Thank you all for being here. Appreciate it.
Yeah. Good to be here, Michael.
First of all, if you don't mind, could we just close the door in the back? Thank you. So, you put out the guidance last night, so I figured maybe just start with that, just talk through it, and then, maybe I'll have a question or two on that.
Sure. So we put out a guidance which shows 4% growth in EBITDA from 2025 to 2026. It shows 8% growth in earnings. It shows us ending the year next year at 3.8 times debt to EBITDA on the balance sheet, well, or at the lower end of our three and a half to four and a half times range. It shows $3.4 billion of expansion CapEx. The other thing we did was we raised our expansion CapEx guide. We used to talk about approximately $2.5 billion per year, and now we're talking about over $3 billion per year for the next few years. That's just a function of the project opportunities that we've continued to add to the backlog as well as the timing of that spend.
And so we think it's a fantastic opportunity in the midstream space right now, you know, getting nice growth in EBITDA and earnings and lots of opportunities for economic investment.
Great. And I should have said upfront, if anyone has questions, just raise your hand. We'll run a mic to you and you just, anytime, just raise your hand and ask a question. Just feel free to interrupt me. Yeah. I guess at a high level, like you said, it's a pretty exciting time in the industry and certainly for the company. It seems like you're in the right place at the right time. You've had a, you know, really significant increase in the backlog the last few years, almost all of that's gas pipeline investments. I guess my first question is, and maybe you kind of answered it already, is what inning do you think we're in here? Like, how long do you see the runway for growth and projects and investment opportunities?
Do you see any risks to that long term?
Sure. So, start with the existing backlog of projects. So these are projects that, you know, we have contracted and are board approved. So that's $9.3 billion, which is our current backlog of approved expansion projects. That's up from, as you mentioned, substantially from two years ago. Two years ago, that number was $3 billion, and so that $9.3 billion is going to generate nice growth in EBITDA for us. As you said, 90% of that is associated with natural gas, and it's coming at less than a six times EBITDA multiple. All those projects, again, board approved, and contracted with customers. So that'll lead to nice growth. But beyond that, you know, we have a huge set of opportunities that we're working on.
When we go back and we look at that set of opportunities that we're working on that's sort of beyond the backlog, we went back and we looked at it when the backlog was $3 billion. And then obviously we know what it is now. And that, you know, that opportunity set hasn't changed. It hasn't gotten any smaller, from when the backlog was $3 billion. So we feel like we've got, you know, really nice continued opportunity in the natural gas space. You know, and that's being driven by the 20% plus growth, in natural gas, in the natural gas demand that we expect, you know, between the end of 2024 and 2030. You know, it's gonna be between 22 and 28 Bcf a day. And 22 is Woodmac's number, which is a third party. 28 is Kinder Morgan's internal number.
And that's primarily being driven by export LNG, and all, you know, power, as well as a little bit of ResCom and exports to, exports to Mexico. So, you know, just a fantastic time to be in this space, seeing lots of opportunities to expand our existing asset base and serve the market.
So, maybe just to follow up on that, on the last call you made, you made a few interesting comments to frame that. You talked about evaluating more than 10 Bcf of natural gas projects tied to the power gen sector. And then you also talked about $10 billion of potential projects, I think mostly tied to natural gas. So, can you bucket those, or is there a way to think about what those, you know, a little more color on what those are?
Yeah. So, yeah, the opportunity set beyond the 9.3 backlog is the over $10 billion of potential projects. Now, I'd say this, you know, some of those projects won't happen and, you know, we won't win every one, but it's, you know, it's a huge set of opportunities to be working on. I'd say that the $10 billion looks kind of like the $9.3 billion backlog. You know, it's more of the same in terms of, you know, it is focused on natural gas. So it is almost all natural gas. It is driven by the same demand drivers that, and supply drivers that we see in the 9.3 billion. So, you know, it is power demand, it's export LNG, you know, it is driven, you know, we have a gathering position in the Haynesville. It's, you know, potential expansion of our Haynesville position.
So it's all the same drivers, and I would say in terms of size, you know, and scope of projects within that, it looks pretty similar. You have, you know, a couple, a few that are big projects, and then you have, you know, a lot of singles and doubles in there, and so I'd say it's largely, you know, across the Southern United States as you go from Arizona to Florida, but you know, we do have some pipes going to the Northeast, so we have some potential developments there and then some on NGPL that goes into Chicago, a little bit in Colorado, but it is substantially, you know, across the Southern United States, so you know, I'm confident, you know, we'll get, you know, we will be able to take some of these projects and ultimately be able to add them to the backlog over time.
Now, you know, timing's a little bit harder to predict. But the need is there and, you know, we've got a great position to work from with our existing asset base to deliver value to our customers.
So maybe if I push that a little bit, I guess multi-part question here, but, you know, some of your potential customers have put some stuff out there. So, you know, Southern SNG, they've sort of intimated that they could spend another $1 billion on an S, another SNG expansion. You've already done one, as we know. So curious if you can talk about that at all. And then, you know, there's also been Dominion has listed you as a gas supplier for a proposed 2.2 gigawatt plant, that I think would be in service in like 2032. So, you know, either speak to those projects specifically if you can, but if not, maybe if you could talk about like the process, how this happens, what's the conversation with the customers, how does the project get from, you know, development to FID?
Sure. So it, you know, the first expansion of our Southern Natural Gas asset, which is a gas pipeline, you know, that moves gas into primarily Alabama and Georgia. You know, it's a $3 billion [SS4] project. Our partner is Southern. We have some expansion on existing systems as well. And so to our share, that project is, I think approximately $1.8 billion. So big project for us. I think things are going pretty well. Expect a FERC certificate, probably next summer. And then we'll start construction. So fully contracted, pipe, and comes in service mainly in 2029. So but I think Southern's continued to see incremental demand in the southeast.
Georgia Power, which is one of Southern's subsidiaries, they filed an amended IRP at the end of November, and they were showing 53,500 megawatts of power demand between, you know, now and the 2030s. And so if you look at that, and that this is just a rough, not when you convert that to gas demand, just rough math, 'cause there's a whole bunch of assumptions that go in here. That's gonna be probably over 10 Bcf a day of gas demand. Now, not all of that'll be gas, right? And, you know, some of that, a small portion of that's being served by the SS4 expansion. But even if you adjust for those two factors, that's still a huge amount of incremental demand in that market, you know, and that's one utility in one state. You're seeing similar things.
You mentioned the, you know, South Carolina and Dominion and Santee Cooper. That power plant that you mentioned there is being served by our Bridge Project, which is about a $425 million project that is in our $9.3 billion project backlog, and it comes online in 2030. That's about 325 dekatherms a day, but that pipeline is easily expandable. So, you know, like, what we see with Georgia Power in Alabama, you know, and in Georgia or in Georgia, we expect, you know, that those South Carolina utilities will probably add additional demand, power demand over time in our pipeline. Our Bridge pipeline is easily expandable to meet that demand. So, you know, what's what we're seeing in Georgia and South Carolina, you know, that's just a microcosm of what we're seeing across the entire Southern United States and in pockets elsewhere that we where we have existing capacity.
So maybe just to follow up on the Georgia example. You know, 10 Bcf, let's cut that in half. Let's just say, just make it easy, five Bcf. I guess a couple questions. One, how many competing pipelines are you competing with there for that business? And, you know, what are the limitations of what SNG can do in terms of ability to expand further? Like, is that a factor?
SNG's got a great position in, you know, in Georgia and in Alabama, and it's got two legs to that pipeline that goes through those states. It's got a great position to compete from. In the northern part of the state, Transco does go through the northern part of the state, and so there is some competing pipeline infrastructure. I'm not saying that we will get, you know, 100% of, in your example, you know, the five Bcf. I mean, it, you know, it's gonna depend on exactly where the power plants are sited, et cetera, and so, you know, there's probably going to be that some of the competition gets, but, you know, in my mind, in those kind of numbers, there's plenty of, there's plenty of gravy to go around and plenty of food to go around.
So, I think there's a nice opportunity for a South System 5 expansion.
Great. I appreciate that. What about, maybe we turn to Arizona for a minute. So obviously you had a project that you were developing, it didn't happen. Fine. But you've said that you still see opportunities to invest in Arizona. So I wonder if you can just elaborate on what that means?
Yeah. So too, you know, too, there's opportunities on the natural gas side and then there's opportunities on the product side actually in Arizona. So let me talk about natural gas real quick, and then I'm gonna let Dax talk about the product opportunities. For those of you that don't know Dax, Dax has been with Kinder Morgan for as long as I have. He most recently ran our product pipeline business unit, and is now the incoming President for Kinder Morgan. Tom Martin will retire in January, and Dax will take that position. On the natural gas side, yes, you know, there are more opportunities, just like I said in the southeast where, you know, Transco will have probably opportunities on some of the power plants depending on exactly where those power plants are.
You know, we've got an existing system, and that goes out to Arizona, that goes through New Mexico and out to Arizona. And so, you know, there's gonna be opportunities, you know, on power plants in New Mexico and other places in Arizona that may not be Phoenix, which is where the new pipeline that competitors scheduled to build is going. You know, there's other places in there's coal conversions and other places that'll need power in Phoenix and Arizona. So I think we're well positioned to compete for some of those opportunities. And so we do see additional opportunities in those states on the natural gas side. And then on the product side, I'll let Dax speak to that opportunity.
Yeah. We've got an open season going out there right now in the desert southwest that actually has brought a lot of interest to a market that's been incredibly boring for probably the last, you know, 50 years. But the project, you know, we've partnered with P66 and we're looking at expanding our East Line system from El Paso into Phoenix. And also, as part of the JV, we would build a line from Borger into El Paso that would bring PADD 2 barrels from Borger as well as Wood River. So the project also would reverse the Gold Line, which connects Wood River to Borger, would reverse that line, bringing barrels again from PADD 2, Wood River into Borger, Borger barrels down to El Paso, all the way across the desert into Phoenix.
Then, you know, our existing system brings barrels from El Paso into Phoenix as well as West Coast PADD 5 barrels from California into Phoenix. That market's about 250,000 barrels a day. Our project would also reverse our West Line. So it would clear barrels that are coming into Phoenix out of Phoenix and move them into the southern California basin. So we've got an open season out right now with P66 that closes in the next week and a half, couple weeks. You know, we haven't put a lot of details out because there is a competing project out there and it's a very, very competitive market. So, but it's something we're excited about and hopefully that'll come together. We're pretty enthusiastic about it. So.
Yeah. The dynamic driving that is just the shutdown of refineries in the California market. So the California refineries right now serve the Phoenix market, Tucson market, to some extent, and also the Nevada market specifically, Las Vegas and Reno. So that's what's basically producing that opportunity.
Just one follow-up on that, on the refined products pipeline project. What's the timing? Just, can you just lay out the timing of how?
Yeah. So the open season closes in the next kind of call it, you know, week and a half to two weeks. I think we'll see what the open season produces, and then we'll, you know, we'll get together with our partner. Our expectation is if we have a, if we have a project that we would probably look to FID at some time in the first quarter.
Got it. I think I know the answer to this question, but I like to ask it every now and then. Just on, you know, the behind the meter power market, you know, which Williams has obviously been very front footed in. None of the other pipeline companies seem to have really done that. I'm pretty sure that's, you're not interested in that. I think I know that, but you had talked about potentially creating some kind of partner structure with other players and then having like a package effectively to deliver to a potential developer or hyperscaler. Can you just talk about where that stands today or if I describe that correctly?
Yeah, sure. So you're right on behind the meter in terms of building power plants. You know, that's not our cup of tea. That's not our business. And so, we've done some new businesses in the past and, you know, it's hard first time that you're doing something, and doesn't always go as smoothly as you would like. And so, that's why we've passed on that opportunity. But, you know, we're seeing huge power demand and opportunities to serve power demand. That includes data centers. Sometimes, you know, a lot of times what we've seen early on is it's been the regulated utilities that are building the power plant. So, and then the data center demand is contract or the data centers, et cetera, the hyperscalers are contracting with the regulated utilities.
So we're serving the regulated utilities, which, you know, is a great model. We did, you know, have a sort of consortium that we put together, you know, to bring a power plant developer and a data center developer and us. We haven't found that that's really necessary to get, you know, the gas supply to, you know, to the power plant or to the data center. We haven't found that that's been necessary to compete. So, you know, we just, that's, you know, that's still something that we could do. But in general, we found that we are getting opportunities without having to complicate the task.
Got it. Thanks. Maybe just last question I think I have on gas is gas storage. So maybe you can just start by describing your current footprint and then, A, do you see just natural uplift in EBITDA as contracts roll? Like where's your contracts versus rates today? And then do you see expansion opportunities around your gas storage assets as it relates to everything else we've been talking about?
Sure. So, our storage footprint is 700 Bcf. So pretty substantial storage portfolio. And you know, about 75% of that is regulated, you know, meaning the rates that we charge are set by the FERC in conjunction with our shippers generally. And about 25% of it is unregulated. So on the unregulated market, it's just, you know, basically market-based rates. You're competing with, you know, other people out of storage to set those rates. Those rates have increased substantially over the last couple of years. And so, you know, typically it depends, but those storage contracts are three-ish years. And so you're marking that portfolio to market every three years and, you know, they don't roll, it doesn't roll radically. And so, but you can think about a third of that rolling every year, give or take. So, but yeah, I mean, storage has been great.
We've done a couple of expansions. We completed one last year, which was a six Bcf expansion on a storage facility in Texas. We are doing another storage 10 Bcf expansion of a facility that we actually just got the FERC permit on within the last week on NGPL, which is in East Texas. And then we recently just had an open season for a storage facility that we own in the southeast and got very good demand on that open season. And right now, you know, in the process of working to put together a project brownfield. You know, as you can see from the projects we've done, you know, brownfield development, which, you know, just expanding existing storage facilities works. You know, you can get the rates you need and the contract duration that you need.
I'd say in terms of greenfield, that's a little more difficult because generally, you know, to do a greenfield project to get the rates down to where you need 'em to be, you know, you've gotta have five or six or seven customers, sometimes because of the size, the scale and scope of that facility, and so getting that number of shippers to sign 10 plus year, 10 or 10 plus year contracts is not there yet. The rates are there, but, and so I, but I think we're getting close, a lot closer on the greenfield side.
Okay. I lied. I had another gas question. Sorry.
Oh, yeah.
About that, so there's been a lot of, in the market, like the stock market, there's been a lot of angst about the AI bubble.
Sure.
That's kind of, you know, vacillating here and there.
Yep.
I'm wondering if in your discussions with potential customers for incremental gas supply into these power projects, are you seeing any of that hesitation or is any of that kind of angst around this AI bubble manifesting in your conversations?
I think, you know, by the time they're getting to the gas supply piece of it, you know, a lot of time, I mean, yes, we're having conversations early on, but, you know, I think that, you know, we try to push away the projects that we don't think are gonna happen so we can focus on the projects that we think are more likely, and then as we focus on the projects that we think are more likely, you know, then we're thinking about, okay, what's the credit here, and that's why you heard me say earlier, you know, doing it with regulated utilities is, is a nice place to be, you know, to have that credit on the, on the other end of, of the gas supply contract.
You know, to the extent that you don't have a regulated utility on the other end, you know, there could be, you know, we're gonna look to determine whether we think collateral is necessary, and a lot of times we do, and so we'll get some form of collateral to help us mitigate costs to make sure we're not gonna be out of pocket depending on, you know, what that credit is. I mean, we might require as much as, you know, the entire project costs to be backed by an LC or something. You know, that would be someone who doesn't have very good credit. Someone that's got better credit than, you know, you'd have, but not, you know, utility-like credit than you'd have, you know, you'd be somewhere in between the two. So that's generally how we think about it.
Make sure that we have the right credit so that if you do have, you know, a bubble in this market that we've tried to pick the winners and that where we have a little bit more, took a little bit more risk, we get higher returns and have a collateral.
Okay. Thanks. Maybe just a related question on the regulatory and the permitting environment. So, I guess the question would be, you know, this administration came in sort of touting that they're gonna have a better, more industry-friendly environment. So I'm curious if you're actually seeing that or how do you think they've done so far in terms of making it easier for you to do business, yeah, permitting as well, which obviously.
Okay. So, I think they've done a good job so far. I think there's more to do is what I would say. So let me tell you about where I think they've done a good job. So the Corps of Engineers has been very quick on, you know, response and permitting, et cetera. And that is, you know, that is a change from what we've seen in the past. Their engagement and their responsiveness and their issuing of permits is just much faster. On the FERC side, which, you know, anytime we build an interstate natural gas pipeline, you know, of any significant size, we have to have a FERC permit. And we've seen some improvement on the FERC side.
The most substantial improvement was they basically retracted what was called 871, which basically was a five-month period from when they permitted your project to when they would let you start building, to give landowners a time to appeal and them to resolve those. So they basically, which is something that they had only put into effect two or three years before, and it had just elongated timelines. So they immediately have rescinded that. So that gives us immediate five months benefit on our big projects. They have said that they're gonna issue our permits in 12 months. They've committed to that. That's the schedule that they put out there, so you know, on some large projects, you know, prior to that, it was taking longer than 12 months. So you know, them committing to 12 months, I think it is a win.
Where we would like to see more is we would like to see that 12 months, and this is on big projects, right? You know, if you're doing a smaller project, it doesn't take 12 months to get a project, to get a permit. But, you know, we'd like to see 'em compress that 12-month timeline more. That being said, we wanna make sure that the permits they're issuing are durable. So we don't want them to issue, take this to the extreme in one day because then they wouldn't have done the work necessary, you know, for that permit to be durable if it was challenged in court. So, you know, but we think that there is a reasonable basis to have durable permits and, you know, less than 12 months to get there.
So, you know, we'd like to see some incremental improvements there. And we're actually, you know, we're working with the FERC to propose some of those changes. So, you know, they, the other thing they did was they took up some of the limits where you don't have to file a permit or where you can file a very modified permit in terms of, you know, the cost of the project. So they, you know, one case, you know, it's one and a half times now. So they increased those limits, and so that was. That's a win as well. So I think, you know, we've seen some good progress so far, but, you know, would like to see more. I mean, I think at some point that the regulatory ends up not being the gating item.
You know, you're gonna get into the supply chain being the gating item. And, you know, in some cases, depending on the project, we're getting close to that. But in other cases, I think there's still room on the regulatory side.
Wow. Could you expand on the last comment about the supply chain? Where are you seeing the potential bottom?
So on the supply chain, I think the biggest issue is gonna be on compression, really, and on our big projects that are in our backlog, you know, we've secured our compression and no concerns. And I think at this point we feel like we're gonna hit our dates there in terms of projected in-service dates. I think it's on new projects, where it can take, you know, a longer time. On the interstate projects, again, with the current regulatory environment, you know, generally not a concern, but if you're doing an unregulated project, you know, that can elongate those times. We're seeing some capacity added in the market, well not added yet, but you know going to be added in the future, but it'll take time to get that capacity on, get it running smoothly.
So I don't think we're gonna get help there for maybe another year or so.
Okay. Do you, just one more follow-up on that. I mean, there's obviously you and many of your competitors are all pursuing a lot of expansion projects. Do you foresee at some point that labor becomes a constraint or do you feel like that's?
We haven't seen it to date.
Okay.
That doesn't mean we won't see it. I mean, we will, we're gonna, we're constantly on the lookout for that. But we've been engaging with a lot of contractors on, you know, the big three projects, MSX and South System 4 and Trident, which are $5.3 billion of the $9.3 billion backlog. And to date, we haven't, you know, those things seem to be about on budget. Now we're not fully done there, in terms of getting those contracts. But the preliminary, well, Trident, we're essentially done. But on South System 4, for example, you know, on the preliminary numbers we've seen there, it's been within budget.
Maybe if I just turn to capital return for a second. So obviously you just announced your dividend and your guidance for 2026. So that is what it is, but I'm wondering just, you know, holistically, you know, your rate of EBITDA on cashflow growth is accelerating. You're gonna, at least on our math, be growing EBITDA the next bunch of years faster than the roughly 2% increase in the dividend. So I guess the question is, do you see, you know, would you consider or would you think about accelerating cash return as your cash growth improves and what form would that come in? Is that, could that be a faster dividend growth rate? Is there buybacks? Is there, or maybe you wanna keep that capital? So just curious how you're thinking about it.
Sure. Sure. So, we've been again growing our dividend in about two cents the last few years. That's really just a function of the opportunity set that we have out there on the capital side. As we said to the beginning of this session, you know, we just raised our expected CapEx guidance for the next couple of years from around $2.5 billion per year to over $3 billion. So, you know, the reason that we've been conservative, I'd say, in our dividend growth rate is to preserve that capital and preserve flexibility for all the opportunities that we're seeing out there.
So I think, you know, on the other side of some of the CapEx, you know, the over $3 billion, you know, I think it starts, and then you'll start seeing projects come into service, you know, then it probably makes sense to look at, you know, a faster growth in the dividend rate. But I think, you know, right now and for the next few years, I think the strategy that we have is the right one.
Okay. Let me squeeze one more in here.
Oh, and then the other thing I'd say, you know, in terms of, in terms of buybacks, you know, that's just gonna be opportunistic. And, you know, our balance sheet is, as I talked about, a few minutes ago, 3.8 times debt to EBITDA, you know, the high end of our range is four and a half times. Every 0.1 times is $850 million. I, you know, I don't foresee us taking our balance sheet up to four and a half times. That flex, we like having that flexibility. But, you know, if there were, if we saw opportunities for share repurchase, we have some capacity there to do that.
So maybe just to round it out in the last, well, we're a little over, but it's fine. Just M&A, obviously there's a lot on your plate organically. You know, just feels like maybe you don't need to do anything, but just curious what the landscape looks like. Is it even on the table or you just feel like you have so much internally that it has to be pretty special.
Okay. So I'll say a couple of things and then I'll let Dax add to it 'cause Dax ran corporate and development for a number of years at Kinder Morgan. So, look, I think that's part of the reason to keep your balance, you know, to keep the capacity on your balance sheet so that when we see opportunities, we can take advantage of 'em. You know, M& A is opportunistic. You can't, you know, you can't schedule it the way, you know, you look at an expansion project and you've got, you know, a year down the road or two years down the road, you're gonna bring these things in service. I mean, those things arise and you've gotta have the flexibility to be able to take advantage of that. We think our balance sheet gives us that.
And if you look what we've done the last couple of years, you know, we did a tuck-in acquisition at the beginning of this year on the Hiland. We did a tuck-in acquisition in Texas at the beginning of 2024. And then I think in 2022, I think it was, we did Stagecoach, which is storage acquisition in the Northeast. So we've been finding opportunities and that $850 million per 0.1 turn, that's just straight adding debt. If you're doing an acquisition and you're adding EBITDA as well, then you've got, you've got, you know, more capacity or less use of the balance sheet, however you wanna think about it. So, so I think we're in a position where when we see opportunities, we can take advantage of 'em.
Yeah. No, totally agree. I mean, we like M& A. Our company was built on M& A over, you know, a 30-year period of time, but you gotta be incredibly opportunistic about it. It's very difficult to predict when the opportunities come about. You know, you've gotta align economics, you know, social issues, people's willingness to part with stuff, you know, at a reasonable price. You don't, you know, it's generally not a good idea to lock in on something you want and chase it at all costs. That's how you end up with bad deals, so you know, we tend to any process that happens in our space, we're generally included in. We generally see what's going on.
And so, we generally sit back and, you know, wait to see what happens and, you know, participate when it makes sense. With respect to selling stuff, people, you know, ask about that pretty frequently. You know, we're a willing seller at everything we own every day at the right price. And that's a true statement. That's not just a, you know, a line. But, you know, you generally have to have somebody who has a different thesis on an asset than you do. And a lot of people, you know, there are a lot of introductory conversations about a potential transaction that, you know, as time passes and it gets closer to time to actually cut a check, those don't necessarily come to fruition.
So, you know, we're working on both ends of that all the time. And, you know, we're only gonna do things when they make sense.
Great. Well, thank you very much for the time this morning. Appreciate it.
Thank you.