Independent investment research firm Morningstar Inc. named Kinder Morgan CEO Richard Kinder its 2005 CEO of the Year for his "exemplary corporate stewardship" and track record of increasing shareholder value.
"He's made key long-term, contrarian decisions to solidify the company's future and created a tremendous amount of value for shareholders since taking over in 1997," said Patrick Dorsey, director of stock analysis for Morningstar. "With compensation that rewards long-term value creation and is tied to company performance, Kinder has demonstrated exemplary stewardship."
Kinder served as Enron's president from 1990 to 1996. Recognizing that greater long-term value would be created by operating hard assets rather than trading energy, Kinder left Enron in 1996, and with his partner Bill Morgan, purchased a controlling stake in one of Enron's pipeline businesses, Enron Liquids Pipeline, LP, renaming it Kinder Morgan Energy Partners. Headquartered in Houston, Kinder Morgan is now one of the country's largest owners and operators of energy pipelines, managing more than 40,000 miles of natural gas and products pipelines, and more than 150 terminals.
Morningstar said that Kinder has stayed "resolutely focused on generating income by investing in hard assets -- often those that were sold off by firms that jumped on the energy-trading bandwagon."
Kinder Morgan sets a high standard for financial disclosure, publishing a detailed annual budget complete with yearly goals, the firm added. The company uses the budget as a benchmark to keep shareholders informed of its progress and to assess employee performance. "There's no chance that the firm will suddenly lower expectations or move the goals if it has a bad year."
It also noted that Kinder's compensation is directly linked to the company's performance. He receives $1 in annual salary, and the rest of his pay comes from distributions and dividends paid from his ownership stakes. He is the largest shareholder of Kinder Morgan Inc. (KMI), owning more than 18% of the company.
"This large stake ties his wealth to the company's performance and to that of the firm's other owners. Also, Kinder has never sold a single share of stock and has bought shares on the open market over the years. During the fourth quarter of 2005 alone, he bought about $1 million worth of shares in KMI and [Kinder Morgan Management]. Finally, Kinder sets a cost-conscious example for the firm. Executive salaries are capped at $200,000 annually, with the bulk of executive compensation tied to performance-related bonuses and restricted stock."
Under Kinder's leadership, KMI has increased its dividend five-fold since 2003. Since 1998, Kinder Morgan Energy Partners units have tripled and partnership distributions have more than doubled. KMP unitholders enjoyed a 32% annualized total return since 1997 when Kinder took over the company.
In 2005, Kinder Morgan bought Canadian oil pipeline and utility operator Terasen and announced plans to build a $3 billion natural gas pipeline to deliver Rocky Mountain natural gas to Northeast and Midwest markets.
"The acquisition of Terasen enables Kinder Morgan to participate in pipeline projects related to the Canadian oil sands, while the Rockies Express project provides much needed pipeline capacity to a region of expanding natural-gas production," Dorsey added. "Kinder's ability to use capital wisely, think strategically, and treat shareholders with respect placed him at the top for our CEO of the Year award."
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