Morningstar DBRS Confirms Credit Rating on Kinder Morgan, Inc. at BBB, Changes Trend to Positive From Stable

DBRS Limited (Morningstar DBRS) confirmed the Issuer Rating of Kinder Morgan, Inc. (KMI or the Company) at BBB. The trend has been changed to Positive from Stable.

KEY CREDIT RATING CONSIDERATIONS
KMI's operating performance in 2024 exhibited broad-based growth across its business segments, which along with higher commodity prices, resulted in higher earnings and Adjusted EBITDA when compared with 2023. Capital expenditure (capex) and dividends were self-funded in 2024 with KMI at the midpoint of its target range of net debt-to-adjusted EBITDA of 3.5 times (x) to 4.5x (YE2024: 4.0x).

The change in trend to Positive from Stable reflects KMI's debt reduction of $3.7 billion since Morningstar DBRS last upgraded the Company's credit rating in 2019, as well as a concurrent increase of approximately $1.2 billion in Adjusted EBITDA resulting in a material decrease in financial leverage over the same period. In addition, the Company's scale has increased through organic investments and acquisitions, while both its contractual position and the quality of its counterparties have improved over the last several years. Morningstar DBRS expects that KMI will continue to maintain a prudent financial policy and fund its capex and shareholder distributions through its cash flows, maintaining its leverage ratio well within its target range of 3.5x to 4.5x of net debt-to-adjusted EBITDA.

CREDIT RATING DRIVERS
Morningstar DBRS could upgrade the credit rating over the next 12 months if KMI maintained its lease-adjusted cash flow-to-debt ratio consistently above 17.5% with a leverage ratio trending toward the lower end of its targeted range while funding its capex and dividends through cash flow from operations. While unlikely, the trend could be changed back to Stable if there were adverse regulatory changes; a rise in counterparty, volume, and commodity risks; or if the Company's lease-adjusted cash flow-to-debt ratio was consistently below 16.0%.

EARNINGS OUTLOOK
Morningstar DBRS expects overall EBITDA in 2025 to be higher relative to 2024 driven by expansion projects within the Natural Gas Pipelines segment and contributions from Renewable Natural Gas (RNG) facilities that will be placed into service.

FINANCIAL OUTLOOK
Morningstar DBRS expects cash flow from operations in 2025 to grow relative to 2024 based on organic capital investment within the Natural Gas pipelines segment. KMI expects to fully fund its dividends and growth capex from its internally generated cash flow for 2025 and expects its net debt-to-adjusted EBITDA to be 3.8x by the end of the year. Dividends for 2025 are projected to be $2.6 billion or $1.17 per share, 2% higher than in 2024. The Company has budgeted discretionary capital of $2.3 billion (excluding acquisitions) and sustaining capital of $1.1 billion for 2025.

CREDIT RATING RATIONALE
Comprehensive Business Risk Assessment (CBRA): BBB
The credit rating is backed by KMI's relatively stable cash flow generated from well-diversified, fee-based energy transportation and storage assets. KMI's assets are difficult to replicate and connect major resource basins to demand centres and export markets. The 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, the Company is exposed to volume risk within its Refined Products Transportation and Gathering and Processing segments. KMI's oil production and operations in its Carbon Dioxide (CO2) segment carry commodity price risk.

Comprehensive Financial Risk Assessment (CFRA): AL
Morningstar DBRS expects KMI's primarily natural gas-focused transmission and storage assets to benefit from projected growth in liquefied natural gas (LNG) driven by long-term growth in exports and industrial demand. Despite low base-case commodity price assumptions, Morningstar DBRS expects KMI to generate higher earnings and cash flows in 2025 as a result of expansion projects within the Natural Gas Pipelines and Energy Transition Ventures group segments.

Morningstar DBRS assesses the Company's financial risk profile as being supportive of the credit rating. The growth in the Company's overall EBITDA through its organic and inorganic expansion has strengthened its financial risk profile.

Intrinsic Assessment (IA): BBB
The IA of BBB is within the Intrinsic Assessment Range and is based on the CBRA and CFRA, also taking into consideration current rating trend and peer comparisons, among other factors.

Additional Considerations: None
KMI's credit ratings include no further negative or positive adjustments because of additional considerations.

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

A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (August 13, 2024) https://dbrs.morningstar.com/research/437781

Further details on the Issuer's Intrinsic Assessment can be found at https://dbrs.morningstar.com/research/453664

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

Morningstar DBRS applied the following principal methodology:

Global Methodology for Rating Companies in the Oil and Gas, Oilfield Services, Pipeline and Midstream Energy Industries (May 6, 2025), https://dbrs.morningstar.com/research/453396

Morningstar DBRS credit ratings may use one or more sections of the Morningstar DBRS Global Corporate Criteria (February 3, 2025; https://dbrs.morningstar.com/research/447186), which covers, for example, topics such as holding companies and parent/subsidiary relationships, guarantees, recovery, and common adjustments to financial ratios.

The following methodologies have also been applied:

-- Morningstar DBRS Criteria: Approach to ESG Factors in Credit Ratings (August 13, 2024)
https://dbrs.morningstar.com/research/437781
-- Morningstar DBRS Global Corporate Criteria (February 3, 2025)
https://dbrs.morningstar.com/research/447186

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

A description of how Morningstar DBRS analyzes corporate finance transactions and how the methodologies are collectively applied can be found at: https://dbrs.morningstar.com/research/431153.

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 info-DBRS@morningstar.com.

The credit rating was not initiated at the request of the rated entity.

The rated entity or its related entities did not participate in the credit rating process for this credit rating action.

Morningstar DBRS 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 credit rating action.

This is an unsolicited credit rating.

For more information on Morningstar DBRS' policy regarding the solicitation status of credit ratings, please refer to the Credit Ratings Global Policy, which can be found in the Morningstar DBRS Understanding Ratings section of the website: https://dbrs.morningstar.com/understanding-ratings

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

Information regarding Morningstar DBRS credit ratings, including definitions, policies, and methodologies, is available on https://dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.

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