Press Release

DBRS Morningstar Confirms Kinder Morgan Inc. at BBB, Stable

Natural Resources
May 12, 2023

DBRS Limited (DBRS Morningstar) confirmed the Issuer Rating of Kinder Morgan, Inc. (KMI or the Company) at BBB with a Stable trend.

KMI’s credit profile reflects the relatively stable cash flow generated from well-diversified, fee-based energy transportation and storage assets. The Company's contractual earnings, scale, presence in multiple resource basins, and a larger focus on natural gas transportation provide resilience to the Company's cash flow. KMI's assets are difficult to replicate, and connect major resource basins to demand centres and export markets. Growing energy demand, particularly from industrial and power generation sectors and global liquefied natural gas (LNG) exports, continues to drive the Company's natural gas transportation volumes.

A majority of KMI's natural gas pipelines and terminal assets are covered by a mix of 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 production and operations in its carbon dioxide segment entail commodity price risk, although, partially mitigated in the short term through an active hedging program.

KMI's operating performance in 2022 was in line with DBRS Morningstar's expectations. Strong performance across its business segments along with higher commodity prices resulted in higher earnings and cash flow compared with 2021 (excluding the impact of winter storm Uri). DBRS Morningstar expects the Company's primarily natural gas focused transmission and storage assets to benefit from expected growth in LNG exports because of focus on energy security. DBRS Morningstar also notes that the Company had satisfactory outcomes to rate cases at its large interstate pipelines. Capital expenditures (capex) and dividends were self-funded in 2022 and the Company also reduced its total debt. Consequently, the Company was well within its leverage target of net debt-to-adjusted EBITDA ratio of less than 4.5 times (x; YE 2022: 4.1x).

KMI's 2023 growth capex are primarily focused on low-carbon opportunities in the pipelines and terminals segments, capacity expansions, and other energy transition initiatives. DBRS Morningstar expects the Company to continue to self-fund capex and dividends primarily from operating cash flow. While rising interest rates are likely to increase debt servicing costs, DBRS Morningstar expects the Company to maintain its leverage ratio within its target and expects key credit metrics to remain supportive of the rating. Liquidity is considered adequate. KMI's credit ratings are based on a consolidated approach as substantially all wholly owned domestic subsidiaries of the Company are parties to an irrevocable and unconditional cross-guarantee agreement.

A positive rating action can be considered should KMI consistently maintain its lease adjusted cash flow-to-debt ratio around 17.5% while pursuing conservative funding strategy. Although unlikely, the rating could be downgraded because of adverse regulatory changes; a rise in counterparty, volume, and commodity risks; and weakened credit metrics to a level that is inconsistent with the Company's BBB rating.

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factors that had a significant or relevant effect on the credit analysis.

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/396929 (May 17, 2022).

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

DBRS Morningstar applied the following principal methodology:
-- Global Methodology for Rating Companies in the Pipeline and Midstream Energy Industry (November 3, 2022; https://www.dbrsmorningstar.com/research/404917)

The credit rating methodologies used in the analysis of this transaction can be found at: https://www.dbrsmorningstar.com/about/methodologies.

A description of how DBRS Morningstar analyzes corporate finance transactions and how the methodologies are collectively applied can be found at: https://www.dbrsmorningstar.com/research/397223.

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].

The 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, management, 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.

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

Information regarding DBRS Morningstar ratings, including definitions, policies, and methodologies, is available on www.dbrsmorningstar.com or contact us at [email protected].

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