Cruising on strong performances from its pipeline unit and master limited partnership, Kinder Morgan Inc. (KMI) on Wednesday reported a 15% increase in 1Q earnings, with income from continuing operations of $145.7 million ($1.17/share), compared with 1Q2004 income of $127 million ($1.02).

Meanwhile, KMI’s Kinder Morgan Energy Partners LP (KMP), reported record quarterly earnings with a 19% increase in 1Q2005 net income to $228.9 million (56 cents/unit), compared with $191.8 million (52 cents) in 1Q2004. Excluding a previously announced $25 million lawsuit settlement, earnings would have been 68 cents/unit. KMP also increased its quarterly cash distribution by 10% over 1Q2004 to 76 cents/unit ($3.04 annualized), compared with 1Q2004’s 69 cents ($2.76).

“A strong performance by Natural Gas Pipeline Company of America (NGPL), along with our ownership of the general partner of KMP, combined to produce record first quarter net income,” said Chairman Richard Kinder. He credited KMP’s success to “strong internal growth” and acquisitions, noting that all four of KMP’s businesses reported increased segment earnings.

KMI’s investments in KMP contributed $132.9 million of pre-tax earnings in 1Q2005, up 20% from $110.5 million in 1Q2004. KMI will receive $141 million in total distributions from its investment in KMP for quarter, compared with $116.8 million in the same period a year ago.

KMI’s NGPL reported earnings of $114.2 million, a 7% increase from $106.7 million in 1Q2004. Earnings were driven by an increase in transportation margins and storage revenues. The company said firm, long-haul transportation capacity on NGPL is 91% sold out through 2005, and storage is fully contracted until April 2006.

Retail’s quarterly segment earnings were down slightly to $33.1 million, from $33.7 million in 1Q2004. Volumes declined about 17%, which KMI said was primarily due to warmer than normal weather. Kinder said that the segment is focusing on expansion projects on Colorado’s Western Slope. “We expect to connect approximately 3,600 new meters in the state in 2005, which would represent a 5% growth rate for our Colorado service territory.”

Power generated 1Q earnings of $4.4 million, up from $3.7 million in 1Q2004. In 2005, Power is expected to only produce about 1% of the total of KMI’s budgeted segment earnings.

KMP’s Products Pipelines segment delivered a 10% increase in 1Q earnings to $125.6 million, compared with $114.3 million in 1Q2004. Growth was driven by contributions from the acquired Southeast terminals and strong earnings from Pacific and Plantation, offset somewhat by a weak quarter for its natural gas liquids (NGL) pipelines, the company said. .

KMP’s Natural Gas Pipelines segment produced earnings of $123.7 million, up 20%, compared with $103.1 million a year earlier. The segment’s growth was driven by strong earnings from the Texas Intrastate Pipeline Group and Red Cedar, along with contributions from the acquired TransColorado pipeline. The CO2 segment earnings were up 58% to $122.9 million from $77.7 million in 1Q2004.

In other news, KMP said it has been informed that the office of the Attorney General of California is contemplating filing a criminal charge against KMP (or subsidiaries of KMP), claiming it intentionally discharged diesel fuel following the release from its 14-inch Concord to Sacramento pipeline, which was discovered on April 28, 2004. The Concord to Sacramento pipeline is owned and operated by KMP’s subsidiary, SFPP LP.

In addition, KMP has been told that the attorney general’s office is also contemplating filing charges alleging that KMP did not provide timely notice regarding certain environmental incidents at its facilities in California.

“KMP believes the contemplated charges are inappropriate and believes that it, its subsidiaries and their employees have acted in good faith,” it said in a statement. “KMP does not believe these charges will have a material adverse effect on its financial condition or results of operations.”

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