DBRS Morningstar Confirms Ratings of Kinder Morgan, Inc. at BBB with Stable Trends

DBRS Limited (DBRS Morningstar) confirmed the Issuer Rating and Senior Notes and Debentures rating of Kinder Morgan, Inc. (KMI or the Company) at BBB. DBRS Morningstar also confirmed the Medium-Term Notes & Unsecured Debentures rating of KMI’s wholly owned subsidiary, Kinder Morgan Energy Partners, L.P. (KMP), at BBB. All trends are Stable. KMI and KMP have the same rating because of the cross-guarantee agreement between the entities.

KMI’s credit profile reflects the relatively stable cash flow generated by the Company's well-diversified and fee-based energy infrastructure assets. Despite the downturn in energy demand and weak oil prices caused by the Coronavirus Disease (COVID-19) pandemic, the Company posted financial metrics supportive of its credit ratings in 2020. KMI's Texas intrastate network, particularly its natural gas storage assets, were well positioned to service the huge surge in natural gas demand during the February 2021 severe Winter Storm Uri. The high natural gas prices during the storm, though nonrecurring, helped deliver a strong Q1 2021 performance for the Company.

KMI's fee-based contracted earnings, diversified portfolio of assets, presence in multiple resource basins, and a larger focus on natural gas transportation provide resilience to the Company's cash flow generation capacity. KMI's assets are difficult to replicate, and connect major resource basins to demand centres and export markets. DBRS Morningstar expects industrial and power sectors, exports to Mexico, and global liquefied natural gas exports to drive natural gas demand as pandemic-related restrictions ease. KMI's pipelines, terminals, and storage assets are well positioned to participate in the energy transition to renewable fuels, including transportation of liquid hydrogen and carbon capture and sequestration.

A majority of KMI's natural gas pipelines and terminal assets are covered by medium- to long-term take-or-pay contracts or minimum volume commitments with no volume or commodity risk. However, KMI is exposed to volume risk in its refined products transportation and gathering and processing activity. The Company's oil transportation and production operations in its carbon dioxide (CO2) segment entail commodity price risk, although partially mitigated in the short term through an active hedging program.

DBRS Morningstar notes that capital expenditures (capex) have moderated due to the pandemic and expects capex to rise over the next two years as markets gradually return to normal and there is a pickup in upstream spending. KMI continues to self-fund capex and dividends primarily from operating cash flow. Liquidity is considered adequate.

DBRS Morningstar notes that although there is lingering uncertainty from the pandemic as to recovery in energy demand and supply, a positive rating action can be considered should KMI improve its credit profile by generating a major portion of its operating cash flow from medium- to long-term take-or-pay contracts with investment-grade counterparties while maintaining its conservative funding strategy. DBRS Morningstar could downgrade the ratings due to adverse regulatory changes; rise in counterparty, volume, and commodity risks; and credit metrics weaken to a level that is inconsistent with the Company's BBB ratings.

ESG CONSIDERATIONS
A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/373262.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The principal methodologies are Rating Companies in the Pipeline and Diversified Energy Industry (November 19, 2020; https://www.dbrsmorningstar.com/research/370267); DBRS Morningstar Criteria: Rating Corporate Holding Companies and Parent/Subsidiary Rating Relationships (November 2, 2020; https://www.dbrsmorningstar.com/research/369167); and DBRS Morningstar Criteria: Guarantees and Other Forms of Support (January 14, 2021; https://www.dbrsmorningstar.com/research/372344/), which can be found on dbrsmorningstar.com under Methodologies & Criteria. Other applicable methodologies include the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (February 3, 2021; https://www.dbrsmorningstar.com/research/373262).

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link under Related Documents or by contacting us at [email protected].

This rating was not initiated at the request of the rated entity.

The rated entity or its related entities did not participate in the rating process for this rating action. DBRS Morningstar did not have access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

This is an unsolicited credit rating.

Generally, the conditions that lead to the assignment of a Negative or Positive trend are resolved within a 12-month period. DBRS Morningstar trends and ratings are under regular surveillance.

DBRS Morningstar will publish a full report shortly that will provide additional analytical detail on this rating action. If you are interested in receiving this report, contact us at [email protected].

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at [email protected].

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