-
DCF per share growing as businesses expected to generate slightly
over $5 billion of cash in 2016
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KMI expects to declare dividends of $.50 per share for 2016 and use
excess cash to fund growth investments
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No need to access equity markets for the foreseeable future
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KMI to take required action to maintain investment grade rating
Kinder Morgan, Inc. (NYSE: KMI) today announced that its Board of
Directors has approved a plan pursuant to which it expects to pay
quarterly dividends of $.125 per share to its common stockholders ($.50
annually), down from its current quarterly level of $.51, beginning with
the fourth quarter 2015 dividend payable in February 2016. This dividend
enables the company to use a significant portion of its large cash flow
to fund the equity portion of its expansion capital requirements,
eliminate any need to access the equity market for the foreseeable
future and maintain a solid investment grade credit rating. KMI
anticipates enough retained internally generated cash flow to fund all
of the required equity contribution projected for 2016 and a significant
portion of its debt requirements. The company has reviewed its expected
investments in 2017 and 2018 and believes that its stable and growing
internally generated cash flow will allow it to continue to fund the
equity portion of its capital budget without the need to access the
equity market. It anticipates meeting all of the rating agencies’
requirements to remain investment grade, and expects a net debt/EBITDA
ratio of 5.5 for 2016 and anticipates reducing that ratio in subsequent
years.
“We evaluated numerous options, including significant asset sales, but
ultimately concluded that these other options were uneconomic to our
investors in the long run. This decision was not made lightly, but we
believe it is in the best interests of the company, its shareholders and
employees,” said Rich Kinder, executive chairman of the KMI board. “It
will allow us to continue to maintain and grow our outstanding set of
midstream energy assets without being required to issue equity at
valuations prevalent in today’s market while maintaining a solid
investment grade rating on our debt obligations. We are directly
addressing concerns about our investment grade rating and concerns about
the need to issue additional equity. We believe today’s action is
beneficial to our shareholders.”
“Our strategy always has been, and will continue to be, to focus on
fee-based midstream energy assets that are core to North American energy
markets,” said Steve Kean, president and CEO. “Our execution of that
strategy has enabled us to grow distributable cash flow (DCF) per share
and we believe we will continue to do so.”
The company has completed its budget process for 2016 and expects DCF
available to its equity holders of slightly over $5 billion, an increase
of approximately 8 percent over 2015. “We grew our DCF per share in 2015
and we expect to grow again in 2016, despite a very difficult
environment in the energy sector. We believe we have the best set of
assets in the midstream energy business and the cash generated by those
assets is fee based and growing. Today’s action is not a reflection of
our underlying business – our business is strong and growing. Today’s
decision is about finding the most economic way to fund our set of
attractive return expansion projects,” said Kean.
Please join Kinder Morgan at 8:30 a.m. Eastern Time on Wednesday, Dec.
9, at http://ir.kindermorgan.com/presentations-webcasts
for a LIVE webcast conference call on this announcement.
Kinder Morgan, Inc. (NYSE: KMI) is the largest energy infrastructure
company in North America. It owns an interest in or operates
approximately 84,000 miles of pipelines and approximately 165 terminals.
The company’s pipelines transport natural gas, gasoline, crude oil, CO2
and other products, and its terminals store petroleum products and
chemicals, and handle bulk materials like coal and petroleum coke. For
more information please visit www.kindermorgan.com.
The non-generally accepted accounting principles, or non-GAAP,
financial measures of distributable cash flow before certain items, both
in the aggregate and per share, and segment earnings before
depreciation, depletion, amortization and amortization of excess cost of
equity investments, or DD&A, and certain items, are presented in this
news release.
Distributable cash flow before certain items is a significant metric
used by us and by external users of our financial statements, such as
investors, research analysts, commercial banks and others, to compare
basic cash flows generated by us to the cash dividends we expect to pay
our shareholders on an ongoing basis. Management uses this metric
to evaluate our overall performance. Distributable cash flow
before certain items is also an important non-GAAP financial measure for
our shareholders because it serves as an indicator of our success in
providing a cash return on investment. This financial measure
indicates to investors whether or not we are generating cash flow at a
level that can sustain or support an increase in the quarterly dividends
we are paying. Distributable cash flow before certain items is
also a quantitative measure used in the investment community. The
economic substance behind our use of distributable cash flow before
certain items is to measure and estimate the ability of our assets to
generate cash flows sufficient to pay dividends to our investors.
We believe the GAAP measure most directly comparable to distributable
cash flow before certain items is net income. Distributable cash
flow before certain items per share is distributable cash flow before
certain items divided by average outstanding shares, including
restricted stock awards that participate in dividends. “Certain
items” are items that are required by GAAP to be reflected in net
income, but typically either (1) do not have a cash impact, for example,
asset impairments, or (2) by their nature are separately identifiable
from our normal business operations and in our view are likely to occur
only sporadically, for example certain legal settlements, hurricane
impacts and casualty losses. Management uses this measure and
believes it is important to users of our financial statements because it
believes the measure more effectively reflects our business’ ongoing
cash generation capacity than a similar measure with the certain items
included.
For similar reasons, management uses segment earnings before DD&A and
certain items in its analysis of segment performance and management of
our business. General and administrative expenses are generally
not controllable by our segment operating managers, and therefore, are
not included when we measure business segment operating performance. We
believe segment earnings before DD&A and certain items is a significant
performance metric because it enables us and external users of our
financial statements to better understand the ability of our segments to
generate cash on an ongoing basis. We believe it is useful to
investors because it is a measure that management believes is important
and that our chief operating decision makers use for purposes of making
decisions about allocating resources to our segments and assessing the
segments’ respective performance.
We believe the GAAP measure most directly comparable to segment
earnings before DD&A and certain items is segment earnings before DD&A.
Our non-GAAP measures described above should not be considered
alternatives to GAAP net income or other GAAP measures and have
important limitations as analytical tools. Our computations of
distributable cash flow before certain items, and segment earnings
before DD&A and certain items may differ from similarly titled measures
used by others. You should not consider these non-GAAP measures
in isolation or as substitutes for an analysis of our results as
reported under GAAP. Management compensates for the limitations
of these non-GAAP measures by reviewing our comparable GAAP measures,
understanding the differences between the measures and taking this
information into account in its analysis and its decision making
processes.
Important Information Relating to
Forward-Looking Statements
This news release includes forward-looking statements within the
meaning of the U.S. Private Securities Litigation Reform Act of 1995 and
Section 21E of the Securities and Exchange Act of 1934. Generally
the words “expects,” “believes,” anticipates,” “plans,” “will,” “shall,”
“estimates,” and similar expressions identify forward-looking
statements, which are generally not historical in nature. Forward-looking
statements are subject to risks and uncertainties and are based on the
beliefs and assumptions of management, based on information currently
available to them. Although Kinder Morgan believes that these
forward-looking statements are based on reasonable assumptions, it can
give no assurance that any such forward-looking statements will
materialize. Important factors that could cause actual results to
differ materially from those expressed in or implied from these
forward-looking statements include the risks and uncertainties described
in Kinder Morgan’s reports filed with the Securities and Exchange
Commission, including its Annual Report on Form 10-K for the year-ended
December 31, 2014 (under the headings “Risk Factors” and “Information
Regarding Forward-Looking Statements” and elsewhere) and its subsequent
reports, which are available through the SEC’s EDGAR system at www.sec.gov
and on our website at ir.kindermorgan.com.
Forward-looking statements speak only as of the date they were made, and
except to the extent required by law, Kinder Morgan undertakes no
obligation to update any forward-looking statement because of new
information, future events or other factors. Because of these
risks and uncertainties, readers should not place undue reliance on
these forward-looking statements.
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