Earnings from subsidiaries and ownership in its master limited partnership sent earnings at Kinder Morgan Inc. (KMI) up 17% during the third quarter compared with a year ago. The Houston-based company topped Wall Street estimates by 2 cents/share, with net income of $111.9 million (90 cents/share), compared with $95.6 million (77 cents) in 3Q2003.

CEO Richard Kinder said the quarterly results were driven by ownership of the general partner of Kinder Morgan Energy Partners LP (KMP) and strong performances by Natural Gas Pipeline Company of America (NGPL) and TransColorado Gas Transmission.

KMI’s total debt-to-capital ratio improved to about 41% at the end of the quarter from 43% at year-end 2003. Through September, KMI has paid down $95 million of the $100 million budgeted for debt reduction this year, and it also has spent $55 million repurchasing shares in the first three quarters, compared to its budgeted target of $60 million for the full year.

“Moving forward, we remain committed to returning cash to our shareholders in an economic and tax-efficient manner, while at the same time maintaining a strong balance sheet and investing in energy infrastructure,” said CEO Richard Kinder. “In 2004, for example, we expect the Kinder Morgan companies will invest approximately $1 billion in acquisitions and capital expansion projects, most of which will occur at KMP. To date, we have announced approximately $320 million in acquisitions and the 2004 budget calls for about $650 million in expansion capital expenditures.”

KMI’s investments in KMP contributed $122.1 million of pre-tax earnings, up 22% from $100.3 million in the same period last year, and on target to meet the published annual budget of 16% growth. KMI will receive $127.3 million in total distributions from its investment in KMP for the quarter, up from $106.7 million a year earlier.

NGPL reported earnings of $94.8 million, a 3% increase over $92.2 million a year ago, and also on target for 3% annual growth. Results were driven by a 5% increase in transportation and storage revenues Storage is fully contracted until April 2005. Throughput volumes were up about 8% for the quarter, led by volumes delivered on the Louisiana Line and Gulf Coast Mainline.

TransColorado brought in $7.1 million in the quarter, up from $4.9 million in 3Q2003, and is on a path to reach 13% growth this year. The quarterly increase was attributed to the completion of a $33 million expansion project, which increased transportation capacity on the pipeline beginning Aug. 1 to 425,000 Dth/d from 300,000 Dth/d. Transport volumes were up almost 27% quarter over quarter. The unit is being sold to KMP for about $300 million by the end of this year, which should contribute to KMP’s value to unitholders (see related story).

There was not good news across the board, however. Retail earnings were down, to stand at $4.8 million, compared with almost $7 million in the same period last year. However, KMI expects the unit to reach its 5% growth target this year. “The decline in third quarter earnings was primarily due to a wet and cool irrigation season in Nebraska, which resulted in a lower irrigation load than during last year’s strong irrigation season,” Kinder said.

Power generated third quarter segment earnings of $4.1 million, down from $5.3 million for the comparable quarter last year. The falling earnings were attributed to discontinued power plant development, and the unit is expected to produce only 1% of KMI’s total segment earnings in 2004.

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