Kinder Morgan, Inc.

now like to turn the call over to Rich Kinder, Executive Chairman of Kinder Morgan. Thank you. You may begin.

Thank you, Sue. As usual, before we begin, I'd like to remind you that KMI's earnings released today and this call include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and the Security and Exchange Act of 1934, as well as certain non-GAAP financial measures. Before making any investment decisions, 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. Now, on these investor calls, I'd like to share with you our perspective on key issues that affect our midstream energy segment. I previously discussed increased demand for natural gas resulting from the astounding growth in LNG export facilities. And last quarter, I talked about the expected growth in the need for electric power as another significant driver of natural gas demand. Since that call, there has been extensive discussion on this topic. with a consensus developing that electricity demand will increase dramatically by the end of the decade, driven in large part by AI and new data centers. I'm a firm believer in anecdotal evidence, particularly when it comes from the actual users of that power and the utilities who will supply it and from the regulators who have to make sure that the need gets satisfied. And the anecdotal evidence over the last decade few months has been jaw-dropping. Let me give you just a few examples. In Texas, the largest power market in the US, ERCOT now predicts the state will need 152 gigawatts of power generation by 2030. That's a 78% increase from 2023's peak power demand of about 85 gigawatts. This new estimate is up from last year's estimate of 111 gigawatts for 2030. Other anecdotal evidence also supports a vigorous growth scenario. For example, one report indicates that Amazon alone is expected to add over 200 data centers in the next several years, consistent with the large expansions being undertaken by other tech companies chasing the need to service AI demand. Annual electricity demand growth over the last 20 years has averaged around one-half of 1%. Within the last 60 days, we've seen industry experts predict annual growth from now until 2030 at a range of 2.6% to one projection of an amazing 4.7%. So the question becomes, how will that demand be satisfied and how much of a role will natural gas play? Many developers of data centers would prefer to rely on renewables for their power, but achieving the needed 24-7 reliability by relying only on renewables is almost impossible, and growth in usage is limited by the need for new electric transmission lines which are difficult to permit and build on a timely basis. Batteries will help some, and some tech companies now want to use dedicated nuclear power for their facilities, but as the Wall Street Journal recently pointed out, they will likely increase reliance on natural gas to replace the diverted nuclear power. Again, anecdotal evidence is key. In Texas, a program that would extend low-cost loans for new natural gas-fired generating facilities was massively oversubscribed, which an ERCOT official predicted a day's gas daily could result in an additional 20 to 40 gigawatts just in the state of Texas. And the governor has already suggested expanding this low-cost loan program. That oversubscription, I think, is clear evidence that the generators are projecting increased demand for natural gas-fired facilities. Perhaps Ernest Moniz, Secretary of Energy under President Obama, summed it up best when he said, And I quote, there's some battery storage, there's some renewables, but the inability to build electricity transmission infrastructure is a huge impediment, so we need the gas capacity, end quote. As an example of how industry players see the world developing, S&P Global Insights, as quoted in Gas Daily, reports that U.S. utilities plan to add 133 new gas plants over the next several years. And this view is reflected in the significant new project in the southeastern United States that we are announcing today. While it's hard to peg an exact estimate of increased demand for natural gas, as a result of all this growth and the need for electric power, we believe it will be significant and makes the future even more robust for natural gas demand overall and for our midstream industry. And with that, I'll turn it over to Kim.

Okay. Thanks, Rich. I'll make a few overall points and then I'll turn it over to Tom and David to give you all the details. We had a solid quarter, adjusted EPS increased by 4%, EBITDA increased by 3% and those were driven by growth in our natural gas segment and our two refined products business segments. We ended the quarter at 4.1 times debt to EBITDA and we continue to return significant value to our shareholders. Today our board approved a dividend of 28.75 cents per share and we expect to end the year roughly on budget. Let's turn and talk about natural gas for a minute. The long term fundamentals in natural gas have gotten stronger over the course of this year with the incremental demand expected from power and backing up data centers that Rich just took you through. Overall, Wood Mac projects gas demand to grow by 20 BCF between now and 2030 with a more than doubling of the LNG exports as well as an almost 50% increase in exports to Mexico. However, they are projecting a 3.9 BCF a day decrease in power demand. As Rich's comments indicated, We simply do not believe that will be the case given the anticipated power-related growth in gas demand associated with AI and data centers, coal conversions, and new capacity to shore up reserve margins and backup renewables. Let's start with the data center demand. Utility IRPs and press releases published since 2023 reflect 3.9 BCF a day of incremental demand and we would expect that number to grow as other utilities update their IRPs. It's early in the process, but we're currently evaluating 1.6 BCF a day of potential opportunities. Most estimates we have seen are between 3 and 10 of incremental gas demand associated with AI. Rich took you through the 20 BCF a day of natural gas power that Texas is contemplating subsidizing, I should have said 20 gigawatts, as well as the U.S. projection of 133 new gas plants over the next several years. At Kinder Morgan, we're having commercial discussions on over five BCF a day of opportunities related to power demand, and that includes the 1.6 of data center demand. Certainly not all these projects will come to fruition. But that gives you a sense of the activity levels we're seeing and supports our belief that growth in natural gas between now and 2030 will be well in excess of the 20 BCF a day. Not included in the 5 BCF of activity that we're seeing is capacity S&G signed up on its successful open season for its proposed approximately $3 billion South System 4 expansion that's designed to increase capacity by 1.2 BCF a day. Upon this completion, this project will help to meet the growing power demand and local distribution company demand in the southeastern markets. Mainly as a result of this project, our backlog increased by 1.9 billion to 5.2 billion during the quarter. In the past, we have indicated that we thought the demand for natural gas would allow us to continue to add to the backlog and South System 4 project is an example of that. We continue to see substantial opportunities beyond this project to add to our backlog. The current multiple on our backlog is about 5.4 times. During the quarter, we also saw some very nice decisions from the Supreme Court. On the Good Neighbor Plan, the court stayed the plan, finding that we are likely to prevail on the merits. There's still a lot to play out here, But I do not think the Good Neighbor Plan will be implemented in its current form. It is likely to be at least a few years before a new or revised plan could be put together, and a few years beyond that for compliance. And in the interim, we've got a presidential election. The overturning of the Chevron doctrine, which gave deference to regulatory agencies when the law is not clear, is also a positive. Together, these decisions will help mitigate the regulatory barrage we've seen over the last couple of years. And with that, I'll turn it over to Tom to give you some details on our business performance for the quarter.