Kinder Morgan, Inc. (NYSE:KMI) Q2 2016 Earnings Conference Call - Final Transcript

Jul 20, 2016 • 04:30 pm ET


Kinder Morgan, Inc. (NYSE:KMI) Q2 2016 Earnings Conference Call - Final Transcript


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Welcome to the quarterly earnings conference call. At this time, all participants are in a listen-only mode. After the presentation, we will conduct a question-and-answer session. (Operator Instructions) This call is being recorded. If you have any objections, you may disconnect at this point.

Now, I will turn the meeting over to your host, Mr. Rich Kinder, Executive Chairman of Kinder Morgan. Sir, you may begin.

Rich Kinder

Okay. Thank you, Laura, and welcome to our call. (Forward-Looking Cautionary Statements) Let me begin by just making a very few introductory comments before turning the call over to our CEO, Steve Kean, and our CFO, Kim Dang. First of all, the operating results for both the second quarter and year to date are very consistent with Kim's guidance which she shared with you on our Q1 call and which were in our Q1 earnings release.

I think this demonstrates once more that our assets are consistent generators of strong cash flow even in these times of volatility. Several specific events have happened since our last call, mostly positive. First of all, the National Energy Board of Canada recommended approval of our Trans Mountain Expansion Project. This is an important step, but we still need an Order in Council and that decision is expected in December of this year.

We also entered into joint ventures, as you know with Southern Company on our SNG Natural gas system and with Riverstone on our Utopia Pipeline Project and have also divested an additional approximately $175 million of non-core assets. These steps allow us to significantly improve our balance sheet with the expectation of now ending this year, 2016 at about 5.3 times debt-to-EBITDA, which is an improvement from the 5.5 times budgeted.

In addition, we are also reducing our future need for expansion CapEx and all of this is getting us measurably closer to being able to return significant additional cash to our shareholders through either increasing the dividend or buying back shares. I can assure you we will continue on this flight path as we work to maintain and strengthen our balance sheet while at the same time preparing to deliver increased value to our shareholders.

With that, I will turn it over to Steve.

Steve Kean

All right. Thanks. I'm going to update on capital and counter-party credit and then hit on some additional segment highlights and trends that we're seeing. On the capital update, we've been talking for several quarters now about high-grading the backlog and how we do that. That consists of making sure that we are attending to our balance sheet but also ensuring that we grow our DCF per share through investments that we're making at attractive returns and that we are now funding out of the excess cash flow that we generate without needing to access the capital market.

The high-grading include select joint ventures on assets and projects. The Utopia JV shows that we can originate high-value midstream projects that are valued by investors. On SNG, we are entering a