Kinder Morgan chairman denies skimping on maintenance

Kinder Morgan (KMI) was today's top gainer among energy stocks after billionaire CEO Richard Kinder held a conference call angrily defending his companies against criticism from 26-year-old analyst Kevin Kaiser, providing details of KMI's reported capital expenditures. (audio)

"What we did in reducing costs is not related to spending on the integrity of our pipelines," Kinder said to claims the company has cut maintenance work to boost cash distributed to investors in its partnerships.

He noted that a $222M variance between El Paso's (EPB) 2011 capex of $354M and its projected $132M in 2013 capex could be explained by the expensing of anomaly repairs and capex synergy among IT systems and mechanical equipment.

Kaiser isn't backing down: "I'm early, not wrong."

Today: KMI +4.4%, KMP +3.2%, KMR +2.9%, EPB +2.4%.

From other sites
Comments (26)
  • crash9010
    , contributor
    Comments (183) | Send Message
    Early not wrong seems to be the fall back every time somebody is wrong.
    18 Sep 2013, 07:42 PM Reply Like
  • Zeus2012
    , contributor
    Comments (714) | Send Message
    You could have said the same thing about Michael Burry's bet against sub-prime housing in 2006. Not saying that I agree with HE's analysis on Kinder, but find many of the responses in SA to be based more on emotion than what's being said (almost like people are married to their stocks). While I'm long KMI, it does bother me that Kaiser was not allowed to participate on the call. Kind of reminds me how Citi used to shut out Mike Mayo because Chuck Prince did not like what he said about Citi's management.
    18 Sep 2013, 07:47 PM Reply Like
  • crash9010
    , contributor
    Comments (183) | Send Message
    I kinda view it the same as a political press conference as only the big players(in media) have access and are allowed to ask questions.
    18 Sep 2013, 07:50 PM Reply Like
  • Energysystems
    , contributor
    Comments (2130) | Send Message
    Why give credence to an amateur, or at best an entry level analyst? If Kaiser put everything into his "report", than that's all that needs to be answered. Personally, I don't see the reasoning behind even addressing the leveraging shorts, imo, all it does is give Hedgewho a platform to continue these organized short attacks via social media. Same question could be raised to Kaiser and Charlie Gasparino, why wasn't Kinder given that same forum? Kinder's maintenance costs per mile are on par with the rest of the industry. Simple as that.
    18 Sep 2013, 07:52 PM Reply Like
  • Disturber
    , contributor
    Comments (201) | Send Message
    How do we know with certainty that Kaiser was shut out?
    18 Sep 2013, 10:33 PM Reply Like
  • rrs2205rrs
    , contributor
    Comments (131) | Send Message
    I want to thank Mr. Kaiser for giving me the opportunity to add to my KMP, KMI, and EPB positions over the last two weeks.
    18 Sep 2013, 11:53 PM Reply Like
  • surfgeezer
    , contributor
    Comments (10438) | Send Message
    SO agree.


    If anything they will make sure integrity is even better, which is always good. Endbridge is getting their butt kicked on clean up costs for pipe breaks.
    19 Sep 2013, 02:10 AM Reply Like
  • Ruffdog
    , contributor
    Comments (3769) | Send Message
    I thank him also.
    19 Sep 2013, 09:25 AM Reply Like
  • Donald Johnson
    , contributor
    Comments (786) | Send Message
    Stock groupies deny reality when the market turns against them. See Apple, gold, etc. I'm trying to not be a stock groupie. I'm holding for now, hoping for more info from KMI, KMP.


    If the SEC and IRS are out to destroy MLPs, we're in trouble.
    19 Sep 2013, 01:50 PM Reply Like
  • Sumflow
    , contributor
    Comments (3595) | Send Message
    Donald Johnson :>hoping for more <


    Hoping that sounds like a well though out strategy.


    Wonderful life:
    19 Sep 2013, 03:40 PM Reply Like
  • srcellfe retired
    , contributor
    Comments (5) | Send Message
    I wish he let me know. I would have waited. :-)
    19 Sep 2013, 04:43 PM Reply Like
  • Be Here Now
    , contributor
    Comments (6361) | Send Message
    I listened and Kinder did not sound angry to me, simply assertive.


    How do we know Kaiser was shut out? The moderator certainly did not. I think he simply chickened out because he knew Kinder would blow him out of the water.
    18 Sep 2013, 08:06 PM Reply Like
  • Bobco23
    , contributor
    Comments (245) | Send Message
    Kinder's response to cannibalizing maintenance to increase distributions:


    "•He noted that a $222M variance between El Paso's (EPB) 2011 capex of $354M and its projected $132M in 2013 capex could be explained by the expensing of anomaly repairs and capex synergy among IT systems and mechanical equipment"


    18 Sep 2013, 08:16 PM Reply Like
  • Be Here Now
    , contributor
    Comments (6361) | Send Message
    Listen to the conference call. He explained this in detail.
    18 Sep 2013, 08:22 PM Reply Like
  • Dividend Growth Machine
    , contributor
    Comments (1651) | Send Message
    Indeed, I thought Kinder did a good job of explaining the bulk of the $222M difference during the call.
    18 Sep 2013, 09:13 PM Reply Like
  • TGC004
    , contributor
    Comments (457) | Send Message
    Kaiser is a punk who knows nothing. He isn't qualified to run the fries station at McDonalds much less investing in anything more sophisticated than Happy Meal toys.
    18 Sep 2013, 08:28 PM Reply Like
  • juluku
    , contributor
    Comments (28) | Send Message
    The world is going to end...I'm not wrong, just early...
    18 Sep 2013, 09:02 PM Reply Like
  • katzm
    , contributor
    Comments (64) | Send Message
    Is that a fact, or are you guessing, that Kaiser was not permitted to be on the call? I thought the Kinder Morgan team did a pretty thorough job of defusing Kaiser's most serious charges concerning sustaining and expansion capex. I do wish that Kinder Morgan was less levered. And I do wish that someone from outside Houston was on Kinder's Board of Directors. It'd be a fantasy come true to have Kinder take his wide moat pipelines and energy infrastructure company to Berkshire Hathaway --- assuming Warren could even figure out how to digest or unravel the Kinder Morgan / MLP corporate structure --- and would be willing to do so.
    18 Sep 2013, 09:20 PM Reply Like
  • Sumflow
    , contributor
    Comments (3595) | Send Message
    > It'd be a fantasy come true to have Kinder take his wide moat pipelines and energy infrastructure company to Berkshire Hathaway <


    One Billionaire in a company is enough. Kinder loads oil sands onto Buffets train set, and Buffett delivers it to Kinder in Houston. Keep the liability's separate.
    19 Sep 2013, 03:34 AM Reply Like
  • fredj
    , contributor
    Comments (155) | Send Message
    So, Kinder expenses certain items instead of capitalizing them and putting them on the balance sheet. Yes, $222 mill is big expense, but it is their choice to not capitalize. Exp is good in that it reduces their taxable income and therefore the amount of cash they are required to distribute to Partners in the MLP. As a CPA, I'm just thinking out loud here. I did not listen to the call, only read the summaries.
    18 Sep 2013, 09:36 PM Reply Like
  • 6.5 swede
    , contributor
    Comments (100) | Send Message
    Looks like the shorts were hit hard today.
    18 Sep 2013, 09:37 PM Reply Like
  • Alpha Wolf
    , contributor
    Comments (231) | Send Message
    I thought Kinder did a fantastic job of explaining their policies on capex, and how they accounted for them. It was really informative and in depth. The discrepancy between El Paso capex and Kinder capex was detailed and made sense--some a question of differences in opex and capex mix, some in straightforward business decisions. Nowhere did I get the impression that the useful life or integrity of the pipelines were impacted. In fact, Kinder also did a good job of pointing out how, due to regulatory requirements, they don't really have an option of ignoring maintenance.


    As to why Kaiser wasn't on the call--I wouldn't have expected him to be invited, anyway. He already said his piece and asked his questions in his research report, and it doesn't seem Kinder was given any chance to comment there. Most of the call was Kinder answering the questions/issues that Kaiser raised--enough Kaiser participation from my perspective.


    Lastly, overall I was quite impressed by Kinder himself. There's a man who knows his business. I'm actually more confident in Kinder Morgan than before I ever heard Kaiser's name.
    18 Sep 2013, 09:41 PM Reply Like
  • Donald Johnson
    , contributor
    Comments (786) | Send Message


    Good comment. Reassuring.
    19 Sep 2013, 01:56 PM Reply Like
  • Workinhard
    , contributor
    Comments (379) | Send Message
    whether Kaiser is right , wrong, early or late on Kinder, it will be good for long term investors in Kinder and other MLP's as they will be much more conservative going forward with expense vs capitalization numbers as they know they will be attracting attention. A little less leverage and better distribution coverage for mlp's will be a positive in the long run.
    18 Sep 2013, 09:56 PM Reply Like
  • Sumflow
    , contributor
    Comments (3595) | Send Message
    Rockefeller would not have achieved what he did in the energy field without plenty of leverage. Kinder's MLPs balance 50% equity, to 50% debt.
    19 Sep 2013, 03:37 AM Reply Like
  • bobcurran
    , contributor
    Comments (9) | Send Message
    Kevin Kaiser will continue with his offence, Time will prove him loud and incorrect regarding KMI's reported capital expenditure.
    26 Sep 2013, 04:27 PM Reply Like
DJIA (DIA) S&P 500 (SPY)
ETF Screener: Search and filter by asset class, strategy, theme, performance, yield, and much more
ETF Performance: View ETF performance across key asset classes and investing themes
ETF Investing Guide: Learn how to build and manage a well-diversified, low cost ETF portfolio
ETF Selector: An explanation of how to select and use ETFs