Kinder Morgan Inc. (KMI) executives spent nearly two hours Thursday assuaging investment analysts and investors about the strength of the company and its master limited partnership (MLP), Kinder Morgan Energy Partners LP (KMP) following two days of pummeling on the stock market that had sent share prices down by as much as 20%.

The day had been intended to announce the closing by KMP of the acquisition of Tejas Gas LLC, a 3,400-mile natural gas pipeline with a transport capacity of 3.5 Bcf/d that extends from South Texas to the Louisiana border to East Texas. Executives of KMP also wanted to boast of a recommendation to the board of directors to increase the first quarter cash distribution per share to at least $0.575 (an annualized rate of $2.30) from $.55 (an annualized rate of $2.20) — its 12th distribution increase since it was formed as KMI’s limited partner in February 1997.

Instead, Chairman Richard Kinder, joined by Michael Morgan, president, William Morgan, vice chairman, and C. Park Shaper, CFO, fielded dozens of questions from analysts and investors about rumors surrounding alleged Securities and Exchange Commission (SEC) investigations, accounting issues, competition for assets, insider selling, lack of access to the commercial paper market, and most bizarre of all, Richard Kinder’s former employment as a president at Enron Corp. For the most part, analysts seemed content with the lengthy explanations from a company which in the past has been sparing with information.

One by one, Richard Kinder and his executive team addressed the rumors “head on.” Noting he was “very disturbed about the negative activity in all of our stocks in the past two days,” he specifically addressed them. “I don’t mind people buying and selling the stock. Our interest and your interest is that they sell this stock based on facts and not unsubstantiated rumors.”

By the end of the week, KMI’s stock was again on the rise, gaining $1.95 on Friday to close the week up 4.76% to stand at $42.95. KMP’s stock was also up, gaining $1.75 on Friday to close up 6.12% and end at $30.35.

Morgan then took conference callers through a 10-minute overview of MLPs, noting that KMP made all of its disclosures to the SEC. “Cash is the only thing of importance to the MLP and the cash is paid out to the limited partners,” he said. Morgan also noted that he had received calls from various national media outlets about KMP’s structure, but expected that any stories generated about it would be positive.

Shaper, who explained the financial outlook for KMI and KMP, said the companies had a “strong balance sheet” with both entities conservatively financed. “There are no liquidity issues,” he said. Shaper said there were “no accounting issues, no investigation into any of our accounting…we are focused on cash flow. We cannot make up cash…cash has to be there. We cannot make it up. We are generating cash internally, not putting out equity to make our distribution.”

Richard Kinder also was quick to emphasize he did not know where the rumor started that the SEC was investigating the company’s accounting methods. “Our accounting is under no kind of scrutiny,” he said, adding that one rumor that Andersen was its auditor also was untrue. PricewaterhouseCoopers has been the company’s auditor since the inception of KMP, Kinder noted.

Another rumor, that KMI and KMP had been “starving” its asset base to feed acquisitions also is unfounded, Richard Kinder noted. “We don’t have rusted out tanks. One of the stupidest things is to starve assets. Corporate jets, we have none. Sports tickets, we have none….we are not siphoning money off. We’re in this for the long haul.”

In perhaps one of the most spirited answers in the conference call, Richard Kinder defended his tenure at Enron, where he had been president in the early 1990s, resigning in 1996. Questioned about his involvement in Enron’s related-party transactions, the chairman and CEO grew agitated. Referring to one of Enron’s first off-balance sheet entities, JEDI, formed by Enron and the California Public Employees’ Retirement System (CalPERS) in 1996.

“JEDI was formed as a legitimate joint venture (during his tenure) and Enron and CalPERS each put up cash,” said Richard Kinder. “As the Powers Report (the internal report on Enron) pointed out, in November 1997, a year after I left, CalPERS wanted to monetize its half of a perfectly legitimate business, and then Chewco (another Enron related-party transaction investigated by the SEC) came up. Chewco was formed long after I left.”

Richard Kinder then said that if he had stayed at Enron, he doubted the company would have been “run into the ground” as it has been.

Carl Kirst of Merrill Lynch noted that “in a post-Enron world, there has been increasing scrutiny of partnerships, whether private or public.” He said the company’s core operations remain strong, and “earnings and cash flow for both KMI and KMP both appear to be on track for first quarter expectations. We expect a positive reporting by both KMI/KMP to start easing the current pressure.”

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