Proceeds will be used to pay down
debt
Kinder Morgan, Inc. (NYSE: KMI) today announced that the Pembina
Pipeline Corporation (TSX: PPL; NYSE: PBA) (Pembina) has acquired
the U.S. portion of the Cochin Pipeline for $1.546 billion. In
addition, Pembina has acquired all of the outstanding common equity
of Kinder Morgan Canada Limited (TSX: KML), including the 70
percent majority voting interest held by Kinder Morgan Inc. (NYSE:
KMI) (the Arrangement). Under the Arrangement, KMI will receive
.3068 shares of Pembina for each KML share it holds. This exchange
ratio results in KMI receiving approximately 25 million shares of
Pembina stock for KMI’s 70 percent interest in KML, which equates
to slightly less than 5 percent of Pembina’s common equity. KMI
expects to ultimately convert these shares into cash in an
opportunistic and non-disruptive manner.
As discussed in the December 5, 2019 press release announcing
our 2020 budget guidance, KMI intends to use the proceeds from the
Pembina transactions to pay down debt – creating approximately $1.2
billion of balance sheet/borrowing flexibility in 2020 (relative to
KMI’s long-term leverage target of 4.5x Net Debt to Adjusted
EBITDA), which provides attractive optionality. KMI can retain that
financial flexibility or use some or all of it to repurchase shares
or invest in attractive projects. For illustrative purposes only,
using $1.2 billion for share repurchases or to invest in projects
could increase the company’s 2020 DCF/share growth from 3 percent
to 5 or 6 percent, respectively, assuming a full year benefit from
the repurchases or projects.
About Kinder Morgan,
Inc.
Kinder Morgan, Inc. (NYSE: KMI) is one of the largest energy
infrastructure companies in North America. Our mission is to
provide energy transportation and storage services in a safe,
efficient and environmentally responsible manner for the benefit of
people, communities and businesses. Our vision is delivering energy
to improve lives and create a better world. We own an interest in
or operate approximately 83,000 miles of pipelines and 146
terminals. Our pipelines transport natural gas, refined petroleum
products, crude oil, condensate, CO2 and other products, and our
terminals transload and store liquid commodities including
petroleum products, ethanol and chemicals, and bulk products,
including petroleum coke, metals and ores. For more information,
please visit www.kindermorgan.com.
Non-GAAP Financial
Measures
The non-generally accepted accounting principles (non-GAAP)
financial measures of distributable cash flow (DCF) per share; net
income before interest expense, income taxes, depreciation,
depletion, amortization, or DD&A, including amortization of
excess cost of equity investments, and Certain Items (Adjusted
EBITDA); and Net Debt are referenced herein.
Our non-GAAP measures described further below should not be
considered alternatives to GAAP net income or other GAAP measures
and have important limitations as analytical tools. Our
computations of these non-GAAP measures may differ from similarly
titled measures used by others. You should not consider these
non-GAAP measures in isolation or as substitutes for an analysis of
our results as reported under GAAP. Management compensates for the
limitations of these non-GAAP measures by reviewing our comparable
GAAP measures, understanding the differences between the measures
and taking this information into account in its analysis and its
decision-making processes.
We do not provide budgeted net income attributable to common
stockholders and net income, the GAAP financial measures most
directly comparable to the non-GAAP financial measures of DCF and
Net Debt-to-Adjusted EBITDA, respectively, due to the
impracticality of quantifying certain components required by GAAP
such as: ineffectiveness of commodity, interest rate and foreign
currency hedges; unrealized gains and losses on derivatives marked
to market; and potential changes in estimates for certain
contingent liabilities.
Certain Items, as adjustments used
to calculate our non-GAAP measures, are items that are required by
GAAP to be reflected in net income, but typically either (1) do not
have a cash impact (for example, asset impairments), or (2) by
their nature are separately identifiable from our normal business
operations and in our view are likely to occur only sporadically
(for example certain legal settlements, enactment of new tax
legislation and casualty losses).
DCF is calculated by adjusting net
income available to common stockholders for Certain Items, DD&A
and amortization of excess cost of equity investments, income tax
expense, cash taxes, sustaining capital expenditures and other
items. DCF is a significant performance measure useful to
management and external users of our financial statements in
evaluating our performance and in measuring and estimating the
ability of our assets to generate cash earnings after servicing our
debt, paying cash taxes and expending sustaining capital, that
could be used for discretionary purposes such as common stock
dividends, stock repurchases, retirement of debt, or expansion
capital expenditures. DCF should not be used as an alternative to
net cash provided by operating activities computed under GAAP. We
believe the GAAP measure most directly comparable to DCF is net
income available to common stockholders. DCF per common share is
DCF divided by average outstanding common shares, including
restricted stock awards that participate in common dividends.
Adjusted EBITDA is calculated by
adjusting net income before interest expense, income taxes, and
DD&A, including amortization of excess cost of equity
investments (EBITDA), for Certain Items, KMI’s share of
unconsolidated joint venture (JV) DD&A and income tax expense
(net of our partners’ share of consolidating JV DD&A and income
tax expense), and net income attributable to noncontrolling
interests. Adjusted EBITDA is used by management and external
users, in conjunction with our Net Debt (as described further
below), to evaluate certain leverage metrics. Therefore, we believe
Adjusted EBITDA is useful to investors. We believe the GAAP measure
most directly comparable to Adjusted EBITDA is net income.
Net Debt is calculated by
subtracting from debt (i) cash and cash equivalents, (ii) the
preferred interest in the general partner of Kinder Morgan Energy
Partners L.P., (iii) debt fair value adjustments and (iv) the
foreign exchange impact on Euro-denominated bonds for which we have
entered into currency swaps. We believe Net Debt is useful to
investors and other users of our financial information in
evaluating our leverage. We believe the most comparable measure to
Net Debt is debt net of cash and cash equivalents.
Important Information Relating to
Forward-Looking Statements
This news release includes forward-looking statements within the
meaning of the U.S. Private Securities Litigation Reform Act of
1995 and Section 21E of the Securities Exchange Act of 1934.
Generally the words “expects,” “believes,” anticipates,” “plans,”
“will,” “shall,” “estimates,” and similar expressions identify
forward-looking statements, which are generally not historical in
nature. Forward-looking statements in this news release include,
among others, express or implied statements pertaining to the
expected use of proceeds from the Pembina transactions; KMI’s
expected sales of Pembina shares; KMI's expected Net
Debt-to-Adjusted EBITDA ratio; potential DCF per share growth;
anticipated dividends; and KMI's capital projects, including
expected completion timing and benefits of those projects.
Forward-looking statements are subject to risks and uncertainties
and are based on the beliefs and assumptions of management, based
on information currently available to them. Although KMI believes
that these forward-looking statements are based on reasonable
assumptions, it can give no assurance as to when or if any such
forward-looking statements will materialize nor their ultimate
impact on our operations or financial condition. Important factors
that could cause actual results to differ materially from those
expressed in or implied by these forward-looking statements include
the risks and uncertainties described in KMI’s reports filed with
the Securities and Exchange Commission (SEC), including its Annual
Report on Form 10-K for the year-ended December 31, 2018 (under the
headings “Risk Factors” and “Information Regarding Forward-Looking
Statements” and elsewhere) and its subsequent reports, which are
available through the SEC’s EDGAR system at www.sec.gov and on our
website at ir.kindermorgan.com. Forward-looking statements speak
only as of the date they were made, and except to the extent
required by law, KMI undertakes no obligation to update any
forward-looking statement because of new information, future events
or other factors. Because of these risks and uncertainties, readers
should not place undue reliance on these forward-looking
statements.
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version on businesswire.com: https://www.businesswire.com/news/home/20191216005722/en/
Kinder Morgan Contacts Media Relations Dave
Conover (713) 369-9407 newsroom@kindermorgan.com
Investor Relations (800) 348-7320 km_ir@kindermorgan.com
www.kindermorgan.com
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