Driven by record 52% growth in 2001 — with generous support from its general partner — Kinder Morgan Inc. (KMI) reported Thursday it expects to have 10-15% growth through the year. Earnings were driven “significantly” by KMI’s ownership of the general partner of Kinder Morgan Energy Partners LP (KMP), which saw its earnings grow 59% from a year earlier.

KMI reported 2001 diluted earnings per share of $1.96 compared with $1.29 for 2000. For the fourth quarter, equivalent earnings were up 40% to $0.60 per share, compared with $0.43 for the fourth quarter of 2000. Overall, KMI reported diluted earnings per share of $1.97 in 2001, up from $1.61 in 2000, and $0.60 for the fourth quarter, compared to $0.74 a year earlier.

“KMI had an excellent year and an outstanding quarter,” said CEO Richard D. Kinder. “KMI’s strong performance in 2001, a difficult year for the economy and businesses across all industries, exemplifies that we have assembled a premier, fee-based portfolio of midstream assets capable of producing reliable cash flow in various market conditions.”

Taking analysts through a hour-and-a-half presentation on the company, Kinder acknowledged the problems at Enron Corp. by carefully explaining the company’s philosophy, which he called a “unique combination of stability and growth.” He said that it is currently a “good time for companies with good balance sheets like Kinder Morgan,” noting that it has “never been a better time for acquisitions…Enron will have some things for sale,” among others.

Calling the off-balance sheet financing transactions so well known through Enron’s collapse, Kinder said his company had only “insignificant” related-party transactions, mostly related to deals it has done with major energy companies such as ExxonMobil Corp. “If we could buy the assets, we would,” Kinder noted, and thus bring them to the bottom line. He also reported that “all of the significant leases have been moved on balance sheet.”

Most of KMI’s earnings were driven by ownership of the general partner of Kinder Morgan Energy Partners LP (KMP), the largest master pipeline master limited partnership in the United States. KMI will receive $272.4 million in total distributions from KMP for 2001, up 82% over 2000, and $73.5 million in total distributions from KMP for the fourth quarter, up 65% from the same period a year earlier. As KMP’s cash flow grows, Kinder said KMI’s general partner share will also grow.

“KMP’s cash flow continued to increase significantly in 2001 due to internal growth in pipeline and terminal segments and the strong performance of acquired assets,” said Kinder. After the effects of equity accounting and amortization, KMP contributed $251.9 million of pre-tax earnings to KMI in 2001, compared to $113.3 million in 2000, and $73 million of pre-tax earnings in the fourth quarter, compared to $35.4 million a year earlier.

Natural Gas Pipeline Company of American (NGPL), a KMI subsidiary, reported segment earnings of $346.4 million in 2001, slightly higher than 2000, and $88.6 million for the fourth quarter. Kinder said “transportation and storage capacity remains virtually sold out on the pipeline and management continues to successfully re-contract capacity and enter into contracts for new electric generation load.” He said NGPL expects to connect between 3,000 and 4,000 MW of incremental gas-fired electric generation capacity a year through 2004.

In other news, Kinder reported that KMI has completed more than 90% of its $300 million common stock repurchase program announced last August, which he said strengthened the balance sheet and put the company in a position to acquire or expand projects. KMI’s Premium Equity Participating Security Units conversion also occurred in November, reducing its debt-to-capital ration to 47% from 71% by year-end.

For 2002, KMI expects earnings per share to fall between $2.55-$2.65, up from its previous guidance of $2.40-$2.50 — mostly because of its pending acquisition by KMP of Tejas Gas for $750 million (see Daily GPI, Dec. 18, 2001).

“We are comfortable with the low end of that [earnings] range, which represents about a 30% increase over this year’s earnings, without additional acquisitions,” said Kinder. “Internal growth remains strong, with both the Horizon Pipeline and St. Louis expansion projects scheduled to come on-line in 2002.”

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