Kinder Morgan Energy Partners, L.P.

NYSE:  KMP

 

 

Kinder Morgan Energy Partners, L. P. is the nation's largest pipeline publicly traded partnership in terms of market capitalization and owns the largest independent refined petroleum products pipeline system in the United States in terms of volumes delivered.  It provides services to customers and increases value for its unitholders primarily through the following activities:

 

Ø                  Transporting, storing and processing refined petroleum products;

 

Ø                  Transporting, storing and selling natural gas;

 

Ø                  Producing, transporting, and selling carbon dioxide for use in, and selling crude oil produced from, enhanced oil recovery operations; and

 

Ø                  Transloading, storing, and delivering a wide variety of bulk, petroleum and petrochemical products at terminal facilities located across the United States.

 

Kinder Morgan owns and operates one of the largest product pipeline systems in the country, serving customers across the United States with more than 10,000 miles of pipeline and 39 associated terminals.  Additional assets include 15,000 miles of natural gas transportation pipelines, plus natural gas gathering and storage facilities; over 50 owned or operated terminal facilities and 60 rail transload facilities, which transload and store refined petroleum products, coal, chemicals, and other dry and liquid bulk products; and ownership interests in carbon dioxide pipelines and carbon dioxide and oil reserves.

 

Kinder Morgan Business Segments

 

Product Pipelines – Kinder Morgan’s product pipelines transport more than 2 million barrels per day of gasoline, jet fuel and diesel fuel, as well as natural gas liquids, through more than 10,000 miles of pipeline.  This segment also includes 39 associated storage terminals and transmix processing facilities.

 

Natural Gas Pipelines - Kinder Morgan’s natural gas pipelines transport up to 7.8 Bcf/day and gathering capability of 1.1 Bcf/day.  Also treat, process and store natural gas along 13,400 miles of pipeline

 

CO2 Pipelines – Kinder Morgan transports and markets more than 1 Bcf/day of carbon dioxide (CO2) through 1,100 miles of pipeline to oil fields that use carbon dioxide to increase oil production in West Texas, including two that Kinder Morgan operates and four in which it has an ownership interest.

 

Terminals – Kinder Morgan owns or operates approximately 52 owned or operated liquid and bulk terminal facilities and approximately 57 rail transloading facilities located throughout the United States, liquids terminal facilities possessing a liquids storage capacity of approximately 55 million barrels for refined petroleum products, chemicals and other liquid products, and bulk and transloading facilities handling nearly 60 million tons of coal, petroleum coke and other dry-bulk materials annually.

 

Since February 1997, when the partnership began operating under the name Kinder Morgan Energy Partners, its operations have experienced considerable growth, from revenues of $17.7 million in 1997 to $697.3 million in 2003.

 

Kinder Morgan’s business strategy is to continue to grow its portfolio of businesses by:

 

Ø                  Providing, for a fee, transportation, storage and handling services which are core to the energy infrastructure of growing markets;

Ø                  Increasing utilization of its assets while controlling costs by:

·      Operating classic fixed-cost businesses with few variable costs; and
·      Improving productivity;

Ø                  Leveraging economies of scale from incremental acquisitions and expansions principally by:

·      Reducing needless overhead; and
·      Eliminating duplicate costs in core operations; and

Ø                  Maximizing the benefits of its financial structure, which allows us to:

·      Minimize the taxation of net income, thereby increasing distributions from our high cash flow businesses; and
·      Maintain a strong balance sheet, allowing flexibility in raising capital for acquisitions and expansions.
 
The partnership depends on three principal strategies for achieving these business objectives:
 

Ø                  Cost reductions:  Kinder Morgan has reduced the total operating, maintenance, general and administrative expenses of both its original operations and those of many of the businesses and assets it has acquired since February 1997.

Ø                  Internal growth:  Kinder Morgan plans to increase income from its current assets through both increased utilization of pipelines and terminals—which is primarily generated through increased demand for the products they transport and store—and internal expansion projects.

Ø                  Strategic acquisitions.   Kinder Morgan regularly seeks opportunities to make strategic acquisitions that will expand existing businesses or allow it to enter related businesses.  It is likely finance these acquisitions by borrowings under its bank credit facilities or issuing commercial paper, and then reducing this short-term debt by issuing new long-term debt, common units, or i-units.

 

Institutional investors can participate in Kinder Morgan Energy Partners through the purchase of shares in Kinder Morgan Management LLC (KMR), whose business is limited to managing and owning limited partner interests --“i-units”-- in Kinder Morgan Energy Partners.  Because KMR is taxed as a corporation, its shares do not generate UBIT and are qualifying income for a mutual fund. 

 

Additional information is available at Kinder Morgan’s website, http://www.kindermorgan.com; or contact KMP Investor Relations at 713-369-9490, [email protected].

 

 

Financial Information from 2003 10-K

(In thousands, except per unit amounts)

 

 

2003

2002

 

 

 

Market value*

$4,577,451

$3,243,518

Current assets                       

$705,522

$669,390

Net property, plant & equipment

$7,091,558

$6,244,242

Total assets

$9,139,182

$8,353,576

Current liabilities

$804,379

$813,327

Long-term debt

$4,316,678

$3,826,489

Partners’ capital

$3,510,927

$3,415,929

Revenues

$6,624,322

$4,237,057

Operating income

$806,689

$724,298

Net income

$693,872

$608,377

Net income/unit (undiluted)

$2.00

$1.96

Distribution / unit     

$2.58

$2.36

High unit price

$49.69

$38.65

Low unit price

$34.25

$28.00

*As of June 30, 2003 and June 28, 2002

 

 

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