Kinder Morgan Inc. (KMI) on Wednesday reiterated an earlier third quarter earnings guidance of 63 cents a share, with earnings of $2.64 a share for the year, maintaining a forecast for 34% growth over last year. Kinder Morgan Energy Partners LP (KMP), the master limited partnership, also held to its forecast to earn 45 cents per unit in the third quarter, and $1.83 per unit for the year, which would be a 17% gain over 2001. The forecasts mirror Wall Street expectations.

Internal growth at KMI is predicted to reach 18-20% a year through 2005, through increased KMP distributions, 3-5% annual growth in other KMI businesses and reinvesting more than $400 million of annual free cash flow in share repurchases and debt repayments.

By itself, the master limited partnership estimates its internal growth will be 8-10% a year, with short-term plans to increase its quarterly cash distribution per unit, from $0.61 ($2.44 annualized) to at least $0.625 ($2.50 annualized) for the fourth quarter of 2002. KMP’s growth will occur by “increasing utilization of existing assets and completing expansion projects.” Because the projects will be financed internally, they will not require access to capital markets.

“This growth is in addition to a current yield of over 7%,” said Mike Morgan, president of KMI and KMP. He said the KMP growth is “sustainable over the long-term, given growth in demand for natural gas and petroleum products, and the need for additional infrastructure development in North America.” Morgan added that in the past five years, KMP has made more than $6 billion in accretive pipeline, terminal and carbon dioxide acquisitions.

“For pipeline assets, KMP targets six to eight times distributable cash flow, which produces returns well above its cost of capital.” Noting that there were a lot of pipeline assets now for sale, the company plans to evaluate all of the opportunities, but would only acquire assets that meet its return criteria. “Any growth from acquisitions will be additive to the expected internal growth rate of 8-10% in KMP distributions per unit.”

Seeking to further distance itself from the distressed energy merchants, the company stated, “KMI and KMP both own stable, fee-based pipelines and terminals which generate predictable cash flows. Kinder Morgan does not have trading and marketing businesses, and has minimal exposure to commodity prices.”

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