the form of additional shares at market price, reducing the need for KMP to raise public equity, or borrow funds.
KMP pays out all of its available cash. The only way they can get fresh capital is to borrow it, or sell something. KMP has to get the cash up each quarter to pay dividends. Some they pay to KMI the holding company, some goes to unitholders. Rather than receiving and distributing cash, KMR, receives cash and distributes a stock distribution in shares, to KMR owners. KMP uses the cash that would have been paid out as dividends, to buy assets from KMI, and finance acquisitions internally among other uses. 
KMR 2013 projected distribution is $5.28 a share which represents a 6.0% growth over 2012. 
Largest natural gas network in U.S. 
Connected to every important U.S. natural gas resource play, including: Eagle Ford, Marcellus, Utica, Uinta, Haynesville, Fayetteville and Barnett
Largest independent transporter of petroleum products in U.S. 
Largest transporter of CO2 in U.S.
2nd largest oil producer in Texas
Largest independent terminal operator in U.S. 
Expansion under way to increase capacity 
Natural Gas Pipelines
CO2 – S&T – Enhanced Oil Recovery
Canada Oilsands pipeline expansion 
Further LNG liquefaction build-out
EPNG oil conversion
Further natural gas expansion to Mexican border
Various other expansion and conversion opportunities
KM wants to build new terminals to export liquefied natural gas to benefit from the increased fuel prices in global markets where it is nearly five-to-six times the U.S. price, to capitalize on the domestic natural gas shale boom. 
Dropdowns from KMI
62% interstate pipelines
19% intrastate pipelines & storage
19% gathering, processing & treating
45% associated terminals & transmix
27% CO2 transport and sales
73% oil production-related 
100% petroleum pipelines 
Natural Gas Pipelines – $14 billion
Products Pipelines – $4.9 billion
Terminals – $5.2 billion
CO2 – $4.7 billion
Kinder Morgan Canada – $1.3 billion 
KMR shares are pari passu with KMP units
KMR dividend is equal to KMP cash distribution, but paid in additional shares; effectively a dividend reinvestment program.
The calculation for the share distribution is you take the KMP quarterly cash distribution per unit, divided by KMR's 10-day average price prior to ex dividend date = fractional share paid from KMP to KMR owners for every KMR share owned. 
Like KMP units, KMR shares are tax efficient — but with simplified tax reporting (no K-1s, no-1099, and no UBTI)
KMR is a significant entity
KMR market cap = $9.6 billion, ~30% of total KMP capitalization
~$30 million in daily liquidity
KMR has generated a 15.3% compound annual total return since 2001 IPO, vs. 15.1% for KMP
KMR trading at a discount to KMP
Potential for KMP to become self-funding through KMR distribution
Possibility of KMR share buybacks if quarterly dividends exceed equity funding needs
Insiders prefer KMR ($14.7 million) to KMP ($4.5 million) 
Generally the general partner KMI buys a corporation with lots of pipeline assets. Then the corporation sells the assets to its own master limited partnerships KMP, and El Paso EPB. The drop-downs move the pipelines to a more tax-efficient partnership structure, and are priced at a level that guarantees cash flow accretion for the partnerships. The corporation takes the proceeds from the asset sale and pays down its acquisition debt, with a goal of holding zero parent-level debt upon completion of asset drop-downs. It works as long as a general partner doesn't pay more for assets than it can charge its partnerships and still have the drop down be cash flow accretive. 
(1) Cash Is King: Ceteris paribus ~ KMP pays its principle in back sooner.
In investing you lay out cash now, to get cash back later on. What determines the value of that investment is how much cash you put in, how soon will you get the cash back, and how sure are you to get the cash back.  The Partnership returns cash sooner than the management company. Cash now, is worth more than cash in the future, so Investors are willing to pay more for KMP shares that pay cash now, than KMR shares which retains the cash for the companies growth.
(2) Liquidity: KMR shares have had average trading volumes lower than the MLP units. The spread between (KMP) and KMR may be narrowing because KMR’s trading volumes have been increasing.
(3) No Natural Arbitrage: MLP units are difficult to sell short. Thus, no natural arbitrage opportunity exists, which would cause the units to trade more closely.
(4) No Conversion Provision: The ability to convert an i-unit to a common unit was removed by the partnerships soon after the public offerings. Hence, the i-units are not entirely pari passu with the MLP common units.
(5) KMR could be worth less than KMP on liquidation.
(6) Brokers have less reason to promote a stock like KMR that can be bought once and not offer additional income to advisors in the form of commissions from dividend reinvestments.
With KMP advisors and planners have funds coming in every quarter that they can redirect and generate additional commissions. Clients invested in KMR have taken the funds out of advisors hands as a source of future brokerage commissions.
KMR is the more tax efficient entity, the discount acts as an incentive for shareholders to reinvest in the company. The ability to buy at a discount is a key benefit of buying KMR instead of KMP for capital accumulation, and higher yield on cost (YOC).
The price may eventually return to the price of the partnership KMP. This price increase, combined with share distributions, will provide a return higher than holding KMP, over the same period of time. 
KMR pays distributions in shares based on the average closing price for the 10 trading days prior to the ex-dividend date.  Cash dividends are paid by KMP as much as two weeks later. A clear advantage to KMR owners who receive shares sooner and cheaper in a rising market.
“Kinder has made a low-return, humdrum business into a river of money.”