Richard D. Kinder – Chairman & Chief Executive Officer
C. Park Shaper – President
Steven J. Kean – Executive Vice President & Chief Operating Officer
Kinder Morgan Energy Partners LP (KMP) Analyst Conference Call January 28, 2010 9:00 AM ET
Richard D. Kinder
Okay, we could go ahead and get seated, we'll get started. I think there are still a few people getting their nametags out in the hall. We are good, right? Okay. All right. Well, welcome to the Kinder Morgan Investor Conference. We are delighted you’re here, and we are going to spend the next few hours really taking you through our thoughts and our plans of Kinder Morgan.
I’m going to kick it off, and I’m going to talk a little bit about our past record and talk about our performance in 2009, but the main focus of my time up here is going to be on 2010 and beyond and particularly talking about our vision for the future and what we see as the opportunities in the mid-term and long-term future for Kinder Morgan in the Midstream energy field.
I guess, I’d put the caveat with a quote from Mark Twain, who said that the art of prophecy is very difficult, particularly with regard to the future. So take anything we say, with a healthy dose of skepticism, we aren't always right, I think we’ve managed to catch a lot of good Tsunami’s over the last 13 years. We certainly haven't caught them all, I’m sure we’ll miss some in the future, but we think we have a pretty good ration of knowledge for what’s going to happen in our part of the energy world and for the foreseeable future.
Let me talk a little bit about the theme of this year's conference, and I think it became particularly relevant during 2009 and it's a pretty trait saying the size does matter, and it matters in a lot of ways. I’ve never been a believer in size for size’s sake, but I've always been a believer in size to the extent, it enables you to do other things that lead to improvement in the bottom-line. And this slide sort of shows you examples of why size does matter. First of all, from a growth opportunity standpoint, as a result of having what we believe is really an unparallel footprint of pipelines, internals and Midstream assets across the United States and Western Canada, we’ve been able to experience lots of opportunities for growth, both through acquisitions and through expansions. Over these 13 years of our existence, we’ve invested about $20 billion in growth capital, about a 11 of that in organic expansion, so called Greenfield projects and about $9 billion in acquisitions over those years. And the opportunities just get better and better, the bigger your footprint is.
The second thing where size matters is in terms of access to capital, and I think that was really shown during the last few months of 2008 and 2009, when we had really an unparallel financial situation in this country, we were able to continually excess – access, both the equity and debt capital markets. And during the course of our existence, we've raised $9 billion in public equity, and we put out a $11 billion in public long-term debt, about 10 billion, if you count it as net of refinancing, which I think is a better way to look at it, so we've been able to grow our business, we've been able to continuously access capital, which is what we need to do in order to maintain that growth, if you are a master limited partnership. And then I think the third thing that comes out of size is stable cash flow. And I think we’ve shown that time and time again. We have five fairly diverse business segments. Now, they are all in the midstream energy field, where we think we have a reasonable measure of expertise, but we’re able to have these different and diverse platforms to operate also in terms of cash flow. And then of course as we pride ourselves on is our toll road strategy and the fact that the majority of our cash flow is not sensitive to commodity prices.
Now, the Kinder Morgan strategy, you’ve seen the slide like this every year since we’ve been having these conferences because this has been our strategy from day one. From February of 1997, when Bill Morgan and I founded this company, we focused on fee-based assets, hopefully these are assets that have growth opportunities built into them and for the most part they do. We focused on being really a low variable cost business, we’re high fixed costs, low variable costs and that gives us lots of opportunities if we can reduce costs or if we can increase throughput, that improvement drops directly to the bottom-line. We're able to leverage the economies of scale from expansions and acquisitions; I touched on that on the previous slide. And finally, it goes without saying, we believe that the MLP structure is a superb structure for holding and building and growing the kind of assets that we have namely, long-term stable assets, that are fee-based in nature. They lend themselves to MLPs and of course in return, the MLP provides tax advantages by avoiding double taxation at the corporate level.
Now, I don't believe a lot in looking back, but I think it is important to look at a company's track record or management's track record and I think it helps you judge the creditability of what they say about the future. If you look at our track record, we are pretty proud of it and this slide is really something, an indication of performance that we can control. I’ll show you the next slide, we’ll talk about what our returns to investors are, but there’s lot of outside factors in that. These are things we can control through good management and if you look at the years of our existence, we’ve grown our total distributions at KMP at a compound annual rate of 43%. If you look just at the limited partners’ distribution per unit, we’ve grown that at a compound rate of 15%. And then the bottom part of this slide shows we’ve done that without leveraging up the balance sheet. We started this whole process with a debt-to-EBITDA ratio of 3.6. We expect to end 2010 at 3.6 and throughout the process we’ve stayed in a pretty tight short group pattern and that’s because we have continued to finance our acquisitions, our expansion with essentially 50% debt, 50% equity.
Now actually, if you that kind of performance, it does lead generally to good returns on the investments that you make in an entity like this. If you look at the left hand side of the slide, if you had put a $100 into Kinder Morgan Energy Partners at the time we started it, it would now be worth $2,200. That’s a compound annual return over 13 years of 27%. That’s a number we are very proud of. Again, you can ask well what have you done for me lately? So we put this smaller part of the slide down lower on it and we went back and just looked at 2009, where then we looked at two-year returns, three-year returns, five-year returns and you can see they’re pretty positive throughout the whole time. Maybe the many of the most important is the two-year because that really embraces the -peak to trough approach that the economy has taken during that period of time and you can see that KMP over that period of time has had return of 37% versus the Alerian Index of MLPs at 15% and versus the minus 19% return on the S&P 500.
So I think we’ve done well in terms of being a good place to part your money. Does that mean it’s a good place to put your money in the future? That’s what you got to decide. We have done a good job, I think of transparency, we like to call it promises made, they’re promises kept. Again, this is no guarantee of the future, but it again is an indication of how this management team approaches its budgets every year, and its efforts to achieve those budget objectives and you can see we’ve been publicly disseminating our targets since 2000, and we’ve made those targets in terms of distribution per unit every year, but one [ph]. And we did that even through some very turbulent times like 2009.
Now, I think I talked about our asset footprint earlier, and I just throw this slide in to kind of give you an idea in terms of each of our business segments of how this footprint leads to acquisitions, which then leads to the -ability to do further internal expansions of those asset. And let’s just take products pipeline, which was our first line of business. We really started out in late 1997 and early ’98, when we acquired the Santa Fe Pacific system. It was a huge acquisition for us, it was a little bit like the -minnow swallowing the whale, it was a lot bigger than Kinder Morgan was at the time. But that got us started, by owning that series of West Coast pipelines, since then we bought the CALNEV System, we bought Central Florida Pipeline, we bought the Charter-Triad Terminals, we bought the terminals from Conoco, we bought Cochin from BP, and then we have a lot of smaller acquisitions in that area.
But on that basis, after we had those assets that led to -internal growth, we did things like dramatically expand the Carson terminal in Los Angeles, which we are still doing, and the North line expansions and the ethanol build out, particularly in the Southeastern United States. And you can go through all of our pipelines, and all of our terminals and take the same approach, I won’t go through the whole slide with you, but what this really says is that once we get our arms on an asset, we can generally use that asset to drive further growth, either through tuck-in or step out acquisitions or through internal expansion opportunities. And on average, we’ve invested about 1.5 billion a year in our business segments for growth purposes.
Now 2009, notwithstanding prior successes was a very challenging year for everybody and it was for us too. And I want to spend just a minute or two on this slide, to give you an idea of why we were able to do well in 2009, notwithstanding the general economy -because I think that has some broader lessons in terms of the strengths and weaknesses of a company like Kinder Morgan.
If you look at this slide, at the beginning of the year, we budgeted $4.20 in distributions, which was a 4.5% growth over 2008, and we budgeted $2.8 billion in growth capital, what I referred to as the pig going through the boa constrictor, biggest terms, in terms of capital expenditure, the most prolific spend here in our history.
As the year began, we faced a lot of operational issues. We had crude oil prices that were significantly below, what we had budgeted because we always budget on the forward curve at the time we do our budget in late October, early November. We had projected $68 WTI price, ended up at 61 in Jan. We had no idea that the steel volumes were going to get this bad, we had an impact from steel volumes in our Terminal segment of a negative approximately $40 million in EBITDA, not because anybody violated any contracts, but because --some of our contracts there are requirements contracts, which means a company like Nucor, for example, one of our big customers is committed for 10 years to have us handle all the input and output -from their five major terminals – steel facilities that we handle, but if they’re at 85% capacity, as they were for 2007 and the first part of 2008, we’ll make a lot more money than when they’re running at 40% capacity, as they were during the first two quarters of 2009 or even at 60% capacity, which is roughly where they’re running today, they’re in the low 60s.
So we faced the headwind from steel volumes in addition to the headwind on crude oil prices. We had a downturn in products pipeline volumes that were more severe than we anticipated. We had delays in finishing our natural gas pipeline. That’s our fault and we could blame it on a lot of other people, but certainly we were not able to get those finished as quickly as we anticipated. And then we had some squeeze on our intrastate natural gas margins in the state of Texas. And that’s a pretty small thing for us because almost all of our dealings, our contracts in -state of Texas are with end users, who really are not playing the market and are going to take the great bulk of the supply from us regardless of what the price of natural gas is, but we did have some squeezing of the margins that we get.
Then we faced the growth capital issue, because that 2.8 billion that we needed turned out to be 3.2 billion. And then finally in a generic basis we faced capital markets that were in disarray in the fourth quarter of 2008. Now not withstanding all those problems we came through the year, we made our 420 distribution, we covered it with $14 million of excess coverage. Actually, we are right on our budget for the whole company for the year. We did that because our crude production volumes were better than we expected at Sac Rock. We had a lot of operational savings both in our business segments, but also in our G & A.
We had good demand for renewable fuels and we were able to do better than we projected on that. We had good demand for our products’ tankage, our liquids terminals did very well both in our terminal segment and in our products pipeline segment. We reduced G&A, we benefited from some relatively small acquisitions and we had some cost of capital improvement, because we had lower interest rates on our floating rate debt than we anticipated. So we were able to overcome the headwinds that we faced through good management, through other factors that offset what the problems were.
On the financial side, we were able to finance our growth that we had in CapEx during the year by maintaining consistent access to capital markets during the year. We had targeted $1 billion in equity, we put out 1.2 plus another 340 million in KMR shares, so really over $1.5 billion in total equity. And we issued about $2 billion in long-term debt or 1.75 net of refinancing versus the $1 billion target.
So we had a lot of challenges. We were able to come through them and we were able to achieve what our financial objectives were for the year. And I think again, you can look at that in a lot of different ways, but to me it was really one of the best years that Kinder Morgan ever had in terms of overcoming challenges. And the pig did make it through the boa constrictor. The pipelines are finished, they are all in service and this is not a real good picture but it’s sort of interesting and illustrates what I have said in the past.
Let's go to the next one, yeah. Obviously, David that didn't get that bigger laugh. We thought we might get the way we started with that. That most of you see in this slide too, it’s just our current capital structure,-when we talk about size, we are at about $29 billion in enterprise value, which I think is the best way to judge the size of an entity. 2010, we expect EBITDA of about $3.2 billion and we expect to distribute $2.4 billion to our limited partners and our general partner and just to contrast that, 1996, the year before Bill and I bought this company, we were the general partner of this company, it distributed just a little less than $17 million to limited partners and the general partner. And then you know the ownership mechanism, we have about 211 million KMP in its outstanding and we have about 85 million KMR shares, and then of course the general partner owns a significant portion of both KMP and KMR, but we do have a large public flow at about 74 million units are shares of KMR and about a 190 million units of KMP are in the public flow.
Now this, I won’t spend a lot of time on this. This just is the footprint and we show this slide every year and every year that footprint gets bigger and accesses more areas. And again, I don’t believe in size, per size for sake, but I do believe in the ability of the footprint to deliver new opportunities for us.
We are the largest independent transporter of petroleum products in United States and we are the second largest transporter of natural gas. We are the largest provider of natural gas treating services in the United States. That’s the Crosstex acquisition that we made. We are the largest transporter of CO2 in the United States with about 1.3 billion cubic feet a day of CO2 down the Permian Basin. We’re the second largest oil producer in Texas and we are the largest independent terminal operator in the United States. And on top of that, we have a significant presence in Canada, although we are certainly not the largest in terms of moving crude oil out of Alberta to both the West Coast and down into the U.S. Midwest.
Now, it’s important to size, because I think location is very important too. And I’ve talked to a few of you -last night out in the hall before this meeting, none of us can really predict what’s going to happen over the next five or 10 years with regard to external forces that impact our business. But what we can do is try to locate our assets in ways that give us as much optionality as possible. And for example, as we look at the shale plays and the whole increased use of natural gas that we consider as a real tsunami right now, we are very well advantaged to play that because we simply have good location of our pipelines accessing all but one of the major shale plays that are under development in the United States. We think our treating operation will be very buyable to producers in the shale play.
On the products pipeline side, we’ve always priored ourselves on having access to both rail transportation and sea transportation, and having access to a lot of various refinery capacity. So that, for example, in California, some of you have probably read about –carb -looking into weather corn-based ethanol, we’re really qualified as they added either of choice, which is now mandated at 10% in California. I don't think in the end they will disqualify, but if they did, we would be available to handle any ethanol that came in from overseas, namely sugar based ethanol from Brazil or elsewhere, if that ever happened. Don't think it’s likely, but in fact that we have large terminals, and port facilities at L.A. is very important.
Same thing happens in New York. We are able to handle volumes of refined products that come up the pipeline from here into New York harbor, but we are also able to take refined products when they come in from Europe, as they sometimes do depending on whether it makes sense from an economic standpoint. And those are just two pretty simplistic examples of what we try to do and again I can't stress enough the analogy of a toll road, we try to be there, we try to be available, so we can handle cars of all types, trucks of all types to use to stretch the analogy a bit through our terminals and through our pipeline facilities. Sometimes people ask about well, how stable is your asset base? And that got us to thinking about well there is a lot of different ways to look at whether an asset is stable and we all have known a lot of people who have said my assets were stable and then two years later, they turned out to be in bankruptcy court.
So I really think what we’ve got on this page and I’m not going to go through every one of our segment, really is a good way to analyze stability of an asset base. And I think if you can pass the kind of test that we have laid out on this page, you can qualify your assets as pretty darn stable. For example, if you look at volume security, if you look at the remaining contract life, if you look at the ability to have pricing security, if you look at what’s the regulatory environment for that particular asset, how much exposure do I have to commodity prices? And finally, what are the barriers to entry? And I would just say if you look across the bottom, we believe that in all five of our business segments, the barriers to entry are high. Somebody asked me out in the hall, well, you know you got all these terminals around the country, what keeps somebody from just coming in next door and put out another terminal and taking away your business.
I would admit it, it's easier to build terminals than pipelines, it would be almost impossible to replicate, for example, any of the major pipelines that we have at any reasonable cost. And even -getting into some of these metropolitan areas would be impossible today. The areas are just built up too much. But let's look at terminals for just a minute. I said out in the hall that if you look at terminals, first of all, the fact that you have a terminal operation already up and running, and generally you have excess space within the parameters of the terminal to do more expansion gives you a well of [ph] advantage. You have economies of scale, you have lessened regulatory environment and then we have contracts and virtually all of our liquids terminals, we have long-term contracts that allow us to serve specific customers. So you have a built-in customer base, the advantages that you have over a new comer are pretty large in scale and make it pretty difficult for anybody else to come in and compete with you. Now, can you have an established competitor, who have some of those same advantages, a 10 to 100 catching on price to compete with you, of course we can, and this is -monopolistic business law.
But what I’m saying that once you are in any of our five businesses and have the kind of assets that we have, they are pretty hard to replicate and you really do have advantages of being out there and being operational in all of those business segments. If you look at our asset base, I guess, you could say, we are a five-legged stool, but with apologies to Ian Anderson, who runs our Canadian operations. He is a pretty short leg on the stool at this point in time, but we have four really big legs that are pretty well balanced and we kind of lay it out here. And I won’t go through the numbers, except to say that if you just look at some of the things we put on this page, it’s kind of interesting.
For example, this is where we show you and Park and Kean will go into more detail on it. Our production hedge in our CO2 segment on the oil that we produce at SACROC and Yates, as you can see we are overwhelmingly hedged. The 73% also includes the NGL volumes. We don’t really generally hedge the NGLs, it’s much dirtier to hedge. So really what we end up doing is hedging virtually all of our crude and leaving the NGLs unhedged, but the overall number is 73%. But if you look at this, you can see we’re heavily hedged in 2010, fairly much in 2011, but we have a policy under which we hedge. We continuously hedge forward. We look at the prices and look out over the next four, or five years. So what you can expect is that not, and you can obviously see there is continued upside in the pricing of the hedges that we’ve put on and as we put on new hedges that upside will just continue to improve because of the more volume subject to the hedge as we go forward.
The other thing I would point out on this slide is that our products pipeline, sometimes we think of it as just a series of regulated pipelines, but actually we have about 40% of that business that is really unregulated and where we have huge competitive advantages and that’s because we own a lot of terminals that are connected to our own pipelines, the terminals are unregulated and we are subject to competition of course. But generally we have very good positions where we operate those terminals and when it comes, for example, to adding -ethanol or other biodiesel, we are in very good shape at those terminals.
So that gives us a little more upside than you would ordinarily think of in that business segment, as we look at it on a going forward basis. We plan to spend, in our budget, we have $1.5 billion in growth expenditures planned for 2010. It breaks out, as you can see among our various business segments and of that 1.5 billion, we have about little less than $450 million in acquisitions and we’ve already closed or announced 300 million of those, the others are identified that they will be done during the first half of the year. In all likelihood if I had to guess write or die [ph], we think we will find substantial additional acquisition opportunities on top of this, but we never budget for acquisition opportunities unless we have them pretty much in the coral [ph] at the time we do our budget.
If you look at our 2010 goals for KMP, pretty simple as always, we expect to produce $4.40 per unit of distribution, which is a little short of 5% growth from 2009. We expect excess coverage of $32 million, which means in terms of actually distributable cash flow per unit being produced, it's 450 or a little better. We anticipate maintaining a solid balance sheet, we expect as I said earlier to have year-end 2010 debt–to-EBITDA of about 3.6 and that’s a little bit better than where we ended 2009 and again as we always do, we will finance our expansions and acquisitions 50% equity, 50% debt and then beyond that, our goal is always to operate all of our assets in a safe compliant and environmentally sound manner, that sounds like sort of a, I don’t know, feel good praise, but as I've said many times and Steve Kean is going to talk about this in a few minutes when he gets talking about operations.
This is no easy task, when you have 24,000 miles of pipeline at KMP and you have over a 180 terminals and 7,800 employees operating in a compliant manner, particularly given some of the regulatory conditions that are put on midstream energy operation today is a significant and continuing challenge. It’s one that we will continue to meet head on, and try to improve on every year, we will never be perfect. I used to use the Toyota phrase, relentless pursuit of perfection, but I don’t think I’ll use that today. But we’ll continue to try as hard as we can to avoid issues, but I will guarantee that there will continue to be issues on a enterprise this large.
Now, I want to spend a couple of minutes talking about what I would call kind of unparalleled turmoil and uncertainty coming to our part of the world, brought to you by your friendly government, by friendly people who have I think, who are mostly well intentioned, but have a different view of the world than some of us in this room may have. And when you have turmoil and uncertainty, you know, there is a couple of ways you can look at. You can get very scared, and be the proverbial turtle and just get under your shell and huddle down or you can look on this as both a challenge and an opportunity, and we take that latter approach.
So I thought on this slide I’ll just talk about four things that seemed to be coming out of the green energy movement that you would think at first glance, well, these are -big problems for a company like Kinder Morgan, I think in all four of these, actually they'll turn out to be benefits to us. The first is an uptick to our reforms but the first is renewable fuels. Now, you can argue all day about the efficiency, the efficacy from an energy standpoint of producing corn-based ethanol, I’m not here to address that or to argue about. The fact is we have renewable fuel standards in this country that are not going to get changed. They may get amended in terms of biodiesel versus corn-based ethanol, but generally speaking, those RFSs will remain in effect and each year, the amount of renewable fuels that have to be used under the mandate are going up.
Our reaction to that has been to spend -close to $500 million in facilities, primarily at our terminals to a limited extent on -couple of our pipelines, so that we’re able to handle more ethanol and biodiesel than we would otherwise be able to. And the end result of that is that we expect to handle in 2010, about 250,000 barrels per day of biofuels primarily ethanol, and that’s between 25% and 30% of the U.S. market.
We generally get paid good fees for handling that, we are not exposed in any way to the pricing of ethanol. We are simply charging our customers, whether they are refiners and they are primarily refiners or ethanol shippers like ADM to use our facilities. And we just announced another acquisition a couple of weeks ago, that really gives us I think just an unrivaled national system of terminals, we are able to handle ethanol brought in by both rail and to a limited degree anyway ship. And we think that there is a good future there and we are going to continue to take advantage of that. All of our terminals in California, for example, have now been restructured to go from a 5.7 to the 10% mandate on ethanol in the California, which took effect at the beginning of this year. We are now fully in service and that will drive profits at – bottom-line for us in those terminals.
On the natural gas side, let me just say I’ve made this point every time I can, every place I can, if you really want to attack the carbon emissions problem in the United States and around the world, the real answer to that can deliver real results over the short intermediate term and by that I mean five to 10 years from now as opposed to 30 or 40 years from now, is to use natural gas more than we presently do. It has the volume, the scale to be able to really address these problems because if you know natural gas emits about half of the CO2 that coal-fired plants do. So whether it’s electric generation or whether it’s - natural gas vehicles, we ought to be placing a huge emphasis on natural gas. That’s one big factor that makes us bullish on natural gas.
The second big factor is that we’ve had a enormous tsunami hit the natural gas area through the shale plates. We’ve had dramatic improvements in horizontal drilling and fracing technology that used in conjunction with our horizontal drilling is able to break natural gas loose out of formations, where we knew it was, but we never expected to be able to get to and get it out of the ground. So if you look at the tremendous additional discoveries and production that we have gotten out of the shale plays and couple that with the benefit that natural gas delivers as the most benign fossil fuel, I think it has a very bright future. And I’m sure there will be fits and starts and there will be lots of disputes over it, but in the long run, at least if we have adult supervision in Washington and elsewhere, Hopefully, they will come to this adult decision that we ought to do what we can to be practical about attacking a problem.
We are well positioned in that. We handle about 20% of the U.S. market in terms of natural gas. We connect over 20 producing basins, including most all of the shale plays as I said and we’re going to continue to utilize and expand that footprint. For example, right now, our Mid-continent Express line, which is handling both Barnett Shale and some Haynesville production, takes it down to - operable - Louisiana when our present compression, expansions are completed. We have about 1.8 Bcf a day capacity operable. There is already at bottleneck at operable. We already have 1.2 Bcf a day of capacity on across through Mississippi, that’s when the compression is finished in the next couple of months. And we’ll be able to deliver and we are delivering massive quantities into Transco’s line on the Alabama, Mississippi border.
We’re able to expand that, we have some cheap expansibility. We haven’t got any plans announced for that yet, but that’s an example of the way we can continue to serve our customers as we see these bottlenecks developing around the country. Another way we will take advantage of this and again, this is one of these looking at a tsunami and then finding ways to ride the tsunami. As we saw this additional shale play, we believe there is going to be a whole of a lot indeed for additional treating capacity around the country because if you are a producer in the shale and your gas is not pipeline quality, and you’ve got huge new volumes coming online, it’s pretty nice to be able to go someone like Kinder Morgan and say, look, I need a treating facility, can you get it, Jimmy. I’ll just pay you to lease it over the next three years, or whatever the term is and we’re able to deliver facilities to them within four to six weeks.
And we think that given our financial half and our connections throughout the oil patch and the natural gas patch, that we will be able to really build that business. We already bought about 290 of these facilities, primarily in Texas, Louisiana and Oklahoma. We think there are opportunities to expand, both in the present geographic footprint and well beyond, another way that we are taking advantage of this natural gas opportunity.
Third thing is and we have a lot of talk about it is, well, we’re going to have clean coal and of course in order to have clean coal, you got to have massive carbon sequestration. There are a lot of issues with that and I don’t think that is as likely to -happen as soon as some of the people in – Washington, elsewhere, think it will, to the extent that something does develop and I think it would require pretty massive government intervention in order to get it done, if they want to do it. We are in a very good position. Our CO2 group handles more CO2 than anybody else. We move 1.3 billion cubic feet a day of it. We inject a way over lot of it in two and soon to be three major fields in West Texas. So to the extent that we need carbon sequestration, I think we will be very much a player in that field.
Right now, we’re just continuing to look for the right opportunities and I would not be real bullish on that particular area. Then you look at wind and -solar power and you say, okay, well, regardless of whether this is the right approach or not, there is a lot of hoopla and a lot of federal money being poured toward wind and solar power and that's got to be a negative for you guys, right? Well, the answer is not necessarily, because what a lot of people don’t understand about wind and solar power is, we should, the sun doesn't shine all the time and the wind doesn't blow all the time and sometimes where the wind blows and the sun shines is not necessarily next to major metropolitan areas, which need the electricity. And those are just three little minor points to consider, but what it says is that you've got to have back up power, if you are going to develop wind and solar, you got to have a hell of a lot of back up power.
Again, I would submit to you that in terms of being able to turn it, take that back up power, being able to turn it on and off, being able to locate it adjacent to metropolitan areas, natural gas is the hands-down winner. So I think some people are saying, if you build a 100 megawatts of wind power, you need about 60 to 65 mega watts of natural gas power to back that wind power up. Now, that varies a lot with where you locate your wind power, and there are lot more factors in that. But the point is, you are not going to have wind and solar. I don’t believe it is the long-term solution. It's part of the solution, but a relatively small part of it, but even to the extent it becomes a real driver, you are still going to need fossil fuels/natural gas in order to back that up.
Now, I think beyond the green energy opportunities that we have in this kind of turmoil and tumultuous times, I just think that we have a lot of opportunities, perhaps more opportunities than we've ever had. And we don’t have all these opportunities nailed, you know. What we are standing up here talking about today, next year, two year’s from now, three year’s from now, there will be different opportunities, we will be here to share with you because that’s how fast moving this field is and there was a time a few year’s ago, we wouldn't have dreamed of talking about opportunities in Petcoke and yet today, we are the largest - Petcoke handler in the United States. There were times, when we wouldn't have dreamed about handling or talking about treating natural gas. We’re the largest treater of natural gas in -United States.
So we are going to continue to be both strategic and optimistic in the way we approach future opportunities in the midstream energy field. But this slide and I won’t go through at all, just gives you an idea of some of the opportunities we have building of the strengths that we have now, and what we have in order to leverage off of that and produce additional opportunities and even bigger footprint in the future. For example, if you look at our CO2 operations. We started that out of course by buying out shale CO2. Then we bought the field at SACROC, then we bought 50% of the unit at Yates, then we bought some smaller fields, Katz and Claytonville.
Well, today we’ve started our project, the new CO2 flooding at our Katz field. As we publicly said, we expect that to result that is peaking about 7,000 barrels a day of additional crude oil production produced by flooding that field with CO2. That same pipeline that goes up to Katz, not only services our own area, but there are all kinds of other fields in that general facility, general vicinity and we’ve over side the facilities of this pipeline to allow for delivering significant additional quantities of CO2, which gives us two huge opportunities for the future up there in that area the Permian Basin.
Number one, we can be a CO2 seller. We are perfectly happy to do that. We sell a lot of CO2 to the third parties. That’s the way we started our business. So we can sell it to other players in adjacent fields who have similar geologic formations to what we have in Katz and elsewhere in the Permian Basin or we can use it to bridge our way in to owning and/or operating of some of those fields for our own account, if the numbers are right.
So we have two big opportunities, either way we win, either way we will end up moving more CO2 through that pipeline three or four years from now that we are currently anticipating to serve just our own Katz field. But that’s just an example of the kind of thing we try to do is really just good common sense, but trying to preserve optionality.
In this case, that pipeline has a good return. The field itself at Katz has a very good return and those returns will only be increased if we are able to sell more CO2 to a third-party or if we are able to expand our own ownership and use the CO2 for our own account. And you can read the slide at your leisure, I’m sure you will, but you can see that in all of our business segments, we have really good opportunities to take the next step forward.
And all of those can’t be as clearly identified as I just did in the Katz opportunities, but in all of them, we are constantly looking at opportunities to expand and grow. So I hesitate to use the slide, because it’s not my job. It is manager's team jobs stand up here and tell you that you ought to buy Kinder Morgan or why you should buy Kinder Morgan? I think our job first of all is to produce the cash every year. I am saying we have around Kinder Morgan is, just keep producing the cash, every thing else will work out.
That seems like a pretty stupid thing to say, but that’s kind of the way we look at the world. But I do think, I just close with this slide to show you that I think Kinder Morgan is a pretty attractive value proposition. I talked a lot about the unparalleled asset footprint. Again, the track record is no guarantee of the future, but maybe have a little more confidence in this management team and if I were a twenty four year old standing up here saying for the first time, I just raised $50 million and watch me go, put some money with me.
We are an industry leader in all of the business segments that we are in. We have a supporting general partner. We never use the dime of it, but during the darkest time of a financial problems nicely as you know, our general partner stepped up and said, we will buy up to $750 million of equity over the next 18 months if needed. We didn’t need to do a bit of it, but we were there. And so certainly showed I think another indication how supportive our general partner is.
We try to do, go to a lot of effort to be transparent and I think you will see that again today. You see it throughout posting the budget. What you see is what you get, you can understand exactly who we are, where we are coming from, what our future is work’s and all [ph]. And then finally in terms of performance, looking forward, I think we offer an attractive return driven by a combination of yield plus growth. And I have never understood why MLP’s would still trade at 6.5% or 7% when they have a lot faster growth than a lot of dividend stocks that are trading at with yields of 3%, 3.5%.
So I think there is opportunity there too. It's just a matter of making sure the general public understands how positive MLP story is. But that’s where we are. We think as we ever seen – we think the best is yet to come. We think we have a good 2010 in front of us not without challenges this economy is not cured yet. I think it’s come of the bottom, but we are not back to where I expect us to be in a couple of years. I think it’s a slow recovery. And I think longer term, there are just an awful lot of opportunities for a company like Kinder Morgan in the mid-stream energy segment and we will be out there, working pretty hard to access those opportunities. And with that I’ll turn it over to Park.
C. Park Shaper
All right. Well, thank you, Rich, and thank all of you all for being here today. The good news for all of you is that I really don’t have very much to cover this morning. So you don’t have to listen to me for very long. I haven’t thought of this until I was sitting over there this morning. But this is the 10th Investor Conference that we’ve had. And again I didn’t do this, because I didn’t think of it until this morning. But if you go back and you look at the slides from 2001, I think you’d find a remarkable number of slides that are identical or very similar, maybe just updated for our current position.
So what you’re going to see today now? Well, that’s painful for many of you, because it means you have sat through ten times of seeing the same stuff. I actually think it’s a testament to the strength of the strategy and the structure of this entity. What we are trying to do hasn’t changed, the way we go about it hasn’t changed. And I think it has been pretty successful.
So looking at what we’ve done and what I’m going to cover again similar to past years. I will go through our return on invested capital. I’ll go through some stuff on KMR and then a few other items at the end. And so, as Richard mentioned, we’ve invested $20 billion today. That’s basically from 1998 through the end of 2009. So if you look at the left side of this chart you will see actually 2010 is in there, it's about a $1.5 billion, Rich walked through a little bit of a pie chart on how that 1.5 billion is going to be spent. That’s not included in the $20 billion. It's similar to how we presented it in past years.
But also you will see 2009 was a very big year we ended about $3.3 billion. Now that total amount has been invested in a few ways, you will see expansions really represented two ways. It totals a little over a $11 billion, it’s a combination of direct investments and then our joint venture investments. And so the light blue really represents our equity contributions to joint ventures, and in acquisitions, again almost $9 billion. And then in the lower right, you will see the total invested by segment at the natural gas pipeline. It’s over $7 billion, Products Pipelines over $4 billion, about $3.5 billion at each of CO2 and terminals and in about $1.3 billion at Kinder Morgan, Canada. And that’s – we’re keeping in mind as we go to the next slide, because the next slide is our return on that invested capital.
And just to begin, we show this every year to refresh your memory on how we are calculating it. This is really an annual look at a cash-on-cash return and so effectively what you have for each segment is that segment’s distributable cash flow generated during the year, divided by its average cash investment. And so that’s the gross cash investment made into that segment in total, since we have owned that assets. The total cash investment is not exactly what you see on the prior page. What you saw on the prior page was the end of year, total investment, and this is an average across the year. And actually this year that probably make the most difference, because again we invested a significant amount of capital during the year. And so again to try to get to at probably a more appropriate number for the year, then we average that invested capital across the year.
So looking at that Products Pipelines. It's about 13.4%, a very attractive return again on that north of $4 billion that $4.3 billion that's been invested on the Products Pipeline side. Natural Gas Pipelines about 14%, now that is down from last year. We've had a significant amount of investment during the year. We did have some cost overruns on some of the joint venture pipeline that is impacting that. But I will remind you I’ve said this before; our goal is not to grow that number, our goal is to earn what we believe to be an appropriate return on that investment.
And so we are talking about north of $7 billion. That $7.4 billion that’s been invested in Natural Gas Pipelines by the end of 2009, and we are earning at 14% unlevered return on it. Again this is before you put any leverage on; we think that’s pretty attractive return. CO2, 23.5%, again we get very nice returns out of CO2 by design. We’re taking a little bit more risk there. One, on the pricing side, we try to mitigate that risk on the pricing side through the use of hedges, but it doesn’t completely mitigate that risk. And then two, on the production side. Predicting what we’re going to produce in our oil fields in West Texas is not as easy as predicting the cash flow that we’re going to generate from our pipelines.
As a result of that, as a result of our taking on that incremental risk, we demand a greater return. Again you can see that we are getting it. Now, it’s down from where it was in 2008, that’s a function of price. The average price that we saw in – and actually this is just average WTI. In 2008, it was almost a $100. The average price in 2009 was a little under $62. And so that’s why you see that return go down a little bit.
On the terminal side, very attractive return, north of 15%, again unleveled on almost $3.5 billion invested. Kinder Morgan, Canada about 12.8% to almost 13% return on those investments, again very happy with that.
When you look at the total and one thing to remember when you look at the KMP ROI line is, while we don’t allocate G&A out to the segment. When you get to this level, we are putting G&A in, so we are impacting this with G&A. It’s still an unleveled return. We are earning almost 14% on $20 billion invested.
The $20 billon has been invested in 2009. We earned about 14% on that. And of course, it's almost 15% in 2008, north of 14% as you go back. We think we are doing a pretty good job of investing capital. And if you look at it on a return on equity perspective like below that you will see about a 25% return on equity.
One thing I want to point out, if we did adjust how we calculate this year and by the way the description of how we go through these calculations within the appendix in your book. But we did adjust this, we moved from book value of our equity, which is how we are calculating it before to true cash equity raise, and so that had a little bit of an impact, if you go back and you look at what we've reported last year was around 30% for 2008 and you can see we are now reporting at 25%.
So we’ve adjusted historically. So all of these numbers reflect that change, but we modified it a little bit, but again our return on equity once you add the impact of leverage very attractive in the mid 20s. That’s a natural question, you go to the next slide is, okay what's are cost of capital. So you are earning at pretty good return. How does that compare to what your cost of capital is. Again we’ve shown this slide repeatedly at these conferences. It does vary, you can see we currently estimated at a little less than 9%, but you if you look at the year ago, and this is what we showed you a year ago, there was a little bit less than 10% overtime it has fluctuated really around that 9% level.
So when we think of what our long-term cost of capital is, we think of it being around 9% and again the calculation the way the methodology is in the appendix, but effectively what we are doing is we’re assuming a 50% debt, 50% equity capital structure, we’re taking a debt rate, multiply that by 50%, we take your yield on KMP you gross it up for the share that the general partner did. So we’re taking into account the incentive distributions to the general partners and then of course you multiply that by 50% added to your cost of debt and that’s how you get to this 8.8, again currently. But again, we think that that over the long run it's around 9%. Now, we could have theoretical debate around, is this the most appropriate way to calculate cost of capital? We believe it is.
And I’m happy to walk you through why we believe that, and really the rationale ties a lot to what we believe is some of the underappreciated benefit of the master limited partnership structure. It gets to the elegance of the master limited partnership structure and some of the power and really simplicity of the MLP structure that goes beyond just the tax savings. And to think about that, and we’ll talk about this in just a minute. Our entire focus, the focus what we believe, the focus of any MLP, but it is absolutely our focus, is to grow distributions to limited partners. That benefits the limited partners. That benefits the general partners.
General partners completely aligned with that. The general partner wants to grow distributions to limited partners. And so how do you do that? And Rich touched on this a little bit, and again this is one of the slides that’s been in there since the beginning of time. But you can do it by increasing utilization on your existing assets. You can do it by cutting costs, you can also do it by investing capital and generating returns that are in excess of your cost of capital as we have calculated it here.
When we invest capital and we generate returns in excess of our cost of capital that means that we have excess cash flow to distribute through our limited partners into our general partner. Again this is why we think this is the right way to thing about our cost of capital, because if we can earn greater than this amount on an investment then we can grow our distribution, and what we’re about is growing our distribution.
But the other thing that means is what we think our long-term cost of capital is 9% we don’t go out and do investments at 9% or at 9.5%. We’re looking to grow our distributions to our limited partners. So we’re going to go and invest capital and look whenever you invest capital, you are taking some risk, and so the amount of risk has to be factored in there. But even if we feel like we’re taking very little risk. Then we want to earn 12%, and that’s rough, I’m not saying it's always 12%, we really think it’s low-risk, maybe look do some per [ph] 11.5%. But 12% is roughly what we’re looking for on a very low-risk investment. And if it’s a higher- risk investment then we’re looking for a higher return on capital. Again I just showed that with the CO2 returns, you can see it there.
And then when we actually make that investment and we got and we earn in excess of that cost of capital, then we can grow the distribution, which showed you and I’ll come back to it later. Since 1997, we have grown the distributions to the limited partners by an average of 15% a year. That is no accident. That is exactly what we are trying to do. That's a complete focus of this organization.
So that's a cost of capital. And again I think that's a benefit and I think an underappreciated benefit of the master limited partnership structure that when you calculate your cost of capital this way and you go and you generate a return in excess of that cost of capital then you can go grow your distribution, it’s that simple. That is the fundamentals of investing at a master limited partnership. Generate in excess your cost of capital you can grow your distribution.
Now there is a disadvantage to the MLP structure. And that is and we can go to next slide that we distribute out all of our cash flow. Now actually again, we would characterize that as an advantage that cash flow belongs to our partners. Our partners own these assets. These assets generate this cash that cash belongs to our partners. They are entitled to it. We are more than happy to return it to. . But if you're going to invest then you need another source of capital. You're not retaining that cash to invest. Now, we retain part of it and again I think that's a underappreciated as well, but you need access to capital, we have it.
I think if there is anything that we’ve proven over the last 13 years is that we can access capital. I think the reason that we have it and probably that we are more advantaged on this front than other MLPs is one size like we’ve discussed. And two is KMR. KMR gives us a huge benefit. So, let’s talk about what we have here. We’ve raised $20 billion of capital at KMP since 1997. Now and $2 billion of additional capital with our JVs that goes beyond our equity contribution. So it’s really the debt side of those joint ventures. That is more than $9 billion of equity, it's more than a $11 billion of debt. Now if you do net of refinancing, it’s a little bit north of $10 billion. And it’s about north of $2 billion in joint venture debt.
In 2009, again now as a big year for us, we had a lot of investments to make in 2009. 2009 was also not a very attractive year in the capital market. I think one of the main point and again it’s really a – right below that. If we've been able to access capital in all market environments and – and that’s important for an MLP. We haven’t stopped investing because the market wasn't attractive. We’ve continued do invest and we’ve continued to be able to access capital. 2009 we’ve raised $3.5 billion of capital.
That was about 1.5 billion of equity as Rich mentioned, just a hair under $1.2 billion in public equity raise and about $340 million of equity raised through the KMR distributions. $2 billion in KMP long-term debt issued, we did have about 250 million of refinancing. So the net amount is 1.75 billion and about $900 million in joint venture debt raise. Now, again there was a little bit of that that was refinancing. So that’s about $800 million net.
Now, we’ve accessed our capital again in all types of market, pretty ugly time for energy companies, especially any energy company that had partnership in its name in 2001 and 2002, we were still able to access the capital market then. It's been ugly in the capital market from almost mid-2007 through the end of 2009 and in that time period, we raised $3 billion of equity, $4.6 billion of debt. Now again, net that’s about 4.1 of new debt and north of $2 billion of joint venture debt. So again, in just about any market we’ve been able to access that capital.
Again that's a testament through the stability of our assets, the stability of our cash flow stream and the size and diversity of our assets. Now going forward 2010, we actually have relatively small equity needs, KMR will provide about $400 million of equity again through those distributions, and then KMP were in addition to that we need to raise about $300 million of equity that will either do in the secondary market or through our at-the-market program.
Now get $400 million of equity that KMP will realize, will raise essentially through the distributions it go to the KMR shareholders. Again that is of huge value to KMP. I think the value of KMR to KMP is underappreciated. In addition, and we can talk about it on the next slide. I think the value of KMR as a security is underappreciated.
Now truthfully, these next few slides and I’ll go through on, really this message shouldn’t be going to you guys. I think a lot of you already understand it. A lot of you clearly are already interested in MLP. KMR is oriented towards people who don’t own MLP. For whatever reason they find a difficult to own, they haven’t ever focused on, if they don’t want to deal with K1 they are concerned about state taxes, they may have UBTI issues. And so they don’t even think about MLP. MLPs are just off-the-table for them, it’s not something that they focus on.
The reason that we create in KMR is to make it appeal to them. So again all that [ph] you are wrong target audience. Although, where KMR trades, it’s a bargain relative to KMP. And so you should be interested in it from that respect. Just to refresh of course on KMR. Again I think many of you already know it, it is essentially identical to KMP, but it pays this distribution in additional shares rather than in cash. We generate the cash to support the distribution.
And so we can only distribute it, all distribution that goes to our limited partners including the KMR shareholders or the high unit, however, you want to think about it. And only be paid if we are generating that cash, but then we don’t have to distribute that cash, because we are sending them additional shares. Effectively what they are doing is they are getting their distribution and they are repurchasing KMR shares with it. So it’s an automatic KMR reinvestment program. It is designed again to be equivalent to a KMP unit.
So for that reason, KMR owns I unit and there is a one-to-one relationship between the number of KMR shares that are outstanding and the number of I units that KMP owns, but fully we won’t have to clear out. Now the distribution, again, is equivalent to the KMP distribution and so has all of that again equivalent to KMP, but simplified.
Simplified and made attractive for an institutional investor. The way that is simplified, if you don’t have to deal with K-1, you don’t have to pay any current taxes, you only pay taxes when you sell and when you sell shares, if it you pay capital gains, especially relevant for individuals and if it’s been a year since your original purchase you pay long-term capital gains. So an easier from a tax perspective, easier to deal with and then it doesn’t have the negative implication that typically prevents institutions from owning MLP equity. And that gets to the K-1, it get to the potential state tax filings. It gets to the UBTI issue, so again simplified and more attractive.
In addition on the next slide, it’s a very attractive investment options. If you look at KMR total returns 50% in 2009, not a bad return in 2009. A 13% north of 13% compound annual returns since its IPO that that compares to about 14% for KMP compares to 13.8% for the Alerian and 0.8% for the S&P 500. Now again it meant to be, –designed to be equivalent to KMP, but trades at a discount. Now why that discount persists, we can't tell you. I have told many of you that I believe it should trade imparity if not at a slight premium because of the simplification and a little bit more tax efficiency. Now in my mind what that means because again fundamentally I believe it is of equivalent value to KMP and truthfully if you look at the design of the security in liquidation it will be of equivalent value to KMP (Inaudible).
That will never happen. So not any reason to count on that, but again it's designed to be equivalent to KMP what that means is, if you go and buy it right now, you get a higher yield over time because you pay a lower price and you get same distribution and you get greater tax efficiency and you have this potential I can't tell you when it will happen, but I do believe it will happen that it's discounts shrinks to KMP and you get that pick up of now around 10%.
In addition it is a significant entity, market capital little less than 5 billion; liquidity $15 million per day. So, there's a fair amount of this Tray Pan [ph]. The discount is wider now than it has been historically, it widened out when the market is kind of - had so much trouble back in late 2008, and it hasn’t come back. So again, we think an attractive opportunity, and then to demonstrate that. If you look at what insiders have done, and what – I mean I think you got to believe that insiders know more about this than anybody else, if you look at what insiders have done, since the KMR IPO, they have bought almost two times more KMRs than KMC.
So, insiders have shown a clear bias towards KMR. They bought 8 million shares of KMR two, I think it is a pretty significant amount. In truth, if you take out one single transaction, that was KMP, because the cash distributions were necessary to service alone if you take out that transaction that ratio goes from about 1.8 to 1, the ratio of KMR purchases, the KMP purchases to north of 5 to 1.
Again, I mean I think on an almost five times basis insiders have been purchasing KMR as opposed purchasing KMP. Now they are both great investments, but if you look at again I think people who know at the best people who know at the best like the discounts that you can get right now in KMR and like the value proposition the KMR offers.
All right couple of additional things, we talked about the exposure to crude prices again in our CO2 business we had the source and transportation business where we're moving CO2, and selling it to third parties and then we do have our crude production its one of the few areas where we have direct exposure to commodity prices. We do the best that we can to hedge away short-term fluctuations in those commodity prices you can see our hedge profile here. So you understand how this is calculated and it’s noted down at the bottom. This includes our crude volumes plus our heavy NGL. It doesn't include all of the NGLs, but it includes the heavy NGLs and on net basis we are about 73% hedged in 2010.
If you look at it just on a crude basis, so you'll take out the heavy NGLs, we are little bit north of 81% hedge on a crude basis. And the sensitivity it's not on this slide, but I think it was on an earlier slide and it is certainly on a later slide, and Kim will touch on it. Its still consistent with where it was last year about $6 million per dollar change in crude prices. And then across the top you see our average hedge price just to give you a sense of perspective in 2008, net average hedge price was a little north of $49, so its grown to 56, 59, 2007 it was little under $44. So as you'd expect, our hedges are coming in at higher prices as we progress through the years.
Next page risks. We’ve talked about these consistently throughout the years. We do operate a lot of regulated assets, our rates on those assets can be challenged, they are currently under challenge on the specific system, we continue to cause resolution there, can’t tell you when that will happen. Tom, will give you a little bit more information on that.
Crude oil production volumes as I mentioned more difficult to predict than the cash flow we are going to get out of the pipeline. Crude oil prices we really talked about that and you can see the sensitivity there. Economically, sensitive businesses, I mean really, it is most significantly in 2009, and that’s largely, the steel volumes down. Now, again if you look at – we talked about this more last year than we have this year. If you look at our volatility and cash flows relative to our total cash flows.
You're talking about again Kim will go through this. $3.4 billion of segment earnings before DD&A. If you look at part of that that's actually sensitive to crude prices or sensitive to economic swings is relatively small. The cash flow that we generate from these assets is remarkably stable.
That doesn't mean that you shouldn't understand these risks and the exposures that we have, but I think you should keep them in contact relative to the overall cash being generated by the assets. Environmental and terrorism, I mean we do handle hazardous material and Steve will get into this in just a minute. We think we're doing a very good job of handling those materials.
We can always get better. We take that very seriously and we're working on continuously improving it, but we do believe that we handle them on a safe manner. Now it doesn't mean that there is not risk and we’ve had sales and incidence in the past. And they generally are insured, but ultimately that comes back to you in the cost of insurance going forward, and there is a reputational issue. We don’t want those things to happen it reflects fully on the company that’s not the way that we operate our assets. We work very hard to prevent those consequences.
And then interest rates, consistent with what we have done long-term, we are 50% floating, 50% fixed. And so we had exposure to floating rate, and as rates go up then we will pay more in interest, we have a built-in through our budget, and Kim will go through this is in a little bit more detail before we recur for interest rate, which does go up and so that drives an increase in interest expense.
On a full year impact on a 100 basis point increase in rates would hit us by about $55 million. Given just take the total debt cut it half, and then apply 1% to the floating portion and you get to that number. That again is – that would have to be first impact us relative to our budgets.
Then for the entire year on average rates will have to be 100 basis points above what we have in our budgets. That’s pretty big increase relative to a budget that again already has an increase in rates built in.
All right and finally actually coming back to the focus on distribution growth. As I said the entire objective, overall objective of KMP is to grow distributions to our limited partners. And the chart on the right, the same chart that we showed you before that that we’ve grown those distributions by 15% a year. Since, this entity became Kinder Morgan Energy Partners.
Now, look at shorter timeframe and that’s on the upper left. One year growth, in 2009 we distribute $4.20 that 4.5% above the $4.02 that we distributed in 2008, three year growth almost 9%. You go with the last five years almost 8%. Again this is what we’re focused on, this is what we’re trying to focus on; this is what we are trying to do. We believe, we’ve done a pretty good job of growing those distributions, and we had every expectation that we’ll continue to do that going forward.
Our budget is $4.40 for 2010 that’s up just a little bit under 5%, and as we look forward, we expect that we can continue to grow that distribution in the 5% to 7% range. Consistent with what we’ve done in the past, we are not promising that we can grow at 15%, we are a larger entity now that’s more difficult to do. But we do believe with the footprint that we have, with the opportunities that we have, with the dynamics that are going on in the energy world and again with our assets and our management experience and expertise that we can grow at about 5% to 7% per year increase in the distribution to the limited partners.
And that’s it, I will hand it over to Steve.
Steven J. Kean
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