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Kinder Morgan Earnings up for 2005, But Down in Q4

Kinder Morgan Inc. (KMI) realized 2005 income of $552.2 million ($4.43 per diluted share), up from $528.5 million ($4.23 per share) in 2004, but the company's fourth quarter was off. Fourth quarter income was $176.3 million ($1.39 per share), down from $185.1 million ($1.48 per share) in 2004, partly due to conservation and some demand destruction seen in the retail gas business.

Results for 2005 also were affected by hedge ineffectiveness, gains from the sale of Kinder Morgan Management shares, the impact of certain items at Kinder Morgan Energy Partners, a reduction in the carrying value of the company's interest in a Colorado power plant, a contribution to the Kinder Morgan foundation, and two items related to the $5.9 billion acquisition of Terasen (see NGI, Aug. 8, 2005).

Earnings per share (diluted) before special items were $4.45 in 2005, up 17% from $3.81 in 2004. For the fourth quarter, earnings per share before special items were $1.29, up 25% from $1.03 in the fourth quarter of 2004.

Kinder Morgan's investments in Kinder Morgan Energy Partners LP (KMP) contributed $567.5 million of pre-tax earnings (before special items). This was up 19% from $477 million in 2005. For the fourth quarter, KMI's investments in KMP contributed $148 million compared to $129.8 million in Q4 2004. KMI will receive $593.5 million in distributions from its investment in KMP for 2005, compared with $501.8 million in 2004. In the fourth quarter KMI will realize $153.9 million, compared with $135.7 million in the Q4 2004.

KMI's Natural Gas Pipeline Co. of America (NGPL) saw an 11% increase in earnings to $436.9 million from $392.8 million. Fourth quarter earnings increased by 12% to $110 million from $97.9 million. However, these figures exclude the timing impact from accounting for hedge ineffectiveness, which resulted in a third-quarter loss that was offset in the fourth.

In 2005 NGPL entered long-term firm transportation and storage contracts with MidAmerican, Peoples, ONEOK, Nicor, NIPSCO and BP. The company said firm long-haul capacity on NGPL is sold out through February 2007, excluding a portion of summer-only capacity on the Gulf Coast Line. "At this time last year, 51 percent of the long-haul capacity NGPL had under contract was scheduled to expire in 2006. However, through successful re-contracting efforts, only 2.5 percent of that capacity remains to be contracted this year," said CEO Rich Kinder.

Throughput volumes were up 11% in the fourth quarter, primarily due to strong demand on the Gulf Coast and Louisiana pipelines and continued high utilization on the Amarillo and the cross-haul pipelines, the company said. However, throughput has only a modest impact on earnings because the vast majority of NGPL's transportation and storage revenues come from demand charges.

KMI's retail segment reported earnings of $58.2 million, down 16% from $69.3 million in 2004. Fourth quarter earnings were $21.3 million, down from $25.8 million. "Factors in the segment earnings decline included lower residential and commercial volumes in Wyoming and Nebraska due to a combination of conservation efforts and warmer than normal temperatures," the company said. In addition, agricultural loads, primarily in Nebraska, were impacted by both warm weather and customers switching from higher priced gas to alternative energy sources." Growth continued in the Colorado service territory as the company added more than 3,700 new meters during 2005.

The power segment generated 2005 earnings of $19.7 million, up from $15.3 million in 2004. In the fourth quarter earnings were $6.3 million, up from $3.5 million. Credited for the increase were a strong performance at the Ft. Lupton, CO, power plant, and the provision of operating and maintenance management services at a new 103 MW combined-cycle plant in Snyder, TX.

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