Executive Summary / Key Takeaways

• Unparalleled Infrastructure for Surging Demand: Kinder Morgan, Inc. (KMI) is strategically positioned as a dominant energy infrastructure provider, leveraging its vast network of pipelines and terminals to capitalize on the accelerating demand for natural gas driven by LNG exports, power generation, and the burgeoning data center industry.
• Robust Project Backlog & Disciplined Growth: The company boasts a substantial $9.3 billion project backlog, primarily focused on natural gas expansions underpinned by long-term, fee-based contracts, ensuring predictable cash flow and future earnings growth.
• Solid Financial Performance & Shareholder Returns: KMI delivered strong Q2 2025 financial results, with significant revenue and net income growth, supported by its resilient business model where nearly two-thirds of EBITDA comes from take-or-pay contracts. The company continues to increase its dividend and expects further balance sheet improvement.
• Operational Excellence as a Differentiator: KMI's competitive edge stems from its extensive existing asset footprint, proven track record in project execution, and sophisticated network optimization capabilities, enabling efficient and reliable energy delivery despite competitive pressures and regulatory hurdles.
• Favorable Macro Tailwinds & Tax Benefits: An improving federal permitting environment, coupled with substantial cash tax benefits expected through 2027 from recent legislation, provides significant tailwinds, enhancing KMI's ability to fund its ambitious growth initiatives.

The Enduring Backbone of North American Energy

Kinder Morgan, Inc. stands as a titan in North American energy infrastructure, operating an expansive network that is foundational to the continent's energy supply. Founded in 1997, KMI has evolved from its initial master limited partnership (MLP) structure, converting to a C-corporation in 2014 to simplify shareholder tax reporting and broaden its investor appeal. This strategic shift, alongside a disciplined approach to capital allocation, has allowed KMI to navigate market cycles, including a significant dividend adjustment in 2015, demonstrating its resilience and commitment to long-term shareholder value through consistent dividend restoration since 2018.

At its core, KMI operates on a highly stable, fee-based business model, acting as a "toll-taker" for energy commodities. This model insulates the company from direct commodity price volatility, with approximately two-thirds of its EBITDA generated from take-or-pay contracts and another 30% from fee-based or hedged arrangements. Only about 5% of KMI's EBITDA is exposed to commodity price fluctuations, providing a robust and predictable cash flow stream that underpins its financial stability and strategic investments.

The current macro environment presents an "amazing time to be in the natural gas industry," as noted by management. Global natural gas demand is projected to increase by 25% over the next 25 years, driven by population growth in emerging markets and the increasing global reliance on liquefied natural gas (LNG). The U.S. is poised to play a critical role, having been the top global natural gas producer for 15 consecutive years and the world's top LNG exporter since 2023. S&P Global Commodity Insights estimates U.S. LNG feed gas demand will more than double by 2030, a significant tailwind for KMI, which currently moves about 40% of all feed gas for these facilities. Beyond LNG, domestic power demand, fueled by the surge in AI and data centers, along with industrial growth and exports to Mexico, further solidifies the long-term demand outlook for natural gas.

Competitive Moats and Operational Excellence

KMI's competitive advantages are deeply rooted in its extensive physical footprint and operational prowess. The company owns or operates approximately 79,000 miles of pipelines, 139 terminals, and over 700 Bcf of natural gas storage capacity, making it one of the largest energy infrastructure players in North America. This unparalleled network allows KMI to build off existing infrastructure, offering highly competitive solutions for new projects and efficiently delivering volumes to customers. This contrasts with competitors like Enbridge Inc. (ENB) and The Williams Companies, Inc. (WMB), who, while having significant footprints, may not possess KMI's geographic density and interconnectivity across key U.S. demand centers.

While some rivals, such as WMB, may boast specific technological advantages like 10% faster processing speeds due to automated controls, KMI's differentiation lies in its comprehensive network intelligence and operational optimization. KMI's ability to integrate new assets, as demonstrated by the seamless integration of the Outrigger Energy acquisition, and its focus on debottlenecking existing systems (e.g., on the Tennessee Gas Pipeline) are critical forms of technological and operational excellence. This allows KMI to leverage its scale for higher throughput efficiency and superior margins, even if some of its infrastructure is older, which can lead to higher operating costs per unit compared to more modern systems of competitors like ENB. KMI's strategic intent is to continuously enhance its network's capabilities and reliability, ensuring it remains the preferred choice for customers seeking secure and timely energy delivery.

KMI's strategic positioning is further highlighted by its market share: it serves approximately 45% of export LNG demand, 50% of exports to Mexico, and 45% of power demand in the combined Desert Southwest, Texas, and Southeast regions. This broad market penetration provides a strong foundation against competitors like TC Energy Corporation (TRP), which focuses more on large-scale transmission, or ONEOK, Inc. (OKE), which specializes in gathering and processing. KMI's diversified portfolio, including its growing Renewable Natural Gas (RNG) generation capacity (now 6.9 Bcf per year with the Autumn Hills facility), also provides a hedge against potential shifts in energy consumption patterns, though it lags ENB in broader renewables diversification.

Strategic Initiatives and Robust Project Backlog

KMI's strategic response to the surging natural gas demand is evident in its rapidly expanding project backlog, which increased from $8.8 billion to $9.3 billion during Q2 2025. This growth reflects $1.3 billion in new projects added and approximately $750 million of projects placed in service during the quarter. The company's backlog has seen a remarkable increase from $3 billion at the end of 2023 to $8.1 billion by Q4 2024, signaling a period of significant expansion.

Key projects underpinning this growth include:

• Trident Project: A $1.7 billion project serving growing demand in Southeast Texas, including the Golden Pass LNG facility. It has the potential for capital-efficient expansion from 1.5 Bcf to 2.8 Bcf.
• Mississippi Crossing (MSX) and South System Expansion 4 (SS4): These projects, totaling approximately $3 billion (KMI's share $1.8 billion), are designed to increase Southern Natural Gas South Line capacity by about 1.2 Bcf per day, meeting growing power generation and residential/commercial demand in the Southeastern U.S. MSX has already been upsized by 300 MMcf/d to 1.8 Bcf/d.
• Gulf Coast Express (GCX) Expansion: This expansion will enable customers to move substantial additional gas out of the Permian Basin, targeting a mid-2026 in-service date.
• Outrigger Energy Acquisition: The $648 million acquisition of a natural gas gathering and processing system in North Dakota in February 2025 complements KMI's existing Bakken assets, adding a 0.27 Bcfd processing facility and a 104-mile rich gas gathering pipeline. This acquisition is expected to reduce future capital expenditures for customer expansions.
• KinderHawk CapEx: Approximately $500 million in capital expenditures were approved for KinderHawk, supported by life-of-lease contracts to accommodate significant customer volume ramp-up in the Haynesville basin, where production is expected to double by 2034.

These projects are predominantly underpinned by long-term contracts with creditworthy customers, ensuring stable returns and predictable cash flows. Approximately 50% of the projects in the current backlog will serve power demand, reflecting the growing needs of utilities and data centers across the Southern U.S.

Financial Performance and Outlook

KMI's financial performance in Q2 2025 demonstrates the strength of its business model. Total revenues increased by 13% year-over-year to $4.04 billion, and net income attributable to KMI rose by 24% to $715 million, translating to $0.32 basic and diluted earnings per share, up $0.06 from the prior year. On an adjusted basis, net income attributable to KMI increased by 13% to $619 million, and adjusted EPS grew by 12% to $0.28. Adjusted EBITDA also saw a healthy 6% increase to $1.972 billion.

For the first six months of 2025, total revenues reached $8.28 billion, a 12% increase over the same period in 2024. Net income attributable to KMI was $1.432 billion, up 8%, with basic and diluted EPS at $0.64, up $0.05. This growth was primarily driven by favorable earnings in the Natural Gas Pipelines segment, which saw its Segment EBDA increase by 17.8% in Q2 2025 to $1.436 billion, fueled by LNG deliveries and new contracts. The Terminals segment also performed well, with EBDA up 6.8% due to higher Jones Act tanker charter rates and expansion project contributions. While Products Pipelines and CO2 segments saw slight declines in EBDA, largely due to commodity price impacts and prior-year divestiture gains, the overall consolidated performance remained strong.

KMI maintains a robust liquidity position, with $82 million in cash and cash equivalents and approximately $2.8 billion available under its credit facility as of June 30, 2025.

The company's net debt stood at $32.3 billion, with a net debt to adjusted EBITDA ratio of 4.0x, an improvement from 4.1x in Q1 2025. Management expects this ratio to further improve to 3.9x by year-end 2025.

Cash flow from operations for the first six months of 2025 was $2.811 billion, providing substantial internal funding capacity. Capital expenditures totaled $1.413 billion in H1 2025, with $959 million allocated to expansion projects.

Looking ahead, KMI expects to exceed its original 2025 budget, with adjusted EBITDA growth projected to reach 5% (including the Outrigger acquisition) and adjusted EPS growth at an attractive 10% from 2024. The company declared a quarterly dividend of $0.2925 per share for Q2 2025, an annualized $1.17 per share, representing a 2% increase from 2024. KMI anticipates investing approximately $2.5 billion per year in expansion capital expenditures over the next several years, which can be fully funded by internally generated cash flow. Furthermore, recent budget reconciliation bills are expected to provide significant cash tax benefits in 2026 and 2027, with KMI not anticipating being a material cash taxpayer until 2028, further bolstering its financial flexibility.

Risks and Mitigation

Despite a strong outlook, KMI faces several risks inherent in the energy infrastructure sector. Litigation remains a persistent challenge, with ongoing disputes such as the Freeport LNG Winter Storm Uri lawsuit, pension plan litigation (where plaintiffs seek over $100 million), and environmental liabilities related to Superfund sites like Portland Harbor and Lower Passaic River. KMI vigorously defends these cases, accruing liabilities based on best estimates and leveraging its legal expertise.

Permitting challenges, while showing signs of improvement under the current federal administration, can still cause project delays. KMI actively engages with regulatory bodies like the U.S. Army Corps of Engineers and FERC, seeking waivers and advocating for expedited processes, as seen with its efforts for South System 4 and MSX. The company also emphasizes building "defensible" permits to withstand legal challenges, a strategy honed over years of successful court outcomes.

Tariffs present another "fly in the ointment," potentially impacting project economics. However, KMI has proactively mitigated this risk by preordering equipment, negotiating caps on tariff impacts, and securing domestic steel and mill capacity, estimating the impact on large projects to be roughly 1% of project cost. While commodity price fluctuations can affect its smaller gathering business, KMI's extensive hedging program and the predominantly fee-based nature of its core operations substantially mitigate this exposure. The company also strategically manages its procurement to minimize cost inflation risks for its large-scale projects.

Conclusion

Kinder Morgan, Inc. stands as a compelling investment proposition, firmly rooted in its indispensable role within North America's evolving energy landscape. Its robust "toll-taker" business model, characterized by stable, fee-based revenues, provides a resilient financial foundation against market volatility. The company's strategic foresight, demonstrated through timely acquisitions and a burgeoning project backlog, positions it to capture the immense growth opportunities arising from surging natural gas demand, particularly from LNG exports, power generation, and the burgeoning data center industry.

KMI's operational excellence, extensive infrastructure, and disciplined capital allocation strategy are key competitive differentiators, enabling it to execute large-scale projects and deliver consistent shareholder returns, including a growing dividend. While risks such as litigation and permitting challenges persist, KMI's seasoned management team has a proven track record of effectively mitigating these hurdles. With a strong balance sheet, significant cash tax benefits on the horizon, and a clear strategic roadmap for expansion, Kinder Morgan is well-equipped to continue fueling America's energy future, offering investors a stable and growing income stream in a sector poised for multi-decade demand.