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WIKI ANALYSIS
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Kinder Morgan
Kinder Morgan is the largest midstream and the third largest energy company (based on combined enterprise value) in North America. We own an interest in or operate approximately 75,000 miles of pipelines and 180 terminals. Our pipelines transport natural gas, refined petroleum products, crude oil, carbon dioxide (CO2) and more. We also store or handle a variety of products and materials at our terminals such as gasoline, jet fuel, ethanol, coal, petroleum coke and steel.
The Kinder Morgan family of companies has four publicly traded entities: Kinder Morgan, Inc. (NYSE: KMI), Kinder Morgan Energy Partners, L.P. (NYSE: KMP) (one of the largest publicly traded pipeline master limited partnerships in America), Kinder Morgan Management, LLC (NYSE: KMR) and El Paso (EP). Combined, the Kinder Morgan companies have an enterprise value of approximately $100 billion [1]
- Kinder Morgan Energy Partners, L.P. (KMP): The Limited Partnership which is the largest independent owner and operator of petroleum product pipelines in the U.S.
- Kinder Morgan, Inc. (KMI): which owns all of the general partner and approximately 11% of the limited partner interests in Kinder Morgan Energy Partners, L.P.
- Kinder Morgan Management, LLC (KMR): is a limited liability company. KMR is a limited partner in Kinder Morgan Energy Partners, L.P. and manages and controls its business and affairs. [2]
Largest products pipeline system in America.
Largest transporter of CO2.
Largest independent owner/operator of terminals, both liquids and bulk. [3]
The largest oil producer in Texas.
The only oilsands pipeline serving Vancouver B.C./Washington state.
Four Kinders
There are four ways to invest in Kinder Morgan - Kinder Morgan, Inc. (NYSE: KMI), Kinder Morgan Energy Partners, L.P. (NYSE: KMP), Kinder Morgan Management, LLC (NYSE: KMR) and El Paso Pipeline Partners (NYSE: EPB).
The three Kinder Morgan companies Kinder Morgan Partners (KMP), Kinder Morgan incorporated (KMI), and the Kinder Morgan management company (KMR), own the same assets: 38,000 miles of natural gas and product pipelines, and 180 terminals. [4]The only cash flow that the management company (KMR), gets is from its ownership of Kinder partners (KMP) shares. Investors in the management company (KMR), do not receive cash distributions, but receive shares proportional to the ownership interest they have in the stock. The cash distributions for Kinder partners (KMP) and the management company (KMR), are equal; the only difference is that KMR distributions are paid in the form of additional shares, reducing the need for the Kinder partners (KMP) to raise public equity, or borrow funds.
The corporation’s (KMI) growth, is driven by Kinder partners (KMP), which currently accounts for approximately 98 percent of the distributions that the corporation (KMI) receives. The corporation (KMI) can then drop down some of the El Paso assets to Kinder partners (KMP). The cash from sales to the Kinder partners (KMP) will be used to reduce the leverage used to buy El Paso in the first place. Some of El Paso’s assets will also be sold as cash, or spun off into a separate company and sold. But the assets are so widely spread out geographically that a spin-off is less likely.
The partners (KMP) has to pay out all of there earnings. So the only way any MLP can get cash is to borrow it, or sell something. Kinder partners (KMP) have to get the cash up to pay dividends anyway. Some they pay to the corporation (KMI) who pays the funds out to shareholders. Rather than receiving and distributing cash, the management company KMR, receives and passes through a dividend in shares known as paid-in-kind distributions. Kinder partners (KMP) uses the cash that would have been paid out as dividends, to buy assets from the corporation (KMI) and finance acquisitions internally. Over $490 million of the equity required for this investment program is expected to be funded by the management company’s (KMR) dividends. [5]
Kinder Morgan Announces 2013 Financial Expectations
KMI $1.57 per share for 2013
KMP $5.28 per unit for 2013, a 6 percent increase over $4.98 per unit,
KMR $5.28 per share for 2013
EPB $2.55 per unit for 2013 a 13 percent increase over $2.25 per unit.
Kinder said: “We see exceptional growth opportunities across all of KMP’s business segments, including the need to build more midstream infrastructure to move or store oil, gas and liquids from the prolific shale plays in the U.S. and the oilsands in Alberta, along with increasing demand for export coal and CO2.” [6]
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