Kinder Morgan Q2 2025 Earnings Call Transcript

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Provided by Quartr
July 16, 2025

Key Takeaways

  • Positive Sentiment: Kinder Morgan reported Q2 net income of $715 million, a 24% increase year-over-year, with adjusted EBITDA up 6% and adjusted EPS up 12%, driving strong financial growth and a 2% dividend increase.
  • Positive Sentiment: The project backlog rose to $9.3 billion from $8.8 billion, supported by long-term contracts for Trident Phase 2, Louisiana Line Texas Access, two NGPL power plant expansions and a $500 million Kinderhawk gathering build-out, with 50% of work serving power demand.
  • Positive Sentiment: Global natural gas demand is forecast to grow 25% by 2050—driven by LNG in Asia and Africa—and the US, top LNG exporter since 2023, is well positioned to supply this surge, underpinning decades of export infrastructure growth.
  • Positive Sentiment: Favorable policy shifts—FERC’s 50% higher prior-notice threshold and waiver of the five-month construction delay, a narrowed NEPA scope from the Supreme Court, and full expensing under the budget reconciliation bill—are expected to accelerate projects and yield significant cash-tax benefits in 2026–27.
  • Negative Sentiment: Gathering volumes fell 6% year-over-year—primarily in the Haynesville—and full-year throughput is now expected 3% below the 2025 budget despite a modest rebound later in the year.
AI Generated. May Contain Errors.
Earnings Conference Call
Kinder Morgan Q2 2025
00:00 / 00:00

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Operator

Good afternoon and thank you for standing by and welcome to the quarterly earnings conference call. Your lines are in a listen only mode until the question and answer session of today's conference. Today's conference is being recorded. If you have any objections, you may disconnect at this time. It is now my pleasure to turn the call over to Mr. Rich Kinder, Executive Chairman of Kinder Morgan. Sir, you may begin.

Richard Kinder
Richard Kinder
Executive Chairman at Kinder Morgan

Thank you, Michelle. Before we begin, as usual, I'd like to remind you that KMI's earnings release today and this call include forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and the Securities Exchange Act of 1934 as well as certain non GAAP financial measures. Before making any investment decision, we strongly encourage you to read our full disclosures on forward looking statements and use of non GAAP financial measures set forth at the end of our earnings release as well as review our latest filings with the SEC for important material assumptions, expectations and risk factors that may cause actual results to differ materially from those anticipated and described in such forward looking statements. In previous quarterly calls, I've emphasized the positive attributes of the natural gas story, concentrating primarily on the rapidly growing demand in America. But as we all know, the gas market is international in nature and a great deal of the growth potential for US production is driven by that worldwide increase in demand.

Richard Kinder
Richard Kinder
Executive Chairman at Kinder Morgan

So I thought today, would spend a bit of time sharing some thoughts on what's driving that overseas growth. Chief economist of a major oil company recently estimated that global gas demand is expected to increase by 25% over the next twenty five years. And I don't believe that that projection is unreasonable and it affirms my belief that natural gas will inevitably remain a key source of energy for the long term around the globe. The factors underpinning that growth are pretty easy to understand. Demographers project continued substantial growth in worldwide population over that time period in the range of 2,000,000,000 additions by 2050.

Richard Kinder
Richard Kinder
Executive Chairman at Kinder Morgan

A great bulk of that increase will occur in the emerging markets of Asia and Africa where the need for energy is particularly acute as large portions of the population move into the middle class, which drives additional energy consumption. Because there's a lack of local production and an inability to access gas by land based delivery in most of those nations, it will be LNG, which will satisfy the bulk of this additional demand, and I think it will grow faster than the overall demand for natural gas. Now what's the impact of all this international growth on The US energy segment? I believe that American exports of LNG will play a critical role in supplying this international LNG demand. The US has been the top global producer of natural gas for fifteen consecutive years and the world's top exporter of LNG since 2023.

Richard Kinder
Richard Kinder
Executive Chairman at Kinder Morgan

I believe The US role becomes even more important in light of recent developments in The Middle East. Customers on the receiving end want security of supply without undue worries about disruptions caused by military actions, and this benefits the position of US supply. This makes us confident that a major portion of the LNG required will move through America's rapidly growing liquefaction terminals. Consistent with this view is the recent estimate of S and P Global Commodity Insights that LNG feed gas demand in America will increase by 3.5 BCF a day this summer compared to 2024 and that it will more than double by 2030. That should be a real positive for Kinder Morgan, and as much as we move about 40% of all the feed gas for those facilities.

Richard Kinder
Richard Kinder
Executive Chairman at Kinder Morgan

When you add the LNG the international LNG growth to the robust need for gas to satisfy US domestic power and industrial demand, examples of which are reflected in the new expansions that Kim and the team will be discussing on this call, it signals to me that the positive natural gas story has legs and will last for decades to come. With that, I'll turn it over to Kim and the team.

Kimberly Dang
Kimberly Dang
CEO & Director at Kinder Morgan

Okay. Thanks, Bruce. Our financial results for the quarter showed strong growth over the '24 with adjusted EBITDA increasing by 6% and adjusted EPS increasing by 12%. For the year, we currently expect to exceed our original budget, which already reflected very nice growth by at least the contribution from the Outrigger acquisition. It's an amazing time to be in the natural gas industry.

Kimberly Dang
Kimberly Dang
CEO & Director at Kinder Morgan

This is certainly the best opportunity set I've seen during my twenty four years in this industry. The underlying market fundamentals are strong with US natural gas demand expected to grow by 20% between now and 2030 by Woodmax estimates. The federal permitting environment has improved. The US Army Corps of Engineers is issuing permits very quickly. We've seen some recent at FERC action, which is helpful, including a 50% increase in the prior notice limit and a one year waiver of the five month waiting period between the time, before you can start construction, between the time the permit is issued and, and you can start construction.

Kimberly Dang
Kimberly Dang
CEO & Director at Kinder Morgan

So the supreme court ruling on NEPA should help narrow the scope of the NEPA reviews and make nuisance lawsuits more difficult. The recent budget reconciliation bill delivers nice tax benefit, including incentives for investment and expanded interest deduction. As a result, we expect significant cash tax benefits in 2026 and 2027 and do not expect KMI to be a material cash taxpayer until 2028. The one fly in the ointment is tariffs. However, at this point, we still do not believe that the tariffs will have significant impact on project economics.

Kimberly Dang
Kimberly Dang
CEO & Director at Kinder Morgan

For our large projects, MSX, South System four, Trident, GCX and Bridge that together comprise almost two thirds of our backlog, We currently estimate that the impact of tariffs to be roughly 1% of project cost, which has not changed from our estimate last quarter. Our project backlog increased from $8,800,000,000 to $9,300,000,000 during the quarter. We added $1,300,000,000 in new projects and placed approximately $750,000,000 of projects in service. The projects we added included Trident Phase two and the Louisiana Line Texas Access project, which include moving natural gas from Katy, Texas into the Louisiana LNG market. We also added two NGPL projects to serve power plants.

Kimberly Dang
Kimberly Dang
CEO & Director at Kinder Morgan

All these projects are underpinned by long term contracts and have attractive returns. We also approved approximately $500,000,000 of CapEx for Kinderhawk, which is supported by life of lease contracts to accommodate a significant volume ramp up by our customers. Currently, approximately 50% of the projects in our backlog will serve power demand. The multiple on the backlog is around 5.6 times, slightly improved from q one as the projects we placed in service were at a lower, that we placed in the backlog were at a lower multiple than the projects we placed in service. Overall, despite $6,000,000,000 in project additions to our backlog in the past year, we continue to see very nice future investment opportunities.

Kimberly Dang
Kimberly Dang
CEO & Director at Kinder Morgan

As Tom Martin said to me the other day, we aren't in the first inning anymore, but we aren't anywhere near the seventh inning stretch. Our strategy remains unchanged. We own and operate stable fee based assets, which are core to the energy infrastructure. We use our significant cash flow generated by these assets to invest in attractive return projects, and we return money to our shareholders all while maintaining a solid balance sheet. With that, I'll turn it over to Tom.

Tom Martin
Tom Martin
President at Kinder Morgan

Thanks Kim. Starting with the natural gas business unit, transport volumes were up 3% in the quarter versus the second quarter of twenty twenty four, primarily due to LNG deliveries on Tennessee Gas Pipeline, as well as new contracts and LNG deliveries on our Texas intrastate system. Natural gas gathering volumes were down 6% in the quarter versus 2024 across most of our G and P assets, the biggest impact being in our Haynesville system. Sequentially, total gathering volumes were down 1%. Our producer customers are still ramping back up after lower gas prices in the second half of twenty twenty four.

Tom Martin
Tom Martin
President at Kinder Morgan

For the full year, we expect our gathering volumes to average 3% above 2024, but 3% below our 2025 budget. We anticipate gathering volumes will grow over the balance of the year given higher price environment than in 2024 and the need for increased production to meet LNG demand growth that is ramping up throughout the remainder of the year. Looking forward, we continue to see significant incremental project opportunities across our natural gas pipeline network to expand our transportation and storage capabilities in support of the growing natural gas market. In our Products Pipeline segment, refined products volumes were up 2% and crude and condensate volumes were also up 2% in the quarter compared to the second quarter of twenty twenty four. For the full year 2025 refined products volumes were forecasted to be approximately 2% higher than in 2024 and flat to our budget.

Tom Martin
Tom Martin
President at Kinder Morgan

In our Terminals business segment, our liquids lease capacity remains high at 94%. Market conditions continue to remain supportive of strong rates and high utilization at our key hubs at Houston Ship Channel and the New York Harbor. Our Jones Act tanker fleet is fully leased today and through the remainder of 2025. Assuming likely options are exercised, the fleet is 100% leased through 2026 and ninety seven percent leased through 2027. We have opportunistically chartered a significant percentage of the fleet at higher market rates and have extended the average length of our firm contract commitments to four years.

Tom Martin
Tom Martin
President at Kinder Morgan

The CO2 segment experienced slightly lower oil production volumes at 3%, higher NGL volumes at 13% and lower CO2 volumes at 8% in the quarter versus second quarter of twenty twenty four. For the full year oil volumes are forecasted to be 4% below 2024 and one percent below our 2025 budget. With that, I'll turn it over to David.

David Michels
David Michels
VP & CFO at Kinder Morgan

All right. Thanks, Tom. Okay. So we're declaring a dividend for the quarter of $0.02 $9.02 $5 per share, which is $1.17 per share annualized at 2% up from our 2024 dividend. For the quarter, we generated net income attributable to KMI of $715,000,000 which is 24 percent above the second quarter of twenty twenty four.

David Michels
David Michels
VP & CFO at Kinder Morgan

We generated EPS of $0.32 up $06 from last year. Some of that benefit was due to favorable mark to market on unsettled hedges, which we treated certain items. But on an adjusted net income basis, which excludes certain items, we generated $619,000,000 and adjusted EPS of $0.28 up 1312% from last year respectively. So even excluding the favorable certain items, we still experienced nice double digit growth from last year. Our growth was driven by greater contributions from our natural gas expansion projects, the Outrigger acquisition and attractive multiple attractive natural gas capacity sales and other services driven by favorable demand on our assets.

David Michels
David Michels
VP & CFO at Kinder Morgan

We also received greater contributions from our Jones Act tankers. On the balance sheet, we ended the quarter with 32,300,000,000 of net debt and a 4.0x net debt to adjusted EBITDA ratio. That 4.0x is down from 4.1x from the first quarter, which was right after we closed the acquisition of Outrigger. We expect to end the year with net debt to adjusted EBITDA that rounds up to 3.9x. Our net debt has increased by $623,000,000 from the beginning of the year, and here's a high level reconciliation of that change.

David Michels
David Michels
VP & CFO at Kinder Morgan

We generated cash flow from operations of $2,811,000,000 for the first two quarters. We paid dividends of $1,300,000,000 We've invested total capital of $1,420,000,000 The Outrigger acquisition was approximately $650,000,000 and all of our other items were a use of cash of about $65,000,000 and that gets you to the $623,000,000 increase for the year. As Kim mentioned, we expect to exceed budget by at least the contribution from the Outrigger acquisition. Our budgeted 2025 adjusted EBITDA growth from 2024 was 4%. Just including the Outrigger acquisition, our EBITDA growth would increase to 5% and our adjusted EPS growth would remain at an attractive 10% from 2024.

David Michels
David Michels
VP & CFO at Kinder Morgan

Most of our 2025 budgeted growth comes from expansion project contributions and we remain on target to place those expansion projects in service on time and on budget with only minor variances. The largest expansion contributions come from Evangeline Pass project and our South Texas to Houston project, our Texas intrastate system. Both of those are now in service. So in in my final items, in June, Moody's placed our credit rating on positive outlook and they joined S and P who put us on positive earlier in the year. Our credit spreads have already improved some as a result.

David Michels
David Michels
VP & CFO at Kinder Morgan

So we're off to a good start for the year tracking to beat our budget. We sanctioned additional attractive projects that will add to our future growth and expect meaningful cash flow benefits from tax reform. I'll turn it back to Kim for Q and A.

Kimberly Dang
Kimberly Dang
CEO & Director at Kinder Morgan

Okay. Michelle, if you'll come back on and we will take questions.

Operator

Thank you. Theresa Chen with Barclays, you may go ahead.

Theresa Chen
Theresa Chen
Senior Analyst at Barclays

Good afternoon and congratulations on the progress, in the commercial backlog, under what seems to be fierce competition. Do you think the commercial landscape has changed with these demand tailwinds on a structural basis? And what do you think has allowed Kinder to win many of these projects? And what kind of learnings can you share that might shape your strategy going forward on the heels of these commercial wins?

Kimberly Dang
Kimberly Dang
CEO & Director at Kinder Morgan

Okay. A a couple of points on that. One, I think, you know, what part of what allows us, to be competitive is the existing asset footprint that we have. We've got an outstanding footprint, and so we are very competitive, where we can build off of that footprint or and or use the existing, footprint to to deliver volumes, to customers. I'd say, you know, the other things are, I think, people trust us to be able to build, projects and get them delivered.

Kimberly Dang
Kimberly Dang
CEO & Director at Kinder Morgan

And so if they've got a significant investment that, you know, they need natural gas delivered, you know, they don't wanna be waiting on those molecules. When they get that project in service, you know, they want to, they wanna be able to to have the supply there. So I think our track record in building and and delivering projects is is helpful. And then I think the way we operate, you know, and the customer service that we provide, in terms of, trying to make sure that if we have, maintenance or other items that our customers know well in advance, trying to make sure that we perform that maintenance at times when our customers would be least impacted and trying to find times when, you know, our customers when we can find alternative delivery for them. So, you know, I think that's some of the things that go into the commercial, the commercial discussions and allow us, you know, allow us to win projects.

Kimberly Dang
Kimberly Dang
CEO & Director at Kinder Morgan

And I think, you know, you can see from the what we've added to the backlog, we've been very successful.

Theresa Chen
Theresa Chen
Senior Analyst at Barclays

Thank you. And looking forward on additional projects to come potentially in the backlog, as far as the expansion westward from the Permian, what is the progress on building additional natural gas infrastructure on that front? And what would something like Copper State Connector amount to in terms of cost, economics, as well as the potential for subsequent brownfield expansions down the line?

Kimberly Dang
Kimberly Dang
CEO & Director at Kinder Morgan

Okay. Well, I don't let's don't get too far ahead of ourselves. You know, on, you know, Copper State, there's clearly a need in Arizona. You know, I think the Arizona utilities have need for more natural gas. I think there's the potential for data centers, and we're having conversations on those fronts.

Kimberly Dang
Kimberly Dang
CEO & Director at Kinder Morgan

Obviously, you know, that would be, you know, a large project. There are others Copper State would. I mean, there are other smaller projects that we have that we're looking at. But it is a competitive process on Copper State. And, you know, constantly changing tariffs, you know, make things more challenging on these larger projects where we've got to come to agreement with multiple different multiple different shippers.

Kimberly Dang
Kimberly Dang
CEO & Director at Kinder Morgan

And then any project that we do on this front, you know, the project's gonna have to meet our return thresholds. And so we're gonna be very disciplined about how we deploy capital on this. You know? But, I mean, a project could be anywhere from 4 to 5,000,000,000 ish.

Theresa Chen
Theresa Chen
Senior Analyst at Barclays

Very helpful. Thank you.

Operator

Thank you. Our next caller is Michael Blum with Wells Fargo. You may go ahead, sir.

Michael Blum
Michael Blum
Managing Director at Wells Fargo Securities

Thanks. Good afternoon, everybody. Had a capital allocation question really between gas pipelines and gathering investments. You talked about this big opportunity set on the gas pipeline side. Your average multiples between five and six times.

Michael Blum
Michael Blum
Managing Director at Wells Fargo Securities

So how do we think about a $500,000,000 investment in Kinderhawk? Does that mean this Haynesville investment is generating an even higher return than that given the higher risk profile? Just trying to think through all that.

Kimberly Dang
Kimberly Dang
CEO & Director at Kinder Morgan

Okay. Sure. So let me start by saying no change in the way, that we make our investment decisions or in our approach to investment or investment returns. The way we've always done it is, you know, we look at the risk reward. So you're looking at you know, on the risk side, you're looking at how stable, or the cap or the cash flows.

Kimberly Dang
Kimberly Dang
CEO & Director at Kinder Morgan

And so that gets into, okay, is it a take or pay contract, or is it a life of lease dedication? Does it have you know, if it's a take or pay, is it a five year contract, or is it a twenty year contract? What's the credit on that? And so, you know, when you have longer contracts with higher credit worthy partners, and, and their take or pay, then you're within our return threshold range, you're gonna skew to the lower side of that range. And when you have things that have commodity exposure or volume exposure, then you're going to, look for a return at the higher end of our target range.

Michael Blum
Michael Blum
Managing Director at Wells Fargo Securities

K. Great. Thanks for that. And then, just wanted to get an update how you're thinking about, behind the meter opportunities. I know you've talked about maybe having something in place with partners where they want to see where that stands and and how meaningful a driver of, future CapEx that could be. Thanks.

Kimberly Dang
Kimberly Dang
CEO & Director at Kinder Morgan

So I think, you know, when we think about where we've seen the most action on the data center front, if you will, is really from regulated utilities. So, I mean, that's where we're seeing most stuff get done. So, you know, regulated utility is able to put it in their rate base. They're going out there getting a con, a PPA with the data center provider. We have not seen a lot of IPPs that have announced projects at this point in time.

Kimberly Dang
Kimberly Dang
CEO & Director at Kinder Morgan

But, obviously, we are we're talking to them, and that is, you know, that's a reasonable possibility because I think if IPPs can get contracts, you know, they they'll be able to to build as well. But I'm gonna turn it over to Seethel, and he can talk a little bit more about our strategy there.

Sital Mody
Sital Mody
President - Natural Gas Pipelines at Kinder Morgan

Yeah. So, one of the things, you know, as we as we look at the landscape on data centers, speed to market is is is is key. And so as we as we look at, you know, the opportunity set, as Kim said, our focus has thus far been on on the utility side and helping them with their power needs. We are looking at, you know, kind of a a broader structure such as, you know, where we've got some key partners that specialize in their respective fields. You know, our our expertise lies in bringing supply to the to the point.

Sital Mody
Sital Mody
President - Natural Gas Pipelines at Kinder Morgan

We bring storage, and then we, you know, we let the other folks do what they do best, including hyperscalers that know how to build data centers. And so, you know, I think the concept is we we are looking at a few key sites in different areas and and seeing if we can kinda pull together a bigger, broader project specifically tied to behind the meter.

Operator

Thank you. Our next caller is John McKay with Goldman Sachs. You may go ahead, sir.

John Mackay
John Mackay
VP - Equity Research at Goldman Sachs

Hey, everyone. Thank you for the time. I'm to pick up on this project thread, of course. Maybe just talking about the backlog on the gas side. You mentioned about 50% power utilities at this point.

John Mackay
John Mackay
VP - Equity Research at Goldman Sachs

That's arguably a larger share than power has in kind of the go forward gas demand growth we're looking at relative to LNG, I suppose. Maybe could you just talk a little bit about how you'd expect that 50% to kind of trend from here with incremental projects on the horizon, maybe putting aside copper state for a second, start leaning more LNG? But, I mean, we need to wait for more FIDs. Maybe just frame up, like, how that mix looks over the next couple quarters or years.

Kimberly Dang
Kimberly Dang
CEO & Director at Kinder Morgan

Yeah. I mean, I'd say it's hard to project exactly what that mix is gonna look like. Obviously, the biggest driver of demand growth, you know, in Woodmax projections and in our, you know, internal projections as LNG and there's a doubling of, you know, expected doubling of LNG. As we've said a number of times, those LNG projects, I mean, generally, when they get sanctioned, there's an original there's an initial project that is sort of a a a main line from the facility to the nearest liquid point. But then generally, as, as they move forward, with their development, you know, they're looking to find more competitive supply and diversified supply.

Kimberly Dang
Kimberly Dang
CEO & Director at Kinder Morgan

And so that leads to additional projects, additional projects down the the line. You know, one of the things that we've consistently said and that we consistently see is, and this is especially true in the WoodMac numbers, is, you know, we don't think that the WoodMac numbers accurately reflect the growth that we think we're gonna see in in power demand. And, you know, that could be a difference between the volumes that they expect to flow and what we expect to to sign up in terms of long term take or pay contracts. But the the demand, the breadth and the scope of the power demand is, is very, enormous. And so, I mean, we're seeing power demand in Arkansas, Louisiana, you know, Georgia, South Carolina, Arizona, Wisconsin.

Kimberly Dang
Kimberly Dang
CEO & Director at Kinder Morgan

I mean Texas. Texas. And so, I mean, the the amount of power demand, I think, and the projects that we're gonna see on that front are, you know, when you look at that relative to the expectations for demand in power, I I just think there is an alignment there.

John Mackay
John Mackay
VP - Equity Research at Goldman Sachs

That's helpful. That's interesting. And maybe, just for my next question, you touched on the new tax rules, should open up some incremental cash flow for you guys. I guess just wondering if you can kind of put a bit of a number around the incremental cash kind of looking forward. And then on a related point, does it change how you think about your ability to go after projects, your kind of implicit cost of capital?

John Mackay
John Mackay
VP - Equity Research at Goldman Sachs

I know you're kind of defending the return profile you wanna get, but, you know, does an incremental, tax framework change that at all?

David Michels
David Michels
VP & CFO at Kinder Morgan

Hey, John. It's David. For the tax reform, benefit, we're we're we're not quantifying it anymore specifically than just saying. We've got nice benefits from it, beginning in 2025. It's not material in 2025 to our to our forecast, but we'll see some benefits this year because it was retroactive to the beginning of the year.

David Michels
David Michels
VP & CFO at Kinder Morgan

We are seeing substantial benefits in 2026 and 2027. So as Kim said, we don't expect to be a material federal income taxpayer in either of those years as a result of the tax reform. We see nice benefits thereafter, but we're not quantifying those. And it also depends a little bit on when we put new projects into service because the full expensing, provision is really the biggest piece of, the benefit that we're getting from from tax reform.

Kimberly Dang
Kimberly Dang
CEO & Director at Kinder Morgan

And I would say, you know, having that incremental cash flow doesn't change our investment strategy. So we're not moving our return thresholds because we have incremental cash flow available. I think, you know, our view is and continues to be that for good return projects, there's unlimited capital, and we will find a way to finance them. So, you know, obviously, we've got a lot of cash flow available more now than we did before. You know, we've got room on our balance sheet.

Kimberly Dang
Kimberly Dang
CEO & Director at Kinder Morgan

And, you know, I think with the projects that we're doing, they're attractive projects. And so if we ever needed to, we could bring in outside capital.

Operator

Thank you. Our next caller is Jeremy Tonet with JPMorgan. You may go ahead, sir.

Jeremy Tonet
Jeremy Tonet
MD & Research Analyst at J.P. Morgan

Hi. Good afternoon.

Kimberly Dang
Kimberly Dang
CEO & Director at Kinder Morgan

Good afternoon, Jeremy.

Jeremy Tonet
Jeremy Tonet
MD & Research Analyst at J.P. Morgan

I want to turn to Arkansas if I could. We've seen recent reports of hyperscaler activity there and want to double click on your Texas Arkansas power project. Notice the binding open season there. And, you know, given the 400 already, prearranged there, it seems like that could support two gigs, you know, very nice size for the project right there. But do you expect more to come along at that point?

Jeremy Tonet
Jeremy Tonet
MD & Research Analyst at J.P. Morgan

Do you see the possibility for more demand beyond that? Or really, you kind of have a fit for purpose pipe right here ready to go? And anything you could provide as far as incremental details there would be helpful.

Sital Mody
Sital Mody
President - Natural Gas Pipelines at Kinder Morgan

Yes. Jeremy, this is Stifel. So I'll backspace on that and tell you that it's, you know, that project is supporting power. But broadly, when you think about, you know, the opportunity set, we are seeing, incremental opportunity set not only in Arkansas, Texas, but along the, that Midwest Corridor. We do see incremental demand on the power side, where the utility ultimately uses it.

Sital Mody
Sital Mody
President - Natural Gas Pipelines at Kinder Morgan

That will be up to the utility. As we talked about, we're looking at our own behind the meter opportunities. So I think there is a robust pipeline of opportunities that we are trying to pursue, specifically in Arkansas and really broader across the network.

Kimberly Dang
Kimberly Dang
CEO & Director at Kinder Morgan

And I'd say we don't always know if the power is going to a data center or, you know, what exactly is that they're using it for. So we don't always have clear visibility through, you know, our our customer is is typically the power is typically the power plant.

Jeremy Tonet
Jeremy Tonet
MD & Research Analyst at J.P. Morgan

Right. Right. Understood. Just the the size of it there, it could support some nice power for for the utility, not for Kinder. Understood there.

Jeremy Tonet
Jeremy Tonet
MD & Research Analyst at J.P. Morgan

But I'll leave that there. And just wondering post the Georgia Power IRP filing here, does this impact I think the opportunity set as you see it in the Southeast? Could there be upside I guess to your current expansion plan scope to make those expansions larger?

Sital Mody
Sital Mody
President - Natural Gas Pipelines at Kinder Morgan

Yes. Look, I mean, as we've alluded to on previous calls, I think there is a broader opportunity set. We're early in our discussions there, but the fundamentals look sound and the opportunity set looks good. Obviously, we're positioned well with the network there, including the latest set of expansions. And as we alluded to on the last call, I think Rich said, we're going to you've got ancillary expansion opportunities to layer on top of that. We will pursue those as they present themselves.

Operator

Thank you. Manav Gupta with UBS. You may go ahead, sir.

Manav Gupta
Manav Gupta
Executive Director at UBS Group

Good afternoon. It looks like you have increased the size of Trident from 1.5 to two BCF. And as I remember, you did this with Mississippi Crossings also. The pipe got announced at 1.5 and got scaled up very quickly to 2.1. So I'm trying to understand it, you know, what's driving this incremental demand?

Manav Gupta
Manav Gupta
Executive Director at UBS Group

You come in, you announce a project, and very quickly you are able to size it up. So help us talk through those dynamics a little.

Kimberly Dang
Kimberly Dang
CEO & Director at Kinder Morgan

Yeah. I mean, I'm trying to think or no demands associated with, with LNG, and it was a fairly easy expansion because there all we needed to do was add, add some compression. I think when you go to a phase three, then that would require some looping. So that's, you know, that's a little bit, that's a little bit bigger nugget to to take on, and so that would require, you know, more volume to to do phase three. But, you know, that pipeline is in a great, great location.

Kimberly Dang
Kimberly Dang
CEO & Director at Kinder Morgan

And, you know, to be able to get, you know, molecules from Texas all the way over into Louisiana is something people have been trying to do for a long time, and the combination of Trident and KMLA does that.

Sital Mody
Sital Mody
President - Natural Gas Pipelines at Kinder Morgan

Yeah. In terms of the timing piece, Manav, I mean, really, it's when we get the executed contracts to get us the returns that are sufficient. We know we have other customers that are interested. We'll FID the project if it makes sense, and then we continue to try and build upon it. That's that's been the strategy.

Manav Gupta
Manav Gupta
Executive Director at UBS Group

Perfect. And it looks like the backlog also benefit from the, NGPL, new projects. Can you talk about a little more about these projects? Looks like the power plant related projects. So if you could help us understand this incremental projects from NGPL that added to the backlog in this quarter. Thank you.

Kimberly Dang
Kimberly Dang
CEO & Director at Kinder Morgan

Yeah. They're both power projects, to serve power demand. One's in Arkansas and one's in, West Compton, essentially.

Sital Mody
Sital Mody
President - Natural Gas Pipelines at Kinder Morgan

Yeah. That's that's probably all we can tell you at this point.

Operator

Thank you. Our next caller is Jean Ann Salisbury with Bank of America. You may go ahead.

Jean Ann Salisbury
Jean Ann Salisbury
Managing Director at Bank of America

Hi. I just wanted to follow-up to Kim's answer to John's question earlier about when LNG projects sign up for their gas pipeline needs vis a vis when they get sanctioned. You've obviously had a ton of LNG contracting activity over the last quarter. I think you're probably still to come this sort of large wave of sanctioning. So I guess my question is if you believe that those projects have kind of already signed up for the gas takeaway that they would need or if that's basically coming as they sanction the projects over the next year.

Kimberly Dang
Kimberly Dang
CEO & Director at Kinder Morgan

Yeah. Generally, what we see and, Cecil, jump in here, is that, you know, when a project get to get a project FID, you know, they need to get their financing and put their financing in place. And so to put that financing in place, usually, they've got to have a gas supply. And so that's when, you know, the initial project, as I'll call it, you know, from the facility to the nearest liquid point gets sanctioned. And then generally, happens after that is as they continue and they're starting to get closer to in service, you know, they decide, okay.

Kimberly Dang
Kimberly Dang
CEO & Director at Kinder Morgan

And they're they're thinking about really how am I gonna supply this on a daily basis. Then they start looking at, okay, that liquid point is very competitively priced. I might wanna get some cheaper molecules and or what happens if a pipe goes down or something, maybe I also need some diversification. So, you know, that happens more over time, you know, between the time, you know, the the project gets sanctioned and before it gets put in service.

Richard Kinder
Richard Kinder
Executive Chairman at Kinder Morgan

And let me just add to what Kim says. Given the fact that this demand is occurring primarily along the Gulf Coast where our system is so extensive, this kind of opportunity just lends itself to a structure like we have. I think we cannot overemphasize the benefit that we have from the infrastructure that already exists and the ability to expand it on a reasonable basis.

Jean Ann Salisbury
Jean Ann Salisbury
Managing Director at Bank of America

That's very clear. Thank you. And then as a follow-up, I wanted to ask about some of the dynamics of Permian gas pipelines. We're very tight on egress capacity today, but something like five BCFD comes online next year, including your own GCX expansion. And I think there are a few other possible projects out of the Permian that seem to be progressing.

Jean Ann Salisbury
Jean Ann Salisbury
Managing Director at Bank of America

So I guess the question is if there's some concern that this could put pressure on rates for Kinder Morgan later in the decade if some of those initial pipeline contracts begin to roll off. Can you just kind of talk about how you would frame that risk of of Permian overbuild?

Kimberly Dang
Kimberly Dang
CEO & Director at Kinder Morgan

Sure. So the contract GCX and PHP are two. I think those ten year contracts expire in 2930. What I would say is given that those were some of the first pipelines built out of the Permian to the Gulf Coast, you know, they have very attractive rates on them. And so it's two things.

Kimberly Dang
Kimberly Dang
CEO & Director at Kinder Morgan

One is, I think, you know, they are lower rates than where new projects are getting priced. So there's gonna be some of the cheaper, some of the cheaper transport out of there. And then, you know, the, I forgot what the second point I was gonna make. But, Sipa, go ahead.

Sital Mody
Sital Mody
President - Natural Gas Pipelines at Kinder Morgan

Yeah. So, I mean, what the the other thing, you know, as we think about the two pipes that we have, if you're talking about kind of recontracting risk, etcetera, those pipelines fit very well in our network and we have the ability to extract probably in my view better value once those if those aren't recontracted. And so we view that risk as low. When we think about the next project out of the basin, we're going to be very prudent. If as we think about our focus has shifted to demand pull when you think about the projects that we sanctioned over the last couple of quarters.

Sital Mody
Sital Mody
President - Natural Gas Pipelines at Kinder Morgan

So if there is another producer push project, it would obviously have to be very well contracted and for a longer term.

Kimberly Dang
Kimberly Dang
CEO & Director at Kinder Morgan

So those pipes go into our Texas interest rate system. They feed contracts that we have in the Austin market. So we have end use demand attached to that, and that's something that we can offer shepherd and customers that that other people can offer. And then the other thing I was gonna say is that, you know, when we run our economics in order to be conservative to make sure we get good returns on these projects, we assume generally, we assume a step down in rates whenever contracts roll. Not saying that that's gonna happen here, but that's, you know, that's part of how we make sure that, we, we get the returns we're expecting to get.

Operator

Thank you. Our next caller is Keith Stanley with Wolfe Research. You may go ahead, sir.

Keith Stanley
Director at Wolfe Research, LLC

Hi. Good afternoon. Wanted to start on the 500,000,000 Haynesville gathering project. When would the expansion capacity be in service? And what's the projected time line for the volume ramp to get to returns? And then relatedly, how do you think, if at all, about potential Haynesville takeaway pipelines, given all the Louisiana LNG projects we're seeing and your expanded gathering presence?

Sital Mody
Sital Mody
President - Natural Gas Pipelines at Kinder Morgan

Sure. So on your first question, we plan on getting all of our facilities in by the end of the fourth quarter next year. And so we do see volume ramping up along the way. Really, we're adding treating capacity and we're adding incremental pipe loops just to get unlock some of the hydraulics there. Look, as we think about the outlook in the Haynesville, you know, you've got a you've got a very productive basin, that's very close to the the demand centers that we've been talking about.

Sital Mody
Sital Mody
President - Natural Gas Pipelines at Kinder Morgan

And so, you know, there's a definite need to get incremental molecules to those consuming base the consuming cut the consumers. Right? We gotta get the physical molecule there. As far as the the build out, the existing build out that's there, given the growth that we see on the Gulf Coast, I think all that does is creates incremental opportunities for us and our in our both our interstate and intrastate networks to be able to, connect the dots. You know, you've got a lot of convergence at Gillis right now.

Sital Mody
Sital Mody
President - Natural Gas Pipelines at Kinder Morgan

We're exploring opportunities downstream of Gillis to connect the the market to that supply that's aggregating at Gillis. And and if there's an opportunity, we could even consider tying in some of that Kinderhawk production on another takeaway project out of the basin. But once again, all of that's got to be contracted for and it's got to make economic sense.

Keith Stanley
Director at Wolfe Research, LLC

Great. Thanks for that. Second one, I wanted to follow-up on some of your opening comments, Kim, on the permitting improvement and the Order eight seventy one and not long no longer having to wait the five month waiting period before starting construction. When you think in aggregate about those improvements that you're seeing, could this meaningfully accelerate the timeline on some of your larger projects versus original expectations?

Kimberly Dang
Kimberly Dang
CEO & Director at Kinder Morgan

So the answer is it depends. So this this is a one on August, it is a, it's one year, but they've got it out for notice and comment. And I think, you know, our expectation is that they they likely make this permanent, but we'll just have to wait and see. And so right now with respect to the one year extension, you know, not a lot of benefit for us. But if they if they make it permanent, then yes.

Kimberly Dang
Kimberly Dang
CEO & Director at Kinder Morgan

There will be benefits to our major projects. And, you know, and so it's gonna depend. And the reason it depends is, you know, it depends on the procurement schedule. And so when we get the pipe and when we get the compression. So there are certain projects that we will be able to move up by that five months and take advantage of, and there are others, that we won't.

Kimberly Dang
Kimberly Dang
CEO & Director at Kinder Morgan

The other thing I'd say is on, is on the, prior notice. That's, that has increased by 50%, so now it's 61,000,000. That means you don't have to file for a seven c for projects that are less than than 61,000,000, so the permitting process is much quicker. And so we will definitely benefit, from that increase in in the prior notice limit. The other thing I'd say on the bigger projects is we've actually filed for a waiver for August.

Kimberly Dang
Kimberly Dang
CEO & Director at Kinder Morgan

So we're not waiting on, the notice and comment period, to be to be complete. We've asked, to them to, decide independently on our big projects, our system for NMFS. And I think we, view the likely outcome of that favorably at this point.

Operator

Thank you. Our next caller is Zach Van Evern with TPH. You may go ahead, sir.

Zack Van Everen
Director - Equity Research at TPH&Co

Hi, guys. Thanks for taking my question. Just going back to the Haynesville expansion real quick. Can you guys speak to the volume or capacity that you're adding there? And then is this mainly from your larger customers?

Zack Van Everen
Director - Equity Research at TPH&Co

Are you seeing demand from some of the privates that feed your system as well?

Kimberly Dang
Kimberly Dang
CEO & Director at Kinder Morgan

It's both. So it's from the larger customers, and it's from the privates. And, you know, somebody may be able to speak to the capacity. But, I mean, they they are ramping up significantly. You know, if you look at our supply numbers, and Tom, help me with this because you talked to the board about this today, But we are expecting, Woodmac is expecting a doubling in the production coming out of the Haynesville.

Kimberly Dang
Kimberly Dang
CEO & Director at Kinder Morgan

So, I mean, it's it's increasing by, I don't know, from '13 to 2626.

Tom Martin
Tom Martin
President at Kinder Morgan

Yeah. To

Kimberly Dang
Kimberly Dang
CEO & Director at Kinder Morgan

to '26 by 02/1934. So, I mean, that gives you a sense of the type of volumes that we are talking about.

Zack Van Everen
Director - Equity Research at TPH&Co

Gotcha. That makes sense. And then maybe one on the LNG side. I know Tennessee Gas feeds the Plaquemines facility and, you know, VG continues to talk about potential further expansion at that site. If they were to do that, does Tennessee Gas have the ability to expand more to feed LNG in that area?

Sital Mody
Sital Mody
President - Natural Gas Pipelines at Kinder Morgan

So first, if they were to do that, I think it further creates opportunities for us with these projects that we're bringing across. I think ultimately, it could would there it would you know, Tennessee is already full in multiple directions, but we've got, you know, the bottleneck debottlenecking capability as we bring this incremental supply from west to east that I've been talking about on the last few calls. We talk about Texas access project, which is kind of continuing on the theme. We talked about Trident and we talked about the header. And now we're actually extending into Texas to take volumes across to Louisiana.

Sital Mody
Sital Mody
President - Natural Gas Pipelines at Kinder Morgan

That helps debottleneck. And so if Plaquemines were to further expand, we would look at opportunities to bring incremental gas to the basin, to that area from not only MSX, but some of our other from some of our other pipes in the in the area including potentially looking at accessing the Haynesville in a different direction. Right? And so, you know, when we talk about Gillis and kind of the directions that these pipes may have, one of those may be going that further eastward direction to kind of help fill that incremental need.

Operator

Thank you. Our next caller is Jason Gabelman with TD Cowen. You may go ahead, sir.

Jason Gabelman
MD - Energy Equity Research at TD Cowen

Yes. Hey, good afternoon. Thanks for taking my questions. The first one I wanted to ask was on the Bakken given the outrigger deal has been closed for quite some time. I think you're early six months and HH is close to ramping up here on the conversion.

Jason Gabelman
MD - Energy Equity Research at TD Cowen

So just wondering what the strategy is on gaining volumes there and kind of securing potentially higher rates that that region has to offer versus other basins?

Sital Mody
Sital Mody
President - Natural Gas Pipelines at Kinder Morgan

I'll take that. So so one, the the integration, as we talked about, has gone well. We're looking at, you know, incremental networking, you know, network bottlenecks to be able to gain further efficiencies out in the basin. But as far as it goes as far as Highland Express goes, you know, we just continue to work with our customers there. I don't have anything to report on that. We're making progress, but but nothing for this call.

Jason Gabelman
MD - Energy Equity Research at TD Cowen

Okay. And then just maybe longer term question. You've you've talked a lot about the LNG growth on the on The US Gulf Coast and the boon it's been for your business. There is some concern that after this wave of capacity, there's going to be a potential oversupply in the market. And I wonder if you're in your conversations with LNG customers hearing anything around a potential slowdown in contracting or need for additional piping into future plants after this wave of capacity comes online or or if your LNG customers really expect, new builds to to continue at pace through through the decade and and into the twenty thirties?

Kimberly Dang
Kimberly Dang
CEO & Director at Kinder Morgan

I mean, from my perspective, I mean, we're not seeing and you can see this from what, you know, the LNG builders are announcing, which is they continue to announce new projects and sign new contracts. And we say we continue to see projects get, announced and projects get expanded. And I think part of the reason that you see that is it is a favorable environment right now to get projects built in The US, number one. Number two, I think that, you know, from a trade negotiation standpoint, it helps on the balance of payments and the whole tariff discussion to take gas from The US. So I mean, to date, we have not seen any slowdown in our discussions with with these customers.

Richard Kinder
Richard Kinder
Executive Chairman at Kinder Morgan

Tom, you might share your model that you showed the board today in terms of overall growth and worldwide demand and and The US portion of it?

Tom Martin
Tom Martin
President at Kinder Morgan

Sure. I mean, as Richard alluded to in his comments, world demand is expected to grow by 25% between now and 2050 and much of that growth, actually more than 25% will be filled in our view and I think in the view from others in the market with LNG. Most of that growth as Rich said is in Asia, basically areas where they don't have production. So it's going to have to be LNG that ultimately fills that hole. And what we've seen so far is that The U.

Tom Martin
Tom Martin
President at Kinder Morgan

S. While the overall demand profile is growing, The U. S. Market share is growing as well. So it's almost a doubling effect of the benefits of having LNG infrastructure growing in The U.

Tom Martin
Tom Martin
President at Kinder Morgan

S. And I think that's for a few reasons. One, the rule of law here in The U. S. As compared to other places around the world.

Tom Martin
Tom Martin
President at Kinder Morgan

There's a very advanced network within The U. S. Such that if there's ever a need to leave molecules back in The U. S. And optimize those from a world price environment versus a domestic U.

Tom Martin
Tom Martin
President at Kinder Morgan

S. Environment. We have a great network of infrastructure here in The U. S. To support that.

Tom Martin
Tom Martin
President at Kinder Morgan

And then I think the track record, I mean, I think the developers in The U. Have done an extremely good job of being successful in getting projects online timely and providing competitive rates. And we have a tremendous supply resource here in The U. S. That I think gives customers internationally a lot of comfort in knowing that there's going to be a plenty of molecules behind these twenty year contracts that they signed with U.

Tom Martin
Tom Martin
President at Kinder Morgan

S. Developers and with customer midstream companies like us. So I think The U. S. Is in a great place to continue to grow well in north of what the overall global gas demand growth is between now and 02/1950.

Tom Martin
Tom Martin
President at Kinder Morgan

So I think that means more to come beyond what we see in the immediate line of sight of projects.

Operator

Thank you. Our next caller is Brandon Bigam with Scotiabank. You may go ahead, sir.

Brandon Bingham
Associate Director - US Equity Research at Scotiabank

Hi. Thanks for taking the questions. Just continuing on the LNG theme here. Could you maybe discuss some of the incremental opportunities you see maybe outside the Haynesville? And concurrently, which basin or basins do you expect to be sort of next on deck to meet all of that growth that you guys have been talking about?

Sital Mody
Sital Mody
President - Natural Gas Pipelines at Kinder Morgan

Yes, sure. So outside of the Haynesville, we've talked about this before. The Lean Eagle Ford is going to be important. One of the key themes that's kind of coming to surface is low nitrogen, the nitrogen quality of the gas. And as you think about LNG plant deficiencies, lower nitrogen equates to better production.

Sital Mody
Sital Mody
President - Natural Gas Pipelines at Kinder Morgan

So we think the Lean Eagle Ford is gonna come into play, especially as it pertains to some of the Texas LNG facilities. You've obviously got the Permian. We you know, when we think about the the Utica and the Marcellus, you know, given the the the constrained nature of the the basin, it's gonna be hard to get extra capacity out of there. That being said, we are evaluating some opportunities to move incremental gas out of out of the the Utica down south using our, Tennessee network. And so, you know, that's in its early phases.

Sital Mody
Sital Mody
President - Natural Gas Pipelines at Kinder Morgan

You know, it's gonna take an all of the above approach because it's not just the LNG folks that are looking for molecules. It's the power demand that we just talked about, and and it's also the existing organic, LDC and and and and the basic power that we've been talking about, you know, since January 2024. All of that's gonna be growing and needing access to molecules. So it's an all of the above basin approach. You know, we've even talked about our Bakken egress project on the residue side moving gas out west.

Sital Mody
Sital Mody
President - Natural Gas Pipelines at Kinder Morgan

Mean that's another example of something that's going to come into play as this demand kind of matures.

Brandon Bingham
Associate Director - US Equity Research at Scotiabank

Okay, great. And then maybe just on the full year budget commentary regarding the EBITDA, reiterating the commentary there about exceeding by at least the outrigger contribution. Could you discuss some of the areas you see outperforming expectations in 2H that sort of offset some of the lighter performance we've seen through 1H to kind of meet that expectation?

David Michels
David Michels
VP & CFO at Kinder Morgan

The outperformance in the second half of the year, consistent with what we've seen in the first half of the year really, natural gas capacity sales, the Outrigger acquisition contributions, park and loan services on our natural gas business, the Jones Act tanker contributions, those are all some of the items that are contributing to the second half outperformance. And those are consistent with what we've seen in the first half. I would say there was a little bit of timing between the first quarter and the second quarter. We didn't see some of that show up in the first quarter, but On On outrigger, particularly, and some of the Powell's performance as well.

Operator

You. Harry Matura with Barclays. You may go ahead, sir.

Harry M
Harry M
Head - Americas FICC Research at Barclays

Good afternoon. David, earlier you made the point that most of the expected reconciliation bill benefits come from the treatment on depreciation, which I think makes sense as it doesn't look like the 30% of EBIT deductibility for interest was a material constraint for KMI. But having said that, does the expanded interest deductibility cause you to rethink anything on the financing or balance sheet side moving forward to take greater advantage of those tax benefits on interest expense down the road?

David Michels
David Michels
VP & CFO at Kinder Morgan

No. It really does. It's a good question, but no, it really doesn't. I think our financing strategy is pretty straightforward and simple. It's pretty plain vanilla.

David Michels
David Michels
VP & CFO at Kinder Morgan

We don't have a ton of external capital needs to fund our growth projects. We can fund $2,500,000,000 internally from cash flow that we generate. As that EBITDA continues to grow, that will continue to grow. And so we really just use our external financing strategy to refinance our maturing bonds. And this tax reform won't influence that in our view.

Harry M
Harry M
Head - Americas FICC Research at Barclays

Got it. Alright. Thank you.

Operator

Thank you. At this time, I am showing no further questions. I'll turn the call back over to you for any closing comments. Thank you.

Richard Kinder
Richard Kinder
Executive Chairman at Kinder Morgan

Thank you very much. Have a good evening.

Operator

Thank you. This concludes today's conference call. You may go ahead and disconnect at this time.

Executives
    • Richard Kinder
      Richard Kinder
      Executive Chairman
    • Kimberly Dang
      Kimberly Dang
      CEO & Director
    • Tom Martin
      Tom Martin
      President
    • David Michels
      David Michels
      VP & CFO
    • Sital Mody
      Sital Mody
      President - Natural Gas Pipelines
Analysts
    • Theresa Chen
      Senior Analyst at Barclays
    • Michael Blum
      Managing Director at Wells Fargo Securities
    • John Mackay
      VP - Equity Research at Goldman Sachs
    • Jeremy Tonet
      MD & Research Analyst at J.P. Morgan
    • Manav Gupta
      Executive Director at UBS Group
    • Jean Ann Salisbury
      Managing Director at Bank of America
    • Keith Stanley
      Director at Wolfe Research, LLC
    • Zack Van Everen
      Director - Equity Research at TPH&Co
    • Jason Gabelman
      MD - Energy Equity Research at TD Cowen
    • Brandon Bingham
      Associate Director - US Equity Research at Scotiabank
    • Harry M
      Head - Americas FICC Research at Barclays
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