Kinder Morgan Inc. (KMI), one of North America’s largest natural gas storage and transportation companies, reported a 17% year-over-year hike in earnings in the third quarter, driven by strong performance from its general partner, Kinder Morgan Energy Partners LP (KMP), as well as another solid quarter from its fee-based assets.

Earnings per share beat the Street by a penny, at 77 cents in the third quarter, up from 66 cents in 3Q02, on net income of $95.6 million, up from $80.4 million a year ago. Cash flow was $130 million in the quarter, and appears to be consistent with KMI’s revised full-year forecast of $530 million. KMI’s original budget was $470 million.

“Through the first nine months of the year, we have increased KMI’s earnings per share by 25%, raised our dividend by 167% and strengthened our balance sheet by paying down approximately $290 million in net debt,” said CEO Richard Kinder. “While we have not yet completed our 2004 budget, our continued growth in cash flow is expected to enable a significant increase in KMI’s dividend in 2004. We expect the increase to be at least 25% from current levels or a minimum of $2.00 per share for the year.” KMI also “remains comfortable” with the higher end of targeted earnings this year of between $3.18-$3.28 per share.

KMI’s interest in its master limited partnership contributed $100.3 million of pre-tax earnings, a 14% increase from 3Q02’s $87.9 million. CEO Kinder said KMP’s growth was mostly internal on its pipeline, terminal and CO2 assets.

KMP, which also released its quarterly earnings on Wednesday, reported a 10% increase in net income of $174.2 million, or 49 cents per unit, versus net income of $158.2 million, or 50 cents, in 3Q02. Wall Street had forecast KMP’s earnings to average 50 cents for the quarter.

At KMI’s Natural Gas Pipeline Company of America (NGPL), earnings rose 4%, to $92.2 million from $88.7 million a year ago. The CEO attributed NGPL’s growth on its ability to successfully re-contract its firm transportation and storage capacity. “As a result, 2004 has fewer firm transportation and storage contracts expiring than any other year since NGPL became part of Kinder Morgan four years ago.” He added that only 14% of NGPL’s long-haul capacity is scheduled to expire in 2004.

TransColorado’s earnings, meanwhile, were up slightly from last year, to $4.9 million versus $4.8 million recorded by KMI for its 50% interest in the same period a year ago.

Power segment earnings were down for the quarter, with earnings of $5.3 million compared with $7.0 million for the same period last year. Discontinuation of plant development activities was partially offset by improved performance at KMI’s tolled plants in Colorado and Michigan. Power, which is expected to account for about 2% of KMI’s total segment income in 2003, also is expected to slightly exceed its annual published budget of $19.4 million.

At Wednesday’s board meeting, directors established a lead director position and elected Stewart Bliss to serve the first one-year term. They also established a separate nominating and governance committee and adopted several committee charters and policies.

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