Kinder Morgan Energy Partners Earnings Call NUGGETS: El Paso Assets, Coal Export Opportunities
El Paso Assets
Ted Durbin – Goldman Sachs: I guess, starting with KMI here, I’m trying to make sure I understand, Kim, your commentary on the El Paso assets, so you’re saying the $142 million of EBITDA is a clean number. In other words, we shouldn’t be adding anything back in terms of transaction or any other kind of payments that were related to the acquisition?
A Closer Look: Kinder Morgan Energy Earnings Cheat Sheet>>
Kimberly Allen Dang – VP and CFO: That’s right. And you can see that detailed in Note 9 on that schedule, we talk about the transaction costs that are excluded from this, and most of those transaction costs are non-cash or they’re one-time in nature, or both.
Ted Durbin – Goldman Sachs: Okay. Great.
Kimberly Allen Dang – VP and CFO: So, just one other thing, the EBITDA is just 37 days.
Richard D. Kinder – Chairman and CEO: Yeah, just from May 21 through June 31.
Ted Durbin – Goldman Sachs: Yeah. Got it. And then if you – can you talk a little bit about your NOL position here post the transaction and how that will play into the cash tax, where you expect to be paying going forward?
Richard D. Kinder – Chairman and CEO: There is a fair amount of NOLs that were utilized on the sale of E&P business just as we’ve discussed previously. There are some remaining that are available for drop downs. We also expect in a number of instances to do (a number of) dispositions associated with the drop downs. So, we’ll manage that as we go forward. There is also some portion of the NOLs that we’re not able to use this year and it will roll over into future years.
Ted Durbin – Goldman Sachs: Is there any estimate you can put on what the cash taxes rate would be based on all that?
David D. Kinder – VP, Corporate Development, Treasurer and IR: I mean, I think the right way to think about the cash tax is to think about it once we get it back to a normal steady state where we’re primarily a general partner and then Kim, I mean, when we get there 36%, 37%, it’s around the right recurring cash tax rate to think about.
Ted Durbin – Goldman Sachs: Then last question is just kind of thinking about capital allocation here at KMI again, desire to pay down some debt versus increasing the dividend. You had a ratings downgrade yesterday. I guess, can you just talk a little bit more about how you’re thinking about the balance sheet?
Richard D. Kinder – Chairman and CEO: Well, of course, first of all, we’re going to have the proceeds from the drop downs to apply to the debt and again, as quickly as we can, we’re going to drop down all of these assets into KMP and EPB to get back to being a pure GP. So, that’s the main source of the debt pay down and we will intend to distribute – again, under this formula we’re going to distribute the cash that’s generated and available for dividends.
David D. Kinder – VP, Corporate Development, Treasurer and IR: I think we have a fairly straightforward path to getting to consolidated debt to EBITDA of around 4.5 times through the drop down process and so, I think we’ll be working our way to that as we go through this transaction. Again, that’s a full 12 month EBITDA to consolidated debt, meaning all of the debt at KMI, EPB and KMP.
Coal Export Opportunities
Darren Horowitz – Raymond James: From a product development or project development standpoint, if you back out the Trans Mountain expansion and you think about breaking down that remaining call it $6 billion of backlog, how do you guys think about allocating capital towards the additional coal export opportunities that seem very promising relative to possibly importing more gasoline to replace U.S. Northeast refinery closures similar to that expansion you did at (indiscernible) versus let’s just say enhanced petcoke export abilities?
Richard D. Kinder – Chairman and CEO: I think first of all, in the underlying principal areas we are not doing any of these unless we have good long term contracts, and then we just look at it and we would be happy to do them all if we have good long term contracts on it, just enormous opportunities, now like I said, on the coal export facility. We have four right now that are up and running and three of them are being expanded. We have a fifth that we would eventually go to also on the East Coast, but we are not prepare to do that yet. So, I think there are enormous opportunities there. Someplace between – I have said these figures before, they vary a little bit quarter-to-quarter, someplace between $450 million to $650 million in coal export facilities alone, but we are going to have an expansion at Galena Park pursuant to a new long term contract that we will be releasing information on tomorrow as a matter of fact. We are going to have other expansions. Certainly, the Edmonton South terminal as we say in our release is actually upscaled again because we had more long-term contracts. I think, the BOSTCO slowdown in ship channel will also probably be upsized because we think we’re about to move beyond the 6.6 million barrels that was our original anticipated amount of tankage. We think we’ll be able to expand that, so just a lot of opportunities again. We’ll look at it based on whether they clear our return on capital targets and whether we have good long-term contracts behind them.
Darren Horowitz – Raymond James: Last question and this is more for Kim, Kim as it relates to KMR’s ability to effectively issue equity and be de facto equity as it’s viewed for KMP, how do you think about the market’s ability to absorb KMR equity throughout, not just this $2.2 billion capital program, but beyond that?
Kimberly Allen Dang – VP and CFO: Well, I guess, we got a couple of tools in our toolbox. I mean, we can issue KMR or we can issue KMP, and we have the ATM or we can do standalone, overnight all claims are marketed of rates on KMR, so I think, on these transactions KMI will be taking back some equity, which lessens the need. We can do in the range of $300 million a year on the ATM. KMR in and of itself is generating $500 million a year. So, you’ve got $800 million of equity that is sort of happens automatically, before you even need to go to the market, and so you can think about that way, that’s – if you say 50%-50%, that’s $1.6 capital spend, before you even need to access the market on an offering.