Welcome to the Quarterly Earnings Conference Call. At this time, all participants are in a listen-only mode until the question-and-answer session of today’s conference. [Operator Instructions] I would like to inform all parties that today’s conference is being recorded. If you have any objections, you may disconnect at this time. I would now like to turn the conference over to Mr. Rich Kinder, Executive Chairman of Kinder Morgan. Thank you. You may begin.

Thank you, Sheila. Before we begin, as usual, I’d like to remind you that today’s earnings releases by KMI and KML and this call include forward-looking and financial outlook statements within the meaning of the Private Securities Litigation Reform Act of 1995, the Securities and Exchange Act of 1934 and applicable Canadian provincial and territorial securities laws 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 and financial outlook statements and use of non-GAAP financial measures set forth at the end of KMI’s and KML’s earnings releases and to review our latest filings with the SEC and Canadian provincial and territorial securities commissions for a list of important material assumptions, expectations and risk factors that may cause actual results to differ materially from those anticipated and described in such forward-looking and financial outlook statements. I'll be very brief in my remarks and then turn the floor over to Steve Kean, our CEO; and Kim Dang, our CFO. The financial results we are reporting today for both the fourth quarter and full year 2017 demonstrate once again the strong cash flow generated by KMI. Equally importantly, we are living within that cash flow, paying our dividend which will increase this year by 60%, funding all of our expansion CapEx and returning additional value to our shareholders through our stock buyback program while continuing to improve our balance sheet, all with internally generated funds. To me, as the Chairman and the largest shareholder, this seems like a recipe for success, both now and for the foreseeable future. Now notwithstanding that, let me add, notwithstanding that good performance, our world-class set of assets and the positive steps we have taken by improving our balance sheet and preparing to return additional funds to our shareholders through the dividend increase I mentioned, our stock continues to trade at a substantial discount to our peer group and I certainly hope and expect that discrepancy to be overcome as we continue to meet our targets and return value to our shareholders. And with that, I'll turn it over to Steve.

All right. Thank you, Rich. So, I'm going to update you on KMI performance highlights and then turn it over to Kim as usual to take you through the financials. And then after that, I'll update you on KML and then turn it over to Dax Sanders, CFO of KML, to give you the KML financial performance and financing updates. And then we'll take your questions on both KMI and KML. Starting with KMI, we've been telling you each quarter this year that we had a good quarter and a good year-to-date. Above planned year-to-date, but it’s all timing and it's going to shake out by end of the year. Kim will break it down for you. But we’re happy to tell you in this call that we finished 2017 very strong. We also saw some improvements in market fundamentals and in the performance of our businesses, which I'll cover in a minute. So here are the few -- a few highlights of 2017. First, we completed the two key steps that we outlined at the beginning of the year to strengthen our balance sheet and put us in position to return value to shareholders. We completed the JV of our Elba Island liquefaction project in the first quarter. That was done consistent with our budget assumptions. And in the second quarter, we secured acceptable financing for our Trans Mountain expansion project, creating a self-funding entity, KML, on the strength of all of our Canadian pipeline and terminal assets. Second, we signed up 1.65 Bcf of long-term firm commitment on Gulf Coast Express, our joint venture with Targa and DCP. We did that in the fourth quarter and expect to sell the remaining 300 a day in the first quarter of this year. We believe there's very strong demand for…

Okay. Thanks, Steve. Today we are declaring a dividend of $0.125 per share, consistent with our 2017 budget. And we've previously indicated next quarter, we anticipate declaring a dividend of $0.20 per share consistent with our guidance of an $0.80 per share dividend for 2018, which is a 60% increase over the dividend declared for '17. Last quarter, I told you two things. I told you, one, that we expected to finish the year slightly behind our DCF budget due to the impacts of Hurricane Harvey and reduced contributions from our Canadian asset as a result of the May IPO of a 30% interest in those assets. And two, that we expected to end the year at 5.2 times debt-to-EBITDA, with some possibility of ending at 5.1 times. Well, we finished the year not slightly behind our budget but ahead of our budget on DCF by approximately 26 million or $0.01 per share and at 5.1 times debt-to-EBITDA. In addition, we've generated approximately 300 more in discretionary free cash flow for the year than our budget. So, we had nice performance in the fourth quarter and for the full year overall. First, let me start with the GAAP numbers and I'll move to DCF, which is the way we look at and think about the numbers and performance. Like a lot of other companies this quarter, our GAAP numbers are significantly impacted by the change in the tax law. We booked 1.38 billion in estimated expense to account for the change, which masked the nice performance in our underlying business. In addition, the charge also masked the fact that from a cash tax perspective, the new tax law is a moderate positive for KMI as it postpones the date when KMI becomes a federal cash taxpayer by approximately one year…

Okay. Turning to KML. Good progress to report here as well. A reminder, KML consisted all of the Kinder Morgan Canada pipelines and terminals assets. And those include our existing Trans Mountain pipeline system, which runs full and is the only outlet for Alberta Crude Terminal to get to the world market. We also have our Terminals position. We've built our Edmonton Terminals position over the last 10 years into the largest merchant terminal network in Edmonton and we continued to expand it and our Base Line Terminal joint venture with which as we announced earlier this week, is on time and on budget with the first four tanks of that expansion coming online earlier this week. The rest of the expansion is projected to be on time and on budget as well as its completed in phases over the course of 2018. So good update there. And all KML is comprised of two strongest, existing business platforms that are integral to fulfilling the transportation, blending and storage needs of producers and refiners and it has a substantial upside associated with the Trans Mountain expansion. Looking back of what we've accomplished over the year, I think we've accomplished a great deal. Early in the year we updated our final cost estimate following final federal approval to $7.42 billion Canadian. That gave our shippers the right to turn back capacity to us. Ian Anderson and his commercial team placed all the capacity. And in so doing have essentially reconfirmed the value and need for the project with a 2017 lineup of shipper needs based on 2017 market conditions. From the Pipelines perspective, the conditions supporting its construction or the need for it have improved from an economic standpoint. It's worth repeating that this is a much-needed project. It has the key…

Thanks, Steve. Before I get into the results, I want to highlight a couple of general corporate matters. On the capital markets front, we completed our second offering of the Canadian rate reset preferred stock in December. We launched with a base deal of $200 million. And in response to significant demand, we were able to upsize to $250 million and priced with a 5.2% coupon which nets us approximately $243 million of proceeds. As a reminder, our preferreds get 100% equity treatment under our construction facility and generally 50% through the eyes of the rating agencies. Combining our first and second offerings, we've now reached $550 million of preferreds. Overall, the success of this offering is yet another positive step towards KML raising the necessary capital to fully finance the expansion, as Steve mentioned. Also, effective January 2, KML became registered with the SEC in the United States. As such, we will become a regular filer of quarterly, annual and other documents with the SEC in addition to our filings with the Canadian regulatory authorities. While KML currently does not intend to list in the U.S., being a U.S. registrant will ensure that we can continue to present our financial results in U.S. GAAP indefinitely and maintain the most efficient management and corporate structure. As I move into the results and to review the results, as I did with the last two quarters, I want to preface my comments with the caveat that while I'll be offering quarter-over-quarter comparisons, those comparisons are of limited value at this point given that we are reporting a quarter where KML was owned by the public and we'll be comparing results through a quarter where its wholly owned by KMI. And during those periods, prior to the IPO, there were shareholder loans in…

All right. Sheila, we’re ready for questions.

Thank you. We will now begin the question-and-answer session. [Operator Instructions] The first question comes from Jean Ann Salisbury with Bernstein. Your line is open.

Hi, congratulations on the Gulf Coast Express, I just had a couple of questions about that. The first one is the three, maybe four owners on the gas pipeline seems like a lot. And I was wondering if you could give any color on how all these partners came to join the project? And do you think it was specific to GCX or is this kind of what doing business in the Permian now entails?

Well, I think, and I'll let Tom expand if I miss anything here. I think, first of all, we’re very glad to have those partners. They are significant players in the Permian Basin. They have significant upstream investments that they're making and they are bringing significant volumes to the project. We are happy to have them in.

Yeah.

And I think that they are interested in being in and bringing their volumes to the project because they think it's a good project. It did take a while to get all the JV stuff worked out. But we got through it and we have very strong demand for the project. I think there is interest in the producer segment, certain parts of it in investing in midstream infrastructure. And, of course, Targa and DCP are both very much in that business already. So, they are investing in midstream and they're already in that business. But I do think even outside of the midstream sector, there is some interest in investing in midstream projects from the upstream sector. Anything?

No, I mean, I think really that's the main point, they brought together -- across the table a significant volume commitment as well as investment capital and we all three have a lot of experience with running major projects. So, I think it's a good merit really for this project. And as far as other opportunities, I mean, it really just depends on the situation. I think we feel very good about our opportunities to develop and execute on incremental projects, certainly, projects of this scale as those opportunities develop. But if there is a nice fit with volume commitments and looking at opportunities similarly like I think the other two partners in this one, we might do it again.

Okay. That's helpful. And then just as a follow-up. What are the remaining major permitting milestones for the Gulf Coast Express? And then how optimistic is October 2019 start up? Is there kind of a bigger thing that we should watch for that could cause it to split?

No, I mean, it’s…

No. Go ahead, Tom.

It's an intrastate pipeline system. So, we’re really working this through local jurisdiction. And that process is getting started as of now. But we have a lot of experience of building pipeline in Texas and feel really good about our 2019 in-service period.

Okay. Great. That’s all for me.

We certainly have permit hurdles to clear, but it's not like de-clearing a 7C process at the federal level. So, it doesn't take us long.

Okay. Fair enough. Thanks a lot.

The next question comes from Kristina Kazarian with Credit Suisse. Your line is open.

Good afternoon, Kristina.

Good afternoon, guys. Hey, so a follow-up on Gulf Coast Express. Beyond the cash flow you're going to get from this project itself, can you talk a little bit about how we should be thinking about the follow-on impacts for your assets on both the upstream in the Permian and the downstream on the Gulf side as well?

Tom, go ahead.

Yeah, I mean, clearly, there's some synergies on EPNG as incremental transportation opportunities afford themselves to the project. And the connectivity at Agua Dulce both to our network and to all the growth into Mexico and LNG, I think we're creating a lot of opportunity for incremental opportunities beyond what we've baked into the base project. I think layered on top, even beyond that is the storage opportunities as Mexico grows, as LNG goes into service in Texas, I think those will all provide further opportunities to this particular project as well as volatility out in the Permian, and how that translates to Agua Dulce. I think those will all be upside opportunities that will manifest itself in the project.

Great. And I'll ask a follow on as well. On the TMX project, I appreciate the milestones and clarity there. That set on the shifted timeframe to December 2020, how did you guys come up with that revised date? And may be if you could talk around conviction level here? Or at this point, is it a project that we just wait for continued updates as we hit those milestones and that progresses?

Yeah, we set the expectation of an unmitigated December 2020 date, partly from the passage of time, but partly from just having -- we need to have a stake in the sand to put out there for our project schedule development and our project planning and we believe that that's a reasonable date. And if another two weeks passes, that doesn't mean that we move that date out another two weeks. We have, we think, the ability to meet that date and we'll continue to build our project plan around it.

Perfect. And a real quick one on fundamentals, turning it back there. Gathering volumes, I think they got a bump versus our 3Q '17 numbers. Can you kind of just talk through what you saw regionally?

Yeah. We saw upticks in the Haynesville and in the Bakken as well as in the Eagle Ford. And additional drilling activity in Haynesville and Bakken, and then driving the Eagle Ford, Tom?

Yeah. Those are really I think primarily re-contracting efforts that drove those incremental volumes plus, there's the Harvey impact in the Q3 and we got the -- we didn't have the same level of interruption in Q4. But overall, I think we feel good about our Eagle Ford position. I think, in 2018 but very excited about Haynesville and the Bakken and Highland as we go into 2018.

Perfect.

And then Harvey in Q3 and then we have freeze ups in Q4. But probably the Harvey effect was bigger again.

Thank you very much guys.

The next question comes from Brian Zarahn with Mizuho. Your line is open.

Good afternoon, Brian.

Hi, everybody. On Gulf Coast Express, the project is largely contracted. I'm sure you're happy to get that over the finish line. Any comment on average contract duration?

Yeah. They're long-term contracts, meaning 10 years.

Okay. And then is your project backlog assume a 50%, a 35% interest in Gulf Coast Express?

I think we took it to 35%. Yeah, we put it at 35%. It could be 50%. But we put it at 35%.

And when does the option for that shipper to acquire 15% interest expire?

End of this year.

End of the year. And then on tax reform, a positive on the cash tax perspective, pushing that out another year. How do you assess the impact of lower corporate taxes on your gas pipeline business?

Yes. So, there's been a lot of that's been a developing issue. And let me give you our perspective on it. The short answer is that we think that this is going to so the impact of this, that meaning the potential flow-through of tax rate changes to shippers on our systems, is mitigated and will be spread out over time. So, it's mitigated because you have to adjust for negotiated rates and discounted rates. And an adjustment is going to impact what the max rates will be. So, the extent you have negotiated rates in place, which were negotiated and don't vary depending on variations and cost of service, or you have discounted rates that mitigates the impact. We also don't think that the FERC about 70% of our revenues by the way are under those kind of arrangements. And we also think it's mitigated because it was likely to be considered along with other changes in the cost of service. We do not believe that the FERC can or should isolate the tax law change for some separate immediate action. We also have many systems that have rates under blackbox settlements where all we agreed to is the final rates, we didn't agree on the individual cost of service component. So, we think it's very well established that needed the pipeline itself nor the commission and selectively adjust one element on the cost of service without considering the overall cost of service. So, our view on it is that this plays itself out over time through periodic Section 4 and Section 5 of the proceedings and settlement.

I know it was a complex issue and I'm sure we will discuss this subject a little bit more next week at your Analyst Day. I'll leave off on a more housekeeping question. The share count at the end of the fourth quarter, roughly 14 million less or were there any other moving parts? Or capital buyback?

Yes, 14 million shares.

And then the 14 million off of the end of the third quarter is the right number for the end of the year?

Yes.

Thank you.

Our next question comes from Darren Horowitz with Raymond James. Your line is open.

Hi, Darren. How are you doing?

Hey, I’m doing fine, Rich. I hope you and everybody is doing well in addition. Steve, a couple of quick ones for me. The first regarding your comments around the TMS milestones and the permitting progress and I know we are going to get into this a week from now. But what do you think the threshold is that drives incremental confidence for you in terms of the pace of permits that can granted? I remember last quarter you spoke about partials being granted that were almost 60% relative to what was needed which was I think over 620. So, what are the critical permits as it sits now for the Ministry of Transportation out of the 80 or so that are needed by next year? Is it still Spread 3 or 4 or has it developed beyond that?

Look, I think really the main factor in consideration is that we think we've got a reliable and timely process for getting the permits. We are not going to get all the permits before we would begin construction. But we do need to see that there's a process in place and that we can count on it and that the timing is going to be reasonable. So that once we start, we can be confident that we are going to finish. So, there's no – we are not sitting around here with the magic number on permit count. We certainly look at that, absolutely. But I think it's more about making sure that we've got good working arrangements on how we are going to get through the permitting process, meet the requirements of the agencies, et cetera. But also that we have a backstop that will deal with any undue delays.

Okay. That makes sense. And then switching gears, back to your comments on KMCC. How much pipe overcapacity currently exists relative to South Texas Eagle Ford supply? And when do you think that market effectively achieves balance between supply and takeaway capacity such that you can get a firming in rates?

Okay. Well, the headline numbers is worse than the reality. But we think that there's probably 2 million barrels of takeaway capacity. And while the Eagle Ford is climbing, it's probably 1.2 million barrels a day or so. Now the reason I say that the headline number is worse than the reality is because, if you look at the system that the products pipeline team has built over the years, they continue to add connectivity to that system on both the supply end and the market end and we've seen volumes go up as we report it. So, we're taking market share, right, taking market share. But the point I was making is, there's a lot of capacity there. And so, we have to discount to take share on renewals and we'll do that where it's appropriate. But we’ve got a great system. And we think a very good system that gives people access to corpus as well as multiple points on the way to Houston and into Houston Ship Channel. And so, we think that our asset is well positioned and well fixed. So, Eagle Ford volumes will grow and we'll continue to look for ways to add connectivity and we'll be thoughtful about the re-contracting process.

That’s all I had. Thanks.

The next question comes from Dennis Coleman with Bank of America. Your line is open.

Yeah. Thanks very much. Good afternoon. Just a couple of follow-ups on the Trans Mountain project. You had this release on December fourth where you talked about the potential that it becomes untenable to proceed. And that seemed like a fairly directed comment. But it does leave a little bit begging. We've now extended the unmitigated delay another three months. What's the circumstance where you get to that untenable position?

Look, I think again, what we're doing here is I think all the right things for our investors, for our customers, for everybody. And that is we are carefully – we are being careful stewards of our capital and we're doing everything we can to get the clarity that we need in order to proceed. And that's the basis on which we're proceeding. We don't expect to find ourselves in an untenable position, but we've made that point in the filing, seeking the relief that we've asked for – from the regulator. And so, we said the same thing to the investors we said to our regulators. That's how we do things.

Okay. So, there's been the regulatory filing, I see.

Yes, correct.

Okay. May be a different one on the share repurchase program. You did 250 right out of the gate in December. What kind of cadence do you see for that over 2018? Is it -- I mean, if you kept that cadence, you're done by July. Is it a longer time horizon now that you're out of the gate?

Yeah, we're not giving specific guidance there. I'll say a couple of things. One is that, we think our stock price is attractive to buy. And the other thing is that we will be opportunistic about it. We will look at what our alternatives are for that cash and we think the stock price is an attractive buy. But there could be project opportunity as well. So, we are not giving guidance.

Yeah. And Dennis, what I'd say is when you look at distributable cash flow for 2018, we will go through all this in the conference next week. Less dividends, less growth CapEx, we have about $568 million in discretionary free cash flow budgeted for 2018 that we will allocate to either share repurchase, new projects, paying down debt or some combination thereof.

Yeah. Drive those at the beginning of the call, the real strength of the company I believe is in the cash flow. When we are funding every all of our needs with internally generating cash flow and have that kind of excess cash to use for various purposes, all of which we believe benefit the shareholder ultimately, even if it's just paying down debt, making the balance sheet stronger. That's where we want to be and that's our game plan.

Okay. That's useful. And I'm sure you'll get more next week. One last little more specific question if I can. Hedging, you have a very established program. But we've seen a nice recovery in commodity prices here. Any chance to accelerate some of the out years with what you're seeing here? Or will you stick with the program?

Yeah, we will stick with the program. We are a little opportunistic there in terms of when we put hedges on, et cetera. But we stay within the parameters that we have lined out for investors.

Yeah. And Dennis, one of the reasons we say within the parameters. And the parameters, I mean, it could be between 60% and 80%. We like the prices. We go to the 80%. We don't like the prices, maybe we stay at 60%. So, we are opportunistic within the bands. But I think we're going to stay within the band. One of the reasons that we do have some costs that are tied to oil price. And so, if you hedge in a very different price market than when you actually go to produce the barrels and you have a cost structure that's tied to a very different oil price, you can get a mismatch. And so, we found that executing on a program is the best way to get the barrels hedged but have execute over time to have a little to help from having a mismatch on the hedge price and the actual price environment where we are producing.

Okay. That's helpful. Obviously, it's worked over the last 15 years so just to question what the prices are. Thank you.

The next question comes from Robert Catellier with CIBC Capital Markets. Your line is open.

Hi. Good afternoon.

Good afternoon.

Congratulations on the success on baseline so far on the results. I just had two questions on the Trans Mountain there is two issues that I can see here before you can go to full construction. One is establishing that process to deal with the permitting issues and the second is the judicial reviews. So, could you clarify if you can move forward if the NEB establishes a process for dealing with permits but before the conclusion of the judicial reviews?

Yeah. I think we want to see the outcome of the judicial review, primarily the federal review because that's the central thing, the Order in Council that was granted 13 months ago I guess now. And look, we think there is a model decision that you look back to, right, which is the Northern Gateway decision. And we read it, looks to us like the federal government read it too and we did everything that we were supposed to in putting together our filing and our participation in getting an NEB recommendation. It looks to us like the government did everything that it was supposed to do as guided by that order, if not more, frankly in what they did in terms of First Nations engagement, et cetera, et cetera. So that's our belief. But it's pricey to be wrong about that belief. And so, we'd like to see that come to the outcome that we are expecting, but we'd like to see that play out.

Okay. That's good color. Thank you. The last question is on the right of way. Can you just give us a brief update there?

Yes, so we are in the middle of routing hearings at the NEB. Some of those have taken place already. There's one going on regarding Chilliwack today. We have Burnaby coming up shortly as well. And so those are proceeding and according to a set schedule, those are the places where we deal with route objections, where we identify the unobjected two lands and where we have the opportunity to procure. If we get objections to the route, we get a right of entry first. And then the question becomes what's the level of compensation involved? But first, we need to have the right of entry and then we can determine or reach an arrangement on the compensation level. But the main thing in my mind is we need to see the route hearings progress. And they are. They are.

Okay. Thank you.

The next question comes from Jeremy Tonet with JPMorgan. Your line is open.

Hi Jeremy.

Hi good afternoon. I just want to turn to the Bakken for a second and just was wondering if you could update us as far as your outlook there with Hiland, how things are progressing and how you see extending that platform. Do you see opportunity kind of repurpose assets for takeaway from the basins. It seems like there is certainly more growth at the commodity price level, just wondering if you could update us there.

Yes. So, I'll break it into two pieces. One is the gathering and processing piece of this which continues to grow, continues to be an opportunity for us to invest, our volumes are growing there. We've been investing there and continue to add capacity. The other piece is the transport takeaway and the transport takeaway with the in-service of DAPL is a bit over piped, so the Bakken is growing and it may fill, the take away space faster than it's filled in the Eagle Ford and this is just a projection as good as what you paid for it. But I think there is more growth going on in the Bakken and less overhang on the capacity front. On the other hand, HH gets you to Cushing; DAPL ultimately gets you to an LLS kind of price market. So that does cause us to evaluate what else is short of capacity up there. And one of the things that appears to us to be short of capacity is NGL takeaway and so that it is a potential conversion candidate, but there is nothing to point you to specifically in that regard other than it looks like a nice fit.

That's very helpful. That’s it from me. Thank you.

The next question comes from Tristan Richardson with SunTrust. Your line is open.

Good afternoon. Just with respect Elba and Cash Flow timing there, does cash flow follow two distinct phases, initial phase in Phase II or as those units come on cash flow will follow as each unit comes up?

Yeah. So, two things about that. We will have some more detail around Elba when we do the conference next week. But it is – most of the cash flow, the majority of the cash flow is, as I said, the majority of the revenue is associated with getting the first unit in-service. And so, we’re diligently working on all of the units and as is Shell and their upstream manufacturer but that's – it's weighted toward getting the first unit into service. And so, as you'd expect, we’re very focused on getting the first units in service.

Great. Thank you. And then just lastly on Southwest Louisiana Supply. It seems straightforward but just curious if there's any contingencies the shipper has with respect to…

Sorry, what was the question?

Right. Just – is there any potential contingencies the shipper has if the downstream pole facility timing is delayed, et cetera? It sounds like shipments are already on your [all's] end in the first quarter this year?

The transportation contracts do not go into service when the facility does. So, we would work with the customer as we do another project in the same situation and try to help them monetize or market their capacity. But there is no delay in our – in service of the transportation contract.

Understood. Very helpful. Thank you, guys.

We are showing no further questions at this time.

Okay. Thank you very much. Thank you all for joining us this afternoon. Have a good day.

This does conclude today's conference. Thank you for participating. You may disconnect at this time.